PSNL 10-K & 10-Q changes, risk factors and insider trading
Personalis, Inc. · Nasdaq · Services-Medical Laboratories · CIK 1527753 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “International trade policies, including tariffs, sanctions and trade barriers may adversely affect our business, financial condition, results of operations and prospects.”
Removed heading “The exit of the U.K. from the EU could lead to further regulatory divergence and require us to incur additional expenses in order to develop, manufacture, and commercialize our products and services.”
Largest changes
The global credit and financial markets have experienced extreme volatility and disruptionssee in full comparisonin(includingtheaspast.a result of tariffs and recession concerns). These disruptions can result in severely diminished liquidity and credit availability, increases in inflation, declines in consumer confidence, declines in economic growth,increasesswings in unemployment rates and uncertainty about economic stability.ThereThecanfinancial markets and the global economy may also benoadverselyassuranceaffectedthatbyfurtherthedeteriorationimpact of tariffs, other restrictive trade policies, supply chain disruptions, labor shortages, fluctuations in currency exchange rates, changes in interest rates, military conflict, acts of terrorism, government shutdowns or other geopolitical events. Sanctions imposed, and other actions taken, by the United States and other countries in response to geopolitical conflicts, may also continue to adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability. Deterioration in credit and financial markets and confidence in economic conditionswillmaynot occur, including actual or perceived changes in interest rates and inflation.continue. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment, higher inflation, or continued unpredictable and unstable market conditions. If the current equity and credit markets continue to deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. Our portfolio of corporate and government bonds could also be adversely impacted. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our operations, growth strategy, financial performance and stock price and could require us to delay or abandon development or commercial initiatives. In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive an economic downturn or rising inflation, which could directly affect our ability to attain our operating goals on schedule and on budget.
Unauthorized access, loss, or dissemination could also damage our reputation or disrupt our operations, including our ability to conduct our analyses, deliver test results, process claims and appeals, provide customer assistance, conduct research and development activities, collect, process, and prepare company financial information, provide information about our tests and other patient and physician education and outreach efforts through our website, and manage the administrative aspects of our business. Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities. For example, like many companies, we use Log4j with respect to certain software or systems to log security and performance information. In early 2022, we discovered a Log4j vulnerability in our environment although to date we have found no indication that our or our partners’ data was exposed. Upon learning of this vulnerability, we applied a patch and made updates to our systems and infrastructure intended to reduce risks associated with the vulnerability. In December 2025, we received notice from our e-mail service provider about certain Personalis suspicious account email activity. See “— If our information technology systems or data, or those of third parties with whom we work or our data, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences.” We are not aware of any unauthorized access to our financial systems or records.see in full comparison
“International trade policies, including tariffs, sanctions and trade barriers may adversely affect our business, financial condition, results of operations and prospects.”see in full comparison
We rely on third parties to operate critical business systems to process sensitive information in a variety of contexts, including, without limitation, on-site systems and cloud-based data centers, systems handling human resources, financial reporting and controls, customer relationship management, regulatory compliance, and other infrastructure operations. We also communicate sensitive data, including patient data, electronically, and through relationships with multiple third-party vendors and their subcontractors. These applications and data encompass a wide variety of sensitive information, including research and development information, patient data, commercial information, and business and financial information. Our ability to monitor these third parties’ security practices is limited, and these third parties may not have adequate security measures in place.see in full comparisonIfFortheexample,thirdinpartiesDecemberwith whom2025, weworkreceivedexperiencenotice from our e-mail service provider about certain suspicious Personalis email account activity. Upon notification of this incident, we conducted asecuritythoroughincidentinvestigation and determined that a threat actor had gained access to a small number of user accounts and some patients’ PHI may have been accessed. We are not aware of any unauthorized access to our financial systems orotherrecordsinterruption,orweanycouldimpactexperiencetoadverseourconsequences.test processing systems. While wemayhavebetakenentitledsteps todamages(a)ifnotify thethirdaffectedparties with whom we work fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award. In addition, supply-chain attacks have increased in frequencypatients andseverity,the U.S Department of Health andweHumancannotServices,guaranteeOfficethatofthirdCivilparties and infrastructure in our supply chain or thatRights of thethirdincident,partiesaswithrequiredwhombywelaw,workandsupply(b)chainsmitigatehavethenotpotentialbeenforcompromisedincidentsorto occur in the future, there can be no assurance thattheythesedomeasuresnotwillcontainbeexploitable defects or bugs that could result in a breach of or disruption to our information technology systems or the third-party information technology systems that support us and our services.effective.
Other international and geo-political events could also have a serious adverse impact on our business.see in full comparisonFor instance, in February 2022, Russia initiated military action against Ukraine and the two countries are now at war. In addition, in October 2023, Hamas attacked Israel which provoked a state of war, and there is now a larger regional conflict. In response, the United States and certain other countries imposed significant sanctions and trade actions against Russia and could impose further sanctions, trade restrictions, and other retaliatory actions.While we cannot predict the broader consequences,thegeo-politicalconflictconflicts and retaliatory and counter-retaliatory actions could continue to affect, and potentially materially adversely affect, global trade, currency exchange rates, inflation, regional economies, and the global economy, which in turn may increase our costs, disrupt our supply chain, impair our ability to raise or access additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition, and results of operations.
“The complexity of announced or future tariffs may also increase the risk that we or our customers or suppliers may be subject to civil or criminal enforcement actions in the United States or foreign jurisdictions related to compliance with trade regulations. Foreign governments may also adopt non-tariff measures, such as procurement preferences or informal disincentives to engage with, purchase from or invest in U.S. entities, which may limit our ability to compete internationally and attract non-U.S. investment, employees, customers and suppliers. …”see in full comparison
Full comparison: every changed paragraph (163)
We have incurred net losses since our inception. For each of the years ended December 31, 20242025 and 2023,2024, we had a net lossesloss of $81$81.3 million and $108 million, respectively.million. As of December 31, 2024,2025, we had an accumulated deficit of $550$631.3 million. To date, we have not generated sufficient revenue to achieve profitability, and we may never achieve or sustain profitability. In addition, we expect to continue to incur net losses for the foreseeable future, and we expect our accumulated deficit to continue to increase as we focus on scaling our business and operations. Our efforts to sustain and grow our business may be more costly than we expect, and we may not be able to increase our revenue sufficiently to offset our higher operating expenses. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital. Our failure to achieve and sustain profitability in the future would negatively affect our business, financial condition, results of operations, and cash flows, and could cause the market price of our common stock to decline.
If we are unable to increase sales of our current services or successfully develop and commercialize other services or products,services, or if we are unable to execute our sales and marketing strategy for our testing services or unable to gain sufficient acceptance in the market, or if we are unable to generate sufficient reimbursement or coverage by insurance or governmental payors for our products,testing services, we may fail to generate sufficient revenue to achieve profitability and sustain our business.
We currently derive substantially all of our revenue from sales of our testing services. We began offering our testing services through our CLIA-certified, CAP-accredited, and state-licensed laboratory in 2013. We are in varying stages of research and development for other services and products that we may offer. If we are unable to increase sales of our existing services or successfully develop and commercialize other services and products,services, we will not generate sufficient revenue to become profitable.
In addition, as a growing genomics company, we have engaged in targeted sales and marketing activities for our testing services. Although we have had revenue from sales of our testing services since 2013, our testing services may never gain significant acceptance in the marketplace and therefore may never generate substantial revenue or permit us to become profitable. We will need to further establish and grow the market for our testing services through the expansion of our current relationships and development of new relationships with biopharmaceutical customers and through gaining acceptance in medical communities. Gaining acceptance in medical communities can be supported by, among other things, publications in leading peer-reviewed journals of results from studies using our testing services. The process of publication in leading medical journals is subject to a peer review process and peer reviewers may not consider the results of our studies sufficiently novel or worthy of publication. Failure to have our studies published in peer-reviewed journals would limit the adoption of our testing services.
Our ability to successfully market our testing services that we have developed, and may develop in the future, will depend on numerous factors, including:
generation of sufficient reimbursement or coverage by insurance or governmental payors for our productstesting services;
our ability to demonstrate the utility and value of our testing services to our customers and potential customers;
whether our customers and potential customers accept that our testing services are sufficiently sensitive and specific;
our ability to educate our customers and potential customers of the utility of the comprehensiveness of our testing services and of testing patients at multiple time points;
whether our testing services are considered superior to those of our competitors;
our success obtaining and maintaining patent and trade secret protection for our testing services and technologies; and our success enforcing and defending intellectual property rights and claims.
Failure to achieve broad market acceptance of our testing services would materially harm our business, financial condition, and results of operations.
Our principal competition comes from commercial and academic organizations that employ various approaches to produce information that is similar to the information that we generate for our customers. These commercial and academic organizations may not utilize our testing services or may not believe them to be superior to those tests that they currently use or others that are developed. Further, it may be difficult to educate our customers and potential customers on the benefits of our comprehensive tests compared to simpler panels provided by our competitors. For example, the information that we provide may be more challenging or require additional resources for our customers to interpret than the information provided by our competitors’ less comprehensive assays. In addition, our suppliers or competitors may announce the development of new products, services or features that results in our customers’ or potential customers’ decision to reduce, postpone or cancel orders from us while they wait to determine which products, services or features are or will be perceived as technologically superior, more commercially successful or adopted as standards in the industry; such decisions by our customers or potential customers may be influenced by their concerns regarding the potential obsolescence of data generated using our testing services and features if our testing services or features are or will not be perceived as technologically superior, commercially successful or adopted as standards in the industry.
Some of our present or potential competitors, including Adela, Inc., BostonGene Corporation, Caris Life Sciences, Inc., DELFI Diagnostics, Inc., Exact Sciences Corporation, Foresightwhich Diagnosticsit Inc.is (“Foresight”),expected to be acquired by Abbott Laboratories, Inc., in the second quarter of 2026, Foresight, which was acquired by Natera in December 2025, Foundation Medicine, Inc., Freenome, Inc., Fulgent Genetics, Inc., Geneseeq TechnologyMedicine Inc., GRAIL, Inc., Guardant Health, Inc., Haystack Oncology, Inc., which was acquired by Quest Diagnostics Incorporated in June 2023, Laboratory Corporation of America Holdings, MedGenome Inc., Myriad Genetics, Inc.,Myriad, Natera, NeoGenomics, Inc., Novogene Corporation, Predicine, Inc., Roche Molecular Systems, Inc., SAGA Diagnostics AB, Tempus, and Veracyte, Inc. may have more widespread brand recognition or substantially greater financial or technical resources, development or production capacities, or marketing capabilities than we do. They may be able to devote greater resources to the development, promotion and sale of their products and services than we do or sell their products and services at prices designed to win more significant levels of market share. Also, we have had, and may have in the future, customer or supply relationships with our present or potential competitors. For example, we have an agreement with Natera to provide advanced tumor analysis for use in Natera’s MRD testing offerings.test. During the year ended December 31, 2024,2025, revenue under our agreement accounted for 30%8% of our total revenue. See “—We currentlyhave derivehistorically derived a substantial portion of our revenue from DNA sequencing and data analysis services that we provideprovided to Natera. We expectno ourlonger have a material commercial relationship with Natera to wind down by mid-2025 and,and if we are unable to grow our customer base and diversify our revenue concentration, our business, financial condition, revenue and other operating results, and cash flows may be materially harmed.” Further, we have partnered with Tempus to expand the sales and marketing of our NeXT Personal Dx tests in four indications and Tempus could in the future develop tests that compete directly or indirectly with our tests or partner with our competitors. If Tempus were to develop competitive tests or partner with our competitors, we or Tempus may terminate the agreement and, upon termination of the agreement, we may be unable to expand our sales force timely to replace the Tempus sales and marketing efforts, which could adversely impact our business or affect our ability to commercialize our testing services. In addition, our present or potential competitors have been or may be acquired by, receive investments from, or enter into other commercial relationships with larger, more well-established and well-financed companies. We may also have disputes with our present or potential competitors. See “—Litigation or other proceedings or third-party claims of intellectual property infringement, misappropriation or other violations may require us to spend significant time and money, and could in the future prevent us from selling our tests or impact our stock price, any of which could have a material adverse effect.”
Others may develop lower-priced, less complex products and services that pharmaceutical companies could view as functionally equivalent to our current or planned future services, and our competitors may develop services with the same attributes and features as our testing services, which could force us to lower the price of our testing services and impact our operating margins and our ability to achieve and maintain profitability. In addition, companies or governments that control access to genetic testing and related services through umbrella contracts or regional preferences could promote our competitors or prevent us from performing certain services. In addition, technological innovations that result in the creation of enhanced productsservices or diagnostic tools that are more sensitive or specific than ours may enable other clinical laboratories, hospitals, physicians, or medical providers to provide specialized products or services 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, or if we cannot maintain successful customer or supply relationships with Natera,Moderna, Illumina or other present or potential competitors, we may be unable to ensure or increase market acceptance and sales of our current or planned future services, which could prevent us from increasing or sustaining our revenue or achieving or sustaining profitability.
We expect that biopharmaceutical companies will increasingly focus attention and resources on the targeted and personalized cancer diagnostic sector as the potential and prevalence of molecularly targeted oncology therapies approved by the FDA along with companion diagnostics increases. For example, the FDA has approved several such targeted oncology therapies that use companion diagnostics, including the anaplastic lymphoma kinase FISH test from Abbott Laboratories, Inc. for use with Xalkori® from Pfizer Inc., the BRAF kinase V600 mutation test from Roche Molecular Systems, Inc. for use with Zelboraf® from Daiichi-Sankyo/Genentech/Roche, and the BRAF kinase V600 mutation test from bioMerieux for use with Tafinlar® from GlaxoSmithKline. Since companion diagnostic tests are part of FDA labeling, non-FDA cleared tests, such as the ones we currently offer as part of our testing services, would be considered an off-label use and this may limit our access to this market segment. Our customers and potential customers may request, or in some cases have requested, that we consider developing and seeking FDA approval for companion diagnostic tests to accompany those customers’ therapeutic product candidates, and it may be necessary for us to do so in order to successfully compete for the business of these customers. If we do not successfully develop FDA-approved companion diagnostics, we may be at a competitive disadvantage and may be unable to increase market acceptance and sales of our other service or product offerings, which would prevent us from increasing or sustaining our revenue or achieving or sustaining profitability. If we were to develop one or more FDA-approved companion diagnostics, we would incur increased research and development expenses, and such activities may also divert our resources or the attention of our management and may create competing internal priorities for us. In addition, we have limited experience developing diagnostics, have never developed an FDA-approved companion diagnostic, and may be unable to successfully compete against companies with more experience developing and commercializing companion diagnostics.
Additionally, projects related to cancer diagnostics and particularly genomics have receivedin the past received, and may in the future receive, increased government funding, both in the United States of America (the “U.S.”) and internationally. As more information regarding cancer genomics becomes available to the public, we anticipate that more products and services aimed at identifying treatment options will be developed and that these products and services may compete with our testing services. In addition, competitors may develop their own versions of our current or planned future services and products in countries where we did not apply for or receive patents and compete with us in those countries, including encouraging the use of their products or services by biopharmaceutical companies in other countries.
We have substantial customer concentration, with a limited number of customers accounting for a substantial portion of our revenue and accounts receivable; in particular, we currently derive a substantial portion of our revenue from two of our largest customers, NateraModerna and Moderna,the VA MVP, and in the past have derived a substantial portion of our revenue from other large customers.
