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What changed in PACIFIC BIOSCIENCES OF CALIFORNIA, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of PACIFIC BIOSCIENCES OF CALIFORNIA, INC.'s 2024 and 2025 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 2025 report.

+417 added−421 removedSource: 10-K (2026-02-25) vs 10-K (2025-03-17)

Top changes in PACIFIC BIOSCIENCES OF CALIFORNIA, INC.'s 2025 10-K

417 paragraphs added · 421 removed · 290 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

56 edited+35 added−48 removed62 unchanged
Biggest changeWe believe that unleashing the full potential of genomics will require a level of accuracy and completeness inaccessible to legacy technologies. Accuracy and completeness are central to our product Fiscal 2024 Form 10-K 3 Table of Contents development strategy; thus, we have created some of the most innovative and high-quality genomics solutions on the market.
Biggest changeAccuracy and completeness are central to our product development strategy; thus, we have created some of the most innovative and high-quality genomics solutions on the market. Our products also have enhanced multi-omic capabilities to look beyond the genome to the transcriptome and epigenome, which we believe is key to understanding a full picture of biology.
Customers Our customers include academic and governmental research institutions, commercial testing and service laboratories, genome centers, public health labs, hospitals and clinical research institutes, contract research organizations ("CROs"), pharmaceutical companies, and agricultural companies.
Our customers include academic and governmental research institutions, commercial testing and service laboratories, genome centers, public health labs, hospitals and clinical research institutes, contract research organizations ("CROs"), pharmaceutical companies, and agricultural companies.
We also have non-exclusive patent licenses with various third parties to supplement our own large and robust patent portfolio. Other Sequencing Solutions There are a significant number of companies offering nucleic acid sequencing equipment or consumables. These include, but are not limited to, Illumina, Inc. (“Illumina”), BGI Genomics (also known as MGI or Complete Genomics), Thermo Fisher Scientific Inc.
We also have non-exclusive patent licenses with various third parties to supplement our own large and robust patent portfolio. Other Sequencing Solutions There are a significant number of companies offering nucleic acid sequencing equipment or consumables. These include, but are not limited to, Illumina, BGI Genomics (also known as MGI or Complete Genomics), Thermo Fisher Scientific Inc.
These discoveries include the presence of chemical modifications to the bases, such as methylation, and post-translational modification, or the processing of RNA molecules after they are transcribed from the genome, both of which can affect protein synthesis. Our Principal Markets Researchers utilize our solutions in human genomics, plant and animal sciences, infectious disease and microbiology, oncology, and other emerging applications.
These discoveries include the presence of chemical modifications to the bases, such as methylation, and post-transcriptional modification, or the processing of RNA molecules after they are transcribed from the genome, both of which can affect protein synthesis. Our Principal Markets Researchers utilize our solutions in human genomics, plant and animal sciences, infectious disease and microbiology, oncology, and other emerging applications.
(“Thermo”), Oxford Nanopore Technologies Ltd. (“ONT Ltd.”), Roche Holding AG (“Roche”), Qiagen N.V. (“Qiagen”), Element Biosciences, Inc. (“Element”), Bionano Genomics, Inc. (“Bionano”), Ultima Genomics, Inc. (“Ultima”), Singular Genomics Systems, Inc. (“Singular”) and 10x Genomics, Inc. ("10x"). These companies may have different levels of financial, technical, manufacturing, administrative, and support resources available to them.
(“Thermo”), Oxford Nanopore Technologies Ltd. (“ONT Ltd.”), Roche Holding AG (“Roche”), Qiagen N.V. (“Qiagen”), Element Biosciences, Inc. (“Element”), Bionano Genomics, Inc. (“Bionano”), Ultima Genomics, Inc. (“Ultima”), and 10x Genomics, Inc. ("10x"). These companies may have different levels of financial, technical, manufacturing, administrative, and support resources available to them.
In general, our customers will isolate, prepare, and analyze genetic samples using PacBio systems in their own laboratories, or they will send their genetic samples to third-party service providers who in turn will sequence the samples with PacBio systems and provide the sequence data back to the customer for further analysis.
Our customers isolate, prepare, and analyze genetic samples using PacBio systems in their own laboratories, or send their genetic samples to third-party service providers who in turn sequence the samples with PacBio systems and provide the sequence data back to the customer for further analysis.
Our sequencing technology delivers highly comprehensive and complete genomes, enabling federal agencies, public health organizations, and healthcare providers to conduct wide-ranging research and surveillance activities to: • generate high quality, complete genome assemblies, revealing variants of all known types, to gain a deeper understanding of community-acquired and hospital-associated infections and transmissions; • identify and characterize pathogens to inform regional, national, and global public health agencies for preparation and response to rapidly evolving microorganisms; and Fiscal 2024 Form 10-K 4 Table of Contents • characterize complex microbial communities to understand their role in human, animal, and environmental health.
Our sequencing technology delivers highly comprehensive and complete genomes, enabling federal agencies, public health organizations, and healthcare providers to conduct wide-ranging research and surveillance activities to: • generate high quality, complete genome assemblies, revealing variants of all known types, to gain a deeper understanding of community-acquired and hospital-associated infections and transmissions; • identify and characterize pathogens to inform regional, national, and global public health agencies for preparation and response to rapidly evolving microorganisms; and • characterize complex microbial communities to understand their role in human, animal, and environmental health.
FDA defines a medical device as an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including any component part or accessory, which is (i) intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals, or (ii) intended to affect the structure or any function of the body of man or other animals and which does not achieve any of its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes.
FDA defines a medical device as an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including any component part or accessory, which is (i) intended for use in the diagnosis of disease or other conditions, or in the cure, Fiscal 2025 Form 10-K 8 Table of Contents mitigation, treatment, or prevention of disease, in man or other animals, or (ii) intended to affect the structure or any function of the body of man or other animals and which does not achieve any of its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes.
Initial genome sequencing studies have shown that mutations in these DNA base pairs play a critical role in human disease, contributing to the burgeoning field of genomics. Since then, recent discoveries have highlighted additional complexities of DNA and RNA.
Initial genome sequencing studies have shown that variation in these DNA base pairs play a critical role in human disease, contributing to the burgeoning field of genomics. Recent discoveries have highlighted additional complexities of DNA and RNA.
Our current patent portfolio, including patents exclusively licensed to us, is directed to various technologies, including SMRT nucleic acid sequencing and other methods for analyzing biological samples, zero-mode waveguide ("ZMW") arrays, surface treatments, phospholinked nucleotides and other reagents for use in nucleic acid sequencing, optical short-read nucleic acid sequencing, nucleic acid preparation, and purification components and systems, processes for identifying nucleotides within nucleic acid sequences, and processes for analysis and comparison of nucleic acid sequence data.
Our current patent portfolio, including patents exclusively licensed to us, is directed to various technologies, including SMRT nucleic acid sequencing and other methods for analyzing biological samples, ZMW arrays, surface treatments, phospholinked nucleotides and other reagents for use in nucleic acid sequencing, nucleic acid preparation, and purification components and systems, processes for identifying nucleotides within nucleic acid sequences, and processes for analysis and comparison of nucleic acid sequence data.
None of our employees are represented by labor unions or are covered by a collective bargaining agreement with respect to their employment. We have not experienced any work stoppages, and we consider our relationship with our employees to be good. Talent Acquisition and Retention We recognize that our employees largely contribute to our success.
None of our employees are represented by labor unions or are covered by a collective bargaining agreement with respect to their employment. We have not experienced any work stoppages, and we consider our relationship with our employees to be good. Talent Acquisition and Retention We recognize that our employees are the driving force behind our success.
Our HiFi long-read sequencing will need to continue to deliver very high consensus accuracy and long-read lengths and include single-molecule, real-time resolution, with the ability to detect real-time kinetic information, fast time-to-result and flexibility, as well as support the breadth and depth of current and future applications.
Our HiFi long-read sequencing will need to continue to deliver high consensus accuracy and long-read lengths, include single-molecule, real-time resolution, detect real-time kinetic information, provide fast time-to-result and flexibility, and support the breadth and depth of current and future applications.
For example, medical device companies are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct their business and may constrain the financial arrangements and relationships through which we research, as well as sell, market and distribute any medical products for which we obtain marketing authorization.
For example, medical device companies are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and Fiscal 2025 Form 10-K 10 Table of Contents foreign jurisdictions in which they conduct their business and may constrain the financial arrangements and relationships through which we research, as well as sell, market and distribute any medical products for which we obtain marketing authorization.
The contents of our website and our X account are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our website or X account are intended to be inactive textual references only. Fiscal 2024 Form 10-K 14 Table of Contents
The contents of our website and our social media accounts are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our website or X account are intended to be inactive textual references only. Fiscal 2025 Form 10-K 13 Table of Contents
Available Information Our website is located at www.pacb.com . The information posted on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K, and the inclusion of our website address is an inactive textual reference only.
The information posted on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K, and the inclusion of our website address is an inactive textual reference only.
We expect continued intense competition within the overall nucleic Fiscal 2024 Form 10-K 9 Table of Contents acid sequencing market as there are several companies developing new sequencing technologies, products and/or services. Increased competition may result in pricing pressures, which could harm our sales, profitability, or share of supply.
We expect continued intense competition within the overall nucleic acid sequencing market as there are several companies developing new sequencing technologies, products and/or services. Increased competition may result in pricing pressures, which could harm our sales, profitability, or share of supply.
Our technology is also capable of detecting epigenetic markers Fiscal 2024 Form 10-K 5 Table of Contents simultaneously by analyzing the kinetics of DNA polymerization that is affected, and thereby detectable, by epigenetic markers such as 5-methylcytosine or N 6 -methyladenine.
Our technology is also capable of detecting epigenetic markers simultaneously by analyzing the kinetics of DNA polymerization that is affected, and thereby detectable, by epigenetic markers such as 5-methylcytosine or N 6 -methyladenine.
These circumstances Fiscal 2024 Form 10-K 10 Table of Contents may include, among other things, written or verbal marketing claims regarding a product’s performance in clinical diagnostic applications and a manufacturer’s provision of technical support for such activities.
These circumstances may include, among other things, written or verbal marketing claims regarding a product’s performance in clinical diagnostic applications and a manufacturer’s provision of technical support for such activities.
As of December 31, 2024, we own or hold exclusive licenses to 448 issued U.S. patents, 69 pending U.S. patent applications, 8 pending Patent Cooperation Treaty ("PCT") patent applications, 265 issued foreign patents, and 120 pending foreign patent applications. The full term of the issued U.S. patents will expire between 2025 and 2042.
As of December 31, 2025, we own or hold exclusive licenses to 450 issued U.S. patents, 69 pending U.S. patent applications, 8 pending Patent Cooperation Treaty ("PCT") patent applications, 318 issued foreign patents, and 104 pending foreign patent applications. The full term of the issued U.S. patents will expire between 2026 and 2042.
Research and Development We have historically made and plan to continue to make significant investments in research and development. Our research and development efforts focus on programs to develop new and existing platforms, as well as increasing throughput and decreasing costs on behalf of our customers.
Fiscal 2025 Form 10-K 7 Table of Contents Research and Development We have historically made and plan to continue to make significant investments in research and development. Our research and development efforts focus on programs to develop new and existing platforms, as well as increasing throughput and decreasing costs on behalf of our customers.
A human carries two copies of the chromosomes, one inherited from each parent. Approximately 23,000 smaller regions within these chromosomes, called genes, contain the blueprints for protein production. The proteins synthesized from these blueprints essentially underlie the operation of all biological systems. Genome sequencing reads the bases of long fragments of nucleic acids.
Approximately 23,000 smaller regions within these chromosomes, called genes, contain the blueprints for protein production. The proteins synthesized from these blueprints essentially underlie the operation of all biological systems. Genome sequencing reads the bases of long fragments of nucleic acids.
In May 2024, the FDA issued a final rule that phases out its enforcement discretion for most LDTs and amends the FDA’s regulations to make explicit that in vitro diagnostics are medical devices under the FDCA, including when the manufacturer of the diagnostic product is a laboratory. This final rule is being challenged in federal courts.
In May 2024, the FDA issued a final rule that phases out its enforcement discretion for most LDTs and amends the FDA’s regulations to make explicit that in vitro diagnostics are medical devices under the FDCA, including when the manufacturer of the diagnostic product is a laboratory. On March 31, 2025, a U.S.
Bribery Act, and other local laws prohibiting corrupt payments to governmental Fiscal 2024 Form 10-K 12 Table of Contents officials, anti-competition regulations and sanctions imposed by the U.S. Office of Foreign Assets Control, and other similar laws and regulations.
Bribery Act, and other local laws prohibiting corrupt payments to governmental officials, anti-competition regulations and sanctions imposed by the U.S. Office of Foreign Assets Control, and other similar laws and regulations.
However, the FDA can reclassify or use “de novo classification” for a device that meets the FDCA standards for a Class II device, permitting the device to be marketed without PMA approval.
However, the FDA can reclassify or use “de novo classification” for a device that meets the FDCA standards for a Class II device, Fiscal 2025 Form 10-K 9 Table of Contents permitting the device to be marketed without PMA approval.
We provide employees with compensation packages that include base salary, short-term incentives such as annual bonuses and commissions, and long-term equity awards.
Our compensation packages include base salary, short-term incentives such as annual bonuses and commissions, and long-term equity awards that align employees with the company’s success.
Any of these risks could harm our international operations and negatively impact our sales, adversely affecting our business, results of operations, financial condition, and growth prospects. Human Capital As of December 31, 2024, we had 575 full-time employees.
Any of these risks could harm our international operations and negatively impact our sales, adversely affecting our business, results of operations, financial condition, and growth prospects. Fiscal 2025 Form 10-K 11 Table of Contents Human Capital As of December 31, 2025, we had 485 full-time employees.
HiFi Consumables Customers purchase proprietary consumable products to run their PacBio systems, including our SMRT Cells and reagent kits. One SMRT Cell is consumed per sequencing reaction, and scientists can choose the number of SMRT Cells they use per experiment. We offer several reagent kits, each designed to address a specific step in the core sequencing workflow.
HiFi Consumables Customers purchase proprietary consumable products to run their PacBio systems, including our SMRT Cells and reagent kits. Typically, one SMRT Cell is consumed per sequencing reaction, and scientists can choose the number of SMRT Cells they use per experiment.
We receive a significant portion of our revenue from a limited number of customers, many of whom make large purchases on a purchase-order basis. For the years ended December 31, 2024, and 2023, no customer accounted for 10% or more of our total revenue. For the year ended December 31, 2022, one customer exceeded 10% of our total revenue.
We receive a significant portion of our revenue from a limited number of customers, many of whom make large purchases on a purchase-order basis. For the years ended December 31, 2025, 2024, and 2023, no customer accounted for 10% or more of our total revenue. We believe that the majority of our current customers are early adopters of sequencing technology.
Of these employees, 207 were in research and development, 67 were in operations, 39 were in service, 187 were in marketing and sales, and 75 were in general and administration. With the exception of our field-based sales, marketing, and service teams, the majority of our employees are in California.
Of these employees, 162 were in research and development, 64 were in operations, 37 were in service, 163 were in marketing and sales, and 59 were in general and administration. With the exception of our field-based sales, marketing, and service teams, the majority of our employees are in California.
Further, in June 2024, the U.S. Supreme Court overruled the Chevron doctrine, which gives deference to regulatory agencies’ statutory interpretations in litigation against federal government agencies, such as the FDA, where the law is ambiguous.
District Court in Texas ruled that the FDA exceeded its authority and vacated and set aside this LDT final rule in its entirety. Further, in June 2024, the U.S. Supreme Court overruled the Chevron doctrine, which gives deference to regulatory agencies’ statutory interpretations in litigation against federal government agencies, such as the FDA, where the law is ambiguous.
We expect to convert the majority of this Fiscal 2024 Form 10-K 8 Table of Contents backlog to revenue during 2025; however, our ability to do so is subject to customers who may seek to cancel or delay their orders even if we are prepared to fulfill them. Manufacturing We manufacture sequencing instruments, SMRT Cells, and reagents.
We expect to convert approximately 80% of our backlog to revenue in 2026, approximately 16% in 2027, and the remainder thereafter; however, our ability to do so is subject to customers who may seek to cancel or delay their orders even if we are prepared to fulfill them. Manufacturing We manufacture sequencing instruments, SMRT Cells, and reagents.
We believe that the majority of our current customers are early adopters of sequencing technology. By focusing our efforts on high-value applications and developing whole product solutions around these applications, we seek to drive the adoption of our products across a broader customer base and into numerous large-scale projects.
By focusing our efforts on high-value applications and developing whole product solutions around these applications, we seek to drive the adoption of our products across a broader customer base and into numerous large-scale projects. In general, the broader adoption of new technologies by mainstream customers can take a number of years.
Intellectual Property Developing and maintaining a strong intellectual property portfolio is an important element of our business. We have sought, and will continue to seek, patent protection for our SMRT kit and SBB technology, for improvements to our SMRT kit and SBB technology, as well as for any of our other technologies where we believe such protection will be advantageous.
We have sought, and will continue to seek, patent protection for our technology, for improvements to our technology, as well as for any of our other technologies where we believe such protection will be advantageous.
We define backlog as purchase orders or signed contracts from our customers, which we believe are firm and for which we have not yet recognized revenue.
Backlog As of December 31, 2025, our backlog was approximately $49.2 million, compared to $58.6 million as of December 31, 2024. We define backlog as purchase orders or signed contracts from our customers, which we believe are firm and for which we have not yet recognized revenue.
A library preparation kit is used to convert DNA into SMRTbell double-stranded DNA library formats and includes typical molecular biology reagents, such as ligase, buffers, and exonucleases. Our binding/polymerase kits include our modified DNA polymerase and are used to bind SMRTbell libraries to the polymerase in preparation for sequencing.
We offer several reagent kits, each designed to address a specific step in the core sequencing workflow. A library preparation kit is used to convert DNA into SMRTbell double-stranded DNA library formats and includes typical molecular biology reagents, such as ligase, buffers, and exonucleases.
In 2024 Revio was increasingly being used in laboratory-developed test (“LDT”) and clinical research settings to consolidate multiple tests and address complex genetic challenges. Marketing, Sales, Service, and Support We market our products through a global sales force and through distribution partners in Australia, certain parts of Asia, Europe, the Middle East, Africa, Central America and South America.
Marketing, Sales, Service, and Support We market our products through a global sales force and through distribution partners in Australia, certain parts of Asia, Europe, the Middle East, Africa, Central America and South America.
Our core sequencing kits contain reagents required for on-instrument, real-time sequencing, including phospholinked nucleotides. Fiscal 2024 Form 10-K 6 Table of Contents We have developed and are offering a new line of Kinnex TM kits with companion SMRT Link software to enable high-throughput, scalable, cost-effective RNA applications including bulk RNA, single-cell RNA, and 16S rRNA sequencing.
Our binding/polymerase kits include our modified DNA polymerase and are used to bind SMRTbell libraries to the polymerase in preparation for sequencing. Our core sequencing kits contain reagents required for on-instrument, real-time sequencing, including phospholinked nucleotides. Our Kinnex TM kits with companion SMRT Link software enable high-throughput, scalable, cost-effective RNA applications including bulk RNA, single-cell RNA, and 16S rRNA sequencing.
Long-read sequencing has been applied to produce telomere-to-telomere genomes of humans, pangenome references, and has been recognized for its ability to provide more complete views of human variation . Our focus is on creating some of the world's most advanced sequencing systems to provide our customers with the most complete and accurate view of genomes, transcriptomes, and epigenomes.
Our focus is on creating some of the world's most advanced sequencing systems to provide our customers with the most complete and accurate view of genomes, transcriptomes, and epigenomes.
This landmark Supreme Court decision may invite various stakeholders to bring lawsuits against the FDA to challenge longstanding decisions and policies of the FDA, including this LDT final rule.
This landmark Supreme Court decision may invite various stakeholders to bring lawsuits against the FDA to challenge longstanding decisions and policies of the FDA. The government may issue new policies and regulations that can impact the compliance status of our products or that of our customers.
We plan to continue to invest in growing our marketing, sales, service, and support resources as we drive continued adoption of products, launch new products, and expand our customer base.
We plan to continue to invest in growing our marketing, sales, service, and support resources as we drive continued adoption of products, launch new products, and expand our customer base. Customers Our customers include academic and governmental research institutions, commercial testing and service laboratories, genome centers, public health labs, hospitals and clinical research institutes, CROs, pharmaceutical companies, and agricultural companies.
Human Genomics: Improving rare disease research and understanding According to a World Health Organization publication, it is estimated that 400 million people worldwide are affected by up to 8,000 distinct rare diseases, with 80% of these believed to be genetic in nature. These genetic diseases are DNA differences, called variants, in the affected individuals.
Human Genomics: Improving rare disease research and understanding According to global health organizations, there are currently over 6,000 distinct rare diseases worldwide, affecting approximately 300 million people, and over 70% of these conditions are believed to have a genetic origin. These genetic diseases are DNA differences, called variants, in the affected individuals.
HiFi Long-Read Sequencing Our HiFi long-read sequencing protocol was built upon our SMRT sequencing systems, including consumables and software, and offers customized end-to-end workflows for different sequencing applications. Highly accurate, long sequence reads simplify and accelerate data analysis algorithms, reducing the need for error correction and/or assembly, depending on the application.
Highly accurate, long sequence reads simplify and accelerate data analysis algorithms, reducing the need for error correction and/or assembly, depending on the application.
The SEC also maintains a website that contains our SEC filings. The address of the site is www.sec.gov. Additionally, we use our website (including the blog section of our website) as well as our X (formerly Twitter) account ( @pacbio ) as a channel of distribution for important company information and to comply with our disclosure obligations under Regulation FD.
Additionally, we use our website (including the blog section of our website at www.pacb.com/blog ) as well as our Bluesky (@pacbio.bsky.social), X ( @pacbio ), and LinkedIn (www.linkedin.com/company/pacific-biosciences) accounts as channels of distribution, where important company information is routinely posted and accessible, and to comply with our disclosure obligations under Regulation FD.
We also offer comprehensive employee benefits, which vary by country and region, such as life, disability, and health insurance, health savings and flexible spending accounts, time off benefits, paid parental leave, Employee Stock Purchase Program, and a 401(k) plan. It is our expressed intent to be an employer of choice in our industry by providing market-competitive compensation and benefits packages.
In addition, we provide a broad range of benefits tailored by country and region, including life, disability, and health insurance; health savings and flexible spending accounts; generous paid time off; paid parental leave; and retirement savings plans such as our 401(k) program. Employees also have the opportunity to share in PacBio’s growth through our Employee Stock Purchase Program.
DNA stores information in linear chains of the chemical bases adenine, cytosine, guanine, and thymine, represented by the symbols A, C, G, and T respectively. In humans, the genome is comprised of approximately three billion DNA base pairs, which are divided into 23 chromosomes ranging in size from 50 million to 250 million bases.
In humans, the genome is comprised of approximately three billion DNA base pairs, which are divided into 23 chromosomes ranging in size from 50 million to 250 million bases. A human carries two copies of the Fiscal 2025 Form 10-K 3 Table of Contents chromosomes, one inherited from each parent.
Program benefits are intended to provide protection and security, so employees can have peace of mind concerning events that may require time away from work or that may impact their financial well-being. These programs are highlighted and updated regularly on our internal benefits platform.
These benefits provide employees with security and peace of mind, supporting them through life events that may require time away from work or impact their financial stability.
The Kinnex kits are built upon the Multiplexed Array Sequencing (MAS-Seq) method for concatenating smaller amplicons into larger fragments to sequence on PacBio's long read sequencers, significantly increasing the molecular yield.
The Kinnex kits use a molecular concatenation approach to link smaller amplicons into longer fragments for sequencing on PacBio long-read systems, significantly increasing molecular yield.
Our Technology, Products, and Solutions We have developed HiFi long-read sequencing based on Single-Molecule Real-Time (SMRT) technology, which accurately detects the nucleotide sequence and epigenetic status of individual DNA molecules. We are also expanding our genomic solutions with our short-read SBB chemistry, which offers sensitive sequencing for short-read applications.
Our Technology, Products, and Solutions Our HiFi long-read sequencing approach is based on Single-Molecule Real-Time ("SMRT") technology and enables highly accurate detection of the nucleotide sequence and epigenetic status of individual DNA molecules. HiFi sequencing delivers long, highly accurate reads that support analysis of complex genomic and transcriptomic features that are difficult to resolve using conventional short-read sequencing technologies.
We are currently developing higher throughput platforms that utilize our HiFi long-read sequencing and SBB short-read sequencing technologies. In addition to platform development, we also innovate across end-to-end workflows to improve usability, as well as develop new applications for the advancement of human health.
We also innovate across end-to-end workflows to improve usability, as well as develop new applications for the advancement of human health. Intellectual Property Developing and maintaining a strong intellectual property portfolio is an important element of our business.
Our products address solutions across a broad set of applications including human genetics, plant and animal sciences, infectious disease and microbiology, oncology, and other emerging applications. Lo ng-read sequencing was recognized by the journal Nature Methods as its “method of the year” for 2022 for its contributions to biological understanding and future potential.
Our products and technology, which include our HiFi long-read sequencing technology, address a broad set of applications including human germline sequencing, plant and animal sciences, infectious disease and microbiology, oncology, and other emerging applications.
Genomics is core to all biological processes, and our advanced genomics tools provide scientists and clinical researchers with the insights to better understand biology and health. The “promise of genomics” postulates that medicine, agriculture, public health, drug development, and other disciplines will be transformed by incorporating routine genomic information over the coming decades.
The “promise of genomics” postulates that medicine, agriculture, public health, drug development, and other disciplines will be transformed by incorporating routine genomic information over the coming decades. We see early progress toward this transformation in the applied use of genomics in areas such as genetic disease, oncology, and sustainable food production.
These features can drive more samples onto HiFi sequencing than ever before. • Investing in future product launches to diversify our offerings. We continue to develop sequencing systems designed to increase throughput and lower the cost to sequence a genome, which we believe will allow us to address an even larger part of the market.
We continue to develop sequencing solutions designed to increase throughput, simplify workflows, lower the cost to sequence a genome, and enhance downstream data analysis and interpretation capabilities, which we believe will allow us to address a larger portion of the market.
Our products also have enhanced multi-omic capabilities to look beyond the genome to the transcriptome and epigenome, which we believe is key to understanding a full picture of biology. The Underlying Science Genetic inheritance in living organisms is conveyed through a naturally occurring information storage system known as deoxyribonucleic acid, or DNA.
The Underlying Science Genetic inheritance in living organisms is conveyed through a naturally occurring information storage system known as deoxyribonucleic acid, or DNA. DNA stores information in linear chains of the chemical bases adenine, cytosine, guanine, and thymine, represented by the symbols A, C, G, and T respectively.
We see early progress toward this transformation in the applied use of genomics in areas such as genetic disease, oncology, and sustainable food production. However, legacy genomics technologies have fundamental limitations in progressing these fields toward the promise of genomics.
However, legacy genomics technologies have fundamental limitations in progressing these fields toward the promise of genomics. We believe that unleashing the full potential of genomics will require a level of accuracy and completeness inaccessible to legacy technologies.
We offer training programs on diversity awareness to help employees understand, recognize, respond, and prevent bias throughout the employee lifecycle. We are focused on inclusive hiring practices, fair and equitable treatment, organizational flexibility, and training and resources. Training and Development We believe in encouraging employees to become lifelong learners by providing ongoing learning and leadership training opportunities.
Our ongoing efforts focus on inclusive hiring practices, fair and equitable treatment, and organizational flexibility, supported by tools and resources that enable every employee to do their best work. Training and Development We are committed to fostering a culture of continuous learning and growth. We encourage employees to be lifelong learners by offering ongoing opportunities for professional and leadership development.
SMRT Technology Our proprietary SMRT Technology enables the observation of DNA synthesis as it occurs in real-time by harnessing the natural process of DNA replication, which in nature is a highly efficient and accurate process actuated by DNA polymerases.
SMRT Technology Our proprietary SMRT sequencing technology enables the direct observation of DNA synthesis in real time by monitoring the activity of individual DNA polymerase molecules as they incorporate nucleotides into a growing DNA strand.
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Our products and technology under development stem from two highly differentiated core technologies focused on accuracy, quality, and completeness, which include our HiFi long-read sequencing technology and our Sequencing by Binding (SBB TM ) short-read sequencing technology.
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Recent Developments On January 30, 2026, we completed the disposition of assets to Illumina Cambridge Limited (the “Buyer”) in accordance with the terms of an Asset Purchase Agreement, dated January 30, 2026 (the “Asset Purchase Agreement”), by and among us, Buyer, and Illumina, Inc.
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Our customers include academic and governmental research institutions, commercial testing and service laboratories, genome centers, public health labs, hospitals and clinical research institutes, contract research organizations (CROs), pharmaceutical companies, and agricultural companies. Recent Developments In 2024, we launched Vega TM , a revolutionary new benchtop sequencer designed to make accurate long-read sequencing accessible to more laboratories than ever before.
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("Illumina"), solely for purposes of Section 8.16 of the Asset Purchase Agreement, pursuant to which, among other matters, Buyer acquired certain intellectual property and other assets related to our short-read DNA sequencing technology and related clustering, sequencing reagent, and detection technologies (the “Asset Sale”).
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Vega delivers up to 60 gigabases of long reads per run and is designed to provide accurate HiFi reads and high-quality genomic, transcriptomic, and epigenetic data for individual labs. Additionally, in the fourth quarter of 2024, we launched SPRQ chemistry for the Revio system.
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As consideration for the Asset Sale, Buyer paid us $50.0 million in cash and assumed certain liabilities (the “Purchase Price”). In addition, Buyer granted us a non-exclusive license to certain intellectual property included in the purchased assets.
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The SPRQ chemistry will increase the efficiency of loading on Revio SMRT ® Cells, reducing DNA input requirements to just 500 ng, a 75% reduction. These lower input requirements will allow HiFi sequencing to support new sample types, like saliva and tumors.
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In connection with the Asset Sale, Buyer will pay at our direction 4% of the net proceeds from the Purchase Price to the former equity holders of Apton Biosystems, Inc. (“Apton”) related to the waiver of all remaining milestone obligations associated with our purchase of Apton in August 2023, which payment is expected in the first quarter of 2026.
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The chemistry is also expected to improve sequencing performance, providing an approximately 33% increase in sequencing yield per SMRT Cell. Collectively, these enhancements are designed to enable each Revio instrument to sequence up to 2,500 human whole genomes per year at a cost of just under $500 per human genome.
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As a result, we received approximately $48.1 million in net cash proceeds from the Asset Sale. Our Mission and Impact Our mission is to enable the promise of genomics to better human health. Genomics is core to all biological processes, and our advanced genomics tools provide scientists and clinical researchers with the insights to better understand biology and health.
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In the first quarter of 2024, we commenced commercial shipments for the PureTarget repeat expansion panel, a new solution designed to comprehensively analyze 20 genes associated with serious neurological disorders, including challenging-to-sequence genes with tandem repeat expansions.
Added
Oncology: Enabling discovery of cancer biology, progression, and relapse Our HiFi sequencing technology supports oncology research by enabling highly accurate, long-read analysis of both DNA and RNA, providing researchers with deeper insight into cancer biology. HiFi RNA sequencing allows generation of full-length transcript data from complex tumor samples, capturing isoforms, fusion transcripts, and alternative splicing events associated with tumor biology.
Removed
We also released the Nanobind PanDNA kit as a single kit that supports extraction of high quality DNA from many sample types, and the HiFi prep kit as a scalable and automation-friendly library prep for genomic samples. Our Mission and Impact Our mission is to enable the promise of genomics to better human health.
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By providing a more complete view of transcript diversity, these approaches support research into biomarkers and molecular mechanisms related to tumor progression and therapeutic response. HiFi whole-genome sequencing ("WGS") of tumor and matched normal samples supports comprehensive characterization of genomic alterations across cancer types.
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Oncology: Enable the discoveries of underlying causes of cancer, progression, and relapse Understanding tumor cells' cellular and molecular complexity is critical in developing more effective targeted cancer therapies. Single-cell transcriptomics is particularly impactful in defining cellular identity and function; however, other technologies miss critical information by only sequencing a portion of RNA.
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The combination of long reads and single- Fiscal 2025 Form 10-K 4 Table of Contents molecule accuracy enables detailed analysis of structural variants, copy-number changes, methylation patterns, and other somatic alterations associated with oncogenesis and treatment resistance.
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Our long-read RNA sequencing method, single-cell Iso-Seq (scIso-Seq), accurately detects molecular events such as RNA isoforms and expressed mutations and provides gene expression information at the single-cell level.
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Researchers increasingly use HiFi tumor/normal WGS to resolve complex genomic rearrangements and to investigate genome-wide mutational processes that are difficult to assess with short-read sequencing technologies.
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We believe scIso-Seq is uniquely positioned to enable discoveries by researchers of the underlying causes of cancer initiation, progression, and relapse, as well as the discovery by researchers of novel diagnostic, prognostic, and predictive biomarkers that may inform future clinical tests.
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Our offerings include sequencing instruments, nanofluidic chips ("SMRT Cells"), reagents for DNA extraction, library preparation, and sequencing, application-specific sequencing workflows, as well as services we perform for customers. HiFi Long-Read Sequencing Our HiFi long-read sequencing protocol was built upon our SMRT sequencing systems, including consumables and software, and offers customized end-to-end workflows for different sequencing applications.
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As novel discoveries continue to be made using our long-read sequencing technology, we believe our SBB short-read sequencing technology will enable us to meet customers' demands in the expanding non-invasive testing market in oncology.
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Using optical nanostructures known as zero-mode waveguides ("ZMWs"), SMRT sequencing detects fluorescently labeled nucleotides as they are incorporated, providing a precise, single-molecule record of DNA sequence and polymerase kinetics without amplification or cloning steps. Each DNA molecule is prepared as a circularized SMRTbell template, allowing both strands of the same molecule to be sequenced multiple times.
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Due to the small amounts of circulating tumor DNA (ctDNA) present in the blood of early-stage cancer patients and those with minimal residual disease (MRD), the presence of cancer often goes undetected, and a more sensitive assay will be required.
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These repeated observations are combined through circular consensus sequencing ("CCS") to generate highly accurate HiFi reads, typically achieving median accuracies above Q30 with average read lengths of 15–20 kilobases.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

132 edited+40 added−21 removed423 unchanged
Biggest changeOur expense reduction initiatives comprise, among other things, workforce reductions, facilities downsizing and a refined pipeline of development activities. For example, during the second quarter of 2024 we initiated plans to reduce certain of our annualized run-rate operating expenses by the end of the year, with the intent of better aligning our organizational structure and resources with our strategic initiatives.
Biggest changeFor example, during the second quarter of 2024 we initiated plans to reduce certain of our annualized run-rate operating expenses by the end of the year, with the intent of better aligning our organizational structure and resources with our strategic initiatives, and during the first quarter of 2025 we initiated further plans to reduce certain of our annualized run-rate operating expenses by the end of the year, given persistent uncertainty surrounding academic and NIH funding, along with the introduction and impact of new or changing tariffs.
The Exchange Transaction closed on November 21, 2024. We may not have sufficient cash to make required payments under the terms of this debt, and should this occur, debt holders have rights senior to common stockholders to make claims on our assets.
The 2024 Exchange Transaction closed on November 21, 2024. We may not have sufficient cash to make required payments under the terms of this debt, and should this occur, debt holders have rights senior to common stockholders to make claims on our assets.
If we do not accurately anticipate our needs or if we receive insufficient components to manufacture our products on a timely basis to meet customer demand, our sales and our gross margin may be adversely affected, and our business could be materially harmed.
If we do not accurately anticipate our needs or if we receive insufficient products or components to manufacture our products on a timely basis to meet customer demand, our sales and our gross margin may be adversely affected, and our business could be materially harmed.
While the Company’s products would not be included under the current IFR, future BIS or other government regulations could potentially apply to our products and/or negatively impact our ability to export those products to certain countries and markets.
While the Company’s products would not be included under the current IFR, future BIS or other government regulations could potentially apply to our products and/or negatively impact our ability to export those products to certain countries and markets.
Our failure to repurchase Notes of a series at a time when the repurchase is required by the applicable indenture or to pay cash upon conversions such Notes or at the applicable maturity as required by the applicable indenture would constitute a default under such indenture.
Our failure to repurchase Notes of a series at a time when the repurchase is required by the applicable indenture or to pay cash upon conversions of such Notes or at the applicable maturity as required by the applicable indenture would constitute a default under such indenture.
A global financial crisis, inflation or a global or regional political disruption, as well as acts of terrorism, hostilities, military conflict and acts of war, including any further escalation of the conflict in the Middle East and the war in Ukraine, as well as the related responses, could cause extreme volatility in the capital and credit markets.
A global financial crisis, inflation or a global or regional political disruption, acts of terrorism, hostilities, military conflict and acts of war, including any further escalation of the conflict in the Middle East and the war in Ukraine, as well as the related responses, could cause extreme volatility in the capital and credit markets.
For example, if output from AIML technologies or that they assist in producing are or are alleged to be deficient, inaccurate, or biased, or for such output, or such technologies or their development or deployment, including the collection, use, or other processing of data used to train or create such AIML technologies, to alleged to infringe upon or to have misappropriated third-party intellectual property rights or to violate applicable laws, regulations, or other actual or asserted legal obligations to which we are or may become subject, then our business, financial condition, and results of operations may be adversely affected.
For example, if output from AIML technologies or that they assist in producing are or are alleged to be deficient, inaccurate, or biased, or for such output, or such technologies or their development or deployment, including the collection, use, or other processing of data used to train or create such AIML technologies, are alleged to infringe upon or to have misappropriated third-party intellectual property rights or to violate applicable laws, regulations, or other actual or asserted legal obligations to which we are or may become subject, then our business, financial condition, and results of operations may be adversely affected.
International operations entail a variety of other risks, including, without limitation: • challenges in staffing and managing foreign operations; • potentially longer sales cycles and more time required to engage and educate customers on the benefits of our platform outside of the United States; • the potential need for localized software and documentation; • reduced protection for intellectual property rights in some countries and practical difficulties of enforcing intellectual property and contract rights abroad; • defending against intellectual property claims in other countries; Fiscal 2024 Form 10-K 49 Table of Contents • restrictions on both inbound and outbound cross-border investment, including enhanced oversight by the Committee on Foreign Investment in the United States (“CFIUS”) and substantial restrictions on investment from China; • U.S. and foreign government trade restrictions, including those which may impose restrictions on the importation, exportation, re-exportation, sale, shipment or other transfer of programming, technology, components, and/or services to foreign persons; • changes in diplomatic and trade relationships, including new tariffs, trade protection measures, import or export licensing requirements, trade embargoes, sanctions, and other trade barriers; • tariffs imposed by the U.S. on goods from other countries and tariffs imposed by other countries on U.S. goods, which may be imposed on products such as ours, the scope and duration of which, if implemented, remains uncertain; • deterioration of political relations among, between, and within the U.S., Russia, China, Japan, Korea, Mexico, Canada, the United Kingdom (“U.K.”), and the European Union ("E.U."), which could have a material adverse effect on our sales and operations in these countries; • changes in social, political, and economic conditions or in laws, regulations and policies governing foreign trade, manufacturing, development, and investment both domestically as well as in the other countries and jurisdictions into which we sell our products; • difficulties in obtaining export licenses or in overcoming other trade barriers and restrictions resulting in delivery delays; • fluctuations in currency exchange rates and the related effect on our results of operations; • increased financial accounting and reporting burdens and complexities; • potential limits to travel as a result of epidemics or pandemics; • disruptions to global trade due to disease outbreaks or conflicts; • potential increases on tariffs or restrictions on trade generally; and • significant taxes or other burdens of complying with a variety of foreign laws and regulations, including laws and regulations relating to privacy and data protection such as the E.U.
