10q10k10q10k.net

What changed in Adaptive Biotechnologies Corp's 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of Adaptive Biotechnologies Corp's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+508 added−494 removedSource: 10-K (2025-03-03) vs 10-K (2024-02-29)

Top changes in Adaptive Biotechnologies Corp's 2024 10-K

508 paragraphs added · 494 removed · 377 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

117 edited+79 added−73 removed162 unchanged
Biggest changePayor coverage for the test has grown to 300 million lives in ALL and MM, 200 million lives in CLL and 70 million lives in DLBCL. 3 • We integrated the clonoSEQ clinical diagnostic test via the Epic System Corporation's (“Epic”) comprehensive electronic medical record (“EMR”) system into the records systems of four accounts in 2023 to enable easier test ordering, with a fifth account nearing launch. • Our MRD Pharma revenue, excluding milestones, increased by 1% from 2022, attributable primarily to the slowdown in pharma services due to broader macroeconomic factors impacting the biopharmaceutical industry. • As of December 31, 2023, our clonoSEQ assay was being used in 143 active trials being conducted by 43 biopharmaceutical partners, including 75 trials in which it represented a clinical endpoint (primary endpoint in 10 trials).
Biggest changeThis represents a 17% increase from the previous episode price and the previous implied per test rate under the episode structure. • We have integrated the clonoSEQ clinical diagnostic test via the Epic System Corporation's (“Epic”) comprehensive electronic medical record (“EMR”) system into the records systems of 18 accounts through 2024 to enable easier test ordering. • Our clonoSEQ assay was being used in more than 170 active trials being conducted by over 40 biopharmaceutical partners, including more than 85 trials where MRD is a clinical endpoint (14 of which use MRD as a primary endpoint).
Despite their relatively low abundance, disease-specific TCRs can mount a systemic, persistent response to most perturbations because of the highly specialized properties of the immune response, as summarized in the table below: In order to fully leverage the natural properties of the immune system to develop clinical products, the enormous diversity and scale of the adaptive immune system must be taken into consideration, including the ability to accurately and reliably measure the relative frequency of each disease-specific T (or B) cell in the blood.
Despite their relatively low abundance, disease-specific TCRs can mount a systemic, persistent response to most perturbations because of the highly specialized properties of the immune response, as summarized in the table below: In order to fully leverage the natural properties of the immune system to develop clinical products, the enormous diversity and scale of the adaptive immune system must be taken into consideration, including the ability to accurately and reliably measure the relative frequency of each disease-specific T cell or B cell in the blood.
Together with our massive clinical immunomics database of immune receptor sequences, our sequencing capabilities provide deep insights into individual and collective immune responses at a scale that is thousands of times greater than was previously possible. • Antigen Identification.
Our sequencing capabilities, together with our massive clinical immunomics database of immune receptor sequences, provide deep insights into individual and collective immune responses at a scale that is thousands of times greater than was previously possible. • Antigen Identification.
With the use of clonoSEQ, we are transforming how lymphoid cancers are treated by working with biopharmaceutical partners, providers and payors.
With the use of clonoSEQ, we are transforming how lymphoid cancers are treated by working with providers, biopharmaceutical partners and payors.
Over the years since, we have secured additional payor coverage for clonoSEQ aligned with our FDA label with Medicare, national private payors and large regional plans, expanding coverage to 300 million covered lives for ALL and MM, 200 million covered lives for CLL and 70 million covered lives for DLBCL.
Over the years since, we have secured additional payor coverage for clonoSEQ aligned with our FDA label with Medicare, national private payors and large regional plans, expanding coverage to over 300 million covered lives for ALL and MM, over 200 million covered lives for CLL and over 70 million covered lives for DLBCL.
For autoimmune disorders, the immune system loses the ability to distinguish between 'self' and 'non-self' and mistakenly recognizes normal protein fragments (“self-antigens”) as foreign, which results in attacking otherwise healthy tissue. 4 The Adaptive Immune Response The key cells of the adaptive immune system that enable our bodies to mount responses against antigens are called T cells and B cells.
For autoimmune disorders, the immune system loses the ability to distinguish between ‘self’ and ‘non-self’ and mistakenly recognizes normal protein fragments (“self-antigens”) as foreign, which results in attacking otherwise healthy tissue. The Adaptive Immune Response The key cells of the adaptive immune system that enable our bodies to mount responses against antigens are called T cells and B cells.
Our massive database of TCRs and healthy control samples enables us to rapidly confirm whether such antigens are disease-specific, even if the antigen or its relationship to the disease was previously unknown. o Antigen-TCR mapping. MIRA (Multiplexed Identification of TCR Antigen Specificity) maps millions of TCRs to thousands of clinically relevant Class I and Class II antigens.
Our massive database of TCRs and healthy control samples enables us to rapidly confirm whether such antigens are disease-specific, even if the antigen or its relationship to the disease was previously unknown. 6 o Antigen-TCR mapping. MIRA (Multiplexed Identification of TCR Antigen Specificity) maps millions of TCRs to thousands of clinically relevant Class I and Class II antigens.
Although we have and maintain a system for compliance with privacy laws and regulations, failure to comply with them could expose us to potential FTC enforcement action and fines. In addition, certain state laws govern the privacy and security of health information and personal information.
Although we have and maintain a system for compliance with privacy laws and regulations, failure to comply with them could expose us to potential FTC enforcement action and fines. 21 In addition, certain state laws govern the privacy and security of health information and personal information.
We have developed powerful approaches to identify disease-related antigens which trigger a T-cell response, even at levels of one T-cell in a million (as may occur in autoimmune disorders). 6 o Human leukocyte antigen (“HLA”)-presented disease specific antigens.
We have developed powerful approaches to identify disease-related antigens which trigger a T-cell response, even at levels of one T-cell in a million (as may occur in autoimmune disorders). o Human leukocyte antigen (“HLA”)-presented disease specific antigens.
The FCPA also requires companies whose securities are listed in the U.S. to meet its accounting provisions, which were designed to operate in tandem with the anti-bribery provisions, and require corporations covered by the provisions to (a) make and keep books and records that accurately and fairly reflect the transactions of the corporation and (b) devise and maintain an adequate system of internal accounting controls. 24 In Europe, various countries have adopted anti-bribery laws providing for severe consequences, in the form of criminal penalties or significant fines, for individuals or companies committing a bribery offence.
The FCPA also requires companies whose securities are listed in the U.S. to meet its accounting provisions, which were designed to operate in tandem with the anti-bribery provisions, and require corporations covered by the provisions to (a) make and keep books and records that accurately and fairly reflect the transactions of the corporation and (b) devise and maintain an adequate system of internal accounting controls. 23 In Europe, various countries have adopted anti-bribery laws providing for severe consequences, in the form of criminal penalties or significant fines, for individuals or companies committing a bribery offence.
In January 2019, clonoSEQ received Medicare coverage aligned with the FDA label and National Comprehensive Cancer Network (“NCCN”) guidelines for longitudinal monitoring in MM and ALL. clonoSEQ is now incorporated in NCCN guidelines and used by all 33 NCCN cancer centers.
Reimbursement In January 2019, clonoSEQ received Medicare coverage aligned with the FDA label and National Comprehensive Cancer Network (“NCCN”) guidelines for longitudinal monitoring in MM and ALL. clonoSEQ is now incorporated in NCCN guidelines and used by all 33 NCCN cancer centers.
In some instances, however, we may seek to push the patentability envelope when the state of the applicable patent laws are in flux, such as patent eligibility for naturally occurring molecules, including TCRs, in the U.S. 16 Methods of Measuring Adaptive Immunity In 2009, a U.S. provisional patent application was filed to pursue protection for immunosequencing by our co-founder, Dr.
In some instances, however, we may seek to push the patentability envelope when the state of the applicable patent laws are in flux, such as patent eligibility for naturally occurring molecules, including TCRs, in the U.S. 15 Methods of Measuring Adaptive Immunity In 2009, a U.S. provisional patent application was filed to pursue protection for immunosequencing by our co-founder, Dr.
In January 2015, we acquired Sequenta, a San Francisco, California-based company that was also developing an NGS test for MRD. Our principal executive offices are located at 1165 Eastlake Avenue East, Seattle, Washington 98109, and our telephone number is (206) 659-0067. 27 Available Information We maintain a website at www.adaptivebiotech.com.
In January 2015, we acquired Sequenta, a San Francisco, California-based company that was also developing an NGS test for MRD. Our principal executive offices are located at 1165 Eastlake Avenue East, Seattle, Washington 98109, and our telephone number is (206) 659-0067. 26 Available Information We maintain a website at www.adaptivebiotech.com.
We may therefore be constrained in our pricing strategies in markets outside of the U.S. For additional information on coverage and reimbursement in the U.S., see “ Risk Factors—Risks Relating to Government Regulation—Future Medicare payment rates are uncertain. ” 26 Our Compliance Program Our compliance program is intended to prevent and detect violations of law or our policies.
We may therefore be constrained in our pricing strategies in markets outside of the U.S. For additional information on coverage and reimbursement in the U.S., see “ Risk Factors—Risks Relating to Government Regulation—Future Medicare payment rates are uncertain. ” 25 Our Compliance Program Our compliance program is intended to prevent and detect violations of law or our policies.
To that end, we developed a combination of technologies to perform the following key functions that broaden our understanding of immune-mediated biology: • Sequencing. Our proprietary NGS-based immunosequencing methods provide sequences for single chains of “Y-shaped” TCRs or BCRs, which enables understanding of the quantity and diversity of T cells and B cells in a biological sample.
We have developed a combination of technologies to perform the following key functions that broaden our understanding of immune-mediated biology: • Sequencing. Our proprietary NGS-based immunosequencing methods provide sequences for single chains of “Y-shaped” TCRs or BCRs, which enables understanding of the quantity and diversity of T cells and B cells in a biological sample.
This law substantially changed the way healthcare is financed by both commercial and government payors, and it has significantly impacted our industry. 25 We anticipate there will continue to be proposals by legislators at both the federal and state levels, regulators and commercial payors to reduce costs while trying to expand individual healthcare benefits.
This law substantially changed the way healthcare is financed by both commercial and government payors, and it has significantly impacted our industry. 24 We anticipate there will continue to be proposals by legislators at both the federal and state levels, regulators and commercial payors to reduce costs while trying to expand individual healthcare benefits.
We identify and focus on a subset of therapeutic-grade candidates to designate and further develop as TCR or antibody based therapeutic products. Our Products and Pipeline (MRD) The MRD business area focuses on the use of our highly sensitive, FDA-authorized NGS assay to measure MRD in patients with hematologic malignancies.
We identify and focus on a subset of therapeutic-grade candidates to designate and further develop as TCR or antibody based therapeutic products. MRD Business The MRD business focuses on the use of our highly sensitive, FDA-authorized NGS assay to measure MRD in patients with hematologic malignancies.
The engine driving the IM platform is our immunosequencing technology that allows us to tap into the massive diversity of the immune repertoire at unparalleled scale and specificity. Our immunosequencing approach utilizes multiplex, bias-controlled PCR to accurately and quantitatively sequence, map, pair and characterize millions of TCRs and BCRs at scale.
The engine driving the immune medicine platform is our immunosequencing technology that allows us to tap into the massive diversity of the immune repertoire at unparalleled scale and specificity. Our immunosequencing approach utilizes multiplex, bias-controlled PCR to accurately and quantitatively sequence, map, pair and characterize millions of TCRs and BCRs at scale.
Our trademark portfolio is designed to protect the brands for our products and services, both current and in the pipeline. 18 Trade Secrecy Program We have a trade secrecy program to prevent disclosure of our trade secrets to others, except under stringent conditions of confidentiality when disclosure is critical to our business.
Our trademark portfolio is designed to protect the brands for our products and services, both current and in the pipeline. 17 Trade Secrecy Program We have a trade secrecy program to prevent disclosure of our trade secrets to others, except under stringent conditions of confidentiality when disclosure is critical to our business.
The FDA has historically exercised enforcement discretion to not regulate most LDTs. As such, LDTs have not been subject to FDA’s marketing clearance and approval processes, or post-marketing controls, for medical devices. LDTs are generally considered to be tests that are designed, developed, validated and used within a single laboratory.
LDTs in the U.S. The FDA has historically exercised enforcement discretion to not regulate most LDTs. As such, LDTs have not been subject to FDA’s marketing clearance and approval processes, or post-marketing controls, for medical devices. LDTs are generally considered to be tests that are designed, developed, validated and used within a single laboratory.
It is possible that the information we post on social media could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on social media channels. 28
It is possible that the information we post on social media could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on social media channels. 27
A covered entity must notify HHS and each affected individual of a breach of unsecured protected health information as well as the media if the breach involves more than 500 individuals. HIPAA violations are subject to civil and criminal penalties.
A covered entity must notify HHS and each affected individual of a breach of unsecured protected health information and must also notify the media if the breach involves more than 500 individuals. HIPAA violations are subject to civil and criminal penalties.
Granted claims extend to the use of particular sets of amplification primers, while pending claims are being pursued to capture additional assessment techniques. Licensed exclusively to us by Fred Hutch, the application has since spawned more than 31 additional patent applications, many of which have been granted as of December 31, 2023, including U.S. Patent No. 9,809,813.
Granted claims extend to the use of particular sets of amplification primers, while pending claims are being pursued to capture additional assessment techniques. Licensed exclusively to us by Fred Hutch, the application has since spawned 28 additional patent applications, many of which have been granted as of December 31, 2024, including U.S. Patent No. 9,809,813.
Further, the prohibitions cover the payment or offer of remuneration to induce a referral to, or in exchange for, an individual using the services of, such providers. This law creates additional risk that relationships with referral sources could be problematic. For anti-corruption legislation, the U.S. Foreign Corrupt Practices Act (“FCPA”) is the most widely enforced law.
Further, the prohibitions cover the payment or offer of remuneration to induce a referral to, or in exchange for, an individual using the services of, such providers. This law creates additional risk that relationships with referral sources could be problematic. For anti-corruption legislation, the U.S. Foreign Corrupt Practices Act (“FCPA”) has historically been widely enforced.
The privacy regulations govern the use and disclosure of “protected” health information by covered healthcare providers, as well as health insurance plans.
The privacy regulations govern the use and disclosure of protected health information by covered healthcare providers, as well as health insurance plans.
If a clinical laboratory is found to be out of compliance with CLIA certification, CAP accreditation or a state license or permit, the applicable regulatory agency may, among other things, suspend, restrict or revoke the certification, accreditation, license or permit to operate the clinical laboratory, assess civil monetary penalties and impose specific corrective action plans, among other sanctions. 21 LDTs in the U.S.
If a clinical laboratory is found to be out of compliance with CLIA certification, CAP accreditation or a state license or permit, the applicable regulatory agency may, among other things, suspend, restrict or revoke the certification, accreditation, license or permit to operate the clinical laboratory, assess civil monetary penalties and impose specific corrective action plans, among other sanctions.
We also may be eligible to receive approximately $1.8 billion over time, including payments of up to $65.0 million upon the achievement of specified regulatory milestones, up to $300.0 million upon the achievement of specified development milestones, and up to $1.4 billion upon the achievement of specified commercial milestones.
The Genentech Agreement provides that we also may be eligible to receive approximately $1.8 billion over time, including payments of up to $65.0 million upon the achievement of specified regulatory milestones, up to $300.0 million upon the achievement of specified development milestones, and up to $1.4 billion upon the achievement of specified commercial milestones.
Therapeutic Antibodies We developed a therapeutic antibody discovery process called TruAB from which neutralizing antibodies have been and are being produced against target antigens in conditions such as SARS-CoV-2, influenza, Respiratory Syncytial Virus, inflammatory bowel disease and MS. Patent applications to a number of these antibodies have been filed and are pending.
Therapeutic Antibodies We developed a therapeutic antibody discovery process called TruAB from which neutralizing antibodies have been and are being produced against target antigens in conditions such as SARS-CoV-2, Type 1 diabetes, influenza, Respiratory Syncytial Virus, inflammatory bowel disease and MS. Patent applications across 11 patent families to a number of these antibodies have been filed and are pending.
In August 2020, the clonoSEQ label was expanded to include patients with CLL from bone marrow and blood samples. In 2022, the assay was launched as a CLIA-validated LDT to detect MRD in blood for patients with DLBCL by measuring circulating tumor DNA (“ctDNA”), which provides patients and clinicians with a powerful blood-based prognostic tool.
In August 2020, the clonoSEQ label was expanded to include patients with CLL from bone marrow and blood samples. In December 2022, we launched commercial promotion of clonoSEQ as a CLIA-validated LDT to detect MRD in blood for patients with DLBCL by measuring circulating tumor DNA (“ctDNA”), which provides patients and clinicians with a powerful blood-based prognostic tool.
We believe clonoSEQ has broad applicability across all lymphoid malignancies, including ALL, CLL, MM, and Non-Hodgkins Lymphoma (“NHL”) conditions (DLCBL, mantle cell lymphoma (“MCL”), and cutaneous T-cell lymphoma (“CTCL”). In September 2018, clonoSEQ was granted marketing authorization from the FDA, under the de novo process, for patients with MM and ALL to monitor their MRD from bone marrow samples.
We believe clonoSEQ has broad applicability across all lymphoid malignancies, including ALL, CLL, MM, and Non-Hodgkins Lymphoma (“NHL”) conditions, such as DLBCL, MCL and cutaneous T cell lymphoma (“CTCL”). In September 2018, clonoSEQ was granted marketing authorization from the FDA, under the de novo process, for patients with MM and ALL to monitor their MRD from bone marrow samples.
Our People and Culture Our employees, internally referred to as “Adapters,” are passionate about immune medicine, empowered by scientific discipline and fueled by our foresight and curiosity about the adaptive immune system. As of December 31, 2023, we had 709 full-time employees of which 132 hold medical or doctoral degrees.
Our People and Culture Our employees, internally referred to as “Adapters,” are passionate about immune medicine, empowered by scientific discipline and fueled by our foresight and curiosity about the adaptive immune system. As of December 31, 2024, we had 619 full-time employees of which 94 hold medical or doctoral degrees.
TCR and BCR DNA, ribonucleic acid or cell-free DNA from samples, including blood and bone marrow, are used to detect, prognose and monitor disease, including autoimmune disease, infection and cancer. More than 112 patents have been granted in the portfolio as of December 31, 2023, including U.S. Patent Nos. 8,628,927 and 8,236,503.
TCR and BCR DNA, ribonucleic acid or cell-free DNA from samples, including blood and bone marrow, are used to detect, prognose and monitor disease, including autoimmune disease, infection and cancer. Sixty-two patents have been granted in the portfolio as of December 31, 2024, including U.S. Patent Nos. 8,628,927 and 8,236,503.
The claimed approach utilizes synthetic templates, reflecting nucleic acid sequences for rearranged V and J receptor segments in the sampled cells. More than 28 related patent applications have since been filed, many of which have been granted as of December 31, 2023, including U.S. Patent Nos. 9,371,558 and 10,214,770.
The claimed approach utilizes synthetic templates, reflecting nucleic acid sequences for rearranged V and J receptor segments in the sampled cells. Twenty-three related patent applications have since been filed, many of which have been granted as of December 31, 2024, including U.S. Patent Nos. 9,371,558 and 10,214,770.
For instance, with the use of clonoSEQ we have the potential to accelerate the development of drugs in lymphoid cancers, assist physicians with critical clinical decisions and enable treatment decisions which may lower payor cost through the discontinuation of costly drugs that are no longer needed.
