ArcherDX (RCHR) DRS/ADraft registration statement (amended)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

If any of our products or our use of AMP is found to infringe such patents, we could be required to redesign our technology or obtain a license from Natera to continue developing, manufacturing, marketing, selling and commercializing AMP and our products. However, we may not be successful in the

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

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

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

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

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

Furthermore, we cannot provide assurance that our customers will always use our products in the manner in which we intend. Any intentional or unintentional misuse of our products by our customers could lead to substantial civil and criminal monetary and non-monetary penalties, and could cause us to incur significant legal and investigatory fees.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Moreover, in the event that we transition to a new supplier from any of our sole suppliers, doing so could be time‑consuming and expensive, may result in interruptions in our ability to supply our products to the market, could affect the performance of our tests or could require that we re‑validate our processes and our other tests using replacement equipment and supplies, which could hinder the adoption of our

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

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

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

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

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

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

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

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

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

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

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

We maintain service and professional liability insurance, but this insurance may not fully protect us from the financial impact of defending against product liability or professional liability claims. Any product liability or professional liability claim brought against us, with or without merit, could increase our insurance rates or prevent us from securing insurance coverage in the future. Additionally, any product liability lawsuit could damage our reputation or cause current clinical or biopharmaceutical collaborators

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

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

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

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

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

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

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

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

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

Seeking foreign regulatory clearance, authorization or approval could result in difficulties and costs for us and our collaborators and require additional preclinical studies, clinical trials or clinical investigations which could be costly and time-consuming. Regulatory requirements and ethical approval obligations can vary widely from country to country and could delay or prevent the introduction of our products and services in those countries. The foreign regulatory clearance, authorization or approval process involves all of the risks and uncertainties associated with FDA clearance, authorization or approval. We currently sell our RUO products outside the United States but have no experience in obtaining regulatory clearance, authorization or approval in international markets other than Japan, where we have submitted

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

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

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

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

Although we take measures to protect such information from unauthorized access or disclosure, our information technology and infrastructure, and that of our third-party service providers may be vulnerable

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

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

We have numerous vendors and other third parties who receive personal data from us in connection with the services we offer our clients. In addition, we have migrated certain data, and may increasingly migrate data, to a cloud hosted by third-party vendors. Some of these vendors and third parties also

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

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

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

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

In addition, many states in which we operate have laws that protect the privacy and security of sensitive and personal information. Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to sensitive and personal information than federal, international or other state laws, and such laws may differ from each other, which may complicate compliance efforts. For example, the California Consumer Privacy Act of 2018, or the CCPA, which increases privacy rights for California residents and imposes stringent data privacy and security obligations on companies that process their personal information, came into effect on January 1, 2020. Among other things, the CCPA requires covered companies to provide new disclosures to California consumers and provide such consumers new data protection and privacy rights, including the ability to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of personal information. This private right of action may increase the likelihood of, and risks associated with, data breach litigation. The CCPA was amended in September 2018 and November 2019, and it is possible that further amendments will be enacted, but

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

As of December 31, 2019, we had federal and state net operating loss carryforwards of approximately $56.4 million due to prior period losses, some of which, if not utilized, will begin to expire in 2034 for federal and state purposes. Our federal research and development tax credits are approximately $0.9 million. The federal research and development tax credits will expire in 2035 if not utilized. These net operating loss and research tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our profitability.

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

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

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

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

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

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

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

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

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our personnel from their normal

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We are pursuing regulatory clearances and/or approvals for STRATAFIDE, which is intended to be a universal IVD that utilizes AMP to measure clinically relevant genomic mutations for tumor profiling and companion diagnostic markers from both tissue and blood. We expect to launch STRATAFIDE as a regulated device in 2021, and we believe it has the potential to be the first-line tumor profiling test for any patient with a late-stage solid tumor (pan-tumor). We are seeking additional regulatory approvals outside

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

As of December 31, 2019, we carried a net operating loss, or NOL, carryforward of $56.4 million, which is available to reduce future taxable income and expires at various times between 2034 and 2038.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Our AMP chemistry is differentiated because it is:

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

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

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

We believe our product development platform has the following advantages:

We believe our reagents have the following advantages:

We believe our bioinformatics software has the following advantages:

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

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

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

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

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

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

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

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

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

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

The following table shows our pre-configured VariantPlex products:

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

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

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

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

The following table shows our pre-configured FusionPlex products:

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

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

The following table shows our pre-configured LiquidPlex products:

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

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

The following table shows our pre-configured Immunoverse products:

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

Assay Designer can be used to configure biomarker targets within the VariantPlex, FusionPlex and LiquidPlex product lines. Assay Designer is an online tool that allows the customer to design new biomarker targets, mix and match existing targets or add new targets to an existing product. Through the online interface, our customers may review hundreds of lab-tested, verified primer designs or use primer design tools to build customized products. Our design experts review all custom products, which are subjected to a rigorous quality control process prior to shipment. While complex designs may require interactive review with the customer, we deliver most designs in four to five weeks.