Like other genomic profiling companies that sell to the pharmaceutical industry, we have substantial customer concentration. We currently derive a significant portion of our revenue from Natera,Moderna, which accounted for 30%22% and 43%28% of our revenue for the years ended December 31, 20242025 and 2023,2024, respectively. We also derive a significant portion of our revenue from Moderna,the VA MVP, which accounted for 28%17% and 5%9% of our revenue for the years ended December 31, 20242025 and 2023,2024, respectively. We previously derived a significant portion of our revenue from the VA MVP,Natera, which more recently accounted for 9%8% and 13%30% of our revenue for the years ended December 31, 20242025 and 2023,2024, respectively. Our top five customers, including Natera, Moderna, and the VA MVP,MVP and Natera, accounted for 81%62% and 74%81% of our revenue for the years ended December 31, 20242025 and 2023,2024, respectively. There are inherent risks whenever a large percentage of revenue is concentrated with a limited number of customers. While we have attempted to grow our customer base and diversify our revenue concentration beyond Natera, Moderna, and the VA MVP,MVP and Natera, we may not be able to successfully do so in the future. Our predictions regarding the future level of demand for our testing services that will be generated by these customers may be wrong. In addition, revenue from our larger customers have historically fluctuated and may continue to fluctuate based on the commencement and completion of clinical trials or other projects, the timing of which may be affected by market conditions or other factors, some of which may be outside of our control. Some of our customers have in the past suspended or terminated clinical trials or projects, received less funding than expected, experienced declining or delayed sales, or otherwise decided to reduce or eliminate their use of our testing services, and these and other customers may also do so in the future. As a result, we could be pressured to reduce the prices we charge for our testing services, which would have an adverse effect on our margins and financial position, and which would likely negatively affect our revenue and results of operations. In particular, if we do not win future VA MVP renewals with a value comparable to that of our historical contracted orders, it may have a material adverse effect on our revenue, cash position, and results of operations. See “—We have derivedderive a substantial portion of our current revenue from DNA sequencing and data analysis services that we providedprovide to one of our largest customers, the VA MVP. If the VA MVP’s demand for and/or funding for our DNA sequencing and data analysis services continues to be substantially reduced, or if our new contract with the VA MVP were to be terminated, our business, financial condition, revenue and other operating results, and cash flows will be materially harmed.” Similarly, if the VA MVP was eliminated, awarded its contract to one of our competitors, further reduced the size of our contract or failed to renew our contract in the future, then our revenue, cash position, and results of operations would be materially adversely impacted. Likewise, if Natera, Moderna or any of our other significant customers were to reduce or cease their use of our testing services, then our revenue, cash position, and results of operations may be materially adversely impacted. Further, if any of our significant customers were to stop payment for our testing services, it would have a material adverse effect on our accounts receivable, increasing our credit risk. The failure of these customers to pay their balances, or any customer to pay future outstanding balances, would result in an operating expense and reduce our cash flows.
We currentlyhave derivehistorically derived a substantial portion of our revenue from DNA sequencing and data analysis services that we provideprovided to Natera. We expectno ourlonger have a material commercial relationship with Natera to wind down by mid-2025 and, if we are unable to grow our customer base and diversify our revenue concentration, our business, financial condition, revenue and other operating results, and cash flows may be materially harmed.
In February 2021, we entered into a partnership in the field of personalized oncology with Natera, pairing our NeXT tumor profiling and diagnostic services and products with Natera’s personalized ctDNA test Signatera™ for treatment monitoring and MRD assessment. Under this non-exclusive agreement, Natera is responsible for validating the design of, and commercialization of, Signatera personalized ctDNA assays using matched tumor and normal exome sequence data from us. The agreement covers MRD testing for both clinical use and research use. Since that time, Natera’s sample volumes have increased such that we currently derive a significant portion of our revenue from sales of our DNA sequencing and data analysis services to Natera under our agreement. For example, in 2024, revenue under our agreement with Natera accounted for 30% of our total revenue.revenue for the year ended December 31, 2024 and only 8% of our total revenue for the year ended December 31, 2025. In December 2024, we amended our agreement with Natera to extend minimum volume commitments through the second quarter of 2025.2025, Uponafter expirationwhich ofsuch thecommitments termexpired ofand thewere amendednot agreement,renewed. weWe expectno ourlonger have a material commercial relationship with Natera and do not expect to terminatehave one going forward, as we are aware that Natera plans to bringbrought such services in-house in lieu of purchasing such services from us. We are also aware of at least one third party supplier of DNA sequencing and analysis services, such that Natera has elected, and may continue to elect in the future, to send a portion (or all) of its samples to its other supplier(s) instead of us, which it is not contractually prohibited from doing, given the non-exclusive nature of our agreement. Our agreement with Natera requires us to achieve certain quality and turnaround time metrics for Natera samples. Recently, the volumes of samples sent to us by Natera have fluctuated significantly and may continue to do so for the remainder of the term of the agreement, which could cause us to experience difficulty in achieving such metrics from time to time, or to meet our other obligations under our agreement.
Additionally, Natera or other customers may allege that any failures to achieve the required metrics are a breach of our agreement and seek to terminate our agreement prior to its expiration and/or pursue any remedies available to it under the agreement, at law or in equity. Relatedly, we have incurred expenses in connection with our scale-up activities under our agreement with Natera, and we may incur additional expenses in the future to increase our laboratory’s capacity to process increased sample volumes from our other customers. Our activities under our agreement with Natera have had, and activities with our other customers may in the future have, an impact on our business, including diversion of our resources and the attention of our management, including with respect to our internal research and development objectives and projects for our other customers, collaborators and/or partners. If we are unable to successfully increase our laboratory’s capacity and manage any such competing objectives and/or projects for other customers, we may be unable to meet the quality and timing requirements of our agreement with Natera or our other customers, collaborators and/or partners. We may also be unable to successfully research, develop, launch and/or commercialize our testing services or service capabilities. Furthermore, our NeXT Personal test is a next-generation, tumor-informed liquid biopsy assay designed to detect and quantify MRD and recurrence in patients previously diagnosed with cancer. If NeXT Personal or any of our other services is seen as competing with Signatera or any of Natera’s other services, we will still be required to fulfill our obligations to Natera under our agreement, although Natera may elect to send a portion (or all) of its samples to its other supplier(s) and/or bring such services in-house. If the volume of samples received under our agreement with Natera were to be significantly reduced or eliminated, or if our agreement with Natera were to be terminated or not renewed after expiration, and we are unable to grow our customer base and diversify our revenue concentration timely, our business, financial condition, revenue and other operating results, and cash flows may be materially harmed.
We have derivedderive a substantial portion of our current revenue from DNA sequencing and data analysis services that we providedprovide to one of our largest customers, the VA MVP. If the VA MVP’s demand for and/or funding for our DNA sequencing and data analysis services continues to be substantially reduced, or if our new contract with the VA MVP were to be terminated, our business, financial condition, revenue and other operating results, and cash flows will be materially harmed.
We have derivedderive a substantial portion of our revenue from sales of our DNA sequencing and data analysis services to the VA MVP. In September 2017, we entered into a one-year contract with three one-year optional renewal periods with the VA for the VA MVP, pursuant to which we received contracted orders from the VA MVP in September 2017, 2018, 2019, 2020, and 2021. In September 2022, we entered into a new contract with the VA MVP to continue providing them WGS services and received an initial task order with a value of up to $10.0 million (the "2022 VA MVP Agreement"). The performance period under the new contract includes a base period of one year, with four one-year renewal option periods that may be exercised upon discretion of the VA MVP. In SeptemberAugust 2024,2025, we received a thirdfourth task order with a value of up to $7.5$13.5 million. There is no guarantee that the VA MVP will exercise any subsequent renewal option.
The VA MVP’s contracted orders for DNA sequencing and data analysis services have fluctuated significantly in value over time and are subject to the availability of funding, enrollment of veterans in the VA MVP study, and the VA MVP’s continued demand, if any, for our testing services among other factors. For example, the VA MVP contracted order received in September 2020 had a value of $30.9 million, whereas annual orders (other than 2025) received in subsequent years had values of $10.0 million, or less, which represents a substantial decline. We have no certainty that funding will be made available for our testing services, or that the VA MVP will honor its payment obligations under the current contract and task order, or award any future contracts, contract renewals or contracted orders to us. The priorities of the VA, the VA MVP, or the U.S. government may change, including in response to a health epidemic pandemicpandemic, or federal cost-cutting initiatives such as those recently announced and enacted by the current administration. Future task orders from the VA MVP for our DNA sequencing and data analysis services may be reduced or eliminated as a result of reductions in government research spending and federal cost-cutting initiatives. For example, funding for our testing services may be limited or not available, and our business, financial condition, and operating results and cash flows will be materially harmed. Similarly, if we do not win future VA MVP contracts and renewals (whether due to being outbid by a competitor or the VA MVP’s decision not to award a future contract on a timely basis or at all, or to terminate for convenience or failure to renew any contract, for whatever reason) with a value comparable to that of our historical contracted orders, our business, financial condition, revenue and other operating results and cash flows may be materially harmed.
We have only recognized revenue under our VA MVP contract upon the receipt and processing of samples, and the timing and number of VA MVP samples we have received has been and could in the future be negatively affected by factors beyond our control, which has resulted, and may result in the future, in delaying our ability to process and recognize revenue for such samples. For example, the revenue we recognized during the contract year that began in September 2020 significantly exceeded the value of the VA MVP contracted order we received in September 2020 because we continued to receive after such date, and subsequently processed, samples under VA MVP contracted orders that remained unfulfilled as of September 2020 due to the time required for the VA to select optimal samples from its collection for research and then provide us those samples. Therefore, period-to-period comparisons of our operating results relating to VA MVP contracted orders may not be meaningful. The timing and number of VA MVP samples may also be negatively affected by a public health crisis. For example, in March 2020, the VA MVP announced that it was suspending sample collection due to the COVID-19 pandemic. In addition, we believe the COVID-19 pandemic may have been a contributing factor to the reduction in values of contracted orders received in 2021 and later years compared to the September 2020 contract order, as the VA MVP delayed new enrollment and also may have needed to divert resources to respond to the pandemic. AAnother health epidemic or pandemic may negatively impact the value of any potential new VA MVP contract or order.
Our corporate customers, other than the VA MVP and Natera, are primarily biopharmaceutical companies that use our testing services to support clinical trials, including Moderna. Our future success is substantially dependent on our ability to maintain our customer relationships and to establish new ones. Many factors have the potential to impact our customer relations,relationships, including the type of support our customers and potential customers require and our ability to deliver it, our customers’ satisfaction with our testing services, and other factors that may be beyond our control. Furthermore, our customers may decide to decrease or discontinue their use of our testing services due to changes in research and product development plans (including as a result of a public health crisis), failures in their clinical trials (which failures are statistically much more likely to occur than not at some point in the clinical development process, notwithstanding any enhanced patient stratification from the use of our proprietary tests and algorithms), financial constraints, or utilization of internal testing resources or tests performed by other parties, or other circumstances outside of our control.
We engage in conversations with corporate customers regarding potential commercial opportunities on an ongoing basis in the event that one of these customers’ drug candidates is approved. 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. Speculation in the industry about our existing or potential relationships with biopharmaceutical companies could be a catalyst for adverse speculation about us, our testing services, and our technology, which can adversely affect our reputation and our business. In addition, the termination of these relationships could result in a temporary or permanent loss of revenue.
Our corporate customers’ clinical trials are expensive, can take many years to complete, and their outcome is 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. Many of the biopharmaceutical companies that are our customers do not have products approved for commercial sale and are not profitable. 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 revenue from these customers may decrease or cease entirely, and our business may be harmed. Furthermore, even if these customers have a drug approved for commercial sale, they may not choose to use our testing services as a companion diagnostic with their drug,drug or they may impose additional customization requirements for commercialization, thereby limiting our potential revenue.revenue and profits.
The coverage and reimbursement status of newly-approved or cleared laboratory developed tests, including our NeXT Dx and NeXT Personal Dx products,testing services, is uncertain. We are seeking reimbursement for our NeXT Dx and NeXT Personal Dx tests, and other in vitro diagnostic tests we may develop, and if such tests are inadequately covered by insurance or ineligible for such reimbursement, this could limit our ability to derive revenue from any such current or future tests. The commercial success of current or future services and products in both domestic and international markets may depend in part on the availability of coverage and adequate reimbursement from third-party payors, including government payors, such as the Medicare and Medicaid programs, or equivalent foreign programs, managed care organizations, and other third-party payors. The government and other third-party payors are increasingly attempting to contain health care costs by limiting both insurance coverage and the level of reimbursement for new diagnostic tests. As a result, they may not cover or provide adequate payment for any current or future in vitro diagnostic tests that we develop. These payors may conclude that our testing services or products are not medically necessary, or are less safe, less effective, or less cost-effective than existing or later-introduced services or products.services. These payors may also conclude that the overall cost of using one of our tests exceeds the overall cost of using a competing test, and third-party payors may not approve any current or future in vitro diagnostic tests we develop for insurance coverage and adequate reimbursement.
In January 2024, we announced that we received a final Medicare coverage determination for our NeXT Dx offering, extended retroactively to August 29, 2023. In November 2025, we announced that we received Medicare coverage for NeXT Personal Dx for post-treatment surveillance of cancer recurrence in patients with Stage II and III breast cancer, with an effective date of October 7, 2025. In February 2026, we also announced that we received Medicare coverage for NeXT Personal Dx for surveillance of patients with Stage I to III NSCLC with an effective date of January 9, 2026. While we estimate that approximately half of new solid tumor cancer cases will be diagnosed in patients covered by Medicare, the Medicare coverage determination may not be indicative of our ability to obtain coverage with other payors. Even if favorable coverage and reimbursement status is attained for one or more of our products,testing services, less favorable coverage policies and reimbursement rates may be implemented in the future.
We are pursuing a partner-centric strategy and have key relationships with Tempus, Myriad, Moderna and Merck, among others. These and any other partnering and/or collaboration arrangements that we have entered into or may enter into in the future may not be successful, or may terminate, which could adversely impact our business or affect our ability to develop and commercialize our servicestesting and products.services.
Any current or future collaborations, including any strategic alliances or any collaborations to develop companion diagnostic tests, that we have entered (for example, our strategic alliances with Moderna and Merck; and our collaborations with Tempus; Myriad; ClearNote Health, Inc.; Cancer Research UK, University College London, and the Francis Crick Institute (the TRACERx study); Institut Curie; The Royal Marsden; the Vall d'Hebron Institute of Oncology (VHIO); the University of California, San Diego; Duke University; Vanderbilt University and Johns Hopkins University (the PREDICT study); the Dana-Farber Cancer Institute; the University of Texas M.D. Anderson Cancer Center; University Medical Center Hamburg-Eppendorf (also known as UKE); Criterium and the Academic Breast Cancer Consortium; Yale Cancer Center; Aarhus University; British Columbia Cancer; and University Health Network, or may enter into may not be successful. The success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators. Collaborations are subject to numerous risks, which include that:
Anderson Cancer Center; University Medical Center Hamburg-Eppendorf (also known as UKE); and Criterium and the Academic Breast Cancer Consortium) or may enter into may not be successful. The success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators. Collaborations are subject to numerous risks, which include that:
collaborators may not pursue development and commercialization of our testing services or products or may elect not to continue or renew development or commercialization programs based on trial or test results, changes in their strategic focus due to the acquisition of competitive services or products, availability of funding, or other external factors, such as a business combination that diverts resources or creates competing priorities for our collaborator;
collaborators could independently develop, or develop with third parties, services or products that compete directly or indirectly with our testing services or products;
disputes may arise between us and a collaborator that causes the delay or termination of the research, development, or commercialization of our current or future services or products or that results in costly litigation or arbitration that diverts management attention and resources;
collaborations may be terminated, and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable current or future services or products;
collaborators may own or co-own intellectual property covering our testing services or products that results from our collaborating with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property;
collaborators’ activities or use of our testing services or deliverables may create additional regulatory obligations and could lead to side effects or adverse events in patients, exposing us to potential liability or regulatory review;
collaborators’ sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings; and we may choose or our collaborators may request or require us to expand our facilities and/or establish new facilities domestically and/or internationally, which may significantly increase our expenses and divert resources and management’s attention. See “—We may need to continue to invest in our infrastructure in advance of increased demand for our testing services; our failure to accurately forecast demand would have a negative impact on our business and our ability to achieve and sustain profitability.” and “—Expansion into international markets would subject us to increased regulatory oversight and regulatory, economic, social, health and political uncertainties, which could cause a material adverse effect on our business, financial position, and results of operations.”
We believe that there are only a few manufacturers other than Illumina that are currently capable of supplying and servicing the equipment necessary for our laboratory operations, including sequencers and various associated reagents. Likewise, we believe that there are a limited number of manufacturers and suppliers for other reagents and materials necessary for our laboratory operations, such as the sample preparation reagents required for our ACE technology, which enables our NeXT Platform to provide more comprehensive sequencing coverage, as well as those required to create personalized liquid biopsy panels for each patient as part of our NeXT Personal assay. Although we have evaluated and may continue in the future to evaluate equipment and materials from other suppliers, the use of equipment or materials provided by these replacement suppliers would require us to alter our laboratory operations. Transitioning to a new supplier would be time-consuming and expensive, would likely result in interruptions in our laboratory operations, could affect the performance specifications of our laboratory operations, or could require that we revalidate our tests. Additionally, an existing supplier of ours may allege that such activities constitute a breach of its agreement with us and may cease supplying us with sufficient quantities of materials or equipment that meet our specifications, in a timely manner or at all. Moreover, an existing supplier or third party may allege that such activities, replacement equipment or materials infringe, misappropriate or otherwise violate its intellectual property, and may bring infringement or other intellectual property-related claims against us. See “—Litigation or other proceedings or third-party claims of intellectual property infringement, misappropriation or other violations may require us to spend significant time and money, and could in the future prevent us from selling our tests or impact our stock price, any of which could have a material adverse effect.” We cannot assure you that, if we were forced to replace Illumina or another supplier on which we rely, we would be able to secure alternative equipment, reagents, and other materials, and bring such equipment, reagents, and other materials on-line and revalidate them without experiencing interruptions in our workflow. If we encounter delays or difficulties in securing, reconfiguring, or revalidating the equipment and reagents we require for our testing services, our business, financial condition, results of operations, and reputation could be adversely affected.
