As filed with the Securities and Exchange Commission on June 5, 2020.

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

ArcherDX, Inc.

(Exact name of Registrant as specified in its charter)



Delaware	2835	38-3944751
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

2477 55th Street, Suite 202

Boulder, CO 80301

(877) 771-1093

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Jason Myers

President and Chief Executive Officer

ArcherDX, Inc.

2477 55th Street, Suite 202

Boulder, CO 80301

(877) 771-1093

(Name, address, including zip code, and telephone number, including area code, of agent for service)



	Copies to:
Brent D. Fassett Matthew P. Dubofsky Cooley LLP 380 Interlocken Crescent, Suite 900 Broomfield, CO 80021 (720) 566-4000	Ben Carver General Counsel ArcherDX, Inc. 2477 55th Street, Suite 202 Boulder, CO 80301 (877) 771-1093	Deanna Kirkpatrick Marcel R. Fausten Davis Polk & Wardwell LLP 450 Lexington Avenue New York, NY 10017 (212) 450-4000

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

CALCULATION OF REGISTRATION FEE



Title of each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price⁽¹⁾⁽²⁾	Amount of Registration Fee
Common stock, par value $0.01 per share	$100,000,000	$12,980


(1)	In accordance with Rule 457(o) under the Securities Act of 1933, as amended, the number of shares being registered and the proposed maximum offering price per share are not included in this table.


(2)	Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) of the Securities Act of 1933, as amended

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant will file a further amendment which specifically states that this Registration Statement will thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement will become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion dated , 2020

PRELIMINARY PROSPECTUS

Common stock

This is the initial public offering of shares of common stock of ArcherDX, Inc. We are offering shares of our common stock.

Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price will be between $ and $ per share. We have applied to list our common stock on The Nasdaq Global Market under the symbol “RCHR.”

We are an “emerging growth company” as defined under the federal securities laws and, as such, we have elected to comply with certain reduced reporting requirements for this prospectus and may elect to do so in future filings. For information regarding these reduced reporting requirements, see “Prospectus summary—Implications of being an emerging growth company.”

See “Risk factors” beginning on page 13 to read about factors you should consider before buying our common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.



	Per Share	Total
Initial public offering price	$	$
Underwriting discount⁽¹⁾	$	$
Proceeds, before expenses, to us	$	$


(1)	See the section titled “Underwriting” for additional information regarding compensation payable to the underwriters.

We have granted the underwriters the right to purchase up to an additional shares of common stock from us at the initial public offering price, less the underwriting discount, for 30 days after the date of this prospectus.

The underwriters expect to deliver the shares against payment in New York, New York on , 2020.



J.P. Morgan	BofA Securities

Stifel	Evercore ISI

Prospectus dated , 2020.

Table of contents



	Page
Prospectus summary	1
Risk factors	13
Special note regarding forward-looking statements	64
Market, industry and other data	66
Use of proceeds	67
Dividend policy	68
Capitalization	69
Dilution	71
Selected consolidated financial data	74
Management’s discussion and analysis of financial condition and results of operations	77
Business	96
Management	148
Executive compensation	155
Certain relationships and related party transactions	167
Principal stockholders	172
Description of capital stock	175
Shares eligible for future sale	180
Material U.S. federal income tax consequences to non-U.S. holders of our common stock	182
Underwriting	186
Legal matters	194
Experts	194
Where you can find additional information	194
Index to consolidated financial statements	F-1

Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectus we have prepared. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus or any free writing prospectus is accurate only as of the date of its date, regardless of its time of delivery or of any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

For investors outside the United States: Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of our common stock and the distribution of this prospectus and any applicable free writing prospectus applicable to such jurisdictions.

Through and including , 2020 (the 25^th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

-i-

Prospectus summary

This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, including the sections titled “Risk factors,” “Management’s discussion and analysis of financial condition and results of operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless the context otherwise requires, all references in this prospectus to “Archer,” “ArcherDX,” the “company,” “we,” “our,” “us” or similar terms refer to ArcherDX, Inc. and, where appropriate, our subsidiary, the ArcherDX business unit of Enzymatics, Inc. and the ArcherDX, Inc. in existence from January 2013 to August 2013, as explained further in the Corporate Information Section below.

Overview

We are a leading genomics company democratizing precision oncology. We offer a suite of products and services that are highly accurate, personal, actionable and easy to use in local settings. This empowers clinicians to control the sample, data, patient care and economics. Additionally, our products and services enable biopharmaceutical companies to cost-effectively accelerate drug development. We believe these benefits will drive broader adoption of precision oncology throughout the therapeutic continuum, improving patient care. Our product development platform, with our proprietary Anchored Multiplex PCR, or AMP, chemistry at the core, has enabled us to develop industry-leading products and services that allow for therapy optimization and cancer monitoring.

We have developed and commercialized research use only, or RUO, products, we are developing in-vitro diagnostic, or IVD, products, and we offer services that meet the unique needs of our customers and their clinical applications. Our five RUO product lines consist of DNA-based VariantPlex, RNA-based FusionPlex, ctDNA-based LiquidPlex and RNA-based Immunoverse, which we collectively refer to as ArcherPlex, and Personalized Cancer Monitoring, or PCM. Our offerings include commercial RUO products and services that laboratories use to conduct genomic analysis for therapy optimization and cancer monitoring. We intend to submit STRATAFIDE, in 2020, and PCM, in the future, for United States Federal Drug Administration, or FDA, approval and/or clearance so they can be marketed as IVDs. STRATAFIDE and PCM have both received Breakthrough Device designation from the FDA, which offers potentially faster review through priority review for certain medical devices that provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human diseases or conditions for which no approved or cleared treatment exists or that offer significant advantages over existing approved or cleared alternatives. Additionally, we offer Assay Designer and Designer Pro as services to clinical and biopharmaceutical customers, which allow them to customize biomarker targets and develop new applications. Our analyte- and sample-agnostic products and services enable clinicians to quickly and locally generate actionable genomic information to deliver industry-leading care to patients with solid tumors, blood cancers or sarcomas.

Since our inception in 2013, our product development platform has enabled us to efficiently develop over 325 unique RUO products, which have been sold to over 300 leading academic and reference laboratories and over 50 biopharmaceutical companies and contract research organizations, or CROs, across 40 countries to facilitate the analysis of over 375,000 samples. We have generated a large and growing body of comprehensive clinical evidence, consisting of over 200 peer-reviewed clinical and scientific publications, which we believe demonstrate our products’ performance for clinical applications. We believe our long-standing commercial relationships with top-tier academic institutions and reference laboratories demonstrate that we are well positioned to become the global leader in driving decentralized genomic testing.

information from genomic tumor profiling to guide therapy optimization and cancer monitoring is referred to as precision oncology. Despite significant investment in research and the introduction of new treatments for cancer, broad adoption of precision oncology has been limited, especially in regional and community settings where approximately 85% of cancer patients receive care. Without precision oncology, late-stage cancer patients can suffer from poor prognosis and outcomes, and early-stage patients can suffer from inaccurate prognosis, resulting in unnecessary treatment with toxic therapies and delayed detection of recurrence. While precision oncology has historically been limited to late-stage patients with solid tumors, clinicians now see the opportunity to expand precision oncology into early-stage cancer. We believe democratizing precision oncology has the potential to turn advanced cancer into a manageable disease and elicit a cure in patients diagnosed with early-stage disease.

Therapy optimization

In the community and regional settings, the lack of infrastructure and expertise to implement genomic analysis is limiting clinicians’ ability to optimize therapy for patients through diagnosis, prognosis and therapy selection. Given the limitations of current centralized testing options, we believe empowering clinicians with our turnkey solution for therapy optimization will enable local testing and be a significant breakthrough in the standard of care. Our solution also benefits biopharmaceutical companies across a range of applications, including patient selection in global clinical trials. Additionally, our solution could help biopharmaceutical companies to identify new genomic targets for drug development and to commercialize the new drugs, once approved. Better access to genomic information can accelerate clinical trial enrollment and increase the probability of success of drug development in a target patient population.

Cancer monitoring

Clinicians are eager to expand precision oncology into early-stage cancer, when the cancer is typically easier to cure compared to late-stage cancer. Current monitoring methods, including imaging and cancer antigen tests, lack resolution and accuracy needed to monitor early-stage disease. Accessing circulating tumor DNA, or ctDNA, from routine blood draws is an effective and non-invasive way to monitor cancer to inform the course of treatment. Our solution is capable of detecting disease burden, including minimal residual disease, or MRD, even when other methodologies fail because we manufacture patient-specific ctDNA panels based upon the genomic tumor profile of their individual cancer. We believe our approach will revolutionize how cancer is managed by measuring cancer progression, measuring therapy effectiveness, determining a treatment regimen and refining therapy.

Barriers to the democratization of precision oncology

We believe that current genomic testing suffers from several major challenges. These barriers can be largely categorized as lack of accuracy, lack of utility, lengthy turnaround time in the clinical setting and lack of economic participation for providers. This has impeded broader adoption of precision oncology in therapy optimization and cancer monitoring, especially within community and regional health settings where the vast majority of cancer patients are treated.

Our Solution

Our modular product development platform combines our high performance AMP chemistry, target-specific primers, ancillary reagents, and bioinformatics software to accurately detect simple and complex, as well as known and unknown, mutations. We are able to customize biomarker targets, which can be

pooled in billions of possible combinations without negatively impacting accuracy or precision. This modularity allows us to quickly expand existing products and customize our products to develop new applications without needing to re-engineer the underlying technology. Our solution leverages scalable, easy-to-use, clinical-grade reagents and powerful bioinformatics software to produce a multitude of products with broad applications for both clinical and biopharmaceutical use.

We believe our solution addresses the barriers to democratization of precision oncology:

•

Accuracy: Although current tests can accurately detect common or simple mutations, most cannot accurately detect complex mutations, resulting in a high rate of false negatives and positives. These tests are designed with inherent biases which fundamentally limit their ability to detect both known and unknown alterations. We believe our purpose built AMP chemistry addresses these shortcomings by accurately detecting complex, as well as known and unknown, mutations. This allows us to provide actionable information to clinicians, enabling them to select therapies targeted to the appropriate mutation, and thereby better informing treatment.

•

Utility: Current tests generally take a “one-size-fits-all” approach, which limits their utility. Because our products are not limited to blood and tissue, they enable testing across a multitude of sample types, targeting DNA, RNA, and ctDNA in order to provide higher resolution and a more comprehensive view of mutations. Our product development platform enables rapid and efficient customization of biomarker targets, which means clinicians can specify which of our products they want to use to identify mutations that they believe are important in treating each patient’s disease. Together, we believe these features open additional areas of clinical application within therapy optimization for individual patients and cancer monitoring of early-stage cancer.

•

Turnaround time: Results from centralized genomic tests can take well over 20 days to be returned, depending on complexity and sample type. As late-stage cancer patients are likely to experience superior survival rates and outcomes when treated as soon as possible after diagnosis, lengthy turnaround times can prevent timely treatment. Our products enable local testing with potential times to run the test in a matter of days, accelerating time to results while also allowing the original clinician to maintain sample custody. The reduction in time to actionable results accelerates clinical decisions, which is critical for cancer patients where immediate treatment is important to achieve optimal outcomes.

•

Economics: The complexity of many genomic testing options requires significant resources and sophisticated infrastructure, which are typically limited to specialized academic or centralized facilities. As a result, hospitals often need to outsource their genomic testing, which incurs costs that are not reimbursed, presenting an additional hurdle to adoption. This particularly affects community and regional hospitals where approximately 85% of cancer patients are treated. Centralized labs that perform genomic testing receive the benefits of reimbursement and often retain possession of patients’ tumor biopsies and control patient data. We believe our platform will empower more hospitals and clinics to practice precision oncology and receive reimbursement for in-house testing that they would otherwise not receive if they send the testing out to centralized labs. In addition, clinicians can retain possession of patients’ tumor biopsies and control the data, which can be matched with clinical data to generate revenue from collaborators, such as biopharmaceutical companies. We believe this empowers providers in all patient care settings to participate in the economics of precision oncology testing.

Our current products and pipeline

Our offerings include commercial RUO products and services that laboratories use to conduct genomic analysis for therapy optimization and cancer monitoring. Our RUO portfolio consists of five product lines: VariantPlex, FusionPlex, LiquidPlex and Immunoverse, which we collectively refer to as ArcherPlex, and PCM. There are multiple products within each of these lines, all of which can be customized. These RUO products allow for a range of applications and can be used individually or in combination, as desired.

We are pursuing regulatory clearances and/or approvals for STRATAFIDE, which is intended to be a universal IVD that utilizes AMP to measure clinically relevant genomic mutations for tumor profiling and companion diagnostic markers from both tissue and blood. We expect to launch STRATAFIDE as a regulated device in 2021, and we believe it has the potential to be the first-line tumor profiling test for any patient with a late-stage solid tumor (pan-tumor). In December 2018, the FDA granted Breakthrough Device designation to STRATAFIDE. We also intend to pursue regulatory clearances and approvals in specific markets outside the United States, including Japan and Europe. A specific companion diagnostic claim was submitted to the Japanese Pharmaceuticals and Medical Device Agency, or PMDA, in December 2019 and approved in March 2020. We intend to develop an additional universal IVD for blood cancers, similar to STRATAFIDE, for commercialization in both the United States and outside the United States.

We are also seeking FDA clearance and/or approval for PCM as an IVD to non-invasively and quantitatively measure cancer recurrence or progression, as well as therapeutic efficacy, to determine a treatment regimen and refine therapy. We believe PCM will improve patient outcomes across multiple clinical applications as a prognostic device for predicting recurrence of primary cancer after initial treatment. In January 2020, we received Breakthrough Device designation from the FDA for PCM. We are seeking additional regulatory approvals outside the United States and intend to expand into additional indications.

We also offer a suite of services to clinical and biopharmaceutical customers, which allow them to customize biomarker targets or develop new applications. Assay Designer is our online tool that

customers can use to customize biomarker targets in their panels. Designer Pro is our advanced panel and application customization service. We also offer clinical trial assay and companion diagnostic development services to biopharmaceutical customers.

Our market opportunity

We believe that democratizing precision oncology by providing personal, actionable, easy-to-use products in the local setting will improve patient care. Our turnkey products and services have applications in therapy optimization and cancer monitoring, representing a total global market opportunity we estimate to be approximately $45 billion. We estimate our opportunity in the United States to be approximately $20 billion and our opportunity outside the United States to be approximately $25 billion.

For therapy optimization, which includes diagnosis, prognosis and targeted therapy selection, we estimate a $5 billion total global market opportunity, which consists of a $1.3 billion market in the United States, a $1.7 billion market outside the United States and a $2 billion global opportunity with biopharmaceutical companies.

We estimate the total global cancer monitoring market is approximately $40 billion, which consists of a $15 billion market in the United States, $24 billion market outside the United States and $1 billion market with biopharmaceutical companies.

Our competitive advantages

We aim to democratize precision oncology by leveraging our core competitive advantages.


•	Our product development platform, featuring our proprietary AMP chemistry, provides accurate, actionable genomic information allowing clinicians to optimize treatment and monitor cancer. Our products allow for the identification of both simple and complex genomic mutations, providing clinicians with more actionable information to improve care.


•	Our versatile product portfolio empowers clinicians to practice precision oncology by providing products and services that are personal and actionable. We provide a versatile product portfolio which allows clinicians to select a test based on the clinically relevant sample type, analyte, cancer type and biomarker targets.

•

Our product development platform can be adapted as new applications emerge. Our AMP chemistry enables customization of biomarker targets which can be pooled in billions of possible combinations while maintaining accuracy and precision. Our custom and fixed content panels follow the same manufacturing processes, varying only in the targeting mechanism, which enables us to easily adapt our products as our customers request new applications.

•

We believe we provide a compelling and differentiated value proposition to all stakeholders. We believe our platform empowers more hospitals and clinics to practice precision oncology and receive reimbursement for in-house testing. In addition, clinicians can retain possession of patients’ tumor biopsies and control the data, which they can match with clinical data to generate revenue from collaborative partners, such as biopharmaceutical companies. Most importantly, faster turnaround time can inform clinical decision making in a timelier manner, which is critical for cancer patients where immediate treatment is important to achieve optimal outcomes.


•	Our multi-faceted commercial capabilities and our regulatory and reimbursement expertise support our ability to bring our products to market globally. Along with our direct sales team, we leverage our medical sales liaisons, distributors, and the sales organizations of our reference lab and biopharmaceutical collaborators to further drive adoption.


•	We have intellectual property protection for our proprietary AMP chemistry and technology platform and its applications. Our patent portfolio includes 3 issued patents and 16 pending patent applications in the United States and 2 issued patents and 43 pending patent applications in foreign countries related to our AMP chemistry and technology platform and its applications.

Our strategy

Our goal is to bring precision oncology to all patients anywhere. To achieve this, we intend to:


•	Democratize precision oncology. We offer a suite of products and services that are personal, actionable and easy to use in local settings to advance the treatment of cancer and monitoring of patients by providing our turnkey solution to clinicians.


•	Pursue regulatory clearances and approvals for our products across the cancer care continuum. We submitted our first companion diagnostic to the Japanese PMDA in December 2019 and obtained approval in March 2020. We plan to submit STRATAFIDE to the FDA in the next 12 months and PCM to the FDA in the following years.


•	Enable new clinical applications with PCM. PCM is capable of high specificity with a low limit of detection, which allows for post-treatment monitoring of early-stage cancer in a cost- and time-efficient manner. PCM also enables the measurement of cancer progression and therapy effectiveness to refine or select a treatment regimen, and can bring precision oncology to earlier stages of cancer.


•	Embed our products and services with biopharmaceutical collaborators. We plan to continue to promote our products and services to create broader and deeper collaborations with current and new biopharmaceutical customers.


•	Expand our global footprint. We are continuing to establish the infrastructure needed to deploy our turnkey solution globally and promote broader adoption. We will continue discussions with global regulatory and reimbursement agencies to obtain country-specific approvals.


•	Leverage our product development platform to identify and advance innovative products. We have established research and development capabilities that allow us to leverage innovations and operational efficiencies from one product across our platform.

Risk factors summary

Investing in our common stock involves substantial risk. The risks described in the section titled “Risk factors” immediately following this summary may cause us to not realize the full benefits of our strengths or may cause us to be unable to successfully execute all or part of our strategy. Some of the more significant challenges include the following:


•	We have incurred losses since our inception and we anticipate that we will continue to incur losses for the foreseeable future, which could harm our future business prospects.


•	We may not be able to obtain regulatory clearance or approval of our IVD products, or even if approved, such products may not be approved for guideline inclusion, which could adversely affect our business, financial condition and results of operations.


•	To date, our revenues have been primarily generated by sales of our RUO products, but our future business growth is partially dependent upon regulatory approval and market acceptance of our IVD products, including STRATAFIDE and PCM. We have limited experience in developing, marketing and commercializing IVDs.


•	A large portion of our revenue is generated from a limited number of customers, and the loss of one or more of our customers or the failure to retain a significant amount of business from them could adversely affect our business, financial condition, and results of operations.


•	Our quarterly results may fluctuate significantly, which could adversely impact the value of our common stock.

•

One of our competitors has alleged that our AMP chemistry and products using AMP are infringing on its intellectual property, and we may be required to redesign our technology, obtain a license, cease using our AMP chemistry altogether and/or pay significant damages, among other consequences, any of which would have a material adverse effect on our business, financial condition and results of operations.


•	We intend to seek to market our IVD products for clinical diagnostic use and will be required to obtain regulatory clearance(s) or approval(s). Any such regulatory process would be expensive, time-consuming and uncertain both in timing and in outcome.


•	Our commercial success could be compromised if we do not receive coverage and adequate reimbursement for our products, including STRATAFIDE and PCM, if approved.


•	We are currently, and may be in the future, subject to claims against us alleging that we are infringing, misappropriating or otherwise violating the intellectual property rights of third parties, the outcome of which could have a material adverse effect on our business.

•

We are currently, and may be in the future, involved in lawsuits to defend or enforce our patents and proprietary rights. Such disputes could result in substantial costs or loss of productivity, delay or prevent the development and commercialization of our technology, products and services, prohibit our use of proprietary technology or sale of nucleic acid preparative and analytical methods and related products or services, or put our patents and other proprietary rights at risk.

•

If we are not able to obtain, maintain, defend or enforce patent and other intellectual property protection for our nucleic acid preparative and analytical methods or related products or services, or if the scope of the patent and other intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products, services and technology similar or identical to ours, which could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.

•

We license patent rights from third-party owners. If such owners do not properly or successfully obtain, maintain or enforce the patents underlying such licenses, or if they retain or license to others any competing rights, our competitive position and business prospects may be adversely affected. If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our relationships with our licensors, we could lose license rights that are important to our business.


•	We have determined that there is substantial doubt about our ability to continue as a “going concern” for the next twelve months.

Corporate information

ArcherDX, Inc. was incorporated in January 2013, and subsequently merged into Enzymatics, Inc. in August 2013. In December 2014, the ArcherDX business unit spun out from Enzymatics, Inc. and was incorporated as ArcherDX, Inc. in Delaware. Our principal executive offices are located at 2477 55th Street, Suite 202, Boulder, CO 80301, and our telephone number is (877) 771-1093. Our website address is www.archerdx.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider information on our website to be part of this prospectus.

The ArcherDX logo and “Archer®” and our other registered and common law trade names, trademarks and service marks, including AMP™, STRATAFIDE™, LiquidPlex™, Immunoverse™, VariantPlex® and FusionPlex®, are the property of ArcherDX, Inc. Other trade names, trademarks and service marks used in this prospectus are the property of their respective owners. Solely for convenience, the trademarks and trade names in this prospectus may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert their rights thereto.

Implications of being an emerging growth company

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and therefore we may take advantage of certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes‑Oxley Act of 2002, or the Sarbanes‑Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and any golden parachute payments. We may take advantage of these exemptions until we are no longer an “emerging growth company.” We will cease to be an “emerging growth company” upon the earliest of: (1) the last day of the fiscal year following the fifth anniversary of this offering; (2) the last day of the first fiscal year in which our annual gross revenues are $1.07 billion or more; (3) the date on which we have, during the previous rolling three-year period, issued more than $1.0 billion in nonconvertible debt securities; and (4) the date on which we are deemed to be a “large accelerated filer” as defined in the Securities Exchange Act of 1934, as amended, or the Exchange Act. In addition, the JOBS Act provides that an “emerging growth company” can delay adopting new or revised accounting standards until those standards apply to private companies. We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.

The offering



Common stock offered by us	shares

Common stock to be outstanding after this offering	shares

Underwriters’ option to purchase additional shares of common stock offered by us	shares

Use of proceeds	We estimate that the net proceeds from the sale of our common stock in this offering will be approximately $ million (or approximately $ million if the underwriters’ option to purchase additional shares of our common stock from us is exercised in full), assuming an initial public offering price of $ per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

	The principal purposes of this offering are to increase our capitalization and financial flexibility, create a public market for our common stock and facilitate our future access to the capital markets. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to us from this offering. We currently expect to use the net proceeds from this offering for research and development activities, including development of STRATAFIDE and PCM, and for working capital and general corporate purposes, including sales and marketing activities, operating expenses and capital expenditures. We may also use a portion of the remaining net proceeds, if any, to acquire or invest in complementary businesses, technologies or other assets. However, we do not have any agreements or commitments to enter into any such acquisitions or investments at this time. See the section titled “Use of Proceeds” for additional information.

Risk factors	You should carefully read the “Risk factors” beginning on page 13 and other information included in this prospectus for a discussion of facts that you should consider before deciding to invest in shares of our common stock.

Proposed Nasdaq trading symbol	“RCHR”

The number of shares of common stock that will be outstanding after this offering is based on shares of common stock outstanding as of March 31, 2020 (assuming the conversion of all outstanding shares of our convertible preferred stock into shares of common stock on March 31, 2020), and excludes:


•	5,418,687 shares of common stock issuable on the exercise of stock options outstanding as of March 31, 2020 under the 2015 Stock Incentive Plan, or the 2015 Plan, with a weighted-average exercise price of approximately $2.17 per share;


•	up to an aggregate of 800,000 shares of common stock which may be issued in connection with the acquisition of Baby Genes, Inc., or Baby Genes, pursuant to certain contingent consideration

provisions of that certain Agreement and Plan of Merger, dated October 2, 2018 and as amended on March 4, 2020, or Baby Genes Merger Agreement, by and among us, ArcherDX Sub, Inc., and Baby Genes, if specified revenue thresholds are achieved;


•	shares of common stock reserved for future issuance under our 2020 Equity Incentive Plan, or the 2020 Plan, as well as any future increases, including annual automatic evergreen increases, in the number of shares of common stock reserved for issuance under our 2020 Plan; and


•	shares of common stock reserved for issuance under our 2020 Employee Stock Purchase Plan, or the ESPP, as well as any future increases, including annual automatic evergreen increases, in the number of shares of common stock reserved for future issuance under our ESPP.

In addition, unless we specifically state otherwise, the information in this prospectus assumes:

•

the issuance of shares of our Series B convertible preferred stock, or the Series B Preferred Stock, upon the automatic net exercise of a warrant to purchase shares of Series B Preferred Stock with an exercise price of $4.82 per share (such warrant outstanding as of December 31, 2019), or the Series B Warrant, in connection with this offering, based on an assumed offering price of , which is the midpoint of the estimated price range set forth on the cover page of this prospectus;


•	the issuance of 389,749 shares of Series A Preferred Stock pursuant to the Baby Genes Merger Agreement;

•

the automatic conversion of all outstanding shares of our Series A Preferred Stock, Series B Preferred Stock, and our Series C convertible preferred stock, or the Series C Preferred Stock, or collectively, the preferred stock, including shares issued as a result of the automatic net exercise of the Series B Warrant and the Series A Preferred Stock issuable pursuant to the Baby Genes Merger Agreement as described above, into an aggregate shares of common stock in connection with this offering;


•	the filing of our amended and restated certificate of incorporation, which will be in effect on the completion of this offering;


•	no exercise of the underwriters’ option to purchase up to an additional shares of common stock from us in this offering.

Summary consolidated financial data

The summary consolidated statement of operations data for the years ended December 31, 2019 and 2018 and the summary consolidated balance sheet data as of December 31, 2019 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated statement of operations data for the three months ended March 31, 2020 and 2019 and the summary consolidated balance sheet data as of March 31, 2020 have been derived from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position and results of operations. The summary consolidated financial data included in this section are not intended to replace the financial statements and related notes included elsewhere in this prospectus.

You should read the consolidated financial data set forth below in conjunction with our consolidated financial statements and the accompanying notes, the information in the “Selected consolidated financial data” and “Management’s discussion and analysis of financial condition and results of operations” sections contained elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected for any other period in the future.



	Year Ended December 31,						Three Months Ended March 31,
	2018			2019			2019			2020
	(in thousands)						(in thousands)
Consolidated Statements of Operations Data:
Revenue
Precision oncology products	$	16,025		$	22,644		$	4,380		$	7,006
Pharma development services	12,429			27,921			5,069			7,784
Total revenue	28,454			50,565			9,449			14,790

Costs & operating expenses
Cost of precision oncology products	4,033			7,335			1,068			2,313
Cost of pharma development services	6,230			9,212			1,706			3,399
Sales and marketing	7,215			15,428			2,644			5,324
Research and development	8,184			34,172			4,295			13,737
General and administrative	7,700			15,875			2,377			7,481
Contingent consideration	—			5,768			2,716			(35		)
Total operating expenses	33,362			87,790			14,806			32,219
Loss from operations	(4,908		)	(37,225		)	(5,357		)	(17,429		)
Interest expense, net	(1,160		)	(2,432		)	—			(893		)
Other income (expense), net	34			(824		)	(8		)	(995		)
Loss before income taxes	(6,034		)	(40,481		)	(5,365		)	(19,317		)
Income tax (benefit) expense	(481		)	497			1			—
Net loss and comprehensive loss	$	(5,553	)	$	(40,978	)	$	(5,366	)	$	(19,317	)



	March 31, 2020
	Actual			Pro Forma⁽²⁾	Pro Forma As Adjusted⁽³⁾
	(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	36,842
Total assets	97,503
Total current assets	66,282
Total current liabilities	31,132
Working capital⁽¹⁾	35,150
Long-term debt, net	28,659
Convertible preferred stock	115,347
Accumulated deficit	(88,560		)
Total stockholders’ (deficit) equity	(84,121		)


(1)	Working capital is defined as current assets less current liabilities.

(2)

The pro forma consolidated balance sheet data gives effect to (a) the issuance of 389,749 shares of Series A Preferred Stock pursuant to the Baby Genes Merger Agreement, (b) the issuance of shares of our Series B Preferred Stock issuable upon the automatic net exercise of the Series B Warrant in connection with this offering, assuming an initial public offering price of $ per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, (c) the automatic conversion of all of our outstanding shares of preferred stock (including the shares issuable pursuant to the Baby Genes Merger Agreement described in (a) and pursuant to the automatic net exercise of the Series B Warrant described in (b) above) into shares of common stock in connection with this offering, (d) the automatic conversion of contingent consideration for the Baby Genes Acquisition from Series A Preferred Stock to up to 800,000 shares of our common stock and the resulting reclassification of the remaining liability to additional paid-in capital, and (e) the filing and effectiveness of our amended and restated certificate of incorporation which will be in effect on the completion of this offering.

(3)

The pro forma as adjusted consolidated balance sheet data reflects (a) the items described in footnote (2) above and (b) our receipt of estimated net proceeds from the sale of shares of common stock that we are offering at an assumed initial public offering price of $ per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) each of cash and cash equivalents, total assets, working capital and total stockholders’ (deficit) equity by $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered by us would increase (decrease) each of cash and cash equivalents, total assets, working capital and total stockholders’ (deficit) equity by $ million, assuming the assumed initial public offering price of $ per share of common stock remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

Risk factors

Investing in our common stock involves a high degree of risk. You should consider and read carefully all of the risks and uncertainties described below, as well as other information included in this prospectus, including our consolidated financial statements and related notes appearing elsewhere in this prospectus, before making an investment decision. The risks described below are not the only ones we face. The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition and results of operations. In such case, the trading price of our common stock could decline, and you may lose some or all of your original investment.

Risks related to our business and strategy

We have incurred losses since our inception and we anticipate that we will continue to incur losses for the foreseeable future, which could harm our future business prospects.

We have historically incurred substantial net losses, including net losses of $5.6 million, $41.0 million, $5.4 million and $19.3 million for the years ended December 31, 2018 and 2019 and the three months ended March 31, 2019 and 2020, respectively. As of December 31, 2019 and March 31, 2020, we had an accumulated deficit of $69.2 million and $88.6 million, respectively. Additionally, while our net losses increased by over $35.4 million for the year ended December 31, 2019 compared to the year ended December 31, 2018, and $14.0 million for the three months ended March 31, 2020 compared to the three months ended March 31, 2019, our total revenue increased by $22.1 million for the year ended December 31, 2019 compared to the year ended December 31, 2018 and $5.3 million for the three months ended March 31, 2020 compared to the three months ended March 31, 2019. As a result, our losses grew at a faster rate than our revenues, and we cannot guarantee that this will not continue in future periods. We expect our losses to continue as we continue to devote a substantial portion of our resources to efforts to increase the adoption of, and reimbursement for, our products and services, improve these products and services, and research, develop and commercialize new products or new services. We have devoted a substantial portion of our resources to the development and commercialization of STRATAFIDE, a pan-solid tumor in vitro diagnostic, or IVD, and to research and development activities related to our Personalized Cancer Monitoring product, or PCM, for cancer monitoring, including clinical and regulatory initiatives to obtain diagnostic clearance and marketing approval. These losses have had, and will continue to have, an adverse effect on our working capital, total assets, and stockholders’ equity. Because of the numerous risks and uncertainties associated with our research, development and commercialization efforts, we are unable to predict when we will become profitable, and we may never become profitable. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our inability to achieve and then maintain profitability would negatively affect our business, financial condition, results of operations, and cash flows.

We may not be able to obtain regulatory clearance or approval of our IVD products, or even if approved, such products may not be approved for guideline inclusion, which could adversely affect our business, financial condition and results of operations.

A significant portion of our commercial strategy, including for STRATAFIDE and PCM, relies on receiving regulatory approvals with guideline inclusion to strengthen our position in establishing coverage and reimbursement of our IVD products with both public and private payors. If we do not receive such regulatory approvals in a timely manner or at all, or we are not successful in receiving such guideline inclusion, we may not be able to commercialize our IVD products. Additionally, third-party payors may be unwilling to provide sufficient coverage and reimbursement for our products necessary for hospitals and other healthcare providers to adopt our solutions as part of their oncological treatment strategy. We have also focused our efforts on the development of PCM for U.S. Food and Drug Administration, or FDA, clearance and approval as a prognostic device for predicting recurrence of a primary cancer after initial treatment, which can include surgery alone or surgery plus adjuvant therapy.

Moreover, development of the data necessary to obtain regulatory clearance and/or approval of an IVD, such as STRATAFIDE, is time-consuming and carries with it the risk of not yielding the desired results. The performance achieved in published studies may not be repeated in later studies that may be required to obtain FDA clearance and/or approval or regulatory approvals in foreign jurisdictions. Limited results from earlier-stage verification studies may not predict results from studies in larger numbers of subjects drawn from more diverse populations over longer periods of time. Unfavorable results from ongoing preclinical and clinical studies could result in delays, modifications or abandonment of ongoing analytical or future clinical studies, or abandonment of a product development program, or may delay, limit or prevent regulatory approvals or clearances or commercialization of our product candidates, any of which may materially adversely affect our business, financial condition, and results of operations.

To date, our revenues have been primarily generated by sales of our research use only, or RUO, products, but our future business growth is partially dependent upon regulatory approval and market acceptance of our IVD products, including STRATAFIDE and PCM. We have limited experience in developing, marketing and commercializing IVDs.

Historically, our revenues and growth have been driven primarily by sales of our RUO products, but we anticipate that our future success will depend in large part on our ability to effectively introduce enhanced or new offerings of oncological in IVD products, such as STRATAFIDE. The development and launch of enhanced or new products and services, whether RUO or IVD, require the completion of certain clinical development and commercialization activities that are complex, costly, time‑intensive and uncertain, and require us to accurately anticipate patients’, providers’ and, if applicable, payors’ attitudes and needs and emerging technology and industry trends. This process is conducted in various stages, and each stage presents the risk that we will not achieve our goals on a timely basis, or at all.

We have limited experience commercializing IVD products. As a result, we have limited experience forecasting future financial performance for our planned IVD products, including STRATAFIDE and PCM, and our actual results may fall below our financial guidance or other projections, or the expectations of analysts or investors, which could cause the price of our common stock to decline. We may experience research and development, regulatory, marketing and other difficulties that could delay or prevent our introduction of enhanced or new products or new services and result in increased costs and the diversion of management’s attention and resources from other business matters. For example, any genomic tests that we may enhance or develop may not prove to be clinically effective, or may not meet our desired target product profile or be offered at acceptable cost and with the sensitivity, specificity and other test performance metrics necessary to address the relevant clinical need or commercial opportunity; our genomic test performance in commercial settings may be inconsistent with our validation or other clinical data; we may not be successful in achieving market awareness and demand, whether through our own sales and marketing operations or entering into collaborative arrangements; the collaborative arrangements we enter into may not be successful or we may not be able to maintain those that are successful; healthcare providers may not order or use, or third‑party payors may not reimburse for, any genomic tests that we may enhance or develop; we may not be able to obtain approval of any of our existing or future devices as a companion diagnostic for existing treatments approved by the FDA; or we may otherwise have to abandon a product or service in which we have invested substantial resources.

An important factor in our ability to commercialize our products is collecting data that supports the value proposition of our products. The data collected from any studies we complete may not be favorable or consistent with our existing data or may not be statistically significant or compelling to the medical community or to third‑party payors seeking such data for purposes of determining coverage for our products. This is particularly true with respect to service defects and errors. Any of the foregoing could have a negative impact on our ability to commercialize our future products, which could have a material adverse effect on our business, financial condition and results of operations.

A large portion of our revenue is generated from a limited number of customers, and the loss of one or more of our customers or the failure to retain a significant amount of business from them could adversely affect our business, financial condition, and results of operations.

Our customer base is highly concentrated. Our customers are primarily (a) laboratories and hospitals with laboratories that purchase our products to perform their own next-generation sequencing, or NGS, tests and (b) biopharmaceutical companies that use our services to support clinical trials and other activities to obtain regulatory approval. For the three months ended March 31, 2020 and the years ended December 31, 2019 and 2018, our largest customer by revenue, Merck KGaA, Darmstadt, Germany, represented approximately 32%, 44% and 20%, respectively, of our total revenue. For the three months ended March 31, 2020 and each of the years ended December 31, 2019 and 2018, four customers accounted for 43%, 55% and 47% of our total accounts receivable, respectively. We expect that a relatively small number of customers will continue to account for a significant portion of our revenue for the foreseeable future. Our agreement with Merck KGaA, Darmstadt, Germany, does not have a defined term and Merck KGaA, Darmstadt, Germany, may terminate the agreement or any project agreement entered thereunder upon 30 days’ prior written notice. Our agreements with our other top customers provide similar termination rights.

Our future success is substantially dependent on our ability to maintain and grow our existing customer relationships and to establish new ones. The loss of one or more of our customers, including the loss of Merck KGaA, Darmstadt, Germany, whether through expiration or termination of our customer agreements, acquisitions, consolidations, bankruptcies of our customers or otherwise, or the failure to retain a significant amount of business from our customers, could harm our business, financial condition, and results of operations. For example, a customer that represented approximately 10% of our total products revenue in 2018 represented less than one percent of our total products revenue in 2019. In addition, even if our existing customers increase their volume of purchases, our average selling price could be reduced by volume discounts, which would lead to lower revenue per reaction sold compared to list pricing that is not discounted.

Many factors have the potential to impact our customer relations, including the type of support our customers and potential customers require and our ability to deliver it, our customers’ satisfaction with our products and services, and other factors that may be beyond our control. Furthermore, our customers may decide to decrease or discontinue their use of our products and services due to changes in research and product development plans, failures in their clinical trials, financial constraints, or utilization of internal testing resources or tests performed by other parties, or other circumstances outside of our control. A material decrease in our customer satisfaction or decrease in customer purchases could have a material adverse effect on our business, financial condition and results of operations.

We have determined that there is substantial doubt about our ability to continue as a “going concern” for the next twelve months.

As of March 31, 2020, we had $36.8 million in cash and cash equivalents. We have incurred losses and negative cash flows since our inception. Management believes that our existing cash and cash equivalents and available access to credit as of March 31, 2020 are not sufficient to satisfy our operating cash needs for at least one year after the date the financial statements are issued.

As revenue across our products and services is expected to grow, we expect our accounts receivable and inventory balances to increase. Any increase in accounts receivable and inventory may not be completely offset by increases in accounts payable and accrued expenses, which could result in greater working capital requirements. Moreover, following the closing of this offering, we expect to incur additional public company costs, including expenses related to legal, accounting, regulatory, and SEC compliance matters.

The financial statements contained elsewhere in this prospectus do not include any adjustments that might result from our inability to consummate this offering or our inability to continue as a going concern.

Our quarterly results may fluctuate significantly, which could adversely impact the value of our common stock.

Our quarterly results of operations, including our revenues, gross margin, net loss and cash flows, may vary significantly in the future as a result of a variety of factors, many of which are outside of our control, and period‑to‑period comparisons of our operating results may not be meaningful. In addition, our quarterly results have historically fluctuated primarily because of the variable timing of revenue from new or existing biopharmaceutical customers. Revenue from pharma development services can vary from quarter to quarter, sometimes significantly, based on the timing of contract execution, milestone-related progress, and other factors.

For example, we engage in conversations with customers regarding potential commercial opportunities on an ongoing basis. There is no assurance that any of these conversations will result in a commercial agreement, or if an agreement is reached, that the resulting relationship will be successful or that clinical studies conducted as part of the engagement will produce successful outcomes. Our customers’ clinical trials are expensive and can take years to complete, and their outcomes are inherently uncertain. Failure can occur at any time during the clinical trial process. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through pre-clinical studies and early clinical trials. Some of our biopharmaceutical customers may not have products approved for commercial sale and are not profitable. Some of these customers must continue to raise capital in order to continue their development programs and to potentially continue as our customers. If our customers’ clinical trials fail or they are unable to raise sufficient capital to continue investing in their clinical programs, our revenues from these customers may decrease or cease entirely. Furthermore, even if these customers have a drug approved for commercial sale, they may not choose to use our products as a companion diagnostic with their drug, thereby limiting our potential revenues.

In addition, to the extent that we continue to spend on our sales and marketing and research and development efforts, we expect to incur costs in advance of achieving the anticipated benefits of such efforts. Fluctuations in quarterly results due to the foregoing may cause our results to fall below our financial guidance or other projections, or the expectations of analysts or investors, which could cause the price of our common stock to decline. Accordingly, our quarterly results should not be relied upon as an indication of future performance.

One of our competitors has alleged that our Anchored Multiplex PCR, or AMP, chemistry and products using AMP are infringing on its intellectual property, and we may be required to redesign our technology, obtain a license, cease using our AMP chemistry altogether and/or pay significant damages, among other consequences, any of which would have a material adverse effect on our business, financial condition and results of operations.

Our AMP chemistry underlies all of our RUO products and is also the foundation of STRATAFIDE and PCM. As a result, our commercial success depends on our ability to continue developing, manufacturing, marketing and selling products based on AMP. On January 27, 2020, one of our competitors, Natera, Inc., or Natera, filed a complaint against us in the United States District Court for the District of Delaware, alleging that our products using AMP chemistry, and the manufacture, use, sale, and offer for sale of such products, infringe U.S. Patent No. 10,538,814. On April 15, 2020, Natera amended its complaint to allege that our products using AMP chemistry, including STRATAFIDE, PCM, LiquidPlex, ArcherMET, FusionPlex, and VariantPlex, and the manufacture, use, sale, and offer for sale of such products, infringe U.S. Patent No. 10,538,814, U.S. Patent No. 10,557,172, U.S. Patent No. 10,590,482, and U.S. Patent No. 10,597,708, or collectively, the Natera Asserted Patents, each of which are held by Natera. Natera seeks, among other things, damages and other monetary relief, costs and attorneys’ fees, and an order enjoining us from further infringement of such patents. On June 4, 2020, we filed a motion seeking dismissal of Natera’s infringement claims against STRATAFIDE, PCM, and ArcherMET, and for a judgment that U.S. Patent No. 10,538,814, U.S. Patent No. 10,557,172, and U.S. Patent No. 10,590,482 are invalid. For more information regarding our litigation with Natera, please see “Business—Legal proceedings.”

If any of our products or our use of AMP is found to infringe such patents, we could be required to redesign our technology or obtain a license from Natera to continue developing, manufacturing, marketing, selling and commercializing AMP and our products. However, we may not be successful in the redesign of our technology or able to obtain any such license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving Natera and other third parties the right to use the same technologies licensed to us, and it could require us to make substantial licensing, royalty and other payments. We also could be forced, including by court order, to permanently cease developing, manufacturing, marketing and commercializing our products that are found to be infringing. In addition, we could be found liable for significant monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed any of the Natera Asserted Patents. Even if we were ultimately to prevail, our litigation with Natera could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.

This litigation is in its early stages and we therefore cannot reasonably estimate the final outcome, including our potential liability or any range of potential future charges associated with it. However, any finding of infringement by us of any of the Natera Asserted Patents could have a material adverse effect on our business, financial condition, results of operations, and prospects.

If our products and services do not perform as expected, our operating results, reputation and business will suffer.

Our success depends on the market’s confidence that we can provide reliable products that enable high quality diagnostic testing with high sensitivity and specificity and short turnaround times. There is no guarantee that the accuracy and reproducibility we have demonstrated to date will continue as our product deliveries increase and our product portfolio expands.

Our products and services use a number of complex and sophisticated biochemical and bioinformatics processes, many of which are highly sensitive to external factors. An operational, technological or other failure in one of these complex processes or fluctuations in external variables may result in sensitivity or specificity rates that are lower than we anticipate or result in longer than expected turnaround times. In addition, labs are required to validate their processes before using our products for clinical purposes. These validations are outside of our control. If our products do not perform, or are perceived to not have performed, as expected or favorably in comparison to competitive products, our operating results, reputation, and business will suffer, and we may also be subject to legal claims arising from product limitations, errors, or inaccuracies. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

In addition, our test reports for STRATAFIDE are planned to match identified mutations with FDA-approved targeted therapies or relevant clinical trials of targeted therapies, and in the case of our future companion diagnostic applications, we plan to include relevant companion diagnostic claims. If a patient or physician who orders a test using one of our products is unable to obtain, or be reimbursed for the use of, targeted therapies because they are not indicated in the FDA-approved label for treatment, the patient is unable to enroll in an identified clinical trial due to the enrollment criteria of the trial, or some other reason, the ordering physician may conclude the test report does not contain actionable information. If physicians do not believe our products consistently generate actionable information about their patients’ disease or condition, they may be less likely to use our products.

