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

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

+620 added−674 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-16)

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

620 paragraphs added · 674 removed · 489 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

129 edited+17 added−37 removed155 unchanged
Biggest changeUnderscoring the reach of our products, these publications cover a wide range of research and applied areas from cell biology to genetic health to neuroscience with the top three areas of publication, according to our estimates, being oncology, immunology and developmental biology. 19 Table of Contents Recent publications describe, for example, the use of our products to: • Understand the heterogeneity driving treatment resistance in pancreatic ductal adenocarcinoma; • Characterize early kinetics in tumor-infiltrating and circulating immune cells in oral cancer patients treated with immune checkpoint blockade therapy in a clinical trial; • Investigate why human ovarian cancer is poorly responsive to immunotherapy; and • Create a cell atlas of the adult human cerebrovasculature by profiling single cell transcriptomes of brain cells to reveal the geographical organization of molecularly defined cerebrovascular cell types in the human brain by using spatial transcriptomics.
Biggest changeUnderscoring the reach of our products, these publications cover a wide range of research and applied areas from cell biology to genetic health to neuroscience with the top three areas of publication, according to our estimates, being oncology, immunology and developmental biology.
Within the instrument, a brightfield image is captured to provide spatial orientation for data analysis, followed by permeabilization of the tissue and transfer of transcriptomic probes to the Visium gene expression slide. The remaining steps, starting with probe extension, follow the standard Visium for FFPE workflow outside of the instrument. Data is visualized using our software tools.
Within the instrument, a brightfield image is captured to provide spatial orientation for data analysis, followed by permeabilization of the tissue and transfer of transcriptomic probes to the Visium Spatial Gene Expression slide. The remaining steps, starting with probe extension, follow the standard Visium for FFPE workflow outside of the instrument. Data is visualized using our software tools.
We have a scalable, multi-channel commercial infrastructure including a direct sales force in North America and certain regions of Europe and distribution partners in Asia, certain regions of Europe, Oceania, South America, the Middle East and Africa that drives our customer growth. This is supplemented with an extensive and highly specialized customer service infrastructure with PhD-level specialists.
We have a scalable, multi-channel commercial infrastructure including a direct sales force in North America and certain regions of Europe and distribution partners in Asia, certain regions of Europe, Oceania, Central America, South America, the Middle East and Africa that drives our customer growth. This is supplemented with an extensive and highly specialized customer service infrastructure with PhD-level specialists.
Our Chromium Connect product is an automated Chromium instrument that incorporates liquid handling robotics to automate our workflow and can be utilized with our Single Cell Gene Expression and Single Cell Immune Profiling solutions. 8 Table of Contents The following are key advantages of our Chromium platform: • High cell throughput : How many cells can be measured at once?
Our Chromium Connect product is an automated Chromium instrument that incorporates liquid handling robotics to automate our workflow and can be utilized with our Single Cell Gene Expression, Single Cell Gene Expression Flex and Single Cell Immune Profiling solutions. 8 Table of Contents The following are key advantages of our Chromium platform: • High cell throughput : How many cells can be measured at once?
We increase awareness of our products among our target customers through direct sales calls, trade shows, seminars, academic conferences, web presence, social media and other forms of internet marketing. We supplement these traditional marketing efforts by fostering an active online community of users of our products consisting of communities, forums and blogs with internally generated and user-generated content.
We increase awareness of our products among our target customers through direct sales calls, trade shows, seminars, academic conferences, web presence, social media and other forms of marketing. We supplement these traditional marketing efforts by fostering an active online community of users of our products consisting of communities, forums and blogs with internally generated and user-generated content.
We will target new customers in addition to expanding the number of 10x instruments within institutions that have already recognized the significant value of our technology. A portion of our current laboratory customers do not yet own a 10x instrument, but rather gain access to one of our instruments through an adjacent lab or core facility within the institution.
We will target new customers in addition to expanding the number of 10x instruments within institutions that have already recognized the significant value of our technology. A portion of our current laboratory customers do not own a 10x instrument, but rather gain access to one of our instruments through an adjacent lab or core facility within the institution.
Over the years, we have developed, acquired or in-licensed a core set of technologies and associated intellectual property rights across a broad range of emerging areas within biology and life sciences. The ability to identify these core technologies and capabilities has complemented our internal product development process and enhanced our growing suite of products and solutions.
Over the years, we have developed, acquired or in-licensed technologies and associated intellectual property rights across a broad range of emerging areas within biology and life sciences. The ability to identify these core technologies and capabilities has complemented our internal product development process and enhanced our growing suite of products and solutions.
The EU IVDR defines an IVD as “any medical device which is a reagent, reagent product, calibrator, control material, kit, instrument, apparatus, piece of equipment, software or system, whether used alone or in combination, intended by the manufacturer to be used in vitro for the examination of specimens, including blood and tissue donations, derived from the human body, solely or principally for the purpose of providing information on one or more of the following: (a) concerning a physiological or pathological process or state; (b) concerning congenital physical or mental impairments; (c) concerning the predisposition to a medical condition or a disease; (d) to determine the safety and compatibility with potential recipients; (e) to predict treatment response or reactions; (f) to define or monitor therapeutic measures.” National competent authorities of the EU member states enforce compliance with medical devices (including IVDs) requirements.
The EU IVDR defines an IVD as “any medical device which is a reagent, reagent product, calibrator, control material, kit, instrument, apparatus, piece of equipment, software or system, whether used alone or in combination, intended by the manufacturer to be used in vitro for the examination of specimens, including blood and tissue donations, derived from the human 23 Table of Contents body, solely or principally for the purpose of providing information on one or more of the following: (a) concerning a physiological or pathological process or state; (b) concerning congenital physical or mental impairments; (c) concerning the predisposition to a medical condition or a disease; (d) to determine the safety and compatibility with potential recipients; (e) to predict treatment response or reactions; (f) to define or monitor therapeutic measures.” National competent authorities of the EU member states enforce compliance with medical devices (including IVDs) requirements.
After probe hybridization, two standard glass slides and a two capture area Visium gene expression slide are placed in the CytAssist instrument so that the tissue sections on the standard slides can be aligned on top of the two Visium capture areas.
After probe hybridization, two standard glass slides and a two capture area Visium Spatial Gene Expression slide are placed in the CytAssist instrument so that the tissue sections on the standard slides can be aligned on top of the two Visium capture areas.
Other competitors are in the process of developing novel technologies for the life sciences market which may lead to products that rival or replace our products. We expect new competitors to emerge and the intensity of competition to increase.
Other competitors are in the process of developing novel technologies for the life sciences market which may lead to products that rival or replace our products. We expect new competitors to continue to emerge and the intensity of competition to continue to increase.
Consequently, products labeled as RUO are essentially not subject to compliance with the EU IVDR requirements such as conformity with general and safety requirements laid down in the EU IVDR. Depending on the products in question, other regulations may be applicable to the RUO products.
Consequently, products labeled as RUO are essentially not subject to compliance with the EU IVDR requirements such as conformity with general, safety and performance requirements laid down in the EU IVDR. Depending on the products in question, other regulations may be applicable to the RUO products.
These cells utilize the basic building blocks of DNA, RNA and protein, configured in cell-specific ways. DNA, the hereditary material of living organisms, is the foundation for a series of biological processes that form the basis for biology and how cells function. DNA is transcribed into messenger RNA (“mRNA”) in a process referred to as transcription or, alternatively, gene expression.
These cells utilize the basic building blocks of DNA, RNA and protein, configured in cell-specific ways. DNA, the hereditary material of living organisms, is the foundation for a series of biological processes that form the basis for biology and how cells function. DNA is transcribed into messenger RNA (mRNA) in a process referred to as transcription or, alternatively, gene expression.
Because we provide solutions to answer a broad diversity of biological questions, we view much of this total market as ultimately accessible to us. Areas in which our current solutions offer alternative or complementary approaches to existing tools represented a total opportunity of approximately $16 billion of the more than $67 billion global life sciences research tools market in 2021.
Because we provide solutions to answer a broad diversity of biological questions, we view much of this total market as ultimately accessible to us. Areas in which our current solutions offer alternative or complementary approaches to existing tools represented a total opportunity of approximately $16 billion of the more than $67 billion annual global life sciences research tools market.
Some of these limitations are: • Average, or “bulk,” measurements obscure underlying differences between different biological units, such as individual cells; • Low throughput prevents requisite sampling of the underlying complexity—for example, when only a few hundred cells can be evaluated at a time; • Limited number of biological analytes are interrogated, giving a myopic view of only a few biological processes; • Limited ability for multi-omic interrogation; • Inefficient use of sample to generate a signal of sufficient strength to analyze the biological molecules of interest; and • Inadequate bioinformatics and software tools.
Some of these limitations are: • Average, or “bulk,” measurements obscure underlying differences between different biological units, such as individual cells; • Low throughput prevents requisite sampling of the underlying complexity—for example, when only a few hundred cells can be evaluated at a time; • Limited number of biological analytes are interrogated, giving a myopic view of only a few biological processes; • Limited ability for multiomic interrogation; • Inefficient use of sample to generate a signal of sufficient strength to analyze the biological molecules of interest; and • Inadequate bioinformatics and software tools.
While our Chromium Single Cell Gene Expression solution answers the “what” of what makes two cells different from each other, our Chromium Single Cell ATAC solution answers the “how.” These two products are highly complementary and can be used as a powerful combination to understand both the cause and effect of gene regulation.
While our Chromium Single Cell Gene Expression solution answers the “what” of what makes two cells different from each other, our Chromium Single Cell ATAC solution answers the “how.” These two products are highly complementary and can be used as a powerful combination to analyze both the cause and effect of gene regulation.
The Visium CytAssist is a compact, benchtop instrument that enables spatial profiling insights with broadest sample access, streamlined workflow logistics allowing the use of pre-sectioned tissues and pre-stained samples with the Visium workflow in both FFPE and fresh frozen samples.
The Visium CytAssist is a compact, benchtop instrument that enables spatial profiling insights with broad sample access and streamlined workflow logistics allowing the use of pre-sectioned tissues and pre-stained samples with the Visium workflow in both FFPE and fresh frozen samples.
In the Visium product workflow, a tissue sample is placed onto the array and reagents are added by the user to create barcoded molecules from the array probes and the biological material in the tissues. This barcoded material encodes the spatial information that was contained in the probes.
In this workflow, a tissue sample is placed onto the array and reagents are added by the user to create barcoded molecules from the array probes and the biological material in the tissues. This barcoded material encodes the spatial information that was contained in the probes.
Due to the pricing of our instruments and consumables, the buying decision is typically made by the principal investigator rather than by committee or department chair, which we believe simplifies the purchasing decision and has helped accelerate adoption of our products.
Due to the pricing of our instruments and consumables, the buying decision is often made by the principal investigator rather than by committee or department chair, which we believe simplifies the purchasing decision and has helped accelerate adoption of our products.
Our Single Cell Multiome ATAC+Gene Expression solution is similar in workflow to our Single Cell Gene Expression and Single Cell ATAC products on the Chromium platform. In the workflow, users treat cell nuclei with transposase enzyme and then use our Chromium instrument to encapsulate these nuclei in GEMs.
Our Single Cell Multiome ATAC+Gene Expression solution is similar in workflow to our Single Cell Gene Expression and Single Cell ATAC products on the Chromium platform. In the workflow, users treat cell nuclei with transposase enzyme and then use a 10x Chromium instrument to encapsulate these nuclei in GEMs.
We obtain some components of our consumables from third-party suppliers. While some of these components are sourced from a single supplier, we have qualified second sources for some, but not all, of our critical reagents, enzymes and oligonucleotides.
We obtain some components of our instruments and consumables from third-party suppliers. While some of these components are sourced from a single supplier, we have qualified second sources for some, but not all, of our components including critical reagents, enzymes and oligonucleotides.
The tagged sequences can be sequenced to infer genomic regions of increased chromatin accessibility as well as map regions that are bound by transcription factor proteins responsible for regulating gene expression. ATAC–seq was pioneered by researchers at Stanford University and intellectual property rights directed to ATAC-seq are exclusively licensed to us.
The tagged sequences can be sequenced to infer genomic regions of increased chromatin accessibility as well as map regions that are bound by transcription factor proteins responsible for regulating gene expression. ATAC–seq was pioneered by researchers at Stanford University and intellectual 12 Table of Contents property rights directed to ATAC-seq are exclusively licensed to us.
Our Chromium Nuclei Isolation kit, specifically designed for use with our single cell assays, streamlines nuclei isolation workflows, ensuring reliable assay performance for gene expression or epigenetic studies with little to no optimization for most tissues. 13 Table of Contents Our Visium platform Our Visium platform enables researchers to understand the spatial positions of biological analytes within tissues at high resolution.
Our Chromium Nuclei Isolation kit, specifically designed for use with our single cell assays, streamlines nuclei isolation workflows, ensuring reliable assay performance for gene expression or epigenetic studies with little to no optimization for most tissues. Our Visium platform Our Visium platform enables researchers to understand the spatial positions of biological analytes within tissues at high resolution.
Our Visium platform allows researchers to combine spatially resolved whole transcriptome measurements across tissue sections with a high-resolution image. Thousands of unique, arrayed barcodes that represent a spatial location allow for analytes to be captured from tissue, spatially barcoded and then mapped back to their original tissue location after sequencing.
Our Visium platform allows researchers to combine spatially resolved whole transcriptome measurements across tissue sections with a high-resolution image. Up to millions of unique, arrayed barcodes that represent a spatial location allow for analytes to be captured from tissue, spatially barcoded and then mapped back to their original tissue location after sequencing.
In an independent study of mouse and human amyotrophic lateral sclerosis samples, researchers were able to observe changes in RNA expression over the disease course, while preserving the understanding of those changes in the spatial context. This allowed them to visualize the key changes that occur in brain regions before and during neuronal degeneration.
In an 14 Table of Contents independent study of mouse and human amyotrophic lateral sclerosis samples, researchers were able to observe changes in RNA expression over the disease course, while preserving the understanding of those changes in the spatial context. This allowed them to visualize the key changes that occur in brain regions before and during neuronal degeneration.
Customers are able to easily transfer data from the instrument and perform visualization and further analysis with 10x-provided software or other tools of their choice. With the launch of our Xenium platform in 2022, we introduced Xenium Explorer, an easy-to-use desktop software tool for interactive exploration and data analysis.
Customers are able to easily transfer data from the instrument and perform visualization and further analysis with 10x-provided software or other tools of their choice. 16 Table of Contents With the launch of our Xenium platform in 2022, we introduced Xenium Explorer, an easy-to-use desktop software tool for interactive exploration and data analysis.
Our intellectual property portfolio includes important patents and patent applications directed to single cell analysis, epigenomics, spatial analysis, in situ analysis and multi-omics. Our rigorous product development processes and scalable infrastructure. We have implemented a rigorous and systematic product development process by which our vision can be efficiently translated into commercial products.
Our intellectual property portfolio includes important patents and patent applications directed to single cell analysis, epigenomics, spatial analysis, in situ analysis and multiomics. Our rigorous product development processes and scalable infrastructure. We have implemented a rigorous and systematic product development process by which our vision can be efficiently translated into commercial products.
We believe that the capability to understand immune receptor-antigen interactions at a high-throughput single cell level is 11 Table of Contents tremendously valuable for elucidating the rules of immune cell targeting and can be used to understand disease and identify leads for immunotherapies and to assist researchers in constructing an immune map of receptor-antigen targeting rules.
We believe that the capability to understand immune receptor-antigen interactions at a high-throughput single cell level is tremendously valuable for elucidating the rules of immune cell targeting and can be used to understand disease and identify leads for immunotherapies and to assist researchers in constructing an immune map of receptor-antigen targeting rules.
These customers are substantial and easily accessible and therefore represent an opportunity for future instrument sales. We also intend to expand our existing geographic reach, both directly and through distributors. Strengthen use and adoption of our consumables . Our instruments are designed to be used exclusively with our consumables.
These customers are substantial and easily accessible and therefore represent an 19 Table of Contents opportunity for future instrument sales. We also intend to expand our existing geographic reach, both directly and through distributors. Strengthen use and adoption of our consumables . Our instruments are designed to be used exclusively with our consumables.
The EU IVDR establishes a modernized and more robust EU legislative framework, with the aim of ensuring better protection of public health and patient safety. Unlike the EU IVDD, the EU IVDR is directly 23 Table of Contents applicable in all EU member states without the need for member states to implement into national law.
The EU IVDR establishes a modernized and more robust EU legislative framework, with the aim of ensuring better protection of public health and patient safety. Unlike the EU IVDD, the EU IVDR is directly applicable in all EU member states without the need for member states to implement into national law.
Our technologies underlie features and performance that differentiate our products from the competition. Further, many of these technological elements can be utilized across multiple products, enabling us to leverage our existing infrastructure and investment when building future products, increasing the speed of product development and product performance.
Our technologies underlie features and performance that differentiate our products from the competition. Further, many of these technological elements can be utilized 18 Table of Contents across multiple products, enabling us to leverage our existing infrastructure and investment when building future products, increasing the speed of product development and product performance.
These improvements may provide increased sensitivity to capture greater amounts of signal from biological analytes, allow broader types of biological samples to be interrogated with our solutions and increase the amount of biological information that can be obtained using our software. Develop new solutions for our Chromium platform .
These improvements may provide increased sensitivity to capture greater amounts of signal from biological analytes, allow broader types of biological samples to be interrogated with our solutions and increase the amount of biological information that can be obtained using our software. Develop new solutions for our platforms .
Our products have enabled researchers to make fundamental discoveries across multiple areas of biology, including oncology, immunology and neuroscience, and have helped empower the single cell revolution hailed by Science magazine as the 2018 “Breakthrough of the Year.” Our products have won many awards, including among others the technological advancements in single cell multimodal omics hailed by Nature Methods journal as the 2019 “Method of the Year” and the technological advancements in spatially resolved transcriptomics hailed by Nature Methods journal as the 2020 “Method of the Year.” Through our compatible partner program, our partnership with two long read sequencing companies launched products and protocols providing the ability to obtain full-length isoforms at single cell resolution.
