Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐☒ No ☒☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~July~~October 31, ~~2019,~~2020, the registrant had ~~124,287,992~~136,772,417 shares of common stock, $0.0001 par value per share, outstanding.

This report contains forward-looking statements that are based on management’s beliefs and assumptions and on information currently available to management. All statements contained in this report other than statements of historical fact are forward-looking statements, which include but are not limited to, statements about:

The forward-looking statements in this report also include statements regarding our ability to develop, commercialize and achieve market acceptance of our current and planned products and services, our research and development efforts and other matters regarding our business strategies, use of capital, results of operations and financial position and plans and objectives for future operations. In some cases, you can identify forward-looking statements by the words “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. These risks, uncertainties and other factors are described under “Risk Factors,” “Management's Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report and in other documents we file with the Securities and Exchange Commission (“SEC”) from time to time. We caution you that forward-looking statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. As a result, the forward-looking statements may not prove to be accurate. The forward-looking statements in this report represent our views as of the date of this report.

We undertake no obligation to update any forward-looking statements for any reason, except as required by law.

Unless otherwise stated or the context otherwise indicates, references to “we,” “us,” “our” and similar references refer to Adaptive Biotechnologies Corporation.

(in thousands,,except ~~except~~share ~~share~~and ~~and~~per share ~~per share~~amounts)

	June 30,			December 31,
	2019			2018			September 30, 2020			December 31, 2019
	(unaudited)						(unaudited)
Assets
Current assets
Cash and cash equivalents	$	48,458		$	55,030		$	497,076		$	96,576
Short-term marketable securities		374,543			109,988
Short-term marketable securities (amortized cost of $336,840 and $479,791, respectively)								338,004			480,290
Accounts receivable, net		7,252			4,807			11,858			12,676
Inventory		8,004			7,838			10,736			9,069
Prepaid expenses and other current assets		4,044			3,055			19,684			14,079
Total current assets		442,301			180,718			877,358			612,690
Long-term assets
Property and equipment, net		22,298			19,125			31,156			60,355
Restricted cash and other assets		5,040			247
Operating lease right-of-use assets								37,733			—
Long-term marketable securities (amortized cost of $16,203 and $105,263, respectively)								16,466			105,435
Restricted cash								2,138			2,138
Intangible assets, net		12,784			13,626			10,653			11,928
Goodwill		118,972			118,972			118,972			118,972
Other assets								997			784
Total assets	$	601,395		$	332,688		$	1,095,473		$	912,302
Liabilities, convertible preferred stock and shareholders’ deficit
Liabilities and shareholders’ equity
Current liabilities
Accounts payable	$	2,944		$	1,793		$	5,412		$	4,453
Accrued liabilities		5,019			2,562			5,346			4,371
Accrued compensation and benefits		4,429			4,641			7,913			8,124
Current portion of deferred rent		1,276			1,109			—			371
Current operating lease liabilities								3,969			—
Current deferred revenue		61,194			12,695			78,192			60,994
Total current liabilities		74,862			22,800			100,832			78,313
Long-term liabilities
Convertible preferred stock warrant liability		2,602			336
Deferred rent liability, less current portion		5,455			6,102			—			6,918
Operating lease liabilities, less current portion								42,366			—
Financing obligation								—			36,607
Deferred revenue, less current portion		240,919			704			174,853			219,332
Other long-term liabilities								2,375			93
Total liabilities		323,838			29,942			320,426			341,263
Commitments and contingencies (Note 8)
Convertible preferred stock: $0.0001 par value, 93,762,517 shares authorized at June 30, 2019 and December 31, 2018, respectively; 93,039,737 and 92,790,094 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively; aggregate liquidation preference of $574,374 and $572,866 at June 30, 2019 and December 31, 2018, respectively		561,931			560,858
Shareholders’ deficit
Common stock: $0.0001 par value, 131,000,000 shares authorized at June 30, 2019 and December 31, 2018, respectively; 13,725,381 and 12,841,536 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively		1			1
Commitments and contingencies (Note 9)
Shareholders’ equity
Preferred stock: $0.0001 par value, 10,000,000 shares authorized at September 30, 2020 and December 31, 2019; 0 shares issued and outstanding at September 30, 2020 and December 31, 2019								—			—
Common stock: $0.0001 par value, 340,000,000 shares authorized at September 30, 2020 and December 31, 2019; 136,392,256 and 125,238,142 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively								13			12
Additional paid-in capital		46,160			37,902			1,240,649			935,834
Accumulated other comprehensive gain (loss)		382			(107	)
Accumulated other comprehensive gain								1,427			671
Accumulated deficit		(330,917	)		(295,908	)		(467,042	)		(365,478	)
Total shareholders’ deficit		(284,374	)		(258,112	)
Total liabilities, convertible preferred stock and shareholders’ deficit	$	601,395		$	332,688
Total shareholders’ equity								775,047			571,039
Total liabilities and shareholders’ equity							$	1,095,473		$	912,302

The accompanying notes are an integral part of these condensed financial statements.

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			Three Months Ended September 30,						Nine Months Ended September 30,
	(unaudited)												2020			2019			2020			2019
Revenue
Sequencing revenue	$	11,865		$	8,281		$	17,948		$	14,061		$	11,276		$	11,683		$	28,730		$	29,631
Development revenue		10,273			3,287			16,856			7,222			15,023			14,375			39,467			31,231
Total revenue		22,138			11,568			34,804			21,283			26,299			26,058			68,197			60,862
Operating expenses
Cost of revenue		5,734			5,044			10,722			9,033			6,053			5,601			16,308			16,323
Research and development		16,527			9,452			29,010			18,307			30,314			20,506			80,241			49,516
Sales and marketing		8,897			5,329			16,714			10,376			14,474			9,099			42,813			25,813
General and administrative		6,662			4,632			13,666			9,175			12,079			8,477			36,138			22,143
Amortization of intangible assets		423			424			842			843			428			428			1,275			1,270
Total operating expenses		38,243			24,881			70,954			47,734			63,348			44,111			176,775			115,065
Loss from operations		(16,105	)		(13,313	)		(36,150	)		(26,451	)		(37,049	)		(18,053	)		(108,578	)		(54,203	)
Interest and other income, net		446			820			2,105			1,567			1,018			4,103			5,805			6,208
Income tax (expense) benefit														(688	)		—			1,116			—
Net loss		(15,659	)		(12,493	)		(34,045	)		(24,884	)		(36,719	)		(13,950	)		(101,657	)		(47,995	)
Fair value adjustment to Series E-1 convertible preferred stock options		(710	)		(2	)		(964	)		2			—			—			—			(964	)
Net loss attributable to common shareholders	$	(16,369	)	$	(12,495	)	$	(35,009	)	$	(24,882	)	$	(36,719	)	$	(13,950	)	$	(101,657	)	$	(48,959	)
Net loss per share attributable to common shareholders, basic and diluted	$	(1.23	)	$	(1.01	)	$	(2.68	)	$	(2.02	)	$	(0.27	)	$	(0.11	)	$	(0.79	)	$	(0.97	)
Weighted-average shares used in computing net loss per share attributable to common shareholders, basic and diluted		13,279,324			12,385,888			13,074,692			12,334,227			134,372,026			124,285,686			129,289,948			50,552,389

The accompanying notes are an integral part of these condensed financial statements.

CondensedStatements of Convertible Preferred Stock and Shareholders’ (Deficit) ~~Deficit~~Equity

Convertible
preferred stock

Common stock

Additional
paid-in

Accumulated
other
comprehensive

Accumulated

Total
shareholders’

Shares

Amount

Shares

Amount

capital

(loss) income

deficit

deficit

Balance as of March 31, 2018 (unaudited)

92,745,734

$
561,396

12,301,844

$
1

$
28,620

$
(283
)

$
(261,950
)

$
(233,612
)
Issuance of common stock for cash upon exercise of stock options (unaudited)

—

—

245,000

—

415

—

—

415

Issuance of Series E-1 convertible preferred stock for cash upon
   exercise of Series E-1 convertible preferred stock options at fair value (unaudited)

44,360

35

—

—

—

—

—

—

Vested Series E-1 convertible preferred stock option forfeitures (unaudited)

—

(767
)

—

—

476

—

291

767

Series E-1 convertible preferred stock option share-based compensation (unaudited)

—

—

—

—

1

—

—

1

Adjustment to redemption value for vested Series E-1 convertible
   preferred stock options (unaudited)

—

1

—

—

(1
)

—

—

(1
)
Change in redemption value for vested Series E-1 convertible
   preferred stock options (unaudited)

—

2

—

—

—

—

(2
)

(2
)
Common stock option share-based compensation (unaudited)

—

—

—

—

2,447

—

—

2,447

Other comprehensive income (unaudited)

—

—

—

—

—

43

—

43

Net loss (unaudited)

—

—

—

—

—

—

(12,493
)

(12,493
)
Balance as of June 30, 2018 (unaudited)

92,790,094

$
560,667

12,546,844

$
1

$
31,958

$
(240
)

$
(274,154
)

$
(242,435
)

Balance as of March 31, 2019 (unaudited)

93,023,694

$
561,210

12,930,536

$
1

$
40,981

$
92

$
(314,548
)

$
(273,474
)
Issuance of common stock for cash upon exercise of stock options (unaudited)

—

—

794,845

—

1,847

—

—

1,847

Issuance of Series E-1 convertible preferred stock for cash upon
   exercise of Series E-1 convertible preferred stock options at fair value (unaudited)

16,043

11

—

—

—

—

—

—

Change in redemption value for vested Series E-1 convertible
   preferred stock options (unaudited)

—

710

—

—

—

—

(710
)

(710
)
Common stock option share-based compensation (unaudited)

—

—

—

—

3,332

—

—

3,332

Other comprehensive income (unaudited)

—

—

—

—

—

290

—

290

Net loss (unaudited)

—

—

—

—

—

—

(15,659
)

(15,659
)
Balance as of June 30, 2019 (unaudited)

93,039,737

$
561,931

13,725,381

$
1

$
46,160

$
382

$
(330,917
)

$
(284,374
)

~~CondensedStatements of Convertible Preferred StockandShareholders’Deficit (Continued)~~

Balance as of December 31, 2017

92,656,029

$
561,333

12,208,731

$
1

$
24,972

$
(166
)

$
(249,423
)

$
(224,616
)
Adjustments to accumulated deficit for adoption of guidance on accounting for share-based payment transactions (unaudited)

—

—

—

—

140

—

(140
)

—

Issuance of common stock for cash upon exercise of stock options (unaudited)

—

—

338,113

—

823

—

—

823

Issuance of Series E-1 convertible preferred stock for cash upon
   exercise of Series E-1 convertible preferred stock options at fair value (unaudited)

134,065

100

—

—

—

—

—

—

Vested Series E-1 convertible preferred stock option forfeitures (unaudited)

—

(767
)

—

—

476

—

291

767

Series E-1 convertible preferred stock option share-based compensation (unaudited)

—

—

—

—

3

—

—

3

Adjustment to redemption value for vested Series E-1 convertible
   preferred stock options (unaudited)

—

3

—

—

(3
)

—

—

(3
)
Change in redemption value for vested Series E-1 convertible
   preferred stock options (unaudited)

—

(2
)

—

—

—

—

2

2

Common stock option share-based compensation (unaudited)

—

—

—

—

5,547

—

—

5,547

Other comprehensive loss (unaudited)

—

—

—

—

—

(74
)

—

(74
)
Net loss (unaudited)

—

—

—

—

—

—

(24,884
)

(24,884
)
Balance as of June 30, 2018 (unaudited)

92,790,094

$
560,667

12,546,844

$
1

$
31,958

$
(240
)

$
(274,154
)

$
(242,435
)

Balance as of December 31, 2018

92,790,094

$
560,858

12,841,536

$
1

$
37,902

$
(107
)

$
(295,908
)

$
(258,112
)
Issuance of common stock for cash upon exercise of stock options (unaudited)

—

—

883,845

—

1,880

—

—

1,880

Issuance of Series E-1 convertible preferred stock for cash upon
   exercise of Series E-1 convertible preferred stock options at fair value (unaudited)

249,643

109

—

—

—

—

—

—

Change in redemption value for vested Series E-1 convertible
   preferred stock options (unaudited)

—

964

—

—

—

—

(964
)

(964
)
Common stock option share-based compensation (unaudited)

—

—

—

—

6,378

—

—

6,378

Other comprehensive income (unaudited)

—

—

—

—

—

489

—

489

Net loss (unaudited)

—

—

—

—

—

—

(34,045
)

(34,045
)
Balance as of June 30, 2019 (unaudited)

93,039,737

$
561,931

13,725,381

$
1

$
46,160

$
382

$
(330,917
)

$
(284,374
)

	Convertible Preferred Stock						Common Stock				Additional Paid-In			Accumulated Other Comprehensive			Accumulated			Total Shareholders’ (Deficit)
	Shares			Amount			Shares		Amount		Capital			Gain			Deficit			Equity
Balance at June 30, 2019		93,039,737		$	561,931			13,725,381	$	1	$	46,160		$	382		$	(330,917	)	$	(284,374	)
Proceeds from initial public offering, net of underwriters' discounts and commissions		—			—			17,250,000		2		320,848			—			—			320,850
Initial public offering costs		—			—			—		—		(4,986	)		—			—			(4,986	)
Conversion of convertible preferred stock to common stock		(93,039,737	)		(561,931	)		93,039,737		9		561,922			—			—			561,931
Conversion of convertible preferred stock warrant to common stock warrant		—			—			—		—		2,602			—			—			2,602
Issuance of common stock upon exercise of common stock warrants		—			—			54,792		—		9			—			—			9
Issuance of common stock for cash upon exercise of stock options		—			—			246,170		—		318			—			—			318
Common stock option and restricted stock unit share- based compensation		—			—			—		—		3,335			—			—			3,335
Other comprehensive income		—			—			—		—		—			190			—			190
Net loss		—			—			—		—		—			—			(13,950	)		(13,950	)
Balance at September 30, 2019		—		$	—			124,316,080	$	12	$	930,208		$	572		$	(344,867	)	$	585,925

Balance at June 30, 2020		—		$	—			128,233,842	$	12	$	958,097		$	2,153		$	(430,323	)	$	529,939
Issuance of common stock upon public offering, after deducting underwriters' discounts and net offering costs payable by us		—			—			7,200,000		1		271,838			—			—			271,839
Issuance of common stock for cash upon exercise of stock options		—			—			958,414		—		4,244			—			—			4,244
Common stock option and restricted stock unit share- based compensation		—			—			—		—		6,470			—			—			6,470
Other comprehensive loss		—			—			—		—		—			(726	)		—			(726	)
Net loss		—			—			—		—		—			—			(36,719	)		(36,719	)
Balance at September 30, 2020		—		$	—			136,392,256	$	13	$	1,240,649		$	1,427		$	(467,042	)	$	775,047

The accompanying notes are an integral part of these condensed financial statements.