Our customers, including key opinion leaders, typically utilize Designer Pro for their challenging applications. It can be used to update biomarker targets or create new applications, allowing customers to customize the targets and facilitate changes to the testing paradigm. Current novel applications of Designer Pro products include using:

STRATAFIDE is our easy-to-use, clinical grade IVD and companion diagnostic under development, designed to be a first-line genomic test for any patient with a late-stage solid tumor. STRATAFIDE utilizes information from our experience with VariantPlex, FusionPlex and LiquidPlex technologies to develop a single pan-solid tumor companion diagnostic device which is designed to meet global regulatory clearance and/or approval requirements. STRATAFIDE is a comprehensive NGS-based therapy optimization product which uses our reagents and bioinformatics software. Our lyophilized reagent kit is used to enrich actionable biomarkers from DNA and RNA extracted from a tissue biopsy and from ctDNA extracted from the plasma fraction of blood. Our bioinformatics software solution identifies both simple and complex genomic mutations in DNA, RNA and ctDNA to provide actionable clinical information for any qualified lab. We believe that, if cleared and/or approved, STRATAFIDE may be the first IVD to enable the analysis of tissue and liquid biopsy in a single, comprehensive device. We believe that STRATAFIDE will democratize precision oncology in late-stage solid tumors.

We developed STRATAFIDE to solve for the underutilization of currently available targeted therapies in late-stage cancer patients with advanced solid tumors. While DNA, RNA and ctDNA each have unique advantages and disadvantages in test accuracy, if only one analyte is used individually, a patient is at risk of an inaccurate result. However, when used together in our STRATAFIDE IVD, we combine the advantages so the clinician has the optionality needed to ensure the clinician receives the right information at the right time to make the right treatment decision for the patient.

STRATAFIDE can be used to detect CNVs, SNVs, InDels and fusions, and utilizes AMP which allows for the addition of biomarker targets to the product without significantly impacting performance. This provides for adaptability as new biomarkers, tumor types, and targeted and immuno-oncology therapies are discovered, which we believe enables development in a shortened timeframe. We intend to include multiple companion diagnostic claims with 27 NCCN genes covered in our FDA submissions. We believe STRATAFIDE can increase in clinical utility and evolve as new claims, biomarker targets, and indications are discovered. We believe additional claims can be added for future therapies as new drugs are approved. We believe STRATAFIDE will allow clinicians to direct patients into relevant clinical trials and ultimately increase the speed of clinical trial stratification and enrollment, which is attractive for patients, clinicians and biopharmaceutical collaborators alike.

In March of 2018, the Centers for Medicare and Medicaid Services, or CMS, finalized a national coverage determination, or NCD, for NGS laboratory tests for patients with advanced cancer. CMS believes when these tests are used as a companion diagnostic to identify patients with certain mutations that may benefit from FDA-approved treatments, these tests can assist clinicians in making more informed treatment decisions. We believe this NCD will not only drive clinical adoption but also encourage our biopharmaceutical collaborators to complement therapies with STRATAFIDE.

We believe STRATAFIDE could also be used to monitor therapy response and determine therapy resistance. Patient response to therapy can be monitored by comparing mutations in the blood before, after, and during treatment. Advanced cancer patients have macroscopic disease and therefore a fixed panel like STRATAFIDE could be used for monitoring in this setting.

In December 2018, the FDA granted Breakthrough Device designation to STRATAFIDE, which offers potentially faster review for breakthrough medical devices that address unmet medical needs. To market STRATAFIDE as an IVD in the United States, we will need to receive FDA approval and/or clearance for STRATAFIDE as a medical device under the FDCA. We plan to submit our initial companion diagnostic claims on STRATAFIDE for FDA approval in 2020, including 510(k) filings or PMA filings, and the additional companion diagnostic claims on STRATAFIDE for FDA approval in 2020 and 2021. We also intend to pursue regulatory clearances and approvals in specific markets outside the United States, including Japan and Europe. A specific companion diagnostic claim was submitted to the Japanese PMDA in December 2019 and approved in March 2020.