International trade policies, including tariffs, sanctions and trade barriers may adversely affect our business, financial condition, results of operations and prospects.
We operate in a global economy, which includes partners and suppliers in certain countries outside the United States. There is inherent risk, based on the complex relationships among the U.S. and the countries in which our partners and suppliers reside, that political, diplomatic, and national security factors can lead to global trade restrictions and changes in trade policies and export regulations that may adversely affect our business and operations. The current international trade and regulatory environment is subject to significant ongoing uncertainty. The U.S. government has announced substantial new tariffs affecting a wide range of products and jurisdictions and has indicated an intention to continue developing new trade policies, including with respect to the pharmaceutical industry. In response, certain foreign governments have announced or implemented retaliatory tariffs and other protectionist measures. These developments have created a dynamic and unpredictable trade landscape, which may adversely impact our business, results of operations, financial condition and prospects.
We do not own or operate, and currently have no plans to establish, any manufacturing facilities. We currently rely, and expect to continue to rely, on third parties for the manufacture of the specialized laboratory equipment, raw materials and other supplies we use in our business. Currently, certain of our direct suppliers are located outside of the United States. In addition, our suppliers in the United States source or may source components of the products we purchase from them from sources outside the United States. Current or new tariffs may adversely impact our supply chain.
Unlike many industries, our ability to pass increased costs to customers is limited by the structure of reimbursement systems and, if the FDA determines our tests are subject to enforcement as medical devices, medical device pricing. The pricing of many of our testing services are, or will be, established through annual or multi-year contracts with commercial, third-party payors, customers, and group purchasing organizations, and reimbursement methodologies established by government programs, such as Medicare. These arrangements typically include fixed pricing terms that may be negotiated prior to the implementation of the recently announced tariffs. As a result, and depending on the timing and scope of the implementation of these tariffs, cost increases due to tariffs may be difficult or impossible to pass through to customers until the next negotiation cycle, which could be years away.
Current or future tariffs may also result in increased research and development expenses, including with respect to increased costs associated with raw materials, laboratory equipment and research materials and components. Trade restrictions affecting the import of materials necessary for our tests could result in increased costs to process tests and delays to delivery of our testing services. Increased costs and extended delivery timelines could place us at a competitive disadvantage compared to companies operating in regions with more favorable trade relationships and could reduce investor confidence and negatively impact our business, results of operations, financial condition and growth prospects.
The complexity of announced or future tariffs may also increase the risk that we or our customers or suppliers may be subject to civil or criminal enforcement actions in the United States or foreign jurisdictions related to compliance with trade regulations. Foreign governments may also adopt non-tariff measures, such as procurement preferences or informal disincentives to engage with, purchase from or invest in U.S. entities, which may limit our ability to compete internationally and attract non-U.S. investment, employees, customers and suppliers. Foreign governments may also take other retaliatory actions against U.S. entities, such as decreased intellectual property protection, increased enforcement actions, or delays in regulatory approvals, which may result in heightened international legal and operational risks. In addition, the United States and other governments have imposed and may continue to impose additional sanctions, such as trade restrictions or trade barriers, which could restrict us from doing business directly or indirectly in or with certain countries or parties and may impose additional costs and complexity to our business.
Trade disputes, tariffs, restrictions and other political tensions between the United States and other countries may also exacerbate unfavorable macroeconomic conditions including inflationary pressures, foreign exchange volatility, financial market instability, and economic recessions or downturns. The ultimate impact of current or future tariffs and trade restrictions remains uncertain and could materially and adversely affect our business, financial condition, and prospects. While we actively monitor these risks, any prolonged economic downturn, escalation in trade tensions, or deterioration in international perception of U.S.-based companies could materially and adversely affect our business, ability to access the capital markets or other financing sources, results of operations, financial condition and prospects. In addition, tariffs and other trade developments have and may continue to heighten the risks related to the other risk factors described elsewhere in this report.
We have a single facility and if it becomes damaged or inoperable, or we are required to vacate our facility, our ability to sell and provide our testing services and pursue research and development efforts may be jeopardized.
We currently derive our revenue from our genomic analysis conducted in our laboratories. Currently, our only clinical reference or research and development laboratory facility is in Fremont, California. Our laboratory facility and equipment could be harmed or rendered inoperable by natural or man-made disasters, including fires, earthquakes, flooding, and power outages, which may render it difficult or impossible for us to sell or perform our testing services for some period of time. Northern California continues to experience serious fires and the San Francisco Bay Area is considered to lie in an area with earthquake risk. The inability to sell or to perform our sequencing and analysis services, disruptions in our operations, or the backlog of samples that could develop if our laboratory facility is inoperable for even a short period of time, may result in the loss of customers or harm to our reputation or relationships with scientific or clinical collaborators, and we may be unable to regain those customers or repair our reputation or such relationships in the future. For example, from January 2023 through April 2023, we experienced substantial disruption to use of our laboratory facility due to a failure of an electrical bus duct serving that facility. Furthermore, our laboratory facility and the equipment we use to perform our testing services and our research and development work could be costly and time-consuming to repair or replace.
Additionally, a key component of our research and development process involves using biological samples as the basis for the development of our testing services, and our testing services typically involve using biological samples provided by or on behalf of our customers or collaborators. In some cases, these samples are difficult to obtain. If the parts of our laboratory facility where we store these biological samples were damaged or compromised, or if these biological samples or the resulting data were otherwise lost, damaged or compromised due to equipment malfunction, human error or other causes, our ability to pursue our research and development projects or provide our testing services, as well as our reputation, could be jeopardized. For example, we have experienced from time to time, and may experience in the future, equipment malfunctions that have resulted in lost, damaged or compromised samples or resulting data. We carry insurance for damage to our property or to our customer's property while in our possession, and we also carry insurance for the disruption of our business, but these types of insurance may not be sufficient to cover all of our potential losses or liabilities and may not continue to be available to us on acceptable terms, if at all.
Further, if our laboratory facility becomes inoperable, we would likely not be able to license or transfer our technology to other facilities with the qualifications, including state licensure and CLIA certification, that would be necessary to cover the scope of our current and our planned future services. Even if we were to find facilities with such qualifications to perform our testing services, they may not be available to us on commercially reasonable terms.
Errors, including if our tests fail to accurately detect gene variants, or mistakes, or any other quality issues, including if we fail to or incompletely or incorrectly identify the significance of gene variants, could have a significant adverse impact on our business. We classify variants in accordance with guidelines that are subject to change and subject to our interpretation. There have also been and could in the future be flaws in the databases, third-party tools or algorithms we use, or in the software that handles automated parts of our classification protocol. If we receive poor quality or degraded samples, our tests may be unable to accurately detect gene variants or we may fail to or incompletely or incorrectly identify the significance of gene variants, which could have a significant adverse impact on our business.business, including our customers returning our tests. In addition, our customers require timely turnaround of high-quality genomic data and analyses, and if we were not able to meet our customers’ specific requirements, it could also have a significant adverse effect on our business. Many of our agreements with our customers grant our customers the right to audit our quality assurance processes. If we fail to meet the standards required by these audits, or if we are unable to remediate any deficient findings from these audits, in a timely manner our customers may terminate their agreements with us and it could have an adverse effect on our business, reputation, and results of operations.
Inaccurate results or misunderstandings of, or inappropriate reliance on, the information we provide to our customers could lead to, or be associated with, lack of efficacy, side effects or adverse events in patients who use our tests, or who rely on our tests to determine therapies to develop, select or monitor, including treatment-related death, and could lead to termination of our testing services or result in claims against us. A product liability or professional liability claim could result in substantial damages and be costly and time-consuming for us to defend.
If we cannot develop services and products to keep pace with rapid advances in technology, medicine, and science, or if we experience delays in developing such services and products,services, our operating results and competitive position could be harmed.
In recent years, there have been numerous advances in technologies relating to the diagnosis and treatment of cancer. Several new cancer drugs have been approved, and a number of new drugs are in pre-clinical and clinical development. There have also been advances in methods used to identify patients likely to benefit from these drugs based on analysis of biomarkers. We must continuously develop new services and products,services, enhance any existing services, and avoid delays in such developments and enhancements to keep pace with evolving technologies on a timely and cost-effective basis. Our current services and our planned future services and products could become obsolete unless we continually innovate and expand them to demonstrate benefit in the diagnosis, monitoring, or prognosis of patients with cancer. New cancer therapies typically have only a few years of clinical data associated with them, and much of that data may not be disclosed by the pharmaceutical company that conducted the clinical trials. This could limit our ability to develop services and products based on, for example, biomarker analysis related to the appearance or development of resistance to those therapies. If we cannot adequately demonstrate the clinical utility of our testing services and our planned future services and products to new treatments, sales of our testing services could decline, which would have a material adverse effect on our business, financial condition, and results of operations.
Personalized cancer therapies represent new therapeutic approaches that could result in heightened regulatory scrutiny, delays in clinical development, or delays in achieving, or inability to achieve, regulatory approval, commercialization, or payor coverage, any of which could adversely affect our business.
Actual or perceived safety issues, including adoption of new therapeutics or novel approaches to treatment, may adversely influence the willingness of subjects to participate in clinical studies, or if approved by applicable regulatory authorities, of physicians to subscribe to the novel treatment mechanics. The FDA or other applicable regulatory authorities may ask for specific post-market requirements, and additional information regarding benefits or risks of our testing services may emerge at any time prior to or after regulatory approval.
Our success in implementing our business strategy depends largely on the skills, experience, and performance of key members of our executive management team and others in key management positions. The collective efforts of each of our executives and others working with them as a team are critical to us as we continue to develop our technologies, services, products, and research and development programs. As a result of the difficulty in locating qualified new management, the loss or incapacity of existing members of our executive management team could adversely affect our operations. If we were to lose one or more of these key employees, we could experience difficulties in finding qualified successors, competing effectively, developing our technologies, and implementing our business strategy. If there are changes to our leadership team, there is a risk to organizational effectiveness and employee retention as well as the potential for disruption to our business. Integrating members into new or different management roles could prove disruptive to our operations, require substantial resources and management attention and ultimately prove unsuccessful. Each member of our executive management team has an employment agreement; however, the existence of an employment agreement does not guarantee retention of members of our executive management team, and we may not be able to retain those individuals or replace them in the event we lose their services. We do not maintain “key person” life insurance on any of our employees.
Management's Discussion & Analysis (MD&A)
Removed heading “Lease Impairment”
Removed heading “Restructuring and Other Charges”
Largest changes
“We reduced our workforce during the first quarter of 2023 and the fourth quarter of 2023 to reduce our cash burn and increase operating efficiencies, which combined affected about 100 employees. We also closed our China operations. The $8.1 million in restructuring and other charges recognized in 2023 is comprised of $7.5 million in one-time employee termination benefits (including costs related to termination of our former China employees) and $0.6 million of other noncash charges (primarily asset disposals and impairments in connection with the closure of our China operations).”see in full comparison
“During the third quarter of 2023, we completed the move of our laboratory operations from our Menlo Park facility to our Fremont facility and began actively marketing the Menlo Park space for sublease. Accordingly, we evaluated the ongoing value of the operating lease right-of-use asset associated with the Menlo Park facility. …”see in full comparison
“During the third quarter of 2023, we completed the move of our laboratory operations from our Menlo Park facility to our Fremont facility and began actively marketing the Menlo Park space for sublease. Accordingly, we evaluated the ongoing value of the operating lease right-of-use asset associated with the Menlo Park facility. …”see in full comparison
“The increase in cost of revenue in 2024 was primarily due to higher revenue levels (revenue increased 15% over the same period). Cost of revenue increased at a lesser rate as compared to the corresponding revenue increases primarily because of lower labor costs resulting from prior workforce reductions and operational efficiencies. …”see in full comparison
Full comparison: every changed paragraph (105)
We develop, market, and sell advanced cancer genomic tests andtesting services. Our testing services are used by pharmaceutical companies for translational research, biomarker discovery, the development of personalized cancer therapies, and for clinical trials. Our tests are used by physicians to detect residual or recurrent cancer in patients, monitor cancer response to therapy, and uncover insights for therapy selection. Our testing services are used by pharmaceutical companies for translational research, biomarker discovery, the development of personalized cancer therapies, and clinical trials. We also provide whole exome and whole genome sequencing services for other diagnostic companies and whole genome sequencing services for population sequencing initiatives.
Today, our products are routinely used by many of the largest oncology-focused pharmaceutical companies for analysis of patient samples in their clinical trials and drug development programs. Our advanced genomic sequencing and analytics also support the development of personalized neoantigen therapies for cancer and other next-generation cancer immunotherapies. For example, we are providing genomic testing to Moderna, Inc. ("Moderna") in its ongoing clinical trials evaluating a personalized cancer therapy. In addition, we partner with diagnostics companies by providing our advanced tumor profiling and analysis capabilities as an input to their products. More recently, we launched new diagnostic offerings for the clinical setting and, in November 2023, entered into an agreement with Tempus to commercialize our NeXT Personal Dx test. We have also pursued non-cancer related business opportunities, specifically within the population sequencing market, by providing whole genome sequencing ("WGS") services under contract with the U.S. Department of Veterans Affairs Million Veteran Program ("VA MVP").
We are working with a growing number of leading cancer centers and world-class academic research institutions to build and publish the clinical evidence-base to support our productstesting services and our key indications, as well as to obtain reimbursement coverage from Medicare and other payors. Because of the ultra-high analytical sensitivity of our technology, we are primarily focusing on three indications: breast cancer, lung cancer, and immunotherapy (IO) monitoring. We have collaborations with Cancer Research UK, University College London, and the Francis Crick Institute (the TRACERx study); Institut Curie; The Royal Marsden; the Vall d'Hebron Institute of Oncology (VHIO); the University of California, San Diego; Duke University; Vanderbilt University and Johns Hopkins University (the PREDICT study); the Dana-Farber Cancer Institute; the University of Texas M.D. Anderson Cancer Center; University Medical Center Hamburg-Eppendorf (also known as UKE); and Criterium and the Academic Breast Cancer Consortium,Consortium; Yale Cancer Center; Aarhus University; British Columbia Cancer; and University Health Network, that will focus on building the evidence-base for our technology and these indications.
Today, our testing services are routinely used by many of the largest oncology-focused pharmaceutical companies for analysis of patient samples in their clinical trials and drug development programs. Our advanced genomic sequencing and analytics also support the development of personalized neoantigen therapies for cancer and other next-generation cancer immunotherapies. For example, we are providing genomic testing services to ModernaTX, Inc. ("Moderna") in its ongoing clinical trials evaluating a personalized cancer therapy. In addition, we partner with diagnostics companies by providing our advanced tumor profiling and analysis capabilities as an input to their products. More recently, we launched new diagnostic offerings for the clinical setting and, in November 2023, entered into an agreement with Tempus to commercialize our NeXT Personal Dx test. In late 2024, we expanded our collaboration partnership with Tempus to enable Tempus to market and sell NeXT Personal to Tempus' pharmaceutical and biotech customers who wish to bundle MRD testing with other Tempus offerings in a given study. In July 2025, we further expanded our collaboration partnership with Tempus to authorize Tempus to market NeXT Personal Dx for colorectal cancer and extend the term of the Tempus Agreement through November 25, 2029. We have also pursued non-cancer related business opportunities, specifically within the population sequencing market, by providing whole genome sequencing ("WGS") services under contract with the U.S. Department of Veterans Affairs Million Veteran Program ("VA MVP").
Total revenue of $69.6 million decreased 18%, or $15.0 million, during 2025 compared to 2024, primarily due to lower expected revenue from Enterprise sales, which was primarily Natera. Revenue from Enterprise sales was $5.9 million in 2025 compared to $25.4 million in 2024 and the decline was due to the winding down of the project with Natera. This decrease was partially offset by higher revenue from population sequencing, which increased $4.3 million, or 58%.
Total revenue of $84.6 million increased 15%, or $11.1 million, during 2024 compared to 2023, primarily driven by higher revenue from pharma tests. Revenue from pharma tests was $50.9 million in 2024 compared to $31.9 million in 2023, an increase of 60%. This increase was partially offset by lower revenue from enterprise sales, which declined $6.4 million, or 20%.