Operational, technical and other difficulties adversely affecting test performance, harm our reputation, may impact the commercial attractiveness of our products, and may increase our costs or divert our resources, including management’s time and attention, from other projects and priorities. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Furthermore, we cannot provide assurance that our customers will always use our products in the manner in which we intend. Any intentional or unintentional misuse of our products by our customers could lead

to substantial civil and criminal monetary and non-monetary penalties, and could cause us to incur significant legal and investigatory fees.

If our current or future products or services are not competitive in their intended markets, we may be unable to increase or sustain our revenues or achieve profitability.

We compete primarily in the biotechnology and pharmaceutical industries, which are characterized by rapid technological changes, frequent new product introductions, reimbursement challenges, emerging competition, evolving industry standards, intellectual property disputes, price competition, aggressive marketing practices and changing customer preferences. We face competition in the field of comprehensive genomic profiling from other companies, many of which are larger, more established and have more experience and more resources than we do. In particular, we compete with numerous companies in the life sciences research, clinical diagnostics and drug development spaces. Our competitors include, among others, Natera, QIAGEN N.V., Guardant Health, Inc., and Illumina, Inc., which we refer to as Illumina. Our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, regulatory clearance approval and compliance, and sales and distribution than we do. Mergers and acquisitions involving life sciences research, clinical diagnostics or drug discovery companies in the personalized medicine space may result in even more resources being concentrated among a smaller number of our competitors. Our competitors also may obtain FDA or other regulatory clearance or approval for their products more rapidly than we may obtain clearance or approval for ours. We cannot assure you that research, discoveries or other advancements by other companies will not render our existing or potential products and services uneconomical or obsolete, or result in products and services that are superior or otherwise preferable to our current or future products and services.

Some of our competitors’ products and services are sold at a lower price than ours, which could cause sales of our products and services to decline or force us to reduce our prices, which would harm our revenues, operating income or market share. Moreover, we are increasingly subject to litigation from our competitors. See “Business—Legal proceedings.” If we are unable to compete successfully, we may be unable to increase or sustain our revenues or achieve profitability.

To remain competitive, we must continually research and develop improvements to our products and services. However, we cannot assure you that we will be able to develop and commercialize the improvements to our products and services on a timely basis. Our competitors may develop and commercialize competing or alternative products and services and improvements faster than we are able to do so, which would negatively affect our ability to increase or sustain our revenue or achieve profitability.

We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy.

We anticipate continued growth in our business operations both inside and outside the United States. Any future growth could create strain on our organizational, administrative, and operational infrastructure, including laboratory operations, quality control, customer service, and sales force management. Our ability to manage our growth properly will require us to continue to improve our operational, financial, and managerial controls, as well as our reporting systems and procedures.

In addition, as our volume grows, we will need to continue to increase our capacity to manufacture our products; implement customer service, billing, and general process improvements and expand our internal quality assurance program to support increased demand. We will also need additional scientific and technical personnel to process higher volumes of our products and services. Portions of our process are not automated and will require additional personnel to grow. We will also need to purchase additional equipment, some of which can take several months or more to procure, set up, and validate, as well as increase our software and computing capacity to meet increased demand. There is no assurance that any of these increases in scale, expansion of personnel, equipment, software and computing capacities,

or process enhancements will be successfully implemented, or that we will have adequate space in our laboratory facilities to accommodate such required expansion.

As we commercialize our products, particularly PCM, we will need to incorporate new equipment, implement new technology systems, automated equipment and laboratory processes, hire new personnel with different qualifications, and procure additional laboratory and manufacturing space to allow us to further develop new services and manufacture our products.

Failure to manage this growth could result in turnaround time delays, higher service costs, declining service quality, deteriorating customer service, and slower responses to competitive challenges. A failure in any one of these areas could make it difficult for us to meet market expectations for our products and services and could damage our reputation, which in turn could have a material adverse effect on our business, financial condition and results of operations.

If we do not have the support of key opinion leaders or clinical data using our products is not published in peer-reviewed journals, it may be difficult to drive adoption of our products and establish them as a component of the standard of care for patients with cancer.

We have established relationships with leading oncology thought leaders at premier cancer institutions and oncology networks. If these key opinion leaders determine that our genomics platform, our existing products and services or other products and services that we develop are not clinically effective, that alternative technologies are more effective, or if they elect to use internally developed products or services, we may see lower demand for our products, and face difficulty establishing our products as an integral component of the applicable standard of care, which would limit our revenue growth and our ability to achieve profitability.

The publication of clinical data using our products in peer‑reviewed journals is also crucial to our success. We are unable to control when, if ever, results are published which may delay or limit broad adoption of our products. Peer‑reviewed publications that include clinical data relating to our products may be limited by many factors, including delays in the completion of, poor design of, or lack of compelling data from, clinical studies, as well as delays in the review, acceptance and publication process. If our products or underlying technology do not receive sufficient favorable exposure in peer‑reviewed publications, the rate of clinician adoption of our products and positive reimbursement coverage determinations for our products, even if approved with guideline inclusion, could be negatively affected.

If we are unable to successfully expand our sales and marketing to match our growth, our business may be adversely affected.

Our future sales will depend in large part on our ability to develop, and substantially expand, our sales force and to increase the scope of our marketing efforts. Our target market of laboratories, hospitals, clinicians and biopharmaceutical companies is a large and diverse market. As a result, we believe it is necessary to develop a sales force that includes sales representatives with specific technical backgrounds and industry expertise. Competition for such employees is intense. We may not be able to attract and retain personnel or be able to build an efficient and effective sales and marketing force, which could negatively impact sales and market acceptance of our services and limit our revenue growth and potential profitability.

Moreover, approximately 33%, 36% and 58% of our total revenues for the three months ended March 31, 2020, the year ended December 31, 2019 and the year ended December 31, 2018, respectively, were attributable to our U.S. direct sales. Sales and marketing activities in the healthcare space in the United States are subject to various rules and regulations. In addition, our marketing messaging can be complex and nuanced, and there may be errors or misunderstandings in our employees’ communication of such messaging. As we continue to grow our sales and marketing efforts in line with the growth in our business, we face an increased need to continuously monitor and improve our policies, processes and procedures to maintain compliance with a growing number and variety of laws and regulations, including with respect to consumer marketing. To the extent that there is any violation, whether actual, perceived or

alleged, of our policies or applicable laws and regulations, we may incur additional training and compliance costs, may receive inquiries from third‑party payors or other third parties, or be held liable or otherwise responsible for such acts of non‑compliance. Any of the foregoing could adversely affect our business, financial condition and results of operations.

We rely on a limited number of suppliers or, in many cases, single suppliers, for laboratory equipment and materials and may not be able to find replacements or immediately transition to alternative suppliers.

We have sourced and will continue to source components of our technology, including sequencers, reagents, enzymes, tubes and other laboratory materials, from third parties. In particular, our sequencers and many of our reagents and enzymes are sole sourced.

For example, our planned STRATAFIDE and PCM products are currently being developed to use only Illumina’s sequencing platform. Without access to these sequencers, we would be unable to run our tests and commercialize our products. In addition, our product customers are required to use Illumina sequencers and reagents to run the tests that they develop based on our technology. Our failure to maintain a continued supply of the sequencers and reagents, along with the right to use certain hardware and software, would adversely impact our business, financial condition, and results of operations. In particular, while we are seeking to validate our tests on additional sequencing platforms, we have not, to date, validated any alternative sequencing platform on which our testing could be run in a commercially viable manner. These efforts will require significant resources, expenditures and time and attention of management, and there is no guarantee that we will be successful in implementing any such sequencing platforms in a commercially sustainable way. We also cannot guarantee that we will appropriately prioritize or select alternative sequencing platforms on which to focus our efforts, in particular given our limited product and research and development resources and various business initiatives, which could result in increased costs and delayed timelines or otherwise impact our business, financial condition, and results of operations.

Because we rely on third‑party suppliers, we do not control the manufacture of the components of our technology, including whether such components will meet our quality control requirements, nor the ability of our suppliers to comply with applicable legal and regulatory requirements. In many cases, our suppliers are not contractually required to supply these components to the quality or performance standards that we require. If the supply of components we receive does not meet our quality control or performance standards, we may not be able to use the components, or if we use them not knowing that they are of inadequate quality, which occasionally occurs with respect to certain reagents, our tests may not work properly or at all, or they may provide erroneous results, and we may be subject to significant delays caused by interruption in production or manufacturing or to lost revenue from such interruption or from spoiled tests. In addition, any natural or other disaster, acts of war or terrorism, shipping embargoes, labor unrest or political instability or similar events at our third‑party manufacturers’ facilities that cause a loss of manufacturing capacity would heighten the risks that we face.

In the event of any adverse developments with our suppliers, in particular for those products that are sole sourced, or if any of our suppliers modifies any of the components they supply to us, our ability to supply our products may be interrupted, and obtaining substitute components could be difficult or require us to re‑design or re‑validate our products. In addition, if we obtain FDA clearance, approval or authorization for any of our tests as an IVD, such issues with suppliers or the components that we source from suppliers could affect our commercialization efforts for such an IVD. Our failure to maintain a continued supply of components that meets our quality control requirements, or changes to or termination of our agreements or inability to renew our agreements with these parties or enter into new agreements with other suppliers, particularly in the case of sole suppliers, could result in the loss of access to important components of our tests and impact our test performance or affect our ability to perform our tests in a timely manner or at all, which could impair, delay or suspend our commercialization activities.

Moreover, in the event that we transition to a new supplier from any of our sole suppliers, doing so could be time‑consuming and expensive, may result in interruptions in our ability to supply our products to the

market, could affect the performance of our tests or could require that we re‑validate our processes and our other tests using replacement equipment and supplies, which could hinder the adoption of our products and services, resulting in increased costs. Any of these occurrences could have a material adverse effect on our business, financial condition and results of operations.

We rely on third‑party laboratories to perform portions of our service offerings.

A large portion of our biopharmaceutical testing services is performed by third‑party laboratories while the remaining portion is performed by third‑party Clinical Laboratory Improvement Amendments of 1988, or CLIA, certified laboratories or our own CLIA-certified laboratory accredited by the College of American Pathologists, or CAP, in Golden, Colorado. The third‑party laboratories are subject to contractual obligations to perform these services for us, but are not otherwise under our control. We therefore do not control the capacity and quality control efforts of these third‑party laboratories other than through our ability to enforce contractual obligations on volume and quality systems, and we have no control over such laboratories’ compliance with applicable legal and regulatory requirements. We also have no control over the timeliness of such laboratories’ performance of their obligations to us, and the third‑party laboratories that we have contracted with have in the past had, and occasionally continue to have, issues with delivering results to us or resolving issues with us within the time frames we expected or established in our contracts with them, which sometimes results in longer than expected turnaround times for, or negatively impacts the performance of, these tests and services. In the event of any adverse developments with these third‑party laboratories or their ability to perform their obligations to us in a timely manner and in accordance with the standards that we and our customers expect, our ability to service our customers may be delayed, interrupted or otherwise adversely affected, which could result in a loss of customers and harm to our reputation. Furthermore, when these issues arise, we have had to expend time, management attention and other resources to address and remedy such issues.

We may not have sufficient alternative backup if one or more of the third‑party laboratories that we contract with are unable to satisfy their obligations to us with sufficient performance, quality and timeliness. Any natural or other disaster, acts of war or terrorism, shipping embargoes, labor unrest or political instability or similar events at one or more of our third‑party laboratories’ facilities that causes a loss of capacity would heighten the risks that we face. Changes to or termination of our agreements or inability to renew our agreements with these third‑party laboratories or enter into new agreements with other laboratories that are able to perform such portions of our service offerings could impair, delay or suspend our efforts to market and sell these services. If any of these events occur, our business, financial condition, and results of operations could suffer.

If our laboratory facilities are insufficient, our ability to conduct our pharma development services or pursue our research and development efforts, and fulfill our contractual obligations may be jeopardized.

Our services revenue is derived in part from testing services performed at our laboratory facility in Golden, Colorado, for which we currently have no backup or redundant facility to perform such tests other than third-party laboratories. Our facilities and equipment could be harmed or rendered inoperable by natural or man-made disasters, including war, fire, earthquake, power loss, communications or Internet failure or interruption, or terrorism, which may render it difficult or impossible for us to provide these services for some period of time. The inability to provide these services or to reduce the backlog of analyses that could develop if one or more of our laboratories become inoperable, for even a short period of time, may result in the loss of customers or harm to our reputation, and we may be unable to regain those customers or repair our reputation in the future. Furthermore, our facilities and the equipment we use to perform our research and development work could be unavailable or costly and time-consuming to repair or replace. It would be difficult, time-consuming, and expensive to rebuild any of our facilities or license or transfer our proprietary technology to a third party, particularly in light of the licensure and accreditation requirements for commercial laboratories like ours. We may be unable to negotiate commercially reasonable terms with such third parties. Adverse consequences resulting from an

interruption of our overall laboratory operations could harm relationships with our customers and regulatory authorities, and our reputation, and could affect our ability to generate revenue.

We may also construct, acquire, or enter into relationships with third parties to procure additional laboratory space inside and outside the United States to support our existing and new services. If we are unable to obtain or are delayed in obtaining or establishing new laboratory space to support these commercialization and development efforts, we could fail to meet certain contractual obligations and agreed upon timelines with certain of our biopharmaceutical collaborators or provide existing services and develop and launch new services in certain territories, which could result in harm to our business and reputation, and adversely affect our business, financial condition, and results of operations. As we continue to transition some of our services to new laboratories, we could experience disruptions in overall laboratory operations and could require adjustments to meet regulatory requirements, resulting in our inability to meet customer turnaround time expectations. Any delays in this transition could result in slower realization of laboratory efficiencies anticipated from operating an additional laboratory facility. Adverse consequences resulting from an interruption of our overall laboratory operations could harm relationships with our customers and regulators, and our reputation, and could affect our ability to generate revenue.

We carry insurance for damage to our property and laboratory and the disruption of our business, but this insurance may not cover all of the risks associated with damage to our property or laboratory or disruption to our business, may not provide coverage in amounts sufficient to cover our potential losses, may be challenged by insurers underwriting the coverage, and may not continue to be available to us on acceptable terms, if at all.

Our research and development efforts to add additional indications to our IVD products, if approved, will be hindered if we are not able to contract with third parties for access to tissue samples.

Under standard clinical practice, tumor biopsies removed from patients are preserved and stored in formalin-fixed paraffin embedded, or FFPE, format, and liquid biopsies are taken with a blood draw and stored in blood collection tubes. In order to add additional indications to our IVD products, if approved, we will need to secure access to these FFPE tumor biopsy and liquid biopsy samples, as well as information pertaining to the clinical outcomes of the patients from which they were derived for our IVD development activities. Others compete with us for access to these samples. Additionally, the process of negotiating access to samples is lengthy because it typically involves numerous parties and approval levels to resolve complex issues such as usage rights, institutional review board approval, privacy rights, publication rights, intellectual property ownership and research parameters. If we are unable to negotiate access to tissue samples on a timely basis or on commercially reasonable terms, or at all, or if other laboratories or our competitors secure access to these samples before us, our ability to research, develop and commercialize future IVD products will be limited or delayed.

We have estimated the sizes of the markets for our current and future products and services, and these markets may be smaller than we estimate.

Our estimates of the annual addressable markets for our current products and services and those under development are based on a number of internal and third-party estimates, including, without limitation, the number of patients who have developed one or more of a broad range of cancers, the number of potential tests utilized per treatment course per patient, the frequency with which patients will be monitored post-treatment and early detection monitoring practices as well as the assumed rates at which such products and services will be reimbursed, or the assumed prices at which we can sell our current and future products and services for markets that have not been established. While we believe our assumptions and the data underlying our estimates are reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, including as a result of factors outside our control, thereby reducing the predictive accuracy of these underlying factors. If the actual number of patients who would benefit from our products or services, the price at which we can sell future products and services or the annual addressable market for our products or

services is smaller than we have estimated, it may impair our sales growth and have an adverse impact on our business, financial condition and results of operations.

Unfavorable global economic conditions could adversely affect our business, financial condition, and results of operations.

We generated 67.4%, 64.3% and 41.8% of our revenues outside the United States, primarily in the European Union, or the EU, the United Kingdom and Japan, during the three months ended March 31, 2020, the years ended December 31, 2019 and 2018, respectively. Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. For instance, legal, political and economic uncertainty surrounding the exit of the United Kingdom from the EU may be a source of instability in international markets, adversely affect our operations in the EU and United Kingdom and pose additional risks to our business, financial condition, and results of operations. A severe or prolonged global economic downturn could result in a variety of risks to our business, including our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our suppliers and customers, possibly resulting in supply disruption or delays in their payments to us, respectively. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

The loss or transition of a key member of our senior management team or our inability to attract and retain highly skilled scientists, clinicians, and salespeople could adversely affect our business.

Our success depends on the skills, experience, and performance of key members of our senior management team, in particular, Dr. Jason Myers, our President and Chief Executive Officer and Director, and Josh Stahl, our Chief Scientific Officer and Chief Operating Officer. The individual and collective efforts of these key members of our senior management will be important as we continue to develop our genetic analysis platform and additional products and services, and as we expand our commercial activities. The loss or incapacity of key members of our senior management team could adversely affect our operations if we experience difficulties in hiring qualified successors.

Our research and development programs and laboratory operations depend on our ability to attract and retain highly skilled scientists and technicians. We may not be able to attract or retain qualified scientists and technicians in the future due to the intense competition for qualified personnel among life science businesses, particularly in Boulder, Colorado. We also face competition from universities and public and private research institutions in recruiting and retaining highly qualified scientific personnel. We may have difficulties locating, recruiting, or retaining qualified sales people. Recruitment and retention difficulties can limit our ability to support our research and development and sales programs, which could in turn have an adverse effect on our business, financial condition, and results of operations.

If we were sued for product liability or professional liability, we could face substantial liabilities that exceed our resources.

The marketing, sale, and use of our products and services could lead to the filing of product liability claims were someone to allege that our products and services identified inaccurate or incomplete information regarding the genomic alterations of the tumor or malignancy analyzed, reported inaccurate or incomplete information concerning the available therapies for a certain type of cancer, or otherwise failed to perform as designed. We may also be subject to liability for errors in, a misunderstanding of, or inappropriate reliance upon the information we provide in the ordinary course of our business activities. A product liability or professional liability claim could result in substantial damages and be costly and time-consuming for us to defend.

We maintain service and professional liability insurance, but this insurance may not fully protect us from the financial impact of defending against product liability or professional liability claims. Any product liability or professional liability claim brought against us, with or without merit, could increase our

insurance rates or prevent us from securing insurance coverage in the future. Additionally, any product liability lawsuit could damage our reputation or cause current clinical or biopharmaceutical collaborators to terminate existing agreements and potential clinical or biopharmaceutical collaborators to seek other collaborators, any of which could impact our results of operations.

Our products or services may be subject to product or service recalls in the future. A recall of products or services, either voluntarily or at the direction of the FDA or another governmental authority, or the discovery of serious safety issues with our products or services, could have a significant adverse impact on us.

The FDA has the authority to require the recall of commercialized products or services that are subject to FDA regulation. Manufacturers may, under their own initiative, recall a product or service if any deficiency is found. For reportable corrections and removals, companies are required to make additional periodic submissions to the FDA after initiating the recall, and often engage with the FDA on their recall strategy prior to initiating the recall. A government-mandated or voluntary recall by us or one of our distributors could occur as a result of an unacceptable health risk, component failures, failures in laboratory processes, malfunctions, manufacturing errors, design or labeling defects, or other deficiencies and issues. Recalls of any of our commercialized products or services would divert managerial and financial resources and adversely affect our business, results of operations, financial condition and reputation. We may also be subject to liability claims, be required to bear other costs or take other actions that may negatively impact our future sales and our ability to generate profits. Companies are also required to maintain certain records of corrections and removals, even if these do not require reporting to the FDA. We may initiate voluntary recalls involving our commercialized products or services. A recall announcement by us could harm our reputation with customers and negatively affect our business, financial condition, and results of operations. In addition, the FDA or other agency could take enforcement action for failing to report the recalls when they were conducted.

If we initiate a recall, including a correction or removal, for one of our commercialized products or services, issue a safety alert, or undertake a field action or recall to reduce a health risk, this could lead to increased scrutiny by the FDA, other governmental and regulatory enforcement bodies, and our customers regarding the quality and safety of our products and services, and to negative publicity, including FDA alerts, press releases, or administrative or judicial actions. Furthermore, the submission of these reports could be used against us by competitors and cause customers to delay purchase decisions or cancel orders, which would harm our reputation.

We may acquire other businesses, form joint ventures, or make investments in other companies or technologies that could negatively affect our operating results, dilute our stockholders’ ownership, increase our debt, or cause us to incur significant expense.

Our business strategy may, from time to time, include pursuing acquisitions of businesses and assets. For example, in October 2018, we completed the acquisition of Baby Genes, Inc., or Baby Genes, or the Baby Genes Acquisition to provide us with a CLIA- and CAP-accredited lab. We may effect similar strategic acquisitions in the future. We also may pursue strategic alliances and joint ventures that leverage our proprietary genomics platform and industry experience to expand our offerings or distribution. We have limited experience with acquiring other companies. Negotiating these transactions and the formation of strategic alliances or joint ventures can be time-consuming, difficult, and expensive, and our ability to execute and/or close these transactions may be subject to third-party approvals, as well as governmental authorities, which are beyond our control. Consequently, we may not be able to complete such transactions on favorable terms or at all, and we can make no assurance that these transactions, once undertaken and announced, will close.

An acquisition or investment may result in unforeseen operating difficulties and expenditures, such as:


•	we could experience difficulty in integrating businesses, services, personnel, operations, and financial and other controls and systems, and retaining key employees;


•	we may assume by acquisition, joint venture, or strategic relationship unknown liabilities, known contingent liabilities that become realized, or known liabilities that prove greater than anticipated;


•	we may have difficulty retaining the customers or employees of any acquired business;


•	we may incur debt, contingent liabilities, or future write-offs of intangible assets or goodwill, any of which could have a material adverse effect on our financial condition, results of operations, and cash flows;


•	we may enter a new market or business line in which we have no prior experience and may not successfully compete in that market or business line;


•	integration of an acquired company may disrupt ongoing operations and require management resources that we would otherwise focus on developing our existing business, and as a result, we cannot be assured that the anticipated benefits of any acquisition, technology license, strategic alliance, or joint venture would be realized; and


•	we may have interests that diverge from those of our joint venture partners or other strategic partners and we may not be able to direct the management and operations of the joint venture or other strategic relationship in the manner we believe is most appropriate, thereby exposing us to additional risk.

These challenges related to acquisitions or investments could adversely affect our business, financial condition, and results of operations.

To finance any acquisitions or joint ventures, we may choose to issue shares of our common stock as consideration, which could dilute the ownership of our stockholders. For instance, pursuant to the terms of the Baby Genes Merger Agreement, we issued 886,884 shares of our Series A Preferred Stock in February 2020, and we will issue an additional 389,749 shares of our Series A Preferred Stock immediately prior to the closing of this offering, which will subsequently convert into an equal number of shares of common stock. In addition, we may be required to issue an additional 800,000 shares of our common stock if we meet certain revenue thresholds in 2020. If the price of our common stock is low or volatile, we may not be able to acquire other companies or fund a joint venture project using our stock as consideration. We may also choose to finance any future acquisitions or joint ventures through additional indebtedness. The incurrence of such indebtedness would result in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional debt and acquire or license intellectual property rights, and other operating restrictions that could adversely impact our ability to conduct our business.

International expansion of our business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside the United States.

Because we and our distributors currently, and in the future may continue to, market our products and services outside the United States, if cleared, authorized or approved, our business is subject to risks associated with doing business outside the United States, including an increase in our expenses and diversion of our management’s attention from the development of future products and services. Accordingly, our business and financial results in the future could be adversely affected due to a variety of factors, including:


•	multiple, conflicting and changing laws and regulations such as privacy security and data use regulations, tax laws, export and import restrictions, economic sanctions and embargoes, employment laws, anti-corruption laws, regulatory requirements, reimbursement or payor regimes and other governmental approvals, permits and licenses;


•	failure by us or our distributors to obtain regulatory clearance, authorization or approval for the use of our products and services in various countries;


•	additional potentially relevant third-party patent rights;


•	complexities and difficulties in obtaining intellectual property protection and maintaining, defending and enforcing our intellectual property;


•	difficulties in staffing and managing foreign operations;


•	employment risks related to hiring employees outside the United States;


•	complexities associated with managing multiple payor reimbursement regimes, government payors or patient self-pay systems;


•	difficulties in negotiating favorable reimbursement negotiations with governmental authorities;


•	logistics and regulations associated with shipping samples, including infrastructure conditions and transportation delays;


•	limits in our ability to penetrate international markets if we are not able to sell our products or conduct our testing or clinical diagnostic services locally;


•	financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products and services and exposure to foreign currency exchange rate fluctuations;


•	natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions;

•

regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’ activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act, or FCPA, its books and records provisions, or its anti-bribery provisions, or laws similar to the FCPA in other jurisdictions in which we may now or in the future operate, such as the United Kingdom’s Bribery Act of 2010, or the U.K. Bribery Act; and


•	onerous anti-bribery requirements of several member states in the EU, the United Kingdom, Japan, and other countries that are constantly changing and require disclosure of information to which U.S. legal privilege may not extend.

Any of these factors could significantly harm our future international expansion and operations and, consequently, our revenue and results of operations.

We may never obtain approval in any other foreign country, including Japan, for any of our products or services and, even if we do, we or our collaborators may never be able to commercialize them in any other jurisdiction, which would limit our ability to realize their full market potential.

In order to eventually market any of our current or future products and services in any particular foreign jurisdiction, we must establish and comply with numerous and varying regulatory requirements on a jurisdiction-by-jurisdiction basis regarding quality, safety, performance and efficacy. In addition, clinical trials or clinical investigations conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory clearance, authorization or approval in one country does not guarantee regulatory clearance, authorization or approval in any other country. For example, the performance characteristics of our products and services may need to be validated separately in specific ethnic and genetic populations. Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods.

Seeking foreign regulatory clearance, authorization or approval could result in difficulties and costs for us and our collaborators and require additional preclinical studies, clinical trials or clinical investigations which could be costly and time-consuming. Regulatory requirements and ethical approval obligations can vary widely from country to country and could delay or prevent the introduction of our products and services in those countries. The foreign regulatory clearance, authorization or approval process involves

all of the risks and uncertainties associated with FDA clearance, authorization or approval. We currently sell our RUO products outside the United States but have no experience in obtaining regulatory clearance, authorization or approval in international markets other than Japan, where we have submitted a companion diagnostic device application to the Pharmaceuticals and Medical Devices Agency, or the PDMA. If we or our collaborators fail to comply with regulatory requirements in international markets or to obtain and maintain required regulatory clearances, authorizations or approvals in international markets, or if those approvals are delayed, our target market will be reduced and our ability to realize the full market potential of our products and services will be unrealized.

We depend on our information technology and telecommunications systems, and those of our third-party service providers, contractors and consultants, and any failure of these systems could harm our business.

We depend on our information technology and telecommunications systems and those of our third-party service providers, contractors and consultants for significant elements of our operations, including our laboratory information management system, our computational biology system, our knowledge management system, our business intelligence system, our customer relationship management system, and our online customer-facing portals for reporting and research. We have installed and are expanding a number of enterprise software systems that affect a broad range of business processes and functional areas, including, for example, systems handling human resources, financial controls and reporting, contract management, and other infrastructure operations. These information technology and telecommunications systems support a variety of functions, including laboratory operations, test validation, sample processing and tracking, quality control, customer service support, research and development activities, and general administrative activities. In addition, our third-party service providers depend upon technology and telecommunications systems provided by outside vendors.

Despite the implementation of preventative and detective security controls, such information technology and telecommunications systems are vulnerable to damage or interruption from a variety of sources, including telecommunications or network failures or interruptions, system malfunction, natural disasters, malicious human acts, terrorism and war. Failures or significant downtime of our information technology or telecommunications systems, or those used by our third-party service providers, contractors or consultants could prevent us from conducting our comprehensive genomic analyses, preparing and providing reports and data to clinicians, handling customer inquiries, conducting research and development activities, and managing the administrative aspects of our business.

If the information technology systems of our third-party service providers and other contractors and consultants become subject to disruptions, we may have insufficient recourse against such third parties and we may have to expend significant resources to mitigate the impact of such an event, and to develop and implement protections to prevent future events of this nature from occurring. Any disruption or loss of information technology or telecommunications systems on which critical aspects of our operations depend could have an adverse effect on our business, financial condition and results of operations.

Security breaches, loss of data, and other disruptions of our or our third-party service providers’ information technology or telecommunications systems could result in a material disruption of our business and expose us to reputational damage and substantial liability.

In the ordinary course of our business, we and our third-party service providers collect, store and transmit sensitive data, including legally protected health information, personally identifiable information, intellectual property and proprietary business information owned or controlled by us or our customers, payors, and biopharmaceutical collaborators. In addition, we offer online customer-facing portals accessible through public web portals. It is critical that we collect, store and transmit sensitive data in a secure manner to maintain the confidentiality and integrity of such confidential information. We manage and maintain our applications and data utilizing a combination of on-site systems, managed data center systems, and cloud-based data center systems. These applications and related data encompass a wide variety of business-critical information including research and development information, commercial information, and business and financial information.

Although we take measures to protect such information from unauthorized access or disclosure, our information technology and infrastructure, and that of our third-party service providers may be vulnerable to attacks by hackers or malicious software, physical break-ins or breached due to inadvertent or intentional actions by our employees, third-party service providers, and/or other third parties, malfeasance or other disruptions. We also face the ongoing challenge of managing access controls to our information technology systems. If we do not successfully manage these access controls it further exposes us to risk of security breaches or disruptions. Any such security breaches or disruptions could compromise the security or integrity of our networks or result in the loss, misappropriation, and/or unauthorized access, use, modification or disclosure of, or the prevention of access to, sensitive data or confidential information (including trade secrets or other intellectual property, proprietary business information, and personal information). For example, any such event that leads to unauthorized access, use, or disclosure of personal information, including personal information regarding our customers or employees, could harm our reputation directly, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information. If our or our vendors’ information systems are breached, sensitive data are compromised, surreptitiously modified, rendered inaccessible for any period of time or maliciously made public, or if we fail to make adequate or timely disclosures to the public or law enforcement agencies following any such event, whether due to delayed discovery or a failure to follow existing protocols, it could result in significant fines, penalties, orders, sanctions and proceedings or actions against us by governmental bodies or other regulatory authorities, clients or third parties. Any of the foregoing could result in significant legal and financial exposure and reputational damages that could potentially have a material adverse effect on our business, financial condition, results of operations and prospects.

Cyber-attacks are increasing in frequency and evolving in nature. We are at risk of attack by a variety of adversaries, including state-sponsored organizations, organized crime, hackers or “hactivists” (activist hackers), through the use of increasingly sophisticated methods of attack, including long-term, persistent attacks referred to as advanced persistent threats. The techniques used to obtain unauthorized access or sabotage systems include, among other things, computer viruses, malicious or destructive code, ransomware, social engineering attacks (including phishing and impersonation), hacking and denial-of-service attacks. For example, we have been subject to phishing incidents and we may experience additional incidents in the future. Our systems are also subject to compromise from internal threats, such as theft, misuse, unauthorized access or other improper actions by employees, vendors and other third parties with otherwise legitimate access to our systems. Given the unpredictability of the timing, nature and scope of information technology disruptions, there can be no assurance that any security procedures and controls that we or our third-party service providers have implemented will be sufficient to prevent cyber-attacks from occurring. The latency of a compromise is often measured in months, but could be years, and we may not be able to detect a compromise in a timely manner. New techniques may not be identified until they are launched against a target, and we may be unable to anticipate these techniques or detect an incident, assess its severity or impact, react or appropriately respond in a timely manner or implement adequate preventative measures, resulting in potential data loss or other damage to our information technology systems.

As the breadth and complexity of the technologies we use and the software and platforms we develop continue to grow, the potential risk of security breaches and cyber-attacks also increases. Our policies, employee training (including phishing prevention training), procedures and technical safeguards may be insufficient to prevent or detect improper access to confidential, proprietary or sensitive data, including personal data. In addition, the competition for talent in the data privacy and cybersecurity space is intense, and we may be unable to hire, develop or retain suitable talent capable of adequately detecting, mitigating or remediating these risks. As cybersecurity threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities. The inability to implement, maintain and upgrade adequate safeguards could have a material adverse effect on our business.

We have numerous vendors and other third parties who receive personal data from us in connection with the services we offer our clients. In addition, we have migrated certain data, and may increasingly migrate data, to a cloud hosted by third-party vendors. Some of these vendors and third parties also have direct access to our systems. Due to applicable laws and regulations or contractual obligations, we may be held responsible for any information security failure or cyber-attack attributed to our vendors as they relate to the information we share with them. In addition, because we do not control our vendors and our ability to monitor their data security is limited, we cannot ensure the security measures they take will be sufficient to protect confidential, proprietary, or sensitive data, including personal data, or prevent cyber-attackers from gaining access to our infrastructure or data through our vendors or other third parties.

Regardless of whether an actual or perceived cyber-attack is attributable to us or our third-party service providers, such an incident could, among other things, result in improper disclosure of information, harm our reputation and brand, reduce the demand for our products and services, lead to loss of customer confidence in the effectiveness of our security measures, disrupt normal business operations or result in our systems or products and services being unavailable. In addition, it may require us to spend material resources to investigate or correct the breach and to prevent future security breaches and incidents. The costs related to significant security breaches or disruptions could be material and exceed the limits of any cybersecurity insurance we maintain, increase our risk of regulatory scrutiny, expose us to legal liabilities, including litigation, regulatory enforcement, indemnity obligations or damages for contract breach, divert the attention of management from the operation of our business and cause us to incur significant costs, any of which could affect our financial condition, operating results and our reputation. Moreover, there could be public announcements regarding any such incidents and any steps we take to respond to or remediate such incidents, and if securities analysts or investors perceive these announcements to be negative, it could, among other things, have a substantial adverse effect on the price of our common stock. In addition, our remediation efforts may not be successful. Any of the foregoing events could have a material adverse effect on our business, financial condition and results of operations.

We are subject to stringent privacy laws, information security laws, regulations, policies and contractual obligations related to data privacy and security and changes in such laws, regulations, policies and contractual obligations could adversely affect our business.

We are subject to numerous state, federal and foreign laws and regulations that govern the collection, transmission, storage, dissemination, use, privacy, confidentiality, security, availability, integrity, and other processing of individually identifiable information. The legislative and regulatory landscape for privacy and data protection continues to evolve in jurisdictions worldwide, and there has been an increasing focus on privacy and data protection issues with the potential to affect our business. Failure to comply with any of these laws and regulations could result in enforcement actions against us, including fines, imprisonment of company officials and public censure, claims for damages by affected individuals, damage to our reputation and loss of goodwill, any of which could have a material adverse effect on our business.

We and our third-party billing and collections provider collect, store, process and transmit sensitive data, including legally protected health information, personally identifiable information, intellectual property and proprietary business information. As we seek to expand our business, we are, and will increasingly become, subject to various laws, regulations and standards, as well as contractual obligations, relating to the collection, use, retention, security, disclosure, transfer and other processing of sensitive and personal information in the jurisdictions in which we operate. In many cases, these laws, regulations and standards apply not only to third-party transactions, but also to transfers of information between or among us, our subsidiaries and other parties with which we have commercial relationships. These laws, regulations and standards may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will be interpreted and applied in ways that will materially and adversely affect our business, financial condition and results of operations. The regulatory framework for data privacy, data security and data transfers worldwide is rapidly evolving and, as a result, interpretation

and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future.

There are numerous U.S. federal and state laws and regulations related to the privacy and security of personal information. These laws and regulations include HIPAA, as amended by HITECH, which establishes a set of national privacy and security standards for the protection of protected health information, or PHI, by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, and the business associates with whom such covered entities contract for services. HIPAA requires covered entities and business associates to develop and maintain policies and procedures with respect to PHI that is used or disclosed, including the adoption of administrative, physical and technical safeguards to protect such information and ensure the confidentiality, integrity and availability of electronic protected health information. For instance, we offer private cloud-based bioinformatics software to help physicians and laboratories more efficiently use our products. The software maintains security safeguards that are designed to be consistent with HIPAA, as amended by HITECH, but we cannot guarantee that these safeguards will not fail or that they will not be deemed inadequate in the future. In addition, we could be subject to periodic audits for compliance with the HIPAA Privacy and Security Standards by the U.S. Department of Health and Human Services, or HHS and our customers. HIPAA also implemented the use of standard transaction code sets and standard identifiers that covered entities must use when submitting or receiving certain electronic healthcare transactions, including activities associated with the billing and collection of healthcare claims. The United States Office of Civil Rights may impose penalties on a covered entity for a failure to comply with a requirement of HIPAA. Penalties will vary significantly depending on factors such as the date of the violation, whether the covered entity knew or should have known of the failure to comply, or whether the covered entity’s failure to comply was due to willful neglect. These penalties include civil monetary penalties of $100 to $50,000 per violation, up to an annual cap of $1,500,000. However, a single breach incident can result in violations of multiple standards. A person who knowingly obtains or discloses individually identifiable health information in violation of HIPAA may face a criminal penalty of up to $50,000 and imprisonment up to one year. The criminal penalties increase to $100,000 and up to five years’ imprisonment if the wrongful conduct involves false pretenses, and to $250,000 and up to 10 years’ imprisonment if the wrongful conduct involves the intent to sell, transfer, or use identifiable health information for commercial advantage, personal gain, or malicious harm. HIPAA also authorizes state attorneys general to file suit on behalf of their residents. Courts may award damages, costs and attorneys’ fees related to violations of HIPAA in such cases. While HIPAA does not create a private right of action allowing individuals to sue us in civil court for violations of HIPAA, its standards have been used as the basis for duty of care in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI. Furthermore, in the event of a breach as defined by HIPAA, the covered entity has specific reporting requirements under HIPAA regulations. In the event of a significant breach, the reporting requirements could include notification to the general public. Enforcement activity can result in reputational harm, and responses to such enforcement activity can consume significant internal resources. Additionally, if we are unable to properly protect the privacy and security of protected health information, we could be found to have breached our contracts. Determining whether protected health information has been handled in compliance with applicable privacy standards and our contractual obligations can be complex and we cannot be sure how these regulations will be interpreted, enforced or applied to our operations.

In addition, many states in which we operate have laws that protect the privacy and security of sensitive and personal information. Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to sensitive and personal information than federal, international or other state laws, and such laws may differ from each other, which may complicate compliance efforts. For example, the California Consumer Privacy Act of 2018, or the CCPA, which increases privacy rights for California residents and imposes stringent data privacy and security obligations on companies that process their personal information, came into effect on January 1, 2020. Among other things, the CCPA requires covered companies to provide new disclosures to California consumers and provide such consumers new data protection and privacy rights, including the ability to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of

action for certain data breaches that result in the loss of personal information. This private right of action may increase the likelihood of, and risks associated with, data breach litigation. The CCPA was amended in September 2018 and November 2019, and it is possible that further amendments will be enacted, but even in its current form it remains unclear how various provisions of the CCPA will be interpreted and enforced. New legislation proposed or enacted in Illinois, Massachusetts, Nevada, New Jersey, New York, Rhode Island, Washington and other states, and a proposed right to privacy amendment to the Vermont Constitution, imposes, or has the potential to impose, additional obligations on companies that collect, store, use, retain, disclose, transfer and otherwise process confidential, sensitive and personal information, and will continue to shape the data privacy environment nationally. State laws are changing rapidly and there is discussion in Congress of a new federal data protection and privacy law to which we would become subject if it is enacted. All of these evolving compliance and operational requirements impose significant costs that are likely to increase over time, may require us to modify our data processing practices and policies, divert resources from other initiatives and projects, and could restrict the way products and services involving data are offered, all of which may have a material and adverse impact on our business, financial condition and results of operations.

Laws, regulations and standards in many jurisdictions apply broadly to the collection, use, retention, security, disclosure, transfer and other processing of personal information, which impose significant compliance obligations. For example, in the European Economic Area, or the EEA, and the United Kingdom, the collection and use of personal data, including clinical trial data, is governed by the provisions of the General Data Protection Regulation, or the GDPR. The GDPR came into effect in May 2018, superseding the European Union Data Protection Directive, and imposing more stringent data privacy and security requirements on companies in relation to the processing of personal data of EU data subjects. The GDPR, together with national legislation, regulations and guidelines of the EU member states and the United Kingdom governing the processing of personal data, impose strict obligations and restrictions on the ability to collect, use, retain, protect, disclose, transfer and otherwise process personal data, including health data from clinical trials and adverse event reporting. In particular, the GDPR includes obligations and restrictions concerning the consent and rights of individuals to whom the personal data relates, the transfer of personal data out of the EEA or the United Kingdom, security breach notifications and the security and confidentiality of personal data. The GDPR authorizes data processing penalties and fines for certain violations of up to 4% of global annual revenue or €20 million, whichever is greater. Such fines are in addition to any civil litigation claims by data subjects. European data protection authorities may interpret the GDPR and national laws differently and impose additional requirements, which contributes to the complexity of processing personal data in or from the EEA or United Kingdom. Guidance on implementation and compliance practices is often updated or otherwise revised. Further, while the United Kingdom enacted the Data Protection Act 2018 in May 2018 that supplements the GDPR and has publicly announced that it will continue to regulate the protection of personal data in the same way post-Brexit for a period of time, Brexit has created uncertainty with regard to the future regulation of data and data protection in the United Kingdom. Other countries also are considering or have passed legislation requiring local storage, processing or security of data, or similar requirements, which could increase the cost and complexity of delivering our products and services.

We make public statements about our use and disclosure of personal information through our privacy policy, information provided on our internet platform and press statements. Although we endeavor to comply with our public statements and documentation, we may at times fail to do so or be alleged to have failed to do so. The publication of our privacy policy and other statements that provide promises and assurances about data privacy and security can subject us to potential government or legal action if they are found to be deceptive, unfair or misrepresentative of our actual practices. Any failure, real or perceived, by us to comply with our posted privacy policies or with any legal or regulatory requirements, standards, certifications or orders or other privacy or consumer protection-related laws and regulations applicable to us could cause our customers to reduce their use of our products and services and could materially and adversely affect our business, financial condition and results of operations. In many jurisdictions, enforcement actions and consequences for non-compliance can be significant and are rising. In addition, from time to time, concerns may be expressed about whether our products, services or

processes compromise the privacy of customers and others. Concerns about our practices with regard to the collection, use, retention, security, disclosure, transfer and other processing of personal information or other privacy-related matters, even if unfounded, could damage our reputation and materially and adversely affect our business, financial condition and results of operations.

Many statutory requirements, both in the United States and abroad, include obligations for companies to notify individuals of security breaches involving certain personal information, which could result from breaches experienced by us or our third-party service providers. For example, laws in all 50 U.S. states and the District of Columbia require businesses to provide notice to consumers whose personal information has been disclosed as a result of a data breach. These laws are not consistent, and compliance in the event of a widespread data breach is difficult and may be costly. Moreover, states have been frequently amending existing laws, requiring attention to changing regulatory requirements. We also may be contractually required to notify customers or other counterparties of a security breach. Although we may have contractual protections with our third-party service providers, contractors and consultants, any actual or perceived security breach could harm our reputation and brand, expose us to potential liability or require us to expend significant resources on data security and in responding to any such actual or perceived breach. Any contractual protections we may have from our third-party service providers, contractors or consultants may not be sufficient to adequately protect us from any such liabilities and losses, and we may be unable to enforce any such contractual protections.

We expect that there will continue to be new proposed laws and regulations concerning data privacy and security, and we cannot yet determine the impact such future laws, regulations and standards may have on our business. New laws, amendments to or re-interpretations of existing laws, regulations, standards and other obligations may require us to incur additional costs and restrict our business operations. Because the interpretation and application of health-related and data protection laws, regulations, standards and other obligations are still uncertain, and often contradictory and in flux, it is possible that the scope and requirements of these laws may be interpreted and applied in a manner that is inconsistent with our practices and our efforts to comply with the evolving data protection rules may be unsuccessful. If so, this could result in government-imposed fines or orders requiring that we change our practices, which could adversely affect our business. In addition, these privacy regulations may differ from country to country, and may vary based on whether testing is performed in the United States or in the local country and our operations or business practices may not comply with these regulations in each country.

In addition to the possibility of fines, lawsuits, regulatory investigations, public censure, other claims and penalties, and significant costs for remediation and damage to our reputation, we could be materially and adversely affected if legislation or regulations are expanded to require changes in our data processing practices and policies or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively impact our business. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices and compliance procedures in a manner adverse to our business. Any inability to adequately address data privacy or security-related concerns, even if unfounded, or to comply with applicable laws, regulations, standards and other obligations relating to data privacy and security, could result in additional cost and liability to us, harm our reputation and brand, damage our relationships with customers and have a material and adverse impact on our business.