For instance, our clonoSEQ assay has the potential to assist physicians with critical clinical decisions, accelerate the development of drugs in lymphoid cancers and enable treatment decisions which may lower payor cost through the discontinuation of costly drugs that are no longer needed.
We are also pursuing a patent application to TCRs responsive to other cancer antigens which are of interest in our collaboration with Genentech.
We have pursued a patent application to TCRs responsive to other cancer antigens which are of interest in our collaboration with Genentech.
Intellectual Property Portfolio by the Numbers As of December 31, 2023, our intellectual property portfolio consisted of the following: • More than 800 patent applications filed worldwide directly or in conjunction with a co-owner or licensor since 2009; • More than 55 pending patent applications; • More than 450 issued patents across our immune medicine platform, including more than 145 patents related to diagnostic approaches in lymphoid malignancies; • 24 patent families directed to methods and tools useful in our immune medicine platform for non-target specific immunosequencing and research; • 17 patent families directed to methods and tools useful in diagnosis, prognosis and disease monitoring, including clonoSEQ, certain diagnostic methods and the TCR-Antigen Map; • 12 patent families directed to methods and tools useful in drug discovery, including our drug discovery screening processes, MIRA and pairSEQ; • 3 patent families directed to therapeutic antibodies and novel antigen targets; • 1 patent family directed to SARS-CoV-2 vaccines; • 3 patent families directed to gene sequencing technology; and • 28 trademarks registered and pending registration worldwide.
Intellectual Property Portfolio by the Numbers As of December 31, 2024, our intellectual property portfolio consisted of the following: • 847 patent applications filed worldwide directly or in conjunction with a co-owner or licensor since 2009; • 70 pending patent applications; • 416 issued and allowed patents across our immune medicine platform, including more than 151 patents related to diagnostic approaches in lymphoid malignancies; • 24 patent families directed to methods and tools useful in our immune medicine platform for non-target specific immunosequencing and research; • 17 patent families directed to methods and tools useful in diagnosis, prognosis and disease monitoring, including clonoSEQ, certain diagnostic methods and TCR-antigen binding; • 12 patent families directed to methods and tools useful in drug discovery, including our drug discovery screening processes, MIRA and pairSEQ; • 1 patent family directed to SARS-CoV-2 vaccines; • 11 patent families directed to novel antigen targets and immune medicine-based therapeutic modalities; • 4 patent families directed to gene sequencing technology; and • 28 trademarks registered and pending registration worldwide.
The Genentech Agreement accounted for 25%, 34% and 40% of our revenue for the year ended December 31, 2023, 2022 and 2021, respectively.
The Genentech Agreement accounted for 8%, 25% and 34% of our revenue for the year ended December 31, 2024, 2023 and 2022, respectively.
It is comprised of our clonoSEQ clinical diagnostic test, offered to clinicians, and our clonoSEQ assay offered to biopharmaceutical partners to advance drug development efforts. We believe clonoSEQ is the test of choice in MRD testing for hematological malignancies with industry leading sensitivity of 1 out of 1,000,000 cells, given sufficient sample input.
It is comprised of our clonoSEQ clinical diagnostic testing service for clinicians and our MRD Pharma service, which consists of offering our clonoSEQ assay to biopharmaceutical partners to advance drug development efforts. We believe clonoSEQ is the preeminent MRD testing choice for hematological malignancies with industry leading sensitivity of 1 out of 1,000,000 cells, given sufficient sample input.
Some of the state laws governing health information privacy and security are more stringent than HIPAA (including providing for patient enforcement of these state laws) and often differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
Some of the state laws governing health information privacy and security are more stringent than HIPAA (including providing a private right to litigate for patients under these state laws) and often differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
One area of these laws relates to use and testing of genetic and genomic data. In addition to the federal Genetic Information Nondiscrimination Act, there are a number of state laws that have recently passed (e.g., the California Genetic Information Privacy Act) and that continue to make appearances on states’ legislative schedules.
In addition to the federal Genetic Information Nondiscrimination Act, there are a number of state laws that have recently passed (e.g., the California Genetic Information Privacy Act) and that continue to make appearances on states’ legislative schedules.
Genentech will also pay us tiered royalties at a rate ranging from the mid-single digits to the mid-teens on aggregate worldwide net sales of the Shared Products and the Personalized Product arising from the strategic collaboration, subject to certain reductions, with aggregate minimum floors.
The Genentech Agreement further provides that Genentech will pay us tiered royalties at a rate ranging from the mid-single digits to the mid-teens on aggregate worldwide net sales of the products arising from the strategic collaboration, subject to certain reductions, with aggregate minimum floors.
Throughout our processes, we apply a rigorous quality management system, which is designed to comply with the Quality System Regulation (“QSR”) and the requirements of CLIA, CAP and other applicable state licensing and accreditation requirements.
Throughout our processes, we apply a rigorous quality management system, which is designed to comply with the Quality System Regulation (“QSR”) and the requirements of the Clinical Laboratory Improvements Amendment of 1988 ("CLIA"), the College of American Pathologists ("CAP") and other applicable state licensing and accreditation requirements.
In that respect, Congress introduced legislation to establish a framework for the FDA to oversee marketing of in vitro clinical tests (“IVCTs”), such as test kits and LDTs (the Verifying Accurate Leading-edge IVCT Development Act, or “VALID Act”).
On the legislative front, Congress introduced the Verifying Accurate Leading-edge IVCT Development Act (“VALID Act”) several times to establish a framework for the FDA to oversee marketing of in vitro clinical tests (“IVCTs”), such as test kits and LDTs.
Raw sequence data are uploaded from the sequencing instrument to our analysis pipeline. 6. Sequence data is analyzed in a multi-step process, where a sample’s sequence data is first identified using the sample index sequences and the data is then processed using a proprietary algorithm with in-line controls to remove amplification bias. 7.
Sequence data is analyzed in a multi-step process, where a sample’s sequence data is first identified using the sample index sequences and the data is then processed using a proprietary algorithm with in-line controls to remove amplification bias. 7.
The products must bear the statement: “For Research Use Only. Not for use in diagnostic procedures.” RUO products cannot make any claims related to safety, effectiveness or diagnostic utility, and they cannot be intended for human clinical diagnostic use.
Thus, RUO products may be used or distributed for research use without first obtaining FDA clearance, authorization or approval. The products must bear the statement: “For Research Use Only. Not for use in diagnostic procedures.” RUO products cannot make any claims related to safety, effectiveness or diagnostic utility, and they cannot be intended for human clinical diagnostic use.
Therefore, blood-based MRD testing may enable more frequent monitoring of patients over longer periods of time. We believe continued validation of clonoSEQ in blood will increase usage, particularly by clinicians in the community setting who perform fewer bone marrow aspirations. • Expand clonoSEQ in NHL.
Testing with blood is less invasive for patients and less expensive as compared to MRD testing from bone marrow samples. Therefore, blood-based MRD testing may enable more frequent monitoring of patients over longer periods of time. We believe continued validation of clonoSEQ in blood will increase usage, particularly by clinicians in the community setting who perform fewer bone marrow aspirations.
Having obtained FDA marketing authorization and expanded coverage to 300 million covered lives for multiple indications of clonoSEQ from Medicare, national private payors and large regional plans, we believe we have developed valuable core capabilities that will facilitate future product development through to regulatory approval and reimbursement. • Strong intellectual property protects our immune medicine platform and its applications.
Having obtained FDA marketing authorization and expanded coverage to greater than 300 million covered lives for multiple indications of clonoSEQ from Medicare, national private payors and large regional plans, we believe we have developed valuable core capabilities that will facilitate future product development through to regulatory approval and reimbursement. • Our proprietary immunomics database provides a robust product development engine.
Due to the significant interest and growth in immune medicine more broadly, we expect the intensity of the competition to increase. However, we believe our scale, precision and speed, and the resulting clinical applicability, distinguish us from our competitors. In clinical diagnostics, clonoSEQ faces competition primarily from institutions performing flow cytometry in-house, particularly outside of the U.S.
Due to the significant interest and growth in immune medicine more broadly, we expect the intensity of the competition to increase. However, we believe our scale, precision and speed, and the resulting clinical applicability, distinguish us from our competitors.
As of December 31, 2023, we had $346.4 million in cash, cash equivalents and marketable securities. In 2023, we focused on reducing our operating expense growth rate.
As of December 31, 2024, we had $256.0 million in cash, cash equivalents and marketable securities. In 2024, we focused on reducing our operating expense growth rate and improving margin profile.
A violation of the AKS may be grounds for the government or a whistleblower to assert that a claim for payment of items or services resulting from such violation constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.
A violation of the AKS may be grounds for the government or a whistleblower to assert that a claim for payment of items or services resulting from such violation constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. 22 The civil monetary penalties statute is another potential statute under which a clinical laboratory may be subject to enforcement.
Immune medicine is being pursued by several biotechnology companies as well as by large-cap biopharmaceutical companies. Many of our current or potential competitors, either alone or with their collaboration partners, have significantly greater financial resources and expertise in research and development, manufacturing, regulatory approval and compliance, and sales and distribution than we do.
Many of our current or potential competitors, either alone or with their collaboration partners, have significantly greater financial resources and expertise in research and development, manufacturing, regulatory approval and compliance, and sales and distribution than we do.
We incurred interest expense of $13.8 million and $4.2 million under the Purchase Agreement for the year ended December 31, 2023 and 2022, respectively. Processing and Manufacturing We process both clinical and research use samples in our laboratory in Seattle, Washington. Our Seattle laboratory is CLIA-certified, College of American Pathologists (“CAP”)-accredited and International Organization for Standardization (“ISO”) 13485-certified.
We incurred interest expense of $11.6 million, $13.8 million and $4.2 million under the Purchase Agreement for the year ended December 31, 2024, 2023 and 2022, respectively. Processing and Manufacturing We process both clinical and research use samples in our laboratory in Seattle, Washington.
If only the First Payment has been made, the Applicable Payment Percentage shall be five percent of the quarterly Revenue Base. If both the First Payment and Second Payment have been made, the Applicable Payment Percentage shall be eight percent of the quarterly Revenue Base.
If both the First Payment and Second Payment have been made, the Applicable Payment Percentage shall be eight percent of the quarterly Revenue Base. If each of the First Payment, Second Payment and Third Payment have been made, the applicable payment percentage applied to the Revenue Interest shall be ten percent of the quarterly Revenue Base.
In October 2022, we entered into a partnership with Epic to integrate clonoSEQ into Epic’s EMR system, which we believe will enable easier test ordering and results access for the clonoSEQ test.
In October 2022, we entered into a partnership with Epic to integrate clonoSEQ into Epic’s EMR system, which we believe will enable easier test ordering and results access for the clonoSEQ test. As of December 2024, clonoSEQ is integrated into the Epic instances at 18 customer accounts. In 2024, we entered into a partnership with Flatiron Health, Inc.
As of December 31, 2023, we had filed over 800 patent applications, more than 450 of which were issued and active as of that date, covering improvements in sequencing methods and new ways to leverage adaptive immune receptors for our MRD and IM business areas.
As of December 31, 2024, we had filed 847 patent applications, 416 of which were issued and active as of that date, covering improvements in sequencing methods and new ways to leverage adaptive immune receptors for our MRD and IM business areas. • We are well capitalized and believe we are on a path to profitability for our MRD business.
Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include sanctions, including but not limited to, warning letters; fines, injunctions, and civil penalties; recall or seizure of the device; operating restrictions, partial suspension or total shutdown of production; refusal to grant 510(k) clearance or premarket approvals (“PMAs”) of new devices; withdrawal of clearance or approval; and civil or criminal prosecution.
Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include sanctions, including but not limited to, warning letters; fines, injunctions, and civil penalties; recall or seizure of the device; operating restrictions, partial suspension or total shutdown of production; refusal to grant 510(k) clearance or premarket approvals (“PMAs”) of new devices; withdrawal of clearance or approval; and civil or criminal prosecution. 19 Position outside of the United States In the European Union (“EU”), IVDs can be placed on the market by obtaining a “CE mark,” which demonstrates conformity via a self-certification with the In vitro Diagnostic Medical Device Directive (“IVDD”).
One prominent law that is pending finalization is the European Union's AI Act.
One prominent law that has been finalized is the European Union's AI Act.
A number of our processing steps utilize automated equipment to help ensure consistency and efficiency. Sequencing is performed using the Illumina NextSeq System, which we have appropriately qualified for the intended uses of our products and services. For our TCR-Antigen Map and drug discovery initiatives, we conduct our operations at our laboratories in Seattle, Washington and South San Francisco, California.
A number of our processing steps utilize automated equipment to help ensure consistency and efficiency. Sequencing is performed using the Illumina NextSeq System, which we have appropriately qualified for the intended uses of our products and services.
We secured clonoSEQ coverage with Medicare for DLBCL patients regardless of line of therapy, treatment regimen or testing timepoint. clonoSEQ is the first and only MRD test to receive Medicare coverage in DLBCL. We anticipate receiving Medicare coverage for another NHL condition, MCL, in early 2024.
In July 2022, coverage expansion continued as we secured Medicare coverage for DLBCL, the most common form of NHL. We secured clonoSEQ coverage with Medicare for DLBCL patients regardless of line of therapy, treatment regimen or testing timepoint. clonoSEQ is the first and only MRD test to receive Medicare coverage in DLBCL.
Government Regulation Life Sciences Research Use Only Technologies Our core research product, Adaptive Immunosequencing, is a research use only (“RUO”) tool in the U.S. that provides data to third parties such as biopharmaceutical companies that are themselves engaged in the research and development of potential diagnostic and therapeutic products and services for which they may later pursue investigation and clearance, authorization or approval from regulatory authorities, such as the FDA. 19 RUO products belong to a separate regulatory classification under a long-standing FDA regulation.
Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the relevant market. 18 Government Regulation Life Sciences Research Use Only Technologies Our core research product in IM, Adaptive Immunosequencing, is a research use only (“RUO”) tool in the U.S. that provides data to third parties such as biopharmaceutical companies that are themselves engaged in the research and development of potential diagnostic and therapeutic products and services for which they may later pursue investigation and clearance, authorization or approval from regulatory authorities, such as the FDA.
However, antigens can be recognized as foreign even if they are not from a virus or pathogen. In cancer cells, tumor associated antigens (“TAAs”) are normal proteins that are aberrantly expressed in a tumor; neoantigens are mutated versions of normal proteins that are specific to the cancer and not found in healthy normal cells.
In cancer cells, tumor associated antigens (“TAAs”) are normal proteins that are aberrantly expressed in a tumor; neoantigens are mutated versions of normal proteins that are specific to the cancer and not found in healthy normal cells. Both TAAs and neoantigens are recognized by the immune system as foreign.
In August 2020, we received FDA clearance for clonoSEQ, following a 510(k) submission, for CLL in bone marrow as well as blood samples. We also received FDA clearance in 2021 for ALL from blood samples, launched a NHL (DLBCL) test under CLIA as a LDT and are actively advancing validation studies in certain other NHL sub-types.
We also received FDA clearance in 2021 for ALL from blood samples, launched in DLBCL and MCL, subtypes of NHL, under CLIA as a LDT and are actively advancing validation studies in certain other NHL sub-types such as CTCL.
After we intake samples sent to us from healthcare providers or research and biopharmaceutical customers, we extract DNA from the sample if required, amplify it and otherwise prepare it for our sequencing and data analysis.
Our Seattle laboratory is CLIA-certified, CLEP-certified, College of American Pathologists (“CAP”)-accredited and International Organization for Standardization (“ISO”) 13485-certified, and IVDR-certified. After we intake samples sent to us from healthcare providers or research and biopharmaceutical customers, we extract DNA from the sample if required, amplify it and otherwise prepare it for our sequencing and data analysis.
It is comprised of our clonoSEQ clinical diagnostic test, offered to clinicians, and our clonoSEQ assay, offered to biopharmaceutical partners, to advance drug development efforts (“MRD Pharma”). clonoSEQ is the first test authorized by the Food and Drug Administration (“FDA”) for the detection and monitoring of MRD in patients with multiple myeloma (“MM”), B cell acute lymphoblastic leukemia (“ALL”) and chronic lymphocytic leukemia (“CLL”) and is also available as a CLIA-validated laboratory developed test (“LDT”) for patients with other lymphoid cancers, including diffuse large B-cell lymphoma (“DLBCL”).
We believe the total addressable market for the MRD business is approximately $5.5 billion, approximately $4.8 billion of which is derivable from clinical testing. clonoSEQ is the first test authorized by the Food and Drug Administration (“FDA”) for the detection and monitoring of MRD in patients with multiple myeloma (“MM”), B cell acute lymphoblastic leukemia (“ALL”) and chronic lymphocytic leukemia (“CLL”), and it is also available as a CLIA-validated laboratory developed test (“LDT”) for patients with other lymphoid cancers, including diffuse large B cell lymphoma (“DLBCL”) and mantle cell lymphoma (“MCL”).
In these respects, our proprietary data and capabilities uniquely position IM to discover and develop therapeutic candidates such as TCR-based modalities, antibodies and potentially vaccines to better understand immune-mediate biology and treat challenging conditions such as cancer and autoimmune disorders. 10 The tremendous potential of IM in drug discovery is demonstrated by the Genentech Agreement.
In these respects, our proprietary data and capabilities uniquely position the IM business to discover and develop differentiated therapeutic candidates such as TCR-based modalities, antibodies and potentially vaccines to better understand immune-mediate biology and treat challenging conditions such as cancer and autoimmune disorders. 11 Under the Genentech Agreement, the IM business supports Genentech in the development of cancer antigen-directed TCR-based cancer cell therapies for the treatment of patients with solid tumors.
We have created a powerful data engine to drive the development of novel therapies. These datasets, which we own, include over 100,000 signatures of cancer and autoimmune disease and approximately 500,000 matches of TCRs to disease-related antigens.
We have created a powerful data engine to drive the development of novel therapies. These datasets, which we own, include more than 100,000 signatures of cancer and autoimmune disease and more than 2,000,000 matches of TCRs to disease-related antigens. We believe that by tapping into these datasets, there is tremendous value in the development of immune-based therapeutics.
This LCD not only affirmed the importance of MRD and clonoSEQ coverage in ALL, MM and CLL in bone marrow and blood, but it also provided a clear and efficient pathway for seeking expanded clonoSEQ coverage through technical assessments in NHL. 8 In July 2022, coverage expansion continued as we secured Medicare coverage for DLBCL, the most common form of NHL.
In November 2021, MolDX published its local coverage decision (“LCD”) for MRD testing. This LCD not only affirmed the importance of MRD and clonoSEQ coverage in ALL, MM and CLL in bone marrow and blood, but it also provided a clear and efficient pathway for seeking expanded clonoSEQ coverage through technical assessments in NHL.
If each of the First Payment, Second Payment and Third Payment have been made, the applicable payment percentage applied to the Revenue Interest shall be ten percent of the quarterly Revenue Base. Payments in respect of the Revenue Interests shall be made quarterly within 45 days following the end of each fiscal quarter (each, a “Revenue Interest Payment”).
Payments in respect of the Revenue Interests shall be made quarterly within 45 days following the end of each fiscal quarter (each, a “Revenue Interest Payment”).
In contrast to the static human genome that is made up of approximately 30,000 genes, the adaptive immune repertoire of a healthy adult consists of more than 100 million different genes. This massive genetic diversity gives the immune system the ability to detect and respond to millions of different antigens associated with human disease.