Condensed Statements of Convertible Preferred StockandShareholders’ (Deficit) Equity (Continued)

	Convertible Preferred Stock						Common Stock				Additional Paid-In			Accumulated Other Comprehensive			Accumulated			Total Shareholders’ (Deficit)
	Shares			Amount			Shares		Amount		Capital			(Loss) Gain			Deficit			Equity
Balance at December 31, 2018		92,790,094		$	560,858			12,841,536	$	1	$	37,902		$	(107	)	$	(295,908	)	$	(258,112	)
Proceeds from initial public offering, net of underwriters' discounts and commissions		—			—			17,250,000		2		320,848			—			—			320,850
Initial public offering costs		—			—			—		—		(4,986	)		—			—			(4,986	)
Conversion of convertible preferred stock to common stock		(93,039,737	)		(561,931	)		93,039,737		9		561,922			—			—			561,931
Conversion of convertible preferred stock warrant to common stock warrant		—			—			—		—		2,602			—			—			2,602
Issuance of common stock upon exercise of common stock warrants		—			—			54,792		—		9			—			—			9
Issuance of common stock for cash upon exercise of stock options		—			—			1,130,015		—		2,198			—			—			2,198
Issuance of Series E-1 convertible preferred stock for cash upon exercise of Series E-1 convertible preferred stock options at fair value		249,643			109			—		—		—			—			—			—
Change in redemption value for vested Series E-1 convertible preferred stock options		—			964			—		—		—			—			(964	)		(964	)
Common stock option and restricted stock unit share-based compensation		—			—			—		—		9,713			—			—			9,713
Other comprehensive income		—			—			—		—		—			679			—			679
Net loss		—			—			—		—		—			—			(47,995	)		(47,995	)
Balance at September 30, 2019		—		$	—			124,316,080	$	12	$	930,208		$	572		$	(344,867	)	$	585,925

Balance at December 31, 2019		—		$	—			125,238,142	$	12	$	935,834		$	671		$	(365,478	)	$	571,039
Issuance of common stock upon public offering, after deducting underwriters' discounts and net offering costs payable by us		—			—			7,200,000		1		271,838			—			—			271,839
Adjustments to accumulated deficit for adoption of guidance on accounting for leases		—			—			—		—		—			—			93			93
Issuance of common stock for cash upon exercise of stock options		—			—			3,949,614		—		15,459			—			—			15,459
Vesting of restricted stock units		—			—			4,500		—		—			—			—			—
Common stock option and restricted stock unit share-based compensation		—			—			—		—		17,518			—			—			17,518
Other comprehensive income		—			—			—		—		—			756			—			756
Net loss		—			—			—		—		—			—			(101,657	)		(101,657	)
Balance at September 30, 2020		—		$	—			136,392,256	$	13	$	1,240,649		$	1,427		$	(467,042	)	$	775,047

	Six Months Ended June 30,
	2019			2018			Nine Months Ended September 30,
	(unaudited)						2020			2019
Operating activities
Net loss	$	(34,045	)	$	(24,884	)	$	(101,657	)	$	(47,995	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation expense		2,811			2,099			4,845			4,446
Noncash lease expense								2,217			—
Share-based compensation expense		6,378			5,550			17,518			9,713
Intangible assets amortization		842			843			1,275			1,270
Investment amortization		(1,896	)		(459	)		(484	)		(3,533	)
Gain on equipment disposals		(79	)		(41	)
Fair value adjustment of convertible preferred stock warrant		2,266			—			—			2,266
Benefit from income tax								(1,116	)		—
Other		1			3			62			(80	)
Changes in operating assets and liabilities:
Accounts receivable, net		(2,445	)		1,165			802			(4,398	)
Inventory		(166	)		(2,921	)		(1,667	)		(829	)
Prepaid expenses and other current assets		(883	)		(364	)		(3,886	)		(6,840	)
Accounts payable and accrued liabilities		1,314			(1,013	)		30			3,131
Deferred rent		(480	)		(359	)		—			(628	)
Operating lease liabilities								(282	)		—
Deferred revenue		288,714			5,425			(27,281	)		276,209
Other		1			(207	)		(215	)		(537	)
Net cash provided by (used in) operating activities		262,333			(15,163	)
Net cash (used in) provided by operating activities								(109,839	)		232,195
Investing activities
Purchases of property and equipment		(5,354	)		(1,614	)		(9,433	)		(8,784	)
Proceeds from sales of equipment		—			19
Purchases of marketable securities		(358,671	)		(110,947	)		(299,786	)		(772,093	)
Proceeds from maturities of marketable securities		96,500			80,516
Net cash used in investing activities		(267,525	)		(32,026	)
Proceeds from sales and maturities of marketable securities								532,224			252,500
Net cash provided by (used in) investing activities								223,005			(528,377	)
Financing activities
Proceeds from exercise of stock options		1,989			923			15,495			2,307
Payment of deferred initial public offering costs		(3,360	)		—
Proceeds from public offering of common stock, net of underwriting discounts and commissions								272,160			320,850
Payment of public offering costs, net								(321	)		(4,986	)
Proceeds from issuance of common stock upon the exercise of a common stock warrant								—			9
Other		(9	)		(10	)		—			(10	)
Net cash (used in) provided by financing activities		(1,380	)		913
Net decrease in cash, cash equivalents and restricted cash		(6,572	)		(46,276	)
Net cash provided by financing activities								287,334			318,170
Net increase in cash, cash equivalents and restricted cash								400,500			21,988
Cash, cash equivalents and restricted cash at beginning of year		55,091			85,366			98,714			55,091
Cash, cash equivalents and restricted cash at end of period	$	48,519		$	39,090		$	499,214		$	77,079
Noncash investing and financing activities
Purchases of equipment included in accounts payable and accrued liabilities	$	1,490		$	535		$	3,582		$	498
Deferred offering costs included in accounts payable and accrued expenses	$	1,433		$	—
Conversion of convertible preferred stock to common stock upon closing of initial public offering							$	—		$	561,931
Conversion of convertible preferred stock warrant to common stock warrant upon closing of initial public offering							$	—		$	2,602
Derecognition of lease financing arrangements upon adoption of guidance on accounting for leases							$	36,607		$	—

The accompanying notes are an integral part of these condensed financial statements.

Adaptive Biotechnologies Corporation (“we,” “us” or “our”) is a commercial-stage company advancing the field of immune-driven medicine by harnessing the inherent biology of the adaptive immune system to transform the diagnosis and treatment of disease. We believe the adaptive immune system is nature’s most finely tuned diagnostic and therapeutic for most diseases, but the inability to decode it has prevented the medical community from fully leveraging its capabilities. Our immune medicine platform is the foundation for our expanding suite of products and services. The cornerstone of our immune medicine platform and core immunosequencing product, immunoSEQ, serves as our underlying research and development engine and generates revenue from academic and biopharmaceutical customers. Our first clinical diagnostic product, clonoSEQ, is the first test authorized by the Food and Drug Administration (“FDA”) for the detection and monitoring of minimal residual disease (“MRD”) in patients with select blood cancers.

We were incorporated in the State of Washington on September 8, 2009 under the name Adaptive TCR Corporation. On December 21, 2011, we changed our name to Adaptive Biotechnologies Corporation. We are headquartered in Seattle, Washington.

Our registration statement on Form S-1 related to our initial public offering ~~(“IPO”)~~ was declared effective on June 26, 2019 and our common stock began trading on the Nasdaq Global Select Market on June 27, 2019. On July 1, 2019, we completed our ~~IPO~~initial public offering in which we issued and sold 17,250,000 shares of common stock, including shares issued upon the exercise in full of the underwriters’ over-allotment option, at a public offering price of ~~$20.00.~~$20.00 per share.

In July 2020, we completed an underwritten public offering of our common stock in which we issued and sold 7,200,000 shares of common stock at a public offering price of $40.00 per share, including shares issued upon the exercise in full of the underwriters’ over-allotment option. We received ~~approximately $316.0~~$271.8 million in net proceeds, after deducting underwriting discounts and ~~commission of approximately $24.2 million and~~net offering expenses ~~of approximately $4.8 million.~~

Immediately prior to the completion of our IPO on July 1, 2019, 93,039,737 shares of convertible preferred stock then outstanding converted into an equivalent number of shares of common stock. On July 1, 2019, in connection with the closing of our IPO, our amended and restated articles of incorporation, as filed with the Secretary of State of the State of Washington, and our amended and restated bylaws became effective. Also on July 1, 2019, we adopted a new equity incentive plan (“2019 Plan”), establishing an initial reserve of 15,519,170 shares under the 2019 Plan.

~~The condensed financial statements as of June 30, 2019, including share and per share amounts, do not give effect to our IPO as it closed subsequent to June 30, 2019.~~payable by us.

The preparation of financial statements in conformity with ~~U.S.~~accounting principles generally accepted ~~accounting principles~~in the United States of America (“GAAP”) requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenues and expenses during the periods presented. We base our estimates on historical experience and other relevant assumptions that we believe to be reasonable under the circumstances. Estimates are used in several areas including, but not limited to, estimates of progress to date for certain performance obligations and the transaction price for certain contracts with customers, share-based compensation, including the fair value of stock, ~~and~~ the provision for income taxes, including related reserves, and goodwill, among others. These estimates generally involve complex issues and require judgments, involve the analysis of historical results and prediction of future trends, can require extended periods of time to resolve and are subject to change from period to period. Actual results may differ materially from management’s estimates.

In our opinion, the accompanying unaudited condensed financial statements have been prepared in accordance with GAAP for interim financial information. These unaudited condensed financial statements include all adjustments necessary to fairly state the financial position and the results of our operations and cash flows for interim periods in accordance with GAAP. All such adjustments are of a normal, recurring nature. Interim-period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period.

The accompanying unaudited condensed financial statements should be read in conjunction with our audited financial statements and notes included in our ~~prospectus dated June 26,~~Annual Report on Form 10-K for the year ended December 31, 2019 filed with the ~~Securities and Exchange Commission (“SEC”)~~SEC on ~~June 27, 2019 in connection with our IPO (“Prospectus”).~~

In the accompanying unaudited condensed statements of cash flows, certain prior year amounts have been reclassified to ~~Unaudited Condensed Financial Statements (Continued)~~conform to the current period presentation. Specifically, the gain on equipment disposals line item and other line item were previously separately stated and are now presented together in the other line item. There was no change to net cash provided by operating activities as a result of the reclassification.

~~Cash~~We are required to maintain certain balances under lease arrangements for our property and~~CashEquivalents~~ facility leases. We had restricted cash of $2.1 million as of September 30, 2020 and December 31, 2019.

We determine if an arrangement contains a lease at inception. We have operating lease agreements for the laboratory and ~~cash equivalents~~office facilities that we occupy, as well as server space. Operating lease right-of-use (“ROU”) assets and operating lease liabilities are ~~stated~~recognized at ~~fair value. Cash equivalents~~the date the underlying asset becomes available for our use and are based on the present value of the future minimum lease payments over the lease term. ROU assets also include any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received. As our leases generally do not provide an implicit interest rate, the present value of our future minimum lease payments is determined using our incremental borrowing rate. This rate is an estimate of the collateralized borrowing rate we would incur on our future lease payments over a similar term and is based on the information available to us at the lease commencement date, or as of January 1, 2020 for commenced leases that existed as of our adoption of the new lease standard, discussed in more detail below.

Certain of our leases contain options to extend or terminate the lease; lease terms are adjusted for these options only ~~securities having an original maturity~~when it is reasonably certain we will exercise these options. Our lease agreements do not contain residual value guarantees or covenants.

We have made a policy election regarding our real estate leases not to separate nonlease components from lease components, to the extent they are fixed. Nonlease components that are not fixed are expensed as incurred as variable lease expense. Our leases for laboratory and office facilities typically include variable nonlease components, such as common-area maintenance costs. We have also elected not to record on the balance sheet a lease that has a lease term of ~~three~~twelve months or less ~~at the time of purchase. We limit our credit risk associated with cash~~ and ~~cash equivalents by placing our investments with banks~~does not contain a purchase option that we ~~believe~~ are ~~highly creditworthy and with highly rated money market funds. Cash and cash equivalents primarily consist~~reasonably certain to exercise.

Lease expense is recognized on a straight-line basis over the terms of ~~bank deposits and investments in money market funds,~~the leases. Incentives granted under our facilities leases, including rent holidays, are recognized as ~~well as highly liquid U.S. government debt and agency securities and commercial paper with original maturities~~adjustments to lease expense on a straight-line basis over the terms of ~~three months or less.~~the leases.

We are subject to a concentration of risk from a limited number of suppliers, or in some cases, single suppliers for some of our laboratory instruments and materials. This risk is managed by targeting a quantity of surplus stock.

Cash, cash equivalents and marketable securities are financial instruments that potentially subject us to concentrations of credit risk. We invest in money market funds, United States (“U.S.”) government debt securities, U.S. government agency ~~bonds,~~securities, commercial paper and corporate bonds with high-quality accredited financial institutions.

Significant customers are those ~~which~~that represent more than 10% of our total revenue or accounts receivable, ~~balance at~~net balances for the periods and as of each ~~respective~~ balance sheet ~~date.~~date presented, respectively. Revenue from these customers reflects their purchase of our products and services and ~~we do not believe their loss would have a material adverse effect on~~ our ~~business.~~collaboration efforts with Genentech.

For each significant customer, revenue as a percentage of total revenue for the periods presented and accounts receivable, net as a percentage of total accounts receivable, net as of the periods presented were as follows:

We recognize revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”), Revenue from Contracts with Customers. Under ASC 606, for all revenue-generating contracts, we perform the following steps to determine the amount of revenue to be recognized: ~~(i)~~(1) identify the contract or contracts; ~~(ii)~~(2) determine whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; ~~(iii)~~(3) measure the transaction price, including the constraint on variable consideration; ~~(iv)~~(4) allocate the transaction price to the performance obligations based on estimated selling prices; and ~~(v)~~(5) recognize revenue when (or as) we satisfy each performance obligation. The following is a summary of the application of the respective model to each of our revenue classifications.

Our revenue is generated from immunosequencing (“sequencing”) products and services (“sequencing revenue”) and from regulatory or development support services leveraging our immune medicine platform (“development revenue”). When revenue generating contracts have elements of both sequencing revenue and development revenue, we ~~allocate~~classify revenue based on the nature of the performance obligation and the allocated transaction price.

Sequencing revenue reflects the amounts generated from providing sequencing services and testing through our ~~immunoSEQ~~clonoSEQ and ~~clonoSEQ~~immunoSEQ products and services to our ~~research~~clinical and ~~clinical~~research customers, respectively.

For research customers, contracts typically include an amount billed in advance of services (“upfront”), and subsequent billings as sample results are delivered to the customer. Upfront amounts received are recorded as deferred revenue, which we recognize as revenue upon satisfaction of performance obligations. We have identified two typical performance obligations under the terms of our

~~research service contracts: sequencing services and related data analysis. We recognize revenue for both identified performance obligations as sample results are delivered to the customer.~~

For other research customers who choose to purchase a research use only kit, the kits are sold on a price per kit basis with amounts payable upon delivery of the kit. Payments received are recorded as deferred revenue. For these customers, we have identified one performance obligation: the delivery of sample results. We recognize revenue as the results are delivered to the customer based on a proportion of the estimated samples that can be reported on for each kit.