Secured Milestone Medicare Coverages for Breast & Lung Cancer: Received Medicare coverage approval in the fourth quarter for the surveillance of cancer recurrence in breast cancer patients, and also, received Medicare coverage for Stage I to III NSCLC in the first quarter of 2026; both are expected to be key catalysts for clinical revenue generation and market share growth in the MRD space Published Landmark TRACERx Data: Highlighted data from one of the largest and most comprehensive NSCLC patient cohorts to date in the journal Cell, demonstrating the clinical importance of Personalis’ ultrasensitive MRD approach Validated ctDNA Dynamics: Published VHIO data in Clinical Cancer Research titled "Broad Utility of Ultrasensitive Analysis of ctDNA Dynamics across Solid Tumors Treated with Immunotherapy," further reinforcing the clinical validity of the NeXT Personal® platform in a broad array of cancer types Clinical Momentum: Clinical test revenue of $2.0 million, more than double the $0.8 million in 2024 Volume Performance: Clinical test volume reached 16,233 tests, a nearly 400% increase over the 3,285 test volume in 2024 Strong Cash Position: Ended the year with approximately $240.0 million in cash, cash equivalents, and short-term investments. This includes approximately $109.0 million in net proceeds from our At-The-Market (ATM) sales program, executed at a weighted-average price of $8.43 per share
Received Medicare coverage for NeXT Dx, our comprehensive tumor profiling test and we are currently seeking Medicare coverage for our separate liquid biopsy molecular residual disease ("MRD") test, Next Personal Dx.
Delivered 3,285 total molecular tests in 2024, compared with 177 tests in the prior year.
Announced a new publication validating our NeXT Personal test, an ultra-sensitive, tumor-informed circulating tumor DNA (ctDNA) assay for detecting MRD, monitoring therapy response, and detecting recurrence in patients diagnosed with solid tumor cancers.
The analytical validation study was published in Oncotarget on March 14, 2024.
The test demonstrated a detection threshold of 1.67 parts per million (PPM) of ctDNA with 100% analytical specificity; enabling an ultra-sensitive range leading to early cancer detection.
Multiple clinical data results demonstrating the clinical performance of NeXT Personal were presented at the American College of Clinical Oncology meeting in Chicago. Key presentations include:
Compelling early-stage breast cancer detection results presented by Dr. Isaac Garcia-Murillas and team (Institute of Cancer Research, London) and Prof. Nicolas Turner and team (Royal Marsden NHS Foundation Trust UK). In this study, they found:
NeXT Personal enabled earlier detection of recurrence, with a ~15-month lead time over imaging.
100% of patients that recurred were detected with NeXT Personal and 100% of patients that were ctDNA negative on longitudinal testing were cancer-free.
A presentation by Dr. Rodrigo Toledo of the Vall d’Hebron Institute of Oncology (VHIO) highlighted the importance of NeXT Personal’s use for immunotherapy monitoring. This data showed:
Baseline levels and the changes in levels of ctDNA detected by NeXT Personal predict therapy response and clinical outcomes for late-stage cancer patients receiving immunotherapy.
NeXT Personal had an average lead time for detecting cancer progression of 81 days over imaging.
Highlighted clinical performance of NeXT Personal at the European Society of Medical Oncology (ESMO) Congress 2024 in Barcelona, Spain:
Significant results from the TRACERx study presented by Professor Charles Swanton of University College London and the Francis Crick Institute with an expanded study cohort of non-small cell lung cancer (NSCLC) patients with strong detection rates for residual cancer in the challenging landmark period (first 10 to 120 days immediately after surgery).
Compelling data for late-stage cancer patients on immunotherapy presented by Dr. Rodrigo Toledo of the Vall d’Hebron Institute of Oncology that accurately linked significant decreases in ctDNA levels in response to immunotherapy to longer overall survival than patients who did not respond well.
Commenced NeXT Personal Dx commercialization efforts with Tempus.
Expanded Tempus collaboration to the biopharma industry, which enables Tempus to market NeXT Personal to Tempus' pharmaceutical and biotech customers who wish to bundle MRD testing with other Tempus offerings in a given study.
Executed a cross-license agreement with Myriad Genetics, Inc. covering patent estates for tumor-informed approaches to detect MRD.
Entered into an agreement with Foresight Diagnostics Inc. to settle and dismiss pending claims of intellectual property infringement by licensing our patents. Foresight agreed to pay a low single-digit tiered royalty on sales covered by the patents.
Raised approximately $35.0 million in net financing proceeds from Tempus, consisting of $18.4 million from Tempus’ exercise of all its common stock warrants, at an average price of $2.00 per share, and $16.6 million net of expenses, from Tempus' purchase of common stock at a price of $5.07 per share.
Raised an additional $30.1 million in net proceeds from selling common stock under our At-The-Market ("ATM") program at a weighted-average price of $4.61 per share.
Advanced business strategy with investment of $50.0 million from Merck and extended collaboration with Moderna.
Received a new task order in the amount of $7.5 million from the VA MVP.
We believe thereThere are several important factors that we expect to impact our operating performance and results of operations, including:
The adoption of ultrasensitive MRD testing. We are pioneering the ultrasensitive MRD testing market with the belief that an ultrasensitive approach will lead to earlier intervention and the ability to better trust that a negative MRD patient is likely cancer-free. There are no assurances that the market will value ultrasensitive testing over other ways to monitor cancer and look for recurrence and disease.
The adoption of ultra-sensitive MRD testing. We are pioneering the ultra-sensitive MRD testing market with the belief that an ultra-sensitive approach will lead to earlier intervention and the ability to better trust that a negative MRD patient is likely cancer-free. There are no assurances that the market will value ultra-sensitive testing over other ways to monitor cancer and look for recurrence and disease.
Increasing adoption of our productstesting services and solutions by existing bio-pharma customers. Our performance depends on our ability to retain and broaden adoption with existing customers. Because our technology is novel, some customers begin using our productstesting services by initiating pilot studies involving a small number of samples to gain experience with our service. As a result, historically a significant portion of our revenue has come from existing customers. We believe that our ability to convert initial pilots into larger orders from existing customers has the potential to drive substantial long-term revenue. We expect there may be some variation in the number of samples they choose to test each quarter.
Adoption of our productstesting and solutionsservices by new customers. While new customers initially may not account for significant revenue, we believe that they have the potential to grow substantially over the long term as they gain confidence in our service.testing services. Our ability to engage new customers is critical to our long-term success. Our publications, posters and presentations at scientific conferences lead to engagement at the scientific level with potential customers who often make the initial decision to gain experience with our products.testing services. Accessing these new customers through scientific engagement and marketing to gain initial buy-in is critical to our success and gives us the opportunity to demonstrate the utility of our products.testing services.
Obtaining coverage and reimbursement status of our diagnostic tests. We believe having our tests covered by Medicare is important to—and a key catalyst for—clinical revenue and market share growth in the MRD testing market. Our NeXT Personal Dx test received Medicare coverage for post-treatment surveillance of cancer recurrence in patients with Stage II and III breast cancer in November 2025, with an effective date of October 7, 2025. Our NeXT Personal Dx test also received Medicare coverage for surveillance of patients with Stage I to III NSCLC in February 2026, with an effective date of January 9, 2026. Coverage decision for one additional indication is pending. We may not be able to establish the medical necessity of this additional indication (coverage) or payment rates that cover our costs (reimbursement).
Obtaining coverage and reimbursement status of our diagnostic tests. Building our clinical laboratory business is subject to a number or reimbursement challenges and we may not be able to establish the medical necessity of our tests (coverage) or payment rates that cover our costs (reimbursement).
Our revenuerevenues and costcosts are affected by the volume of samples we receive from customers from period to period. The timing and size of sample shipments received after orders have been placed is variable. Since sample shipments can be large, and are often received from a third party, the timing of arrival can be difficult to predict over the short term. Although our long-term performance is not affected, we see quarter-to-quarter volatility due to these factors. Samples arriving later than expected may not be processed in the quarter proposed and result in revenue the following quarter. Since many of our customers request defined turnaround times, we employ project managers to coordinate and manage the complex process from sample receipt to sequencing and delivery of results.
Investment in productservice innovation to support growth. Investment in research and development, including the development of new productsservices and capabilities is critical to establish and maintain our leading position. We have invested significantly in our NeXT platform, introducing new productsservices and additional capabilities. We are also collaborating with KOLs to support the clinical utility of our products.testing services. We believe this work is critical to gaining customer adoption and expect our investments in these efforts to continue.
Leverage our operational infrastructure. We have invested significantly in our sample processing capabilities and commercial infrastructure. With our current operating model and infrastructure, we can increase our production and commercialize new generations of our products.testing services. We expect to grow our revenue and spread our costs over a larger volume of services.
Pharma tests andtesting services includes sales of testing services and data analytics for clinical trials and research to pharmaceutical companies in support of their oncology drug development programs.
Clinical diagnostic includes sales of comprehensive tumor profiling test that is used to help select therapy for a cancer patient and identify potential clinical trials for a patient, and sales of ultra-sensitive,ultrasensitive, tumor-informed diagnostic tests, ordered by healthcare providers for cancer patients. Revenue in this category is derived from Medicare and private insurance reimbursements.
Other includes sales of genomic tests and analytics to universities and non-profits. Other also includes royalty payments for the patents licensed by the Company.
Our ability to increase revenue will depend on our ability to further increase sales to these groups of customers and expand our customer base within each group. To do this, we are developing a growing set of state-of-the-art services and products; advancing our operational infrastructure; building our regulatory credentials; focusing our marketing efforts on large pharmaceutical companies; building and publishing the clinical evidence-base to support our products andtesting services in our key indications, pursuing reimbursement coverage from Medicare and other payors; and seeking additional partnerships. We market to biopharma customers and doctors through a small direct sales force. In late 2023, we entered into an agreement with Tempus to co-commercializecommercialize NeXT Personal Dx in the clinical diagnostics market and will be leveraging Tempus' significantly larger sales force as a key vector to grow our clinical diagnostic business. In late 2024, we expanded our collaboration partnership with Tempus to enable Tempus to market and sell NeXT Personal to Tempus' pharmaceutical and biotech customers who wish to bundle MRD testing with other Tempus offerings in a given study. In July 2025, we further expanded our collaboration partnership with Tempus to authorize Tempus to market NeXT Personal Dx for colorectal cancer and extend the term of the Tempus Agreement through November 25, 2029.
We have one reportable segment which is providingto provide advanced cancer genomic teststesting services for precision oncology andapplications, personalized testing.testing and other tests. Most of our revenue to date has been derived from sales in the United States.
Cost of revenue consists of raw materials costs, personnel costs (salaries, bonuses, stock-based compensation, payroll taxes, and benefits), laboratory supplies and consumables, depreciation and maintenance on equipment, and allocated facilities and information technology (“IT”) costs and clinical diagnostic test costs. We expect variability in our gross margins over the medium-term due to fluctuations in customer mix and volume, investments in newer sequencing platforms and new capabilities such as automation of laboratory workflows, processing of diagnostic tests for the clinical market while we work to secure reimbursement, and costs related to our Fremont facility. Over the long-term, we anticipate higher gross margins as growing revenue leads to economies of scale.
Research and development expenses consist of costs incurred for the research and development of our testing services and products and costs related to conducting studies and collaborations with partners to validate the clinical utility of our offerings. The expenses primarily consist of personnel costs (salaries, bonuses, stock-based compensation, payroll taxes, and benefits); laboratory supplies and consumables; costs of processing samples for research, product development, collaborations and studies; depreciation and maintenance on equipment; and allocated facilities and IT costs. We include in research and development expenses the costs to further develop software we use to operate our laboratory, analyze the data it generates, and automate our operations.
We expense our research and development costs in the period in which they are incurred. We expect research and development expenses to remainincrease consistentover intime to support the short-term since the completiongrowth of our reductionsclinical indiagnostic workforce in 2023.offerings.
Selling,We expect selling, general and administrative expenses have decreased since the completion of our reductions in workforce in 2023. But we expect them to increase over time to support the mediumgrowth term as we commercializeof our clinical diagnostic offerings.offerings and expected gain of market share.
Lease Impairment
We recognized an impairment loss for operating lease right-of-use assets as a result of the change in use of our Menlo Park facility during the third quarter of 2023.
Restructuring and Other Charges
Restructuring and other charges consists of charges in connection with our reductions in workforce and charges in connection with the closure of our China operations.
Interest income consists primarily of interest earned on our cash, cash equivalentsequivalents, and short-term investments. Interest expense is the recognition of imputed interest on noninterest bearing loans.
Other income (expense), net includes foreign currency exchange gains and losses. Other income (expense), net during the year ended December 31, 2024 consisted primarily of a noncash loss related to the remeasurement of the warrants issued in connection with our November 2023 agreement with Tempus, which was exercised in full and settled in August 2024.
In connection with our November 2023 agreement with Tempus, we issued two warrants to Tempus to purchase, in the aggregate, up to 9,218,800 shares of our common stock (the “Tempus Warrants”). Other income (expense), net consists primarily of a noncash loss related to the remeasurement and settlement of the Tempus Warrants. Other income (expense), net also includes foreign currency exchange gains and losses.
(1) Includes related party revenue of $5.4 million and $2.0 million for the years ended December 31, 2025 and December 31, 2024, respectively.
(2) Includes related party sales and marketing expenses of $4.6 million and $0.5 million for the years ended December 31, 2025 and December 31, 2024, respectively.
(3) Includes related party other expense of $18.3 million in connection with the change in fair value of Tempus Warrants for the year ended December 31, 2024.
(1) Includes related party accounts receivable of $2.5 million as of December 31, 2025 and December 31, 2024.
What changed in the latest 10-Q
Risk Factors
New heading “Risks Related to Our Pending Acquisition by Tempus”
New heading “The completion of the Merger is subject to a number of conditions, including certain conditions that are beyond our control, and may not be satisfied on a timely basis, or at all.*”
New heading “The value of the per share stock consideration payable to our stockholders in the Merger is subject to changes based on fluctuations in the value of Tempus’ Class A Common Stock, and our stockholders may receive per share stock consideration with a value that is less than $16.25 per share in certain circumstances.*”
New heading “The announcement and pendency of the Merger, and uncertainty regarding the Merger, may adversely affect our relationships and our business.*”
New heading “While the Merger Agreement is in effect, we are subject to restrictions on our business activities.*”
New heading “We have incurred, and will continue to incur, direct and indirect costs as a result of the pending Merger.*”
New heading “In certain instances, the Merger Agreement requires us to pay a termination fee to Tempus, which could require us to use available cash that would have otherwise been available for general corporate purposes.*”
New heading “Litigation may arise in connection with the Merger, which could be costly and divert management’s attention and otherwise materially harm our business.*”
Removed heading “We have undertaken in the past, and may in the future undertake, internal restructuring activities that could result in disruptions to our business or otherwise harm our results of operations or financial condition.”
