Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Jul. 31, 2019 | |
Document and Entity Information | ||
Entity Registrant Name | Natera, Inc. | |
Entity Central Index Key | 0001604821 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 70,129,854 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 29,928 | $ 46,407 |
Restricted cash | 55 | 4,597 |
Short-term investments | 208,053 | 107,461 |
Accounts receivable, net of allowance of $1,997 in 2019 and $1,788 in 2018 | 62,974 | 62,223 |
Inventory | 15,236 | 13,633 |
Prepaid expenses and other current assets | 5,721 | 6,197 |
Total current assets | 321,967 | 240,518 |
Property and equipment, net | 22,039 | 24,336 |
Operating lease right-of-use assets | 26,229 | |
Other assets | 13,091 | 3,317 |
Total assets | 383,326 | 268,171 |
Current liabilities: | ||
Accounts payable | 8,319 | 14,587 |
Accrued compensation | 10,149 | 12,668 |
Other accrued liabilities | 39,157 | 32,442 |
Deferred revenue, current portion | 19,154 | 4,131 |
Short-term debt financing | 50,146 | 50,153 |
Total current liabilities | 126,925 | 113,981 |
Long-term debt financing | 73,511 | 73,357 |
Deferred rent, net of current portion | 8,613 | |
Deferred revenue, long-term portion | 60,527 | 40,058 |
Operating lease liabilities, long-term portion | 29,275 | |
Total liabilities | 290,238 | 236,009 |
Commitments and contingencies (Note 8) | ||
Stockholders' equity: | ||
Common stock, $0.0001 par value: 750,000 shares authorized at both June 30, 2019 and December 31, 2018, respectively; 70,035 and 62,083 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively | 7 | 7 |
Additional paid in capital | 733,137 | 607,236 |
Accumulated deficit | (640,851) | (574,529) |
Accumulated other comprehensive income (loss) | 795 | (552) |
Total stockholders' equity | 93,088 | 32,162 |
Total liabilities and stockholders' equity | $ 383,326 | $ 268,171 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Condensed Consolidated Balance Sheets | ||
Allowances on accounts receivable | $ 1,997 | $ 1,788 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 750,000 | 750,000 |
Common stock, shares issued | 70,035 | 62,083 |
Common stock, shares outstanding | 70,035 | 62,083 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Revenues | ||||
Total revenues | $ 74,355 | $ 63,069 | $ 141,179 | $ 125,409 |
Cost and expenses | ||||
Cost of revenues | 41,382 | 39,204 | 82,987 | 78,259 |
Research and development | 12,124 | 11,852 | 23,559 | 26,192 |
Selling, general and administrative | 47,042 | 37,440 | 90,874 | 75,365 |
Total cost and expenses | 102,991 | 90,287 | 201,561 | 183,144 |
Loss from operations | (28,636) | (27,218) | (60,382) | (57,735) |
Interest expense | (2,721) | (2,560) | (5,445) | (4,949) |
Interest and other income (expense), net | 836 | (3,933) | 1,289 | (3,796) |
Loss before income taxes | (30,521) | (33,711) | (64,538) | (66,480) |
Income tax expense | (1,895) | (113) | (1,969) | (217) |
Net loss | (32,416) | (33,824) | (66,507) | (66,697) |
Unrealized gain (loss) on available-for-sale securities, net of tax | 1,061 | 46 | 1,347 | (92) |
Comprehensive loss | $ (31,355) | $ (33,778) | $ (65,160) | $ (66,789) |
Net loss per share (Note 13): | ||||
Basic (in dollars per share) | $ (0.48) | $ (0.62) | $ (1.01) | $ (1.23) |
Diluted (in dollars per share) | $ (0.48) | $ (0.62) | $ (1.01) | $ (1.23) |
Weighted-average number of shares used in computing basic and diluted net loss per share: | ||||
Basic (in shares) | 68,224 | 54,551 | 65,542 | 54,342 |
Diluted (in shares) | 68,224 | 54,551 | 65,542 | 54,342 |
Product | ||||
Revenues | ||||
Total revenues | $ 65,099 | $ 60,353 | $ 128,463 | $ 114,622 |
Licensing and other | ||||
Revenues | ||||
Total revenues | 9,256 | 2,716 | 12,716 | 10,787 |
Cost and expenses | ||||
Cost of revenues | $ 2,443 | $ 1,791 | $ 4,141 | $ 3,328 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Deficit) - USD ($) shares in Thousands, $ in Thousands | Common stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total |
Balance at Dec. 31, 2017 | $ 6 | $ 472,552 | $ (766) | $ (446,375) | $ 25,417 |
Balance (in shares) at Dec. 31, 2017 | 54,040 | ||||
Issuance of common stock upon exercise of stock options | 4,196 | 4,196 | |||
Issuance of common stock upon exercise of stock options (in shares) | 788 | ||||
Issuance of common stock under employee stock purchase plan | 1,855 | 1,855 | |||
Issuance of common stock under employee stock purchase plan (in shares) | 206 | ||||
Issuance of common stock upon exercise of warrants | 6,762 | 6,762 | |||
Issuance of common stock upon exercise of warrants (in shares) | 333 | ||||
Vesting of restricted stock (in shares) | 87 | ||||
Stock based compensation | 6,522 | 6,522 | |||
Unrealized gain (loss) on available-for-sale securities | (92) | (92) | |||
Net loss | (66,697) | (66,697) | |||
Balance at Jun. 30, 2018 | $ 6 | 491,887 | (858) | (513,072) | (22,037) |
Balance (in shares) at Jun. 30, 2018 | 55,454 | ||||
Balance at Mar. 31, 2018 | $ 6 | 476,270 | (904) | (479,248) | (3,876) |
Balance (in shares) at Mar. 31, 2018 | 54,251 | ||||
Issuance of common stock upon exercise of stock options | 3,632 | 3,632 | |||
Issuance of common stock upon exercise of stock options (in shares) | 643 | ||||
Issuance of common stock under employee stock purchase plan | 1,855 | 1,855 | |||
Issuance of common stock under employee stock purchase plan (in shares) | 206 | ||||
Issuance of common stock upon exercise of warrants | 6,762 | 6,762 | |||
Issuance of common stock upon exercise of warrants (in shares) | 333 | ||||
Vesting of restricted stock (in shares) | 21 | ||||
Stock based compensation | 3,368 | 3,368 | |||
Unrealized gain (loss) on available-for-sale securities | 46 | 46 | |||
Net loss | (33,824) | (33,824) | |||
Balance at Jun. 30, 2018 | $ 6 | 491,887 | (858) | (513,072) | (22,037) |
Balance (in shares) at Jun. 30, 2018 | 55,454 | ||||
Balance at Jun. 30, 2019 | $ 7 | 733,137 | 795 | (640,851) | $ 93,088 |
Balance (in shares) at Jun. 30, 2019 | 70,035 | 70,035 | |||
Balance at Dec. 31, 2018 | $ 7 | 607,236 | (552) | (574,529) | $ 32,162 |
Balance (in shares) at Dec. 31, 2018 | 62,083 | 62,083 | |||
Cumulative-effect adjustment upon adoption of ASU 2018-07 | (185) | 185 | |||
Issuance of common stock upon exercise of stock options | 5,983 | $ 5,983 | |||
Issuance of common stock upon exercise of stock options (in shares) | 1,468 | ||||
Issuance of common stock under employee stock purchase plan | 2,147 | 2,147 | |||
Issuance of common stock under employee stock purchase plan (in shares) | 132 | ||||
Issuance of common stock for public offering, net | 107,595 | 107,595 | |||
Issuance of common stock for public offering, net (in shares) | 6,053 | ||||
Issuance of common stock to Orbimed | 506 | 506 | |||
Issuance of common stock to Orbimed (in shares) | 25 | ||||
Vesting of restricted stock (in shares) | 274 | ||||
Stock based compensation | 9,855 | 9,855 | |||
Unrealized gain (loss) on available-for-sale securities | 1,347 | 1,347 | |||
Net loss | (66,507) | (66,507) | |||
Balance at Jun. 30, 2019 | $ 7 | 733,137 | 795 | (640,851) | $ 93,088 |
Balance (in shares) at Jun. 30, 2019 | 70,035 | 70,035 | |||
Balance at Mar. 31, 2019 | $ 7 | 613,680 | (266) | (608,435) | $ 4,986 |
Balance (in shares) at Mar. 31, 2019 | 63,340 | ||||
Issuance of common stock upon exercise of stock options | 3,405 | 3,405 | |||
Issuance of common stock upon exercise of stock options (in shares) | 398 | ||||
Issuance of common stock under employee stock purchase plan | 2,147 | 2,147 | |||
Issuance of common stock under employee stock purchase plan (in shares) | 132 | ||||
Issuance of common stock for public offering, net | 107,595 | 107,595 | |||
Issuance of common stock for public offering, net (in shares) | 6,053 | ||||
Issuance of common stock to Orbimed | 506 | 506 | |||
Issuance of common stock to Orbimed (in shares) | 25 | ||||
Vesting of restricted stock (in shares) | 87 | ||||
Stock based compensation | 5,804 | 5,804 | |||
Unrealized gain (loss) on available-for-sale securities | 1,061 | 1,061 | |||
Net loss | (32,416) | (32,416) | |||
Balance at Jun. 30, 2019 | $ 7 | $ 733,137 | $ 795 | $ (640,851) | $ 93,088 |
Balance (in shares) at Jun. 30, 2019 | 70,035 | 70,035 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Operating activities | ||
Net loss | $ (66,507) | $ (66,697) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 3,952 | 3,679 |
Non-cash lease expense | 3,849 | |
Stock-based compensation | 9,855 | 6,522 |
Premium amortization and discount accretion on investment securities | 151 | 310 |
Amortization of debt discount | 215 | 195 |
Inventory excess adjustments | 212 | 152 |
Impairment of assets | 1,544 | |
Loss on investments | 32 | |
Loss from changes in fair value of warrants | 4,119 | |
Other non-cash charges | 203 | |
Other non-cash (benefits) | (50) | |
Changes in operating assets and liabilities | ||
Accounts receivable | (829) | (12,854) |
Inventory | (1,815) | (3,477) |
Prepaid expenses and other current assets | (4,464) | 1,564 |
Other assets | (9,499) | 415 |
Accounts payable | (6,378) | (784) |
Accrued compensation | (2,519) | (984) |
Other accrued liabilities | 2,331 | (3,752) |
Deferred revenue | 35,492 | 35,889 |
Deferred rent, net of current portion | (320) | |
Net cash used in operating activities | (35,751) | (34,497) |
Investing activities | ||
Purchases of investments | (162,176) | (20,584) |
Proceeds from sale of investments | 27,895 | |
Proceeds from maturity of investments | 62,780 | 27,600 |
Purchases of property and equipment, net | (1,599) | (1,227) |
Net cash used in (provided by) investing activities | (100,995) | 33,684 |
Financing activities | ||
Proceeds from exercise of stock options | 5,983 | 4,197 |
Proceeds from issuance of common stock under employee stock purchase plan | 2,147 | 1,855 |
Proceeds from public offering | 107,595 | |
Net cash provided by financing activities | 115,725 | 6,052 |
Net (decrease) increase in cash, cash equivalents and restricted cash | (21,021) | 5,239 |
Cash, cash equivalents and restricted cash, beginning of period | 51,004 | 13,021 |
Cash, cash equivalents and restricted cash, end of period | 29,983 | $ 18,260 |
Supplemental non-cash investing and financing activities: | ||
Obtaining right-of-use assets in exchange for lease liabilities | 28,191 | |
Purchases of property and equipment in accounts payable and accruals | $ 323 |
Description of Business
Description of Business | 6 Months Ended |
Jun. 30, 2019 | |
Description of Business | |
Description of Business | 1. Description of Business Natera, Inc. (the "Company") was formed in the state of California as Gene Security Network, LLC in November 2003 and incorporated in the state of Delaware in January 2007. The Company’s mission is to change the management of genetic disease worldwide. The Company operates a laboratory certified under the Clinical Laboratory Improvement Amendments ("CLIA") providing a host of preconception and prenatal genetic testing services. The Company determines its operating segments based on the way it organizes its business to make operating decisions and assess performance. The Company has only one segment, which is the discovery, development and commercialization of genetic testing services, and it has a subsidiary that operates in the state of Texas. The Company's product offerings include its Panorama Non-Invasive Prenatal Test ("NIPT") that screens for chromosomal abnormalities of a fetus typically with a blood draw from the mother; Vistara (“Vistara”), a single-gene mutations screening test performed to identify single-gene disorders; Horizon Carrier Screening ("HCS") to determine carrier status for a large number of severe genetic diseases that could be passed on to the carrier’s children; Spectrum Pre-implantation Genetic Screening ("PGS") and Spectrum Pre-implantation Genetic Diagnosis ("PGD") to analyze chromosomal anomalies or inherited genetic conditions during an in vitro fertilization ("IVF") cycle to select embryos with the highest probability of becoming healthy children; Anora Products of Conception ("POC") test to rapidly and extensively analyze fetal chromosomes to understand the cause of miscarriage; and Non-Invasive Paternity Testing ("PAT"), to determine paternity by analyzing the fragments of fetal deoxyribonucleic acid ("DNA") in a pregnant mother's blood and a blood sample from the alleged father(s), which is marketed and sold by a licensee from whom the Company receives a royalty. All testing is available principally in the United States. The Company also offers its Panorama test to customers outside of the United States, primarily in Europe. The Company also offers Constellation (“Constellation”), a cloud-based software product that allows laboratory customers to gain access through the cloud to the Company’s algorithms and bioinformatics in order to validate and launch tests based on the Company’s technology. The Company also offers Evercord, which is a cord blood and cord tissue processing and storage service; and Signatera TM , a circulating tumor DNA technology that analyzes and tracks mutations specific to an individual's tumor. Further, the Company has expanded its Panorama test to now screen twin pregnancies for zygosity and chromosomal abnormalities. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2019 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited interim condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. The unaudited interim condensed consolidated financial information includes only adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position, changes in stockholders’ equity, and cash flows. The results of operations for the three and six months ended June 30, 2019, are not necessarily indicative of the results for the full year or the results for any future periods. The condensed consolidated balance sheet as of December 31, 2018 has been derived from audited financial statements at that date, these financial statements should be read in conjunction with the audited financial statements, and related notes for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2019. Effective January 1, 2019, the Company transitioned to the new accounting requirements under the Accounting Standards Update (“ASU”) No. 2018-07, S tock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting . The Company applied the modified retrospective approach upon transition with a cumulative-effect adjustment of $0.2 million recorded to accumulated deficit as of January 1, 2019. The results in all of the prior period financial statements presented in this Form 10-Q were not retroactively adjusted. See Note 2 under Recently Adopted Accounting Pronouncements for further discussion. On January 1, 2019, the Company adopted the new accounting requirements under ASU 2016-02, Leases , and concurrently elected ASU 2018-11, Leases (Topic 842): Targeted Improvements , which permitted the Company to adjust any cumulative-effect of the accounting change to the balance of accumulated deficit as of the adoption date instead of the earliest period presented by using the modified retrospective approach. None of the prior period financial results in this Form 10-Q were retroactively adjusted as a result of the adoption of ASU 2016-02. See Note 2 under Recently Adopted Accounting Pronouncements for more detail. Liquidity Matters The Company has incurred net losses since its inception and anticipates net losses and negative operating cash flows for the near future. The Company had a net loss of $66.5 million for the six months ended June 30, 2019 and recorded a cumulative-effect adjustment of $0.2 million upon the adoption of ASU 2018-07 on January 1, 2019, which increased the accumulated deficit to $640.9 million at June 30, 2019 from $574.6 million at December 31, 2018. At June 30, 2019, the Company had $30.0 million in cash and cash equivalents, $208.1 million in marketable securities, $50.1 million of outstanding balance of the Credit Line (as defined in Note 10) including accrued interest, and $73.5 million of net carrying amount of the 2017 Term Loan (as defined in Note 10). While the Company has introduced multiple products that are generating revenues, these revenues have not been sufficient to fund all operations. Accordingly, the Company has funded the portion of operating costs that exceeds revenues through a combination of equity issuances, debt issuances, and other financings. The Company continues to develop and commercialize future products and, consequently, it will need to generate additional revenues to achieve future profitability and may need to raise additional equity or debt financing. If the Company raises additional funds by issuing equity securities, its stockholders would experience dilution. Additional debt financing, if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt financing or additional equity that the Company raises may contain terms that are not favorable to it or its stockholders and requires significant debt service payments, which diverts resources from other activities. Additional financing may not be available at all, or in amounts or on terms acceptable to the Company. If the Company is unable to obtain additional financing, it may be required to delay the development and commercialization of its products and significantly scale back its business and operations. On April 23, 2019, the Company completed an underwritten equity offering to sell 5,263,158 shares of its common stock at a price to the public of $19 per share. On April 26, 2019, the Company sold an additional 789,473 shares of its common stock to the underwriters at the same price upon their exercise of the option to purchase those shares. Before offering expenses of $0.6 million, the Company received proceeds of $108.1 million net of the underwriting discount. Based on the Company’s current business plan, the Company believes that its existing cash and marketable securities will be sufficient to meet its anticipated cash requirements for at least 12 months after August 8, 2019. Principles of Consolidation The accompanying condensed consolidated financial statements include all the accounts of the Company and its subsidiary. The Company established a subsidiary that operates in the state of Texas to support the Company’s laboratory and operational functions. All intercompany balances and transactions have been eliminated. Use of Estimates The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions about future events that affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Significant items subject to such estimates include the allowance for doubtful accounts, the operating right-of-use assets and the associated lease liabilities, deferred revenues associated with unsatisfied performance obligations, accrued liability for potential refund requests, stock-based compensation, the fair value of common stock and warrants, income tax uncertainties, and the expected consideration to be received from contracts with customers. These estimates and assumptions are based on management's best estimates and judgment. Management regularly evaluates its estimates and assumptions using historical experience and other factors, including contractual terms and statutory limits; however, actual results could differ from these estimates and could have an adverse effect on the Company's financial statements. Fair Value The Company discloses the fair value of financial instruments for financial assets and liabilities for which the value is practicable to estimate. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Cash and Cash Equivalents Cash and cash equivalents consist of cash and money market deposits with financial institutions. Restricted Cash The Company discloses both short-term and long-term restricted cash. As of June 30, 2019, short-term restricted cash totaled $0.1 million and long-term restricted cash totaled zero in cash deposits held as collateral for the settlement of foreign currency transactions and deposit per credit card terms. In the first quarter of 2019, the Company paid the final quarterly installment of $1.4 million in connection with the settlement agreement relating to reimbursement-related claims, and accordingly, the restriction imposed on the $4.2 million cash deposits to secure the letter of credit required under the settlement agreement was released. Restricted cash is currently presented as a separate line item in the Company’s balance sheet. In the statements of cash flows, it is included together with cash and cash equivalents and considered as part of the total ending cash balance. The following is the reconciliation between how restricted cash is presented in the balance sheet and the statements of cash flows for all periods presented: June 30, December 31, 2019 2018 (in thousands) Cash and cash equivalents in balance sheet $ 29,928 $ 46,407 Restricted cash, current portion in balance sheet 55 4,597 Total cash, cash equivalents and restricted cash in statements of cash flows $ 29,983 $ 51,004 Investments Investments consist primarily of debt securities such as U.S. Treasuries, U.S. agency and municipal bonds. Management determines the appropriate classification of securities at the time of purchase and re-evaluates such determination at each balance sheet date. The Company generally classifies its entire investment portfolio as available-for-sale. The Company views its available-for-sale portfolio as available for use in current operations. Accordingly, the Company classifies all investments as short-term, even though the stated maturity may be more than one year from the current balance sheet date. Available-for-sale securities are carried at fair value, with unrealized gains and losses reported in accumulated other comprehensive income (loss), which is a separate component of stockholders’ equity. Risk and Uncertainties Financial instruments that potentially subject the Company to credit risk consist of cash, accounts receivable and investments. The Company limits its exposure to credit loss by placing its cash in financial institutions with high credit ratings. The Company's cash may consist of deposits held with banks that may at times exceed federally insured limits. The Company performs evaluations of the relative credit standing of these financial institutions and limits the amount of credit exposure with any one institution. The Company bills third-party payers for certain tests performed. The amount that is ultimately received from the payer for the Company’s claim and the timing of such payments are subject to the determination of the payer based on the nature of the test performed and their view of the Company’s business practices with respect to collections of plan deductibles and co-payments from patients and other activities. This determination can impact both the amount and timing of when the Company’s invoices are collected. Payers may also withhold payments and request refunds of prior payments if the payer asserts that the Company has not performed in accordance with the policies of these payers. The Company performs evaluations of financial conditions for insurance carriers, patients, clinics and laboratory partners and generally does not require collateral to support credit sales. For the three and six months ended June 30, 2019, and 2018, there were no customers exceeding 10% of total revenues on an individual basis. As of June 30, 2019 and December 31, 2018, there were no customers with an outstanding balance exceeding 10% of net accounts receivable. Revenue Recognition The Company adopted the new revenue recognition guidance, Accounting Standards Codification (“ASC”) Topic 606, beginning January 1, 2018. ASC 606 mandates revenue recognition to be evaluated using the following five steps: · Identification of a contract, or contracts, with a customer; · Identification of the performance obligations in the contract; · Determination of the transaction price; · Allocation of the transaction price to the performance obligations in the contract; and · Revenue recognition when, or as, the performance obligations are satisfied See Note 3, Revenue Recognition , for detailed discussions of product revenues, licensing and other revenues, and how the five steps described above are applied. Cost of Product Revenues The components of cost of product revenues are material and service costs, impairment charges associated with testing equipment, personnel costs, including stock-based compensation expense, equipment and infrastructure expenses associated with testing samples, electronic medical records, order and delivery systems, shipping charges to transport samples, third-party test fees and allocated overhead including