Unlike all other genes in the human genome, the genetic sequences of TCRs and BCRs rearrange over time creating massive genetic diversity. In contrast to the static human genome that is made up of approximately 30,000 genes, the adaptive immune repertoire of a healthy adult consists of more than 100 million different genes.
The civil monetary penalties statute also prohibits a person from offering or providing remuneration to any Medicare or Medicaid beneficiary that is likely to influence the individual to order or receive its items or services from a particular provider or supplier. 23 The exclusion statute requires the exclusion of entities and individuals who have been convicted of federal-program related crimes or healthcare felony fraud or controlled substance charges.
The civil monetary penalties statute also prohibits a person from offering or providing remuneration to any Medicare or Medicaid beneficiary that is likely to influence the individual to order or receive its items or services from a particular provider or supplier.
Immunosequencing reveals the nucleotide structure of each individual chain, but not which chains match as cognate pairs. We developed and are pursuing patent protection for multiple bioinformatic-based approaches to pairing the two chains of TCRs and BCRs, including one deployed in our pairSEQ technique.
We developed and are pursuing patent protection for multiple bioinformatic-based approaches to pairing the two chains of TCRs and BCRs, including one deployed in our pairSEQ technique. Our methods also allow for identification of receptor chain pairs which are specific to particular antigen targets.
From an FDA perspective, products that are intended for research use only and are labeled as RUO are exempt from most regulatory controls, and are therefore not subject to the regulatory requirements discussed below for clinical diagnostic products. Thus, RUO products may be used or distributed for research use without first obtaining FDA clearance, authorization or approval.
RUO products belong to a separate regulatory classification under a long-standing FDA regulation. From an FDA perspective, products that are intended for research use only and are labeled as RUO are exempt from most regulatory controls and are therefore not subject to the regulatory requirements discussed below for clinical diagnostic products.
Extracted DNA quality is assessed, and rearranged immune receptors are amplified using a multiplex polymerase chain reaction (“PCR”). 3. Reaction-specific index barcode sequences for sample identification are added to the amplified receptor sequences by PCR. 4. Sequencing libraries are prepared from barcoded amplified DNA which are then sequenced by synthesis using NGS. 5.
DNA is extracted from a fresh biological specimen, typically bone marrow (gDNA), blood (gDNA) or plasma (cell-free DNA). 2. Extracted DNA quality is assessed, and rearranged immune receptors are amplified using a multiplex polymerase chain reaction (“PCR”). 3. Reaction-specific index barcode sequences for sample identification are added to the amplified receptor sequences by PCR. 4.
Pre-collaboration, we filed 10 related patent applications for methods to produce antigen-exposed enriched T cell populations and identify their antigen specificities by comparison to a pre-exposure population of cells or by use of an algorithm. We have filed additional patent applications relating to algorithmic-based methods to characterize antigen specificities.
TCR-Antigen Binding We continue to make significant progress in our understanding of the T-cell mediated response across different indications. We filed 10 related patent applications for methods to produce antigen-exposed enriched T cell populations and identify their antigen specificities by comparison to a pre-exposure population of cells or by use of an algorithm.
The proprietary datasets we have generated to date include over 100,000 signatures of disease (such as cancer and autoimmune conditions) and approximately 500,000 matches of paired TCRs to disease-related antigens. Drug Discovery We are focusing our drug discovery programs to develop therapies on our own or in partnership.
The proprietary datasets we have generated to date include more than 100,000 signatures of disease (such as cancer and autoimmune conditions) and over 2,000,000 matches of paired TCRs to disease-related antigens.
The innate and adaptive immune systems both play a role in human immunity. However, the adaptive immune system alone provides a specific response to signals of disease, or antigens. These disease specific antigens are primarily fragments of proteins that are recognized as foreign, such as proteins from a virus.
It recognizes and responds to most antigens, whether they come from outside the body, such as a virus, or inside the body, such as mutations that drive cancer. 4 The innate and adaptive immune systems both play a role in human immunity. However, the adaptive immune system alone provides a specific response to signals of disease, or antigens.
We translate the natural capabilities of the immune system into the clinic by capturing the millions of diverse unique receptors present in a patient’s blood.
We are using the adaptive immune system to build a dynamic clinical immunomics database that is machine learning/AI-enabled. We translate the natural capabilities of the immune system into the clinic by capturing the millions of diverse unique receptors present in a patient’s blood.
These include requirements to develop and implement programs to protect workers from exposure to blood-borne pathogens by preventing or minimizing any exposure through needle stick or similar penetrating injuries. U.S.
These include requirements to develop and implement programs to protect workers from exposure to blood-borne pathogens by preventing or minimizing any exposure through needle stick or similar penetrating injuries. U.S. Healthcare Reform In the U.S., a number of legislative and regulatory changes at the federal and state levels have sought to reduce healthcare costs and improve the quality of healthcare.
The combination of our large, quality data and our ability to generate additional insights creates a data foundation which we will continue to leverage to accelerate our target and drug discovery efforts. • We are well capitalized and on a path to profitability for our MRD business area.
The combination of our large, quality data and our ability to generate additional insights creates a data foundation which we will continue to leverage to accelerate our target and drug discovery efforts. • Strong intellectual property protects our immune medicine platform and its applications.
Revenue Interest Purchase Agreement In September 2022, we entered into a Revenue Interest Purchase Agreement (the "Purchase Agreement") with OrbiMed Royalty & Credit Opportunities IV, LP ("OrbiMed"), an affiliate of OrbiMed Advisors LLC, as collateral agent and administrative agent for the purchasers party thereto (the “Purchasers”).
The Genentech Agreement will continue until the expiration of all royalty payments, but may be terminated by mutual agreement, upon an uncured material breach by either party, upon insolvency of either party, or by Genentech for convenience upon prior written notice. 13 Revenue Interest Purchase Agreement In September 2022, we entered into a Revenue Interest Purchase Agreement (the "Purchase Agreement") with OrbiMed Royalty & Credit Opportunities IV, LP ("OrbiMed"), an affiliate of OrbiMed Advisors LLC, as collateral agent and administrative agent for the purchasers party thereto (the “Purchasers”).

… 189 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

172 edited+28 added−31 removed470 unchanged
Biggest changeSummary of Risk Factors Generally, the risks described below relate to the following: • our significant net losses since inception, expected net losses in the future and need for significant investments in products and services, as well as our ability to manage operating expenses in light of profitability goals; • our collaboration with Genentech and ability to develop and commercialize cellular therapeutics, including our ability to achieve milestones and realize the intended benefits of the collaboration; • our laboratory operations, including errors or defects in our products or services and our reliance on a limited number of suppliers, and in some cases single suppliers, for our equipment and materials, some of which include reagents or other materials that may also require additional internal validation prior to use; • our limited experience with the development and commercialization of therapeutic products, including cellular therapies and antibodies; • our ability to leverage our immune medicine platform to discover, develop and commercialize target antigens and therapeutic products may not be successful; • our expected and potential reliance on collaborators for development and clinical testing of therapeutic product candidates, which may fail at any time due to a number of possible unforeseen events; • market acceptance of our products and services; • our ability to increase our capacity, manage the evolution of our products and services, stay current in our rapidly changing industry and otherwise manage our growth; • the loss of any member of our senior management team, or of the support of key opinion leaders; • the extensive regulation of our industry, including reimbursement coverage decisions; • the validity of our patents, protection of our trade secrets and related intellectual property matters; and • the effects of health epidemics in regions where we or third parties on which we rely have significant laboratory operations, manufacturing facilities, concentrations of clinical trial sites or other business operations. 29 Risks Relating to Our Business We have incurred significant losses since inception, we expect to incur losses in the future and we may not be able to generate sufficient revenue to achieve and maintain profitability.
Biggest changeSummary of Risk Factors Generally, the risks described below relate to the following: • our significant net losses since inception, expected net losses in the future and need for significant investments in products and services, as well as our ability to manage operating expenses in light of profitability goals; • market acceptance and our ability to increase the adoption of our products and services, including via coverage or reimbursement decisions related to our clinical diagnostic products; • our ability to increase our capacity, manage the evolution of our products and services, stay current in our rapidly changing industry and otherwise manage our growth; • our laboratory operations, including errors or defects in our products or services and our reliance on a limited number of suppliers, and in some cases single suppliers, for our equipment and materials, some of which include reagents or other materials that may also require additional internal validation prior to use; • our collaboration with Genentech and ability to develop and commercialize cellular therapeutics, including our ability to achieve milestones and realize the intended benefits of the collaboration; • our limited experience with the development and commercialization of therapeutic products, including cellular therapies and antibodies; • our expected and potential reliance on collaborators for development and clinical testing of therapeutic product candidates, which may fail at any time due to a number of possible unforeseen events; • the extensive regulation of our industry, including fraud and abuse laws and data privacy regulations; • the loss of any member of our senior management team, or of the support of key opinion leaders; and • the validity of our patents, protection of our trade secrets and related intellectual property matters. 28 Risks Relating to Our Business We have incurred significant losses since inception, we expect to incur losses in the future and we may not be able to generate sufficient revenue to achieve and maintain profitability.
We expect to continue to incur significant expenses and operating losses as we continue to invest in the development of products and services utilizing our immune medicine platform to support the validation of additional clinical diagnostic and therapeutic products and services. We will need to generate significant additional revenue to achieve and sustain profitability.
We expect to continue to incur significant expenses and operating losses as we continue to invest in the development of products and services utilizing our immune medicine platform to support the validation of additional clinical therapeutic and diagnostic products and services. We will need to generate significant additional revenue to achieve and sustain profitability.
We expect to make significant investments in our continued research and development of new products and services, which may not be successful. We are seeking to leverage our immune medicine platform to develop a pipeline of future disease-specific research, diagnostic and therapeutic products.
We expect to make significant investments in our continued research and development of new products and services, which may not be successful. We are seeking to leverage our immune medicine platform to develop a pipeline of future disease-specific research, therapeutic and diagnostic products.
Our future success is dependent on our and Genentech’s ability to successfully develop therapeutic product candidates and advance those product candidates into the clinic, and Genentech’s ability, where applicable, to obtain regulatory and marketing approval for, and then successfully commercialize, cellular therapeutics.
Our future success is dependent on our and Genentech’s ability to successfully develop therapeutic product candidates and advance those product candidates into the clinic, and Genentech’s ability, where applicable, to obtain regulatory and marketing approval for, and then to successfully commercialize, cellular therapeutics.
We or our collaborators may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our or their ability to conduct further clinical trials or obtain regulatory clearance, authorization or approval of or commercialize future products and services or improvements to current products and services, including: Evolving Regulatory Requirements and Policies • the area of “precision medicine” or “personalized medicine” and its regulation may be subject to ongoing changes in terms of regulatory requirements and governmental policies, in ways we cannot predict; Trial Design • regulatory authorities or ethical review boards, including IRBs, may not authorize commencement of a clinical trial or conduct a clinical trial at a prospective trial site; • there may be delays in reaching or failure to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites; 36 • the FDA or other regulatory authorities may disagree with a clinical trial design or a sponsor’s interpretation of data and may change the requirements for product clearance, authorization or approval even after they have reviewed and commented on the clinical trial design; • differences in trial design between early stage clinical trials and later-stage clinical trials may make it difficult to extrapolate the results of earlier clinical trials to later clinical trials; • the FDA or other regulatory authorities may disagree about whether study endpoints are clinically meaningful; • the number of patients, or amount of data, required for clinical trials, or improvements to current products, may be larger than anticipated, patient enrollment in these clinical trials may be slower than anticipated or patients may drop out of clinical trials at a higher rate than anticipated; Testing • changes may be made to product candidates after commencing clinical trials, which may require that previously completed stages of clinical testing be repeated or delay later stages of testing, for example, we, or our collaborators, may pursue one or more different product development pathways for our T cell therapeutic products; • clinical trials may fail to satisfy the applicable regulatory requirements of the FDA or other regulatory authorities responsible for oversight of the conduct of clinical trials in other countries; • regulators may elect to impose a clinical hold, or governing IRBs, data safety monitoring board or ethics committees may elect to suspend or terminate our clinical research or trials for various reasons, including non-compliance with regulatory requirements or a finding that the participants are being exposed to unacceptable risks to their health or the privacy of their health information being disclosed; • the cost of clinical trials of future products, or improvements to current products, may be greater than we anticipate; • we may not have sufficient capacity in our laboratories to perform testing as requested or volumes requested or with the requested turnaround times necessary for clinical trials; • the supply or quality of materials or data necessary to conduct clinical trials of future products, or improvements to current products, may be insufficient or inadequate; Trial Outcomes • the outcome of our collaborators’ preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results; • product candidates may be associated with negative or inconclusive results in clinical trials, and we or our collaborators may decide to deprioritize or abandon these product candidates, or regulatory authorities may require us to abandon them or impose onerous changes or requirements, which could lead to deprioritization or abandonment; • product candidates may have undesirable side effects which could lead to serious adverse events, or other unexpected characteristics.
We or our collaborators may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our or their ability to conduct further clinical trials or obtain regulatory clearance, authorization or approval of or commercialize future products and services or improvements to current products and services, including: Evolving Regulatory Requirements and Policies • the area of “precision medicine” or “personalized medicine” and its regulation may be subject to ongoing changes in terms of regulatory requirements and governmental policies, in ways we cannot predict; Trial Design • regulatory authorities or ethical review boards, including IRBs, may not authorize commencement of a clinical trial or conduct a clinical trial at a prospective trial site; • there may be delays in reaching or failure to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites; • the FDA or other regulatory authorities may disagree with a clinical trial design or a sponsor’s interpretation of data and may change the requirements for product clearance, authorization or approval even after they have reviewed and commented on the clinical trial design; • differences in trial design between early stage clinical trials and later-stage clinical trials may make it difficult to extrapolate the results of earlier clinical trials to later clinical trials; • the FDA or other regulatory authorities may disagree about whether study endpoints are clinically meaningful; • the number of patients, or amount of data, required for clinical trials, or improvements to current products, may be larger than anticipated, patient enrollment in these clinical trials may be slower than anticipated or patients may drop out of clinical trials at a higher rate than anticipated; Testing • changes may be made to product candidates after commencing clinical trials, which may require that previously completed stages of clinical testing be repeated or delay later stages of testing, for example, we, or our collaborators, may pursue one or more different product development pathways for our T cell therapeutic products; • clinical trials may fail to satisfy the applicable regulatory requirements of the FDA or other regulatory authorities responsible for oversight of the conduct of clinical trials in other countries; • regulators may elect to impose a clinical hold, or governing IRBs, data safety monitoring board or ethics committees may elect to suspend or terminate our clinical research or trials for various reasons, including non-compliance with regulatory requirements or a finding that the participants are being exposed to unacceptable risks to their health or the privacy of their health information being disclosed; • the cost of clinical trials of future products, or improvements to current products, may be greater than we anticipate; • we may not have sufficient capacity in our laboratories to perform testing as requested or volumes requested or with the requested turnaround times necessary for clinical trials; • the supply or quality of materials or data necessary to conduct clinical trials of future products, or improvements to current products, may be insufficient or inadequate; Trial Outcomes • the outcome of our collaborators’ preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results; • product candidates may be associated with negative or inconclusive results in clinical trials, and we or our collaborators may decide to deprioritize or abandon these product candidates, or regulatory authorities may require us to abandon them or impose onerous changes or requirements, which could lead to deprioritization or abandonment; 36 • product candidates may have undesirable side effects which could lead to serious adverse events, or other unexpected characteristics.
Areas of the regulatory environment that may affect our ability to conduct business include, without limitation, federal and state laws relating to: • laboratory testing, including CLIA and state laboratory licensing laws; • the development, testing, use, distribution, promotion and advertising of research services, kits, clinical diagnostics and pharmaceutical therapies, including certain LDTs, and related services, which are regulated by the FDA under the FDCA and the FTC; • test ordering, documentation of tests ordered, billing practices and claims payment under CMS and the HHS OIG enforcing those laws and regulations; • cellular therapies, medical device and in vitro diagnostic clearance, marketing authorization or approval; • laboratory anti-mark-up laws; • the handling and disposal of medical and hazardous waste; • fraud and abuse laws such as the False Claims Act, the AKS, EKRA, and the Stark Law; • Occupational Safety and Health Administration rules and regulations; • HIPAA and other federal and state medical data privacy and security laws; • the Genetic Information Nondiscrimination Act (“GINA”) and similar state laws; and • coverage and restrictions on coverage and reimbursement for clinical diagnostics and pharmaceutical therapies and Medicare, Medicaid, other governmental payors and private insurers reimbursement levels.
Areas of the regulatory environment that may affect our ability to conduct business include, without limitation, federal and state laws relating to: • laboratory testing, including CLIA and state laboratory licensing laws; • the development, testing, use, distribution, promotion and advertising of research services, kits, clinical diagnostics and pharmaceutical therapies, including certain LDTs, and related services, which are regulated by the FDA under the FDCA and the FTC; • test ordering, documentation of tests ordered, billing practices and claims payment under CMS and the HHS OIG enforcing those laws and regulations; • cellular therapies, medical device and in vitro diagnostic clearance, marketing authorization or approval; • laboratory anti-mark-up laws; • the handling and disposal of medical and hazardous waste; • fraud and abuse laws such as the False Claims Act, the AKS, EKRA, and the Stark Law; • Occupational Safety and Health Administration rules and regulations; • HIPAA and other federal and state data privacy and security laws; • federal and state genetic information laws, such as the Genetic Information Nondiscrimination Act (“GINA”) and similar state laws; and • coverage and restrictions on coverage and reimbursement for clinical diagnostics and pharmaceutical therapies and Medicare, Medicaid, other governmental payors and private insurers reimbursement levels.
In the event that the FDA requires marketing authorization of our LDTs in the future, the FDA may not ultimately grant any clearance, authorization or approval requested by us in a timely manner, or at all.
In the event that the FDA requires marketing authorization of our LDTs in the future, the FDA may not ultimately grant any clearance or approval requested by us in a timely manner, or at all.
The legal systems of many other countries do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biotechnology, which could make it difficult for us to stop the infringement of our patents in such countries.
The legal systems of many other countries do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biotechnology, which could make it difficult for us to stop the infringement of our patents in such countries.
We and our collaborators may not succeed in achieving significant commercial market acceptance for our current or future products and services due to a number of factors, including: • our ability, and that of our collaborators, to secure and maintain FDA and other regulatory clearance, authorization or approval for our products; • the agreement by third-party payors to reimburse our diagnostics, the scope and extent of which will affect patients’ willingness or ability to pay for our diagnostics, even in markets that we expect to be primarily self-pay, and will likely heavily influence physicians’ decisions to recommend our tests; • the rate of adoption of our immune medicine platform and related products and services by academic institutions, clinicians, key opinion leaders, advocacy groups and biopharmaceutical companies; and • the impact of our investments in product innovation and commercial growth.
We and our collaborators may not succeed in achieving significant commercial market acceptance for our current or future products and services due to a number of factors, including: • our ability, and that of our collaborators, to secure and maintain FDA and other regulatory clearance, authorization or approval for our products; • the agreement by third-party payors to reimburse our diagnostics, the scope and extent of which will affect patients’ willingness or ability to pay for our diagnostics, even in markets that we expect to be primarily self-pay, and will likely heavily influence physicians’ decisions to recommend our tests; • the rate of adoption of our immune medicine platform and related products and services by academic institutions, clinicians, key opinion leaders, advocacy groups and biopharmaceutical companies; and 37 • the impact of our investments in product innovation and commercial growth.