Largest changes
“Lawsuits may be filed challenging the disclosures contained in the registration statement on Form S-4 and proxy statement/prospectus that will be filed with the Securities and Exchange Commission in connection with the proposed Merger and/or challenging other aspects of the proposed Merger. Regardless of the outcome of any future litigation related to the proposed Merger, such litigation may be time-consuming and expensive and may distract our management from running the day-to-day operations of our business. …”see in full comparison
“We have undertaken in the past, and may in the future undertake, internal restructuring activities that could result in disruptions to our business or otherwise harm our results of operations or financial condition.”see in full comparison
“Litigation may arise in connection with the Merger, which could be costly and divert management’s attention and otherwise materially harm our business.*”see in full comparison
“In addition, the Device Master Files that we filed with the FDA, which are focused on the technology, quality management, and validation of our platform, specifically on its use for the development of personalized immunotherapies, are predicated on our use of specified equipment and processes, including Illumina sequencers and related equipment. The detailed information in the Device Master Files is not shared with our customers, but with our permission they can reference our FDA file numbers in their Investigational New Drug filings with the FDA. …”see in full comparison
We believe that there are only a few manufacturers other than Illumina that are currently capable of supplying and servicing the equipment necessary for our laboratory operations, including sequencers and various associated reagents. Likewise, we believe that there are a limited number of manufacturers and suppliers for other reagents and materials necessary for our laboratory operations, such as the sample preparation reagents required for our ACE technology, which enables our NeXT Platform to provide more comprehensive sequencing coverage, as well as those required to create personalized liquid biopsy panels for each patient as part of our NeXT Personal assay. Although we have evaluated and may continue in the future to evaluate equipment and materials from other suppliers, the use of equipment or materials provided by these replacement suppliers would require us to alter our laboratory operations. Transitioning to a new supplier would be time-consuming and expensive, would likely result in interruptions in our laboratory operations, could affect the performance specifications of our laboratory operations, or could require that we revalidate our tests. Additionally, an existing supplier of ours may allege that such activities constitute a breach of its agreement with us and may cease supplying us with sufficient quantities of materials or equipment that meet our specifications, in a timely manner or at all. Moreover, an existing supplier or third party may allege that such activities, replacement equipment or materials infringe, misappropriate or otherwise violate its intellectual property, and may bring infringement or other intellectual property-related claims against us. See “—Litigation or other proceedings or third-party claims of intellectual property infringement, misappropriation or other violations may require us to spend significant time and money, and could in the future prevent us from selling our tests or impact our stock price, any of which could have a material adverse effect.” We cannot assure you that, if we were forced to replace Illumina or another supplier on which we rely, we would be able to secure alternative equipment, reagents, and other materials, and bring such equipment, reagents, and other materials on-line and revalidate them without experiencing interruptions in our workflow. If we encounter delays or difficulties in securing, reconfiguring, or revalidating the equipment and reagents we require for our testing services, our business, financial condition, results of operations, and reputation could be adverselysee in full comparisonaffected.affected, In addition, the Device Master Files that we filed with the FDA, which are focused on the technology, quality management, and validation of our platform, specifically on its use for the development of personalized immunotherapies, are predicated on our use of specified equipment and processes, including Illumina sequencers and related equipment. The detailed information in the Device Master Files is not shared with our customers, but with our permission they can reference our FDA file numbers in their Investigational New Drug filings with the FDA. If we were required to transition to a new supplier of sequencers or certain other equipment or processes in our laboratory, our Device Master Files would need to be replaced or updated, and until such time as that occurred, customers for which we deliver services after the transition would not be able to reference our Device Master Files, which would cause us to lose a competitive advantage.
“The value of the per share stock consideration payable to our stockholders in the Merger is subject to changes based on fluctuations in the value of Tempus’ Class A Common Stock, and our stockholders may receive per share stock consideration with a value that is less than $16.25 per share in certain circumstances.*”see in full comparison
Full comparison: every changed paragraph (68)
Risks Related to Our Pending Acquisition by Tempus
The completion of the Merger is subject to a number of conditions, including certain conditions that are beyond our control, and may not be satisfied on a timely basis, or at all.*
The completion of the Merger is subject to a number of conditions set forth in the Merger Agreement, including: (i) the approval of the Merger and adoption of the Merger Agreement by the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote thereon; (ii) the approval for listing on Nasdaq of Tempus Class A Common Stock to be issued in the Merger; (iii) the effectiveness of a registration statement on Form S-4 filed by Tempus registering the Tempus Class A Common Stock to be issued in connection with the Merger; (iv) the expiration or termination of the required waiting period applicable to the Mergers under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”); (v) our receipt of an opinion to the effect that the Merger will qualify as a reorganization for U.S. federal income tax purposes; and (vi) the absence of material adverse effects impacting us or Tempus. Many of these conditions are beyond our control, resulting in uncertainty as to the timing of completion of the Merger and as to whether the Merger will be completed at all.
Failure to complete the Merger within the expected timeframe or at all could adversely affect our business and the market price of our common stock in a number of ways, including:
the market price of our common stock may decline to the extent that the current market price reflects an assumption that the Merger will be consummated;
we have incurred, and will continue to incur, significant expenses for professional services in connection with the Merger for which we will have received little or no benefit if the Merger is not consummated;
under the Merger Agreement, we are subject to certain restrictions on the conduct of our business prior to completing the Merger which may prevent us from making desirable expenditures, including with regard to capital projects, pursuing otherwise attractive business opportunities and making other changes to our business prior to completion of the Merger or termination of the Merger Agreement;
matters relating to the Merger may require substantial commitments of time and resources by our management, which could otherwise have been devoted to other opportunities that may have been beneficial to us as an independent company; and we may experience negative publicity and/or reactions from our investors, employees, patients, customers, regulators, suppliers, collaborators, and other business partners, which could negatively impact our results of operations and business prospects.
The value of the per share stock consideration payable to our stockholders in the Merger is subject to changes based on fluctuations in the value of Tempus’ Class A Common Stock, and our stockholders may receive per share stock consideration with a value that is less than $16.25 per share in certain circumstances.*
In the Merger, each share of our issued and outstanding as of immediately prior to the Merger (other than shares owned by Tempus and shares which are held by stockholders who have exercised and perfected appraisal rights for such shares in accordance with Delaware law) will be converted into the right to receive a number of Tempus’ Class A Common Stock equal to an Exchange Ratio (defined below), provided that Tempus may elect to pay cash for up to 50% of the aggregate number of outstanding shares of our common stock, which will be applied pro rata among shares eligible to receive the Merger consideration. See Note 13, Subsequent Events, in Part 1, Item 1 of this Quarterly Report on Form 10-Q for more information.
If the volume-weighted average price of Tempus’ Class A Common Stock on Nasdaq for the fifteen consecutive trading days prior to the last trading day prior to the closing date of the Merger (the “Parent Stock Price”) is greater than $48.42 (the “Floor Price”), the Exchange Ratio will be equal to $16.25 divided by the Parent Stock Price. However, if the Parent Stock Price is equal to or less than the Floor Price, the Exchange Ratio will be fixed at 0.3356. Accordingly, if the Parent Stock Price is equal to or less than the Floor Price, then the value of the per share stock consideration received at the time of the closing of the Merger will likely be less than $16.25.
At the time that our stockholders cast their votes regarding approval of the Merger Agreement, they will not know the actual market value of the shares of Tempus Class A Common Stock that they will receive if and when the Merger is finally completed, including whether the Parent Stock Price will be equal to or less than the Floor Price. Fluctuations in the market value of shares of Tempus Class A Common Stock may be caused by changes in the businesses, operations, results and prospects of both Tempus and us, market expectations of the likelihood that the Merger will be completed and the timing of the completion, competition in our industry, general market and economic conditions, or other factors.
The announcement and pendency of the Merger, and uncertainty regarding the Merger, may adversely affect our relationships and our business.*
The Merger will occur only if the Merger Agreement’s conditions to consummation of the Merger are satisfied or waived. Accordingly, there may be uncertainty regarding the completion of the Merger. Uncertainty as to whether the Merger will be completed may affect our ability to recruit prospective employees or to retain and motivate existing employees. Employee retention or focus may be particularly challenging while the Merger is pending because employees may experience uncertainty about their roles following consummation of the Merger. Uncertainty as to our future could adversely affect our business and our relationship with patients, customers, regulators, suppliers, collaborators, and other business partners. For example, collaborators, customers and other counterparties may defer decisions concerning contracting or working with us, or seek to change existing business relationships with us. Changes to or termination of existing business relationships could adversely affect our results of operations and financial condition, as well as the market price of our common stock. The adverse effects of the pendency of the Merger could be exacerbated by any delays in completion of the Merger or termination of the Merger Agreement.
While the Merger Agreement is in effect, we are subject to restrictions on our business activities.*
While the Merger Agreement is in effect, we are subject to restrictions on our business activities, generally requiring us to conduct our business in the ordinary course and consistent with past practice in all material respects, and subjecting us to a variety of specified restrictions absent Tempus’ prior consent. These limitations include, among other things, restrictions on our ability to acquire other businesses and assets, dispose of our assets, make investments, enter into certain contracts, repurchase or issue securities, pay dividends, make capital expenditures, take certain actions relating to intellectual property, amend our organizational documents, and incur indebtedness. These restrictions could prevent us from pursuing strategic business opportunities, taking actions with respect to our business that we may consider advantageous and responding effectively and/or timely to competitive pressures and industry developments, and may, as a result, materially and adversely affect our business, results of operations and financial condition.
We have incurred, and will continue to incur, direct and indirect costs as a result of the pending Merger.*
We have incurred, and will continue to incur, significant costs and expenses, including fees for professional services and other transaction costs, in connection with the pending Merger. We must pay substantially all of these costs and expenses whether or not the Merger is completed.
There are a number of factors beyond our control that could affect the total amount or the timing of these costs and expenses.
In certain instances, the Merger Agreement requires us to pay a termination fee to Tempus, which could require us to use available cash that would have otherwise been available for general corporate purposes.*
Under the terms of the Merger Agreement, we may be required to pay Tempus a termination fee of approximately $76.8 million if the Merger Agreement is terminated under specific circumstances described in the Merger Agreement, including, but not limited to, in connection with a change in the recommendation of the Board or a termination of the Merger Agreement by us to enter into an agreement for a “Superior Proposal,” as defined in the Merger Agreement. If the Merger Agreement is terminated under such circumstances, the termination fee we would be required to pay under the Merger Agreement may require us to use available cash that would have otherwise been available for general corporate purposes and other uses. For these and other reasons, termination of the Merger Agreement could materially and adversely affect our business operations and financial condition, which in turn would materially and adversely affect the price of our common stock.
Litigation may arise in connection with the Merger, which could be costly and divert management’s attention and otherwise materially harm our business.*
Lawsuits may be filed challenging the disclosures contained in the registration statement on Form S-4 and proxy statement/prospectus that will be filed with the Securities and Exchange Commission in connection with the proposed Merger and/or challenging other aspects of the proposed Merger. Regardless of the outcome of any future litigation related to the proposed Merger, such litigation may be time-consuming and expensive and may distract our management from running the day-to-day operations of our business. The litigation costs and diversion of management’s attention and resources to address the claims and counterclaims in any litigation related to the proposed Merger may materially adversely affect our business, financial condition and operating results. The outcome of any lawsuit filed or that may be filed challenging the proposed Merger is uncertain. If any lawsuit is successful in obtaining an order enjoining the Merger, then the transaction may not be consummated within the expected time frame, or at all, and could result in substantial costs, including but not limited to, costs associated with the indemnification of our directors and officers. If the Merger is not consummated for any reason, litigation could be filed in connection with the failure to consummate the Merger. Any litigation related to the proposed Merger may result in negative publicity or an unfavorable impression of us, which could adversely affect the price of our common stock, impair our ability to recruit or retain employees, damage our relationships with our investors, employees, patients, customers, regulators, suppliers, collaborators, and other business partners, or otherwise materially harm our operations and financial performance.
We have incurred net losses since our inception. For the year ended December 31, 2025, we had a net loss of $81.3 million. For the threesix months ended MarchJune 31,30, 2026, we had a net loss of $30.0$61.7 million. As of MarchJune 31,30, 2026, we had an accumulated deficit of $661.0$693.0 million. To date, we have not generated sufficient revenue to achieve profitability, and we may never achieve or sustain profitability. In addition, we expect to continue to incur net losses for the foreseeable future, and we expect our accumulated deficit to continue to increase as we focus on scaling our business and operations. Our efforts to sustain and grow our business may be more costly than we expect, and we may not be able to increase our revenue sufficiently to offset our higher operating expenses. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital. Our failure to achieve and sustain profitability in the future would negatively affect our business, financial condition, results of operations, and cash flows, and could cause the market price of our common stock to decline.
If we cannot compete successfully with our competitors, we may be unable to increase or sustain our revenue or achieve and sustain profitability. *
Our principal competition comes from commercial and academic organizations that employ various approaches to produce information that is similar to the information that we generate for our customers. These commercial and academic organizations may not utilize our testing services or may not believe them to be superior to those tests that they currently use or others that are developed. Further, it may be difficult to educate our customers and potential customers on the benefits of our comprehensive tests compared to simpler panels provided by our competitors. For example, the information that we provide may be more challenging or require additional resources for our customers to interpret than the information provided by our competitors’ less comprehensive assays. In addition, our suppliers or competitors may announce the development of new products, services or features that results in our customers’ or potential customers’ decision to reduce, postpone or cancel orders from us while they wait to determine which products, services or features are or will be perceived as technologically superior, more commercially successful or adopted as standards in the industry; such decisions by our customers or potential customers may be influenced by their concerns regarding the potential obsolescence of data generated using our testing our services and features if our testing services or features are or will not be perceived as technologically superior, commercially successful or adopted as standards in the industry.
Some of our present or potential competitors, including Adela, Inc., Caris Life Sciences, Inc., DELFI Diagnostics, Inc., Exact Sciences Corporation,Corporation which was acquired by Abbott Laboratories, Inc., in March 2026, Foresight Diagnostics Inc. (“Foresight”), which was acquired by Natera in December 2025,2025. Foundation Medicine, Inc., GRAIL, Inc., Guardant Health, Inc., Haystack Oncology, Inc., which was acquired by Quest Diagnostics Incorporated in June 2023, Laboratory Corporation of America Holdings, MedGenome Inc., Myriad Genetics, Inc., Natera, NeoGenomics, Inc., Predicine, Inc., SAGA Diagnostics AB which is expected to be acquired by Foundation Medicine, Inc. in the third quarter of 2026, Veracyte, Inc. and Veracyte,BillionToOne, Inc. may have more widespread brand recognition or substantially greater financial or technical resources, development or production capacities, or marketing capabilities than we do. They may be able to devote greater resources to the development, promotion and sale of their products and services than we do or sell their products and services at prices designed to win more significant levels of market share. Also, we have had, and may have in the future, customer or supply relationships with our present or potential competitors. For example, we have an agreement with Natera to provide advanced tumor analysis for use in Natera’s MRD test. During the year ended December 31, 2025, revenue under our agreement accounted for 8% of our total revenue. See “—We have historically derived a substantial portion of our revenue from DNA sequencing and data analysis services that we provided to Natera. We no longer have a material commercial relationship with Natera and, if we are unable to grow our customer base and diversify our revenue concentration, our business, financial condition, revenue and other operating results, and cash flows may be materially harmed.” Further, we have partnered with Tempus to expand the sales and marketing of our NeXT Personal® Dx tests in four indications and Tempus could in the future develop tests that compete directly or indirectly with our tests or partner with our competitors. If Tempus were to develop competitive tests or partner with our competitors, we or Tempus may terminate the agreement and, upon termination of the agreement, we may be unable to expand our sales force timely to replace the Tempus sales and marketing efforts, which could adversely impact our business or affect our ability to commercialize our testing services. In addition, our present or potential competitors have been or may be acquired by, receive investments from, or enter into other commercial relationships with larger, more well-established and well-financed companies. We may also have disputes with our present or potential competitors. See “—Litigation or other proceedings or third-party claims of intellectual property infringement, misappropriation or other violations may require us to spend significant time and money, and could in the future prevent us from selling our tests or impact our stock price, any of which could have a material adverse effect.”
We have substantial customer concentration, with a limited number of customers accounting for a substantial portion of our revenue and accounts receivable; in particular, we currently derive a substantial portion of our revenue from three of our largest customers, Moderna, the VA MVP and Merck, and in the past have derived a substantial portion of our revenue from other large customers. *
Like other genomic profiling companies that sell to the pharmaceutical industry, we have substantial customer concentration. We currently derive a significant portion of our revenue from Moderna, which accounted for 16%14% of our revenue for the threesix months ended MarchJune 31,30, 2026, and 22% and 28% of our revenue for the years ended December 31, 2025 and 2024, respectively. We derive a significant portion of our revenue from the VA MVP, which accounted for 16%15% of our revenue for the threesix months ended MarchJune 31,30, 2026, and 17% and 9% of our revenue for the years ended December 31, 2025 and 2024, respectively. We also derive a significant portion of our revenue from Merck, which accounted for 19%30% and 7% of our revenue for the threesix months ended MarchJune 31,30, 2026 and each of the years ended December 31, 2025 and 2024, respectively. We previously derived a significant portion of our revenue from Natera, which accounted for 8% and 30% of our revenue for the years ended December 31, 2025 and 2024, respectively. Our top five customers, including Moderna, the VA MVP, Merck and Natera, accounted for 62% and 81% of our revenue for the years ended December 31, 2025 and 2024, respectively. Our top five customers, including Moderna, the VA MVP,MVP and Merck,Merck accounted for 69%67% of our revenue for the threesix months ended MarchJune 31,30, 2026. There are inherent risks whenever a large percentage of revenue is concentrated with a limited number of customers. While we have attempted to grow our customer base and diversify our revenue concentration beyond Moderna, the VA MVP, MerckMVP and Natera,Merck, we may not be able to successfully do so in the future. Our predictions regarding the future level of demand for our testing services that will be generated by these customers may be wrong. In addition, revenue from our larger customers have historically fluctuated and may continue to fluctuate based on the commencement and completion of clinical trials or other projects, the timing of which may be affected by market conditions or other factors, some of which may be outside of our control. Some of our customers have in the past suspended or terminated clinical trials or projects, received less funding than expected, experienced declining or delayed sales, or otherwise decided to reduce or eliminate their use of our testing services, and these and other customers may also do so in the future. As a result, we could be pressured to reduce the prices we charge for our testing services, which would have an adverse effect on our margins and financial position, and which would likely negatively affect our revenue and results of operations. In particular, if we do not win future VA MVP renewals with a value comparable to that of our historical contracted orders, it may have a material adverse effect on our revenue, cash position, and results of operations. See “—We derive a substantial portion of our revenue from DNA sequencing and data analysis services that we provideprovided to one of our largest customers, the VA MVP. If the VA MVP’s demand for and/or funding for our DNA sequencing and data analysis services continues to be substantially reduced, or if our new contract with the VA MVP were to be terminated, our business, financial condition, revenue and other operating results, and cash flows will be materially harmed.” Similarly, if the VA MVP was eliminated, awarded its contract to one of our competitors, further reduced the size of our contract or failed to renew our contract in the future, then our revenue, cash position, and results of operations would be materially adversely impacted. Likewise, if Moderna or any of our other significant customers were to reduce or cease their use of our testing services, then our revenue, cash position, and results of operations may be materially adversely impacted. Further, if any of our significant customers were to stop payment for our services, it would have a material adverse effect on our accounts receivable, increasing our credit risk. The failure of these customers to pay their balances, or any customer to pay future outstanding balances, would result in an operating expense and reduce our cash flows.