rent, information technology costs, equipment depreciation and utilities. Costs associated with the performance of diagnostic services are recorded as tests are accessioned. Cost of Licensing and Other Revenues The components of cost of licensing and other revenues are material costs associated with test kits, engineering costs incurred to improve and maintain the Constellation software platform, and amortization of Constellation software development costs. Costs also include collection kits consumed during the processing of cord blood samples, processing service and storage of the cord blood samples, and freight charged to transport the samples to the storage facility. Stock‑Based Compensation Stock‑based compensation is related to stock options and restricted stock units (“RSUs”) granted to the Company’s employees and is measured at the grant date based on the fair value of the award. The fair value is recognized as expense over the requisite service period, which is generally the vesting period of the respective awards on a straight-line basis. No compensation cost is recognized when the requisite service has not been met and the awards are therefore forfeited. The Company also recognizes stock-based compensation from option awards and RSUs granted to non-employees. Prior to January 1, 2019, the fair value of non-employee awards was subject to remeasurement at the end of each reporting period until the vesting date of such awards, and the resulting change in fair value was recognized in the Company's statements of operations and comprehensive loss during the period that the related services were rendered. On January 1, 2019, the Company adopted ASU 2018-07, which allows the accounting for non-employee awards to be treated the same as for employee awards. The fair value of non-employee awards is now determined based on a one-time measurement at the grant date, and it is no longer subject to periodic remeasurement. The Company continues to recognize stock-based compensation expense as services are rendered by the non-employees over the vesting period, which is accounted for on a straight-line basis. See further discussion under the Recently Adopted Accounting Pronouncements section within this footnote, as well as the election of certain accounting policy as a result of the adoption. The Company uses the Black‑Scholes option‑pricing model and the Monte Carlo simulation model to estimate the fair value of stock options issued to employees and non-employees. The model requires the input of the Company's expected stock price volatility, the expected term of the awards, and a risk-free interest rate. Determining these assumptions requires significant judgment. See further discussion on the valuation assumptions used under Note 9. Warrants The Company historically accounted for warrants to purchase shares of its common stock as a liability at fair value on the balance sheet date because the Company could have been obligated to redeem these warrants at some point in the future. The warrants were subject to re-measurement at each balance sheet date, with changes in fair value of the warrants recognized as a gain or loss in interest and other income in the statements of operations and comprehensive loss. Further adjustments resulting from changes in fair value are no longer required as the warrants were fully exercised in June 2018. Capitalized Software Held for Internal Use The Company capitalizes salaries and related costs of employees and consultants who devote time to the development of internal-use software development projects. Capitalization begins during the application development stage, once the preliminary project stage has been completed. If a project constitutes an enhancement to previously developed software, the Company assesses whether the enhancement is significant and creates additional functionality to the software, thus qualifying the work incurred for capitalization. Once the project is available for general release, capitalization ceases and the Company estimates the useful life of the asset and begins amortization. The Company periodically assesses whether triggering events are present to review internal-use software for impairment. Changes in estimates related to internal-use software would increase or decrease operating expenses or amortization recorded during the reporting period. See Property and Equipment, net under Note 6 for more detail regarding an impairment charge recorded to write off certain project development costs during the first quarter of 2018. The Company amortizes its internal-use software over the estimated useful lives of three years. The net book value of capitalized software held for internal use was $1.8 million and $1.7 million as of June 30, 2019 and December 31, 2018, respectively. Amortized expense for amounts previously capitalized for the three months ended June 30, 2019 and 2018 was $0.3 million for each period; and $0.6 million and $0.7 million for the six months ended June 30, 2019 and 2018, respectively. Accumulated Other Comprehensive Income (Loss) Comprehensive loss and its components encompass all changes in equity other than those with stockholders, and include net loss, unrealized gains and losses on available-for-sale marketable securities. Three months ended June 30, Six months ended June 30, 2019 2018 2019 2018 (in thousands) (in thousands) Beginning balance $ (266) $ (904) $ (552) $ (766) Net unrealized gain (losses) on available-for-sale securities, net of tax 1,061 46 1,347 (124) Reclassifications of losses realized from sale of available-for-sale securities — — — 32 Increase (decrease) in other comprehensive income (loss) 1,061 46 1,347 (92) Ending balance $ 795 $ (858) $ 795 $ (858) Net Loss per Share Basic net loss per share is calculated by dividing net loss by the weighted-average shares outstanding during the period, without consideration for potential dilutive shares. For purposes of the diluted net loss per share calculation, outstanding common stock options, RSUs, ESPP, and warrants are considered potential dilutive shares but are excluded from this calculation as the result becomes anti-dilutive, unless the consideration of any one of them gives a dilutive effect. Property and Equipment Property and equipment, including purchased and internally developed software, are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which are generally three to five years. Leasehold improvements are amortized using the straight-line method over the estimated useful lives of the assets or the remaining term of the lease, whichever is shorter. Impairment of Long-lived Assets The Company periodically evaluates the carrying value of its long-lived assets for indicators of possible impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. The Company then compares the carrying amount of the long-lived assets with the future net undiscounted cash flows expected to be generated by such asset. Should an impairment exist, the impairment loss would be measured based on the excess carrying value of the asset over the asset’s fair value determined using discounted estimates of future cash flows. See Note 6 for more detail regarding assets impairment. Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) under its accounting standard codifications or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed below, the Company believes that the impact of accounting standards updates recently issued that are not yet effective will not have a material impact on its financial position or results of operations upon adoption. Recently Adopted Accounting Pronouncements Leases On January 1, 2019, the Company adopted ASU 2016-02 and concurrently elected to adopt ASU 2018-11, which are collectively known as ASC 842, Leases (“ASC 842”) . ASU 2018-11 provides an alternative transition method such that the initial application of the new lease accounting standards can be completed as of January 1, 2019 using the modified retrospective approach instead of the earliest period presented. The financial results in the statement of operations and comprehensive loss for the three and six months ended March 31, 2018 and the balance sheet as of December 31, 2018 were not retroactively restated. As a result of electing the transition guidance as described above, on January 1, 2019, the Company recorded operating right-of-use assets of $28.2 million, including the derecognition of deferred rent of $9.5 million and prepaid rent of $0.7 million, with the corresponding lease liabilities totaling $37.0 million. There was no material impact to the Company’s statements of operations and comprehensive loss upon adoption. Upon transition, the Company has elected the package of practical expedients available under ASC 842, which allows the Company not to reassess (i) whether any expired or existing contracts as of the transition date are or contain a lease, (ii) lease classification for any expired or existing leases as of the transition date, and (iii) initial direct costs for any existing leases as of the transition date. The Company has decided not to elect the practical expedient on applying hindsight in determining the lease term and the impairment of the right-of-use assets. See Note 7, Leases , for more detail information regarding the accounting for operating leases. Non-employee stock-based compensation Effective January 1, 2019, the Company transitioned to the new accounting requirements under ASU 2018-07 for non-employee stock-based awards using the modified retrospective approach. The new guidance aligns the accounting treatment for both the employee and non-employee stock-based awards, which simplifies the fair value measurement process by requiring a one-time valuation of the non-employee stock options as of the grant date. Upon transition, the Company performed the final fair value remeasurement for its existing unvested non-employee stock-based awards, which included stock options and restricted stock units, up until the transition date, and adjusted the amount of the cumulative stock-based compensation expense accordingly by $0.2 million. The Company recorded this amount as a cumulative-effect adjustment to the opening balance of accumulated deficit in its balance sheet. Under the new guidance, the Company is permitted to carry-over the method it has used to recognize stock-based compensation expense from non-employee awards, which is accounted for on a straight-line basis as services are rendered over the vesting period. However, there are certain accounting options available for election in connection with estimated forfeitures and the valuation input for the expected term or remaining contractual term. The Company has elected to account for the actual forfeitures upon the cancellation of the awards, and to use of the same expected term valuation input as it uses for employee awards. Reclassification of tax effects from accumulated other comprehensive income The Company adopted ASU 2018-02 on January 1, 2019, which was established as a result of the Tax Cuts and Jobs Act passed in December 2017 and provided an opportunity for entities to reclassify residual income tax effects from accumulated other comprehensive income to retained earnings due to the reduction of the corporate income tax rate. Upon adoption, the Company had the option to apply this new guidance using either the full retrospective approach or to record the reclassifications as of the adoption date. As of January 1, 2019, the Company had a full valuation allowance reserved against its deferred tax assets, and as a result, there was no restatement or reclassification required. Statements of stockholders’ equity In August 2018, the SEC adopted amendments to certain disclosure requirements in Securities Act Release No. 33-10532, Disclosure Update and Simplification . One of the amendments applicable to the Company was the presentation of the analysis of changes in stockholders’ equity in its first interim financial statements following the effective date of the amendments in November 2018, which would be included in the Form 10-Q beginning the first quarter of 2019, with comparative information for the same period in the prior year. As such, the Company has added the presentation of its consolidated statements of stockholders’ equity for the three and six months ended June 30, 2019 and 2018 under Item 1 of this Form 10-Q. New Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, and ASU 2019-05. The standard requires measurement and recognition of expected credit losses for financial assets by requiring an allowance to be recorded as an offset to the amortized cost of such assets. For available-for-sale debt securities, expected credit losses should be estimated when the fair value of the debt securities is below their associated amortized costs. The standard will become effective for the Company in the first quarter of 2020, with early adoption permitted beginning the first quarter of 2019. The modified retrospective approach should be applied upon adoption of this new guidance. The Company is currently evaluating the impact of adopting the standard on its financial statements. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement . ASU 2018-13 proposes new disclosure requirements for unrealized gains or losses recognized in other comprehensive income that are attributable to fair value changes in assets and liabilities categorized within Level III of the fair value hierarchy, as well as quantitative information about significant unobservable inputs used to value such assets and liabilities. It eliminates the requirement to disclose the reasons for the transfers of assets and liabilities measured in fair value on a recurring basis between Level I and Level II. ASU 2018-13 is effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year, with early adoption permitted. The Company is currently assessing the impact of this standard on its consolidated financial statements. In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 , which clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, Topic 808 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. This guidance will be effective for the Company beginning January 1, 2020. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements . |
Revenue Recognition
Revenue Recognition | 6 Months Ended |
Jun. 30, 2019 | |
Revenue Recognition | |
Revenue Recognition | 3. Revenue Recognition The Company recognizes revenues when, or as, performance obligations in the contracts are satisfied, in the amount reflecting the expected consideration to be received from the goods or services transferred to the customers. Product Revenues Product revenues are derived from contracts with insurance carriers, laboratory partners and patients in connection with sales of prenatal genetic tests. The majority of the Company’s revenues is derived from Panorama NIPT, HCS (as defined in Note 1), and to a lesser extent, other genetic tests. The Company enters into contracts with insurance carriers with primarily payment terms related to tests provided to the patients who have health insurance coverage. Insurance carriers are considered as third-party payers on behalf of the patients, and the patients are considered as the customers who receive genetic test services. Tests may be billed to insurance carriers, patients, or a combination of insurance carriers and patients. Further, the Company sells tests to a number of domestic and international laboratory partners and identifies the laboratory partners as customers provided that there is a test services agreement between the two parties. A performance obligation represents a promise in a contract to transfer a distinct good or service to a customer, which represents a unit of accounting in accordance with ASC 606. A portion of the consideration should be allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company evaluates its contracts with insurance carriers, laboratory partners and patients and identifies a single performance obligation in those contracts, which is the delivery of the test results. The total consideration which the Company expect to collect in exchange for our products is an estimate and may be fixed or variable. Consideration includes reimbursement from both patients and insurance carriers, adjusted for variable consideration related to disallowed cases, discounts, refunds and doubtful accounts, and is estimated using the expected value approach. For insurance carriers with similar reimbursement characteristics, we use a portfolio of relevant historical data to estimate variable consideration and total collections for our products. The Company constrains the estimated variable consideration when we assess it is probable that a significant reversal in the amount of cumulative revenue recognized may occur in future periods. The consideration expected from laboratory partners usually includes a fixed amount, but it can be variable depending on the volume of tests performed, and the Company determines the variable consideration using the expected value approach. For insurance carriers, laboratory partners and patients, the Company allocates the total consideration to a single performance obligation, which is the delivery of the test results to the customers. When assessing the total consideration for insurance carriers and patients, a certain percentage of revenues is further constrained for estimated refunds. The Company generally bills an insurance carrier, a laboratory partner or a patient upon delivery of test results. The Company also bills patients directly for out-of-pocket costs involving co-pays and deductibles that they are responsible for. Tests billed to insurance carriers and directly to patients usually take an average of nine to twelve months to collect the payments, and for tests billed to laboratory distribution partners, the average collection cycle takes approximately two to three months. At times, the Company may or may not get reimbursed for the full amount billed. Further, the Company may not get reimbursed at all for tests performed if such tests are not covered under the insurance carrier’s reimbursement policies or the Company is not a qualified provider to the insurance carrier, or if the tests were not previously authorized. Product revenue is recognized in an amount equal to the total consideration (as described above) at a point in time when the test results are delivered. The Company reserves certain amounts in other accrued liabilities on the balance sheet in anticipation of requests for refunds of payments previously made by insurance carriers, which are accounted for as reductions in product revenues in the statement of operations and comprehensive loss. During the three and six months ended June 30, 2019, $0.8 million and $1.3 million were released from amounts previously held in reserves in other accrued liabilities and recognized as product revenue, compared to $0.9 million and $1.8 million for the three and six months ended June 30, 2018. Licensing and Other Revenues The Company recognizes licensing revenues from its cloud-based distribution service offering, Constellation, by granting licenses to its licensees to use certain of the Company’s proprietary intellectual properties and cloud-based software. The Company also recognizes revenues from Evercord for the collection and storage of newborn cord blood and cord tissue units. Constellation The laboratory partners with which the Company enters into a licensing arrangement represent the licensees and are identified as customers. The licensees do not have the right to possess the Company’s software, but rather receive the software as a service. These arrangements often include: (i) the delivery of the software as a service, (ii) the necessary support and training, and (iii) the reagent kits (“IVD kits”) to be consumed as tests are processed. The Company does not consider the software as a service, the support and training as being distinct in the context of such arrangements, and therefore they are combined as a single performance obligation. The software, support and training are delivered simultaneously to the licensees over the term of the arrangement. The Company provides IVD kits that are customized for its licensees to process tests using its cloud-based software. IVD kits revenues are recognized based on their standalone selling price at a point in time upon delivery to the licensees. The Company bills the majority of licensees, who process the tests in their laboratories, a fixed price for each test processed. Licensing revenues are recognized as the performance obligations are satisfied over time and reported in licensing and other revenues in the statements of operations and comprehensive loss. Evercord The Company recognizes revenues from Evercord for the collection and storage of newborn cord blood and cord tissue units. The patient enters into an enrollment agreement with the Company. According to the agreement, there are two performance obligations: (i) the provision of a collection kit and the processing of newborn cord blood and cord tissue units, which are considered delivered at the beginning of the process (the “processing services”), and (ii) the storage of the cord blood and cord tissue units (the “storage services”), for either an annual fee or a prepayment covering an extended period or the lifetime of the newborn donor. The Company offers its processing services together with storage services, and each of them is capable of being distinct, and is distinct in the context of the contract, and therefore, represents separate performance obligations. Evercord customers may pay for both processing and storage services over a period of six, 12, or 18 months. The transaction price for the processing and storage services is calculated as the stated contract price, adjusted for discounts, refunds, and significant financing components. The Company determines that the transaction price represents the standalone selling prices that are observable in the market for both the processing and storage services. The total consideration is allocated between the processing services and storage services based on their standalone selling prices. Upon the completion of the processing services, the Company issues a certificate of preservation indicating that the cord blood and cord tissue units are ready for storage, and processing revenues are recognized at this particular point in time. Storage revenues are recognized over time, which is the applicable storage period. The Company believes the methodology of recognizing storage revenues over time meaningfully depicts the timing of storage services delivered to customers as it exerts the necessary efforts to deliver such services equally over time. Evercord revenues are reported in licensing and other revenues in the statements of operations and comprehensive loss. Qiagen In March 2018, the Company entered into a License, Development and Distribution Agreement (“the Qiagen Agreement”) with Qiagen under which the Company granted Qiagen a license to develop, manufacture, distribute and commercialize NGS-based genetic testing assays and sequencing systems utilizing such assays, which incorporate the Company’s proprietary technology. According to the terms of the agreement, the Company is initially entitled to receive an upfront license fee and prepaid royalties totaling $40.0 million, which was fully collected in 2018. All or a portion of the prepaid royalties are refundable in limited circumstances. In addition, the Company is entitled to potential milestone payments from Qiagen upon the successful achievement of certain volume, regulatory and commercial milestones, and tiered royalties of $10.0 million, of which the Company has received $5.0 million due as of December 31, 2018. The Qiagen Agreement has a term of 10 years and expires in March 2028, and it may be terminated earlier in certain circumstances. Upon termination of the Qiagen Agreement, the license granted to Qiagen will also terminate, except in certain limited circumstances. The Company provided to Qiagen standard indemnification protections, which is part of an assurance that the license meets the contract’s specifications and is not an obligation to provide goods or services. The Company identified the following goods and services in the agreement that it concluded were distinct performance obligations: Technology license. The Company granted the right to Qiagen to use its proprietary intellectual properties (“technology license”) to develop, manufacture, distribute and commercialize genetic testing assays and sequencing systems in certain countries. The technology license was transferred to Qiagen at the inception