Our products have enabled researchers to make fundamental discoveries across multiple areas of biology, including oncology, immunology and neuroscience, and have helped empower the single cell revolution hailed by Science magazine as the 2018 “Breakthrough of the Year.” Our products have won many awards, including among others the technological advancements in single cell multimodal omics hailed by Nature Methods journal as the 2019 “Method of the Year” and the technological advancements in spatially resolved transcriptomics hailed by Nature Methods journal as the 2020 “Method of the Year.” Through our compatible partner program, we and our two long read sequencing company partners launched products and protocols providing the ability to obtain full-length isoforms at single cell resolution.
Our position as a leader in this market allows us to form deep partnerships with our customers who help us stay on the frontiers of biology, giving us insight on industry needs that inform our product strategy and providing us with a strong competitive advantage. Our proprietary technologies.
Our position as a leader allows us to form deep partnerships with our customers who help us stay on the frontiers of biology, giving us insight on industry needs that inform our product strategy and providing us with a strong competitive advantage. Our proprietary technologies.
We also expect to pursue additional opportunities that will further expand our opportunity, including new potential applications of our single cell, spatial and in situ technologies in the future. As of December 31, 2022, we employed a commercial team of 453 employees, many of whom hold PhD degrees, who help drive adoption of our products and support our vision.
We also expect to pursue additional opportunities that will further expand our opportunity, including new potential applications of our single cell, spatial and in situ technologies in the future. As of December 31, 2023, we employed a commercial team of 450 employees, many of whom hold PhD degrees, who help drive adoption of our products and support our vision.
Information from the mRNA molecules is then translated into protein in a process called translation. Each gene has the ability to create multiple different mRNAs, resulting in the production of over 100,000 different mRNAs from about 30,000 genes.
Information from the mRNA molecules is then translated into protein in a process called translation. Each gene has the ability to create multiple different mRNAs, resulting in the production of over 100,000 different 5 Table of Contents mRNAs from about 30,000 genes.
The complete collection of all of the DNA, mRNA and proteins are called the genome, 5 Table of Contents transcriptome or gene expression profile, and the proteome, respectively. The epigenome includes molecular configurations and chemical DNA modifications that affect how genes are regulated.
The complete collection of all of the DNA, mRNA and proteins are called the genome, transcriptome or gene expression profile, and the proteome, respectively. The epigenome includes molecular configurations and chemical DNA modifications that affect how genes are regulated.
Xenium In Situ detects and preserves the cellular localization of hundreds of RNA targets directly in a fresh frozen or formalin-fixed paraffin-embedded (FFPE) tissue section without the need for conventional sequencing, providing researchers with a detailed map of gene expression patterns without sacrificing resolution or target number.
Xenium In Situ detects and preserves the cellular localization of hundreds of RNA targets directly in a fresh frozen or FFPE tissue section without the need for conventional sequencing, providing researchers with a detailed map of gene expression patterns without sacrificing resolution or target number.
In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws and consumer protection laws and regulations govern the collection, use, disclosure, and protection of health-related and other personal information.
In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws and consumer protection laws and regulations govern the collection, use, disclosure, and protection of health-related and other personal information. In addition, certain foreign laws govern the privacy and security of personal data, including health-related data.
We own registered trademarks on 10X GENOMICS and product related brand names in the United States and worldwide. Pursuant to certain license agreements, we in-license rights under certain U.S. and foreign patents and patent applications from third parties directed to our products and technology.
We own registered trademarks on 10X GENOMICS and product related brand names in the United States and worldwide. 24 Table of Contents Pursuant to certain license agreements, we in-license rights under certain U.S. and foreign patents and patent applications from third parties directed to our products and technology.
In the “Century of Biology,” we believe that 17 Table of Contents the mastery of biology will create advances and benefits for a broad and growing range of industries including broader segments of the healthcare industry and beyond.
In the “Century of Biology,” we believe that the mastery of biology will create advances and benefits for a broad and growing range of industries including broader segments of the healthcare industry and beyond.
We have also built comprehensive product testing and quality control into our culture and processes to help guarantee the performance of our products in customer hands. As of December 31, 2022, we employed a commercial team of 453 full time employees.
We have also built comprehensive product testing and quality control into our culture and processes to help guarantee the performance of our products in customer hands. As of December 31, 2023, we employed a commercial team of 450 full time employees.
These contingent payments are equal to a percentage in the teens multiplied by such revenue.
These contingent payments were equal to a percentage in the teens multiplied by such revenue.
Single Cell Gene Expression Flex In 2022, we introduced our Chromium Single Cell Gene Expression Flex solution. Like our Chromium Single Cell Gene Expression solution, Flex provides customers with the ability to measure the transcriptome of single cells, revealing gene activity and networks on a cell-by-cell basis.
Like our Chromium Single Cell Gene Expression solution, Flex provides customers with the ability to measure the transcriptome of single cells, revealing gene activity and networks on a cell-by-cell basis.
However, all IVDs placed on the EU market must meet general and safety requirements of the EU IVDR including the requirement that an IVD must be designed and manufactured in such a way that, during normal conditions of use, it is suitable for its intended purpose.
However, all IVDs placed on the EU market must meet general, safety and performance requirements laid down in Annex I to the EU IVDR including the requirement that an IVD must be designed and manufactured in such a way that, during normal conditions of use, it is suitable for its intended purpose.
The Harvard Agreement is projected to expire in 2034. In connection with our acquisition of Spatial Transcriptomics, we are required to make contingent payments to the sellers based on revenue from sales of Spatial Transcriptomics products and Visium products, for the years ended December 31, 2019 through December 31, 2022.
The Harvard Agreement is projected to expire in 2034. In connection with our acquisition of Spatial Transcriptomics Holdings AB (“Spatial Transcriptomics”), we were required to make contingent payments to the sellers based on revenue from sales of Spatial Transcriptomics products and Visium products, for the years ended December 31, 2019 through December 31, 2022.
Feature Barcode can currently be used to: • Measure cell surface proteins simultaneously with gene expression, giving a far fuller picture of the states of single cells that includes the transcriptional profile inside the cells as well as the proteins on the outside of the cells; and • Measure a set of CRISPR genetic perturbations that have been applied to a cell simultaneously with the resulting changes to gene expression and/or surface protein characterization, allowing users to interrogate the impact of actively perturbing many different aspects of a biological system in a massively parallel fashion.
Feature Barcode can currently be used to: • Measure cell surface proteins simultaneously with gene expression, giving a far fuller picture of the states of single cells that includes the transcriptional profile inside the cells as well as the proteins on the outside of the cells; and • Measure a set of CRISPR genetic perturbations that have been applied to a cell simultaneously with the resulting changes to gene expression and/or surface protein characterization, allowing users to interrogate the impact of actively perturbing many different aspects of a biological system in a massively parallel fashion. 10 Table of Contents Single Cell Gene Expression Flex In 2022, we introduced our Chromium Single Cell Gene Expression Flex solution.
We expect that our investments in research and development will allow us to increase our penetration of our accessible markets. Expand sales of our instruments . Since our commercial launch in mid-2015 through December 31, 2022, cumulatively we have sold 4,630 instruments and serve thousands of researchers globally.
We expect that our investments in research and development will allow us to increase our penetration of our accessible markets. Expand sales of our instruments . Since our commercial launch in mid-2015 through December 31, 2023, cumulatively we have sold 5,966 instruments and serve thousands of researchers globally.
We have a dedicated global strategic sales, marketing and business development team to support the adoption cycle by biopharmaceutical companies.
We have a dedicated pharmaceutical sales, marketing and business development team to support the adoption cycle by biopharmaceutical companies.
Our Company's scientific expertise is therefore embedded within the management team and throughout the organization. We are very proud to say that some of the world-leading experts in chemistry, molecular biology, microfluidics, hardware, computational biology and software engineering work and thrive at 10x. Our employees are highly motivated by our mission. We continue to emphasize employee development and training.
Our 22 Table of Contents Company's scientific expertise is therefore embedded within the management team and throughout the organization. We are very proud to say that some of the world-leading experts in chemistry, molecular biology, microfluidics, hardware, computational biology and software engineering work and thrive at 10x. Our employees are highly motivated by our mission.
We expect the size of these payments to grow as our business grows. The patents we own expire beginning in 2030 and the patents we exclusively in-license expire beginning in 2028. We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost-effective.
Other than payments under the Spatial Transcriptomics acquisition agreement, we expect the size of these payments to grow as our business grows. The patents we own expire beginning in 2030 and the patents we exclusively in-license expire beginning in 2028. We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost-effective.
Compliance with general and safety requirements of the EU IVDR is a prerequisite for European conformity marking (“CE mark”) without which IVDs cannot be marketed or sold in the EU. The 510(k) clearance, PMA and CE mark processes can be resource intensive, expensive and lengthy, and require payment of significant (user) fees. Medical devices are also subject to post-market requirements.
Compliance with general, safety and performance requirements of the EU IVDR is a prerequisite for European conformity marking (“CE mark”) without which IVDs cannot be marketed or sold in the EU. The 510(k) clearance, PMA and CE mark processes can be resource intensive, expensive and lengthy, and require payment of significant (user) fees.
Our competitive strengths We believe our continued growth will be driven by the following competitive strengths: Our position as a leader in a large and growing market. Since launching our first product in mid-2015 through December 31, 2022, cumulatively we have sold 4,630 instruments and we serve thousands of researchers globally.
Our competitive strengths We believe our continued growth will be driven by the following competitive strengths: Our position as a leader in a large and growing industry. Since launching our first product in mid-2015 through December 31, 2023, cumulatively we have sold 5,966 instruments and we serve thousands of researchers globally.
The Stanford Agreement is projected to expire in 2038. For the years ended December 31, 2022 and 2021, we made aggregate contingent and royalty payments under the Spatial Transcriptomics acquisition agreement, Stanford license agreement and Harvard license agreement, collectively, of less than $12.8 million and $12.0 million , respectively.
The Stanford Agreement is projected to expire in 2038. For the years ended December 31, 2023 and 2022, we made aggregate contingent and royalty payments under the Spatial Transcriptomics acquisition agreement, Stanford license agreement and Harvard license agreement, collectively, of approximately $15.4 million and $12.8 million, respectively.
Worldwide we own or exclusively in-license over 700 issued or allowed patents and more than 1,050 pending patent applications as of December 31, 2022. In addition to these owned and exclusively licensed patents and pending patent applications, we also license patents on a non-exclusive and/or territory restricted basis.
Worldwide we own or exclusively in-license over 970 issued or allowed patents and 1,220 pending patent applications as of December 31, 2023. In addition to these owned and exclusively licensed patents and pending patent applications, we also license patents on a non-exclusive and/or territory restricted basis.
As of December 31, 2022, our employees included 448 in research and development, 453 in sales, marketing and support, 213 in general and administrative and 129 in manufacturing, many of whom hold PhDs in their respective disciplines. Additionally, most of our senior management team and the members of our board of directors hold PhDs and/or other advanced degrees.
As of December 31, 2023, our employees included 451 in research and development, 450 in sales, marketing and support, 196 in general and administrative and 162 in manufacturing, many of whom hold PhDs in their respective disciplines. Additionally, most of our senior management team and the members of our board of directors hold PhDs and/or other advanced degrees.
Depending on the sample type, sectioning, sample preparation, staining, and hematoxylin and eosin (H&E) or immunofluorescent (IF) imaging take place on a standard glass slide in the Visium CytAssist workflow.
Regardless of the sample type, sectioning, sample preparation, staining by either hematoxylin and eosin (H&E) or immunofluorescence (IF), and imaging take place on a standard glass slide in the Visium CytAssist workflow.
In 2021, we launched Visium Spatial Gene Expression for FFPE enabling Visium to be applied to FFPE tissues with similarly high sensitivity and the same spatial resolution as fresh frozen samples.
In 2021, we launched Visium Spatial Gene Expression for FFPE which featured an entirely new probe-based chemistry enabling Visium to be applied to FFPE tissues with similarly high sensitivity and the same spatial resolution as fresh frozen samples.
We currently have customers in 50 countries. Our revenue was $516.4 million and $490.5 million for the years ended 2022 and 2021, respectively, representing a year-over-year growth rate of 5%. We generated net losses of $166.0 million and $58.2 million for the years ended 2022 and 2021, respectively. The complexity of biology Biology is staggeringly complex.
We currently have customers in over 50 countries. Our revenue was $618.7 million and $516.4 million for the years ended 2023 and 2022, respectively, representing a year-over-year growth rate of 20%. We generated net losses of $255.1 million and $166.0 million for the years ended 2023 and 2022, respectively. The complexity of biology Biology is staggeringly complex.
Customers can fix fresh samples at the point of collection to lock in biological states and preserve fragile cells or use this solution to access archived samples. We expect that this solution will be especially suited for translational and clinical labs where fragile samples or time constraints would otherwise preclude single cell analysis.
A key advantage is that customers can fix whole fresh tissue pieces at the point of collection to lock in biological states and preserve fragile cells or use this solution to access archived samples, making it especially suited for translational and clinical labs where fragile samples or time constraints would otherwise preclude single cell analysis.
We are led by a talented, global and diverse team of scientists, software developers and subject matter experts who help drive adoption of our products and support our vision.
Human Capital At 10x, our success begins with our people. We are led by a talented, global and diverse team of scientists, software developers and subject matter experts who help drive adoption of our products and support our vision.
Just as our past success is attributable to our innovative technologies, we believe that our future growth will be driven in large part by our significant continued investment in research and development.
Our growth strategy Our growth strategy includes the following key elements: Develop critical enabling technologies . Just as our past success is attributable to our innovative technologies, we believe that our future growth will be driven in large part by our significant continued investment in research and development.
Chromium Single Cell Gene Expression Flex allows for profiling up to 1,000,000 fixed single cells at once with a scalable workflow. Chromium Single Cell Gene Expression Flex can be used exclusively with our Chromium X Series instruments to generate GEMs. Prior to GEM generation, cells are fixed and permeabilized and can be safely stored or transported without compromising data quality.
Chromium Single Cell Gene Expression Flex can be used exclusively with our Chromium X Series instruments to generate GEMs. Prior to GEM generation, cells are fixed and permeabilized and can be safely stored or transported without compromising data quality.
Our research and development costs were $265.7 million and $211.8 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we employed 448 employees in research and development.
Our research and development costs were $270.3 million and $265.7 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we employed 451 employees in research and development.
Our focus on enabling a comprehensive view of biology, and not narrowly focusing on a particular analyte such as DNA alone, has produced products which we believe have broad applications and target numerous opportunities across different areas of life sciences research.
Our diverse products and solutions allow biologists to interrogate and understand biological systems at exceptional resolution and scale. Our focus on enabling a comprehensive view of biology, and not narrowly focusing on a particular analyte such as DNA alone, has produced products which we believe have broad applications and target numerous opportunities across different areas of life sciences research.
Once these elements are identified they can be targeted in order to generate mice with specific cell types labeled or perturbed at a level of specificity not usually achievable using gene expression alone.
Once these elements are identified they can be targeted in order to generate mice with specific cell types labeled or perturbed at a level of specificity not usually achievable using gene expression alone. The ability to specifically target new cell types of interest allows in-depth investigations of the functions of those targeted cells.
We design our products to facilitate the expansion of single cell approaches into more areas of academic research, to increase adoption of single cell approaches in translational and biopharmaceutical applications and to harness the emergence of spatial biology as a bridge between genomics and pathology.
We design our products to facilitate the expansion of single cell approaches into more areas of academic research, to increase adoption of single cell approaches in translational and biopharmaceutical applications including by identifying means to drive prices lower to support researchers and expand the opportunity for single cell analysis, and to harness the emergence of spatial biology as a bridge between genomics and pathology.
We believe this deep investment distinguishes us from our competition and is worthwhile because it: • Removes barriers to adoption. With our software, our customers can immediately begin making sense of their experimental data.
Since our founding, we have committed to making software engineering and computational biology world-class, core internal competencies. We believe this deep investment distinguishes us from our competition and is worthwhile because it: • Removes barriers to adoption. With our software, our customers can immediately begin making sense of their experimental data.
Our Chromium Single Cell ATAC solution has been adopted by a number of key opinion leaders. In one example, researchers used a combination of single cell transcriptome profiling and single cell ATAC-seq to identify enhancer elements that mark specific sub-classes of cells in the mouse brain.
In one example, researchers used a combination of single cell transcriptome profiling and single cell ATAC-seq to identify enhancer elements that mark specific sub-classes of cells in the mouse brain.
Importantly, this functionality allows users to determine the antigen that is bound by immune cells simultaneously with their gene expression. This capability allows researchers to determine both the receptor sequences of individual immune cells as well as an antigen that the receptor targets and makes this analysis practical to perform for millions of immune cells.
This capability allows researchers to determine both the receptor sequences of individual immune cells as well as an antigen that the receptor targets and makes this analysis practical to perform for millions of immune cells.
We prioritize innovations that meet large unmet market needs, such as measuring novel biological analytes with key functional impact at the single cell level or with spatial context.
We prioritize innovations that meet large unmet market needs, such as measuring novel biological analytes with key functional impact at the single cell level or with spatial context, and our aim to enable superior performance at larger scale and lower cost.
Corporate information We were incorporated in the State of Delaware on July 2, 2012 under the name Avante Biosystems, Inc. We changed our name to 10X Technologies, Inc. in September 2012 and to 10x Genomics, Inc. in November 2014. Our principal executive offices are located at 6230 Stoneridge Mall Road, Pleasanton, California 94588, and our telephone number is (925) 401-7300.
We changed our name to 10X Technologies, Inc. in September 2012 and to 10x Genomics, Inc. in November 2014. Our principal executive offices are located at 6230 Stoneridge Mall Road, Pleasanton, California 94588, and our telephone number is (925) 401-7300.
In our international territories, apart from standard industry-wide labor unions and compulsory collective bargaining agreements, such as in Italy where we have fewer than ten employees, none of our employees are represented by a labor union or subject to a collective bargaining agreement. We consider our relationship with our employees to be positive.
In our international territories, apart from standard industry-wide labor unions and compulsory collective bargaining agreements, none of our employees are represented by a labor union or subject to a collective bargaining agreement. We consider our relationship with our employees to be positive. Competition The life sciences industry is highly competitive.
Research and development Our research and development teams have designed and developed our proprietary products using an interdisciplinary approach that combines expertise across the fields of chemistry, molecular biology, microfluidics, hardware, computational biology and software engineering. Our research and development groups work together in cross-functional project teams, an approach that has been key to our success to date.
Research and development Our research and development teams have designed and developed our proprietary products using an interdisciplinary approach that combines expertise across the fields of chemistry, molecular biology, microfluidics, hardware, computational biology and software engineering.
We believe that our future success largely depends upon our continued ability to attract and retain highly skilled employees. We provide our employees with competitive salaries and bonuses, opportunities for equity ownership and development programs that enable continued learning and growth. In addition, we regularly conduct an employee survey to gauge employee engagement and identify areas of focus.
We continue to emphasize employee development and training. We believe that our future success largely depends upon our continued ability to attract and retain highly skilled employees. We provide our employees with competitive salaries and bonuses, opportunities for equity ownership and development programs that enable continued learning and growth.
We have built deep expertise across diverse disciplines including chemistry, biology, hardware and software. Innovations in all of these areas have enabled our rapidly expanding suite of products, which allow our customers to interrogate biological systems at previously inaccessible resolution and scale.
Innovations in all of these areas have enabled our rapidly expanding suite of products, which allow our customers to interrogate biological systems at previously inaccessible resolution and scale.
We have never experienced a work stoppage. In addition, none of our U.S. employees are represented by a labor union or covered under a collective bargaining agreement.
In addition, we regularly conduct an employee survey to gauge employee engagement and identify areas of focus. We have never experienced a work stoppage. In addition, none of our U.S. employees are represented by a labor union or covered under a collective bargaining agreement.
These platforms guide customers through the workflow from sample preparation to analysis and visualization. 3 Table of Contents Each of our platforms is designed to interrogate a major class of biological information that is impactful to researchers at high resolution and scale: • Our Chromium platform enables high-throughput analysis of individual biological components.
Each of our platforms is designed to interrogate a major class of biological information that is impactful to researchers at high resolution and scale: • Our Chromium platform enables high-throughput analysis of individual biological components.
Our Chromium platform currently provides researchers with the following solutions: Single Cell Gene Expression Our Chromium Single Cell Gene Expression solution provides customers with the ability to measure the transcriptome of single cells, revealing gene activity and networks on a cell-by-cell basis.
Both approaches cater to unique use cases, open the door for different applications and expand sample compatibility Our Chromium platform currently provides researchers with the following solutions: Single Cell Gene Expression Our Chromium Single Cell Gene Expression solution provides customers with the ability to measure the transcriptome of single cells, revealing gene activity and networks on a cell-by-cell basis.
Sequencing reads are analyzed using our Cell Ranger ATAC software and visualized using our Loupe Cell Browser, which has been specially configured to display epigenetic data.
Sequencing reads are analyzed using our Cell Ranger ATAC software and visualized using our Loupe Cell Browser, which has been specially configured to display epigenetic data. Our Chromium Single Cell ATAC solution has been adopted by a number of key opinion leaders.
The ability to specifically target new cell types of interest allows in-depth investigations of the functions of those targeted cells. 12 Table of Contents Single Cell Multiome ATAC+Gene Expression Our Chromium Single Cell Multiome ATAC+Gene Expression solution enables customers to link a cell’s epigenetic state, which affects how genes are regulated, directly to its transcriptional output, in up to millions of cells simultaneously.
Single Cell Multiome ATAC+Gene Expression Our Chromium Single Cell Multiome ATAC+Gene Expression solution enables customers to link a cell’s epigenetic state, which affects how genes are regulated, directly to its transcriptional output, in up to millions of cells simultaneously.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to: • the level of demand for our products, which may vary significantly and result in excess capacity expenses, our ability to accurately forecast such demand and our ability to increase penetration in our existing markets and expand into new markets; • general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors; • the success of our recently introduced products and new versions of existing products, and our ability to generate revenue for such products, and the introduction of other new products or product enhancements by us or others in our industry; • risks related to our business in China, including potential impacts of COVID-19, competition or other factors; • changes in governmental funding of life sciences research and development or other changes that impact budgets, budget cycles or seasonal or other spending patterns of our customers; • changes in product mix, particularly from newly introduced products with lower gross margins; • the volume and mix of our instrument and consumable sales or changes in the manufacturing or sales costs related to our instruments and consumables; • differences in purchasing patterns across our customer base, including potential differences in consumables spending between early adopters of our solutions and more recent customers and variances in rates of increase of consumables spending following new instrument purchases, some of which may be compounded by impacts of the COVID-19 pandemic; • the timing of our price increases; • our ability and the ability of our partners to successfully manufacture our instruments and consumables in necessary quantities at necessary quality, including due to the impacts of supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages; • shortages, delays, production problems, distribution and quality issues with the materials we purchase for manufacturing, which could impact our ability to manufacture and ship our instruments, consumables and related components; • our inability or the inability of our customers to source our products or necessary equipment, components and materials used in our products or in conjunction with our products because of issues with suppliers, including supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages; • the timing and amount of expenditures that we may incur to acquire, develop or commercialize additional products and technologies or for other purposes; • our dependence and the dependence of our customers on single source and sole source suppliers for some of the equipment, components and materials used in our products or in conjunction with our products; • the effects of inflation on us or our customers, manufacturers and suppliers, including increases in the cost of labor and materials; • our ability to successfully integrate personnel, technology and other assets that we acquire into our company; • difficulties encountered by our commercial carriers in delivering our instruments or consumables, whether as a result of external factors such as weather, customs or import processes, transportation bottlenecks, port lockdowns or slowdowns or fuel shortages or internal issues such as labor disputes or difficulties hiring and retaining adequate staffing; • higher than anticipated warranty costs; • the timing and amount of expenditures (including success fees) related to litigation, as well as the outcomes of and related rulings in the litigation and administrative proceedings which may vary substantially from quarter to quarter; • the outcome of any current or future litigation or governmental investigations involving us or other third parties; • changes in customer payment timing trends including potential increases in the days sales outstanding (DSO); • future accounting pronouncements or changes in our accounting policies; • expenses related to our facilities and real estate portfolio, including construction projects; 28 Table of Contents • disruptions in customers’ on-going experiments or interruptions in the ability of our customers to complete research projects, including as a result of the COVID-19 pandemic; • reductions in or other difficulties relating to staffing, capacity, shutdowns or slowdowns of laboratories and other institutions, such as reduced or delayed spending on instruments or consumables due to reductions in or other difficulties relating to staffing, capacity, shutdowns or slowdowns of laboratories and other institutions in which our instruments and solutions are used; • the impacts of geopolitical issues, infectious disease, epidemics or pandemics such as COVID-19 outbreaks and resurgences on our business operations and on the business operations of our customers, manufacturers and suppliers; and • the other factors described in this “ Risk Factors ” section.
Biggest changeThese fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to: • fluctuations in demand for our products, which may vary significantly, our ability to accurately forecast demand, and our ability to increase penetration with our existing customers and to expand to new customers; • changes in general market conditions and other factors, including factors unrelated to our operating performance or the performance of our competitors; • the success of our recently introduced and recently announced products and new versions of existing products, and our ability to generate revenue for such products, and the introduction of new products or product enhancements by us or others in our industry including the timing of such introductions; • risks related to our business and demand for our products in China and elsewhere in the Asia-Pacific region, including competition or other factors; • the timing and magnitude of our price changes; • changes in volume and product mix, particularly from products with lower gross margins than other products that we sell, or changes in costs related to our instruments and consumables, including products which incur royalty payment obligations at higher rates than other products we sell; • changes in governmental funding of life sciences research and development or other changes that impact budgets, budget cycles or seasonal or other spending patterns of our customers; • changes in the competitive environment, including new product introductions, new versions of existing products with additional capabilities and features or pricing changes; • investment decisions we make with respect to the allocation of our resources, including regarding product development or to support our commercial organization; • differences in purchasing patterns across our customer base or across our three platforms and variances in consumables spending for each of our platforms; • our ability and the ability of our partners to successfully manufacture our instruments and consumables in necessary quantities at necessary quality, including due to the impacts of supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages; • the timing and amount of expenditures that we may incur to acquire, develop or commercialize additional products and technologies or for other purposes; • shortages, delays, production problems, distribution and quality issues with the materials we purchase for manufacturing, which could impact our ability to manufacture and ship our instruments, consumables and related components; • our inability or the inability of our customers to source our products or necessary equipment, components and materials used in our products or in conjunction with our products because of issues with suppliers, including supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages; • excess capacity expenses and higher inventory write-downs; • our dependence and the dependence of our customers on single source and sole source suppliers for some of the equipment, components and materials used in our products or in conjunction with our products; • the effects of inflation on us or our customers, manufacturers and suppliers, including increases in the cost of labor and materials; • higher than anticipated warranty costs; • the timing and amount of expenditures (including success fees) related to litigation, as well as the outcomes of and related rulings in the litigation and administrative proceedings which may vary substantially from quarter to quarter; • the outcome of any current or future litigation or governmental investigations involving us or other third parties; • changes in customer payment timing trends including potential increases in the days sales outstanding (DSO); • expenses related to our facilities and real estate; • our ability to successfully integrate personnel, technology and other assets that we acquire into our company; 29 Table of Contents • difficulties encountered by our commercial carriers in delivering our instruments or consumables, whether as a result of external factors such as weather, customs or import processes, transportation bottlenecks, port lockdowns or slowdowns or fuel shortages or internal issues such as labor disputes or difficulties hiring and retaining adequate staffing; • disruptions in customers’ on-going experiments or interruptions in the ability of our customers to complete research projects; • reductions in or other difficulties relating to staffing, capacity, shutdowns or slowdowns of laboratories and other institutions, such as reduced or delayed spending on instruments or consumables due to reductions in or other difficulties relating to staffing, capacity, shutdowns or slowdowns of laboratories and other institutions in which our instruments and solutions are used; • our reputation or public perception of us; • the impacts of geopolitical issues, infectious disease, epidemics or pandemics on our business operations and on the business operations of our customers, manufacturers and suppliers; and • the other factors described in this “ Risk Factors ” section.
The life sciences scientific community is comprised of a small number of early adopters and key opinion leaders who significantly influence the rest of the community. The success of life sciences products is due, in large part, to acceptance by the scientific community and their adoption of certain products as best practice in the applicable field of research.
The life sciences scientific community is comprised in part of a small number of early adopters and key opinion leaders who significantly influence the rest of the community. The success of life sciences products is due, in large part, to acceptance by the scientific community and their adoption of certain products as best practice in the applicable field of research.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change attributes, such as research tax credits, to offset its post-change income may be limited.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income may be limited.
We regularly monitor for unauthorized use of our intellectual property rights and, from time to time, analyze whether to seek enforce our rights against potential infringement, misappropriation or violation of our intellectual property rights.
We regularly monitor for unauthorized use of our intellectual property rights and, from time to time, analyze whether to seek to enforce our rights against potential infringement, misappropriation or violation of our intellectual property rights.
We have currently obtained only director and officer liability coverage (commonly referred to as “Side A” coverage).
We have currently obtained only director and officer liability coverage (commonly referred to as “Side A” coverage).
This means that while our directors and officers have direct insurance coverage for acts which the company is not legally required or permitted to indemnify them, the company itself does not have coverage for amounts incurred in defending, among other things, stockholder derivative or securities class action lawsuits or in the event of certain investigative actions, for amounts it must pay as a result of such suits or amounts it must pay to indemnify our directors or officers.
This means that while our directors and officers have direct insurance coverage for acts which the company is not legally required or permitted to indemnify them, the company itself does not have coverage for amounts incurred in defending, among other things, stockholder derivative or securities class action lawsuits or in the event of certain investigative actions, for amounts it must pay as a result of such suits or amounts it must pay to indemnify our directors or officers.
In addition to the factors discussed in this “ Risk Factors ” section and elsewhere in this report, these factors include: • the timing of our launch of future products and degree to which the launch and commercialization thereof meets the expectations of securities analysts and investors; • changes in the structure or funding of research at academic and research laboratories and institutions, including changes that would affect their ability to purchase our instruments or consumables; • the success of existing or new competitive businesses or technologies; • announcements about new research programs or products of our competitors; • general economic, industry and market conditions; • volatility and variations in market conditions in the life sciences sector generally, or the genomics sector specifically; 69 Table of Contents • whether our financial results meet our publicly announced expectations or the expectations of securities analysts or investors; • actual or anticipated changes in our estimates as to our financial results or development timelines, variations in our financial results or those of companies that are perceived to be similar to us or changes in estimates or recommendations by securities analysts, if any, that cover our Class A common stock or companies that are perceived to be similar to us; • investor perceptions of us or our industry; • the level of expenses related to any of our research and development programs or products; • litigation and governmental investigations involving us, our industry or both; • the outcomes of and related rulings in the litigation and administrative proceedings in which we are currently or may in the future become involved; • developments or disputes concerning patent applications, issued patents or other proprietary rights; • the recruitment or departure of key personnel; • regulatory or legal developments in the United States and other countries; • the announcement or expectation of additional financing efforts; • stock-based compensation expense; • the failure or discontinuation of any of our product development and research programs; • sales of our Class A common stock or Class B common stock by us, our insiders or other stockholders; • natural disasters, infectious diseases, conflict, war, civil unrest, epidemics or pandemics such as COVID-19 outbreaks or resurgences or major catastrophic events; and • the other factors described in this “ Risk Factors ” section.
In addition to the factors discussed in this “ Risk Factors ” section and elsewhere in this report, these factors include: • the timing of our launch of future products and degree to which the launch and commercialization thereof meets the expectations of securities analysts and investors; • changes in the structure or funding of research at academic and research laboratories and institutions, including changes that would affect their ability to purchase our instruments or consumables; • the success of existing or new competitive businesses or technologies; • announcements about new research programs or products of our competitors; • general economic, industry and market conditions; • volatility and variations in market conditions in the life sciences sector generally, or the genomics sector specifically; • whether our financial results meet our publicly announced expectations or the expectations of securities analysts or investors; • actual or anticipated changes in our estimates as to our financial results or development timelines, variations in our financial results or those of companies that are perceived to be similar to us or changes in estimates or recommendations by securities analysts, if any, that cover our Class A common stock or companies that are perceived to be similar to us; • investor perceptions of us or our industry; • the level of expenses related to any of our research and development programs or products; • litigation and governmental investigations involving us, our industry or both; • the outcomes of and related rulings in the litigation and administrative proceedings in which we are currently or may in the future become involved; • developments or disputes concerning patent applications, issued patents or other proprietary rights; • the recruitment or departure of key personnel; • regulatory or legal developments in the United States and other countries; • the announcement or expectation of additional financing efforts; 71 Table of Contents • stock-based compensation expense; • the failure or discontinuation of any of our product development and research programs; • sales of our Class A common stock or Class B common stock by us, our insiders or other stockholders; • natural disasters, infectious diseases, conflict, war, civil unrest, epidemics or pandemics such as COVID-19 outbreaks or resurgences or major catastrophic events; and • the other factors described in this “ Risk Factors ” section.
Because certain of our consumables and the raw materials we use to manufacture consumables at our Pleasanton facilities are perishable and must be kept in temperature controlled storage, the loss of power to our facilities, mechanical or other issues with our storage facilities or other events that impact our temperature controlled storage could result in the loss of some or all of such consumables and raw materials and we may not be able to replace them without disruption to our customers or at all.
Because certain of our consumables and the raw materials we use to manufacture consumables are perishable and must be kept in temperature controlled storage, the loss of power to our facilities, mechanical or other issues with our storage facilities or other events that impact our temperature controlled storage could result in the loss of some or all of such consumables and raw materials and we may not be able to replace them without disruption to our customers or at all.
If any of the foregoing occurs, we could be forced to re-brand our products or technologies, resulting in loss of brand recognition and requiring us to devote resources to advertising and marketing new brands, and suffer other competitive harm. Third parties may also adopt trademarks similar to ours, which could harm our brand identity and lead to market confusion.
If any of the foregoing occurs, we could be forced to re-brand our products, services or technologies, resulting in loss of brand recognition and requiring us to devote resources to advertising and marketing new brands, and suffer other competitive harm. Third parties may also adopt trademarks similar to ours, which could harm our brand identity and lead to market confusion.
In certain situations, new life sciences technology, even if sufficiently covered in peer-reviewed publications, may not be adopted until the consistency and accuracy of such technology, method or device has been proven. As a result, the sizes of the annual total addressable market for new products are even more difficult to predict.
In certain situations, new life sciences products or applications, even if sufficiently covered in peer-reviewed publications, may not be adopted until the consistency and accuracy of such technology, method or device has been proven. As a result, the sizes of the annual total addressable market for new products and applications are even more difficult to predict.
In order to ensure we are able to meet these expectations, our Pleasanton, California manufacturing facilities, as well as the facilities of our third-party manufacturers, have obtained International Organization for Standardization (“ISO”) quality management certifications and employ other quality control measures. On occasion, our customers have experienced quality control and manufacturing defects and may again in the future.
In order to ensure we are able to meet these expectations, our Pleasanton, California and Singapore manufacturing facilities, as well as the facilities of our third-party manufacturers, have obtained International Organization for Standardization (“ISO”) quality management certifications and employ other quality control measures. On occasion, our customers have experienced quality control and manufacturing defects and may again in the future.
Even if we implement policies or procedures designed to ensure compliance with these laws and regulations, there can be no assurance that our distribution partners, our employees, contractors or agents will not violate our policies and subject us to potential claims or penalties. Our business in China subjects us to unique operational, competitive and regulatory risks.
Even if we implement policies or procedures designed to ensure compliance with these laws and regulations, there can be no assurance that our distribution partners, our employees, contractors or agents will not violate our policies and subject us to potential claims or penalties. Our business in China subjects us to unique commercial, operational, competitive and regulatory risks.
An attack or security incident that exposes personal data, or sensitive or confidential information to unauthorized persons could lead to the loss of trade secrets or other intellectual property, or could lead to the exposure of personal data of our employees, customers and others, any of which could have a material adverse effect on our business, reputation, financial condition and results of operations.
An attack or security incident that exposes Confidential Information to unauthorized persons could lead to the loss of trade secrets or other intellectual property, or could lead to the exposure of personal data of our employees, customers and others, any of which could have a material adverse effect on our business, reputation, financial condition and results of operations.
In addition, inventory that is stolen from warehouses, plants or while in-transit, and that is subsequently improperly stored and sold through unauthorized channels, could adversely impact our customers’ experiments, our reputation and our business. The investment of marketable securities is subject to risks which may cause losses and affect the liquidity of these investments.
Inventory that is stolen from warehouses, plants or while in-transit, and that is subsequently improperly stored and sold through unauthorized channels, could adversely impact our customers’ experiments, our reputation and our business. The investment of marketable securities is subject to risks which may cause losses and affect the liquidity of these investments.
However, the EU requires that all IVDs placed on the market in the EU must meet general and safety requirements of the EU IVDR including the requirement that an IVD must be designed and manufactured in such a way that, during normal conditions of use, it is suitable for its intended purpose.
However, the EU requires that all IVDs placed on the market in the EU must meet general, safety and performance requirements of the EU IVDR including the requirement that an IVD must be designed and manufactured in such a way that, during normal conditions of use, it is suitable for its intended purpose.
Under these new listing rules, Nasdaq-listed companies are required, subject to certain exceptions, to annually disclose diversity statistics regarding their directors’ voluntary self-identified characteristics and include on their boards of directors at least two “Diverse” directors or publicly disclose why their boards do not include such “Diverse” directors.
Under these listing rules, Nasdaq-listed companies are required, subject to certain exceptions, to annually disclose diversity statistics regarding their directors’ voluntary self-identified characteristics and include on their boards of directors at least two “Diverse” directors or publicly disclose why their boards do not include such “Diverse” directors.
We sell our products through third-party distributors in Asia, certain regions of Europe, Oceania, South America, the Middle East and Africa. We intend to continue to grow our business internationally and to do so we must attract additional distributors and retain existing distributors to maximize the commercial opportunity for our products.
We sell our products through third-party distributors in Asia, certain regions of Europe, Oceania, Central America, South America, the Middle East and Africa. We intend to continue to grow our business internationally and to do so we must attract additional distributors and retain existing distributors to maximize the commercial opportunity for our products.
A substantial percentage of our direct sales revenue comes from sales to academic institutions, whose research often requires long uninterrupted studies performed on a consistent basis over time; thus interruptions in our ability to supply consumables could be particularly damaging to these studies and our reputation.
A substantial percentage of our revenue comes from sales to academic institutions, whose research often requires long uninterrupted studies performed on a consistent basis over time; thus interruptions in our ability to supply consumables could be particularly damaging to these studies and our reputation.
We are involved in lawsuits to protect, enforce or defend our patents and other intellectual property rights, which are expensive, time consuming and could ultimately be unsuccessful. Nanostring On May 6, 2021, we filed suit against Nanostring Technologies, Inc. ("Nanostring") in the U.S.
We are involved in lawsuits to protect, enforce or defend our patents and other intellectual property rights, which are expensive, time consuming and could ultimately be unsuccessful. NanoString On May 6, 2021, we filed suit against NanoString Technologies, Inc. (“NanoString”) in the U.S.
Both our and our third-party providers’ information technology systems are vulnerable to attack, damage or disruption due to breakdown, malicious intrusion, computer viruses, worms, malware (e.g. ransomware) or other disruptive events, including but not limited to, natural disasters and catastrophes.
Both our and our third-party providers’ information technology systems are vulnerable to attack, damage or disruption due to breakdown, malicious intrusion, computer viruses, malware (e.g. ransomware) or other disruptive events, including but not limited to, natural disasters and catastrophes.
Our previous acquisitions and any future transactions could be material to our financial condition and operating results and expose us to many risks, including: • increases in our expenses and reductions in our cash available for operations and other uses; • difficulties integrating acquired personnel, technologies and operations into our existing business; • failure to realize anticipated benefits or synergies from such a transaction; • unanticipated costs of or legal exposure related to complying with existing and future laws and regulations, including land use, environmental or antitrust-related laws and regulations; • disruption in our relationships with customers, distributors, manufacturers, suppliers or other third parties as a result of such a transaction; • unanticipated liabilities related to acquired real estate or companies, including liabilities related to acquired intellectual property or litigation relating thereto; • diversion of management time and focus from operating our business; • possible write-offs or impairment charges relating to acquired businesses; and • potential higher taxes if our tax positions relating to certain acquisitions were challenged.
Our previous acquisitions and any future transactions could be material to our financial condition and operating results and expose us to many risks, including: 44 Table of Contents • increases in our expenses and reductions in our cash available for operations and other uses; • difficulties integrating acquired personnel, technologies and operations into our existing business; • failure to realize anticipated benefits or synergies from such a transaction; • unanticipated costs of or legal exposure related to complying with existing and future laws and regulations, including land use, environmental or antitrust-related laws and regulations; • disruption in our relationships with customers, distributors, manufacturers, suppliers or other third parties as a result of such a transaction; • unanticipated liabilities related to acquired real estate or companies, including liabilities related to acquired intellectual property or litigation relating thereto; • diversion of management time and focus from operating our business; • possible write-offs or impairment charges relating to acquired businesses; and • potential higher taxes if our tax positions relating to certain acquisitions were challenged.
Although we believe our tax estimates are reasonable, if the United States Internal Revenue Service or other taxing authority disagrees with the positions taken on our tax returns, we could have additional tax liability, including interest and penalties.
Although we believe our tax estimates are reasonable, if the United States Internal Revenue Service or any other taxing authority disagrees with the positions taken on our tax returns, we could have additional tax liability, including interest and penalties.
Changes in patent law could diminish the value of our patents in general, thereby impairing our ability to protect our current and future products or technologies, and could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our current or future patents.
Changes in patent law could diminish the value of our patents in general, thereby impairing our ability to protect our current and future products, services or technologies, and could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our current or future patents.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that: 51 Table of Contents • others will not develop, manufacture and/or commercialize similar or alternative products or technologies that do not infringe our patents; • any patents issued to us will provide a basis for an exclusive market for our commercially viable products or technologies will provide us with any competitive advantages or will not be challenged by third parties; • any of our challenged patents will be found to ultimately be valid and enforceable; • any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our products or services; • any of our pending patent applications will issue as patents; • we will be able to successfully manufacture and commercialize our products on a substantial scale before relevant patents we may have expire; • we were the first to make the inventions covered by each of our patents and pending patent applications; • we were the first to file patent applications for these inventions; • we will develop additional proprietary technologies or products that are separately patentable; or • our commercial activities or products will not infringe upon the patents of others.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that: • others will not develop, manufacture and/or commercialize similar or alternative products or technologies that do not infringe our patents; • any patents issued to us will provide a basis for an exclusive market for our commercially viable products or technologies, will provide us with any competitive advantages or will not be challenged by third parties; • any of our challenged patents will be found to ultimately be valid and enforceable; • any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our products or services; • any of our pending patent applications will issue as patents; • we will be able to successfully manufacture and commercialize our products on a substantial scale before relevant patents we may have expire; • we were the first to make the inventions covered by each of our patents and pending patent applications; • we were the first to file patent applications for these inventions; • we will develop additional proprietary technologies or products that are separately patentable; or • our commercial activities or products will not infringe upon the patents of others.
The following are examples of litigation and other adversarial proceedings or disputes that we could become a party to involving our patents or patents licensed to us: • we have initiated, and in the future may initiate, litigation or other proceedings against third parties to enforce our patent rights; • third parties have initiated, and in the future may initiate, litigation or other proceedings seeking to invalidate patents owned by or licensed to us or to obtain a declaratory judgment that their product or technology does not infringe our patents or patents licensed to us or that such patents are invalid or unenforceable; • third parties have initiated, and in the future may initiate, oppositions, IPRs, post grant reviews or reexamination proceedings challenging the validity or scope of our patent rights, requiring us and/or licensors to participate in such proceedings to defend the validity and scope of our patents; • there are, and in the future may be, more challenges or disputes regarding inventorship or ownership of patents currently identified as being owned by or licensed to us; or • at our initiation or at the initiation of a third-party, the USPTO may initiate an interference between patents or patent applications owned by or licensed to us and those of our competitors, requiring us and/or licensors to participate in an interference proceeding to determine the priority of invention, which could jeopardize our patent rights.
The following are examples of litigation and other adversarial proceedings or disputes that we could become a party to involving our patents or patents licensed to us: • we have initiated, and in the future may initiate, litigation or other proceedings against third parties to enforce our patent rights; • third parties have initiated, and in the future may initiate, litigation or other proceedings seeking to invalidate patents owned by or licensed to us or to obtain a declaratory judgment that their product or technology does not infringe our patents or patents licensed to us or that such patents are invalid or unenforceable; • third parties have initiated, and in the future may initiate, oppositions, IPRs, post grant reviews or reexamination proceedings challenging the validity or scope of our patent rights, requiring us and/or licensors to participate in such proceedings to defend the validity and scope of our patents; • there are, and in the future may be, more challenges or disputes regarding inventorship or ownership of patents currently identified as being owned by or licensed to us; or 68 Table of Contents • at our initiation or at the initiation of a third-party, the USPTO may initiate an interference between patents or patent applications owned by or licensed to us and those of our competitors, requiring us and/or licensors to participate in an interference proceeding to determine the priority of invention, which could jeopardize our patent rights.
Brexit has had, and may continue to have, a significant adverse effect on global economic conditions and the stability of global financial markets, and could significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. 46 Table of Contents The illegal distribution and sale by third parties of counterfeit or unfit versions of our products or stolen products could have a negative impact on our reputation and business.
Brexit has had, and may continue to have, a significant adverse effect on global economic conditions and the stability of global financial markets, and could significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. 47 Table of Contents The illegal distribution and sale by third parties of counterfeit or unfit versions of our products or stolen products could have a negative impact on our reputation and business.
In addition, we intend to launch additional new products and new versions of existing products in the near future. Further development and commercialization of our current and future products are key elements of our growth strategy.
We intend to launch additional new products and new versions of existing products in the near future. Further development and commercialization of our current and future products are key elements of our growth strategy.
Our operating costs have increased, and may continue to increase, due to the recent growth in inflation. We may not fully offset these cost increases by raising prices for our instruments and consumables, which could result in downward pressure on our margins. Further, our clients may choose to reduce their business with us if we increase our pricing.
Our operating costs have increased, and may continue to increase, due to the recent growth in inflation. We may not fully offset these cost increases by raising prices for our instruments and consumables, which could result in downward pressure on our margins. Further, our customers may choose to reduce their business with us if we increase our pricing.
These could include risks related to counterparty performance under future hedging contracts and risks related to currency fluctuations. 45 Table of Contents If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
These could include risks related to counterparty performance under future hedging contracts and risks related to currency fluctuations. 46 Table of Contents If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
In particular, our estimates are based on our expectations that: (a) researchers seeking life sciences research tools and technologies will view our solutions as competitive alternatives to, or better options than, such existing tools and technologies; (b) researchers who already own such existing tools and technologies will recognize the ability of our solutions to complement, enhance and enable new applications of their current tools and technologies and find the value proposition offered by our solutions convincing enough to purchase our solutions in addition to the tools and technologies they already own; and (c) the trends we have seen among our customers with respect to placements of our instruments are representative of the broader demand.
In particular, our estimates are based on our expectations that researchers seeking life sciences research tools and technologies will view our solutions as competitive alternatives to, or better options than, existing tools and technologies, researchers who already own such existing tools and technologies will recognize the ability of our solutions to complement, enhance and enable new applications of their current tools and technologies and find the value proposition offered by our solutions convincing enough to purchase our solutions in addition to the tools and technologies they already own and the trends we have seen among our customers with respect to placements of our instruments are representative of the broader demand.
In many cases we do not have long term contracts with these suppliers, and even in the cases where we do, the contracts include significant qualifications that would make it extremely difficult for us to force the supplier to provide us with their services, equipment, materials or components should they choose not to do so.
In many cases we do not have long term contracts with these suppliers, and even in the cases where we do, some such contracts include significant qualifications that would make it extremely difficult for us to force the supplier to provide us with their services, equipment, materials or components should they choose not to do so.
In the United States, California enacted the California Consumer Privacy Act of 2018, as amended (the "CCPA"), which came into effect on January 1, 2020 and limits and imposes requirements on how we may collect and use personal information and provides for civil penalties for violations and a private right of action for data breaches.
In the United States, California enacted the California Consumer Privacy Act of 2018 (the "CCPA"), which came into effect on January 1, 2020 and limits and imposes requirements on how we may collect and use personal information and provides for civil penalties for violations and a private right of action for data breaches.
Risks related to our business and industry Our operating results have in the past fluctuated significantly and may continue to fluctuate significantly in the future, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide. 27 Table of Contents Our quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to predict our future operating results.
Risks related to our business and industry Our operating results have in the past fluctuated significantly and may continue to fluctuate significantly in the future, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide. 28 Table of Contents Our quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to predict our future operating results.
These laws generally prohibit, unless authorized by the relevant authority or otherwise exempt from the regulations, the conduct of business with persons, countries, regions, and governments that are targeted by “sanctions,” 43 Table of Contents including but not limited to persons listed on the United States Department of Commerce’s List of Denied Persons and the United States Department of Treasury’s Specially Designated Nationals and Blocked Persons List, and the areas subject to trade embargoes by the United States (currently, Cuba, Iran, Syria, North Korea, and the Crimea region of Ukraine).
These laws generally prohibit, unless authorized by the relevant authority or otherwise exempt from the regulations, the conduct of business with persons, countries, regions, and governments that are targeted by “sanctions,” including but not limited to persons listed on the United States Department of Commerce’s List of Denied Persons and the United States Department of Treasury’s Specially Designated Nationals and Blocked Persons List, and the areas subject to trade embargoes by the United States (currently, Cuba, Iran, Syria, North Korea, and the Crimea region of Ukraine).
In the event that the FDA or foreign authorities requires us to obtain marketing authorization or certification of our RUO products in the 47 Table of Contents future, there can be no assurance that these authorities will grant any clearance, approval or certification requested by us in a timely manner, or at all.
In the event that the FDA or foreign authorities requires us to obtain marketing authorization or certification of our RUO products in the 48 Table of Contents future, there can be no assurance that these authorities will grant any clearance, approval or certification requested by us in a timely manner, or at all.
Mentions in peer-reviewed journal publications is a good barometer for the general acceptance of our products as best practices. Ensuring that early adopters and key opinion leaders publish research involving the use of our products is critical to ensuring our products gain widespread acceptance and market growth.
Mentions in peer-reviewed journal publications is a good barometer for the general acceptance of our products as best practices. Ensuring that early adopters and key opinion leaders publish research involving the use of our products is important to ensuring our products gain widespread acceptance and market growth.
If we do not sustain or successfully manage our growth and anticipated growth, our business and prospects will be harmed. We have historically experienced rapid growth and future growth will place significant strains on our management, operational and manufacturing systems and processes, financial systems and internal controls and other aspects of our business.
If we do not sustain or successfully manage our growth and anticipated growth, our business and prospects will be harmed. We have historically experienced rapid growth and we expect that future growth will place significant strains on our management, operational and manufacturing systems and processes, financial systems and internal controls and other aspects of our business.
For example, we depend on a limited number of suppliers for enzymes and amplification mixes used in our consumables. In some cases, these manufacturers are the sole source of certain necessary enzymes and reagents. We do not have long-term contracts with most of these sole source suppliers.
For example, we depend on a limited number of suppliers for enzymes and amplification mixes used in our consumables. In some cases, these manufacturers are the sole source of certain necessary enzymes and reagents. We do not have long-term contracts with many of these sole source suppliers.
The facilities and the equipment we and our third-party manufacturers use to manufacture our instruments and consumables and that we use in our research and development programs would be costly to replace and could require substantial lead times to repair or replace. Our facilities in Pleasanton and Singapore are vulnerable to natural disasters and catastrophic events.
The facilities and the equipment we and our third-party manufacturers use to manufacture our instruments and consumables and that we use in our research and development programs would be costly to replace and could require substantial lead times to repair or replace. Our facilities are vulnerable to natural disasters and catastrophic events.
These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their 68 Table of Contents choosing and to cause us to take other corporate actions they desire, any of which, under certain circumstances, could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our Class A common stock.
These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they desire, any of which, under certain circumstances, could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our Class A common stock.
District Court for the District of Delaware alleging that Nanostring's GeoMx Digital Spatial Profiler and associated instruments and reagents infringe U.S. Patent Nos. 10,472,669, 10,662,467, 10,961,566, 10,983,113 and 10,996,219 (the "GeoMx Action"). On May 19, 2021, we filed an amended complaint additionally alleging that the GeoMx products infringe U.S. Patent Nos. 11,001,878 and 11,008,607.
District Court for the District of Delaware alleging that NanoString’s GeoMx Digital Spatial Profiler and associated instruments and reagents infringe U.S. Patent Nos. 10,472,669, 10,662,467, 10,961,566, 10,983,113 and 10,996,219 (the “GeoMx Action”). On May 19, 2021, we filed an amended complaint additionally alleging that the GeoMx products infringe U.S. Patent Nos. 11,001,878 and 11,008,607.
Third parties might illegally distribute and sell counterfeit or unfit versions of our products, which do not meet our rigorous manufacturing, distribution and quality standards. As we expand our business internationally, we expect to encounter counterfeit versions of our products, particularly our consumables.
Third parties might illegally distribute and sell counterfeit or unfit versions of our products, which do not meet our rigorous manufacturing, distribution and quality standards. As we expand our business internationally, we expect to encounter counterfeit versions of our products, including our consumables.
Conversely, if genome sequencing falls out of favor as a preferred approach for genomic research, whether through the development of alternative solutions or real or perceived problems with sequencing itself or if our products are not compatible with third-party sequencers used by our customers or potential customers, the utility of our products which are used in conjunction with third-party sequencers could be significantly impacted.
Conversely, if genome sequencing falls out of favor as a preferred approach for genomic research, whether through the development of alternative solutions or real or perceived problems with sequencing itself or if our products are not compatible with third-party sequencers used by our customers or potential customers, the utility of our products which are used in conjunction with third- 32 Table of Contents party sequencers could be significantly impacted.
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 in the Asia-Pacific region.
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, including in the Asia-Pacific region.
In the European Union (“EU”), under Regulation (EU) No 2017/746 (“EU IVDR”), RUO products which are intended to be used for research purposes, without any medical objective, are not regarded as devices for performance evaluation used in diagnostic procedures. More importantly, the EU IVDR expressly provides that products intended for RUO are excluded from the scope of the Regulation.
In the EU, under Regulation (EU) No 2017/746 (“EU IVDR”), RUO products which are intended to be used for research purposes, without any medical objective, are not regarded as devices for performance evaluation used in diagnostic procedures. More importantly, the EU IVDR expressly provides that products intended for RUO are excluded from the scope of the Regulation.