Our estimates of the annual addressable markets for our current products and services and those under development are based on a number of internal and third-party estimates, including, without limitation, the number of patients who have developed one or more of a broad range of cancers, the number of individuals who are at a higher risk for developing one or more of a broad range of cancers, and the number of individuals who have developed or are at a higher risk of developing certain autoimmune disorders, as well as the proportion of patients in each market whose needs can be addressed by our or our collaborators’ products, and the assumed prices at which we can sell our current and future products and services for markets that have not been established.
Our estimates of the annual total addressable markets for our current products and services and those under development are based on a number of internal and third-party estimates, including, without limitation, the number of patients who have developed one or more of a broad range of cancers, the number of individuals who are at a higher risk for developing one or more of a broad range of cancers, and the number of individuals who have developed or are at a higher risk of developing certain autoimmune disorders, as well as the proportion of patients in each market whose needs can be addressed by our or our collaborators’ products, and the assumed prices at which we can sell our current and future products and services for markets that have not been established.
Our Articles of Incorporation and Bylaws contain provisions that: • authorize “blank check” preferred stock, which could be issued by our board of directors without shareholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock; • create a classified board of directors whose members serve staggered three-year terms, with one class being elected each year by our shareholders; 70 • specify that special meetings of our shareholders can be called only by our board of directors, the Chairperson of our board of directors, our chief executive officer or our president; • provide that a director may only be removed from the board of directors for cause and then only by the affirmative vote of our shareholders; • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even if less than a quorum; • specify that only our board of directors may change the size of our board of directors; • establish an advance notice procedure for shareholder proposals to be brought before an annual meeting of our shareholders, including proposed nominations of persons for election to our board of directors; • specify that no shareholder is permitted to cumulate votes at any election of directors; • expressly authorize our board of directors to modify, alter or repeal our Bylaws; and • require supermajority votes of the holders of our common stock to amend specified provisions of our Articles of Incorporation and Bylaws.
Our Articles of Incorporation and Bylaws contain provisions that: • authorize “blank check” preferred stock, which could be issued by our board of directors without shareholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock; • create a classified board of directors whose members serve staggered three-year terms, with one class being elected each year by our shareholders; 69 • specify that special meetings of our shareholders can be called only by our board of directors, the Chairperson of our board of directors, our chief executive officer or our president; • provide that a director may only be removed from the board of directors for cause and then only by the affirmative vote of our shareholders; • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even if less than a quorum; • specify that only our board of directors may change the size of our board of directors; • establish an advance notice procedure for shareholder proposals to be brought before an annual meeting of our shareholders, including proposed nominations of persons for election to our board of directors; • specify that no shareholder is permitted to cumulate votes at any election of directors; • expressly authorize our board of directors to modify, alter or repeal our Bylaws; and • require supermajority votes of the holders of our common stock to amend specified provisions of our Articles of Incorporation and Bylaws.
If we or our collaborators fail to comply with applicable regulatory requirements following clearance, authorization, approval, accreditation or licensure of any of our products and services, a regulatory agency may: • initiate an inspection of our or our collaborators’ facilities; • issue an untitled or warning letter asserting that we or our collaborators are in violation of law; • seek an injunction or impose civil or criminal penalties or monetary fines; 53 • suspend or withdraw regulatory clearance, authorization or approval, or revoke a license or accreditation; • suspend any ongoing clinical studies; • delay or refuse clearance, authorization or approval of a pending regulatory submission or supplement submitted by us or our collaborators; • impose restrictions on our or our collaborators’ cleared, authorized, approved, accredited or licensed products or services; • seize or recall the product or service; • partially suspend or entirely shut down our or our collaborators’ manufacturing or laboratory operations; • issue advisories or other field actions; • impose operating restrictions; • refuse to allow us or our collaborators to enter into supply contracts, including government contracts; or • refer matters to the DOJ or other enforcement or regulatory bodies.
If we or our collaborators fail to comply with applicable regulatory requirements following clearance, authorization, approval, accreditation or licensure of any of our products and services, a regulatory agency may: • initiate an inspection of our or our collaborators’ facilities; • issue an untitled or warning letter asserting that we or our collaborators are in violation of law; • seek an injunction or impose civil or criminal penalties or monetary fines; • suspend or withdraw regulatory clearance, authorization or approval, or revoke a license or accreditation; • suspend any ongoing clinical studies; • delay or refuse clearance, authorization or approval of a pending regulatory submission or supplement submitted by us or our collaborators; • impose restrictions on our or our collaborators’ cleared, authorized, approved, accredited or licensed products or services; • seize or recall the product or service; • partially suspend or entirely shut down our or our collaborators’ manufacturing or laboratory operations; • issue advisories or other field actions; 52 • impose operating restrictions; • refuse to allow us or our collaborators to enter into supply contracts, including government contracts; or • refer matters to the DOJ or other enforcement or regulatory bodies.
Our obligations under the Purchase Agreement could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things: • requiring the dedication of a portion of our cash flow from operations to service the Purchase Agreement obligations, which will reduce the amount of cash available for other purposes, and if our cash inflows and capital resources are insufficient to allow us to make required payments, we may have to reduce or delay additional investments in our operations or seek additional capital; 68 • increasing our vulnerability to adverse economic and industry conditions; • limiting our ability to obtain additional financing; • placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital; and • if we fail to comply with the terms of the Purchase Agreement, resulting in an event of default that is not cured or waived, the Purchasers could seek to enforce their security interest.
Our obligations under the Purchase Agreement could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things: • requiring the dedication of a portion of our cash flow from operations to service the Purchase Agreement obligations, which will reduce the amount of cash available for other purposes, and if our cash inflows and capital resources are insufficient to allow us to make required payments, we may have to reduce or delay additional investments in our operations or seek additional capital; 67 • increasing our vulnerability to adverse economic and industry conditions; • limiting our ability to obtain additional financing; • placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital; and • if we fail to comply with the terms of the Purchase Agreement, resulting in an event of default that is not cured or waived, the Purchasers could seek to enforce their security interest.
We may not realize the anticipated benefits of any acquisition, technology license, collaboration or joint venture. 43 To finance any acquisitions or joint ventures, we may choose to issue shares of our common stock as consideration, which would dilute the ownership of our shareholders. Additional funds may not be available on terms that are favorable to us, or at all.
We may not realize the anticipated benefits of any acquisition, technology license, collaboration or joint venture. To finance any acquisitions or joint ventures, we may choose to issue shares of our common stock as consideration, which would dilute the ownership of our shareholders. Additional funds may not be available on terms that are favorable to us, or at all.
This risk extends to the data we entrust to the third-party vendors and subcontractors that help us manage this sensitive data or otherwise process it on our behalf. The secure processing, storage, maintenance and transmission of this critical information are vital to our operations and business strategy, and we devote significant resources to protecting such information.
This risk extends to the data we entrust to the third-party vendors and subcontractors that help us manage this sensitive data or otherwise process it on our behalf. 58 The secure processing, storage, maintenance and transmission of this critical information are vital to our operations and business strategy, and we devote significant resources to protecting such information.
Any disruption in Illumina’s operations or the suppliers of our reagents, materials or other equipment could impact our ability to do business. 35 We believe there are only a few other equipment manufacturers that are currently capable of supplying the equipment necessary for our laboratory operations and product development, including sequencers and various associated reagents.
Any disruption in Illumina’s operations or the suppliers of our reagents, materials or other equipment could impact our ability to do business. We believe there are only a few other equipment manufacturers that are currently capable of supplying the equipment necessary for our laboratory operations and product development, including sequencers and various associated reagents.
Our diagnostic revenue depends in part on achieving broad coverage and reimbursement for our diagnostic tests from payors, including both private and government payors. Certain large private payors have issued policies that decline to cover testing methods that they regard as experimental or investigational. Other payors may issue similar non-coverage policies.
Our diagnostic revenue depends in part on achieving broad coverage and reimbursement for our clonoSEQ tests from payors, including both private and government payors. Certain large private payors have issued policies that decline to cover testing methods that they regard as experimental or investigational. Other payors may issue similar non-coverage policies.
Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory clearance, authorization or approval of products in development. 37 We may need to expand our workforce, commercial infrastructure and laboratory operations over time to support demand for our products.
Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory clearance, authorization or approval of products in development. We may need to expand our workforce, commercial infrastructure and laboratory operations over time to support demand for our products.
If the actual number of patients who would benefit from our products, the price at which we can sell future products and services or the annual addressable market for our products or services is smaller than we have estimated, it may impair our sales growth and have an adverse impact on our business.
If the actual number of patients who would benefit from our products, the price at which we can sell future products and services or the annual total addressable market for our products or services is smaller than we have estimated, it may impair our sales growth and have an adverse impact on our business.
Our executive officers have signed employment agreements with us, but their service is at-will and may end at any point in time. Our research and development initiatives and laboratory operations depend on our ability to attract and retain highly skilled scientists, technicians and software engineers.
Our executive officers have signed employment agreements with us, but their service is at-will and may end at any point in time. 39 Our research and development initiatives and laboratory operations depend on our ability to attract and retain highly skilled scientists, technicians and software engineers.
Conduct that results in a False Claims Act violation may also implicate various federal criminal statutes. 55 • The Criminal Health Care Fraud Statute, which imposes criminal and civil liability for knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors, and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
Conduct that results in a False Claims Act violation may also implicate various federal criminal statutes. 54 • The Criminal Health Care Fraud Statute, which imposes criminal and civil liability for knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors, and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
We may not be able to attract or retain qualified scientists, technicians or software engineers in the future due to the competition for qualified personnel among life sciences and technology businesses, particularly near our facilities located in Seattle, Washington and our laboratory facilities located in South San Francisco, California.
We may not be able to attract or retain qualified scientists, technicians or software engineers in the future due to the competition for qualified personnel among life sciences and technology businesses, particularly near our facilities located in Seattle, Washington and in South San Francisco, California.
Moreover, disputes may also arise between us and our licensors regarding intellectual property subject to a license agreement, including: • the scope of rights granted under the license agreement and other interpretation-related issues; • whether, and the extent to which, our products, services, technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; 64 • our right to sublicense patent and other rights to third parties under collaborative development relationships; • 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 licensors and us and our collaborators; and • the priority of invention of patented technology.
Moreover, disputes may also arise between us and our licensors regarding intellectual property subject to a license agreement, including: • the scope of rights granted under the license agreement and other interpretation-related issues; • whether, and the extent to which, our products, services, technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; 63 • our right to sublicense patent and other rights to third parties under collaborative development relationships; • 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 licensors and us and our collaborators; and • the priority of invention of patented technology.
In particular, for clonoSEQ we are attempting to generate sufficient clinical evidence to support the utility of MRD in additional lymphoid cancers beyond ALL, MM, CLL, and DLBCL while also demonstrating the clinical utility of blood as a sample type for all lymphoid cancers.
In particular, for clonoSEQ we are attempting to generate sufficient clinical evidence to support the utility of MRD in additional lymphoid cancers beyond ALL, MM, CLL, DLBCL and MCL while also demonstrating the clinical utility of blood as a sample type for all lymphoid cancers.
In order to eventually market any of our current or future products and services in any particular foreign jurisdiction, we must establish and comply with numerous and varying regulatory requirements on a jurisdiction-by-jurisdiction basis regarding quality, safety, performance and efficacy.
In order to market any of our current or future products and services in any particular foreign jurisdiction, we must establish and comply with numerous and varying regulatory requirements on a jurisdiction-by-jurisdiction basis regarding quality, safety, performance and efficacy.
Sales of substantial amounts of our common stock or other equity securities in the public market, particularly by our directors, executive officers and significant shareholders, including upon the expiration of any lock-up periods entered into in connection with offerings of our common stock or other equity securities, or the perception that these sales could occur, could materially and adversely affect the price of our common stock and impair our ability to raise capital through the sale of equity securities. 69 We are subject to financial reporting and other requirements for which our accounting and other management systems and resources may not be adequately prepared.
Sales of substantial amounts of our common stock or other equity securities in the public market, particularly by our directors, executive officers and significant shareholders, including upon the expiration of any lock-up periods entered into in connection with offerings of our common stock or other equity securities, or the perception that these sales could occur, could materially and adversely affect the price of our common stock and impair our ability to raise capital through the sale of equity securities. 68 We are subject to financial reporting and other requirements for which our accounting and other management systems and resources may not be adequately prepared.
We have limited resources to conduct our operations in both the MRD and IM business areas, and have not yet fully established infrastructure for sales, marketing or distribution in connection with all of our current or potential products.
We have limited resources to conduct our operations in both the MRD business and IM business areas, and have not yet fully established infrastructure for sales, marketing or distribution in connection with all of our current or future potential products.
These exclusive-forum provisions may limit a shareholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees or cause shareholders to incur additional costs to bring claims in the forums designated in our Articles of Incorporation. 71 If a court were to find these exclusive-forum provisions in our Articles of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations.
These exclusive-forum provisions may limit a shareholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees or cause shareholders to incur additional costs to bring claims in the forums designated in our Articles of Incorporation. 70 If a court were to find these exclusive-forum provisions in our Articles of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations.
We may not be able to perform our product research, development and commercialization related obligations under the Genentech Agreement, including performing TCR screening activities for product candidates being developed and commercialized under that agreement.
We may not be able to perform our research, development and commercialization related obligations under the Genentech Agreement, including performing TCR screening activities for product candidates being developed and commercialized under the Genentech Agreement.
In addition, certain state and local laws may impose additional transparency and healthcare compliance requirements on medical device manufacturers, as well as certain restrictions or limits on interactions with healthcare professionals. 56 • The FTCA, which the FTC interprets to require taking appropriate steps to secure consumers’ personal information and considers the failures to do so to constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the FTCA.
In addition, certain state and local laws may impose additional transparency and healthcare compliance requirements on medical device manufacturers, as well as certain restrictions or limits on interactions with healthcare professionals. 55 • The FTCA, which the FTC interprets to require taking appropriate steps to secure consumers’ personal information and considers the failures to do so to constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the FTCA.
Therefore, inefficient or variable processes can cause variability in our operating results and damage our reputation. In addition, our development laboratory operations could result in any number of errors or defects.
Therefore, inefficient or variable processes can cause variability in our operating results and damage our reputation. 32 In addition, our development laboratory operations could result in any number of errors or defects.
Any of these occurrences may harm our and our collaborators’ ability to identify and develop future products and services, and may significantly harm our business, financial condition, result of operations and prospects. 54 We are subject to various laws and regulations, such as healthcare fraud and abuse laws, false claim laws and health information privacy and security laws, among others, and failure to comply with these laws and regulations may have an adverse effect on our business.
Any of these occurrences may harm our and our collaborators’ ability to identify and develop future products and services, and may significantly harm our business, financial condition, result of operations and prospects. 53 We are subject to various laws and regulations, such as healthcare fraud and abuse laws, false claim laws and health information privacy and security laws, among others, and failure to comply with these laws and regulations may have an adverse effect on our business.
As a result, increasingly high barriers are being erected to the entry of new products. 47 Our business could be harmed by the loss, suspension or other restriction on a license, certification or accreditation, or by the imposition of a fine or penalties, under CLIA, its implementing regulations or other state, federal and foreign laws and regulations affecting licensure or certification, or by future changes in these laws or regulations.
As a result, increasingly high barriers are being erected to the entry of new products. 46 Our business could be harmed by the loss, suspension or other restriction on a license, certification or accreditation, or by the imposition of a fine or penalties, under CLIA, its implementing regulations or other state, federal and foreign laws and regulations affecting licensure or certification, or by future changes in these laws or regulations.
These laws and regulations are increasing in complexity and number, may change frequently and sometimes conflict. 57 The HIPAA privacy, security and breach notification regulations, including the expanded requirements under HITECH, establish comprehensive federal standards with respect to the uses and disclosures of PHI by health plans, healthcare providers, including laboratories, and healthcare clearinghouses, in addition to setting standards to protect the confidentiality, integrity and security of PHI.
These laws and regulations are increasing in complexity and number, may change frequently and sometimes conflict. 56 The HIPAA privacy, security and breach notification regulations, including the expanded requirements under HITECH, establish comprehensive federal standards with respect to the uses and disclosures of PHI by health plans, healthcare providers, including laboratories, and healthcare clearinghouses, in addition to setting standards to protect the confidentiality, integrity and security of PHI.
Courts frequently render opinions in the biotechnology field that may affect the patentability of certain inventions or discoveries, including opinions that may affect the patentability of diagnostic methods and biological molecules. 62 The patent position of companies engaged in the development and commercialization of clinical diagnostic tests (like our clonoSEQ diagnostic test) and of biologic material (such as TCRs) are particularly uncertain.
Courts frequently render opinions in the biotechnology field that may affect the patentability of certain inventions or discoveries, including opinions that may affect the patentability of diagnostic methods and biological molecules. 61 The patent position of companies engaged in the development and commercialization of clinical diagnostic tests (like our clonoSEQ diagnostic test) and of biologic material (such as TCRs) are particularly uncertain.
Factors relating to our business that may contribute to these fluctuations include the following, as well as other factors described elsewhere in this Annual Report on Form 10-K: • the timing of upfront payments from our collaborators; • our ability and that of our collaborators to develop and successfully commercialize our products, including therapeutic products; • our ability to achieve collaboration-based milestones on currently contemplated timelines, or at all; • availability and extent of reimbursement by governmental and private payors for our products; • the ability of our clinical sales teams to continue converting physicians from using incumbent products in the market to clonoSEQ and new diagnostic products and services we may develop; • our ability to continue driving repeat usage of the clonoSEQ diagnostic test by physicians and get reimbursed for that repeat usage by commercial and government payors for monitoring of MRD; • the outcomes of research initiatives, clinical trials or other product development or approval processes conducted by us or our collaborators; • the level of demand for our products; • our relationships, and any associated exclusivity terms, with collaborators; • our ability to manage our growth and operating expenses; • our contractual or other obligations to provide resources to fund our products and services and to provide resources to our collaborations; • delays or failures in advancement of future products in clinical trials by us or our collaborators; • risks associated with any future international expansion of our business, including the potential to conduct clinical trials and commercialize our products and services in multiple international locations; • our ability and that of our collaborators to consistently manufacture our products; • our dependence on, and the need to attract and retain, key management and other personnel; • our ability to obtain, protect and enforce our intellectual property rights; • our ability to prevent the theft or misappropriation of our intellectual property, know-how or technologies; 38 • our ability to obtain additional capital that may be necessary to expand our business; • our ability to accurately report our financial results in a timely manner; • business interruptions such as power outages, strikes, acts of terrorism or natural disasters; and • our ability to use our net operating loss (“NOL”) carryforwards to offset future taxable income.
Factors relating to our business that may contribute to these fluctuations include the following, as well as other factors described elsewhere in this Annual Report on Form 10-K: • the ability of our clinical sales teams to continue converting physicians from using incumbent products in the market to clonoSEQ and new diagnostic products and services we may develop; • our ability to continue driving repeat usage of the clonoSEQ diagnostic test by physicians and get reimbursed for that repeat usage by commercial and government payors for monitoring of MRD; • our ability to manage our growth and operating expenses; • the outcomes of research initiatives, clinical trials or other product development or approval processes conducted by our customers, us or our collaborators; • our ability to obtain positive coverage decisions for our tests from additional commercial payers; • the timing of upfront payments from our collaborators; • our ability and that of our collaborators to develop and successfully commercialize our products, including therapeutic products; • our ability to achieve collaboration-based milestones on currently contemplated timelines, or at all; • availability and extent of reimbursement by governmental and private payors for our products; • the level of demand for our products; • our relationships, and any associated exclusivity terms, with collaborators; • our contractual or other obligations to provide resources to fund our products and services and to provide resources to our collaborations; • delays or failures in advancement of future products in clinical trials by us or our collaborators; • risks associated with any future international expansion of our business, including the potential to conduct clinical trials and commercialize our products and services in multiple international locations; • our ability and that of our collaborators to consistently manufacture our products; • our dependence on, and the need to attract and retain, key management and other personnel; • our ability to obtain, protect and enforce our intellectual property rights; • our ability to prevent the theft or misappropriation of our intellectual property, know-how or technologies; • our ability to obtain additional capital that may be necessary to expand our business; • our ability to accurately report our financial results in a timely manner; • business interruptions such as power outages, strikes, acts of terrorism or natural disasters; and 29 • our ability to use our net operating loss (“NOL”) carryforwards to offset future taxable income.