Our business activities are subject to the FCPA and similar anti-bribery and anti-corruption laws.

Our business activities are subject to the FCPA and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which we operate, including the U.K. Bribery Act. The FCPA generally prohibits offering, promising, giving, or authorizing others to give anything of value, either directly or indirectly, to a non-U.S. government official in order to influence official action, or otherwise obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Our business is heavily regulated and therefore involves significant interaction with public officials, including officials of non-U.S. governments. Additionally, in

many other countries, the healthcare providers who prescribe biopharmaceuticals are employed by their government, and the purchasers of biopharmaceuticals are government entities; therefore, our dealings with these prescribers and purchasers are subject to regulation under the FCPA. Recently, the U.S. Securities and Exchange Commission, or the SEC, and Department of Justice have increased their FCPA enforcement activities with respect to biotechnology companies. There is no certainty that all of our employees, agents, contractors, or those of our affiliates, will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers, or our employees, the closing down of our facilities, requirements to obtain export licenses, cessation of business activities in sanctioned countries, implementation of compliance programs, and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, and our business, prospects, operating results, and financial condition.

Our employees, principal investigators, consultants, and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.

We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants, and commercial partners. Misconduct by these parties could include intentional failures to comply with the regulations of the FDA and non-United States regulatory authorities, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or data accurately, or disclose unauthorized activities to us. In particular, sales, marketing, and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs, and other business arrangements. Such misconduct could also involve the improper use of information obtained in the course of clinical studies, which could result in regulatory sanctions and cause serious harm to our reputation. We currently have a code of conduct applicable to all of our employees, but it is not always possible to identify and deter employee misconduct, and our code of conduct and the other precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses, or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could result in the imposition of significant fines or other sanctions, which could have a significant impact on our business. Whether or not we are successful in defending against such actions or investigations, we could incur substantial costs, including legal fees, and divert the attention of management in defending ourselves against any of these actions or investigations.

If we use hazardous materials in a manner that causes injury, we could be liable for damages.

Our activities currently require the use of hazardous chemicals and biohazardous waste, including chemical, biological agents and compounds, blood and bone marrow samples, and other human tissue. We cannot eliminate the risk of accidental contamination or injury to employees or third parties from the use, storage, handling, or disposal of these materials. In the event of contamination or injury, we could be held liable for any resulting damages, and any liability could exceed our resources or any applicable insurance coverage we may have. Additionally, we are subject on an ongoing basis to federal, state, and local laws and regulations governing the use, storage, handling, and disposal of these materials and specified waste services. The cost of compliance with these laws and regulations may become significant and could negatively affect our business, financial condition and results of operations.

We and our independent registered public accounting firm have identified material weaknesses in our internal control over financial reporting in the past. Any failure to maintain effective internal control over financial reporting could harm us.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles, or GAAP. Under standards established by the United States Public Company Accounting Oversight Board, a material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected and corrected on a timely basis.

For example, in connection with the audit of the fiscal year ended December 31, 2018, we and our independent registered public accounting firm identified a material weakness in our internal controls over financial reporting related to the accuracy of valuations performed during the year. Specifically, our process to select an outside valuation specialist with the requisite competency and to review the work performed by such specialist was deemed to be not operating effectively. We have taken steps to address this weakness, including hiring a new third-party valuation firm. We have not identified material weaknesses in internal control over financial reporting during 2019. However, neither we nor our independent registered public accounting firm tested the effectiveness of our internal control over financial reporting. We cannot assure you that we will not suffer from other material weaknesses in the future.

Upon completion of this offering, we will be required to document and test our internal controls over financial reporting pursuant to Section 404 of Sarbanes–Oxley Act of 2002, or the Sarbanes–Oxley Act, so that our management can certify as to the effectiveness of our internal controls over financial reporting. Likewise, our independent registered public accounting firm will be required to provide an attestation report on the effectiveness of our internal control over financial reporting at such time as we cease to be an “emerging growth company,” as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse if a material weakness is identified.

If our senior management is unable to conclude that we have effective internal control over financial reporting, or to certify the effectiveness of such controls, or if our independent registered public accounting firm cannot render an unqualified opinion on management’s assessment and the effectiveness of our internal control over financial reporting, or if material weaknesses in our internal controls are identified in the future, we could be subject to regulatory scrutiny and a loss of public confidence, which could have a material adverse effect on our business and our stock price. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to manage our business effectively or accurately report our financial performance on a timely basis, which could cause a decline in our common stock price and adversely affect our business, financial condition, and results of operations.

If a clinical trial subject’s informed consent is challenged or proven invalid, unlawful, or otherwise inadequate for our purposes, our product development efforts may be hindered and we could become involved in legal challenges.

We have implemented measures designed to ensure that all clinical data and genomic and other biological samples that we receive from our biopharmaceutical collaborators have been collected from subjects who have provided appropriate informed consent for purposes that extend to our product development activities. We seek to ensure such data and samples are provided to us in a subject de-identified manner. We also implemented measures in an effort to ensure that the subjects from whom the data and samples are collected do not have any proprietary or commercial rights to the data or any discoveries derived from them. Our biopharmaceutical collaborators conduct clinical trials in a number of different countries. The collection of data and samples in many different countries results in complex legal questions regarding the adequacy of informed consent and the status of genomic material under a

large number of different legal systems. Therefore, in addition to the measures we have implemented, we rely on our biopharmaceutical and contract laboratories to comply with the subject’s informed consent and with applicable local law and international regulation. The subject’s informed consent obtained in any particular country could be challenged in the future, and those informed consents could prove invalid, unlawful, or otherwise inadequate for our purposes. Any findings against us, or our biopharmaceutical collaborators, could deny us access to or force us to stop using some of our clinical samples, which would hinder our molecular information product development efforts. We could become involved in legal challenges, which could consume our management and financial resources.

Shutdowns of the U.S. federal government could materially impair our business and financial condition.

Development of our planned future products and services and/or regulatory approval may be delayed for reasons beyond our control. For example, over the last several years the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC have had to furlough critical FDA, SEC and other government employees and stop critical activities. If a prolonged government shutdown or budget sequestration occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, in our operations as a public company, future government shutdowns could impact our ability to access the public markets, such as through the declaration of effectiveness of registration statements, and obtain necessary capital in order to properly capitalize and continue our operations.

The outbreak of COVID-19 could materially adversely affect our business, financial condition and results of operations.

The recent outbreak of COVID-19 is negatively impacting worldwide economic and commercial activity and financial markets, as well as increasing demand for certain reagents that we use in our products and that are also used in certain COVID-19 test kits. COVID-19 has also resulted in significant business and operational disruptions, including business closures, supply chains disruptions, travel restrictions, stay-at-home orders and limitations on the availability of workforces. The full impact of COVID-19 is unknown and is rapidly evolving. Current customers, including hospitals, labs, and other medical centers, may delay or cancel product orders due to operational disruptions within their organizations, enrollment for the clinical trials we support may decline due to the various travel restrictions, and our biopharmaceutical collaborators may cancel or delay their companion diagnostic development and research programs due to decrease in enrollment, economic disruptions, current focus by the healthcare industry on combatting COVID-19, or other factors. The extent to which COVID-19 negatively impacts our business and operations will depend on the severity, location and duration of the effects and spread of COVID-19, the actions undertaken by national, regional and local governments and health officials to contain the virus or treat its effects, how quickly and to what extent economic conditions improve and normal business and operating conditions resume, and whether the supply of PCR-related reagents will remain sufficient to satisfy market demand and any impact on its pricing. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this ‘‘Risk factors’’ section, such as those relating to our reliance on a limited number of suppliers and our need to raise additional capital to fund our existing operations.

Risks related to regulatory and reimbursement matters

We intend to seek to market our IVD products for clinical diagnostic use and will be required to obtain regulatory clearance(s) or approval(s). Any such regulatory process would be expensive, time-consuming and uncertain both in timing and in outcome.

Our currently available products are labeled as RUO, and are not intended for diagnostic use. While we have focused initially on the RUO products only, our strategy is to expand our product line to encompass products that are intended to be used as IVDs. Such IVD products will be subject to regulation by the FDA as medical devices, including requirements for regulatory clearance or approval of such products before they can be marketed. Accordingly, we will be required to obtain FDA 510(k) clearance or

premarket approval in order to sell our products in a manner consistent with FDA laws and regulations. Such regulatory approval processes or clearances are expensive, time-consuming and uncertain; our efforts may never result in any premarket approval, or PMA, or 510(k) approval or clearance for our products; and failure by us to obtain or comply with such approvals and clearances could have an adverse effect on our business, financial condition or operating results.

If we successfully obtain such approvals, we will be subject to a substantial number of additional requirements for medical devices, including establishment registration, device listing, Quality Systems Regulations, or QSRs, which cover the design, testing, production, control, quality assurance, labeling, packaging, servicing, sterilization (if required), and storage and shipping of medical devices (among other activities), product labeling, advertising, recordkeeping, post-market surveillance, post-approval studies, adverse event reporting, and correction and removal (recall) regulations. We may be required to expend significant resources to ensure ongoing compliance with the FDA regulations and/or take satisfactory corrective action in response to enforcement action, which may have a material adverse effect on the ability to design, develop, and commercialize products using our technology as planned. Failure to comply with these requirements may subject us to a range of enforcement actions, such as warning letters, injunctions, civil monetary penalties, criminal prosecution, recall and/or seizure of products, and revocation of marketing authorization, as well as significant adverse publicity. If we fail to obtain, or experience significant delays in obtaining, regulatory approvals for IVD or other products, such products may not be able to be launched or successfully commercialized in a timely manner, or at all.

Laboratory developed tests, or LDTs, are a subset of IVD tests that are designed, manufactured and used within a single laboratory. The FDA maintains that LDTs are medical devices and has for the most part exercised enforcement discretion for most LDTs. A significant change in the way that the FDA regulates any LDTs that our customers develop using our RUO components could affect our business. If the FDA requires laboratories to undergo premarket review and comply with other applicable FDA requirements in the future, the cost and time required to commercialize an LDT will increase substantially, and may reduce the financial incentive for laboratories to develop LDTs, which could reduce demand for our RUO products.

Our commercial success could be compromised if we do not receive coverage and adequate reimbursement for our products, including STRATAFIDE and PCM, if approved.

We currently generate revenue for our products through our agreements with our customers, including biopharmaceutical companies, academic institutions and molecular labs, who use our products for research purposes. Therefore, the commercial success of our RUO products depends charging our customers reasonable pricing for the RUO products. However, in the future, we intend to generate revenue on our products from several sources, including third-party payors, laboratory services intermediaries, and self-paying individuals. The commercial success of our commercial products, including STRATAFIDE and PCM, if approved, will depend on the extent to which our customers receive coverage and adequate reimbursement from third-party payors, including as managed care organizations and government payors (e.g., Medicare and Medicaid). Coverage and reimbursement by a payor may depend on a number of factors, including a payor’s determination that our commercial products, once approved, are:


•	not experimental or investigational;


•	medically necessary;


•	appropriate for the specific patient;


•	cost-effective;


•	supported by peer-reviewed publications; and


•	included in clinical practice guidelines.

Because there is no uniform policy of coverage and reimbursement in the United States, each payor generally determines for its own enrollees or insured patients whether to cover or otherwise establish a policy to reimburse our genomic tests, and seeking payor approvals is a time-consuming and costly process. We cannot be certain that coverage for our current and our planned future products will be provided in the future by additional payors or that existing agreements, policy decisions or reimbursement levels will remain in place, remain adequate, or be fulfilled under existing terms and provisions. If we cannot obtain coverage and adequate reimbursement from private and governmental payors such as Medicare and Medicaid for our current products or new products that we may develop in the future, demand for our devices may decline or may not grow as we expect, which could limit our ability to generate revenue and have a material adverse effect on our financial condition, results of operations and cash flow. Further, we may experience delays and interruptions in the receipt of payments from payors due to missing documentation and/or other issues, which could cause delay in collecting our revenue.

In addition, the coverage and reimbursement market is ever changing and we are not in control of how our competitors’ coverage and pricing strategies are established. Some of our competitors have widespread brand recognition and substantially greater financial and technical resources and development, production and marketing capabilities than we do. Others may develop lower-priced, less complex tests that payors and physicians could view as functionally equivalent to our products, which could force us to lower the list price of our tests and impact our operating margins and our ability to achieve and maintain profitability. Payors may compare our products to our competitors and utilize them as precedence, which may impact our coverage and/or reimbursement. In addition, technological innovations that result in the creation of enhanced diagnostic tools that are more effective than ours may enable other clinical laboratories, hospitals, physicians or medical providers to provide specialized diagnostic tests similar to ours in a more patient-friendly, efficient or cost-effective manner than is currently possible. If we cannot compete successfully against current or future competitors, we may be unable to increase or create market acceptance and sales of our products, which could prevent us from increasing or sustaining our revenue or achieving or sustaining profitability.

We expect to rely on third parties in conducting a portion of future clinical studies of diagnostic products that may be required by the FDA or other regulatory authorities, and those third parties may not perform satisfactorily.

We do not have the ability to independently conduct clinical trials for drug approvals without a biopharmaceutical partner or other studies that may be required to obtain FDA and other regulatory clearance or approval for future diagnostic products. Accordingly, we expect that we would rely on third parties, such as biopharmaceutical companies, laboratories, clinical investigators, consultants, and collaborators to conduct such studies if needed. Our reliance on these third parties for clinical and other development activities would reduce our control over these activities. If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if the third parties need to be replaced or if the quality or accuracy of the data they obtain is compromised, we may not be able to obtain regulatory clearance or approval.

Complying with numerous regulations pertaining to our laboratory licensing is an expensive and time-consuming process, and any failure to comply could result in substantial penalties.

We sell our RUO products to CLIA laboratories that validate them for use in their own LDTs. CLIA is a federal law regulating clinical laboratories that perform testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention or treatment of disease. Our own clinical laboratory must be certified under CLIA in order for us to perform testing on human specimens. CLIA is intended to ensure the quality and reliability of clinical laboratories in the United States by mandating specific standards in the areas of personnel qualifications, administration, and participation in proficiency testing, patient test management, quality control, quality assurance and inspections. We have a current certificate of accreditation under CLIA to perform high complexity testing, and our laboratory is accredited by CAP, one of six CLIA-approved accreditation organizations. To renew this certificate, we are subject to survey and inspection every two years. Moreover, CLIA and CAP inspectors may make periodic

inspections of our clinical laboratory outside of the renewal process. The failure to comply with CLIA or CAP requirements can result in enforcement actions, including the revocation, suspension, or limitation of our CLIA and/or CAP certificate of accreditation, as well as a directed plan of correction, state on-site monitoring, civil money penalties, civil injunctive suit and/or criminal penalties. We must maintain CLIA compliance and certification to be eligible to bill for assays provided to Medicare beneficiaries. If we were to be found out of compliance with CLIA program requirements and subjected to sanctions, our business and reputation could be harmed. Even if it were possible for us to bring our laboratory back into compliance, we could incur significant costs to achieve such compliance in addition to losing revenue during any period in which our laboratory was not operational.

In addition, our laboratory is located in Golden, Colorado and is required by state law to maintain a state laboratory license; as we expand our geographic focus, we may need to obtain laboratory licenses from additional states. In addition, we hold licenses from the states of California, Pennsylvania, Maryland, and Rhode Island to test specimens from patients in those states or received from ordering physicians in those states. Currently, we do not maintain a license necessary to obtain specimens from residents of the state of New York. Other states and foreign jurisdictions may have similar requirements or may adopt similar requirements in the future. Finally, we may be subject to additional regulation in foreign jurisdictions if we seek to expand international distribution of our assays outside the United States.

If we were to lose our CLIA certification or our state laboratory licenses, whether as a result of a revocation, suspension or limitation, we would no longer be able to offer certain services, which would limit our revenues and harm our business. If we were to lose, or fail to obtain, a license in any other state where we are required to hold a license, we would not be able to test specimens from those states. If we were to lose our CAP accreditation, our reputation for quality, as well as our business, financial condition and results of operations, could be significantly and adversely affected.

We are subject to federal and state healthcare fraud and abuse laws and regulations and could face substantial penalties if we are unable to fully comply with such laws.

We are or expect to become subject to health care fraud and abuse regulation and enforcement by both the federal government and the states in which we conduct our business. These health care laws and regulations include, for example:

•

the federal Anti-Kickback Statute, or the AKS, which prohibits, among other things, persons or entities from soliciting, receiving, offering or providing remuneration, directly or indirectly, overtly or covertly, in cash or in kind, in return for or to induce either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or services for which payment may be made under a federal health care program such as the Medicare and Medicaid programs;


•	the federal physician self-referral prohibition, commonly known as the Stark Law, which prohibits physicians from referring Medicare or Medicaid patients to providers of “designated health services” with whom the physician or a member of the physician’s immediate family has an ownership interest or compensation arrangement, unless a statutory or regulatory exception applies;


•	HIPAA, which established additional federal civil and criminal liability for, among other things, knowingly and willfully executing a scheme to defraud any health care benefit program or making false statements in connection with the delivery of or payment for health care benefits, items or services;


•	HIPAA, as amended by HITECH and its implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information;


•	federal false claims and civil monetary penalties laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, false or fraudulent claims for payment to the federal government;

•

the federal Physician Payments Sunshine Act requirements under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the ACA, which require certain manufacturers of drugs, devices, biologics and medical supplies to report to the Centers for Medicare and Medicaid Services, or CMS, information related to payments and other transfers of value made to or at the request of covered recipients, such as physicians, as defined by such law, and teaching hospitals, and certain ownership and investment interests held by physicians and their immediate family members;


•	the Stark Law, which prohibits, among other things, physicians who have a financial relationship, including an investment, ownership or compensation relationship with an entity, from referring Medicare patients for designated health services, which include clinical laboratory services, unless an exception applies; and


•	state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, which may apply to items or services reimbursed by any third-party payor, including commercial insurers.

Further, the ACA, among other things, amended the intent requirement of the federal AKS and certain criminal health care fraud statutes. Where the intent requirement has been lowered, a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, the government may now assert that a claim including items or services resulting from a violation of the federal AKS constitutes a false or fraudulent claim for purposes of the false claims statutes. Moreover, these laws may change significantly and adversely in the future.

Any action brought against us for violation of these laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. If our operations are found to be in violation of any of these laws and regulations, we may be subject to any applicable penalty associated with the violation, including, among others, significant administrative, civil and criminal penalties, damages, fines, disgorgement, imprisonment, integrity oversight and reporting obligations, and exclusion from participation in government funded healthcare programs such as Medicare and Medicaid. Additionally, we could be required to refund payments received by us, and we could be required to curtail or cease our operations. Any of the foregoing consequences could seriously harm our business, financial condition, and results of operations.

Healthcare policy changes may have a material adverse effect on our business, financial condition and results of operations.

The ACA, enacted in March 2010, made a number of substantial changes in the way healthcare is financed by both governmental and private insurers. Among other ways in which the ACA may significantly impact our business, the ACA includes: provisions regarding coordination and promotion of research on comparative clinical effectiveness of different technologies and procedures; initiatives to revise Medicare payment methodologies; and initiatives to promote quality indicators in payment methodologies.

On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, or Texas District Court Judge, ruled that the entire ACA is invalid based primarily on the fact that the legislation enacted on December 22, 2017, informally known as Tax Cuts and Jobs Act, or the TCJA, repealed the tax-based shared responsibility payment imposed by the ACA, on certain individuals who fail to maintain qualifying health coverage for all or part of a year, which is commonly referred to as the “individual mandate.” Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the Texas District Court Judge’s ruling that that the individual mandate was unconstitutional and remanded the case back to the district court to determine whether the remaining provisions of the ACA are invalid as well. It is unclear how this decision, future decisions, subsequent appeals, and other efforts to repeal and replace the ACA will impact the ACA.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted. For example, the Budget Control Act of 2011, among other things, included aggregate reductions to Medicare payments to providers and suppliers of 2% per fiscal year, starting in 2013, and, following passage of the Bipartisan Budget Act of 2015, will remain in effect through 2029 unless additional congressional action is taken. The full impact on our business of the ACA and the sequester law is uncertain. Furthermore, on January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

We cannot predict whether future healthcare initiatives will be implemented at the federal or state level, or how any future legislation or regulation may affect us. The expansion of government’s role in the U.S. healthcare industry as a result of the ACA’s implementation, and changes to the reimbursement amounts paid by Medicare and other payors for our current genomic tests and our planned future genomic tests, may reduce our profits, if any, and have a materially adverse effect on our business, financial condition, results of operations and cash flows. Moreover, Congress has proposed on several occasions to impose a 20% coinsurance payment requirement on patients for clinical laboratory tests reimbursed under the Medicare Clinical Laboratory Fee Schedule, which would require us to bill patients for these amounts and may decrease our testing volume. In the event that Congress were to ever enact such legislation, the cost of billing and collecting for our genomic tests could often exceed the amount actually received from the patient.

Under the Protecting Access to Medicare Act of 2014, or PAMA, which was signed to law in April 2014, clinical laboratories subject to the law must report certain data for the Medicare-covered clinical laboratory tests that they furnish. The reported data must include the payment rate (reflecting all discounts, rebates, coupons and other price concessions) and the volume of each test that was paid by each private payor (including health insurance issuers, group health plans, Medicare Advantage plans and Medicaid managed care organizations). The CMS final rule implementing PAMA was issued June 17, 2016 indicating that data reporting for the new PAMA process would begin in 2017 and, beginning in 2018, the Medicare payment rate for covered clinical laboratory tests, with some exceptions, would be based on the weighted median of the reported private third-party payor payments for the test, as calculated using data collected by applicable laboratories during the specified data collection period and reported to CMS during a specified data reporting period. This revised reimbursement methodology is expected to generally result in relatively lower reimbursement under Medicare for clinical diagnostic lab tests than has been historically available. The reporting period under the PAMA has been delayed until 2021. As a result, data collected during the original data collection period of January 1, 2019 through June 30, 2019 now must be reported between January 1, 2021 and March 31, 2021. Data reporting will thereafter resume on a three year reporting cycle beginning in 2024. The resulting change in reimbursement methodology applicable to our tests may reduce our Medicare reimbursement rate and adversely affect our business, financial condition and results of operations.

We cannot predict the impact changes to these laws or the implementation of, or changes to, any other laws applicable to us in the future may have on our business, financial condition and results of operations.

Payors from whom we receive reimbursement may withdraw or decrease the amount of reimbursement provided for our products at any time in the future.

Our commercial success also depends on our ability to obtain and maintain coverage and adequate reimbursement from those payors that elect not to cover and reimburse our products, withdraw coverage and stop providing reimbursement for our products in the future or may reimburse our products only on a case-by-case basis. Managing reimbursement on a case-by-case basis is time consuming and contributes to an increase in the number of days it takes us to collect accounts receivable and increases our risk of non-payment. Negotiating reimbursement on a case-by-case basis also typically results in the provision of reimbursement at a significant discount to the list price of our products.

Further, even if we obtain written agreements regarding coverage and reimbursement with certain payors, these agreements are not guarantees of indefinite coverage in an adequate amount. For example, these agreements are typically terminable without cause by either party and are typically renewable annually, and the applicable payor could opt against renewal upon expiration. In addition, the terms of certain of our written arrangements may require us to seek pre-approval from the payor or put in place other controls and procedures prior to conducting a test for a customer. To the extent we fail to follow these requirements, we may fail to receive some or all of the reimbursement payments to which we are otherwise entitled. These payors must also conclude that our claim satisfies the applicable contractual criteria. In addition, our written agreements regarding reimbursement with payors may not guarantee us the receipt of reimbursement payments at what we believe to be the applicable contracted rate for each reimbursement claim that we submit to such payors. If payors withdraw coverage for our products or reduce the reimbursement amounts for our products, our ability to generate revenue could be limited, which may have a material adverse effect on our business, financial condition, results of operations, and cash flow.

Changes in tax law could adversely affect our business and could differ materially from the financial statements provided herein.

The rules dealing with U.S. federal, state and local income taxation are constantly under review by the Internal Revenue Service, the U.S. Treasury Department and other governmental bodies. Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of our common stock. In recent years, many such changes have been made and changes are likely to continue to occur in the future. Future changes in tax laws could have a material adverse effect on our business, financial condition, results of operations, and cash flow. We urge investors to consult with their legal and tax advisers regarding the implication of potential changes in tax laws on an investment in our common stock.

Certain U.S. state tax authorities may assert that we have a state nexus and seek to impose state and local income taxes which could adversely affect our results of operations.

We currently file state income tax returns in certain states. There is a risk that certain state tax authorities where we do not currently file a state income tax return could assert that we are liable for state and local income taxes based upon income or gross receipts allocable to such states. States are becoming increasingly aggressive in asserting a nexus for state income tax purposes. We could be subject to state and local taxation, including penalties and interest attributable to prior periods, if a state tax authority in which we do not currently file a state income tax return successfully asserts that our activities give rise to a taxable nexus. Such tax assessments, penalties and interest may adversely affect our results of operations.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2019, we had federal and state net operating loss carryforwards of approximately $56 million due to prior period losses, some of which, if not utilized, will begin to expire in 2034 for federal and state purposes. Our federal research and development tax credits are approximately $0.9 million. The federal research and development tax credits will expire in 2035 if not utilized. These net operating loss and research tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our profitability.

Under the TCJA, federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited. It is uncertain if and to what extent various states will conform to the TCJA. In addition, under Sections 382 and 383 of the U.S. Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change” (generally defined as a greater than 50 percentage-point cumulative change (by value) in the equity ownership of certain stockholders over a rolling three-year period), the corporation’s ability to use its pre-change net operating losses and other pre-change tax attributes to offset its post-change taxable

income or taxes may be limited. We have not completed an analysis to determine whether any such limitations have been already triggered. We may also experience ownership changes as a result of this offering or future issuances of our stock or as a result of subsequent shifts in our stock ownership, some of which are outside our control. Therefore, as a result of ownership changes with respect to our common stock, our ability to use our current net operating losses and other pre-change tax attributes to offset post-change taxable income or taxes could be subject to limitation. We will be unable to use our net operating losses if we do not attain profitability sufficient to offset our available net operating losses prior to their expiration.

Risks related to our intellectual property

We are currently, and may be in the future, subject to claims against us alleging that we are infringing, misappropriating or otherwise violating the intellectual property rights of third parties, the outcome of which could have a material adverse effect on our business.

Our commercial success depends in part upon our ability to develop, manufacture, market and sell our products and services and use our technology without infringing, misappropriating or otherwise violating the patents or other intellectual property or proprietary rights of third parties. Litigation relating to infringement, misappropriation or other violations of patents and other intellectual property rights in biotechnology industry is common, including patent infringement lawsuits, trade secret lawsuits, interferences, oppositions, and inter-partes review, post-grant review and reexamination proceedings before the United States Patent and Trademark Office, or the USPTO, and corresponding international patent offices. The various markets in which we plan to operate are subject to frequent and extensive litigation regarding patents and other intellectual property rights. In addition, many companies in intellectual property-dependent industries, including the biotechnology industry, have employed intellectual property litigation as a means to gain an advantage over their competitors. Numerous United States, EU and other internationally issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing and commercializing nucleic acid preparative and analytical technology, and as the biotechnology industry expands and more patents are issued, the risk increases that our products, services and technology may be subject to intellectual property related claims by third parties. There are many issued and pending patents that claim aspects of oligonucleotide chemistry and modifications that we may need to apply to our therapeutic candidates. There are also many issued patents that claim targeting genes or portions of genes that may be relevant for nucleic acid preparative and analytical methods that we wish to develop. Thus, it is possible that one or more organizations will hold patent rights to which we will need a license. If those organizations refuse to grant us a license to such patent rights on reasonable terms, we may be unable to develop, manufacture, market, sell and commercialize products or services or perform research and development or other activities covered by these patents.

For example, as described above, Natera, one of our competitors, has filed suit against us alleging that our AMP chemistry and our existing products (including STRATAFIDE, PCM, LiquidPlex, ArcherMET, FusionPlex and VariantPlex) infringe the Natera Asserted Patents. If we are found to infringe any of the Natera Asserted Patents, it would have a material adverse effect on our business. For information regarding our litigation with Natera, please see “Risk factors—Risks related to our business and strategy—One of our competitors has alleged that our Anchored Multiplex PCR, or AMP, chemistry and products using AMP are infringing on its intellectual property, and we may be required to redesign our technology, obtain a license, cease using our AMP chemistry altogether and/or pay significant damages, among other consequences, any of which would have a material adverse effect on our business, financial condition and results of operations.”

In the future, we may also be subject to third-party claims and similar adversarial proceedings or litigation regarding any infringement, misappropriation or other violation by us of patent or other intellectual property rights of third parties. If any such claim or proceeding is brought against us, our collaborators or our third-party service providers, our development, manufacturing, marketing, sales and other commercialization activities could be similarly adversely affected. Even if we believe third-party

intellectual property claims are without merit, there is no assurance that a court would find in our favor on questions of infringement, validity, enforceability, or priority. A court of competent jurisdiction could hold that third party patents asserted against us are valid, enforceable, and infringed, which could materially and adversely affect our ability to develop, manufacture, market, sell and commercialize any of our products or services. In order to successfully challenge the validity of any such U.S. patent in federal court, we would need to overcome a presumption of validity. As this burden is a high one requiring us to present clear and convincing evidence as to the invalidity of any such U.S. patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such U.S. patent. If we are found to infringe any third party’s patents or other intellectual property rights, and we are unsuccessful in demonstrating that such patents or other intellectual property are invalid or unenforceable, we could be required to obtain a license from such third party to continue developing, manufacturing, marketing, selling and commercializing our products and services. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, which would give our competitors and other third parties access to the same technologies licensed to us, and it could require us to make substantial licensing, royalty and other payments. We also could be forced, including by court order, to cease developing, manufacturing, marketing, selling and commercializing the infringing product or technology. In addition, we could be found liable for significant monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar material adverse effect on our business, financial condition, results of operations, and prospects.

Some claimants may have substantially greater resources than we do and may be able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. In addition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us. In addition, if the breadth or strength of protection provided by the patents and patent applications we own or in-license is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future technology. In addition, intellectual property litigation, regardless of its outcome, may cause negative publicity, adversely impact prospective customers, cause product shipment delays or prohibit us from manufacturing, marketing, selling or otherwise commercializing our products, services and technology.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our personnel from their normal responsibilities. In addition, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing, or commercialization activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Uncertainties resulting from patent and other intellectual property litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace, our ability to raise additional funds, and could otherwise have a material adverse effect on our business, financial condition, results of operations, and prospects.

Competitors and other third parties may infringe, misappropriate or otherwise violate our patents and intellectual property rights or the patents and intellectual property rights of our licensors. The enforcement of such claims can be expensive and time consuming. In an infringement proceeding, a court may decide that a patent owned or in-licensed by us is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our owned and in-licensed patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our owned or in-licensed patents at risk of being invalidated or interpreted narrowly.

For example, in July 2018, we and the General Hospital Corporation d/b/a Massachusetts General Hospital, which we refer to as MGH, filed a lawsuit in the United States District Court for the District of Delaware against QIAGEN Sciences LLC and several of its affiliates, as well as a named QIAGEN executive, for, among other things, infringement of U.S. Patent No. 10,017,810, or the ’810 Patent, and trade secret misappropriation and related tort claims. We are seeking damages and a permanent injunction. In October 2019, we amended our complaint to allege infringement of both the ’810 Patent and U.S. Patent No. 10,450,597, or the ’597 Patent. The defendants have asserted defenses that, among other things, the ’810 Patent and ’597 Patent are not infringed and are invalid. The parties are currently conducting fact discovery, and a jury trial is scheduled to begin in August 2021. For more information regarding this litigation, please see “Business—Legal proceedings.” Should the court rule that any or all of the claims of the ’810 Patent and ’597 Patent are not infringed or invalid, such a ruling could limit our ability to stop others from using or commercializing similar or identical nucleic acid preparative and analytical methods as those used by us, as well as similar or identical products and services provided by us, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

If we were to initiate other legal proceedings against any other third party to enforce a patent covering our technology, the defendant could assert that our patent is invalid or unenforceable. In patent litigation in the United States and Europe, defendants alleging invalidity or unenforceability are common. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, for example, lack of novelty, obviousness, lack of written description or non-enablement. Third parties might allege unenforceability of our patents because during prosecution of the patent an individual connected with such prosecution withheld relevant information, or made a misleading statement. Third parties may also raise challenges to the validity of our patent claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post-grant review, inter partes review, interference proceedings, derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in the revocation of, cancellation of, or amendment to our patents in such a way that they no longer cover our technology or products. The outcome of proceedings involving assertions of invalidity and unenforceability, including during patent litigation, is unpredictable. With respect to the validity of patents, for example, we cannot be certain that there is no invalidating prior art of which we and the patent examiner were unaware during prosecution, but that an adverse third party may identify and submit in support of such assertions of invalidity. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our technology. Such a loss of patent protection could have a material adverse effect on our business. Our patents and other intellectual property rights also will not protect our technology if competitors design around our protected technology without infringing our patents or other intellectual property rights.

responsibilities. In addition, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing, or commercialization activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Uncertainties resulting from patent and other intellectual property litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace, our ability to raise additional funds, and could otherwise have a material adverse effect on our business, financial condition, results of operations, and prospects.

Our success depends in part on our ability to obtain, maintain, defend and enforce patents and other forms of intellectual property rights, including in-licenses of intellectual property rights of others, for our nucleic acid preparative and analytical methods or related products or services, as well as our ability to preserve our trade secrets, to prevent third parties from infringing, misappropriating or otherwise violating our intellectual property and proprietary rights. Our ability to protect our nucleic acid preparative and analytical methods and related products or services from unauthorized use by third parties depends on the extent to which valid and enforceable patents cover them or they are effectively protected as trade secrets. Although we have rights to issued patents that relate to aspects of our AMP chemistry, other aspects of our patent portfolio are in earlier stages of prosecution, and we do not own or license any issued patents related to other aspects of our products and technology, including our instruments and techniques. For information regarding our patent portfolio, please see “Business—Intellectual property.” The patent position of biotechnology companies generally is highly uncertain, involves complex legal and factual questions, and has been the subject of much litigation in recent years. As a result, the issuance, scope, validity, enforceability, and commercial value of our patent rights are highly uncertain. There can be no assurance that our patent rights will not be invalidated or held to be unenforceable, will adequately protect our technology, products or services or provide any competitive advantage, or that any of our pending or future patent applications will issue as valid and enforceable patents. Our ability to obtain and maintain patent protection for our nucleic acid preparative and analytical methods and related products or services is uncertain due to a number of factors, including that:


•	we or our licensors may not have been the first to invent the technology covered by our pending patent applications or issued patents;


•	we or our licensors may not be the first to file all patent applications covering our nucleic acid preparative and analytical methods or related products or services, as patent applications in the United States and most other countries are confidential for a period of time after filing;


•	our methods and related products may not be patentable;


•	our disclosures in patent applications may not be sufficient to meet the statutory requirements for patentability;


•	any or all of our pending patent applications may not result in issued patents;


•	others may independently develop identical, similar or alternative technologies;


•	others may design around our patent claims to produce competitive technologies or methods or products that fall outside of the scope of our patents;


•	we may fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection;


•	we may not seek or obtain patent protection in countries that may eventually provide us a significant business opportunity;


•	any patents issued to us may not provide a basis for commercially viable methods or products, may not provide any competitive advantages or may be successfully challenged by third parties;


•	a third party may challenge our patents and, if challenged, a court may not hold that our patents are valid, enforceable and infringed;


•	a third party may challenge our patents in various patent offices and, if challenged, we may be compelled to limit the scope of our allowed or granted claims or lose the allowed or granted claims altogether;


•	the patents of others could harm our business;


•	our competitors could conduct research and development activities in countries where we will not have enforceable patent rights and then use the information learned from such activities to develop competitive methods or products for sale in our major commercial markets; and


•	the growing scientific and patent literature relating to nucleotide analysis, including our own patents and publications, may make it increasingly difficult or impossible to patent new nucleic acid preparative and analytical methods and related products or services in the future.

Even if we have or obtain patents covering our nucleic acid preparative and analytical methods and related products or services, we may still be barred from making, using and selling such methods, products, or services because of the patent rights of others. Others may have filed, and in the future may file, patent applications covering compositions, products or methods that are similar or identical to ours, which could materially affect our ability to successfully develop our technology or to successfully commercialize any approved assays alone or with collaborators. Patent applications in the U.S. and elsewhere are generally published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering our nucleic acid preparative and analytical methods and related products or services could have been filed by others without our knowledge. Additionally, pending claims in patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our platform technologies or related products and services. These patent applications may have priority over patent applications filed by us.

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. We may be subject to third party pre-issuance submissions of prior art to the USPTO, or become involved in opposition, derivation, revocation, reexamination, post-grant and inter partes review, or interference proceedings challenging our patent rights. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our products, services and technology and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products or provide services without infringing third-party patent rights. Moreover, we, or our licensors, may have to participate in interference proceedings declared by the USPTO to determine priority of invention or in post-grant challenge proceedings, such as oppositions in a foreign patent office, that challenge priority of invention or other features of patentability. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical products, services and

technology, or limit the duration of the patent protection of our products, services and technology. Such proceedings also may result in substantial cost and require significant time from our employees and management, even if the eventual outcome is favorable to us.

Furthermore, we cannot guarantee that any patents will be issued from any of our pending or future patent applications. The standards applied by the USPTO and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter or the scope of claims allowable in biotechnology patents. As such, we do not know the degree of future protection that we will have on our proprietary products, services and technology. Thus, even if our patent applications issue as patents, they may not issue in a form that will provide us with meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. While we will endeavor to protect our technology with intellectual property rights such as patents, as appropriate, the process of obtaining patents is time-consuming, expensive and sometimes unpredictable.

In addition, third parties may be able to develop technology that is similar to, or better than, ours in a way that is not covered by the claims of our patents, or may have blocking patents that could prevent us from marketing our products or practicing our own patented technology. Moreover, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed and the life of a patent, and the protection it affords, is limited. Without patent protection for current or future methods and related products and services, we may face competing technology. Given the amount of time required for the development and testing, and regulatory review where necessary, patents protecting such technology might expire before or shortly after such technology is commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing technology similar or identical to that we or our collaborators may develop.

Moreover, certain of our patents and patent applications are, and others may in the future be, co-owned with third parties. 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 use or license their rights to other third parties, including our competitors, and our competitors could market competing products and technology. In addition, we may need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our business, financial conditions, results of operations, and prospects.

We do not solely own any issued patents. Therefore, we do, and will continue to, rely on intellectual property rights licensed from third parties to protect our technology, including licenses that give us rights to third-party intellectual property that is necessary or useful for our business. For example, we are dependent on a license from MGH for certain patent rights related to our AMP technology. If our license agreement with MGH were to terminate for any reason, we may be required to cease the development, manufacturing, marketing, selling and commercialization of our AMP technology and our products and services. For more information regarding this license agreement, please see “Business—Intellectual property.”

We also may license additional third-party intellectual property in the future. Our success will depend in part on the ability of our licensors to obtain, maintain, protect and enforce patent protection for our licensed intellectual property, in particular, those patents to which we have secured exclusive rights. Our licensors may not successfully prosecute the patent applications licensed to us. Even if patents issue or are granted, our licensors may fail to maintain these patents, may determine not to pursue litigation

against other companies that are infringing these patents, or may pursue litigation less aggressively than we would. Further, we may not obtain exclusive rights, which would allow for third parties to develop competing products. Without protection for, or exclusive right to, the intellectual property we license, other companies might be able to offer substantially identical products for sale, which could adversely affect our competitive business position and harm our business prospects.

Our existing license agreements, including our license agreement with MGH, impose, and we expect that future license agreements will impose, various development, commercialization, funding, milestone, royalty, diligence, sublicensing, insurance, patent prosecution and enforcement, and other obligations on us. If we breach any of these obligations, we may be required to pay damages and the licensor may have the right to terminate the license, which could result in us being unable to commercialize any nucleic acid preparative and analytical methods and related products or services that are covered by these agreements, which could materially adversely affect the value of any such technology and our business. Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements with less favorable terms, or cause us to lose our rights under these agreements, including our rights to important intellectual property or technology. In addition, while we cannot currently determine the amount of the royalty obligations we would be required to pay on sales of future assays or products, if any, the amounts may be significant. The amount of our future royalty obligations will depend on the technology and intellectual property we use in the assays, products and services that we successfully develop and commercialize, if any. Therefore, even if we successfully develop and commercialize assays, products and services, we may be unable to achieve or maintain profitability.

We may need to outsource and rely on third parties for aspects of the development, sales and marketing of any assays and products covered under our current and future license agreements. Delay or failure by these third parties could adversely affect the continuation of our license agreements with our licensors. If we fail to comply with any of our obligations under these agreements, or we are subject to a bankruptcy, our licensors may have the right to terminate the license, in which event we would not be able to market any assays or products covered by the license.

In addition, disputes may arise under our license agreements, including regarding the payment of the royalties or other payments due to licensors in connection with our exploitation of the rights we license from them. For example, licensors may contest the basis of royalties we retained and claim that we are obligated to make payments under a broader basis. In addition to the costs of any litigation we may face as a result, any legal action against us could increase our payment obligations under the respective agreement and require us to pay interest and potentially damages to such licensors.

In some cases, patent prosecution of our licensed technology is controlled solely by the licensor. Therefore, we cannot be certain that these patents and patent applications will be prepared, filed, prosecuted, and maintained in a manner consistent with the best interests of our business. If such licensor fails to obtain and maintain patent or other protection for the proprietary intellectual property we license from such licensor, we could lose our rights to such intellectual property or the exclusivity of such rights, and our competitors could market competing technology using such intellectual property. In that event, we may be required to expend significant time and resources to develop or license replacement technology. If we are unable to do so, we or our collaborators may be unable to develop or commercialize the affected technology, which could harm our business significantly. Our license agreements also limit the exclusive and non-exclusive rights granted to us to use the licensed intellectual property and technology to a particular field of use. As a result, we may not be able to prevent competitors from developing and commercializing products and technology that may use this technology in other fields of use.

Disputes may arise regarding intellectual property subject to a license agreement, including those relating to:


•	the scope of rights, if any, granted under the license agreement and other interpretation-related issues;


•	the amounts of royalties, milestones or other payments due under the license agreement;


•	whether and the extent to which our technology and processes infringe, misappropriate or otherwise violate intellectual property of the licensor that is not subject to the license agreement;


•	our right to sublicense patent and other rights to third parties under collaborative development relationships;


•	our diligence obligations under the license agreement and what activities satisfy those diligence obligations;


•	the ownership of inventions and know-how resulting from the creation or use of intellectual property by our licensors and by us and our collaborators; and


•	the priority of invention of patented technology.

The agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement. Such disputes may be costly to resolve and may divert management’s attention away from day-to-day activities. If disputes over intellectual property that we have licensed from third parties prevent or impair our ability to maintain our licensing arrangements on acceptable terms, we or our collaborators may be unable to successfully develop and commercialize the affected technology, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Obtaining and maintaining a patent portfolio entails significant expense, including periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and patent applications. These expenditures can be at numerous stages of prosecuting patent applications and over the lifetime of maintaining and enforcing issued patents. We may or may not choose to pursue or maintain protection for particular intellectual property in our portfolio. If we choose to forgo patent protection or to allow a patent application or patent to lapse purposefully or inadvertently, our competitive position could suffer. Furthermore, we employ reputable law firms and other professionals to help us comply with the various procedural, documentary, fee payment and other similar provisions we are subject to and, in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. There are situations, however, in which failure to make certain payments or noncompliance with certain requirements in the patent process can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our business.

Legal action that may be required to enforce our patent rights can be expensive and may involve the diversion of significant management time. There can be no assurance that we will have sufficient financial or other resources to file and pursue infringement claims, which typically last for years before they are concluded. In addition, these legal actions could be unsuccessful and result in the invalidation of our patents, a finding that they are unenforceable or a requirement that we enter into a licensing agreement with or pay monies to a third party for use of technology covered by our patents. We may or may not choose to pursue litigation or other actions against those that have infringed on our patents, or have used them without authorization, due to the associated expense and time commitment of monitoring these activities. If we fail to successfully protect or enforce our intellectual property rights, our competitive position could suffer, which could harm our results of operations.

We may not be successful in obtaining necessary rights to any product candidates we may develop through acquisitions and in-licenses.

We currently have rights to intellectual property, through licenses from third parties, to identify and develop product candidates. Many pharmaceutical companies, biotechnology companies, and academic institutions are competing with us and filing patent applications potentially relevant to our business. In order to avoid infringing these third party patents, we may find it necessary or prudent to obtain licenses from such third party intellectual property holders. However, we may be unable to secure such licenses or otherwise acquire or in-license any compositions, methods of use, processes, or other intellectual property rights from third parties that we identify as necessary for our business. The licensing or acquisition of third party intellectual property rights is a competitive area, and several more established companies may pursue strategies to license or acquire third party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third party intellectual property rights on terms that would allow us to make an appropriate return on our investment or at all. If we are unable to successfully obtain rights to required third party intellectual property rights or maintain the existing intellectual property rights we have, it could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Some of our intellectual property has been discovered through government funded programs and thus may be subject to federal regulations such as “march-in” rights, certain reporting requirements and a preference for U.S.-based companies, and compliance with such regulations may limit our exclusive rights and our ability to contract with non-U.S. manufacturers.