International operations entail a variety of other risks, including, without limitation: • challenges in staffing and managing foreign operations; • potentially longer sales cycles and more time required to engage and educate customers on the benefits of our platform outside of the United States; • the potential need for localized software and documentation; • reduced protection for intellectual property rights in some countries and practical difficulties of enforcing intellectual property and contract rights abroad; • challenges with defending against intellectual property claims in other countries; Fiscal 2025 Form 10-K 48 Table of Contents • restrictions on both inbound and outbound cross-border investment, including enhanced oversight by the Committee on Foreign Investment in the United States (“CFIUS”) and substantial restrictions on investment from China; • U.S. and foreign government trade restrictions, including those which may impose restrictions on the importation, exportation, re-exportation, sale, shipment or other transfer of programming, technology, components, and/or services to foreign persons; • changes in diplomatic and trade relationships, including new, increased, or enhanced tariffs, trade protection measures, import or export licensing requirements, trade embargoes, sanctions, and other trade barriers; • tariffs imposed by the U.S. on goods from other countries and tariffs imposed by other countries on U.S. goods, which may be imposed on products such as ours, the scope and duration of which, if implemented, remains uncertain; • deterioration of political relations among, between, and within the U.S., Russia, China, Japan, Korea, Mexico, Canada, the United Kingdom (“U.K.”), and the European Union ("E.U."), which could have a material adverse effect on our sales and operations in these countries; • changes in social, political, and economic conditions or in laws, regulations and policies governing foreign trade, manufacturing, development, and investment both domestically as well as in the other countries and jurisdictions into which we sell our products; • difficulties in obtaining export licenses or in overcoming other trade barriers and restrictions resulting in delivery delays; • fluctuations in currency exchange rates and the related effect on our results of operations; • increased financial accounting and reporting burdens and complexities; • potential limits to travel as a result of epidemics or pandemics; • disruptions to global trade due to disease outbreaks or conflicts; • potential increases on tariffs or restrictions on trade generally; and • significant taxes or other burdens of complying with a variety of foreign laws and regulations, including laws and regulations relating to privacy and data protection such as the E.U.
There can be no assurance that future products for which we may seek pre-market clearance or approval will be approved or cleared by FDA or a comparable foreign regulatory authority on a timely basis, if at all, nor can there be assurance that labeling claims will be consistent with our anticipated claims or adequate to support continued adoption of such products.
There can be no assurance that future products for which we may seek pre-market clearance or approval will be approved or cleared by the FDA or a comparable foreign regulatory authority on a timely basis, if at all, nor can there be assurance that labeling claims will be consistent with our anticipated claims or adequate to support continued adoption of such products.
Due to challenges we may experience in developing and marketing our existing products and launching new products, we may not be able to effectively: • manage the timeliness of our new product introductions and the rate at which sales of our new products may cannibalize sales of our existing products or manage sales and marketing of multiple sequencing platforms; • drive adoption of our current and future products; • maintain our competitive position by continuing to attract and retain customers for our products; • provide appropriate levels of customer training and support for our products; • implement an effective marketing strategy to promote awareness of our products; • develop and implement an effective sales and distribution strategy for our current and future products; • develop, manufacture and commercialize new products or achieve an acceptable return on our manufacturing or research and development efforts and expenses; • comply with regulatory requirements applicable to our products; • anticipate and adapt to changes in our market; • accommodate customer expectations and demands with respect to our products, increase product adoption by our existing customers or develop new customer relationships; • deliver our early access systems to our external early access testing sites or complete our external early access testing program on our currently expected timelines; Fiscal 2024 Form 10-K 16 Table of Contents • overcome unexpected challenges discovered during early access testing; • complete the scientific and technical validation of new products on our currently expected timeline or at all; • deliver our future products in a timely manner to our customers; • grow our market share by marketing and selling our products for new and additional applications; • manage the significant burdens that expanding our existing or future products into current and new markets may impose on marketing, compliance, and other administrative and managerial resources; • maintain and develop strategic relationships with vendors, manufacturers, and other industry partners to acquire necessary materials for the production of, and to develop, manufacture and commercialize, our existing or future products; • adapt or scale our manufacturing activities to meet performance specifications and potential demand at a reasonable cost; • avoid infringement and misappropriation of third-party intellectual property; • obtain and maintain any necessary licenses to third-party intellectual property on commercially reasonable terms; • obtain valid and enforceable patents that give us a competitive advantage or enforce existing patents; • protect our proprietary technology; and • attract, retain, and motivate qualified personnel.
Due to challenges we may experience in developing and marketing our existing products and launching new products, we may not be able to effectively: • manage the timeliness of our new product introductions and the rate at which sales of our new products may cannibalize sales of our existing products or manage sales and marketing of multiple sequencing platforms; • drive adoption of our current and future products; • maintain our competitive position by continuing to attract and retain customers for our products; • provide appropriate levels of customer training and support for our products; • implement an effective marketing strategy to promote awareness of our products; • develop and implement an effective sales and distribution strategy for our current and future products; • develop, manufacture and commercialize new products or achieve an acceptable return on our manufacturing or research and development efforts and expenses; • comply with regulatory requirements applicable to our products; • anticipate and adapt to changes in our market; Fiscal 2025 Form 10-K 15 Table of Contents • accommodate customer expectations and demands with respect to our products, increase product adoption by our existing customers or develop new customer relationships; • deliver our early access systems to our external early access testing sites or complete our external early access testing program on our currently expected timelines; • overcome unexpected challenges discovered during early access testing; • complete the scientific and technical validation of new products on our currently expected timeline or at all; • deliver our future products in a timely manner to our customers; • grow our market share by marketing and selling our products for new and additional applications; • manage the significant burdens that expanding our existing or future products into current and new markets may impose on marketing, compliance, and other administrative and managerial resources; • maintain and develop strategic relationships with vendors, manufacturers, and other industry partners to acquire necessary materials for the production of, and to develop, manufacture and commercialize, our existing or future products; • adapt or scale our manufacturing activities to meet performance specifications and potential demand at a reasonable cost; • avoid infringement and misappropriation of third-party intellectual property; • obtain and maintain any necessary licenses to third-party intellectual property on commercially reasonable terms; • obtain valid and enforceable patents that give us a competitive advantage or enforce existing patents; • protect our proprietary technology; and • attract, retain, and motivate qualified personnel.
It also is possible that additional restrictions will be put in place that could impact our ability to provide our products to customers or distributors in China or source components from China. The continued threats of tariffs, trade restrictions and trade barriers could have a generally disruptive impact on the global economy and, therefore, negatively impact our sales.
It is possible that additional restrictions will be put in place that could impact our ability to provide our products to customers or distributors in China or source components from China. The continued threats of tariffs, trade restrictions and trade barriers could have a generally disruptive impact on the global economy and, therefore, negatively impact our sales.
In November 2020, California also passed the California Privacy Rights Act, or (“CPRA”), which significantly expanded the CCPA as of January 1, 2023, including by introducing additional obligations such as data minimization and storage limitations and granting additional rights to consumers, among others.
In November 2020, California also passed the California Privacy Rights Act (“CPRA”), which significantly expanded the CCPA as of January 1, 2023, including by introducing additional obligations such as data minimization and storage limitations and granting additional rights to consumers, among others.
We cannot assure you that product supplies will not be limited or interrupted, especially with respect to our sole source third-party manufacturing and supply collaborators, or that product supplies will be of satisfactory quality or continue to be available at acceptable prices.
We cannot assure you that products or product supplies will not be limited or interrupted, especially with respect to our sole source third-party manufacturing and supply collaborators, or that products or product supplies will be of satisfactory quality or continue to be available at acceptable prices.
Substantially all of our consumable chips are partly manufactured by a company based in Taiwan. Our supply of consumables chips and other critical components may be materially and adversely affected by diplomatic, geopolitical, military and other developments affecting the relationship between China and Taiwan.
Substantially all of our consumable chips are partly manufactured by a company based in Taiwan. Our supply of consumable chips and other critical components may be materially and adversely affected by diplomatic, geopolitical, military and other developments affecting the relationship between China and Taiwan.
We have and may continue to face challenges in our supply chain, which has and may continue to adversely impact margins. During periods of shortage or delay, the price of components may increase or the components may not be available at all.
We have and may continue to face challenges in our supply chain, which has and may continue to adversely impact margins. During periods of shortage or delay, the price of products or components may increase or the products or components may not be available at all.
Workforce reductions, such as the workforce reduction we implemented in 2024, and other expense reduction efforts may be negatively received by potential or current employees, and accordingly result in attrition or difficulty in recruiting desirable candidates.
Workforce reductions, such as the workforce reduction we implemented in 2024 and 2025, and other expense reduction efforts may be negatively received by potential or current employees, and accordingly result in attrition or difficulty in recruiting desirable candidates.
Our operating results during any given period can also be impacted by numerous other factors, including the following: • market acceptance for our products; • our ability to attract new customers; • the length of our sales cycles, as discussed above; • our ability to achieve economies of scale and other manufacturing efficiencies at the rate we anticipate; Fiscal 2024 Form 10-K 31 Table of Contents • publications of studies by us, our competitors or third parties; • the timing and success of new product introductions by us or our competitors or other changes in the competitive dynamics of our industry, such as consolidation; • the amount and timing of our costs and expenses; • changes in our pricing policies or those of our competitors; • general economic, industry and market conditions; • the impact of catastrophic events, including health epidemics or pandemics and military or other armed conflicts; • the regulatory environment in which we operate; • expenses associated with warranty obligations or unforeseen product quality issues; • the hiring, training, and retention of key employees, including our ability to grow our sales organization; • litigation or other claims against us for intellectual property infringement or otherwise; • our ability to obtain additional financing as necessary; and • changes or trends in new technologies and industry standards.
Our operating results during any given period can also be impacted by numerous other factors, including the following: • market acceptance for our products; • our ability to attract new customers; • the length of our sales cycles, as discussed above; • our ability to achieve economies of scale and other manufacturing efficiencies at the rate we anticipate; Fiscal 2025 Form 10-K 30 Table of Contents • publications of studies by us, our competitors or third parties; • the timing and success of new product introductions by us or our competitors or other changes in the competitive dynamics of our industry, such as consolidation; • the amount and timing of our costs and expenses; • changes in our pricing policies or those of our competitors; • general economic, industry and market conditions; • the impact of catastrophic events, including health epidemics or pandemics and military or other armed conflicts; • the regulatory environment in which we operate; • expenses associated with warranty obligations or unforeseen product quality issues; • the hiring, training, and retention of key employees, including our ability to grow our sales organization; • litigation or other claims against us for intellectual property infringement or otherwise; • our ability to obtain additional financing as necessary; and • changes or trends in new technologies and industry standards.
Our customers have previously experienced reliability issues with our existing products, including the Sequel and Sequel II/IIe systems. In addition, it is possible our customers could experience reliability issues with current or future products, including the Sequel II/IIe, Revio, Onso and Vega systems.
Our customers have previously experienced reliability issues with our existing products, including the Sequel and Sequel II/IIe systems. In addition, it is possible our customers could experience reliability issues with current or future products, including the Revio and Vega systems.
Supreme Court recently overruled the Chevron doctrine, which gave deference to regulatory agencies’ statutory interpretations in litigation against federal government agencies, such as the FDA, where the law is ambiguous.
Supreme Court overruled the Chevron doctrine, which gave deference to regulatory agencies’ statutory interpretations in litigation against federal government agencies, such as the FDA, where the law is ambiguous.
The market for sequencing systems and consumables products is evolving, making it difficult to accurately predict the size of the markets for our current and future products, including our Revio, Onso and Vega instruments.
The market for sequencing systems and consumables products is evolving, making it difficult to accurately predict the size of the markets for our current and future products, including our Revio and Vega instruments.
In addition, the introduction of future products, including with respect to future long-read and short-read products, and related consumables, has and may in the future lead to our limiting or ceasing development of further enhancements to our existing products as we focus our resources on new products, and has resulted and could in the future result in reduced marketplace acceptance and loss of sales of our existing products, materially adversely affecting our revenue and operating results.
In addition, the introduction of future products, including with respect to future long-read products, and related consumables, has led and may in the future lead to our limiting or ceasing development of further enhancements to our existing products as we focus our resources on new products, and has resulted and could in the future result in reduced marketplace acceptance and loss of sales of our existing products, materially adversely affecting our revenue and operating results.
If we do not successfully manage these product transitions, including with respect to the Revio, Onso and Vega systems and each of their related consumables, and any future long-read and short-read products, our business, operations, financial condition, and prospects may be materially and adversely affected. Our business may be adversely affected by epidemics or other public health emergencies.
If we do not successfully manage these product transitions, including with respect to the Revio and Vega systems and each of their related consumables, and any future long-read products, our business, operations, financial condition, and prospects may be materially and adversely affected. Our business may be adversely affected by epidemics or other public health emergencies.
Increased scrutiny of our environmental, social or governance responsibilities may result in additional costs and risks, and may adversely impact our reputation, employee retention, and willingness of customers and suppliers to do business with us. Investor advocacy groups, institutional investors, investment funds, proxy advisory services, stockholders, and customers are increasingly focused on environmental, social, and governance (“ESG”) practices of companies.
Increased scrutiny of our environmental, social or governance responsibilities may result in additional costs and risks, and may adversely impact our reputation, employee retention, and willingness of customers and suppliers to do business with us. Certain investor advocacy groups, institutional investors, investment funds, proxy advisory services, stockholders, and customers are focused on environmental, social, and governance (“ESG”) practices of companies.
Under Sections 382 and 383 of the Internal Revenue Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses (“NOLs”) and other pre-change tax attributes, such as research and development credits, to offset its post-change taxable income or tax liability.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses (“NOLs”) and other pre-change tax attributes, such as research and development credits, to offset its post-change taxable income or tax liability.
While we plan to continue pursuing new products and expand into adjacent markets, we have limited experience in managing and selling multiple products and, as a result, may face challenges selling in new markets and fail to successfully carry out these initiatives, which may adversely impact our business, financial condition or results of operation. ” above.
While we plan to continue pursuing new products and expanding into adjacent markets, we have limited experience in managing and selling multiple products and, as a result, may face challenges selling in new markets and fail to successfully carry out these initiatives, which may adversely impact our business, financial condition or results of operation. ” above.
While we plan to continue pursuing new products and expand into adjacent markets, we have limited experience in managing and selling multiple products and, as a result, may face challenges selling in new markets and fail to successfully carry out these initiatives, which may adversely impact our business, financial condition or results of operation. ” above.
While we plan to continue pursuing new products and expanding into adjacent markets, we have limited experience in managing and selling multiple products and, as a result, may face challenges selling in new markets and fail to successfully carry out these initiatives, which may adversely impact our business, financial condition or results of operation . ” above.
While we plan to continue pursuing new products and expand into adjacent markets, we have limited experience in managing and selling multiple products and, as a result, may face challenges selling in new markets and fail to successfully carry out these initiatives, which may adversely impact our business, financial condition or results of operation.
While we plan to continue pursuing new products and expanding into adjacent markets, we have limited experience in managing and selling multiple products and, as a result, may face challenges selling in new markets and fail to successfully carry out these initiatives, which may adversely impact our business, financial condition or results of operation.
If we are required to purchase these components from alternative sources, it could take several months or longer to qualify the alternative sources.
If we are required to purchase these products or components from alternative sources, it could take several months or longer to qualify the alternative sources.
Our sales cycles may also lengthen, and those sales cycles may result in lower units sold per cycle, as we continue to introduce our Revio and Onso instruments and their associated consumables to the market, as our customers may have additional administrative, technical or other requirements associated with transitioning to new products and technologies.
Our sales cycles may also lengthen, and those sales cycles may result in lower units sold per cycle, as we continue to introduce our Revio and Vega instruments and their associated consumables to the market, as our customers may have additional administrative, technical or other requirements associated with transitioning to new products and technologies.
If as a result of global economic or political instability, such as the uncertainty in the Middle East, an escalation of the war in Ukraine, potential uncertainty related to Taiwan and its relationship with China, changing international trade policies, other disease outbreaks, or supply issues, we or our contractors could experience shortages, business disruptions or delays for materials sourced or manufactured in the affected countries, and their ability to supply us with instruments or product components may be affected.
As a result of global economic or political instability, such as the uncertainty in the Middle East, an escalation of the war in Ukraine, potential uncertainty related to Taiwan and its relationship with China, changing international trade policies, other disease outbreaks, or supply issues, we or our contractors could experience shortages, business disruptions or delays for materials sourced or manufactured in the affected countries, and their ability to supply us with instruments, products or components may be affected.
As of December 31, 2024, we had outstanding approximately $200.0 million aggregate principal amount of our 2029 Notes and $441.0 million aggregate principal amount of our 2030 Notes. The 2029 Notes will mature on August 15, 2029, subject to earlier conversion, redemption or repurchase, including upon a fundamental change.
As of December 31, 2025, we had outstanding approximately $200.0 million aggregate principal amount of our 2029 Notes and $441.0 million aggregate principal amount of our 2030 Notes. The 2029 Notes will mature on August 15, 2029, subject to earlier conversion, redemption or repurchase, including upon a fundamental change.
As of December 31, 2024, we had outstanding approximately $200.0 million aggregate principal amount of our 1.50% Convertible Senior Notes due 2029 (the “2029 Notes”) and $441.0 million aggregate principal amount of our 1.375% Convertible Senior Notes due 2030 (the “2030 Notes” and together with the 2029 Notes, the “Notes”). As discussed in Note 5 .
As of December 31, 2025, we had outstanding approximately $200.0 million aggregate principal amount of our 1.50% Convertible Senior Notes due 2029 (the “2029 Notes”) and $441.0 million aggregate principal amount of our 1.375% Convertible Senior Notes due 2030 (the “2030 Notes” and together with the 2029 Notes, the “Notes”). As discussed in Note 5 .
As of December 31, 2024, we were in compliance with all covenants under the Letter Agreement. However, if an event of default occurs, SBN could accelerate our obligations under the 2029 Notes. Any such acceleration could result in an event of default under our other indebtedness, including the 2030 Notes.
As of December 31, 2025, we were in compliance with all covenants under the Letter Agreement. However, if an event of default occurs, SBN could accelerate our obligations under the 2029 Notes. Any such acceleration could result in an event of default under our other indebtedness, including the 2030 Notes.
Bribery Act of 2010 and other anti-corruption laws, regulations relating to the use of certain hazardous substances or chemicals in commercial products, and require the collection, reuse, and recycling of waste from products we manufacture; • required compliance with U.S. laws such as the Foreign Corrupt Practices Act, and other U.S. federal laws and trade and economic sanctions and other regulations established by the Office of Foreign Asset Control; • export requirements and import or trade restrictions; • laws and business practices favoring local companies; • restrictions on both inbound and outbound cross-border investment; Fiscal 2024 Form 10-K 42 Table of Contents • foreign currency exchange, longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems; • changes in social, economic, and political conditions or in laws, regulations and policies governing foreign trade, manufacturing, research and development, and investment both domestically as well as in the other countries and jurisdictions in which we operate and into which we may sell our products including as a result of ongoing geopolitical tensions related to the political uncertainty and military actions associated with the war in Ukraine, resulting sanctions imposed by the U.S. and other countries, and retaliatory actions taken by Russia in response to such sanctions; • potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements, and other trade barriers; • difficulties and costs of staffing and managing foreign operations; and • difficulties protecting, maintaining, enforcing, or procuring intellectual property rights and defending against intellectual property claims under the law and judicial systems of other countries.