As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. 67 Risks Relating to our Common Stock and Capital Structure The market price of our common stock is volatile and is likely to continue to fluctuate substantially.
As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. 66 Risks Relating to our Common Stock and Capital Structure The market price of our common stock is volatile and is likely to continue to fluctuate substantially.
We depend on information technology and telecommunications systems, including third-party cloud computing infrastructure, operating systems and artificial intelligence platforms, for significant elements of our operations, including our laboratory information management system, clinical immunomics database, TCR-Antigen Map, laboratory workflow tools, customer and collaborator reporting and related functions.
We depend on information technology and telecommunications systems, including third-party cloud computing infrastructure, operating systems and artificial intelligence platforms, for significant elements of our operations, including our laboratory information management system, clinical immunomics database, TCR-antigen binding, laboratory workflow tools, customer and collaborator reporting and related functions.
In addition, some countries have stricter consumer notice or consent requirements relating to personal data collection, use or sharing, have more stringent requirements relating to organizations’ privacy programs and provide stronger individual rights. 58 Moreover, international privacy and data security regulations are becoming more complex and may result in greater penalties.
In addition, some countries have stricter consumer notice or consent requirements relating to personal data collection, use or sharing, have more stringent requirements relating to organizations’ privacy programs and provide stronger individual rights. 57 Moreover, international privacy and data security regulations are becoming more complex and may result in greater penalties.
NOLs generated prior to 2018 are eligible to be carried forward up to 20 years. Based on the available objective evidence, management determined that it was more likely than not that the net deferred tax assets would not be realizable as of December 31, 2023.
NOLs generated prior to 2018 are eligible to be carried forward up to 20 years. Based on the available objective evidence, management determined that it was more likely than not that the net deferred tax assets would not be realizable as of December 31, 2024.
It would be costly and time-consuming to defend such claims. 66 Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our current or future products, technologies and services may infringe.
It would be costly and time-consuming to defend such claims. 65 Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our current or future products, technologies and services may infringe.
In addition, a growing number of states are considering or have adopted cybersecurity requirements for cloud-based provision of services which we may be required to comply with as a condition of doing business with government-affiliated organizations, such as state universities.
In addition, a growing number of states and countries are considering or have adopted cybersecurity requirements for cloud-based provision of services which we may be required to comply with as a condition of doing business with government-affiliated organizations, such as state universities.
We have limited experience in marketing and selling certain products and services, and if we are unable to expand our direct sales and marketing force or partner with collaborators in certain product areas and markets to adequately address our customers’ needs, our business may be adversely affected. We have no experience marketing and selling therapeutic products.
We have limited experience in marketing and selling certain products and services, and if we are unable to expand our direct sales and marketing force or partner with collaborators in certain product areas and markets to adequately address our customers’ needs, our business may be adversely affected.
These process enhancements and increases in scale, expansion of personnel, laboratory space and equipment may not be successfully implemented, and we may not have adequate laboratory facilities or resources to accommodate all the requirements that we currently anticipate needing to be successful.
These process enhancements and increases in scale, expansion of personnel, laboratory space and equipment, among others, may not be successfully implemented, and we may not have adequate laboratory facilities or resources to accommodate all the requirements that we currently anticipate needing to be successful.
Accordingly, management applied a full valuation allowance against net deferred tax assets as of December 31, 2023. We may experience ownership changes in the future as a result of shifts in our stock ownership, which may be outside of our control.
Accordingly, management applied a full valuation allowance against net deferred tax assets as of December 31, 2024. We may experience ownership changes in the future as a result of shifts in our stock ownership, which may be outside of our control.
Changes in the reimbursement landscape may occur, which are outside of our control, and may impact the commercial viability of our products and services. 46 There is significant uncertainty related to the insurance coverage and reimbursement of newly cleared, authorized or approved products and services.
Changes in the reimbursement landscape may occur, which are outside of our control, and may impact the commercial viability of our products and services. 45 There is significant uncertainty related to the insurance coverage and reimbursement of newly cleared, authorized or approved products and services.
For example, there have been numerous advances in technologies relating to life sciences research and the diagnosis and treatment of cancer, and autoimmune disorders. There have also been advances in technologies used to computationally analyze very large amounts of biologic information.
For example, there have been numerous advances in technologies relating to life sciences research, MRD technologies and assays and the diagnosis and treatment of cancer and autoimmune disorders. There have also been advances in technologies used to computationally analyze very large amounts of biologic information.
Some states, most notably Massachusetts and Nevada, also have adopted laws requiring the implementation of security measures to protect personal information, and all 50 states and the District of Columbia, Puerto Rico and Guam, have adopted breach notification laws. • Analogous state laws and regulations, such as state anti-kickback, self-referral and false claims laws, which may apply to items or services reimbursed by any third-party payor, including commercial insurers, and in some cases even in self-pay scenarios.
Many states have passed comprehensive privacy laws, some states, most notably Massachusetts and Nevada, also have adopted laws requiring the implementation of security measures to protect personal information, and all 50 states and the District of Columbia, Puerto Rico and Guam, have adopted breach notification laws. • Analogous state laws and regulations, such as state anti-kickback, self-referral and false claims laws, which may apply to items or services reimbursed by any third-party payor, including commercial insurers, and in some cases even in self-pay scenarios.
Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management and other employees. 65 We may not be able to protect and enforce our trademarks.
Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management and other employees. 64 We may not be able to protect and enforce our trademarks.
Our results of operations could be adversely affected by general conditions in the global economy and financial markets. Changes in these economic conditions can arise suddenly, such as in the case of the recent rise in inflation.
Our results of operations could be adversely affected by general conditions in the global economy and financial markets. Changes in these economic conditions can arise suddenly, such as in the case of recent inflation fluctuations.
The uncertainties and costs surrounding the prosecution of our owned or in-licensed patent applications and the enforcement or defense of our owned or in-licensed issued patents could have a material adverse effect on our business. 63 Recent U.S.
The uncertainties and costs surrounding the prosecution of our owned or in-licensed patent applications and the enforcement or defense of our owned or in-licensed issued patents could have a material adverse effect on our business. 62 Recent U.S.
As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. 72 Item 1B. Un resolved Staff Comments Not applicable .
As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. 71 Item 1B. Un resolved Staff Comments Not applicable .
Recently, there has been an increase in public awareness of privacy issues in the wake of revelations about the data-collection activities of various government agencies and in the number of private privacy-related lawsuits filed against companies (including a private right of action under the CCPA and other similar state laws, as described below).
Recently, there has been an increase in public awareness of privacy issues in the wake of revelations about the data-collection activities of various government agencies and in the number of private privacy-related lawsuits filed against companies (including a private right of action under the California Consumer Privacy Act ("CCPA") and other similar state laws, as described below).
Medical data is considered sensitive data that merits stronger safeguards, and the FTC’s guidance for appropriately securing consumers’ personal information is consistent with what is required by the HIPAA Security Rule.
Health information is considered sensitive data that merits stronger safeguards, and the FTC’s guidance for appropriately securing consumers’ personal information is consistent with what is required by the HIPAA Security Rule.
Our cellular therapeutics product candidates that appear promising in the early phases of development may fail to advance, experience delays in the clinic, experience clinical holds or fail to reach the market for many reasons, including: • discovery efforts identifying potential TCR-based cellular therapies may not be successful; • nonclinical or preclinical study results may show potential TCR-based cellular therapies to be less effective than desired or to have harmful or problematic side effects; • clinical trials may fail to meet one or more endpoints, or results may show the TCR-based cellular therapies to be less effective than expected or to have unacceptable side effects or toxicities; • adverse effects relating to any one of our therapeutic product candidates or adverse effects relating to our therapeutics discovery process may lead to delays in or termination of one or more of our products or services; 60 • the inability of our translational models to reduce risk or predict outcomes in humans, given that each component of our therapeutic product candidates may have a dependent or independent effect on safety, tolerability and efficacy, and that such effects may, among other things, be species-dependent; • manufacturing failures or insufficient supply of current good manufacturing practices (“cGMP”) materials for future clinical trials, or higher than expected cost, could delay or set back clinical trials or make TCR-based cellular therapies commercially unattractive; • our collaborators’ improvements in the manufacturing processes for this new class of potential immune medicines may not be sufficient to satisfy the clinical or commercial demand of our jointly developed TCR-based cellular therapies or regulatory requirements for clinical trials; • changes that we or our collaborators make to optimize manufacturing, testing or formulating of cGMP materials could impact the safety, tolerability and efficacy of our therapeutic products in development; • pricing or reimbursement issues or other factors that delay clinical trials or make any TCR-based cellular therapies uneconomical or noncompetitive with other therapeutic products; • failure to timely advance our or our collaborators’ therapeutic products or receive the necessary regulatory clearances, authorizations or approvals or a delay in receiving such clearances, authorizations or approvals due to, among other reasons, slow or failure to complete enrollment in clinical trials, withdrawal by trial participants from trials, failure to achieve trial endpoints, additional time requirements for data analysis, data integrity issues, Biologics License Application or the equivalent application, discussions with the FDA or the European Medicines Agency, a regulatory request for additional nonclinical or clinical data, or safety formulation or manufacturing issues may lead to our inability to obtain sufficient funding; and • the proprietary rights of others and their competing products and services that may prevent our TCR-based cellular therapies from being commercialized or threaten future commercialization activities. 61 Risks Relating to our Intellectual Property We may not be successful in obtaining or maintaining sufficient intellectual property protection for our products, services and technologies and uses thereof, and the scope of the intellectual property protection obtained may not be sufficiently broad.
Our cellular therapeutics product candidates that appear promising in the early phases of development may fail to advance, experience delays in the clinic, experience clinical holds or fail to reach the market for many reasons, including: • discovery efforts identifying potential TCR-based cellular therapies may not be successful; • nonclinical or preclinical study results may show potential TCR-based cellular therapies to be less effective than desired or to have harmful or problematic side effects; • clinical trials may fail to meet one or more endpoints, or results may show the TCR-based cellular therapies to be less effective than expected or to have unacceptable side effects or toxicities; • adverse effects relating to any one of our therapeutic product candidates or adverse effects relating to our therapeutics discovery process may lead to delays in or termination of one or more of our products or services; • the inability of our translational models to reduce risk or predict outcomes in humans, given that each component of our therapeutic product candidates may have a dependent or independent effect on safety, tolerability and efficacy, and that such effects may, among other things, be species-dependent; • manufacturing failures or insufficient supply of current good manufacturing practices (“cGMP”) materials for future clinical trials, or higher than expected cost, could delay or set back clinical trials or make TCR-based cellular therapies commercially unattractive; • our collaborators’ improvements in the manufacturing processes for this new class of potential immune medicines may not be sufficient to satisfy the clinical or commercial demand of our jointly developed TCR-based cellular therapies or regulatory requirements for clinical trials; • changes that we or our collaborators make to optimize manufacturing, testing or formulating of cGMP materials could impact the safety, tolerability and efficacy of our therapeutic products in development; • pricing or reimbursement issues or other factors that delay clinical trials or make any TCR-based cellular therapies uneconomical or noncompetitive with other therapeutic products; 59 • failure to timely advance our or our collaborators’ therapeutic products or receive the necessary regulatory clearances, authorizations or approvals or a delay in receiving such clearances, authorizations or approvals due to, among other reasons, slow or failure to complete enrollment in clinical trials, withdrawal by trial participants from trials, failure to achieve trial endpoints, additional time requirements for data analysis, data integrity issues, Biologics License Application or the equivalent application, discussions with the FDA or the European Medicines Agency, a regulatory request for additional nonclinical or clinical data, or safety formulation or manufacturing issues may lead to our inability to obtain sufficient funding; and • the proprietary rights of others and their competing products and services that may prevent our TCR-based cellular therapies from being commercialized or threaten future commercialization activities.
If our laboratory facilities become damaged or inoperable or we are required to vacate our existing facilities, our ability to conduct our laboratory processes and analysis and pursue our research and development efforts may be jeopardized. We operate laboratory facilities located in Seattle, Washington and South San Francisco, California.
If our laboratory facilities are damaged, become inoperable or we are required to vacate our existing facilities, our ability to support our customers, conduct our laboratory processes and pursue our research and development efforts may be jeopardized. We operate laboratory facilities located in Seattle, Washington and South San Francisco, California.
We may also be subject to enforcement action, including, among other things, significant regulatory fines or penalties. Our employees, principal investigators, consultants and collaborators may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.
We may also be subject to enforcement action, including, among other things, significant regulatory fines or penalties. 50 Our employees, consultants and collaborators may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.
Numerous foreign, federal and state laws and regulations govern the collection, dissemination, use and confidentiality of personal information, including genetic, biometric and health information, including state privacy, data security and breach notification laws, federal and state consumer protection and employment laws, HIPAA, GINA, the GDPR and other foreign data protection laws.
Numerous foreign, federal and state laws and regulations govern the collection, dissemination, use and confidentiality of personal information, including genetic, biometric and health information, including state privacy, data security and breach notification laws, federal and state consumer protection and employment laws, HIPAA, GINA, CCPA and foreign data protection laws like the GDPR.
For example, we continually expand our immunomics database and antigen-annotated TCR-Antigen Map with a view toward continually advancing target antigen discovery to leverage in developing therapies such as prophylactic or therapeutic antibodies.
For example, we continually expand our immunomics database and TCR-antigen binding with a view toward advancing target antigen discovery to leverage in developing therapies such as prophylactic or therapeutic antibodies.
We may never obtain approval in the EU or in any other foreign country for any of our products or services and, even if we do, we or our collaborators may never be able to commercialize them in any other jurisdiction, which would limit our ability to realize their full market potential.
We may not be able to retain regulatory approval of clonoSEQ in the EU and may never obtain approval in any other foreign country for any of our products or services and, even if we do, we or our collaborators may never be able to commercialize them in any other jurisdiction, which would limit our ability to realize their full market potential.
For example, the FDA currently has a policy of refraining from enforcing its medical device requirements with respect to LDTs, which the FDA considers to be a type of in vitro diagnostic test that is designed, manufactured and used within a single properly licensed laboratory.
For example, the FDA currently refrains from enforcing its medical device requirements with respect to LDTs, which the FDA considers to be a type of in vitro diagnostic test that is designed, manufactured and used within a single properly licensed laboratory.
If there should be an ownership change, our ability to utilize our NOL carryforwards and credits could be limited. We have completed a Section 382 analysis for changes in ownership through June 30, 2023 and continue to monitor for changes that could trigger a limitation.
If there should be an ownership change, our ability to utilize our NOL carryforwards and credits could be limited. We have completed a Section 382 analysis for changes in ownership through December 31, 2023 and continue to monitor for changes that could trigger a limitation.
Our present and future funding requirements will depend on many factors, including: • our ability to achieve revenue growth; • our rate of continued progress in establishing payor coverage and reimbursement arrangements with domestic and international commercial third-party payors and government payors for our clonoSEQ diagnostic test; • the cost of expanding our laboratory operations and offerings, including our sales and marketing efforts; • our rate of progress in supporting the development of cellular therapies developed under the Genentech Agreement; • our rate of progress in, and research and development expenses associated with, products and services in research and early development; • the effect of competing technological, product and market developments; • costs related to international expansion; and • the potential cost of and delays in product development as a result of any regulatory oversight applicable to our products and services.
Our present and future funding requirements will depend on many factors, including: • our ability to achieve revenue growth; • our rate of continued progress in establishing payor coverage and reimbursement arrangements with domestic and international commercial third-party payors and government payors for our clonoSEQ diagnostic test; • the cost of expanding our laboratory operations and offerings, including our sales and marketing efforts; • our rate of progress in supporting the development of cellular therapies developed under the Genentech Agreement; • our rate of progress in, and research and development expenses associated with, products and services in research and early development; • the effect of competing technological, product and market developments; • costs related to international expansion; and • the potential cost of and delays in product development as a result of any regulatory oversight applicable to our products and services. 41 The various ways we could raise additional capital carry potential risks.
There is typically an extremely high rate of failure as therapeutic products in development proceed through clinical trials. Products in later stages of clinical trials or validation also may fail to show the desired safety and efficacy profile despite having progressed through non-clinical studies and initial clinical trials or validations.
There is typically an extremely high rate of failure as therapeutic products in development proceed through clinical trials. Products in later stages of clinical trials or validation also may fail to show the desired safety and efficacy profile despite convincing data generated in non-clinical studies and initial clinical trials or validations.
We may pursue acquisitions of businesses and assets. We also may pursue joint ventures or investments that leverage our immune medicine platform and industry experience to expand our offerings or distribution. We have no experience forming joint ventures and limited experience investing in or acquiring other companies.
We also may pursue joint ventures or investments that leverage our immune medicine platform and industry experience to expand our offerings or distribution. We have no experience forming joint ventures and limited experience investing in or acquiring other companies.
If we cannot satisfy our obligations, Genentech is entitled to trigger a technology transfer of our TCR screening process (specific to the Personalized Product) or terminate the Genentech Agreement.
If we cannot satisfy our obligations, Genentech is entitled to trigger a technology transfer of our TCR screening process or terminate the Genentech Agreement.
Future Medicare payment rates are uncertain. In January 2020, CMS revised the National Coverage Determination (“NCD”) for molecular diagnostic laboratory testing services utilizing a NGS methodology, which includes our clinical diagnostic products, for Medicare beneficiaries with advanced cancer. CMS revised the NCD to extend specific coverage for germline (inherited) testing.
In January 2020, CMS revised the National Coverage Determination (“NCD”) for molecular diagnostic laboratory testing services utilizing a NGS methodology, which includes our clinical diagnostic products, for Medicare beneficiaries with advanced cancer. CMS revised the NCD to extend specific coverage for germline (inherited) testing.
We have incurred significant losses since our inception. For the year ended December 31, 2023, 2022 and 2021, we incurred a net loss of $225.3 million, $200.4 million and $207.3 million, respectively. As of December 31, 2023, we had an accumulated deficit of $1.1 billion.
We have incurred significant losses since our inception. For the year ended December 31, 2024, 2023 and 2022, we incurred a net loss of $159.6 million, $225.3 million and $200.4 million, respectively. As of December 31, 2024, we had an accumulated deficit of $1.3 billion.
If we do not update our platform and products to reflect new scientific knowledge about DNA sequencing, immunology, computational biology, software development, new disease diagnostics and therapies or the diseases we seek to treat, our products and technology could become obsolete so products and services based on our immune medicine platform could decline or fail to grow as expected.
If we do not update our platform and products to reflect new scientific knowledge about DNA sequencing, immunology, computational biology, software development, new disease diagnostics and therapies or the diseases we seek to treat or assist in the treatment of, such as lymphoid malignancies, our products and technology could become obsolete so products and services based on our immune medicine platform could decline or fail to grow as expected.