of this agreement when the license became effective and the technology transfer was completed. Development services. The Company is responsible for providing certain support services to assist Qiagen in its design and development of the genetic testing assays. Market development support. The Company is required to support Qiagen’s market development for the genetic testing assays. Option to expand commercialization to another country. The Company has provided an option to Qiagen to expand the commercialization of its genetic testing assays to another country following all of the necessary regulatory approvals. The initial transaction price was primarily comprised of the upfront non-refundable fee and a payment associated with the initial milestone under the agreement. The Company constrains the estimated variable consideration when it assesses it is probable that a significant reversal in the amount of cumulative revenue recognized may occur in future periods. The remaining milestone and prepaid royalty amounts were constrained and not included in the transaction price due to the uncertainties of research and development and the potential for prepaid royalty refund. The Company re-evaluates the transaction price, including the estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period and as uncertain events are resolved or other changes in circumstances occur. The allocation of the transaction price was performed based on standalone selling prices, which are based on estimated amounts that the Company would charge for a performance obligation if it were sold separately. Future variable consideration such as milestones and royalties are considered associated with the technology license performance obligation. The amounts included in the initial transaction price were allocated to the remaining value of the technology license, as well as development services, market development support and the option to expand commercialization using the relative standalone selling price approach. The amount initially allocated to the technology license was $5.5 million. For the three months ended June 30, 2019 and 2018, the Company recognized revenue of $0.5 million and $0.1 million, respectively, related to support services provided and the delivery of its technology license to Qiagen. For the six months ended June 30, 2019 and 2018, the Company recognized revenues of $0.7 million and $5.6 million, respectively. Costs of revenue consist primarily of labor and other costs of development activities and are included in research and development expense in the statements of operations. Such costs were $0.1 million for the three and six months ended June 30, 2019 . In accordance with ASC 340-40, any incremental costs incurred to obtain a contract with a customer are required to be capitalized and amortized over the period in which the goods and services are transferred to the customer. The Company has elected to apply a practical expedient under ASC 340-40 to recognize the incremental costs of obtaining a contract as an expense when incurred provided that the amortization period of such costs, if capitalized, is one year or less. BGI Genomics In February 2019, the Company entered into a License Agreement with BGI Genomics Co., Ltd. (“BGI Genomics”) to develop, manufacture, and commercialize NGS-based genetic testing assays for clinical and commercial use. The agreement has a term of ten years and expires in February 2029. According to the agreement, the Company is entitled to a total of $50 million, comprised of upfront technology license fees, prepaid royalties relating to future sales of licensed products and performance of assay interpretation services, and milestone payments, as well as additional future royalties. During the three months ended June 30, 2019, the Company received $35.6 million, net of withholding taxes, of these amounts. Also, as required by the agreement with BGI Genomics, in June 2019 the Company prepaid $6.0 million to BGI Genomics for future sequencing services and $4.0 million for future sequencing equipment. These advance payments for equipment and services to be received in future periods aggregating $10 million were recorded in long-term advances. Pursuant to the agreement, the Company licensed its intellectual property and will provide development services. Following completion of development services, the Company will provide assay interpretation services over the term of the agreement. The Company concluded that the license is not a distinct performance obligation as it does not have a stand-alone value to BGI Genomics apart from the related development services. Therefore, license and related development services, for each of NIPT and Oncology products, represents a single performance obligation. The Company is responsible for transferring specified licensed intellectual property and performing certain development activities to customize its genetic testing assays for oncology and NIPT for use with BGI Genomics’ sequencing instruments and proprietary technology platform. Revenue associated with these performance obligations is recognized over time using the input method, based on costs incurred to perform the development services, since the level of costs incurred over time best reflect the transfer of development services. The estimated period of performance and project cost is reviewed quarterly and adjusted, as needed, to reflect the Company’s current assumptions regarding the timing of its deliverables. There were no material changes in estimates during the three and six months ended June 30, 2019. Revenue associated with the assay interpretation services will be recognized upon delivery of these services. Funds received in advance are recorded as deferred revenue and will be recognized as the related services are delivered. The initial transaction price was primarily comprised of license and milestone fees. The Company constrains the estimated variable consideration when it assesses it is probable that a significant reversal in the amount of cumulative revenue recognized may occur in future periods. Certain milestone and license fees were constrained and not included in the transaction price due to the uncertainties of research and development. The Company re-evaluates the transaction price, including the estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period and as uncertain events are resolved or other changes in circumstances occur. The allocation of the transaction price was performed based on standalone selling prices, which are based on estimated amounts that the Company would charge for a performance obligation if it were sold separately. For the three and six months ended June 30, 2019, the Company recognized approximately $5.0 million of revenue from the License Agreement with BGI Genomics. This revenue is presented as Licensing and other revenue. Costs of revenue consist primarily of labor and other costs of development activities and are included in research and development expense in the statements of operations. Such costs were $0.4 million for the three and six months ended June 30, 2019. In accordance with ASC 340-40, any incremental costs incurred to obtain a contract with a customer are required to be capitalized and amortized over the period in which the goods and services are transferred to the customer. The Company has elected to apply a practical expedient under ASC 340-40 to recognize the incremental costs of obtaining a contract as an expense when incurred provided that the amortization period of such costs, if capitalized, is one year or less. The incremental costs incurred in connection with the BGI arrangement is not material on an accumulated basis and therefore will not be capitalized on the balance sheet but will be expensed as incurred. Disaggregation of Revenues The primary source of the Company’s revenues relates to the sale of prenatal genetic tests. The Company also recognizes licensing revenues from its cloud-based software platform, Constellation and other revenues. The following table shows disaggregation of revenues by types of products and services, with sales of genetic tests further disaggregated by test families: Three months ended Six months ended June 30, June 30, 2019 2018 2019 2018 (Amounts in thousands) Sales of genetic tests Panorama NIPT $ 36,467 $ 35,715 $ 73,713 $ 68,982 HCS 24,286 21,421 47,035 39,683 Other genetic tests 4,346 3,217 7,715 5,957 Product revenues 65,099 60,353 128,463 114,622 Licensing and other Constellation 1,312 1,293 2,644 2,598 Qiagen 527 94 675 5,594 BGI 5,018 — 5,018 — Other 2,399 1,329 4,379 2,595 Licensing and other revenues 9,256 2,716 12,716 10,787 Total revenues $ 74,355 $ 63,069 $ 141,179 $ 125,409 The Company measures its performance results primarily based on revenues recognized from the three categories described below. The following table shows disaggregation of revenues by payer types: Three months ended Six months ended June 30, June 30, 2019 2018 2019 2018 (Amounts in thousands) Insurance carriers $ 50,777 $ 48,321 $ 100,978 $ 92,463 Laboratory partners 15,132 10,132 25,155 25,020 Patients 8,446 4,616 15,046 7,926 Total revenues $ 74,355 $ 63,069 $ 141,179 $ 125,409 The following table presents total revenues by geographic area based on the location of the Company’s payers: Three months ended Six months ended June 30, June 30, 2019 2018 2019 2018 (Amounts in thousands) United States $ 62,393 $ 56,631 $ 122,676 $ 106,995 Americas, excluding U.S. 767 847 1,585 1,697 Europe, Middle East, India, Africa 4,318 3,756 8,322 13,078 Other 6,877 1,835 8,596 3,639 Total revenues $ 74,355 $ 63,069 $ 141,179 $ 125,409 The following table summarizes the Company’s beginning and ending balances of accounts receivable and deferred revenues: Balance at Balance at June 30, December 31, (Amounts in thousands) 2019 2018 Assets: Accounts receivable $ 62,974 $ 62,223 Liabilities: Deferred revenue, current portion $ 19,154 $ 4,131 Deferred revenue, long-term portion 60,527 40,058 Total deferred revenues $ 79,681 $ 44,189 As of June 30, 2019, accounts receivable of $63.0 million included trade receivables, as well as receivables from Evercord customers who selected certain prepayment plans for storage services to be delivered over the duration of lifetime or 18 years. Evercord customers have the option to either prepay for storage services in full upfront or finance their prepayment plans over the period of six, 12, or 18 months. Generally, prepayments collected by the Company for the lifetime or 18-year storage plans are non-refundable unless the storage service agreement is terminated. However, Evercord customers who choose the financing option will be obligated to make the remainder of their payments pursuant to the terms of the financing plan, and this represents the Company’s unconditional right to the consideration from its customers. Total receivables pertaining to the financing options was $4.4 million, of which $0.3 million was related to financing over the period greater than 12 months. The Company reclassified $0.3 million to other noncurrent assets in its condensed consolidated balance sheet as of June 30, 2019. The following table shows the changes in the balance of deferred revenues during the period: Deferred Revenues (in thousands) Balance at December 31, 2018 $ 44,189 Increase in deferred revenues 45,524 Revenue recognized during the period that was included in (733) Revenue recognized from performance obligations satisfied (9,299) Balance at June 30, 2019 $ 79,681 During the six months ended June 30, 2019, revenue recognized that was included in the deferred revenue balance at the beginning of the period totaled approximately $0.7 million, of which $0.4 million was related to genetic testing services, $0.2 million pertained to undelivered Evercord storage services over the remaining contractual life of such services, and approximately $0.1 million was related to the Qiagen Agreement. The following table shows the balance of current and long-term portions of deferred revenues during the period: Deferred Revenues Current Long-term Total BGI agreement 15,000 19,982 34,982 Qiagen agreement 1,963 36,568 38,531 Other deferred revenues $ 2,191 $ 3,977 $ 6,168 Balance at June 30, 2019 $ 19,154 $ 60,527 $ 79,681 |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 30, 2019 | |
Fair Value Measurements | |
Fair Value Measurements | 4. Fair Value Measurements The Company's financial assets and liabilities carried at fair value are comprised of investment assets that include money market and investments. The fair value accounting guidance requires that assets and liabilities be carried at fair value and classified in one of the following three categories: Level I: Quoted prices in active markets for identical assets and liabilities that the Company has the ability to access. Level II: Observable market‑based inputs or unobservable inputs that are corroborated by market data, such as quoted prices, interest rates, and yield curves. Level III: Inputs that are unobservable data points that are not corroborated by market data. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Assets and Liabilities That Are Measured at Fair Value on a Recurring Basis The following table represents the fair value hierarchy for the Company’s financial assets and financial liabilities measured at fair value on a recurring basis: June 30, 2019 December 31, 2018 Level I Level II Level III Total Level I Level II Level III Total (in thousands) Financial Assets: Money market deposits $ 630 $ — $ — $ 630 $ 26,539 $ — $ — $ 26,539 U.S. Treasury securities 159,097 — — 159,097 75,685 — — 75,685 U.S. agency securities — 12,977 — 12,977 — 12,891 — 12,891 Municipal securities — 35,979 — 35,979 — 18,885 — 18,885 Total financial assets $ 159,727 $ 48,956 $ — $ 208,683 $ 102,224 $ 31,776 $ — $ 134,000 During the six months ended June 30, 2019, the Company did not make any transfers between Level I and Level II assets. |
Financial Instruments
Financial Instruments | 6 Months Ended |
Jun. 30, 2019 | |
Financial Instruments | |
Financial Instruments | 5. Financial Instruments The Company elected to invest a portion of its cash assets in conservative, income earning, and liquid investments. Cash equivalents and investments, all of which are classified as available-for-sale securities, consisted of the following: June 30, 2019 December 31, 2018 Amortized Gross Gross Estimated Fair Value Amortized Gross Gross Estimated Fair Value (in thousands) Money market deposits $ 630 $ — $ — $ 630 $ 26,539 $ — $ — $ 26,539 U.S. Treasury securities 158,429 733 (65) 159,097 76,061 29 (405) 75,685 U.S. agency securities 13,004 — (27) 12,977 13,017 — (126) 12,891 Municipal securities 35,825 162 (8) 35,979 18,935 7 (57) 18,885 Total $ 207,888 $ 895 $ (100) $ 208,683 $ 134,552 $ 36 $ (588) $ 134,000 Classified as: Cash equivalents $ 630 $ 26,539 Short-term investments 208,053 107,461 Total $ 208,683 $ 134,000 The Company invests in U.S. Treasuries, U.S. agency and high quality municipal bonds which mature at par value and are all paying their coupons on schedule. The Company has therefore concluded there is currently no other than temporary impairment of its investments and will continue to recognize unrealized gains and losses in other comprehensive income (loss). During the six months ended June 30, 2019, there were no sales of investments, and during the six months ended June 30, 2018, the amount of gross realized gains and realized losses upon sales of investments were insignificant. The Company uses the specific investment identification method to calculate realized gains and losses and amounts reclassified out of other comprehensive income to net income. As of June 30, 2019, the Company had 7 investments in an unrealized loss position in its portfolio. The following table summarizes the Company’s portfolio of available-for-sale securities by contractual maturity as of June 30, 2019: June 30, 2019 Amortized Fair (in thousands) Less than one year $ 97,180 $ 97,276 Greater than one year but less than five years 110,077 110,777 Total $ 207,257 $ 208,053 |
Balance Sheet Components
Balance Sheet Components | 6 Months Ended |
Jun. 30, 2019 | |
Balance Sheet Components | |
Balance Sheet Components | 6. Balance Sheet Components Property and Equipment, net The Company’s property and equipment consisted of the following: June 30, December 31, Useful Life 2019 2018 (in thousands) Machinery and equipment 3-5 years $ 36,614 $ 35,400 Furniture and fixtures 3 years 1,376 1,319 Computer equipment 3 years 1,949 2,117 Capitalized software held for internal use 3 years 5,545 4,868 Leasehold improvements Lesser of useful life or lease term 12,580 10,916 Construction-in-process 2,201 4,013 60,265 58,633 Less: Accumulated depreciation and amortization (38,226) (34,297) Total Property and Equipment, net $ 22,039 $ 24,336 During the three months ended March 31, 2018, an asset impairment charge of $1.6 million was recorded in research and development expenses in the statements of operations and comprehensive loss. This charge was recorded to write off the project development costs that were previously capitalized. Other Assets In April 2016, the Company entered into a four-year agreement with a health insurance carrier whereby in return for partial exclusivity and the right to pricing benefits, the Company agreed to a total consideration payment of $3.2 million. As of June 30, 2019 and December 31, 2018, $0.6 million and $1.0 million of deferred costs related to the total consideration paid were included in other long-term assets, respectively. The deferred costs are being amortized ratably over the four-year term of the agreement. During the three months ended June 30, 2019 and 2018, amortization of such costs totaling $0.2 million was recorded for each of the two periods; and for the six months ended June 30, 2019 and 2018, $0.4 million of such costs was recorded for each of the two periods as a reduction of product revenues in the statements of operations and comprehensive loss. In August 2017, the Company entered into the 2017 Term Loan with OrbiMed (as described in Note 10) and issued 300,000 shares of its common stock in exchange for OrbiMed’s initial and remaining funding commitments. In April 2019, the Company issued an additional 25,000 shares of its common stock to OrbiMed for extending the expiration date to draw the unused borrowing capacity until December 31, 2019. The Company has classified $1.2 million out of the total debt issuance costs in noncurrent assets for the unused borrowing capacity of $50.0 million. The debt discount is being amortized on a straight-line basis over the remaining term of the loan. For the three and six months ended June 30, 2019 and 2018, debt discount amortized from noncurrent assets was insignificant. As of June 30, 2019, total unamortized remaining in noncurrent assets was $1.0 million. As of June 30, 2019, other assets also included long-term advances to BGI of $10.0 million for future sequencing equipment and services and receivables from Evercord customers who selected the financing option for their prepayment plans (as described in Note 3). Total receivables associated with the financing option over the period greater than 12 months were $0.3 million. Accrued Compensation The Company’s accrued compensation consisted of the following: June 30, December 31, 2019 2018 (in thousands) Accrued paid time off $ 1,839 $ 1,825 Accrued commissions 3,584 4,492 Accrued bonuses 2,325 3,757 Other accrued compensation 2,401 2,594 Total accrued compensation $ 10,149 $ 12,668 Other Accrued Liabilities The Company’s other accrued liabilities consisted of the following: June 30, December 31, 2019 2018 (Amounts in thousands) Settlement accrued for reimbursement related claims $ — $ 1,378 Reserves for refunds to third-party payers 10,897 10,012 Accrued charges for outsourced testing 5,993 5,001 Testing and laboratory materials from suppliers 2,253 2,742 Marketing and corporate affairs 2,112 1,306 Legal, audit and consulting fees 2,082 1,058 Accrued shipping charges 255 852 Sales tax payable 906 1,255 Accrued specimen service fees 1,355 1,378 Accrued rent — 903 Clinical trials and studies 1,310 1,694 Operating lease liabilities, current portion 5,339 — Other accrued expenses 6,655 4,863 Total other accrued liabilities $ 39,157 $ 32,442 In December 2017, the Company accrued a total of $11.4 million for amounts due under a settlement agreement related to reimbursement related claims and was required to make periodic payments as described in Note 8 under Legal Proceedings . In 2018, payments totaling $10.3 million including interest were made by the Company, with the final quarterly installment of $1.4 million remaining in other accrued liabilities as of December 31, 2018. The Company paid the final quarterly installment in March 2019. Reserves for refunds to third-party payers include overpayments from and amounts to be refunded to insurance carriers, and additional amounts that the Company estimates as reserves for potential refund requests during the period. When the Company releases these previously reserved amounts, they are recognized as product revenues in the statements of operations and comprehensive loss. As of December 31, 2018, reserves relating to payers were $10.0 million. During the six months ended June 30, 2019, the Company reserved an additional $4.8 million, while a reduction of $3.9 million occurred within the same period resulting from the release of previously reserved amounts from payers and refunds of overpayments. Remaining reserves relating to payers in other accrued liabilities were $10.9 million as of June 30, 2019 . |
Leases
Leases | 6 Months Ended |
Jun. 30, 2019 | |
Leases | |
Leases | 7. Leases In October 2016, the Company entered into a lease directly with its landlord for laboratory and office spaces at its corporate headquarters located in San Carlos, California. The Company currently occupies approximately 113,000 square feet comprised of two office spaces (the “First Space” and the “Second Space”). The First Space covers approximately 88,000 square feet, and the Second Space totals approximately 25,000 square feet. The term of this lease is approximately 84 months and expires in October 2023. This lease contains an option to renew the lease term for five years, but the fair market rent amount upon renewal is not available from the landlord. In addition, the Company entered into a sublease agreement in June 2019 with a third party to sublease 25,879 square feet of space located on the third floor of the San Carlos, California building while maintaining its primary obligation as the intermediate lessor. The term of this lease is approximately 48 months commencing in October 2019 and expiring in September 2023. The yearly lease payment starts at $1.9 million and will escalate annually starting in October 2020. In March 2018, the Company entered into a lease for its cord blood tissue storage facility in Tukwila, Washington that covers approximately 10,000 square feet. The lease term of this facility began in June 2018 with rent payment commencing in August 2018. The lease term is 62 months expiring in July 2023. The Company has the option to extend this lease for five years, and the fair market rent upon renewal is not determinable. In September 2015, the Company’s subsidiary entered into a long-term lease agreement for laboratory and office space totaling approximately 94,000 square feet in Austin, Texas. The lease term is 132 months beginning in December 2015 and expiring in November 2026 with monthly payments beginning in December 2016. As a result of electing the package of practical expedients, the Company did not reassess the classification for the three existing leases described above upon the adoption of ASC 842, which carried over as operating leases. These leases are not impacted by any renewal or termination option. In addition, the Company has also entered into leases of individual workspaces at premises located in different locations on a month-to-month basis and is not committed to an established lease term. The Company has elected to not recognize them as the right-of-use assets on the balance sheet as they are all considered as short-term leases. Short-term lease expenses were insignificant in the three and six months ended June 30, 2019. The operating lease right-of-use assets are classified as noncurrent assets in the balance sheet. The corresponding lease liabilities are separated into current and long-term portions as follows: June 30, 2019 (Amounts in thousands) Operating lease liabilities, current portion included in other accrued liabilities $ 5,339 Operating lease liabilities, long-term portion 29,275 Total operating lease liabilities $ 34,614 The initial recognition of the operating lease liabilities was measured as the present value of the future minimum lease payments using a discount rate determined as of January 1, 2019. The operating right-of-use assets was calculated as the operating lease liabilities discounted at the present value, less the amount of cumulative lease expense recognized up until the adoption date. The discount rate used was the Company’s incremental borrowing rate given that the implicit rate to each lease was not readily determinable. As of the adoption date, the incremental borrowing rate was estimated as the annual percentage yield resulting from a corporate debt financing over a loan term approximating the remaining term of each lease, with the effect of certain credit risk rating. As of June 30, 2019, the weighted-average remaining lease term was 3.33 years and the weighted-average discount rate was 10.77%. Subsequent to the adoption date, the Company continues to recognize lease expense on a straight-line basis as was required under the previous guidance, ASC 840. The lease expense includes the amortization of the right-of-assets with the associated interest component estimated by applying the effective interest method. For the three and six months ended June 30, 2019, total lease expense of $2.0 million and $3.8 million, respectively, was recognized in the statements of operations and comprehensive loss. Cash paid for amounts in the measurement of operating lease liabilities totaled $2.1 million for the three months ended June 30, 2019. The present value of the future annual minimum lease payments under all non-cancelable operating leases as of June 30, 2019 are as follows: Operating Leases (in thousands) Year ending December 31: 2019 (remaining 6 months) $ 4,320 2020 8,825 2021 9,067 2022 9,319 2023 7,797 2024 and thereafter 7,130 46,458 Less: imputed interest (11,844) Operating lease liabilities $ 34,614 |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies | |
Commitments and Contingencies | 8. Commitments and Contingencies Legal Proceedings From time to time, the Company is involved in disputes, litigation, and other legal actions. The Company is aggressively defending its current litigation matters, and while there can be no assurances and the outcome of these matters is currently not determinable, the Company currently believes that there are no existing claims or proceedings that are likely to have a material adverse effect on its financial position. There are many uncertainties associated with any litigation and these actions or other third-party claims against the Company may cause the Company to incur costly litigation and/or substantial settlement charges. In addition, the resolution of any intellectual property litigation may require the Company to make royalty payments, which could adversely affect gross margins in future periods. If this were to occur, the Company's business, financial condition, results of operations, and cash flows could be adversely affected. The actual liability in any such matters may be materially different from the Company's estimates, if any, which could result in the need to record or adjust a liability and record additional expenses. During the periods presented, the Company has not recorded any accrual for loss contingencies associated with such legal proceedings, determined that an unfavorable outcome is probable or reasonably possible, or determined that the amount or range of any possible loss is reasonably estimable, except for the amount accrued in connection with the settlement agreement with the United States Department of Justice described below. On or about March 26, 2019, CareDX, Inc., or CareDX, the Company’s primary competitor in the transplant rejection testing field, filed suit against it in the United States District Court for the District of Delaware. The suit alleges that the Company infringed two of CareDX’s patents, 9,845,497 and 8,703,652. The complaint seeks unspecified damages and injunctive relief. On May 16, 2019, the Company filed a motion to dismiss CareDX’s patent infringement complaint for failure to state a claim, after which both parties filed answering briefs in June and July 2019. In addition, on or about April 10, 2019, CareDX filed suit against the Company in the United States District Court for the District of Delaware, alleging false advertising, trademark disparagement, unfair competition, and unfair or deceptive trade practices based on statements describing studies that concern the Company’s technology and CareDX’s technology. The complaint seeks unspecified damages and injunctive relief. On May 30, 2019, the Company filed a motion to dismiss the entirety of CareDX’s second complaint for failure to state a claim, after which both parties filed answering briefs in June 2019. The parties are currently awaiting a hearing date and/or order from the court on the motions. The Company intends to defend both of these matters vigorously, but cannot provide any assurance as to the ultimate outcome of either matter or that an adverse resolution to either matter or both matters would not have a material adverse effect on its financial condition and results of operations. The Company is unable to predict the ultimate outcome of either matter and is unable to make a meaningful estimate of the amount or range of loss, if any, that could result from any unfavorable outcome of either matter. On March 15, 2019, a purported class action lawsuit was filed against the Company in the United States District Court for the Northern District of California, alleging that the plaintiff received an unauthorized text message to her cellular telephone in violation of the Telephone Consumer Protection Act. Among other relief, the complaint seeks statutory and other damages, injunctive relief, attorneys’ fees, and costs. On June 18, 2019, the Company filed a motion to dismiss, which is currently pending. The Company intends to vigorously defend the matter but cannot provide any assurance as to the ultimate outcome or that an adverse resolution would not have a material adverse effect on its financial condition and results of operations. The Company is unable to predict the ultimate outcome and is unable to make a meaningful estimate of the amount or range of loss, if any, that could result from any unfavorable outcome. On January 22, 2019, a lawsuit was filed against the Company in the Superior Court of the State of California for the County of San Mateo, by a patient family alleging claims relating to a discordant test result. The complaint seeks unspecified damages. On April 23, 2019, Natera filed a demurrer, a motion to strike portions of the complaint, and a motion to dismiss, or in the alternative stay, the action for forum nonconveniens. On July 8, 2019, the court issued a minute order granting the forum nonconveniens motion and staying the action until October 3, 2019, and the minor plaintiff dismissed her claim without prejudice. The Company intends to continue to defend the matter vigorously, but cannot provide any assurance as to the ultimate outcome or that an adverse resolution would not have a material adverse effect on its financial condition and results of operations. The Company is unable to predict the ultimate outcome and is unable to make a meaningful estimate of the amount or range of loss, if any, that could result from any unfavorable outcome. On March 16, 2018, a lawsuit (the ’831 lawsuit) against the Company was filed in the United States District Court for the Northern District of California by Illumina, Inc., or Illumina, alleging that the Company’s Panorama test infringes certain claims of U.S. Patent No. 9,493,831 (the ‘831 patent). Among other relief, the complaint seeks damages or other monetary relief including costs and pre- and post-judgment interest, treble damages, injunctive relief, attorneys’ fees and costs. On June 29, 2018, the Company filed a petition for inter partes review to challenge the validity of the ‘831 patent with the Patent Trial and Appeal Board of the United States Patent Office, or PTAB, which petition was not instituted. On August 16, 2018, the Company filed a patent infringement action in the United States District Court for the Northern District of California against Illumina, alleging that certain of Illumina’s tests infringe on the Company’s U.S. Patent No. 8,682,592 (the ’592 patent). Among other relief, Natera seeks damages or other monetary relief including costs and pre- and post-judgment interest, treble damages, injunctive relief, attorneys’ fees and costs. On January 16, 2019, the United States District Court for the Northern District of California held a claim construction hearing, and on January 30, 2019, issued an order construing certain claims. On June 13, 2019, Illumina field a petition for inter partes review of the ’592 patent. The Company intends to vigorously defend against the claims in the ‘831 lawsuit and assert its own claims with respect to the ‘592 patent, but cannot provide any assurance as to the ultimate outcome of either matter or that an adverse resolution of either lawsuit would not have a material adverse effect on its financial condition and results of operations. The Company is unable to predict the outcome and is unable to make a meaningful estimate of the amount or range of loss, if any, that could result from any unfavorable outcome. On each of February 17, 2016, March 10, 2016, March 28, 2016 and April 4, 2016, purported class action lawsuits were filed in the Superior Court of the State of California for the County of San Mateo (the “San Mateo Superior Court”), against Natera, its directors, certain of its officers and 5% stockholders and their affiliates, and each of the underwriters of the Company’s July 1, 2015 initial public offering (the “IPO”). The complaints assert claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended. The complaints allege, among other things, that the Registration Statement and Prospectus for the Company’s IPO contained materially false or misleading statements, and/or omitted material information that was required to be disclosed, about the Company’s business and prospects. Among other relief, the complaints seek class certification, unspecified compensatory damages, rescission, attorneys' fees, and costs. The Company removed these actions to the United States District Court for the Northern District of California, and the actions were subsequently remanded back to the San Mateo Superior Court. The Company has appealed the remand and discovery has been stayed pending the appeal. The Company also filed a demurrer, or a request for dismissal as a matter of law, in the San Mateo Superior Court, which was granted on October 23, 2017. The San Mateo Superior Court demurred the claims under Sections 12(a)(2) and 15 of the Securities Act of 1933, as amended, without leave to re-file, and granted the demurrer as to Section 11 of the Act with leave to re-file. Plaintiffs refiled an amended complaint on November 22, 2017. The Company filed a motion for judgment on the pleadings under the amended complaint on January 25, 2018, which the plaintiffs opposed. Hearings on the motion were held in May and July of 2018. On August 7, 2018 the judge granted the Company’s motion for judgment on the pleadings, without leave to amend, and ordered that judgment be entered in favor of the defendants. Plaintiffs filed a notice of appeal on or about October 18, 2018 and their brief on or about March 29, 2019. Natera filed its brief in response on June 27, 2019. The Company intends to continue to defend the matter vigorously, but cannot provide any assurance as to the ultimate outcome or that an adverse resolution would not have a material adverse effect on its financial condition and results of operations. The Company is unable to predict the ultimate outcome and is unable to make a meaningful estimate of the amount or range of loss, if any, that could result from any unfavorable outcome On December 12, 2015, the Company received a civil investigative demand from the United States Department of Justice in connection with a qui tam action related to past reimbursement submissions for some of its testing. The qui tam action was originally filed under seal by the relators on January 26, 2015 in the United States District Court for the Western District of Kentucky. The qui tam complaint alleged that Natera submitted false claims to government health care programs for its testing services performed during the period from January 1, 2013 to December 31, 2016, and sought damages and penalties. The complaint was unsealed on February 8, 2018. On March 7, 2018, the Company reached agreement with the United States Department of Justice to resolve all claims made against it in the action. Under the settlement agreement, the Company will pay a total of approximately $11.4 million to the federal government and the participating state Medicaids, of which approximately $5.3 million plus applicable interest will be paid in four equal quarterly installments, subject to the Company’s option to prepay without penalty. In exchange for the payment of the settlement amounts, the United States and the relators agreed to release the Company from certain claims, including civil or administrative monetary relief sought under the complaint. The settlement agreement does not contain or represent an admission of liability or wrongdoing by the Company, and there will be no corporate integrity agreement. For the year ended December 31, 2017, the Company recorded a charge of $11.4 million associated with this settlement in its statements of operations and comprehensive loss. During the year ended December 31, 2018, the Company paid $5.3 million and the required quarterly installments, and the final quarterly installment of $1.4 million was paid in March 2019. See Note 6 under Other Accrued Liabilities for more detail on payments made . Director and Officer Indemnifications As permitted under Delaware law, and as set forth in the Company’s Certificate of Incorporation and its Bylaws, the Company indemnifies its directors, executive officers, other officers, employees and other agents for certain events or occurrences that may arise while in such capacity. The maximum potential amount of future payments the Company could be required to make under this indemnification is unlimited; however, the Company has insurance policies that may limit its exposure and may enable it to recover a portion of any future amounts paid. Assuming the applicability of coverage, the willingness of the insurer to assume coverage, and subject to certain retention, loss limits and other policy provisions, the Company believes any obligations under this indemnification would not be material, other than an initial $1.5 million for securities related claims and $0.3 million for commercial general liability claims. However, no assurances can be given that the covering insurers will not attempt to dispute the validity, applicability, or amount of coverage without expensive litigation against these insurers, in which case the Company may incur substantial liabilities as a result of these indemnification obligations. Third-Party Payer Reimbursement Audits From time to time, the Company receives recoupment requests from third-party payers for alleged overpayments. The Company disagrees with the contentions of pending requests and/or has recorded an estimated reserve for the alleged overpayments. Contractual Commitments As of June 30, 2019, the Company has non-cancelable contractual commitments with a supplier for approximately $5.8 million and other material supplier commitments for approximately $4.4 million for inventory material used in the laboratory testing process. As of June 30, 2019, the Company has a non-cancelable application service agreement with a vendor, in which a license was granted to the Company to utilize the proprietary technology for gene sequencing data analysis. The minimum committed fees remaining under the agreement is $1.3 million, which covers services through March 2020. As of June 30, 2019, the Company has non-cancelable contractual commitments with a vendor for biological sample processing and storage totaling approximately $0.3 million for the next 9 months. As of June 30, 2019, the Company has non-cancelable minimum purchase commitments with a supplier of diagnostic reagents totaling approximately $0.4 million through February 2020. As of June 30, 2019, the Company has remaining non-cancelable commitments to have a minimum number of genetic tests processed by a vendor totaling approximately $2.6 million through December 2019. The term of this vendor agreement expires in December 2020. As of June 30, 2019, the Company has a remaining non-cancellable minimum purchase commitment with a supplier of gene sequencing reagents and kits, which requires a minimum annual purchase commitments totaling approximately $1.4 million through April 2021. |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Jun. 30, 2019 | |
Stock-Based Compensation | |
Stock-Based Compensation | 9. Stock‑Based Compensation 2015 Equity Incentive Plan In June 2015, the Board adopted, and the Company’s stockholders approved, the Company’s 2015 Equity Incentive Plan (the “2015 Plan”), which, by its terms, took effect as of the Company’s IPO on July 2, 2015. The 2015 Plan replaced the Company’s 2007 Stock Plan (the “2007 Plan”). No further awards have been granted under the 2007 Plan after July 1, 2015. However, any remaining awards that were outstanding under the 2007 Plan will continue to be governed by the terms of that plan. The Company initially reserved 3,451,495 shares of its common stock for issuance under the 2015 Plan; in addition, the Company authorized the reservation of up to 9,890,310 shares of common stock to cover shares reserved but unissued under the 2007 Plan and shares subject to outstanding awards under the 2007 Plan that expire or lapse unexercised or shares issued under the 2007 Plan that are subsequently reacquired by the Company. Performance-based Awards In June 2017, the Board approved a stock option grant of 425,000 shares to the Company’s executive chairman, of which 200,000 shares are performance-based options. The vesting of these performance-based options is contingent upon the completion of requisite service for the next three years and the achievement of certain milestones within such time period. The milestones are (i) to successfully secure a specified strategic arrangement, at which point 50,000 shares will begin vesting over one year in equal quarterly installments, (ii) to successfully secure a specified licensing arrangement, at which point 75,000 shares will begin vesting over one year in equal quarterly installments, and (iii) to successfully secure specified licensing arrangements related to oncology, at which point 75,000 shares will begin vesting over one year in equal quarterly installments. Each milestone is independent of the other. Milestones (i) and (ii) described above have been achieved during the first quarter of 2019 and 2018, respectively. During the three and six months ended June 30, 2019, total stock-based compensation expense recorded for the performance-based options was $0.2 million and $0.2 million, respectively; and during the three and six months ended June 30, 2018, the Company recognized stock-based compensation expense of $0.1 million and $0.3 million, respectively. In December 2018, the Board approved a performance-based option grant of 600,000 shares to the Company’s executive chairman. The vesting of these performance-based options is contingent upon the achievement of a certain milestone, and provided that the completion of requisite service is through the date of such vesting, at which point the performance-based options will become fully vested and exercisable. The revenue milestone was not achieved or was not probable of being achieved during the six months ended June 30, 2019, and the Company did not recognize any stock-based compensation expense associated with it. In January 2019, the Board approved a stock option grant of 200,000 shares and 100,000 restricted stock units to the Company’s chief executive officer, which are performance-based awards with market conditions. Such awards will vest based on the achievement of certain values of the Company’s common stock at two separate thresholds within certain periods and are contingent upon the completion of requisite service through the date of such vesting. The Company utilized a Monte Carlo Simulation to determine the grant date fair value of such awards and the period when such award will become probable. The Company recorded approximately $0.2 million of stock-based compensation related to such awards during the three and six months ended June 30, 2019. Additionally, the Board approved 100,000 restricted stock units each to the Company’s chief financial officer and chief operating officer in March 2019. These two awards also have performance and market conditions, which are based on the same stock value performance target as that of the chief executive officer’s before such awards vest and are contingent upon the completion of requisite service through the date of such vesting. The Company utilized a Monte Carlo Simulation to determine the grant date fair value of such awards and the period when such award will become probable. The Company recorded approximately $0.4 million of stock-based compensation related to such awards during the three and six months ended June 30, 2019. Employee Stock Purchase Plan In the second quarter of 2015, the Company’s stockholders approved the 2015 Natera, Inc. Employee Stock Purchase Plan (the “ESPP”), which became effective upon the Company’s IPO on July 2, 2015. Under the ESPP, employees may purchase the Company’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning or the end of six-month offering periods. An employee’s payroll deductions under the ESPP are limited to 15% of the employee’s compensation and employees may not purchase more than 5,000 shares of stock during any offering period. A participant shall not be granted an option under the ESPP if such option would permit the participant’s rights to purchase stock to accrue at a rate that exceeds $25,000 fair market value of stock for each calendar year in which such option is outstanding at any time. The Company has made 893,548 shares available for issuance under the Plan, a number that is automatically increased by the least of (i) 1% of the total number of shares of common stock actually issued and outstanding on the last business day of the prior fiscal year, (ii) 880,000 shares of common stock (subject to certain adjustments pursuant to Subsection (c) below), or (iii) a number of shares of common stock determined by the Board. The first offering period of 2019 started on November 1, 2018 and ended on April 30, 2019, and 132,177 shares were purchased at the end of the first offering period for total proceeds of $2.1 million. The second offering period of 2019 started on May 1, 2019 and will end on October 31, 2019. As of June 30, 2019, no shares had been purchased in the second offering period. Stock Options The following table summarizes option activity for the six months ended June 30, 2019: Outstanding Options Weighted- Weighted- Average Shares Average Remaining Aggregate Available for Number of Exercise Contractual Intrinsic (in thousands, except for contractual life and exercise price) Grant Shares Price Life Value (In years) Balance at December 31, 2018 5,431 9,463 $ 7.69 6.91 $ 61,718 Additional shares authorized 2,483 — Options granted (1,697) 1,697 $ 17.94 Options exercised — (1,468) $ 4.08 Options forfeited/cancelled 286 (286) $ 14.10 Balance at June 30, 2019 6,503 9,406 $ 9.90 7.24 $ 166,273 Exercisable at June 30, 2019 5,028 $ 6.51 5.79 $ 105,948 Vested and expected to vest at June 30, 2019 9,219 $ 9.80 7.19 $ 163,939 Restricted Stock Units The following table summarizes RSU activity for the six months ended June 30, 2019: Weighted- Average Grant Date (in thousands, except for grant date fair value) Shares Fair Value Balance at December 31, 2018 1,084 $ 11.72 Granted 1,625 $ 17.70 Vested (273) $ 10.24 Canceled/forfeited (105) $ 15.86 Balance at June 30, 2019 2,331 $ Stock‑Based Compensation Expense Employee stock‑based compensation expense was calculated based on awards ultimately expected to vest and has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods, if actual forfeitures differ from those estimates. Non-employee stock-based compensation expense was not adjusted for estimated forfeitures up until the occurrence