Bribery Act of 2010 and other anti-corruption laws, regulations relating to the use of certain hazardous substances or chemicals in commercial products, and require the collection, reuse, and recycling of waste from products we manufacture; • required compliance with U.S. laws such as the Foreign Corrupt Practices Act, and other U.S. federal laws and trade and economic sanctions and other regulations established by the Office of Foreign Asset Control; • export requirements and import or trade restrictions; • laws and business practices favoring local companies; • restrictions on both inbound and outbound cross-border investment; • foreign currency exchange, longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems; • changes in social, economic, and political conditions or in laws, regulations and policies governing foreign trade, manufacturing, research and development, and investment both domestically as well as in the other countries and jurisdictions in which we operate and into which we may sell our products including as a result of ongoing geopolitical tensions related to the political uncertainty and military actions associated with the war in Ukraine, resulting sanctions imposed by the U.S. and other countries, and retaliatory actions taken by Russia in response to such sanctions; • potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements, and other trade barriers; • difficulties and costs of staffing and managing foreign operations; and • difficulties protecting, maintaining, enforcing, or procuring intellectual property rights and defending against intellectual property claims under the law and judicial systems of other countries.
Acquisitions and strategic transactions involve numerous risks, any of which could harm our business and negatively affect our financial condition and results of operations, including: • intense competition for suitable acquisition targets, which could increase prices and adversely affect our ability to consummate deals on favorable or acceptable terms; • failure or material delay in closing a transaction; Fiscal 2024 Form 10-K 19 Table of Contents • transaction-related lawsuits or claims; • difficulties in integrating the technologies, operations, existing contracts, and personnel of an acquired company; • difficulties in retaining key employees or business partners of an acquired company; • difficulties in retaining suppliers, partners, or customers of an acquired company; • challenges with integrating the brand identity of an acquired company with our own; • diversion of financial and management resources from existing operations or alternative acquisition opportunities; • failure to realize the anticipated benefits or synergies of a transaction; • difficulties in developing technology post-acquisition; • failure to identify the problems, liabilities, or other shortcomings or challenges of an acquired company or technology, including issues related to intellectual property, regulatory compliance practices, litigation, revenue recognition or other accounting practices, or employee or user issues; • risks that regulatory bodies may enact new laws or promulgate new regulations that are adverse to an acquired company or business; • risks that regulatory bodies do not approve our acquisitions or business combinations or delay such approvals; • theft of our trade secrets or confidential information that we share with potential acquisition candidates or other potential strategic partners; • risk that an acquired company or investment in new services cannibalizes a portion of our existing business; and • adverse market reaction to an acquisition or other strategic transaction.
Acquisitions and strategic transactions involve numerous risks, any of which could harm our business and negatively affect our financial condition and results of operations, including: • intense competition for suitable acquisition targets, which could increase prices and adversely affect our ability to consummate deals on favorable or acceptable terms; • failure or material delay in closing a transaction; • transaction-related lawsuits or claims; • difficulties in integrating the technologies, operations, existing contracts, and personnel of an acquired company; • difficulties in retaining key employees or business partners of an acquired company; • difficulties in retaining suppliers, partners, or customers of an acquired company; • challenges with integrating the brand identity of an acquired company with our own; • diversion of financial and management resources from existing operations or alternative acquisition opportunities; • failure to realize the anticipated benefits or synergies of a transaction; • difficulties in developing technology post-acquisition; • failure to identify the problems, liabilities, or other shortcomings or challenges of an acquired company or technology, including issues related to intellectual property, regulatory compliance practices, litigation, revenue recognition or other accounting practices, or employee or user issues; • risks that regulatory bodies may enact new laws or promulgate new regulations that are adverse to an acquired company or business; • risks that regulatory bodies do not approve our acquisitions or business combinations or delay such approvals; • theft of our trade secrets or confidential information that we share with potential acquisition candidates or other potential strategic partners; • risk that an acquired company or investment in new services cannibalizes a portion of our existing business; and • adverse market reaction to an acquisition or other strategic transaction.
We do not always have arrangements in place for a redundant or second-source supply for our sole source vendors in the event they cease to provide their products or services to us or fail to provide sufficient quantities in a timely manner.
We do not always have arrangements in place for a redundant or second-source supply for our sole source manufacturers and vendors in the event they cease to provide their products or services to us or fail to provide sufficient quantities in a timely manner.
Convertible Senior Notes in Part II, Item 8 of this Annual Report on Form 10-K, we exchanged the remaining approximately $459.0 million in aggregate principal amount of our 1.50% Convertible Senior Notes due 2028 (the “2028 Notes”) for (i) $200.0 million aggregate principal amount of the 2029 Notes, (ii) 20,451,570 shares of common stock and (iii) $50.0 million of cash (the “Exchange Transaction”).
Convertible Senior Notes in Part II, Item 8 of this Annual Report on Form 10-K, we exchanged the remaining approximately $459.0 million in aggregate principal amount of our 1.50% Convertible Senior Notes due 2028 (the “2028 Notes”) for (i) $200.0 million aggregate principal amount of the 2029 Notes, (ii) 20,451,570 shares of common stock and (iii) $50.0 million of cash (the “2024 Exchange Transaction”).
Our success depends upon the continuing services of members of our senior management team and scientific and engineering personnel. In particular, our scientists and engineers are critical to our technological and product innovations, and we will need to hire additional qualified personnel.
Our success depends upon the continuing services of members of our senior management team and scientific and engineering personnel. In particular, our scientists and engineers are critical to our technological and product innovations, and we will need to hire additional qualified personnel from time to time.
If we are unable to source these product components from sole-source third-party manufacturing and supply collaborators for any reason, including in connection with acts of terrorism, hostilities, military conflict and acts of war, including between China and Taiwan, or secure a sufficient supply of these product components on a timely basis and at an acceptable cost, or if these components do not meet our expectations or specifications for quality and functionality, our operations and manufacturing would be materially and adversely affected, we could be unable to meet customer demand and our business and results of operations may be materially and adversely affected.
If we are unable to source these products or product components from sole-source third-party manufacturing and supply collaborators for any reason, including acts of terrorism, hostilities, military conflict and acts of war, including between China and Taiwan, or secure a sufficient supply of these products or product components on a timely basis and at an acceptable cost, or if these products or components do not meet our expectations or specifications for quality and functionality, our operations and manufacturing would be materially and adversely affected, we could be unable to meet customer demand and our business and results of operations may be materially and adversely affected.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, up to 50,000,000 shares of undesignated preferred stock and up to approximately 1,000,000,000 shares of authorized but unissued shares of common stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; Fiscal 2024 Form 10-K 45 Table of Contents • specify that special meetings of our stockholders can be called only by our board of directors, the Chair of the Board, the Chief Executive Officer or the President; • establish advance notice procedures for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors; • establish that our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered terms (until our board of directors is fully declassified beginning with the 2027 annual meeting of stockholders); • provide that our directors may be removed only for cause; and • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, up to 50,000,000 shares of undesignated preferred stock and up to approximately 1,000,000,000 shares of authorized but unissued shares of common stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, the Chair of the Board, the Chief Executive Officer or the President; • establish advance notice procedures for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors; • establish that our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered terms (until our board of directors is fully declassified beginning with the 2027 annual meeting of stockholders); • provide that our directors may be removed only for cause; and • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum.
For instance, if we are not able to successfully execute on the commercialization of the Revio HiFi long-read sequencing system, the Onso SBB short-read sequencing system, and the Vega benchtop long-read sequencing system, and each of their related consumables, and any future products that may be developed for research, medical and clinical uses, including acquired technologies, it could have a material adverse effect on our business, financial condition and results of operations.
For instance, if we are not able to successfully execute on the commercialization plan for our Revio HiFi long-read sequencing system and the Vega benchtop long-read sequencing system, and each of their related consumables, and any future products that may be developed for research, medical and clinical uses, including acquired technologies, it could have a material adverse effect on our business, financial condition and results of operations.
These impacts could include, but are not necessarily limited to: • shutdowns or business disruptions experienced by manufacturers, suppliers and other third parties with whom we conduct business; • disruptions or interruptions to our supply chains; • changes in applicable public health regulations that require us to modify our business practices and operations; and Fiscal 2024 Form 10-K 22 Table of Contents • disruption to customer demand for our products.
These impacts could include, but are not necessarily limited to: • shutdowns or business disruptions experienced by manufacturers, suppliers and other third parties with whom we conduct business; • disruptions or interruptions to our supply chains; • changes in applicable public health regulations that require us to modify our business practices and operations; and Fiscal 2025 Form 10-K 21 Table of Contents • disruption to customer demand for our products.
Such risks are discussed more fully below and include, but are not limited to, risks related to: • our ability to successfully market, commercialize, and sell current and future products and related maintenance services; • our ability to achieve profitability for our business; • our ability to implement required expense reduction initiatives; • our ability to repay our debt and fund our long-term operations; • our ability to successfully leverage and integrate our acquisitions and future acquisitions; • our ability to successfully research, develop and timely manufacture our current and future products; • management of new product introductions and transitions, resultant costs, and ability of new products to generate promised performance; • recent significant changes to our leadership team and resultant disruptions to our business; • retention, recruitment, and training of senior management, key personnel, scientists and engineers; • our ability to further penetrate nucleic acid sequencing applications, as well as grow product demand; • our reliance on outsourcing to other companies for manufacturing certain components and sub-assemblies, some of which are sole-sourced; • the impact of tariffs recently imposed by the U.S. government and its trading partners in response, other possible tariffs or trade protection measures, import or export licensing requirements, new or different customs duties, trade embargoes and sanctions and other trade barriers; • our ability to consistently manufacture our instruments and consumables to meet customers’ specifications, quantity, cost, or performance requirements; • the high amount of competition we face in our industry; • our ability to attract customers and increase sales of current and future products; • our reliance on a limited number of customers for a significant portion of our revenues, including academic, research and government institutions, which may be impacted by reductions in funding or targeted cancellations of certain grants or contracts by the U.S. federal government; • the complexity of our products giving rise to defects or errors; • our unpredictable and lengthy sales cycles; • the possibility that our goodwill or intangible assets could become impaired; • adverse effects resulting from political and economic tensions between the United States and other countries, including China and Russia, and other geopolitical uncertainties; • securing and maintaining patent or other intellectual property protection for our products and related improvements; • current and future legal proceedings filed against us claiming intellectual property infringement; Fiscal 2024 Form 10-K 15 Table of Contents • the potential adverse impact of health epidemics; • potential cybersecurity incidents and security breaches; • governmental regulations that burden operations or narrow the market for our products; • adverse effects resulting from enhanced trade tariffs, import restrictions, export restrictions, or other trade barriers; • evolving ethical, legal, privacy, social, and regulatory concerns regarding genetic testing; • volatility of the price of our common stock; and • our stock price falling as a result of future offerings or sales of securities.
Such risks are discussed more fully below and include, but are not limited to, risks related to: • our ability to successfully market, commercialize, and sell current and future products and related maintenance services; • our ability to achieve profitability for our business; • our ability to implement required expense reduction initiatives; • our ability to repay our debt and fund our long-term operations; • the impact of the disposition of assets related to our short-read DNA sequencing technology and related clustering, sequencing reagent, and detection technologies could have on our business, financial condition and results of operations; • our ability to successfully leverage and integrate our acquisitions and future acquisitions; • our ability to successfully research, develop and timely manufacture our current and future products; • management of new product introductions and transitions, resultant costs, and ability of new products to generate promised performance; • recent significant changes to our leadership team and resultant disruptions to our business; • retention, recruitment, and training of senior management, key personnel, scientists and engineers; • our ability to further penetrate nucleic acid sequencing applications, as well as grow product demand; • our reliance on outsourcing to other companies for manufacturing certain of our products, components and sub-assemblies, some of which are sole-sourced; • the impact of tariffs recently imposed by the U.S. government and its trading partners in response, other possible tariffs or trade protection measures, import or export licensing requirements, new or different customs duties, trade embargoes and sanctions and other trade barriers; • our ability to consistently manufacture our instruments and consumables to meet customers’ specifications, quantity, cost, or performance requirements; • the high amount of competition we face in our industry; • our ability to attract customers and increase sales of current and future products; • our reliance on a limited number of customers for a significant portion of our revenues, including academic, research and government institutions, which may be impacted by reductions in funding or targeted cancellations of certain grants or contracts by the U.S. federal government; • the complexity of our products giving rise to defects or errors; • our unpredictable and lengthy sales cycles; • the possibility that our goodwill or intangible assets could become impaired; • adverse effects resulting from political and economic tensions between the United States and other countries, including China and Russia, and other geopolitical uncertainties; Fiscal 2025 Form 10-K 14 Table of Contents • securing and maintaining patent or other intellectual property protection for our products and related improvements; • current and future legal proceedings filed against us claiming intellectual property infringement; • the potential adverse impact of health epidemics; • potential cybersecurity incidents and security breaches; • governmental regulations that burden operations or narrow the market for our products; • adverse effects resulting from new, increased, or enhanced trade tariffs, import restrictions, export restrictions, or other trade barriers; • evolving ethical, legal, privacy, social, and regulatory concerns regarding genetic testing; • volatility of the price of our common stock; and • our stock price falling as a result of future offerings or sales of securities.
The commercial success of our products, including the Sequel, Sequel II/IIe, Revio, Onso and Vega systems, and the products under development, including acquired technologies, depends on a number of factors, including performance and reliability of the systems, our anticipating and effectively addressing customer preferences and demands, the success of our sales and marketing efforts, effective forecasting and management of product demand, purchase commitments and inventory levels, effective management of manufacturing and supply costs, and the quality of our products, including consumables such as SMRT Cells and reagents.
The commercial success of our products, including the Revio and Vega systems, and the products under development, including acquired technologies, depends on a number of factors, including performance and reliability of the systems, our anticipating and effectively addressing customer preferences and demands, the success of our sales and marketing efforts, effective forecasting and management of product demand, purchase commitments and inventory levels, effective management of manufacturing and supply costs, and the quality of our products, including consumables such as SMRT Cells and reagents.
Our amended and restated bylaws provide that unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another State court in Delaware or the federal district court for the District of Delaware) will, to the fullest extent permitted by law, be the sole and exclusive forum for: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, stockholders, officers, or other employees to us or our stockholders; (iii) any action arising pursuant to any provision of the Delaware General Corporation Law; (iv) any action to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws; or (v) any action asserting a claim governed by the internal affairs doctrine, except as to each of (i) through (v) above, for any claim as to which such court determines that there is an indispensable party not subject to the jurisdiction of such court.
Our amended and restated bylaws provide that unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another State court in Delaware or the federal district court for the District of Delaware) will, to the fullest extent permitted by law, be the sole and exclusive forum for: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, stockholders, officers, or other employees to us or our stockholders; (iii) any action arising pursuant to any provision of the Delaware General Corporation Law; (iv) any action to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws; or (v) any action asserting a claim governed by the internal affairs doctrine, except as to each of (i) Fiscal 2025 Form 10-K 45 Table of Contents through (v) above, for any claim as to which such court determines that there is an indispensable party not subject to the jurisdiction of such court.
Fiscal 2024 Form 10-K 55 Table of Contents While we have in place formal policies and procedures related to the storage, collection, and processing of information, and have conducted data privacy audits, we continue to evaluate our compliance needs, including the need to conduct additional internal and external data privacy audits or adopt additional policies and procedures, to ensure our compliance with all applicable data protection laws and regulations.
Fiscal 2025 Form 10-K 54 Table of Contents While we have in place formal policies and procedures related to the storage, collection, and processing of information, and have conducted data privacy audits, we continue to evaluate our compliance needs, including the need to conduct additional internal and external data privacy audits or adopt additional policies and procedures, to ensure our compliance with all applicable data protection laws and regulations.
If the continued rollout of our current and future products, including with respect to the SMRT Cell, the Sequel, Sequel II/IIe, Revio, Onso and Vega systems, is delayed or is not successful or less successful than anticipated, then we may not be able to achieve an acceptable return, if any, on our substantial research and development efforts, and our business may be materially and adversely affected.
If the continued rollout of our current and future products, including with respect to the SMRT Cell, the Revio and Vega systems, is delayed or is not successful or less successful than anticipated, then we may not be able to achieve an acceptable return, if any, on our substantial research and development efforts, and our business may be materially and adversely affected.
Moreover, the Chinese government may retaliate against U.S. trade restrictions in ways that could impact our business, including through the imposition of tariffs on imports from the U.S. and/or the imposition of export controls affecting the export of certain items from China.
Moreover, the Chinese government may continue to retaliate against U.S. trade restrictions in ways that could impact our business, including through the imposition of additional tariffs on imports from the U.S. and/or the imposition of additional export controls affecting the export of certain items from China.
Fiscal 2024 Form 10-K 23 Table of Contents If one or more of our senior executives or other key personnel were unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, and other senior management may be required to divert attention from other aspects of the business.
Fiscal 2025 Form 10-K 22 Table of Contents If one or more of our senior executives or other key personnel were unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, and other senior management may be required to divert attention from other aspects of the business.
Fiscal 2024 Form 10-K 27 Table of Contents There are also several companies that are in the process of developing or have already developed and commercialized new, competing or potentially competing technologies, products and/or services, including ONT Ltd. and its subsidiaries, against whom we have filed complaints for patent infringement in the U.S.
Fiscal 2025 Form 10-K 26 Table of Contents There are also several companies that are in the process of developing or have already developed and commercialized new, competing or potentially competing technologies, products and/or services, including ONT Ltd. and its subsidiaries, against whom we have filed complaints for patent infringement in the U.S.
These components are either sourced directly from companies in China or indirectly from third parties that source from companies in China. Fiscal 2024 Form 10-K 30 Table of Contents Consequently, we are subject to significant risks associated with the trading relationship between the U.S. and China, which is currently characterized by significant uncertainty.
These components are either sourced directly from companies in China or indirectly from third parties that source from companies in China. Fiscal 2025 Form 10-K 29 Table of Contents Consequently, we are subject to significant risks associated with the trading relationship between the U.S. and China, which is currently characterized by significant uncertainty.
The occurrence of any of these events could impair our ability to operate without infringing upon the proprietary rights of others or prevent us from establishing or maintaining a competitive advantage over our competitors. Fiscal 2024 Form 10-K 33 Table of Contents Variability in intellectual property laws may adversely affect our intellectual property position.
The occurrence of any of these events could impair our ability to operate without infringing upon the proprietary rights of others or prevent us from establishing or maintaining a competitive advantage over our competitors. Fiscal 2025 Form 10-K 32 Table of Contents Variability in intellectual property laws may adversely affect our intellectual property position.
Fiscal 2024 Form 10-K 36 Table of Contents We have been, are currently, and could in the future be, subject to legal proceedings with third parties who may claim that our products infringe or misappropriate their intellectual property rights. Our products are based on complex, rapidly developing technologies.
Fiscal 2025 Form 10-K 35 Table of Contents We have been, are currently, and could in the future be, subject to legal proceedings with third parties who may claim that our products infringe or misappropriate their intellectual property rights. Our products are based on complex, rapidly developing technologies.
The introduction of new products, including the recent commercialization of our Revio, Onso and Vega systems, has had and may in the future also have a negative impact on our revenue in the near-term as our current and future customers have delayed or cancelled and may in the future delay or cancel orders of existing products in anticipation of new products and we may also be pressured to decrease prices for our existing products.
The introduction of new products, including the recent commercialization of our Vega system, has had and may in the future also have a negative impact on our revenue in the near-term as our current and future customers have delayed or cancelled and may in the future delay or cancel orders of existing products in anticipation of new products and we may also be pressured to decrease prices for our existing products.