The GDPR also imposes strict rules on the transfer of personal data out of the EU to the U.S. These obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other requirements or our practices.
For example, the GDPR imposes strict rules on the transfer of personal data out of the EU to the U.S., and the obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other requirements or our practice.
If we support the commercialization of one or more products under the Genentech Agreement, we may need to incorporate new equipment, implement new technology systems and laboratory processes and hire new personnel with different qualifications.
If we support Genentech in late-stage clinical development or the commercialization of one or more products under the Genentech Agreement, we may need to incorporate new equipment, implement new technology systems and laboratory processes and hire new personnel with different qualifications.
The FDA can delay, limit or deny clearance, authorization or approval of a device for many reasons, including: • the inability to demonstrate to the satisfaction of the FDA that the products are safe or effective for their intended uses; • the disagreement of the FDA with the design, conduct or implementation of the clinical trials or the analysis or interpretation of data from preclinical studies, analytical studies or clinical trials; • serious and unexpected adverse device effects experienced by participants in clinical trials; • the data from preclinical studies, analytical studies and clinical trials may be insufficient to support clearance, authorization or approval, where required; • the inability to demonstrate that the clinical and other benefits of the device outweigh the risks; • an advisory committee, if convened by the FDA, may recommend against approval of a PMA or other application or may recommend that the FDA require, as a condition of approval, additional preclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions, or even if an advisory committee makes a favorable recommendation, the FDA may still not approve the product; • the FDA may identify deficiencies in our marketing application; • the FDA may identify deficiencies in our or our collaborators’ manufacturing processes, facilities or analytical methods; • the potential for policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering clinical data or regulatory filings insufficient for clearance, authorization or approval; and • the FDA or foreign regulatory authorities may audit clinical trial data and conclude that the data is not sufficiently reliable to support a PMA. 50 There are numerous FDA personnel assigned to review different aspects of marketing submissions, which can present uncertainties based on their ability to exercise judgment and discretion during the review process.
The FDA can delay, limit or deny clearance, authorization or approval of a device for many reasons, including: • the inability to demonstrate to the satisfaction of the FDA that the products are safe or effective for their intended uses; • the disagreement of the FDA with the design, conduct or implementation of the clinical trials or the analysis or interpretation of data from preclinical studies, analytical studies or clinical trials; • serious and unexpected adverse device effects experienced by participants in clinical trials; • the data from preclinical studies, analytical studies and clinical trials may be insufficient to support clearance, authorization or approval, where required; • the inability to demonstrate that the clinical and other benefits of the device outweigh the risks; 49 • an advisory committee, if convened by the FDA, may recommend against approval of a PMA or other application or may recommend that the FDA require, as a condition of approval, additional preclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions, or even if an advisory committee makes a favorable recommendation, the FDA may still not approve the product; • the FDA may identify deficiencies in our marketing application; • the FDA may identify deficiencies in our or our collaborators’ manufacturing processes, facilities or analytical methods; • the potential for policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering clinical data or regulatory filings insufficient for clearance, authorization or approval; and • the FDA or foreign regulatory authorities may audit clinical trial data and conclude that the data is not sufficiently reliable to support a PMA.
Our therapeutic product candidates are at an early stage of discovery and development under our Genentech collaboration, and we are continuing to develop our process being used under that collaboration to develop TCR-based cellular therapies for the treatment of cancer.
Our therapeutic product candidates are at an early stage of discovery and development under our Genentech collaboration, and we are continuing to develop our process to develop TCR-based cellular therapies for the treatment of patients with cancer.
For example, in the event a product is commercialized under the Genentech Agreement, as the volume of product sales grows, we will likely need to continue to increase our workflow capacity for sample intake, customer service and general process improvements, and expand our internal quality assurance program to support TCR screening on a larger scale within expected turnaround times.
For example, in the event Genentech commercializes a under this agreement, as the volume of product sales grows, we will likely need to continue to increase our workflow capacity and general process improvements, and expand our internal quality assurance program to support TCR screening on a larger scale within expected turnaround times.
In the event that the FDA requires marketing authorization of our RUO products in the future, the FDA may not ultimately grant any clearance, authorization or approval requested by us in a timely manner, or at all. Future changes in FDA enforcement discretion for LDTs could subject our operations to much more significant regulatory requirements.
In the event that the FDA requires marketing authorization of our RUO products in the future, the FDA may not ultimately grant any clearance, authorization or approval requested by us in a timely manner, or at all. FDA’s Final LDT Rule and targeted enforcement discretion policies for LDTs could subject our operations to much more significant regulatory requirements.
We have funded our operations to date principally from the sale of convertible preferred stock and common stock, including the sale of common stock in our initial public offering, and, to a lesser extent, revenue as well as entry into the Purchase Agreement.
We have funded our operations to date principally from the sale of convertible preferred stock and common stock, including the sale of common stock in our initial public offering and follow-on offering, and, to a lesser extent, revenue as well as transactions pursuant to the Purchase Agreement.
For example, we have purchased and rely on the Illumina NextSeq System. Illumina supplies us with reagents that have been designed for use solely with this sequencer and Illumina is the sole provider of maintenance and repair services for the Illumina NextSeq System.
For example, we have purchased and rely on the Illumina NextSeq System and plan to rely in the future on the NovaSeq X system. Illumina supplies us with reagents that have been designed for use solely with this sequencer and Illumina is the sole provider of maintenance and repair services for the Illumina NextSeq System.
Consequently, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. As of December 31, 2023, we own or have rights to more than 450 active patents and patent applications filed in the U.S., Europe and elsewhere. Of these, there are more than 55 pending patent applications.
Consequently, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. As of December 31, 2024, we own or have rights to 416 active patents and patent applications filed in the U.S., Europe and elsewhere. Of these, there are 70 pending patent applications.
We may not be able to attract and retain personnel or be able to build or adequately train an efficient and effective sales organization, which could negatively impact sales and market acceptance of our clinical diagnostics and limit our revenue growth and potential profitability.
We may not be able to attract and retain personnel or be able to build or adequately train an efficient and effective sales organization, which could negatively impact sales and market acceptance of our clinical diagnostics and limit our revenue growth and potential profitability. We have no experience marketing and selling therapeutic products.
Further, various states, such as California, New York and Massachusetts, have implemented similar privacy laws and regulations (such as the California Confidentiality of Medical Information Act, California Consumer Privacy Act and California Privacy Rights Act) that impose restrictive requirements regulating the use and disclosure of personal information, while other states are considering adoption of similar provisions.
Further, various states, such as Washington, California and Colorado, have implemented similar privacy laws and regulations (such as the California Confidentiality of Medical Information Act, CCPA and California Privacy Rights Act) that impose restrictive requirements regulating the use and disclosure of personal information, while other states are considering adoption of similar provisions.

… 151 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

5 edited+1 added−1 removed4 unchanged
Biggest changeThe PISSC is made up of our Head of Security, Privacy Officer, Chief Operations Officer, Chief Financial Officer, General Counsel and Chief People Officer and meets on a quarterly basis. Our Head of Security is a senior information security professional with more than 20 years of experience implementing and leading security programs.
Biggest changeThe PISSC is made up of our Privacy Officer, Chief Operations Officer (who is also acting as head of our security team), Chief Financial Officer, General Counsel and Chief People Officer and meets on a quarterly basis.
Our cybersecurity program is based on the ISO 27001 security controls set, and in particular, it focuses on the principles of confidentiality, integrity and availability. We maintain an ISO 27001 certification with a fully integrated set of operational policies and procedures to adhere to the 14 domains of ISO 27001.
Our cybersecurity program is based on the ISO 27001 security controls set, and in particular, it focuses on the principles of confidentiality, integrity and availability. We maintain an ISO 27001 certification with a fully integrated set of operational policies and procedures to adhere to the domains of ISO 27001.
We perform an annual risk assessment conducted by an outside assessor and operate a vendor risk assessment program for third party vendors to evaluate how their systems may impact our business in the event of a cybersecurity incident.
We perform an annual risk assessment conducted by an outside assessor and conduct vendor risk assessments for third party vendors to evaluate how their systems may impact our business in the event of a cybersecurity incident.
Our board of directors is kept apprised of cybersecurity risks and assessments through regular presentations to the Audit Committee regarding our information security and privacy governance and reports on information security and privacy incidents. Cybersecurity threats, including as a result of any past cybersecurity incidents, have not materially affected us, including our business strategy, results of operations or financial condition.
Our board of directors is kept apprised of cybersecurity risks and assessments through regular presentations to the Audit Committee regarding our information security and privacy governance and reports on information security and privacy incidents.
For more information regarding how cybersecurity risks may affect us, see the “Risk Factors” section.
Cybersecurity threats, including as a result of any past cybersecurity incidents , have not materially affected us, including our business strategy, results of operations or financial condition. For more information regarding how cybersecurity risks may affect us, see the “Risk Factors” section.
Removed
Our Head of Security holds an undergraduate degree in computer science, has a Six Sigma certification in Total Quality Management and is a Certified Information Systems Security Professional (“CISSP”).
Added
Julie Rubinstein, who serves as our Chief Operations Officer, is leading our security team on an interim basis and is supported by a fractional chief information security officer.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeRegardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. Item 4. Mine Safe ty Disclosures Not applicable . 73 PAR T II
Biggest changeRegardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. Item 4. Mine Safe ty Disclosures Not applicable . 72 PAR T II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 4. Mine Safety Disclosures 73 PART II 74 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 74 Item 6. [Reserved] 74 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 75 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 87 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 72 PART II 73 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 73 Item 6. [Reserved] 73 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 74 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 87 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−0 removed6 unchanged
Biggest changeHolders of Record As of February 23, 2024, there were approximately 85 holders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of shareholders represented by these record holders.
Biggest changeHolders of Record As of February 26, 2025, there were approximately 73 holders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of shareholders represented by these record holders.
The offering price of our common stock in our initial public offering, which had a closing stock price of $40.30 on June 27, 2019, was $20.00 per share. The stock price performance below is based upon historical data and is not necessarily indicative of, nor intended to forecast, future performance of our common stock.
The offering price of our common stock in our initial public offering, which had a closing stock price of $40.30 on June 27, 2019, was $20.00 per share. The stock price performance below is based on historical data and is not necessarily indicative of, nor intended to forecast, future performance of our common stock.

Item 7. Management's Discussion & Analysis

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

76 edited+23 added−12 removed58 unchanged
Biggest changeComparison of the Years Ended December 31, 2023 and 2022 Revenue Year Ended December 31, Change Percent of Revenue (in thousands, except percentages) 2023 2022 $ % 2023 2022 Immune Medicine revenue Service revenue $ 24,959 $ 31,777 $ (6,818 ) (21)% Collaboration revenue 42,578 66,387 (23,809 ) (36 ) Total Immune Medicine revenue 67,537 98,164 (30,627 ) (31 ) 40 % 53 % MRD revenue Service revenue 102,739 81,144 21,595 27 Regulatory milestone revenue — 6,000 (6,000 ) (100 ) Total MRD revenue 102,739 87,144 15,595 18 60 % 47 % Total revenue $ 170,276 $ 185,308 $ (15,032 ) (8 ) 100 % 100 % 79 The $30.6 million decrease in Immune Medicine revenue was primarily due to a $20.2 million decrease in revenue generated from the Genentech Agreement which resulted from decreased collaboration expenses partially offset by the $8.2 million of revenue recognized in connection with the regulatory milestone achieved in May 2023.
Biggest changeComparison of the Years Ended December 31, 2024 and 2023 Revenue Year Ended December 31, Change Percent of Revenue (in thousands, except percentages) 2024 2023 $ % 2024 2023 MRD revenue Service revenue $ 133,029 $ 102,739 $ 30,290 29 % Regulatory milestone revenue 12,500 — 12,500 * Total MRD revenue 145,529 102,739 42,790 42 81 % 60 % Immune Medicine revenue Service revenue 19,976 24,959 (4,983 ) (20 ) Collaboration revenue 13,452 42,578 (29,126 ) (68 ) Total Immune Medicine revenue 33,428 67,537 (34,109 ) (51 ) 19 % 40 % Total revenue $ 178,957 $ 170,276 $ 8,681 5 100 % 100 % * Not applicable 78 The $42.8 million increase in MRD revenue was primarily due to a $26.3 million increase in revenue generated from providing clonoSEQ to clinical customers, a $12.5 million increase in revenue recognized upon the achievement of regulatory milestones by certain of our biopharmaceutical customers, and a $5.8 million increase in revenue generated from providing MRD sample testing services to biopharmaceutical customers.
For our research customers, which include biopharmaceutical customers and academic institutions for both our Adaptive Immunosequencing and MRD services, delivery of the respective test results may include some level of professional support and analysis. Terms with biopharmaceutical customers generally include non-refundable payments made in advance of services (“upfront payments”), which we record as deferred revenue.
For our research customers, which include biopharmaceutical customers and academic institutions for both our MRD and Adaptive Immunosequencing services, delivery of the respective test results may include some level of professional support and analysis. Terms with biopharmaceutical customers generally include non-refundable payments made in advance of services (“upfront payments”), which we record as deferred revenue.
We expect cost of revenue to increase in absolute dollars as we grow our sample testing volume, but the cost per sample to decrease over the long term due to the efficiencies we may gain as assay volume increases from improved utilization of our laboratory capacity, automation and other value engineering initiatives.
We expect cost of revenue to increase in absolute dollars in the long term as we grow our sample testing volume, but the cost per sample to decrease over the long term due to the efficiencies we may gain as assay volume increases from improved utilization of our laboratory capacity, automation and other value engineering initiatives.
Investing Activities Cash provided by investing activities during the year ended December 31, 2023 was $129.6 million, which was primarily attributable to proceeds from maturities of marketable securities of $569.9 million, partially offset by purchases of marketable securities of $429.6 million and purchases of property and equipment of $10.7 million.
Cash provided by investing activities during the year ended December 31, 2023 was $129.6 million, which was primarily attributable to proceeds from maturities of marketable securities of $569.9 million, partially offset by purchases of marketable securities of $429.6 million and purchases of property and equipment of $10.7 million.
Our Immune Medicine revenue consists of revenue generated from (1) providing sample testing services for our commercial research product, Adaptive Immunosequencing, to biopharmaceutical customers and academic institutions; (2) our collaboration agreements with Genentech and other biopharmaceutical customers in areas of drug and target discovery; and (3) for prior years, providing our T-Detect COVID tests to clinical customers.
Our Immune Medicine revenue consists of revenue generated from (1) providing sample testing services for our commercial research product, Adaptive Immunosequencing, to biopharmaceutical customers and academic institutions; (2) our collaboration agreements with Genentech and other biopharmaceutical customers in areas of drug and target discovery; and (3) for years prior to 2023, providing our T-Detect COVID tests to clinical customers.
Our first clinical diagnostic product, clonoSEQ, is the first test authorized by the FDA for the detection and monitoring of MRD in patients with MM, B cell ALL and CLL, and is also available as a CLIA-validated laboratory developed test for patients with other lymphoid cancers, including DLBCL.
Our first clinical diagnostic product, clonoSEQ, is the first test authorized by the FDA for the detection and monitoring of MRD in patients with MM, B cell ALL and CLL, and is also available as a CLIA-validated laboratory developed test for patients with other lymphoid cancers, including DLBCL and MCL.
Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to capital preservation and liquidity. Currently, our funds are held in money market funds and marketable securities consisting of U.S. government treasury and agency securities, commercial paper and corporate bonds.
Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to capital preservation and liquidity. Currently, our funds are held in money market funds and marketable securities consisting of U.S. government treasury securities, corporate bonds and commercial paper.
Impairment losses, if incurred, are classified within the consolidated statements of operations in accordance with the use of the asset group, if not separately stated within its own financial statement line item.
Impairment losses, if incurred, are classified within the consolidated statements of operations in accordance with the use of the asset or asset group, if not separately stated within its own financial statement line item.
NOLs generated prior to 2018 are eligible to be carried forward up to 20 years. Based on the available objective evidence, management determined that it was more likely than not that the net deferred tax assets would not be realizable as of December 31, 2023.
NOLs generated prior to 2018 are eligible to be carried forward up to 20 years. Based on the available objective evidence, management determined that it was more likely than not that the net deferred tax assets would not be realizable as of December 31, 2024.
We evaluate certain qualitative factors such as macroeconomic conditions, the market and industry in which we operate, cost factors, overall financial performance and other relevant entity-specific events to determine if there are any negative trends or events that could indicate impairment.
We evaluate certain qualitative factors such as macroeconomic conditions, the market and industry in which we operate, cost factors, overall financial performance and other relevant entity- and reporting unit-specific events to determine if there are any negative trends or events that could indicate impairment.
A significant increase or decrease in or changes in timing of forecasted revenue will prospectively impact our interest expense and the time period for repayment. As of December 31, 2023, a hypothetical ten percent increase in forecasted quarterly revenue would not result in a material change in projected annual interest expense.
A significant increase or decrease in or changes in timing of forecasted revenue will prospectively impact our interest expense and the time period for repayment. As of December 31, 2024, a hypothetical ten percent increase in forecasted quarterly revenue would not result in a material change in projected annual interest expense.
Accordingly, management applied a full valuation allowance against net deferred tax assets as of December 31, 2023. Critical Accounting Policies and Estimates We have prepared the consolidated financial statements in accordance with GAAP.
Accordingly, management applied a full valuation allowance against net deferred tax assets as of December 31, 2024. Critical Accounting Policies and Estimates We have prepared the consolidated financial statements in accordance with GAAP.
See Note 10, Leases of the accompanying notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for details regarding our impairment assessments and considerations.
See Note 10, Leases and Note 15, Restructurings of the accompanying notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for details regarding our impairment assessments and considerations.
Further, we believe it is helpful in highlighting trends in our operating results because it excludes items that are not indicative of our core operating performance. 81 Adjusted EBITDA has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.
Further, we believe it is helpful in highlighting trends in our operating results because it excludes items that are not indicative of our core operating performance. Adjusted EBITDA, including segment Adjusted EBITDA, has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.
See Note 16, Restructuring of the accompanying notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for details on our restructuring expense. (4) Represents share-based compensation expense related to stock option, restricted stock unit and market-based restricted stock unit awards.
See Note 15, Restructurings of the accompanying notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for details on our restructuring expense. (4) Represents share-based compensation expense related to stock option, restricted stock unit and market-based restricted stock unit awards.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 may be found in Part II, Item 7 under the caption “ Management's Discussion and Analysis of Financial Condition and Results of Operations ” in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 14, 2023.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 may be found in Part II, Item 7 under the caption “ Management's Discussion and Analysis of Financial Condition and Results of Operations ” in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024.
The annual limitation may result in the expiration of NOL carryforwards and credits before utilization. If there should be an ownership change, our ability to utilize our NOL carryforwards and credits could be limited. We have completed a Section 382 analysis for changes in ownership through June 30, 2023 and continue to monitor for changes that could trigger a limitation.
The annual limitation may result in the expiration of NOL carryforwards and credits before utilization. If there should be an ownership change, our ability to utilize our NOL carryforwards and credits could be limited. We have completed a Section 382 analysis for changes in ownership through December 31, 2023 and continue to monitor for changes that could trigger a limitation.
Key assumptions in this analysis include anticipated demand for our products and services, including industry and regulatory changes, revenue growth and cash flow trends. These assumptions are determined based on our historical performance and management’s forecasted results.
Key assumptions in this analysis include anticipated demand for our products and services, including industry and regulatory changes, revenue growth and financial performance trends. These assumptions are determined based on our historical performance and management’s forecasted results.
Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure that we define as net loss attributable to Adaptive Biotechnologies Corporation adjusted for interest and other income, net, interest expense, income tax (expense) benefit, depreciation and amortization expense, impairment costs for right-of-use and related long-lived assets, restructuring expense and share-based compensation expense.
Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure that we define as net loss attributable to Adaptive Biotechnologies Corporation adjusted for interest and other income, net, interest expense, income tax (expense) benefit, depreciation and amortization expense, impairment costs for long-lived assets, restructuring expense and share-based compensation expense.
Please refer to “Adjusted EBITDA” below for a reconciliation between Adjusted EBITDA and net loss attributable to Adaptive Biotechnologies Corporation, the most directly comparable GAAP financial measure, and a discussion about the limitations of Adjusted EBITDA.
See “Adjusted EBITDA” below for a reconciliation between Adjusted EBITDA and net loss attributable to Adaptive Biotechnologies Corporation, the most directly comparable GAAP financial measure, and a discussion about the limitations of Adjusted EBITDA.
Other limitations include that Adjusted EBITDA does not reflect: • all expenditures or future requirements for capital expenditures or contractual commitments; • changes in our working capital needs; • interest expense, which is an ongoing element of our costs to operate; • income tax (expense) benefit, which may be a necessary element of our costs and ability to operate; • the costs of replacing the assets being depreciated and amortized, which will often have to be replaced in the future; • the noncash component of employee compensation expense; • right-of-use and related long-lived assets impairment costs; and • the impact of earnings or charges resulting from matters we consider not to be reflective, on a recurring basis, of our ongoing operations, such as our March 2022 restructuring and reduction in workforce.
Other limitations include that Adjusted EBITDA, including segment Adjusted EBITDA, does not reflect: • all expenditures or future requirements for capital expenditures or contractual commitments; • changes in our working capital needs; • interest expense, which is an ongoing element of our costs to operate; • income tax (expense) benefit, which may be a necessary element of our costs and ability to operate; • the costs of replacing the assets being depreciated and amortized, which will often have to be replaced in the future; • the noncash component of employee compensation expense; • long-lived assets impairment costs; and • the impact of earnings or charges resulting from matters we consider not to be reflective, on a recurring basis, of our ongoing operations, such as our restructuring activities and reductions in workforce.
Financing Activities Cash provided by financing activities during the year ended December 31, 2023 was $2.2 million, which was attributable to proceeds from the exercise of stock options.
Financing Activities Cash provided by financing activities during the year ended December 31, 2024 was $0.2 million, which was attributable to proceeds from the exercise of stock options.
We expect our MRD revenue to increase in the long term as we continue to increase our MRD clinical testing volume through increased penetration in our existing covered patient populations, expansion into new patient populations and as we optimize payor coverage.
We expect our MRD revenue to increase in the long term as we continue to increase our MRD clinical testing volume through enhanced penetration in our existing covered patient populations, expand into new patient populations and optimize payor coverage.
See Note 11, Revenue Interest Purchase Agreement of the accompanying notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for details on the Purchase Agreement. (2) Represents impairment costs for right-of-use and related long-lived assets.
See Note 11, Revenue Interest Purchase Agreement of the accompanying notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for details on the Purchase Agreement. (2) Represents impairment costs for certain long-lived assets.
See Note 10, Leases of the accompanying notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for details on our impairment expense. (3) Represents expenses recognized in conjunction with restructuring activities.
See Note 10, Leases and Note 15, Restructurings of the accompanying notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for details on our impairment expense. (3) Represents personnel-related expenses recognized in conjunction with restructuring activities.
Liquidity and Capital Resources We have incurred losses since inception and have incurred negative cash flows from operations since inception through the year ended December 31, 2018, and again in the years ended December 31, 2020, 2021, 2022 and 2023. As of December 31, 2023, we had an accumulated deficit of $1.1 billion.
Liquidity and Capital Resources We have incurred losses since inception and have incurred negative cash flows from operations since inception through the year ended December 31, 2018, and again in the years ended December 31, 2020 through December 31, 2024. As of December 31, 2024, we had an accumulated deficit of $1.3 billion.
If we determine that it is more likely than not that the fair value of our reporting unit is less than its carrying amount, or if we choose to bypass the qualitative assessment, we perform a quantitative goodwill impairment test.
If we determine that it is more likely than not that the fair value of one or both of our reporting units is less than its respective carrying amount, or if we choose to bypass the qualitative assessment, we perform a quantitative goodwill impairment test.
In addition, these expenses include external costs such as advertising expenses, customer education and promotional expenses, market analysis expenses, conference fees, travel expenses and allocated facility and information technology costs. We expect sales and marketing expenses to remain relatively consistent in the short term.
In addition, these expenses include external costs such as advertising expenses, customer education and promotional expenses, market analysis expenses, conference fees, travel expenses and allocated facility and information technology costs. 76 We expect sales and marketing expenses to increase in the short term.
This section generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
This section generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
Contractual Obligations Our contractual obligations as of December 31, 2023 include operating lease obligations of $121.3 million, which reflects the minimum commitments for our office and laboratory spaces in Seattle, Washington and South San Francisco, California and our warehouse lease in Bothell, Washington.
Contractual Obligations Our contractual obligations as of December 31, 2024 include operating lease obligations of $107.6 million, which reflects the minimum commitments for our office and laboratory spaces in Seattle, Washington and South San Francisco, California and our warehouse lease in Bothell, Washington.
We evaluate goodwill for impairment by first assessing qualitative factors to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount.
We evaluate goodwill for impairment by first assessing qualitative factors to determine whether it is more likely than not that the fair value of one or both of our reporting units is less than its respective carrying amount.
As of December 31, 2023, we had cash, cash equivalents and marketable securities of $346.4 million. 82 We believe our existing cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 12 months.
As of December 31, 2024, we had cash, cash equivalents and marketable securities of $256.0 million. We believe our existing cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 12 months.
If the carrying amount is found to be unrecoverable, we then assess the asset group's fair value. We utilize the income approach to measure fair value, which requires management to make estimates regarding cash flow projections and discount rates. The extent to which the asset group's carrying amount exceeds its fair value represents the impairment cost to be recognized.
We utilize the income approach to measure fair value, which requires management to make estimates regarding cash flow projections and discount rates. The extent to which the asset's or asset group's carrying amount exceeds its fair value represents the impairment cost to be recognized.
We also have minimum commitments for laboratory material suppliers, which are generally fulfilled within one year, software and service license commitments, which are generally fulfilled within one to three years, and royalty commitments. 83 Cash Flows The following table summarizes our uses and sources of cash for the years ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, 2023 2022 Net cash used in operating activities $ (156,324 ) $ (183,945 ) Net cash provided by investing activities 129,647 2,905 Net cash provided by financing activities 2,245 132,265 Operating Activities Cash used in operating activities during the year ended December 31, 2023 was $156.3 million, which was primarily attributable to a net loss of $225.3 million and a net change in operating assets and liabilities of $46.2 million, partially offset by noncash share-based compensation of $62.9 million, noncash impairment of right-of-use and related long-lived assets of $25.4 million, noncash depreciation and amortization of $13.0 million, noncash lease expense of $6.9 million, noncash interest expense related to the Purchase Agreement of $5.3 million and inventory reserve expense of $1.4 million.
We also have minimum commitments for laboratory material suppliers, which are generally fulfilled within one year, software and service license commitments, which are generally fulfilled within one to three years, and royalty commitments. 83 Cash Flows The following table summarizes our uses and sources of cash for the years ended December 31, 2024 and 2023 (in thousands): Year Ended December 31, 2024 2023 Net cash used in operating activities $ (95,212 ) $ (156,324 ) Net cash provided by investing activities 77,792 129,647 Net cash provided by financing activities 241 2,245 Operating Activities Cash used in operating activities during the year ended December 31, 2024 was $95.2 million, which was primarily attributable to a net loss of $159.6 million and a net change in operating assets and liabilities of $17.5 million, partially offset by noncash share-based compensation of $53.6 million, noncash depreciation and amortization of $11.0 million, noncash impairment of long-lived assets of $7.2 million related to our restructuring activities, noncash lease expense of $5.3 million, noncash interest expense related to the Purchase Agreement of $2.6 million and inventory reserve expense of $1.9 million.
We have funded our operations to date principally from the sale of convertible preferred stock and common stock and, to a lesser extent, revenue and proceeds from the Purchase Agreement.
We have funded our operations to date principally from the sale of convertible preferred stock and common stock, including the sale of common stock in our initial public offering and follow-on offering, and, to a lesser extent, revenue and proceeds from the Purchase Agreement.
We may in the future incur expenses similar to the adjustments in the presentation of Adjusted EBITDA. In particular, we expect to incur meaningful share-based compensation expense in the future.
We may in the future incur expenses similar to the adjustments we make. In particular, we expect to incur meaningful share-based compensation expense in the future.
If impairment exists, the carrying value of the goodwill is reduced to fair value through an impairment charge recorded in the consolidated statements of operations. To date, we have not recognized any impairment of goodwill.
If impairment exists, the carrying value of the allocated goodwill is reduced to fair value through an impairment charge recorded in the consolidated statements of operations.
Cash provided by financing activities during the year ended December 31, 2022 was $132.3 million, which was primarily attributable to $124.4 million in proceeds from the Purchase Agreement, net of issuance costs, as well as $7.9 million in proceeds from the exercise of stock options. 84 Net Operating Loss Carryforwards Utilization of our NOL carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 and similar state provisions.
Cash provided by financing activities during the year ended December 31, 2023 was $2.2 million, which was attributable to proceeds from the exercise of stock options. 84 Net Operating Loss Carryforwards Utilization of our NOL carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 and similar state provisions.
We plan to utilize the existing cash, cash equivalents and marketable securities on hand primarily to fund our continued research and development initiatives related to drug discovery, our commercial and marketing activities associated with clonoSEQ and our continued investments in streamlining our laboratory operations.
This additional capital may not be available on reasonable terms, or at all. 82 We plan to utilize the existing cash, cash equivalents and marketable securities on hand primarily to fund our commercial and marketing activities associated with clonoSEQ, our continued investments in streamlining our laboratory operations and our continued research and development initiatives related to drug discovery.
Cash provided by investing activities during the year ended December 31, 2022 was $2.9 million, which was primarily attributable to proceeds from maturities of marketable securities of $298.0 million, partially offset by purchases of marketable securities of $278.8 million and purchases of property and equipment of $16.3 million.
Investing Activities Cash provided by investing activities during the year ended December 31, 2024 was $77.8 million, which was primarily attributable to proceeds from maturities of marketable securities of $325.7 million, partially offset by purchases of marketable securities of $244.3 million and purchases of property and equipment of $3.7 million.
A significant increase or decrease in or changes in timing of forecasted revenue will prospectively impact our interest expense. 78 Statements of Operations Data and Other Financial and Operating Data The following table sets forth our statements of operations data and other financial and operating data for the periods presented (in thousands, except share and per share amounts): Year Ended December 31, 2023 2022 2021 Statements of Operations Data: Revenue $ 170,276 $ 185,308 $ 154,344 Operating expenses Cost of revenue 75,553 57,909 49,301 Research and development 122,117 141,756 142,343 Sales and marketing 88,579 95,603 95,465 General and administrative 83,934 88,527 74,502 Amortization of intangible assets 1,699 1,699 1,699 Impairment of right-of-use and related long-lived assets 25,429 — — Total operating expenses 397,311 385,494 363,310 Loss from operations (227,035 ) (200,186 ) (208,966 ) Interest and other income, net 15,531 4,056 1,668 Interest expense (13,800 ) (4,238 ) — Net loss (225,304 ) (200,368 ) (207,298 ) Add: Net loss attributable to noncontrolling interest 54 177 19 Net loss attributable to Adaptive Biotechnologies Corporation $ (225,250 ) $ (200,191 ) $ (207,279 ) Net loss per share attributable to Adaptive Biotechnologies Corporation common shareholders, basic and diluted $ (1.56 ) $ (1.40 ) $ (1.48 ) Weighted-average shares used in computing net loss per share attributable to Adaptive Biotechnologies Corporation common shareholders, basic and diluted 144,383,294 142,515,917 140,354,915 Other Financial and Operating Data: Adjusted EBITDA (1) $ (116,413 ) $ (121,589 ) $ (151,743 ) (1) Adjusted EBITDA is a non-GAAP financial measure that we define as net loss attributable to Adaptive Biotechnologies Corporation adjusted for interest and other income, net, interest expense, income tax (expense) benefit, depreciation and amortization expense, impairment costs for right-of-use and related long-lived assets, restructuring expense and share-based compensation expense.
A significant increase or decrease in or changes in timing of forecasted revenue will prospectively impact our interest expense. 77 Statements of Operations Data and Other Financial and Operating Data The following table sets forth our statements of operations data and other financial and operating data for the periods presented (in thousands, except share and per share amounts): Year Ended December 31, 2024 2023 2022 Statements of Operations Data: Revenue $ 178,957 $ 170,276 $ 185,308 Operating expenses Cost of revenue 72,080 75,553 57,909 Research and development 102,953 122,117 141,756 Sales and marketing 84,759 88,579 95,603 General and administrative 72,806 83,934 88,527 Amortization of intangible assets 1,703 1,699 1,699 Impairment of long-lived assets 7,205 25,429 — Total operating expenses 341,506 397,311 385,494 Loss from operations (162,549 ) (227,035 ) (200,186 ) Interest and other income, net 14,534 15,531 4,056 Interest expense (11,580 ) (13,800 ) (4,238 ) Net loss (159,595 ) (225,304 ) (200,368 ) Add: Net loss attributable to noncontrolling interest 103 54 177 Net loss attributable to Adaptive Biotechnologies Corporation $ (159,492 ) $ (225,250 ) $ (200,191 ) Net loss per share attributable to Adaptive Biotechnologies Corporation common shareholders, basic and diluted $ (1.08 ) $ (1.56 ) $ (1.40 ) Weighted-average shares used in computing net loss per share attributable to Adaptive Biotechnologies Corporation common shareholders, basic and diluted 147,101,648 144,383,294 142,515,917 Other Financial and Operating Data: Adjusted EBITDA (1) $ (80,371 ) $ (116,413 ) $ (121,589 ) (1) Adjusted EBITDA is a non-GAAP financial measure that we define as net loss attributable to Adaptive Biotechnologies Corporation adjusted for interest and other income, net, interest expense, income tax (expense) benefit, depreciation and amortization expense, impairment costs for long-lived assets, restructuring expense and share-based compensation expense.
If each of the First Payment, Second Payment and Third Payment have been made, the applicable payment percentage applied to the Revenue Interest shall be ten percent of the quarterly Revenue Base. Revenue Interest Payments shall be made quarterly within 45 days following the end of each fiscal quarter.
If both the First Payment and Second Payment have been made, the Applicable Payment Percentage shall be eight percent of the quarterly Revenue Base. If each of the First Payment, Second Payment and Third Payment have been made, the applicable payment percentage applied to the Revenue Interest shall be ten percent of the quarterly Revenue Base.
Management uses Adjusted EBITDA to evaluate the financial performance of our business and the effectiveness of our business strategies. We present Adjusted EBITDA because we believe it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry and it facilitates comparisons on a consistent basis across reporting periods.
We present these figures because we believe it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry and it facilitates comparisons on a consistent basis across reporting periods.
See Note 10, Leases of the accompanying notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information, including the timing of cash payments related to these lease obligations.
See Note 10, Leases of the accompanying notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information, including the timing of cash payments related to these lease obligations. In connection with certain of our lease agreements, we have $2.1 million in letters of credit with one of our financial institutions.
General and Administrative Year Ended December 31, Change Percent of Revenue (in thousands, except percentages) 2023 2022 $ % 2023 2022 General and administrative $ 83,934 $ 88,527 $ (4,593 ) (5)% 49 % 48 % The $4.6 million decrease in general and administrative expenses was primarily attributable to an $8.0 million decrease in building, facility and depreciation related expenses, driven largely by office space transitions made to support laboratory consolidation activities, a $2.0 million decrease in consultant costs and a $1.6 million decrease in insurance costs.
General and Administrative Year Ended December 31, Change Percent of Revenue (in thousands, except percentages) 2024 2023 $ % 2024 2023 General and administrative $ 72,806 $ 83,934 $ (11,128 ) (13)% 41 % 49 % The $11.1 million decrease in general and administrative expenses was primarily attributable to a $5.7 million decrease in personnel costs, a $3.0 million decrease in building, facility, overhead and depreciation related expenses largely driven by office space transitions made to support laboratory consolidation activities, a $1.8 million decrease in legal fees, a $1.1 million decrease in insurance costs and a $0.9 million decrease in consultant costs.
Cash used in operating activities during the year ended December 31, 2022 was $183.9 million, which was primarily attributable to a net loss of $200.4 million and a net change in our operating assets and liabilities of $71.5 million, partially offset by noncash share-based compensation of $55.5 million, noncash depreciation and amortization of $21.7 million, noncash lease expense of $7.2 million, a research and development inventory reserve charge of $2.6 million and noncash interest expense related to the Purchase Agreement of $1.0 million.
Cash used in operating activities during the year ended December 31, 2023 was $156.3 million, which was primarily attributable to a net loss of $225.3 million and a net change in operating assets and liabilities of $46.2 million, partially offset by noncash share-based compensation of $62.9 million, noncash impairment of right-of-use and related long-lived assets of $25.4 million, noncash depreciation and amortization of $13.0 million, noncash lease expense of $6.9 million, noncash interest expense related to the Purchase Agreement of $5.3 million and inventory reserve expense of $1.4 million.
The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations. This additional capital may not be available on reasonable terms, or at all.
The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations.
The following is a reconciliation of net loss attributable to Adaptive Biotechnologies Corporation, the most directly comparable GAAP financial measure, to Adjusted EBITDA for the periods presented (in thousands): Year Ended December 31, 2023 2022 2021 Net loss attributable to Adaptive Biotechnologies Corporation $ (225,250 ) $ (200,191 ) $ (207,279 ) Interest and other income, net (15,531 ) (4,056 ) (1,668 ) Interest expense (1) 13,800 4,238 — Depreciation and amortization expense 22,231 20,920 13,953 Impairment of right-of-use and related long-lived assets (2) 25,429 — — Restructuring expense (3) — 2,023 — Share-based compensation expense (4) 62,908 55,477 43,251 Adjusted EBITDA $ (116,413 ) $ (121,589 ) $ (151,743 ) (1) Represents costs associated with our revenue interest liability and noncash interest costs associated with the amortization of the related deferred issuance costs.
In addition, Adjusted EBITDA, including segment Adjusted EBITDA, may not be comparable to similarly titled measures used by other companies in our industry or across different industries. 81 The following is a reconciliation of net loss attributable to Adaptive Biotechnologies Corporation, the most directly comparable GAAP financial measure, to Adjusted EBITDA for the periods presented (in thousands): Year Ended December 31, 2024 2023 2022 Net loss attributable to Adaptive Biotechnologies Corporation $ (159,492 ) $ (225,250 ) $ (200,191 ) Interest and other income, net (14,534 ) (15,531 ) (4,056 ) Interest expense (1) 11,580 13,800 4,238 Depreciation and amortization expense 19,256 22,231 20,920 Impairment of long-lived assets (2) 7,205 25,429 — Restructuring expense (3) 2,004 — 2,023 Share-based compensation expense (4) 53,610 62,908 55,477 Adjusted EBITDA $ (80,371 ) $ (116,413 ) $ (121,589 ) (1) Represents costs associated with our revenue interest liability and noncash interest costs associated with the amortization of the related deferred issuance costs.