Our intellectual property rights may be subject to a reservation of rights by one or more third parties. For example, certain intellectual property rights that we have licensed from MGH have been generated through the use of U.S. government funding and are therefore subject to certain federal regulations. As a result, the U.S. government may have certain rights to intellectual property embodied in our current or future processes and related products and services pursuant to the Bayh-Dole Act of 1980, or the Bayh-Dole Act. These U.S. government rights include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, the U.S. government has what are referred to as “march-in rights” to, under certain limited circumstances, require the licensor to grant exclusive, partially exclusive or non-exclusive licenses to any of these inventions to a third party if it determines that (1) adequate steps have not been taken to commercialize the invention and achieve practical application of the government-funded technology, (2) government action is necessary to meet public health or safety needs, (3) government action is necessary to meet requirements for public use under federal regulations or (4) we fail to meet requirements of federal regulations. The U.S. government also has the right to take title to these inventions if we or our licensors fail to disclose the invention to the government or fail to file an application to register the intellectual property within specified time limits. These rights may permit the government to disclose our confidential information to third parties. In addition, our rights in such inventions may be subject to certain requirements to manufacture products embodying such inventions in the United States. Intellectual property generated under a government funded program is also subject to certain reporting requirements, compliance with which may require us to expend substantial resources. To the extent any of our future owned or licensed intellectual property is also generated through the use of U.S. government funding, the provisions of the Bayh-Dole Act may similarly apply. Any exercise by the government of such rights could have a material adverse effect on our competitive position, business, financial condition, results of operations and prospects.

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

There are numerous recent changes to the patent laws and proposed changes to the rules of the USPTO which may have a significant impact on our ability to protect our technology and enforce our intellectual

property rights. For example, the Leahy-Smith America Invents Act, or the AIA, enacted in September 2011, resulted in significant changes to the U.S. patent system. An important change introduced by the AIA is that, as of March 16, 2013, the United States transitioned from a “first-to-invent” to a “first-to-file” system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the same invention. Under a “first-to-file” system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to a patent on the invention regardless of whether another inventor had made the invention earlier. A third party that files a patent application in the USPTO after that date but before us could therefore be awarded a patent covering an invention of ours even if we made the invention before it was made by the third party. Circumstances could prevent us from promptly filing patent applications on our inventions.

The AIA provided opportunities for third parties to challenge any issued patent in the USPTO. Those provisions apply to all of our U.S. patents, regardless of when issued. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in U.S. federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. These provisions could increase the uncertainties and costs surrounding the prosecution of our or our licensors’ patent applications and the enforcement or defense of our or our licensors’ issued patents.

In addition, the U.S. Supreme Court has ruled on several patent cases in recent years, some of which either narrow the scope of patent protection available in certain circumstances or weaken the rights of patent owners in certain situations. For example, the 2013 decision by the U.S. Supreme Court in Association for Molecular Pathology v. Myriad Genetics, Inc. precludes a claim to a nucleic acid having a stated nucleotide sequence which is identical to a sequence found in nature and unmodified. We currently are not aware of an immediate impact of this decision on our patents or patent applications because we are developing nucleic acid products that are not found in nature. However, this decision has yet to be clearly interpreted by courts and by the USPTO. We cannot assure you that the interpretations of this decision or subsequent rulings will not adversely impact our patents or patent applications. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing U.S. patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. In addition, the European patent system is relatively stringent in the type of amendments that are allowed during prosecution, but the complexity and uncertainty of European patent laws has also increased in recent years. Complying with these laws and regulations could limit our ability to obtain new patents in the future that may be important for our business.

In addition, changes in, or different interpretations of, patent laws in the United States and other countries may permit others to use our discoveries or to develop and commercialize our technology without providing any compensation to us, or may limit the scope of patent protection that we are able to obtain. The laws of some countries do not protect intellectual property rights to the same extent as U.S. laws, and those countries may lack adequate rules and procedures for defending our intellectual property rights.

If the patent applications we hold or have in-licensed with respect to our current and future technology fail to issue, if the validity, breadth or strength of protection of our patent rights is threatened, or if such patent rights fail to provide meaningful exclusivity for our methods and related products that we or our collaborators may develop, it could dissuade companies from collaborating with us, encourage competitors to develop competing technology and threaten our or our collaborators’ ability to commercialize future nucleic acid preparative and analytical methods and related products or services. Any such outcome could have a material adverse effect on our business.

We will not seek to protect our intellectual property rights in all jurisdictions throughout the world, and we may not be able to adequately enforce our intellectual property rights even in the jurisdictions where we seek protection.

Filing, prosecuting and defending patents in all countries and jurisdictions throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those in the United States, assuming that rights are obtained in the United States. In-licensing patents covering our technology in all countries throughout the world may similarly be prohibitively expensive, if such opportunities are available at all. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States, even in jurisdictions where we do pursue patent protection. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, even in jurisdictions where we do pursue patent protection, or from selling or importing our technology in and into the United States or other jurisdictions.

We generally apply for patents in those countries where we intend to make, have made, use, offer for sale or sell nucleic acid preparative and analytical methods and related products or services and where we assess the risk of infringement to justify the cost of seeking patent protection. However, we may not seek protection in all countries where we will commercialize our products and services and we may not accurately predict all the countries where patent protection would ultimately be desirable. If we fail to timely file a patent application in any such country or major market, we may be precluded from doing so at a later date. Competitors may use our technology in jurisdictions where we do not pursue and obtain patent protection to develop their own assays and products and may export otherwise infringing assays and products to territories where we have patent protection, but where our ability to enforce our patent rights is not as strong as in the United States. These assays and products may compete with technologies that we or our collaborators may develop, and our patents or other intellectual property rights may not be effective or sufficient to prevent such competition.

The laws of some other countries do not protect intellectual property rights to the same extent as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than U.S. law does. Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries. In addition, the legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to biopharmaceuticals or biotechnologies. As a result, many companies have encountered significant difficulties in protecting and defending intellectual property rights in certain jurisdictions outside the United States. Such issues may make it difficult for us to stop the infringement of our patents, if obtained, or the misappropriation of our other intellectual property rights. For example, many other countries, including countries in the EU, have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. In those countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party, which could materially diminish the value of those patents and could limit our potential revenue opportunities. Accordingly, our and our licensors’ efforts to enforce intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we own or license.

Furthermore, proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, subject our patents to the risk of being invalidated or interpreted narrowly, subject our patent applications to the risk of not issuing or provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded to us, if any, may not be commercially meaningful, while the damages and other remedies we may be ordered to pay such third parties may be significant.

Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to seeking patent protection for certain aspects of our technology, we also consider trade secrets, including confidential and unpatented know-how, important to the maintenance of our competitive position. We protect trade secrets and confidential and unpatented know-how, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to such knowledge, such as our employees, corporate collaborators, outside scientific collaborators, contract research organizations, or CROs, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants that obligate them to maintain confidentiality and assign their inventions to us. We cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes or that the assignment agreements that have been entered into are self-executing. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, or claim ownership in intellectual property that we believe is owned by us. Monitoring unauthorized uses and disclosures of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual property will be effective. In addition, we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts in the U.S. and certain foreign jurisdictions are less willing or unwilling to protect trade secrets.

Moreover, our competitors or other third parties may independently develop knowledge, methods and know-how equivalent to our trade secrets or seek to reverse engineer our technology for which we do not have patent protection. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third parties, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.

We are also subject both in the U.S. and outside the U.S. to various regulatory schemes regarding requests for the information we provide to regulatory authorities, which may include, in whole or in part, trade secrets or confidential commercial information. While we are likely to be notified in advance of any disclosure of such information and would likely object to such disclosure, there can be no assurance that our challenge to the request would be successful. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects.

We may be subject to claims that our employees, consultants, or advisors have wrongfully used or disclosed trade secrets or other confidential information of their current or former employers or claims asserting ownership of what we regard as our own intellectual property.

Many of our employees, consultants, and advisors are currently or were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants, and advisors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these individuals have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual’s current or former employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property. Such claims could have a material adverse effect on our business, financial condition, results of operations, and prospects.

If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. Any trademark litigation could be expensive. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential collaborators or customers in our markets of interest. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our business may be adversely affected.

Our use of “open source” software could subject our proprietary software to general release, adversely affect our ability to sell our products or provide our services, and subject us to possible litigation.

A portion of the products or technologies licensed, developed or distributed by us incorporate so-called “open source” software and we may incorporate open source software into other products or technologies in the future. Such open source software is generally licensed by its authors or other third parties under open source licenses. Some open source licenses contain requirements that we disclose source code for modifications we make to the open source software and that we license such modifications to third parties at no cost. In some circumstances, distribution of our software in connection with open source software could require that we disclose and license some or all of our proprietary code in that software as well as distribute our products that use particular open source software at no cost to the user. We monitor our use of open source software in an effort to avoid uses in a manner that would require us to disclose or grant licenses under our proprietary source code, however, there can be no assurance that such efforts will be successful. Open source license terms are often ambiguous and such use could inadvertently occur. There is little legal precedent governing the interpretation of many of the terms of certain of these licenses, and the potential impact of these terms on our business may result in unanticipated obligations regarding our products and technologies. Companies that incorporate open source software into their products have, in the past, faced claims seeking enforcement of open source license provisions and claims asserting ownership of open source software incorporated into their product. If an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of an open source license, we could incur significant legal costs defending ourselves against such allegations. In the event such claims were successful, we could be subject to significant damages or be enjoined from the distribution of our products. In addition, if we combine our proprietary software with open source software in certain ways, under some open source licenses we could be required to release the source code of our proprietary software, which could substantially help our competitors develop products and services that are similar to or better than ours and otherwise have a material adverse effect on our business.

Intellectual property rights do not necessarily address all potential threats.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:


•	others may be able to make products or provide services that are similar to ours but that are not protected by our intellectual property;


•	we or our licensors might not have been the first to make the inventions covered by our patents;


•	we or our licensors might not have been the first to file patent applications covering certain of our or their inventions;


•	others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;


•	it is possible that our pending patent applications or those that we may own in the future will not lead to issued patents;


•	issued patents for which we have rights may be held invalid or unenforceable, including as a result of legal challenges by our competitors;


•	our competitors might conduct activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products and services in our commercial markets;


•	we may not develop additional proprietary technologies that are patentable;


•	the patents of others may harm our business; and


•	we or our licensors may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.

Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Risks related to our financial condition and capital requirements

We may need to raise additional capital to fund our existing operations, further develop our genetic analysis platform, commercialize new products and services, and expand our operations.

We may seek to sell common or preferred equity or convertible debt securities, enter into another credit facility or another form of third-party funding, or seek other debt financing. We may also need to raise capital sooner or in larger amounts than currently anticipated for numerous reasons, including because of lower demand for our products and services as a result of failure to obtain regulatory approvals for our IVD and companion diagnostics, or if such approvals are obtained, lower than currently expected rates of reimbursement from commercial third-party payors or government payors or other risks described in this prospectus.

We may also consider raising additional capital in the future to expand our business, to pursue strategic investments, to take advantage of financing opportunities, or for other reasons, including to:


•	increase our sales and marketing efforts to facilitate market adoption of our services and address competitive developments;


•	fund development and marketing efforts of any future services;


•	further expand our laboratory operations domestically and outside the United States;


•	expand our technologies into other types of cancers;


•	acquire, license or invest in technologies, including information technologies;


•	acquire or invest in complementary businesses or assets; and


•	finance capital expenditures and general and administrative expenses.

Our present and future funding requirements will depend on many factors, including:


•	our ability to achieve revenue growth;


•	our ability to secure domestic and international regulatory approval for our products;


•	our rate of progress in establishing reimbursement arrangements for our approved products, if any, with domestic and international commercial third-party payors and government payors;


•	the cost of expanding our laboratory operations and offerings, including our sales and marketing efforts;


•	our rate of progress in, and cost of the sales and marketing activities associated with, establishing adoption of and reimbursement for our services;


•	our rate of progress in, and cost of research and development activities associated with, services in research and early development;


•	the effect of competing technological and market developments;


•	costs related to international expansion; and


•	the potential cost of and delays in research and development as a result of any regulatory oversight applicable to our services.

The various ways we could raise additional capital carry potential risks. If we raise funds by issuing equity securities, our stockholders’ ownership interests will be diluted. Any equity securities we issue could also provide for rights, preferences, or privileges senior to those of holders of our common stock. If we raise funds by issuing debt securities, those debt securities would have rights, preferences, and privileges senior to those of holders of our common stock. If we raise funds through borrowings pursuant to a credit agreement, the incurrence of such indebtedness would result in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional debt and acquire or license intellectual property rights, and other operating restrictions that could adversely impact our ability to conduct our business. If we raise funds through collaborations and alliances and licensing arrangements, we might be required to relinquish significant rights to our genomics platform, technologies or services, or grant licenses on terms that are unfavorable to us.

Additional equity or debt financing might not be available on reasonable terms, if at all. If we cannot secure additional funding when needed, we may have to delay, reduce the scope of, or eliminate one or more research and development programs or sales and marketing initiatives. In addition, we may have to work with a partner on one or more of our development programs, which could lower the economic value of those programs to us.

Lastly, if we are unable to obtain the requisite amount of financing needed to fund our planned operations, it could have a material adverse effect on our business and ability to continue operating as a going concern.

Our Credit Agreement with Perceptive Credit contains restrictions that limit our flexibility in operating our business.

In May 2019, we entered into a credit agreement and guaranty, subsequently amended in April 2020, or, as amended, the Credit Agreement, with Perceptive Credit Holdings II, LP, or Perceptive Credit, an affiliate of Perceptive Life Sciences Master Fund LTD, or Perceptive Life. The Credit Agreement provides for a $30 million senior secured term loan and a $15 million revolving senior secured delayed draw loan facility, or the Delayed Draw Loan Facility. The Credit Agreement is guaranteed by all of our subsidiaries (other than immaterial foreign subsidiaries) and is secured by a lien on substantially all of our and our subsidiaries assets, including, but not limited to, shares of our subsidiaries, our current and future intellectual property, insurance, trade and intercompany receivables, inventory and equipment and

contract rights. The Credit Agreement requires us to meet specified minimum cash and revenue requirements, as described below, and contains various affirmative and negative covenants that limit our ability to engage in specified types of transactions. These covenants, which are subject to customary exceptions, limit our ability to, among other things:


•	sell, lease, transfer or otherwise dispose of certain assets;


•	acquire another company or business or enter into a merger or similar transaction with third parties;


•	incur additional indebtedness;


•	make investments;


•	enter into inbound and outbound licenses of intellectual property;


•	encumber or permit liens on certain assets; and


•	pay dividends and make other restricted payments with respect to our common stock.

In addition, we are required to deposit into controlled accounts all cash or other payments received in respect of any and all of our accounts receivable or any other contract or right and interest, and, at all times, to maintain a minimum aggregate balance of $3 million in cash in one or more such controlled accounts. These accounts are required to be maintained as cash collateral accounts securing our obligations under the Credit Agreement. Until such obligations have been discharged, our ability to use cash amounts held in these controlled accounts in the operation of our business will be limited.

The Credit Agreement also requires us to maintain certain revenue requirements. As of the last day of each fiscal quarter, we must have received recurring revenue for the twelve consecutive previous months of at least $38,710,000, as of March 31, 2020, increasing quarterly to $102,628,000 as of March 31, 2023:

Our ability to draw on the Delayed Draw Loan Facility is contingent on our compliance with the covenants described above and certain other covenants, as well as our achievement of designated revenue milestones. These milestones include, for any period of twelve consecutive months ending no later than June 30, 2020, generating at least $48,000,000 in revenue. The inability to draw on the Delayed Draw Loan Facility may adversely affect our performance and results of operations.

Our board of directors or management team could believe that taking any one of these actions would be in our best interests and the best interests of our stockholders. As such, if we are unable to complete any of these actions because Perceptive Credit does not provide its consent, it could adversely impact our business, financial condition, and results of operations. In the event of a default, including, among other things, our failure to make any payment when due or our failure to comply with any provision of the Credit Agreement, subject to customary grace periods, Perceptive Credit could elect to declare all amounts outstanding to be immediately due and payable and terminate all commitments to extend further credit. If we are unable to repay those amounts, Perceptive Credit could proceed against the collateral granted to them to secure such indebtedness, which could have a material adverse effect on our business, financial condition, and results of operations.

Perceptive Credit’s interests as a lender may not always be aligned with our interests or with Perceptive Life’s interests as a stockholder. If our interests come into conflict with those of Perceptive Credit, including in the event of a default under the Credit Agreement, Perceptive Credit may choose to act in its self-interest, which could adversely affect the success of our current and future collaborative efforts with Perceptive Life.

Additionally, in connection with the first amendment to the Credit Agreement, we issued and delivered to Perceptive Credit a warrant entitling it to purchase up to 323,333 fully paid and nonassessable shares of Series B Preferred Stock at $4.82 per share, the original issue price of the Series B Preferred Stock. We refer to this warrant as the Delayed Draw Warrant. The Delayed Draw Warrant expires on April 27, 2027.

Upon exercise of the Delayed Draw Warrant, our stockholders, including investors who purchase shares of common stock in this offering, will experience additional dilution. See “Management’s discussion and analysis of financial condition and results of operations—Liquidity and capital resources”.

If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our common stock.

The preparation of our financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources. For example, in connection with the revenue accounting standard, ASC 606, management makes judgments and assumptions based on our interpretation of the new standard. The revenue standard is principle-based and interpretation of those principles may vary from company to company based on their unique circumstances. It is possible that interpretation, industry practice and guidance may evolve as we apply the standard. If our assumptions underlying our estimates and judgments relating to our critical accounting policies change or if actual circumstances differ from our assumptions, estimates or judgments, our operating results may be adversely affected and could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our common stock.

Risks related to our common stock and the offering

Our stock price may be volatile, and the value of our common stock may decline.

The market price of our common stock may be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, some of which are beyond our control, including, but not limited to:


•	actual or anticipated fluctuations in our financial condition or results of operations;


•	variance in our financial performance from expectations of securities analysts;


•	changes in the pricing of our products and services;


•	changes in our projected operating and financial results;


•	changes in laws or regulations applicable to our products and services;


•	the results of our clinical trials;


•	announcements by us or our competitors of significant business developments, acquisitions, or new offerings;


•	significant data breaches of our company, providers, vendors or pharmacies;


•	our involvement in litigation;


•	future sales of our common stock by us or our stockholders, as well as the anticipation of lock-up releases;


•	changes in senior management or key personnel;


•	negative publicity, such as whistleblower complaints or unsupported allegations made by short sellers, about us or our products or services;


•	the trading volume of our common stock;


•	changes in investor perceptions of us or our industry;


•	changes in the anticipated future size and growth rate of our market;


•	general economic, political, regulatory, industry, and market conditions; and


•	natural disasters or major catastrophic events.

These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. In recent years, stock markets in general, and the market for life science technology companies in particular (including companies in the genomics, biotechnology, diagnostics and related sectors), have experienced significant price and volume fluctuations that have often been unrelated or disproportionate to changes in the operating performance of the companies whose stock is experiencing those price and volume fluctuations. Broad market and industry factors may seriously affect the market price of our common stock, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our stock shortly following this offering. Following periods of such volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Because of the potential volatility of our stock price, we may become the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources from our business.

Prior to this offering, there has been no public market for shares of our common stock and an active trading market for our common stock may never develop or be sustained.

No public market for our common stock currently exists. An active public trading market for our common stock may not develop following the completion of this offering, or if developed, it may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair value of your shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration. The initial public offering price of shares of our common stock has been determined by negotiation between us and the underwriters and may not be indicative of prices that will prevail following the completion of this offering. The market price of shares of our common stock may decline below the initial public offering price, and you may not be able to resell your shares of our common stock at or above the initial public offering price.

Future sales of our common stock in the public market could cause the market price of our common stock to decline.

Sales of a substantial number of shares of our common stock in the public market following the completion of this offering, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities.

All of our directors and officers and the holders of substantially all of our capital stock and securities convertible into our capital stock are subject to lock-up agreements that restrict their ability to transfer shares of our capital stock for 180 days from the date of this prospectus. These lock-up agreements limit the number of shares of capital stock that may be sold immediately following this offering. Subject to certain limitations, substantially all of these shares will become eligible for sale upon expiration of the 180-day lock-up period. J.P. Morgan Securities LLC and BofA Securities, Inc. may, in their sole discretion, permit our stockholders who are subject to these lock-up agreements to sell shares prior to the expiration of the lock-up agreements.

In addition, there were 5,418,687 shares of common stock issuable upon the exercise of options outstanding as of March 31, 2020. We intend to register all of the shares of common stock issuable upon

exercise of such outstanding options or other equity incentives we may grant in the future, for public resale under the Securities Act of 1933, as amended, or the Securities Act. The shares of common stock will become eligible for sale in the public market to the extent such options are exercised, subject to the lock-up agreements described above and compliance with applicable securities laws.

Further, based on shares outstanding as of March 31, 2020, holders of approximately shares, or % of our capital stock after the completion of this offering, will have rights, subject to some conditions, to require us to file registration statements covering the sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.

There are also 1,189,749 shares of Series A Preferred Stock issuable in connection with the Baby Genes Merger Agreement, as well as 646,667 and 323,333 shares of Series B Preferred Stock issuable in connection with the Series B Warrant and the Delayed Draw Warrant, respectively. The issuance of shares in connection with any subsequent issuance could depress the market price of our common stock.

We are unable to predict the effect that such issuances and/or sales may have on the prevailing market price of our common stock.

If you purchase shares of common stock in this offering, you will experience immediate and substantial dilution in your investment. You will experience further dilution if we issue additional equity or equity-linked securities in the future.

The initial public offering price of our common stock is substantially higher than the pro forma net tangible book value per share of our common stock immediately after this offering. If you purchase shares of our common stock in this offering, you will suffer immediate dilution of $ per share, representing the difference between our pro forma as adjusted net tangible book value per share after giving effect to the sale of shares of common stock in this offering and an anticipated public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus. See the section titled “Dilution.”

If we issue additional shares of common stock, or securities convertible into or exchangeable or exercisable for shares of common stock, our stockholders, including investors who purchase shares of common stock in this offering, will experience additional dilution, and any such issuances may result in downward pressure on the price of our common stock.

We are an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.

We are an “emerging growth company”, as defined in the JOBS Act. For so long as we remain an emerging growth company, we are permitted by SEC rules and plan to rely on exemptions from certain disclosure requirements that are applicable to other SEC-registered public companies that are not emerging growth companies.

These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes–Oxley Act, not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, the information we provide stockholders will be different from the information that is available with respect to other public companies. In this prospectus, we have not included all of the executive compensation related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

We do not expect to pay any dividends for the foreseeable future. Investors in this offering may never obtain a return on their investment.

You should not rely on an investment in our common stock to provide dividend income. We have never declared or paid cash dividends on our capital stock, and we do not anticipate that we will pay any dividends to holders of our common stock in the foreseeable future. Instead, we plan to retain all available funds and future earnings to fund the development and expansion of our business. In addition, our Credit Agreement with Perceptive Credit contains, and any future credit facility or financing we obtain may contain, terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any return on their investment. As a result, investors seeking cash dividends should not purchase our common stock.

If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our common stock, the price of our common stock could decline.

The trading market for our common stock will rely in part on the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by industry or securities analysts. If no or few analysts commence coverage of us, the trading price of our common stock could decrease. Even if we do obtain analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our common stock, the price of our common stock could decline. If one or more of these analysts cease to cover our common stock, we could lose visibility in the market for our common stock, which in turn could cause the price of our common stock to decline.

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.

As a public company, we will incur significant legal, accounting, and other expenses that we did not incur as a private company, which we expect to further increase after we are no longer an emerging growth company. The Sarbanes–Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq Stock Market, or Nasdaq, and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel devote a substantial amount of time to compliance with these requirements. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time- consuming and costly. We cannot predict or estimate the amount of additional costs we will incur as a public company or the specific timing of such costs.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

We will have broad discretion in the application of the net proceeds to us from this offering, including for any of the purposes described in the section titled “Use of proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, our ultimate use may vary substantially from our currently intended use. Investors will need to rely upon the judgment of our management with respect to the use of proceeds. Pending use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities, such as money market accounts, certificates of deposit, commercial paper, and guaranteed obligations of the United States government that may not generate a high yield for our stockholders. If we do not use the net proceeds that we receive in this offering effectively, our business, financial condition, results of operations and prospects could be harmed, and the market price of our common stock could decline.

Our management and principal stockholders own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

As of March 31, 2020, our executive officers, directors and five percent or greater stockholders and their respective affiliates, beneficially own, in the aggregate, approximately % of our outstanding common stock, assuming the conversion of all our outstanding convertible preferred stock. Upon the closing of this offering, assuming that we sell the number of shares reflected on the cover page of this prospectus, that same group will beneficially own, in the aggregate, approximately % of our outstanding common stock. As a result, after this offering, these stockholders, if they act together, will be able to exercise considerable influence over matters requiring stockholder approval, including the election of directors, amendments of our organizational documents and approval of any merger, sale of substantially all our assets or other significant corporate transactions. This concentration of ownership may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you or other stockholders may feel are in your or their best interest as one of our stockholders.

As a result of being a public company, we are obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock.

We will be required, pursuant to Section 404 of the Sarbanes–Oxley Act to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the fiscal year ending December 31, 2021, which is the year covered by the second annual report following the completion of our initial public offering. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting in our first annual report required to be filed with the SEC following the date we are no longer an emerging growth company if we are not a non-accelerated filer at such time. We have recently commenced the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404 of the Sarbanes–Oxley Act, but we may not be able to complete our evaluation, testing and any required remediation in a timely fashion once initiated. Our compliance with Section 404 of the Sarbanes–Oxley Act will require that we incur substantial accounting expenses and expend significant management efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404 of the Sarbanes–Oxley Act.

If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

Our amended and restated certificate of incorporation that we intend to adopt effective upon the closing of this offering will designate the state courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against us or our directors, officers, or employees.

Our amended and restated certificate of incorporation that we intend to adopt effective upon the completion of this offering will provide that, to the fullest extent permitted by law, unless we consent in

writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, any state court located within the State of Delaware, or if all such state courts lack jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a breach of a fiduciary duty owed by any current or former director, officer or other employee, to us or our stockholders; (3) any action or proceeding asserting a claim against us or any of our current or former directors, officers or other employees, arising out of or pursuant to any provisions of the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws; (4) any action or proceeding to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws; (5) any action or proceeding as to which the Delaware General Corporation Law confers jurisdiction to the Court of Chancery of the State of Delaware; and (6) any action asserting a claim against us, or any of our directors, officers or other employees, that is governed by the internal affairs doctrine, in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants. The amended and restated certificate of incorporation we intend to adopt effective upon closing of this offering states that these choice of forum provisions will not apply to suits brought to enforce a duty or liability created by the Securities Act, the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. This amended and restated certificate of incorporation will further provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.

These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees and may discourage these types of lawsuits. Furthermore, if a court were to find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

Our amended and restated certificate of incorporation that we intend to adopt effective upon the closing of this offering and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our common stock and could entrench management.

Our amended and restated certificate of incorporation that we intend to adopt effective upon the completion of this offering will contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These provisions include a staggered board of directors and the ability of the board of directors to designate the terms of and issue new series of preferred shares, which may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.

We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.

Special note regarding forward-looking statements

This prospectus contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:


•	our expectations regarding our revenue, expenses and other operating results;


•	the anticipated cost, timing or outcome of any patent litigation or other proceeding relating to our owned patents, licensed patents or patent applications, including our litigation with Natera;


•	future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements, future revenues, expenses, reimbursement rates and needs for additional financing;


•	the timing or outcome of any of our domestic and international regulatory submissions;


•	impact from future regulatory, judicial, and legislative changes or developments in the United States and foreign countries;


•	our ability to acquire new customers and successfully engage new and existing customers;


•	the costs and success of our marketing efforts, and our ability to promote our brand;


•	our ability to increase demand for our products and services, obtain favorable coverage and reimbursement determinations from third-party payers and expand geographically;


•	our expectations of the reliability, accuracy and performance of our products and services, as well as expectations of the benefits to patients, clinicians and providers of our products and services;


•	our efforts to successfully develop and commercialize our products and services, including our ability to successfully conduct clinical trials;


•	our ability to successfully develop additional revenue opportunities and expand our product and service offerings, including our recently launched offerings;


•	our ability to successfully commercialize our products and services through strategic or commercial partnerships, such as our agreements with Illumina and our ability to enter into additional such partnerships in the future;


•	the scope of protection we establish and maintain for, and developments or disputes concerning, our intellectual property or other proprietary rights, data-privacy and security breaches, as well as the integrity of our information and telecommunications systems;


•	our ability to attract, and reliance on, collaborators such as medical institutions, contract laboratories, laboratory partners and other third parties;


•	the performance of our third-party suppliers and manufacturers;


•	our ability to effectively manage our growth, including our ability to expand our network of specialists, retain and recruit personnel, and maintain our culture;


•	our ability to compete effectively with existing competitors and new market entrants;


•	our ability to successfully acquire and integrate other businesses, form joint ventures or make investments in other companies;


•	the impact on our business of economic or political events or trends;


•	the size and growth potential of the markets for our products and services, and our ability to serve those markets; and


•	the rate and degree of market acceptance of our products and services.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this prospectus primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk factors” and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this prospectus. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject as of the date of this prospectus. These statements are based on information available to us as of the date of this prospectus, and while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete, and our beliefs and opinions may change based on new or additional information made available to us in the future. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this prospectus to reflect events or circumstances after the date of this prospectus or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

Market, industry and other data

This prospectus contains statistical data, estimates and forecasts that are based on independent industry publications or other publicly available information, as well as other information based on our internal sources. This information involves many assumptions and limitations, and you are cautioned not to give undue weight to these estimates. We have not independently verified the accuracy or completeness of the data contained in these industry publications and other publicly available information. Further, while we believe our internal research is reliable, such research has not been verified by any third party. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk factors,” that could cause results to differ materially from those expressed in these publications and other publicly available information.

Use of proceeds

We estimate that we will receive net proceeds from the sale of the common stock that we are offering of approximately $ million (or approximately $ million if the underwriters exercise their option to purchase additional shares of our common stock from us in full) based on an assumed initial public offering price of $ per share of common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share of common stock would increase (decrease) the net proceeds to us from this offering by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered by us would increase (decrease) the net proceeds to us from this offering by approximately $ million, assuming the assumed initial public offering price of $ per share of common stock remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

The principal purposes of this offering are to increase our capitalization and financial flexibility, create a public market for our common stock and facilitate our future access to the capital markets. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to us from this offering. We currently expect to use the net proceeds from this offering for:


•	research and development activities, including development of STRATAFIDE and PCM,


•	regulatory submission and commercialization of our first IVD product, STRATAFIDE, and additional follow-on companion diagnostic claims for STRATAFIDE,


•	commercialization activities relating to STRATAFIDE, and


•	working capital and general corporate purposes, including sales and marketing activities, operating expenses and capital expenditures. We may also use a portion of the net proceeds, if any, to acquire or invest in complementary businesses, technologies or other assets. However, we do not have any agreements or commitments to enter into any such acquisitions or investments at this time.

Although we currently anticipate that we will use the net proceeds from this offering as described above, there may be circumstances where a reallocation of funds is necessary. For instance, we anticipate that the net proceeds from this offering will be sufficient to fund our development of STRATAFIDE through approval and/or clearance by the FDA, but we cannot guarantee that to be the case. We also anticipate that the net proceeds from this offering will allow for development of PCM, although additional funds will be needed to support regulatory submission for approval and/or clearance of PCM and commercialization of PCM. If the net proceeds from this offering are insufficient to fund development of STRATAFIDE and PCM through approval and/or clearance by the FDA, we may raise additional capital, including through the sale of our common or preferred equity or convertible debt securities, entry into another credit facility or another form of third-party funding, or other debt financing. The amounts and timing of our actual expenditures will depend upon numerous factors, including our commercialization efforts, demand for our products, rates of reimbursement, the costs of equipment, the progress of our research and development efforts, our operating costs and the other factors described in the section titled “Risk factors.” Accordingly, we will have broad discretion over how to use the net proceeds to us from this offering. We intend to invest the net proceeds to us from the offering that are not used as described above in investment-grade, interest-bearing instruments and U.S. government securities.

Dividend policy

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and future earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination regarding the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant. In addition, we have entered into, and may enter into agreements in the future, that contain restrictions on payments of cash dividends.

Capitalization

The following table sets forth our cash and capitalization as of March 31, 2020:


•	on an actual basis;

•

on a pro forma basis, giving effect to (1) the issuance of 389,749 shares of Series A Preferred Stock pursuant to the Baby Genes Merger Agreement, (2) the issuance of shares of our Series B Preferred Stock issuable upon the automatic net exercise of the warrant to purchase Series B Preferred Stock, or the Series B Warrant, in connection with this offering, assuming an initial public offering price of $ per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, (3) the automatic conversion of all of our outstanding shares of preferred stock (including the shares issuable pursuant to the Baby Genes Merger Agreement described in (1) above and pursuant to the automatic net exercise of the Series B Warrant described in (2) above) into shares of common stock in connection with this offering, (4) the automatic conversion of contingent consideration for the Baby Genes Acquisition from Series A Preferred Stock to up to 800,000 shares of our common stock and the resulting reclassification of the remaining liability to additional paid-in capital, and (5) the filing and effectiveness of our amended and restated certificate of incorporation which will be in effect on the completion of this offering; and

•

on a pro forma as-adjusted basis, giving effect to (1) the pro forma adjustments set forth above and (2) our receipt of estimated net proceeds from the sale of shares of our common stock that we are offering at an assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

You should read this table together with the sections titled “Selected consolidated financial data” and “Management’s discussion and analysis of financial condition and results of operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.



	As of March 31, 2020
	Actual			Pro Forma (unaudited)	Pro Forma As Adjusted (unaudited)
	(in thousands except share and per share amounts)
Cash and cash equivalents	$	36,842		$	$
Long-term debt	$	28,659		$	$
Convertible preferred stock, $0.001 par value; 28,293,525 shares authorized, 26,130,896 shares issued and outstanding, actual; and no shares authorized, issued and outstanding, pro forma and pro forma as adjusted	115,347
Stockholders’ (deficit) equity:
Common stock, $0.01 par value; 45,000,000 authorized; 9,246,778 shares issued and outstanding, actual; shares authorized and shares issued and outstanding, pro forma; and shares authorized and shares issued and outstanding, pro forma as adjusted	92
Additional paid-in capital	4,347
Accumulated deficit	(88,560		)
Total stockholders’ (deficit) equity	$	(84,121	)	$	$
Total capitalization	$	59,885		$	$

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share of common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) each of our pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders’ (deficit) equity and total capitalization by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated expenses payable by us. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered by us would increase (decrease) each of our pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders’ (deficit) equity and total capitalization by approximately $ million, assuming the assumed initial public offering price of $ per share of common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

The million shares of our common stock outstanding, pro forma, and the million shares of our common stock outstanding, pro forma as adjusted, excludes:


•	5,418,687 shares of common stock issuable on the exercise of stock options outstanding as of March 31, 2020 under the 2015 Plan, with a weighted-average exercise price of approximately $2.17 per share;


•	up to an aggregate of 800,000 shares of common stock which may be issued in connection with the Baby Genes Acquisition, pursuant to certain earn-out provisions if specified revenue thresholds are achieved;


•	shares of common stock reserved for future issuance under our 2020 Plan, as well as any future increases, including annual automatic evergreen increases, in the number of shares of common stock reserved for issuance under our 2020 Plan; and


•	shares of common stock reserved for issuance under our ESPP, as well as any future increases, including annual automatic evergreen increases, in the number of shares of common stock reserved for future issuance under our ESPP.

Dilution

If you invest in our common stock in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per share of common stock and the pro forma as adjusted net tangible book value per share immediately after this offering.

Our historical net tangible book value as of March 31, 2020 was $25.7 million, or $2.78 per share. Net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by the number of our shares of common stock outstanding as of March 31, 2020. Our pro forma net tangible book value as of March 31, 2020 was $ million, or $ per share. Pro forma net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by the number of our shares of common stock outstanding as of March 31, 2020, after giving effect to (1) the issuance of 389,749 shares of Series A Preferred Stock pursuant to the Baby Genes Merger Agreement, (2) the issuance of shares of our Series B Preferred Stock issuable upon the automatic net exercise of the Series B Warrant in connection with this offering, assuming an initial public offering price of $ per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, (3) the automatic conversion of all of our outstanding shares of preferred stock (including the shares issuable pursuant to the Baby Genes Merger Agreement described in (1) above and issuable pursuant to the automatic net exercise of the Series B Warrant described in (2) above) into shares of common stock in connection with this offering, (4) the automatic conversion of contingent consideration for the Baby Genes Acquisition from Series A Preferred Stock to up to 800,000 shares of our common stock and the resulting reclassification of the remaining liability to additional paid-in capital and (5) the filing and effectiveness of our amended and restated certificate of incorporation which will be in effect on the completion of this offering.

After giving effect to the sale by us of shares of common stock in this offering at an assumed initial public offering price of $ per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of March 31, 2020 would have been $ million, or $ per share. This amount represents an immediate increase in pro forma as adjusted net tangible book value of $ per share to our existing stockholders and an immediate dilution in pro forma as adjusted net tangible book value of $ per share to new investors purchasing common stock in this offering. We determine dilution by subtracting the pro forma as adjusted net tangible book value per share after this offering from the amount of cash that a new investor paid for a share of common stock. The following table illustrates this dilution on a per share basis:



Assumed initial public offering price per share			$
Historical net tangible book value per share as of March 31, 2020	$	2.78
Increase in historical net tangible book value per share attributable to the pro forma adjustments described above
Pro forma net tangible book value per share as of March 31, 2020
Increase in pro forma as adjusted net tangible book value per share attributable to new investors purchasing shares in this offering
Pro forma as adjusted net tangible book value per share after this offering
Dilution in pro forma as adjusted net tangible book value per share to new investors participating in this offering			$

The dilution information discussed above is illustrative only and may change based on the actual initial public offering price and other terms of this offering. A $1.00 increase (decrease) in the assumed initial public offering price of $ per share of common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value per share after this offering by $ per share and increase (decrease) the dilution to new investors by $ per share, in each case assuming the number of shares of common stock offered by us,

as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered by us would increase (decrease) our pro forma as adjusted net tangible book value by approximately $ per share and decrease (increase) the dilution to new investors by approximately $ per share, in each case assuming the assumed initial public offering price of $ per share of common stock remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their option to purchase additional shares of common stock in full, the pro forma net tangible book value per share, as adjusted to give effect to this offering, would be $ per share, and the dilution in pro forma net tangible book value per share to investors in this offering would be $ per share.

The following table summarizes, as of March 31, 2020, on a pro forma as adjusted basis as described above, the number of shares of our common stock, the total consideration and the average price per share (1) paid to us by existing stockholders, and (2) to be paid by new investors acquiring our common stock in this offering at an assumed initial public offering price of $ per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, before deducting underwriting discounts and commissions and estimated offering expenses payable by us. The table below assumes no exercise of the underwriters’ option to purchase additional shares of common stock.



	Shares Purchased			Total Consideration			Average Price Per Share
	Number	Percent		Amount	Percent		Average Price Per Share
Existing stockholders		%			%
New investors
Totals		100.0	%	$	100.0	%

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share of common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by new investors and total consideration paid by all stockholders by approximately $ million, assuming that the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

The information set forth in the table and calculations above are based on shares of common stock outstanding as of March 31, 2020 (assuming the conversion of all outstanding shares of our convertible preferred stock into shares of common stock on March 31, 2020), and excludes:


•	5,418,687 shares of common stock issuable on the exercise of stock options outstanding as of March 31, 2020 under the 2015 Plan, with a weighted-average exercise price of approximately $2.17 per share;


•	up to an aggregate of 800,000 shares of common stock which may be issued in connection with the Baby Genes Acquisition, pursuant to contingent consideration provisions if specified revenue thresholds are achieved;


•	shares of common stock reserved for future issuance under the 2020 Plan, as well as any future increases, including annual automatic evergreen increases, in the number of shares of common stock reserved for issuance under the 2020 Plan; and


•	shares of common stock reserved for issuance under our ESPP, as well as any future increases, including annual automatic evergreen increases, in the number of shares of common stock reserved for future issuance under our ESPP.

To the extent that any outstanding options or warrants are exercised or new options are issued under our stock-based compensation plans, or we issue additional warrants, convertible securities or shares of our common stock or our convertible preferred stock in the future, there will be further dilution to investors participating in this offering.

Selected consolidated financial data

The selected consolidated statement of operations data for the years ended December 31, 2019 and 2018 and the selected consolidated balance sheet data as of December 31, 2019 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated statements of operations data for the three months ended March 31, 2020 and 2019 and the selected consolidated balance sheet data as of March 31, 2020 have been derived from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements, and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position and results of operations. The selected consolidated financial data included in this section are not intended to replace the financial statements and related notes included elsewhere in this prospectus.

You should read the consolidated financial data set forth below in conjunction with our consolidated financial statements and the accompanying notes and the information in “Management’s discussion and analysis of financial condition and results of operations” contained elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected for any other period in the future.



	Year Ended December 31,						Three Months Ended March 31,
	2018			2019			2019			2020
	(in thousands, except share and per share data)
Consolidated Statements of Operations Data:
Revenue
Precision oncology products	$	16,025		$	22,644		$	4,380		$	7,006
Pharma development services	12,429			27,921			5,069			7,784
Total revenue	28,454			50,565			9,449			14,790

Costs & operating expenses
Cost of precision oncology products	4,033			7,335			1,068			2,313
Cost of pharma development services	6,230			9,212			1,706			3,399
Sales and marketing	7.215			15.428			2,644			5,324
Research and development	8.184			34.172			4,295			13,737
General and administrative	7,700			15,875			2,377			7,481
Contingent consideration	—			5,768			2,716			(35		)
Total operating expenses	33,362			87,790			14,806			32,219
Loss from operations	(4,908		)	(37,225		)	(5,357		)	(17,429		)
Interest expense, net	(1,160		)	(2,432		)	—			(893		)
Other income (expense), net	34			(824		)	(8		)	(995		)
Loss before income taxes	(6,034		)	(40,481		)	(5,365		)	(19,317		)
Income tax (benefit) expense	(481		)	497			1			—
Net loss and comprehensive loss	$	(5,553	)	$	(40,978	)	$	(5,366	)	$	(19,317	)
Basic and diluted loss per common share	$	(0.61	)	$	(4.50	)	$	(0.59	)	$	(2.10	)
Basic and diluted weighted-average common shares outstanding⁽¹⁾	9,059,508			9,113,833			9,059.703			9,196.159
Pro forma basic and diluted loss per common share⁽¹⁾⁽²⁾
Pro forma basic and diluted weighted-average common shares outstanding⁽¹⁾⁽²⁾


(1)	See Note 15 to our consolidated financial statements included elsewhere in this prospectus for a description of how we compute basic and diluted net loss per share of common stock.

(2)

The pro forma consolidated financial data gives effect to (a) the issuance of 389,749 shares of Series A Preferred Stock pursuant to the Baby Genes Merger Agreement, (b) the issuance of shares of our Series B Preferred Stock issuable upon the automatic net exercise of the Series B Warrant in connection with this offering, assuming an initial public offering price of $ per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, (c) the automatic conversion of all of our outstanding shares of convertible preferred stock (including the shares issuable pursuant to the Baby Genes Merger Agreement described in (a) and issuable pursuant to the automatic net exercise of the Series B Warrant described in (b)) into shares of common stock in connection with this offering, (d) the automatic conversion of contingent consideration for the Baby Genes Acquisition from Series A Preferred Stock to up to 800,000 shares of our common stock and the resulting reclassification of the remaining liability to additional paid-in capital and (e) the filing and effectiveness of our amended and restated certificate of incorporation which will be in effect on the completion of this offering.



	December 31,						March 31
	2018			2019			2020
	(in thousands)						(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	9,324		$	59,492		$	36,842
Total assets	29,475			106,796			97,503
Total current assets	19,231			83,290			66,282
Total current liabilities	9,059			18,377			31,132
Working capital⁽¹⁾	10,172			64,913			35,150
Long-term debt, net	—			28,572			28,659
Convertible preferred stock	42,180			110,154			115,347
Accumulated deficit	(28,265		)	(69,243		)	(88,560		)
Total stockholders’ deficit	(25,095		)	(65,239		)	(84,121		)


(1)	Working capital is defined as current assets less current liabilities.