Fiscal 2024 Form 10-K 21 Table of Contents Our research and development efforts may not result in the benefits that we anticipate, and our failure to successfully market, sell, and commercialize our current and future products could have a material adverse effect on our business, financial condition and results of operations.
Fiscal 2025 Form 10-K 20 Table of Contents Our research and development efforts may not result in the benefits that we anticipate, and our failure to successfully market, sell, and commercialize our current and future products could have a material adverse effect on our business, financial condition and results of operations.
We are continuing to expand our international operations as part of our growth strategy and have experienced an increasing concentration of sales in certain regions outside the United States, especially the Asia-Pacific region, as discussed above.
We are continuing to expand our international operations as part of our growth strategy and have experienced an increasing concentration of sales in certain regions outside the United States, especially the Asia-Pacific region and in Europe.
The market price of our common stock is highly volatile, and we expect it to continue to be volatile for the foreseeable future in response to many risk factors listed in this section, and others beyond our control, including: • actual or anticipated fluctuations in our financial condition and operating results; • announcements of new products, technological innovations or strategic partnerships by us or our competitors; • announcements by us, our customers, partners, or suppliers relating directly or indirectly to our products, services or technologies; • overall conditions in our industry and market; • addition or loss of significant customers; • changes in laws or regulations applicable to our products; • actual or anticipated changes in our growth rate relative to our competitors; • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, capital commitments or achievement of significant milestones; • additions or departures of key personnel; • competition from existing products or new products that may emerge; • issuance of new or updated research or reports by securities analysts; • fluctuations in the valuation of companies perceived by investors to be comparable to us; • disputes or other developments related to proprietary rights, including patents, litigation matters or our ability to obtain intellectual property protection for our technologies; • announcement or expectation of additional financing efforts; • sales of our common stock by us or our stockholders; • stock price and volume fluctuations attributable to inconsistent trading volume levels of our shares; • reports, guidance and ratings issued by securities or industry analysts; • operating results below the expectations of securities analysts or investors; and Fiscal 2024 Form 10-K 44 Table of Contents • general economic and market conditions, which could be impacted by various events including health epidemics or pandemics, interest rate fluctuations, increases in fuel prices, foreign currency fluctuations, changing international trade policies, acts of terrorism, hostilities or the perception that hostilities may be imminent, military conflict and acts of war, including further political uncertainty and military actions associated with the war in Ukraine and the related response, including sanctions or other restrictive actions, by the United States and/or other countries.
The market price of our common stock is highly volatile, and we expect it to continue to be volatile for the foreseeable future in response to many risk factors listed in this section, and others beyond our control, including: • actual or anticipated fluctuations in our financial condition and operating results; • announcements of new products, technological innovations or strategic partnerships by us or our competitors; Fiscal 2025 Form 10-K 43 Table of Contents • announcements by us, our customers, partners, or suppliers relating directly or indirectly to our products, services or technologies; • overall conditions in our industry and market; • addition or loss of significant customers; • changes in laws or regulations applicable to our products; • actual or anticipated changes in our growth rate relative to our competitors; • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, capital commitments or achievement of significant milestones; • additions or departures of key personnel; • competition from existing products or new products that may emerge; • issuance of new or updated research or reports by securities analysts; • fluctuations in the valuation of companies perceived by investors to be comparable to us; • disputes or other developments related to proprietary rights, including patents, litigation matters or our ability to obtain intellectual property protection for our technologies; • announcement or expectation of additional financing efforts; • sales of our common stock by us or our stockholders; • stock price and volume fluctuations attributable to inconsistent trading volume levels of our shares; • reports, guidance and ratings issued by securities or industry analysts; • operating results below the expectations of securities analysts or investors; and • general economic and market conditions, which could be impacted by various events including health epidemics or pandemics, interest rate fluctuations, increases in fuel prices, foreign currency fluctuations, changing international trade policies, acts of terrorism, hostilities or the perception that hostilities may be imminent, and military conflict and acts of war.
The existence of the Notes may encourage short selling by market participants because the conversion of the Notes could depress the price of our common stock. Fiscal 2024 Form 10-K 48 Table of Contents General Risk Factors Unfavorable global economic or political conditions could adversely affect our business, financial condition or results of operations.
The existence of the Notes may encourage short selling by market participants because the conversion of the Notes could depress the price of our common stock. Fiscal 2025 Form 10-K 47 Table of Contents General Risk Factors Unfavorable global economic or political conditions could adversely affect our business, financial condition or results of operations.
Unanticipated difficulties or delays in replacing existing products with new products or in commercializing our existing or new products in sufficient quantities and of acceptable quality to meet customer demand, including with respect to the SMRT Cell and the Sequel, Sequel II/IIe, Revio, Onso and Vega systems, could diminish future demand for our products and may materially and adversely harm our future operating results.
Unanticipated difficulties or delays in replacing existing products with new products or in commercializing our existing or new products in sufficient quantities and of acceptable quality to meet customer demand, including with respect to the SMRT Cell and the Revio and Vega systems, could diminish future demand for our products and may materially and adversely harm our future operating results.
Fiscal 2024 Form 10-K 34 Table of Contents The measures that we use to protect the security of and enforce our intellectual property and other proprietary rights may not be adequate, which could result in the loss of legal protection for, and thereby diminish the value of, such intellectual property and other rights.
Fiscal 2025 Form 10-K 33 Table of Contents The measures that we use to protect the security of and enforce our intellectual property and other proprietary rights may not be adequate, which could result in the loss of legal protection for, and thereby diminish the value of, such intellectual property and other rights.
Spending budgets are based on a wide variety of factors, including the allocation of available resources to make purchases, funding from government sources which is highly uncertain and subject to change, the spending priorities among various types of research equipment, policies regarding capital expenditures during economically uncertain periods and the potential impacts from health epidemics or pandemics.
Spending budgets are based on a wide variety of factors, including the allocation of available resources to make purchases, funding from government sources which is highly uncertain and subject to change, including the persistent uncertainty surrounding NIH and academic funding, the spending priorities among various types of research equipment, policies regarding capital expenditures during economically uncertain periods and the potential impacts from health epidemics or pandemics.
Fiscal 2024 Form 10-K 50 Table of Contents Moreover, changes in the value of the relevant currencies may affect the cost of certain items required in our operations. Changes in currency exchange rates may also affect the relative prices at which we are able to sell products in the same market.
Fiscal 2025 Form 10-K 49 Table of Contents Moreover, changes in the value of the relevant currencies may affect the cost of certain items required in our operations. Changes in currency exchange rates may also affect the relative prices at which we are able to sell products in the same market.
Fiscal 2024 Form 10-K 29 Table of Contents We may not be able to convert our orders in backlog into revenue. Our backlog represents product orders from our customers that we have confirmed but have not been able to fulfill, and, accordingly, for which we have not yet recognized revenue.
Fiscal 2025 Form 10-K 28 Table of Contents We may not be able to convert our orders in backlog into revenue. Our backlog represents product orders from our customers that we have confirmed but have not been able to fulfill, and, accordingly, for which we have not yet recognized revenue.
Our net losses since inception and our expectation of incurring substantial losses and negative cash flow for the foreseeable future could: • make it more difficult for us to satisfy our obligations; • increase our vulnerability to general adverse economic and industry conditions; Fiscal 2024 Form 10-K 17 Table of Contents • limit our ability to fund future working capital, capital expenditures, research and development and other business opportunities; • increase the volatility of the price of our common stock; • limit our flexibility to react to changes in our business and the industry in which we operate; • place us at a disadvantage to other companies that offer nucleic acid sequencing equipment or consumables; and • limit our ability to borrow additional funds.
Our net losses since inception and our expectation of incurring substantial losses and negative cash flow for the foreseeable future could: • make it more difficult for us to satisfy our obligations; • increase our vulnerability to general adverse economic and industry conditions; • limit our ability to fund future working capital, capital expenditures, research and development and other business opportunities; • increase the volatility of the price of our common stock; • limit our flexibility to react to changes in our business and the industry in which we operate; • place us at a disadvantage to other companies that offer nucleic acid sequencing equipment or consumables; and • limit our ability to borrow additional funds.
Fiscal 2024 Form 10-K 28 Table of Contents In addition, many of our customers, including some of our larger customers, have negotiated, or may in the future negotiate, volume-based discounts or other more favorable terms from us or our sales and distribution partners, which can and have had a negative effect on our gross margins or revenue.
Fiscal 2025 Form 10-K 27 Table of Contents In addition, many of our customers, including some of our larger customers, have negotiated, or may in the future negotiate, volume-based discounts or other more favorable terms from us or our sales and distribution partners, which have had and may have a negative effect on our gross margins or revenue.
Fiscal 2024 Form 10-K 32 Table of Contents Our facilities in California are located near earthquake faults, and the occurrence of an earthquake or other catastrophic disaster could cause damage to our facilities and equipment, which could require us to cease or curtail operations.
Fiscal 2025 Form 10-K 31 Table of Contents Our facilities in California are located near earthquake faults, and the occurrence of an earthquake or other catastrophic disaster could cause damage to our facilities and equipment, which could require us to cease or curtail operations.
The expenses or losses associated with delayed or unsuccessful product development or lack of market acceptance of our existing and new products, including the SMRT Cell and the Sequel, Sequel II/IIe, Revio, Onso and Vega systems could materially and adversely affect our business, operations, financial condition, and prospects.
The expenses or losses associated with delayed or unsuccessful product development or lack of market acceptance of our existing and new products, including the SMRT Cell and the Revio and Vega systems could materially and adversely affect our business, operations, financial condition, and prospects.
If we sought and received regulatory clearance or approval for certain of our products, we would be subject to ongoing FDA obligations and continued regulatory oversight and review, including the general controls listed above and the FDA’s QSRs for our development and manufacturing operations.
If we sought and received regulatory clearance or approval for certain of our products, we would be subject to ongoing FDA obligations and continued regulatory oversight and review, including the general controls listed above and the FDA’s Quality System Regulations for our development and manufacturing operations.
Fiscal 2024 Form 10-K 18 Table of Contents We are not cash flow positive and may not have sufficient cash to make required payments under the terms of our debt or fund our long-term planned operations.
Fiscal 2025 Form 10-K 17 Table of Contents We are not cash flow positive and may not have sufficient cash to make required payments under the terms of our debt or fund our long-term planned operations.
Fiscal 2024 Form 10-K 26 Table of Contents The size of the markets for our products, including our Revio, Onso and Vega instruments, may be smaller than estimated, and new market opportunities may not develop as quickly as we expect, or at all, limiting our ability to successfully sell our products.
Fiscal 2025 Form 10-K 25 Table of Contents The size of the markets for our products, including our Revio and Vega instruments, may be smaller than estimated, and new market opportunities may not develop as quickly as we expect, or at all, limiting our ability to successfully sell our products.
These existing and future controls may impact our ability to export certain products to customers or distributors in China or other locations and restrict our ability to use certain integrated circuits in our products.
These existing and future laws and regulations may impact our ability to export certain products to customers or distributors in China or other locations and may restrict our ability to use certain integrated circuits in our products.
New products, including the Revio, Onso and Vega systems, or enhancements to our existing products, including the SMRT Cell and the Sequel II/IIe systems, in particular may contain undetected errors or performance problems that are discovered only after delivery to customers.
New products, including the Revio and Vega systems, or enhancements to our existing products, including the SMRT Cell, in particular may contain undetected errors or performance problems that are discovered only after delivery to customers.
Fiscal 2024 Form 10-K 51 Table of Contents There is significant ongoing uncertainty with respect to potential legislation, regulation and government policy at the federal level, as well as the state and local levels.
Fiscal 2025 Form 10-K 50 Table of Contents There is significant ongoing uncertainty with respect to potential legislation, regulation and government policy at the federal level, as well as the state and local levels.
In addition, we may not be successful in transitioning our prior generation products to our Revio and Vega products, or transitioning users of other third party sequencing platforms to our portfolio of products, and could incur related obsolete inventory charges and losses on firm purchase commitments.
In addition, we may not be successful in transitioning the customers of our prior generation products to our Revio and Vega products, or transitioning users of other third-party sequencing platforms to our portfolio of products, and have incurred and could continue to incur related obsolete inventory charges and losses on firm purchase commitments.
Future changes in our stock ownership could result in additional ownership changes, including potentially material changes, under Sections 382 and 383. Further, California has enacted legislation that limits the use of state NOLs for tax years beginning on or after January 1, 2024 and before January 1, 2027.
Future changes in our stock ownership could result in additional ownership changes, including potentially material changes, under Sections 382 and 383. Further, California has enacted legislation that limits the use of state NOLs for tax years beginning on or after January 1, 2024, and before January 1, 2027. Other limitations may also apply under state tax law.
Fiscal 2024 Form 10-K 35 Table of Contents Some of our technology is subject to “march-in” rights by the U.S. government. Some of our patented technology was developed with U.S. federal government funding.
Fiscal 2025 Form 10-K 34 Table of Contents Some of our technology is subject to “march-in” rights by the U.S. government. Some of our patented technology was developed with U.S. federal government funding.
Fiscal 2024 Form 10-K 25 Table of Contents Our current manufacturing process is also characterized by long lead times between the placement of orders for and delivery of our products.
Fiscal 2025 Form 10-K 24 Table of Contents Our current manufacturing process is also characterized by long lead times between the placement of orders for and delivery of our products.
Fiscal 2024 Form 10-K 52 Table of Contents Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
Fiscal 2025 Form 10-K 51 Table of Contents Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
Fiscal 2024 Form 10-K 54 Table of Contents In the United States, various federal and state regulators, including governmental agencies like the Consumer Financial Protection Bureau and the Federal Trade Commission, have adopted, or are considering adopting, laws and regulations concerning personal information and data security.
Fiscal 2025 Form 10-K 53 Table of Contents In the United States, various federal and state regulators, including governmental agencies like the Consumer Financial Protection Bureau, the Department of Justice, and the Federal Trade Commission, have adopted, or are considering adopting, laws and regulations concerning personal information and data security.
Because some of our customers and suppliers are based in China, our business, financial condition and results of operations could be adversely affected by the political and economic tensions between the United States and China. We are subject to risks associated with political conflicts between the U.S. and China. A portion of our revenue is generated from China.
Because some of our customers and suppliers are based in China, our business, financial condition and results of operations could be adversely affected by the political and economic tensions between the United States and China. We are subject to risks associated with political conflicts between the U.S. and China.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Vice President and Head of Information Technology is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents by leading cybersecurity risk management and working directly with our IT team. Our Vice President and Head of Information Technology also provides appropriate information and updates to our management committee on cybersecurity.
Biggest changeOur Head of Information Technology and our management committee on cybersecurity oversee our cybersecurity policies and processes, including those described in “Risk Management and Strategy” above. Our Head of Information Technology is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents by leading cybersecurity risk management and working directly with our IT team.
We devote resources and designate high-level personnel, including our Vice President and Head of Information Technology who reports to our Chief Operating Officer, to manage the risk assessment and mitigation process. As part of our overall risk management system, we monitor and test our safeguards, including through annual third-party vulnerability assessments.
We devote resources and designate high-level personnel, including our Head of Information Technology who reports to our Chief Operating Officer, to manage the risk assessment and mitigation process. As part of our overall risk management system, we monitor and test our safeguards, including through annual third-party vulnerability assessments.
Our Vice President and Head of Information Technology and representatives from our management committee on cybersecurity provide annual briefings to the audit committee regarding our company’s cybersecurity risks and activities, including any recent cybersecurity incidents and related responses, cybersecurity systems testing, activities of third parties, and the like.
Our Head of Information Technology and representatives from our management committee on cybersecurity provide annual briefings to the audit committee regarding our company’s cybersecurity risks and activities, including any recent cybersecurity incidents and related responses, cybersecurity systems testing, activities of third parties, and the like.
Our board of directors administers its cybersecurity risk oversight function directly as a whole, as well as through the audit committee. Our Vice President and Head of Information Technology and our cyber committee, which includes Facilities, HR, IT, Legal, and Management, are primarily responsible to assess and manage our material risks from cybersecurity threats.
Our board of directors administers its cybersecurity risk oversight function directly as a whole, as well as through the corporate governance and nominating committee. Our Head of Information Technology and our cyber committee, which includes Facilities, HR, IT, Software, Legal, and Management, are primarily responsible to assess and manage our material risks from cybersecurity threats.
These risk assessments include identification of reasonably foreseeable internal and external risks, the likelihood and potential damage that could result from such risks, and the sufficiency of existing policies, procedures, systems, and safeguards in place to manage such risks.
These risk assessments include identification of reasonably foreseeable internal and Fiscal 2025 Form 10-K 55 Table of Contents external risks, the likelihood and potential damage that could result from such risks, and the sufficiency of existing policies, procedures, systems, and safeguards in place to manage such risks.
Fiscal 2024 Form 10-K 56 Table of Contents We conduct periodic risk assessments to identify cybersecurity threats, as well as assessments in the event of a material change in our business practices that may affect information systems that are vulnerable to such cybersecurity threats.
We conduct periodic risk assessments to identify cybersecurity threats, as well as assessments in the event of a material change in our business practices that may affect information systems that are vulnerable to such cybersecurity threats.
These service providers assist us in designing and implement our cybersecurity policies and procedures, as well as to monitor and test our safeguards. We have established procedures to evaluate and respond to cybersecurity incidents, including cybersecurity incidents at third-party service providers which have a potential to impact our data and systems.
These service providers assist us with the design and implementation of our cybersecurity policies and procedures, as well as in monitoring and testing our safeguards. We have established procedures to evaluate and respond to cybersecurity incidents, including cybersecurity incidents at third-party service providers which have a potential to impact our data and systems.
Our audit committee provides regular updates to the board of directors on such reports. Fiscal 2024 Form 10-K 57 Table of Contents
Our corporate governance and nominating committee provides regular updates to the board of directors on such reports.
Removed
Our Vice President and Head of Information Technology has years of cybersecurity experience and expertise including holding numerous applicable cybersecurity certifications, such as ISC2 Certified Information Systems Security Professional (CISSP). Our Vice President and Head of Information Technology and our management committee on cybersecurity oversee our cybersecurity policies and processes, including those described in “Risk Management and Strategy” above.
Added
Our Head of Information Technology also provides appropriate information and updates to our management committee on cybersecurity.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIncluding these leases, we lease approximately 191,000 square feet globally. We believe that our existing facilities, together with suitable additional or alternative space available on commercially reasonable terms, will be sufficient to meet our needs.
Biggest changeIncluding these leases, we lease approximately 189,600 square feet globally. We believe that our existing facilities, together with suitable additional or alternative space available on commercially reasonable terms, will be sufficient to meet our needs. Fiscal 2025 Form 10-K 56 Table of Contents
ITEM 2. PROPERTIES Our corporate headquarters, research and development facilities, and manufacturing and distribution centers are located in Menlo Park, California, where we lease approximately 180,200 square feet under a lease expiring on October 31, 2027. Additionally, our European headquarters is located in London, where we lease approximately 7,300 square feet under a lease expiring November 30, 2026.
ITEM 2. PROPERTIES Our corporate headquarters, research and development facilities, and manufacturing and distribution centers are located in Menlo Park, California, where we lease approximately 180,200 square feet under a lease expiring on April 30, 2034. Additionally, our European headquarters is located in London, where we lease approximately 7,300 square feet under a lease expiring November 30, 2026.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeOther Proceedings From time to time, we may also be involved in a variety of other claims, lawsuits, investigations, and proceedings relating to securities laws, product liability, patent infringement, contract disputes, employment, and other matters that arise in the normal course of our business.
Biggest changeWe plan to vigorously defend against the remaining claims. Other Proceedings From time to time, we may also be involved in a variety of other claims, lawsuits, investigations, and proceedings relating to securities laws, product liability, patent infringement, contract disputes, employment, and other matters that arise in the normal course of our business.