We have historically derived a substantial portion of our revenue from DNA sequencing and data analysis services provided to Natera. We no longer have a material commercial relationship with Natera and, if we are unable to grow our customer base and diversify our revenue concentration, our business, financial condition, revenue and other operating results, and cash flows may be materially harmed.*
In February 2021, we entered into a commercial relationship in the field of personalized oncology with Natera, pairing our NeXT tumor profiling and diagnostic services with Natera’s personalized ctDNA test Signatera™ for treatment monitoring and MRD assessment. Under this non-exclusive agreement, Natera is responsible for validating the design of, and commercialization of, Signatera personalized ctDNA assays using matched tumor and normal exome sequence data from us. The agreement covers MRD testing for both clinical use and research use. Since that time, Natera’s sample volumes have increased such that we currently derive a significant portion of our revenue from sales of our DNA sequencing and data analysis services to Natera under our agreement. For example, revenue under our agreement with Natera accounted for 30% of our total revenue for the year ended December 31, 2024 and only 8% of our total revenue for the year ended December 31, 2025. In December 2024, we amended our agreement with Natera to extend minimum volume commitments through the second quarter of 2025, after which such commitments expired and were not renewed. We no longer have a material commercial relationship with Natera and do not expect to have one going forward, as we are aware that Natera brought such services in-house in lieu of purchasing such services from us. We are also aware of at least one third party supplier of DNA sequencing and analysis services, such that Natera has elected, and may continue to elect in the future, to send a portion (or all) of its samples to its other supplier(s) instead of us. If we are unable to grow our customer base and diversify our revenue concentration timely, our business, financial condition, revenue and other operating results, and cash flows may be materially harmed.
Our corporate customers, other than Natera,customers are primarily biopharmaceutical companies that use our testing services to support clinical trials, including Moderna. Our future success is substantially dependent on our ability to maintain our customer relationships and to establish new ones. Many factors have the potential to impact our customer relationships, including the type of support our customers and potential customers require and our ability to deliver it, our customers’ satisfaction with our testing services, and other factors that may be beyond our control. Furthermore, our customers may decide to decrease or discontinue their use of our testing services due to changes in research and product development plans (including as a result of a public health crisis), failures in their clinical trials (which failures are statistically much more likely to occur than not at some point in the clinical development process, notwithstanding any enhanced patient stratification from the use of our proprietary tests and algorithms), financial constraints, or utilization of internal testing resources or tests performed by other parties, or other circumstances outside of our control.
Our corporate customers’ clinical trials are expensive, can take many years to complete, and their outcome is 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. Many of the biopharmaceutical companies that are our customers do not have products approved for commercial sale and are not profitable. 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 revenue from these customers may decrease or cease entirely, and our business may be harmed. Furthermore, even if these customers have a drug approved for commercial sale, they may not choose to use our testing services as a companion diagnostic with their drug or they may impose additional customization requirements for commercialization, thereby limiting our potential revenue and profits.revenue.
Building our clinical laboratory business is subject to a number of reimbursement challenges and we may not be able to establish the medical necessity of our tests for coverage or reimbursement rates that cover our costs.*
In January 2024, we announced that we received a final Medicare coverage determination for our NeXT Dx offering, extended retroactively to August 29, 2023. In November 2025, we announced that we received Medicare coverage for NeXT Personal Dx for post-treatment surveillance of cancer recurrence in patients with Stage II and III breast cancer, with an effective date of October 7, 2025. In February 2026, we also announced that we received Medicare coverage for NeXT Personal Dx for surveillance of patients with Stage I to III NSCLC with an effective date of January 9, 2026. In May 2026, we announced that we received Medicare coverage for NeXT Personal Dx for immunotherapy monitoring for patients with late-stage solid tumors with an effective date of March 16, 2026. In May 2026, we also announced that we received Medicare coverage for NeXT Personal Dx for monitoring treatment response to neoadjuvant therapy (NAT) in patients diagnosed with Stage II-III Triple-Negative Breast Cancer (TNBC) or HER2-positive (HER2+) breast cancer, with an effective date of April 6, 2026. While we estimate that approximately half of new solid tumor cancer cases will be diagnosed in patients covered by Medicare, the Medicare coverage determination may not be indicative of our ability to obtain coverage with other payors. Even if favorable coverage and reimbursement status is attained for one or more of our testing services, less favorable coverage policies and reimbursement rates may be implemented in the future.
Any current or future collaborations, including any strategic alliances or any collaborations to develop companion diagnostic tests, that we have entered (for example, our strategic alliances with Moderna and Merck; and our collaborations with Tempus; Myriad; ClearNote Health, Inc.; Cancer Research UK, University College London, and the Francis Crick Institute (the TRACERx study); Institut Curie; The Royal Marsden; the Vall d'Hebron Institute of Oncology (VHIO); the University of California, San Diego; Duke University; Vanderbilt University and Johns Hopkins University (the PREDICT study); the Dana-Farber Cancer Institute; the University of Texas M.D. Anderson Cancer Center; University Medical Center Hamburg-Eppendorf (also known as UKE); Criterium and the Academic Breast Cancer Consortium; Yale Cancer Center; Aarhus University; British Columbia Cancer; and University Health Network), or may enter into,into may not be successful. The success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators. Collaborations are subject to numerous risks, which include that.that:
collaborators could independently develop, or develop with third parties, services or products that compete directly or indirectly with our testing services;
We believe that there are only a few manufacturers other than Illumina that are currently capable of supplying and servicing the equipment necessary for our laboratory operations, including sequencers and various associated reagents. Likewise, we believe that there are a limited number of manufacturers and suppliers for other reagents and materials necessary for our laboratory operations, such as the sample preparation reagents required for our ACE technology, which enables our NeXT Platform to provide more comprehensive sequencing coverage, as well as those required to create personalized liquid biopsy panels for each patient as part of our NeXT Personal assay. Although we have evaluated and may continue in the future to evaluate equipment and materials from other suppliers, the use of equipment or materials provided by these replacement suppliers would require us to alter our laboratory operations. Transitioning to a new supplier would be time-consuming and expensive, would likely result in interruptions in our laboratory operations, could affect the performance specifications of our laboratory operations, or could require that we revalidate our tests. Additionally, an existing supplier of ours may allege that such activities constitute a breach of its agreement with us and may cease supplying us with sufficient quantities of materials or equipment that meet our specifications, in a timely manner or at all. Moreover, an existing supplier or third party may allege that such activities, replacement equipment or materials infringe, misappropriate or otherwise violate its intellectual property, and may bring infringement or other intellectual property-related claims against us. See “—Litigation or other proceedings or third-party claims of intellectual property infringement, misappropriation or other violations may require us to spend significant time and money, and could in the future prevent us from selling our tests or impact our stock price, any of which could have a material adverse effect.” We cannot assure you that, if we were forced to replace Illumina or another supplier on which we rely, we would be able to secure alternative equipment, reagents, and other materials, and bring such equipment, reagents, and other materials on-line and revalidate them without experiencing interruptions in our workflow. If we encounter delays or difficulties in securing, reconfiguring, or revalidating the equipment and reagents we require for our testing services, our business, financial condition, results of operations, and reputation could be adversely affected.affected, In addition, the Device Master Files that we filed with the FDA, which are focused on the technology, quality management, and validation of our platform, specifically on its use for the development of personalized immunotherapies, are predicated on our use of specified equipment and processes, including Illumina sequencers and related equipment. The detailed information in the Device Master Files is not shared with our customers, but with our permission they can reference our FDA file numbers in their Investigational New Drug filings with the FDA. If we were required to transition to a new supplier of sequencers or certain other equipment or processes in our laboratory, our Device Master Files would need to be replaced or updated, and until such time as that occurred, customers for which we deliver services after the transition would not be able to reference our Device Master Files, which would cause us to lose a competitive advantage.
In addition, the Device Master Files that we filed with the FDA, which are focused on the technology, quality management, and validation of our platform, specifically on its use for the development of personalized immunotherapies, are predicated on our use of specified equipment and processes, including Illumina sequencers and related equipment. The detailed information in the Device Master Files is not shared with our customers, but with our permission they can reference our FDA file numbers in their Investigational New Drug filings with the FDA. If we were required to transition to a new supplier of sequencers or certain other equipment or processes in our laboratory, our Device Master Files would need to be replaced or updated, and until such time as that occurred, customers for which we deliver services after the transition would not be able to reference our Device Master Files, which would cause us to lose a competitive advantage.
We do not own or operate, and currently have no plans to establish,establish any manufacturing facilities. We currently rely, and expect to continue to rely, on third parties for the manufacture of the specialized laboratory equipment, raw materials and other supplies we use in our business. Currently, certain of our direct suppliers are located outside of the United States. In addition, our suppliers in the United States source or may source components of the products we purchase from them from sources outside the United States. Current or new tariffs may adversely impact our supply chain.
Personalized cancer therapies represent new therapeutic approaches that could result in heightened regulatory scrutiny, delays in clinical development, or delays in or inability to achieve,achieve regulatory approval, commercialization, or payor coverage, any of which could adversely affect our business.
We have undertaken in the past, and may in the future undertake, internal restructuring activities that could result in disruptions to our business or otherwise harm our results of operations or financial condition.
From time to time, we may undertake internal restructuring activities as we continue to evaluate and attempt to optimize our cost and operating structure in light of developments in our business strategy and long-term operating plans. For example, in the first quarter of 2023 and in the fourth quarter of 2023, we implemented reductions in our workforce to reduce operating costs and improve operating efficiency that collectively affected nearly 50% of our workforce. Any restructuring activities that we may undertake in the future may result in write-offs or other restructuring charges. There can be no assurance that any restructuring activities that we undertake in the future will achieve the cost savings, operating efficiencies or other benefits that we may initially expect. Restructuring activities may also result in a loss of continuity, accumulated knowledge and inefficiency during transitional periods and thereafter. In addition, internal restructurings can require a significant amount of time and focus from management and other employees, which may divert attention from commercial operations and disrupt our ongoing business. If any internal restructuring activities we undertake in the future fail to achieve some or all of the expected benefits therefrom, our business, results of operations and financial condition could be materially and adversely affected.
We expanded our laboratory facility in advance of increased demand for our testing services. Our current and projected future expense levels are to a large extent fixed and are largely based on our current investment plans and our estimates of future test volume. As a result, if revenue does not meet our expectations we may not be able to promptly adjust or reduce our spending to levels commensurate with our revenue, or at all. If we fail to generate demand commensurate with our infrastructure growth or if we fail to scale our infrastructure sufficiently in advance of demand to successfully meet such demand, our business, prospects, financial condition, and results of operations could be adversely affected.
As a result, if revenue does not meet our expectations we may not be able to promptly adjust or reduce our spending to levels commensurate with our revenue, or at all. If we fail to generate demand commensurate with our infrastructure growth or if we fail to scale our infrastructure sufficiently in advance of demand to successfully meet such demand, our business, prospects, financial condition, and results of operations could be adversely affected.
For example, our operations were previously impacted by the COVID-19 pandemic. The previous shelter-in-place order and health orders during the COVID-19 pandemic negatively impacted productivity, disrupted our business, and slowed research and development activities due to us limiting access to our laboratory space that would otherwise be used by our research and development group, and, to the extent such orders return in similar or more stringent form, they may cause similar effects on our operations. COVID-19 disrupted, and a future health epidemic or pandemic may disrupt in the future, the ability of our suppliers to fulfill our purchase orders in a timely manner or at all. Additionally, we use certain consumables in our operations, and we have faced, and may face in the future, difficulties in acquiring such consumables if our suppliers prioritize orders related to a health epidemic or pandemic or if other supply chain issues arise as a result of such a public health crisis. Several of our customers were delayed in sending us samples due to their inability to collect or ship samples during the COVID-19 pandemic, and these and additional customers may be disrupted from collecting samples or sending purchase orders or samples to us in the future in the event of the emergence of another health epidemic or pandemic.
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 LDTs, which are a subset of in vitro diagnostic devices that are intended for clinical use and designed, manufactured, and used entirely within a single laboratory. We currently market our tests as used in our testing services as LDTs and, therefore, we believe that they are not currently subject to the FDA’s enforcement of its medical device regulations and the applicable FDC Act provisions.
If the FDA determines that our tests and associated software do not fall within the definition of an LDT, or if we voluntarily submit one or more of our tests for premarket authorization from the FDA as medical devices, we may be required to obtain premarket clearance for our tests and associated software under Section 510(k) of the FDC Act, granting of a De Novo authorization request under Section 513(f)(2) of the FDC Act, or approval of a premarket approval application (“PMA”) under Section 515(c) of the FDC Act. We would also be subject to ongoing regulatory requirements such as registration and listing requirements, labeling requirements, medical device reporting requirements, and current good manufacturing practice requirements. If our tests are considered medical devices not subject to enforcement discretion, or if we voluntarily submit one or more of our tests for marketing authorization from the FDA as medical devices, the regulatory requirements to which our tests are subject would depend on the FDA’s classification of our tests. The FDA has issued regulations classifying generic types of medical devices into one of three classes (Class I, Class II, or Class III) depending on the risk of the device for use as intended and degree of regulation that the FDA finds necessary to provide reasonable assurance of their safety and effectiveness. The class into which a device is placed determines the requirements that a medical device manufacturer must meet both pre- and post-market. On January 31, 2024, FDA announced its intent to initiate a reclassification process for most IVDs that are currently Class III (high risk), the majority of which are infectious disease and companion diagnostic IVDs, into Class II (moderate risk) with special controls. This reclassification would allow manufacturers of certain types of IVDs to seek marketing clearance through the less burdensome Class II 510(k) premarket notification pathway rather than the Class III premarket approval (PMA) pathway, the most stringent type of FDA medical device review.
If premarket review of our tests is required, the premarket review process may involve, among other things, successfully completing additional clinical trials. If we are required to conduct premarket clinical trials, whether using prospectively acquired samples or archival samples, delays in the commencement or completion of clinical testing could significantly increase our service and product development costs, delay commercialization of any future services, and interrupt sales of our current testing services. Many of the factors that may cause or lead to a delay in the commencement or completion of clinical trials may also ultimately lead to delay or denial of regulatory clearance or approval. The commencement of clinical trials may be delayed due to insufficient patient enrollment, which is a function of many factors, including the size of the patient population, the concerns around genetic testing, the nature of the protocol, the proximity of patients to clinical sites, and the eligibility criteria for the clinical trial.
Moreover, there can be no assurance that any authorized labeling claims will be consistent with our current claims or adequate to support continued adoption of our testing services. If premarket review is required for some or all of our tests, the FDA may require that we stop using such tests in our testing services pending marketing authorization, which would negatively impact our business. Even if our testing services are allowed to remain on the market prior to marketing authorization of our tests, demand for our testing services may decline if there is uncertainty about our tests, if we are required to label our tests as investigational by the FDA, or if the FDA limits the labeling claims we are permitted to make for our testing services. As a result, we could experience significantly increased development costs and a delay in generating additional revenue from our testing services,services or from other services now in development.
In addition, if we offer tests or services to customers within the EEA (and Northern Ireland) (whether directly or via intermediaries) that fall within the scope of the IVDR, we would be required to comply with strict requirements in order to affix the CE mark to our products related to our testing services, including requirements for clinical evidence, pre-market assessment of safety and performance, quality management system, traceability of products, promotion and advertising, and conduct costly post-market testing and surveillance to monitor the safety or effectiveness of the tests related to our testing services in the EEA and detailed reporting obligations.