Management’s discussion and analysis of financial condition and results of operations

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes and other financial information appearing elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk factors” section of this prospectus, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a leading genomics company democratizing precision oncology. We offer a suite of products and services that are highly accurate, personal, actionable and easy to use in local settings. This empowers clinicians to control the sample, data, patient care and economics. Additionally, our products and services enable biopharmaceutical companies to cost-effectively accelerate drug development. We believe these benefits will drive broader adoption of precision oncology throughout the therapeutic continuum, improving patient care. Our product development platform, with our proprietary AMP chemistry at the core, has enabled us to develop industry-leading products and services that allow for therapy optimizing and cancer monitoring.

We have developed and commercialized RUO products, we are developing IVD products, and we offer services that meet the unique needs of our customers and their clinical applications. Our five RUO product lines consist of DNA-based VariantPlex, RNA-based FusionPlex, ctDNA-based LiquidPlex and RNA-based Immunoverse, which we collectively refer to as ArcherPlex, and PCM. There are multiple products within each of these lines, all of which can be customized. These RUO products allow for a range of applications and can be used individually or in combination, as desired. Our offerings include commercial RUO products and services that laboratories use to conduct genomic analysis for therapy optimization and cancer monitoring. We intend to submit STRATAFIDE, in 2020, and PCM, in the future, for FDA approval and/or clearance so they can be marketed as IVDs. STRATAFIDE and PCM have both received Breakthrough Device designation from the FDA. Additionally, we offer Assay Designer and Designer Pro as services to clinical and biopharmaceutical customers, which allow them to customize biomarker targets and develop new applications. Our analyte- and sample-agnostic products and services enable clinicians to quickly and locally generate actionable genomic information to deliver industry-leading care to patients with solid tumors, blood cancers or sarcomas.

Since our inception in 2013, our product development platform has enabled us to efficiently develop over 325 unique RUO products, which have been sold to over 300 leading academic and reference laboratories and over 50 biopharmaceutical companies and contract research organizations, or CROs, across 40 countries to facilitate the analysis of over 425,000 samples. We have generated a large and growing body of comprehensive clinical evidence, consisting of over 200 peer-reviewed clinical and scientific publications, which we believe demonstrate our products’ performance for clinical applications. We believe our long-standing commercial relationships with top-tier academic institutions and reference laboratories demonstrate that we are well positioned to become the global leader in driving decentralized genomic testing.

the United States. We intend to develop an additional universal IVD for blood cancers, similar to STRATAFIDE.

We are also seeking FDA clearance and/or approval for PCM as an IVD to non-invasively and quantitatively measure cancer recurrence or progression, as well as therapeutic efficacy, to determine a treatment regimen and refine therapy. We believe PCM will improve patient outcomes across multiple clinical applications as a prognostic device for predicting recurrence of primary cancer after initial treatment. We are seeking additional regulatory approvals outside the United States and intend to expand into additional indications.

As of March 31, 2020, we employed 39 sales representatives in the United States to market our RUO products to clinical customers, which include academic and reference laboratories, for development into laboratory-developed tests. We employed 5 sales representatives to market our products and services to biopharmaceutical companies. We expect to expand this commercial presence ahead of regulatory clearances and/or approvals of our pipeline products. Outside the United States, we market our products and services to clinical customers in over 40 countries through our targeted sales organization of 15 sales representatives and over 20 distributors.

We generated total revenue of $28.5 million and $50.6 million for the years ended December 31, 2018 and 2019, respectively, and $9.4 million and $14.8 million for the three months ended March 31, 2019 and 2020, respectively. We also incurred net losses of $(5.6) million and $(41.0) million in the years ended December 31, 2018 and 2019, respectively, and $(5.4) million and $(19.3) million for the three months ended March 31, 2019 and 2020, respectively.

Historical financing activities

Our historical financing arrangements have included the sale of convertible preferred stock, the issuance of convertible notes and entry into term loans. For the year ended December 31, 2019, we sold $15.0 million and $55.0 million of Series B Preferred Stock and Series C Preferred Stock, respectively, and we entered into a $45.0 million credit facility with Perceptive under which we have drawn an aggregate of $30.0 million. For the year ended December 31, 2018, we issued (i) $15.0 million of Series A Preferred Stock for cash and (ii) $22.6 million of Series A Preferred Stock upon conversion of then outstanding convertible promissory notes. We have also historically issued warrants to purchase shares of our Series A Preferred Stock and Series B Preferred Stock to certain of our lenders. These warrants are recorded as a liability and adjusted to fair value each reporting period. The warrant to purchase 227,115 shares of Series A Preferred Stock was exercised in the three months ended March 31, 2020.

Baby Genes acquisition

In October 2018, we acquired Baby Genes, through which we acquired a CLIA- and CAP-accredited laboratory to further support our biopharmaceutical customers’ development and clinical trial programs. Under the Baby Genes Merger Agreement, we may pay aggregate consideration of up to 3.5 million shares of Series A Preferred Stock to the stockholders of Baby Genes. At closing, we issued 1.4 million of these shares. In February 2020, we issued an additional 0.9 million of these shares for achievement of a 2019 revenue target. We will issue up to an additional 0.4 million of these shares immediately prior to the closing of this offering and we may issue up to an additional 0.8 million of these shares if a 2020 revenue target is achieved. This contingent consideration is recorded as a liability and adjusted to fair value each reporting period through other income or expenses.

COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic. This outbreak has caused major disruptions to businesses and markets worldwide as the virus spread and has resulted in governments around the world implementing stringent measures to help control the spread of the virus, including “shelter in place” and “stay at home” orders, travel restrictions, business and school closures, and other measures. Because of the nature of our operations, we are currently considered to be an essential business so, to date, our operations have only

been partially affected by this order. The partial disruption, even temporary, may impact our operations and overall business. We have modified our business practices, including mandating that all non-essential personnel work remotely, significantly restricting employee travel, and canceling various planned sales activities, including conferences and internal and external sales meetings. The long term operational impacts of these changes are still being evaluated. Our supply chain has not yet experienced significant disruptions resulting from the pandemic. We are actively evaluating our key suppliers’ abilities to meet our demand as well as the capabilities of our customers to receive products. While we have not yet experienced a notable negative impact on the demand for our products or services, current customers, including hospitals, labs, and other medical centers, may delay or cancel product orders due to operational disruptions within their organizations, enrollment for the clinical trials we support may decline due to the various travel restrictions, and our biopharmaceutical collaborators may cancel or delay their companion diagnostic development and research programs due to decreases in enrollment, economic disruptions,shift in focus by the healthcare industry on combating COVID-19, or other factors.

The ultimate impact of the COVID-19 pandemic on our business and financial condition will depend on many factors, including the duration of the outbreak and the mitigation requirements affecting our operations. We will continue to evaluate the impact of the COVID-19 pandemic on our business. See also “Risk factors—Risks related to our business and strategy—The outbreak of COVID-19 could materially adversely affect our business, financial condition and results of operations.”

Components of results of operations

Revenue

We derive our revenue from two sources: (i) precision oncology products and (ii) pharma development services.

Precision oncology products. Precision oncology product revenue is generated from sales of our genomic products, which can be sold alone or in combination with a service performance obligation. When sold in combination, we use our precision oncology products to provide clinical research and clinical trial services to our customers.

Our products are configured to accommodate the differing NGS test volume requirements of our customers. Our products are typically configured to include reagents sufficient to perform 8 to 96 NGS tests. We refer to the set of reagents needed to perform an NGS test as a “reaction”. Management views reactions sold as a key measure of our operating performance. Since inception, we have sold over 425,000 reactions.

Pricing of our products varies based on our customer mix, as customers require differing volumes of reactions and levels of customization. Generally, the average selling price of our RUO products increases as the level of customization increases. Conversely, the average selling price of our RUO products decreases as the volume of reactions sold to a single customer increases due to volume discounts.

From the company’s inception through March 31, 2020, precision oncology product revenue has been comprised primarily of sales of our ArcherPlex RUO products for therapy optimization as well as our PCM products for cancer monitoring. We anticipate that the launch of STRATAFIDE and PCM IVD products, if cleared and/or approved, will enable us to expand our customer base, to include additional hospitals and other point of care providers that do not currently purchase our RUO products, but may utilize our IVD products. In addition, based on current comparable reimbursement rates, we believe reimbursement from third-party payors on our IVD products will enable us to sell IVD products at a higher price than our RUO products.

We recognize revenue on precision oncology product sales once product shipment has occurred or upon the completion of services when the product and service are a combined performance obligation. Payments from our customers are typically due within 90 days from invoice date. We have a diverse range of customers in our RUO product business and no single customer accounted for more than 10% of our precision oncology product revenue for the year ended December 31, 2019 or for the three

months ended March 31, 2020.

Pharma development services. Pharma development services revenue is generated primarily from services provided to biopharmaceutical companies related to companion diagnostic development, clinical research, and clinical trial services across the research, development, and commercialization phases of collaborations.

For companion diagnostic development, we collaborate with biopharmaceutical companies to develop assays for clinical utility studies and clinical trials. As part of these collaborations, we provide services related to regulatory filings with the FDA in the United States, and various international regulatory agencies, to support companion diagnostic device submissions. Under these collaborations we generate revenue from achievement of milestones, provision of on-going support, and related pass-through costs and fees. We generally have distinct performance obligations for development milestones related to our development of a companion diagnostic device. We use a cost plus a margin approach to estimate the standalone value of our companion diagnostic development service performance obligations. Revenue is recognized over time using input and output methods based on our surveys of performance completed to date toward each milestone.

Clinical research activities and clinical trial service revenue are generated primarily from custom assay design services and sample processing activities, separate from revenue generated by the related product component. Revenue is recognized as samples are processed or scope of work is completed, based on contracted agreements with biopharmaceutical companies.

Historically, revenues from pharma development services have been driven by a small number of biopharmaceutical customers who use our services in connection with their product development. For example, one biopharmaceutical customer in Europe accounted for 76% and 57% of our pharma development services revenue for the year ended December 31, 2019, and the three months ended March 31, 2020, respectively. We are actively seeking to diversify our pharma development services revenue across multiple biopharmaceutical customers. The timing of revenue from biopharmaceutical collaborations may be difficult to forecast, because it is dependent on each biopharmaceutical company’s decisions and clinical trial progress.

Costs and operating expenses

Cost of precision oncology products. Cost of precision oncology products generally consists of the cost of materials and consumables, personnel-related expenses, freight, royalties, professional services, equipment and allocated overhead costs associated with the manufacturing of products. Allocated overhead costs include allocated occupancy costs and information technology costs.

Cost of pharma development services. Cost of pharma development services generally consists of personnel-related expenses, the cost of consumables and equipment expenses associated with sample processing, costs paid to CROs for lab services and clinical trial support, and allocated overhead costs. Allocated overhead costs include allocated occupancy costs and information technology costs. Costs associated with processing samples are recognized regardless of whether revenue is recognized with respect to that performance obligation. Additional costs associated with companion diagnostic development services for biopharmaceutical companies also include, but are not limited to, contractors and professional services, regulatory fees, and commercialization fees.

Costs incurred for process development, feasibility, or analytical and clinical validation activities that would have otherwise been incurred for product development for STRATAFIDE and PCM IVD and reported as costs of pharma development services are reported as research and development expenses.

Sales and marketing. Our sales and marketing expenses include costs associated with our sales and marketing organization, medical affairs, and personnel focused on market access and reimbursement activities. These expenses consist primarily of personnel-related costs, travel, marketing-related expenses, as well as allocated overhead costs. Allocated overhead costs include allocated occupancy costs and information technology costs.

We have made investments in our sales and marketing organization which have helped drive revenue growth. In the near term, we expect our sales and marketing expenses to increase in absolute dollars, and as a percentage of revenue, as we expand our sales force and marketing efforts, and further increase our presence within the United States, Europe, and Asia. We believe that continuing to increase these activities, inside and outside the United States, will drive further awareness and adoption of our product and service offerings. In the long term, we expect these expenses to gradually and modestly decrease as a percentage of revenue, though they may vary as a percentage from period to period due the timing and amount of these expenses.

Research and development. We conduct research and development activities for product and service offerings across therapy optimization and cancer monitoring. Expenditures made for research and development include personnel-related expenses, laboratory supplies, biorepository and sequencing costs, consulting services, and allocated overhead costs. Allocated overhead costs include allocated occupancy costs and information technology costs.

Research and development expenses include our clinical collaboration expenses with academic and other research institutions. While our clinical collaboration expenses have historically been a small portion of our overall research and development expenses, we believe these collaboration investments are critical to advancing our product development and building awareness of our products and services. As a result, we expect our clinical collaboration expenses to increase in future periods.

A portion of our research and development expenses include costs incurred for process development, feasibility, or analytical and clinical validation activities that also meet the performance obligations under contracts to provide companion diagnostics services.

In the near term, we expect our research and development expenses will continue to increase in absolute dollars, and as a percentage of revenue, as we continue to advance development of STRATAFIDE and PCM. In the long term, we expect these expenses to gradually and modestly decrease as a percentage of revenue, though they may vary as a percentage from period to period due to the timing and amount of these expenses.

General and administrative. Our general and administrative expenses include costs for our executive, accounting and finance, legal and human resources functions. These expenses consist primarily of personnel-related expenses, as well as professional services fees such as audit, tax and legal services, and general corporate costs and allocated overhead costs, which include occupancy costs and information technology costs.

In the near term, we expect that our general and administrative expenses will continue to increase in absolute dollars, and as a percentage of revenue, primarily due to increased litigation costs, and increased headcount and public company costs, including expenses related to legal, accounting, regulatory, director and officer insurance premiums and investor relations. In the long term, we expect these expenses to gradually and modestly decrease as a percentage of revenue, though they may vary as a percentage from period to period due the timing and amount of these expenses.

Contingent consideration expense. Our contingent consideration expense is the change in fair value of the shares of Series A Preferred Stock issued for contingent consideration in connection with the Baby Genes Acquisition from the acquisition date of Baby Genes to the share issuance date in February 2020 and the estimated change in fair value of the remaining shares of the Series A Preferred Stock expected to be issued as part of the consideration paid in connection with the Baby Genes Acquisition. The contingent consideration is subject to re-measurement at each balance sheet date with gains and losses reported in our consolidated statements of operations and comprehensive income.

Interest expense, net

Interest income consists of interest earned on our cash and cash equivalents. Our interest income has not been significant to date but we expect interest income to increase in 2020 based on investment of the net proceeds from this offering.

Interest expense for the year ended December 31, 2019 consists primarily of interest payable on the amounts outstanding under the Credit Agreement with Perceptive and costs to extinguish our previous line of credit. Interest expense for the three months ended March 31, 2020 consists primarily of interest payable on the amounts outstanding under the Credit Agreement. As of December 31, 2019 and March 31, 2020, we had $30.0 million of principal outstanding under the Credit Agreement which accrues interest at an annual rate equal to the sum of 8.25% plus the greater of (i) one month LIBOR or (ii) 2.75%.

Other income, net

Other income is primarily comprised of changes in the fair value of the liability for the Series A Warrant, prior to its exercise in March 2020, and Series B Warrant, which is expected to be reclassified to stockholders’ equity upon completion of this offering.

Income tax (benefit) expense

For the years ended December 31, 2018 and 2019, and for the three months ended March 31, 2019 and 2020, income tax (benefit) expense is primarily related to the Baby Genes Acquisition and is not expected to be material in future periods due to a valuation allowance recorded against our net operating losses.

Comparison of the three months ended March 31, 2020 and 2019



	Three Months Ended March 31,						Change
(in thousands, except percentages)	2019			2020			$			%
Revenue
Precision oncology products	$	4,380		$	7,006		$	2,626		60	%
Pharma development services	5,069			7,784			2,715			54	%
Total revenue	9,449			14,790			5,341			57	%
Costs & operating expenses
Cost of precision oncology products	1,068			2,313			1,245			117	%
Cost of pharma development services	1,706			3,399			1,693			99	%
Sales and marketing	2,644			5,324			2,680			101	%
Research and development	4,295			13,737			9,442			220	%
General and administrative	2,377			7,481			5,104			215	%
Contingent consideration	2,716			(35		)	(2,751		)	(101	)%
Total operating expenses	14,806			32,219			17,413			118	%
Loss from operations	(5,357		)	(17,429		)	(12,072		)	225	%
Interest expense, net	—			(893		)	(893		)	*
Other expense, net	(8		)	(995		)	(987		)	*
Loss before income taxes	(5,365		)	(19,317		)	(13,952		)	260	%
Income tax expense	1			—			(1		)	(100	)%
Net loss	(5,366		)	(19,317		)	(13,951		)	260	%


*	Not meaningful

Revenue

Total revenue was $14.8 million for the three months ended March 31, 2020 compared to $9.4 million for the three months ended March 31, 2019, an increase of $5.3 million, or 57%.

Precision oncology products revenue was $7.0 million for the three months ended March 31, 2020 compared to $4.4 million for the three months ended March 31, 2019, an increase of $2.6 million, or 60%. The increase in precision oncology products revenue was primarily attributable to (i) a 54% increase in

the number of reactions sold for the three months ended March 31, 2020 to approximately 37,000, from approximately 24,000 for the three months ended March 31, 2019, and (ii) an increase in average selling price on products primarily resulting from shifts in our customer mix.

Pharma development services revenue was $7.8 million for the three months ended March 31, 2020 compared to $5.1 million for the three months ended March 31, 2019, an increase of $2.7 million, or 54%. The increase was primarily attributable to an increase in the number of companion diagnostic development agreements with multiple biopharmaceutical partners signed in the period and associated activity, primarily an increase in milestone-driven revenue and revenue associated with prospective clinical trial services.

Cost and operating expenses

Cost of precision oncology products

Cost of precision oncology products was $2.3 million for the three months ended March 31, 2020 compared to $1.1 million for the three months ended March 31, 2019, an increase of $1.2 million, or 117%. The increase year over year was primarily attributable to an increase in revenue resulting in an increase in labor and materials costs of $0.8 million as well as increased professional services costs, freight and royalties. Furthermore, we incurred higher costs related to process development and production of reactions used in prospective clinical trials of $0.2 million.

Cost of pharma development services

Cost of pharma development services was $3.4 million for the three months ended March 31, 2020 compared to $1.7 million for the three months ended March 31, 2019, an increase of $1.7 million, or 99%. The increase in the cost of pharma development services was primarily attributable to an increase in lab supplies and services costs of $1.7 million, primarily related to increased clinical trial and analytical validation activity.

Sales and marketing

Sales and marketing expense was $5.3 million for the three months ended March 31, 2020 compared to $2.6 million for the three months ended March 31, 2019, an increase of $2.7 million, or 101%. The increase was primarily attributable to an increase in personnel costs of $2.0 million related to expansion of our sales and marketing teams, an increase of $0.3 million in travel and conference costs, and an increase of $0.2 million in professional services fees.

Research and development

Research and development expense was $13.7 million for the three months ended March 31, 2020 compared to $4.3 million for the three months ended March 31, 2019, an increase of $9.4 million, or 220%. The increase was primarily attributable to a $5.1 million increase in materials, lab services, and consulting services for the development of our STRATAFIDE and PCM products, a $2.8 million increase in personnel costs as we increased headcount to support development of our technology, and an increase of $1.5 million related to allocated overhead and depreciation costs.

General and administrative

General and administrative expense was $7.5 million for the three months ended March 31, 2020 compared to $2.4 million for the three months ended March 31, 2019, an increase of $5.1 million, or 215%. The increase was primarily attributable to increased personnel costs of $1.9 million related to an increase in headcount, higher legal costs of $1.5 million primarily related to an increase in costs from the litigation we initiated against QIAGEN Sciences, higher professional services costs of $1.2 million, and an increase of $0.5 million for higher allocated overhead, depreciation, and other costs.

Contingent consideration

Contingent consideration for the three months ended March 31, 2019 of $2.7 million was attributable to the change in fair value of the contingent consideration for the Baby Genes Acquisition. There was not a significant change in the fair value for the three months ended March 31, 2020.

Interest expense, net

Interest income was $0.1 million for the three months ended March 31, 2020. We had no interest income for the three months ended March 31, 2019. Our interest income for the three months ended March 31, 2020 consisted of interest earned on our cash and cash equivalents, which increased primarily as a result of our proceeds from the issuance of Series C Preferred Stock in December 2019.

Interest expense was $1.0 million for the three months ended March 31, 2020. We had no interest expense for the three months ended March 31, 2019. The increase in interest expense was primarily attributable to our draw down of $30.0 million from the Credit Agreement in May 2019.

Other expense

Other expense of $1.0 million for the three months ended March 31, 2020 was primarily due to the increase in fair value of our Series A Warrant, until its exercise in March 2020, and our Series B Warrant.

Income tax (benefit) expense

Income tax expense was not material due to incurred losses and a valuation allowance recorded against deferred tax assets.

Recent Developments

For a discussion of the risks presented by the COVID-19 pandemic to our results of operations, see the “Risk factors” section of this report.

Comparison of the years ended December 31, 2019 and 2018



	Year Ended December 31,						Change
(in thousands, except percentages)	2018			2019			$			%
Revenue
Precision oncology products	$	16,025		$	22,644		$	6,619		41	%
Pharma development services	12,429			27,921			15,492			125	%
Total revenue	28,454			50,565			22,111			78	%
Costs & operating expenses
Cost of precision oncology products	4,033			7,335			3,302			82	%
Cost of pharma development services	6,230			9,212			2,982			48	%
Sales and marketing	7,215			15,428			8,213			114	%
Research and development	8,184			34,172			25,988			318	%
General and administrative	7,700			15,875			8,175			106	%
Contingent consideration	—			5,768			5,768			*
Total operating expenses	33,362			87,790			54,428			163	%
Loss from operations	(4,908		)	(37,225		)	(32,317		)	658	%
Interest expense, net	(1,160		)	(2,432		)	(1,272		)	110	%
Other income (expense), net	34			(824		)	(858		)	*
Loss before income taxes	(6,034		)	(40,481		)	(34,447		)	571	%
Income tax (benefit) expense	(481		)	497			978			(203	)%
Net loss	(5,553		)	(40,978		)	(35,425		)	638	%


*	Not meaningful

Revenue

Total revenue was $50.6 million for the year ended December 31, 2019 compared to $28.5 million for the year ended December 31, 2018, an increase of $22.1 million, or 78%.

Precision oncology products revenue was $22.6 million for the year ended December 31, 2019 compared to $16.0 million for the year ended December 31, 2018, an increase of $6.6 million, or 41%. The increase in precision oncology products revenue was primarily attributable to (i) a 33% increase in the number of reactions sold for the year ended December 31, 2019 to approximately 124,000, from approximately 93,000 for the year ended December 31, 2018, (ii) an increase in average selling price on products primarily resulting from shifts in our customer mix.

Pharma development services revenue was $27.9 million for the year ended December 31, 2019 compared to $12.4 million for the year ended December 31, 2018, an increase of $15.5 million, or 125%. The increase was primarily attributable to increased development and regulatory support activity in the development of companion diagnostics for pharmaceutical companies resulting from multiple companion diagnostic agreements signed in late 2018 and throughout 2019.

Cost and operating expenses

Cost of precision oncology products

Cost of precision oncology products was $7.3 million for the year ended December 31, 2019 compared to $4.0 million for the year ended December 31, 2018, an increase of $3.3 million, or 82%. The increase in cost of revenue year over year was primarily attributable to an increase in revenue resulting in an increase in materials costs of $2.1 million as well as increased freight and royalties.

Cost of pharma development services

Cost of pharma development services was $9.2 million for the year ended December 31, 2019 compared to $6.2 million for the year ended December 31, 2018, an increase of $3.0 million, or 48%. The increase in the cost of pharma development services primarily consisted of an increase in professional services costs of $2.6 million, primarily related to an increase in companion diagnostic development activity, and increased personnel costs of $0.4 million.

Sales and marketing

Sales and marketing expense was $15.4 million for the year ended December 31, 2019 compared to $7.2 million for the year ended December 31, 2018, an increase of $8.2 million, or 114%. The increase was primarily due to an increase in personnel costs of $4.6 million related to expansion of the sales and marketing teams, an increase of $1.5 million in professional services fees, including for market research studies, an increase of $1.5 million in travel and conference costs, and an increase of $0.6 million related to allocated overhead costs.

Research and development

Research and development expense was $34.2 million for the year ended December 31, 2019 compared to $8.2 million for the year ended December 31, 2018, an increase of $26.0 million, or 318%. The increase was primarily attributable to a $14.3 million increase in external costs attributed to the development of our STRATAFIDE and PCM technology, primarily including materials, lab services, and consulting services, a $7.5 million increase in personnel costs as we increased headcount to support development of our technology, and a $3.5 million increase in allocated overhead costs.

General and administrative

General and administrative expense was $15.9 million for the year ended December 31, 2019 compared to $7.7 million for the year ended December 31, 2018, an increase of $8.2 million, or 106%. The increase was primarily attributable to higher legal costs of $3.7 million primarily related to the litigation we initiated against QIAGEN Sciences, and from increased personnel costs of $3.6 million related to an increase in headcount.

Contingent consideration

Contingent consideration expense was $5.8 million for the year ended December 31, 2019 and is the change in the estimated fair value of the expected shares of Series A Preferred Stock to be issued as part of the consideration in connection with the Baby Genes Acquisition, which was completed in October 2018.

Interest expense, net

Interest income was $0.2 million for year ended December 31, 2019. We had no interest income in the year ended December 31, 2018. Our interest income in the year ended December 31, 2019 consisted of interest earned on our cash and cash equivalents, which increased primarily as a result of sales of Series B Preferred Stock and Series C Preferred Stock.

Interest expense was $2.6 million for the year ended December 31, 2019 compared to $1.2 million for the year ended December 31, 2018, an increase of $1.4 million, or 123%. The increase in interest expense was driven by our draw down of $30.0 million from the Credit Agreement in May 2019. Interest expense for the year ended December 31, 2018 was primarily related to interest payable on our convertible promissory notes and a related-party note payable, which were converted to Series A Preferred Stock in March 2018.

Other income (expense)

Other income (expense) was $(0.8) million for the year ended December 31, 2019. This was primarily due to the increase in fair value of our Series A Warrant and Series B Warrant liabilities.

Income tax (benefit) expense

Income tax expense was $0.5 million for the year ended December 31, 2019, compared to an income tax benefit of $0.5 million for the year ended December 31, 2018, both of which were related to the Baby Genes Acquisition.

Going concern, liquidity and capital resources

We have incurred losses and negative cash flows since our inception. As of March 31, 2020, we had an accumulated deficit of $88.6 million. We have funded our operations to date principally from the sale of convertible preferred stock, the issuance of convertible notes, entry into term loans and, to a lesser extent, products and services revenue. As of March 31, 2020, we had cash and cash equivalents of $36.8 million. We intend to raise additional capital through this offering. If we are unable to raise additional capital through this offering, we will need to seek other forms of financing and take other actions to preserve cash, such as by selling additional common or preferred equity or convertible debt securities or entering into additional credit facilities or other forms of third-party funding. Additional capital may not be available on reasonable terms, or at all.

We evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern over the next twelve months through May 2021, which is one year from the date the interim financial statements were issued. Our cash requirements include, but are not limited to, investments in the research and development of our technologies and sales and marketing, capital expenditures, and working capital requirements. Based on such evaluation and our current plans, management believes that, without additional capital raised from this offering or other financings, our existing cash and cash equivalents and available access to credit as of March 31, 2020 are not sufficient to satisfy our operating cash needs for at least one year after the date the financial statements were issued. These factors raise substantial doubt about our ability to continue as a going concern for a period of twelve months subsequent to the issuance of these financial statements. The financial statements included elsewhere in this prospectus have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The financial statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary if we are unable to continue as a going concern. Please see also “Risk factors — Risks related to our financial condition and capital requirements — We have determined that there is substantial doubt about our ability to continue as a “going concern” for the next twelve months.”

We plan to utilize the existing cash and cash equivalents on hand primarily to fund our commercial and marketing activities associated with our clinical products and services, continued research and development initiatives and scaling of our operations with our anticipated growth.

The COVID-19 pandemic and the measures imposed to contain this pandemic have impacted and are expected to continue to impact our business. The impact of the COVID-19 pandemic on our business and financial condition will depend on many factors, including the duration of the outbreak and the mitigation requirements affecting our operations, and healthcare delivery and society in general. We will continue to evaluate the impact of the COVID-19 pandemic on our business. While we have not yet

experienced a notable negative impact on the demand for our products or services, current customers, including hospitals, labs, and other medical centers, may delay or cancel product orders due to operational disruptions within their organizations, enrollment for the clinical trials we support may decline due to the various travel restrictions, and our biopharmaceutical collaborators may cancel or delay their companion diagnostic development and research programs due to economic disruptions, or other factors. See also “Risk factors—Risks related to our business and strategy—The outbreak of COVID-19 could materially adversely affect our business, financial condition and results of operations.”

Cash flows

The following table summarizes our uses and sources of cash for each of the periods presented (in thousands):



	Year Ended December 31,						Three Months Ended March 31,
	2018			2019			2019			2020
Cash used in operating activities	$	(4,603	)	$	(37,454	)	$	(2,118	)	$	(21,902	)
Cash used in investing activities	(1,978		)	(9,710		)	(236		)	(797		)
Cash provided by financing activities	13,528			97,182			(12		)	49

Operating activities

Cash used in operating activities during the three months ended March 31, 2020 was $21.9 million, which was primarily attributable to a net loss of $19.3 million, offset by non-cash depreciation and amortization of $1.1 million, convertible preferred stock warrant change in fair value of $1.0 million, and share-based compensation of $0.4 million, offset by a decline in working capital of $5.3 million. The working capital changes included an increase in inventories of $2.8 million, an increase in prepaid expenses and other assets of $4.1 million, a decrease in deferred revenue of $1.3 million, and an increase in accounts receivable of $0.5 million, partially offset by an increase of accounts payable and accrued liabilities of $3.4 million.

Cash used in operating activities during the three months ended March 31, 2019 was $2.1 million, which was primarily attributable to a net loss of $5.4 million, offset by non-cash contingent consideration change in fair value of $2.7 million, depreciation and amortization of $0.5 million, and share-based compensation of $0.1 million.

Cash used in operating activities during the year ended December 31, 2019 was $37.5 million, which was primarily attributable to a net loss of $41.0 million and an increase in our net operating assets and liabilities of $7.1 million, partially offset by non-cash depreciation and amortization of $2.7 million, contingent consideration change in fair value of $5.8 million, convertible preferred stock warrant change in fair value totaling $0.8 million, and non-cash share compensation of $0.8 million. The net change in our operating assets and liabilities is primarily reflected by an increase in accounts receivable of $8.6 million, an increase in inventory of $3.5 million primarily to support expected product and services sales growth, and an increase of $4.5 million for prepaid expenses and other assets, partially offset by an increase in accounts payable and accrued liabilities of $6.8 million, and an increase of $2.5 million in deferred revenue related to timing of invoicing on pharma development service contracts.

Cash used in operating activities during the year ended December 31, 2018 was $4.6 million, which was primarily attributable to a net loss of $(5.6) million and an increase in our net operating assets and liabilities of $0.6 million, partially offset by non-cash depreciation and amortization of $0.8 million, non-cash interest expense of $0.7 million and non-cash share-based compensation of $0.2 million. The net change in our operating assets and liabilities reflects an increase in inventory of $1.1 million to support precision oncology product sales growth and an increase in accounts receivable of $3.0 million, partially offset by an increase in accounts payable and accrued liabilities of $2.2 million, and an increase of $1.7 million in deferred revenue related to timing of invoicing on pharma development service contracts.

Investing activities

Cash used in investing activities during the three months ended March 31, 2020 and March 31, 2019 was $0.8 million and $0.2 million, respectively, which was primarily attributable to capital expenditures to support research and development and revenue activities.

Cash used in investing activities during the years ended December 31, 2019 and December 31, 2018 was $9.7 million and $2.0 million, respectively, which was primarily attributable to capital expenditures to support research and development and revenue activities.

Financing activities

Cash provided by financing activities was immaterial during the three months ended March 31, 2020 and 2019.

Cash provided by financing activities during the year ended December 31, 2019 was $97.2 million, which was primarily attributable to net proceeds from the issuance of Series B Preferred Stock of $13.2 million, Series C Preferred Stock of $54.8 million, and $29.1 million in term loans from Perceptive concurrent with the issuance of Series B Preferred Stock.

Cash provided by financing activities during the year ended December 31, 2018 was $13.5 million, which was primarily attributable to net proceeds from issuance of Series A Preferred Stock of $14.8 million, offset by repayment of related-party debt of $1.3 million.

Indebtedness

In May 2019, we and our subsidiary entered into a credit agreement and guaranty, subsequently amended in April 2020, which, as amended, we refer to as the Credit Agreement, with Perceptive Credit. The Credit Agreement provides for a $30 million senior secured term loan and a $15 million revolving senior secured delayed draw loan facility, or the Delayed Draw Loan Facility. We drew the $30 million senior secured term loan in full immediately upon entering into the Credit Agreement.

The Credit Agreement has a four-year term, maturing on May 10, 2023. The outstanding principal amount under the Credit Agreement accrues interest at an annual rate equal to the sum of (a) 8.25% plus (b) the greater of (i) one-month LIBOR and (ii) 2.75%. Interest is payable monthly and all outstanding principal and interest is due and payable at maturity. At December 31, 2019, the interest rate was 11%. The Credit Agreement is guaranteed by all of our subsidiaries (other than immaterial foreign subsidiaries) and is collateralized by substantially all of our and our subsidiaries’ tangible and intangible assets, including our existing and future intellectual property. The Credit Agreement also contains customary covenants that limit our ability to enter into indebtedness, make distributions and enter into inbound or outbound intellectual property licenses, among other restrictions. As of December 31, 2019, the aggregate amount of outstanding principal under the Credit Agreement was $30 million, and we have not made any principal payments on such amount.

Under the terms of the Credit Agreement, we are required to maintain a $3 million cash balance in controlled accounts as collateral securing our obligations under the Credit Agreement. The Credit Agreement also requires us to meet certain ongoing revenue requirements. As of the last day of each fiscal quarter, we must have received recurring revenue for the twelve consecutive previous months ending on the last day of such fiscal quarter of at least $38,162,000 for the quarter ending March 31, 2020, increasing quarterly to $102,628,000 for the quarter ending March 31, 2023. As of March 31, 2020, we were in compliance with all revenue requirements under the Credit Agreement and we expect to be in compliance with the ongoing revenue requirements. In the event that we were to fail to comply with these ongoing revenue requirements, such non-compliance would constitute an event of default under the Credit Agreement, and Perceptive Credit could declare the outstanding obligations thereunder to be due and payable in whole or in part. At such time, the principal amount so declared and any accrued interest thereon and all fees would become due and payable immediately.

In connection with the entry into the Credit Agreement, we issued the Series B Warrant to purchase 646,667 shares of Series B Preferred Stock at an exercise price of $4.82 per share to Perceptive Credit. The Series B Warrant will automatically be net exercised for shares of Series B Preferred Stock in connection with this offering, assuming an initial public offering price of $ per share, the midpoint of the estimated price range set forth on the cover page of this prospectus.

Under the terms of the Credit Agreement, we may draw on the Delayed Draw Loan Facility through April 27, 2022 if we meet certain conditions, including meeting certain revenue milestones. These milestones include, for any period of twelve consecutive months ending no later than June 30, 2020, generating at least $48,000,000 in revenue. In April 2020, in connection with the first amendment to the Credit Agreement, we issued and delivered to Perceptive Credit the Delayed Draw Date Warrant, which entitles Perceptive Credit to purchase up to 323,333 fully paid and nonassessable shares of Series B Preferred Stock at $4.82 per share, the original issue price of the Series B Preferred Stock. We did not draw on the Delayed Draw Loan Facility in connection with the issuance of the Delayed Draw Warrant. See “Risks related to our financial condition and capital requirements—Our Credit Agreement with Perceptive Credit contains restrictions that limit our flexibility in operating our business.”

Contractual obligations and commitments

The following table summarizes our contractual obligations as of December 31, 2019, which represents contractually committed future obligations:



	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in thousands)
Lease obligations⁽¹⁾	$	6,034	$	953	$	2,421	$	2,555	$	105
Debt obligations⁽²⁾	30,000		—		—		30,000		—
Interest obligations⁽²⁾	11,092		3,300		6,600		1,192		—
Royalty obligation⁽³⁾	10,229		1,491		2,947		5,791		—
Purchase obligations⁽⁴⁾	—		—		—		—		—
Total	$	57,355	$	5,744	$	11,968	$	39,538	$	105


(1)	We lease office and laboratory space in St. Louis, Missouri; Boston, Massachusetts; Boulder, Colorado; and Golden, Colorado. Please see Note 8 to our audited financial statements for additional information pertaining to our lease obligations.


(2)	Interest obligations is based upon our debt outstanding on December 31, 2019 of $30 million and the then effective interest rate of 11%. Please see Note 9 to our audited financial statements for additional information pertaining debt and interest obligations.

(3)

Under certain of these agreements, we are obligated to pay royalties ranging up to the mid-single digits of sales in which the patents are used in the product or service sold, subject to minimum annual royalties or fees in certain agreements. Please see note 16 to our audited financial statements for additional information pertaining to our royalty obligation. Only minimum royalty payments are listed.


(4)	We have contracts and purchase orders for limited future obligations related to continuing ongoing operations. Substantially all of our contracts and purchase orders maybe be canceled without significant penalty to us.

As of March 31, 2020, there have been no material changes to our contractual obligations and commitments.

Net operating loss carryforward

As of December 31, 2019, we carried a net operating loss, or NOL, carryforward of approximately $56 million, which is available to reduce future taxable income and expires at various times between 2034 and 2038.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income or taxes may be limited. We have not completed a study to assess

whether an ownership change for purposes of Section 382 or 383 has occurred, or whether there have been multiple ownership changes since our inception. We may have experienced ownership changes in the past and may experience ownership changes in the future as a result of shifts in our stock ownership (some of which shifts are outside our control), including in connection with this offering. As a result, if we earn net taxable income, our ability to use our pre-change NOL carryforwards to offset such taxable income will be subject to limitations. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. As a result, even if we attain profitability, we may be unable to use a material portion of our NOL carryforwards and other tax attributes, which could adversely affect our future cash flows. See “Risk factors—Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.”

Off-balance sheet arrangements

As of December 31, 2018 and 2019 and March 31, 2020, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

Quantitative and qualitative disclosures about market risk

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates.

Interest rate risk

Our Credit Agreement with Perceptive has an interest rate equal to the sum of (a) 8.25% plus (b) the greater of (i) one-month LIBOR and (ii) 2.75%. The LIBOR is variable. Such interest-bearing instruments carry a degree of risk; however, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. As of March 31, 2020, we had $30 million outstanding under our Credit Agreement with Perceptive. As of March 31, 2020, a hypothetical 100 basis point increase in interest rates would result in an approximate $0.2 million increase in interest expense for the remainder of 2020. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.

Inflation rate risk

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and results of operations.

Critical accounting policies and estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including estimates related to revenue, the allowance for doubtful accounts, the allowance for obsolete inventory, allocation of purchase price in business combinations, contingent consideration, convertible preferred stock warrants and stock-based compensation. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates.

While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements included elsewhere in this prospectus, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our financial statements.

Revenue recognition

We recognize revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition we follow five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

Precision oncology product sales are recorded net of discounts and other deductions. We only recognize revenue on product sales once product shipment has occurred or upon the completion of services when the product and service are a combined performance obligation.

Our pharma development services contracts consist primarily of milestone-based payments along with annual fees and marked-up pass-through costs. The arrangements are treated as short-term contracts for revenue recognition purposes because they allow termination of the agreement by the customers with 30 to 120 days’ written notice without a termination penalty. Upon termination, customers are required to pay for the proportion of services provided under milestones which were in progress. For revenue, we use a cost plus a margin approach to estimate the standalone value of our performance obligations, which are generally tied to performance-based milestones. Revenue is recognized over time using both input and output methods, based upon our surveys of performance completed to date toward each milestone, including labor hours expended, tests processed or time elapsed, that measure our progress toward the achievement of the milestone. We recognize revenue in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To select the measure of progress, we consider the expectations of the performance period which may be based on estimates of samples or internal estimates of the labor hours to be expended based on both the customer and our expected development timeframes and requirements. We regularly review our expectations of the extent of progress and if any changes in estimates are made, we recognize revenue using the cumulative catch-up method.

Share-based compensation

We measure share-based compensation expense for stock options granted on the date of grant and recognize the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the award.

We estimate the fair value of stock options granted to our employees and directors on the grant date, and the resulting share-based compensation expense, using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of assumptions regarding a number of inputs and assumptions including the fair value of our common stock, expected term, volatility, risk-free interest rate and expected dividends. The fair value of our common stock requires significant judgment and was historically determined by our board of directors, with input from management.

At December 31, 2019 and March 31, 2020, unrecognized share-based compensation expense related to unvested stock options was $3.5 million and $7.3 million, respectively, which is expected to be recognized over a remaining weighted-average period of 3.1 years and 3.3 years, respectively.

As there has been no public market for our common stock to date, the estimated fair value of the common stock issuable upon exercise of our stock options was determined by our board of directors, with input from management, considering our most recently available valuations of common stock and our board of directors’ assessment of additional objective and subjective factors that it believed were relevant, and factors that may have changed from the date of the most recent valuation through the date of the grant. We believe our board of directors has the relevant experience and expertise to determine the fair value of our common stock.

The valuations of our common stock were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. The assumptions we use in the valuation models, are based on future expectations combined with management’s judgment. These factors include:


•	the prices, rights, preferences, and privileges of our Preferred Stock relative to those of our common stock;


•	lack of marketability of the common stock;


•	current business conditions and projections;


•	hiring of key personnel and the experience of management;


•	our stage of development;


•	likelihood of achieving a liquidity event, such as an initial public offering, a merger or acquisition of our company given prevailing market conditions, or other liquidation event;


•	the market performance of comparable publicly traded companies;


•	the U.S. and global capital market conditions; and


•	the magnitude of the impact of the COVID-19 pandemic on our productivity, results of operations and financial position, as well as on U.S. and global capital market conditions.

The assumptions we use in the valuation models are based on future expectations combined with management’s judgment. As of December 31, 2019, we included a 20% probability of an initial public offering in our valuation models. For the valuation models used for the quarter ended March 31, 2020, in evaluating our probability of an initial public offering, management took into consideration the positive steps taken by the company in progressing towards an initial public offering, while also taking into account the unprecedented market volatility and short and long term economic uncertainty associated with the COVID-19 pandemic. At March 31, 2020, the COVID-19 related factors significantly reduced the likelihood that a public offering would be a viable financing strategy for the company. The balance of these considerations led management to include a 20% probability of an initial public offering in our valuation model as of March 31, 2020.

In valuing our common stock during 2019 and for the quarter ended March 31, 2020, we utilized an option pricing method, or OPM, for the majority of the year and a hybrid methodology that includes a probability-weighted expected return method, or PWERM, and an OPM, which is a highly complex and subjective valuation methodology, after our Series C Preferred Stock financing when activities leading up to this offering were more significant. Under a PWERM, the fair market value of the common stock is estimated based upon an analysis of future values for the enterprise assuming various future outcomes. Within one of those potential outcomes, we utilized the OPM. The OPM treats the rights of the holders of convertible preferred stock and common stock as equivalent to that of call options on any value of the enterprise above certain break points of value based upon the liquidation preferences of the holders of convertible preferred stock, as well as their rights to participation and conversion. Based on the timing and nature of an assumed liquidity event in each scenario, a discount for lack of marketability either was or was not applied to each scenario as appropriate. We then probability-weighted the value of each expected outcome to arrive at an estimate of fair value per share of common stock. For valuations after the closing of this offering, our board of directors plans to determine the fair value of each share of common stock based on the closing price of our common stock on the date of grant or other relevant determination date, as reported on The Nasdaq Global Market.

Warrants to purchase convertible preferred stock

We have issued warrants to purchase our convertible preferred stock in connection with current and historical long-term debt arrangements. See “Certain relationships and related party transactions” for a

description of our warrants. The fair value of the warrants was initially recorded as debt issuance cost and is amortized to interest expense over the term of the debt. The warrants are recorded as a liability due to provisions underlying our convertible preferred stock which could prevent us from settling the warrants with shares. The liabilities are adjusted to fair value each reporting period. The fair value is determined utilizing the valuation analysis that is performed to determine the value of our common stock, which is a highly complex and subjective valuation methodology.

Contingent Consideration

Contingent consideration is recorded in connection with accounting for business combinations. Contingent consideration liabilities are recognized at the estimated fair value on the acquisition date. Subsequent changes to the fair value of contingent consideration liabilities are recognized in operating expense in the consolidated statements of operations. For the Baby Genes Acquisition, the fair value of the contingent consideration is driven by changes in the fair value of our Series A Preferred Stock and expectations related to meeting revenue targets.

Goodwill

Goodwill represents the excess of the purchase price over the net amount of identifiable assets acquired and liabilities assumed in a business combination measured at fair value. We assess goodwill for impairment on a quarterly basis and upon any occurrence of triggering events or substantive changes in circumstances that could indicate a potential impairment.