In a patent or other intellectual property infringement proceeding, a court may decide that a patent or other intellectual property right of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims or other intellectual property narrowly or refuse to stop the other party from using the technology at issue on the grounds that our patents or other intellectual property do not cover the technology in question.
In a patent or other intellectual property infringement proceeding, a court may decide that a patent or other intellectual property right of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims or other intellectual property narrowly or refuse to stop the other party from using the technology at issue on the 53 Table of Contents grounds that our patents or other intellectual property do not cover the technology in question.
If we fail to maintain the patents and patent applications covering our products or services, we may not be able to stop a competitor from marketing products or services that are the same as or similar to our products or services, which would have a material adverse effect on our business, financial condition and results of operations.
If we or our patent licensors fail to maintain the patents and patent applications covering our products, services or technology, we may not be able to stop a competitor from marketing products, services or technologies that are the same as or similar to our products, services or technologies which would have a material adverse effect on our business, financial condition and results of operations.
Our effective income tax rate could be adversely affected by various factors, including, but not limited to, changes in the mix of earnings in tax jurisdictions with different statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in existing tax policies, laws, regulations or rates, changes in the level of non-deductible expenses (including share-based compensation), changes in the location of our operations, changes in our future levels of research and development spending, changes in tax benefits from share based compensation, mergers and acquisitions or the result of examinations by various tax authorities.
Our effective income tax rate could be adversely affected by various factors, including, but not limited to, changes in the mix of earnings in tax jurisdictions with different statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in the level of non-deductible expenses (including share-based compensation), changes in the location of our operations, changes in our future levels of research and development spending, changes in tax benefits from share based compensation, mergers and acquisitions or the result of examinations by various tax authorities.
Our products may not compete favorably or be successful in the face of increasing competition from products and technologies introduced by our existing competitors, companies entering our markets or developed by our customers internally.
Our products may not compete favorably or be successful in the face of increasing competition from products and technologies introduced by our existing competitors, companies entering our segments or developed by our customers internally.
Finally, the Organization for Economic Co-Operation and Development has released guidance and blueprints covering various topics, including a global minimum effective tax rate on certain corporate groups known as “Pillar Two," and rules governing transfer pricing, country-by-country reporting, and definitional changes to permanent establishment that could ultimately impact our tax liabilities as those guidance and blueprints are potentially implemented in various jurisdictions.
In addition, the Organization for Economic Co-Operation and Development has released guidance and blueprints covering various topics, including a global minimum effective tax rate of 15% on certain corporate groups known as “Pillar Two," and rules governing transfer pricing, country-by-country reporting and definitional changes to permanent establishment that could ultimately impact our tax liabilities as those guidance and blueprints are potentially implemented in various jurisdictions.
Therefore, it is possible further tariffs may be imposed that could cover imports of the export or sale of our instruments and/or consumables, or our business may be adversely impacted by retaliatory trade measures taken by China or other countries, which could materially 48 Table of Contents harm our business, financial condition and results of operations.
Therefore, it is possible further tariffs may be imposed that could cover imports of the export or sale of our instruments and/or consumables, or our business may be adversely impacted by retaliatory trade measures taken by China or other countries, which could materially harm our business, financial condition and results of operations.
If we are unable to successfully obtain rights to necessary third-party intellectual property rights, we may not be able to develop, manufacture or commercialize our current and/or future products or technologies, which could have a material adverse effect on our business, financial condition and results of operations.
If we are unable to successfully license or acquire necessary third-party intellectual property rights, we may not be able to develop, manufacture or commercialize our current and/or future products or technologies, which could have a material adverse effect on our business, financial condition and results of operations.
Our trademarks or trade names may be infringed, circumvented, declared generic or determined to be violating or infringing on other marks. 57 Table of Contents Our solutions contain third-party open source software components and failure to comply with the terms of the underlying open source software licenses could restrict our ability to sell our products.
Our trademarks or trade names may be infringed, circumvented, declared generic or determined to be violating or infringing on other marks. Our solutions contain third-party open source software components and failure to comply with the terms of the underlying open source software licenses could restrict our ability to sell our products.
This is particularly true for the largest research centers and labs who are continually testing and trying new technologies, whether from a third-party vendor or developed internally.
This is particularly true for the largest research centers and labs which are continually testing and trying new technologies, whether from a third-party vendor or developed internally.
In particular, a failure to protect our proprietary rights may allow competitors to copy our technology, which could adversely affect our pricing and market share. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our trade secret rights and related confidentiality and nondisclosure provisions.
In particular, a failure to protect our proprietary rights may allow competitors to copy our technology, which could adversely affect our pricing and market share. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our trade secret rights and related confidentiality and nondisclosure provisions, and outcomes are unpredictable.
Furthermore, any successful challenge to these patents or any other patents owned by or licensed to us after patent issuance could deprive us of rights necessary for our commercial success. Further, there can be no assurance that we will have adequate resources to enforce our patents. Patents have a limited lifespan.
Furthermore, any successful challenge to these patents or any other patents owned by or licensed to us after patent issuance could deprive us of rights necessary for our commercial success. Further, there can be no assurance that we will have adequate resources to enforce our patents.
Because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation. There could also be public 63 Table of Contents announcements of the results of hearing, motions, or other interim developments.
Because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation. There could also be public announcements of the results of hearing, motions, or other interim developments.
Under the phase-in period for these new listing rules, for companies listed on the Nasdaq Global Select Market, this disclosure requirement regarding the existence of at least one “Diverse” director applies starting on the later of August 7, 2023, or the date that the company files its proxy statement for its annual shareholder meeting during 2023, and regarding the existence of at least two “Diverse” directors applies starting on the later of August 6, 2025, or the 71 Table of Contents date that the company files its proxy statement for its annual shareholder meeting during 2025.
Under the phase-in period for these listing rules, for companies listed on the Nasdaq Global Select Market, this disclosure requirement regarding the existence of at least one “Diverse” director applies starting on the later of August 7, 2023, or the date that the company files its proxy statement for its annual shareholder meeting during 2023, and regarding the existence of at least two “Diverse” directors applies starting on the later of August 6, 2025, or the date that the company files its proxy statement for its annual shareholder meeting during 2025.
An adverse result in any litigation or administrative proceeding could put one or more of our patents or other intellectual property rights at risk of being 52 Table of Contents invalidated or interpreted narrowly, which could adversely affect our competitive business position, financial condition and results of operations.
An adverse result in any litigation or administrative proceeding could put one or more of our patents or other intellectual property rights at risk of being invalidated or interpreted narrowly, which could adversely affect our competitive business position, financial condition and results of operations.
A third party that perceives us to be a competitor may be unwilling to assign or license its intellectual property rights to us. In addition, the licensing or acquisition of third-party intellectual property rights is a competitive area, and other companies may also pursue similar strategies to license or acquire such third party’s intellectual property rights.
A third party that perceives us to be a 54 Table of Contents competitor may be unwilling to assign or license its intellectual property rights to us. In addition, the licensing or acquisition of third-party intellectual property rights is a competitive area, and other companies may also pursue similar strategies to license or acquire such third party’s intellectual property rights.
For example: • others may independently develop, manufacture and commercialize technologies or products that are similar to, or are alternatives or duplicates of any of our technologies or products without infringing, misappropriating or otherwise violating our intellectual property rights; • issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors; • it is possible that our pending patent applications or those that we may own in the future will not lead to issued patents; • our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop, manufacture and commercialize competitive products or technologies for sale in our major commercial markets; • we, or current or future collaborators, might not have been the first to make the inventions covered by the issued patent or pending patent application that we license or may own in the future; • we, or current or future collaborators, might not have been the first to file patent applications covering certain of our or their inventions; • we may not develop additional proprietary technologies that are patentable; • the patents of others may harm our business; and • we may choose not to seek patent protection for some of our proprietary technology to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such trade secrets or know-how.
For example: • others may independently develop, manufacture and commercialize products, services or technologies that are similar to or are alternatives or duplicates of any of our products, services or technologies without infringing, misappropriating or otherwise violating our intellectual property rights; • issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors; • it is possible that our pending patent applications or those that we may own in the future will not lead to issued patents or even when they issue, the scope of the claims may be narrowed; • our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop, manufacture and commercialize competitive products, services or technologies for sale in our major commercial markets; • we, or current or future licensors or collaborators, might not have been the first to make the inventions covered by the issued patent or pending patent application that we license or may own in the future; • we, or current or future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions; • we may not develop additional proprietary technologies that are patentable; • the intellectual property rights of others may harm our business; and • we may choose not to seek patent protection for some of our proprietary technology to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such trade secrets or know-how.
If we incur debt, a portion of our cash flows will be needed to satisfy our debt service obligations. In the event that additional financing is required, we may not be able to raise it on terms acceptable to us or at all.
If we incur debt, a portion of our cash flows would likely be needed to satisfy our debt service obligations. In the event that additional financing is required, we may not be able to raise it on terms acceptable to us or at all.
Our proprietary software is a crucial component of our solutions, as our software allows our end users to visualize genomic and multi-omic information provided by our instruments and reagents. Our software is generally downloadable free of charge from our website for installation and use by end users on their computer systems.
Our proprietary software is a crucial component of our solutions, as our software allows our end users to visualize genomic and multiomic information provided by our instruments and reagents. Our software is generally downloadable free of charge from our website for installation and use by end users on their computer systems.
Some of these companies may be established and may have a competitive advantage over us due to their size, capital resources and greater development, manufacturing and commercialization capabilities.
Some of these companies may have a competitive advantage over us due to their size, capital resources and greater development, manufacturing and commercialization capabilities.
Although we try to ensure that our employees and consultants do not use the intellectual property rights, proprietary information, know-how or trade secrets of others in their work for us, we may be subject to claims that we or these individuals have, inadvertently or otherwise, misappropriated the intellectual property rights or disclosed the alleged trade secrets or other proprietary information, of these former employers or customers.
Although we try to ensure that our employees and consultants do not use the intellectual property rights, proprietary information, know-how or trade secrets of others in their work for us, we may be subject to claims that we or these individuals have, inadvertently or otherwise, misappropriated the intellectual property rights or disclosed the alleged trade secrets or other proprietary information, of these former employers, clients or other third parties.
Factors that could impact our suppliers’ willingness and ability to continue to provide us with the required equipment, materials and components include shortages, alternative priorities, logistics, shipping or other distribution difficulties, disruption at or affecting our suppliers’ facilities, such as difficulties hiring and retaining adequate staffing, work stoppages or natural disasters, infectious disease, epidemics or pandemics such as COVID-19 outbreaks and resurgences, adverse weather or other conditions that affect their supply, the financial condition of our suppliers, deterioration in our relationships with these suppliers or the decision by such suppliers to introduce products that compete directly with our solutions.
Factors that could impact our suppliers’ willingness and ability to continue to provide us with the required equipment, materials and components include shortages, alternative priorities, logistics, shipping or other distribution difficulties, disruption at or affecting our suppliers’ facilities, such as difficulties hiring and retaining adequate staffing, work stoppages or natural disasters, infectious disease, epidemics or pandemics, adverse weather or other conditions that affect their supply, the financial condition of our suppliers, disagreements, disputes or deterioration in our relationships with these suppliers or the decision by such suppliers to introduce products that compete directly with our solutions.
When we assign leases or sublease to third parties, or if we vacate facilities we lease, we can 39 Table of Contents remain liable on the lease obligations for the balance of the term and we could be contingently liable if the assignee does not perform their obligations to us or third parties.
When we assign leases or sublease to third parties, or if we vacate facilities we lease, we can remain liable on the lease obligations for the balance of the term and we could be contingently liable if the assignee does not perform their obligations to us or third parties.
We will have similar burdens to overcome in foreign courts in order to successfully challenge a third-party claim of patent infringement. Our defense of any litigation or interference proceedings may fail and, even if successful, defending such claims brought against us would cause us to incur substantial expenses.
We will have similar burdens to overcome in foreign courts in order to successfully challenge a third-party claim of patent infringement. Our defense of any litigation or interference proceedings may fail and, even if successful, defending such claims brought against us would cause us to incur substantial expenses and distract our management and other employees.
Following a national referendum and subsequent legislation, the United Kingdom formally withdrew from the European Union, commonly referred to as “Brexit,” and ratified a trade and cooperation agreement governing its future relationship with the European Union. Among other things, the agreement, which became effective in 2021, addresses trade, economic arrangements, law enforcement, judicial cooperation and governance.
Following a national referendum and subsequent legislation, the United Kingdom formally withdrew from the European Union, commonly referred to as “Brexit” and ratified a trade and cooperation agreement governing its future relationship with the European Union (“EU”). Among other things, the agreement, which became effective in 2021, addresses trade, economic arrangements, law enforcement, judicial cooperation and governance.
At this time, it is unknown whether the Phase One deal will last, whether there will be sufficient progress on Phases Two and Three to lead to a further reduction in U.S.-China trade tensions and what effect the ultimate trade agreement will have on our business. There are also pressures on the U.S.
At this 49 Table of Contents time, it is unknown whether the Phase One deal will last, whether there will be sufficient progress on Phases Two and Three to lead to a further reduction in U.S.-China trade tensions and what effect the ultimate trade agreement will have on our business. There are also pressures on the U.S.
For example: • competition for shipping and air transport in the past impacted, and in the future may impact, our ability to timely deliver products to our customers; • energy shortages and other issues in the past impacted, and in the future may impact, factory production of upstream components utilized by us or our suppliers; 32 Table of Contents • shortages of non-10x sequencing consumables in the past impacted, and in the future may impact, the workflows of our customers and their ability to complete their experiments; • the storage and distribution of COVID-19 vaccinations in the past impacted, and in the future may impact, the availability of cold storage for components and materials used by us and our customers in connection with our products; • plastic component shortages, including of pipette tips utilized by our customers to complete their experiments, in the past impacted, and in the future may impact, the availability of plastic components used by us and our customers in connection with our products; • shortages of certain chemicals, oils and beads utilized in our microfluidic chips in the past impacted, and in the future may impact, our ability to carry a buffer of inventory to safeguard against continuous significant shortages of such materials; and • semiconductor chip shortages in the past impacted, and in the future may impact, the availability of semiconductor chips utilized in our instruments and in the manufacture of certain of our products.
For example: • competition for shipping and air transport in the past impacted, and in the future may impact, our ability to timely deliver products to our customers; • energy shortages and other issues in the past impacted, and in the future may impact, factory production of upstream components utilized by us or our suppliers; • shortages of non-10x sequencing consumables in the past impacted, and in the future may impact, the workflows of our customers and their ability to complete their experiments; • plastic component shortages, including of pipette tips utilized by our customers to complete their experiments, in the past impacted, and in the future may impact, the availability of plastic components used by us and our customers in connection with our products; • shortages of certain chemicals, oils and beads utilized in our microfluidic chips in the past impacted, and in the future may impact, our ability to carry a buffer of inventory to safeguard against continuous significant shortages of such materials; • semiconductor chip shortages in the past impacted, and in the future may impact, the availability of semiconductor chips utilized in our instruments and in the manufacture of certain of our products; and • the storage and distribution of vaccines in the past impacted, and in the future may impact, the availability of cold storage for components and materials used by us and our customers in connection with our products.
We and our third-party manufacturers may not be able to launch new products on time, transition manufacturing of existing products to new manufacturers, transition our manufacturing capabilities to a new location or transition manufacturing of any additional consumables in-house without manufacturing def ects.
We and our third-party manufacturers may not be able to launch new products or new versions of existing products on time, transition manufacturing of existing products to new manufacturers, transition our manufacturing capabilities to a new location or transition manufacturing of any additional consumables in-house without manufacturing def ects or other issues.
We cannot predict the number, timing or size of future investments, acquisitions or dispositions or the effect that any such transactions might have on our operating results. 41 Table of Contents Seasonality may cause fluctuations in our revenue and results of operations.
We cannot predict the number, timing or size of future investments, acquisitions or dispositions or the effect that any such transactions might have on our operating results. Seasonality may cause fluctuations in our revenue and results of operations.
The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.
The FTC expects a company’s data security measures to be reasonable and appropriate in light of the 60 Table of Contents sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.
A finding of infringement, or an unfavorable interference or derivation proceedings outcome could prevent us from developing, manufacturing and/or commercializing our products or technologies, or force us to cease some or all of our business operations, 62 Table of Contents which could materially harm our business.
A finding of infringement or an unfavorable interference or derivation proceedings outcome could prevent us from developing, manufacturing and/or commercializing our products or technologies, or force us to cease some or all of our business operations, which could materially harm our business.
Our board of directors currently includes two female directors, and three directors from an “underrepresented community.” However, if our current or future female or other “Diverse” directors no longer serve on our board of directors prior to the applicable dates under the phase-in period for the new Nasdaq listing rules, we could be out of compliance with the new Nasdaq listing rules.
Our board of directors currently includes two female directors, and three directors from an “underrepresented community.” However, if our current or future female or other “Diverse” directors no longer serve on our board of directors prior to the applicable dates for the new Nasdaq listing rules, we could be out of compliance with the Nasdaq listing rules.
While we use commonly accepted security measures, trade secret violations are often a matter of state law in the United States, and the criteria for protection of trade 54 Table of Contents secrets can vary among different jurisdictions.
While we use commonly accepted security measures, trade secret violations are often a matter of state law in the United States, and the criteria for protection of trade secrets can vary among different jurisdictions.
Further, the exercise of March-In rights, the requirement that we grant additional licenses to third parties, or the 61 Table of Contents termination of our license of the relevant technologies could materially adversely affect our business, operations and financial condition.
Further, the exercise of March-In Rights, the requirement that we grant additional licenses to third parties, or the termination of our license of the relevant technologies could materially adversely affect our business, operations and financial condition.
For example, according to the FTC, failing to take appropriate steps to keep consumers’ personal information secure can constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act.
For example, according to the FTC, failing to take appropriate steps to keep consumers’ personal information secure can constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act.
If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products, services and technology.
If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products, 52 Table of Contents services and technology.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn January 2021, we completed the acquisition of certain real property located in Pleasanton, California for an aggregate cash purchase price of $29.4 million. We intend to utilize this site to accommodate our future growth requirements and construction is expected to be completed on an approximately 150,000 square feet facility located on this site in the near future.
Biggest changeIn January 2021, we completed the acquisition of certain real property located in Pleasanton, California for an aggregate cash purchase price of $29.4 million which become operational in April 2023. The property is comprised of approximately 150,000 square feet to support our manufacturing and operations functions.