Regardless of the outcome, litigation can have an adverse impact on us because of litigation and settlement costs, diversion of management resources, and other factors. Fiscal 2024 Form 10-K 59 Table of Contents
Regardless of the outcome, litigation can have an adverse impact on us because of litigation and settlement costs, diversion of management resources, and other factors.
Removed
We plan to vigorously defend against the remaining claims. Fiscal 2024 Form 10-K 58 Table of Contents On December 14, 2022, Take2 Technologies, Ltd. (“Take2”) and the Chinese University of Hong Kong (“CUHK”) filed a complaint in the U.S. District Court for Delaware against us alleging infringement of U.S. Patent No. 11,091,794 (the “’794 Patent”) (C.A.
Removed
No. 22- cv-01595) (the “Take2 District Court matter”) . The complaint alleges that our Sequel II systems, Sequel IIe systems, and Revio systems that operate version 11.0 or later of the SMRT Link software, infringe the ‘794 Patent. The complaint seeks unspecified monetary damages and an order enjoining us from infringing the ’794 Patent.
Removed
We filed a motion to dismiss on February 14, 2023 , which was denied on March 25, 2024 . We also filed a motion to transfer the case from the District of Delaware to the Northern District of California which was granted on August 2, 2023 . The case was transferred on August 16, 2023 (C.A. No. 5:23-cv-04166).
Removed
Take2 filed a motion to disqualify our in-house legal department from representing PacBio in the district court action on September 20, 2023. We opposed Take2’s disqualification motion on October 4, 2023.
Removed
An oral hearing on the disqualification motion was held on October 26, 2023 and the court issued orders on November 6 and December 4 of 2023 partially granting the motion. While some members of the in-house legal department were disqualified, General Counsel for PacBio was not disqualified and continues to represent PacBio in the Take2 District Court matter.
Removed
We filed a petition for inter partes review at the Board ( IPR2024-00028) challenging the validity of all claims of the ’794 patent on October 17, 2023. The CUHK filed a preliminary response to the petition on January 26, 2024.
Removed
On April 22, 2024, we filed our answer to the complaint, denying infringement and seeking declaratory judgments of non-infringement and invalidity of the ‘794 Patent. On April 24, 2024, the Board granted institution of IPR2024-00028 on the validity of all claims of the ’794 patent.
Removed
On May 2, 2024, the parties filed a joint stipulation and proposed order to stay the Take2 District Court matter pending inter partes review. On May 3, 2024, the Court granted the motion to stay, and the case currently remains stayed. Briefing is complete in IPR2024-00028 and an oral hearing took place on January 23, 2025.
Removed
The Board is scheduled to issue a final decision on or before April 24, 2025 that addresses the validity of all claims of the ’794 patent. On March 7, 2025, we entered into a purchase agreement with CUHK to purchase the ‘794 patent.
Removed
In connection with our purchase of the ‘794 Patent, each of Take2 and CUHK, on the one hand, and PacBio, on the other hand, agreed to waive and seek the discharge of all outstanding litigation claims and patent-related challenges, including with respect to the Take2 District Court matter and IPR2024-00028.
Removed
The agreement to discharge the litigation claims and the patent challenge remains subject to approval by the Northern District of California and the Board, respectively. Proceedings in China On May 12, 2020, PGI filed a complaint in the Wuhan Intermediate People’s Court in China alleging infringement of one or more claims of China patent No.
Removed
CN101743321B (the “CN321 Patent”), which is related to the ‘441 Patent. On November 23, 2020, we filed an Invalidation Petition at the China National Intellectual Property Administration ("CNIPA") demonstrating the invalidity of the claims in the CN321 Patent on grounds of insufficient disclosure, and the lack of support, essential technical features, clarity, novelty, and inventiveness.
Removed
A hearing in the invalidation proceeding at the CNIPA was held on April 29, 2021. On September 2, 2021, the CNIPA issued its decision on the Invalidation Petition and determined that all claims (1-61) of the CN321 patent were invalid. On December 1, 2021, PGI filed an appeal with the Beijing IP Court, contesting the CNIPA decision.
Removed
We filed a petition with the Wuhan Intermediate People’s court requesting dismissal of the infringement action based on the CNIPA invalidation decision, and PGI filed a petition to withdraw its complaint. The Wuhan Intermediate People’s court granted PGI’s petition and dismissed the infringement action in May 2022.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on The Nasdaq Global Select Market under the symbol “PACB.” Holders of Record As of February 28, 2025, there were approximately 85 stockholders of record of our common stock, although we believe that there are a significantly larger number of beneficial owners of our common stock.
Biggest changeMARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on The Nasdaq Global Select Market under the symbol “PACB.” Holders of Record As of January 31, 2026, there were approximately 75 stockholders of record of our common stock, although we believe that there are a significantly larger number of beneficial owners of our common stock.
Fiscal 2024 Form 10-K 61 Table of Contents Performance Graph The performance graph included in this Annual Report on Form 10-K shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any filing of Pacific Biosciences under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Fiscal 2025 Form 10-K 58 Table of Contents Performance Graph The performance graph included in this Annual Report on Form 10-K shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any filing of Pacific Biosciences under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
The following graph shows a comparison from December 31, 2019 through December 31, 2024 of the cumulative total return for our common stock, the Nasdaq Composite Index and the Nasdaq Biotechnology Index. Such returns are based on historical results and are not intended to suggest future performance.
The following graph shows a comparison from December 31, 2020 through December 31, 2025 of the cumulative total return for our common stock, the Nasdaq Composite Index and the Nasdaq Biotechnology Index. Such returns are based on historical results and are not intended to suggest future performance.
Removed
Data for The Nasdaq Composite Index and the Nasdaq Biotechnology Index assume reinvestment of dividends. Recent Sales of Unregistered Securities Other than as previously reported on our Current Reports on Form 8-K filed with the SEC on November 7, 2024 and November 22, 2024, there were no unregistered sales of equity securities by us during 2024.
Added
Data for The Nasdaq Composite Index and the Nasdaq Biotechnology Index assume reinvestment of dividends.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeOperating expenses increased $124.3 million primarily driven by $184.5 million of impairment charges, $20.8 million of restructuring charges, and an increase of $11.8 million in amortization of acquired intangible assets, partially offset by a $15.9 million decrease in the change in the fair value of the contingent consideration, a $9.0 million decrease in non-recurring merger-related costs, and a decrease in research and development expenses primarily driven by a decrease in personnel and related expenses due to restructuring activities. • Cash, cash equivalents, and investments were $389.9 million at December 31, 2024, which represents a 38% decrease compared to the balance of $631.4 million at December 31, 2023.
Biggest changeAs a result of the restructuring, core operating expenses, consisting of research and development and sales, general and administrative expenses, decreased by $71.1 million. • Cash, cash equivalents, and investments were $279.5 million at December 31, 2025, which represents a 28% decrease compared to the balance of $389.9 million at December 31, 2024.
These factors could continue to impact our revenues and results of operations in future periods; however, the magnitude and duration of these impacts is uncertain and inherently unpredictable. On an ongoing basis, we evaluate our significant estimates, including those related to the valuation of goodwill, indefinite-lived and finite-lived assets.
These factors could continue to impact our revenues and results of operations in future periods; however, the magnitude and duration of these impacts is highly uncertain and inherently unpredictable. On an ongoing basis, we evaluate our significant estimates, including those related to the valuation of goodwill, indefinite-lived and finite-lived assets.
A discussion of the changes in our results of operations between the years ended December 31, 2023 and December 31, 2022 , has been omitted from this Annual Report on Form 10-K but may be found in
A discussion of the changes in our results of operations between the years ended December 31, 2024 and December 31, 2023 , has been omitted from this Annual Report on Form 10-K but may be found in
ITEM 6. [RESERVED] Fiscal 2024 Form 10-K 62 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes included in this Annual Report on Form 10-K.
ITEM 6. [RESERVED] Fiscal 2025 Form 10-K 59 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes included in this Annual Report on Form 10-K.
Fiscal 2024 Form 10-K 65 Table of Contents RESULTS OF OPERATIONS A detailed discussion of our consolidated financial results comparison between 2024 and 2023 is presented below.
Fiscal 2025 Form 10-K 62 Table of Contents RESULTS OF OPERATIONS A detailed discussion of our consolidated financial results comparison between 2025 and 2024 is presented below.
However, these estimates could change in future periods based on events or changes in circumstances, which could result in material future impairment charges. We recorded $184.5 million of impairment charges during the year ended December 31, 2024. See additional discussion below in Results of Operations, as well as Note 4 .
However, these estimates could change in future periods based on events or changes in circumstances, which could result in material future impairment charges. We recorded $15.0 million of impairment charges during the first quarter of 2025. See additional discussion below in Results of Operations, as well as Note 4.
Gross margins may also be affected by product mix, manufacturing efficiencies, warranty cost improvements, average selling price fluctuations, future product launches, changes to inventory reserves, and costs of raw materials. • Loss from operations increased $139.8 million or 42%, to $474.3 million for the year ended December 31, 2024, as compared to $334.5 million for the year ended December 31, 2023.
Gross margins may be affected by product mix, manufacturing efficiencies, changes in warranty costs, average selling price fluctuations, future product launches, changes to inventory reserves, costs of raw materials, and tariffs. • Loss from operations increased for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to $383.1 million of restructuring-related costs.
We continue to develop sequencing systems designed to increase throughput and lower the cost to sequence a genome, which we believe will allow us to address an even larger part of the market.
We continue to develop sequencing solutions designed to increase throughput, simplify workflows, lower the cost to sequence a genome, and enhance downstream data analysis and interpretation capabilities, which we believe will allow us to address a larger portion of the market.
Revenue was comprised of $65.8 million in instrument revenue, approximately $70.3 million in consumables revenue and $17.9 million in service and other revenue for the year ended December 31, 2024. The decrease was primarily due to lower Revio unit sales and lower average selling prices, which was partially offset by higher consumable sales.
Revenue was comprised $70.3 million in consumables revenue, $65.8 million in instrument revenue, and $17.9 million in service and other revenue for the year ended December 31, 2024.
Financial Overview Key highlights of our 2024 consolidated financial results include the following: Revenue of Gross Profit of Operating Loss of Cash, cash equivalents, and investments of $154 M $37 M $474 M $390 M compared to $201 M in the prior year representing 24% of gross margin compared to $334 M in the prior year compared to $631 M last year • Revenue decreased $46.5 million, or 23%, to $154.0 million for the year ended December 31, 2024, as compared to $200.5 million for the year ended December 31, 2023.
Financial Overview Key highlights of our 2025 consolidated financial results include the following: Revenue of Gross Profit of Operating Loss of Cash, cash equivalents, and investments of $160.0 M $45.8 M $553.9 M $279.5 M compared to $154.0 M in the prior year compared to $37.3 M in the prior year compared to $474.3 M in the prior year compared to $389.9 M last year • Revenue was comprised of approximately $82.0 million in consumables revenue, $53.8 million in instrument revenue, and $24.2 million in service and other revenue for the year ended December 31, 2025.
Our customers include academic and governmental research institutions, commercial testing and service laboratories, genome centers, public health labs, hospitals and clinical research institutes, CROs, pharmaceutical companies, and agricultural companies.
Our focus is on creating some of the world’s most advanced sequencing systems to provide our customers with the most complete and accurate view of genomes, transcriptomes, and epigenomes. Our customers include academic and governmental research institutions, commercial testing and service laboratories, genome centers, public health labs, hospitals and clinical research institutes, CROs, pharmaceutical companies, and agricultural companies.
In 2024 Revio was increasingly being used in LDT and clinical research settings to consolidate multiple tests and address complex genetic challenges. We continue to believe that with the capabilities of our HiFi chemistry and SMRT technology, we can be a market leader in whole-genome clinical sequencing. Leading institutions have adopted our products to study rare and inherited disease.
We continue to believe that with the capabilities of our technology, we can be a market leader in whole-genome clinical sequencing. Leading institutions have adopted our products to study rare and inherited disease. We believe the market opportunity for clinical sequencing is significant and could drive substantial revenue growth for the company.
Collaborative arrangements add to the awareness of our products and service offerings and may drive new applications for use of our technology.
We plan to continue to pursue partner collaborations where the technologies being developed or applications being considered extend beyond whole-genome clinical sequencing. Collaborative arrangements add to the awareness of our products and service offerings and may drive new applications for use of our technology.
Our products address solutions across a broad set of applications including human genetics, plant and animal sciences, infectious disease and microbiology, oncology, and other emerging applications. Long-read sequencing was recognized by the journal Nature Methods as its “method of the year” for 2022 for its contributions to biological understanding and future potential.
Our products and technology, which include our HiFi long-read sequencing technology, address a broad set of applications including human germline sequencing, plant and animal sciences, infectious disease and microbiology, oncology, and other emerging applications.
Fiscal 2024 Form 10-K 64 Table of Contents • Gross profit decreased for the year ended December 31, 2024, primarily due to the decrease in revenue described above, $4.4 million of restructuring charges, and an increase of $7.4 million in amortization of acquired intangible assets, partially offset by lower inventory adjustments.
The increase in total revenue was primarily due to higher consumable sales, Vega instrument sales, and Fiscal 2025 Form 10-K 61 Table of Contents service and other revenue, partially offset by lower Revio instrument sales as compared to the prior year. • Gross profit increased for the year ended December 31, 2025 compared to the year ended December 31, 2024.
Removed
Our products and technology under development stem from two highly differentiated core technologies focused on accuracy, quality, and completeness, which include our HiFi long-read sequencing technology and our Sequencing by Binding (SBB) short-read sequencing technology.
Added
Recent Developments On January 30, 2026, we completed a disposition of assets to Buyer in accordance with the terms of the Asset Purchase Agreement, pursuant to which, among other matters, Buyer acquired certain intellectual property and other assets related to our short-read DNA sequencing technology and related clustering, sequencing reagent, and detection technologies.
Removed
Long-read sequencing has been applied to produce telomere-to-telomere genomes of humans, pangenome references, and has been recognized for its ability to provide more complete views of human variation . Our focus is on creating some of the world’s most advanced sequencing systems to provide our customers with the most complete and accurate view of genomes, transcriptomes, and epigenomes.
Added
As consideration for the Asset Sale, Buyer paid us $50.0 million in cash and assumed certain liabilities. In addition, Buyer granted us a non-exclusive license to certain intellectual property included in the purchased assets.
Removed
Fiscal 2024 Form 10-K 63 Table of Contents Strategic Objectives Though challenging, 2024 was a productive year for PacBio as we launched products, improved our financial flexibility, and made progress in reducing cash burn.
Added
In connection with the Asset Sale, Buyer will pay at our direction 4% of the net proceeds from the Purchase Price to the former equity holders of Apton related to the waiver of all remaining milestone obligations associated with our purchase of Apton in August 2023, which payment is expected in the first quarter of 2026.
Removed
Looking ahead to 2025, our main objectives are to grow revenue and expand gross margins through the following four activities: • Enabling the full-scale release of the Vega benchtop platform to broaden our market reach. We believe this platform broadens the long-read market opportunity. • Accelerating samples onto the Revio platform via SPRQ chemistry and application kits.
Added
As a result, we received approximately $48.1 million in net cash proceeds from the Asset Sale. Fiscal 2025 Form 10-K 60 Table of Contents Strategic Objectives Looking ahead to 2026, our main objectives are to grow revenue and expand gross margins through the following five activities.
Removed
The SPRQ chemistry enables the sub-$500 HiFi genome, improves methylation detection capabilities, and achieves a 75% reduction in DNA input requirements for human whole genome sequencing. These features can drive more samples onto HiFi sequencing than ever before. • Investing in future product launches to diversify our offerings.
Added
These initiatives are designed to improve the economics of HiFi sequencing, expand adoption across clinical and research markets, and drive durable growth across our platform portfolio. • Accelerate samples onto the Revio platform through SPRQ-Nx chemistry and application kits.
Removed
Additionally, we continue to develop kitted-solutions, like our Kinnex Full-length RNA kits and PureTarget, and enhance our on-market sequencers with products like SPRQ chemistry to drive more sequencing volume. • Progressing our clinical strategy to improve outcomes and create durability.
Added
SPRQ-Nx is designed to lower the cost of sequencing and improve sequencing efficiency, which we believe will support higher throughput, increased sample volumes, and broader adoption of HiFi sequencing in large-scale research studies and clinical applications. • Expand the capabilities of the Vega benchtop platform to broaden our market reach.
Removed
We believe the market opportunity for clinical sequencing is significant and could drive substantial revenue growth for the company. We plan to continue to pursue partner collaborations where the technologies being developed or applications being considered extend beyond whole-genome clinical sequencing.
Added
We plan to enable faster run times and enhanced user experience through software improvements, which are intended to support broader adoption and improve the overall economics of HiFi sequencing. • Progress our clinical strategy to improve outcomes and create durability.
Removed
While we do not expect Vega to meaningfully impact Revio sales, we are mindful that there may be some cases where potential customers take more time to assess our new offerings, which may prolong some sales cycles. We ended the year with cumulative shipments of 270 Revio systems.
Added
Revio is increasingly being adopted in laboratory-developed test ("LDT") and clinical research settings, supporting consolidation of multiple tests, addressing complex genetic challenges, and driving sustained utilization of HiFi sequencing. • Advance data-driven interpretation through scalable HiFi datasets and analytics.
Removed
During the year ended December 31, 2023 we recognized an increase of approximately $4.6 million of inventory adjustments primarily related to excess consumables inventory resulting from faster-than-expected decline in demand of Sequel II/IIe consumables due primarily to a faster than expected ramp on the Revio system.
Added
We are focused on leveraging the accuracy of HiFi sequencing and growing datasets to support advanced data analysis and AI-assisted interpretation approaches.
Removed
The decrease in cash includes approximately $50.2 million of payments made in conjunction with the convertible notes exchange transaction in November 2024. The median sales cycle for Revio instrument purchases continues to be elongated.
Added
Collaborative initiatives such as the HiFi Solves Global Consortium are designed to aggregate large, well-characterized HiFi datasets, which we believe can support improved understanding of complex genetic variation and disease biology while maintaining expert oversight. • Invest in future product launches to drive platform innovation.
Removed
We believe this has been caused by, among other reasons, the uncertainty surrounding the funding for new capital equipment, in particular, uncertainty in the United States related to NIH and academic funding; procurement delays; small-to-mid-size existing customers yet to increase their sample volumes to drive an upgrade to Revio; new customers, which have shown they have longer sales cycles compared to existing PacBio customers; and sample volumes materializing slower than expected for some potential Revio customers.
Added
The increase was primarily driven by higher consumable volumes, which drove a more favorable product mix.
Removed
We believe our consumables revenue was also impacted primarily by slower-than-expected ramp-up in sequencing by our small- to mid-sized customers, many of whom are new to PacBio; sample delays impacting sequencing volume at certain large customers; and some service providers in China operating at lower utilization as a result of the difficult funding environment.
Added
See Note 6. Restructuring in Part II, Item 8 of this Annual Report on Form 10-K for additional information about restructuring activities. These restructuring-related costs were partially offset by a $169.5 million decrease in impairment charges and a $17.9 million change in fair value of contingent consideration.
Added
We believe that our sales cycles for Revio instruments continues to be elongated due to, among other reasons, continued capital funding constraints in academic and research markets, procurement timing considerations, and longer adoption cycles among new customers, which have affected the timing of certain instrument orders.