We evaluate goodwill for impairment by first assessing qualitative factors to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount. We evaluate certain qualitative factors such as macroeconomic conditions, the market and industry in which we operate, cost factors, overall financial performance and other relevant entity-specific events to determine if there are any negative trends or events that could indicate impairment. If we determine that it is more likely than not that the fair value of our reporting unit is less than its carrying amount, or if we choose to bypass the qualitative assessment, we perform a quantitative goodwill impairment test. Goodwill impairment exists when the estimated fair value of our one reporting unit is less than its carrying value. If impairment exists, the carrying value of the goodwill is reduced to fair value through an impairment charge recorded in our statements of operations. To date, we have not recognized any impairment of goodwill.

Emerging growth company status

We are an “emerging growth company” as defined in the JOBS Act, and therefore we may take advantage of certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes–Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and any golden parachute payments. We may take advantage of these exemptions until we are no longer an “emerging growth company.” We will cease to be an “emerging growth company” upon the earliest of: (1) the last day of the fiscal year following the fifth anniversary of this offering; (2) the last day of the first fiscal year in which our annual gross revenues are $1.07 billion or more; (3) the date on which we have, during the previous rolling three-year period, issued more than $1.0 billion in nonconvertible debt securities; and (4) the date on which we are deemed to be a “large accelerated filer” as defined in the Exchange Act.

We have elected to take advantage of some of the reduced disclosure obligations described above, and may elect to take advantage of other reduced reporting requirements in future filings. In particular, we have elected to adopt the reduced disclosure with respect to our executive compensation disclosure. In addition, we have presented only two years of audited financial statements and only two years of related “Management’s discussion and analysis of financial condition and results of operations” disclosure in this prospectus, and intend to take advantage of the exemption from auditor attestation on the effectiveness of

our internal control over financial reporting. As a result of this election, the information that we provide stockholders may be different than you might get from other public companies.

In addition, the JOBS Act provides that an “emerging growth company” can delay adopting new or revised accounting standards until those standards apply to private companies. We do not intend to avail ourselves of such extended transition period.

Recent accounting pronouncements

See Note 2 – ‘Summary of Significant Accounting Policies’ to our audited financial statements included elsewhere in this prospectus for more information.

Business

Overview

We have developed and commercialized RUO products, we are developing IVD products, and we offer services that meet the unique needs of our customers and their clinical applications. Our five RUO product lines consist of VariantPlex, FusionPlex, LiquidPlex and Immunoverse, which we collectively refer to as ArcherPlex, and PCM. Our offerings include commercial RUO products and services that laboratories use to conduct genomic analysis for therapy optimization and cancer monitoring. We intend to submit STRATAFIDE, in 2020, and PCM, in the future, for FDA approval and/or clearance so they can be marketed as IVDs. STRATAFIDE and PCM have both received Breakthrough Device designation from the FDA, which offers potentially faster review through priority review for certain medical devices that provide for more effective treatment of diagnosis of life-threatening or irreversibly debilitating human diseases or conditions for which no approved or cleared treatment exists or that offer significant advantages over existing approved or cleared alternatives. Additionally, we offer Assay Designer and Designer Pro as services to clinical and biopharmaceutical customers, which allow them to customize biomarker targets and develop new applications. Our analyte- and sample-agnostic products and services enable clinicians to quickly and locally generate actionable genomic information to deliver industry-leading care to patients with solid tumors, blood cancers or sarcomas.

Since our inception in 2013, our product development platform has enabled us to efficiently develop over 325 unique RUO products, which have been sold to over 300 leading academic and reference laboratories and over 50 biopharmaceutical companies and CROs across 40 countries to facilitate the analysis of over 375,000 samples. We have generated a large and growing body of comprehensive clinical evidence, consisting of over 200 peer-reviewed clinical and scientific publications, which we believe demonstrate our products’ performance for clinical applications. We believe our long-standing commercial relationships with top-tier academic institutions and reference laboratories demonstrate that we are well positioned to become the global leader in driving decentralized genomic testing.

Over the last several decades, advances in understanding cancer genetics and genomic technologies, including next generation sequencing, or NGS, have enabled genomic tumor profiling which refers to a characterization of the mutations unique to an individual’s cancer. The discipline of using genetic information from genomic tumor profiling to guide therapy optimization and cancer monitoring is referred to as precision oncology. Despite significant investment in research and the introduction of new treatments for cancer, broad adoption of precision oncology has been limited, especially in regional and community settings where approximately 85% of cancer patients receive care. Without precision oncology, late-stage cancer patients can suffer from poor prognosis and outcomes, and early-stage patients can suffer from inaccurate prognosis, resulting in unnecessary treatment with toxic therapies and delayed detection of recurrence. While precision oncology has historically been limited to late-stage patients with solid tumors, clinicians now see the opportunity to expand precision oncology into early-stage cancer. We believe democratizing precision oncology has the potential to turn advanced cancer into a manageable disease and elicit a cure in patients diagnosed with early-stage disease.

Therapy optimization

In the community and regional settings, the lack of infrastructure and expertise to implement genomic analysis is limiting clinicians’ ability to optimize therapy for patients through diagnosis, prognosis and therapy selection. Given the limitations of current centralized testing options, we believe empowering clinicians with turnkey solution for therapy optimization will enable local testing and be a significant breakthrough in the standard of care. Our solution also benefit biopharmaceutical companies across a range of applications, including patient selection in global clinical trials. Additionally, our solution could help biopharmaceutical companies to identify new genomic targets for drug development and to commercialize the new drugs once approved. Better access to genomic information can accelerate clinical trial enrollment and increase the probability of success of drug development in a target patient population.

Cancer monitoring

Our solution

Our solution delivers turnkey products for clinicians to drive the democratization of precision oncology. We refer to the democratization of precision oncology as allowing genomic testing in the community and regional settings, where 85% of cancer patients are treated, and where testing is currently limited or non-existent due to the lack of infrastructure and expertise to implement genomic analysis. Our modular product development platform combines our high performance AMP chemistry, target-specific primers, ancillary reagents, and bioinformatics software to accurately detect simple and complex, as well as known and unknown, mutations. We are able to customize biomarker targets, which can be pooled in billions of possible combinations without negatively impacting accuracy or precision. This modularity allows us to quickly expand existing products and customize our products to develop new applications without needing to re-engineer the underlying technology. Our solution leverages scalable, easy-to-use, clinical-grade reagents and powerful bioinformatics software to produce a multitude of products with broad applications for both clinical and biopharmaceutical use.

We believe our solution addresses the following barriers to democratization of precision oncology:

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allows us to provide actionable information to clinicians, enabling them to select therapies targeted to the appropriate mutation, and thereby better informing treatment.

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Our current products and pipeline

Our offerings include commercial RUO products and services that laboratories use to conduct genomic analysis for therapy optimization and cancer monitoring. In addition, we are developing IVD products. Our RUO portfolio consists of five product lines: DNA-based VariantPlex, RNA-based FusionPlex, ctDNA-based LiquidPlex and RNA-based Immunoverse, which we collectively refer to as ArcherPlex, and PCM. There are multiple products within each of these lines, all of which can be customized. These RUO products allow for a range of applications and can be used individually or in combination, as desired. We are pursuing regulatory clearances and/or approvals for STRATAFIDE, which is intended to be a universal IVD that utilizes AMP to measure clinically relevant genomic mutations for tumor profiling and companion diagnostic markers from both tissue and blood.

In December 2018, the FDA granted Breakthrough Device designation to STRATAFIDE. We expect to launch STRATAFIDE as a regulated device in 2021, and we believe it has the potential to be the first-line tumor profiling test for any patient with a late-stage solid tumor (pan-tumor). We are seeking additional regulatory approvals outside the United States. We intend to develop an additional universal IVD for blood cancers, similar to STRATAFIDE, for commercialization in both the United States and outside the United States.

We are also seeking FDA clearance and/or approval for PCM as an IVD to non-invasively and quantitatively measure cancer recurrence or progression, as well as therapeutic efficacy, to determine a treatment regimen and refine therapy. In January 2020, we received Breakthrough Device designation from the FDA for PCM. We believe PCM will improve patient outcomes across multiple clinical applications as a prognostic device for predicting recurrence of primary cancer after initial treatment. We are seeking additional regulatory approvals outside the United States and intend to expand into additional indications.

We also offer a suite of services to clinical and biopharmaceutical customers, which allow them to customize biomarker targets or develop new applications. Assay Designer is our online tool that customers can use to customize biomarker targets in their panels. Designer Pro is our advanced panel

and application customization service. We also offer clinical trial assay and companion diagnostic development services to biopharmaceutical customers.

We generated total revenue of $50.6 million and $28.5 million in the years ended December 31, 2019 and 2018, respectively, representing 2019 and 2018 revenue growth rates of 78% and 90%, respectively. We also incurred net losses of $41.0 million and $5.6 million in the years ended December 31, 2019 and 2018, respectively.

Our competitive advantages

We aim to democratize precision oncology by leveraging our core competitive advantages.

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Our product development platform, featuring our proprietary AMP chemistry, provides accurate, actionable genomic information allowing clinicians to optimize treatment and monitor cancer. Current genomic tests often lack accuracy resulting in a high rate of false negatives and false positives. Because AMP is bi-directional and strand-specific and capable of analyzing DNA, RNA and ctDNA, it provides high sensitivity without sacrificing specificity. Further, AMP’s ability to achieve a limit of detection below a single molecule means it is capable of detecting previously undetectable cancer, while maintaining near-perfectspecificity. Our products allow for the identification of both simple and complex genomic mutations, providing clinicians with more actionable information to improve care.

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Our versatile product portfolio empowers clinicians to practice precision oncology by providing products and services that are personal and actionable. Currently clinicians have a small set of standardized genomic testing options that are static by nature and inherently limited. This limitation often results in serial testing with clinical decisions being made on incomplete data available at the time. We provide a versatile product portfolio which allows clinicians to select a test based on the clinically relevant sample type, analyte, cancer type and biomarker targets. Through our flexible products, we believe we provide actionable information that enables clinicians to personalize treatment regimens and drives broader adoption of precision oncology.

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Our easy-to-use, clinical-grade reagents allow our AMP technology to be deployed at the site of care near the patient. Our easy-to-use reagents enable our decentralized model, permitting any testing center or hospital with a compatible sequencer to run our assay near its patients, improving turnaround time. We conveniently package and ship all necessary reagents to perform biomarker enrichment ahead of sequencing on several platforms. Our pre-packaged reagents are easy to use with minimal hands-on steps, which we believe reduces technician errors and thereby increases assay precision. Our robust proprietary software has quality control features that identify human errors and produces an actionable report for the clinician. Our products can be run individually or easily batched to provide flexibility of throughput. We believe enabling local genomic testing helps reduce significant upfront costs, adds flexibility of scale, and will bring precision oncology to all patients, anywhere.

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Our product development platform can be adapted as new applications emerge. Our AMP chemistry enables customization of biomarker targets which can be pooled in billions of possible combinations while maintaining accuracy and precision. The modular nature of our platform allows us to rapidly and easily build customized panels that meet the specific needs of our customers or an individual cancer patient. The majority of our product revenue comes from customized products. Our

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custom and fixed content panels follow the same manufacturing processes, varying only in the targeting mechanism, which enables us to easily adapt our products as our customers request new applications.

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Our multi-faceted commercial capabilities and our regulatory and reimbursement expertise support our ability to bring our products to market globally. We have developed over 325 unique RUO products, which have been sold across 40 countries to facilitate the analysis of over 375,000 samples. Along with our direct sales team, we leverage our medical sales liaisons, distributors, and the sales organizations of our reference lab and biopharmaceutical collaborators to further drive adoption. Additionally, we have added key personnel with extensive regulatory and reimbursement expertise that we believe will facilitate future product development through to regulatory clearance, approval and reimbursement.

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We have intellectual property protection for our proprietary AMP chemistry and technology platform and its applications. Our patent portfolio includes 3 issued patents and 16 pending patent applications in the United States and 2 issued patents and 44 pending patent applications in foreign countries related to our AMP chemistry and technology platform and its applications. We also have trade secrets related to our enrichment chemistry and bioinformatics analysis techniques that we believe strengthen our competitive position.

Our strategy

Our objective is to bring precision oncology to all patients anywhere. To achieve this, we intend to:

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Democratize precision oncology. We offer a suite of products and services that are personal, actionable and easy to use in local settings to advance the treatment of cancer and monitoring of patients by providing our turnkey solution to clinicians. We believe we address common barriers to the broad adoption of precision oncology by developing products that have increased accuracy and clinical utility, and provide expedited test results and shared economics. We plan to increase our commercial footprint and further collaborate with patient advocacy groups, biopharmaceutical companies, regulatory agencies, clinicians and payors to drive broader adoption of our products.

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Pursue regulatory clearances and/or approvals for our products across the cancer care continuum. We are pursuing regulatory clearances and/or approvals for the clinical use of STRATAFIDE and the use of PCM in clinical trials. We submitted our first companion diagnostic to the Japanese PMDA in December 2019 and obtained approval in March 2020. We plan to submit STRATAFIDE to the FDA in the next 12 months and PCM to the FDA in the following years. If we receive clearances and/or approvals for these uses of STRATAFIDE and PCM, we will advocate for inclusion of our tests in treatment guidelines, which will strengthen our position in establishing coverage and reimbursement. We plan to leverage our regulatory strategy to efficiently expand the indications for use of future products.

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Enable new clinical applications with PCM. Clinicians currently have a limited ability to monitor low levels of cancer, resulting in a large unmet medical need for monitoring early-stage cancer and informing post-diagnosis therapy. PCM is capable of high specificity with a low limit of detection, which allows for post-treatment monitoring of early-stage cancer in a cost- and time-efficient manner. PCM enables the measurement of cancer progression and therapy effectiveness to refine or select a treatment regimen, and can bring precision oncology to earlier stages of cancer. We intend to create

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a regulated device that can be used by both clinicians and biopharmaceutical companies, and to conduct our own studies to demonstrate clinical utility in support of the broader adoption of PCM.

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Embed our products and services with biopharmaceutical collaborators. We believe we deliver industry-leading products that provide the accuracy, flexibility, and convenience that biopharmaceutical companies are looking for in their drug development programs. We believe our products allow biopharmaceutical companies to accelerate their product pipeline development by decreasing cost and time of performing clinical trials, potentially accelerating their approval and the expansion of sample types and indications of use across geographies. We plan to continue to promote our products and services to create broader and deeper collaborations with current and new biopharmaceutical customers.

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Expand our global footprint. We are continuing to establish the infrastructure needed to deploy our turnkey solution globally and promote broader adoption. We will continue discussions with global regulatory and reimbursement agencies to obtain country-specific approvals. We plan to expand our international targeted sales force to advance commercialization and will continue active dialogue with international key opinion leaders, large pharmaceutical companies, and health systems to increase awareness. We collaborate with a number of distributors internationally and intend to strategically partner with additional distributors to expand access.

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Leverage our product development platform to identify and advance innovative products. We have established research and development capabilities that allow us to leverage innovations and operational efficiencies from one product across our platform. We are focused on improving the technical performance and expanding the uses of our products, including indication expansion for STRATAFIDE and PCM. Additionally, we plan to leverage our relationships with key opinion leaders to further identify additional applications for our platform.

Our industry

Despite significant investment in research and the introduction of new treatments, cancer remains a critical area of unmet medical need, particularly in regional and community settings. The American Cancer Society, or ACS, estimates that one in three individuals in the United States will be diagnosed with cancer during their lifetime and one in five will die from the disease. ACS reported in 2016 there were more than 15.5 million Americans who were living with cancer or who had had cancer in the past and estimated that more than 1.7 million new individuals were diagnosed in 2019 and 610,000 Americans died of cancer in 2019. From a global perspective, the International Agency for Research on Cancer reported that 44 million individuals were living with cancer, with an additional 18 million new cases and 9.5 million cancer deaths recorded in 2018.

The biology of cancer

When information stored in DNA is converted into RNA, the instructions for making proteins, it is called gene expression. Gene expression is a tightly regulated process that maintains normal cellular behavior, location, and function. A cell is considered cancerous when it no longer responds to the body’s attempts to control its growth, function, and location due to abnormalities in its DNA. DNA abnormalities, also referred to as genomic mutations, generally fall into four categories:


•	Copy number variants, CNVs — gain or loss of copies of one or more genes


•	Single nucleotide variants, SNVs — changes in a single base


•	Insertions/deletions, InDels — additions or deletions of parts of genes


•	Genomic rearrangement — unusual rearrangement of chromosomes

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Genomic mutations are converted to defective RNA instructions, which in turn result in the production of defective proteins, ultimately causing a cell to replicate out of control or become cancerous.

How a specific cancer cell behaves depends on which processes are not functioning properly. “Oncogenes” are genes that, when overly active, cause a normal cell to become cancerous. “Tumor suppressor genes” are genes that must remain activated to prevent cancer, so when these are turned off, the cell can become cancerous. Many cancers start with a few discreet genomic mutations but additional mutations accumulate as the cells divide and expand. Some cancer cells simply divide and produce more cancer cells locally, and the tumor mass stays where it began. Other cancer cells are able to invade normal tissue, enter the bloodstream, and metastasize to a remote site in the body. Regardless of where a tumor is located, cancerous cells in the tumor die and are replaced by new ones. The dead cells get broken down and their contents, including DNA, are released into the bloodstream and are referred to as ctDNA.

A history on the diagnosis, treatment, and monitoring of cancer

The diagnosis, prognosis and treatment of cancer are inextricably linked to technological advances to detect and treat the disease. Prior to 1970, cancer was viewed as a singular disease characterized by uncontrollable cell replication. Treatment was guided by the specific organ in which cancer was detected and consisted primarily of highly toxic treatments that indiscriminately killed any replicating cells, irrespective of whether they were cancerous or healthy. In the 1970s, scientists discovered that cancerous cells often harbored unique proteins on their surface, which launched the discipline of immunohistochemistry. In the 1990s, molecular advances led to the large-scale cloning of genes. Over

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the last several decades, advances in cancer genetics and genomic technologies, including the introduction of NGS in 2007, have led to a greater focus on the genetic drivers of cancer as the basis for treatment.

Genomic tumor profiling is the practice of identifying multiple genomic mutations unique to the cancer in a particular patient. This profiling allows physicians to tailor therapy selection to each patient’s particular disease. The discipline of using genetic information to guide therapy selection is referred to as precision oncology. In order to perform genomic tumor profiling, clinicians must have the significant resources and sophisticated infrastructure to request genomic tumor profiling tests and to interpret the resulting data to treat their patients with the most appropriate therapy.

Identifying the genomic mutations that have caused the cancerous cells is critical to properly treating patients. The human genome consists of over 20,000 genes comprised of over 3 billion base pairs, and as a result, identifying these DNA mutations is challenging and time consuming. Consequently, as the repertoire of biomarkers expands and treatment paradigms become more complex, the identification of multiple markers is central to therapy optimization. As such, identifying genomic mutations through RNA reduces the complexity by leveraging the biological processes that translate potentially hundreds of thousands of possible DNA mutations into a single detectable RNA event. Since DNA is locked inside tissue, it can often be inaccessible. As cancer cells die, ctDNA is released into the bloodstream specifically in the plasma, making it more readily available. Therefore, using additional analytes, such as RNA and ctDNA, can add significant fidelity in order to optimize therapy and monitor cancer.

Genomic tumor profiling is benefiting oncology drug development, ultimately improving clinical outcomes for patients across many cancer types. Biopharmaceutical companies are able to increase chances of a drug’s success in clinical trials by identifying and selecting patients with the right genomic tumor profile. This enables them to potentially require fewer patients for a trial and shorten the duration of late-stage clinical trials.

Limitations of precision oncology today

We believe that genomic testing suffers from several major challenges, which have impeded broad adoption of precision oncology, especially within community and regional health settings where the vast majority of cancer patients are treated.

Therapy optimization

Many clinicians are not able to use genomic testing broadly for diagnosis, prognosis or targeted therapy selection to guide treatment, which we define as therapy optimization.

We believe existing genomic testing platforms are unable to analyze all cancers types (solid tumor, hematologic, sarcoma) and are limited by sample types (blood, tissue) and analytes (DNA, RNA, ctDNA). There are limitations and risks associated with tissue biopsies such as risk of adverse events, lack of access, availability of tissue, sampling bias, and cost. There are also limitations and risks associated with liquid-only biopsies due to the limitations of ctDNA, such as the inability to accurately detect complex mutations and the lack of shedding ctDNA in blood leading to undetectable levels in blood. Thus, a genomic testing solution offering the added flexibility of sample and analyte type could provide additional optionality for clinicians’ decision making.

Today’s prominent genomic tests are generally fixed panels, meaning the genomic targets being examined are the same for all cancer patients. In addition, these panels are not adaptable without significant re-engineering. As a result, genomic testing providers utilize a broad panel in attempts to future-proof their tests due to the inherent limitations of the underlying technology. These “one-size-fits-all” tests are not customizable for a patient-specific set of mutations and the entire panel must be run, irrespective of the additional cost or additional time associated with portions of the test that may be irrelevant for the particular patient.

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The complexity of many genomic testing options require significant resources and sophisticated infrastructure, which are typically limited to specialized academic or centralized facilities. As a result, hospitals need to outsource their genomic testing, which can take anywhere from 7 days to well over 20 days. This incurs costs that are not reimbursed, presenting an additional hurdle to adoption. These factors particularly affect community and regional hospitals where approximately 85% of cancer patients are treated. In the central laboratory model, once a patient sample is obtained, either through blood or tissue, the sample must be physically delivered to the centralized testing facility and analyzed, and results must then be sent back to the site of care. The centralized testing facility controls the patient sample and the resulting raw genetic data and receives reimbursement from payors, which disintermediates the provider and their workflow due to lack of utility, high cost and turnaround time.

Biopharmaceutical companies use genomic tests in connection with clinical trials to determine the efficacy of drugs they have in development. The tests they use face the same limitations noted above. Additionally, due to the complexity of available genomic tests, all samples must be shipped back to a central lab for testing, which can be impractical, introduce privacy concerns and impede multi-jurisdictional studies for biopharmaceutical companies. With over 800 late-stage pipeline therapies in 2018, the ability to bring genomic testing to clinical trial sites locally would help streamline clinical trials and allow them to expand beyond geographic boundaries.

Cancer monitoring

Clinicians are eager to expand precision oncology into early-stage cancer, where it is more likely to elicit a cure. Although genomic testing is starting to be used in therapy selection for late-stage cancer, there has not been wide adoption of genomics to measure cancer progression, identify recurrent cancer sooner, or enable patients to receive treatment intended to eradicate microscopic levels of recurrent disease.

Cancer monitoring is most clinically useful when frequently and routinely performed with high levels of specificity following cancer diagnosis. For example, having specificity of only 97% would statistically result in 6% of false positives from 2 tests per person, which grows to 38% of false positives from 16 tests per person. In other words, if 4 tests were performed on each patient per year, approximately 1 in 20 patients would be falsely diagnosed with cancer recurrence within the first 6 months and worsening to approximately 1 in 10 within the first year. This would translate into well over one million misdiagnoses per year. Specificity of 99.99% or more is needed in order to provide confidence that the presence of cancer is not falsely identified.

High sensitivity is also required at a sub-single molecule limit of detection, as having high specificity alone is not sufficient to create a clinically useful monitoring test. Large fixed panel tests are generally not sensitive enough to detect the low levels of cancer in a patient following treatment of early-stage cancer, nor can they detect cancer early enough to provide a significant advantage over standard of care. This is because these tests typically do not target enough patient-specific mutations, a problem commonly referred to as sampling bias. Additionally, these panels are generally expensive and would be cost prohibitive to perform serially. The lack of cost-effective, highly specific and sensitive routine monitoring has led to minimal new therapeutic options for patients and represents a large unmet medical need, as it is understood that treatment of early-stage cancer patients is more likely curative than treatment of late-stage cancer patients.

Biopharmaceutical companies are seeking new technologies that can accurately and specifically identify this population so that they can reduce clinical trial size, increase the likelihood of demonstrating therapy effectiveness and, in doing so, reduce clinical trial costs. Because of the difficulty in identifying MRD, it has historically been problematic to identify which patient populations are at high risk for recurrence following early surgical or other intervention, and drug development for post-treatment therapies is currently under-resourced. In addition, due to heavy competition in the late-stage cancer space there is intense interest in finding clinical utility in early stage cancers for already approved drugs. Lastly, there is also increasing focus on the genomic information provided by ctDNA given its presence is strongly correlated with disease progression. Detection of MRD using ctDNA can lead to more effective patient selection and alternative clinical trial endpoints. Therefore, the earlier ctDNA can be detected, the faster

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biopharmaceutical companies can reach clinical trial endpoints, accelerate drug approvals and further reduce drug development costs.

Barriers to the democratization of precision oncology

We believe the challenges of accuracy, utility, turnaround time, and economics of genomic testing have prevented broad adoption of precision oncology.


•	Accuracy: Although current tests can accurately detect common or simple mutations, most cannot accurately detect complex mutations, resulting in a high rate of false negatives and positives. These tests are designed with inherent biases which fundamentally limit their ability to detect both known and unknown alterations.


•	Utility: Current tests generally take a “one-size-fits-all” approach, limiting utility. Generally, these tests are limited to blood or tissue and can only target one analyte, providing a limited view of mutations. Biomarker targets in these tests are often static because re-engineering the biomarker content or underlying technology is difficult.


•	Turnaround time: Results from centralized genomic tests can take well over 20 days to be returned, depending on complexity and sample type. As late-stage cancer patients are likely to experience superior survival rates and outcomes when treated as soon as possible after diagnosis, lengthy turnaround times can prevent timely treatment.

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Economics: The complexity of many genomic testing options require significant resources and sophisticated infrastructure, which are typically limited to specialized academic or centralized facilities. As a result, hospitals typically outsource their genomic testing, which incurs costs that are not reimbursed, presenting an additional hurdle to adoption. This particularly affects community and regional hospitals where approximately 85% of cancer patients are treated. Centralized labs that perform genomic testing receive the benefits of reimbursement and retain possession of patients’ tumor biopsies and control patient data.

The potential for democratized precision oncology

When precision oncology is democratized and genomic testing is available locally, we believe biopharmaceutical companies will be able to introduce promising new therapies more efficiently to broader cancer populations, furthering clinicians’ ability to better treat their patients, which will reduce the burden on the healthcare system and improve patient outcomes.

We believe democratizing precision oncology will herald a new paradigm in the treatment of cancer characterized by the following:


•	Genetic tests will be personalized for every patient — Genetic tests that are specifically designed to detect each patient’s unique form of cancer will be available and clinicians will be able to determine a personalized course of treatment for every patient and monitor their progress.


•	Patients will be treated with the right treatment, and only when treatment is needed — Tests that can identify previously undetected mutations will be available, providing the possibility of matching patients with targeted therapy, thereby reducing the use of outdated, non-specific chemotherapy and other toxic treatment regimens and their resulting consequences.


•	Patients can be tested and treated anywhere — Patients globally will have access to the same level of cancer testing, treatment and care whether they have access to a large academic cancer center or their community hospital. Patients will be able to remain closer to home as they receive care, which can also enhance clinical outcomes.


•	Clinicians will have access to flexible genetic tests — Clinicians will no longer be locked into a “one-size-fits-all” testing modality. They will have access to tests that will be able to selectively target the biomarker of interest and test across sample type or analyte, depending on their specific need.

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Biopharmaceutical companies will have access to tests that can lower costs and expedite their clinical trials — Biopharmaceutical companies will be able to increase the chances of a drug’s success in clinical trials because they will be able to identify and select patients with the right genomic tumor profile for participation in their trials. This will enable them to potentially require fewer patients for their trials, thus shortening the duration of late-stage clinical trials and bringing more best-in-class drugs to patients who need them sooner.


•	Genomic testing costs for all stakeholders will be economically feasible — Genomic testing will be affordable for patients and profitable for hospitals and providers which will drive broad adoption. For hospitals and clinics, genomic testing will evolve from a cost center to a revenue generator.

Our market opportunity

Therapy optimization

Clinicians are eager to optimize therapy through diagnosis, prognosis and targeted therapy selection. Given the limitations of current centralized testing options, we believe empowering clinicians with a decentralized turnkey solution for therapy optimization will be a significant breakthrough in the standard of care. Our solution also benefits biopharmaceutical companies across a range of applications, including patient selection and recruitment for clinical trials and potentially commercialization once the drug is approved, as well as identification of new genomic targets for drug development.

For therapy optimization, we estimate a $5 billion total global market opportunity, inclusive of clinical and biopharmaceutical markets. This includes a U.S. clinical opportunity of $1.3 billion, which assumes

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approximately 900,000 metastatic patients with solid tumors, blood cancers and sarcomas in the United States. Outside of the United States for therapy selection, we estimate a clinical opportunity of $1.7 billion, which assumes approximately 2.3 million metastatic patients with solid tumors, blood cancers and sarcomas. Finally, we estimate a $2 billion global opportunity for therapy optimization based on the industry’s clinical pipeline of over 800 late-stage therapies in 2018.

Cancer monitoring

Clinicians are eager to expand precision oncology into early-stage cancer, where it is more likely to elicit a cure. Our solution is capable of detecting disease burden, including MRD, even when other methodologies fail because we manufacture patient-specific ctDNA panels based upon the genomic profile of their cancer. We believe our approach will revolutionize how cancer is managed by measuring cancer progression, measuring therapy effectiveness, determining a treatment regimen and refining therapy.

In the United States, we estimate 5.5 million non-metastatic cancer patients are eligible for personalized cancer monitoring. Outside of the United States, we estimate 11 million non-metastatic cancer patients are eligible for personalized cancer monitoring.

We estimate the total global cancer monitoring market is approximately $40 billion, which consists of a $15 billion market in the United States, a $24 billion market outside the United States and a $1 billion market with biopharmaceutical companies.

We estimate the market opportunity for personalized cancer monitoring for biopharmaceutical companies to be approximately $1 billion. We believe that approximately 180 global clinical trials are eligible for cancer monitoring.

Our solution

We believe we have overcome the challenges of accuracy, utility, turnaround time and economics of genomic analysis with our flexible product development platform that can generate hundreds of products so cancer patients with almost any cancer type, can receive therapy informed by a genomic test.


•	Accuracy: We believe our purpose built AMP chemistry can accurately detect complex, as well as known and unknown, mutations. This allows us to provide actionable information to clinicians to better inform treatment.

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Utility: Our products can test across a multitude of sample types, not limited to blood and tissue, targeting DNA, RNA, and ctDNA in order to provide higher resolution and a more comprehensive view of mutations. Our platform enables rapid and efficient customization of biomarker targets. Together, we believe these features open additional areas of clinical application within therapy optimization and monitoring of early-stage cancer.


•	Turnaround time: Our products enable local testing, accelerating time to results while also allowing the original clinician to maintain sample custody. The reduction in time to actionable results accelerates clinical decisions, which we believe improves clinical care as intervention can occur sooner.


•	Economics: We have designed a flexible platform that seeks to empower providers in all patient care settings to participate in the economics of precision oncology testing.

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The core of our solution is our proprietary AMP chemistry. Our flexible product development platform consists of our proprietary reagents, our AMP chemistry and our bioinformatics software, all of which are scalable, easy to use and clinical grade. We have used our product development platform to develop a suite of RUO products. We have also developed a pipeline of IVD products, including STRATAFIDEand PCM, by adapting our RUO product lines. Our flexible product development platform, suite of RUO products, and pipeline of IVD products provide a solution for clinical-use or pharmaceutical development which we believe will drive the democratization of precision oncology.

Our proprietary AMP chemistry

At the core of every Archer assay is AMP, our proprietary target enrichment chemistry developed to create target-enriched libraries for NGS. AMP chemistry is purpose-built to accurately identify both simple and complex genetic mutations by leveraging the power of bidirectional primers and molecular barcodes, or MBCs, from low nucleic acid input in tissue or blood. AMP chemistry is also flexible, so it can be used for applications in DNA, RNA, and ctDNA sequencing across most tumor types.

Our AMP chemistry is differentiated because it is:


•	Unbiased — AMP is able to identify simple and complex genetic mutations given its use of bidirectional gene-specific primers.

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Efficient — Tumors are heterogenous, comprised of normal and cancerous cells, making cancer signals difficult to detect. AMP was designed to capture the mutated DNA, RNA, or ctDNA molecules even at low levels. For example, AMP-based target enrichment is able to preferentially enrich for highly fragmented ctDNA over genomic DNA. This reduces background noise and increases the sensitivity for detection of low-allelic fraction mutations, which are low level cancer signals, while retaining specificity.

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•	Error correcting — PCR and NGS can both introduce errors that need to be identified and corrected. AMP uses MBCs and strand-specific bidirectional primers to correct these technical errors to achieve high clinical accuracy.


•	Quantitative — AMP uses MBCs to enable unique molecule counting. This allows for statistical analysis to provide high confidence in negative and positive calls. This also enables clinicians to accurately correlate results with disease burden, allowing investigation and eventual clinical application of therapy optimization and cancer monitoring.

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Flexible — The biomarker targets of AMP-powered assays can be customized with minimal re-engineering. New biomarker targets can be added to AMP-powered assays to match the pace of discovery while maintaining performance of existing biomarker targets. The AMP chemistry makes it easy to design primers for the desired targets, because AMP only requires one primer per biomarker target. This flexibility allows us to rapidly build customized products without re-engineering AMP.


•	Versatile — AMP chemistry was purpose-built for wide sample type compatibility, including low-input and degraded DNA, RNA, and ctDNA. AMP enables us to analyze multiple analytes with a range of quality and quantity, allowing providers to extract more information from every sample, which is particularly useful for patients with limited biopsy material.

Our product development platform

We have developed a turnkey solution that enables any laboratory to generate high quality genomic data. On the front end, our reagents enrich and prepare actionable biomarkers for sequencing. On the back end, our bioinformatics analysis identifies the cancer-associated genomic mutation to inform therapy.

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Our product development platform consists of our proprietary reagents, AMP chemistry, and bioinformatics software:

Our reagents include DNA, RNA, or ctDNA modifying enzymes, gene or patient specific primers, and our core AMP chemistry. Our platform is designed to be modular, allowing customers to choose the enzymes specific to analyte type, followed by biomarker-specific primers. These off-the-shelf or custom reagents are packaged and delivered to our customers. The reagents are then applied to the patient sample to produce a target-enriched NGS library. The clinicians then run the NGS library through a sequencer. The resulting sequence data is then analyzed using our robust bioinformatics software, which can be tailored to a broad array of sequencing applications through add-on modules. Our bioinformatics software enables the automation of sequencing data processing, corrects for common errors, has a simple graphical user interface, and allows clinicians in almost any lab to have ready access to actionable information from genomic testing.

We believe our product development platform has the following advantages:

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Manufacturing and processing efficiency — The product development platform’s flexibility and robustness allows for assay customization as quickly as within two weeks. We are able to streamline the total number of components needed for assay development and manufacturing as only the primers or enrichment reagents need to change for new assays, not the underlying technology, AMP, or the enzymes. This streamlines the process in order to scale manufacturing throughput with automation without incurring significant additional cost.

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Reliability — AMP supports reproducible and consistent results. Our product development platform minimizes the need to introduce more complicated elements than necessary, helping to allow our AMP chemistry to perform to its full potential, leading to consistent, reproducible highly accurate results. This enables our tests to work reliably and be clinically relevant for our users, which drives repeat orders and we believe will drive further adoption of our products.


•	Simplification and optimization — We have designed our tests to work as needed by the clinician by providing all the specific reagents and biomarker-specific primers needed to prepare their specific sample type for AMP. We believe this quality control and convenience will provide a seamless experience for users and further drive adoption.

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Modularity — The modular nature of our product development platform where we pair AMP with target or sample-specific enrichment reagents or biomarker-specific primers has allowed us to develop hundreds of custom RUO products since our inception. We believe we can leverage our modular product development platform in the future to continually produce new products at a quicker pace than if we had to redesign the underlying technology for each new assay design.

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We believe our reagents have the following advantages:

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Easy-to-use reagents — Our reagents are shipped in a convenient pre-packaged format containing biomarker-specific primers and lyophilized reagents. Reagents are lyophilized for ease of use and packaged into single-use strip tubes which facilitate correct usage. Each component is clinical grade with features to identify and avoid human error, such as contamination or liquid master mix preparation mistakes. Additionally, flexible formats allow for various run size, automation compatibility and batching of patients in a single run depending on lab capability and testing demand.


•	Lower thresholds for training — Our easy-to-use reagent workflows overlap from product to product, which allows for consistent library preparation and helps ease laboratory staff training requirements, improving assay precision and adoption.

We believe our bioinformatics software has the following advantages:


•	Easily understandable outputs — Our bioinformatics software provides easily understandable readouts with relevant information that clinicians can interpret themselves and use to inform therapy, rather than having to spend large amounts of capital to develop proprietary bioinformatics or rely on centralized labs to interpret results.


•	Data control — Our bioinformatics software allows hospitals to retain control of their data. Its flexible configuration can be used via a private cloud-based instance or a virtual machine that can be installed on a customer’s own hardware behind their firewall.


•	Rapid results — Our bioinformatics software can analyze hundreds of samples simultaneously to deliver fast turnaround times and quickly provide clinicians with actionable results to optimize therapy for patients. We believe our bioinformatics software’s ability to make results intelligible will lead to broader adoption of our solution as clinicians are able to rapidly access test results.


•	Customizable — Our bioinformatics software can be tailored to a broad array of sequencing applications through add-on modules without the need to update the core software. This provides clinicians with a singular, easy-to-use portal for current and future applications.

Clinical applications of our product development platform

We have used our product development platform to create hundreds of RUO products. We believe we will be able to leverage our experience from these efforts to develop IVDs for therapy optimization and cancer monitoring. Currently, we are developing our IVD products, STRATAFIDE and PCM, which have both received Breakthrough Device designation from the FDA. We believe that our product development platform makes us a partner of choice for biopharmaceutical companies.

STRATAFIDE

We developed STRATAFIDE to solve for the underutilization of currently available targeted therapies in late-stage cancer patients with advanced solid tumors. While DNA, RNA and ctDNA each have unique advantages and disadvantages in test accuracy, if only one analyte is used individually, a patient is at risk of an inaccurate result. However, in our STRATAFIDE IVD, we intend to combine the advantages so the

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clinician has the optionality needed to ensure each patient receives the right information at the right time to make the right treatment decision. With STRATAFIDE, our kitted solution, clinicians can practice precision oncology even in regional and community settings, where approximately 85% of cancer patients receive care.

Personalized Cancer Monitoring (PCM)

We developed PCM as a powerful patient-specific product for monitoring cancer to expand precision oncology to early-stage cancer treatment. We believe PCM will address the limitations of standard of care methodologies, such as imaging and cancer antigen testing, by monitoring patients through routine blood draws to measure cancer progression, measure therapy effectiveness, determine a treatment regimen and refine therapy. Similar monitoring approaches have proven beneficial in blood cancer treatment. We believe applying a similar approach to early-stage solid tumors could prove equally beneficial.

Biopharmaceutical collaborations

We believe we are a collaborator of choice for biopharmaceutical companies because of the strengths of our product development platform. Many large biopharmaceutical companies are multinational, making the ability to effectively operate clinical trials on a global basis important. Our deployable pre-packaged solution enable us to install an assay for clinical trials at any global CRO, making our reach truly global and not limited by geography. We couple this with assay development and regulatory expertise required to provide assays across geographies.

Our product development platform creates customized products that are sample agnostic and able to detect both known and novel genomic mutations, therefore capable of identifying patients’ eligible for clinical trial enrollment with greater accuracy. With the ability to identify patients faster, we believe biopharmaceutical companies can potentially accelerate clinical trial enrollment and ultimately drug approval.

In March 2020, we announced that our companion diagnostics, or CDx, was approved by the Japanese Ministry of Health, Labour and Welfare, or MHLW, and the PMDA to detect MET exon 14, or METex14, skipping alterations in tissue and liquid biopsy from patients with advanced non-small cell lung cancer, or NSCLC, for consideration for treatment with Merck KGaA, Darmstadt, Germany’s oral MET inhibitor. We believe our CDx is the first and only CDx to be approved for the detection of MET gene alterations and allows for testing of blood and tissue samples.

In May 2020, we announced a collaboration with Bayer to develop an NGS-based CDx for VITRAKVI®, or larotrectinib, a TRK inhibitor approved in the United States and Europe for adult and pediatric patients with TRK fusion cancer across solid tumors. We plan to seek approval in various markets, including the EU, U.S. and Japan. We believe that a CDx that is tumor agnostic and can detect all NTRK gene fusions will enable high quality genomic testing to be deployed in regional and community settings. This CDx application received Breakthrough Device Designation from the FDA in April 2020.

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In May 2020, we announced a strategic partnership with AstraZeneca UK Limited, or AZ UK, to develop PCM tests for MRD. The collaboration will include assay development to support multiple planned Phase 3 clinical trials for AZ UK’s targeted immuno-oncology therapeutics. We will perform whole exome sequencing of non-small cell lung cancer samples from patients who have undergone resection followed by generation of patient-specific ctDNA tests. We plan to leverage the PCM tests to develop companion diagnostics for AZ UK’s associated therapies, and together we plan to seek global regulatory approvals if the Phase 3 clinical trials are completed successfully. The tests are currently for investigational use only.

Our products and services

We have five marketed RUO product lines: VariantPlex, FusionPlex, LiquidPlex, and Immunoverse, which we refer to as our ArcherPlex suite, and PCM. Our RUO products are configured to accommodate the differing NGS test volume requirements of our customers. Our RUO products are typically configured to include reagents sufficient to perform 8 to 96 NGS tests. We refer to the set of reagents needed to perform an NGS test as a “reaction”. Each of our RUO products can be used individually or in combination as deemed necessary by the clinician. Our RUO product lines have been used by over 300 leading academic and commercial laboratories, we have delivered products for over 375,000 reactions, and we have worked with over 50 biopharmaceutical companies and CROs. We are pursuing FDA clearance and/or approval for STRATAFIDE, our universal IVD and companion diagnostic product, which has received Breakthrough Device designation from the FDA. We have also received Breakthrough Device designation from the FDA for PCM, which we are developing as an IVD for cancer monitoring. Additionally, our products are used by leading pharmaceutical companies globally for a range of applications, including identifying target patient populations to accelerate clinical trial enrollment, drug development and potential commercialization as a companion diagnostic test post drug approval.

RUO products

VariantPlex

VariantPlex utilizes AMP and was purpose-built to accommodate low-input and degraded DNA from common clinical samples, such as FFPE tissue or blood. VariantPlex can detect complex mutations like

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large InDels and CNVs. VariantPlex can also enrich for difficult to access, complex regions in the genome, such as CEBPA or pseudogenes, to unlock clinically actionable information and improve patient care.

VariantPlex has applications for both solid tumors and blood cancer. It was developed to investigate biomarker targets with known or suspected clinical relevance, including those recommended in NCCN guidelines. Biopharmaceutical companies also use VariantPlex to investigate biomarker targets in the context of clinical trials. In addition, VariantPlex can be used for monitoring blood cancers such as acute myeloid leukemia, or AML.

The following table shows our pre-configured VariantPlex products:

FusionPlex

We designed RNA-based FusionPlex to identify RNA abnormalities and measure RNA expression levels across cancer types, including solid tumors, sarcomas and blood cancers. FusionPlex’s simultaneous detection of fusions, splicing, kinase domain duplications, or KDDs, internal tandem duplications, SNVs InDels and expression empowers clinicians with robust information, conserving sample and time.

FusionPlex uses RNA instead of DNA as input material, which allows for more accurate and more cost-effective fusion detection than DNA-based hybrid capture techniques. FusionPlex places gene-specific primers near known fusion breakpoints to identify RNA abnormalities with a single primer. Because FusionPlex can identify known and novel alterations, with a limited number of primers, it can detect fusions more efficiently and accurately than DNA-based approaches.

KDDs are emerging as an important and actionable mutation, because patients with KDDs can respond to targeted therapies. Like KDDs, other emerging biomarkers best suited for discovery in RNA are becoming better understood. We believe FusionPlex’s ability to accurately and efficiently detect KDDs and other novel RNA abnormalities means it is well-positioned to accelerate drug development for cancer associated with these emerging biomarkers.

FusionPlex can also determine relative RNA expression for select genes because MBCs are ligated to input material prior to amplification. For example, RNA expression can define tissue of origin, or be used to define cellular subtypes.

FusionPlex has applications for solid tumors, including sarcoma, and blood cancers, and is capable of amplifying small amounts of degraded RNA. It was developed to investigate biomarker targets with known or suspected clinical relevance, including those recommended in NCCN guidelines. Biopharmaceutical companies also use FusionPlex to investigate biomarker targets in the context of clinical trials. In addition, FusionPlex can be used for monitoring blood cancers.