Recoverability and Impairment of Long-Lived Assets We review long-lived assets for impairment annually or whenever events or circumstances indicate the carrying amount of an asset group may not be recoverable. To test for recoverability, we compare the carrying amount of the asset group to projected future net undiscounted cash flows.
To date, we have not recognized any impairment of goodwill. 86 Recoverability and Impairment of Long-Lived Assets We review long-lived assets for impairment annually or whenever events or circumstances indicate the carrying amount of an asset or asset group may not be recoverable.
These changes were partially offset by a $7.1 million increase in accounts payable and accrued liabilities, a $3.6 million decrease in prepaid expenses and other current assets and a $0.8 million decrease in inventory.
These changes were partially offset by a $5.4 million decrease in inventory and a $0.7 million increase in accounts payable and accrued liabilities.
Sales and Marketing Year Ended December 31, Change Percent of Revenue (in thousands, except percentages) 2023 2022 $ % 2023 2022 Sales and marketing $ 88,579 $ 95,603 $ (7,024 ) (7)% 52 % 52 % 80 The $7.0 million decrease in sales and marketing expenses was primarily attributable to a $5.0 million decrease in marketing expenses, which was largely driven by reduced clonoSEQ marketing activities and our deferral of commercializing T-Detect, a $3.8 million decrease in personnel costs and a $1.0 million decrease in consultant costs.
Sales and Marketing Year Ended December 31, Change Percent of Revenue (in thousands, except percentages) 2024 2023 $ % 2024 2023 Sales and marketing $ 84,759 $ 88,579 $ (3,820 ) (4)% 47 % 52 % 79 The $3.8 million decrease in sales and marketing expenses was primarily attributable to a $4.1 million decrease in personnel costs and a $2.0 million decrease in marketing expenses, which was largely driven by reduced clonoSEQ marketing activities, followed by reduced research and corporate marketing activities.
We recognized revenue of $170.3 million and $185.3 million for the year ended December 31, 2023 and 2022, respectively. Net loss attributable to Adaptive Biotechnologies Corporation was $225.3 million and $200.2 million for the year ended December 31, 2023 and 2022, respectively.
Net loss attributable to Adaptive Biotechnologies Corporation was $159.5 million and $225.3 million for the year ended December 31, 2024 and 2023, respectively.
We expect our Immune Medicine revenue to decrease in the short term primarily due to our expected reduction in revenue generated from the Genentech Agreement. Over the long term, we expect our Immune Medicine revenue to increase as we or our collaborators advance therapies to commercialization.
We expect our Immune Medicine revenue to increase in the long term as we or our collaborators advance therapies to commercialization.
Our current product and service offerings in MRD related to the MRD market are our clonoSEQ clinical diagnostic test, offered to clinicians, and our clonoSEQ or MRD assay, offered to biopharmaceutical partners to advance drug development efforts (“MRD Pharma”).
Our existing and future commercial products and services are aligned to two business areas which we refer to as MRD and Immune Medicine. Our current product and service offerings in MRD related to the MRD market are our clonoSEQ clinical diagnostic test, offered to clinicians, and our clonoSEQ or MRD assay, offered to biopharmaceutical partners to advance drug development efforts.
The net change in our operating assets and liabilities was primarily due to a $56.5 million reduction in deferred revenue driven largely by revenue recognized from the Genentech Agreement, an increase in accounts receivable, net of $22.6 million, $7.1 million of which was attributed to growth in receivables related to clonoSEQ with the remaining increase driven largely by growth in receivables from biopharmaceutical customers, and a $4.1 million decrease in operating lease right-of-use assets and liabilities.
The net change in operating assets and liabilities was primarily driven by a $10.5 million reduction in deferred revenue driven largely by revenue recognized from the Genentech Agreement, a $9.4 million decrease in operating lease right-of-use assets and liabilities and a $3.7 million increase in accounts receivable, net.
Certain of our MRD revenue arrangements with biopharmaceutical customers include cash consideration from the achievement of regulatory milestones of the respective biopharmaceutical customers’ therapeutics. Such revenue is constrained from recognition until it becomes probable that such milestone will be achieved.
Certain of our MRD revenue arrangements with biopharmaceutical customers include cash consideration from the achievement of regulatory milestones of the respective biopharmaceutical customers’ therapeutics.
These decreases were partially offset by a $2.4 million increase in computer and software expenses and a $0.8 million increase in building, facility and depreciation related expenses.
There was also a $0.8 million decrease in travel and customer event related expenses. These decreases were partially offset by a $2.1 million increase in computer and software expenses and a $1.1 million increase in allocated facility and overhead expenses.
Research and Development Year Ended December 31, Change Percent of Revenue (in thousands, except percentages) 2023 2022 $ % 2023 2022 Research and development $ 122,117 $ 141,756 $ (19,639 ) (14)% 72 % 76 % The following table presents disaggregated research and development expenses by cost classification for the periods presented: Year Ended December 31, (in thousands) 2023 2022 Change Research and development materials and allocated production laboratory expenses $ 20,243 $ 43,706 $ (23,463 ) Personnel expenses 74,385 68,177 6,208 Allocable facilities and information technology expenses 11,617 8,856 2,761 Software and cloud services expenses 3,394 2,678 716 Depreciation and other expenses 12,478 18,339 (5,861 ) Total $ 122,117 $ 141,756 $ (19,639 ) The $19.6 million decrease in research and development expenses was primarily attributable to a $23.5 million decrease in cost of materials and allocated production laboratory expenses, which was driven primarily by decreased investments in T-Detect and TCR-Antigen Map development activities, as well as decreased investments in drug discovery efforts, including collaboration efforts with Genentech.
Research and Development Year Ended December 31, Change Percent of Revenue (in thousands, except percentages) 2024 2023 $ % 2024 2023 Research and development $ 102,953 $ 122,117 $ (19,164 ) (16)% 58 % 72 % The following table presents disaggregated research and development expenses by cost classification for the periods presented: Year Ended December 31, (in thousands) 2024 2023 Change Research and development materials and allocated production laboratory expenses $ 15,844 $ 20,243 $ (4,399 ) Personnel expenses 62,742 74,385 (11,643 ) Allocable facilities and information technology expenses 10,839 11,617 (778 ) Software and cloud services expenses 4,908 3,394 1,514 Depreciation and other expenses 8,620 12,478 (3,858 ) Total $ 102,953 $ 122,117 $ (19,164 ) The $19.2 million decrease in research and development expenses was primarily attributable to an $11.6 million decrease in personnel costs and a $4.4 million decrease in laboratory materials and allocated production laboratory expenses, which was driven primarily by decreased investments in drug discovery efforts, including collaboration efforts with Genentech, and decreased investments in TCR-antigen binding development activities, partially offset by an increase in investments related to the MRD business.
Our MRD revenue may fluctuate period to period due to the uncertain timing of receipt of our biopharmaceutical customer samples, which may cause uncertainty in the delivery of our products and services, the recognition of milestones related to regulatory approvals of our biopharmaceutical customers’ therapeutics and changes in estimates of our clinical revenue reimbursement rates. 76 Cost of Revenue Cost of revenue includes the cost of materials, personnel-related expenses (including salaries, benefits and share-based compensation), shipping and handling expenses, equipment costs, allocated facility costs associated with processing samples and professional support costs related to our service revenue activities.
Our MRD revenue may fluctuate period to period due to the uncertain timing of receipt of our biopharmaceutical customer samples, which may cause uncertainty in the delivery of our products and services, the recognition of milestones related to regulatory approvals of our biopharmaceutical customers’ therapeutics and changes in estimates of our clinical revenue reimbursement rates.
Interest and Other Income, Net Year Ended December 31, Change (in thousands, except percentages) 2023 2022 $ % Interest and other income, net $ 15,531 $ 4,056 $ 11,475 283 % The $11.5 million increase in interest and other income, net was primarily attributable to an increase in net interest income and investment amortization driven by increased interest rates and related yields of our invested cash and cash equivalents and marketable securities.
Interest and Other Income, Net Year Ended December 31, Change (in thousands, except percentages) 2024 2023 $ % Interest and other income, net $ 14,534 $ 15,531 $ (997 ) (6)% The $1.0 million decrease in interest and other income, net was primarily attributable to a decrease in net interest income and investment amortization driven by decreased holdings of and interest rates pertaining to our cash, cash equivalents and marketable securities.
Impairment of Right-of-Use and Related Long-Lived Assets Year Ended December 31, Change Percent of Revenue (in thousands, except percentages) 2023 2022 $ % 2023 2022 Impairment of right-of-use and related long-lived assets $ 25,429 $ — $ 25,429 *% 15 % 0 % * Not applicable The $25.4 million increase in impairment of right-of-use and related long-lived assets expenses was attributable to us vacating certain leased space in Seattle, Washington in October 2023 and the resulting impairment of related leasehold improvements.
Impairment of Long-Lived Assets Year Ended December 31, Change Percent of Revenue (in thousands, except percentages) 2024 2023 $ % 2024 2023 Impairment of long-lived assets $ 7,205 $ 25,429 $ (18,224 ) (72)% 4 % 15 % * Not applicable The $18.2 million decrease in impairment of long-lived assets expenses was primarily due to a $25.4 million decrease in impairment costs related to us vacating certain leased space in Seattle, Washington in October 2023, which was partially offset by a $7.2 million increase in impairment costs resulting from various restructuring activities implemented in 2024.
We recognized $25.4 million in impairment expense related to certain right-of-use and related leasehold improvement assets during the year ended December 31, 2023. 86 Recent Accounting Pronouncements See Note 2, Significant Accounting Policies of the accompanying notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information.
Recent Accounting Pronouncements See Note 2, Significant Accounting Policies of the accompanying notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information.
Allocated facility costs include depreciation of laboratory equipment, as well as allocated facility occupancy and information technology costs. Costs associated with processing samples are recorded as expense, regardless of the timing of revenue recognition. As such, cost of revenue and related volume does not always trend in the same direction as revenue recognition and related volume.
Costs associated with processing samples are recorded as expense, regardless of the timing of revenue recognition. As such, cost of revenue and related volume does not always trend in the same direction as revenue recognition and related volume. Additionally, costs to support the Genentech Agreement are a component of our research and development expenses.
In Drug Discovery, we use our proprietary capabilities to discover new drug targets and leverage our validated TCR and BCR discovery approaches to discover and develop TCR or antibody therapeutic assets. Drug Discovery includes the Genentech Agreement.
We are applying AI and machine learning models to map at scale TCR sequences to the diseases they bind to enable our drug discovery efforts. Also in our drug discovery programs, we use our proprietary capabilities to discover new drug targets and leverage our validated TCR and BCR discovery approaches to discover and develop TCR or antibody therapeutic assets.
Revenue recognized from these activities relate primarily to the Genentech Agreement. For our clinical customers, we primarily derive revenue from providing our clonoSEQ report to ordering physicians. We bill commercial, government and medical institution payors based on reports delivered to ordering physicians.
For our clinical customers, we primarily derive revenue from providing our clonoSEQ report to ordering physicians. We bill commercial, government and medical institution payors based on reports delivered to ordering physicians. Amounts paid for clonoSEQ by commercial, government and medical institution payors vary based on respective reimbursement rates and patient responsibilities, which may differ from our targeted list price.
In addition, these expenses include insurance costs, external legal costs, accounting and tax service expenses, consulting fees and allocated facility and information technology costs.
In addition, these expenses include insurance costs, external legal costs, accounting and tax service expenses, consulting fees and allocated facility and information technology costs. We expect general and administrative expenses to moderately increase in the short term and to decrease as a percentage of revenue in the long term.
If only the First Payment has been made, the Applicable Payment Percentage shall be five percent of the quarterly Revenue Base. If both the First Payment and Second Payment have been made, the Applicable Payment Percentage shall be eight percent of the quarterly Revenue Base.
Additionally, pursuant to the Purchase Agreement, the Purchasers have a right to receive Revenue Interests from us based on the Applicable Payment Percentage of the Revenue Base. If only the First Payment has been made, the Applicable Payment Percentage shall be five percent of the quarterly Revenue Base.
For our clonoSEQ coverage under Medicare, we bill an episode of treatment when we deliver the first eligible test report. This billing contemplates all necessary tests required during a patient’s treatment cycle, which is currently estimated at approximately four tests per patient, including the initial sequence identification test.
This billing contemplates all necessary tests required during a patient’s treatment cycle, which is currently estimated at approximately four tests per patient, including the initial sequence identification test. Revenue recognition commences at the time the initial billable test report is delivered and is based upon cumulative tests delivered to date.
These increases were partially offset by a $6.0 million decrease in revenue recognized upon the achievement of regulatory milestones by some of our biopharmaceutical customers. Our clonoSEQ test volume increased by 53% to 56,496 tests delivered in the year ended December 31, 2023 from 36,871 tests delivered in the year ended December 31, 2022.
These increases were partially offset by a $1.6 million decrease in revenue generated from providing MRD sample testing services to investigator-led clinical trials. Our clonoSEQ test volume increased by 35% to 76,105 tests delivered in the year ended December 31, 2024 from 56,496 tests delivered in the year ended December 31, 2023.
These decreases were partially offset by a $2.7 million increase in personnel costs, driven primarily by increased share-based compensation, a $1.6 million increase in legal and accounting fees, a $1.3 million increase in computer and software expenses and a $1.2 million increase in third-party billing service fees.
These decreases were partially offset by a $1.7 million increase in third-party billing service fees.
There was also a $3.1 million decrease in consultant costs and a $2.5 million decrease in costs related to collaboration studies and clinical trials, which were the primary drivers of the $5.9 million decrease in depreciation and other expenses.
There was also a $3.9 million decrease in depreciation and other expenses, inclusive of a $2.6 million decrease in costs related to collaboration studies primarily related to Immune Medicine, and a $0.8 million decrease in allocable facilities expenses. These decreases were partially offset by a $1.5 million increase in software and cloud services expenses.
Under certain agreements with our biopharmaceutical customers who seek access to our platform to support their therapeutic development activities, revenues are generated from research and development support services that we provide. These agreements may include substantial non-refundable upfront payments, which we recognize over time as we perform the respective services.
Such revenue is constrained from recognition until it becomes probable that such milestone will be achieved. 75 Under certain agreements with our biopharmaceutical customers who seek access to our platform to support their therapeutic development activities, revenues are generated from research and development support services that we provide.
Cost of Revenue Year Ended December 31, Change Percent of Revenue (in thousands, except percentages) 2023 2022 $ % 2023 2022 Cost of revenue $ 75,553 $ 57,909 $ 17,644 30 % 44 % 31 % The $17.6 million increase in cost of revenue was primarily attributable to an $8.6 million increase related to higher usage of our production laboratory to process revenue samples versus research and development samples, a $5.1 million increase in overhead costs largely driven by laboratory relocation and consolidation activities, a $2.8 million increase in materials cost resulting from increased revenue sample volume and a $1.2 million increase in shipping and handling expenses.
Cost of Revenue Year Ended December 31, Change Percent of Revenue (in thousands, except percentages) 2024 2023 $ % 2024 2023 Cost of revenue $ 72,080 $ 75,553 $ (3,473 ) (5)% 40 % 44 % The $3.5 million decrease in cost of revenue was primarily attributable to a $10.4 million decrease in overhead costs, which was largely driven by laboratory relocation and consolidation activities.
Amounts paid for clonoSEQ by commercial, government and medical institution payors vary based on respective reimbursement rates and patient responsibilities, which may differ from our targeted list price. We recognize clinical revenue by evaluating customer payment history, contracted reimbursement rates, if applicable, and other adjustments to estimate the amount of revenue that is collectible.
We recognize clinical revenue by evaluating customer payment history, contracted reimbursement rates, if applicable, and other adjustments to estimate the amount of revenue that is collectible. For our clonoSEQ coverage under Medicare, we bill an episode of treatment when we deliver the first eligible test report.
With the use of clonoSEQ, we are transforming how lymphoid cancers are treated by working with providers, pharmaceutical partners and payors. Immune Medicine leverages our proprietary ability to sequence, map, pair and characterize TCRs and BCRs at scale to drive opportunities in cancer, autoimmune disorders, infectious diseases and neurodegenerative disorders.
Immune Medicine leverages our proprietary ability to sequence, map, pair and characterize TCRs and BCRs at scale to drive opportunities in cancer and autoimmune disorders. Our immunosequencing technology, which includes our Adaptive Immunosequencing research product, serves as the research and development engine driving our immune medicine platform and generates revenue from biopharmaceutical and academic customers.
We expect general and administrative expenses to remain relatively consistent in the short term and to decrease as a percentage of revenue in the long term. 77 Impairment of Right-of-Use and Related Long-Lived Assets Expenses Impairment of right-of-use and related long-lived assets expenses include our impairment charge for certain leased office and laboratory space, as well as impairment costs for related leasehold improvements.
Impairment of Long-Lived Assets Expenses Impairment of long-lived assets expenses include our impairment charges for certain leased office and laboratory space, related long-lived assets (including leasehold improvements and laboratory equipment) and long-lived assets associated with our halted software enhancements.
Removed
Our existing and future commercial products and services are aligned to two business areas which we refer to as MRD and Immune Medicine.
Added
In the fourth quarter of 2024, we obtained Medicare coverage for MCL and initiated promotional efforts in MCL. We also recently obtained a new Medicare CLFS rate of $2,007 per test for clonoSEQ and MolDX updated the clonoSEQ episode pricing to $8,029 for all covered indications.
Removed
Our core research product, Adaptive Immunosequencing, serves as our underlying research and development engine and generates revenue from biopharmaceutical and academic customers. Leveraging our collaboration with Microsoft, we are creating the TCR-Antigen Map. We are using the TCR-Antigen Map to identify and validate disease signatures to improve the diagnosis and treatment of many diseases.
Added
This represents a 17% increase from the previous episode price and the previous implied per test rate under the episode structure. With the use of clonoSEQ, we are transforming how lymphoid cancers are treated by working with providers, pharmaceutical partners and payors.

… 31 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed2 unchanged
Biggest changeAs of December 31, 2023 and 2022, we had cash and cash equivalents of $65.1 million and $90.0 million, respectively, held primarily in cash deposits and money market funds. As of December 31, 2023, we had short-term marketable securities of $281.3 million, held in U.S. government treasury and agency securities, commercial paper and corporate bonds.
Biggest changeAs of December 31, 2024 and 2023, we had cash and cash equivalents of $47.9 million and $65.1 million, respectively, held primarily in cash deposits and money market funds. As of December 31, 2024, we had short-term and long-term marketable securities of $208.0 million, held in U.S. government treasury securities, corporate bonds and commercial paper.
As of December 31, 2023, a hypothetical 100 basis point increase in interest rates would have resulted in a $1.2 million decline in fair value of our available-for-sale securities, as compared to a $1.5 million decline as of December 31, 2022. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur.
As of December 31, 2024, a hypothetical 100 basis point increase in interest rates would have resulted in a $1.0 million decline in fair value of our available-for-sale securities, as compared to a $1.2 million decline as of December 31, 2023. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur.
As of December 31, 2022, we had short-term marketable securities of $408.2 million, held in U.S. government treasury securities, corporate bonds and commercial paper. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of interest rates in the U.S.
As of December 31, 2023, we had short-term marketable securities of $281.3 million, held in U.S. government treasury and agency securities, commercial paper and corporate bonds. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of interest rates in the U.S.

Other ADPT 10-K year-over-year comparisons