For clinical customers, we derive revenues from providing our clonoSEQ test report to ordering physicians, and we bill and receive payments from medical institutions and commercial and government third-party ~~payors and medical institutions.~~payors. In these transactions, we have identified one performance obligation: the delivery of a clonoSEQ report. As payment from the respective payors may vary based on the various reimbursement rates and patient responsibilities, we consider the transaction price to be variable and record an estimate of the transaction price, subject to the constraint for variable consideration, as revenue at the time of delivery. The estimate of transaction price is based on historical and expected reimbursement rates with the various payors, which are monitored in subsequent periods and adjusted as necessary based on actual collection experience.

~~In January 2019,~~For our clonoSEQ ~~received~~coverage under Medicare, coverage aligned with the FDA label and National Comprehensive Cancer Network (“NCCN”) guidelines for longitudinal monitoring in multiple myeloma (“MM”) and B cell acute lymphoblastic leukemia (“ALL”). Wewe bill ~~Medicare for~~ an episode of treatment when we deliver the first eligible test results. This billing contemplates all necessary tests required during a patient’s treatment cycle, which is currently estimated at approximately four tests per patient, including the initial sequence identification test. Revenue ~~is recognized~~recognition commences at the time the initial billable test result is delivered and is based upon cumulative tests delivered to date. ~~For~~We estimate the ~~three and six months ended June 30, 2019,~~number of tests we ~~recognized $0.3 million and $0.8 million relating~~expect to ~~the coverage policy, respectively; $0.1 million and $0.4 million of this revenue was related~~deliver over a patient’s treatment cycle based on historical testing frequencies for patients by indication. These estimates are subject to ~~tests delivered in periods prior to the three and six months ended June 30, 2019, respectively.~~change as we develop more information about utilization over time. Any unrecognized revenue from the initial billable test is recorded as deferred revenue and is recognized as we deliver the remaining tests in a patient’s treatment cycle.

For research customers, contracts typically include an amount billed in advance of services (“upfront”) and subsequent billings as sample results are delivered to the customer. Upfront amounts received are recorded as deferred revenue, which we recognize as revenue upon satisfaction of performance obligations. We have identified 2 typical performance obligations under the terms of our research service contracts: sequencing services and related data analysis. We recognize revenue for both identified performance obligations as sample results are delivered to the customer.

We derive revenue by providing services through development agreements to biopharmaceutical customers who seek access to our immune medicine platform technologies. We generate revenues from the delivery of professional support activities pertaining to the use of our proprietary immunoSEQ and clonoSEQ services in the development of the respective customers’ initiatives. The transaction price for these contracts may consist of a combination of non-refundable upfront fees, separately priced sequencing fees, ~~progress based~~progress-based milestones and regulatory milestones. The development agreements may include single or multiple performance obligations, depending on the contract. For certain contracts, we may perform services to support the biopharmaceutical customers’ regulatory ~~submission~~submissions as part of their registrational trials. These services include regulatory support pertaining to our technology intended to be utilized as part of the submission, development of analytical plans for our sequencing data, participation on joint research committees and assistance in completing a regulatory submission. Generally, these services are not distinct within the context of the contract, and they are accounted for as a single performance obligation.

When sequencing services are separately priced customer options, we assess if a material right exists and, if not, the customer option to purchase additional sequencing services is not considered part of the contract. Except for any non-refundable upfront fees, the other forms of compensation represent variable consideration. Variable consideration related to ~~progress based~~progress-based and regulatory milestones is estimated using the most likely amount method, where variable consideration is constrained until it is probable that a significant reversal of cumulative revenue recognized will not occur. Progress milestones, such as the first sample result delivered or final patient enrollment in a customer trial, are customer dependent and are included in the transaction price when the respective milestone is probable of occurring. Milestone payments that are not within our customers’ control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. Determining whether regulatory milestone payments are probable is an area that requires significant judgment. In making this assessment, we evaluate ~~the~~ scientific, clinical, regulatory and other risks, ~~that must be managed,~~ as well as the level of effort and investment required to achieve the respective milestone.

The primary method used to estimate standalone selling price for performance obligations is the adjusted market assessment approach. Using this approach, we evaluate the market in which we sell our services and estimate the price that a customer in that market would be willing to pay for our services. We recognize revenue using either an input or output measure of progress that faithfully depicts performance on a contract, depending on the contract. The measure used is dependent on the nature of the service to be provided in each contract. Selecting the measure of progress and estimating progress to date requires significant judgment.

Deferred offering costs consist of fees and expenses incurred in connection with the anticipated sale of our common stock in the IPO, including the legal, accounting, printing and other IPO-related costs. Deferred offering costs of $4.8 million are capitalized and classified within restricted cash and other assets on the condensed balance sheet as of June 30, 2019.

We calculate basic net loss per share attributable to common shareholders by dividing the net loss attributable to common shareholders by the weighted-average number of shares of common stock outstanding for the period. The diluted net loss per share attributable to common shareholders is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period determined using the treasury stock method. For purposes of this calculation, common stock warrants, stock options and restricted stock units are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common shareholders, as their effect is anti-dilutive.

Prior to the closing of our initial public offering in July 2019 and the related conversion of our convertible preferred stock into common stock, we calculated our basic and diluted net loss per share attributable to common shareholders in conformity with the two-class method required for companies with participating securities. We ~~consider~~considered our convertible preferred stock to be participating securities. In the event a dividend ishad been declared or paid on common stock, holders of convertible preferred stock ~~are~~would have been entitled to a share of such dividend in proportion to the holders of common stock on an as-if converted basis. Under the two-class method, basic net loss per share attributable to common shareholders is calculated by dividing the net loss attributable to common shareholders by the weighted-average number of shares of common stock outstanding for the period. Net loss attributable to common shareholders is determined by allocating undistributed earnings between common and preferred shareholders. The diluted net loss per share attributable to common shareholders is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period determined using the treasury stock method. The net loss attributable to common shareholders was not allocated to the convertible preferred stock under the two-class method, as the convertible preferred stock ~~does~~did not have a contractual obligation to share in our losses. The diluted net loss per share attributable to common shareholders was computed by giving effect to all potential dilutive common stock equivalents outstanding for the period determined using the treasury stock method. For purposes of this calculation, convertible preferred stock, convertible preferred stock warrants, common stock warrants, stock options and ~~warrants to purchase common~~restricted stock ~~or convertible preferred stock are~~units were considered common stock equivalents but ~~have been~~were excluded from the calculation of diluted net loss per share attributable to common shareholders, as their effect iswas anti-dilutive.

In ~~March~~February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. ~~2016-09,~~ ~~Compensation—Stock Compensation~~ (Topic 718), intended to simplify the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statements of cash flows. This guidance also allowed for an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur. We adopted this guidance as of January 1, 2018 and elected to account for forfeitures as they occur. We utilized a modified retrospective transition method, recorded the cumulative impact of applying this guidance, and recognized a cumulative increase to additional paid-in capital and an increase to accumulated deficit of $0.1 million.

~~In January 2017, the FASB issued ASU No. 2017-04,~~ ~~Intangibles—Goodwill and Other~~ ~~(Topic 350):~~ ~~Simplifying the Test for Goodwill Impairment~~, intended to simplify the goodwill impairment test. Under the new guidance, goodwill impairment is measured by the amount by which the carrying value of a reporting unit exceeds its fair value, without exceeding the carrying amount of goodwill allocated to that reporting unit. This guidance is effective January 1, 2022 and is required to be adopted on a prospective basis, with early adoption permitted. We adopted this guidance as of January 1, 2018 and the adoption did not have any impact on our financial statements.

~~In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation~~ ~~(Topic 718):~~ ~~Improvements to Nonemployee Share-Based Payment Accounting~~, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The guidance is effective for us beginning in 2019, with early adoption permitted. We adopted the guidance effective January 1, 2019 and the adoption did not have any impact on our financial statements.

~~In February 2016, the FASB issued ASU No.~~ 2016-02, Leases (Topic 842) (“ASC 842”), intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheets and disclosing key information about leasing arrangements. ~~This~~We adopted the guidance is effective January 1, 2020 using the optional transition method described in ASU 2018-11, Leases (Topic 842) Targeted Improvements. Under the optional transition method, we recognized a cumulative-effect adjustment in the period of adoption. Prior period amounts were not adjusted and continue to be reported in accordance with the previous accounting under ASC 840, Leases (“ASC 840”).

In adopting the new standard, we utilized certain practical expedients available. These practical expedients include waiving reassessment of (1) whether any expired or existing contracts are or contain leases; (2) lease classification of expired or existing leases; and (3) initial direct costs for usexisting leases. We also elected to use hindsight in ~~fiscal years,~~determining the lease term and ~~interim periods within those fiscal years, beginning after December 15, 2019. Although~~in assessing impairment of our ROU assets. Furthermore, we have made a policy decision regarding our real estate leases not to separate nonlease components from lease components, to the extent they are fixed. We have also elected not to record on the balance sheet a lease that has a lease term of twelve months or less and does not contain a purchase option that we are ~~currently evaluating the~~reasonably certain to exercise.

The standard had a material impact ~~that adopting this guidance will have~~ on our ~~financial~~unaudited condensed balance sheets but did not have a material impact on our unaudited condensed statements ~~we believe the~~of operations or unaudited condensed statements of cash flows. The most significant ~~changes will be related to~~impact was the recognition of ~~the right-of-use~~$33.0 million and $39.7 million of operating lease ROU assets and ~~related~~liabilities, respectively, and the derecognition of a $36.6 million asset and corresponding liability previously recorded pursuant to build-to-suit lease accounting guidance under ASC 840, which resulted in an increase to retained earnings of $0.1 million. The operating lease ROU assets and liabilities ~~related~~recorded at adoption included the derecognition of $7.3 million of deferred rent recognized as of December 31, 2019, as well as a $0.5 million reclassification of tenant incentive receivables previously recognized in the prepaid expenses and other current assets line item on our balance sheet. Refer to Note 8 of the accompanying notes to our ~~operating leases on the balance sheets.~~unaudited condensed financial statements for additional information regarding leases.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade ~~receivables~~receivables. The expected credit losses are recorded through an allowance account that is deducted from the amortized cost basis of the financial asset, and the net carrying value of the financial asset is presented on the balance sheet. The guidance also amends the previous other-than-temporary impairment model for available-for-sale debt ~~securities. The~~securities by requiring the recognition of impairments relating to credit losses through an allowance account, limited to the difference between a security’s amortized cost basis and its fair value. Furthermore, the standard update removes the distinction between whether an impairment is temporary or other-than temporary. We adopted the guidance is effective ~~for us beginning in 2020, with early adoption permitted. Although we are currently evaluating~~January 1, 2020. Given the ~~impact that adopting this guidance prospectively will have on~~short-term nature of our ~~financial statements, we do not expect~~accounts receivable, the adoption as it relates to trade receivables did not have a ~~material~~significant impact on our unaudited condensed financial statements. Furthermore, impairment of available-for-sale debt securities as of the adoption date was determined to be due to factors other than credit loss; therefore, a credit allowance was not recognized.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other: Internal-Use Software (Subtopic 350-40), to provide additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement. We adopted this guidance effective January 1, 2020 on a prospective basis, and the adoption did not have any impact on our unaudited condensed financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which eliminates certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. Among other things, this guidance also clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. This guidance is effective for fiscal years beginning after December 15, ~~2019~~2020, and interim periods within those fiscal years. Early adoption is permitted, and the guidance is to be applied prospectively, except for certain amendments. We early ~~adoption of~~adopted the ~~amendments in this update are permitted. We do not expect~~guidance on January 1, 2020 and the adoption ~~of this guidance to~~did not have a material impact on our unaudited condensed financial statements.

On December 18, 2015, we entered into a translational development agreement with a biopharmaceutical customer for access to certain of our oncology immunosequencing research datasets, including full-time employee support, to accelerate the customer’s preclinical, nonclinical and clinical trial testing. Under the initial terms of the agreement we could be entitled to up to $40.0 million over a period of four years which does not include any separately negotiated research sequencing contracts. If the biopharmaceutical customer terminates the agreement prior to the end of the initial four-year research term for any reason other than a material uncured breach by us, then the biopharmaceutical partner has agreed to pay us $0.8 million. In May 2019, the agreement was subsequently amended to reduce the services provided, which in turn reduced the fourth year of eligible payments to $2.3 million.

We identified one performance obligation under this agreement, as the services were determined to be highly interrelated. We determined that any separately negotiated sequencing contracts are not performance obligations under the contract, as the contract did not contain any material rights related to such sequencing contracts. For the identified performance obligation, we assessed the work to be performed over the duration of the contract and determined that it is a consistent level of support throughout the period, and therefore revenue has been recognized straight-line over the contract term.

Revenue recognized from this translational development agreement, excluding separately negotiated research sequencing contracts, was $1.1 million and $2.5 million in the three months ended June 30, 2019 and 2018, respectively, and $1.1 million and $5.0 million in the six months ended June 30, 2019 and 2018, respectively.

In 2017, we entered into an agreement with a customer to provide services to accelerate its research initiatives. We identified one performance obligation under the agreement, as the services were determined to be highly interrelated. We determined that any separately negotiated sequencing contracts are not performance obligations under the contract, as the contract did not contain any material rights related to such sequencing contracts. Revenue recognized from this agreement, excluding sequencing revenue, was $0.1 million and $0.2 million in the three months ended June 30, 2019 and 2018, respectively, and $0.2 million and $0.3 million in the six months ended June 30, 2019 and 2018, respectively.

~~In 2017 and 2018, we~~We have entered into agreements with biopharmaceutical customers to further develop and commercialize clonoSEQ and the biopharmaceutical customers’ therapeutics. Under each of the agreements, we received or will receive non-refundable upfront payments and could receive substantial additional payments upon reaching certain progress milestones or achievement of certain regulatory milestones pertaining to the customers’ ~~therapeutic~~therapeutics and our clonoSEQ test.

Under the contracts, we identify performance obligations, which may include: ~~(i)~~(1) obligations to provide services supporting the customer’s regulatory submission activities as they relate to our clonoSEQ test; and ~~(ii)~~(2) sequencing services ~~for~~related to customer-provided samples for their regulatory submissions. The transaction price allocated to the respective performance obligations is estimated using an adjusted market assessment approach for the regulatory support services and a standalone selling price for the estimated immunosequencing services. At contract inception, we fully ~~constrained~~constrain any consideration related to the regulatory milestones, as the achievement of such milestones is subject to third-party regulatory approval and the customers’ own submission decision-making. We recognize revenue relating to the sequencing services as sequencing revenue over time using an output method based on the proportion of sample results delivered relative to the total amount of sample results expected to be delivered and when expected to be a faithful depiction of progress. We use the same method to recognize the regulatory support services. When an output method based on the proportion of sample results delivered is not expected to be a faithful depiction of progress, we utilize an input method based on estimates of effort completed using a cost-based model.

In the three and nine months ended September 30, 2020 and in the three and nine months ended September 30, 2019, we earned $2.5 million and ~~$0.6~~$2.0 million, respectively, upon the achievement of certain regulatory milestones by us and our respective customers’ therapeutics. All $2.5 million and $2.0 million was recognized as revenue within the respective periods, as we determined these amounts were consistent with our estimated standalone selling price and the respective performance obligations were complete.In total, we recognized $2.6 million and $3.1 million in development revenue related to these contracts induring the three and nine months ended ~~June~~September 30, ~~2019 and 2018,~~2020, respectively, and ~~$0.8~~$2.3 million and ~~$1.9~~$3.1 million induring the ~~six~~three and nine months ended ~~June~~September 30, 2019, ~~and 2018,~~ respectively.

As of ~~June~~September 30, ~~2019,~~2020, in future periods we could receive up to an additional ~~$115.0~~$313.5 million in milestone payments if certain regulatory approvals are obtained by our customers’ therapeutics in connection with MRD data generated from our clonoSEQ test.

In December 2018, we entered into a worldwide collaboration and license agreement (“Genentech Agreement”) with Genentech ~~Inc. (“Genentech”)~~ to leverage our capability to develop cellular therapies in oncology. Subsequent to receipt of regulatory approval in January 2019, we received a non-refundable, upfront payment of $300.0 million in February 2019 and may be eligible to receive more than $1.8 billion over time, including payments of up to $75.0 million upon the achievement of specified regulatory milestones, up to $300.0 million upon the achievement of specified development milestones and up to $1,430.0 million upon the achievement of specified commercial milestones. In addition, we are separately able to receive tiered royalties at a rate ranging from the mid-single digits to the mid-teens on aggregate worldwide net sales of products arising from the strategic collaboration, subject to certain reductions, with aggregate minimum floors. Under the agreement, we are pursuing two product development pathways for novel T cell immunotherapies in which Genentech intends to use T cell receptors (“TCRs”) screened by our immune medicine platform to engineer and manufacture cellular medicines:

Under the terms of the agreement, we granted Genentech exclusive worldwide licenses to develop and commercialize TCR-based cellular therapies in the field of oncology, including licenses to existing shared antigen data packages. Additionally, Genentech has the right to determine which product candidates to further develop for commercialization purposes. We determined that this arrangement meets the criteria set forth in ASC Topic 808, Collaborative Arrangements (“ASC 808”), because both parties are active participants in the activity and are exposed to significant risks and rewards depending on the activity’s commercial failure or success. Because ASC 808 does not provide guidance on how to account for the activities under a collaborative arrangement, we applied the guidance in ASC 606 to account for the activities related to the Genentech ~~collaboration.~~Agreement.

In applying ASC 606, we identified the following performance obligations at the inception of the agreement:

We determined that none of the licenses, research and development services or obligations to participate on various committees were distinct within the context of the contract, given such rights and activities were highly interrelated and there was substantial additional research and development to further develop the licenses. We considered factors such as the stage of development of the respective existing antigen data packages, the subsequent development that would be required to both identify and submit a potential target for investigational new drug acceptance under both product pathways and the variability in research and development pathways given Genentech’s control of product commercialization. Specifically, under the agreement, Genentech is not required to pursue development or commercialization activities pertaining to both product pathways and may choose to proceed with one or the other, as opposed to both. Accordingly, we determined that all of the identified performance obligations were attributable to one general performance obligation, which is to further the development of our TCR-specific platform, including data packages, and continue to make our TCR identification process available to Genentech to pursue either product pathway.

Separately, we have a responsibility to Genentech to enter into a supply and manufacturing agreement for ~~patient specific~~patient-specific TCRs as it pertains to any Personalized Product therapeutic. We determined this was an option right of Genentech should they pursue commercialization of a Personalized Product therapy. Because of the uncertainty ~~as a result of~~resulting from the early stage of development, the novel approach of our collaboration with Genentech and our rights to future commercial milestones and royalty payments, we determined that this option right was not a material right that should be accounted for at inception. As such, we will account for the supply and manufacturing agreement when entered into between the parties.

We determined the initial transaction price shall be made up of only the $300.0 million upfront, non-refundable payment, as all potential regulatory and development milestone payments were probable of significant revenue reversal asgiven their achievement was highly dependent on factors outside our control. As a result, these payments were fully constrained and were not included in the transaction price as of ~~June~~September 30, ~~2019.~~2020. We excluded the commercial milestones and potential royalties from the transaction price, as those items relate predominantly to the license rights granted to Genentech and will be assessed when and if such events occur.

As there are potential substantive developments necessary, which Genentech may be able to direct, we determined that we would apply a proportional performance model to recognize revenue for our performance obligation. We measure proportional performance using an input method based on costs incurred relative to the total estimated costs of research and development efforts to pursue both the Shared Product and Personalized Product pathways. We currently expect to recognize the revenue over a period of approximately seven to eight years from the effective date. This estimate of the research and development period considers pursuit options of development activities supporting both the Shared Product and the Personalized Product, but may be reduced or increased based on the various activities as directed by the joint committees, decisions made by Genentech, regulatory feedback or other factors not currently known.

We recognized revenue of ~~approximately $8.5~~$12.3 million and ~~$14.8~~$11.4 million ~~for~~during the three ~~and six~~ months ended ~~June~~September 30, 2020 and 2019, respectively, and $35.9 million and $26.2 million during the nine months ended September 30, 2020 and 2019, respectively, related to the Genentech ~~collaboration.~~Agreement. Costs related to the Genentech ~~collaboration~~Agreement are included in research and development expenses.

The following ~~table sets~~tables set forth the fair value of financial assets as of September 30, 2020 and ~~liabilities~~December 31, 2019 that were measured at fair value on a recurring basis (in thousands):

Level 1 securities include highly liquid money market funds, for which we measure the fair value based on quoted prices in active markets for identical assets or liabilities. Level 2 securities consist of U.S. government debt securities, ~~U.S. government agency bonds,~~ commercial paper and corporate bonds, and are valued based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. Of the Level 2 commercial paper and U.S. government debt and agency securities balances, $6.0 million and $4.0 million, respectively, is recorded as cash and cash equivalents. Level 3 liabilities that are measured at fair value on a recurring basis consist of a convertible preferred stock warrant liability. During the six months ended June 30, 2019, we recognized $2.3 million of expense related to the revaluation of the convertible preferred stock warrant liability in interest and other income, net.

~~The fair value of the convertible preferred stock warrant liability is estimated using the Black-Scholes option-pricing model. Certain inputs were utilized in the option-pricing model as follows:~~

Available-for-sale investments consisted of the following as of ~~June~~September 30, ~~2019~~2020 and December 31, ~~2018~~2019 (in thousands):

All the commercial paper, U.S. government debt and agency securities and corporate bonds designated as short-term marketable securities have an effective maturity date that is equal to ~~Unaudited Condensed Financial Statements (Continued)~~or less than one year from the respective balance sheet date. Those that are designated as long-term marketable securities have an effective maturity date that is more than one year from the respective balance sheet date.

Accrued interest receivable is excluded from the amortized cost and estimated fair value of our marketable securities. Accrued interest receivables of $1.4 million and $2.2 million were presented separately within the prepaid expenses and other current assets line item on our unaudited condensed balance sheet as of September 30, 2020 and on our balance sheet as of December 31, 2019, respectively. We have made an accounting policy election to not measure an allowance for credit losses for accrued interest receivables.

The following table presents the gross unrealized holding losses and fair value for investments in an unrealized loss position, and the length of time that individual securities have been in a continuous loss position, as of ~~June~~September 30, ~~2019~~2020 (in thousands):

We ~~evaluated~~periodically review our ~~securities for other-than-temporary impairment and considered the decline in market value for the~~available-for-sale securities to ~~be primarily attributable~~assess for credit impairment. Some of the factors considered in assessing impairment include the extent to ~~current economic~~which the fair value is less than the amortized cost basis, adverse conditions related to the security, an industry or geographic area, changes to security ratings or sector credit ratings and other relevant market ~~conditions. It is~~data.

As of September 30, 2020, we did not intend, nor were we more likely than not ~~that we will~~to be required, to sell ~~the securities, and we do not intend to do so prior to~~our available-for-sale investments before the recovery of ~~the~~their amortized cost ~~basis.~~basis, which may be maturity. Based on ~~this analysis, these marketable securities were not considered~~our assessment, we concluded all impairment as of September 30, 2020 to be ~~other-than-temporarily impaired~~due to factors other than credit loss, such as changes in interest rates. A credit allowance was not recognized and the impairment of ~~June 30, 2019.~~

~~All the corporate debt, U.S. government and agency~~our available-for-sale securities ~~and commercial paper have an effective maturity date of less than one year.~~was recorded in other comprehensive loss.

There have been no0 changes in the carrying amount of goodwill since its recognition in 2015.

Intangible assets subject to amortization as of ~~the dates presented~~September 30, 2020 and December 31, 2019 consisted of the following (in thousands):

The developed technology was acquired in connection with our acquisition of Sequenta, Inc. (“Sequenta”) in 2015. The remaining balance of the acquired technology and the purchased intellectual property is expected to be amortized over the next ~~approximately 7.5~~6.3 years.

As of ~~June~~September 30, ~~2019,~~2020, expected future amortization expense for intangible assets was as follows (in thousands) ~~(unaudited)~~:

Deferred revenue by revenue classification as of September 30, 2020 and December 31, 2019 was as follows (in thousands):

Deferred revenue from our Genentech ~~deferred revenue~~Agreement represents ~~$45.0~~$59.9 million and ~~$240.2~~$169.1 million of the current and non-current development deferred revenue balances, respectively, at ~~June~~September 30, 2020 and $48.1 million and $216.8 million of the current and non-current development deferred revenue balances, respectively, at December 31, 2019. In general, we expect that the current amounts will be recognized as revenue within 12 months and the ~~long-term~~non-current amounts will be recognized as revenue over a period of approximately ~~seven~~six to ~~eight~~seven years. This period of time represents an estimate of the research and development period to develop cellular therapies in oncology, which may be reduced or increased based on the various development activities.

Changes in deferred revenue during the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2020 were as follows (in thousands):

As of ~~June~~September 30, ~~2019, $4.4~~2020, $41.9 million was recognized as revenue that was included in the deferred revenue balance at December 31, ~~2018.~~2019. As a result of cancelled customer sequencing contracts, we recognized ~~$0.8~~$0.5 million and $0.9 million of sequencing revenue during the ~~six~~three and nine months ended ~~June~~September 30, ~~2019.~~2020, respectively.

We have ~~entered into various non-cancelable~~operating lease agreements for ~~our office and laboratory spaces.~~

~~In July 2011, we entered into a non-cancelable lease agreement with a minority shareholder for~~the laboratory and office ~~space~~facilities that we occupy in Seattle, ~~Washington. The~~Washington and South San Francisco, California, as well as server space. Our leases include an amendment to our previous lease terms were subsequently amended multiple times, most recently in June 2016. The lease terminates in June 2023. The lease also requires us to pay additional amounts for operating and maintenance expenses.

~~In October 2016, we entered into an agreement to sublease certain laboratory and office space~~ in South San Francisco, ~~California. The lease~~California to rent 19,867 additional square feet, which commenced ~~in October 2016 and terminated in March 2019. The lease required us to pay additional amounts for operating and maintenance expenses.~~

~~In April 2018, we entered into a lease agreement to lease additional space in South San Francisco, California. The lease term is through March 2026~~during the nine months ended September 30, 2020 and provides for ~~one five-year option. We will be responsible for our share~~a $0.6 million tenant improvement allowance. As of ~~allocable operating expenses, tax expenses~~September 30, 2020, we were not party to any finance leases. Our leases have remaining terms of 1.6 years to 11.8 years, and ~~utilities cost during the duration~~include options to extend certain of the ~~lease term. In connection with the lease, the landlord funded agreed-upon improvements prior~~leases up to the lease commencement date of December 12, 2018. The landlord was solely responsible for the $2.4 million cost of such improvements, which we recognized as a leasehold improvement asset that depreciates beginning from the commencement date to the initial lease term,10.0 years and ~~a corresponding leasehold incentive obligation, which is amortized over the life~~terminate certain of the ~~lease.~~leases after 3.0 years. We adjust lease terms for these options only when it is reasonably certain we will exercise these options. As of September 30, 2020, it was reasonably certain that we would exercise our option to terminate 2 of our leases after 3.0 years.

Other information related to our operating leases as of September 30, 2020 was as follows:

The following table reconciles our undiscounted operating lease cash flows to our operating lease liabilities as of September ~~to Unaudited Condensed Financial Statements (Continued)~~

~~As of June~~ 30, ~~2019, future minimum lease payments, exclusive of operating and maintenance costs, were as follows~~2020 (in thousands) ~~(unaudited)~~:

Operating lease expense was $1.4 million and $3.7 million for the three and nine months ended September 30, 2020, respectively. Variable lease expense for operating leases was $0.7 million and $1.8 million for the three and nine months ended September 30, 2020, respectively.Rent ~~expenses,~~expense recognized under ASC 840, inclusive of operating and maintenance costs, ~~were $1.1~~was $1.3 million and ~~$0.9~~$3.6 million for the three and nine months ended ~~June~~September 30, 2019, ~~and 2018, respectively, and $2.3 million and~~respectively.

Cash paid for amounts included in the measurement of lease liabilities for the nine months ended September 30, 2020 was $1.8 million, net of $1.8 million of cash received for tenant improvement allowances.

In August 2019, we entered into an agreement to rent 100,000 square feet in a to-be-constructed building in Seattle, Washington. In connection with the lease, we entered into a $2.1 million letter of credit with one of our existing financial institutions. Due to our significant involvement during the construction process of the leased building, we qualified as the deemed owner of the building under build-to-suit lease accounting guidance that proceeded ASC 842. The resulting asset and long-term financing obligation recorded on our balance sheet for the ~~six months ended June~~cost of the building was derecognized upon adoption of ASC 842. As of September 30, ~~2019~~2020, we have incurred $2.4 million in certain tenant improvement costs relating to the to-be-constructed building, which are presented within the other long-term liabilities line item on our unaudited condensed balance sheet as of September 30, 2020. These costs will be reimbursed by the landlord. The related receivable of $2.4 million is presented within the prepaid expenses and ~~2018, respectively.~~other current assets line item on our unaudited condensed balance sheet as of September 30, 2020.

This lease will be assessed for classification and a lease liability and corresponding ROU asset will be recorded upon lease commencement. Future non-cancellable undiscounted lease payments total $89.8 million, payable over the lease term of 12.7 years.

We are subject to claims and assessments from time to time in the ordinary course of business. We will accrue a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. We are not currently party to any material legal proceedings.

In the ordinary course of business, we may provide indemnification of varying scope and terms to vendors, lessors, customers and other parties with respect to certain matters including, but not limited to, losses arising out of breach of our agreements with them or from intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with members of our ~~Board~~board of ~~Directors~~directors and certain of our executive officers that will require us to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments that we could be required to make under these indemnification agreements is, in many cases, unlimited. We have not incurred any material costs as a result of such indemnifications and are not currently aware of any indemnification claims.

~~Convertible preferred stock at June 30, 2019 consisted of the following (in thousands, except share data) (unaudited):~~

~~(1) Includes vested Series E-1 convertible preferred stock options of $0.7 million which are not included in the shares issued and outstanding.~~

Immediately prior to the completion of our initial public offering on July 1, 2019, 93,039,737 shares of convertible preferred stock then outstanding converted into an equivalent number of shares of common stock. As of September 30, 2020, 0 shares of convertible preferred stock were outstanding.

We are authorized to issue ~~131,000,000~~10,000,000 shares of preferred stock, par value $0.0001 per share. As of September 30, 2020, 0 shares of preferred stock were outstanding.

We are authorized to issue 340,000,000 shares of common stock. Our common stock has a par value of $0.0001, no preferences or privileges and is not redeemable. Holders of our common stock are entitled to ~~one~~1 vote for each share of common stock held. The holders of record of outstanding shares of common stock shall be entitled to receive, when, as and if declared, out of funds legally available, such cash and other dividends as may be declared from time to time. As of September 30, 2020, we had 136,392,256 shares of common stock outstanding.

WeAs of September 30, 2020, we have reserved shares of common stock for the ~~following as of June 30, 2019 (unaudited):~~following:

Our 2019 Equity Incentive Plan (“2019 Plan”) provides for annual increases in the number of shares that may be issued under the 2019 Plan on January 1, 2020 and on each subsequent January 1, thereafter, by a number of shares equal to the lesser of (a) 5% of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or (b) an amount determined by our board of directors.

Furthermore, our Employee Stock Purchase Plan (“ESPP”) provides for annual increases in the number of shares available for issuance under our ESPP on January 1, 2020 and on each January 1, thereafter, by a number of shares equal to the smallest of (a) 1% of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or (b) an amount determined by our board of directors.

On January 1, 2020, our 2019 Plan and ESPP reserves automatically increased by 6,261,907 shares and 1,252,381 shares, respectively.

In ~~connection with two transactions in 2012 and 2013,~~2014, we granted warrants to purchase up to 55,032 shares of common stock. The warrants are exercisable at any time for a period of ten years from the date of issuance at a weighted-average exercise price of $0.37, except in the case ofissued a warrant to purchase ~~20,000~~56,875 shares of ~~common~~Series C convertible preferred stock at an exercise price of ~~$0.45 per share that would have expired if unexercised~~$2.64. The warrant is exercisable for a period of seven years from the date of issuance. Immediately prior to and in connection with the ~~closing~~completion of our ~~IPO.~~initial public offering on July 1, 2019, this convertible preferred stock warrant, which was previously recorded as a financial liability, was converted to a warrant to purchase the same number of shares of common stock. Upon conversion, the financial liability was reclassified to the additional paid-in capital line item on our unaudited condensed balance sheet. The warrant to purchase 56,875 shares of common stock remains outstanding as of September 30, 2020.

We adopted an equity incentive plan in 2009 (“2009 Plan”) that provides for the issuance of incentive and nonqualified common stock options, and other share-based awards for employees, directors and consultants. Under the 2009 Plan, the option exercise price for incentive and nonqualified stock options may not be less than the fair market value of our common stock at the date of grant as determined by our Board of Directors. Options expire no later than ten years from the grant date, and vesting is established at the time of grant. As of June 30, 2019, we have 20,837,404 shares of common stock available for issuance under the 2009 Plan.

~~A summary of our option activity during the six months ended June 30, 2019 is as follows:~~

In connection with our acquisition of Sequenta in January 2015, we assumed Sequenta’s Equity Incentive Plan (“2008 Plan”), including all outstanding options and shares available for future issuance under the 2008 Plan, which, ~~are~~prior to the completion of our initial public offering, were all exercisable for Series E-1 convertible preferred stock. Upon completion of our initial public offering in July 2019, the outstanding options were exercisable for common stock. NaN shares are available for future issuance under this plan and 0 equity awards are outstanding under this plan as of September 30, 2020.

We adopted an equity incentive plan in 2009 (“2009 Plan”) that provided for the issuance of incentive and nonqualified common stock options and other share-based awards for employees, directors and consultants. Under the 2009 Plan, the option exercise price for incentive and nonqualified stock options were not to be less than the fair market value of our common stock at the date of grant. Options granted under this plan expire no later than ten years from the grant date and vesting was established at the time of grant. Pursuant to the terms of the 2019 Plan, any shares subject to outstanding options originally granted under the 2009 Plan that terminate, expire or lapse for any reason without the delivery of shares to the holder thereof shall become available for issuance pursuant to awards granted under the 2019 Plan. While 0 shares are available for future issuance under the 2009 Plan, it continues to govern outstanding equity awards granted thereunder.

The 2019 Plan was approved by our shareholders on June 13, 2019 and, pursuant to the resolutions adopted by our board of directors, became effective immediately prior to the closing of our initial public offering. The 2019 Plan provides for the issuance of awards in the form of options and other share-based awards for employees, directors and consultants. Under the 2019 Plan, the option exercise price per share shall not be less than the fair market value of a share of stock on the grant date of the option, as defined by the 2019 Plan, unless explicitly qualified under the provisions of Section 409A or Section 424(a) of the Internal Revenue Code of 1986. Additionally, unless otherwise specified, options granted under this plan expire no later than ten years from the grant date and vesting is established at the time of grant. Except for certain option grants made to non-employee directors, stock options granted under the 2019 Plan generally vest over a four-year period, subject to continuous service through each applicable vesting date. As of September 30, 2020, we have authorized 22,102,754 shares of common stock for issuance under the 2019 Plan.

Changes in shares available for grant during the nine months ended September 30, 2020 were as follows:

Stock option activity under the 2008 Plan, 2009 Plan and 2019 Plan during the nine months ended September 30, 2020 was as follows:

The weighted-average remaining contractual life for options outstanding at September 30, 2020 was 7.1 years. The weighted-average remaining contractual life for vested and exercisable options outstanding at September 30, 2020 was 5.9 years.

Of the $15.5 million proceeds from exercise of stock options included on our unaudited condensed statements of cash flows for the nine months ended September 30, 2020, $0.5 million related to ~~Unaudited Condensed Financial Statements (Continued)~~

~~A summary of our Series E-1 convertible preferred stock option activity~~options exercised prior to but settled during the ~~six~~nine months ended ~~June~~September 30, 2020. As of September 30, 2020, $0.4 million was included in the prepaid expenses and other current assets line item on our unaudited condensed balance sheet for unsettled cash proceeds related to options exercised.

As of December 31, 2019, ~~is as follows:~~4,500 shares of restricted stock units (“RSUs”), with a weighted-average grant date fair value per share of $41.63, were nonvested and outstanding. We granted 50,000 shares of RSUs, with a weighted-average grant date fair value per share of $28.10, during the nine months ended September 30, 2020. During the nine months ended September 30, 2020, 4,500 shares of RSUs, with a weighted-average grant date fair value per share of $41.63, vested. As of September 30, 2020, 50,000 shares of RSUs, with a weighted-average grant date fair value per share of $28.10, remained nonvested and outstanding.

Fair Value of Options ~~Granted~~and Grant Date Fair Value of Restricted Stock Units

The estimated fair value of options granted during the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2020 and ~~2018~~2019 was estimated using the Black-Scholes option-pricing model with the following ~~weighted-average assumptions for our 2009 Plan:~~assumptions:

The weighted-average volatility used in the fair value calculations of options granted during the nine months ended September 30, 2020 and 2019 was 71.2% and 68.0%, respectively.

The determination of the fair value of stock options on the date of grant using a Black-Scholes option-pricing model is affected by the estimated fair value of our common stock, as well as assumptions regarding a number of variables that are complex, subjective and generally require significant judgment to determine. The valuation assumptions were determined as follows:

Fair value of common stock—~~The~~Prior to the closing of our initial public offering, the grant date fair value of our common stock ~~has been~~was determined ~~by our Board of Directors~~ with input from ~~management. The grant date fair value of the common stock was determined~~management using valuation methodologies which ~~utilize~~utilized certain assumptions, including probability weighting of events, volatility, time to liquidation, a risk-free interest rate and an assumption for a discount for lack of marketability (Level 3 inputs). In determining the fair value of ~~the~~our common stock, the methodologies used to estimate the enterprise value were performed using methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as ~~Compensation.~~Compensation. For valuations of grants made after the closing of our ~~IPO, our board of directors plans to determine~~initial public offering, the fair value of each share of common stock is based on the closing price of our common stock on the date of grant, or other relevant determination date, as reported on The Nasdaq Global Select Market.

Expected term—The expected ~~life~~term of options granted to employees and non-employee directors is determined using the “simplified” method, as illustrated in ASC Topic 718, Compensation—Stock Compensation, as we do not have sufficient exercise history to determine a better estimate of expected term. Under this approach, the expected term is ~~presumed to be~~based on the ~~average~~midpoint between the vesting date and the end of ~~the weighted-average vesting term and~~ the contractual term of the option.

Risk-free interest rate—We utilize a risk-free interest rate in the option valuation model based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected ~~term~~terms of the options.

Expected volatility—As we do not have sufficient trading history for our common stock, the expected volatility is based on the historical volatility of our publicly traded industry peers utilizing a period of time consistent with our estimate of the expected term.

Expected dividend yield—We do not anticipate paying any cash dividends in the foreseeable future and, therefore, use an expected dividend yield of ~~zero~~0 in the option valuation model.

The grant date fair value of RSUs granted after the closing of our initial public offering is based on the closing price of our common stock on the date of grant, or other relevant determination date, as reported on The Nasdaq Global Select Market.

Share-based compensation expense of ~~$3.3~~$6.5 million and ~~$2.4~~$3.3 million was recognized during the three months ended ~~June~~September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~$6.4~~$17.5 million and ~~$5.6~~$9.7 million was recognized during the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, ~~and 2018,~~ respectively.

The compensation costs related to stock options and RSUs for the three and nine months ended September 30, 2020 and 2019, respectively, are included inon our ~~unaudited condensed~~ statements of operations as follows (in thousands):

At ~~June~~September 30, ~~2019,~~2020, unrecognized share-based compensation expense related to unvested stock options was ~~$33.2~~$75.5 million, which is expected to be recognized over a remaining weighted-average period of ~~3.16~~3.1 years. Additionally, at September 30, 2020, unrecognized share-based compensation expense related to unvested RSUs was $1.2 million, which is expected to be recognized over a remaining weighted-average period of 3.5 years.

The effective tax expense was $0.7 million and the effective tax benefit was $1.1 million for the three and nine months ended September 30, 2020, respectively. There was 0 effective tax benefit for the year ended December 31, 2019.

We calculate our tax provision by applying a forecasted annual effective tax rate (“AETR”) against year-to-date pre-tax loss, and taking into account certain discrete items, primarily related to the exercise activity of stock options, in the quarter in which they occur. We recorded an income tax expense for the three months ended September 30, 2020 and an income tax benefit for the nine months ended September 30, 2020 because the discrete benefit from option exercises was greater than the year-to-date AETR tax expense. We do not expect to recognize any tax expense or benefit on a full year basis, inclusive of discrete items.

We file income tax returns in the U.S. federal jurisdiction and various U.S. state jurisdictions. Significant disputes may arise with authorities involving issues of the timing and amount of deductions, the use of tax credits and allocations of income and expenses among various tax jurisdictions because of differing interpretations of tax laws, regulations and the relevant facts. We believe our accrual for income tax liabilities is appropriate based on past experience, interpretations of tax law and judgments about potential actions by tax authorities; however, due to the complexity of the provision for income taxes, the ultimate resolution of any tax matters may result in payments greater or less than amounts accrued. Because of net operating loss carryforwards, substantially all tax years since inception remain open to federal and state tax examination.

On March 27, 2020, the U.S. enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) to provide emergency economic stimulus in light of the effects of COVID-19. While the CARES Act provides extensive tax changes, some of the more significant provisions include removing certain limitations on utilization of net operating losses, increasing the loss carryback period for certain losses to five years and increasing the ability to deduct interest expense, as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act of 2017 (“TCJA”). We are still evaluating the CARES Act, but do not anticipate a significant impact to our income tax provision.

The following table sets forth the computation of the basic and diluted net loss per share attributable to common shareholders for the three and nine months ended September 30, 2020 and 2019, respectively (in thousands, except ~~shares~~share and per share amounts):

Since we were in a loss position for all periods presented, basic net loss per share attributable to common shareholders is the same as diluted net loss per share attributable to common shareholders, as the inclusion of all potential shares of common stock outstanding would have been anti-dilutive. The following weighted-average common stock equivalents were excluded from the calculation of diluted net loss per share attributable to common shareholders for the ~~periods presented,~~three and nine months ended September 30, 2020 and 2019, respectively, as they had an anti-dilutive effect:

On July 1, 2019, we completed our IPO. For details regarding this event, including the automatic conversion of all shares of our convertible preferred stock into common stock, our amended and restated articles of incorporation and bylaws and our 2019 Plan, please refer to Note 1 – Organization and Description of Business – Initial Public Offering.

In August 2019, we entered into an operating lease to rent 100,000 square feet in a to-be-constructed building in Seattle, Washington. Shell construction is expected to be completed in 2020. The lease term commences on the date that the landlord delivers the premises to us for construction of certain tenant improvements. Rent obligations commence 10 months thereafter, and the lease term ends 142 months form the date rent commences, subject to our option to twice extend the lease for five years. The lease is cancellable under certain circumstances if the landlord fails to deliver the premises to us by May 1, 2021. We plan to occupy the new building in 2021, once interior construction is finished. The lease also requires us to pay additional amounts for operating and maintenance expenses. In connection with the new lease, we also entered into a letter of credit of $2.1 million with one of our existing financial institutions.

Furthermore, in August 2019, we amended the lease for our current headquarters in Seattle, Washington to expand the size of the existing premises by approximately 8,400 square feet. Rent obligations of the expanded premises commence four months after the landlord delivers the premises to us for construction of certain tenant improvements, and the lease term for both the existing premises and the expanded premises ends 142 months after the commencement date of the new lease mentioned above, subject to our option to twice extend the lease for five years. If the new lease does not commence, the lease term for the existing premises and the expanded premises ends March 31, 2024.

Expected future minimum payments for the leased spaces, exclusive of operating and maintenance costs and assuming attainment of our target commencement dates, are as follows (in thousands) (unaudited):

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed financial statements and related notes and the other financial information appearing elsewhere in this report, as well as the other financial information we file with the SEC from time to time. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and ~~uncertainties.~~ uncertainties relating to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements.

As a result of many factors, including those factors set forth in the “Risk Factors” section of this report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

We are advancing the field of immune-driven medicine by harnessing the inherent biology of the adaptive immune system to transform the diagnosis and treatment of disease. Our immune medicine platform applies our proprietary technologies to read the diverse genetic code of a patient’s immune system and understand precisely how it detects and treats disease in that patient. We capture these insights in our dynamic clinical immunomics database, which is underpinned by computational biology and machine learning, and use them to develop and commercialize clinical products and services that we are tailoring to each individual patient. We have two commercial products and services and a robust pipeline of clinical products and services that we are designing to diagnose, monitor and enable the treatment of diseases such as cancer, autoimmune conditions and infectious diseases.