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The following table shows our pre-configured FusionPlex products:

LiquidPlex

Although tissue biopsies are the standard for genomic testing in cancer, they can be cumbersome and invasive. Tissue biopsies require the extraction of solid matter either directly from a tumor or from bone marrow which can involve needles, endoscopic tools or excision using sharp tools. Side effects can include risk of infection, internal bleeding and/or prolonged recovery time. We developed our LiquidPlex product to address the disadvantages of tissue biopsies. Liquid biopsies measure ctDNA in a sample of fluid which can be collected in less-invasive ways such as an intravenous blood draw. We designed the ctDNA LiquidPlex technology to enable efficient target capture of, and mutation detection in, ctDNA from liquid biopsies. Our LiquidPlex technology uses AMP-based target enrichment to preferentially enrich highly fragmented ctDNA over genomic DNA to reduce background noise and increase detection sensitivity of low-allelic fraction mutations. LiquidPlex utilizes error correction to enable high accuracy mutation detection.

LiquidPlex has applications for solid tumors. It was developed to investigate biomarker targets with known or suspected clinical relevance, including those recommended in NCCN guidelines. Biopharmaceutical companies also use LiquidPlex to investigate biomarker targets in the context of clinical trials. In addition, LiquidPlex can be used for cancer monitoring.

The following table shows our pre-configured LiquidPlex products:

Immunoverse

We created Immunoverse to characterize the human immune repertoire from RNA input. Immunoverse uses AMP for clonotype identification and frequency reporting. AMP-powered error correction measures sample complexity and enables rare clone identification. The unbiased amplification provides for an accurate and reproducible measure of T cell receptor, or TCR, and B cell receptor, or BCR, diversity.

Immunoverse has applications for both solid tumors and blood cancer, including prognosis and repertoire profiling. It can be used to profile tumor infiltrating lymphocytes, or TILs, and compare TCR diversity in the tumor and in circulation. Immunodiversity can be prognostic and can be used to map neo-antigens derived from cancer cells to the corresponding TCRs. Immunoverse can also measure BCR diversity and look for clonal amplifications indicative of blood cancer.

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The following table shows our pre-configured Immunoverse products:

Custom design services

The rapid evolution in our market demands customization of genomic content and applications. Our product development platform addresses this need. Our Assay Designer enables biomarker content customization and our Designer Pro enables new application development.

Assay Designer

Assay Designer can be used to configure biomarker targets within the VariantPlex, FusionPlex and LiquidPlex product lines. Assay Designer is an online tool that allows the customer to design new biomarker targets, mix and match existing targets or add new targets to an existing product. Through the online interface, our customers may review hundreds of lab-tested, verified primer designs or use primer design tools to build customized products. Our design experts review all custom products, which are subjected to a rigorous quality control process prior to shipment. While complex designs may require interactive review with the customer, we deliver most designs in four to five weeks.

Designer Pro

Most customized products can be created within Assay Designer. However, for customers seeking an additional layer of product optimization, we offer Designer Pro. We collaborate with our customers to develop every Designer Pro product to customer-defined specifications. We provide full hands-on training and bioinformatic support for a quick and easy transition into customers’ labs.

Our customers, including key opinion leaders, typically utilize Designer Pro for their challenging applications. It can be used to update biomarker targets or create new applications, allowing customers to customize the targets and facilitate changes to the testing paradigm. Current novel applications of Designer Pro products include using:


•	a custom VariantPlex product for MRD detection in pediatric patients with acute myeloid leukemia;


•	a custom FusionPlex product for real-time sequencing and rapid identification of fusions in leukemias using rapid NGS technology; and


•	a custom LiquidPlex product for tumor virus genome detection to track tumor burden and study viral oncogenicity and antiviral drug response.

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Product development pipeline

STRATAFIDE

STRATAFIDE is our easy-to-use, clinical grade IVD and companion diagnostic under development, designed to be a first-line genomic test for any patient with a late-stage solid tumor. STRATAFIDE utilizes information from our experience with VariantPlex, FusionPlex and LiquidPlex technologies to develop a single pan-solid tumor companion diagnostic device which is designed to meet global regulatory clearance and/or approval requirements. STRATAFIDE is a comprehensive NGS-based therapy optimization product which uses our reagents and bioinformatics software. Our lyophilized reagent kit is used to enrich actionable biomarkers from DNA and RNA extracted from a tissue biopsy and from ctDNA extracted from the plasma fraction of blood. Our bioinformatics software solution identifies both simple and complex genomic mutations in DNA, RNA and ctDNA to provide actionable clinical information for any qualified lab. We believe that, if cleared and/or approved, STRATAFIDE may be the first IVD to enable the analysis of tissue and liquid biopsy in a single, comprehensive device. We believe that STRATAFIDE will democratize precision oncology in late-stage solid tumors.

We developed STRATAFIDE to solve for the underutilization of currently available targeted therapies in late-stage cancer patients with advanced solid tumors. While DNA, RNA and ctDNA each have unique advantages and disadvantages in test accuracy, if only one analyte is used individually, a patient is at risk of an inaccurate result. However, when used together in our STRATAFIDE IVD, we combine the advantages so the clinician has the optionality needed to ensure the clinician receives the right information at the right time to make the right treatment decision for the patient.

STRATAFIDE can be used to detect CNVs, SNVs, InDels and fusions, and utilizes AMP which allows for the addition of biomarker targets to the product without significantly impacting performance. This provides for adaptability as new biomarkers, tumor types, and targeted and immuno-oncology therapies are discovered, which we believe enables development in a shortened timeframe. We intend to include multiple companion diagnostic claims with 27 NCCN genes covered in our FDA submissions. We believe STRATAFIDE can increase in clinical utility and evolve as new claims, biomarker targets, and indications are discovered. We believe additional claims can be added for future therapies as new drugs are approved. We believe STRATAFIDE will allow clinicians to direct patients into relevant clinical trials and ultimately increase the speed of clinical trial stratification and enrollment, which is attractive for patients, clinicians and biopharmaceutical collaborators alike.

In March of 2018, the Centers for Medicare and Medicaid Services, or CMS, finalized a national coverage determination, or NCD, for NGS laboratory tests for patients with advanced cancer. CMS believes when these tests are used as a companion diagnostic to identify patients with certain mutations that may benefit from FDA-approved treatments, these tests can assist clinicians in making more informed treatment decisions. We believe this NCD will not only drive clinical adoption but also encourage our biopharmaceutical collaborators to complement therapies with STRATAFIDE.

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We believe STRATAFIDE could also be used to monitor therapy response and determine therapy resistance. Patient response to therapy can be monitored by comparing mutations in the blood before, after, and during treatment. Advanced cancer patients have macroscopic disease and therefore a fixed panel like STRATAFIDE could be used for monitoring in this setting.

In December 2018, the FDA granted Breakthrough Device designation to STRATAFIDE, which offers potentially faster review for breakthrough medical devices that address unmet medical needs. To market STRATAFIDE as an IVD in the United States, we will need to receive FDA approval and/or clearance for STRATAFIDE as a medical device under the FDCA. We plan to submit our initial companion diagnostic claims on STRATAFIDE for FDA approval in 2020, including 510(k) filings or PMA filings, and the additional companion diagnostic claims on STRATAFIDE for FDA approval in 2020 and 2021. We also intend to pursue regulatory clearances and approvals in specific markets outside the United States, including Japan and Europe. A specific companion diagnostic claim was submitted to the Japanese PMDA in December 2019 and approved in March 2020.

In April 2020, we entered into a partnership agreement with Premier Inc., or Premier, to implement STRATAFIDE at eight to ten Premier member institutions in a research capacity. These institutions will participate in a retrospective study to evaluate STRATAFIDE’s sequencing performance in comparison to other diagnostic tests. The expanded collaboration intends to further understand best practices to implement and utilize a distributed IVD in community hospital settings.

Personalized Cancer Monitoring (PCM)

PCM is a powerful patient-specific product for monitoring cancer, which is based on a customized LiquidPlex panel. We intend to use our product development platform to create a wide array of PCM products needed to serve the large population of cancer patients.

We believe PCM has the potential to address the limitations of standard of care methodologies, such as imaging and cancer antigen testing, by monitoring patients through a routine blood draw to measure disease progression, measure therapy effectiveness, determine a treatment regimen and refine therapy. Similar monitoring approaches have proven beneficial in blood cancer treatment. We believe applying a similar approach to early-stage solid tumors could prove equally beneficial. PCM provides tumor-informed longitudinal analysis of ctDNA found in patient blood where the quantity of ctDNA is a predictor of disease stage and burden. PCM achieves accuracy at low limits of detection by focusing the ctDNA analysis on known patient-specific mutations found in the tumor tissue. PCM has been able to leverage greater than 600 mutations in a single LiquidPlex panel, but we believe its ability to leverage mutations is only limited by the number of mutations found in the patient’s cancer.

We believe early-stage cancer patients can benefit from cancer monitoring to:


•	Measure disease progression (Recurrence Monitoring of Residual Disease) — We can detect recurrence before it is symptomatic, allowing for early intervention when the cancer is most curable.


•	Measure therapy effectiveness (Therapy Response Monitoring) — We can identify if a therapy is truly effective or ineffective earlier than standard trial endpoints (i.e., Response Evaluation Criteria in Solid Tumors, or RECIST), reducing the cost and time to perform clinical trials.


•	Determine treatment regimen (Therapy Optimization) — We can identify previously undetectable high-risk patients in the adjuvant cancer setting to bring approved therapies currently approved for late-stage patients into the early-stage setting, when the cancer is most curable.


•	Refine therapy (Therapy Modulation) — We believe a future application of PCM could be to remove adjuvant therapy from surgically cured patients.


•	Measure clinical trial endpoints (Novel Surrogate Clinical Trial Endpoints) — We believe PCM could potentially reduce the cost and length of trials to accelerate drug development, which can bring life-

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saving therapies to market faster and allow biopharmaceutical companies to complete more trials in the same finite time period.

With respect to recurrence monitoring of residual disease, early detection of recurrence to treat micro-metastatic disease that is not detectable by other modalities, such as imaging which is a lagging indicator of relapse, could improve clinical outcomes. Early intervention in patients with solid tumors is more likely to elicit a cure, and the ability to identify patients at high-risk for recurrence makes interventional adjuvant trials possible. Previously, early-stage cancer interventional trials would require large cohorts due to the low probability of relapse, but with PCM, we believe patients could be identified as high risk sooner, reducing the number of patients biopharmaceutical companies would need to enroll in clinical trials.

In addition, PCM has benefits in blood cancers, such as AML, which has low mutational burden making it a prime candidate for fixed biomarker analysis supplemented by patient-specific biomarker analysis. Furthermore, blood draws yield large amounts of nucleic acid making rare clone detection feasible. PCM provides clinicians with a high level of sensitivity, which we believe has not been previously achieved. PCM has the ability to detect the recurrence of cancer earlier, which can lead to more favorable outcomes.

Our PCM process involves the following steps for solid tumors:


(1)	At initial diagnosis, exome sequencing of the surgically removed tumor or a tumor biopsy is used to identify the patient-specific cancer mutations.


(2)	Data from the exome sequencing is analyzed with proprietary algorithms to select the patient-specific cancer mutations most likely to yield the greatest sensitivity for recurrence of the patient’s cancer.


(3)	An enhanced version of Assay Designer is used to create a personalized LiquidPlex product, which is used to longitudinally track ctDNA and measure cancer burden.


(4)	The personalized product is delivered to the laboratory affiliated with the patient’s care team.


(5)	The clinicians use the personalized product to assess ctDNA taken from non-invasive peripheral blood draws at specified intervals, yielding a quantitative longitudinal view of the cancer’s evolution.

Our PCM process provides multiple benefits, including the accuracy of sequencing the whole exome for the longitudinal serial measures without added cost, since only the patient-specific mutations are sequenced. Additionally, by tracking multiple mutations, PCM overcomes the limitations of sampling low levels of ctDNA in blood using fixed panel approaches, affording high sensitivity and specificity necessary for a monitoring application. We believe that, if approved as a companion diagnostic, PCM will identify patients that have primary recurrence during systemic adjuvant therapy, making them eligible for additional therapy and improving overall survival and disease-free survival.

As part of an on-going collaboration with University College London and the Francis Crick Institute, we are utilizing PCM to detect low-volume minimal residual disease at high levels of sensitivity to help achieve a more personalized approach to developing cancer treatments.

In January 2020, the FDA granted Breakthrough Device designation to PCM, which offers potentially faster review for breakthrough medical devices that address unmet medical needs. To market PCM as an IVD in the United States, we will need to receive FDA approval and/or clearance for PCM as a medical device under the FDCA. We are developing PCM for regulatory clearance and/or approval both on our own and in collaboration with biopharmaceutical companies. We plan to submit PCM for FDA clearance and/or approval, including 510(k) filings or PMA filings, in the future.

Clinical evidence

Our collaborations have showcased our AMP technology and provided insight into the clinical utility of distributed genomic testing. We believe our relationships with leading academic cancer centers such as

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University College London and others have validated our technology and its applicability in a wide variety of clinical settings as well as provided insight into future applications.

We have a large and growing body of comprehensive clinical evidence supporting the accuracy and utility of our core chemistry and product portfolio. To date, our products have been featured in over 200 peer-reviewed clinical and scientific publications, demonstrating our products’ performance for clinical applications.

Cumulative peer-reviewed publications

Below we highlight data that showcase the capabilities of Archer’s proprietary AMP chemistry:


•	High sensitivity and specificity — Archer AMP chemistry has demonstrated high sensitivity and specificity of simple and complex mutations compared to other methods.


•	Chemistry modularity — Archer AMP chemistry provides us with the ability to mix and match different sets of biomarker content without sacrificing performance.


•	Known and unknown mutation detection — The accuracy of the Archer AMP chemistry has identified unknown RNA fusions for the very first time, which were unable to be detected given a lack of sensitivity in other testing methods.

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Improved clinical utility — Archer AMP chemistry has been proven to demonstrate improved clinical utility. For example, clinicians at Memorial Sloan Kettering profiled over 2,500 lung cancers using the MSK-IMPACT test. FusionPlex identified previously undetected, actionable mutations in 33 patients. Of these 33 patients, 10 received a matched targeted therapy, and 8 of these 10 achieved clinical benefit.

The following summarizes data included in peer-reviewed publications and documents submitted to regulatory agencies from studies which involved the use of our platform:

Selection of peer-reviewed customer publications


•	Summary of study results: Archer’s products provide highly sensitive (true positive) results, correctly identifying individuals with a genetic mutation, and highly specific (true negative) results, correctly identifying individuals without a genetic mutation across institutions.

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Summary of data: In a subset of 219 patient samples, multiple institutions achieved a sensitivity of 100% and specificity of 100% using our FusionPlex product. In addition, investigators at Virginia Commonwealth University, Duke University and Genosity’s CAP-accredited laboratory also achieved sensitivity and specificity of 100% in over 515 patient samples with our VariantPlex product. Finally, investigators at Massachusetts General Hospital interrogated 110 mutations using our LiquidPlex

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product to identify mutations in solid tumors from blood samples with 90% sensitivity and 100% specificity.

The table below contains data from certain customer publications reporting the use of our products in analytical validation studies. We believe these studies are representative of the results of the use of our products based on the quality of the design and size of each study.

Detection of MET Exon 14 (METex14) skipping is another example of the precision of Archer’s platform to identify variants that can inform therapy. METex14 is a predictive biomarker that maps to specific targeted therapies. Thus, accurate detection of METex14 is key to ensure patients receive best-in-class targeted therapy instead of toxic chemotherapy. The table below is a performance example from an Investigational Device Exemption validation that we performed that demonstrates Archer’s test can detect METex14 with 100% sensitivity and specificity at greater than 10% tumor content.

Comparison of Archer’s AMP against conventional genetic testing methods — AMP

Anchored multiplex PCR for targeted next-generation sequencing

Z. Zheng et al., Nat. Med., 2014


•	Summary of study result: Clinical validation of AMP as compared to fluorescent in situ hybridization, or FISH. The first validation of AMP demonstrated superior performance with respect to clinical

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sensitivity and specificity when compared to standard clinical FISH assays. The study also demonstrated AMP can reduce tissue sample quantity needed while still gathering high quality results.

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Summary of data: An AMP gene rearrangement panel using 319 FFPE samples showed 100% sensitivity (95% confidence limit: 96.5-100%) and 100% specificity (95% confidence limit: 99.3-100%) compared with reference methods. Based on performing AMP on 986 clinical FFPE samples, the study demonstrated AMP’s potential as both a robust clinical assay and a powerful discovery tool, which was used to identify new therapeutically important gene fusions: ARHGEF2-NTRK1 and CHTOP-NTRK1 in glioblastoma, MSN-ROS1, TRIM4-BRAF, VAMP2-NRG1, TPM3-NTRK1 and RUFY2-RET in lung cancer, FGFR2-CREB5 in cholangiocarcinoma and PPL-NTRK1 in thyroid carcinoma.

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Archer implication: Accuracy and Utility — AMP is a scalable and efficient next-generation sequencing target enrichment method for research and clinical applications. Archer’s AMP chemistry is compatible with low nucleic acid input from FFPE specimens and is effective in detecting gene rearrangements (without prior knowledge of the fusion partners), single nucleotide variants, insertions, deletions and copy number changes.

Comparison of Archer’s AMP against conventional genetic testing methods — FusionPlex

Molecular Analysis of Gene Fusions in Bone and Soft Tissue Tumors by Anchored Multiplex PCR-Based Targeted Next-Generation Sequencing

Lam, S., et al., J Mol Diag, 2018


•	Summary of study result: Archer FusionPlex-based test is superior to FISH and PCR in identifying complex mutations and can also identify previously unknown fusion partners.

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Summary of data: Archer’s AMP chemistry was used in a 26-gene FusionPlex Sarcoma panel and was evaluated and compared with FISH and reverse transcriptase-PCR (RT-PCR). Eighty-one samples were subjected to AMP-based targeted NGS, and 86% (n = 70) were successfully conducted and were either fusion positive (n = 48) or fusion negative but met all criteria for good quality (n = 22). A concordance of 90% was found between NGS and conventional techniques. AMP-based targeted NGS showed superior results compared to FISH and RT-PCR, which showed four cases that were false negative. The Archer assay also revealed COL1A1 and SEC31A as novel fusion partners for USP6 in nodular fasciitis, whereas FISH and RT-PCR did not detect these fusion partners.


•	Archer implication: Accuracy and Utility — Archer’s platform can potentially unlock new clinical applications demonstrated by the validation of Archer’s AMP chemistry’s ability to detect complex mutations in RNA not possible with other technologies. This study provides clinical validation of AMP and demonstrates its superior utility compared to FISH and RT-PCR.

Detection of previously unknown genomic mutations through RNA

High yield of RNA sequencing for targetable kinase fusions in lung adenocarcinomas with no driver alteration detected by DNA sequencing and low tumor mutation burden

Benayed et al., Clinical Cancer Research, 2019


•	Summary of study result: Large DNA-based sequencing tests lack adequate sensitivity for detecting all treatable cancer-related mutations, resulting in patients receiving non-specific, toxic chemotherapy. This study led to a new NCCN recommendation for concurrent RNA-based testing.


•	Summary of data: As part of the prospective clinical genomic testing, clinicians at Memorial Sloan Kettering profiled 2,522 lung adenocarcinomas using the MSK-IMPACT test panel. This prospective clinical testing identified 195 (7.7%) fusions and 119 (4.7%) METex14 alterations. FusionPlex identified previously undetected mutations in 14% (36/254) of cases, 33 of which were actionable. Of

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these 33 patients, 10 then received matched targeted therapy, which achieved clinical benefit in 8 cases (80%).


•	Archer implication: Utility and Flexibility — Archer’s RNA-based FusionPlex product line can identify previously undetected mutations, providing the possibility of matching more patients with targeted therapy, thereby reducing the consequences of outdated, non-specific chemotherapy and toxic regimens.

Validation of custom products for diverse patient populations

Development and Clinical Validation of a Large Fusion Gene Panel for Pediatric Cancers

Chang F., et al., J Mol Diagn. 2019


•	Summary of study result: Clinical validation of a large, custom FusionPlex test interrogating 106 cancer genes involving nearly 600 different fusions reported in hematological malignancies and solid tumors. This test identified fusions with 100% sensitivity and specificity, regardless of sample type.

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Summary of data: Gene fusions are one of the most common genomic alterations in pediatric cancer. Many fusions encode oncogenic drivers and play important roles in cancer diagnosis, risk stratification, and treatment selection. In the validation for this study, the test demonstrated perfect accuracy, with 100% sensitivity and 100% specificity on 60 pediatric tumor samples. In addition to identifying all known fusions in the validation samples, three previously unrecognized, yet clinically significant, fusions were also detected. Following assay validation, 276 additional cases were analyzed, identifying 51 different fusions. Of these, 16 were not previously identified and provided genomic information useful for clinical management.


•	Archer implication: Accuracy and Utility — This study demonstrates that Archer’s AMP chemistry enables custom FusionPlex products with many biomarker targets without sacrificing assay performance. In addition, FusionPlex products are able to detect the vast majority of known and previously unknown clinically-relevant fusions in pediatric cancers accurately and efficiently.

Driver mutation identification through liquid biopsy — LiquidPlex

Clinical Validation of a Cell-Free DNA Gene Panel

Cheng, J. et al., J Mol Diagn. 2019


•	Summary of study result: Clinical validation of a 28-gene Archer LiquidPlex cell-free DNA panel that targets the most common genetic alterations in solid tumors that demonstrated 100% specificity and over 89% sensitivity in identifying solid tumor driver mutations.

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Summary of data: The use of liquid biopsies to identify driver mutations in patients with solid tumors holds great promise for performing targeted therapy selection, monitoring disease progression, and detecting treatment resistance mechanisms. In this study, the panel and analytical tools developed were used to analyze commercially available controls, allowing establishment of a limit of detection allele fraction cutoff of 0.25%, with 100% (95% CI, 81.5%-100%) specificity and 89.8% (95% CI, 81.0%-94.9%) sensitivity. In addition, a total of 163 blood samples were analyzed from patients with metastatic cancer (n = 123) and demonstrated a >90% sensitivity for detecting previously identified expected mutations. Longitudinal monitoring of patients revealed a strong correlation of variant allele frequency changes and clinical outcome. Additional clinically relevant information included identification of resistance mutations in patients receiving targeted treatment and detection of complex patterns of mutational heterogeneity.

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Archer implication: Accuracy and Utility — Although tissue is the gold standard sample type, it may be difficult to obtain and not every patient is healthy enough to undergo an invasive biopsy. This study demonstrates the ability of our LiquidPlex product to identify solid tumor driver mutations via liquid biopsy filling a critical need for patients without a tissue biopsy available. The high sensitivity and

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specificity and the correlation of variant allele frequency changes and clinical outcome strongly support clinical implementation of cell-free DNA panels in advanced cancer patients. We designed the ctDNA LiquidPlex technology to enable efficient target capture of and variant detection in ctDNA from liquid biopsies. Our LiquidPlex technology uses AMP-based target enrichment to preferentially enrich for highly fragmented ctDNA over genomic DNA to reduce background noise and increase detection sensitivity of low-allelic fraction variants.

Minimal residual disease detection for blood cancers

Impact of Conditioning Intensity of Allogeneic Transplantation for Acute Myeloid Leukemia With Genomic Evidence of Residual Disease

Hourigan et al., J Clin Oncol. 2019


•	Summary of study result: Clinical validation of a custom Archer panel to identify blood cancers by detecting MRD in patients with AML in remission.

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Summary of data: Patients with AML in remission remain at risk for relapse even after allogeneic hematopoietic cell transplantation. Ultra-deep, error-corrected sequencing for 13 commonly mutated genes in AML was performed on preconditioning blood from patients treated in a phase III clinical trial that randomly assigned adult patients with myeloid malignancy in morphologic complete remission to myeloablative conditioning, or MAC, or reduced-intensity conditioning, or RIC. This study provided evidence that MAC rather than RIC in patients with AML with genomic evidence of MRD before alloHCT can result in improved survival.


•	Archer implication: Utility — This study underscores the power of the Archer platform to provide accurate genomic alteration detection regardless of sample sources (solid tumor or hematological malignancies), addressing the current limitations of “one-size-fits-all” approaches, and establishing the foundation for expansion of therapy optimization and cancer monitoring into blood cancers.

Correlation between accuracy in identifying novel fusion and clinical benefit

Dramatic Response to Crizotinib in a Patient with Lung Cancer Positive for an HLA-DRB1-MET Gene Fusion

Davies, K.D., et al., JCO Precis Oncol, 2018


•	Summary of study result: FusionPlex used to identify a novel fusion in a lung-cancer patient that responded to a MET-specific drug.

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Summary of data: The study describes the first case of a MET fusion in lung cancer identified and treated during course of clinical care, and the dramatic response of the patient’s tumor to crizotinib treatment. The authors utilized FusionPlex to detect a previously undescribed fusion of HLA-DRB1 exon 5 to MET exon 15, and this fusion was predicted to be in-frame and preserve the MET kinase domain. The finding was confirmed on a separate extraction and repeat analysis from the resection sample. The patient began treatment with off-label oral crizotinib 250mg twice daily. After 6 weeks of therapy, repeat CT showed complete resolution of the previously observed left upper lobe perihilar and right lower lobe lung nodules with no new lesions. This robust response remains as of 8 months on therapy. The recent rapid expansion in the number of characterized driver oncogenes, the increase in the number of approved therapies, and the large number of clinical studies now available testing drugs that target these novel oncogenes, necessitates evaluating multiple genes simultaneously. NGS-based assays are well suited to meet this requirement due to the ability to sequence in massively parallel fashion. This study employed AMP, an NGS-based assay designed specifically for gene fusion detection. The ability of this assay to detect fusions without prior knowledge of the fusion partner was critical in this case, as fusion of MET to HLA-DRB1 has not been reported previously.

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•	Archer implication: Accuracy and Utility — The accuracy of FusionPlex allows for the detection of novel fusions that expand the druggable targets within an indication. This study unlocks new applications for targeted therapies used by biopharmaceutical companies leading to more use in clinical trials and expanded clinical utility.

Minimal residual disease detection for solid tumors

Minimal Residual Disease Surveillance Data in post-operative early-stage NSCLC patients

Abbosh, C., et al., AACR 2020


•	Summary of study result: Utilizing ArcherDX’s AMP technology, ctDNA monitoring for MRD can detect relapse of NSCLC earlier than standard of care imaging surveillance in some instances. AMP personalized cell-free DNA, or cfDNA, enrichment can accurately detect low-frequency variant DNA at low assay DNA inputs consistent with an MRD setting.

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Summary of data: Post-operative timepoints were analyzed from 90 TRACERx patients. In patients whose cancer had relapsed and shed ctDNA, the ctDNA was detected at or before relapse with a median lead-time, or time from ctDNA detection to clinical relapse, of 164 days (range: 6 to 1,022 days) in the TRACERx study tracking a median of 200 variants per patient. Furthermore, in non-relapse patients, the assay demonstrated 99.3% clinical specificity within the research data set. Results from the analytical validation of a 50-variant version of the research assay demonstrated 100% specificity with detection down to 0.003% variant fractions at high cfDNA input levels.

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Archer implication: Accuracy and Utility — The study provides further evidence that Archer’s AMP technology has the ability to potentially accurately detect exceedingly low levels of cancer-derived DNA from patient blood which is important for successful PCM. Furthermore, with more sensitive detection of ctDNA for MRD as a biomarker, it is possible for adjuvant clinical trials to be conducted in smaller and more relevant settings by only escalating therapy in patients who are set to relapse, thereby potentially reducing trial size, cost and time.

Commercialization

Since our inception in 2013, our RUO products and bioinformatics services have been used by over 300 leading academic and commercial laboratories, we have shipped products for more than 375,000 samples, and we have worked with over 50 CROs and biopharmaceutical companies to help bring new treatment options for patients to market faster by enabling clinical research and trials.

Our commercial team is multi-faceted to support the local reference laboratory, medical practitioner, payer, and biopharmaceutical markets on a global scale. The team includes experts in business development, sales, marketing, sales support, and reimbursement, complemented by a medical organization headed by our Chief Medical Officer. Along with our direct sales team, we leverage our medical sales liaisons, distributors, and the sales organizations of our reference lab and biopharmaceutical collaborators to reach out to molecular pathologists and oncologists to further drive adoption of our products. We have also established strong leadership in critical areas such as regulatory affairs and reimbursement, which we believe will lead to approvals and drive commercial adoption of our regulated products, upon their approval and launches.

United States

We commercialize our products in the United States to researchers and pathologists through our targeted sales organization. As of March 31, 2020, our sales organization in the United States included 39 sales representatives that are engaged in sales efforts and promotional activities primarily to pathologists practicing in academic cancer centers, private hospitals and commercial testing laboratories. Our sales representatives typically have extensive backgrounds in laboratory testing, therapeutics and oncology. We have supplemented the team with field application specialists with extensive NGS experience to provide training and technical field support, which is essential for distributed product success. Our

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commercial efforts are focused on driving adoption of our product portfolio with academic research institutions and with commercial reference laboratories who serve community-based oncologists.

We will seek to expand our commercial sales force in advance of the potential approval of our first pan-solid tumor IVD, STRATAFIDE. We believe we will also be able to leverage our existing relationships with reference labs to have our products reach as many providers and patients as possible. In addition, we are also actively engaged in educating integrated delivery networks, or IDNs, on the value of providing STRATAFIDE to their patients and providers. For providers who prefer to send out for genomic testing, they will be able to choose STRATAFIDE from the broader suite of our currently offered products and send samples/biopsies to their local reference labs as they do currently.

Our U.S. sales organization is complemented by our reimbursement division of approximately five individuals with expertise in the reimbursement process that is focused on provider and payer support. We believe this team will help us to expand our reach to include group purchasing organizations, integrated delivery networks, integrated physician practices and government medical facilities that are looking to develop internal NGS capabilities. We believe this multi-pronged approach will help further drive commercial adoption of all our products and services across all providers of cancer care.

International markets

We currently offer our RUO products primarily through a targeted direct sales force in 40 countries, including in Germany, the United Kingdom, France, Belgium, Switzerland, Italy, Sweden, and Japan. We have also developed relationships with over 20 distributors in Europe, the Middle East, Asia Pacific and Australia and have entered into a direct contract with a testing laboratory in Brazil. As of March 31, 2020, our sales organization outside the United States included 15 sales representatives that are engaged in sales efforts and promotional activities primarily to pathologists practicing in academic cancer centers, private hospitals and commercial testing laboratories. This team also leverages the commercial teams of our global biopharmaceutical collaborators.

Global biopharmaceutical commercial efforts

Our business development team is focused on enterprise selling to biopharmaceutical companies in the United States and internationally. Our strategy with each biopharmaceutical customer is to demonstrate the value proposition of our products and services and expand utilization across the organization from early stage research through clinical development to commercialization. Given the broad utility of our platform, we believe we can support our biopharmaceutical customers across many applications, including drug discovery, biomarker discovery, clinical trial development, genomic profiling, cancer monitoring, and companion diagnostic development services. We provide companion diagnostic design and development services as well as clinical trial services, with the opportunity for patient samples to be analyzed in our CLIA-CAP laboratory, providing a seamless, fully integrated business for clinical trial support that includes enrollment, stratification, and endpoint/outcome validation.

Our customers include global biopharmaceutical companies given that our products align with their global distribution needs both for clinical trial kits and approved companion diagnostics. We believe we have a competitive advantage, particularly where clinical trials are being conducted across multiple sites, countries or continents, because we bring our personalized medicine products to local laboratories. We believe we are well positioned in this market versus single-site specialty labs because many of these U.S.-based laboratories lack the ability to run genomic testing in countries outside the United States where the clinical trials are being conducted, which impacts scalability, turnaround time, and heightening privacy concerns.

Commercial co-promotion agreement with Illumina

In January 2020, we announced a multi-year, non-exclusive co-marketing partnership with Illumina to increase awareness and sales of our planned IVD products, including for therapy selection and personalized cancer monitoring. Upon regulatory clearances and approvals, Illumina’s global commercial team will co-promote our IVD products for use on Illumina’s NextSeq™ 550Dx and MiSeq™ Dx systems.

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IVD Collaboration Agreement with Illumina

In May 2016, we entered into an IVD Collaboration Agreement, or the IVD Collaboration Agreement, with Illumina, Inc., or Illumina, pursuant to which we agreed to collaborate with Illumina for the development and commercialization of sequencing companion diagnostics.

Pursuant to the IVD Collaboration Agreement, we and Illumina have agreed to coordinate on certain development projects for each party’s specified clients. The participation of each party in any particular project is contingent on each client’s approval, and each party’s ability to satisfy the technical and commercialization requirements for the applicable project. We will enter into an individual project agreement with Illumina for each project that we agree to under the terms of the IVD Collaboration Agreement. This individual project agreement will specify the terms and conditions of the applicable project. Generally, each individual project agreement entered into under the IVD Collaboration Agreement provides for specified milestone and revenue share payments to be paid to Illumina in connection with any collaboration effected under the IVD Collaboration Agreement. Unless otherwise agreed to in the applicable individual project agreement, any collaboration under the IVD Collaboration Agreement is non-exclusive, and we are not restricted from entering into similar collaborations with other third parties. We are also not obligated to present or accept any collaboration project or enter into any individual project agreement under the IVD Collaboration Agreement. Unless otherwise agreed to in the applicable individual project agreement, we retain all rights to our intellectual property used in or developed by us in connection with any project under the IVD Collaboration Agreement.

The IVD Collaboration Agreement will terminate on the date that is five years from the effective date thereof. The IVD Collaboration Agreement may also be terminated by either party upon a (i) material breach (subject to a standard cure period) or the bankruptcy, insolvency or winding up of the other party; or (ii) upon written notice delivered at any time after the third anniversary of the effective date of the IVD Collaboration Agreement, so long as no there are no active individual project agreements under the IVD Collaboration Agreement at such time. Illumina may also terminate the IVD Collaboration Agreement upon a change of control by us if the acquirer in such change of control is a company that sells, or has announced its intention to sell, nucleic acid sequencing instruments, and we may terminate the IVD Collaboration Agreement upon any change of control by us.

The IVD Collaboration Agreement also established a joint steering committee, which monitors progress of the development and commercialization efforts of the parties under the IVD Collaboration Agreement.

Merck Collaboration and CDx Agreements

In December 2017, we entered into a Master Collaboration Agreement, or the Master Collaboration Agreement, with Merck KGaA, Darmstadt, Germany, and in September 2018, we entered into a Master CDx Agreement, or the CDx Agreement, with Merck KGaA, Darmstadt, Germany.

Pursuant to the Master Collaboration Agreement, we have agreed to provided certain services in order for Merck KGaA, Darmstadt, Germany to discover biomarkers and/or validate their proprietary biomarkers for use as diagnostics or in certain indications. In connection with any services we may provide under the Master Collaboration Agreement, we enter into individual statements of work identifying the specific services that we have agreed to perform and the timelines and fees associated with such services. We retain all rights to our intellectual property used in or developed by us in connection with any services under the Master Collaboration Agreement, subject to any licenses granted to Merck KGaA, Darmstadt, Germany under the Agreement, as the case may be. The Master Collaboration Agreement terminates on the date that is three years from the effective date thereof. The Master Collaboration Agreement may also be terminated by either party upon (i) a material breach (subject to a standard cure period); or (ii) prior written notice.

Pursuant to the CDx Agreement, we have agreed to collaborate with Merck KGaA, Darmstadt, Germany on certain projects regarding the development of diagnostic products for commercialization to stratify patients eligible for treatment with Merck KGaA, Darmstadt, Germany’s pharmaceutical products. We

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enter into project agreements in connection with each project under the CDx Agreement. These project agreements outline the specific companion diagnostic tools that we are collaborating to develop with Merck KGaA, Darmstadt, Germany along with the associated costs and timelines. Under each project agreement, Merck KGaA, Darmstadt, Germany agrees to pay us specified fees upon achievement of milestones included in the applicable project agreement. Each project agreement is managed by a team of individuals from each party to monitor the development and commercialization of the specific diagnostic products. Any collaboration under the CDx Agreement is non-exclusive, and we are not restricted from entering into similar collaborations with other third parties so long as such arrangements do not conflict with our obligations to perform under the CDx Agreement. Subject to licenses granted to Merck KGaA, Darmstadt, Germany, under the CDx Agreement in conjunction with each project agreement, we retain all rights to our intellectual property used in or developed by us in connection with any diagnostic product developed under the CDx Agreement, including the commercialization rights thereto; provided that Merck KGaA, Darmstadt, Germany retains the rights to any intellectual property that relates to the compound that is subject to any project under the CDx Agreement. The CDx Agreement may be terminated by either party upon (i) a material breach (subject to a standard cure period) or the bankruptcy, insolvency or winding up of the other party; or (ii) prior written notice, in the event that there are no existing project agreements and that one has not been active for at least two years. Merck KGaA, Darmstadt, Germany may also terminate any project agreement for convenience with prior written notice. Each party may terminate any project agreement upon a material breach (subject to a standard cure period) or the bankruptcy, insolvency or winding up of the other party.

AZ Master Services Agreement

In July 2019, we entered into a Master Services Agreement, or the MSA, with AstraZeneca AB (Publ), or AZ AB, a company incorporated in Sweden.

Pursuant to the MSA, we agreed to supply AZ AB a variety of services including, among others, developing, launching and implementing next generation sequencing based clinical trial assays for participants with certain types of cancer, through separate statements of work, or SOWs. Generally, each individual SOW entered into under the MSA specifies the terms and conditions of the applicable service and provides for specified milestones and payments to be paid to us in connection with any services to be performed under the MSA.

The MSA has a term of up to five years, but AZ can terminate the MSA earlier without cause upon 20 days’ prior written notice. Each SOW term expires upon completion of the services contemplated under the respective SOW, unless earlier terminated pursuant to the terms of the MSA.

AZ Collaboration Agreement

In April 2020, we entered into an In Vitro Diagnostics Master Collaboration Agreement with AZ UK pursuant to which we agreed to collaborate with AZ UK for the development and commercialization of one or more diagnostic products, including assays, for use with one or more therapeutic products of AZ UK.

We will enter into an individual project schedule with AZ UK for each project that the parties agree to under the terms of the AZ Collaboration Agreement. The individual project schedule will specify the terms and conditions of the applicable project. Generally, each individual project schedule adopted under the AZ Collaboration Agreement provides for specified milestone and payments to be paid to us in connection with any collaboration effected under the AZ Collaboration Agreement.

Any collaboration under the AZ Collaboration Agreement is non-exclusive. Subject to confidentiality and other obligations under the AZ Collaboration Agreement, either party may enter into agreements with third parties to develop and/or commercialize an IVD without requiring the consent of the other party.

We retain all rights to our background intellectual property and our foreground intellectual property, the latter which includes certain of our know-how that, among other criteria, do not rely upon the continued use or AZ’s confidential information and that are not AZ foreground know-how.

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The AZ Collaboration Agreement will terminate as a result of or in connection with, among others, (i) a material breach of the AZ Collaboration Agreement, certain covenants of the AZ Collaboration Agreement or a project schedule, (ii) mutual agreement, (iii) without cause by AZ, (iv) by us unilaterally in certain circumstances, or (v) insolvency of either party.

The AZ Collaboration Agreement also established a framework for governance through joint project teams and a joint program committee, which monitor progress of the development and commercialization efforts of the parties under the AZ Collaboration Agreement.

Operations

We manufacture our products primarily at our headquarters in Boulder, Colorado. We also operate a CAP-accredited, CLIA-certified laboratory in Golden, Colorado. Our operations consist of demand forecast planning, raw material procurement, manufacturing and distribution. The operations team is responsible for maintaining facilities and equipment per our Quality Management System to meet or exceed ISO 13485:2016 standards to support manufacturing, testing and distribution of our products.

Manufacturing process

Our manufacturing process consists of procurement, manufacturing, packaging and shipping. In procurement, we receive raw materials and consumables from qualified suppliers. In manufacturing, we dispense and mix raw materials according to a manufacturing work order. We then perform lyophilization, also known as freeze drying, of single-use amounts, which allows for greater stability and ease-of-use. We package the lyophilized reagents into tubes or plates, place these amounts into subassembly pouches, and store at an appropriate temperature. Finally, we pick and pack specific sets of subassemblies into a final saleable product and then ship to the customer. We manufacture both customized and fixed content products for our customers, and our manufacturing processes are similar for both customizable RUO and IVD product types. Our preconfigured and customized products generally follow the same manufacturing processes.

Supply chain management

Manufacturing involves over 50 raw materials, intermediates and subassemblies. We utilize industry-leading vendors for our supply chain. We work diligently to identify multiple vendors for reagents and materials where possible. To further mitigate risk, we employ a multi-month, multi-lot safety stock strategy to promote an uninterrupted supply of reagents and materials to the laboratory. Our assay quality and testing efficacy depends on enzymes, oligonucleotides and lyophilization services. Our operations team continues to identify and qualify additional suppliers to mitigate the potential risks of supply chain single point failures while ensuring supply agreements are in place with our primary vendors.

In December 2014, we entered into a supply and manufacturing agreement with QIAGEN, Inc. to provide the enzymes that we use in our products. During the term of the supply agreement, we are required to make a rolling, non-binding forecast of our expected needs for enzymes, and place purchase orders for the next quarter’s forecast. QIAGEN may not unreasonably reject conforming purchase orders. The supply agreement does not require us to order minimum amounts of product or to exclusively use their products. The agreement contains negotiated use limitations, representations and warranties, indemnification, limitations of liability, and other provisions. The initial term of the supply agreement continues until December 2024, and the supply agreement automatically renews for additional one-year terms thereafter unless we or QIAGEN provide the other with notice of termination within 90 days of the date when such termination takes effect.

We use a limited number of suppliers for our laboratory equipment and materials. We manage this concentration risk by targeting levels of surplus stock that we believe would allow us to locate alternative suppliers if needed. However, if any of our suppliers fails to perform adequately or fulfill our needs, we may be required to incur significant costs and devote significant efforts to find new suppliers and may face delays in processing samples or developing and commercializing our products and services. For example, we have purchased Illumina MiSeq™ and NextSeq™ instruments, and Illumina supplies us with

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reagents that have been designed for use solely with these sequencers. While we acquire these reagents from Illumina on customary terms, if we had to replace our reagents we may also need to acquire and qualify a replacement sequencer, validate the sequencing reagents and potentially revalidate aspects of our existing assays.

Competition

Biotechnology and pharmaceutical industries, including life sciences research, clinical diagnostics and drug development, are characterized by rapidly advancing technologies, intense competition and a strong emphasis on intellectual property. Given the breadth and promise of personalized medicine, we face substantial competition from different sources, including life sciences tools and diagnostics companies and academic research institutions. Due to the significant interest and growth in comprehensive genomic profiling both in tissue and liquid biopsies and personalized medicine more broadly, we expect ongoing intense competition. However, we believe our proprietary and flexible technology platform, our process capabilities and our scale will distinguish us from our competitors. For example, our FusionPlex and VariantPlex products uniquely provide a NGS multiplex assay for detection of novel gene fusions, which is critical to those customers for whom such gene fusions are a priority. Without using our proprietary and patented technology, such novel fusions may not be detected. In this sector of the market, Archer’s principal competitor is QIAGEN N.V. In life sciences research more broadly, FusionPlex, VariantPlex, LiquidPlex and Immunoverse face competition from a number of companies, including Thermo Fisher Scientific Inc., Illumina, Inc., QIAGEN N.V., Adaptive Biotechnologies and Invivoscribe.

In clinical diagnostics, we anticipate facing competition primarily from institutions performing single-site PMA or in-house LDTs. Competitors with diagnostic technology platforms include Illumina, Inc., Thermo Fisher, Inc., Foundation Medicine, Inc., which was acquired by Roche Holdings, Inc. in July 2018, Guardant Health, Inc., Caris Life Sciences, Tempus, Natera Corporation, and Personal Genome Diagnostics, Inc. More broadly, large lab companies like Laboratory Corporation of America, Quest Diagnostics, Inc., NeoGenomics, Inc. or Bio-Reference Laboratories, Inc., which was acquired by OPKO, may elect to build their own tissue or liquid biopsy tests for genomic profiling. In the future, it is possible we may face competition from companies presently developing early cancer detection testing products for indications that do not currently compete with us including Exact Sciences Corporation, GRAIL, Inc., Freenome and Thrive Earlier Detection Corp.

In biopharmaceutical services, clinical trials and companion diagnostic projects are being pursued by a number of industry and academic players. Direct competitors include Foundation Medicine, Inc., Guardant Health, Inc., Natera Corporation, Adaptive Biotechnologies, Inc., Illumina, Inc., Thermo Fisher, Inc., Invivoscribe, Inc., Nanostring Technologies, Inc., Asuragen Inc., Covance, Inc. and several others.

Many of our current or potential competitors, either alone or with their collaboration partners, have significantly greater financial resources and expertise in research and development, manufacturing, regulatory clearance approval and compliance, and sales and distribution than we do. Mergers and acquisitions involving life sciences research, clinical diagnostics or drug discovery companies in the personalized medicine space may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and in acquiring technologies complementary to, or necessary for, our programs. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize research or diagnostic products or services that are more accurate, more convenient to use or more cost-effective than our products or services. Competitor therapeutic products could also prove to be more safe, more effective, more convenient to administer or more cost-effective than any products we may develop with our collaborators. Our competitors also may obtain FDA or other regulatory clearance or approval for their products more rapidly than we may obtain clearance or approval for ours, which could result in our competitors establishing a strong market position before we are able to enter a particular market.

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We believe key competitive factors impacting our success include the accuracy, utility, turnaround time and economics of our products, commercial execution, support and traction by our collaborators and key opinion leaders, reimbursement rates established for our IVD products in the future, and pace with which biopharmaceutical companies scale clinical trial work globally using our technology. We also believe our success in part depends on the timing of obtaining regulatory clearances and approvals for STRATAFIDE and PCM and customer readiness to order FDA and PMDA-approved kits for therapy optimization and cancer monitoring from us. While our kits can be ordered from our large reference laboratory partners, which we believe reduces the risks of our multi-pronged commercial strategy, we also believe future customer adoption of Illumina MiSeq™ Dx and NextSeq™ 550Dx instruments may impact our operating results in our clinical testing business in the future. Upon obtaining regulatory clearances and/or approvals, we believe we will be the first company to offer both tissue and blood-based therapy optimization kits, and we expect to be among the first to offer an IVD-cleared kit for cancer monitoring.

Intellectual property

Our success depends in part on our ability to obtain and maintain intellectual property protection for our technology, defend and enforce our intellectual property rights, preserve the confidentiality of our trade secrets, and operate without infringing, misappropriating or otherwise violating valid and enforceable intellectual property rights of others. We seek to protect the investments made into the development of our technology by relying on a combination of patents, trademarks, copyrights, trade secrets, including know-how, and license agreements. We also seek to protect our proprietary technology, in part, by requiring our employees, consultants, contractors and other third parties to execute confidentiality agreements and invention assignment agreements.

Patents

Our intellectual property strategy is focused on protecting through patents and other intellectual property rights our core technologies, including AMP, implementations for preparing target-enriched libraries for NGS using clinical samples, and related instrumentation and software applications. In addition, we protect our ongoing research and development into the detection and monitoring of cancer or other diseases and related therapeutic applications through patents and other intellectual property rights.

As of March 31, 2020, we solely own 13 pending U.S. patent applications and 36 pending foreign patent applications, we co-own one issued U.S. patent, one pending U.S. patent application and five pending foreign patent applications with MGH, and we in-license three issued U.S. patents, three pending U.S. patent applications, two issued foreign patents and seven pending foreign patent applications from MGH, including an in-license to MGH’s interest in the co-owned patent and patent applications described above. We do not solely own any issued patents. Our patent portfolio generally includes patents and patent applications relating to our AMP chemistry, including claims directed to methods for generating target-enriched nucleic acid samples, preparing libraries for various NGS platforms, and sequencing libraries prepared from patient samples to detect and monitor cancer and other diseases based on genetic variations, and pending patent applications directed to instruments and systems used to practice such methods.

Issued U.S. patents in our portfolio of company-owned and in-licensed patents and patent applications (if issued) are expected to expire between 2031 and 2037.

Trademarks

Our trademark portfolio is designed to protect the brands of our current and future products and includes U.S. trademark registrations for our company name, Archer, and various product names, such as FusionPlex and VariantPlex.

Trade secrets

We also rely on trade secrets, including know-how, unpatented technology and other proprietary information, to strengthen our competitive position. We have determined that certain technologies, such

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as aspects of our enrichment chemistry and some bioinformatics analysis techniques, are better kept as trade secrets, rather than pursuing patent protection. To prevent disclosure of trade secrets to others, it is our policy to enter into nondisclosure, invention assignment and confidentiality agreements with parties who have access to trade secrets, such as our employees, collaborators, outside scientific collaborators, consultants, advisors and other third parties. These agreements also provide that all inventions resulting from work performed for us or relating to our business and conceived or completed during the period of employment or assignment, as applicable, are our exclusive property. In addition, we take other appropriate precautions, such as physical and technological security measures, to guard against misappropriation of our proprietary information by third parties.

We intend to pursue additional intellectual property protection to the extent we believe it would advance our business objectives. Notwithstanding these efforts, there can be no assurance that we will adequately protect our intellectual property or provide any competitive advantage. We cannot provide any assurance that any patents will be issued from our pending or any future applications or that any issued patents will adequately protect our products or technology. Our intellectual property rights may be invalidated, circumvented or challenged. For instance, we are currently subject to ongoing litigation with Natera in which Natera alleges that our AMP products infringe the Natera Asserted Patents. We cannot predict the outcome of this action or if we will be subject to similar claims in the future. In addition, the laws of various foreign countries where our products are distributed may not protect our intellectual property rights to the same extent as laws in the United States. Furthermore, it may be difficult to protect our trade secrets. While we have confidence in the measures we take to protect and preserve our trade secrets, they may be inadequate and can be breached, and we may not have adequate remedies for violations of such measures. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. For more information regarding risks related to intellectual property, please see “Risk factors—Risks related to our intellectual property.”

MGH license

In July of 2013, we entered into a license agreement with The General Hospital Corporation, d/b/a Massachusetts General Hospital, which we refer to as MGH, pursuant to which we obtained a field exclusive, worldwide, royalty-bearing license under certain patent rights related to our AMP technology in the IVD and non-clinical laboratory research fields. Our license from MGH is sublicensable only with the written approval of MGH.

The license granted to us is subject to the right of MGH and not-for-profit academic, government and other not-for-profit institutions to make and to use the subject matter described or claimed in the rights granted under the licensed patents and, for any licensed patents that are supported by federal funding, the license granted to us is subject to certain rights, conditions and limitations imposed by U.S. law, including a royalty-free, non-exclusive license granted to the United States government and a requirement that any products used or sold in the United States must be manufactured substantially in the United States.

We paid MGH a license issue fee and issued MGH shares of our common stock in connection with the execution of the license agreement. In addition, we reimbursed MGH for a specified portion of costs associated with the preparation, filing, prosecution and maintenance of the licensed patent rights. We have paid MGH success fees upon the achievement of specified milestones and are obligated to pay to MGH additional success fees upon the achievement of other specified milestones relating to commercial sales of regulated products. Additionally, we are obligated to pay to MGH a single-digit percentage running royalty on net sales of licensed products and processes, and we must pay MGH a six digit minimum annual license fee. Additionally, we are obligated to pay MGH a percentage of all sublicensing revenue depending on the term year of our license agreement, which percentage is currently in the low double-digits.

The term of the license agreement continues until the expiration of the last to expire licensed patent. MGH may terminate the license agreement if we challenge the validity or enforceability of a licensed patent. MGH may terminate the license agreement for our failure to pay the amounts required by the

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agreement or our bankruptcy or insolvency-related events or our failure to maintain our insurance obligations under the agreement. We may terminate the license agreement for convenience. Either we or MGH may terminate the license agreement for the other party’s uncured breach.

BD license

In March of 2019, we entered into a license agreement with Becton, Dickinson and Company, which we refer to as BD. Pursuant to this agreement, we obtained a non-exclusive, non-sublicensable, worldwide license under certain patent rights related to molecular barcodes, also referred to as unique molecular identifiers, in the field of stochastic labeling technology for nucleic acid analysis for research and non-infectious disease diagnostics.

The license agreement includes an upfront fee due upon execution and payable in annual installments through 2024. This fee, which is in the seven digits, becomes payable upon the conclusion of this offering. Additionally, we are obligated to pay BD a quarterly low double-digit percentage royalty on net sales of licensed products and processes, which percentage is subject to reduction in certain circumstances.

The term of the license agreement continues until the expiration of the last to expire valid claim of a licensed patent. BD may terminate the license agreement if we challenge the validity or enforceability of a licensed patent. We may terminate the license agreement for convenience subject to immediate payment of the remaining annual fees described above. Either we or BD may terminate the license agreement for the other party’s uncured material breach, bankruptcy or insolvency.

Government regulation and product approval

Regulations

Clinical laboratory improvement amendments of 1988

As a clinical reference laboratory, we are required to hold certain federal, state and local licenses, certifications and permits to conduct our business. Under the Clinical Laboratory Improvement Amendments of 1988, or CLIA, we are required to hold a certificate applicable to the type of laboratory tests we perform and to comply with standards applicable to our operations, including test processes, personnel, facilities administration, equipment maintenance, recordkeeping, quality systems and proficiency testing, which are intended to ensure, among other things, that clinical laboratory testing services are performed under a quality management system designed to ensure accurate, reliable and timeliness. Furthermore, we must maintain CLIA compliance and certification to be eligible to bill for clinical laboratory services provided to federal health care program beneficiaries.

To renew our CLIA certificate, we are subject to survey and inspection every two years to assess compliance with program standards. Because we are a College of American Pathologists, or CAP, accredited laboratory, the Centers for Medicare & Medicaid Services, or CMS, does not perform this survey and inspection, and instead relies on our CAP survey and inspection. The CAP accreditation program involves unannounced on-site inspections of our laboratory. CAP is an independent, non-governmental organization that accredits laboratories nationwide on a voluntary basis and that has been recognized by CMS as an accreditation organization to inspect laboratories to determine adherence to CLIA standards. Laboratories performing high complexity testing are required to meet more stringent requirements than laboratories performing less complex tests. In addition, a laboratory that is certified as “high complexity” under CLIA may develop, manufacture, validate and use LDTs. CLIA specifies analytical validation parameters including accuracy, precision, specificity, sensitivity and establishment of a reference range for any LDT used in clinical testing. The regulatory and compliance standards applicable to the testing we perform may change over time, and any such changes could have a material effect on our business.

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Penalties for non-compliance with CLIA requirements include a range of enforcement actions, including suspension, limitation or revocation of the laboratory’s CLIA certificate, as well as directed plan of correction, state on-site monitoring, civil monetary penalties, civil injunctive suit or criminal penalties.

State laboratory licensing

In addition to federal certification requirements of laboratories under CLIA, CLIA provides that states may adopt laboratory regulations and licensure requirements that are more stringent than those under federal law. A number of states have implemented their own more stringent laboratory regulatory requirements. Such laws, among other things, establish standards for the day-to-day operation of a clinical laboratory, including the training and skills required of personnel and quality control. Our laboratory is currently located in Boulder, Colorado and we maintain state laboratory licenses in California, Maryland, Pennsylvania and Rhode Island. State laws may require that nonresident laboratories, or out-of-state laboratories, maintain an in-state laboratory license to perform tests on samples from patients who reside in that state. If any states currently have or adopt similar licensure requirements in the future, we may be required to modify, delay or stop our operations in those states.

Federal oversight of laboratory developed tests

The laws and regulations governing the marketing of clinical laboratory testing and diagnostic products are evolving, extremely complex and, in many instances, there are no significant regulatory or judicial interpretations of these laws and regulations. Clinical laboratory tests are regulated under CLIA, as administered by CMS, as well as by applicable state laws. In addition, the FDCA defines a medical device to include any instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component part, or accessory, intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals. Among other things, pursuant to the FDCA and its implementing regulations, the FDA regulates the research, testing, manufacturing, safety, labeling, storage, recordkeeping, pre-market clearance or approval, marketing and promotion, and sales and distribution of medical devices in the United States to ensure that medical products distributed domestically are safe and effective for their intended uses. In addition, the FDA regulates the export of medical devices manufactured in the United States to international markets.

Although the FDA has statutory authority to assure that medical devices are safe and effective for their intended uses, the FDA has generally exercised its enforcement discretion and not enforced applicable regulations with respect to in vitro diagnostics that are designed, manufactured, and used within a single laboratory for use only in that laboratory. These tests are referred to as LDTs.

Legislative and administrative proposals proposing to amend FDA’s oversight of LDTs have been introduced in recent years and we expect that new legislative and administrative proposals will continue to be introduced from time to time. It is possible that legislation could be enacted into law or regulations or guidance could be issued by the FDA which may result in new or increased regulatory requirements. For example, in recent years, FDA has stated its intention to modify its enforcement discretion policy with respect to LDTs. Specifically, on July 31, 2014, the FDA notified Congress of its intent to modify, in a risk-based manner, its policy of enforcement discretion with respect to LDTs. On October 3, 2014, the FDA issued two draft guidance documents titled “Framework for Regulatory Oversight of Laboratory Developed Tests (LDTs),” or the Framework Guidance, and “FDA Notification and Medical Device Reporting for Laboratory Developed Tests (LDTs),” or the Reporting Guidance. The Framework Guidance stated that FDA intends to modify its policy of enforcement discretion with respect to LDTs in a risk-based manner consistent with the classification of medical devices generally in Classes I through III. The Reporting Guidance would have further enabled FDA to collect information regarding the LDTs currently being offered for clinical use through a notification process, as well as to enforce its regulations for reporting safety issues and collecting information on any known or suspected adverse events related to the use of an LDT.

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Although the FDA halted finalization of these guidance documents in November 2016 to allow for further public discussion on an appropriate oversight approach to LDTs and to give congressional authorizing committees the opportunity to develop a legislative solution, and the FDA issued a discussion paper on possible approaches to LDT regulation in January 2017, the FDA could ultimately modify its current approach to LDTs in a way that would subject LDTs to additional regulatory requirements. Moreover, legislative measures could likewise result in a change to the approach to FDA’s regulation over LDTs, including a requirement for premarket review of LDTs, among other things.

Medical device regulatory framework

Pursuant to its authority under the FDCA, the FDA has jurisdiction over medical devices, which are defined to include, among other things, IVDs. The FDA regulates the research, design, development, pre-clinical and clinical testing, manufacturing, safety, effectiveness, packaging, labeling, storage, recordkeeping, pre-market clearance or approval, adverse event reporting, marketing, promotion, sales, distribution and import and export of medical devices. Specifically, if the FDA begins to actively regulate LDTs, then, unless an exemption applies, each new or significantly modified medical device we seek to commercially distribute in the United States could require either a premarket notification to the FDA requesting permission for commercial distribution under Section 510(k) of the FDCA, also referred to as a 510(k) clearance, or approval from the FDA of a premarket approval, or PMA, application. Both the 510(k) clearance and PMA processes can be resource intensive, expensive, and lengthy, and require payment of significant user fees.

Device classification

Under the FDCA, medical devices are classified into one of three classes (Class I, Class II or Class III) depending on the degree of risk associated with each medical device and the extent of control needed to provide reasonable assurances with respect to safety and effectiveness.

Class I includes devices with the lowest risk to the patient and are those for which safety and effectiveness can be reasonably assured by adherence to General Controls for Medical Devices, which require compliance with the applicable portions of the FDA’s Quality System Regulation, facility registration and product listing, reporting of adverse events and malfunctions, and appropriate, truthful and non-misleading labeling and promotional materials. While some Class I devices also require premarket clearance by the FDA through the 510(k) premarket notification process described below, most Class I products are exempt from the premarket notification requirements.

Class II devices are those that are subject to the General Controls, as well as Special Controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device. These Special Controls can include performance standards, patient registries, FDA guidance documents and post-market surveillance. Most Class II devices are subject to premarket review and clearance by the FDA. Premarket review and clearance by the FDA for Class II devices is accomplished through the 510(k) premarket notification process.

Class III devices include devices deemed by the FDA to pose the greatest risk, such as life-supporting, life-sustaining devices, or implantable devices, in addition to those deemed novel and not substantially equivalent following the 510(k) process. The safety and effectiveness of Class III devices cannot be reasonably assured solely by the General Controls and Special Controls described above. Therefore, these devices are subject to the PMA process, which is generally more costly and time-consuming than the 510(k) process. Through the PMA process, the applicant must submit data and information demonstrating reasonable assurance of the safety and effectiveness of the device for its intended use to the FDA’s satisfaction. Accordingly, a PMA typically includes, but is not limited to, extensive technical information regarding device design and development, pre-clinical and clinical trial data, manufacturing information, labeling and financial disclosure information for the clinical investigators in device studies. The PMA application must provide valid scientific evidence that demonstrates to the FDA’s satisfaction a reasonable assurance of the safety and effectiveness of the device for its intended use.

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The 510(k) clearance process

Under the 510(k) clearance process, the manufacturer must submit to the FDA a premarket notification, demonstrating that the device is “substantially equivalent” to a legally marketed predicate device. A predicate device is a legally marketed device that is not subject to a PMA, i.e., a device that was legally marketed prior to May 28, 1976 (pre-amendments device) and for which a PMA is not required, a device that has been reclassified from Class III to Class II or I, or a device that was previously found substantially equivalent through the 510(k) process. To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device. Clinical data is sometimes required to support substantial equivalence.

After a 510(k) premarket notification is submitted, the FDA determines whether to accept it for substantive review. If it lacks necessary information for substantive review, the FDA will refuse to accept the 510(k) premarket notification. If it is accepted for filing, the FDA begins a substantive review. By statute, the FDA is required to complete its review of a 510(k) notification within 90 days of receiving the 510(k) notification. As a practical matter, clearance often takes longer, and clearance is never assured. Although many 510(k) premarket notifications are cleared without clinical data, the FDA may require further information, including data from samples collected in a clinical setting, to make a determination regarding substantial equivalence, which may significantly prolong the review process. If the FDA agrees that the device is substantially equivalent, it will grant clearance to commercially market the device.

If the FDA determines that the device is not “substantially equivalent” to a predicate device, or if the device is automatically classified into Class III, the device sponsor must then fulfill the much more rigorous premarketing requirements of the PMA approval process, or seek reclassification of the device through the De Novo classification process. The De Novo classification process is an alternate pathway to classify medical devices that are automatically classified into Class III but which are low to moderate risk. A manufacturer can submit a petition for direct de novo review if the manufacturer is unable to identify an appropriate predicate device and the new device or new use of the device presents a moderate or low risk. De Novo classification may also be available after receipt of a “not substantially equivalent” letter following submission of a 510(k) to FDA.

After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a new or major change in its intended use, will require a new 510(k) clearance or, depending on the modification, could require a PMA application. The FDA requires each manufacturer to determine whether the proposed change requires a new submission in the first instance, but the FDA can review any such decision and disagree with a manufacturer’s determination. Many minor modifications are accomplished by an internal letter-to-file in which the manufacture documents its reasoning for why a change does not require premarket submission to the FDA. The letter-to-file is in lieu of submitting a new 510(k) to obtain clearance for such change. The FDA can always review these letters to file in an inspection. If the FDA disagrees with a manufacturer’s determination regarding whether a new premarket submission is required for the modification of an existing 510(k)-cleared device, the FDA can require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or approval of a PMA application is obtained. In addition, in these circumstances, the FDA can impose significant regulatory fines or penalties for failure to submit the requisite application(s).

The PMA approval process

Following receipt of a PMA application, the FDA conducts an administrative review to determine whether the application is sufficiently complete to permit a substantive review. If it is not, the agency will refuse to file the PMA. If it is, the FDA will accept the application for filing and begin the review. The FDA has 180 days to review a filed PMA application, although the review of an application more often occurs over a significantly longer period of time. During this review period, the FDA may request additional information

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or clarification of information already provided, and the FDA may issue a major deficiency letter to the applicant, requesting the applicant’s response to deficiencies communicated by the FDA.

Before approving or denying a PMA, an FDA advisory committee may review the PMA at a public meeting and provide the FDA with the committee’s recommendation on whether the FDA should approve the submission, approve it with specific conditions, or not approve it. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Prior to approval of a PMA, the FDA may conduct inspections of the clinical trial data and clinical trial sites, as well as inspections of the manufacturing facility and processes. Overall, the FDA review of a PMA application generally takes between one and three years, but may take significantly longer. The FDA can delay, limit or deny approval of a PMA application for many reasons, including:


•	the device may not be shown safe or effective to the FDA’s satisfaction;


•	the data from pre-clinical studies and/or clinical trials may be found unreliable or insufficient to support approval;


•	the manufacturing process or facilities may not meet applicable requirements; and


•	changes in FDA clearance or approval policies or adoption of new regulations may require additional data.

If the FDA evaluation of a PMA is favorable, the FDA will issue either an approval letter, or an approvable letter, the latter of which usually contains a number of conditions that must be met in order to secure final approval of the PMA. When and if those conditions have been fulfilled to the satisfaction of the FDA, the agency will issue a PMA approval letter authorizing commercial marketing of the device, subject to the conditions of approval and the limitations established in the approval letter. If the FDA’s evaluation of a PMA application or manufacturing facilities is not favorable, the FDA will deny approval of the PMA or issue a not approvable letter. The FDA also may determine that additional tests or clinical trials are necessary, in which case the PMA approval may be delayed for several months or years while the trials are conducted and data is submitted in an amendment to the PMA, or the PMA is withdrawn and resubmitted when the data are available. The PMA process can be expensive, uncertain and lengthy and a number of devices for which the FDA approval has been sought by other companies have never been approved by the FDA for marketing.

New PMA applications or PMA supplements are required for modification to the manufacturing process, equipment or facility, quality control procedures, sterilization, packaging, expiration date, labeling, device specifications, ingredients, materials or design of a device that has been approved through the PMA process. PMA supplements often require submission of the same type of information as an initial PMA application, except that the supplement is limited to information needed to support any changes from the device covered by the approved PMA application and may or may not require as extensive technical or clinical data or the convening of an advisory panel, depending on the nature of the proposed change.

In approving a PMA application, as a condition of approval, the FDA may also require some form of post- approval study or post-market surveillance, whereby the applicant conducts a follow-up study or follows certain patient groups for a number of years and makes periodic reports to the FDA on the clinical status of those patients when necessary to protect the public health or to provide additional or longer term safety and effectiveness data for the device. The FDA may also approve a PMA application with other post-approval conditions intended to ensure the safety and effectiveness of the device, such as, among other things, restrictions on labeling, promotion, sale, distribution and use. New PMA applications or PMA supplements may also be required for modifications to any approved diagnostic tests, including modifications to manufacturing processes, device labeling and device design, based on the findings of post-approval studies.

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The investigational device process

In the United States, absent certain limited exceptions, human clinical trials intended to support medical device clearance or approval require an investigational device exemption, or IDE, application. Some types of studies deemed to present “non-significant risk” are deemed to have an approved IDE—without affirmative submission of an IDE application to the FDA—once certain requirements are addressed and Institutional Review Board, or IRB, approval is obtained. If the device presents a “significant risk” to human health, as defined by the FDA, the sponsor must submit an IDE application to the FDA and obtain IDE approval prior to commencing the human clinical trials. The IDE application must be supported by appropriate data, such as animal and laboratory testing results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound. Generally, clinical trials for a significant risk device may begin once the IDE application is approved by the FDA and the study protocol and informed consent are approved by appropriate IRBs at the clinical trial sites. Submission of an IDE will not necessarily result in the ability to commence clinical trials, and although the FDA’s approval of an IDE allows clinical testing to go forward for a specified number of subjects, it does not bind the FDA to accept the results of the trial as sufficient to prove the product’s safety and efficacy, even if the trial meets its intended success criteria.

Such clinical trials must be conducted in accordance with the FDA’s IDE regulations that govern investigational device labeling, prohibit promotion and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. Clinical trials must further comply with good clinical practice regulations for IRB approval and for informed consent and other human subject protections. Required records and reports are subject to inspection by the FDA for any clinical trials subject to FDA oversight. The results of clinical testing may be unfavorable, or, even if the intended safety and efficacy success criteria are achieved, may not be considered sufficient for the FDA to grant marketing approval or clearance of a product. The commencement or completion of any clinical trial may be delayed or halted, or be inadequate to support approval of a PMA application or clearance of a 510(k) premarket notification, for numerous reasons.

The Breakthrough Devices Program is a voluntary program intended to expedite the review, development, assessment and review of certain medical devices that provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human diseases or conditions for which no approved or cleared treatment exists or that offer significant advantages over existing approved or cleared alternatives. All submissions for devices designated as Breakthrough Devices will receive priority review, meaning that the review of the submission is placed at the top of the appropriate review queue and receives additional review resources, as needed. Although Breakthrough Device designation or access to any other expedited program may expedite the development or approval process, it does not change the standards for approval. Access to an expedited program may also be withdrawn by the FDA if it believes that the designation is no longer supported by data from our clinical development program. Additionally, qualification for any expedited review procedure does not ensure that we will ultimately obtain regulatory clearance or approval for such product.

Research use only

In the United States, products labeled and sold for research use only, and not for the diagnosis or treatment of disease, are sold to a variety of parties, including biopharmaceutical companies, academic institutions and molecular labs. Because such products are not intended for use in clinical practice in diagnostics, and the products cannot include clinical or diagnostic claims, they are exempt from many regulatory requirements otherwise applicable to medical devices. In particular, while the FDA regulations require that RUO products be labeled, “For Research Use Only. Not for use in diagnostic procedures,” the regulations do not otherwise subject such products to the FDA’s pre- and post-market controls for medical devices.

A significant change in the laws governing RUO products or how they are enforced may require a change to our business model in order to maintain compliance. For instance, in November 2013 the FDA issued a guidance document entitled “Distribution of In Vitro Diagnostic Products Labeled for Research Use Only

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or Investigational Use Only”, or the RUO Guidance, which highlights the FDA’s interpretation that distribution of RUO products with any labeling, advertising or promotion that suggests that clinical laboratories can validate the test through their own procedures and subsequently offer it for clinical diagnostic use as a laboratory developed test is in conflict with RUO status. The RUO Guidance further articulates the FDA’s position that any assistance offered in performing clinical validation or verification, or similar specialized technical support, to clinical laboratories, conflicts with RUO status. If we engage in any activities that the FDA deems to be in conflict with the RUO status held by the products that we sell, we may be subject to immediate, severe and broad FDA enforcement action that would adversely affect our ability to continue operations. Accordingly, if the FDA finds that we are distributing our RUO products in a manner that is inconsistent with its regulations or guidance, we may be forced to stop distribution of our RUO tests until we are in compliance, which would reduce our revenues, increase our costs and adversely affect our business, prospects, results of operations and financial condition. In addition, the FDA’s proposed implementation for a new framework for the regulation of LDTs may negatively impact the LDT market and thereby reduce demand for RUO products.

If the FDA requires marketing authorization of our RUO products in the future, there can be no assurance that the FDA will ultimately grant any clearance or approval requested by us in a timely manner, or at all.

Post-market regulation

After a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply. These include:


•	establishment registration and device listing with the FDA;


•	QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process;


•	labeling regulations and FDA prohibitions against the promotion of investigational products, or the promotion of “off-label” uses of cleared or approved products;


•	requirements related to promotional activities;


•	clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices, or approval of certain modifications to PMA-approved devices;


•	medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur;


•	correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health;


•	the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and


•	post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.

Device manufacturing processes are required to comply with the applicable portions of the QSR, which cover the methods and the facilities and controls for the design, manufacture, testing, production, processes, controls, quality assurance, labeling, packaging, distribution, installation and servicing of finished devices intended for human use. The QSR also requires, among other things, maintenance of a

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device master file, device history file, and complaint files. Manufacturers are subject to periodic scheduled or unscheduled inspections by the FDA. A failure to maintain compliance with the QSR requirements could result in the shut-down of, or restrictions on, manufacturing operations and the recall or seizure of products. The discovery of previously unknown problems with products, including unanticipated adverse events or adverse events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or off-label by a physician in the practice of medicine, could result in restrictions on the device, including the removal of the product from the market or voluntary or mandatory device recalls.

The FDA has broad regulatory compliance and enforcement powers. If the FDA determines that a manufacturer has failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, including the following:


•	issuance of warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties;


•	requesting or requiring recalls, withdrawals, or administrative detention or seizure of our products;


•	imposing operating restrictions or partial suspension or total shutdown of production;


•	refusing or delaying requests for 510(k) marketing clearance or PMA approvals of new products or modified products;


•	withdrawing 510(k) clearances or PMA approvals that have already been granted;


•	refusal to grant export approvals for our products; or


•	criminal prosecution.

Federal and state health care laws

Federal and state physician self-referral prohibitions

We are subject to the federal physician self-referral prohibitions, commonly known as the Stark Law, and to comparable state laws. Together these restrictions generally prohibit us from billing a patient or governmental or private payor for certain designated health services, including clinical laboratory services, when the physician ordering the service, or a member of such physician’s immediate family, has a financial relationship, such as an ownership or investment interest in or compensation arrangement with us, unless the relationship meets an applicable exception to the prohibition. Several Stark Law exceptions are relevant to many common financial relationships involving clinical laboratories and referring physicians, including: (1) fair market value compensation for the provision of items or services; (2) payments by physicians to a laboratory for clinical laboratory services; (3) space and equipment rental arrangements that satisfy certain requirements, and (4) personal services arrangements that satisfy certain requirements. The laboratory cannot submit claims to the Medicare Part B program for services furnished in violation of the Stark Law, and Medicaid reimbursements may be at risk as well. These prohibitions apply regardless of any intent by the parties to induce or reward referrals or the reasons for the financial relationship and the referral. In addition, knowing violations of the Stark Law may also serve as the basis for liability under the federal False Claims Act, or the FCA, which can result in additional civil and criminal penalties.

Federal and state anti-kickback laws

The federal Anti-Kickback Statute, or the AKS, makes it a felony for a person or entity, including a clinical laboratory, to knowingly and willfully offer, pay, solicit or receive any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, in order to induce business that is reimbursable under any federal health care program. The government may also assert that a claim that includes items or services resulting from a violation of the AKS constitutes a false or fraudulent claim under the FCA, which is discussed in greater detail below. Additionally, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. Although the AKS

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applies only to items and services reimbursable under any federal health care program, a number of states have passed statutes substantially similar to the AKS that apply to all payors. Penalties for violations of such state laws include imprisonment and significant monetary fines. Federal and state law enforcement authorities scrutinize arrangements between health care providers and potential referral sources to ensure that the arrangements are not designed as a mechanism to induce patient care referrals or induce the purchase or prescribing of particular products or services. Generally, courts have taken a broad interpretation of the scope of the AKS, holding that the statute may be violated if merely one purpose of a payment arrangement is to induce referrals or purchases. In addition to statutory exceptions to the AKS, regulations provide for a number of safe harbors. If an arrangement meets the provisions of an applicable exception or safe harbor, it is deemed not to violate the AKS. An arrangement must fully comply with each element of an applicable exception or safe harbor in order to qualify for protection. Failure to meet the requirements of the safe harbor, however, does not render an arrangement illegal. Rather, the government may evaluate such arrangements on a case-by-case basis, taking into account all facts and circumstances.

Corporate practice of medicine

A number of states do not allow business corporations to employ physicians to provide professional services. This prohibition against the “corporate practice of medicine” is aimed at preventing corporations such as us from exercising control over the medical judgments or decisions of physicians. The state licensure statutes and regulations and agency and court decisions that enumerate the specific corporate practice rules vary considerably from state to state and are enforced by both the courts and regulatory authorities, each with broad discretion. If regulatory authorities or other parties in any jurisdiction successfully assert that we are engaged in the unauthorized corporate practice of medicine, we could be required to restructure our contractual and other arrangements with certain physicians and other health care professions.

Other federal and state health care laws

In addition to the requirements discussed above, several other health care fraud and abuse laws could have an effect on our business.

The FCA prohibits, among other things, a person from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment or approval and from, making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim in order to secure payment or retaining an overpayment by the federal government. In addition to actions initiated by the government itself, the statute authorizes actions to be brought on behalf of the federal government by a private party having knowledge of the alleged fraud. Because the complaint is initially filed under seal, the action may be pending for some time before the defendant is even aware of the action. If the government intervenes and is ultimately successful in obtaining redress in the matter or if the plaintiff succeeds in obtaining redress without the government’s involvement, then the plaintiff will receive a percentage of the recovery. Finally, the Social Security Act includes its own provisions that prohibit the filing of false claims or submitting false statements in order to obtain payment. Several states have enacted comparable false claims laws which may be broader in scope and apply regardless of payor.

The Social Security Act includes civil monetary penalty provisions that impose penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent. In addition, a person who offers or provides to a Medicare or Medicaid beneficiary any remuneration, including waivers of co-payments and deductible amounts (or any part thereof), that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of Medicare or Medicaid payable items or services may be liable under the civil monetary penalties statute. Moreover, in certain cases, providers who routinely waive copayments and deductibles for Medicare and Medicaid beneficiaries, for example, in connection with patient assistance programs, can also be held liable under the AKS and FCA. One of the statutory exceptions to the prohibition is non-routine, unadvertised waivers of copayments or deductible

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amounts based on individualized determinations of financial need or exhaustion of reasonable collection efforts. The Office of Inspector General of HHS, emphasizes, however, that this exception should only be used occasionally to address special financial needs of a particular patient.

The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created new federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Like the AKS, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

The Physician Payments Sunshine Act, enacted as part of the ACA, also imposed annual reporting requirements on manufacturers of certain devices, drugs and biologics for certain payments and transfers of value by them to physicians, as defined by such law, and teaching hospitals, as well as ownership and investment interests held by such physicians and their immediate family members.

Efforts to ensure that our internal operations and business arrangements with third parties comply with applicable laws and regulations involve substantial costs. Any action brought against us for violation of these or other laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. If our operations are found to be in violation of any of the fraud and abuse laws described above or any other laws that apply to us, we may be subject to penalties, including potentially significant criminal, civil and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government healthcare programs, contractual damages, reputational harm, integrity oversight and reporting obligations, diminished profits and future earnings, and the curtailment or restructuring of our operations.

Privacy and security laws

Health insurance portability and accountability act

Under HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, HHS has issued regulations to protect the privacy and provide for the security of protected health information, or PHI, used or disclosed by certain entities including certain health care providers, such as us. HIPAA also regulates standardization of data content, codes and formats used in certain health care transactions and standardization of identifiers for health plans and providers.

Three standards have been promulgated under HIPAA’s and HITECH’s regulations: the Standards for Privacy of Individually Identifiable Health Information, which restrict the use and disclosure of certain individually identifiable health information, the Standards for Electronic Transactions, which establish standards for common healthcare transactions, such as claims information, plan eligibility, payment information and the use of electronic signatures, and the Security Standards for the Protection of Electronic Protected Health Information, which require covered entities and business associates to implement and maintain certain security measures to safeguard certain electronic health information, including the adoption of administrative, physical and technical safeguards to protect such information.

The HIPAA privacy regulations cover the use and disclosure of PHI by covered entities as well as business associates, which are defined to include subcontractors that create, receive, maintain, or transmit PHI on behalf of a covered entity or business associate. They also set forth certain rights that an individual has with respect to his or her PHI maintained by a covered entity, including the right to access or amend certain records containing PHI, or to request restrictions on the use or disclosure of PHI. The HIPAA security regulations establish requirements for safeguarding the confidentiality, integrity, and availability of PHI that is electronically transmitted or electronically stored. HITECH, among other things, established certain health information security breach notification requirements. A covered entity must notify any individual whose PHI is breached according to the specifications set forth in the breach

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notification rule. The HIPAA privacy and security regulations establish a uniform federal “floor” and do not preempt state laws that are more stringent or provide individuals with greater rights with respect to the privacy or security of, and access to, their records containing PHI or insofar as such state laws apply to personal information that is broader in scope than PHI. In addition, individuals (or their personal representatives, as applicable) generally have the right to access test reports directly from laboratories and to direct that copies of those reports be transmitted to persons or entities designated by the individual.

HIPAA authorizes state attorneys general to file suit on behalf of their residents for violations. Courts are able to award damages, costs and attorneys’ fees related to violations of HIPAA in such cases. While HIPAA does not create a private right of action allowing individuals to file suit against us in civil court for violations of HIPAA, its standards have been used as the basis for duty of care cases in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI. In addition, violations of HIPAA could result in significant penalties imposed by the HHS’s Office for Civil Rights. HIPAA also mandates that the Secretary of HHS conduct periodic compliance audits of HIPAA covered entities, such as us, and their business associates for compliance with the HIPAA privacy and security standards. It also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of the civil monetary penalty paid by the violator.

We have certain obligations under HIPAA regarding the use and disclosure of any PHI that may be provided to us. HIPAA and HITECH impose significant administrative, civil and criminal penalties against covered entities and business associates for noncompliance with privacy and security requirements. Further, various states, such as California and Massachusetts, have implemented similar privacy laws and regulations that impose restrictive requirements regulating the use and disclosure of health information and other personally identifiable information. For example, on June 28, 2018, California enacted the California Consumer Privacy Act, or CCPA, which became effective on January 1, 2020. The CCPA creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

Numerous other federal, state and foreign laws, including consumer protection laws and regulations, govern the collection, dissemination, use, access to, confidentiality and security of patient health information. We intend to continue to comprehensively protect all personal information and to comply with all applicable laws regarding the protection of such information.

General data protection regulation

European Union member states, the United Kingdom, Switzerland and other jurisdictions have adopted data protection laws and regulations, which impose significant compliance obligations. In the EEA and the United Kingdom, the collection and use of personal data, including clinical trial data, are governed by the provisions of the GDPR. The GDPR became effective on May 25, 2018, repealing its predecessor directive and increasing responsibility and liability of companies in relation to the processing of personal data of European Union data subjects. The GDPR, together with national legislation, regulations and guidelines of the European Union member states and the United Kingdom governing the processing of personal data, impose strict obligations and restrictions on the ability to collect, analyze and transfer personal data, including health data from clinical trials and adverse event reporting. In particular, these obligations and restrictions concern the consent of the individuals to whom the personal data relates, the information provided to the individuals, the transfer of personal data out of the EEA or the United Kingdom, security breach notifications, security and confidentiality of the personal data and imposition of substantial potential fines for breaches of the data protection obligations. European data protection authorities may interpret the GDPR and national laws differently and impose additional requirements, which add to the complexity of processing personal data in or from the EEA or the United Kingdom. Guidance on implementation and compliance practices are often updated or otherwise revised.

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Reimbursement for clinical laboratory services

However, in the future, we intend to generate revenue on our products from several sources, including third-party payors, laboratory services intermediaries, and self-paying individuals. To receive reimbursement from third-party payors, we would need to comply with third-party payor coverage policies.

Healthcare reform

In March 2010, the ACA was enacted in the U.S. The ACA made a number of substantial changes to the way healthcare is financed both by governmental and private insurers. For example, the ACA required each medical device manufacturer to pay a sales tax equal to 2.3% of the price for which such manufacturer sells its medical devices but this medical device tax has been permanently eliminated as part of the 2020 federal spending package, effective January 1, 2020. The ACA also contains a number of other provisions, including provisions governing enrollment in federal and state healthcare programs, reimbursement matters and fraud and abuse, which we expect will impact our industry and our operations in ways that we cannot currently predict.

On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, or Texas District Court Judge, ruled that the entire ACA is invalid based primarily on the fact that the TCJA repealed the tax-based shared responsibility payment imposed by the ACA, on certain individuals who fail to maintain qualifying health coverage for all or part of a year, which is commonly referred to as the “individual mandate.” Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the Texas District Court Judge ruling that that the individual mandate was unconstitutional and remanded the case back to the district court to determine whether the remaining provisions of the ACA are invalid as well. It is unclear how this decision, future decisions, subsequent appeals, and other efforts to repeal and replace the ACA will impact the ACA.

Employees

As of March 31, 2020, we had a total of 337 employees, 335 of whom were full time employees, and 144 of whom had advanced degrees in various subject matters, including research and development, software engineering, bioinformatics, regulatory, statistics, data management and lab operations. Our employees are located in Boulder, Colorado, Golden, Colorado, and other locations inside and outside the United States. None of our employees are represented by any collective bargaining agreements. We believe that we maintain good relations with our employees.

Facilities

Our corporate headquarters are located in Boulder, Colorado, where we occupy approximately 65,600 square feet of office and laboratory space in Boulder, Colorado under a lease that ends in January 2025, with an option to extend the lease for five additional years. We also lease approximately 8,700 square feet in Boulder, Colorado under a sublease that terminates in November 2022. We also lease approximately 22,600 square feet of office space and laboratory space in Boulder, Colorado under a sublease that ends in June 2021 and 1,300 square feet of residential space (for use by remote employees visiting Boulder), also in Boulder, Colorado, under a lease that ends in July 2020. We also lease approximately 52,465 square feet of office, manufacturing, distribution, lab and freezer space in Louisville, Colorado, under a lease that terminates in July 2027. In addition, we occupy laboratory spaces

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in a number of rooms in St. Louis, Missouri, pursuant to a license agreement that expires on December 31, 2020. We also occupy office space in a number of rooms at a co-working facility in Boston, Massachusetts, pursuant to a month-to-month license agreement. We also occupy approximately 3,500 square feet of office and laboratory space in Golden, Colorado under a lease that ends in June 2024, with an option to renew for four additional years. We believe our existing facilities meet our current needs. We will need additional space in the future as we continue to build our development, commercial and support teams. We believe we can find suitable additional space in the future on commercially reasonable terms.

Legal proceedings

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors, and there can be no assurances that favorable outcomes will be obtained. We are currently not a party to any material legal proceedings other than as disclosed below:

Natera, Inc. On January 27, 2020, Natera filed a lawsuit against us in the United States District Court for the District of Delaware, alleging that our products using AMP chemistry, and the manufacture, use, sale, and offer for sale of such products, infringe U.S. Patent No. 10,538,814. On March 25, 2020, we filed an answer denying Natera’s allegations and asserting certain affirmative defenses and counterclaims, including that U.S. Patent No. 10,538,814 is invalid and not infringed. On April 15, 2020, Natera filed an answer denying our counterclaims and filed an amended complaint alleging that our products using AMP chemistry, including STRATAFIDE, PCM, LiquidPlex, ArcherMET, FusionPlex, and VariantPlex, and the manufacture, use, sale, and offer for sale of such products, infringe U.S. Patent No. 10,538,814, U.S. Patent No. 10,557,172, U.S. Patent No. 10,590,482, and U.S. Patent No. 10,597,708, or collectively, the Natera Asserted Patents, each of which are held by Natera. Natera seeks, among other things, damages and other monetary relief, costs and attorneys’ fees, and an order enjoining us from further infringement of the Natera Asserted Patents. On May 13, 2020, we filed an answer to Natera’s amended complaint denying Natera’s allegations and asserting certain affirmative defenses and counterclaims, including that the Natera Asserted Patents are invalid and not infringed. On June 3, 2020, Natera filed an answer denying our counterclaims. On June 4, 2020, we filed a motion seeking dismissal of Natera’s infringement claims against STRATAFIDE, PCM, and ArcherMET, and for a judgment that U.S. Patent No. 10,538,814, U.S. Patent No. 10,557,172, and U.S. Patent No. 10,590,482 are invalid. The litigation is ongoing and is in its early stages. For risks related to this litigation, please see “Risk factors—Risks related to our business and strategy–One of our competitors has alleged that our Anchored Multiplex PCR, or AMP, chemistry and products using AMP are infringing on its intellectual property, and we may be required to redesign our technology, obtain a license, cease using our AMP chemistry altogether and/or pay significant damages, among other consequences, any of which would have a material adverse effect on our business, financial condition and results of operations.”

QIAGEN Sciences. On July 10, 2018, we and MGH filed a lawsuit in the United States District Court for the District of Delaware against QIAGEN Sciences, LLC, QIAGEN LLC, QIAGEN Beverly, Inc., QIAGEN Gaithersburg, Inc., QIAGEN GmbH and QIAGEN N.V., which we collectively refer to as QIAGEN, and a named QIAGEN executive who was a former member of our board of directors, alleging several causes of action, including infringement of the ’810 Patent, trade secret misappropriation, breach of fiduciary duty, false advertising, tortious interference and deceptive trade practices. The ’810 Patent relates to methods for preparing a nucleic acid for sequencing and aspects of our AMP technology. On October 30, 2019, with the permission of the Court, we amended our complaint to add a claim for infringement of the ’597 Patent. The ’597 Patent relates to methods of preparing and analyzing nucleic acids, such as by enriching target sequences prior to sequencing, and aspects of our AMP technology. The QIAGEN products that we allege infringe the ’810 Patent and the ’597 Patent include, but are not limited to, QIAseq Targeted DNA Panels, QIAseq Targeted RNAscan Panels, QIAseq Index Kits and QIAseq Immune Repertoire RNA Library Kits. We are seeking, among other things, damages for Archer’s lost profits due to QIAGEN’s infringement and a permanent injunction enjoining QIAGEN from marketing and selling the

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infringing products and from using our trade secrets. On December 5, 2019, QIAGEN and the named QIAGEN executive submitted their answer denying the allegations in our complaint and asserting affirmative defenses that, among other things, the ’810 Patent and ’597 Patent are not infringed by QIAGEN’s products, that both patents are invalid, and that the complaint fails to state any claim for which relief may be granted. This litigation is ongoing, and trial is currently scheduled for August 2021. For risks related to this litigation, please see “Risk factors—Risks related to our intellectual property.”

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Management

The following table sets forth information for our executive officers and directors as of April 20, 2020:



Name	Age	Position
Executive Officers:
Jason W. Myers	44	President and Chief Executive Officer and Director
Joshua Stahl	34	Chief Scientific Officer and Chief Operating Officer
Britton A. Russell	31	Senior Vice President, Finance
Non-Employee Directors:
Steven J. Kafka	50	Executive Chairman of the Board of Directors

ArcherDX, Inc. S-1