Item 2. Properties. Our global corporate headquarters, research and development facilities and manufacturing and distribution centers are located in Pleasanton, California, where we lease approximately 307,000 square feet of space under leases expiring between December 2023 and June 2033, as well as a manufacturing center in Singapore. Including the Pleasanton leases, we lease approximately 396,000 square feet globally.
Item 2. Properties. Our global corporate headquarters, research and development facilities, and manufacturing and distribution centers are located in Pleasanton, California, where we lease approximately 338,000 square feet of space under leases expiring between December 2024 and June 2033, as well as a manufacturing and distribution center in Singapore and a manufacturing center in Taiwan.
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Including the Pleasanton leases, we lease approximately 470,000 square feet globally. In 2023, we vacated some of our leased office space located in Pleasanton, California comprising of approximately 43,000 square feet for the remaining lease term through 2026 and entered into agreements to sublease some of the vacated office space.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFor further discussion of the risks relating to intellectual property and our pending litigation, see the section titled “ Risk Factors—Risks related to litigation and our intellectual property ” under Item 1A. Item 4. Mine Safety Disclosures. Not applicable. 73 Table of Contents PART II
Biggest changeFor further discussion of the risks relating to intellectual property and our pending litigation, see the section titled “ Risk Factors—Risks related to litigation and our intellectual property ” under Item 1A. Item 4. Mine Safety Disclosures. Not applicable. 75 Table of Contents PART II
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We are regularly subject to lawsuits, claims, arbitration proceedings, administrative actions and other legal and regulatory proceedings involving intellectual property disputes, commercial disputes, competition and other matters, and we may become subject to additional types of lawsuits, claims, arbitration proceedings, administrative actions, government investigations and legal and regulatory proceedings in the future and as our business grows, including proceedings related to product liability or our acquisitions, securities issuances or our business practices, including public disclosures about our business.
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Item 3. Legal Proceedings. See Note 7, Commitments and Contingencies, to the consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K for information regarding certain legal proceedings in which we are involved.
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Our success depends in part on our non-infringement of the patents or proprietary rights of third parties. In the past, third parties have asserted and may in the future assert that we are employing their proprietary technology without authorization.
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We have been involved in multiple patent litigation matters and other proceedings in the past and we expect that given the litigious history of our industry and the high profile of operating as a public company, third parties may claim that our products infringe their intellectual property rights.
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We have also initiated litigation to defend our technology including technology developed through our significant investments in research and development. It is our general policy not to out-license our patents but to protect our sole right to own and practice them.
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There are inherent uncertainties in these legal matters, some of which are beyond management’s control, making the ultimate outcomes difficult to predict. Nanostring On May 6, 2021, we filed suit against Nanostring Technologies, Inc. ("Nanostring") in the U.S. District Court for the District of Delaware alleging that Nanostring's GeoMx Digital Spatial Profiler and associated instruments and reagents infringe U.S.
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Patent Nos. 10,472,669, 10,662,467, 10,961,566, 10,983,113 and 10,996,219 (the "GeoMx Action"). On May 19, 2021, we filed an amended complaint additionally alleging that the GeoMx products infringe U.S. Patent Nos. 11,001,878 and 11,008,607. On May 4, 2022, we filed an amended complaint in the GeoMx Action additionally alleging that the GeoMx products infringe U.S.
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Patent No. 11,293,917 and withdrawing our claim of infringement of U.S. Patent No. 10,662,467. Nanostring filed its answer to the GeoMx Action on May 18, 2022. Discovery is in progress. A Markman hearing is scheduled for February 2023 and trial is scheduled for November 2023. On February 28, 2022, we filed a second suit against Nanostring in the U.S.
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District Court for the District of Delaware alleging that Nanostring's CosMx Spatial Molecular Imager and associated instruments, reagents and services infringe U.S. Patent Nos. 10,227,639 and 11,021,737 (the "CosMx Action"). On May 12, 2022, we filed an amended complaint in the CosMx Action additionally alleging that the CosMx products infringe U.S. Patent Nos. 11,293,051, 11,293,052 and 11,293,054.
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Nanostring filed 72 Table of Contents its answer to the CosMx Action on May 26, 2022. Discovery is in progress. A Markman hearing is scheduled for July 2023 and trial is scheduled for June 2024. On August 16, 2022, Nanostring filed a counterclaim in the CosMx Action alleging that our Visium products infringe U.S. Patent No. 11,377,689.
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We filed our answer to Nanostring's counterclaim in the CosMx Action on August 30, 2022. On November 23, 2022, we moved to sever claims relating to NanoString’s assertion of U.S. Patent No. 11,377,689 and consolidate those claims with the patent case NanoString filed against us on October 20, 2022 (discussed below). On January 24, 2023, the Court granted our motion.
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On October 20, 2022, Nanostring filed suit against us in the U.S. District Court for the District of Delaware alleging that our Visium products infringe U.S. Patent No. 11,473,142, a continuation of U.S. Patent No. 11,377,689 (the "Nanostring Action"). On January 24, 2023, the Court severed Nanostring’s claims with respect to U.S.
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Patent No. 11,377,689 from the CosMx Action and consolidated those claims with this action. Discovery is in progress; no case schedule has been set. We believe Nanostring's claim in the Nanostring Action is meritless and we intend to vigorously defend ourselves.
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On March 9, 2022, we filed suit in the Munich Regional Court in Germany alleging that Nanostring's CosMx Spatial Molecular Imager and associated instruments, reagents and services infringe EP Patent No. 2794928B1 (the "928 Patent") (the "Germany CosMx Action"). Nanostring filed its statement of defense to the Germany CosMx Action on August 26, 2022.
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A hearing on infringement is scheduled for March 2023 and a decision is expected around May 2023. On July 29, 2022, Nanostring filed a nullity action with the German Federal Patent Court challenging the validity of the 928 Patent.
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On February 10, 2023, the Federal Patent Court issued a preliminary opinion upholding the validity of certain claims of the 928 Patent directed to in situ analysis. A hearing on validity is scheduled before the Federal Patent Court in May 2024 and a decision is expected around the end of 2024.
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Vizgen In May 2022, we filed suit against Vizgen, Inc. ("Vizgen") in the U.S. District Court for the District of Delaware alleging that Vizgen’s MERSCOPE Platform and workflow and Vizgen’s Lab Services program, including associated instruments and reagents, infringe U.S. Patent Nos. 11,021,737, 11,293,051, 11,293,052, 11,293,054 and 11,299,767.
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On July 25, 2022, Vizgen filed a motion to dismiss our claims for willful and indirect infringement, which the Court denied on September 19, 2022. Discovery is in progress. A Markman hearing is scheduled for July 2023 and trial is scheduled for July 2024.
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On August 30, 2022, Vizgen filed its answer and counterclaims alleging that our Xenium product infringes U.S. Patent No. 11,098,303. Vizgen also filed counterclaims alleging that we tortiously interfered with Vizgen's contractual and business relationship with Harvard and that we engaged in unfair practices under Massachusetts state law.
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On October 27, 2022, we filed a partial answer and motion to dismiss the infringement counterclaim and the tort counterclaims. On February 2, 2023, our motion to dismiss was denied. We believe Vizgen’s claims are meritless and intend to vigorously defend ourselves. Parse On August 24, 2022, we filed suit against Parse Biosciences, Inc. ("Parse") in the U.S.
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District Court for the District of Delaware alleging that Parse’s Evercode Whole Transcriptomics and ATAC-seq products infringe U.S. Patent Nos. 10,155,981, 10,697,013, 10,240,197, 10,150,995, 10,619,207, and 10,738,357. On October 17, 2022, Parse filed a motion to dismiss alleging that the asserted claims are directed to patent ineligible subject matter.
Removed
The Court held a hearing on the motion to dismiss on November 22, 2022, and supplemental briefing was submitted on December 15, 2022. A ruling on the motion to dismiss is expected around March 2023. Discovery has not yet commenced and no case schedule has been set.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe stockholder returns shown on the graph below are based on historical results and are not indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns. 74 Table of Contents COMPARISON OF CUMULATIVE TOTAL RETURN among 10x Genomics, Inc., the Nasdaq Composite Index and the Nasdaq Biotechnology Composite Index Cumulative Total Return September 12, 2019 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 10x Genomics, Inc. $ 100 $ 144.55 $ 268.44 $ 282.39 $ 69.08 Nasdaq Composite Index 100 109.50 157.28 190.92 127.73 Nasdaq Biotechnology Composite Index $ 100 $ 115.79 $ 145.53 $ 144.61 $ 128.83 Securities Authorized for Issuance under Equity Compensation Plans The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2023 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2022.
Biggest changeThe stockholder returns shown on the graph below are based on historical results and are not indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns. 76 Table of Contents COMPARISON OF CUMULATIVE TOTAL RETURN among 10x Genomics, Inc., the Nasdaq Composite Index and the Nasdaq Biotechnology Composite Index Cumulative Total Return September 12, 2019 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 10x Genomics, Inc. $ 100 $ 144.55 $ 268.44 $ 282.39 $ 69.08 $ 106.09 Nasdaq Composite Index 100 109.50 157.28 190.92 127.73 183.19 Nasdaq Biotechnology Composite Index $ 100 $ 115.79 $ 145.53 $ 144.61 $ 128.83 $ 133.65 Securities Authorized for Issuance under Equity Compensation Plans The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2023 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2023.
An investment of $100 is assumed to have been made in our Class A common stock and each index at market close on September 12, 2019 (the first day of trading of our Class A Common Stock on the Nasdaq Global Select Market) and its relative performance is tracked through December 31, 2022.
An investment of $100 is assumed to have been made in our Class A common stock and each index at market close on September 12, 2019 (the first day of trading of our Class A Common Stock on the Nasdaq Global Select Market) and its relative performance is tracked through December 31, 2023.
Market Information Our Class A common stock is listed on the Nasdaq Global Select Market under the symbol “TXG.” Holders of Common Stock As of January 31, 2023, there were 41 holders of record of our Class A common stock and 21 holders of record of our Class B common stock.
Market Information Our Class A common stock is listed on the Nasdaq Global Select Market under the symbol “TXG.” Holders of Common Stock As of January 31, 2024, there were 38 holders of record of our Class A common stock and 19 holders of record of our Class B common stock.
Sales of Unregistered Securities None. Use of Proceeds None. Issuer Purchases of Equity Securities None. Item 6. [Reserved] 75 Table of Contents
Sales of Unregistered Securities None. Use of Proceeds None. Issuer Purchases of Equity Securities None.

Item 7. Management's Discussion & Analysis

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

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Biggest changeFor a discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2021. 82 Table of Contents Year Ended December 31, (in thousands) 2022 2021 2020 Revenue $ 516,409 $ 490,490 $ 298,845 Cost of revenue 120,386 74,091 58,468 Gross profit 396,023 416,399 240,377 Operating expenses: Research and development 265,667 211,752 123,375 In-process research and development — — 447,548 Selling, general and administrative 298,300 257,560 202,326 Accrued contingent liabilities — (660) 1,270 Total operating expenses 563,967 468,652 774,519 Loss from operations (167,944) (52,253) (534,142) Other income (expense): Interest income 6,647 206 1,532 Interest expense (476) (866) (1,682) Other (expense) income, net (198) (802) 1,337 Loss on extinguishment of debt — — (1,521) Total other income (expense) 5,973 (1,462) (334) Loss before provision for income taxes (161,971) (53,715) (534,476) Provision for income taxes 4,029 4,508 8,255 Net loss $ (166,000) $ (58,223) $ (542,731) Revenue Year Ended December 31, Change (dollars in thousands) 2022 2021 $ % Instruments $ 72,396 $ 64,474 $ 7,922 12 % Consumables 435,588 418,740 16,848 4 % Services 8,425 7,276 1,149 16 % Total revenue $ 516,409 $ 490,490 $ 25,919 5 % Revenue increased $25.9 million, or 5%, for the year ended December 31, 2022 as compared to year ended December 31, 2021.
Biggest changeFor a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022. 83 Table of Contents Year Ended December 31, (in thousands) 2023 2022 2021 Revenue $ 618,727 $ 516,409 $ 490,490 Cost of revenue 209,414 120,386 74,091 Gross profit 409,313 396,023 416,399 Operating expenses: Research and development 270,332 265,667 211,752 In-process research and development 60,980 — — Selling, general and administrative 343,330 298,300 257,560 Accrued contingent liabilities — — (660) Total operating expenses 674,642 563,967 468,652 Loss from operations (265,329) (167,944) (52,253) Other income (expense): Interest income 16,906 6,647 206 Interest expense (33) (476) (866) Other expense, net (307) (198) (802) Total other income (expense) 16,566 5,973 (1,462) Loss before provision for income taxes (248,763) (161,971) (53,715) Provision for income taxes 6,336 4,029 4,508 Net loss $ (255,099) $ (166,000) $ (58,223) Revenue Year Ended December 31, Change 2023 2022 $ % Instruments Chromium $ 47,866 $ 58,552 $ (10,686) (18) % Spatial 75,605 13,844 61,761 446 % Total instruments revenue 123,471 72,396 51,075 71 % Consumables Chromium 420,316 400,433 19,883 5 % Spatial 59,237 35,155 24,082 69 % Total consumables revenue 479,553 435,588 43,965 10 % Services 15,703 8,425 7,278 86 % Total revenue $ 618,727 $ 516,409 $ 102,318 20 % Revenue increased $102.3 million, or 20%, for the year ended December 31, 2023 as compared to year ended December 31, 2022.
Selling, general and administrative expense primarily consists of costs related to the selling and marketing of our products, including sales incentives and advertising expenses and costs associated with our finance, accounting, legal (excluding accrued contingent liabilities), human resources and administrative personnel.
Selling, general and administrative. Selling, general and administrative expense primarily consists of costs related to the selling and marketing of our products, including sales incentives and advertising expenses and costs associated with our finance, accounting, legal (excluding accrued contingent liabilities), human resources and administrative personnel.
Investing activities The net cash used in investing activities of $350.9 million in the year ended December 31, 2022 was due to purchases of marketable securities of $282.9 million, purchases of property and equipment of $131.7 million and payment of acquisition-related holdback cash and contingent consideration of $4.0 million, partially offset by proceeds from sales and maturities of marketable securities of $49.1 million and $18.5 million, respectively.
The net cash used in investing activities of $350.9 million in the year ended December 31, 2022 was due to purchases of marketable securities of $282.9 million, purchases of property and equipment of $131.7 million and payment of acquisition-related holdback cash and contingent consideration of $4.0 million, partially offset by proceeds from sales and maturities of marketable securities of $49.1 million and $18.5 million, respectively.
Financing activities The net cash provided by financing activities of $15.8 million in the year ended December 31, 2022 was primarily from proceeds of $21.2 million from the issuance of common stock from the exercise of stock options and employee stock purchase plan purchases partially offset by payments on financing arrangements of $5.4 million.
The net cash provided by financing activities of $15.8 million in the year ended December 31, 2022 was primarily from proceeds of $21.2 million from the issuance of common stock from the exercise of stock options and employee stock purchase plan purchases partially offset by payments on financing arrangements of $5.4 million.
Our commercial product portfolio leverages our Chromium X Series and Chromium Connect, which we refer to as “Chromium instruments,” our Visium CytAssist, an instrument designed to simplify the Visium solution workflow by facilitating the transfer of transcriptomic probes from standard glass slides to Visium slides, our Xenium Analyzer, an instrument designed for fully automated high-throughput analysis of cells in their tissue environment, and our proprietary microfluidic chips, slides, reagents and other consumables for our Chromium, Visium and Xenium solutions, which we refer to as “consumables.” We bundle our software with these products to guide customers through the workflow, from sample preparation through analysis and visualization.
Our commercial product portfolio leverages our Chromium X Series and Chromium Connect instruments, which we refer to as “Chromium instruments,” our Visium CytAssist, an instrument designed to simplify the Visium solution workflow by facilitating the transfer of transcriptomic probes from standard glass slides to Visium slides, and our Xenium Analyzer, an instrument designed for fully automated high-throughput analysis of cells in their tissue environment, which we refer to as “Spatial instruments,” and our proprietary microfluidic chips, slides, reagents and other consumables for our Chromium, Visium and Xenium solutions, which we refer to as “consumables.” We bundle our software with these products to guide customers through the workflow, from sample preparation through analysis and visualization.
Each of our consumables solutions is designed to allow researchers to study a different aspect of biology, such as DNA, RNA, protein or epigenetics, at a resolution and scale that may be impractical or impossible using existing tools. As each of our solutions has been introduced, they have been initially purchased by a small number of early adopters.
Each of our consumables solutions is designed to allow researchers to study a different aspect of biology, such as DNA, RNA, protein or epigenetics, at a resolution and scale that may be impractical or impossible using previously existing tools. As each of our solutions has been introduced, they have been initially purchased by a small number of early adopters.
Revenue is recorded net of discounts, distributor commissions and sales taxes collected on behalf of governmental authorities. Customers are invoiced generally upon shipment, or upon order for services, and payment is typically due within 45 days. Cash received from customers in advance of product shipment or providing services is recorded as a liability.
Revenue is recorded net of discounts, distributor commissions and sales taxes collected on behalf of governmental authorities. Customers are invoiced generally upon shipment, or upon order for services, and payment is typically due within 30 days. Cash received from customers in advance of product shipment or providing services is recorded as a liability.
Our gross profit and gross margins in future periods are expected to fluctuate from quarter to quarter and will depend on a variety of factors, including: market conditions that may impact our pricing; sales mix changes among 80 Table of Contents consumables, instruments and services; product mix changes between established products and new products; impacts of inflation and increased supply chain costs; excess and obsolete inventories; royalties; our cost structure for manufacturing operations relative to volume; and product warranty obligations.
Our gross profit and gross margins in future periods are expected to fluctuate from quarter to quarter and will depend on a variety of factors, including: market conditions that may impact our pricing; sales mix changes among consumables, instruments and services; product mix changes between established products and new products; impacts of inflation and increased supply chain costs; excess and obsolete inventories; royalties; our cost structure for manufacturing operations relative to volume; and product warranty obligations.
Our products cover a wide variety of applications and allow researchers to analyze biological systems at fundamental resolution and on massive scale, such as at the single cell level for millions of cells. Customers purchase instruments and consumables from us for use in their experiments.
Our products cover a wide variety of applications and allow researchers to analyze biological systems at fundamental resolutions and on massive scale, such as at the single cell level for millions of cells. Customers purchase instruments and consumables from us for use in their experiments.