Our immune medicine platform is the foundation for our expanding suite of products and services. The cornerstone of our platform and core immunosequencing product, immunoSEQ, serves as our underlying research and development engine and generates revenue from academic and biopharmaceutical customers. Our first clinical diagnostic product, clonoSEQ, is the first test authorized by the FDA for the detection and monitoring of MRD in patients with MM and ALL and is being validated for patients with other blood cancers. Leveraging our collaboration with Microsoft Corporation (“Microsoft”) to create the TCR-Antigen Map, we are also developing a clinical diagnostic product, T-Detect (previously referred to as immunoSEQ ~~Dx,~~Dx), that may enable early detection of many diseases from a single blood test. We are currently running our first clinical validation study in acute Lyme disease following proof of concept in 2019. Our therapeutic product candidates, being developed under the Genentech Agreement, leverage our platform to identify specific immune cells to develop into cellular therapies in oncology.

Since our inception, we have devoted a majority of our resources to research and development activities to develop our immune medicine platform, which enables the delivery of our products and services for life sciences research, clinical diagnostics and drug discovery customers.

For our life science research customers, we provide two categories of products and services using immunoSEQ, our core sequencing and immunomics tracking technology. First, we provide immunosequencing services, the revenue from which we record as sequencing revenue. Second, we provide certain research customers professional support, for which we may receive payments upon those customers achieving specified milestones. We record these support activities as development revenue.

For our clinical diagnostics customers, we sell our clonoSEQ diagnostic tests, which include our immunosequencing services and are thus recorded as sequencing revenue. In the future, we intend to sell other diagnostics products and services, which we also expect to record as sequencing revenue.

For our current drug discovery collaborator, Genentech, we screen, identify and characterize TCRs in support of our collaboration. We record revenue from this collaboration as development revenue.

Historically, we have sold immunoSEQ as a fee-for-service offering to academic centers and biopharmaceutical customers and further deepened those relationships over time by supporting their development initiatives. These research offerings have comprised the ~~vast~~ majority of our revenue to date, although our business is pursuing broader opportunities. As we continue to expand the use of our clonoSEQ diagnostic tests, develop and commercialize ~~immunoSEQ Dx~~T-Detect and develop and commercialize therapeutic product candidates with our drug discovery collaborator, we expect our mix of revenue to shift to clinical products and services, which we believe will become our largest sources of revenue.

We are actively pursuing opportunities to deepen our relationships with current customers and initiate relationships with new customers. We have an experienced, specialty salesforce that is targeting department heads, laboratory directors, principal investigators, core facility directors, clinicians, payors and research scientists and pathologists at leading academic institutions, biopharmaceutical companies, research institutions and contract research organizations. As MRD assessment becomes standard practice for patient management across a range of blood cancers, we believe it will be essential for clinicians and patients to have access to a highly accurate, sensitive and standardized MRD assessment tool. We are focused on establishing and maintaining collaborative relationships with payors, developing health economic evidence and building billing and patient access infrastructure to expand reimbursement coverage for our clinical diagnostics. We continue to seek expanded coverage of our clonoSEQ diagnostic test and, in 2019, we successfully expanded coverage through contractual agreements or positive medical policies with Medicare and several of the largest national private health insurers in the United States.

We generated revenue of ~~$22.1~~$26.3 million and ~~$34.8~~$68.2 million for the three and ~~six~~nine months ended ~~June~~September 30, ~~2019,~~2020, respectively, and ~~$11.6~~$26.1 million and ~~$21.3~~$60.9 million for the three and ~~six~~nine months ended ~~June~~September 30, ~~2018,~~2019, respectively. Our net losses were ~~$15.7~~$36.7 million and ~~$34.0~~$101.7 million for the three and ~~six~~nine months ended ~~June~~September 30, ~~2019,~~2020, respectively, and ~~$12.5~~$14.0 million and ~~$24.9~~$48.0 million for the three and ~~six~~nine months ended ~~June~~September 30, ~~2018.~~2019, respectively. We have funded our operations to date principally from the sale of convertible preferred stock and common stock and, to a lesser extent, sequencing and development revenue. As of ~~June~~September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we had cash, cash equivalents and marketable securities of ~~$423.0~~$851.5 million and ~~$165.0~~$682.3 million, respectively.

In ~~December 2018,~~March 2020, we ~~entered into~~extended our collaboration with Microsoft to decode the ~~Genentech Agreement pursuant~~adaptive immune response and pursue a diagnostic signal for COVID-19. In the second quarter of 2020, we confirmed a clinical signal for the detection of the virus that causes COVID-19, called SARS-CoV-2. We are actively exploring T-Detect’s ability to detect the TCR response to the virus and believe that quantifying virus-specific T cells may enable new diagnostic applications and inform our ability to assess immunity and response to vaccines or other drugs in development. As part of this effort, we initiated the ImmuneCODE program to collect, analyze and publicize data about the TCRs specific to SARS-CoV-2. We continue to collect samples from our own prospective study, ImmuneRACE, and participating institutions around the world that are interested in contributing. We are making all of the sequencing data publicly available in our ImmuneCODE database, which was launched in June 2020.

In August 2020, we launched immunoSEQ T-MAP COVID, a proprietary research product and data analysis service to measure the T cell immune response to vaccines being developed by third parties and track the persistence of that response over time. In November 2020, we announced plans to launch T-Detect COVID, a T cell-based clinical diagnostic product for COVID-19.

For a discussion of the risks presented by the COVID-19 pandemic, including risks to our results of operations and inherent in development of new products and services related to the pandemic, see the “Risk Factors” section of this report.

In July 2020, we completed an underwritten public offering of our common stock in which we issued and sold 7,200,000 shares of common stock at a public offering price of $40.00 per share. We received ~~a $300.0~~$271.8 million ~~initial upfront payment~~ in ~~February 2019, may be eligible to receive approximately $1.8 billion over time, including payments upon achievement of specified development, regulatory~~net proceeds, after deducting underwriting discounts and ~~commercial milestones, and may receive additional royalties on sales of products commercialized under this agreement.~~net offering expenses payable by us.

We derive our revenue from two sources: ~~(i)~~(1) sequencing revenue and ~~(ii)~~(2) development revenue.

Sequencing revenue. Sequencing revenue reflects the amounts generated from providing ~~sequencing services through immunoSEQ to research customers and from providing~~ testing services through clonoSEQ to clinical and research customers and from providing sequencing services through immunoSEQ to research customers.

For our clinical customers, we derive revenue from providing our clonoSEQ test report to ordering physicians. We bill medical institutions and commercial and government payors based on tests delivered to ordering physicians. Amounts paid for clonoSEQ diagnostic tests by medical institutions and commercial and government payors vary based on respective reimbursement rates and patient responsibilities, which may differ from our targeted list price. To date, the majority of our clonoSEQ diagnostic test revenue has been received from medical institutions. We recognize clinical revenue by evaluating customer payment history, contracted reimbursement rates, if applicable, and other adjustments to estimate the amount of revenue that is collectible. Until 2019, we did not have reimbursement available to us through any government payors for clonoSEQ.

For our clonoSEQ coverage under Medicare, we bill an episode of treatment when we deliver the first eligible test results. This billing contemplates all necessary tests required during a patient’s treatment cycle, which is currently estimated at approximately four tests per patient, including the initial sequence identification test. Revenue recognition commences at the time the initial billable test result is delivered and is based upon cumulative tests delivered to date. Any unrecognized revenue from the initial billable test is recorded as deferred revenue and recognized as we deliver the remaining tests in a patient’s treatment cycle.

For our research customers, which include biopharmaceutical customers and academic institutions, delivery of the sequencing results may include some level of professional support and analysis. Terms with biopharmaceutical customers generally include non-refundable upfront payments, which we record as deferred revenue. For all customers, we recognize revenue as we deliver sequencing results. From time to time, we offer discounts in order to gain rights and access to certain datasets. Revenue is recognized net of these discounts and costs associated with these services are reflected in cost of revenue.

For our clinical customers, we derive revenue from providing our clonoSEQ test report to ordering physicians. We bill commercial payors and medical institutions as we deliver test results to ordering physicians. Amounts paid for clonoSEQ diagnostic tests by commercial payors and medical institutions vary based on respective reimbursement rates and patient responsibilities, which may vary from our targeted list price. To date, the majority of our clonoSEQ diagnostic test revenue has been received from medical institutions. We recognize clinical revenue by evaluating customer payment history and estimating the amount of revenue that is collectible. As of December 31, 2018, we did not have reimbursement available to us through any government payors for clonoSEQ.

In January 2019, clonoSEQ received Medicare coverage aligned with the FDA label and NCCN guidelines for longitudinal monitoring in MM and ALL. We bill Medicare for an episode of treatment when we deliver the first eligible test results. This billing contemplates all necessary tests required during a patient’s treatment cycle, which is currently estimated at approximately four tests per patient, including the initial sequence identification test. Revenue is recognized at the time the initial billable test result is delivered and is based upon cumulative tests delivered to date. Any unrecognized revenue from the initial billable test is recorded as deferred revenue and recognized as we deliver the remaining tests in a patient’s treatment cycle.

Development revenue. Development revenue primarily represents regulatory or development support services, other than sequencing revenue, that we provide to biopharmaceutical customers who seek access to our platform to support their therapeutic development activities. Additionally, we generate development revenue from the achievement of regulatory milestones. We enter into collaboration and similar agreements with these customers. When these agreements include sequencing activities, we separately classify those activities as sequencing revenue. These agreements may also include substantial non-refundable upfront payments, which we recognize as development revenue over time as we perform the respective services.

We expect revenue to increase over the long term, particularly as the mix of revenue migrates to clinical diagnostics and drug discovery. The pace by which this mix migrates will be determined by the level of customer adoption and frequency of use of our products and services. ~~However, our~~Our revenue may fluctuate from period to period due to the uncertain nature of delivery of our ~~product~~products and services, the achievement of milestones by us or our customers, timing of expenses incurred, changes in estimates of total anticipated costs related to our Genentech Agreement and ~~milestone achievement.~~other events not within our control, such as the delivery of customer samples or customer decisions to no longer pursue their development initiatives.

Due to the ongoing uncertainties related to the COVID-19 pandemic, we may experience variability in revenue in the near term as restrictions in our customers’ abilities to procure samples for their research initiatives change, as customer initiatives evolve and as clinical testing is impacted. For more information, see the section of this report captioned “Risk Factors—The COVID-19 pandemic could adversely impact portions of our business that rely on research and development activities or clinical trials and delay or disrupt our pipeline, which may adversely impact revenue.”

Cost of revenue includes the cost of materials, personnel-related expenses (comprised of salaries, benefits and share-based compensation), shipping and handling, equipment and allocated facility costs associated with processing samples and professional support for our sequencing revenue. Allocated facility costs include depreciation of laboratory equipment, allocated facility occupancy and information technology costs. Costs associated with processing samples are recorded as expense, regardless of the timing of revenue recognition. As such, cost of revenue and related volume does not always trend in the same direction as revenue recognition and related volume. Additionally, costs to support our Genentech Agreement are a component of our research and development activities.

We expect cost of revenue to increase in absolute dollars as we grow our sequencing volume but the cost per sample to decrease over the long term due to the efficiencies we may gain as sequencing volume increases from improved utilization of our laboratory capacity, automation and other value engineering initiatives. If our sample volume throughput is reduced as a result of the COVID-19 pandemic or otherwise, cost of revenue as a percentage of total revenue may be adversely impacted due to fixed overhead costs.

Research and development expenses ~~comprise~~consist of laboratory materials costs, personnel-related expenses, equipment costs, allocated facility costs, information technology expenses and contract service expenses. Research and development activities support further development and refinement of existing assays and products, discovery of new technologies and investments ~~into~~in our immune medicine platform. We also include in research and development expenses the costs associated with software development activities to support laboratory scaling and workflow, as well as development of applications to support future commercial opportunities. We are currently conducting research and development activities for several products and services and we typically use our laboratory materials, personnel, facilities, information technology and other development resources across multiple development programs. Additionally, certain of these research and development activities benefit more than one of our product opportunities. We do not track research and development expenses by specific product candidates.

A component of our research and development activities is supporting clinical and analytical validations to obtain regulatory approval for future clinical products and services. Additionally, the costs to support our Genentech Agreement are a component of our research and development activities. Some of these activities have generated and may in the future generate development revenue.

We expect our research and development expenses to continue to increase in absolute dollars as we innovate and expand the application of our platform. However, we expect research and development expenses to decrease as a percentage of revenue in the long term, ~~and they~~although the percentage may fluctuate ~~as a percentage of revenue~~ from period to period due to the timing and extent of our ~~efforts needed~~development and commercialization efforts. While the pace and priorities of our research and development initiatives may continue to ~~develop~~be impacted by the COVID-19 pandemic, we expect to continue to increase expenses in both the near and ~~commercialize new products and services.~~long-term to support our ongoing initiatives, which include our initiatives with respect to COVID-19.

Sales and marketing expenses consist primarily of personnel-related expenses for commercial sales, account management, marketing, reimbursement, medical education and business development personnel that support commercialization of our platform products. In addition, these expenses include external costs such as advertising expenses, customer education and promotional expenses, market analysis expenses, conference fees, travel expenses and allocated facility costs.

We expect our sales and marketing expenses to increase in absolute dollars as we expand our commercial sales, marketing and business development teams and increase marketing activities to drive awareness and adoption of our products and services. However, we expect sales and marketing expenses to decrease as a percentage of revenue in the long term, ~~though they may fluctuate as a percentage of revenue~~subject to fluctuations from period to period due to the timing and magnitude of these expenses.

General and administrative expenses consist primarily of personnel-related expenses, including share-based compensation, salaries and benefits for our personnel in executive, legal, finance and accounting, human resources and other administrative functions, including third-party billing services. In addition, these expenses include insurance costs, external legal costs, accounting and tax service expenses, consulting fees and allocated ~~facilities~~facility costs.

We expect our general and administrative expenses to continue to increase in absolute dollars as we increase headcount and incur costs associated with operating as a public company, including expenses related to legal, accounting, regulatory matters, maintaining compliance with exchange listing and requirements of the SEC, director and officer insurance premiums and investor relations.headcount. Though expected to increase in absolute dollars, we expect these expenses to decrease as a percentage of revenue in the long ~~term.~~term as revenue increases.