Item 7. Management's Discussion & Analysis

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

70 edited+36 added−33 removed74 unchanged
Biggest changeComparison of the Years Ended December 31, 2024 and 2023 Years Ended December 31, (in thousands, except per share amounts) 2024 2023 $ Change % Change Revenue: Product revenue $ 136,149 $ 183,872 $ (47,723) (26 %) Service and other revenue 17,865 16,649 1,216 7 % Total revenue 154,014 200,521 (46,507) (23 %) Cost of Revenue: Cost of product revenue 92,284 127,568 (35,284) (28 %) Cost of service and other revenue 14,057 14,754 (697) (5 %) Amortization of acquired intangible assets 9,393 1,983 7,410 374 % Loss on purchase commitment 998 3,436 (2,438) (71 %) Total cost of revenue 116,732 147,741 (31,009) (21 %) Gross profit 37,282 52,780 (15,498) (29 %) Operating Expense: Research and development 134,922 187,170 (52,248) (28 %) Sales, general and administrative 175,017 169,818 5,199 3 % Impairment charges 184,500 — 184,500 — Merger-related expenses — 9,042 (9,042) (100) % Change in fair value of contingent consideration (850) 15,060 (15,910) (106 %) Amortization of acquired intangible assets 18,006 6,157 11,849 192 % Total operating expense 511,595 387,247 124,348 32 % Operating loss (474,313) (334,467) (139,846) 42 % Loss on extinguishment of debt — (2,033) 2,033 (100 %) Gain on debt restructuring 154,407 — 154,407 — Interest expense (13,412) (14,343) 931 (6 %) Other income, net 23,783 32,684 (8,901) (27 %) Loss before income taxes (309,535) (318,159) 8,624 (3 %) Income tax provision (benefit) 316 (11,424) 11,740 (103 %) Net loss $ (309,851) $ (306,735) $ (3,116) 1 % Fiscal 2024 Form 10-K 66 Table of Contents Revenue Total Revenue Total revenue decreased $46.5 million, or 23%, to $154.0 million for the year ended December 31, 2024, as compared to $200.5 million for the year ended December 31, 2023.
Biggest changeComparison of the Years Ended December 31, 2025 and 2024 Years Ended December 31, (In thousands, except per share amounts) 2025 2024 $ Change % Change Revenue: Product revenue $ 135,758 $ 136,149 $ (391) — % Service and other revenue 24,247 17,865 6,382 36 % Total revenue 160,005 154,014 5,991 4 % Cost of Revenue: Cost of product revenue 89,763 92,284 (2,521) (3 %) Cost of service and other revenue 15,390 14,057 1,333 9 % Amortization of acquired intangible assets 4,894 9,393 (4,499) (48 %) Loss on purchase commitment 4,178 998 3,180 319 % Total cost of revenue 114,225 116,732 (2,507) (2 %) Gross profit 45,780 37,282 8,498 23 % Operating Expense: Research and development 97,307 134,922 (37,615) (28 %) Sales, general and administrative 141,493 175,017 (33,524) (19 %) Impairment charges 15,000 184,500 (169,500) (92 %) Amortization of acquired intangible assets 364,541 18,006 346,535 1,925 % Change in fair value of contingent consideration (18,700) (850) (17,850) 2,100 % Total operating expense 599,641 511,595 88,046 17 % Operating loss (553,861) (474,313) (79,548) 17 % Gain on debt restructuring — 154,407 (154,407) (100 %) Interest expense (6,954) (13,412) 6,458 (48 %) Other income, net 14,757 23,783 (9,026) (38 %) Loss before income taxes (546,058) (309,535) (236,523) 76 % Income tax provision 318 316 2 1 % Net loss $ (546,376) $ (309,851) $ (236,525) 76 % Fiscal 2025 Form 10-K 63 Table of Contents Revenue Total Revenue Total revenue increased $6.0 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024.
Financing Activities Cash used in financing activities during the year ended December 31, 2024, was primarily due to payments made in conjunction with the convertible notes exchange of $50.2 million partially offset by proceeds of $7.7 million from the issuance of common stock through our equity compensation plans.
Cash used in financing activities during the year ended December 31, 2024, was primarily due to payments made in conjunction with the convertible notes exchange of $50.2 million partially offset by proceeds of $7.7 million from the issuance of common stock through our equity compensation plans.
They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts.
They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts.
We may enter into, or periodically modify, contracts with customers that include a combination of promised products and services, resulting in arrangements containing multiple performance obligations. We determine whether each product or service is distinct, in order to identify the performance obligations in the contract and allocate the contract transaction price among the distinct performance obligations.
We may enter into, or periodically modify, contracts with customers that include a combination of promised products and services, resulting in arrangements containing multiple performance obligations. We determine whether each product or service is distinct, in order to identify the performance obligations in the contract and allocate the contract transaction price among the separate performance obligations.
Revenues are recognized when control of the promised goods are transferred to our customers, or services are performed, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
Revenues are recognized when control of the promised goods is transferred to our customers, or services are performed, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
To the extent that such indemnification obligations apply to the lawsuits described in Legal Proceedings in Part I, Item 3 of this Annual Report on Form 10-K, any associated expenses incurred are included within the related accrued litigation expense amounts. No additional liability associated with such indemnification agreements has been recorded as of December 31, 2024.
To the extent that such indemnification obligations apply to the lawsuits described in Legal Proceedings in Part I, Item 3 of this Annual Report on Form 10-K, any associated expenses incurred are included within the related accrued litigation expense amounts. No additional liability associated with such indemnification agreements has been recorded as of December 31, 2025.
The 2029 Notes, the Exchange Shares, and shares of common stock issuable upon conversion of the 2029 Notes are subject to certain lock-up restrictions for a six-month period (the “Lock-Up Period”) beginning on the Closing Date of the Exchange Transaction; the lock-up restrictions will terminate immediately prior to the consummation of any change in control of the Company.
The 2029 Notes, the Exchange Shares, and shares of common stock issuable upon conversion of the 2029 Notes were subject to certain lock-up restrictions for a six-month period (the “Lock-Up Period”) beginning on the Closing Date of the Exchange Transaction; the lock-up restrictions will terminate immediately prior to the consummation of any change in control of the Company.
We determine the best estimate of standalone selling price using historical average selling prices combined with an assessment of current market conditions.
We determine the best estimate of standalone selling price primarily using historical average selling prices combined with an assessment of current market conditions.
Our future capital requirements and the adequacy of our available funds will depend on many factors, including: • our ability to successfully commercialize and develop products and solutions that address customer needs; • the pace of adoption of our products and our ability to obtain new customers in markets; • the progress of our research and development programs and our ability to initiate or expand research programs; Fiscal 2024 Form 10-K 72 Table of Contents • our ability to manage manufacturing and production costs, including purchase obligations, and litigation costs, including the costs involved in preparing, filing, prosecuting, defending and enforcing intellectual property rights; and • the extent to which we engage in collaborations with partners and acquire other businesses or technologies.
Our future capital requirements and the adequacy of our available funds will depend on many factors, including: • our ability to successfully commercialize and develop products and solutions that address customer needs; • the pace of adoption of our products and our ability to obtain new customers in markets; • the progress of our research and development programs and our ability to initiate or expand research programs; Fiscal 2025 Form 10-K 68 Table of Contents • our ability to manage manufacturing and production costs, including purchase obligations, and litigation costs, including the costs involved in preparing, filing, prosecuting, defending and enforcing intellectual property rights; and • the extent to which we engage in collaborations with partners and acquire other businesses or technologies.
Under the terms of these agreements, we may be obligated to pay royalties based on revenue from the sales of licensed products, or minimum royalties, whichever is greater, and license maintenance fees. The future license maintenance fees and minimum royalty payments under the license agreements are not deemed to be material. • Payments related to acquisitions.
Under the terms of these agreements, we may be obligated to pay royalties based on revenue from the sales of licensed products, or minimum royalties, whichever is greater, and license maintenance fees. The future license maintenance fees and minimum royalty payments under the license agreements are not deemed to be material.
If our estimates of the economic lives change, depreciation or amortization expense could be accelerated or extended. We capitalize in-process research and development ("IPR&D"), which is considered indefinite lived until the completion or abandonment of the associated research and development efforts.
If our estimates of the economic lives change, depreciation or amortization expense could be accelerated or extended. We capitalize IPR&D, which is considered indefinite lived until the completion or abandonment of the associated research and development efforts.
Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development agreements generally includes upfront and milestone payments. Revenue for these agreements is recognized when each distinct performance obligation is satisfied.
Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development agreements generally includes upfront and milestone payments. Revenue for these agreements is recognized when each separate performance obligation is satisfied.
If a contract provides the customer an option to acquire additional goods or services at a discount that exceeds the range of discounts that we typically give for that product or service for the same class of customer, or if the option provides the customer certain additional goods or services for free, the option may be considered a material right and, therefore, a performance obligation.
If a contract provides the customer an option to acquire additional goods or services at a discount that exceeds the range of discounts that we typically give for that product or service for the same class of customer, or if the option provides the customer certain additional goods or services for free, the option is considered a material right and, therefore, a performance obligation.
OFF-BALANCE SHEET ARRANGEMENTS As of December 31, 2024, we did not have any off-balance sheet arrangements. In the ordinary course of business, we enter into standard indemnification arrangements.
OFF-BALANCE SHEET ARRANGEMENTS As of December 31, 2025, we did not have any off-balance sheet arrangements. In the ordinary course of business, we enter into standard indemnification arrangements.
A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract.
A product or service is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2023 , filed with the Securities and Exchange Commission on February 28, 2024 , which is incorporated herein by reference, and is available free of charge on the SEC’s website at www.sec.gov and our corporate website (www.pacb.com).
Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2024 , filed with the Securities and Exchange Commission on March 17, 2025 , which is incorporated herein by reference, and is available free of charge on the SEC’s website at www.sec.gov and our corporate website (www.pacb.com).
Recent and expected working and other capital requirements, in addition to the above matters, include: • Our purchase orders and contractual obligations of approximately $57.6 million as of December 31, 2024, which consist of open purchase orders and contractual obligations in the ordinary course of business, including commitments with contract manufacturers and suppliers for which we have not received the goods or services.
Recent and expected working and other capital requirements, in addition to the above matters, include: • Our purchase orders and contractual obligations of approximately $71.3 million as of December 31, 2025, which consist of open purchase orders and contractual obligations in the ordinary course of business, including commitments with contract manufacturers and suppliers for which we have not received the goods or services.
Impairment charges could materially decrease our future results of operations and result in lower asset values on our balance sheet. Intangible Assets and Other Finite-Lived Assets — Impairment Assessment We capitalize finite-lived intangibles assets and generally amortize them on a straight-line basis over the estimated useful lives.
Impairment charges could materially decrease our future results of operations and result in lower asset values on our balance sheet. Intangible Assets and Other Finite-Lived Assets — Impairment Assessment We capitalize finite-lived intangible assets and generally amortize such assets on a straight-line basis over their estimated useful lives.
Fiscal 2024 Form 10-K 71 Table of Contents Additional Capital Requirements We believe that our existing cash, cash equivalents, and investments will be sufficient to fund our projected operating and capital requirements for at least the next 12 months from the date of filing of this Annual Report on Form 10-K for the year ended December 31, 2024.
Additional Capital Requirements We believe that our existing cash, cash equivalents, and investments will be sufficient to fund our projected operating and capital requirements for at least the next 12 months from the date of filing of this Annual Report on Form 10-K for the year ended December 31, 2025.
Fiscal 2024 Form 10-K 70 Table of Contents In November 2024, we entered into an exchange agreement with SBN, pursuant to which we agreed to exchange the remaining approximately $459.0 million in aggregate principal amount of 2028 Notes outstanding for (i) $200.0 million aggregate principal amount of the 2029 Notes, (ii) 20,451,570 shares of common stock (the “Exchange Shares”) and (iii) $50.0 million of cash.
In November 2024, we entered into an exchange agreement with SBN, pursuant to which we agreed to exchange the remaining approximately $459.0 million in aggregate principal amount of 2028 Notes outstanding for (i) $200.0 million aggregate principal amount of the 2029 Notes, (ii) 20,451,570 shares of common stock (the “Exchange Shares”) and (iii) $50.0 million of cash.
Convertible Senior Notes in Part II, Item 8 of this Annual Report on Form 10-K for further details.
See Note 5. Convertible Senior Notes in Part II, Item 8 of this Annual Report on Form 10-K for further details.
We approved and implemented certain efficiency and expense reduction initiatives during 2024. These expense reduction initiatives included workforce reductions, facilities downsizing and a refined pipeline of development programs. Cash, Cash Equivalents, and Investments As of December 31, 2024, we had $389.9 million in cash, cash equivalents, and investments, compared to $631.4 million at December 31, 2023.
We approved and implemented certain efficiency and expense reduction initiatives during 2025 and 2024. These expense reduction initiatives included workforce reductions, facilities downsizing and a refined pipeline of development programs. Cash, Cash Equivalents, and Investments As of December 31, 2025, we had $279.5 million in cash, cash equivalents, and investments, compared to $389.9 million at December 31, 2024.
If economic, financial, business, or other factors adversely affect our ability to fund our projected operating cash requirements, we may be required to obtain funding through traditional or alternative sources of financing. We cannot be certain that funds will be available on favorable terms, or at all.
If economic, financial, business, or other factors adversely affect our ability to fund our projected operating cash requirements, we may be required to obtain funding through traditional or alternative sources of financing. Raising additional funds may result in dilution to existing shareholders. We cannot be certain that funds will be available on favorable terms, or at all.
The key assumptions that we use in our Fiscal 2024 Form 10-K 78 Table of Contents cash flow model are the amount and timing of estimated future cash flows to be generated by the asset over an extended period of time and a rate of return that considers the relative risk of achieving the cash flows, the time value of money, and other factors that a willing market participant would consider.
The key assumptions that we use in our cash flow model are the amount and timing of estimated future cash flows to be generated by the asset over an extended period of time and a rate of return that considers the relative risk of achieving the cash flows, the time value of money, and other factors that a willing market participant would consider.
We accrue the cost of the assurance warranty when revenue of the instrument is recognized. Employee sales commissions are generally recorded as selling, general, and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. Inventories Inventories are stated at the lower of cost or net realizable value.
We accrue the cost of the assurance warranty when revenue of the instrument is recognized. Employee sales commissions are generally recorded as selling, general, and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less.
Fiscal 2024 Form 10-K 75 Table of Contents Certain of our agreements provide options to customers which can be exercised at a future date, such as the option to purchase our product at discounted prices, among others. In accounting for customer options, we determine whether an option is a material right and this may require us to exercise judgment.
Certain of our agreements provide options to customers which can be exercised at a future date, such as the option to purchase our product at discounted prices, among others. In accounting for customer options, we determine whether an option is a material right and this may require us to exercise judgment.
Convertible Senior Notes On February 9, 2021, we entered into an investment agreement with SB Northstar LP (“SBN”), a subsidiary of SoftBank Group Corp., relating to the issuance and sale to SBN of $900.0 million in aggregate principal amount of our 2028 Notes.
Fiscal 2025 Form 10-K 66 Table of Contents Convertible Senior Notes On February 9, 2021, we entered into an investment agreement with SB Northstar LP (“SBN”), a subsidiary of SoftBank Group Corp., relating to the issuance and sale to SBN of $900.0 million in aggregate principal amount of our 2028 Notes.
Any adjustments identified after the measurement period are recorded on our consolidated statements of operations and comprehensive loss. We acquired $55.0 million of IPR&D, and $52.3 million of goodwill in connection with the acquisition of Apton Biosystems, Inc. in the third quarter of 2023.
Any adjustments identified after the measurement period are recorded on our consolidated statements of operations and comprehensive loss. Fiscal 2025 Form 10-K 72 Table of Contents We acquired $55.0 million of IPR&D, and $52.3 million of goodwill in connection with the acquisition of Apton Biosystems, Inc. in the third quarter of 2023.
Changes in the fair value of contingent consideration subsequent to the acquisition date are recognized in operating expenses on our consolidated statements of operations and comprehensive loss. Fiscal 2024 Form 10-K 76 Table of Contents We typically use the discounted cash flow method to value our acquired intangible assets.
Changes in the fair value of contingent consideration subsequent to the acquisition date are recognized in operating expenses on our consolidated statements of operations and comprehensive loss. We typically use the discounted cash flow method to value our acquired intangible assets.
Determining net realizable value of inventories involves numerous judgements, including projecting future average selling prices, sales volumes, and costs to complete products in work in process inventories. We make inventory purchases and commitments to meet future shipment schedules based on forecasted demand for our products.
Cost includes depreciation, labor, material, and overhead costs, including product and process technology costs. Determining net realizable value of inventories involves judgements, including projecting future average selling prices, sales volumes, and costs to complete products in work in process inventories. We make inventory purchases and commitments to meet future shipment schedules based on forecasted demand for our products.
If the carrying amount of the IPR&D exceeds the fair value, we record an impairment loss based on the difference. We generally perform our impairment test using an income approach to determine the fair value of IPR&D. The income approach utilizes estimated discounted cash flows.
Otherwise, we proceed to compare the estimated fair value of the IPR&D with the carrying value. If the carrying amount of the IPR&D exceeds the fair value, we record an impairment loss based on the difference. We generally perform our impairment test using an income approach to determine the fair value of IPR&D.
We account for a contract with a customer when there is a legally enforceable contract between us and the customer, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable.
Fiscal 2025 Form 10-K 70 Table of Contents We account for a contract with a customer when there is a legally enforceable contract between us and the customer, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable.
In addition, the Letter Agreement restricts the ability of the Company and its subsidiaries from guaranteeing any indebtedness or incurring certain indebtedness outside of the ordinary course of business unless, in each case, the Company and its subsidiaries concurrently provide a guarantee of the Company’s obligations under the 2029 Notes. See Note 5 .
In addition, the Letter Agreement restricts the ability of the Company and its subsidiaries from guaranteeing any Fiscal 2025 Form 10-K 67 Table of Contents indebtedness or incurring certain indebtedness outside of the ordinary course of business unless, in each case, the Company and its subsidiaries concurrently provide a guarantee of the Company’s obligations under the 2029 Notes.
Fiscal 2024 Form 10-K 74 Table of Contents Revenue Recognition Our revenue is generated primarily from the sale of products and services. Product revenue primarily consists of sales of our instruments and related consumables; service and other revenue consist primarily of revenue earned from product maintenance agreements.
Revenue Recognition Our revenue is generated primarily from the sale of products and services. Product revenue primarily consists of sales of our instruments and related consumables; service and other revenue consist primarily of revenue earned from product maintenance agreements.
In order to estimate the fair values of identifiable intangible assets with finite lives and other finite-lived assets, we estimate the present value of future cash flows from those assets.
Fiscal 2025 Form 10-K 74 Table of Contents In order to estimate the fair values of identifiable intangible assets with finite lives and other finite-lived assets, we estimate the present value of future cash flows from those assets.
Although open purchase orders are considered enforceable and legally binding, the terms generally allow us the option to cancel, reschedule and adjust our requirements based on our business needs prior to the delivery of goods or performance of services. • As described in more detail in Note 7 - Commitments and Contingencies in Part II, Item 8 of this Annual Report on Form 10-K we signed a Supply Agreement, which was most recently amended in September 2024, with a supplier for the purchase of certain products over the period of 2023 through 2027.
Although open purchase orders are considered enforceable and legally binding, the terms generally allow us the option to cancel, reschedule and adjust our requirements based on our business needs prior to the delivery of goods or performance of services. • As described in Note 7 - Commitments and Contingencies in Part II, Item 8 of this Annual Report on Form 10-K, we have a Supply Agreement, that includes minimum annual purchase commitments for certain products through 2031.
Fiscal 2024 Form 10-K 73 Table of Contents Cash provided by investing activities for the year ended December 31, 2023, was due primarily to maturities of investments of $769.5 million partially offset by purchases of investments of $756.6 million and capital expenditures of $8.8 million.
Fiscal 2025 Form 10-K 69 Table of Contents Cash provided by investing activities for the year ended December 31, 2024, was due primarily to maturities of investments of $594.0 million partially offset by purchases of investments of $498.6 million and capital expenditures of $6.2 million.
We periodically modify existing contracts with customers, which could change the scope or the price of the contract, or both.
Modification of existing contracts with customers could change the scope or the price of the contract, or both.