To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. 86 Table of Contents We believe that the accounting estimates described below involve a significant degree of judgment and complexity.
To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. 88 Table of Contents We believe that the accounting estimates described below involve a significant degree of judgment and complexity.
Our integrated platform solutions include instruments, consumables and software for analyzing biological systems at a resolution and scale that matches the complexity of biology. We have launched multiple products that enable researchers to understand and interrogate biological analytes in their full biological context.
Our integrated solutions include instruments, consumables and software for analyzing biological systems at resolution and scale that matches the complexity of biology. We have launched multiple products that enable researchers to understand and interrogate biological analytes in their full biological context.
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” under Part I, Item 1A above. Overview We are a life science technology company focused on building innovative products to interrogate, understand and master biology.
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” under Part I, Item 1A above. Overview We are a life sciences technology company focused on building innovative products and solutions to interrogate, understand and master biology.
Accrued contingent liabilities In 2021 and 2020, accrued contingent liabilities were comprised of the original charge, estimated royalties and interest charges primarily related to our litigation with Bio-Rad Laboratories, Inc. We did not incur any accrued contingent liabilities in 2022.
Accrued contingent liabilities In 2021, accrued contingent liabilities were comprised of the original charge, estimated royalties and interest charges primarily related to our litigation with Bio-Rad Laboratories, Inc. We did not incur any accrued contingent liabilities in 2023 and 2022.
Research and development expense primarily consists of personnel and related costs, independent contractor costs, laboratory supplies, equipment maintenance prototype and materials expenses, amortization of developed technology and intangibles and allocated costs including facilities and information technology. We plan to continue to invest in our research and development efforts, including hiring additional employees, to enhance existing products and develop new products.
Research and development expense primarily consists of personnel and related costs, independent contractor costs, laboratory supplies, equipment maintenance prototype and materials expenses, amortization of developed technology and intangibles and allocated costs including facilities and information technology. We plan to continue to invest in our research and development efforts to enhance existing products and develop new products.
Our ability to successfully address the factors below is subject to various risks and uncertainties, including those described under the heading “ Risk Factors .” Instrument sales Management focuses on instrument sales as an indicator of current business success and a leading indicator of likely future sales of consumables.
Our ability to successfully address the factors below is subject to various risks and uncertainties, including those described under the heading “ Risk Factors .” 79 Table of Contents Instrument sales Management focuses on instrument sales as an indicator of current business success and a leading indicator of likely future sales of consumables.
Revenue is recognized net of any sales incentive, distributor rebates and commissions and any taxes collected from customers. Instrument service agreements are typically entered into for a one-year term, with the coverage period beginning after the expiration of the standard one-year warranty period. Revenue from the sale of instrument service agreements are recognized ratably over the coverage period.
Revenue is recognized net of any sales incentive, distributor rebates and commissions and any taxes collected from customers. Instrument service agreements are typically entered into for a one-year term, with the coverage period beginning after the expiration of the standard one-year warranty period.
Inventory Inventory is recorded at the lower of cost, determined on a first-in, first-out basis, or net realizable value. We use judgment to analyze and determine if the composition of our inventory is obsolete, slow-moving or unsalable and frequently review such determinations.
Inventory Inventory is recorded at the lower of cost, determined on a first-in, first-out basis, or net realizable value. We use judgment to analyze and determine if the composition of our inventory is obsolete, slow-moving, unsalable or otherwise carried above the net realizable value and frequently review such determinations.
Results of Operations In this section, we discuss the results of our operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Results of Operations In this section, we discuss the results of our operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
The revenue contribution from these and other consumable products has varied and is expected to vary on a quarterly basis due to several factors, including the publication of scientific papers demonstrating the value of the consumables, the availability of grants to fund research, budgetary timing and our introduction of new product features and new consumables offerings.
The revenue contribution from these and other consumable products has varied and is expected to vary on a quarterly basis due to several factors, including the publication of scientific papers demonstrating the value of the consumables, the availability of grants to fund research, budgetary timing, our introduction of new product features and new consumables offerings and our own manufacturing capacity or the capacity of our partners.
Cost of revenue, gross profit and gross margin Cost of revenue. Cost of revenue primarily consists of manufacturing costs incurred in the production process including personnel and related costs, costs of component materials, manufacturing overhead, packaging and delivery costs and allocated costs including facilities and information technology.
Cost of revenue primarily consists of manufacturing costs incurred in the production process including personnel and related costs, costs of component materials, manufacturing overhead, packaging and delivery costs and allocated costs including facilities and information technology.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change attributes, such as research tax credits, to offset its post-change income may be limited.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and other pre-change attributes, such as tax credits, to offset its post-change income may be limited.
The increase was primarily due to interest income generated from our cash equivalents and marketable securities during the year ended December 31, 2022 and an increase in interest rates.
The increase was primarily due to interest income generated from our cash equivalents and marketable securities during the year ended December 31, 2023 reflecting an increase in interest rates.
We have experienced a history of losses and a lack of future taxable income would adversely affect our ability to utilize these NOLs and research and development credit carryforwards. We currently maintain a full valuation allowance against these tax assets.
We have experienced a history of losses and a lack of future taxable income would adversely affect our ability to utilize these NOL and tax credit carryforwards. We currently maintain a full valuation allowance against these tax assets.
Our revenue is subject to fluctuation based on the foreign currency in which our products are sold, principally for sales denominated in the euro. Our revenue from consumables includes sales of our Chromium, Visium and Xenium consumable products. Our consumables are designed to work exclusively with our instruments.
Our revenue is subject to fluctuation based on the foreign currency in which our products are sold, principally for sales denominated in the euro, Great British pound and Japanese yen. Our revenue from consumables includes sales of our Chromium, Visium and Xenium consumable products. Our consumables are designed to work exclusively with our instruments.
During the year ended December 31, 2022, we issued market-based performance stock awards ("PSAs") comprising of performance stock options and performance restricted stock units.
During the years ended December 31, 2023 and 2022, we issued market-based performance stock awards ("PSAs") comprising of performance stock options and performance restricted stock units.
We write down specifically identified unusable, obsolete, slow-moving or known unsalable inventory in the period that it is first recognized by using a number of factors including product expiration dates, open and unfulfilled orders and sales forecasts.
We write down specifically identified unusable, obsolete, slow-moving or known unsalable inventory and inventory otherwise carried above the net realizable value in the period that it is first recognized by using a number of factors including product expiration dates, open and unfulfilled orders and sales forecasts.
Revenue contribution from our Single Cell Gene Expression and Single Cell ATAC consumables decreased as a percentage of overall consumables revenue while revenue contribution from our Single Cell Immune Profiling, Single Cell Multiome ATAC+Gene Expression solution and Visium consumables increased as a percentage of overall consumables revenue for the year ended December 31, 2022.
Revenue contribution from our Single Cell Gene Expression, Single Cell Multiome ATAC+Gene Expression and Single Cell Immune Profiling consumables decreased as a percentage of overall consumables revenue while revenue contribution from our Single Cell Gene Expression Flex, Single Cell ATAC and Visium and Xenium consumables increased as a percentage of overall consumables revenue for the year ended December 31, 2023.
As of December 31, 2022, we had an accumulated deficit of $1.0 billion and cash and cash equivalents and marketable securities totaling $430.0 million. We expect to continue to incur significant expenses for the foreseeable future and to incur operating losses in the near term.
As of December 31, 2023, we had an accumulated deficit of $1.3 billion and cash and cash equivalents and marketable securities totaling $388.7 million. We expect to continue to incur significant expenses for the foreseeable future and to incur operating losses in the near term.
In addition, certain attributes attributable to ReadCoor are subject to annual limitations as a result of our acquisition of ReadCoor, which constituted an ownership change of ReadCoor. Such limitations may result in expiration of a portion of our net operating loss carryforwards or other tax attributes before utilization.
In addition, certain ReadCoor tax attributes are subject to annual limitations as a result of our acquisition of ReadCoor, which constituted an ownership change of ReadCoor. Such limitations may result in expiration of a portion of our NOL or tax credit carryforwards before utilization.
We completed a study through October 31, 2022 to determine whether an ownership change had occurred under Section 382 or 383 of the Code, and we determined that an ownership change occurred in 2013. As a result, our net operating losses generated through November 1, 2013 may be subject to limitation under Section 382 of the Code.
We completed a study through September 30, 2023 to determine whether an ownership change had occurred under Section 382 or 383 of the Code, and we determined that an ownership change occurred in 2013. As a result, our NOLs generated through November 1, 2013 may be subject to limitation under Section 382 of the Code.
We expect these costs to be recognized only in periods during which we complete an acquisition of assets comprised in whole or part of intellectual property for research and development. We periodically evaluate acquisitions of this nature. Selling, general and administrative.
In-process research and development. In-process research and development consists of costs incurred to acquire intellectual property for research and development. We expect these costs to be recognized, in most cases, only in periods during which we complete an acquisition of assets comprised in whole or part of intellectual property for research and development. We periodically evaluate acquisitions of this nature.
The net cash provided by financing activities of $35.3 million in the year ended December 31, 2021 was primarily from proceeds of $40.3 million from the issuance of common stock from the exercise of stock options and employee stock purchase plan purchases partially offset by payments on financing arrangements of $5.0 million.
Financing activities The net cash provided by financing activities of $13.7 million in the year ended December 31, 2023 was primarily from proceeds of $19.5 million from the issuance of common stock from the exercise of stock options and employee stock purchase plan purchases partially offset by payments on financing arrangements of $5.8 million.
We estimated the value of the PSA awards granted in the year ended December 31, 2022 to be approximately $16.0 million using a Monte Carlo simulation model, using assumptions including volatility, risk-free interest rate, cost of equity and dividends. We will recognize the compensation expense over the derived service period using the accelerated attribution method commencing on the grant date.
We estimated the value of the PSA awards granted using a Monte Carlo simulation model, using assumptions including volatility, risk-free interest rate, cost of equity and dividends. We will recognize the compensation expense over the derived service period using the accelerated attribution method commencing on the grant date.
We define cumulative instruments sold as the cumulative number of Chromium instruments, including the Chromium X Series, the Chromium Connect and the legacy Chromium Controller, Visium CytAssist instruments and Xenium instruments sold since inception. 77 Table of Contents Our quarterly instrument unit volumes can fluctuate due to a number of factors, including the procurement and budgeting cycles of many of our customers, especially government and academic institutions where unused funds may be forfeited or future budgets reduced if purchases are not made by their fiscal year end, and the purchasing patterns of international customers which vary due to procurement or budgeting cycles, holidays or other factors which may result in a disproportionate amount of their purchasing activity occurring in specific periods.
Our quarterly instrument unit volumes can fluctuate due to a number of factors, including the procurement and budgeting cycles of many of our customers, especially government and academic institutions where unused funds may be forfeited or future budgets reduced if purchases are not made by their fiscal year end, and the purchasing patterns of international customers which vary due to procurement or budgeting cycles, holidays or other factors which may result in a disproportionate amount of their purchasing activity occurring in specific periods.
The change in other income (expense), net for the year December 31, 2022 as compared to the year ended December 31, 2021 was driven by realized and unrealized losses from foreign currency rate measurement fluctuations.
Other expense, net increased by $0.1 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022 and was driven by realized and unrealized losses from foreign currency rate measurement fluctuations.
Our ability to use net operating loss carryforwards, research and development credit carryforwards and other tax attributes to reduce future taxable income and liabilities may be further limited as a result of future changes in stock ownership.
Our ability to use NOL or tax credit carryforwards to reduce future taxable income and liabilities may be further limited as a result of future changes in stock ownership.
In addition, we had state tax credit carryforwards of $46.6 million, which carry forward indefinitely. Our ability to utilize such carryforwards for income tax savings is subject to certain conditions and may be subject to certain limitations in the future due to ownership changes. As such, there can be no assurance that we will be able to utilize such carryforwards.
Our ability to utilize such carryforwards for income tax savings is subject to certain conditions and may be subject to certain limitations in the future due to ownership changes. As such, there can be no assurance that we will be able to utilize such carryforwards.
As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards or other pre-change tax attributes to offset United States federal and state taxable income may still be subject to limitations, which could potentially result in increased future tax liability to us.
As a result, if we generate taxable income, our ability to use our pre-change NOL or tax credit carryforwards to offset U.S. federal and state taxable income may still be subject to limitations, which could potentially result in increased future tax liability.
Selling, general and administrative expenses increased $40.7 million, or 16%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Selling, general and administrative expenses increased $45.0 million, or 15%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
The PSAs consist of three separate tranches and the vesting of each tranche is subject to the Class A common stock closing price being maintained at or above the predetermined share price goals of $60, $80 and $105 for each tranche, respectively, for a period of 20 consecutive trading days.
The PSAs consist of three separate tranches and the vesting of each tranche is subject to the Class A common stock closing price being maintained at or above certain 89 Table of Contents predetermined share price goals for each tranche.
However, our liquidity assumptions may prove to be incorrect, and we could exhaust our available financial resources sooner than we currently expect. We intend to continue to evaluate market conditions and may in the future pursue additional sources of funding, such as mortgage or other financing, to further enhance our financial position and to execute our business strategy.
We intend to continue to evaluate market conditions and may in the future pursue additional sources of funding, such as mortgage or other financing, to further enhance our financial position and to execute our business strategy.
We expect our expenses will increase substantially in connection with our ongoing activities, as we: • attract, hire and retain qualified personnel; • scale our technology platforms and introduce new products and services; • protect and defend our intellectual property; • acquire businesses or technologies; and • invest in processes, tools and infrastructure and facilities to support the growth of our business. 76 Table of Contents Operational Effectiveness in the COVID-19 Pandemic Environment We continue to closely monitor developments surrounding the COVID-19 pandemic including, among other developments, the potential impacts of variants.
We expect our expenses will increase in connection with our ongoing activities, as we: • attract, hire and retain qualified personnel; • scale our technology platforms and introduce new products and services; • protect and defend our intellectual property; • acquire businesses or technologies; and • invest in processes, tools and infrastructure to support the growth of our business.
The net cash used in operating activities of $21.4 million for the year ended December 31, 2021 was due primarily to a net loss of $58.2 million, net cash outflow from changes in operating assets and liabilities of $87.4 million, partially offset by stock-based compensation expense of $96.0 million, depreciation and amortization of $21.1 million and amortization of leased right-of-use assets of $7.1 million.
The net cash used in operating activities of $33.6 million for the year ended December 31, 2022 was due primarily to a net loss of $166.0 million, net cash outflow from changes in operating assets and liabilities of $39.4 million, partially offset by stock-based compensation expense of $136.8 million, depreciation and amortization of $25.4 million, amortization of leased right-of-use assets of $7.6 million, loss on disposal of property and equipment of $1.1 million and amortization of premium and accretion of discount on marketable securities, net of $0.9 million.
See Note 4 to the consolidated financial statements for further details of the above acquisitions. Key business metrics We regularly review a number of operating and financial metrics, including cumulative instruments sold and consumable pull-through, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Key business metrics We regularly review a number of operating and financial metrics, including cumulative instruments sold and total consumables reactions, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Our Chromium Connect and Xenium instruments require installation and we offer in-person training for their use. We believe cumulative instruments sold, a metric we previously referred to as our instrument installed base, is one of the indicators of our ability to drive customer adoption of our products.
Our Chromium Controller, Chromium X Series and Visium CytAssist instruments are user installable and do not require in-person training. Our Chromium Connect and Xenium instruments require installation and we offer in-person training for their use. We believe cumulative instruments sold is one of the indicators of our ability to drive customer adoption of our products.
For each of the years ended December 31, 2022, 2021 and 2020, our Single Cell Gene Expression consumables, which were introduced in 2016, were our highest selling consumables product. For the year ended December 31, 2022, the remaining consumables revenue was substantially comprised of sales of our Single Cell Immune Profiling consumables, Single Cell Multiome ATAC+Gene Expression solution and Visium.
For each of the years ended December 31, 2023, 2022 and 2021, our Single Cell Gene Expression consumables, which were introduced in 2016, were our highest selling consumables product.
Cash flow summary The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2022 2021 (in thousands) Net cash (used in) provided by: Operating activities $ (33,606) $ (21,373) Investing activities (350,887) (106,729) Financing activities 15,817 35,297 Effect of exchange rates changes on cash, cash equivalents, and restricted cash (44) 234 Net decrease in cash, cash equivalents, and restricted cash $ (368,720) $ (92,571) 85 Table of Contents Operating activities The net cash used in operating activities of $33.6 million for the year ended December 31, 2022 was due primarily to a net loss of $166.0 million, net cash outflow from changes in operating assets and liabilities of $39.4 million, partially offset by stock-based compensation expense of $136.8 million, depreciation and amortization of $25.4 million, amortization of leased right-of-use assets of $7.6 million, loss on disposal of property and equipment of $1.1 million and amortization of premium and accretion of discount on marketable securities, net of $0.9 million.
Cash flow summary The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2023 2022 (in thousands) Net cash (used in) provided by: Operating activities $ (15,197) $ (33,606) Investing activities 133,492 (350,887) Financing activities 13,669 15,817 Effect of exchange rates changes on cash, cash equivalents, and restricted cash (33) (44) Net increase (decrease) in cash, cash equivalents, and restricted cash $ 131,931 $ (368,720) 87 Table of Contents Operating activities The net cash used in operating activities of $15.2 million for the year ended December 31, 2023 was due primarily to a net loss of $255.1 million, partially offset by stock-based compensation expense of $167.0 million, depreciation and amortization of $35.5 million, net cash inflow from changes in operating assets and liabilities of $17.3 million, asset impairment charges of $9.8 million, amortization of leased right-of-use assets of $8.1 million, realized losses on sale of marketable securities of $1.7 million and other non-cash expenses of $0.4 million.
Provision for Income Taxes The Company’s provision for income taxes was $4.0 million and $4.5 million, respectively, for the year ended December 31, 2022 as compared to the year ended December 31, 2021. The provision for income taxes for the years ended December 31, 2022 and 2021 consists primarily of foreign taxes.
Provision for Income Taxes The Company’s provision for income taxes was $6.3 million and $4.0 million, respectively, for the year ended December 31, 2023 and 2022. The provision for income taxes increased by $2.3 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022. The increase was primarily due to higher foreign income.