As a clinical laboratory, our business practices may face additional scrutiny from government regulatory agencies and authorities such as the Department of Justice, the U.S. Department of Health and Human ServicesHHS Office of Inspector General (the “OIG”), and CMS. Certain arrangements between clinical laboratories and referring physicians have been identified in fraud alerts issued by the OIG as implicating the Anti-Kickback Statute. The OIG has stated that it is particularly concerned about these types of arrangements because the choice of laboratory, as well as the decision to order laboratory tests, typically are made or strongly influenced by the physician, with little or no input from patients. Moreover, the provision of payments or other items of value by a clinical laboratory to a referral source could be prohibited under the Stark Law unless the arrangement meets all criteria of an applicable exception. The government has been active in enforcement of these laws as they apply to clinical laboratories.
Our effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued amounts. *
Our commercial success will depend, in part, on our avoiding infringement of patents and the infringement, misappropriation, or other violation of proprietary rights of third parties, including, for example, the intellectual property of competitors. There is extensive intellectual property litigation involving the biotechnology and pharmaceutical industries and genetic sequencing technology, including with regard to liquid biopsy assays such as those designed to detect or quantify MRD or recurrence in patients previously diagnosed with cancer. Our activities may be subject to claims that we infringe or otherwise violate patents owned or controlled by third parties. Numerous U.S. and foreign patents and pending patent applications exist in the genetic testing market and are owned by third parties. We cannot assure you that our operations do not, or will not in the future, infringe existing or future patents. For example, we are aware of several third-party issued U.S. patents and pending patent applications with claims relating to genetic sequencing technology and methodology that may be asserted against us and may be construed to encompass our testing services. In order to avoid liability related to an allegation of infringement of these third-party patents, we may find it necessary or prudent to initiate invalidity proceedings against such patents or to obtain licenses from such third-party intellectual property holders. If we are not able to invalidate such patents or obtain or maintain a license on commercially reasonable terms and such third parties assert infringement claims against us, we may be prevented from exploiting our technology and our business, financial condition, results of operations, and prospects may be materially and adversely affected. We may also be unaware of patents that a third party, including for example a competitor in the genetic testing market, might assert are infringed by our business. There may also be patent applications that, if issued as patents, could be asserted against us. Patent applications in the U.S. and elsewhere are typically 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. Certain U.S. patent applications that will not be filed outside the U.S. can remain confidential until patents issue. Therefore, patent applications covering our testing services or technologies could have been filed by third parties without our knowledge. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our testing services, technologies, and their use. The scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent, and the patent’s prosecution history and can involve other factors such as expert opinion. Our interpretation of the relevance or the scope of claims in a patent or a pending application may be incorrect, which may negatively impact our ability to market our testing services. Further, we may incorrectly determine that our technologies or services are not covered by a third-party patent or may incorrectly predict whether a third party’s pending patent application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the U.S. or abroad that we consider relevant may be incorrect, which may negatively impact our ability to develop and market our testing services.
Patent terms may be inadequate to protect our competitive position for an adequate amount of time. *
Patents have a limited lifespan. In the U.S., the natural expiration of a patent is generally 20 years after its first effective non-provisional filing date. Although various extensions may be available, the life of a patent, and the protection it affords, is limited. Even if patents covering our technologies,technologies and services are obtained, once the patent life has expired, we may be open to competition from competitive services. Our issued patents will expire on dates ranging from 2033 to 2042, subject to any patent extensions that may be available for such patents. If patents are issued on our pending patent applications, the resulting patents are projected to expire on dates ranging from 2033 to 2045. In addition, although upon issuance in the U.S., a patent’s life can be increased based on certain delays caused by the USPTO, this increase can be reduced or eliminated based on certain delays caused by the patent applicant during patent prosecution. If we do not have sufficient patent life to protect our technologiestechnologies, products and services, our competitive position, business, financial condition, results of operations, and prospects will be adversely affected.
If we are not able to obtain and enforce patent protection for any services we develop and for our technologies, or if the scope of patent protection obtained is not sufficiently broad, our competitors and other third parties could develop and commercialize services and technology similar or identical to ours, and our ability to successfully commercialize our testing servicesservices, and technologies may be adversely affected.
Once granted, patents may remain open to opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices or similar proceedings for a given period after allowance or grant, during which time third parties can raise objections against such initial grant. In the course of such proceedings, which may continue for a protracted period of time, the patent owner may be compelled to limit the scope of the granted claims thus attacked, or may lose the granted claims altogether. An adverse determination in any such proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology andtechnology, services and compete directly with us, without payment to us, or result in our inability to commercialize our testing servicesservices, and technologies without infringing third-party patent rights. Such proceedings also may result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us. If the breadth or strength of protection provided by our patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize current or future services, or technologies. In addition, there can be no assurance that:
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims have caused and may continue to cause us to incur significant expenses and could distract our personnel from their normal responsibilities. In addition, there could 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 substantial adverse effect on the price of our common stock.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims have caused and may continue to cause us to incur significant expenses and could distract our personnel from their normal responsibilities. In addition, there could 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 substantial 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 distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
Management's Discussion & Analysis (MD&A)
Largest changes
“The increases in research and development in the second quarter of 2026 and in the first half of 2026 compared to the same periods of 2025 were primarily due to increased personnel and personnel-related costs due to higher compensation costs and increased headcount and R&D lab activities. These expenses increased in order to further and complete clinical evidence studies, process development work to enhance laboratory operations’ productivity, and technology development.”see in full comparison
Specific components of the increase in the first half of 2026 were asee in full comparison$1.4$3.8 million increase in diagnostic test costs, a $1.2 million increase in direct material costs due to higher biopharma revenue, a $1.8 million increase in personnelandcosts,personnel-relatedacosts$0.4drivenmillionby increased headcount and employee compensationincrease intheequipmentfirstmaintenancequartercosts,of 2026,and a $0.3 million increase inIT-relatedfacilitiesexpenses,costs,andoffset partially by a$0.2$0.5 millionincreasedecrease inlablaboratory suppliesutilized.costs.
“The increase in research and development expenses in the first quarter of 2026 was primarily due to an increase in personnel and personnel-related costs, expenses related to IT support, and lab supplies utilized. These expenses increased in order to further and complete clinical evidence studies, process development work to enhance laboratory operations’ productivity, and technology development.”see in full comparison
Specific components of the increase in the second quarter of 2026 were asee in full comparison$1.3$3.2 million increase in diagnostic test costs, a$0.8$1.6 million increase in direct material costs due to higher biopharma revenue, a $1.1 million increase in personnel costs, and a$0.2$0.3 million increase infacilitiesequipmentexpenses,maintenance costs, offset partially by a$0.5$1.0 million decrease indirectlaboratorymaterialsuppliescosts due to lower biopharma revenue.costs.
Research and development expensessee in full comparisonconsist ofincludes costs incurredfortothedevelopresearchtechnology anddevelopmentofferings,ofexpensesour testing services and costs related tofor conducting clinical studies with collaborators andcollaborations withpartners to validate the clinicalutilitybenefits of ourofferings.offerings and develop and implement workflow automation technologies. The expenses primarily consist of personnel costs (salaries, bonuses, stock-based compensation, payroll taxes, and benefits); laboratory supplies and consumables; costs of processing samples for research, product development, collaborations and studies; depreciation and maintenance on equipment; and allocated facilities and IT costs. We include in research and development expenses the costs to further develop software we use to operate our laboratory, analyze the data it generates, and automate our operations.
“On July 20, 2026, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Tempus (sometimes referred to as Parent), Aviary Development, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub I”) and Toucan Development, LLC, a Nevada limited liability company and a wholly owned subsidiary of Parent (“Merger Sub II”). …”see in full comparison
Full comparison: every changed paragraph (52)
We develop, market, and sell advanced cancer genomic testing services. Our testing services are used by physicians to detect residual or recurrent cancer in patients, monitor cancer response to therapy, and uncover insights for therapy selection. Our testing services are also used by pharmaceutical companies for translational research, biomarker discovery, the development of personalized cancer therapies, and clinical trials. We also provide whole exome sequencing services for other diagnostic companies and whole genome sequencing services for population sequencing initiatives.
Today,Currently, our testing services are routinely used by many of the largest oncology-focused pharmaceutical companies for analysis of patient samples in their clinical trials and drug development programs. Our advanced genomic sequencing and analytics also support the development of personalized neoantigen therapies for cancer and other next-generation cancer immunotherapies. For example, we are providing genomic testing services to ModernaTX, Inc. ("Moderna") in its ongoing clinical trials evaluating a personalized cancer therapy. In addition, we have partnered with diagnostics companies by providing our advanced tumor profiling and analysis capabilities as an input to their products. We also have a collaboration with Tempus that enables Tempus to market our NeXT Personal® Dx test to physicians for breast cancer, lung cancer, colorectal cancer and immuno-oncology monitoring, and to market and sell NeXT Personal to Tempus' pharmaceutical and biotech customers who wish to bundle MRD testing with other Tempus offerings in a given study, through November 25, 2029. We have also pursued non-cancer related business opportunities, specifically within the population sequencing market, by providing whole genome sequencing ("WGS") services under contract with the U.S. Department of Veterans Affairs Million Veteran Program ("VA MVP").
On July 20, 2026, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Tempus (sometimes referred to as Parent), Aviary Development, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub I”) and Toucan Development, LLC, a Nevada limited liability company and a wholly owned subsidiary of Parent (“Merger Sub II”). Pursuant to the Merger Agreement, and upon the terms and subject to the conditions therein, (a) Merger Sub I will be merged with and into Personalis (the “First Merger”), with Personalis surviving the First Merger as a wholly owned subsidiary of Parent (the “First Surviving Corporation”), and (b) as part of the same overall transaction, immediately after the First Merger, the First Surviving Corporation will merge with and into Merger Sub II (together, with the First Merger, referred to collectively as the “Merger”), with Merger Sub II surviving as a wholly owned subsidiary of Parent (see Note 13, Subsequent Events, in Part 1, Item 1 of this Form 10-Q in our Consolidated Financial Statements for additional information).
FirstSecond Quarter 2026 Strategic and Operational Highlights
Total revenue of $22.4 million increased 30%, or $5.2 million, during the second quarter of 2026 compared to the second quarter of 2025, due to (i) higher revenue from pharma testing services and (ii) higher clinical test revenue as a result of obtaining Medicare reimbursement coverage decisions in November 2025, February 2026 and May 2026 for breast cancer, lung cancer, immunotherapy monitoring for patients with late-stage solid tumors and neoadjuvant therapy (NAT) monitoring for breast cancer, respectively. These increases were partially offset by (i) the expected revenue decline from Enterprise sales due to the completion of the project with Natera, and (ii) planned lower population sequencing revenue from the VA MVP.
Total revenue of $15.5 million decreased 25%, or $5.1 million, during the first quarter of 2026 compared to the first quarter of 2025, due to (i) lower revenue from pharma testing services and other customers; (ii) an expected revenue decline from Enterprise sales, which was primarily Natera; and (iii) planned lower population sequencing revenue from the VA MVP. Revenue from Enterprise sales was $0.4 million in the first quarter of 2026 compared to $2.4 million in the first quarter of 2025 and the decline was due to the expected winding down of the project with Natera. These decreases were partially offset by higher clinical test revenue, which increased $1.1 million, or 365%, compared to the first quarter of 2025, as a result of obtaining Medicare reimbursement coverage decisions in November 2025 and February 2026 for breast and lung cancer, respectively.
Key business accomplishments and financial updates in the firstsecond quarter of 2026 include:
Secured Medicare Coverage for IO Monitoring: Received Medicare coverage approval for NeXT Personal® for immunotherapy monitoring for patients with late-stage solid tumors;
Secured Medicare Coverage for Neoadjuvant Therapy Monitoring for Breast Cancer: Received Medicare coverage approval for NeXT Personal for monitoring treatment response to NAT in patients diagnosed with Stage II-III Triple-Negative Breast Cancer (TNBC) or HER2-positive (HER2+) breast cancer;
Presented Compelling Colorectal Cancer Recurrence Detection: The prospective VICTORI study led by the University of British Columbia showed NeXT Personal detected 100% of all patient relapses, including all distant metastases in historically difficult-to-detect regions like the lung. Notably, just four weeks after surgery, NeXT Personal detected over 80% of patients who later relapsed, providing clinicians with an early signal of cancer to inform treatment pathways;
Highlighted Importance of Sub-10 ppm Sensitivity in Lung Cancer: Approximately 21% of pre-operative adenocarcinoma and 18% of post-operative landmark detections in the TRACERx study were below 10 ppm—thresholds frequently missed by less sensitive assays. Patients detected in this range experienced a three-fold increased risk of recurrence compared to patients with undetectable ctDNA, potentially enabling much earlier clinical intervention.
Secured Milestone Medicare Coverage for Lung Cancer: Received Medicare coverage approval in the first quarter for the surveillance of cancer recurrence in lung cancer patients for Stage I to III non-small cell lung cancer (NSCLC). This marks the Company's second major Medicare coverage decision in six months, alongside breast cancer Announced Early Access Launch of Real-Time Variant Tracker™: Launched a pioneering new feature for NeXT Personal® that empowers clinicians to longitudinally track resistance and therapeutically targetable mutations during routine disease monitoring, and potentially optimize treatment Published Neoadjuvant Treatment Monitoring Results in Breast Cancer: Featured data in the Journal of Clinical Oncology from the PREDICT-DNA prospective study for Triple-Negative (TNBC) and HER2+ breast cancer patients that showed NeXT Personal can outperform current standard approaches for predicting patient outcomes following neoadjuvant therapy (NAT) Presented Compelling Data at the American Association for Cancer Research (AACR) Annual Meeting:
o
Colorectal Cancer (CRC) Podium Presentation: Highlighted the ultrasensitive ctDNA detection by NeXT Personal for predicting and tracking response to neoadjuvant immunotherapy in CRC patients, demonstrating a remarkable 100% negative predictive value and 100% specificity for disease relapse following surgery o Lung Cancer Poster Presentation: Demonstrated that ultrasensitive ctDNA monitoring with NeXT Personal successfully predicts the early response of immunotherapy in recurrent metastatic NSCLC patients
Enterprise sales includes sales of tumor profiling and diagnostic tests directly to other businesses as an input to their products. Revenue from our previous commercial relationship with Natera to provide advanced tumor analysis for use in Natera's MRD test currently makesmade up substantially all of the revenue in this category.
We have one reportable segment which is to provide advanced cancer genomic testing services for precision oncology applications, personalized testingtesting, and other tests. Most of our revenue to date has been derived from sales in the United States.
Cost of revenue consistsincludes ofcosts rawfor materials costs,materials, personnel costs (salaries, bonuses, stock-based compensation, payroll taxes, and benefits), laboratory supplies and consumables, depreciation and maintenanceequipment on equipment,maintenance, allocated facilities and information technology (“IT”) costs and clinical diagnostic test costs. We expect variability in our gross margins over the medium-term due to fluctuations in customer mix and volume, investments in newer sequencing platforms and new capabilitiescapabilities, such as automation of laboratory workflows, and processing of diagnostic tests for the clinical market while we work to secure reimbursement, and costs related to our Fremont facility.reimbursement. Over the long-term, we anticipate higher gross marginsmargin expansion as growingwe expect increases in revenue leadsto toresult in economies of scale.
Research and development expenses consist ofincludes costs incurred forto thedevelop researchtechnology and developmentofferings, ofexpenses our testing services and costs related tofor conducting clinical studies with collaborators and collaborations with partners to validate the clinical utilitybenefits of our offerings.offerings and develop and implement workflow automation technologies. The expenses primarily consist of personnel costs (salaries, bonuses, stock-based compensation, payroll taxes, and benefits); laboratory supplies and consumables; costs of processing samples for research, product development, collaborations and studies; depreciation and maintenance on equipment; and allocated facilities and IT costs. We include in research and development expenses the costs to further develop software we use to operate our laboratory, analyze the data it generates, and automate our operations.
Selling expenses consist of personnel costs (salaries, commissions, bonuses, stock-based compensation, payroll taxes, and benefits), customer support expenses, directfees paid to Tempus (see Note 8, Related Party Transactions, in Part 1, Item 1 of this Form 10-Q in our Consolidated Financial Statements for additional information), marketing communication expenses, and market research. Our general and administrative expenses include costs for ouradministration, executive,finance and accounting, finance, legal, and human resources functions. These expenses consist of personnel costs (salaries, bonuses, stock-based compensation, payroll taxes, and benefits), corporate insurance, audit and legal expenses, consulting costs, and allocated facilities and IT costs. We expense all selling, general and administrative costs as incurred.
We expect selling, general and administrative expenses to continue to increase over time to support the growth of our clinical diagnostic offerings and expected gain of market share.offerings.
(1) Includes related party revenue of $3.1$8.4 million and $0.5$1.9 million for the three months ended MarchJune 31,30, 2026 and March2025, 31,respectively, and $11.5 million and $2.4 million for the six months ended June 30, 2026 and 2025, respectively.
(2) Includes related party sales and marketing expenses of $2.9$3.8 million and $0.6$0.9 million for the three months ended MarchJune 31,30, 2026 and March2025, 31,respectively, and $6.7 million and $1.5 million for the six months ended June 30, 2026 and 2025, respectively.
(1) Includes related party accounts receivable of $4.5$7.5 million and $2.5 million as of MarchJune 31,30, 2026 and December 31, 2025, respectively.
(2) Includes related party liabilities of $4.4$5.4 million and $5.7 million as of MarchJune 31,30, 2026 and December 31, 2025, respectively.
(3) Includes related party contract liabilities of $2.7$1.7 million and nil as of MarchJune 31,30, 2026 and December 31, 2025, respectively.
(1) Includes related party revenue of $3.1$8.4 million and $0.5$1.9 million for the three months ended MarchJune 31,30, 2026 and March2025, 31,respectively, and $11.5 million and $2.4 million for the six months ended June 30, 2026 and 2025, respectively.
The decreaseincrease in pharma testing services revenue in the firstsecond quarter of 2026 and the first half of 2026 compared to the same periods of 2025 was primarily due to aan decreaseincrease in the number of clinical trial samples processed for Moderna in addition to a small decline in selling prices.Merck. We expect variability in revenue from pharmaceutical companies in the future due to the timing of their patient enrollment for clinical trials or project schedules.
The decrease in revenue from enterprise sales in the firstsecond quarter of 2026 and the first half of 2026 compared to the same periods of 2025 was mainly due to the expected decrease in the number of samples processed for Natera after the second quarter of 2025 when the minimum volume commitments in our agreement with Natera expired. We no longer have a material commercial relationship with Natera and do not expect to have one going forward.
Revenue recognized each period from population sequencing is impacted by timing of our fulfillment of samples under each annual task order. The decrease in revenue in the firstsecond quarter of 2026 and in the first half of 2026 compared to the same periods of 2025 was due to a planned decrease in the number of samples we processed. Our annual task orders received in 2025 and 2024 were $13.5 million and $7.5 million, respectively. Our contract with the VA MVP does not include specific testing turnaround times. Therefore, we may modulate the volume of samples processed from the VA MVP to accommodate sample volumes from other customers, which can vary from period to period. We anticipate fulfilling the task order received in August 2025 during the first three quarters of 2026.
Clinical diagnostic revenue is generated from Medicare and private insurance payors. In January 2024, we received a Medicare coverage determination for NeXT Dx, our ultra-comprehensive tumor genomic profiling assay. In November 2025, we received Medicare coverage determination for NeXT Personal Dx for post-treatment surveillance of cancer recurrence in patients with Stage II and III breast cancer, with an effective date of October 7, 2025. In February 2026, we also received Medicare coverage for NeXT Personal Dx for surveillance of patients with Stage I to III NSCLC, with an effective date of January 9, 2026. In May 2026, we received Medicare coverage for NeXT Personal Dx for immunotherapy monitoring for patients with late-stage solid tumors, with an effective date of March 16, 2026. In May 2026, we also received Medicare coverage for NeXT Personal Dx for monitoring treatment response to NAT in patients diagnosed with Stage II-III TNBC or HER2+ breast cancer, with an effective date of April 6, 2026. The increaseincreases in clinical diagnostic revenue in the firstsecond three monthsquarter of 2026 wasand in the first half of 2026 compared to the same periods of 2025 were mainly attributable to an increase in NeXT Dx test volume and NeXT Personal Dx reimbursements received from certain private payors and Medicare for breast cancercancer, NSCLC surveillance, immunotherapy monitoring for patients with late-stage solid tumors and NSCLCNAT surveillance.monitoring for breast cancer.
The increase in cost of revenue in the firstsecond quarter of 2026 and in the first half of 2026 compared to the same periods of 2025 was primarily due to increased clinical diagnostic test costs where the corresponding revenue and reimbursement amounts were less than the cost of the testing services due to selling testing services in advance of Medicare reimbursement in order to gain market share.
Specific components of the increase in the second quarter of 2026 were a $1.3$3.2 million increase in diagnostic test costs, a $0.8$1.6 million increase in direct material costs due to higher biopharma revenue, a $1.1 million increase in personnel costs, and a $0.2$0.3 million increase in facilitiesequipment expenses,maintenance costs, offset partially by a $0.5$1.0 million decrease in directlaboratory materialsupplies costs due to lower biopharma revenue.costs.
The increase in research and development expenses in the first quarter of 2026 was primarily due to an increase in personnel and personnel-related costs, expenses related to IT support, and lab supplies utilized. These expenses increased in order to further and complete clinical evidence studies, process development work to enhance laboratory operations’ productivity, and technology development.
Specific components of the increase in the first half of 2026 were a $1.4$3.8 million increase in diagnostic test costs, a $1.2 million increase in direct material costs due to higher biopharma revenue, a $1.8 million increase in personnel andcosts, personnel-relateda costs$0.4 drivenmillion by increased headcount and employee compensationincrease in theequipment firstmaintenance quartercosts, of 2026,and a $0.3 million increase in IT-relatedfacilities expenses,costs, andoffset partially by a $0.2$0.5 million increasedecrease in lablaboratory supplies utilized.costs.
The increases in research and development in the second quarter of 2026 and in the first half of 2026 compared to the same periods of 2025 were primarily due to increased personnel and personnel-related costs due to higher compensation costs and increased headcount and R&D lab activities. These expenses increased in order to further and complete clinical evidence studies, process development work to enhance laboratory operations’ productivity, and technology development.
Specific components of the increase in the second quarter of 2026 were a $2.2 million increase in personnel and personnel-related costs driven by increased headcount and employee compensation and a $1.8 million increase due to higher lab supplies utilized, IT and internal operation supports, and consulting services for R&D projects.
Specific components of the increase in the first half of 2026 were a $3.7 million increase in personnel and personnel-related costs driven by increased headcount and employee compensation and a $2.2 million increase in lab supplies utilized, IT related expenses, and consulting services to support R&D projects and volume growth.
The increaseincreases in selling, general and administrative expenses wasin the second quarter of 2026 and in the first half of 2026 compared to the same periods of 2025 were primarily due to anincreased increasepersonnel inand sellingpersonnel related expenses due to higher compensation costs and increased headcount and marketing expenses associated with increases in testing volume for NeXT Personal Dx.
Specific components of the increase in the second quarter of 2026 were a $2.4$3.3 million increase in Tempus' sales &and marketing expenses,expenses and commercial-related expenses associated with higher NeXT Personal Dx testing volume, a $1.8$3.5 million increase in personnel and personnel-relatedpersonnel costsrelated drivenexpenses bydue increasedto higher headcount and employee compensation in the first quarter of 2026,compensation, and a $0.8 million increase in commercial related expenses associated with higher testing volume for NeXT Personal Dx. These expenses were further impacted by a $0.6 million increase in equipment-related expenses and subscription fees and a $0.3$1.3 million increase in professional services,services primary associated with the Merger Agreement, partially offset by a $0.3 million decrease in depreciation costs.expenses.
Specific components of the increase in the first half of 2026 were a $6.6 million increase in Tempus' sales and marketing expenses and commercial-related expenses associated with higher NeXT Personal Dx testing volume, a $5.9 million increase in personnel and personnel-related expenses due to higher sales commission, headcount, and employee compensation, and a $1.6 million increase in professional services primarily associated with the Merger Agreement, partially offset by a $0.6 million decrease in depreciation expenses.
The increaseincreases in interest income in the second quarter of 2026 and the first quarterhalf of 2026 compared to the same quarterperiods inof 2025 waswere driven by higher average investment balances, partially offset by decreased yields. Interest expense is the recognition of imputed interest on noninterest bearing loans.
Other income (expense), net, in the periods presentedpresented, consisted mainly of foreign currency remeasurements.
From our inception through MarchJune 31,30, 2026, we have funded our operations primarily from net proceeds from issuance of redeemable convertible preferred stock, IPO, follow-on equity offerings, At-the-Market ("ATM") facility (see Note 9, Stock-BasedAt-the-Market Compensation,Equity Offerings, in Part 1, Item 1 of this Form 10-Q in our Consolidated Financial Statements for additional information), Tempus exercising warrants and purchasing additional shares under an investment agreement, and Merck purchasing shares of our common stock under an investment agreement (see Note 8, Related Party Transactions, in Part 1, Item 1 of this Form 10-Q in our Consolidated Financial Statements for additional information), as well as debt financings. As of MarchJune 31,30, 2026, we had cash and cash equivalents of $73.6$94.0 million and short-term investments of $159.6$118.7 million.
We have incurred net losses since our inception. We anticipate that our current cash and cash equivalents and short-term investmentsinvestments, are sufficient to fund our near-term capital and operating needs for at least the next 12 months.
We have based these future funding requirements on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. If the Merger is not completed and our available cash balances and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, including because of lower demand for our testing services or other risks described in this Quarterly Report on Form 10-Q, we may seek to sell additional common or preferred equity or convertible debt securities, enter into an additional credit facility or another form of third-party funding or seek other debt financing. We filed a sales agreement prospectus supplement in NovemberMay 2025,2026, pursuant to which we offeredmay offer and soldsell $100.0$150.0 million of shares of our common stock through our ATM facility. Asfacility, of Marchwhich 31,approximately 2026,$145.4 nomillion shares of our common stock remainremains available for sale.sale as of June 30, 2026, provided that we may not sell any shares through the ATM facility while the closing of the Merger is pending. The sale of equity and convertible debt securities may result in dilution to our stockholders and, in the case of convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations. Additional capital may not be available on reasonable terms, or at all.
The increase in cash used in operating activities was primarily due to workingan capitalincrease needsin andnet lower revenue with reduced gross margin.loss.
The increasedecrease in cash used by investing activities was primarily due to a $2.7$14.2 million increasedecrease in investment of our cash into short-term investments, $20.2$9.0 million lowerhigher proceeds from the maturity of short-term investments, andpartially offset by a $0.6$4.0 million increase in capital expenditures.
The decreaseincrease in cash provided by financing activities was primarily due to a $2.6 million decrease in proceeds from loans, a $2.1 million payment of a finance lease, and $1.0 million higher repayments of loans, partially offset by $3.3$7.7 million higher net proceeds from sales of common stock under our ATM facility and our$3.1 million higher proceeds from issuance of common stock under equity incentive plans, andpartially $0.1offset by a $2.6 million lowerdecrease paymentsin proceeds from loans and a $2.1 million payment of costsa associatedfinance with the Tempus and Merck investment agreements.lease.
Our material cash requirements in the short- and long-term consist primarily of variable costs of revenue, operating expenditures, capital expenditures, property leases, and other spend. We plan to fund our material cash requirements with our existing cash and cash equivalents and short-term investments, which amounted to $233.2$212.7 million as of MarchJune 31,30, 2026, as well as anticipated cash receipts from customers. ToIf the Merger is not completed, to fund our material cash requirements in the short- and long-term, we may also seek to sell additional common or preferred equity or convertible debt securities, enter into an additional credit facility or another form of third-party funding or seek other debt financing.
Variable costs of revenue. From time to time in the ordinary course of business, we enter into agreements with vendors for the purchase of raw materials, laboratory supplies and consumables to be used in the sequencing of customer samples. However, we generally do not have binding and enforceable purchase orders beyond the short term, and the timing and magnitude of purchase orders beyond such period is difficult to accurately project. We currently expect spending in this area to increase compared to the levels in 2025 in order to support expected higher levels of revenue.
Property leases. Our noncancelable operating lease payments were $60.6$58.8 million as of MarchJune 31,30, 2026. The timing of these future payments, by year, can be found in Note 7, Leases, in Part I, Item 1 of this Form 10-Q in the Consolidated Financial Statements.
Other. As of MarchJune 31,30, 2026, we have an outstanding noninterest bearing loan that was used to finance the purchase of equipment for our laboratory. We owe a total of $0.9 million, which is payable in 2027. Further discussion of the loan can be found in Note 6, Loans, in Part I, Item 1 of this Form 10-Q in the Consolidated Financial Statements.
PSNL insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 12 filings (4 insiders, 8 trade dates, 551,488 shares, about $7.4M; 8 of these filings say the sales were made under a Rule 10b5-1 trading plan). Net open-market shares: -551,488 (purchases minus sales); net value about -$7.4M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-18 | Moore Stephen Michael |
Open-market sale | 2,068 | $16.22 | $33.5K |
| 2026-09-18 | Chen Richard |
Open-market sale | 3,998 | $16.22 | $64.8K |
| 2026-09-18 | Hall Christopher M |
Open-market sale | 7,459 | $16.22 | $121.0K |
| 2026-09-18 | Tachibana Aaron |
Open-market sale | 2,931 | $16.22 | $47.5K |
| 2026-07-15 | Chen Richard |
Open-market sale |
100,000 | $15.15 | $1.5M |
| 2026-07-15 | Chen Richard |
Option exercise |
100,000 | $2.44 | $244.0K |
| 2026-07-09 | Hall Christopher M |
Option exercise |
100,000 | $1.61 | $161.0K |
| 2026-07-09 | Hall Christopher M |
Open-market sale |
100,000 | $15.08 | $1.5M |
| 2026-06-29 | Tachibana Aaron |
Open-market sale |
4,982 | $14.00 | $69.7K |
| 2026-06-29 | Tachibana Aaron |
Option exercise |
4,982 | $5.32 | $26.5K |
| 2026-06-26 | Tachibana Aaron |
Option exercise |
22,419 | $5.32 | $119.3K |
| 2026-06-26 | Tachibana Aaron |
Option exercise |
28,832 | $9.16 | $264.1K |
| 2026-06-26 | Tachibana Aaron |
Open-market sale |
51,251 | $13.18 | $675.5K |
| 2026-06-26 | Hall Christopher M |
Option exercise |
100,000 | $1.61 | $161.0K |
| 2026-06-26 | Hall Christopher M |
Open-market sale |
100,000 | $13.15 | $1.3M |
| 2026-06-04 | Tachibana Aaron |
Open-market sale |
40,000 | $12.01 | $480.4K |
| 2026-06-04 | Tachibana Aaron |
Option exercise |
40,000 | $9.16 | $366.4K |
| 2026-05-29 | Hall Christopher M |
Open-market sale |
80,091 | $11.02 | $882.6K |
| 2026-05-29 | Hall Christopher M |
Option exercise |
80,091 | $1.61 | $128.9K |
| 2026-05-29 | Tachibana Aaron |
Option exercise |
38,799 | $9.16 | $355.4K |
| 2026-05-29 | Tachibana Aaron |
Open-market sale |
38,799 | $11.58 | $449.3K |
| 2026-05-28 | Hall Christopher M |
Option exercise |
19,909 | $1.61 | $32.1K |
| 2026-05-28 | Hall Christopher M |
Open-market sale |
19,909 | $11.02 | $219.4K |
| 2026-05-12 | Eastham Karin |
Grant/award | 6,250 | — | — |
| 2026-05-12 | Eastham Karin |
Grant/award | 6,250 | — | — |
| 2026-05-12 | Bowman A Blaine |
Grant/award | 6,250 | — | — |
| 2026-05-12 | Widder Kenneth J |
Grant/award | 6,250 | — | — |
| 2026-05-12 | Shoff Lonnie |
Grant/award | 6,250 | — | — |
| 2026-05-12 | Bloom Olivia Kyusuk |
Grant/award | 6,250 | — | — |
| 2026-05-12 | Myers Woodrow A Jr |
Grant/award | 6,250 | — | — |
Well-known investors holding PSNL (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| ARK Investment Management (Cathie Wood) | 2026-06-30 | 8,271,339 | $110.8M | 0.72% | Added 4% |
| Millennium Management (Israel Englander) | 2026-06-30 | 450,160 | $6.0M | 0.0% | Added 7% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 144,998 | $1.9M | 0.0% | New position |
| Two Sigma Investments | 2026-06-30 | 57,258 | $767.3K | 0.0% | Reduced 37% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 11,821 | $158.4K | 0.0% | Reduced 32% |
| Renaissance Technologies | 2026-06-30 | 15,200 | $96.8K | — | Sold out |