For example, if our future operating results do not meet current forecasts or if we experience a sustained decline in our market capitalization that is determined to be indicative of a reduction in fair value of our reporting unit, or if there is a delay in development of the IPR&D or lower projected sales, we may be required to record future impairment charges for goodwill and intangible assets with indefinite lives.
For example, if our future operating results do not meet current forecasts or if we experience a sustained decline in our market capitalization that is determined to be indicative of a reduction in fair value of our reporting unit, we may be required to record future impairment charges for goodwill.
Cash Flow Summary Years Ended December 31, (in thousands) 2024 2023 Cash used in operating activities $ (206,058) $ (259,173) Cash provided by investing activities 124,004 4,604 Cash (used in) provided by financing activities (42,987) 108,891 Net decrease in cash, cash equivalents and restricted cash $ (125,041) $ (145,678) Operating Activities Our primary uses of cash in operating activities include the development of future products and product enhancements, manufacturing, and support functions related to our sales, general, and administrative activities.
Cash Flow Summary Years Ended December 31, (In thousands) 2025 2024 Cash used in operating activities $ (111,209) $ (206,058) Cash provided by investing activities 115,448 124,004 Cash provided by (used in) financing activities 3,428 (42,987) Net increase (decrease) in cash, cash equivalents and restricted cash $ 7,667 $ (125,041) Operating Activities Our primary uses of cash in operating activities include the development of future products and product enhancements, manufacturing, and support functions related to our sales, general, and administrative activities.
Financial Instruments for further discussion on valuation assumptions. RECENT ACCOUNTING PRONOUNCEMENTS Please see Note 1. Organization and Significant Accounting Policies , subsection titled “Recent Accounting Pronouncements”, in Part II, Item 8 of this Annual Report on Form 10-K for information regarding applicable recent accounting pronouncements. Fiscal 2024 Form 10-K 79 Table of Contents
Subsequent Events in Part II, Item 8 of this Annual Report on Form 10-K for further details. RECENT ACCOUNTING PRONOUNCEMENTS Please see Note 1. Organization and Significant Accounting Policies , subsection titled “Recent Accounting Pronouncements”, in Part II, Item 8 of this Annual Report on Form 10-K for information regarding applicable recent accounting pronouncements.
If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair value of the IPR&D is less than the carrying amount, then no additional assessment is deemed necessary. Otherwise, we proceed to compare the estimated fair value of the IPR&D with the carrying value.
The qualitative factors include, but are not limited to, macroeconomic conditions, industry-specific conditions, and company-specific conditions. If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair value of the IPR&D is less than the carrying amount, then no additional assessment is deemed necessary.
Research and Development Expense Research and development expense decreased by $52.2 million, or 28%, to $134.9 million for the year ended December 31, 2024, compared to $187.2 million for the year ended December 31, 2023.
Research and Development Expense Research and development expense decreased by $37.6 million, or 28%, for the year ended December 31, 2025, compared to the year ended December 31, 2024.
The impairment tests showed the carrying amounts of our goodwill and in-process research and development ("IPR&D") exceeded fair values. As a result, we recorded $184.5 million of impairment charges for the year ended December 31, 2024. See Note 4 . Balance Sheet Components in Part II, Item 8 of this Annual Report on Form 10-K for further details.
Balance Sheet Components in Part II, Item 8 of this Annual Report on Form 10-K for further details. We recorded impairment charges of $184.5 million during the year ended December 31, 2024 including $144.5 million of goodwill and $40.0 million of IPR&D as a result of quantitative interim impairment tests.
If a quantitative assessment is performed, the evaluation includes management estimates of cash flow projections based on internal future projections. Key assumptions include, but are not limited to, revenue projections, revenue growth rates, discount rates and other factors. Different assumptions from those made in our analysis could materially affect projected cash flows and the evaluation of assets for impairment.
The income approach utilizes estimated discounted cash flows. If a quantitative assessment is performed, the evaluation includes management estimates of cash flow projections based on internal future projections. Key assumptions include, but are not limited to, revenue projections, revenue growth rates, discount rates and other factors.
We expect to continue to invest in capital expenditures in fiscal 2025 to continue to support manufacturing and expansion of our business. • Amounts related to future lease payments for operating lease obligations at December 31, 2024, totaling $27.4 million, with $11.5 million expected to be paid within the next 12 months. See Note 12 .
We expect to continue to invest in capital expenditures in fiscal 2026 to continue to support manufacturing and expansion of our business. • Amounts related to future lease payments for operating lease obligations at December 31, 2025, totaling $98.2 million, with $4.0 million expected to be paid within the next 12 months. • Payments related to licensing and other arrangements, which are cancellable license agreements with third parties for certain patent rights and technology.
See Note 2. Business Acquisitions in Part II, Item 8 of this Annual Report on Form 10-K for further information.
Subsequent Events in Part II, Item 8 of this Annual Report on Form 10-K for further details.
Fiscal 2024 Form 10-K 77 Table of Contents Significant estimates and assumptions used in the income approach during the fourth quarter of 2024, included revenue growth expectations and a discount rate of 12.0%. The discount rate was based on the weighted average cost of capital, determined using market, peer company, industry data, and related risk factors.
Significant assumptions used in the income approach included revenue growth expectations and a selected discount rate of 12.0%. The discount rate was based on the weighted average cost of capital, determined using market, industry data, and related risk factors. The assumptions used were inherently subject to uncertainty.
While we expect to continue our investment in research and development in 2025, including enhancements of our existing products, and continued development of other new technology and products, we expect research and development expenses to decline in 2025 as compared to the year ended December 31, 2024 due to recent product transitions. • Cash outflows for capital expenditures of $6.2 million in 2024 and $8.8 million in 2023.
We expect to continue our investment in research and development in 2026, including enhancements of our existing products, and continued development of other new technology and products. • Cash outflows for capital expenditures of $2.7 million in 2025 and $6.2 million in 2024.
Events that would indicate impairment and trigger an interim impairment test include, but are not limited to, unexpected adverse business conditions, weak demand for a specific product line or business, economic factors, shifting focus to certain lines of business, unanticipated technological changes or competitive activities, loss of key personnel, changes in business strategy and acts by governments or courts.
Events that could indicate impairment and trigger an interim impairment test include, but are not limited to, adverse changes in business or economic conditions, lower-than-expected performance of a product line or business, changes in strategic direction, unanticipated technological or competitive developments, loss of key personnel, and actions by governments or courts.
Investing Activities Our investing activities consist primarily of purchases, sales and maturities of investments as well as capital expenditures. Cash provided by investing activities for the year ended December 31, 2024, was due primarily to maturities of investments of $594.0 million partially offset by purchases of investments of $498.6 million and capital expenditures of $6.2 million.
Cash provided by investing activities for the year ended December 31, 2025, was due primarily to maturities of investments of $340.1 million partially offset by purchases of investments of $216.9 million, $5.0 million in purchases of intangible assets, and capital expenditures of $2.7 million.
We may elect to bypass the qualitative assessment in a period and proceed to perform the quantitative impairment test. There is substantial risk inherent in forecasting revenues and spend associated with research and development, including assumptions around the timing and level of resources and investment to be made.
There is substantial risk inherent in forecasting revenues and spend associated with research and development, including assumptions around the timing and level of resources and investment to be made. We recognized a $40.0 million impairment charge during the year ended December 31, 2024 as a result of a quantitative interim impairment test.
Cost is determined using the first-in, first-out (“FIFO”) method. Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess or obsolete balances. Cost includes depreciation, labor, material, and overhead costs, including product and process technology costs.
Fiscal 2025 Form 10-K 71 Table of Contents Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (“FIFO”) method. Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess or obsolete balances.
Research and development expense included share-based compensation of $19.2 million and $22.4 million during the years ended December 31, 2024 and 2023, respectively. Sales, General, and Administrative Expense Sales, general and administrative expense increased by $5.2 million, or 3%, to $175.0 million for the year ended December 31, 2024, compared to $169.8 million for the year ended December 31, 2023.
We recorded $2.8 million of restructuring-related charges during the year ended December 31, 2025 compared to $5.9 million for the year ended December 31, 2024. Research and development expense included share-based compensation of $11.2 million and $19.2 million during the years ended December 31, 2025 and 2024, respectively.
Sales, general, and administrative expense included share-based compensation expenses of $46.2 million and $44.3 million during the years ended December 31, 2024 and 2023, respectively.
We recorded $6.1 million of restructuring-related charges during the year ended December 31, 2025 compared to $14.9 million for the year ended December 31, 2024. Sales, general, and administrative expense included share-based compensation expenses of $26.6 million and $46.2 million during the years ended December 31, 2025 and 2024, respectively.
A decrease of one year to the obsolescence factor used in our analysis would have resulted in additional IPR&D impairment of approximately $5 million. See Note 4 . Balance Sheet Components in Part II, Item 8 of this Annual Report on Form 10-K for further information. Assumptions and estimates about future values are complex and often subjective.
Balance Sheet Components in Part II, Item 8 of this Annual Report on Form 10-K for further information. Assumptions and estimates about future values are complex and often subjective.
Gross margins may also be affected by product mix, manufacturing efficiencies, warranty cost improvements, average selling price fluctuations, future product launches, changes to inventory reserves, and costs of raw materials.
Restructuring in Part II, Item 8 of this Annual Report on Form 10-K for additional information about restructuring activities. Gross margins may be affected by product mix, manufacturing efficiencies, changes in warranty costs, average selling price fluctuations, future product launches, changes to inventory reserves, costs of raw materials and tariffs.
Cash provided by financing activities during the year ended December 31, 2023, resulted from net proceeds from issuance of common stock under equity offerings of $189.2 million, proceeds of $15.3 million from the issuance of common stock through our equity compensation plans, partially offset by $86.4 million due to the payment of contingent consideration, $7.4 million due to the payment of debt issuance costs, and $1.8 million due to the payment of notes payable.
Financing Activities Cash provided by financing activities during the year ended December 31, 2025 resulted from $3.4 million of proceeds from the issuance of common stock through our equity compensation plans.
Fiscal 2024 Form 10-K 67 Table of Contents Cost of Revenue, Gross Profit, and Gross Margin Cost of product revenue decreased $35.3 million, or 28%, for the year ended December 31, 2024, compared to the year ended December 31, 2023 primarily driven by the decrease in revenue described above and lower inventory adjustments.
Fiscal 2025 Form 10-K 64 Table of Contents Cost of Revenue and Gross Profit Total cost of revenue decreased $2.5 million, or 2%, during the year ended December 31, 2025, compared to the year ended December 31, 2024 primarily due to more favorable product mix driven by higher consumable sales and a decrease in amortization of acquired intangible assets.
Cost of revenue included amortization attributable to acquired intangible assets of $9.4 million and $2.0 million that are related to sales generating activities during the years ended December 31, 2024 and 2023, respectively. Cost of revenue included share-based compensation expense of $5.7 million and $5.4 million during the years ended December 31, 2024 and 2023, respectively.
Total cost of revenue included share-based compensation expense of $3.8 million and $5.7 million during the years ended December 31, 2025 and 2024, respectively.
Instrument Revenue Instrument revenue decreased $54.7 million, or 45%, to $65.8 million for the year ended December 31, 2024, as compared to $120.5 million for the year ended December 31, 2023, primarily due to the sale of 97 Revio systems during the year ended December 31, 2024 compared to 173 Revio systems during the year ended December 31, 2023.
Instrument Revenue Instrument revenue decreased for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to a lower number of Revio systems sold—61 units during the year ended December 31, 2025 compared to 97 Revio systems during the year ended December 31, 2024.
The decrease was primarily attributable to $206.1 million cash used in operating activities during the year ended December 31, 2024 and an additional $50.2 million of payments made in conjunction with the convertible notes exchange transaction in November 2024.
The decrease was primarily attributable to $111.2 million cash used in operating activities during the year ended December 31, 2025.
Cash used in operating activities for the year ended December 31, 2023, of $259.2 million was due primarily to a $306.7 million net loss that was partially offset by non-cash items such as share-based compensation of $72.1 million, a change in the estimated fair value of contingent consideration of $15.1 million, depreciation of $11.5 million, inventory provision of $10.6 million, amortization of intangible assets of $8.3 million, and amortization of right-of-use assets of $6.8 million, offset by accretion of discount and amortization of premium on marketable securities, net of $12.8 million, and deferred income taxes of $11.4 million.
Cash used in operating activities for the year ended December 31, 2025, of $111.2 million was due primarily to a $546.4 million net loss that included non-cash items such as impairment charges of $15.0 million, share-based compensation of $41.7 million, amortization of intangible assets of $369.4 million, depreciation of $13.0 million, amortization of right-of-use assets of $4.0 million, and $4.4 million from changes in net operating assets and liabilities primarily driven by a decrease in prepaid expenses and other assets as well as increases in accrued expenses and accounts payable partially offset by increases in accounts receivable and inventory.
These decreases were partially offset by restructuring charges in cost of revenue of $4.4 million, including $3.6 million of charges for excess inventory due to a decrease in internal demand relating to the expense reduction initiatives during the year ended December 31, 2024.
These decreases were partially offset by $8.1 million of excess inventory charges resulting from reduced external demand and $3.9 million of estimated losses on purchase commitments associated with anticipated excess inventory in connection with the Company’s expense reduction and strategic initiatives. Excess inventory charges were $3.6 million for the year ended December 31, 2024.
During the IPR&D impairment review, we assess qualitative factors to determine whether it is more likely than not that the fair value of the IPR&D is less than the carrying amount. The qualitative factors include, but are not limited to, macroeconomic conditions, industry-specific conditions, and company-specific conditions.
Balance Sheet Components in Part II, Item 8 of this Annual Report on Form 10-K for further information. Fiscal 2025 Form 10-K 73 Table of Contents During the IPR&D impairment review, we assess qualitative factors to determine whether it is more likely than not that the fair value of the IPR&D is less than the carrying amount.
The decrease was primarily driven by a decrease in personnel and related expenses due to restructuring activities, as well as the transition of products from development to commercialization. We incurred restructuring charges of $5.9 million, primarily related to employee separation benefits during the year ended December 31, 2024.
The decrease was primarily driven by a decrease in personnel and related expenses, including share-based compensation expense, lower product development costs due to the transition of launched products from development to commercialization, and lower restructuring-related charges, partially offset by an increase in future product development activities.
Interest Expense Interest expense for the year ended December 31, 2024 was $13.4 million compared to $14.3 million for the year ended December 31, 2023 and was primarily comprised of interest on the Notes. Other Income, Net The decrease in other income, net was primarily driven by lower investment income due to lower cash and investment balances.
Convertible Senior Notes in Part II, Item 8 of this Annual Report on Form 10-K for additional information. Other Income, Net The decrease in other income, net was primarily driven by lower investment income due to lower cash and investment balances.
Significant estimates and assumptions used in the income approach during the fourth quarter of 2024, included revenue growth assumptions, a discount rate of 14.0%, and an obsolescence factor of 13 years.
The impairment charge is included on our consolidated statements of operations and comprehensive loss for the year ended December 31, 2025. Significant estimates and assumptions used in the income approach include timing of future cash flows, revenue growth assumptions, a selected discount rate of 14.0%, and a selected obsolescence factor of 11 years.
The assessed fair value was deemed reasonable based on a market capitalization reconciliation. See Note 4. Balance Sheet Components in Part II, Item 8 of this Annual Report on Form 10-K for further information.
See N ote 2. Business Acquisitions in Part II, Item 8 of this Annual Report on Form 10-K for further information. We estimate the fair value of the contingent consideration liability based on the simulated revenue of the Company through the five-year anniversary of the closing date of the acquisition.
The increase was primarily driven by restructuring charges of $14.9 million, primarily related to employee separation benefits and lease-related costs during the year ended December 31, 2024, partially offset by a decrease in personnel expenses. We expect to incur an additional $0.9 million of remaining estimated restructuring costs through 2025 relating to the actions taken in 2024.
Sales, General, and Administrative Expense Sales, general and administrative expense decreased by $33.5 million, or 19%, during the year ended December 31, 2025, compared to the year ended December 31, 2024. The decrease was primarily due to a decrease in personnel and related expenses, including share-based compensation expense, and lower restructuring-related charges.
Removed
The decrease in product revenue resulted primarily from a decrease of $54.7 million in instrument revenue, partially offset by an increase of approximately $6.9 million in consumable revenue. Service and other revenue increased approximately $1.3 million to $17.9 million for the year ended December 31, 2024 as compared to $16.6 million for the year ended December 31, 2023.
Added
Product revenue decreased slightly compared to prior year. Instrument revenue decreased $12.0 million, or 18% and consumables revenue increased $11.6 million, or 16%. Service and other revenue increased $6.4 million, or 36%, primarily driven by an increase in Revio service contracts.
Removed
Consumables Revenue Consumables revenue increased approximately $6.9 million, or 11%, to $70.3 million for the year ended December 31, 2024, as compared to $63.4 million for the year ended December 31, 2023.
Added
Consumables Revenue The increase in consumables revenue for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily driven by higher Revio consumables sales, reflecting the continued expansion of the Revio instrument installed base.
Removed
The increase in consumable sales was primarily due to higher Revio consumables and library preparation sales attributable to the growth in the Revio instrument installed base, partially offset by a decline in Sequel II and IIe consumables as customers transition to Revio. We expect Revio consumable sales to increase as the installed base grows.
Added
Looking ahead, we expect consumables revenue to increase as we execute against our strategic objectives and expand utilization of our sequencing platforms. This growth is expected to be driven by a growing installed base of Revio and Vega instruments, enhancing platform economics that support higher throughput, and broader adoption across research and clinical research applications.
Removed
While we expect to see a decline in Sequel II and IIe consumable sales resulting from the product transition, there is uncertainty as to the rate at which these sales will decline.
Added
In addition, continued investments in chemistry, application kits, and workflow enhancements are intended to expand addressable applications and increase consumables usage per instrument over time.
Removed
During the year ended December 31, 2023, we recognized an increase of approximately $4.6 million of inventory adjustments primarily related to excess consumables inventory resulting from faster-than-expected decline in demand of Sequel II/IIe consumables due primarily to a faster than expected ramp on the Revio system.
Added
This decline primarily reflects variability in customer purchasing behavior resulting from uncertainty surrounding the funding for new capital equipment, particularly among academic and research institutions. The decrease was partially offset by sales of Vega systems, with 140 units sold during the year ended December 31, 2025 following its commercial launch in the fourth quarter of 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA hypothetical 100 basis-point (one percentage point) increase or decrease in interest rates compared to rates on December 31, 2024 would have affected the fair value of our investment portfolio by approximately $2.1 million. The carrying value of the 2029 Notes were recorded at the undiscounted cash flow amount on our consolidated balance sheets.
Biggest changeA hypothetical 100 basis-point (one percentage point) increase or decrease in interest rates compared to rates on December 31, 2025 would have affected the fair value of our investment portfolio by approximately $1.5 million. The carrying value of the 2029 Notes were recorded at the undiscounted cash flow amount on our consolidated balance sheets.
Our international operations are subject to risks typical of international operations, including, but not limited to, differing economic conditions, changes in political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate volatility. Fiscal 2024 Form 10-K 80 Table of Contents
Our international operations are subject to risks typical of international operations, including, but not limited to, differing economic conditions, changes in political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate volatility. Fiscal 2025 Form 10-K 76 Table of Contents
Removed
Our foreign currency exposure is primarily concentrated in the Euro. A 10% strengthening of the U.S. dollar exchange rate against all currencies with which we have exposure, after taking into account offsetting positions at December 31, 2024 would have resulted in a $1.8 million decrease in the carrying amounts of those net assets.
Added
Our foreign currency exposure is primarily concentrated in the Euro. While we are exposed to market risks related to changes in foreign currency exchange rates, we do not believe a hypothetical 10% change in exchange rates would have a material impact on our financial position or results of operations.

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