We expect our instrument sales to continue to grow as we increase penetration in our existing markets and expand into, or offer new features and solutions that appeal to, new markets. 78 Table of Contents We plan to grow our instrument sales in the coming years through multiple strategies including expanding our sales efforts globally and continuing to enhance the underlying technology and applications for life sciences research.
We plan to grow our instrument sales in the coming years through multiple strategies including expanding our sales efforts globally and continuing to enhance the underlying technology and applications for life sciences research.
Short-term restricted cash of $2.6 million and long-term restricted cash of $5.0 million primarily serves as collateral for outstanding letters of credit for facilities. We have generated negative cumulative cash flows from operations since inception through the year ended December 31, 2022, and we have generated losses from operations since inception as reflected in our accumulated deficit of $1.0 billion.
We have generated negative cumulative cash flows from operations since inception through the year ended December 31, 2023, and we have generated losses from operations since inception as reflected in our accumulated deficit of $1.3 billion.
Additionally, our 2020 acquisitions of CartaNA and ReadCoor were largely comprised of purchases of intellectual property which were expensed as in-process research and development in the quarter during which such acquisitions occurred.
Our 2023 acquisition of certain intangible and other assets from Centrillion Technologies, Inc. and Centrillion Technology Holdings Corp. and 2020 acquisitions of CartaNA and ReadCoor were largely comprised of purchases of intellectual property which were expensed as in-process research and development in the quarter during which such acquisitions occurred or when certain technology development milestones were met.
Our federal NOLs generated after January 1, 2018, which total $708.5 million, are carried forward indefinitely, while all of our other federal NOLs and tax credit carryforwards expire beginning in 2033. As of December 31, 2022, we had state NOLs of $375.7 million, which expire beginning in 2033.
As of December 31, 2023, we had federal net operating loss (“NOL”) carryforwards of $672.3 million and federal tax credit carryforwards of $77.3 million. Our federal NOLs generated after December 31, 2017, which total $665.9 million, are carried forward indefinitely, while all of our other federal NOL and tax credit carryforwards expire beginning in 2033.
In 2020, we introduced our Chromium Connect instrument, which is an automated version of our legacy Chromium Controller instrument. We believe the automated features of the Chromium Connect will increase our addressable market by increasing utilization by biopharmaceutical customers.
In 2020, we introduced our Chromium Connect instrument, which is an automated version of our legacy Chromium Controller instrument.
The net cash outflow from operating assets and liabilities was partially offset by an increase in accrued compensation and other related benefits of $16.3 million, an increase in accounts payable of $11.1 million due to higher operational spending and timing of vendor payments, a decrease in deferred revenue of $1.5 million and a decrease in other noncurrent assets of $1.0 million.
The net cash inflow from operating assets and liabilities was partially offset by an increase in accounts receivable of $10.6 million primarily due to an increase in revenue and timing of collections, a decrease of $8.7 million due to payment of operating lease liabilities, a decrease in accounts payable of $6.0 million due to timing of vendor payments, a decrease in accrued compensation and other related benefits of $2.6 million and an increase in prepaid expenses and other current assets of $2.4 million.
We currently anticipate making aggregate capital expenditures of between approximately $60 million and $70 million during the next 12 months, the majority of which we expect to incur for construction costs of the facilities on our property in Pleasanton, California in the first half of 2023, as well as other global facilities and equipment to be used for manufacturing and research and development.
We currently anticipate making aggregate capital expenditures of between approximately $20 million and $25 million during the next 12 months, which we expect to include, among other expenditures, equipment to be used for manufacturing and research and development.
We have invested, and will continue to invest, in our manufacturing capabilities and commercial infrastructure. We expect to complete the expansion of our research and development center and manufacturing facility adjacent to our Pleasanton global headquarters in the near future.
We completed the expansion of our research and development center and manufacturing facility adjacent to our Pleasanton global headquarters in 2023.
We take a long-term view in growing and scaling our business and we regularly review acquisition and investment opportunities, and we may in the future enter into arrangements to acquire or invest in businesses, real estate, services and technologies, including intellectual property rights, and any such acquisitions or investments could significantly increase our capital needs.
Our future capital requirements will depend on many factors including our revenue growth rate, research and development efforts, investments in or acquisitions of complementary or enhancing technologies or businesses, the timing and extent of additional capital expenditures to invest in existing and new facilities, the expansion of sales and marketing and international activities, legal costs associated with defending and enforcing intellectual property rights and the introduction of new products. 86 Table of Contents We take a long-term view in growing and scaling our business and we regularly review acquisition and investment opportunities, and we may in the future enter into arrangements to acquire or invest in businesses, real estate, services and technologies, including intellectual property rights, and any such acquisitions or investments could significantly increase our capital needs.
As we expand the scale and scope of our international business activities, any changes in the United States and foreign taxation of such activities may increase our overall provision for income taxes in the future. As of December 31, 2022, we had federal net operating loss carryforwards (“NOLs”) of $717.0 million and federal tax credit carryforwards of $59.0 million.
Provision for income taxes Our provision for income taxes consists primarily of foreign taxes. As we expand the scale and scope of our international business activities, any changes in the U.S. and foreign taxation of such activities may increase our overall provision for income taxes in the future.
The increase was primarily driven by increased personnel expenses of $50.3 million, including $21.6 million in stock-based compensation expense and $2.5 million in restructuring expense, $3.1 million of higher costs for facilities and information technology to support operational expansion, partially offset by decreased outside legal expenses of $7.7 million, $3.8 million of consulting and professional services and $2.5 million of lower marketing expenses related to conferences and seminars.
The increase was primarily driven by increases in outside legal expenses of $18.1 million, personnel expenses of $14.4 million, including $14.7 million in stock-based compensation expense, $6.4 million for facilities and information technology including lease impairment charges of $2.8 million, $4.5 million of impairment charges relating to the discontinuance of a product line, and higher consulting and professional services of $1.8 million.
We expect our operating expenditures to continue to increase in 2023 and beyond as we increase our investment to support new and existing research and development projects and incentivize and retain key talent, which we expect to result in increased stock-based compensation expense in future periods.
Excluding acquisitions, we expect our operating expenditures to continue to increase in 2024 and beyond as we increase our investment in new and existing research and development projects, commercial efforts to support revenue growth and incentives to retain key talent.
We expect to incur additional selling, general and administrative expenses due to continued investment in our sales, marketing and customer service efforts to support the anticipated growth of our business. We also expect increased infrastructure costs, as well as increased costs for accounting, human resources, legal including litigation-related fees and contingency payments, insurance and investor relations.
We expect to incur additional selling, general and administrative expenses due to continued investment in our sales, marketing and customer service efforts to support the anticipated growth of our business and increased legal costs to support the protection of our intellectual property portfolio. We expect infrastructure costs including allocated facilities and information technology costs to remain flat in absolute dollars.
In 2022 and 2021, we introduced five and four new consumables products for each of these years, respectively. We intend to continue to make focused investments to increase revenue and scale operations to support the growth of our business and therefore expect expenses in this area to increase.
We intend to continue to make focused investments to increase revenue and scale operations to support the growth of our business and therefore expect expenses in this area to increase. We have invested, and will continue to invest, in our manufacturing capabilities and commercial infrastructure.
As a result of these and other initiatives, we expect research and development expense will increase in absolute dollars in future periods and vary from period to period as a percentage of revenue. In-process research and development. In-process research and development consists of costs incurred to acquire intellectual property for research and development.
As a result of these and other initiatives, we expect research and development expense will increase in absolute dollars in future periods and vary from period to period as a percentage of revenue. Having completed the expansion of our global headquarters in Pleasanton in 2023, we expect allocated facilities and information technology costs to remain relatively flat in 2024.
While we expect to continue to incur operating losses for the foreseeable future due to the investments we intend to make, we believe that our existing cash and cash equivalents and cash generated from sales of our products will be sufficient to meet our anticipated cash needs for at least the next 12 months.
We believe that our existing cash and cash equivalents and cash generated from sales of our products will be sufficient to meet our anticipated cash needs for at least the next 12 months. However, our liquidity assumptions may prove to be incorrect, and we could exhaust our available financial resources sooner than we currently expect.
Our margins are generally higher for those instruments and consumables that we sell directly to customers as compared to those that we sell through distributors. While we expect the mix of direct sales as compared to sales through distributors to remain relatively constant in the near term, we are currently evaluating increasing our direct sales capabilities in certain geographies.
Our margins are generally higher for those instruments and consumables that we sell directly to customers as compared to those that we sell through distributors.
The increase was primarily driven by an increase in personnel expenses of $34.8 million, including $17.2 million in stock-based compensation expense and $1.4 million in restructuring expense, higher costs of laboratory materials and supplies of $4.6 million used to support our research and development efforts, $11.2 million of higher costs for facilities and information technology to support operational expansion, higher consulting and professional services of $1.1 million for product development and $0.9 million of higher depreciation.
The increase was primarily driven by an increase in personnel expenses of $15.0 million, including $13.6 million in stock-based compensation expense and higher costs for facilities and information technology of $4.6 million including a lease impairment charge of $2.1 million.
Interest income Interest income consists of interest earned on our cash and cash equivalents which are invested in bank deposit, in money market funds and from our investments in marketable securities.
Interest income Interest income consists of interest earned on our cash and cash equivalents which are invested in bank deposits, money market funds and marketable securities. 82 Table of Contents Other income (expense), net Other income (expense), net primarily consists of realized and unrealized gains and losses related to foreign exchange rate remeasurements.
Overall, we expect our gross margin will trend lower in the near-term due in part to change in product mix with newly introduced products and the impacts of inflation and increased supply chain costs. 79 Table of Contents Continued investment in growth Our significant revenue growth has been driven by rapid innovation towards novel solutions that command price premiums and quick adoption of our solutions by our customer base.
Continued investment in growth Our significant revenue growth has been driven by rapid innovation towards novel solutions that command price premiums and quick adoption of our solutions by our customer base.
We believe that these metrics are representative of our current business; however, we anticipate these may change or may be substituted for additional or different metrics as our business grows and as we introduce new products.
We believe that these metrics are representative of our current business; however, we anticipate these may change or may be substituted for additional or different metrics as our business grows and as we introduce new products. 78 Table of Contents Cumulative instruments sold As of December 31, 2023 2022 2021 Chromium 5,180 4,411 3,511 Visium 531 211 — Xenium 255 8 — Cumulative instruments sold 5,966 4,630 3,511 Our products are sold to academic and translational researchers and biopharmaceutical companies.
Instrument revenue increased $7.9 million, or 12%, to $72.4 million for the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to higher volume of instruments sold including our newly introduced Visium CytAssist and Xenium instruments.
Instruments revenue increased $51.1 million, or 71%, to $123.5 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to higher volume of Spatial instruments sold. The revenues for the years ended December 31, 2023 and 2022 included twelve and three months of sales of Xenium instruments, respectively.
Cost of revenue, Gross Profit and Gross Margin Year Ended December 31, Change (dollars in thousands) 2022 2021 $ % Cost of revenue $ 120,386 $ 74,091 $ 46,295 62 % Gross profit $ 396,023 $ 416,399 $ (20,376) (5) % Gross margin 77 % 85 % Cost of revenue increased $46.3 million, or 62%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Consumables revenue increased $44.0 million, or 10%, to $479.6 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily driven by growth in both Chromium and Spatial consumables sales. 84 Table of Contents Cost of revenue, Gross Profit and Gross Margin Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Cost of revenue $ 209,414 $ 120,386 $ 89,028 74 % Gross profit $ 409,313 $ 396,023 $ 13,290 3 % Gross margin 66 % 77 % Cost of revenue increased $89.0 million, or 74%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Operating Expenses Year Ended December 31, Change (dollars in thousands) 2022 2021 $ % Research and development $ 265,667 $ 211,752 $ 53,915 25 % Selling, general and administrative 298,300 257,560 40,740 16 % Accrued contingent liabilities — (660) 660 (100) % Total operating expenses $ 563,967 $ 468,652 $ 95,315 20 % Research and development expense increased $53.9 million, or 25%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Operating Expenses Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Research and development $ 270,332 $ 265,667 $ 4,665 2 % In-process research and development 60,980 — 60,980 N/A Selling, general and administrative 343,330 298,300 45,030 15 % Total operating expenses $ 674,642 $ 563,967 $ 110,675 20 % Research and development expense increased $4.7 million, or 2%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
In September 2020, we completed a public offering of our Class A common stock for aggregate proceeds of $482.3 million, net of offering costs, underwriting discounts and commissions. Since our inception in 2012, we have incurred net losses in each year. Our net losses were $166.0 million and $58.2 million for the years ended December 31, 2022 and 2021, respectively.
In addition to instrument and consumable sales, we derive revenue from post-warranty service contracts for our instruments. Since our inception in 2012, we have incurred net losses in each year. Our net losses were $255.1 million and $166.0 million for the years ended December 31, 2023 and 2022, respectively.
The net cash outflow from operating assets and liabilities was primarily due to a decrease in accrued contingent liabilities of $44.2 million, of which $29.4 million was paid as cash settlement arising from the Bio-Rad Agreement, an increase in accounts receivable of $34.0 million due to an increase in sales, an increase in inventory of $30.1 million due to build of inventory to meet anticipated demand, a decrease in other noncurrent liabilities of $4.7 million, an increase in prepaid expenses and other current assets of $1.1 million, a decrease of $2.5 million in payment of operating lease expenses and a decrease in accrued expenses and other current liabilities of $0.9 million due to the timing of payments including license fees.
The net cash inflow from operating assets and liabilities was primarily due to an increase in accrued expenses and other current liabilities of $28.3 million primarily driven by $20.0 million of accrued purchase consideration, an increase in deferred revenue of $10.9 million, a decrease in inventory of $7.9 million and an increase in other noncurrent liabilities of $1.3 million.
Other Income (Expense), Net Year Ended December 31, Change (dollars in thousands) 2022 2021 $ % Interest income $ 6,647 $ 206 $ 6,441 3,127 % Interest expense (476) (866) 390 (45) % Other (expense) income, net (198) (802) 604 (75) % Total other income (expense) $ 5,973 $ (1,462) $ 7,435 (509) % Interest income increased by $6.4 million for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
In addition, we expect increased legal costs in 2024 to support the protection of our intellectual property portfolio. 85 Table of Contents Other Income (Expense), Net Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Interest income $ 16,906 $ 6,647 $ 10,259 154 % Interest expense (33) (476) 443 (93) % Other expense, net (307) (198) (109) 55 % Total other income (expense) $ 16,566 $ 5,973 $ 10,593 177 % Interest income increased by $10.3 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Deferred tax assets related to our domestic operations are fully offset by a valuation allowance. 84 Table of Contents Liquidity and Capital Resources As of December 31, 2022, we had approximately $430.0 million in cash and cash equivalents, and marketable securities which were primarily held in U.S. banks.
Furthermore, the Company expects to pay cash consideration tied to future sales milestones if such milestones are met. See Note 4 to the consolidated financial statements for further details. Liquidity and Capital Resources As of December 31, 2023, we had approximately $388.7 million in cash and cash equivalents, and marketable securities which were primarily held in U.S. banks.
(the "Bio-Rad Agreement") during the year ended December 31, 2021, $19.7 million from higher manufacturing costs due to increased sales and higher costs of newly introduced products, $5.1 million of higher inventory scrap and excess and obsolete inventory charges, $3.7 million of higher warranty costs and $3.1 million of higher royalty expenses.
The increase was primarily driven by higher manufacturing costs of $79.0 million due to increased sales and higher costs of newly introduced products, $4.4 million of higher inventory write-downs and $4.4 million of higher warranty charges.
Removed
Since launching our first product in mid-2015 through December 31, 2022, cumulatively we have sold 4,630 instruments to researchers around the world, including all of the top 100 global research institutions as ranked by Nature in 2021 based on publications and all of the top 20 global biopharmaceutical companies by 2021 research and development spend.
Added
We define cumulative instruments sold as the cumulative number of Chromium instruments, including the Chromium X Series, the Chromium Connect and the legacy Chromium Controller, Visium CytAssist instruments and Xenium instruments sold since inception.
Removed
In addition to instrument and consumable sales, we derive revenue from post-warranty service contracts for our instruments. We focus a substantial portion of our resources on developing new products and solutions.

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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 changeHistorically, most of our revenue is denominated in U.S. dollars, although we sell our products and services in local currency outside of the United States, principally the euro. For the years ended December 31, 2022 and 2021, approximately 18% and 17%, respectively, of our sales were denominated in currencies other than U.S. dollars.
Biggest changeHistorically, most of our revenue is denominated in U.S. dollars, although we sell our products and services in local currency outside of the United States, principally the euro, Great British pound and Japanese yen. For the years ended December 31, 2023 and 2022, approximately 23% and 18%, respectively, of our sales were denominated in currencies other than U.S. dollars.
We have performed a sensitivity analysis as of December 31, 2022 and as of December 31, 2021, using a modeling technique that measures the change in the amount of non-U.S. dollar monetary assets arising from a hypothetical 10% movement in the levels of foreign currency exchange rates relative to the U.S. dollar, with all other variables held constant.
We have performed a sensitivity analysis as of December 31, 2023 and as of December 31, 2022, using a modeling technique that measures the change in the amount of non-U.S. dollar monetary assets arising from a hypothetical 10% movement in the levels of foreign currency exchange rates relative to the U.S. dollar, with all other variables held constant.
A hypothetical 100 basis-point (one percentage point) increase in interest rates compared to rates at December 31, 2022 would have adversely affected the fair value of our investment portfolio by approximately $1.4 million.
A hypothetical 100 basis-point (one percentage point) increase in interest rates compared to rates at December 31, 2023 and December 31, 2022 would have adversely affected the fair value of our investment portfolio by approximately $0.1 million and $1.4 million, respectively.
The sensitivity analysis indicated that a hypothetical 10% movement in foreign currency exchange rates would change the amount of cash and cash equivalents and accounts receivable that we would report in U.S. Dollars as of December 31, 2022 and December 31, 2021 by approximately $6.0 million and $2.4 million, respectively. 88 Table of Contents
The sensitivity analysis indicated that a hypothetical 10% movement in foreign currency exchange rates would change the amount of cash and cash equivalents and accounts receivable that we would report in U.S. Dollars as of December 31, 2023 and December 31, 2022 by approximately $3.8 million and $6.0 million, respectively. 90 Table of Contents
Added
In 2023, we reduced our marketable securities portfolio which decreased our unrealized losses from the impact of further increases in interest rates during the year.

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