of the actual forfeiture of the associated awards. The following tables present the effect of employee and non‑employee stock‑based compensation expense on selected statements of operations line items for the three and six months ended June 30, 2019 and 2018. Three months ended June 30, 2019 2018 Employee Non-Employee Total Employee Non-Employee Total (in thousands) Cost of revenues $ 215 $ 10 $ 225 $ 152 $ 1 $ 153 Research and development 1,264 — 1,264 1,013 — 1,013 Selling, general and administrative 4,226 89 4,315 2,206 (4) 2,202 Total $ 5,705 $ 99 $ 5,804 $ 3,371 $ (3) $ 3,368 Six months ended June 30, 2019 2018 Employee Non-Employee Total Employee Non-Employee Total (in thousands) Cost of revenues $ 383 $ 10 $ 393 $ 290 $ 5 $ 295 Research and development 2,157 — 2,157 1,916 — 1,916 Selling, general and administrative 6,873 432 7,305 4,314 (3) 4,311 Total $ 9,413 $ 442 $ 9,855 $ 6,520 $ 2 $ 6,522 As of June 30, 2019, approximately $43.7 million of unrecognized compensation expense, adjusted for estimated forfeitures, related to unvested option awards and RSUs will be recognized over a weighted‑average period of approximately 2.92 years. Valuation of Stock Option Grants to Employees and Non-employees Upon the adoption of ASU 2018-07 on January 1, 2019, the fair value of stock options granted to both employees and non-employees is estimated on the grant date using the Black-Scholes option-pricing model except for the performance-based options with a market condition. Prior to January 1, 2019, the Company only estimated the fair value of the stock options granted to its employees on the grant date, while the fair value of its unvested non-employee stock options was remeasured at the end of each reporting period up until their vesting date. The fair value of the stock options is amortized on a straight‑line basis over the requisite service period of the awards, which is generally the vesting period. The Company utilizes Black-Scholes option pricing model when estimating the fair value of stock options. For the three and six months ended June 30, 2019, the following valuation assumptions were applied on both the employee and non-employee options. In the same period of the prior year, the valuation assumptions as follows were only used for stock options granted to employees. Three months ended June 30, Six months ended June 30, 2019 2018 2019 2018 Expected term (years) 5.30 — 10.00 5.61 — 5.62 5.30 — 10.00 5.24 — 5.62 Expected volatility 42.71 % — 43.49 % 40.77 % — 40.98 % 42.53 % — 43.49 % 40.28 % — 40.98 % Expected dividend rate 0.00 % 0.00 % 0.00 % 0.00 % Risk-free interest rate 1.78 % — 2.51 % 2.70 % — 2.86 % 1.78 % — 2.60 % 2.37 % — 2.86 % For the three and six months ended June 30, 2018, the Company used a different set of Black-Scholes valuation assumptions when estimating the fair value of stock options granted to its non-employees. The fair value was remeasured at the end of each reporting period up until December 31, 2018. The following table summarizes the valuation assumptions used: Three months ended Six months ended June 30, 2018 June 30, 2018 Expected term (years) 2.75 2.72 — 2.75 Expected volatility 42.03 % 41.48 % — 42.03 % Expected dividend rate 0.00 % 0.00 % Risk-free interest rate 2.58 % 2.36 % — 2.58 % Expected Term : The expected term of options represents the period of time that options are expected to be outstanding. The Company determines its expected term for the employee and non-employee stock options by calculating the average of (1) historical stock options exercise behavior, and (2) the weighted-average of the time-to-vesting and the total contractual life of the options. For stock options granted to non-employees prior to January 1, 2019, the Company estimated the expected term by assessing their historical exercise behavior and length of service and calculated the average of these two components. Expected Volatility : The Company derived the expected volatility from the average historical volatilities of comparable publicly traded companies in the DNA sequencing, diagnostics, or personalized medicine industries over a period approximately equal to the expected term. When selecting these companies, certain comparable characteristics such as enterprise value and financial leverage were considered. The selected companies also had sufficient historical stock price volatility commensurate with the expected term of the Company’s stock options. Expected Dividend Rate : The Company has not paid and does not anticipate paying any dividends in the near future. Risk-Free Interest Rate : The risk-free interest rate assumption is based on U.S. Treasury yield in effect at the time of grant for zero coupon U. S. Treasury notes with maturities approximately equal to the expected term. As of June 30, 2019, total options outstanding include 105,584 shares of option awards that were granted to non-employees, of which 24,721 shares are unvested. Stock-based compensation expense related to stock options granted to non-employees is recognized as the stock option is earned and the services are rendered. The Company believes that the estimated fair value of the stock options is more readily measurable than the fair value of the services rendered. |
Debt
Debt | 6 Months Ended |
Jun. 30, 2019 | |
Debt | |
Debt | 10. Debt Credit Line Agreement In September 2015, the Company entered into a credit line with UBS (the “Credit Line”) providing for a $50.0 million revolving line of credit that can be drawn down in increments at any time. The Credit Line bears interest at 30-day LIBOR plus 1.10%. The Credit Line is secured by a first priority lien and security interest in the Company’s money market and marketable securities held in its managed investment account with UBS. UBS has the right to demand full or partial payment of the Credit Line Obligations and terminate the Credit Line, in its discretion and without cause, at any time. For the three months ended June 30, 2019 and 2018, the Company recorded interest expense on the Credit Line of $0.5 million and $0.4 million, respectively; and for the six months ended June 30, 2019 and 2018, interest expense on the Credit Line of $0.9 million and $0.7 million was recorded, respectively. Interest payments on the Credit Line were made within the same periods. As of June 30, 2019, remaining accrued interest was $1.1 million, and the total principal amount outstanding with accrued interest was $50.1 million. 2017 Term Loan In August 2017, the Company entered into the 2017 Term Loan with OrbiMed, which has a maximum borrowing capacity of $100.0 million. On the closing date of August 8, 2017, the Company borrowed $75.0 million, with the remaining $25.0 million available to borrow at the Company’s option at any time through December 31, 2018, subject to standard conditions. The amounts borrowed under 2017 Term Loan have and will continue to primarily be used for general corporate purposes and to fund and support the Company’s business and operations. Interest is accrued on the outstanding balance of the loan at a rate equal to the sum of (i) 8.75% plus (ii) the higher of 1.00% or LIBOR. The 2017 Term Loan has an eighty-four month term and will mature in August 2024. The Company is required to make interest payments on a quarterly basis, with repayment of the full outstanding balance on the maturity date. The Company’s obligations under the 2017 Term Loan are secured by substantially all of its assets, including its intellectual property, subject to certain customary exceptions. On December 31, 2018, the Company amended certain terms in the 2017 Term Loan with OrbiMed. The amendment increased the existing unused borrowing capacity from $25.0 million to $50.0 million and extended the expiration date for the option to draw the unused capacity to March 31, 2019. If such option were exercised by the Company, the interest rate described above would instead decrease to the sum of (i) 8.50% plus (ii) the higher of 1.00% or LIBOR. In April 2019, the Company entered into a second amendment on the 2017 Term Loan with OrbiMed to further extend the expiration date until December 31, 2019 to draw the unused borrowing capacity of $50.0 million. The second amendment reduces the interest rate to the sum of (i) 8.25% plus (ii) the higher of 1.00% or LIBOR from previously the sum of (i) 8.50% plus (ii) the higher of 1.00% of LIBOR, provided that a minimum capacity of $25.0 million were drawn. As a fee in consideration of extending the commitment to provide this option to draw until December 31, 2019, the Company issued an additional 25,000 shares of its common stock to OrbiMed as of April 29, 2019. As of June 30, 2019, the Company had not exercised such option. The 2017 Term Loan contains customary affirmative and negative covenants including financial information maintenance covenants, indebtedness limitation covenants, minimum net revenues covenants, and investment covenants. It also includes standard events of default such as payment defaults and nonperformance of obligations and covenants described above. Upon an event of default, an additional interest of 3.00% may be applied to the outstanding debt balance until such default is cured, and OrbiMed may declare all outstanding obligations immediately due and payable. As of June 30, 2019, the Company was in compliance with all of its covenants under the 2017 Term Loan. The Company is allowed to voluntarily make prepayments on its outstanding debt balance either partially or in full. When prepayments are made, an additional prepayment premium will be applied to the outstanding principal amount at the time. The prepayment premium will gradually reduce from 12.5% to 2.5% over the term of the loan. Initially, the Company paid OrbiMed a fee in consideration of providing the 2017 Term Loan by issuing 300,000 shares of its common stock at a fair value of $2.7 million. Following the second amendment on the term loan as described above, an additional 25,000 shares were issued to OrbiMed on April 29, 2019 at a fair value of $0.5 million. The fair value for total fees paid to date was $3.2 million, which is accounted for as a debt discount to be amortized on a straight-line basis over the remaining term of the loan. The Company has classified the cumulative debt discount of $2.0 million as a direct reduction from the outstanding debt balance of $75.0 million, while the remaining $1.2 million is classified as noncurrent assets (as described in Note 6). For the three months ended June 30, 2019 and 2018, the Company recorded interest expense for the 2017 Term Loan totaling $2.2 million and $2.0 million, respectively, and $4.5 million and $4.0 million for the six months ended June 30, 2019 and 2018, respectively, which also included the amortization of debt discount. Debt discount amortized as interest expense in the statements of operations and comprehensive loss for the three months ended June 30, 2019 and 2018 was $0.1 million in each of the two periods, and $0.2 million in each of the six month period ended June 30, 2019 and 2018. In addition, the Company made interest payments totaling $ 4.3 million and $4.0 million during the six months ended June 30, 2019 and 2018, respectively. As of June 30, 2019, the amount of the unamortized debt discount was $1.5 million, and the net carrying amount of the debt was $73.5 million. |
Warrants
Warrants | 6 Months Ended |
Jun. 30, 2019 | |
Warrants. | |
Warrants | 11. Warrants In April 2014, the Company granted approximately 376,691 warrants to purchase common stock with an exercise price of $2.3229 per common share. The warrants were granted to ROS Acquisition Offshore LP (“ROS”) in connection with a senior secured term loan that has since been repaid. It was determined that the warrants granted are detachable and therefore are a standalone component of the senior secured term loan to be fair valued using Level III inputs as a separate derivative. On June 26, 2018, the warrants were fully exercised by ROS using the option of net share settlement. Instead of remitting cash exercise proceeds to purchase the shares, ROS elected to receive a net amount of 332,896 shares. The Company remeasured the fair value of its warrant liability to $6.8 million during this period until June 26, 2018 and reclassified this amount to stockholders’ equity. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2019 | |
Income Taxes | |
Income Taxes | 12. Income Taxes During the three and six months ended June 30, 2019, the Company recorded total income tax expense of $1.9 million and $2.0 million, respectively. The Company provides testing to clinics and licenses cloud-based software and intellectual property, that are based in a foreign country, which contributed to a foreign income tax expense of approximately $1.9 million and $2.0 million for the three and six months ended June 30, 2019, respectively. In addition, the Company recorded $20,000 in state income tax expense for the three and six months ended June 30, 2019. During the three and six months ended June 30, 2018, the Company recorded total income tax benefit of $0.1 million and $0.2 million, respectively. Total income tax expense included a foreign income tax expense of $65,000 and $0.1 million for the three and six months ended June 30, 2018, respectively. State income tax expense of $48,000 and $92,000 was also recorded during the three and six months ended June 30, 2018, respectively. Due to the Company’s history of cumulative operating losses, the Company concluded that, after considering all the available objective evidence, it is not more likely than not that all of the Company’s net deferred tax assets will be realized. Accordingly, all of the Company’s deferred tax assets, which includes net operating loss or NOL carryforwards and tax credits related primarily to research and development, continue to be subjected to a valuation allowance as of June 30, 2019. The Company will continue to maintain a full valuation allowance until there is sufficient evidence to support recoverability of its deferred tax assets. In December 2017, the U.S. Congress passed the Tax Cuts and Jobs Act of 2017 (“Tax Act”). As a result, corporate tax rate was reduced to 21%, effective January 1, 2018. ASC 740, Income Taxes , requires entities to recognize the effect of the tax law changes in the period of enactment. Shortly after the enactment of the Tax Act, the Securities and Exchange Commission (“SEC”) staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when an entity does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The Company made provisional adjustments to reduce its deferred tax assets and liabilities as of December 31, 2017, based on the reduction of the U.S. federal corporate tax rate from 34% to 21% and assessed the realizability of its deferred tax assets based on its current understanding of the provisions of the new law. As of December 31, 2018, the Company completed its assessment of the tax rate change and determined no additional adjustments were required. The Company had $8.1 million and $7.4 million in unrecognized tax benefits at June 30, 2019 and December 31, 2018, respectively. The reversal of the uncertain tax benefits would not affect the effective tax rate to the extent that the Company continues to maintain a full valuation allowance against its deferred tax assets. Unrecognized tax benefits may change during the next twelve months for items that arise in the ordinary course of business. Interest and/or penalties related to income tax matters are recognized as a component of income tax expense. As of June 30, 2019, there were no accrued interest and penalties related to uncertain tax positions. |
Net Loss per Share
Net Loss per Share | 6 Months Ended |
Jun. 30, 2019 | |
Net Loss per Share | |
Net Loss per Share | 13. Net Loss per Share Basic net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period, excluding shares subject to repurchase and without consideration of potentially dilutive securities. Diluted net loss per share is computed by giving effect to all potentially dilutive common shares outstanding for the period. For purposes of this computation, outstanding common stock options, restricted stock units and warrants are considered to be common share equivalents. Common share equivalents are excluded from the computation in periods in which they have an anti-dilutive effect, unless the consideration of any one of them gives a dilutive effect. The following table provides the basic and diluted net loss per share computations for the three and six months ended June 30, 2019 and 2018. Three months ended Six months ended June 30, June 30, (in thousands, except per share data) 2019 2018 2019 2018 Numerator: Net loss, basic and diluted $ (32,416) $ (33,824) $ (66,507) $ (66,697) Denominator: Weighted-average number of shares used in computing net loss per share, basic and diluted 68,224 54,551 65,542 54,342 Net loss per share, basic $ (0.48) $ (0.62) $ (1.01) $ (1.23) Net loss per share, diluted $ (0.48) $ (0.62) $ (1.01) $ (1.23) The following table shows total outstanding potentially dilutive shares excluded from the computation of diluted loss per share as their effect would be anti-dilutive, as of June 30, 2019 and 2018: June 30, 2019 2018 (in thousands) Options to purchase common stock 9,406 10,255 Restricted stock units 2,331 1,025 Employee stock purchase plan 54 70 11,791 11,350 |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2019 | |
Subsequent Events | |
Subsequent Events | 14. Subsequent Events None. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The accompanying unaudited interim condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. The unaudited interim condensed consolidated financial information includes only adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position, changes in stockholders’ equity, and cash flows. The results of operations for the three and six months ended June 30, 2019, are not necessarily indicative of the results for the full year or the results for any future periods. The condensed consolidated balance sheet as of December 31, 2018 has been derived from audited financial statements at that date, these financial statements should be read in conjunction with the audited financial statements, and related notes for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2019. Effective January 1, 2019, the Company transitioned to the new accounting requirements under the Accounting Standards Update (“ASU”) No. 2018-07, S tock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting . The Company applied the modified retrospective approach upon transition with a cumulative-effect adjustment of $0.2 million recorded to accumulated deficit as of January 1, 2019. The results in all of the prior period financial statements presented in this Form 10-Q were not retroactively adjusted. See Note 2 under Recently Adopted Accounting Pronouncements for further discussion. On January 1, 2019, the Company adopted the new accounting requirements under ASU 2016-02, Leases , and concurrently elected ASU 2018-11, Leases (Topic 842): Targeted Improvements , which permitted the Company to adjust any cumulative-effect of the accounting change to the balance of accumulated deficit as of the adoption date instead of the earliest period presented by using the modified retrospective approach. None of the prior period financial results in this Form 10-Q were retroactively adjusted as a result of the adoption of ASU 2016-02. See Note 2 under Recently Adopted Accounting Pronouncements for more detail. |
Liquidity Matters | Liquidity Matters The Company has incurred net losses since its inception and anticipates net losses and negative operating cash flows for the near future. The Company had a net loss of $66.5 million for the six months ended June 30, 2019 and recorded a cumulative-effect adjustment of $0.2 million upon the adoption of ASU 2018-07 on January 1, 2019, which increased the accumulated deficit to $640.9 million at June 30, 2019 from $574.6 million at December 31, 2018. At June 30, 2019, the Company had $30.0 million in cash and cash equivalents, $208.1 million in marketable securities, $50.1 million of outstanding balance of the Credit Line (as defined in Note 10) including accrued interest, and $73.5 million of net carrying amount of the 2017 Term Loan (as defined in Note 10). While the Company has introduced multiple products that are generating revenues, these revenues have not been sufficient to fund all operations. Accordingly, the Company has funded the portion of operating costs that exceeds revenues through a combination of equity issuances, debt issuances, and other financings. The Company continues to develop and commercialize future products and, consequently, it will need to generate additional revenues to achieve future profitability and may need to raise additional equity or debt financing. If the Company raises additional funds by issuing equity securities, its stockholders would experience dilution. Additional debt financing, if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt financing or additional equity that the Company raises may contain terms that are not favorable to it or its stockholders and requires significant debt service payments, which diverts resources from other activities. Additional financing may not be available at all, or in amounts or on terms acceptable to the Company. If the Company is unable to obtain additional financing, it may be required to delay the development and commercialization of its products and significantly scale back its business and operations. On April 23, 2019, the Company completed an underwritten equity offering to sell 5,263,158 shares of its common stock at a price to the public of $19 per share. On April 26, 2019, the Company sold an additional 789,473 shares of its common stock to the underwriters at the same price upon their exercise of the option to purchase those shares. Before offering expenses of $0.6 million, the Company received proceeds of $108.1 million net of the underwriting discount. Based on the Company’s current business plan, the Company believes that its existing cash and marketable securities will be sufficient to meet its anticipated cash requirements for at least 12 months after August 8, 2019. |
Principles of Consolidation | Principles of Consolidation The accompanying condensed consolidated financial statements include all the accounts of the Company and its subsidiary. The Company established a subsidiary that operates in the state of Texas to support the Company’s laboratory and operational functions. All intercompany balances and transactions have been eliminated. |
Use of Estimates | Use of Estimates The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions about future events that affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Significant items subject to such estimates include the allowance for doubtful accounts, the operating right-of-use assets and the associated lease liabilities, deferred revenues associated with unsatisfied performance obligations, accrued liability for potential refund requests, stock-based compensation, the fair value of common stock and warrants, income tax uncertainties, and the expected consideration to be received from contracts with customers. These estimates and assumptions are based on management's best estimates and judgment. Management regularly evaluates its estimates and assumptions using historical experience and other factors, including contractual terms and statutory limits; however, actual results could differ from these estimates and could have an adverse effect on the Company's financial statements. |
Fair Value | Fair Value The Company discloses the fair value of financial instruments for financial assets and liabilities for which the value is practicable to estimate. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) |
Cash and Cash Equivalents | . Cash and Cash Equivalents Cash and cash equivalents consist of cash and money market deposits with financial institutions. |
Restricted Cash | Restricted Cash The Company discloses both short-term and long-term restricted cash. As of June 30, 2019, short-term restricted cash totaled $0.1 million and long-term restricted cash totaled zero in cash deposits held as collateral for the settlement of foreign currency transactions and deposit per credit card terms. In the first quarter of 2019, the Company paid the final quarterly installment of $1.4 million in connection with the settlement agreement relating to reimbursement-related claims, and accordingly, the restriction imposed on the $4.2 million cash deposits to secure the letter of credit required under the settlement agreement was released. Restricted cash is currently presented as a separate line item in the Company’s balance sheet. In the statements of cash flows, it is included together with cash and cash equivalents and considered as part of the total ending cash balance. The following is the reconciliation between how restricted cash is presented in the balance sheet and the statements of cash flows for all periods presented: June 30, December 31, 2019 2018 (in thousands) Cash and cash equivalents in balance sheet $ 29,928 $ 46,407 Restricted cash, current portion in balance sheet 55 4,597 Total cash, cash equivalents and restricted cash in statements of cash flows $ 29,983 $ 51,004 |
Investments | Investments Investments consist primarily of debt securities such as U.S. Treasuries, U.S. agency and municipal bonds. Management determines the appropriate classification of securities at the time of purchase and re-evaluates such determination at each balance sheet date. The Company generally classifies its entire investment portfolio as available-for-sale. The Company views its available-for-sale portfolio as available for use in current operations. Accordingly, the Company classifies all investments as short-term, even though the stated maturity may be more than one year from the current balance sheet date. Available-for-sale securities are carried at fair value, with unrealized gains and losses reported in accumulated other comprehensive income (loss), which is a separate component of stockholders’ equity. |
Risk and Uncertainties | Risk and Uncertainties Financial instruments that potentially subject the Company to credit risk consist of cash, accounts receivable and investments. The Company limits its exposure to credit loss by placing its cash in financial institutions with high credit ratings. The Company's cash may consist of deposits held with banks that may at times exceed federally insured limits. The Company performs evaluations of the relative credit standing of these financial institutions and limits the amount of credit exposure with any one institution. The Company bills third-party payers for certain tests performed. The amount that is ultimately received from the payer for the Company’s claim and the timing of such payments are subject to the determination of the payer based on the nature of the test performed and their view of the Company’s business practices with respect to collections of plan deductibles and co-payments from patients and other activities. This determination can impact both the amount and timing of when the Company’s invoices are collected. Payers may also withhold payments and request refunds of prior payments if the payer asserts that the Company has not performed in accordance with the policies of these payers. The Company performs evaluations of financial conditions for insurance carriers, patients, clinics and laboratory partners and generally does not require collateral to support credit sales. For the three and six months ended June 30, 2019, and 2018, there were no customers exceeding 10% of total revenues on an individual basis. As of June 30, 2019 and December 31, 2018, there were no customers with an outstanding balance exceeding 10% of net accounts receivable. |
Revenue Recognition | Revenue Recognition The Company adopted the new revenue recognition guidance, Accounting Standards Codification (“ASC”) Topic 606, beginning January 1, 2018. ASC 606 mandates revenue recognition to be evaluated using the following five steps: · Identification of a contract, or contracts, with a customer; · Identification of the performance obligations in the contract; · Determination of the transaction price; · Allocation of the transaction price to the performance obligations in the contract; and · Revenue recognition when, or as, the performance obligations are satisfied See Note 3, Revenue Recognition , for detailed discussions of product revenues, licensing and other revenues, and how the five steps described above are applied. |
Cost of Product Revenues | Cost of Product Revenues The components of cost of product revenues are material and service costs, impairment charges associated with testing equipment, personnel costs, including stock-based compensation expense, equipment and infrastructure expenses associated with testing samples, electronic medical records, order and delivery systems, shipping charges to transport samples, third-party test fees and allocated overhead including rent, information technology costs, equipment depreciation and utilities. Costs associated with the performance of diagnostic services are recorded as tests are accessioned. |
Cost of Licensing and Other Revenues | Cost of Licensing and Other Revenues The components of cost of licensing and other revenues are material costs associated with test kits, engineering costs incurred to improve and maintain the Constellation software platform, and amortization of Constellation software development costs. Costs also include collection kits consumed during the processing of cord blood samples, processing service and storage of the cord blood samples, and freight charged to transport the samples to the storage facility. |
Stock-Based Compensation | Stock‑Based Compensation Stock‑based compensation is related to stock options and restricted stock units (“RSUs”) granted to the Company’s employees and is measured at the grant date based on the fair value of the award. The fair value is recognized as expense over the requisite service period, which is generally the vesting period of the respective awards on a straight-line basis. No compensation cost is recognized when the requisite service has not been met and the awards are therefore forfeited. The Company also recognizes stock-based compensation from option awards and RSUs granted to non-employees. Prior to January 1, 2019, the fair value of non-employee awards was subject to remeasurement at the end of each reporting period until the vesting date of such awards, and the resulting change in fair value was recognized in the Company's statements of operations and comprehensive loss during the period that the related services were rendered. On January 1, 2019, the Company adopted ASU 2018-07, which allows the accounting for non-employee awards to be treated the same as for employee awards. The fair value of non-employee awards is now determined based on a one-time measurement at the grant date, and it is no longer subject to periodic remeasurement. The Company continues to recognize stock-based compensation expense as services are rendered by the non-employees over the vesting period, which is accounted for on a straight-line basis. See further discussion under the Recently Adopted Accounting Pronouncements section within this footnote, as well as the election of certain accounting policy as a result of the adoption. The Company uses the Black‑Scholes option‑pricing model and the Monte Carlo simulation model to estimate the fair value of stock options issued to employees and non-employees. The model requires the input of the Company's expected stock price volatility, the expected term of the awards, and a risk-free interest rate. Determining these assumptions requires significant judgment. See further discussion on the valuation assumptions used under Note 9. |
Warrants | Warrants The Company historically accounted for warrants to purchase shares of its common stock as a liability at fair value on the balance sheet date because the Company could have been obligated to redeem these warrants at some point in the future. The warrants were subject to re-measurement at each balance sheet date, with changes in fair value of the warrants recognized as a gain or loss in interest and other income in the statements of operations and comprehensive loss. Further adjustments resulting from changes in fair value are no longer required as the warrants were fully exercised in June 2018. |
Capitalized Software Held for Internal Use | Capitalized Software Held for Internal Use The Company capitalizes salaries and related costs of employees and consultants who devote time to the development of internal-use software development projects. Capitalization begins during the application development stage, once the preliminary project stage has been completed. If a project constitutes an enhancement to previously developed software, the Company assesses whether the enhancement is significant and creates additional functionality to the software, thus qualifying the work incurred for capitalization. Once the project is available for general release, capitalization ceases and the Company estimates the useful life of the asset and begins amortization. The Company periodically assesses whether triggering events are present to review internal-use software for impairment. Changes in estimates related to internal-use software would increase or decrease operating expenses or amortization recorded during the reporting period. See Property and Equipment, net under Note 6 for more detail regarding an impairment charge recorded to write off certain project development costs during the first quarter of 2018. The Company amortizes its internal-use software over the estimated useful lives of three years. The net book value of capitalized software held for internal use was $1.8 million and $1.7 million as of June 30, 2019 and December 31, 2018, respectively. Amortized expense for amounts previously capitalized for the three months ended June 30, 2019 and 2018 was $0.3 million for each period; and $0.6 million and $0.7 million for the six months ended June 30, 2019 and 2018, respectively. |
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Income (Loss) Comprehensive loss and its components encompass all changes in equity other than those with stockholders, and include net loss, unrealized gains and losses on available-for-sale marketable securities. Three months ended June 30, Six months ended June 30, 2019 2018 2019 2018 (in thousands) (in thousands) Beginning balance $ (266) $ (904) $ (552) $ (766) Net unrealized gain (losses) on available-for-sale securities, net of tax 1,061 46 1,347 (124) Reclassifications of losses realized from sale of available-for-sale securities — — — 32 Increase (decrease) in other comprehensive income (loss) 1,061 46 1,347 (92) Ending balance $ 795 $ (858) $ 795 $ (858) |
Net Loss per Share | Net Loss per Share Basic net loss per share is calculated by dividing net loss by the weighted-average shares outstanding during the period, without consideration for potential dilutive shares. For purposes of the diluted net loss per share calculation, outstanding common stock options, RSUs, ESPP, and warrants are considered potential dilutive shares but are excluded from this calculation as the result becomes anti-dilutive, unless the consideration of any one of them gives a dilutive effect. |
Property and Equipment | Property and Equipment Property and equipment, including purchased and internally developed software, are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which are generally three to five years. Leasehold improvements are amortized using the straight-line method over the estimated useful lives of the assets or the remaining term of the lease, whichever is shorter. |
Impairment of Long-lived Assets | Impairment of Long-lived Assets The Company periodically evaluates the carrying value of its long-lived assets for indicators of possible impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. The Company then compares the carrying amount of the long-lived assets with the future net undiscounted cash flows expected to be generated by such asset. Should an impairment exist, the impairment loss would be measured based on the excess carrying value of the asset over the asset’s fair value determined using discounted estimates of future cash flows. See Note 6 for more detail regarding assets impairment. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) under its accounting standard codifications or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed below, the Company believes that the impact of accounting standards updates recently issued that are not yet effective will not have a material impact on its financial position or results of operations upon adoption. Recently Adopted Accounting Pronouncements Leases On January 1, 2019, the Company adopted ASU 2016-02 and concurrently elected to adopt ASU 2018-11, which are collectively known as ASC 842, Leases (“ASC 842”) . ASU 2018-11 provides an alternative transition method such that the initial application of the new lease accounting standards can be completed as of January 1, 2019 using the modified retrospective approach instead of the earliest period presented. The financial results in the statement of operations and comprehensive loss for the three and six months ended March 31, 2018 and the balance sheet as of December 31, 2018 were not retroactively restated. As a result of electing the transition guidance as described above, on January 1, 2019, the Company recorded operating right-of-use assets of $28.2 million, including the derecognition of deferred rent of $9.5 million and prepaid rent of $0.7 million, with the corresponding lease liabilities totaling $37.0 million. There was no material impact to the Company’s statements of operations and comprehensive loss upon adoption. Upon transition, the Company has elected the package of practical expedients available under ASC 842, which allows the Company not to reassess (i) whether any expired or existing contracts as of the transition date are or contain a lease, (ii) lease classification for any expired or existing leases as of the transition date, and (iii) initial direct costs for any existing leases as of the transition date. The Company has decided not to elect the practical expedient on applying hindsight in determining the lease term and the impairment of the right-of-use assets. See Note 7, Leases , for more detail information regarding the accounting for operating leases. Non-employee stock-based compensation Effective January 1, 2019, the Company transitioned to the new accounting requirements under ASU 2018-07 for non-employee stock-based awards using the modified retrospective approach. The new guidance aligns the accounting treatment for both the employee and non-employee stock-based awards, which simplifies the fair value measurement process by requiring a one-time valuation of the non-employee stock options as of the grant date. Upon transition, the Company performed the final fair value remeasurement for its existing unvested non-employee stock-based awards, which included stock options and restricted stock units, up until the transition date, and adjusted the amount of the cumulative stock-based compensation expense accordingly by $0.2 million. The Company recorded this amount as a cumulative-effect adjustment to the opening balance of accumulated deficit in its balance sheet. Under the new guidance, the Company is permitted to carry-over the method it has used to recognize stock-based compensation expense from non-employee awards, which is accounted for on a straight-line basis as services are rendered over the vesting period. However, there are certain accounting options available for election in connection with estimated forfeitures and the valuation input for the expected term or remaining contractual term. The Company has elected to account for the actual forfeitures upon the cancellation of the awards, and to use of the same expected term valuation input as it uses for employee awards. Reclassification of tax effects from accumulated other comprehensive income The Company adopted ASU 2018-02 on January 1, 2019, which was established as a result of the Tax Cuts and Jobs Act passed in December 2017 and provided an opportunity for entities to reclassify residual income tax effects from accumulated other comprehensive income to retained earnings due to the reduction of the corporate income tax rate. Upon adoption, the Company had the option to apply this new guidance using either the full retrospective approach or to record the reclassifications as of the adoption date. As of January 1, 2019, the Company had a full valuation allowance reserved against its deferred tax assets, and as a result, there was no restatement or reclassification required. Statements of stockholders’ equity In August 2018, the SEC adopted amendments to certain disclosure requirements in Securities Act Release No. 33-10532, Disclosure Update and Simplification . One of the amendments applicable to the Company was the presentation of the analysis of changes in stockholders’ equity in its first interim financial statements following the effective date of the amendments in November 2018, which would be included in the Form 10-Q beginning the first quarter of 2019, with comparative information for the same period in the prior year. As such, the Company has added the presentation of its consolidated statements of stockholders’ equity for the three and six months ended June 30, 2019 and 2018 under Item 1 of this Form 10-Q. New Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, and ASU 2019-05. The standard requires measurement and recognition of expected credit losses for financial assets by requiring an allowance to be recorded as an offset to the amortized cost of such assets. For available-for-sale debt securities, expected credit losses should be estimated when the fair value of the debt securities is below their associated amortized costs. The standard will become effective for the Company in the first quarter of 2020, with early adoption permitted beginning the first quarter of 2019. The modified retrospective approach should be applied upon adoption of this new guidance. The Company is currently evaluating the impact of adopting the standard on its financial statements. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement . ASU 2018-13 proposes new disclosure requirements for unrealized gains or losses recognized in other comprehensive income that are attributable to fair value changes in assets and liabilities categorized within Level III of the fair value hierarchy, as well as quantitative information about significant unobservable inputs used to value such assets and liabilities. It eliminates the requirement to disclose the reasons for the transfers of assets and liabilities measured in fair value on a recurring basis between Level I and Level II. ASU 2018-13 is effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year, with early adoption permitted. The Company is currently assessing the impact of this standard on its consolidated financial statements. In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 , which clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, Topic 808 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. This guidance will be effective for the Company beginning January 1, 2020. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Summary of Significant Accounting Policies | |
Schedule of reconciliation of restricted cash | June 30, December 31, 2019 2018 (in thousands) Cash and cash equivalents in balance sheet $ 29,928 $ 46,407 Restricted cash, current portion in balance sheet 55 4,597 Total cash, cash equivalents and restricted cash in statements of cash flows $ 29,983 $ 51,004 |
Schedule of Accumulated Other Comprehensive (Income) Loss | Three months ended June 30, Six months ended June 30, 2019 2018 2019 2018 (in thousands) (in thousands) Beginning balance $ (266) $ (904) $ (552) $ (766) Net unrealized gain (losses) on available-for-sale securities, net of tax 1,061 46 1,347 (124) Reclassifications of losses realized from sale of available-for-sale securities — — — 32 Increase (decrease) in other comprehensive income (loss) 1,061 46 1,347 (92) Ending balance $ 795 $ (858) $ 795 $ (858) |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Revenue Recognition | |
Schedule of disaggregation of revenue by test families | Three months ended Six months ended June 30, June 30, 2019 2018 2019 2018 (Amounts in thousands) Sales of genetic tests Panorama NIPT $ 36,467 $ 35,715 $ 73,713 $ 68,982 HCS 24,286 21,421 47,035 39,683 Other genetic tests 4,346 3,217 7,715 5,957 Product revenues 65,099 60,353 128,463 114,622 Licensing and other Constellation 1,312 1,293 2,644 2,598 Qiagen 527 94 675 5,594 BGI 5,018 — 5,018 — Other 2,399 1,329 4,379 2,595 Licensing and other revenues 9,256 2,716 12,716 10,787 Total revenues $ 74,355 $ 63,069 $ 141,179 $ 125,409 |
Schedule of disaggregation of revenue by payer types | Three months ended Six months ended June 30, June 30, 2019 2018 2019 2018 (Amounts in thousands) Insurance carriers $ 50,777 $ 48,321 $ 100,978 $ 92,463 Laboratory partners 15,132 10,132 25,155 25,020 Patients 8,446 4,616 15,046 7,926 Total revenues $ 74,355 $ 63,069 $ 141,179 $ 125,409 |
Schedule of total revenue by geographic area | Three months ended Six months ended June 30, June 30, 2019 2018 2019 2018 (Amounts in thousands) United States $ 62,393 $ 56,631 $ 122,676 $ 106,995 Americas, excluding U.S. 767 847 1,585 1,697 Europe, Middle East, India, Africa 4,318 3,756 8,322 13,078 Other 6,877 1,835 8,596 3,639 Total revenues $ 74,355 $ 63,069 $ 141,179 $ 125,409 |
Schedule of beginning and ending balances of accounts receivable and deferred revenues | Balance at Balance at June 30, December 31, (Amounts in thousands) 2019 2018 Assets: Accounts receivable $ 62,974 $ 62,223 Liabilities: Deferred revenue, current portion $ 19,154 $ 4,131 Deferred revenue, long-term portion 60,527 40,058 Total deferred revenues $ 79,681 $ 44,189 |
Schedule of changes in the balance of deferred revenues | Deferred Revenues (in thousands) Balance at December 31, 2018 $ 44,189 Increase in deferred revenues 45,524 Revenue recognized during the period that was included in (733) Revenue recognized from performance obligations satisfied (9,299) Balance at June 30, 2019 $ 79,681 |
Schedule of current and long-term portions of deferred revenues | Deferred Revenues Current Long-term Total BGI agreement 15,000 19,982 34,982 Qiagen agreement 1,963 36,568 38,531 Other deferred revenues $ 2,191 $ 3,977 $ 6,168 Balance at June 30, 2019 $ 19,154 $ 60,527 $ 79,681 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Fair Value Measurements | |
Summary of financial assets and liabilities measured on recurring basis | June 30, 2019 December 31, 2018 Level I Level II Level III Total Level I Level II Level III Total (in thousands) Financial Assets: Money market deposits $ 630 $ — $ — $ 630 $ 26,539 $ — $ — $ 26,539 U.S. Treasury securities 159,097 — — 159,097 75,685 — — 75,685 U.S. agency securities — 12,977 — 12,977 — 12,891 — 12,891 Municipal securities — 35,979 — 35,979 — 18,885 — 18,885 Total financial assets $ 159,727 $ 48,956 $ — $ 208,683 $ 102,224 $ 31,776 $ — $ 134,000 |
Financial Instruments (Tables)
Financial Instruments (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Financial Instruments | |
Schedule of available-for-sale securities | June 30, 2019 December 31, 2018 Amortized Gross Gross Estimated Fair Value Amortized Gross Gross Estimated Fair Value (in thousands) Money market deposits $ 630 $ — $ — $ 630 $ 26,539 $ — $ — $ 26,539 U.S. Treasury securities 158,429 733 (65) 159,097 76,061 29 (405) 75,685 U.S. agency securities 13,004 — (27) 12,977 13,017 — (126) 12,891 Municipal securities 35,825 162 (8) 35,979 18,935 7 (57) 18,885 Total $ 207,888 $ 895 $ (100) $ 208,683 $ 134,552 $ 36 $ (588) $ 134,000 Classified as: Cash equivalents $ 630 $ 26,539 Short-term investments 208,053 107,461 Total $ 208,683 $ 134,000 |
Summarized portfolio of available-for-sale securities by contractual maturity | June 30, 2019 Amortized Fair (in thousands) Less than one year $ 97,180 $ 97,276 Greater than one year but less than five years 110,077 110,777 Total $ 207,257 $ 208,053 |
Balance Sheet Components (Table
Balance Sheet Components (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Balance Sheet Components | |
Schedule of property and equipment | June 30, December 31, Useful Life 2019 2018 (in thousands) Machinery and equipment 3-5 years $ 36,614 $ 35,400 Furniture and fixtures 3 years 1,376 1,319 Computer equipment 3 years 1,949 2,117 Capitalized software held for internal use 3 years 5,545 4,868 Leasehold improvements Lesser of useful life or lease term 12,580 10,916 Construction-in-process 2,201 4,013 60,265 58,633 Less: Accumulated depreciation and amortization (38,226) (34,297) Total Property and Equipment, net $ 22,039 $ 24,336 |
Schedule of accrued compensation | June 30, December 31, 2019 2018 (in thousands) Accrued paid time off $ 1,839 $ 1,825 Accrued commissions 3,584 4,492 Accrued bonuses 2,325 3,757 Other accrued compensation 2,401 2,594 Total accrued compensation $ 10,149 $ 12,668 |
Schedule of other accrued liabilities | June 30, December 31, 2019 2018 (Amounts in thousands) Settlement accrued for reimbursement related claims $ — $ 1,378 Reserves for refunds to third-party payers 10,897 10,012 Accrued charges for outsourced testing 5,993 5,001 Testing and laboratory materials from suppliers 2,253 2,742 Marketing and corporate affairs 2,112 1,306 Legal, audit and consulting fees 2,082 1,058 Accrued shipping charges 255 852 Sales tax payable 906 1,255 Accrued specimen service fees 1,355 1,378 Accrued rent — 903 Clinical trials and studies 1,310 1,694 Operating lease liabilities, current portion 5,339 — Other accrued expenses 6,655 4,863 Total other accrued liabilities $ 39,157 $ 32,442 |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Leases | |
Schedule of lease liabilities | June 30, 2019 (Amounts in thousands) Operating lease liabilities, current portion included in other accrued liabilities $ 5,339 Operating lease liabilities, long-term portion 29,275 Total operating lease liabilities $ 34,614 |
Schedule of future annual minimum lease payments | Operating Leases (in thousands) Year ending December 31: 2019 (remaining 6 months) $ 4,320 2020 8,825 2021 9,067 2022 9,319 2023 7,797 2024 and thereafter 7,130 46,458 Less: imputed interest (11,844) Operating lease liabilities $ 34,614 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Summary of stock option activity | Outstanding Options Weighted- Weighted- Average Shares Average Remaining Aggregate Available for Number of Exercise Contractual Intrinsic (in thousands, except for contractual life and exercise price) Grant Shares Price Life Value (In years) Balance at December 31, 2018 5,431 9,463 $ 7.69 6.91 $ 61,718 Additional shares authorized 2,483 — Options granted (1,697) 1,697 $ 17.94 Options exercised — (1,468) $ 4.08 Options forfeited/cancelled 286 (286) $ 14.10 Balance at June 30, 2019 6,503 9,406 $ 9.90 7.24 $ 166,273 Exercisable at June 30, 2019 5,028 $ 6.51 5.79 $ 105,948 Vested and expected to vest at June 30, 2019 9,219 $ 9.80 7.19 $ 163,939 |
Restricted stock units | Weighted- Average Grant Date (in thousands, except for grant date fair value) Shares Fair Value Balance at December 31, 2018 1,084 $ 11.72 Granted 1,625 $ 17.70 Vested (273) $ 10.24 Canceled/forfeited (105) $ 15.86 Balance at June 30, 2019 2,331 $ |
Summary of stock-based compensation expenses | Three months ended June 30, 2019 2018 Employee Non-Employee Total Employee Non-Employee Total (in thousands) Cost of revenues $ 215 $ 10 $ 225 $ 152 $ 1 $ 153 Research and development 1,264 — 1,264 1,013 — 1,013 Selling, general and administrative 4,226 89 4,315 2,206 (4) 2,202 Total $ 5,705 $ 99 $ 5,804 $ 3,371 $ (3) $ 3,368 Six months ended June 30, 2019 2018 Employee Non-Employee Total Employee Non-Employee Total (in thousands) Cost of revenues $ 383 $ 10 $ 393 $ 290 $ 5 $ 295 Research and development 2,157 — 2,157 1,916 — 1,916 Selling, general and administrative 6,873 432 7,305 4,314 (3) 4,311 Total $ 9,413 $ 442 $ 9,855 $ 6,520 $ 2 $ 6,522 |
Employee stock options | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Schedule of assumptions used in valuation of fair value of employee stock options | Three months ended June 30, Six months ended June 30, 2019 2018 2019 2018 Expected term (years) 5.30 — 10.00 5.61 — 5.62 5.30 — 10.00 5.24 — 5.62 Expected volatility 42.71 % — 43.49 % 40.77 % — 40.98 % 42.53 % — 43.49 % 40.28 % — 40.98 % Expected dividend rate 0.00 % 0.00 % 0.00 % 0.00 % Risk-free interest rate 1.78 % — 2.51 % 2.70 % — 2.86 % 1.78 % — 2.60 % 2.37 % — 2.86 % |
Non-employee stock options | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Schedule of assumptions used in valuation of fair value of employee stock options | Three months ended Six months ended June 30, 2018 June 30, 2018 Expected term (years) 2.75 2.72 — 2.75 Expected volatility 42.03 % 41.48 % — 42.03 % Expected dividend rate 0.00 % 0.00 % Risk-free interest rate 2.58 % 2.36 % — 2.58 % |
Net Loss per Share (Tables)
Net Loss per Share (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Net Loss per Share | |
Basic and diluted net loss per common share | Three months ended Six months ended June 30, June 30, (in thousands, except per share data) 2019 2018 2019 2018 Numerator: Net loss, basic and diluted $ (32,416) $ (33,824) $ (66,507) $ (66,697) Denominator: Weighted-average number of shares used in computing net loss per share, basic and diluted 68,224 54,551 65,542 54,342 Net loss per share, basic $ (0.48) $ (0.62) $ (1.01) $ (1.23) Net loss per share, diluted $ (0.48) $ (0.62) $ (1.01) $ (1.23) |
Total outstanding potentially dilutive shares not included in the calculation of dilutive EPS | June 30, 2019 2018 (in thousands) Options to purchase common stock 9,406 10,255 Restricted stock units 2,331 1,025 Employee stock purchase plan 54 70 11,791 11,350 |
Description of Business (Detail
Description of Business (Details) | 6 Months Ended |
Jun. 30, 2019segment | |
Description of Business | |
Number of operating segments | 1 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Basis of Presentation and Liquidity (Details) - USD ($) $ / shares in Units, $ in Thousands | Apr. 26, 2019 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Apr. 30, 2019 | Apr. 23, 2019 | Dec. 31, 2018 | Aug. 31, 2017 |
Policies | |||||||||
Net (loss) income | $ (32,416) | $ (33,824) | $ (66,507) | $ (66,697) | |||||
Accumulated deficit | 640,851 | 640,851 | $ 574,529 | ||||||
Cash and cash equivalents | 29,928 | 29,928 | 46,407 | ||||||
Marketable securities | 208,053 | 208,053 | 107,461 | ||||||
Short-term Credit Line, outstanding balance | 50,146 | 50,146 | 50,153 | ||||||
Long-term Term Loan, carrying amount | $ 73,511 | $ 73,511 | $ 73,357 | ||||||
Common stock, shares issued | 70,035,000 | 70,035,000 | 62,083,000 | ||||||
Proceeds from issuance of common stock | $ 108,100 | ||||||||
Payment of offering costs | $ 600 | ||||||||
2017 Term Loan | |||||||||
Policies | |||||||||
Common stock, shares issued | 25,000 | 300,000 | |||||||
Equity offering | |||||||||
Policies | |||||||||
Common stock, shares issued | 5,263,158 | ||||||||
Stock issued (in dollars per share) | $ 19 | ||||||||
Option for additional shares | |||||||||
Policies | |||||||||
Common stock, shares issued | 789,473 | ||||||||
Accumulated Deficit | |||||||||
Policies | |||||||||
Net (loss) income | $ (32,416) | $ (33,824) | $ (66,507) | $ (66,697) | |||||
Cumulative-effect adjustment upon adoption of ASU 2018-07 | $ (185) |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies Restricted Cash (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | |||
Mar. 31, 2019 | Dec. 31, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2017 | |
Settlement agreement installment paid | $ 1,400 | $ 10,300 | |||
Cash and cash equivalents in balance sheet | 46,407 | $ 29,928 | |||
Restricted cash, current portion in balance sheet | 4,597 | 55 | |||
Restricted cash, long-term | 0 | ||||
Total cash, cash equivalents and restricted cash in statements of cash flows | $ 51,004 | $ 29,983 | $ 18,260 | $ 13,021 | |
Letter of Credit | |||||
Decrease in restricted cash | $ 4,200 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Concentration (Details) - customer | 3 Months Ended | 6 Months Ended | 18 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | |
Sales | Customer | |||||
Risk and Uncertainties | |||||
Number of customers exceeding 10% of benchmark | 0 | 0 | 0 | 0 | |
Concentration risk (as a percent) | 10.00% | ||||
Accounts Receivable | Credit | |||||
Risk and Uncertainties | |||||
Number of customers exceeding 10% of benchmark | 0 | ||||
Concentration risk (as a percent) | 10.00% |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Costs (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Cost of revenues | $ 41,382 | $ 39,204 | $ 82,987 | $ 78,259 | |
Capitalized software | 1,800 | $ 1,800 | $ 1,700 | ||
Capitalized software held for internal use | |||||
Estimated useful life (in years) | 3 years | ||||
Amortized expense | $ 300 | $ 600 | $ 700 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - AOCIL (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning balance | $ (552) | |||
(Decrease) increase in other comprehensive loss | $ 1,061 | $ 46 | 1,347 | $ (92) |
Reclassifications of losses realized from sale of available-for-sale securities | 32 | |||
Increase (decrease) in other comprehensive income (loss) | 1,061 | 46 | 1,347 | (92) |
Ending balance | 795 | 795 | ||
Unrealized (loss) gain on available-for-sale securities, net of tax | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
(Decrease) increase in other comprehensive loss | 1,061 | 46 | 1,347 | (124) |
Accumulated Other Comprehensive Income (Loss) | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning balance | (266) | (904) | (552) | (766) |
Ending balance | $ 795 | $ (858) | $ 795 | $ (858) |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Property (Details) | 6 Months Ended |
Jun. 30, 2019 | |
Minimum | |
Property and Equipment | |
Estimated useful life | P3Y |
Maximum | |
Property and Equipment | |
Estimated useful life | P5Y |
Summary of Significant Accou_10
Summary of Significant Accounting Policies - Accounting Pronouncements (Details) - USD ($) $ in Thousands | Jan. 01, 2019 | Jun. 30, 2019 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease right-of-use assets | $ 26,229 | |
Operating lease liabilities | 34,614 | |
Accounting Standards Update 2016-02 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease right-of-use assets | $ 28,200 | |
Derecognition of deferred rent | 9,500 | |
Derecognition of prepaid rent | 700 | |
Operating lease liabilities | $ 37,000 | |
Accumulated Deficit | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Cumulative-effect adjustment upon adoption of ASU 2018-07 | $ (185) |
Revenue Recognition (Details)
Revenue Recognition (Details) $ in Thousands | Dec. 31, 2018USD ($) | May 31, 2019USD ($) | Feb. 28, 2019USD ($) | Apr. 30, 2016 | Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Jun. 30, 2019USD ($)item | Jun. 30, 2018USD ($) |
Revenue recognized | $ 700 | ||||||||
Agreement term | 4 years | ||||||||
Deferred revenue, noncurrent | $ 40,058 | $ 60,527 | 60,527 | ||||||
Other assets | 3,317 | 13,091 | 13,091 | ||||||
Deferred revenue | 44,189 | 79,681 | 79,681 | ||||||
Deferred revenue, current portion | 4,131 | 19,154 | 19,154 | ||||||
Total revenues | 74,355 | $ 63,069 | 141,179 | $ 125,409 | |||||
Deferred revenue, long-term portion | 40,058 | 60,527 | 60,527 | ||||||
Research and development | |||||||||
Costs | 100 | 100 | |||||||
Product | |||||||||
Revenue recognized | 800 | 900 | 1,300 | 1,800 | |||||
Total revenues | 65,099 | 60,353 | $ 128,463 | 114,622 | |||||
Product | Minimum | |||||||||
Billing collection period (in months) | 9 months | ||||||||
Product | Maximum | |||||||||
Billing collection period (in months) | 12 months | ||||||||
Licensing and other | |||||||||
Total revenues | 9,256 | 2,716 | $ 12,716 | 10,787 | |||||
IVD kits and genetic testing services | |||||||||
Revenue recognized | 400 | ||||||||
Deferred revenue, noncurrent | 3,977 | 3,977 | |||||||
Deferred revenue | 6,168 | 6,168 | |||||||
Deferred revenue, current portion | 2,191 | 2,191 | |||||||
Deferred revenue, long-term portion | 3,977 | 3,977 | |||||||
Storage services | |||||||||
Revenue recognized | $ 200 | ||||||||
Evercord | Processing and storage services | |||||||||
Number of performance obligations | item | 2 | ||||||||
Evercord | Processing and storage services | Minimum | |||||||||
Billing collection period (in months) | 6 months | ||||||||
Evercord | Processing and storage services | Maximum | |||||||||
Billing collection period (in months) | 18 months | ||||||||
Evercord | Processing and storage services | Alternate | |||||||||
Billing collection period (in months) | 12 months | ||||||||
Evercord | Storage services | |||||||||
Other assets | 300 | $ 300 | |||||||
Qiagen | |||||||||
Revenue recognized | 500 | $ 100 | $ 5,500 | 700 | $ 5,600 | ||||
Revenue, remaining performance obligation | 40,000 | 40,000 | |||||||
Deferred revenue, noncurrent | 36,568 | 36,568 | |||||||
Deferred revenue | 38,531 | 38,531 | |||||||
Deferred revenue, current portion | 1,963 | 1,963 | |||||||
Deferred revenue, long-term portion | 36,568 | 36,568 | |||||||
Qiagen | The Qiagen Agreement | |||||||||
Revenue recognized | $ 100 | ||||||||
Agreement term | 10 years | ||||||||
Qiagen | Volume, regulatory and commercial milestones | |||||||||
Revenue recognized | $ 5,000 | ||||||||
Revenue, remaining performance obligation | 10,000 | $ 10,000 | |||||||
Laboratory distribution partners | Product | Minimum | |||||||||
Billing collection period (in months) | 2 months | ||||||||
Laboratory distribution partners | Product | Maximum | |||||||||
Billing collection period (in months) | 3 months | ||||||||
BGI | |||||||||
Revenue recognized | 5,000 | $ 5,000 | |||||||
Proceeds from license agreement | $ 35,600 | $ 50,000 | |||||||
Agreement term | 10 years | ||||||||
Deferred revenue, noncurrent | 19,982 | 19,982 | |||||||
Deferred revenue | 34,982 | 34,982 | |||||||
Deferred revenue, current portion | 15,000 | 15,000 | |||||||
Deferred revenue, long-term portion | 19,982 | 19,982 | |||||||
BGI | Research and development | |||||||||
Costs | 400 | ||||||||
BGI | Sequencing services | |||||||||
Other assets | 6,000 | 6,000 | |||||||
BGI | Sequencing products | |||||||||
Other assets | 4,000 | 4,000 | |||||||
BGI | Sequencing products and services | |||||||||
Other assets | $ 10,000 | $ 10,000 |
Revenue Recognition - Disaggreg
Revenue Recognition - Disaggregation (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Disaggregation of Revenue [Line Items] | ||||
Total revenues | $ 74,355 | $ 63,069 | $ 141,179 | $ 125,409 |
Previously delivered tests, revenue recognized | (9,299) | |||
Decrease to loss from operations | (28,636) | (27,218) | (60,382) | (57,735) |
United States | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 62,393 | 56,631 | 122,676 | 106,995 |
Americas, excluding U.S. | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 767 | 847 | 1,585 | 1,697 |
Europe, Middle East, India, Africa | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 4,318 | 3,756 | 8,322 | 13,078 |
Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 6,877 | 1,835 | 8,596 | 3,639 |
Insurance carriers | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 50,777 | 48,321 | 100,978 | 92,463 |
Laboratory partners | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 15,132 | 10,132 | 25,155 | 25,020 |
Patients | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 8,446 | 4,616 | 15,046 | 7,926 |
Panorama NIPT | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 36,467 | 35,715 | 73,713 | 68,982 |
HCS | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 24,286 | 21,421 | 47,035 | 39,683 |
Other genetic tests | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 4,346 | 3,217 | 7,715 | 5,957 |
Product | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 65,099 | 60,353 | 128,463 | 114,622 |
Constellation | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 1,312 | 1,293 | 2,644 | 2,598 |
Qiagen | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 527 | 94 | 675 | 5,594 |
BGI | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 5,018 | 5,018 | ||
Other, licensing and other | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | 2,399 | 1,329 | 4,379 | 2,595 |
Licensing and other | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | $ 9,256 | $ 2,716 | $ 12,716 | $ 10,787 |
Revenue Recognition - Accounts
Revenue Recognition - Accounts Receivable and Deferred Revenue (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Dec. 31, 2018 | |
Assets | ||
Accounts receivable | $ 62,974 | $ 62,223 |
Liabilities: | ||
Deferred revenue, current portion | 19,154 | 4,131 |
Deferred revenue, long-term portion | 60,527 | 40,058 |
Total deferred revenues | 79,681 | 44,189 |
Current accounts receivable | 62,974 | 62,223 |
Other noncurrent assets | $ 13,091 | $ 3,317 |
Evercord | Processing and storage services | Alternate | ||
Liabilities: | ||
Billing collection period (in months) | 12 months | |
Evercord | Processing and storage services | Minimum | ||
Liabilities: | ||
Billing collection period (in months) | 6 months | |
Evercord | Processing and storage services | Maximum | ||
Liabilities: | ||
Billing collection period (in months) | 18 months | |
Evercord | Storage services | ||
Liabilities: | ||
Prepayment plan, delivery duration (in years) | 18 years | |
Accounts receivable | $ 4,400 | |
Other noncurrent assets | $ 300 | |
Evercord | Storage services | Alternate | ||
Liabilities: | ||
Prepayment plan, financing duration (in months) | 12 months | |
Evercord | Storage services | Minimum | ||
Liabilities: | ||
Prepayment plan, financing duration (in months) | 6 months | |
Evercord | Storage services | Maximum | ||
Liabilities: | ||
Prepayment plan, financing duration (in months) | 18 months | |
BGI | ||
Liabilities: | ||
Deferred revenue, current portion | $ 15,000 | |
Deferred revenue, long-term portion | 19,982 | |
Total deferred revenues | $ 34,982 |
Revenue Recognition - Changes i
Revenue Recognition - Changes in Balance of Deferred Revenues (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Balance | $ 44,189 |
Increase in deferred revenues | 45,524 |
Revenue recognized during the period from performance obligations included in deferred revenues at the beginning of the period | (733) |
Revenue recognized from performance obligations satisfied within the same period | (9,299) |
Balance | 79,681 |
IVD kits and genetic testing services | |
Balance | $ 6,168 |
Revenue Recognition - Remaining
Revenue Recognition - Remaining Obligations (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Deferred revenue, current portion | $ 19,154 | $ 4,131 |
Deferred revenue | 79,681 | 44,189 |
Deferred revenue, noncurrent | 60,527 | $ 40,058 |
Qiagen | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Revenue, remaining performance obligation | 40,000 | |
Deferred revenue, current portion | 1,963 | |
Deferred revenue | 38,531 | |
Deferred revenue, noncurrent | 36,568 | |
BGI | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Deferred revenue, current portion | 15,000 | |
Deferred revenue | 34,982 | |
Deferred revenue, noncurrent | 19,982 | |
IVD kits and genetic testing services | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Deferred revenue, current portion | 2,191 | |
Deferred revenue | 6,168 | |
Deferred revenue, noncurrent | $ 3,977 |
Revenue Recognition - Deferred
Revenue Recognition - Deferred Revenues (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Deferred revenue, current portion | $ 19,154 | $ 4,131 |
Deferred revenue, noncurrent | 60,527 | 40,058 |
Total deferred revenues | 79,681 | $ 44,189 |
BGI | ||
Deferred revenue, current portion | 15,000 | |
Deferred revenue, noncurrent | 19,982 | |
Total deferred revenues | 34,982 | |
Qiagen | ||
Deferred revenue, current portion | 1,963 | |
Deferred revenue, noncurrent | 36,568 | |
Total deferred revenues | 38,531 | |
IVD kits and genetic testing services | ||
Deferred revenue, current portion | 2,191 | |
Deferred revenue, noncurrent | 3,977 | |
Total deferred revenues | $ 6,168 |
Fair Value Measurements - Hiera
Fair Value Measurements - Hierarchy (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Dec. 31, 2018 | |
Fair Value Measurements | ||
Fair value, transfers between Level I and Level II assets | $ 0 | |
Recurring | ||
Financial Assets: | ||
Total financial assets | 208,683 | $ 134,000 |
Recurring | Money market deposits | ||
Financial Assets: | ||
Total financial assets | 630 | 26,539 |
Recurring | U.S. Treasury securities | ||
Financial Assets: | ||
Total financial assets | 159,097 | 75,685 |
Recurring | U.S. agency securities | ||
Financial Assets: | ||
Total financial assets | 12,977 | 12,891 |
Recurring | Municipal securities | ||
Financial Assets: | ||
Total financial assets | 35,979 | 18,885 |
Recurring | Level 1 | ||
Financial Assets: | ||
Total financial assets | 159,727 | 102,224 |
Recurring | Level 1 | Money market deposits | ||
Financial Assets: | ||
Total financial assets | 630 | 26,539 |
Recurring | Level 1 | U.S. Treasury securities | ||
Financial Assets: | ||
Total financial assets | 159,097 | 75,685 |
Recurring | Level 2 | ||
Financial Assets: | ||
Total financial assets | 48,956 | 31,776 |
Recurring | Level 2 | U.S. agency securities | ||
Financial Assets: | ||
Total financial assets | 12,977 | 12,891 |
Recurring | Level 2 | Municipal securities | ||
Financial Assets: | ||
Total financial assets | $ 35,979 | $ 18,885 |
Financial Instruments (Details)
Financial Instruments (Details) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019USD ($)positionitem | Dec. 31, 2018USD ($) | |
Debt Securities, Available-for-sale, Fair Value to Amortized Cost [Abstract] | ||
Estimated Fair Value | $ 208,053 | $ 107,461 |
Other than temporary impairment | $ 0 | |
Number of investments sold | item | 0 | |
Number of investments, unrealized loss position | position | 7 | |
Amortized Cost | ||
Less than one year | $ 97,180 | |
Greater than one year but less than five years | 110,077 | |
Total | 207,257 | |
Fair Value | ||
Less than one year | 97,276 | |
Greater than one year but less than five years | 110,777 | |
Total | 208,053 | |
Available-for-sale securities | ||
Debt Securities, Available-for-sale, Fair Value to Amortized Cost [Abstract] | ||
Cost | 207,888 | 134,552 |
Unrealized Gain | 895 | 36 |
Unrealized Loss | (100) | (588) |
Estimated Fair Value | 208,683 | 134,000 |
Money market deposits | ||
Debt Securities, Available-for-sale, Fair Value to Amortized Cost [Abstract] | ||
Cost | 630 | 26,539 |
Estimated Fair Value | 630 | 26,539 |
U.S. Treasury securities | ||
Debt Securities, Available-for-sale, Fair Value to Amortized Cost [Abstract] | ||
Cost | 158,429 | 76,061 |
Unrealized Gain | 733 | 29 |
Unrealized Loss | (65) | (405) |
Estimated Fair Value | 159,097 | 75,685 |
U.S. agency securities | ||
Debt Securities, Available-for-sale, Fair Value to Amortized Cost [Abstract] | ||
Cost | 13,004 | 13,017 |
Unrealized Loss | (27) | (126) |
Estimated Fair Value | 12,977 | 12,891 |
Municipal securities | ||
Debt Securities, Available-for-sale, Fair Value to Amortized Cost [Abstract] | ||
Cost | 35,825 | 18,935 |
Unrealized Gain | 162 | 7 |
Unrealized Loss | (8) | (57) |
Estimated Fair Value | 35,979 | 18,885 |
Cash equivalents | Available-for-sale securities | ||
Debt Securities, Available-for-sale, Fair Value to Amortized Cost [Abstract] | ||
Estimated Fair Value | 630 | 26,539 |
Short-term investments | Available-for-sale securities | ||
Debt Securities, Available-for-sale, Fair Value to Amortized Cost [Abstract] | ||
Estimated Fair Value | $ 208,053 | $ 107,461 |
Balance Sheet Components - Prop
Balance Sheet Components - Property (Details) - USD ($) $ in Thousands | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Property and Equipment, net | |||
Property and equipment, gross | $ 60,265 | $ 58,633 | |
Less: Accumulated depreciation and amortization | (38,226) | (34,297) | |
Total Property and Equipment, net | 22,039 | 24,336 | |
Impairment of assets | $ 1,544 | ||
Machinery and equipment | |||
Property and Equipment, net | |||
Property and equipment, gross | 36,614 | 35,400 | |
Furniture and fixtures | |||
Property and Equipment, net | |||
Property and equipment, gross | $ 1,376 | 1,319 | |
Useful Life | 3 years | ||
Computer equipment | |||
Property and Equipment, net | |||
Property and equipment, gross | $ 1,949 | 2,117 | |
Useful Life | 3 years | ||
Capitalized software held for internal use | |||
Property and Equipment, net | |||
Property and equipment, gross | $ 5,545 | 4,868 | |
Useful Life | 3 years | ||
Leasehold improvements | |||
Property and Equipment, net | |||
Property and equipment, gross | $ 12,580 | 10,916 | |
Construction-in-process | |||
Property and Equipment, net | |||
Property and equipment, gross | $ 2,201 | $ 4,013 | |
Minimum | Machinery and equipment | |||
Property and Equipment, net | |||
Useful Life | 3 years | ||
Maximum | Machinery and equipment | |||
Property and Equipment, net | |||
Useful Life | 5 years |
Balance Sheet Components - Othe
Balance Sheet Components - Other Assets (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||||||
Feb. 28, 2019 | Apr. 30, 2016 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Apr. 30, 2019 | Dec. 31, 2018 | Aug. 31, 2017 | Aug. 08, 2017 | |
Balance Sheet Components [Line Items] | ||||||||||
Agreement term | 4 years | |||||||||
Total consideration | $ 3,200 | |||||||||
Deferred costs included in other long-term assets | $ 600 | $ 600 | $ 1,000 | |||||||