In April 2020, we entered into a partnership agreement with Premier Inc., or Premier, to implement STRATAFIDE at eight to ten Premier member institutions in a research capacity. These institutions will participate in a retrospective study to evaluate STRATAFIDE’s sequencing performance in comparison to other diagnostic tests. The expanded collaboration intends to further understand best practices to implement and utilize a distributed IVD in community hospital settings.

PCM is a powerful patient-specific product for monitoring cancer, which is based on a customized LiquidPlex panel. We intend to use our product development platform to create a wide array of PCM products needed to serve the large population of cancer patients.

We believe PCM has the potential to address the limitations of standard of care methodologies, such as imaging and cancer antigen testing, by monitoring patients through a routine blood draw to measure disease progression, measure therapy effectiveness, determine a treatment regimen and refine therapy. Similar monitoring approaches have proven beneficial in blood cancer treatment. We believe applying a similar approach to early-stage solid tumors could prove equally beneficial. PCM provides tumor-informed longitudinal analysis of ctDNA found in patient blood where the quantity of ctDNA is a predictor of disease stage and burden. PCM achieves accuracy at low limits of detection by focusing the ctDNA analysis on known patient-specific mutations found in the tumor tissue. PCM has been able to leverage greater than 600 mutations in a single LiquidPlex panel, but we believe its ability to leverage mutations is only limited by the number of mutations found in the patient’s cancer.

We believe early-stage cancer patients can benefit from cancer monitoring to:

With respect to recurrence monitoring of residual disease, early detection of recurrence to treat micro-metastatic disease that is not detectable by other modalities, such as imaging which is a lagging indicator of relapse, could improve clinical outcomes. Early intervention in patients with solid tumors is more likely to elicit a cure, and the ability to identify patients at high-risk for recurrence makes interventional adjuvant trials possible. Previously, early-stage cancer interventional trials would require large cohorts due to the low probability of relapse, but with PCM, we believe patients could be identified as high risk sooner, reducing the number of patients biopharmaceutical companies would need to enroll in clinical trials.

In addition, PCM has benefits in blood cancers, such as AML, which has low mutational burden making it a prime candidate for fixed biomarker analysis supplemented by patient-specific biomarker analysis. Furthermore, blood draws yield large amounts of nucleic acid making rare clone detection feasible. PCM provides clinicians with a high level of sensitivity, which we believe has not been previously achieved. PCM has the ability to detect the recurrence of cancer earlier, which can lead to more favorable outcomes.

Our PCM process involves the following steps for solid tumors:

Our PCM process provides multiple benefits, including the accuracy of sequencing the whole exome for the longitudinal serial measures without added cost, since only the patient-specific mutations are sequenced. Additionally, by tracking multiple mutations, PCM overcomes the limitations of sampling low levels of ctDNA in blood using fixed panel approaches, affording high sensitivity and specificity necessary for a monitoring application. We believe that, if approved as a companion diagnostic, PCM will identify patients that have primary recurrence during systemic adjuvant therapy, making them eligible for additional therapy and improving overall survival and disease-free survival.

As part of an on-going collaboration with University College London and the Francis Crick Institute, we are utilizing PCM to detect low-volume minimal residual disease at high levels of sensitivity to help achieve a more personalized approach to developing cancer treatments.

In January 2020, the FDA granted Breakthrough Device designation to PCM, which offers potentially faster review for breakthrough medical devices that address unmet medical needs. To market PCM as an IVD in the United States, we will need to receive FDA approval and/or clearance for PCM as a medical device under the FDCA. We are developing PCM for regulatory clearance and/or approval both on our own and in collaboration with biopharmaceutical companies. We plan to submit PCM for FDA clearance and/or approval, including 510(k) filings or PMA filings, in the future.

Our collaborations have showcased our AMP technology and provided insight into the clinical utility of distributed genomic testing. We believe our relationships with leading academic cancer centers such as

We have a large and growing body of comprehensive clinical evidence supporting the accuracy and utility of our core chemistry and product portfolio. To date, our products have been featured in over 200 peer-reviewed clinical and scientific publications, demonstrating our products’ performance for clinical applications.

Below we highlight data that showcase the capabilities of Archer’s proprietary AMP chemistry:

The following summarizes data included in peer-reviewed publications and documents submitted to regulatory agencies from studies which involved the use of our platform: