Forward-Looking Statements

This Annual Report on Form 10-K, or Annual Report, particularly in Item 1. “Business” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the documents incorporated herein by reference, include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements, other than statements of historical fact are statements that could be deemed to be forward-looking statements, including, but not limited to, statements regarding our future financial position, business strategy, research and development efforts, and plans and objectives of management for future operations. When used in this Annual Report, the words “believe,” “may,” “could,” “will,” “estimate,” “continue,” “intend,” “expect,” “target,” “anticipate,” “aim,” “plan” and similar expressions, including their use in the negative, are intended to identify forward-looking statements.

These forward-looking statements are based on current expectations, estimates, forecasts and projections about our business and the industry in which we operate and management’s beliefs and assumptions. They are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Annual Report may turn out to be inaccurate. Risks and other factors that may cause such differences include, but are not limited to, those described under the heading “Risk Factors” in Item 1A of Part I of this Annual Report.

In light of these risks, uncertainties and assumptions, actual results and timing of events could differ materially and adversely from those anticipated or implied in the forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on such forward-looking statements.

Except as required by law, we do not intend to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Trademarks and Trade Names

GenMark^®, eSensor^®, ~~XT-8™~~XT-8^® and ~~ePlex™~~ePlex^® and our other logos and trademarks are the property of GenMark Diagnostics, Inc. or its subsidiaries. All other brand names or trademarks appearing in this Annual Report are the property of their respective holders. Our use or display of other parties’ trademarks, trade dress or products in this Annual Report does not imply that we have a relationship with, or the endorsement or sponsorship of, the trademark or trade dress owners.

Use of External Estimates

This Annual Report includes market share and industry data and forecasts that we obtained from industry publications and surveys. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of such included information. We have not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions relied upon therein. While we are not aware of any misstatements regarding the industry and market data presented herein, the data involve risks and uncertainties and are subject to change based on various factors.

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PART I.



Item 1.	BUSINESS

GenMark Diagnostics, Inc., or GenMark, is a molecular diagnostics company focused on developing and commercializing ~~our proprietary eSensor~~^® ~~detection technology.~~multiplex molecular tests that aid in the diagnosis of complex medical conditions and help guide therapy decisions. References herein to “we,” “us” or “our” refer to GenMark Diagnostics, Inc. and its wholly owned subsidiaries, unless the context specifically requires otherwise.

Overview

~~Our~~We currently develop and commercialize high-value, simple to perform, clinically relevant multiplex molecular tests based on our proprietary eSensor electrochemical ~~technology enables fast, accurate and highly sensitive~~ detection of multiple distinct biomarkers in a single sample. We are currently focused on developing and commercializing eSensor-based instruments and diagnostic tests for performing highly multiplexed reactions to simultaneously detect numerous, clinically relevant pathogens and/or genetic markers in rapidly expanding market segments.technology. We currently sell our XT-8 instrument and related diagnostic and research tests, as well as certain custom manufactured reagents, which collectively we refer to as our XT-8 system, in the United States. In addition, we have developed and intend to commercially launch our sample-to-answer ePlex instrument and its associated diagnostic tests, which we collectively refer to as our ePlex system, in Europe and the United States during 2016. All of our product revenues for 2015 were derived from sales of our XT-8 system.

Our XT-8 system ~~received 510(k) clearance from the United States Food and Drug Administration, or FDA, and is designed to support~~supports a broad range of molecular ~~diagnostic and research~~ tests with a compact and easy-to-use workstation and disposable test cartridges. ~~Our XT-8 system supports up~~In addition, we have developed and are commercializing of our sample-to-answer ePlex instrument and Respiratory Pathogen (RP) Panel. We intend to ~~24 independent test cartridges, each~~offer a number of which can be run independently, resulting in a highly convenient and flexible workflow for our XT-8 customers, which are primarily hospitals and reference laboratories. As of December 31, 2015, we had an installed base of 633 XT-8 analyzers, or placements, with our customers. We have a menu of eightadditional associated diagnostic tests for use with our XT-8 instrument. Four diagnostic tests which run on our XT-8 instrument have received FDA clearance: our Respiratory Viral Panel; our Cystic Fibrosis Genotyping Test; our Warfarin Sensitivity Test; and our Thrombophilia Risk Test. We have also developed a number of hepatitis C virus, or HCV, genotyping tests and custom manufactured reagents, as well as other research-based and pharmacogenomics products, versions of which are available for use with our XT-8 instrument for research use only (RUO).

~~In addition, we have developed our sample-to-answer~~ ePlex instrument, which ~~integrates automated nucleic acid extraction and amplification with our eSensor detection technology~~we collectively refer to enable operators using ePlex to place a raw or a minimally prepared patient sample directly into our test cartridge and obtain results without any additional steps. This sample-to-answer capability is enabled by the robust nature of our eSensor detection technology, which is not impaired by sample impurities that we believe hinder competing technologies. We have designedas our ePlex system to further simplify workflow and provide powerful, cost-effective molecular diagnostics solutions to a significantly expanded group of hospitals and reference laboratories. We have initiated development programs for seven assays for our ePlex instrument, which include a respiratory panel (RP), gram-positive (GP) and gram-negative (GN) blood culture identification panels, a gastrointestinal (GI) pathogen panel, an HCV genotyping test (HCVg), a central nervous system (CNS) panel, and a fungal panel (FP). ~~We intend to continue investing in our ePlex system and its related test menu for the foreseeable future.~~system.

Since inception, we have incurred net losses from operations each year, and we expect to continue to incur losses for the foreseeable future. Our net losses for the fiscal year ended December 31, ~~2015~~2016 and ~~2014~~2015 were approximately ~~$42.2~~$50.6 million and ~~$38.3~~$42.2 million, respectively. As of December 31, ~~2015,~~2016, we had an accumulated deficit of ~~$304.7~~$355.3 million. Our operations to date have been funded principally through sales of capital stock, borrowings, and cash from operations. We expect to incur increasing expenses over the next several years, principally to ~~develop and~~ commercialize our ePlex system, ~~and additional diagnostic tests,~~ as well as to further increase our manufacturing capabilities and domestic and international commercial organization.

Our Strategy

Our goal is to become the market leading provider of automated, multiplex molecular diagnostic testing systems. ~~We intend to commercially launch our ePlex system in Europe and the United States during 2016, as well as expand the use of our XT-8 system in the United States.~~ In order to achieve ~~these objectives,~~this objective, we intend to:

~~Launch~~Successfully Commercialize our ePlex System. We believe the ePlex system ~~will be~~is an attractive tosolution for a ~~broader~~broad range of hospitals and laboratories that lack the technical or economic resources to perform molecular diagnostic testing with existing products and technology. We believe the ePlex system will expand our current potential user base from approximately 1,000 domestic customers to approximately 12,000 potential customers globally.

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Expand our Menu of Clinical Diagnostic Products. We intend to develop a broad menu of molecular diagnostic tests for our ePlex system that we believe will satisfy important medical needs and present attractive commercial opportunities. ~~We have initiated~~For example, in June 2016 we obtained CE Mark of our ePlex instrument and RP Panel, and in December 2016 we submitted 510(k) applications to the United States Food and Drug Administration, or the FDA, for our ePlex instrument and RP Panel. During 2017, we intend to complete the development of, ~~seven assays for~~CE Mark, and submit 510(k) applications to the FDA our ePlex blood culture identification (BCID) family of panels, which include a gram-positive (GP), a gram-negative (GN), and a fungal pathogen panel. In addition, we are actively evaluating the development of additional assay panels that we believe will meet important, unmet clinical needs, which our ePlex system ~~and anticipate continuing~~is uniquely positioned to ~~invest in expanding our assay test menu for the foreseeable future.~~address.

Grow our Installed Base of Customers. We have identified those laboratories and hospitals that we believe will benefit from our ~~eSensor technology.~~product portfolio. We intend to leverage our commercial organization to ~~commercially launch and~~ drive placements of our ePlex system both domestically and ~~internationally, as well as place additional XT-8 systems in the United States.~~internationally. We anticipate that the expansion of our installed base of customers will drive sales of our test cartridges, from which we anticipate generating the majority of our revenues for the foreseeable future.

Increase Test Utilization. We intend to increase the use of our diagnostic tests by developing and offering tools and support tailored to our products such as ~~accredited physician~~ education programs and seminars, product training for our customers, and reimbursement support. These activities are designed to aid in establishing the clinical and health economic utility of multiplex molecular diagnostic tests, which we believe will increase adoption of our products.

Revenues, net loss, and total assets for the past three years are contained in our consolidated financial statements in Part II of this Annual Report. Substantially all of our revenues for the periods reported in our consolidated financial statements in Part II of this Annual Report were derived from customers located within the United States.

Our Technology

Our eSensor^® Technology

Our proprietary eSensor technology is based on the principles of deoxyribonucleic acid, or DNA, hybridization and electrochemical detection. DNA naturally forms a double-stranded structure, with each strand binding with high affinity, or hybridizing, only to a complementary strand. Our technology takes advantage of this highly specific binding by first creating two types of single-stranded DNA, the capture probe and the signal probe. The capture probe and signal probe are each complementary to a different segment of the target DNA that is the focus of the particular diagnostic test. Using our ~~proprietary~~ technology and processes, we attach our capture probes to a proprietary monolayer on the surface of a gold electrode within our ~~proprietary~~ test cartridges. We separately attach ferrocene, a proprietary label, to our signal probes.

Before placing the sample into our XT-8 test cartridge, the technician mixes the amplified DNA sample with our signal probe. If the target biomarker is present in the prepared patient sample, a segment of the biomarker DNA will hybridize with a solution containing our signal probe. This solution is then run past an electrode, against which our capture probes have been immobilized. The as-yet unbound segment of the target biomarker binds to our capture probe, creating a target DNA, signal probe, capture probe complex at the surface of the electrode. This complex produces an electrochemical signal which is analyzed and interpreted by our XT-8 system.

With our ePlex sample-to-answer test cartridges, the operator adds a patient sample directly or with minimal preparation into the sample chamber, closes the lid, and inserts the test cartridge into the ePlex instrument. Within the instrument, the same steps performed by a technician with the XT-8 system are performed within the ePlex test cartridge, resulting in the delivery of target DNA and signal probes to the eSensor electrodes within the ePlex cartridge. As with XT-8, when a complex forms as a result of a target match, the complex produces an electrochemical signal that is interpreted by the ePlex system.

Our XT-8 and ePlex test cartridges utilize the combination of distinct electrodes and multiple signal probes to detect dozens of target biomarkers from a single sample, thereby enabling highly multiplexed testing. Our eSensor technology is highly specific for the target biomarker, and is not based on optical or fluorescent detection. As a result, our diagnostic tests are less prone to sample contamination risk and do not require many of the time-consuming washing and preparation steps required by competing technologies. The sample preparation steps required before using our XT-8 test cartridges are ~~DNA/RNA~~nucleic acid purification and a polymerase chain reaction, or PCR, amplification, which involves amplifying, or generating billions of copies of the target DNA molecules, followed by transfer of the sample to our test cartridge and insertion of the test cartridge into any open module in our XT-8 system. In some XT-8 tests, amplified DNA is subject to an additional enzymatic treatment to produce a single-stranded-DNA. In contrast, the ePlex system generally requires no pre-analytic steps to be performed by the user, except, in limited cases, certain minimal up-front sample handling.

We believe our proprietary electrochemical ~~signal~~ detection technology has several advantages over other signal detection platforms, including high sensitivity and accuracy, streamlined sample preparation, efficient multiplexing, effective use of lab space, low maintenance, and the ability to cost-effectively develop additional tests.

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Digital Microfluidics

Digital microfluidics is another innovative technology included within our ePlex system which we have exclusively licensed within a defined field of use from an affiliate of Illumina, Inc. Digital microfluidics is a technique for moving small droplets of liquid using electrowetting, a process for making a surface hydrophobic or hydrophilic based on the application of a voltage to a surface. Our ePlex printed circuit board contains eSensor electrodes capable of nucleic acid detection along with electrowetting electrodes capable of digital microfluidics. The ePlex system uses numerous choreographed digital inputs to perform the fluid manipulations associated with sample-to-answer molecular diagnostics. Drops are dispensed, mixed, merged, heated, cooled, split and delivered, all under precise and programmable digital control. In this manner, standard procedures of the molecular diagnostics lab (e.g., DNA purification, PCR, exonuclease digestion, etc.) can be performed automatically within our ePlex cartridge.

Our Instrument Systems

Our XT-8 ~~Test Cartridges~~. Our XT-8 test cartridges are devices specifically configured for a particular diagnostic test to be used within our XT-8 instrument. Each test cartridge includes a sample compartment and a plastic cover that forms a hybridization chamber. The test cartridge is fitted with a diaphragm pump and valves that circulate the hybridization solution, including the signal probe and prepared patient sample, when inserted into the XT-8 instrument. The test cartridge also includes a printed circuit board consisting of an array of gold-plated electrodes, a silver/silver chloride reference electrode, and two auxiliary electrodes. Each electrode is customized with a proprietary monolayer that immobilizes the DNA capture probes specific for each target of a test panel. The test cartridge also contains an electrically erasable, programmable read-only memory (EEPROM) component that stores information related to the cartridge such as an assay identifier, cartridge lot number and expiration date.

~~Our XT-8 Instrument~~System. Our XT-8 instrument is a post-PCR multiplex workstation that has a modular design consisting of an integrated touch screen and up to three analyzers. Each analyzer contains eight modules into which individual test cartridges are placed. The test cartridge modules operate independently of each other allowing up to 24 independent test cartridges to be loaded at one time, with the remaining modules available for use at any future time while the system is running. Each module contains a test cartridge connector, a precision-controlled heater, an air pump and electronics. The air pumps drive the diaphragm pump and valve system in the test cartridge, eliminating fluid contact between the module and the cartridge. The pneumatic pumping enables recirculation of the hybridization solution allowing the target DNA and the signal probes to efficiently hybridize with the complementary capture probes on the electrodes. The diaphragm pump in the test cartridge is connected to a pneumatic source from the XT-8 instrument and provides unidirectional pumping of the hybridization mixture through the cartridge during hybridization.

We believe that our XT-8 system offers reference laboratories and hospitals the following benefits:



Key Features & Benefits	Description
Broad Test Menu	~~Eight tests available~~We offer the following four FDA-cleared assays on our XT-8 ~~instrument including 4 FDA cleared assays across~~instrument: a ~~number~~Respiratory Viral Panel, Cystic Fibrosis Genotyping Test, Thrombofilia Risk Test, and a Warfarin Sensitivity Test. We also offer a Hepatitis C (HCV) Genotyping Test and associated custom manufactured reagents, as well as a 2C19 Genotyping Test, each of ~~areas in molecular diagnostics.~~which is available for research use only (RUO).
Fast Turnaround	Approximately 30 minutes post-PCR to result from an amplified DNA sample with minimal technician time needed.
Accurate Results	Our Cystic Fibrosis Genotyping Test, our Warfarin Sensitivity Test and our Thrombophilia Risk Test demonstrated 100% accuracy in clinical studies compared to DNA sequencing and other standards.
Ease of Use	Minimal manual processing steps, intuitive touch-screen interface and clear result reports.
Random Access	Each of up to 24 test cartridge modules can be accessed independently resulting in a highly flexible workflow.
Minimal Maintenance	No routine maintenance or calibration is required.
Multiplex Capability	Detects numerous distinct biomarkers in a single sample reducing the need for reflex testing.

Our ePlex ~~Sample-To-Answer Test Cartridges~~. Our ePlex test cartridges are single use, fully-integrated consumables containing all necessary reagents for a particular diagnostic test to be used within our ePlex instrument. Each test cartridge includes a sample compartment with a plastic cover into which a raw or minimally prepared sample is placed. The test cartridge contains liquid reagents in proprietary blister packs, optimized for long-term reagent storage and delivery into the appropriate reagent reservoirs. The test cartridge also contains biologic reagents such as enzymes and oligonucleotides, stabilized with proprietary additives designed to support long-term room temperature stability and dried onto various internal surfaces where they can be rehydrated for use during the sample-to-answer diagnostic test. The ePlex test cartridge also includes a printed

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circuit board consisting of an array of gold-plated electrodes. Using the same eSensor technology contained in XT-8 cartridges, each electrode is similarly customized with a proprietary monolayer that immobilizes the DNA capture probes specific for each target of a test panel. The ePlex test cartridge also contains an EEPROM that stores information related to the cartridge such as an assay identifier, cartridge lot number and expiration date. The ePlex EEPROM and associated workflow and programming also supports positive patient identification, helping to ensure error-free linking of the ePlex test report to the correct patient.

~~Our ePlex Instrument.~~System. Our ePlex instrument is a multiplex, sample-to-answer platform that fully integrates nucleic acid extraction, amplification and detection and has a modular design consisting of an integrated touch screen and up to four analyzers. Each analyzer contains six modules into which individual ePlex ~~sample-to-answer~~panel test cartridges are placed. The test cartridge modules operate independently supporting continuous random access of up to 24 independent test cartridges. Each module contains a test cartridge connector, several precision-controlled heaters, a mix motor, an air pump and mechanisms for dispensing liquid from blister packs and positioning a small magnet. Each module also contains all of the necessary electronics hardware and firmware for controlling the module, performing real-time monitoring, calibration testing and generating test results. The air pump, blister/magnet mechanisms and motor drive the nucleic acid extraction and reagent dispensing initial phase of the sample-to-answer diagnostic tests and avoid fluid contact between the ePlex module and the cartridge. All subsequent steps are driven by a proprietary electrowetting technology which we have exclusively licensed within a defined field of use.

We believe our ePlex system ~~will offer~~offers reference laboratories and hospitals the following benefits:



Key Features & Benefits	Description
Broad Test Menu	~~Seven tests are in development on~~We obtained CE Mark for our ePlex ~~instrument.~~system and RP Panel in June 2016, and filed 510(k) applications with the FDA for the ePlex instrument and RP Panel in December 2016. During 2017, we intend to complete the development of, CE Mark, and submit 510(k) applications to the FDA our ePlex blood culture identification (BCID) family of panels, which include a gram-positive (GP), a gram-negative (GN), and a fungal pathogen panel. In addition, we are actively evaluating the development of additional assay panels that we believe will meet important, unmet clinical needs, which our ePlex system is uniquely positioned to address.
Ease of Use	Minimal manual processing steps, intuitive touch-screen interface and clear result reports.
True Sample-to-Answer	The user simply adds a raw or minimally prepared sample to the test cartridge and inserts the cartridge into the instrument. ~~The test cartridge is self-contained, with all required reagents stored in room-temperature stable formats.~~
Fast Turnaround	Results are ~~expected to be~~capable of being produced in approximately ~~60-90 minutes~~1-2 hours from sample input.
Random Access	Each of up to 24 test cartridge modules can be accessed independently resulting in a highly flexible workflow.
Minimal Routine Maintenance	Minimal maintenance or calibration is required.
Multiplex Capability	Detects numerous distinct biomarkers in a single sample reducing the need for reflex testing.
Positive Patient Identification (PosID)	Incorporates patented positive patient identification technology to reduce sample reporting errors.
IT Integration	Multiple design features to improve operational efficiency, such as bi-directional laboratory information system (LIS) connectivity and remote access capability to reduce downtime and service costs.

Market Opportunity

We believe the global market for molecular diagnostics is currently approximately $5.0 billion and will experience a growth rate of over 10% per year over the course of the next several years based on research published by leading market research firms. Although we believe the global market for molecular diagnostics is approximately $5.0 billion, we believe the aggregate global total addressable market for the tests we currently offer, are actively developing on ePlex, or ~~will~~may consider developing ~~in the near-term~~ is approximately ~~$2.3 billion and is expected to grow by more than 20% per year for the next several years.~~$2.5 billion. Many factors are driving ~~growth of~~the strong opportunity in this market, including increased demand for infectious disease ~~diagnostics panels,~~diagnostic solutions and an increased focus on value-based medical care that enhances patient outcomes, improves key quality metrics, and reduces the ~~expansion of genetic testing for disease predisposition, and advances in personalized medicine, such as the tailoring of therapies to those individuals most likely to respond.~~total cost-of-care.

Research and Development

~~In addition to developing our ePlex system and expanding our diagnostic test menus, our~~Our research and development (R&D) team is focused on expanding our ePlex test menu. In addition, our R&D team is supporting the following initiatives:

On Market Product Support. A role of our ~~research and development~~R&D team is to assist our manufacturing and quality assurance teams in ensuring high product quality and thorough complaint handling and investigation. ~~In addition, we work to improve~~This team also supports improvements in quality control methods and metrics and are active participants in the continuous improvement processes utilized by our product manufacturing teams.

Improving the Clinical and Practical Utility of our Tests. Our ~~research and development~~R&D organization also ~~helps establish~~supports the clinical utility and value of our molecular diagnostic tests. We have previously and intend to continue to partner with academic and reference laboratories to perform validation and clinical studies on our tests. Key aspects of our efforts are aimed at improving workflow in the laboratory setting, positively comparing our tests to historical or “gold standard” tests, and demonstrating that our tests can help improve patient care and lower

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diagnostic and medical treatment costs. We intend to publish the results from these clinical studies in peer-reviewed or trade journals, submit them to regulatory bodies and present them at industry conferences in support of our commercialization strategy.

Manufacturing

We manufacture our proprietary test cartridges, certain related components and ancillary reagents in our Carlsbad, ~~California.~~California facilities. We perform reagent formulation, test cartridge manufacturing and packaging of final components and test cartridges in accordance with applicable guidelines for medical device manufacturing. We currently lease an aggregate of approximately 87,000 square feet at two nearby locations in Carlsbad, California, where we maintain our corporate office and manufacturing facilities.

We currently outsource the manufacture of our XT-8 instrument to Leica Biosystems Melbourne Pty Ltd., or ~~Leica. We also~~Leica, and outsource the manufacture of our ePlex ~~instrument.~~instrument to Plexus Corp, or Plexus. We rely on third party suppliers, including in certain instances, sole source suppliers, for ~~oligonucleotide~~certain raw materials and other ~~raw materials~~supplies and components used in our ~~products and much of the disposable component molding and sub-component assembly for our test cartridges.~~products.

We have implemented a quality management system designed to comply with FDA regulations and ISO standards governing diagnostic medical device products. These regulations control the design, manufacture, testing and release of diagnostics products, as well as raw material receipt and control. In 2012, our Carlsbad, California corporate headquarters facility obtained ISO 13485 certification. We ~~also have controlled~~control methods for the consistent manufacturing of our proprietary test cartridges and reagents at our facilities. Our key outsourcing partners are regularly audited to help ensure a continual supply of high quality components.

We plan to continue to manufacture components that we determine are highly proprietary or highly customized, while outsourcing more commodity-like components. We are likely to establish additional outsourcing partnerships as we manufacture additional products.

Sales and Marketing

Our current sales and marketing strategy is to expand our business globally with the ~~anticipated~~ commercialization of our ePlex system in ~~Europe and~~ the United States ~~in 2016,~~and Europe, while also continuing to ~~expand~~support the placement and use of our XT-8 system in the United States. Our products are sold in the United States through a geographically dispersed direct sales and technically specialized service organization, which is supported by a centralized team of product managers and marketing, customer support, and technical support personnel. We ~~intend to~~ utilize a direct sales and technical support team to sell our ePlex system in certain key European countries, which ~~we expect will be~~are augmented by ~~marketing partners and~~ distributors in other ~~geographies as we further expand~~locations internationally.

Our sales representatives typically have experience in molecular diagnostics and a network of laboratory contacts within their respective territories. We utilize our representatives’ knowledge along with market research databases to target and qualify our customers. We execute a variety of sales campaigns and strategies to meet the buying criteria of the different customer segments we serve. To support ~~our expanding molecular test menu,~~the growth in our customer base and our launch plans for our ePlex system, we continue to make investments in these customer facing organizations.

Our sales cycle typically includes customer evaluations and validations of our products. Upon successful validation, a customer may generally acquire our ~~XT-8~~instrument system in the following ways:

Capital Purchase: The instrument is paid for upfront and in its entirety by the customer. Customers are also eligible to receive structured pricing incentives if they enter into an optional annual minimum cartridge purchase commitment.

Reagent Rental: A reagent rental agreement requires that a customer ~~commitment~~commit to purchase a minimum number of test cartridges over the term of the agreement, and a portion of the charge for each cartridge ~~equates~~is attributable to a usage fee for the instrument. ~~Our reagent rental agreements do not typically provide for any cancellation rights by the customer.~~

Customers

Our target customers include hospital-based laboratories and research institutions. We believe our ePlex system will expand our current potential user base from approximately 1,000 domestic customers to approximately 12,000 potential customers globally. In 2016 and 2015, Laboratory Corporation of America, Inc. represented 27% and 17%, respectively, of our total revenue. In 2014, no single customer represented more than 10% of our total revenue. ~~In 2013, Natural Molecular Testing Corporation, or NMTC, represented approximately 30% of our total revenue.~~

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Instrument placements are defined in terms of the number of analyzers sold to or placed with a customer, reflecting a direct correlation between the reagent test revenue opportunity and the number of test cartridges that can be analyzed at any one time. As of December 31, 2015, we had placed 633 XT-8 analyzers with our customers, as compared to 540 analyzer placements at December 31, 2014. The increase in analyzers placed and related revenue generated in 2015 over the prior year is due to an increase in the number of new customers buying our products and growth in the sale of consumables to existing customers.

Competition

We primarily face competition in the molecular diagnostic testing markets with testing products and systems developed by public and private companies such as ~~Cepheid, Siemens, Hologic, Inc., Luminex Corporation, Nanosphere, Inc., Seegene, Roche Diagnostics, a division of F. Hoffmann-La Roche Ltd.,~~ bioMerieux (which acquired Biofire Diagnostics, Inc.), Luminex Corporation (which acquired Nanosphere, Inc.), Danaher Corporation (which acquired Cephied), Siemens, Hologic, Inc., Seegene, Roche Diagnostics and Abbott Molecular ~~Diagnostics, a division of Abbott Laboratories.~~Diagnostics. Our diagnostic tests also face competition with laboratory developed tests, or LDTs, developed by national and regional reference laboratories and hospitals. We believe that our testing systems compete largely on the basis of accuracy, ~~and~~ reliability, enhanced laboratory workflow, multiplex capability, ease-of-use and return on investment for customers.

Many of our competitors have substantially greater financial, technical, research and other resources and larger, more established marketing, sales and distribution organizations than we do. Many of our competitors also offer broader product lines and have greater brand recognition than we do. Moreover, our existing and new competitors may make rapid technological developments that may result in our technologies and products becoming obsolete before we recover the expenses incurred to develop them or before they generate significant revenue.

Intellectual Property

To establish and protect our proprietary technologies and products, we rely on a combination of our patents, copyrights, trademarks, and trade secrets, as well as other intellectual property rights in our technology and business information. Our intellectual property portfolio for our core electrochemical technology was initially built through the combination of our acquisition of the Clinical Micro Sensors business from Motorola and licensing patents from the California Institute of Technology. We ~~currently~~also have exclusively ~~license~~licensed the digital microfluidics technology utilized in our ePlex system within a defined field of ~~use.~~use from an affiliate of Illumina.

We believe that our patent portfolio, which includes ~~approximately 120~~over 100 owned and exclusively licensed U.S. and foreign patents and approximately 3530 pending applications, provides us with ~~robust~~extensive protection of our ~~electrochemical detection techniques, chemical insulators and attachment points on electrode surfaces and other technology that, collectively, form the basis of our~~ eSensor ~~platform.~~systems. We continue to pursue the issuance of new patents to protect our ongoing research, development and commercial activities, ~~including~~in particular with respect to our ePlex system and related consumables. In general, patents have a term of at least 20 years from the application filing date or earlier claimed priority date. A majority of our issued and exclusively licensed patents are scheduled to expire by 2021, with approximately one half of the patents expiring by 2018. Several of our pending applications have the potential to mature into patents that may expire between 2028 and 2034. Our success depends to a significant degree upon our ability to police infringement and continue to develop proprietary products and technologies without infringing the intellectual property rights of others.

We also rely in part on ~~trade-secret~~trade secret protection of our intellectual property. We attempt to protect our trade secrets by entering into confidentiality agreements with third parties, employees and consultants. Our employees and consultants also sign agreements requiring that they assign to us their interests in intellectual property, such as patents and copyrights arising from their work for us. All employees sign an agreement not to compete unfairly with us during their employment and upon termination of their employment through the misuse of confidential information.

We also have filed for registration, or obtained registration, in the U.S. and other countries for marks used with our products and technology. Our issued ~~and pending trademark registrations~~trademarks in the United States ~~and~~and/or Europe include eSensor®, word and design marks for GenMark®, GenMark DX®, eSensor®, ~~XT-8™~~XT-8®, eSensor ~~XT-8™~~XT-8®, ~~ePlex™~~ePlex®, and GenMark ~~ePlex™~~ePlex®, among others.

~~Trademark protection continues in some countries for as long as the mark is used and, in other countries, for as long as it is registered. Registrations generally are for fixed but renewable terms.~~

Government Regulation

The design, development, manufacture, testing and sale of our molecular diagnostic products are subject to regulation by numerous governmental authorities, principally the FDA, and corresponding state and foreign regulatory agencies.

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Regulation by the FDA

In the United States, the Federal Food, Drug, and Cosmetic Act, or FDCA, FDA regulations and other federal and state statutes and regulations govern, among other things, medical device design and development, preclinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import, and post-market surveillance. The FDA regulates the design, manufacturing, servicing, sale and distribution of medical devices, including molecular diagnostic test kits and instrumentation systems. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending applications, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution. Unless an exemption applies, each medical device we wish to distribute commercially in the United States will require marketing authorization from the FDA prior to distribution.

The two primary types of FDA marketing authorization required applicable to a device are premarket notification, also called 510(k) clearance, and premarket approval, also called PMA. We have obtained 510(k) clearance from the FDA for the following molecular diagnostic tests for use on our XT-8 system: the Respiratory Viral panel, the eSensor Warfarin Sensitivity Test, the Cystic Fibrosis Genotyping Test, and the Thrombophilia Risk Test. In December 2016, we filed 510(k) applications with the FDA for our ePlex instrument and RP Panel.

Proposed Regulation of Laboratory Developed Tests (LDTs). In October 2014, the FDA promulgated draft guidance which describes a new proposed regulatory framework for LDTs. Based on this proposal, clinical laboratories that develop and use LDTs would be required to comply with specific regulatory requirements (e.g., adverse even reporting, quality system regulation, or QSR, premarket submission, and FDA review) prior to the use of LDTs for clinical diagnostic purposes. The timeline for phasing in the proposed regulatory requirements would begin upon finalization of the FDA guidance document. The ultimate impact of this draft guidance on our customers remains uncertain.

Regulation after FDA Clearance or Approval. Any devices we manufacture or distribute pursuant to clearance or approval by the FDA are subject to pervasive and continuing regulation by the FDA and certain state agencies. We are required to adhere to applicable regulations setting forth detailed Good Manufacturing Practices, or GMP, requirements, as set forth in the QSR, which includes testing, control and documentation requirements. Non-compliance with these standards can result in fines, injunctions, civil penalties, recalls or seizures of products, total or partial suspension of production, refusal of the government to grant 510(k) clearance or PMA of devices, withdrawal of marketing approvals and criminal prosecutions. We have designed and implemented quality system processes within our manufacturing facilities in order to comply with FDA’s GMP requirements.

Because we are a medical device manufacturer, we must also comply with FDA’s medical device reporting requirements whenever there is evidence that reasonably suggests that one of our products may have caused or contributed to a death or serious injury. We must also report any incident in which our product has malfunctioned if that malfunction would likely cause or contribute to a death or serious injury if it were to recur.

Labeling, advertising, and promotional activities are subject to scrutiny by the FDA and, in certain circumstances, by the Federal Trade Commission. Medical devices approved or cleared by the FDA may not be promoted for unapproved or uncleared uses, otherwise known as “off-label” promotion. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability, including substantial monetary penalties and criminal prosecution. We have implemented quality system processes and advertising/promotional policies designed to comply with these requirements.

Environmental Regulations. We are also subject to numerous federal, state and local laws relating to such matters as safe working conditions, manufacturing practices, environmental protection, fire hazard control and disposal of hazardous or potentially hazardous substances. Some of these laws require us to obtain licenses or permits to conduct our operations. We have numerous policies and quality system procedures in place to ensure compliance with these laws and to minimize the risk of occupational exposure to hazardous materials. We do not expect the operations of our products to produce significant quantities of hazardous or toxic waste or radiation that would require the use of extraordinary disposal practices. Although the costs to comply with these applicable laws and regulations have not been material, we cannot predict the impact on our business of new or amended laws or regulations or any changes in the way existing and future laws and regulations are interpreted or enforced, nor can we ensure we will be able to obtain or maintain any required licenses or permits.

Export of Our Products. Medical devices that are legally marketed in the U.S. may be exported anywhere in the world without prior FDA notification or approval. Devices that have not been approved or cleared in the U.S. must follow the export provisions of the FDCA. Depending on which section of the FDCA we may export under, we may need to request an export permit letter or export certificate, or we may need to submit a simple notification. Export certificates may be requested by

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foreign customers or foreign governments to provide proof of the products’ status as regulated by the FDA. The export certificate is prepared by the FDA and contains information about a product’s regulatory or marketing status in the United States.

Clinical Laboratory Improvement Amendments of 1988. The use of our products is also affected by the Clinical Laboratory Improvement Amendments of 1988, or CLIA, and related federal and state regulations, which provide for regulation of laboratory testing. Any customers using our products for clinical use in the United States will be regulated under CLIA, which establishes quality standards for all laboratory testing to ensure the accuracy, reliability and timeliness of patient test results regardless of where the test was performed. In particular, these regulations mandate that clinical laboratories must be certified by the federal government or a federally approved accreditation agency, or must be located in a state that has been deemed exempt from CLIA requirements because the state has in effect laws that provide for requirements equal to or more stringent than CLIA requirements. Moreover, these laboratories must meet quality assurance, quality control and personnel standards, and they must undergo proficiency testing and inspections. The CLIA standards applicable to clinical laboratories are based on the complexity of the method of testing performed by the laboratory, which range from “waived” to “moderate complexity” to “high complexity.” We expect that most of our products will be categorized as “high complexity,” since most molecular diagnostic tests are currently FDA-cleared as CLIA “high complexity” devices.

Foreign Government Regulation. We intend to market our products in European and other select international markets. The regulatory pre-market requirements for in vitro diagnostic, or IVD, devices vary from country to country. Some countries impose product standards, packaging requirements, labeling requirements and import restrictions on devices. Each country has its own tariff regulations, duties and tax requirements. Failure to comply with applicable foreign regulatory requirements may subject us to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

Fraud and Abuse Regulations

We are subject to numerous federal and state health care anti-fraud laws, including the federal anti-kickback statute and False Claims Act, or the FCA, that are intended to reduce waste, fraud and abuse in the health care industry. These laws are broad and subject to evolving interpretations. They prohibit many arrangements and practices that are lawful in industries other than health care, including certain payments for consulting and other personal services, some discounting arrangements, the provision of gifts and business courtesies, the furnishing of free supplies and services, and waivers of payments. In addition, many states have enacted or are considering laws that limit arrangements between medical device manufacturers and physicians and other health care providers and require significant public disclosure concerning permitted arrangements. These laws are vigorously enforced against medical device manufacturers and have resulted in manufacturers paying significant fines and penalties and being subject to stringent corrective action plans and reporting obligations. We must operate our business within the requirements of these laws and, if we were accused of violating them, we could be forced to expend significant resources on investigation, remediation and monetary penalties.

Patient Protection and Affordable Care Act

Our operations are affected by the federal Patient Protection and Affordable Care Act of 2010, as modified by the Health Care and Education Reconciliation Act of 2010, which we refer to as the Health Care Act. The Health Care Act imposes a 2.3% excise tax on sales of medical devices by manufacturers. In December 2015, the excise tax was suspended for ~~two years.~~2016 and 2017. We are unable to predict whether the suspension will be continued beyond 2017. Taxable devices include any medical device defined in section 201(h) of the FDCA and intended for use by humans, with limited exclusions for devices purchased by the general public at retail for individual use. There is no exemption for small companies, and we ~~began paying~~paid the tax infrom January 2013 ~~and continued~~ through December 2015. The Health Care Act also requires manufacturers to report to the Department of Health and Human Services detailed information about financial arrangements with physicians and teaching hospitals. These reporting provisions preempt state laws that require reporting of the same information, but not those that require reports of different or additional information. Failure to comply with these requirements subjects the manufacturer to significant civil monetary penalties.

Employees

As of December 31, ~~2015,~~2016, we had ~~233 employees. Approximately 114~~308 employees, of which: 163 employees were involved in research and ~~development, 47~~development; 51 in operations, manufacturing and quality ~~assurance, 44~~assurance; 62 in sales and ~~marketing,~~marketing; and 2832 in general and administrative functions. Our success will depend in large part upon our ability to attract and retain employees. We face competition in this

regard from other companies, research and academic institutions, government entities and other organizations. None of our employees are covered by a collective bargaining agreement.

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Corporate and Available Information

Our ~~principal~~ corporate ~~offices are~~office is located at 5964 La Place Court, Carlsbad, California. We also lease additional manufacturing space nearby to our corporate office in Carlsbad, ~~California, which is located nearby our corporate offices.~~California.

We make available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or the SEC. We also make these documents and certain public financial information available on our website, which is www.genmarkdx.com. Our SEC reports and other financial information can be accessed through the investor relations section of our website. Some of the information found on our website is not part of this or any other report we file with or furnish to the SEC.



Item 1A.	RISK FACTORS

You should consider each of the following factors as well as the other information in this Annual Report in evaluating our business and our prospects. The risks and uncertainties described below are not the only ones we face. If any of the following risks actually occur, our business and financial results could be harmed. In that case, the trading price of our common stock could decline. You should also refer to the other information set forth in this Annual Report, including our financial statements and the related notes.

We may ~~not successfully commercialize our ePlex system and its related test menu.~~

Our current plan for achieving positive cash flow and our future growth projections relies upon the successful development and commercialization of our ePlex system and its related test menu. We have designed our ePlex system to integrate automated nucleic acid extraction and amplification with our eSensor technology to allow operators to place raw or minimally prepared patient samples directly into our test cartridges and obtain clinically relevant results. Based on extensive market research and input received from our customers, we believe that our ePlex system will offer advantages over competitive systems, including superior multiplexing capability, reduced hands-on processing time, testing capacity and flexibility, and other factors. However, the commercial success of ePlex will depend on a number of factors, including, but not limited to, our ability to manage the risks associated with technology and manufacturing process transfer and scaling up new product production, our and our supplier's ability to consistently manufacture high quality products, timely market introduction, product reliability, overall market acceptance, our ability to offer a broad test menu at a competitive price, the effective management of purchase and supply commitments and inventory levels in line with anticipated product demand, the availability of products in appropriate quantities and at expected costs to meet anticipated demand and drive market adoption, increased repair or re-engineering costs due to product returns or design adjustments, and the risk that new products may not have the level of quality in the early stages of introduction that our customers expect. If we arebe unsuccessful in ~~effectively commercializing~~obtaining FDA clearance for our ePlex system within our expected ~~time frame,~~timeframe.

We are investing significantly in the commercialization of our ePlex instrument and the development of its related molecular diagnostic panels to expand our future product offerings. Our ePlex system requires 510(k) clearance or ~~at all,~~pre-market approval by the FDA prior to marketing it for clinical use in the United States. In December 2016, we filed 510(k) applications with the FDA for our ePlex instrument and RP Panel. There are a number of potential risks associated with conducting clinical trials and obtaining regulatory clearance for our ePlex system. For example, we may ~~invest in anticipation~~have difficulty maintaining the level of ~~growth~~product reliability and clinical accuracy required to obtain FDA clearance or approval for our ePlex system. In addition, the FDA may require that ~~does not materialize, or which develops more slowly than~~ we ~~expect, which in turn~~conduct additional studies that could ~~harm our financial results, reduce our cash balances, result in overcapacity,~~impact the cost associated with product clearance and ~~our business and future prospects may be adversely affected.~~

~~Our financial results will depend on the acceptance and increased demand among our target customers and the medical community~~could potentially delay commercial launch of our ~~molecular diagnostic technologies and products.~~

Our future success depends on the belief by our target customers and the medical community that our molecular diagnostic products are a reliable, medically-relevant, accurate and cost-effective replacement for other diagnostic testing methods. Our business success depends on our ability to convince our target customers to perform these tests internally with our products if they have historically outsourced their testing needs or have historically used non-molecular methods to perform such testing, or to replace their current molecular testing platforms with ourePlex system ~~and its related test offerings.~~

~~Many other factors may affect the market acceptance and commercial success of our molecular diagnostic technology and products, including:~~

~~the relative convenience, ease of use, accuracy, scalability, cost, and time-to-result of our diagnostic products over competing products;~~

~~the introduction of new technologies and competing products that may make our technologies and products a less attractive solution for our target customers;~~

~~the breadth and relevance of our menu of available diagnostic tests relative to our competitors;~~

~~our success in training our customers~~ in the ~~proper use of our products;~~

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~~the acceptance in the medical community and key opinion leaders of our molecular diagnostic technology and products;~~

~~the extent and success of our marketing and sales efforts; and~~

~~general economic conditions.~~

Professional societies, government agencies, practice management groups, private health/science foundations and organizations involved in healthcare issues may publish guidelines, recommendations or studies for the healthcare and patient communities. Recommendations of government agencies or these other organizations may relate to such matters as cost-effectiveness and use of related products. Organizations like these have in the past made recommendations about our competitors’ products, such as the need for less frequent screening tests, which could result in reduced product sales. Moreover, the perception by the investment community or stockholders that recommendations, guidelines or studies will result in decreased use of our products could adversely affect the prevailing market price for our common stock.

United States. We may be unsuccessful in ~~expanding sales of our product offerings outside the United States.~~

Assuming we receive the applicable regulatory clearances or approvals, we plan to offer our molecular diagnostic products in European and other international markets in the near future. We intend to utilize a direct sales and technical support team in certain key European countries, which we expect will be augmented by a third party logistics provider that will be responsibleobtaining FDA clearance for managing the international delivery of our products and providing certain other related services. We intend to also utilize marketing partners and distributors in certain locations as we expand internationally. We have introduced our XT-8 system to key opinion leader sites in certain European countries in order to familiarize these markets with our technology and certain tests in advance of ther anticipated European launch of our ePlex ~~system. If we are unable to establish the infrastructure~~system within our expected timeframe, or recruit highly qualified personnel to support our direct sales and support organization, if we fail to adequately plan for or integrate our direct sales activities with those of our third party logistics provider, or if we are unsuccessful in developing awareness and acceptance of our products and technology internationally, our anticipated revenue growth internationally may not materialize, our customers may not receive the level of service they expect from us, andat all, which could adversely impact our future financial performance ~~may be adversely affected. Furthermore, any distributors we establish in particular geographic regions may not commit the necessary resources~~and cause our stock price to market and sell our products to meet our expectations. If distributors do not perform adequately or in compliance with applicable laws and regulations in particular geographic areas, or if we are unable to locate distributors in particular geographic areas, our ability to realize revenue growth based on sales outside the United States would be harmed.decline.

~~In order~~From time to ~~market our products in the European Union and many other foreign jurisdictions,~~time we or our distributors or partners, may be required to meet and/or comply with numerous and varying regulatory requirements before selling our products in such jurisdictions. The applicable approval or clearance procedures may vary among countries and could involve additional testing or other requirements. We, our distributors or other partners may not obtain applicable approvals or clearances from regulatory authorities outside the United States on a timely basis, if at all, which could harm our ability to expand into markets outside the United States.

~~We face intense competition from established and new companies in the molecular diagnostics field and expect to face increased competition in the future.~~

The markets for our technologies and products are highly competitive and we expect the intensity of competition to increase. We compete with companies engaged in the development, commercialization and distribution of similar products intended for clinical molecular diagnostic applications. Categories of our competitors include:

companies developing and marketing multiplex molecular diagnostics systems, including: Luminex; Nanosphere, Inc.; bioMerieux, which acquired BioFire Diagnostics, Inc.; Qiagen NV; Abbott Molecular Diagnostics, a division of Abbott Laboratories; Hologic, Inc. and Cepheid;

large hospital-based laboratories and reference laboratories who provide large-scale testing using their own proprietary testing methods, including Quest Diagnostics Incorporated and Laboratory Corporation of America; and

companies that manufacture laboratory-based tests and analyzers, including: Cepheid; Siemens; Hologic, Inc.; Qiagen NV; bioMérieux; Roche Diagnostics, a division of F. Hoffmann-La Roche Ltd.; and Abbott Molecular Diagnostics.

Our diagnostic tests also face competition from laboratory developed tests, or LDTs, developed by national and regional reference laboratories and hospitals. LDTs may not currently be subject to the same regulatory requirements, including those requiring clinical trials and FDA review and clearance or approval that may apply to our diagnostic products.

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operations internationally. Many of our current and potential competitors have greater name recognition, more substantial intellectual property portfolios, longer operating histories, significantly greater resources to invest in new technologies, more substantial experience in new product development, greater regulatory expertise, and more extensive manufacturing and distribution capabilities. It is critical to our success that we anticipate changes in technology and customer requirements and successfully introduce enhanced and competitive technology to meet our customers’ and prospective customers’ needs on a timely basis.

We and our key suppliers experience, and may ~~have~~in the future experience, difficulties scaling manufacturing operations ~~for~~to the levels required to support our anticipated ~~future~~ growth.

To date, we have produced our products in limited quantities relative to the quantities necessary to achieve our desired revenue growth. Developing the necessary manufacturing and quality procedures internally and in conjunction with our key suppliers for a significant number of our newly developed, ~~unique~~highly complex products and product components is a ~~complex~~challenging process. ~~We or~~From time to time we and our suppliers experience, and may in the future experience, manufacturing variability and may not be able to consistently produce sufficient quantities of high quality ~~products.~~products and product components at the levels necessary to achieve our revenue growth expectations or to support our product development timelines. If we or our key suppliers continue to encounter difficulties in producing sufficient yields of high quality products or product components, or scaling manufacturing operations as a result of, among other things, process and manufacturing transfer complexities, quality control and quality assurance issues, ~~and~~and/or availability of ~~components,~~subcomponents, equipment and raw material supplies, our reputation may be harmed and we may not achieve our anticipated financial results or product development goals within the time frame we expect, or at all. In addition, finding solutions to product quality, reliability, and ~~reliability~~variability issues ~~can be~~is time consuming and expensive, and we may incur significant additional costs or lose revenue as a result of, among other things, delayed product introduction, product recalls, shipment holds, scrapped material, and warranty and service obligations.

To manage our anticipated future growth effectively, we must enhance our manufacturing and supply chain capabilities, infrastructure and operations, information technology infrastructure, and financial and accounting systems and controls. Organizational growth and scale-up of operations could strain our existing managerial, operational, financial and other resources. If our management is unable to effectively prepare for our expected future growth, our expenses may increase more than anticipated, our revenue could grow more slowly than expected, and we may not be able to achieve our commercialization

or product development goals. Our failure to effectively implement the necessary processes and procedures and otherwise prepare for our anticipated growth could have a material adverse effect on our future financial condition and prospects.

Disruptions in the supply of raw materials, consumable goods or other key product components, or issues associated with their cost or quality from our single source suppliers, could result in delays or difficulties successfully ~~launching~~commercializing our ePlex system or a significant disruption in sales and profitability.

We must manufacture or engage third parties to manufacture components of our products in sufficient quantities and on a timely basis, while maintaining product quality, acceptable manufacturing costs and complying with regulatory requirements. Our instrument systems and certain critical components are custom-made by only a few outside suppliers. In certain instances, we and our customers have a sole source supply for certain key products, product components and ancillary items used to run our tests. If we are unable to satisfy our forecasted demand from existing suppliers for our products, or we or our customers are unable to find alternative suppliers for key product components or ancillary items at reasonably comparable prices, it could have a material adverse effect on our financial condition and results of operations. Additionally, although we have entered into supply agreements with most of our suppliers of strategic reagents and parts to help ensure component availability and flexible purchasing terms with respect to the purchase of such components, if our suppliers discontinue production of a key component for one or more of our products, we may be unable to identify or secure a viable, cost-effective alternative on reasonable terms, or at all, which could limit our ability to manufacture our products.

In determining the required quantities of our products and the manufacturing schedule, we must make significant judgments and estimates based on seasonality, inventory levels, current market trends and other related factors. Because of the inherent nature of estimates and our limited experience in marketing our products, there could be significant differences between our estimates and the actual amounts of products we require. This can result in shortages if we fail to anticipate demand, or excess inventory and write-offs if we order more than we need.

Reliance on third-party manufacturers entails risk to which we would not be subject if we manufactured these components ourselves, including:

reliance on third parties for regulatory compliance and quality assurance;

possible breaches of manufacturing agreements by the third parties because of factors beyond our control;

possible regulatory violations or manufacturing problems experienced by our suppliers;

possible termination or non-renewal of agreements by third parties, based on their own business priorities, at times that are costly or inconvenient for us;

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the potential obsolescence and/or inability of our suppliers to obtain required components;

the potential delays and expenses of seeking alternate sources of supply or manufacturing services;

the inability to qualify alternate sources without impacting performance claims of our products;

reduced control over pricing, quality and timely delivery due to the difficulties in switching to alternate suppliers or assemblers;

the potential for financial hardship or other detrimental circumstances at key suppliers that may impact our ability to source key materials or services required for the manufacturing of our products; and

increases in prices of raw materials and key components.

The manufacturing operations for our test cartridges use highly technical processes involving unique, proprietary techniques. In addition, the manufacturing equipment we use would be costly and time consuming to repair or replace. Any interruption in our operations or decrease in the production capacity of our manufacturing facility or the facilities of any of our key suppliers because of equipment failure, natural disasters such as earthquakes, tornadoes and fires, or otherwise, would limit our ability to meet customer demand for our products and would have a material adverse effect on our business, financial condition and results of operations. In the event of a disruption, we may lose customers and we may be unable to regain those customers thereafter. Our insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all.

We may not expand sales of our ePlex system outside the United States at the levels we anticipate.

In June 2016, we obtained CE Mark under the European In-Vitro Diagnostic Devices Directive (98/79/EC) for our ePlex instrument and ePlex RP Panel. We are commercializing our ePlex system in Europe utilizing a direct sales and technical support team in certain key European countries, which we have augmented with a third party logistics provider that is responsible for managing the international delivery of our products and providing certain other related services. We have also engaged a number of distributors in certain European countries and intend to further expand internationally over time. If we are

unable to establish the infrastructure or recruit highly qualified personnel to support our international direct sales and support organization, if we fail to adequately plan for or integrate our direct sales activities with those of our third party logistics provider, or if we are unsuccessful in developing awareness and acceptance of our products and technology internationally, our anticipated revenue growth internationally may not materialize, our customers may not receive the level of service or product dependability they expect from us, and our future financial performance may be adversely affected. Furthermore, any distributors we establish in particular geographic regions may not commit the necessary resources to market and sell our products to meet our expectations. If distributors do not perform adequately or in compliance with applicable laws and regulations in particular geographic areas, or if we are unable to locate distributors in particular geographic areas, our ability to realize revenue growth based on sales outside the United States would be harmed.

Our financial results will depend on the acceptance and increased demand among our target customers and the medical community of our molecular diagnostic technologies and products.

Many other factors may affect the market acceptance and commercial success of our molecular diagnostic technology and products, including:

the relative convenience, ease of use, accuracy, reliability, scalability, cost, and time-to-result of our diagnostic products over competing products;

the introduction of new technologies and competing products that may make our technologies and products a less attractive solution for our target customers;

the breadth and relevance of our menu of available diagnostic tests relative to our competitors;

our success in training our customers in the proper use of our products;

the acceptance in the medical community and key opinion leaders of our molecular diagnostic technology and products;

the extent and success of our marketing and sales efforts; and

general economic conditions.

We face intense competition from established and new companies in the molecular diagnostics field and expect to face increased competition in the future.

companies developing and marketing multiplex molecular diagnostics systems, including: Luminex; Nanosphere, Inc. (which was acquired by Luminex in June 2016); bioMerieux (which acquired BioFire Diagnostics, Inc.); Abbott Molecular Diagnostics; Hologic, Inc.; Seegene and Cepheid (which was acquired by Danaher Corporation);

companies that manufacture laboratory-based tests and analyzers, including: Cepheid; Siemens; Hologic, Inc.; Qiagen NV; bioMérieux; Roche Diagnostics; and Abbott Molecular Diagnostics.

Our diagnostic tests also face competition from LDTs developed by national and regional reference laboratories and hospitals. LDTs may not currently be subject to the same regulatory requirements, including those requiring clinical trials and FDA review and clearance or approval that may apply to our diagnostic products.

We anticipate that we will face increased competition in the future as new companies enter the market with new technologies, our competitors improve their current products and expand their menu of diagnostic tests, and as we expand our operations internationally. Many of our current and potential competitors have greater name recognition, more substantial intellectual property portfolios, longer operating histories, significantly greater resources to invest in new technologies, more substantial experience in new product development, greater regulatory expertise, and more extensive manufacturing and distribution capabilities. It is critical to our success that we anticipate changes in technology and customer requirements and successfully introduce enhanced and competitive technology to meet our customers’ and prospective customers’ needs on a timely basis.

Our quarterly revenue and operating results may vary significantly and we may experience constraints or inefficiencies caused by unanticipated acceleration and deceleration of customer demand.

Revenue from our infectious disease products fluctuates based upon the occurrence of related outbreaks and changes in testing recommendations and available therapies. Influenza and other respiratory-related outbreaks are usually more concentrated in the first and fourth quarters of the year. New information or the introduction of advanced treatment options with respect to a particular disease may also affect related diagnostic testing. Although certain infectious disease outbreaks tend to occur each year, the timing, severity and length of these incidents varies from one year to another and can vary across different patient populations. In addition, we may not accurately predict changes to infectious disease testing recommendations affecting our products. As a result of one or more of these factors, we may not be able to accurately forecast sales from our infectious disease products.

Also, unanticipated changes in customer demand for our products may result in constraints or inefficiencies related to our manufacturing, sales force, customer service and administrative infrastructure. These constraints or inefficiencies may adversely affect us as a result of delays, lost potential product sales or loss of current or potential customers due to their dissatisfaction.

Our revenue, results of operations and cash flows would suffer upon the loss of a significant customer.

Our largest customer, Laboratory Corporation of America, Inc., accounted for approximately ~~17%~~27% of our total revenue for the fiscal year ended December 31, ~~2015.~~2016. The loss of a significant customer or a significant reduction in the amount of product ordered by our significant ~~customer~~customers may adversely affect our revenue, results of operations and cash flows.

We may not be able to correctly estimate or control our future operating expenses, which could lead to cash shortfalls.

Our operating expenses may fluctuate significantly in the future as a result of a variety of factors, many of which may be outside of our control. These factors include, but are not limited to:

the time and resources required to develop, and conduct clinical studies and obtain regulatory clearances for, our diagnostic tests;

the expenses we incur for research and development required to maintain and improve our technology, including developing our ePlex ~~system;~~test menu;

the costs of preparing, filing, prosecuting, defending and enforcing patent claims and other patent related costs, including litigation costs and the results of such litigation;

the expenses we incur in connection with commercialization activities, including product marketing, sales, and distribution expenses;

the expenses we incur in licensing technologies from third parties to expand the menu of diagnostics tests we plan to offer;

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our sales strategy and whether the revenues from sales of our test cartridges or systems will be sufficient to offset our expenses;

the costs to attract and retain personnel with the skills required for effective operations; and

the costs associated with being a public company.

Our budgeted expense levels are based in part on our expectations concerning future revenues from sales of our ~~XT-8 system and its related test menu and our expected commercialization of ePlex,~~products, as well as our assessment of the future investments needed to expand our commercial organization and support research and development activities in connection with our ePlex system. We may be unable to reduce our expenditures in a

timely manner to compensate for any unexpected events or a shortfall in revenue. Accordingly, a shortfall in demand for our products or other unexpected events could have an immediate and material impact on our business and financial condition.

Our credit facility requires that we satisfy certain milestones in order to access funding and contains restrictions that limit our flexibility in operating our business.

In January 2015, we entered into a ~~loan~~Loan and ~~security agreement~~Security Agreement, or the LSA, with Solar Capital Partners (as successor-in-interest to General Electric Capital ~~Corporation, or GECC,~~Corporation), and certain other ~~lenders, which was amended in September 2015.~~lenders. Pursuant to the ~~agreement,~~LSA, as amended, we borrowed $10 million in March 2015 and another $10 million in June 2016. We may borrow up to an additional ~~$25~~$15 million if we timely ~~satisfy certain regulatory requirements related to~~obtain FDA clearance of our ePlex system. In addition, we have access to up to $5 million under a revolving credit facility, subject to certain conditions and a defined borrowing base. If we fail to satisfy the conditions to funding under our credit facility, including, but not limited to, as a result of our failure to timely achieve ~~the identified regulatory milestones related to~~FDA clearance of our ePlex system, we may not have the ability to borrow ~~certain~~additional amounts under our credit facility.

In addition, we must comply with certain affirmative and negative covenants under our credit facility, including covenants that limit or restrict our ability to, among other things:

incur additional indebtedness or issue certain preferred shares;

pay dividends on, repurchase or make distributions in respect of, our capital stock or make other restricted payments;

make certain investments or acquisitions;

sell certain assets;

create liens; or

enter into certain transactions with our affiliates.

If we default under the agreement, because of a covenant breach or otherwise, the outstanding amounts thereunder could become immediately due and payable and the lenders could terminate all commitments to extend further financing.

We may need to raise additional funds in the future, and such funds may not be available on a timely basis, or at all.

Until such time, if ever, as we can generate positive cash flows from operations, we will be required to finance our operations with our cash resources and amounts made available under our credit facility. We may need to raise additional funds in the future to support our operations. We cannot be certain that additional capital will be available as needed, on acceptable terms, or at all. If we require additional capital at a time when investment in our company, in molecular diagnostics companies, or the marketplace in general is limited, we may not be able to raise such funds at the time that we desire, or at all. If we do raise additional funds through the issuance of equity or convertible securities, the percentage ownership of holders of our common stock could be significantly diluted. In addition, newly issued securities may have rights, preferences or privileges senior to those of holders of our common stock. If we raise additional funds through collaborations and licensing arrangements, we could be required to relinquish significant rights to our technologies and products, or grant licenses on terms that are not favorable to us.

We have a history of net losses, and we may never achieve or maintain profitability.

We have a history of significant net losses and a limited history commercializing our molecular diagnostic products. Our net losses were approximately ~~$42.2~~$50.6 million and ~~$38.3~~$42.2 million for the years ended December 31, ~~2015~~2016 and ~~2014,~~2015, respectively. As of December 31, ~~2015,~~2016, we had an accumulated deficit of ~~$304.7~~$355.3 million. We expect to continue to incur significant expenses for the foreseeable future in connection with our ongoing operations, primarily related to expanding our commercial organization (sales and marketing), research and development, manufacturing, clinical and regulatory activities related to our ePlex system, maintaining our existing intellectual property portfolio, obtaining additional intellectual property rights, and investing in corporate infrastructure. We cannot provide any assurance that we will achieve profitability and, even if we achieve

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profitability, that we will be able to sustain or increase profitability on a quarterly or annual basis. Further, because of our limited commercialization history and the rapidly evolving nature of our target market, we have limited insight into the trends that may emerge and affect our business. We may make errors in predicting and reacting to relevant business trends, which could harm our business and financial condition.

The regulatory clearance or approval process for certain products is expensive, time consuming and uncertain, and the failure to obtain and maintain required clearances or approvals could prevent us from commercializing our products.

25 action items designed to make the process more rigorous and transparent. Some of these proposals, if enacted, could impose additional regulatory requirements for device manufacturers which could delay our ability to obtain new 510(k) clearances, increase the costs of compliance or restrict our ability to maintain our current clearances. Similarly, the European Union, or EU, is proposing to update the European Directive 98/79/EC on in vitro diagnostic medical device, or IVD Directive (IVDD), that could impact the classification of our molecular diagnostic products and result in additional regulatory requirements, which could delay our ability to CE Mark our products. Delays in receipt of, or failure to obtain, clearances or approvals for future products would result in delayed, or no, realization of revenues from such products and in substantial additional costs, which could decrease our profitability.

We must also comply with the applicable FDA and foreign regulatory agency post-market requirements. Any failure to maintain post-market compliance with FDA or foreign regulatory requirements could harm our business, operations, and/or financial condition.

We derive revenues from the sale of research use only, or RUO, tests and custom manufactured reagents, which are not intended for diagnostic purposes. Clinical laboratories are regulated under CLIA and may validate the clinical diagnostic use of an LDT specifically for use in their laboratory using any labeled products. The FDA has traditionally practiced enforcement discretion regarding the use of the LDTs for clinical diagnostic purposes. However, the FDA has recently promulgated draft guidance which outlines stringent regulatory requirements for CLIA labs in order to use LDTs for clinical diagnostic application. These proposed requirements, if implemented, may result in a significant reduction in the sale of our RUO or custom manufactured products, which could reduce our revenues and adversely affect our operations and/or financial condition.

If our products do not perform as expected or the reliability of the technology on which our products are based is questioned, our operating results and business would suffer.

Our success depends on the market’s confidence that we can provide reliable, high quality, molecular diagnostic products. We believe that customers in our target markets are likely to be particularly sensitive to product defects and errors. As a result, our reputation and the public image of our products and technologies will be significantly impaired if our products fail to perform as expected. Although our diagnostic systems are designed to be user friendly, the functions they perform are complex and our products may develop or contain undetected defects or errors.

We currently manufacture our proprietary test cartridges at our Carlsbad, California manufacturing ~~facility.~~facilities. We outsource manufacturing of our ~~XT-8 system~~instruments and much of the disposable component molding for our test cartridges. ~~In 2012, we formalized our relationship with~~ Leica, the contract manufacturer of our XT-8 ~~instrument. Leica specializes~~instruments, and Plexus Corp., the contract manufacturer of our ePlex instrument, both specialize in the manufacturing of electronic and ~~electromechanical devices for medical use.~~electro-mechanical devices. While we work closely with Plexus and Leica to ensure continuity of supply while maintaining high quality and reliability, we cannot guarantee that these efforts will be successful. ~~We intend to manufacture the proprietary test cartridges for our ePlex system, and we outsource the manufacture of our ePlex system to a third party manufacturing partner.~~

If we experience a material defect or error in any of our current or future products, it could result in the loss or delay of revenues, increased costs, delayed or reduced market acceptance, damaged reputation, diversion of development and management resources, legal and/or regulatory claims, recalls, increased insurance costs or increased service and warranty costs, any of which could materially harm our business, financial condition and results of operations.

We also face the risk of product liability exposure related to the sale of our products. We currently carry product liability insurance that covers us against specific product liability claims. We also carry a separate general liability and umbrella policy that covers us against certain claims but excludes coverage for product liability. Any claim in excess of our insurance coverage, or for which we do not have insurance coverage, would need to be paid out of our cash reserves, which would harm our financial condition. We cannot assure you that we have obtained sufficient insurance or broad enough coverage to cover potential claims. Also, we cannot assure you that we can or will maintain our insurance policies on commercially acceptable terms, or at all. A product liability claim could significantly harm our business, financial condition and results of operations.

We are investing significantly in the development of our ePlex instrument and its related molecular diagnostic tests to expand our future product offerings. Our molecular diagnostic products, including our ePlex system, will require 510(k) clearance or pre-market approval by the FDA prior to their marketing for commercial use in the United States. For international commercialization, the classification of, and the regulatory pre-market requirements for, our molecular diagnostic products vary from country to country. There are a number of potential risks associated with the regulatory review processes for our products in development. For example, regulatory authorities may require that we conduct additional studies that could impact the cost associated with product development and could potentially delay commercial launch of the product. In addition, we may be unsuccessful in obtaining regulatory clearance for all of our desired intended uses for our products or product approval or clearance within certain jurisdictions.

The regulatory environment is constantly evolving. For example, the FDA conducted a review of the pre-market clearance process in response to internal and external concerns regarding the 510(k) program and, in January 2011, announced 25 action items designed to make the process more rigorous and transparent. Some of these proposals, if enacted, could impose additional regulatory requirements for device manufacturers which could delay our ability to obtain new 510(k) clearances, increase the costs of compliance or restrict our ability to maintain our current clearances. Similarly, the European Union, or EU, is proposing to update the European Directive 98/79/EC on in vitro diagnostic medical device, or IVD Directive (IVDD), that could impact the classification of our molecular diagnostic products and result in additional regulatory requirements, which could delay our ability to CE Mark our products. Delays in receipt of, or failure to obtain, clearances or approvals for future products, including our ePlex instrument and products that are currently in design or development, would result in delayed, or no, realization of revenues from such products and in substantial additional costs, which could decrease our profitability.

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We are subject to various federal and state laws pertaining to health care fraud and abuse, including anti-kickback, self-referral, false claims and fraud laws, and any violations by us of such laws could result in fines or other penalties.

Our commercial, research and other financial relationships with healthcare providers and institutions are subject to various federal and state laws intended to prevent health care fraud and abuse. The federal anti-kickback statute prohibits the knowing offer, receipt or payment of remuneration in exchange for or to induce the referral of patients or the use of products or services that would be paid for in whole or part by Medicare, Medicaid or other federal health care programs. Remuneration has been broadly defined to include anything of value, including cash, improper discounts, and free or reduced price items and services. Many states have similar laws that apply to their state health care programs as well as private payors. Violations of the anti-kickback laws can result in exclusion from federal health care programs and substantial civil and criminal penalties.

The ~~federal False Claims Act, or the~~ FCA imposes liability on persons who, among other things, present or cause to be presented false or fraudulent claims for payment by a federal health care program. The FCA has been used to prosecute persons submitting claims for payment that are inaccurate or fraudulent, that are for services not provided as claimed, or for services that are not medically necessary. We have implemented procedures designed to ensure our compliance with relevant legal requirements. Nevertheless, if our marketing, sales or other arrangements, including our reagent rental arrangements, were determined to violate anti-kickback or related laws, including the FCA, then our revenues could be adversely affected, which would likely harm our business, financial condition and results of operations.

The ~~Patient Protection and Affordable~~Health Care Act ~~as amended by the Health Care and Education Reconciliation Act, or the PPACA,~~ also imposes reporting and disclosure requirements on device manufacturers for payments to healthcare providers and ownership of their stock by healthcare providers. In February 2013, the Centers for Medicine and Medicaid Services, or, CMS, released the final rule implementing the federal Physician Payments Sunshine Act, or the Sunshine Act. The law requires certain pharmaceutical, biologic, and medical device manufacturers to annually report to CMS payments or other transfers of value they furnish to physicians and teaching hospitals. These reporting requirements took effect on August 1, 2013. Failure to submit required information may result in significant civil monetary penalties. We expect compliance with the PPACA and Sunshine Act to impose significant administrative and financial burdens on us.

In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians for marketing. Some states, such as California, Massachusetts and Vermont, mandate implementation of corporate compliance programs, along with the tracking and reporting of gifts, compensation and other remuneration to physicians. The shifting commercial compliance environment and the need to build and maintain robust and expandable systems to comply with different compliance and/or reporting requirements in multiple jurisdictions increase the possibility that a healthcare company may run afoul of one or more of the requirements.

~~Once we commence commercial operations outside the United States, we will be~~We are also subject to the U.S. Foreign Corrupt Practices Act, or the FCPA, and other countries’ anti-corruption/anti-bribery regimes, such as the U.K. Bribery Act. The FCPA prohibits improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business. Safeguards we implement to discourage improper payments or offers of payments by our employees, consultants, sales agents or distributors may be ineffective, and violations of the FCPA and similar laws may result in severe criminal or civil sanctions, or other liabilities or proceedings against us, any of which would likely harm our reputation, business, financial condition and results of operations.

Legislative or regulatory healthcare reforms may have a material adverse effect on our business and results of operations.

Federal and state governments in the United States are undertaking efforts to control growing health care costs through legislation, regulation and voluntary agreements with medical care providers and third-party payors. In March 2010, Congress enacted the PPACA. While the PPACA involves expanding coverage to more individuals, it includes regulatory mandates and

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other measures designed to constrain medical costs. Among other requirements, the PPACA imposes a 2.3% excise tax on sales of medical devices by manufacturers. In December 2015, the excise tax was suspended for ~~two years.~~2016 and 2017. Taxable devices include any medical device defined in Section 201(h) of the FDCA and intended for use by humans, with limited exclusions for devices purchased by the general public at retail for individual use. There is no exemption for small companies, and we ~~began paying~~paid the tax infrom 2013 ~~and continued~~ through 2015. recently, Congress and the new administration have proposed and taken various steps to revise, repeal, or delay implementation of various aspects of PPACA. If the PPACA is significantly revised, repealed, or if implementation of various aspects are delayed, such modification, repeal, or delay may impact our business, financial condition, results of operations, cash flows and the trading price of our securities. Complying with PPACA may significantly increase our tax liabilities and costs, which could adversely affect our business and financial condition.

In August 2011, President Obama signed into law the Budget Control Act of 2011, which among other things, created automatic reductions to several government programs, including aggregate reductions of Medicare payments to providers of up to 2% per fiscal year. In April 2013, the 2% Medicare payment reductions went into effect. In addition to the potential impacts to PPACA under the new administration, there could be sweeping changes to the Budget Control Act and other healthcare reforms. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressure.

Our products could infringe patent rights of others, which may require costly litigation and, if we are not successful, could cause us to pay substantial damages or limit our ability to commercialize our products.

Our commercial success depends on our ability to develop, manufacture and market our systems and tests and use our proprietary technology without infringing the patents and other proprietary rights of third parties. As the molecular diagnostics industry expands and more patents are issued, the risk increases that there may be patents issued to third parties that relate to our products and technology of which we are not aware or that we must challenge to continue our operations as currently contemplated. Our products may infringe or may be alleged to infringe these patents.

The patent positions of medical device companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in patents in these fields has emerged to date in the United States or in many foreign jurisdictions. Both the U.S. Supreme Court and the Court of Appeals for the Federal Circuit have made, and will likely continue to make, changes in how the patent laws of the United States are interpreted. For example, three Supreme Court cases, Association for Molecular Pathology et al. v. Myriad Genetics, Inc., et al., Mayo Collaborative Services v. Prometheus Laboratories, and Alice v. CLS Bank, have introduced additional questions regarding the patentability of isolated naturally occurring genes and gene fragments, proteins, peptides, natural products, and related diagnostic and therapeutic methods, which are likely to be resolved only through continued litigation. The overall impact of these decisions and others on the molecular diagnostics industry remains uncertain and our interpretation of the scope of these rulings on existing or future patents may be inaccurate.

There is a significant amount of uncertainty regarding the extent of patent protection and infringement. Companies may have filed pending patent applications that cover technologies we incorporate in our products. As a result, we could be subjected to substantial damages for past infringement or be required to modify our products or stop selling them if it is ultimately determined that our products infringe a third party’s proprietary rights. Even if we are successful in defending against potential intellectual property infringement claims, we could incur substantial costs in doing so. Any litigation related to such claims could consume our resources and lead to significant damages, royalty payments, or an injunction on the sale of certain products. Any additional licenses to patented technology could obligate us to pay substantial additional royalties, which could adversely impact our product costs and harm our business.

If we are unable to obtain, maintain and enforce intellectual property protection covering our products, others may be able to make, use or sell products substantially the same as ours, which could adversely affect our ability to compete in the market.

Our commercial success is dependent in part on obtaining, maintaining and enforcing intellectual property rights, including our patents and other intellectual property rights. If we are unable to obtain, maintain and enforce intellectual property protection covering our products, others may be able to make, use or sell products that are substantially the same as ours without incurring the sizeable development and licensing costs that we have incurred, which would adversely affect our ability to compete in the market.

We seek to obtain and maintain patents and other intellectual property rights to restrict the ability of others to market products that compete with our products. Currently, our patent portfolio is comprised on a worldwide basis of ~~approximately 120~~more than 100 owned and exclusively licensed patents and approximately 3530 additional pending patent applications. In general, patents have a term of at least 20 years from the application filing date or earlier claimed priority date. A majority of our issued and exclusively licensed patents are scheduled to expire by 2021, with approximately one half of the patents expiring by 2018. Several of our pending applications have the potential to mature into patents that may expire between 2028 and 2034. However, not all of the pending or future patent applications owned by or licensed to us are guaranteed to mature into patents, and,

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moreover, issued patents owned by or licensed to us now or in the future may be found by a court to be invalid or otherwise unenforceable. Also, even if our patents are determined by a court to be valid and enforceable, they may not be sufficiently broad to prevent others from marketing products similar to ours or designing around our patents, despite our patent rights, nor provide us with freedom to operate unimpeded by the patent rights of others.

We also rely on trade-secret protection to protect our interests in proprietary know-how and for processes for which patents are difficult to obtain or enforce. We may not be able to protect our trade secrets adequately. We have limited control over the protection of trade secrets used by our licensors, collaborators and suppliers. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside scientific collaborators and other advisors may unintentionally or willfully disclose our information to competitors. Enforcing a claim that a third party illegally obtained and is using any of our trade secrets is difficult, expensive and time consuming, and the outcome is unpredictable. We rely, in part, on non-disclosure and confidentiality agreements with our employees, consultants and other parties to protect our trade secrets and other proprietary technology. These agreements may be breached and we may not have adequate remedies for any breach. Moreover, others may independently develop equivalent proprietary information, and third parties may otherwise gain access to

our trade secrets and proprietary knowledge. Any disclosure of confidential data into the public domain or to third parties could allow our competitors to learn our trade secrets and use the information in competition against us.

We and our suppliers, contract manufacturers and customers are subject to various governmental regulations, and we may incur significant expenses to comply with, and experience delays in our product commercialization as a result of, these regulations.

Our manufacturing processes and facilities and those of some of our contract manufacturers must comply with the federal Quality System Regulation, or QSR, which covers the procedures and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our devices. The FDA enforces the QSR through periodic announced and/or unannounced inspections of manufacturing facilities. We and our contract manufacturers have been, and anticipate in the future being, subject to such inspections, as well as to inspections by other federal and state regulatory agencies.

We must also file reports of device corrections and removals and adhere to the FDA’s rules on labeling and promotion. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability, including substantial monetary penalties and criminal prosecution.

Failure to comply with applicable FDA requirements, or later discovery of previously unknown problems with our products or manufacturing processes, including our failure or the failure of one of our contract manufacturers to take satisfactory corrective action in response to an adverse QSR inspection, can result in, among other things:

administrative or judicially imposed sanctions;

injunctions or the imposition of civil penalties;

recall or seizure of our products;

total or partial suspension of production or distribution;

withdrawal or suspension of marketing clearances or approvals;

clinical holds;

warning letters;

refusal to permit the import or export of our products; and

criminal prosecution.

Any of these actions, in combination or alone, could prevent us from marketing, distributing or selling our products and would likely harm our business.

In addition, a product defect or regulatory violation could lead to a government-mandated or voluntary recall by us. We believe that the FDA would request that we initiate a voluntary recall if a product was defective or presented a risk of injury or gross deception. Regulatory agencies in other countries have similar authority to recall devices because of material deficiencies or defects in design or manufacture that could endanger health. Any recall would divert management attention and financial resources, could cause the price of our common stock to decline and expose us to product liability or other claims, including

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contractual claims from parties to whom we sold products, and harm our reputation with customers. ~~A recall involving our XT-8 system or our diagnostic tests would be particularly harmful to our business and financial results.~~

The use of our diagnostic products by our customers is also affected by CLIA and related federal and state regulations that provide for regulation of laboratory testing. 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, participation in proficiency testing, patient test management, quality assurance, quality control and inspections. Current or future CLIA requirements or the promulgation of additional regulations affecting laboratory testing may prevent some laboratories from using some or all of our diagnostic products.

If our customers are not adequately reimbursed or compensated for the use of our products we may have difficulty selling our products.

Our ability to sell our products depends in part on the extent to which reimbursement related to performing tests using our products is available from governmental authorities, such as Medicare and other domestic and foreign governmental programs, private insurance plans, managed care organizations and other organizations. There are ongoing efforts by governmental and third-party payers to contain or reduce the costs of healthcare coverage. In addition, efforts to reform the healthcare delivery system in the United States and Europe has increased pressure on healthcare providers to reduce costs, which has, in turn, increased pressure on medical device manufacturers to decrease prices charged for their products. If

purchasers or users of our products are not able to obtain adequate reimbursement for the cost of using our products, either directly or indirectly, they may forego or reduce their purchase and use of our products.

Obtaining coverage and reimbursement approval for a product from each government or third-party payor is a time consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our product to each government or third-party payor. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. In addition, eligibility for coverage does not imply that any product will be covered and reimbursed in all cases or reimbursed at a rate that allows our potential customers to make a profit or even cover their costs. Further, third-party payors may choose to reimburse our customers per test based on individual biomarker detection, rather than on the basis of the number of results given by the test. This may result in our customers electing to use separate tests to screen for each disease or condition so that they can receive reimbursement for each test they conduct. In that event, these entities may purchase separate tests for each disease, rather than products, such as ours, that can be used to return highly multiplexed test results.

We are currently reliant on the commercial success of our XT-8 system and its related test menu to partially fund our current operations and ePlex development programs.

We currently market our XT-8 instrument and four FDA-cleared diagnostic tests. In addition, we sell RUO tests and custom manufactured reagents. We have primarily placed our XT-8 systems with customers at no initial charge through reagent rental agreements, under which customers generally commit to purchase minimum quantities of test cartridges and reagents (consumables) over a typical period of one to three years, with a component of the cartridge and reagent price allocated to recover the instrument price. We also offer our XT-8 systems for sale. We intend to continue to dedicate a significant portion of our resources to the commercialization of our XT-8 system and its related test menu, while also dedicating significant resources to the commercialization of our ePlex system and the development of its related test menu. As a result, to the extent that our XT-8 system and our existing and future products are not commercially successful or are withdrawn from the market for any reason, our operating results, financial condition and critical ePlex development programs would be harmed and we may be required to seek additional funding to support our ongoing operations.

In addition, we have limited marketing, sales and distribution experience and capabilities. Our ability to achieve profitability depends on attracting customers for our products and building brand loyalty. To successfully perform sales, marketing, distribution and customer support functions ourselves, we face a number of risks, including:

our ability to attract and retain the skilled support team, marketing staff and sales force necessary to commercialize and gain market acceptance for our technology and our products;

the ability of our sales and marketing team to identify and penetrate the potential customer base, including hospitals and national and regional reference laboratories; and

the difficulty of establishing brand recognition and loyalty for our products.

Some hospital-based and reference laboratories may not consider adopting our XT-8 system unless we offer a broader menu of diagnostic tests or may choose not to convert from competitive products unless and until we are able to offer a sample-to-answer instrument solution, such as our ePlex instrument. In addition, in order to commercialize our products, we are

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required to undertake time consuming and costly development activities, including clinical studies for which the outcome is uncertain. Products that appear promising during early development and preclinical studies may, nonetheless, fail to demonstrate the results needed to support regulatory approval or, if approved, may not generate the demand we expect. If we are unable to effectively compete with our XT-8 system and its related test menu, our revenues and our ability to achieve profitability will be significantly impaired.

We incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies in the United States, and failure to comply with these laws could harm our business and the price of our common stock.

As a public company listed in the United States, we incur significant legal, accounting and other expenses. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC, the Public Company Accounting Oversight Board (PCAOB), and The NASDAQ Global Market, may increase our legal and financial compliance costs and make some activities more time consuming. These laws, regulations and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If we nevertheless fail to comply with new laws, regulations and standards, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

Economic conditions and an uncertain economic outlook may adversely impact our business, results of operations, financial condition or liquidity.

Global economic conditions may remain challenging and uncertain for the foreseeable future. These conditions may not only limit our access to capital but also make it extremely difficult for our customers, our vendors and us to accurately forecast and plan future business activities, and they could cause U.S. and foreign businesses and consumers to slow spending on our products and services, which would delay and lengthen sales cycles. Some of our customers rely on government research grants to fund technology purchases. If negative trends in the economy affect the government’s allocation of funds to research, there may be less grant funding available for certain of our customers to purchase technologies from us. Certain of our customers may face challenges gaining timely access to sufficient credit or may otherwise be faced with budget constraints, which could result in decreased purchases of our products or in an impairment of their ability to make timely payments to us. If our customers do not make timely payments to us, we may be required to assume greater credit risk relating to those customers, increase our allowance for doubtful accounts, and our days sales outstanding would be negatively impacted. Although we maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments, we may not continue to experience the same loss rates that we have in the past. Additionally, these economic conditions and market turbulence may also impact our suppliers, causing them to be unable to supply sufficient quantities of customized components in a timely manner, thereby impairing our ability to manufacture on schedule and at commercially reasonable costs.

We are exposed to risks associated with long-lived and intangible assets that may become impaired and result in an impairment charge.

The carrying amounts of long-lived and intangible assets are affected whenever events or changes in circumstances indicate that the carrying amount of any asset may not be recoverable. These events or changes might include an inability to successfully deliver an instrument to the marketplace and attain customer acceptance, a change in the rights or use of licensed intellectual property, adjustments to our depreciation assumptions, or other matters. Adverse events or changes in circumstances may affect the estimated discounted future cash flows expected to be derived from long-lived and intangible assets. If at any time we determine that an impairment has occurred, we will be required to reflect the impaired value as a charge, resulting in a reduction in earnings in the quarter such impairment is identified and a corresponding reduction in our net asset value. In the past we have incurred, and in the future we may incur, impairment charges. A material reduction in earnings resulting from such a charge could cause us to fail to meet the expectations of investors and securities analysts, which could cause the price of our stock to decline.

Providing instrument systems to our customers through reagent rental agreements may harm our liquidity.

~~The majority~~Many of our ~~XT-8~~ systems are provided to customers via “reagent rental” agreements, under which customers are afforded the right to use the ~~XT-8 system~~instrument in return for a commitment to purchase minimum quantities of reagents and test cartridges over a period of time. Accordingly, we must either incur the expense of manufacturing ~~XT-8 systems~~instruments well in advance of receiving sufficient revenues from test cartridges to recover our expenses or obtain third party financing sources for the

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purchase of our ~~XT-8 systems.~~instrument. The amount of capital required to provide instrument systems to customers depends on the number of systems placed. Our ability to generate capital to cover these costs depends on the amount of our revenues from sales of reagents and test cartridges sold through our reagent rental agreements. We do not currently sell enough reagents and test cartridges to recover all of our fixed expenses, and therefore we currently have a net loss. If we cannot sell a sufficient number of reagents and test cartridges to offset our fixed expenses, our liquidity will continue to be adversely affected.

We use hazardous chemicals, biological materials and infectious agents in our business. Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly.

Our research, product development and manufacturing processes involve the controlled use of hazardous materials, including chemicals, biological materials and infectious disease agents. Our operations produce hazardous waste products. We cannot eliminate the risk of accidental contamination or discharge and any resulting injury from these materials. We may be sued for any injury or contamination that results from our use or the use by third parties of these materials, and our liability may exceed our insurance coverage and our total assets. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of these hazardous materials and specified waste products, as well as the discharge of pollutants into the environment and human health and safety matters. Our operations are regulated and may require that environmental permits and approvals be issued by applicable government agencies. Compliance with environmental laws and regulations may be expensive and may impair our research, development and production efforts. If we fail to comply with these requirements, we could incur substantial costs, including civil or criminal fines and penalties, clean-up costs or capital expenditures for control equipment or operational changes necessary to achieve and maintain compliance. In addition, we

cannot predict the impact on our business of new or amended environmental laws or regulations or any changes in the way existing and future laws and regulations are interpreted and enforced.

If we are unable to retain key employees or hire additional skilled employees, we may be unable to achieve our goals.

Our performance is substantially dependent on the performance of our senior management. Competition for top management personnel is intense and we may not be able to recruit and retain the personnel we need. Our senior managers can terminate their relationship with us at any time. The loss of services of any of these key personnel could significantly reduce our operational effectiveness and investor confidence and our stock price could decline. We do not maintain key-man life insurance on any of our employees.

In addition, our product development and marketing efforts could be delayed or curtailed if we are unable to attract, train and retain highly skilled technical employees and scientific advisors. To expand our research, product development and commercial efforts, we will need to retain additional people skilled in areas such as electrochemical and molecular science, information technology, manufacturing, sales, marketing and technical support. Because of the complex and technical nature of our systems and the dynamic market in which we compete, any failure to attract and retain a sufficient number of qualified employees could materially harm our ability to develop and commercialize our technology. We may not be successful in hiring or retaining qualified personnel, and any failure to do so could have a material adverse effect on our business, financial condition and results of operations.

Cyberattacks and other security breaches could compromise our proprietary information which could harm our business and reputation.

In the ordinary course of our business, we generate, collect and store proprietary information, including intellectual property and business information. The secure storage, maintenance, and transmission of and access to this information is critical to our operations, business strategy, and reputation. Computer hackers may attempt to penetrate our computer systems or our third party IT service providers' systems and, if successful, misappropriate our proprietary information. In addition, an employee, contractor, or other third-party with whom we do business may attempt to circumvent our security measures in order to obtain such information, and may purposefully or inadvertently cause a breach involving such information. While we will continue to implement additional protective measures to reduce the risk of and detect cyber-attacks, these incidents are becoming more sophisticated and frequent, and the techniques used in such attacks evolve rapidly and are difficult to detect. Despite our cybersecurity measures, our information technology networks and infrastructure may still be vulnerable to unpermitted access by hackers or other breaches, or employee error or malfeasance. Any such compromise of our, or our third party IT service providers' data security and access to, or public disclosure or loss of, confidential business or proprietary intellectual property information could disrupt our operations, damage our reputation, provide our competitors with valuable information, and subject us to additional costs which could adversely affect our business.

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Information technology systems implementation issues could disrupt our internal operations and adversely affect our financial results.

Portions of our information technology infrastructure may experience interruptions, delays or cessations of service or produce errors in connection with ongoing systems implementation work. In particular, we have implemented an enterprise resource planning software system. To more fully realize the potential of this system, we are continually reassessing and upgrading processes and this may be more expensive, time consuming and resource intensive than planned. Any disruptions that may occur in the operation of this system or any future systems could increase our expenses and adversely affect our ability to report in an accurate and timely manner the results of our consolidated operations, our financial position and cash flows and to otherwise operate our business in a secure environment, all of which could adversely affect our financial results, stock price and reputation.

Our ability to use our net operating loss carryforwards may be limited.

As of December 31, ~~2015,~~2016, we had net operating loss, or NOL, carryforwards available of approximately ~~$166.4~~$206.9 million for U.S. federal income tax purposes. These loss carryforwards will expire in varying amounts through ~~2034.~~2035. Section 382 of the U.S. Internal Revenue Code of 1986, as amended, or the Code, generally imposes an annual limitation on the amount of NOL carryforwards that may be used to offset taxable income when a corporation has undergone significant changes in stock ownership. We have determined that we have experienced multiple ownership changes under Section 382 of the Code. Our ability to use the current NOL carryforwards may also be limited by the issuance of common stock in the future. To the extent our use of NOL carryforwards is limited, our income may be subject to corporate income tax earlier than it would if we were able to use NOL carryforwards. We have recorded a full valuation allowance against our net deferred tax assets.

We also had ~~non-U.S.~~state NOL carryforwards of approximately $165.0 million as of December 31, ~~2015.~~2016. We have recorded a full valuation allowance against our net deferred tax assets.

Provisions of our certificate of incorporation, our bylaws and Delaware law could make an acquisition of our Company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove the current members of our board and management.

Certain provisions of our certificate of incorporation and bylaws could discourage, delay or prevent a merger, acquisition or other change of control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. Furthermore, these provisions could prevent or frustrate attempts by our stockholders to replace or remove members of our Board of Directors. These provisions also could limit the price that investors might be willing to pay in the future for our common stock, thereby depressing the market price of our common stock. Stockholders who wish to participate in these transactions may not have the opportunity to do so. These provisions:

allow the authorized number of directors to be changed only by resolution of our Board of Directors;

provide that our stockholders may remove our directors only for cause;

establish a classified board of directors, such that not all members of the Board of Directors may be elected at one time;

authorize our Board of Directors to issue without stockholder approval up to 100,000,000 shares of common stock, that, if issued, would dilute our stock ownership and could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that is not approved by our Board of Directors;

authorize our Board of Directors to issue without stockholder approval up to 5,000,000 shares of preferred stock, the rights of which will be determined at the discretion of the Board of Directors that, if issued, could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that is not approved by our Board of Directors;

require that stockholder actions must be effected at a duly called stockholder meeting or by unanimous written consent;

establish advance notice requirements for stockholder nominations to our Board of Directors or for stockholder proposals that can be acted on at stockholder meetings;

limit who may call stockholder meetings; and

require the approval of the holders of 80% of the outstanding shares of our capital stock entitled to vote in order to amend certain provisions of our certificate of incorporation and bylaws.

~~Table of Contents~~

In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may, unless certain criteria are met, prohibit large stockholders, in particular those owning 15% or more of the voting rights on our common stock, from merging or combining with us for a prescribed period of time.



Item 1B.	UNRESOLVED STAFF COMMENTS

None.



Item 2.	PROPERTIES

We currently operate from ~~a facility~~two facilities, each of which is located in Carlsbad, California. We do not own any real property. In February 2010, we entered into a lease for an approximately 31,000 square foot facility in Carlsbad, California, the term of which originally ran through September 2017. The facility is part of a three-building office and research and development project located at 5964 La Place Court, Carlsbad, California. In January 2012, we signed a lease amendment which expanded our executive and administrative office, research and development, and manufacturing space by approximately an22,000 additional ~~22,000~~ square feet and extended the term of the lease through June 2021. In June 2015, we leased an additional 34,000 square feet at a nearby location in Carlsbad, California, which we ~~intend to~~ utilize primarily for ~~future~~ePlex manufacturing operations. The term of the lease runs through September 2023, and we have an option to extend the term of the lease for an additional five years. We believe that our currently leased facilities are adequate to meet our needs for the foreseeable future.



Item 3.	LEGAL PROCEEDINGS

We are from time to time subject to various claims and legal actions in the ordinary course of our business. We believe that there are currently no claims or legal actions that would reasonably be expected to have a material adverse effect on our results of operations or financial condition.



Item 4.	MINE SAFETY DISCLOSURES

Not applicable.

PART II.



Item 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock has been quoted on The NASDAQ Global Market under the symbol “GNMK” since May 28, 2010. ~~Prior to that time, our stock traded under the ticker symbol “OMH” on the London Stock Exchange.~~ The following table sets forth for the indicated periods the high and low sales prices per share of our common stock as reported on The NASDAQ Global Market.


	High		Low		High		Low
Year Ended December 31, 2016
First Quarter					$	7.73	$	4.20
Second Quarter					$	9.48	$	5.13
Third Quarter					$	12.17	$	8.03
Fourth Quarter					$	13.29	$	10.01
Year Ended December 31, 2015
First Quarter	$	14.40	$	11.67	$	14.40	$	11.67
Second Quarter	$	13.04	$	8.81	$	13.04	$	8.81
Third Quarter	$	10.55	$	7.22	$	10.55	$	7.22
Fourth Quarter	$	9.74	$	4.63	$	9.74	$	4.63
Year Ended December 31, 2014
First Quarter	$	14.18	$	9.28
Second Quarter	$	13.63	$	8.48
Third Quarter	$	13.87	$	8.64
Fourth Quarter	$	14.18	$	8.62

~~Table of Contents~~

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of GenMark Diagnostics, Inc.

We have audited GenMark Diagnostics, Inc.’s internal control over financial reporting as of December 31, ~~2015,~~2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). GenMark Diagnostics, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s 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 for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, GenMark Diagnostics, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2015,~~2016, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the ~~2015~~2016 consolidated financial statements of GenMark Diagnostics, Inc. and our report dated February ~~23, 2016~~28, 2017 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

San Diego, California

February ~~23, 2016~~28, 2017

~~Table of Contents~~



Item 9B.	OTHER INFORMATION

~~None.~~On February 27, 2017, we entered into a second amendment to the LSA with Solar Capital Partners and certain other financial institutions party thereto, as lenders, pursuant to which the parties extended the date by which the future funding requirements in respect of Term Loan C must be satisfied. In addition, the parties agreed to extend the interest-only period in respect of amounts already borrowed under Term Loan A and Term Loan B, and the amount, if any, borrowed pursuant to Term Loan C (the “Interest-Only Period”), until June 1, 2017. The parties also agreed that we have the option to further extend the Interest-Only Period until August 1, 2017, and subsequently to March 1, 2018, subject in each case to the satisfaction of certain conditions.

PART III.



Item 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is incorporated in this Annual Report by reference from the information under the captions “Board of Directors Information,” “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance” contained in the Proxy Statement to be filed in connection with our ~~2016~~2017 Annual Meeting of Stockholders, or the Proxy Statement.

Code of Business Conduct and Ethics

We have adopted a code of business conduct and ethics for our directors, officers and employees, which is available on our website at www.genmarkdx.com in the Investor Relations section under “Corporate Governance.” If we make any substantive amendments to the code of business conduct and ethics or grant any waiver from a provision of the code of business conduct and ethics to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website. The information on, or that can be accessed from, our website is not incorporated by reference into this Annual Report.



Item 11.	EXECUTIVE COMPENSATION

The information required by this Item is incorporated in this Annual Report by reference from the information under the captions “Executive Compensation,” “Compensation Committee Interlocks and Insider Participation” and “Report of the Compensation Committee” contained in the Proxy Statement.



Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated in this Annual Report by reference from the information under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” contained in the Proxy Statement.



Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated in this Annual Report by reference from the information under the captions “Certain Relationships and Related Transactions,” and “Board of Directors Information” contained in the Proxy Statement.



Item 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated in this Annual Report by reference from the information under the captions “Principal Accountant Fees and Services” and “Report of the Audit Committee” contained in the Proxy Statement.

~~Table of Contents~~



Item 15.	EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES


(a)	Documents filed as part of this Annual Report.


1.	The following financial statements of GenMark Diagnostics, Inc. and Report of Independent Registered Public Accounting Firm, are included in this report:

Report of ~~Ernst & Young LLP, Independent Registered Public Accounting Firm~~

~~Report of Deloitte & Touche LLP,~~ Independent Registered Public Accounting Firm

Consolidated Balance Sheets at December 31, ~~2015~~2016 and ~~2014~~2015

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2016, 2015 ~~2014~~ and ~~2013~~2014

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2016, 2015 ~~2014~~ and ~~2013~~2014

Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 ~~2014~~ and ~~2013~~2014

Notes to Consolidated Financial Statements


2.	List of financial statement schedules. All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.


4.	List of Exhibits required by Item 601 of Regulation S-K. See Item 15(b) below.


(b)	Exhibits.

The exhibits listed in the accompanying “Exhibit Index” are filed, furnished or incorporated by reference as part of this Annual Report, as indicated.



Item 16.	FORM 10-K Summary

None.

~~Table of Contents~~

SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on February ~~23, 2016.~~28, 2017.



GENMARK DIAGNOSTICS, INC.

By:		/s/ HANY MASSARANY
Name:		Hany Massarany
Title:		Chief Executive Officer, President and Director (principal executive officer)

February ~~23, 2016~~28, 2017



By:		/s/ SCOTT MENDEL
Name:		Scott Mendel
Title:		Chief Financial Officer (principal financial and accounting officer)

February ~~23, 2016~~28, 2017

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Hany Massarany and Scott Mendel, jointly and severally, his attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.



Signature	Title	Date

/S/ HANY MASSARANY	President, Chief Executive Officer and Director (principal executive officer)	2/~~23/2016~~28/2017
Hany Massarany

/S/ SCOTT MENDEL	Chief Financial Officer (principal financial and accounting officer)	2/~~23/2016~~28/2017
Scott Mendel

/S/ JAMES FOX	Chairman of the Board	2/~~23/2016~~28/2017
James Fox

/S/ DARYL J. FAULKNER	Director	2/~~23/2016~~28/2017
Daryl J. Faulkner

/S/ KEVIN C. O’BOYLE	Director	2/~~23/2016~~28/2017
Kevin C. O’Boyle

/S/ MICHAEL S. KAGNOFF	Director	2/~~23/2016~~28/2017
Michael S. Kagnoff

/s/ LISA M. GILES	Director	2/~~23/2016~~28/2017
Lisa M. Giles

~~Table of Contents~~

EXHIBIT INDEX ~~TO EXHIBITS~~



Exhibit	Description

3.1	Certificate of Incorporation (incorporated by reference to our Registration Statement on Form S-1 (File No. 333-165562) filed with the Commission on March 19, 2010).

3.2	Amended and Restated By-Laws (incorporated by reference to our Current Report on 8-K filed on October 31, 2014).

10.1	Lease between The Campus Carlsbad, LLC and Clinical Micro Sensors, Inc. dba Osmetech Molecular Diagnostics, dated February 8, 2010 (incorporated by reference to our Registration Statement on Form S-1 (File No. 333-165562) filed with the Commission on March 19, 2010).

10.2	Settlement and Release Agreement and First Amendment to Lease between The Campus Carlsbad, LLC and Clinical Micro Sensors, Inc., dated July 1, 2010 (incorporated by reference herein form our Form 10-K as filed with the SEC on March 14, 2013).

10.3	Settlement and Release Agreement and Second Amendment to Lease, dated January 19, 2012, by and between the Campus Carlsbad, LLC and Clinical Micro Sensors, Inc. d.b.a. GenMark Diagnostics, Inc. (incorporated by reference to our Annual Report on Form 10-K filed with the Commission on March 21, 2012).

10.4	Third Amendment to Lease agreement dated August 28, 2012, by and between The Campus Carlsbad, LLC and Clinical Micro Sensors, Inc. dba GenMark Diagnostics, Inc. (incorporated by reference herein from our Form 10-Q as filed with the SEC on November 8, 2012).

10.5	Second Amendment to License Agreement dated June 20, 2000 by and between California Institute of Technology and Clinical Micro Sensors, Inc. (incorporated by reference herein form our Form 10-K/A as filed with the SEC on April 18, 2013). †

10.6	Amended and Restated Chemically Modified Enzymes Kit Patent License Agreement by and between Roche Molecular Systems, Inc., F. Hoffman-La Roche Ltd., and Clinical Micro Sensors, Inc. dba Osmetech Molecular Diagnostics, dated February 27, 2008 (incorporated by reference to our Registration Statement on Form S-1 (File No. 333-165562) filed with the Commission on May 21, 2010). †

10.7	Non-Exclusive License Agreement by and between Clinical Micro Sensors, Inc. d.b.a. GenMark Diagnostics, Inc. and Caliper Life Sciences Inc. dated effective as of March 27, 2012 (incorporated by reference herein from our Form 10-Q as filed with the SEC on May 10, 2012). †

10.8	Development Collaboration and License Agreement, dated July 26, 2012, by and between Advanced Liquid Logic, Inc. and Clinical Micro Sensors, Inc. dba GenMark Diagnostics, Inc. (incorporated by reference herein from our Form 10-Q/A as filed with the SEC on March 22, 2013). †

10.9	Amendment Number One to Development Collaboration and License Agreement, effective as of January 18, 2016, by and among Clinical Micro Sensors, Inc. d.b.a. GenMark Diagnostics, Inc., Advanced Liquid Logic, Inc., and Illumina, Inc. (incorporated by reference herein from our Form 10-Q as filed with the SEC on May 3, 2016).†

10.10	Loan and Security Agreement dated as of January 12, 2015 by and among GenMark Diagnostics, Inc., as borrower, its domestic subsidiaries, as guarantors, General Electric Capital Corporation, and certain other financial institutions as lenders (incorporated by reference herein to our Form 10-Q filed with the SEC on May 5, 2015). †

~~10.10~~10.11	Amendment to Loan and Security Agreement dated September 30, 2015 by and among GenMark Diagnostics, Inc., as borrower, General Electric Capital Corporation, as agent and lender, and the lenders signatory thereto (incorporated by reference herein to our Form 10-Q filed with the SEC on October 27, 2015). †

~~10.11~~10.12	Letter agreement dated March 17, 2016 by and among GenMark Diagnostics, Inc., as borrower, Healthcare Financial Solutions, LLC, as agent and lender, and the lenders signatory thereto (incorporated by reference herein from our Form 10-Q as filed with the SEC on May 3, 2016).†

10.13	First Amendment to Loan and Security Agreement dated July 27, 2016 by and among GenMark Diagnostics, Inc., as borrower, its domestic subsidiaries, as guarantors, Solar Senior Capital Ltd., as administrative and collateral agent, and certain other financial institutions as lenders (incorporated by reference herein from our Form 10-Q as filed with the SEC on November 3, 2016).†

10.14	XT-8 Instrument Supply Agreement, dated August 3, 2012, by and between Leica Biosystems Melbourne Pty Ltd and Clinical Micro Sensors, Inc. dba GenMark Diagnostics, Inc. (incorporated by reference herein from our Form 10-Q/A as filed with the SEC on March 22, 2013).†



Exhibit	Description

~~10.12~~10.15	Manufacturing and Supply Agreement, dated December 15, 2015, by and between Plexus Corp. and Clinical Micro Sensors, Inc. d.b.a GenMark Diagnostics, Inc. + ü

10.16	Form of Market Stock Units Grant Notice and Award Agreement (incorporated by reference herein from our Form 10-Q filed with the SEC on May 5, 2015)*

~~10.13~~	The GenMark Diagnostics, Inc. 2014 Bonus Plan (incorporated by reference herein to our Form 8-K as filed with the SEC on March 11, 2014).*

~~10.14~~10.17	The GenMark Diagnostics, Inc. 2015 Bonus Plan (incorporated by reference herein to our Form 8-K as filed with the SEC on February 25, 2015).*

~~10.15~~10.18	The GenMark Diagnostics, Inc. 2016 Bonus Plan (incorporated by reference herein to our Form 8-K as filed with the SEC on February 24, 2016).*

10.19	GenMark Diagnostics, Inc. 2010 Equity Incentive Plan, as amended (incorporated by reference to our Definitive Proxy Statement on Schedule 14A filed with the SEC on April 17, 2014).*

~~Table of Contents~~



~~Exhibit~~	~~Description~~

~~10.16~~10.20	Form of Stock Option Agreement (incorporated by reference to our Registration Statement on Form S-1 (File No. 333-165562) filed with the Commission on April 20, 2010).*

~~10.17~~10.21	Form of Restricted Stock Agreement (incorporated by reference herein to our Form 10-Q as filed with the SEC on November 9, 2010).*

~~10.18~~10.22	Form of Restricted Stock Units Grant Notice and Agreement (incorporated by reference herein to our Form 8-K as filed with the SEC on March 12, 2013).*

~~10.19~~10.23	Form of Amendment of Restricted Stock, Restricted Stock Unit and/or Stock Option Agreement(s)~~(incorporated by reference herein to our Form 10-Q as filed with the SEC on May 6, 2014)~~.*ü

~~10.20~~10.24	GenMark Diagnostics, Inc. 2013 Employee Stock Purchase Plan (incorporated by reference to our Definitive Proxy Statement on Schedule 14A filed with the Commission on April 5, 2013).*

~~10.21~~10.25	Form of Director and Officer Indemnification Agreement (incorporated by reference to our Registration Statement on Form S-1 (File No. 333-165562) filed with the Commission on March 19, 2010).*

~~10.22~~	Executive Employment Agreement, dated January 1, 2010, by and between Osmetech Technology Inc. and Jon Faiz Kayyem, Ph.D. (incorporated by reference to our Registration Statement on Form S-1 (File No. 333-165562) filed with the Commission on March 19, 2010).*

~~10.23~~10.26	Executive Employment Agreement, dated as of April 5, 2011, by and between GenMark Diagnostics, Inc. and Hany Massarany (incorporated by reference herein from our Form 10-Q as filed with the SEC on May 13, 2011).*

~~10.24~~10.27	Employment Offer Letter effective May 7, 2014 by and between GenMark Diagnostics, Inc. and Scott Mendel (incorporated by reference to our Current Report on Form 8-K filed with the SEC on May 12, 2014).*

~~10.25~~10.28	GenMark Diagnostics, Inc. Non-Plan Stock Option Agreement with Scott Mendel (incorporated by reference to our Registration Statement on Form S-8 (File No. 333-195924) filed with the SEC on May 13, 2014).*

~~10.26~~10.29	GenMark Diagnostics, Inc. Non-Plan Restricted Stock Units Agreement with Scott Mendel (incorporated by reference to our Registration Statement on Form S-8 (File No. 333-195924) filed with the SEC on May 13, 2014).*

~~10.27~~	Executive Employment Agreement dated March 1, 2010, by and between Clinical Micro Sensors, Inc. d.b.a. GenMark Diagnostics, Inc. and Jeffrey Hawkins (incorporated by reference herein from our Form 10-Q as filed with the SEC on May 13, 2011).*

~~10.28~~10.30	Executive Employment Agreement dated April 13, 2010 by and between Osmetech Molecular Diagnostics and Jennifer Williams (incorporated by reference herein from our Form 10-K as filed with the SEC on March 14, 2013).*

~~10.29~~10.31	Executive Employment ~~Offer Letter~~Agreement dated ~~April 1, 2013~~October 12, 2012 by and between ~~Clinical Micro Sensors, Inc., d.b.a.~~ GenMark Diagnostics, Inc. and ~~Ingo Chakravarty~~Eric Stier. *ü

10.32	Equity Distribution Agreement dated June 14, 2016 by and between GenMark Diagnostics, Inc. and Canaccord Genuity Inc. (incorporated by reference herein from our Form 10-Q as filed with the SEC on ~~May 6, 2014)~~July 28, 2016).*

21.1	List of Subsidiaries (incorporated by reference to our Form 10-K as filed with the SEC on February 24, 2015).

23.1	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm ü

~~Table of Contents~~



Exhibit	Description

24.1	Power of Attorney (included on the signature page hereto). ü

31.1	Certification of principal executive officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. ü

31.2	Certification of principal financial officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. ü

32.1	Certification of the principal executive officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. section 1350. ü

32.2	Certification of the principal financial officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. section 1350. ü

101	XBRL Instance Document

101	XBRL Taxonomy Extension Schema Document

101	XBRL Taxonomy Calculation Document

101	XBRL Taxonomy Definition Linkbase Document
101	XBRL Taxonomy Label Linkbase Document

101	XBRL Taxonomy Presentation Linkbase Document

_____________________



*	Indicates a management contract or compensatory plan or arrangement in which any director or named executive officer participates.



ü	Included in this filing.



†	Confidential treatment has been granted with respect to certain portions of this exhibit.



+	GenMark has requested confidential treatment with respect to certain portions of this exhibit.



Delaware		27-2053069
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

5964 La Place Court, Carlsbad, California		92008-8829
(Address of principal executive offices)		(Zip code)



Title of Each Class:		Name of Each Exchange on which Registered:
Common Stock, par value $0.0001 per share		The NASDAQ Stock Market LLC (NASDAQ Global Market)

																															FIVE YEAR SELECTED FINANCIAL DATA
	Years ended December 31,															Years ended December 31,
	2015			2014			2013			2012			2011			2016			2015			2014			2013			2012
Consolidated Statements of Comprehensive Loss Data:	(In thousands, except per share data)
Consolidated Statements of Net Loss Data:																(In thousands, except per share data)
Revenue
Product revenue	$	39,029		$	30,328		$	27,204		$	20,211		$	4,700		$	48,914		$	39,029		$	30,328		$	27,204		$	20,211
License and other revenue	382			266			200			258			309			360			382			266			200			258
Total revenue	39,411			30,594			27,404			20,469			5,009			49,274			39,411			30,594			27,404			20,469
Cost of revenue	15,317			13,127			15,570			11,640			6,206			19,700			15,317			13,127			15,570			11,640
Gross profit (loss)	24,094			17,467			11,834			8,829			(1,197		)
Gross profit																29,574			24,094			17,467			11,834			8,829
Operating expenses
Sales and marketing	14,385			12,629			12,818			6,378			4,969			14,734			14,385			12,629			12,818			6,378
General and administrative	13,772			12,069			11,836			10,806			8,960			14,363			13,772			12,069			11,836			10,806
Research and development	37,472			31,823			22,060			13,536			8,737			49,458			37,472			31,823			22,060			13,536
Total operating expenses	65,629			56,521			46,714			30,720			22,666			78,555			65,629			56,521			46,714			30,720
Loss from operations	(41,535		)	(39,054		)	(34,880		)	(21,891		)	(23,863		)	(48,981		)	(41,535		)	(39,054		)	(34,880		)	(21,891		)
Other income (expense):
Interest income (expense), net	(755		)	224			384			(48		)	(74		)	(1,360		)	(755		)	224			384			(48		)
Other income (expense)	133			(6		)	897			(16		)	19			(160		)	133			(6		)	897			(16		)
Total other income (expense)	(622		)	218			1,281			(64		)	(55		)	(1,520		)	(622		)	218			1,281			(64		)
Loss before income taxes	(42,157		)	(38,836		)	(33,599		)	(21,955		)	(23,918		)	(50,501		)	(42,157		)	(38,836		)	(33,599		)	(21,955		)
Income tax expense (benefit)	40			(573		)	44			148			52			100			40			(573		)	44			148
Net loss	$	(42,197	)	$	(38,263	)	$	(33,643	)	$	(22,103	)	$	(23,970	)	$	(50,601	)	$	(42,197	)	$	(38,263	)	$	(33,643	)	$	(22,103	)
Net loss per share, basic and diluted	$	(1.00	)	$	(0.93	)	$	(0.95	)	$	(0.84	)	$	(1.45	)	$	(1.15	)	$	(1.00	)	$	(0.93	)	$	(0.95	)	$	(0.84	)
Weighted average number of shares outstanding, basic and diluted	42,157			41,346			35,253			26,215			16,572			44,100			42,157			41,346			35,253			26,215

	As of December 31,															As of December 31,
	2015			2014			2013			2012			2011			2016			2015			2014			2013			2012
	(In thousands)															(In thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents and marketable securities(1)(2)(3)	$	45,465		$	70,506		$	105,589		$	51,250		$	30,320		$	41,566		$	45,465		$	70,506		$	105,589		$	51,250
Total assets	70,667			91,970			121,754			68,016			38,186			80,324			70,667			91,970			121,754			68,016
Long-term liabilities	11,481			1,653			2,349			2,392			1,171			15,752			11,481			1,653			2,349			2,392
Total liabilities	22,070			13,946			12,586			11,566			7,552			42,173			22,070			13,946			12,586			11,566
Accumulated deficit	(304,669		)	(262,472		)	(224,209		)	(190,566		)	(168,463		)	(355,270		)	(304,669		)	(262,472		)	(224,209		)	(190,566		)
Total stockholders’ equity (1)(2)(3)	48,597			78,024			109,168			56,450			30,634			38,151			48,597			78,024			109,168			56,450



Machinery and laboratory equipment	3 - 5 years
Instruments	4 - 5 years
Office equipment	53 - 7 years
Leasehold improvements	over the shorter of the remaining life of the lease or the useful economic life of the asset



	Years ended December 31,						2015 vs 2014				2014 vs 2013
	2015		2014		2013		$ Change		% Change		$ Change		% Change
Revenue	$	39,411	$	30,594	$	27,404	$	8,817	29	%	$	3,190	12	%



ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



		Page
PART I.

Item 1.	Business	3

Item 1A.	Risk Factors	1110

Item 1B.	Unresolved Staff Comments	2422

Item 2.	Properties	2422

Item 3.	Legal Proceedings	2423

Item 4.	Mine Safety Disclosures	2423

PART II.

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24

Item 6.	Selected Consolidated Financial Data	25

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	3736

Item 8.	Financial Statements and Supplementary Data	3837

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	59

Item 9A.	Controls and Procedures	59

Item 9B.	Other Information	62

PART III.

Item 10.	Directors, Executive Officers and Corporate Governance	62

Item 11.	Executive Compensation	62

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Maters	62

Item 13.	Certain Relationships and Related Transactions, and Director Independence	62

Item 14.	Principal Accountant Fees and Services	62

Item 15.	Exhibits and Financial Statement Schedule	63

Item 16.	Form 10-K Summary	63


(1)	In August and September 2016, we issued approximately 8.3 million shares of common stock at an average price of $9.04 per share. We raised approximately $29.1 million in net proceeds.


(2)	In August 2013, we issued approximately 8.7 million shares of common stock at a price of $9.84 per share. We raised approximately $81.0 million in net proceeds.


~~(2)~~(3)	In June 2012, we issued approximately 11.5 million shares of common stock at a price of $4.20 per share. We raised approximately $45.1 million in net proceeds.


~~(3)~~	~~In June 2011, we issued approximately 8.1 million shares of common stock at a price of $4.25 per share. We raised approximately $31.7 million in net proceeds.~~



	Years ended December 31,						2016 vs 2015				2015 vs 2014
	2016		2015		2014		$ Change		% Change		$ Change		% Change
Revenue	$	49,274	$	39,411	$	30,594	$	9,863	25	%	$	8,817	29	%


	Payments due by period										Payments due by period
	Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years		Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years
Lease obligations (1)	$	11,461	$	1,432	$	3,412	$	3,879	$	2,738	$	10,058	$	1,644	$	5,677	$	2,143	$	594
Licensing payment obligation	1,924		1,653		181		90		—
Licensing payment obligations											1,750		1,494		181		75		—
Instrument purchase obligations	29		29		—		—		—		1,278		1,309		—		—		—
Total obligations	$	13,414	$	3,114	$	3,593	$	3,969	$	2,738	$	13,086	$	4,447	$	5,858	$	2,218	$	594


(1)	We enter into leases in the ordinary course of business with respect to facilities. Our lease agreements have fixed payment terms based on the passage of time. Certain facility leases require payment of maintenance and real estate taxes. Our future operating lease obligations could change if we terminate certain contracts or if we enter into additional leases.



Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


	Common Stock				Additional paid-in capital			Accumulated other comprehensive loss			Accumulated deficit				Total stockholders' equity			Common Stock				Additional paid-in capital		Accumulated other comprehensive loss			Accumulated deficit			Total stockholders' equity
	Shares		Par Value				Shares				Accumulated deficit			Par Value								Additional paid-in capital		Accumulated other comprehensive loss			Accumulated deficit			Total stockholders' equity
Balance—December 31, 2012	32,753		$	3	Additional paid-in capital		$	Accumulated other comprehensive loss	247,449		$	(436	)		Total stockholders' equity		$	(190,566	)	$	56,450
Issuance of stock in lieu of accrued bonuses	—		—		653			—			—				653
Stock-based compensation expense	—		—		3,893			—			—				3,893
Issuance of employee stock purchase plan shares	33		—		300			—			—				300
Restricted stock awards issued, net of cancellations	(122	)	—		—			—			—				—
Shares issued under stock-based compensation plans	91		—		396			—			—				396
Issuance of common stock, net of offering expenses	8,765		1		80,672			—			—				80,673
Elimination of cumulative foreign currency translation adjustments upon liquidation of foreign subsidiary	—		—		—			450			—				450
Net loss	—		—		—			—			(33,643		)		(33,643		)
Unrealized loss on marketable securities	—		—		—			(4		)	—				(4		)
Balance—December 31, 2013	41,520		4		333,363			10			(224,209		)		109,168			41,520		$	4	$	333,363	$	10		$	(224,209	)	$	109,168
Stock-based compensation expense	—		—		5,796			—			—				5,796			—		—		5,796		—			—			5,796
Issuance of employee stock purchase plan shares	89		—		812			—			—				812			89		—		812		—			—			812
Restricted stock awards issued, net of cancellations	149		—		—			—			—				—			149		—		—		—			—			—
Shares issued under stock-based compensation plans	101		—		531			—			—				531			101		—		531		—			—			531
Net loss	—		—		—			—			(38,263		)		(38,263		)	—		—		—		—			(38,263		)	(38,263		)
Unrealized loss on marketable securities	—		—		—			(20		)	—				(20		)	—		—		—		(20		)	—			(20		)
Balance—December 31, 2014	41,859		4		340,502			(10		)	(262,472		)		78,024			41,859		4		340,502		(10		)	(262,472		)	78,024
Issuance of stock in lieu of accrued bonuses	105		—		863			—			—				863			105		—		863		—			—			863
Stock-based compensation expense	—		—		9,995			—			—				9,995			—		—		9,995		—			—			9,995
Issuance of employee stock purchase plan shares	122		—		884			—			—				884			122		—		884		—			—			884
Restricted stock issued, net of cancellations	284		—		—			—			—				—
Restricted stock awards issued, net of cancellations																		284		—		—		—			—			—
Shares issued under stock-based compensation plans	181		—		989			—			—				989			181		—		989		—			—			989
Net loss	—		—		—			—			(42,197		)		(42,197		)	—		—		—		—			(42,197		)	(42,197		)
Foreign currency translation adjustments								36							36			—		—		—		36			—			36
Unrealized gain on marketable securities																		—		—		—		3			—			3
Balance—December 31, 2015																		42,551		4		353,233		29			(304,669		)	48,597
Issuance of stock in lieu of accrued bonuses																		28		—		364		—			—			364
Stock-based compensation expense																		—		—		9,236		—			—			9,236
Issuance of employee stock purchase plan shares																		138		—		921		—			—			921
Restricted stock issued, net of cancellations																		421		—		—		—			—			—
Shares issued under stock-based compensation plans																		99		—		712		—			—			712
Issuance of common stock, net of offering expenses																		3,317		—		28,856		—			—			28,856
Net loss																		—		—		—		—			(50,601		)	(50,601		)
Foreign currency translation adjustments																		—		—		—		77			—			77
Unrealized loss on marketable securities	—		—		—			3			—				3			—		—		—		(11		)	—			(11		)
Balance—December 31, 2015	42,551		$	4	$	353,233		$	29		$	(304,669	)		$	48,597
Balance—December 31, 2016																		46,554		$	4	$	393,322	$	95		$	(355,270	)	$	38,151


	Allowance for doubtful accounts			Allowance for doubtful accounts
Balance December 31, 2013	$	2,736
Provision for doubtful accounts	—
Write-off and recoveries, net	(34		)
Balance December 31, 2014	$	2,702		$	2,702
Provision for doubtful accounts	25			25
Write-off and recoveries, net	—
Balance December 31, 2015	$	2,727		$	2,727
Provision for doubtful accounts				13
Balance December 31, 2016				$	2,740



Machinery and laboratory equipment	3 – 5 years
Instruments	4 – 5 years
Office equipment	53 – 7 years
Leasehold improvements	over the shorter of the remaining life of the lease or the useful economic life of the asset


	Year Ended December 31,			Year Ended December 31,
	2015	2014	2013	2016	2015	2014
Options outstanding to purchase common stock	3,004	2,479	1,821	2,570	3,004	2,479
Other unvested equity awards	1,267	948	976	2,000	1,267	948
Total	4,271	3,427	2,797	4,570	4,271	3,427



	December 31,
	2016		2015
Laboratory Corporation of America, Inc.	33	%	35	%



	December 31, 2015							December 31, 2014
	Gross carrying amount		Accumulated amortization			Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
Licensed intellectual property	$	3,550	$	(1,174	)	$	2,376	$	2,750	$	(880	)	$	1,870



	December 31, 2016							December 31, 2015
	Gross carrying amount		Accumulated amortization			Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
Licensed intellectual property	$	4,250	$	(1,580	)	$	2,670	$	3,550	$	(1,174	)	$	2,376


Years Ending December 31,	Future Amortization Expense		Future Amortization Expense
2016	$	375
2017	375		$	497
2018	375		497
2019	375		497
2020	375		497
2021			497
Thereafter	501		185
Total	$	2,376	$	2,670



	Number of shares		Weighted average exercise price
Outstanding at December 31, 2014	2,479,435		$	8.66
Granted	889,450		$	12.36
Exercised	(180,326	)	$	5.46
Forfeitures	(184,548	)	$	12.06
Outstanding at December 31, 2015	3,004,011		$	9.74
Vested and expected to vest at December 31, 2015	2,765,180		$	9.55
Exercisable at December 31, 2015	1,611,828		$	7.77


	Restricted Stock Awards				Restricted Stock Units				Restricted Stock Awards				Restricted Stock Units
	Number of shares		Weighted Average Grant Date Fair Value		Number of shares		Weighted Average Grant Date Fair Value		Number of shares		Weighted Average Grant Date Fair Value		Number of shares		Weighted Average Grant Date Fair Value
Unvested at December 31, 2014	173,610		$	4.56	741,992		$	11.46
Unvested at December 31, 2015									32,837		$	5.00	934,977		$	12.66
Granted	—		$	—	683,996		$	13.29	—		$	—	1,580,273		$	5.80
Vested	(133,774	)	$	4.34	(385,503	)	$	11.56	(32,369	)	$	4.91	(444,365	)	$	11.79
Forfeitures	(6,999	)	$	4.35	(105,508	)	$	12.98	(312	)	$	11.19	(304,762	)	$	7.65
Unvested at December 31, 2015	32,837		$	5.00	934,977		$	12.66
Unvested at December 31, 2016									156		$	11.19	1,766,123		$	7.18



	Market-Based Stock Units
	Number of Shares		Weighted Average Grant Date Fair Value
Unvested at December 31, 2015	136,730		18.07
Units granted	335,253		4.94
Vested	(192,941	)	8.01
Cancelled	(56,269)		9.81
Unvested at December 31, 2016	222,773		7.34



	2016			2015
Expected volatility	49		%	45		%
Risk-free interest rate	0.90		%	1.10		%
Expected dividend	—		%	—		%
Weighted average fair value	$	4.94		$	18.07


Years Ending December 31,	Amount		Amount
2016	$	1,432
2017	1,632		$	1,644
2018	1,780		1,792
2019	1,907		1,913
2020	1,972		1,972
2021			1,372
Thereafter	2,738		1,365
Total minimum lease payments	$	11,461	$	10,058



	December 31, 2015
Term Loan A
6.9% principal	$	10,000
Unamortized issuance premium	(483		)
Total debt, net	9,517
Current portion of unamortized issuance premium	373
Long-term debt	$	9,890



	December 31, 2016			December 31, 2015
Term Loans
Term Loan A - 6.9% principal	$	10,000		$	10,000
Term Loan B - 6.9% principal	10,000			—
Final fee obligation	400			400
Unamortized issuance costs	(585		)	(883		)
Total debt, net	19,815			9,517
Current portion of long-term debt	(7,935		)	373
Long-term debt	$	11,880		$	9,890


	December 31, 2015								December 31, 2016
	Quotes Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quotes Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Money market funds (cash equivalents)	$	22,128	$	—	$	—	$	22,128	$	556	$	—	$	—	$	556
Corporate notes and bonds	—		8,483		—		8,483		—		18,821		—		18,821
U.S. government and agency securities	—		799		—		799		—		3,503		—		3,503
Commercial paper	—		798		—		798		—		3,283		—		3,283
	$	22,128	$	10,080	$	—	$	32,208	$	556	$	25,607	$	—	$	26,163

	December 31, 2014								December 31, 2015
	Quotes Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quotes Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Money market funds (cash equivalents)	$	31,412	$	—	$	—	$	31,412	$	22,128	$	—	$	—	$	22,128
Corporate notes and bonds	—		18,387		—		18,387		—		8,483		—		8,483
U.S. government and agency securities	—		15,264		—		15,264		—		799		—		799
Commercial paper									—		798		—		798
	$	31,412	$	33,651	$	—	$	65,063	$	22,128	$	10,080	$	—	$	32,208


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Corporate notes and bonds	$	8,495	$	1	$	(13	)	$	8,483	$	18,846	$	—	$	(25	)	$	18,821
U.S. government and agency securities	799		—		—			799		3,506		—		(3		)	3,503
Commercial Paper	798		—		—			798		3,283		—		—			3,283
Total	$	10,092	$	1	$	(13	)	$	10,080	$	25,635	$	—	$	(28	)	$	25,607