Amortization of deferred costs | 200 | |||||||||
Cost of revenues | $ 41,382 | $ 39,204 | $ 82,987 | $ 78,259 | ||||||
Common stock, shares issued | 70,035,000 | 70,035,000 | 62,083,000 | |||||||
Amortization of debt discount | $ 100 | $ 100 | $ 215 | 195 | ||||||
Debt discount | 1,000 | 1,000 | ||||||||
Noncurrent assets | 13,091 | 13,091 | $ 3,317 | |||||||
2017 Term Loan | ||||||||||
Balance Sheet Components [Line Items] | ||||||||||
Common stock, shares issued | 25,000 | 300,000 | ||||||||
Remaining borrowing capacity | $ 50,000 | $ 50,000 | $ 25,000 | |||||||
2017 Term Loan | Direct reduction from outstanding debt balance | ||||||||||
Balance Sheet Components [Line Items] | ||||||||||
Debt instrument, fee amount | $ 2,000 | |||||||||
2017 Term Loan | Noncurrent assets | ||||||||||
Balance Sheet Components [Line Items] | ||||||||||
Debt instrument, fee amount | 1,200 | 1,200 | $ 1,200 | |||||||
Health Insurance Carrier Agreement | ||||||||||
Balance Sheet Components [Line Items] | ||||||||||
Cost of revenues | 400 | $ 400 | ||||||||
Evercord | Storage services | ||||||||||
Balance Sheet Components [Line Items] | ||||||||||
Noncurrent assets | 300 | 300 | ||||||||
BGI | ||||||||||
Balance Sheet Components [Line Items] | ||||||||||
Agreement term | 10 years | |||||||||
BGI | Sequencing products and services | ||||||||||
Balance Sheet Components [Line Items] | ||||||||||
Noncurrent assets | $ 10,000 | $ 10,000 |
Balance Sheet Components - Accr
Balance Sheet Components - Accrued Compensation (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Balance Sheet Components | ||
Accrued paid time off | $ 1,839 | $ 1,825 |
Accrued commissions | 3,584 | 4,492 |
Accrued bonuses | 2,325 | 3,757 |
Other accrued compensation | 2,401 | 2,594 |
Total accrued compensation | $ 10,149 | $ 12,668 |
Balance Sheet Components - Ot_2
Balance Sheet Components - Other Accured Liabilities (Details) - USD ($) $ in Thousands | 1 Months Ended | 6 Months Ended | 12 Months Ended | ||
Mar. 31, 2019 | Jun. 30, 2019 | Dec. 31, 2018 | Mar. 07, 2018 | Dec. 31, 2017 | |
Balance Sheet Components | |||||
Settlement accrued for reimbursement related claims | $ 1,378 | ||||
Reserves for refunds to third-party payers | $ 10,897 | 10,012 | |||
Accrued charges for outsourced testing | 5,993 | 5,001 | |||
Testing and laboratory materials from suppliers | 2,253 | 2,742 | |||
Marketing and corporate affairs | 2,112 | 1,306 | |||
Legal, audit and consulting fees | 2,082 | 1,058 | |||
Accrued shipping charges | 255 | 852 | |||
Sales tax payable | 906 | 1,255 | |||
Accrued specimen service fees | 1,355 | 1,378 | |||
Accrued rent | 903 | ||||
Clinical trials and studies | 1,310 | 1,694 | |||
Operating lease liabilities, current portion | 5,339 | ||||
Other accrued expenses | 6,655 | 4,863 | |||
Total other accrued liabilities | 39,157 | 32,442 | |||
Accrued settlement liability | 1,400 | $ 11,400 | $ 11,400 | ||
Settlement agreement, amount plus applicable interest to be paid in installments | $ 5,300 | ||||
Additional reserves for refunds to insurance carriers | 4,800 | ||||
Settlement agreement installment paid | $ 1,400 | $ 10,300 | |||
Revenue recognized | 700 | ||||
Overpayments from insurance carriers | $ 3,900 |
Leases (Details)
Leases (Details) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019USD ($)ft² | Jun. 30, 2019USD ($)ft²location | |
Lessee, Lease, Description [Line Items] | ||
Operating lease liabilities, current portion included in other accrued liabilities | $ | $ 5,339 | $ 5,339 |
Operating lease liabilities, long-term portion | $ | 29,275 | 29,275 |
Operating lease liabilities | $ | $ 34,614 | $ 34,614 |
Weighted average remaining lease term | 3 years 3 months 29 days | 3 years 3 months 29 days |
Weighted average discount rate (as a percent) | 10.77% | 10.77% |
Lease expense | $ | $ 2,000 | $ 3,800 |
Operating lease payments | $ | $ 2,100 | |
Corporate Headquarters Lease | ||
Lessee, Lease, Description [Line Items] | ||
Office space (area) | ft² | 113,000 | 113,000 |
Number of office space locations | location | 2 | |
Term of lease | 84 months | 84 months |
Renewal term of lease | 5 years | 5 years |
"First Space" Sublease | ||
Lessee, Lease, Description [Line Items] | ||
Office space (area) | ft² | 88,000 | 88,000 |
"Second Space" Sublease | ||
Lessee, Lease, Description [Line Items] | ||
Office space (area) | ft² | 25,000 | 25,000 |
Corporate Headquarters Sublease | ||
Lessee, Lease, Description [Line Items] | ||
Office space (area) | ft² | 25,879 | 25,879 |
Term of lease | 48 months | 48 months |
Sublease receivable | $ | $ 1,900 | $ 1,900 |
Tukwila, WA lease | ||
Lessee, Lease, Description [Line Items] | ||
Office space (area) | ft² | 10,000 | 10,000 |
Term of lease | 62 months | 62 months |
Renewal term of lease | 5 years | 5 years |
Austin TX, Long-term Lease | ||
Lessee, Lease, Description [Line Items] | ||
Office space (area) | ft² | 94,000 | 94,000 |
Term of lease | 132 months | 132 months |
Leases - Payments (Details)
Leases - Payments (Details) $ in Thousands | Jun. 30, 2019USD ($) |
Leases | |
2019 (remaining 6 months) | $ 4,320 |
2020 | 8,825 |
2021 | 9,067 |
2022 | 9,319 |
2023 | 7,797 |
2024 and thereafter | 7,130 |
Total | 46,458 |
Less: imputed interest | (11,844) |
Operating lease liabilities | $ 34,614 |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Millions | Mar. 07, 2018USD ($)installment | Mar. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Jun. 30, 2019USD ($) | Dec. 31, 2017USD ($) |
Other commitments | |||||
Accrued settlement liability | $ 11.4 | $ 1.4 | $ 11.4 | ||
Settlement agreement, amount plus applicable interest to be paid in installments | $ 5.3 | ||||
Settlement agreement, number of equal quarterly installments | installment | 4 | ||||
Settlement amount | $ 1.4 | 5.3 | |||
Settlement agreement installment paid | $ 1.4 | $ 10.3 | |||
Inventory material | |||||
Other commitments | |||||
Purchase commitment | $ 5.8 | ||||
Gene sequencing data analysis commitment | |||||
Other commitments | |||||
Purchase commitment | 1.3 | ||||
Another supplier | Inventory material | |||||
Other commitments | |||||
Purchase commitment | 4.4 | ||||
Supplier three | Biological sample processing and storage | |||||
Other commitments | |||||
Purchase commitment | 0.3 | ||||
Supplier Four | Diagnostic reagents | |||||
Other commitments | |||||
Purchase commitment | 0.4 | ||||
Supplier Five | Tests | |||||
Other commitments | |||||
Purchase commitment | 2.6 | ||||
Supplier Six | |||||
Other commitments | |||||
Purchase commitment | 1.4 | ||||
Securities related claims | |||||
Other commitments | |||||
Estimate of possible loss | 1.5 | ||||
Commercial general liability claims | |||||
Other commitments | |||||
Estimate of possible loss | $ 0.3 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) | Jun. 30, 2019 | Apr. 30, 2019 | Dec. 31, 2018 | Jun. 30, 2017 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Jan. 31, 2019 | Jun. 30, 2015 |
Chief Executive Officer | ||||||||||
Stock Based Compensation | ||||||||||
Stock option shares approved | 425,000 | |||||||||
2015 Plan | ||||||||||
Stock Based Compensation | ||||||||||
Shares reserved for issuance | 3,451,495 | |||||||||
Additional shares reserved for issuance | 9,890,310 | |||||||||
Employee stock purchase plan | ||||||||||
Stock Based Compensation | ||||||||||
Issuance of common stock under employee stock purchase plan (in shares) | 0 | 132,177 | ||||||||
Proceeds from issuance of common stock under employee stock purchase plan | $ 2,100,000 | |||||||||
Performance-based awards | ||||||||||
Stock Based Compensation | ||||||||||
Stock option shares approved | 600,000 | |||||||||
Stock-based compensation expense | $ 0 | |||||||||
Performance-based awards | Chief Executive Officer | ||||||||||
Stock Based Compensation | ||||||||||
Stock option shares approved | 200,000 | 200,000 | ||||||||
Requisite service period | 3 years | |||||||||
Stock-based compensation expense | $ 200,000 | $ 100,000 | $ 200,000 | $ 300,000 | ||||||
Performance-based awards | First Vesting Milestone | Chief Executive Officer | ||||||||||
Stock Based Compensation | ||||||||||
Number of options vested | 50,000 | |||||||||
Vesting period | 1 year | |||||||||
Performance-based awards | Second Vesting Milestone | Chief Executive Officer | ||||||||||
Stock Based Compensation | ||||||||||
Number of options vested | 75,000 | |||||||||
Vesting period | 1 year | |||||||||
Performance-based awards | Third Vesting Milestone | Chief Executive Officer | ||||||||||
Stock Based Compensation | ||||||||||
Number of options vested | 75,000 | |||||||||
Vesting period | 1 year | |||||||||
Employee and non-employee stock options | ||||||||||
Stock Based Compensation | ||||||||||
Stock-based compensation expense | $ 5,804,000 | $ 3,368,000 | $ 9,855,000 | $ 6,522,000 | ||||||
Shares available for issuance | 6,503,000 | 5,431,000 | 6,503,000 | 6,503,000 | ||||||
Restricted stock units | ||||||||||
Stock Based Compensation | ||||||||||
Shares granted | 1,625,000 | |||||||||
Restricted stock units | Chief Executive Officer | ||||||||||
Stock Based Compensation | ||||||||||
Stock option shares approved | 100,000 | |||||||||
Stock-based compensation expense | $ 200,000 | $ 200,000 | ||||||||
Restricted stock units | Chief Financial Officer and Chief Operating Officer | ||||||||||
Stock Based Compensation | ||||||||||
Stock-based compensation expense | $ 400,000 | $ 400,000 | ||||||||
2015 Employee Stock Purchase Plan | ||||||||||
Stock Based Compensation | ||||||||||
Shares reserved for issuance | 893,548 | 893,548 | 893,548 | |||||||
Shares reserved for issuance as a proportion common stock outstanding (as a percent) | 1.00% | |||||||||
Price in relation to fair market value of common stock on the date of grant, lower range limit (as a percent) | 85.00% | |||||||||
Maximum number of shares a participant may receive during the period (in shares) | 5,000 | |||||||||
Maximum amount of award or purchase during a calendar year | $ 25,000 | |||||||||
Maximum employee contribution of employee's cash compensation (as a percent) | 15.00% | 15.00% | 15.00% | |||||||
2015 Employee Stock Purchase Plan | Minimum | ||||||||||
Stock Based Compensation | ||||||||||
Shares reserved for issuance | 880,000 | 880,000 | 880,000 |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock Options (Details) - Employee and non-employee stock options $ / shares in Units, shares in Thousands, $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019USD ($)$ / sharesshares | Dec. 31, 2018USD ($)$ / sharesshares | |
Stock Based Compensation | ||
Shares available for grant, beginning balance | 5,431 | |
Additional shares authorized | 2,483 | |
Options granted (in shares) | (1,697) | |
Options forfeited (in shares) | 286 | |
Shares available for grant, end balance | 6,503 | 5,431 |
Number of shares | ||
Outstanding, beginning balance (in shares) | 9,463 | |
Options granted (in shares) | 1,697 | |
Options exercised (in shares) | (1,468) | |
Options forfeited (in shares) | (286) | |
Outstanding, end balance (in shares) | 9,406 | 9,463 |
Exercisable (in shares) | 5,028 | |
Vested and expected to vest (in shares) | 9,219 | |
Weighted-Average Exercise Price | ||
Outstanding, beginning balance (in dollars per share) | $ / shares | $ 7.69 | |
Granted (in dollars per share) | $ / shares | 17.94 | |
Exercised (in dollars per share) | $ / shares | 4.08 | |
Forfeited (in dollars per share) | $ / shares | 14.10 | |
Outstanding, end balance (in dollars per share) | $ / shares | 9.90 | $ 7.69 |
Exercisable (in dollars per share) | $ / shares | 6.51 | |
Vested and expected to vest (in dollars per share) | $ / shares | $ 9.80 | |
Additional disclosures | ||
Weighted average contractual term, options outstanding | 7 years 2 months 27 days | 6 years 10 months 28 days |
Exercisable (in years) | 5 years 9 months 15 days | |
Vested and expected to vest (in years) | 7 years 2 months 9 days | |
Aggregate intrinsic value, options outstanding | $ | $ 166,273 | $ 61,718 |
Aggregate intrinsic value, options exercisable | $ | 105,948 | |
Aggregate intrinsic value, vested and expected to vest | $ | $ 163,939 |
Stock-Based Compensation - Perf
Stock-Based Compensation - Performance-based Awards (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||||
Dec. 31, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Jan. 31, 2019 | Jun. 30, 2017 | |
Chief Executive Officer | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Stock option shares approved | 425,000 | ||||||
Performance-based awards | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Stock option shares approved | 600,000 | ||||||
Stock-based compensation expense | $ 0 | ||||||
Performance-based awards | Chief Executive Officer | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Stock option shares approved | 200,000 | 200,000 | |||||
Stock-based compensation expense | $ 0.2 | $ 0.1 | $ 0.2 | $ 0.3 | |||
Restricted stock units | Chief Executive Officer | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Stock option shares approved | 100,000 | ||||||
Stock-based compensation expense | 0.2 | 0.2 | |||||
Restricted stock units | Chief Financial Officer | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Stock option shares approved | 100,000 | ||||||
Restricted stock units | Chief Operating Officer | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Stock option shares approved | 100,000 | ||||||
Restricted stock units | Chief Financial Officer and Chief Operating Officer | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Stock-based compensation expense | $ 0.4 | $ 0.4 |
Stock-Based Compensation - Rest
Stock-Based Compensation - Restricted Stock Units (Details) - Restricted stock units shares in Thousands | 6 Months Ended |
Jun. 30, 2019$ / sharesshares | |
Shares | |
Balance (in shares) | 1,084 |
Granted (in shares) | 1,625 |
Vested (in shares) | (273) |
Canceled/Forfeited (in shares) | (105) |
Balance (in shares) | 2,331 |
Weighted Average Grant Date Fair Value | |
Balance (in dollars per share) | $ / shares | $ 11.72 |
Granted (in dollars per share) | $ / shares | 17.70 |
Vested (in dollars per share) | $ / shares | 10.24 |
Canceled/Forfeited (in dollars per share) | $ / shares | $ 15.86 |
Stock-Based Compensation - Comp
Stock-Based Compensation - Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Employee and non-employee stock options | ||||
Stock based compensation expense | ||||
Options granted (in shares) | 1,697,000 | |||
Stock-based compensation expense | $ 5,804 | $ 3,368 | $ 9,855 | $ 6,522 |
Unrecognized compensation expense | 43,700 | $ 43,700 | ||
Unrecognized compensation expense recognized over weighted average period | 2 years 11 months 1 day | |||
Employee and non-employee stock options | Cost of product revenues | ||||
Stock based compensation expense | ||||
Stock-based compensation expense | 225 | 153 | $ 393 | 295 |
Employee and non-employee stock options | Research and development | ||||
Stock based compensation expense | ||||
Stock-based compensation expense | 1,264 | 1,013 | 2,157 | 1,916 |
Employee and non-employee stock options | Selling, general and administrative | ||||
Stock based compensation expense | ||||
Stock-based compensation expense | 4,315 | 2,202 | 7,305 | 4,311 |
Employee stock options | ||||
Stock based compensation expense | ||||
Stock-based compensation expense | 5,705 | 3,371 | 9,413 | 6,520 |
Employee stock options | Cost of product revenues | ||||
Stock based compensation expense | ||||
Stock-based compensation expense | 215 | 152 | 383 | 290 |
Employee stock options | Research and development | ||||
Stock based compensation expense | ||||
Stock-based compensation expense | 1,264 | 1,013 | 2,157 | 1,916 |
Employee stock options | Selling, general and administrative | ||||
Stock based compensation expense | ||||
Stock-based compensation expense | $ 4,226 | 2,206 | $ 6,873 | 4,314 |
Non-employee stock options | ||||
Stock based compensation expense | ||||
Options granted (in shares) | 105,584 | |||
Options unvested (in shares) | 24,721 | 24,721 | ||
Stock-based compensation expense | $ 99 | $ 442 | 2 | |
Stock-based compensation benefit | (3) | |||
Non-employee stock options | Cost of product revenues | ||||
Stock based compensation expense | ||||
Stock-based compensation expense | 10 | 1 | 10 | 5 |
Non-employee stock options | Selling, general and administrative | ||||
Stock based compensation expense | ||||
Stock-based compensation expense | $ 89 | $ 432 | ||
Stock-based compensation benefit | $ (4) | $ (3) |
Stock-Based Compensation - Assu
Stock-Based Compensation - Assumptions (Details) - shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Employee and non-employee stock options | ||||
Stock Based Compensation | ||||
Options granted (in shares) | 1,697,000 | |||
Employee stock options | ||||
Valuation of Stock Option Grants to Employees | ||||
Expected volatility, minimum | 42.71% | 40.77% | 42.53% | 40.28% |
Expected volatility, maximum | 43.49% | 40.98% | 43.49% | 40.98% |
Expected dividend rate | 0.00% | 0.00% | 0.00% | 0.00% |
Risk free interest rate, minimum | 1.78% | 2.70% | 1.78% | 2.37% |
Risk free interest rate, maximum | 2.51% | 2.86% | 2.60% | 2.86% |
Employee stock options | Minimum | ||||
Valuation of Stock Option Grants to Employees | ||||
Expected term (years) | 5 years 3 months 18 days | 5 years 7 months 10 days | 5 years 3 months 18 days | 5 years 2 months 27 days |
Employee stock options | Maximum | ||||
Valuation of Stock Option Grants to Employees | ||||
Expected term (years) | 10 years | 5 years 7 months 13 days | 10 years | 5 years 7 months 13 days |
Non-employee stock options | ||||
Stock Based Compensation | ||||
Options granted (in shares) | 105,584 | |||
Options unvested (in shares) | 24,721 | 24,721 | ||
Valuation of Stock Option Grants to Employees | ||||
Expected term (years) | 2 years 9 months | |||
Expected volatility | 42.03% | |||
Expected volatility, minimum | 41.48% | |||
Expected volatility, maximum | 42.03% | |||
Expected dividend rate | 0.00% | 0.00% | ||
Risk free interest rate | 2.58% | |||
Risk free interest rate, minimum | 2.36% | |||
Risk free interest rate, maximum | 2.58% | |||
Non-employee stock options | Minimum | ||||
Valuation of Stock Option Grants to Employees | ||||
Expected term (years) | 2 years 8 months 19 days | |||
Non-employee stock options | Maximum | ||||
Valuation of Stock Option Grants to Employees | ||||
Expected term (years) | 2 years 9 months |
Debt (Details)
Debt (Details) - USD ($) $ in Thousands | Apr. 30, 2019 | Dec. 31, 2018 | Aug. 08, 2017 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Dec. 31, 2017 | Mar. 31, 2019 | Aug. 31, 2017 | Sep. 30, 2015 |
Debt Instrument [Line Items] | ||||||||||||
Interest paid | $ 4,300 | $ 4,000 | ||||||||||
Issuance of common stock to Orbimed | $ 506 | $ 506 | $ 2,700 | |||||||||
Common stock, shares issued | 62,083,000 | 70,035,000 | 70,035,000 | 70,035,000 | ||||||||
Amortization of debt discount | $ 100 | $ 100 | $ 215 | 195 | ||||||||
Debt discount | 1,000 | 1,000 | $ 1,000 | |||||||||
Interest expense | 2,721 | 2,560 | 5,445 | 4,949 | ||||||||
Net carrying amount | $ 73,357 | 73,511 | 73,511 | 73,511 | ||||||||
Line Of Credit-UBS | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Maximum borrowing capacity | $ 50,000 | |||||||||||
Outstanding balance | 50,100 | 50,100 | 50,100 | |||||||||
Accrued interest | $ 1,100 | |||||||||||
Interest expense | 500 | 400 | $ 900 | 700 | ||||||||
Line Of Credit-UBS | 30-day LIBOR | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Spread on interest rate (as a percent) | 1.10% | |||||||||||
2017 Term Loan | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Maximum borrowing capacity | $ 100,000 | |||||||||||
Available borrowing capacity | 75,000 | |||||||||||
Remaining borrowing capacity | $ 50,000 | $ 25,000 | $ 50,000 | |||||||||
Interest expense | 2,200 | $ 2,000 | $ 4,500 | $ 4,000 | ||||||||
Additional interest in the event of default (as a percent) | 3.00% | |||||||||||
Issuance of common stock to Orbimed | 3,200 | |||||||||||
Debt instrument, term | 84 months | |||||||||||
Common stock, shares issued | 25,000 | 300,000 | ||||||||||
2017 Term Loan | Minimum | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Prepayment premium (as a percent) | 2.50% | |||||||||||
2017 Term Loan | Maximum | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Prepayment premium (as a percent) | 12.50% | |||||||||||
2017 Term Loan | Base Rate | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Spread on interest rate (as a percent) | 8.50% | 8.75% | ||||||||||
Base interest rate (as a percent) | 1.00% | 1.00% | ||||||||||
2017 Term Loan | Base Rate | Scenario of minimum capacity of $25.0 million drawn | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Spread on interest rate (as a percent) | 8.25% | |||||||||||
2017 Term Loan | Direct reduction from outstanding debt balance | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Debt instrument, fee amount | $ 2,000 | |||||||||||
Unamortized debt discount | 1,500 | 1,500 | 1,500 | |||||||||
2017 Term Loan | Noncurrent assets | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Debt instrument, fee amount | $ 1,200 | $ 1,200 | $ 1,200 | $ 1,200 |
Warrants (Details)
Warrants (Details) - USD ($) $ / shares in Units, $ in Millions | Jun. 26, 2018 | Jun. 30, 2019 |
Class of Stock [Line Items] | ||
Warrants exercised (in shares) | 332,896 | |
Level 3 | ||
Class of Stock [Line Items] | ||
Warrant liability, fair value | $ 6.8 | |
Secured Loan Arrangement | ||
Class of Stock [Line Items] | ||
Warrants outstanding (in shares) | 376,691 | |
Warrants exercise price (in dollars per share) | $ 2.3229 |
Income taxes (Details)
Income taxes (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Taxes | ||||||
Income tax expense | $ 1,895,000 | $ 113,000 | $ 1,969,000 | $ 217,000 | ||
Foreign income tax expense | 1,900,000 | 65,000 | 2,000,000 | 100,000 | ||
State income tax expense | 20,000 | $ 48,000 | 20,000 | $ 92,000 | ||
Corporate tax rate | 21.00% | 34.00% | ||||
Unrecognized tax benefits | 8,100,000 | 8,100,000 | $ 7,400,000 | |||
Interest and penalties accrued | $ 0 | $ 0 |
Net Loss per Share - Loss per S
Net Loss per Share - Loss per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Numerator: | ||||
Net loss, basic and diluted | $ (32,416) | $ (33,824) | $ (66,507) | $ (66,697) |
Denominator: | ||||
Weighted-average number of shares used in computing net loss per share, basic and diluted | 68,224 | 54,551 | 65,542 | 54,342 |
Net loss per share, basic (in dollars per share) | $ (0.48) | $ (0.62) | $ (1.01) | $ (1.23) |
Net loss per share, diluted (in dollars per share) | $ (0.48) | $ (0.62) | $ (1.01) | $ (1.23) |
Net Loss per Share - Potentiall
Net Loss per Share - Potentially Dilutive Shares (Details) - shares shares in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive shares not included in diluted per share calculations | 11,791 | 11,350 |
Employee and non-employee stock options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive shares not included in diluted per share calculations | 9,406 | 10,255 |
Restricted stock units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive shares not included in diluted per share calculations | 2,331 | 1,025 |
Employee stock purchase plan | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive shares not included in diluted per share calculations | 54 | 70 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Millions | Apr. 26, 2019 | Dec. 31, 2018 | Aug. 08, 2017 | Apr. 30, 2016 | Jun. 30, 2019 | Apr. 30, 2019 | Apr. 23, 2019 | Aug. 31, 2017 |
Subsequent Event [Line Items] | ||||||||
Common stock, shares issued | 62,083,000 | 70,035,000 | ||||||
Proceeds from issuance of common stock | $ 108.1 | |||||||
Payment of offering costs | $ 0.6 | |||||||
Agreement term | 4 years | |||||||
Supplier Six | ||||||||
Subsequent Event [Line Items] | ||||||||
Purchase commitment | $ 1.4 | |||||||
2017 Term Loan | ||||||||
Subsequent Event [Line Items] | ||||||||
Remaining borrowing capacity | $ 50 | $ 25 | $ 50 | |||||
Common stock, shares issued | 25,000 | 300,000 | ||||||
Base Rate | 2017 Term Loan | ||||||||
Subsequent Event [Line Items] | ||||||||
Spread on interest rate (as a percent) | 8.50% | 8.75% | ||||||
Base interest rate (as a percent) | 1.00% | 1.00% | ||||||
Equity offering | ||||||||
Subsequent Event [Line Items] | ||||||||
Common stock, shares issued | 5,263,158 | |||||||
Stock issued (in dollars per share) | $ 19 | |||||||
Option for additional shares | ||||||||
Subsequent Event [Line Items] | ||||||||
Common stock, shares issued | 789,473 | |||||||
Gene sequencing data analysis commitment | ||||||||
Subsequent Event [Line Items] | ||||||||
Purchase commitment | $ 1.3 |