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			Three Months Ended September 30,						Nine Months Ended September 30,
	(unaudited)												2020			2019			2020			2019
	(in thousands, except share and per share amounts)												(in thousands, except share and per share amounts)
Statements of Operations Data:
Revenue
Sequencing revenue	$	11,865		$	8,281		$	17,948		$	14,061		$	11,276		$	11,683		$	28,730		$	29,631
Development revenue		10,273			3,287			16,856			7,222			15,023			14,375			39,467			31,231
Total revenue		22,138			11,568			34,804			21,283			26,299			26,058			68,197			60,862
Operating expenses
Cost of revenue		5,734			5,044			10,722			9,033			6,053			5,601			16,308			16,323
Research and development		16,527			9,452			29,010			18,307			30,314			20,506			80,241			49,516
Sales and marketing		8,897			5,329			16,714			10,376			14,474			9,099			42,813			25,813
General and administrative		6,662			4,632			13,666			9,175			12,079			8,477			36,138			22,143
Amortization of intangible assets		423			424			842			843			428			428			1,275			1,270
Total operating expenses		38,243			24,881			70,954			47,734			63,348			44,111			176,775			115,065
Loss from operations		(16,105	)		(13,313	)		(36,150	)		(26,451	)		(37,049	)		(18,053	)		(108,578	)		(54,203	)
Interest and other income, net		446			820			2,105			1,567			1,018			4,103			5,805			6,208
Income tax (expense) benefit														(688	)		—			1,116			—
Net loss		(15,659	)		(12,493	)		(34,045	)		(24,884	)		(36,719	)		(13,950	)		(101,657	)		(47,995	)
Fair value adjustment to Series E-1 convertible preferred stock options		(710	)		(2	)		(964	)		2			—			—			—			(964	)
Net loss attributable to common shareholders	$	(16,369	)	$	(12,495	)	$	(35,009	)	$	(24,882	)	$	(36,719	)	$	(13,950	)	$	(101,657	)	$	(48,959	)
Net loss per share attributable to common shareholders, basic and diluted	$	(1.23	)	$	(1.01	)	$	(2.68	)	$	(2.02	)	$	(0.27	)	$	(0.11	)	$	(0.79	)	$	(0.97	)
Weighted-average shares used in computing net loss per share attributable to common shareholders, basic and diluted		13,279,324			12,385,888			13,074,692			12,334,227			134,372,026			124,285,686			129,289,948			50,552,389
Other Fianncial and Operating Data:
Other Financial and Operating Data:
Adjusted EBITDA ⁽¹⁾	$	(10,903	)	$	(9,374	)	$	(26,119	)	$	(17,959	)	$	(28,435	)	$	(12,655	)	$	(84,940	)	$	(38,774	)

⁽¹⁾ Adjusted EBITDA is a non-GAAP financial measure that we define as net loss adjusted for interest and other income, net, income tax (expense) benefit, ~~(expense),~~ depreciation and amortization and share-based compensation expenses. Please refer to “Adjusted EBITDA” below for a reconciliation between Adjusted EBITDA and net loss, the most directly comparable GAAP financial measure, and a discussion about the limitations of Adjusted EBITDA.

Comparison of the Three Months Ended ~~June~~September 30, ~~2019~~2020 and ~~2018~~2019

Total revenue was ~~$22.1~~$26.3 million for the three months ended ~~June~~September 30, ~~2019~~2020, compared to ~~$11.6~~$26.1 million for the three months ended ~~June~~September 30, ~~2018,~~2019, representing an increase of ~~approximately $10.6~~$0.2 million, or ~~91%~~1%.

Sequencing revenue ~~increased~~decreased to ~~$11.9~~$11.3 million for the three months ended ~~June~~September 30, ~~2019,~~2020, representing ~~an increase~~a decrease of ~~$3.6~~$0.4 million, or ~~43%~~3%. The ~~increase~~decrease in sequencing revenue was primarily attributable to ~~an increase of $2.6~~a $1.9 million decrease in revenue generated from biopharmaceutical ~~and academic~~ customers, ~~and~~inclusive of a ~~$1.0~~decrease in revenue recognized from cancelled customer projects of $0.2 million, which was partially offset by a $1.4 million increase in revenue generated from clinical customers.

Research sequencing volume ~~increased~~decreased by ~~22%~~38% to ~~9,084~~6,541 sequences delivered in the three months ended ~~June~~September 30, ~~2019~~2020 from ~~7,457~~10,618 sequences delivered in the three months ended ~~June~~September 30, ~~2018.~~2019. A large driver of the decrease in research sequencing volume, and the related sequencing revenue, was the expiration of a translational agreement with a biopharmaceutical customer in the fourth quarter of 2019. Clinical sequencing volume increased by ~~50%~~58% to ~~2,388~~4,023 clinical tests delivered in the three months ended ~~June~~September 30, ~~2019~~2020 from ~~1,587~~2,551 clinical tests delivered in the three months ended ~~June~~September 30, ~~2018.~~2019.

Development revenue increased to ~~$10.3~~$15.0 million for the three months ended ~~June~~September 30, ~~2019,~~2020, representing an increase of ~~$7.0~~$0.6 million, or ~~213%~~5%. The increase was primarily attributable to ~~$8.6~~a $0.9 million ofincrease in revenue generated from the Genentech Agreement and a $0.3 million increase in revenue generated from MRD development agreements, which were partially offset by a ~~$1.4~~$0.6 million decrease in revenue generated from translational ~~agreements and a $0.2 million decrease in revenue generated from MRD development~~ agreements.

Cost of revenue was ~~$5.7~~$6.1 million for the three months ended ~~June~~September 30, ~~2019,~~2020, compared to ~~$5.0~~$5.6 million for the three months ended ~~June~~September 30, ~~2018,~~2019, representing an increase of ~~$0.7~~$0.5 million, or ~~14%~~approximately 8%. The increase in cost of revenue was primarily attributable to ana $1.1 million increase in labor and overhead costs, which was partially offset by a $0.9 million decrease related to higher usage of ~~$0.6 million in the cost of overhead and $0.1 million in the cost of materials due to the~~our production laboratory ~~expansion~~to process research and ~~increased sample volumes.~~development samples versus revenue samples.

The following table presents disaggregated research and development expenses by cost classification for the periods presented:

Research and development expenses were ~~$16.5~~$30.3 million for the three months ended ~~June~~September 30, ~~2019,~~2020, compared to ~~$9.5~~$20.5 million for the three months ended ~~June~~September 30, ~~2018,~~2019, representing an increase of ~~approximately $7.1~~$9.8 million, or ~~approximately 75%~~48%. The increase was primarily attributable to ~~$4.0~~a $4.3 million increase in ~~additional~~personnel costs and a $2.8 million increase in cost of materials and allocated production laboratory expenses, which was primarily related to ~~support~~supporting investments in our ~~TCR~~T-Detect and TCR-Antigen Map development, as well as our immune medicine platform and drug discovery ~~efforts and other platform expansions, a $2.4 million increase in personnel costs, a $0.5~~efforts. A $2.0 million increase in depreciation and other expenses ~~and a $0.2 million increase in software and cloud services.~~also contributed to the overall period-over-period increase.

Sales and marketing expenses were ~~$8.9~~$14.5 million for the three months ended ~~June~~September 30, ~~2019,~~2020, compared to ~~$5.3~~$9.1 million for the three months ended ~~June~~September 30, ~~2018,~~2019, representing an increase of $5.4 million, or 59%. The increase was primarily attributable to $3.8 million in additional personnel costs and a $1.7 million increase in marketing fees, which was primarily related to additional investments in both our clonoSEQ marketing efforts and our shared corporate marketing initiatives. A $0.3 million increase in consulting fees and a $0.2 million increase in computer and software expenses also contributed to the period-over-period increase, which was partially offset by a $0.7 million decrease in travel, entertainment and customer event related expenses.

General and administrative expenses were $12.1 million for the three months ended September 30, 2020, compared to $8.5 million for the three months ended September 30, 2019, representing an increase of $3.6 million, or ~~approximately 67%~~42%. The increase was primarily attributable to $2.3 million in additional personnel costs ~~$0.6 million in additional consulting~~ and marketing expenses and $0.5 million in additional travel, entertainment and customer event related expenses. An additional $0.1 million in computer and software expenses also contributed to the overall increase.

General and administrative expenses were $6.7 million for the three months ended June 30, 2019, compared to $4.6 million for the three months ended June 30, 2018, representing an increase of approximately 2.0 million, or approximately 44%. The increase was primarily attributable to $1.3 million in additional personnel costs, $0.2 million in additional travel and entertainment related expenses and $0.2 million in additional consulting fees. A $0.1a $1.0 million increase in ~~computer~~legal, accounting and ~~software expenses and a $0.1 million increase in insurance expenses also contributed to the overall increase.~~tax fees.

Interest and other income, net was ~~$0.4~~$1.0 million for the three months ended ~~June~~September 30, ~~2019,~~2020, compared to ~~$0.8~~$4.1 million for the three months ended ~~June~~September 30, ~~2018,~~2019, representing a decrease of ~~$0.4~~$3.1 million, or approximately ~~negative 46%~~75%. The decrease was ~~primarily~~ attributable to ~~the $2.2 million impact of revaluing~~ a ~~convertible preferred stock warrant liability~~decrease in ~~the second quarter of 2019 due to an increase in valuation of our common stock, offset by a $1.9 million increase in~~net interest ~~earned on~~income and investment amortization ~~of a larger portfolio.~~resulting from reduced interest rates and related yields.

Comparison of the ~~Six~~Nine Months Ended ~~June~~September 30, ~~2019~~2020 and ~~2018~~2019

Total revenue was ~~$34.8~~$68.2 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2020, compared to ~~$21.3~~$60.9 million for the ~~six~~nine months ended ~~June 30, 2018, representing an increase of $13.5 million, or approximately 64%.~~

~~Sequencing revenue increased to $17.9 million for the six months ended June~~September 30, 2019, representing an increase of ~~$3.9~~$7.3 million, or ~~28%~~12%.

Sequencing revenue decreased to $28.7 million for the nine months ended September 30, 2020, representing a decrease of $0.9 million, or 3%. The ~~increase~~decrease in sequencing revenue was ~~primarily~~ attributable to ~~an increase of $2.3~~a $5.2 million decrease in revenue generated from biopharmaceutical and academic customers, ~~driven~~inclusive of a decrease in revenue recognized from cancelled customer projects of $0.6 million, which was partially offset by a ~~mix to higher priced products and services, and a $1.6~~$4.3 million increase in revenue generated from clinical customers.

Research sequencing volume decreased by 2% to 13,975 sequences delivered in the six months ended June 30, 2019 from 14,315 sequences delivered in the six months ended June 30, 2018. Clinical sequencing volume increased by 44% to 4,399 clinical tests delivered in the six months ended June 30, 2019 from 3,053 clinical tests delivered in the six months ended June 30, 2018.

Research sequencing volume decreased by 32% to 16,756 sequences delivered in the nine months ended September 30, 2020 from 24,593 sequences delivered in the nine months ended September 30, 2019. The reduction in research sequencing volume was primarily attributable to the expiration of a translational agreement with a biopharmaceutical customer in the fourth quarter of 2019, as well as trial enrollment delays and project deferrals from our biopharmaceutical and academic customers. Clinical sequencing volume increased by 54% to 10,677 clinical tests delivered in the nine months ended September 30, 2020 from 6,950 clinical tests delivered in the nine months ended September 30, 2019.

Development revenue increased to ~~$16.9~~$39.5 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019,~~2020, representing an increase of ~~$9.6~~$8.2 million, or ~~133%~~26%. The increase was primarily attributable to ~~$14.8~~a $9.7 million ofincrease in revenue generated from the Genentech Agreement, partially offset by a ~~$4.0~~$1.5 million decrease in revenue generated from translational ~~agreements and a $1.2 million decrease in revenue generated from MRD development~~ agreements.

Cost of revenue was ~~$10.7~~$16.3 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019,~~2020, compared to ~~$9.0~~$16.3 million for the ~~six~~nine months ended ~~June~~September 30, ~~2018,~~2019, representing ~~an increase of $1.7~~no net change. Period-over-period, there was a $3.3 million ~~or 19%. The~~ increase in ~~cost of revenue was primarily attributable to an~~labor and overhead costs, a $0.3 million increase ~~of $1.5 million~~ in ~~the cost of overhead~~biopharmaceutical partner support costs and a $0.1 million increase in ~~the~~materials cost ~~of materials~~ due to ~~the~~product mix. These increases were partially offset by a $3.4 million decrease related to higher usage of our production laboratory ~~expansion~~to process research and ~~increased sample volumes,~~development samples versus revenue samples, as well as ~~an increase in personnel costs of $0.1 million. This increase was offset by~~ a ~~$0.1~~$0.4 million decrease in ~~computer and software expenses.~~material costs resulting from a decrease in revenue sample volume.

The following table presents disaggregated research and development expenses by cost classification for the periods presented:

Research and development expenses were ~~$29.0~~$80.2 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019,~~2020, compared to ~~$18.3~~$49.5 million for the ~~six~~nine months ended ~~June~~September 30, ~~2018,~~2019, representing an increase of ~~$10.7~~$30.7 million, or ~~58%~~62%. The increase was primarily attributable to ~~$5.5~~a $12.8 million increase in ~~additional~~personnel costs and an $11.4 million increase in cost of materials and allocated production laboratory expenses, which was primarily related to ~~support~~supporting investments in our ~~TCR~~T-Detect and TCR-Antigen Map development and immune medicine platform, as well as our drug discovery ~~efforts and other platform expansions, $4.0 million increase in personnel costs, a $0.8~~efforts. A $4.2 million increase in depreciation and other expenses ~~a $0.3 million increase in software and cloud service costs and an increase in allocable facilities and information technology costs of $0.2 million.~~also contributed to the overall increase.

Sales and marketing expenses were $16.7 million for the six months ended June 30, 2019, compared to $10.4 million for the six months ended June 30, 2018, representing an increase of $6.3 million, or 61%. The increase was primarily attributable to $3.9 million in additional personnel costs, $1.2 million in additional travel, entertainment and customer event related expenses and $1.0 million in

Sales and marketing ~~expenses. An~~expenses were $42.8 million for the nine months ended September 30, 2020, compared to $25.8 million for the nine months ended September 30, 2019, representing an increase of $17.0 million, or 66%. The increase was primarily attributable to $9.9 million in additional ~~$0.2~~personnel costs and $6.8 million in additional marketing fees, which was largely related to investments supporting our clonoSEQ marketing efforts and shared corporate marketing initiatives. A $0.5 million increase in computer and software expenses, $0.3 million increase in consulting fees and $0.3 million increase in advisory expenses, all of which were partially offset by a $0.9 million decrease in travel, entertainment and customer event related expenses, also contributed to the overall increase.

General and administrative expenses were ~~$13.7~~$36.1 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019,~~2020, compared to ~~$9.2~~$22.1 million for the ~~six~~nine months ended ~~June~~September 30, ~~2018,~~2019, representing an increase of ~~$4.5~~$14.0 million, or ~~49%~~63%. The increase was primarily attributable to ~~$1.7~~a $7.5 million increase in ~~additional~~ personnel costs, ~~$1.2~~as well as a $3.7 million increase in ~~additional~~legal, accounting and tax fees and $2.1 million increase in insurance costs, both of which were largely due to the effect of operating as a public company for the full nine months ended September 30, 2020. Additionally, there was a $0.5 million increase in computer and software costs, a $0.5 million increase in credit and collections fees and a $0.5 million increase in consultant fees. These increases were partially offset by a $1.0 million decrease in business taxes ~~largely due to~~primarily resulting from the timing of the Genentech upfront payment received in February 2019 and a ~~$0.9~~$0.4 million ~~increase in legal, tax, accounting and consultant fees. A $0.2 million increase in computer and software expenses, a $0.2 million increase~~decrease in travel and ~~entertaining expenses, a $0.1 million increase in insurance expense and a $0.1 million increase in administration costs also contributed to the overall increase.~~entertainment expenses.

Interest and other income, net was ~~$2.1~~$5.8 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019,~~2020, compared to ~~$1.6~~$6.2 million for the ~~six~~nine months ended ~~June~~September 30, ~~2018,~~2019, representing ~~an increase~~a decrease of ~~$0.5~~$0.4 million, or ~~approximately 34%~~6%. The ~~increase~~decrease was primarily attributable to a $2.8 million ~~increase~~decrease in net interest ~~earned on~~income and investment amortization ~~of a larger portfolio,~~resulting from reductions in interest rates and related yields, partially offset by the $2.3 million impact of revaluing a convertible preferred stock warrant liability in the nine months ended September 30, 2019.

Adjusted EBITDA is a non-GAAP financial measure that we define as net loss adjusted for interest and other income, net, income tax (expense) benefit, ~~(expense),~~ depreciation and amortization and share-based compensation expenses.

Management uses Adjusted EBITDA to evaluate the financial performance of our business and the effectiveness of our business strategies. We present Adjusted EBITDA because we believe it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry and it facilitates comparisons on a consistent basis across reporting periods. Further, we believe it is helpful in highlighting trends in our operating results because it excludes items that are not indicative of our core operating performance.

Adjusted EBITDA has limitations as an analytical tool and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. We may in the future incur expenses similar to the adjustments in the presentation of Adjusted EBITDA. In particular, we expect to incur meaningful share-based compensation expense in the future. Other limitations include that Adjusted EBITDA does not reflect:

In addition, Adjusted EBITDA may not be comparable to similarly titled measures used by other companies in our industry or across different industries.

The following is a reconciliation of our net loss to Adjusted EBITDA for the three and nine months ended September 30, 2020 and 2019, respectively (in thousands):

⁽¹⁾ Represents share-based compensation expense related to option and RSU awards. See Note 11 of the accompanying notes to our unaudited condensed financial statements appearing elsewhere in this report for details on our share-based compensation expense.

We have incurred losses since inception and have incurred negative cash flows from operations from inception through December 31, ~~2018.~~2018, and again in the interim periods within the first nine months of 2020. As of ~~June~~September 30, ~~2019,~~2020, we had an accumulated deficit of ~~$330.9~~$467.0 million.

We have funded our operations to date principally from the sale of convertible preferred stock and common stock and, to a lesser extent, sequencing and development revenue. In December 2018, we entered into the Genentech Agreement pursuant to which we received a $300.0 million initial upfront payment in February 2019, may receive approximately $1.8 billion over time, including payments upon achievement of specified development, regulatory and commercial milestones, and may receive additional royalties on sales of products commercialized under this agreement. As of ~~June~~September 30, ~~2019,~~2020, we had cash, cash equivalents and marketable securities of ~~$423.0~~$851.5 million.

We believe ~~our cash flows from operations and~~ our existing cash, cash equivalents and marketable securities ~~together with the net proceeds from our IPO that closed July 1, 2019,~~ will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 12 months. We may consider raising additional capital to expand our business, to pursue strategic investments, to take advantage of financing opportunities or for other reasons.

We plan to utilize the existing cash, cash equivalents and marketable securities on hand primarily to fund our commercial and marketing activities associated with our clinical products and services, continued research and development initiatives for our pipeline candidates and drug discovery initiatives, ongoing investments into our immune medicine platform and scaling of our laboratory operations with our anticipated growth. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. Currently, our funds are held in money market funds and marketable securities consisting of U.S. government debt securities, U.S. government agency bonds, commercial paper and corporate bonds.

As revenue from sales of immunoSEQ and clonoSEQ is expected to grow, we expect our accounts receivable and inventory balances to increase. Any increase in accounts receivable and inventory may not be completely offset by increases in accounts payable and accrued expenses, which could result in greater working capital requirements. Moreover, following the closing of our IPO, we expect to incur additional costs associated with operating as a public company, including expenses related to legal, accounting, regulatory, exchange listing and SEC compliance matters.

If our available cash, cash equivalents and marketable securities balances ~~net proceeds from our IPO that closed July 1, 2019~~ and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity or convertible debt securities, enter into a credit facility or another form of third-party funding or seek other debt financing. The sale of equity and convertible debt securities may result in dilution to our shareholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations. ~~Additional~~This additional capital may not be available on reasonable terms, or at all.

While we may experience reductions in our revenue in the near term as a result of the COVID-19 pandemic or otherwise, as long-term revenue from sales of our current and future products and services is expected to grow, we expect our accounts receivable and inventory balances to increase. Any increase in accounts receivable and inventory may not be completely offset by increases in accounts payable and accrued expenses, which could result in greater working capital requirements.

The following table summarizes our uses and sources of cash for the ~~periods presented~~nine months ended September 30, 2020 and 2019 (in thousands):

Cash used in operating activities during the nine months ended September 30, 2020 was $109.8 million, which was primarily attributable to a net loss of $101.7 million, a net change in our operating assets and liabilities of $32.5 million and a benefit from income tax of $1.1 million, which were partially offset by non-cash share-based compensation of $17.5 million, non-cash depreciation and amortization of $5.6 million and non-cash lease expense of $2.2 million. The net change in our operating assets and liabilities was primarily due to a $27.3 million reduction in deferred revenue primarily related to revenue recognized from the Genentech Agreement, a $3.9 million increase in prepaid expenses and other current assets and a $1.7 million increase in inventory. These changes were partially offset by a reduction in accounts receivable, net of $0.8 million.

Cash provided by operating activities during the ~~six~~nine months ended ~~June~~September 30, 2019 was ~~$262.3~~$232.2 million, which was primarily attributable to a net change in our operating assets and liabilities of ~~$286.1~~$266.1 million, non-cash share-based compensation of ~~$6.4~~$9.7 million, non-cash depreciation and amortization of ~~$1.8~~$2.2 million and a $2.3 million fair value adjustment of ~~the~~our convertible preferred stock warrant liability ~~due to~~caused by an increase in valuation of our common stock, partially offset by a net loss of ~~$34.0~~$48.0 million. The net change in our operating assets and liabilities ~~primarily~~ reflects an increase in deferred revenue of ~~$288.7~~$276.2 million, primarily due to the $300.0 million upfront payment by Genentech, and an increase in accounts payable and accrued liabilities of ~~$1.3~~$3.1 million, primarily due to increased headcount and growth in operating ~~expenses and~~expenditures, as well as the timing of vendor ~~payments,~~payments. These increases were partially offset by an increase in accounts receivable of ~~$2.4~~$4.4 million, primarily due to an increase in clinical billings, as well as an increase in sequencing revenue paid in arrears rather than upfront by biopharmaceutical customers, an increase in prepaid expenses and other current assets of ~~$0.9~~$6.8 million, primarily due to ~~receivables from investment maturities~~prepaid insurance and prepaid software, an increase in inventory of $0.8 million to support the growth in laboratory operations, reductions in deferred rent of $0.6 million due to increased rent payments and a $0.5 million ~~decrease in deferred rent due to increased cash rent payments.~~security deposit.

Cash ~~used in operating~~provided by investing activities during the ~~six~~nine months ended ~~June~~September 30, ~~2018~~2020 was ~~$15.2~~$223.0 million, which was primarily attributable to ~~a net loss~~proceeds from sales and maturities of ~~$24.9~~marketable securities of $532.2 million, partially offset by ~~non-cash share-based compensation~~purchases of ~~$5.6 million, non-cash depreciation and amortization~~marketable securities of ~~$2.5~~$299.8 million and ~~a net change in our operating assets~~purchases of property and ~~liabilities~~equipment of ~~$1.7~~$9.4 million. The net change in our operating assets and liabilities reflects a $5.4 million increase in deferred revenue primarily due to upfront payments from MRD biopharmaceutical agreements, a decrease in accounts receivable of $1.2 million primarily due to the timing of receipts, partially offset by an increase in inventory of $2.9 million to support growth in revenue and research and development activities, a decrease in accounts payable and accrued liabilities of $1.0 million primarily due to corporate bonus payments and reduction in marketing and legal payables, an increase in prepaid expenses and other current assets of $0.4 million primarily due to receivables from investment maturities and reductions in deferred rent of $0.4 million due to increased cash rent payments.

Cash used in investing activities during the ~~six~~nine months ended ~~June~~September 30, 2019 was ~~$267.5~~$528.4 million, which was primarily attributable to purchases of marketable securities of ~~$358.7~~$772.1 million and purchases of property and equipment of ~~$5.4~~$8.8 million, partially offset by proceeds from maturities of marketable securities of ~~$96.5~~$252.5 million.

Cash used in investing activities during the six months ended June 30, 2018 was $32.0 million, which was primarily attributable to purchases of marketable securities of $110.9 million and purchases of property and equipment of $1.6 million, partially offset by maturities of marketable securities of $80.5 million.36

Cash used by financing activities during the six months ended June 30, 2019 was $1.4 million, which was primarily attributable to payment of deferred IPO costs of $3.4 million, partially offset by proceeds of $2.0 million from the exercise of stock options.

Cash provided by financing activities during the ~~six~~nine months ended ~~June~~September 30, ~~2018~~2020 was ~~$0.9~~$287.3 million, which was primarily attributable to $271.8 million in proceeds, after deducting underwriting discounts and net offering expenses payable by us, received from our underwritten public offering completed in July 2020, as well as $15.5 million in proceeds from the exercise of stock options.

Cash provided by financing activities during the nine months ended September 30, 2019 was $318.2 million, which was primarily attributable to proceeds from our initial public offering, net of underwriting discounts and commissions, of $320.9 million, and proceeds from the exercise of stock ~~options.~~

~~Adaptive~~options of $2.3 million, partially offset by the payment of deferred initial public offering costs of $5.0 million.~~BiotechnologiesCorporation~~

~~Our principal contractual~~Except for the addition of the amendment to our lease in South San Francisco, California, as set forth in Note 8 of the accompanying notes to our unaudited condensed financial statements, which resulted in additional lease obligations ~~and commitments were reported in our Prospectus. As~~ of ~~June~~$9.0 million upon execution of the lease, as of September 30, ~~2019,~~2020, there have been no material changes outside the ordinary course of business to our contractual obligations and commitments as previously disclosed in our ~~Prospectus.~~Annual Report on Form 10-K for the year ended December 31, 2019.

Utilization of our NOL carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986 (“Section 382”) and similar state provisions. The annual limitation may result in the expiration of NOL carryforwards and credits before utilization. If there should be an ownership change, our ability to utilize our NOL carryforwards and credits could be limited. We have completed a Section 382 analysis and have determined there are no permanent limitations on the utilization of approximately ~~$186.9~~$225.4 million of our federal NOLs as of December 31, 2018. We have not updated this analysis for ownership changes subsequent to December 31, 2018. Under the TCJA, federal net operating losses incurred in 2018 and future years may be carried forward indefinitely, but the deductibility of such federal NOL is subject to an annual limitation. Net operating losses generated prior to 2018 are eligible to be carried forward up to 20 years. Based on the available objective evidence, management determined that it was more likely than not that the net deferred tax assets would not be realizable as of December 31, ~~2018.~~2019. Accordingly, management applied a full valuation allowance against net deferred tax assets as of December 31, ~~2018.~~2019. In March 2020, under the newly enacted CARES Act, NOLs arising in tax years beginning after December 31, 2017 and before January 1, 2021 may be carried back to each of the five tax years preceding the tax year of the loss. Additionally, the CARES Act temporarily removes the 80% limitation, reinstating it for tax years beginning after 2020.

As of ~~June~~September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we have not had any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

We have prepared our financial statements in accordance with GAAP. Our preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities and related disclosures at the date of the financial statements, as well as revenue and expense recorded during the reporting periods. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and or other relevant assumptions that we believe to be reasonable under the circumstances. Estimates are used in several areas, including, but not limited to, estimates of progress to date for certain performance obligations and transaction price for certain contracts with customers, share-based compensation, including the fair value of ~~common~~ stock, ~~granted prior to our IPO,~~ the provision for income taxes, including related reserves, and goodwill, among others. These estimates generally involve complex issues and require judgments, involve the analysis of historical results and prediction of future trends, can require extended periods of time to resolve and are subject to change from period to period. Actual results may differ materially from management’s estimates.

While our significant accounting policies are described in more detail in our ~~Prospectus,~~Annual Report on Form 10-K for the year ended December 31, 2019, as well as in Note 2 of the accompanying notes to our unaudited condensed financial statements included elsewhere in this report, we believe the following accounting policies are critical to the judgments and estimates used in the preparation of our financial statements:

There have been no material changes to our critical accounting policies and estimates as previously disclosed in our ~~Prospectus.~~

We are an “emerging growth company” within the meaning of the Jumpstart Our Business Startups Act of 2012 (“JOBS ~~Act.~~Act”). The JOBS Act allows an emerging growth company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. We have elected to use this extended transition period and, as a result, our financial statements may not be comparable to companies that comply with public company effective dates. We also intend to rely on other exemptions provided by the JOBS Act, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.

We will remain an emerging growth company until ~~the earliest of (1) the last day of the fiscal year following the fifth anniversary of the closing of the IPO, (2) the last day of the fiscal year in which~~December 31, 2020, when we ~~have total annual gross revenue of at least $1.07 billion, (3) the last day of the fiscal year in which we are~~will be deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended ~~(“Exchange Act”~~(the "Exchange Act")~~, which would occur if~~ based on the market value of our common stock held by non-affiliates ~~exceeded~~exceeding $700.0 million as of the last business day of the ~~second fiscal~~ quarter ~~of such year or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.~~ended June 30, 2020.

See Note 2 of the accompanying notes to ~~the~~our unaudited condensed financial statements included elsewhere in this report for more information.

We are exposed to market risk for changes in interest rates related primarily to our cash and cash equivalents and marketable securities. As of ~~June~~September 30, ~~2019, we had cash and cash equivalents of $48.5 million, held primarily~~2020, there have been no material changes to our market risks as previously disclosed in cash deposits, money market funds, commercial paper and U.S. government debt securities. Our marketable securities are held in U.S. government debt securities, U.S. government agency bonds, commercial paper and corporate bonds. As of June 30, 2019, we had short-term marketable securities of $374.5 million. Our primary exposure to market risk is interest income sensitivity, which is affected by changes inour Annual Report on Form 10-K for the general level of interest rates in the United States. As of June 30, 2019, a hypothetical 100 basis point increase in interest rates would have resulted in an approximate $1.4 million decline of the fair value of our available-for-sale securities. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur.year ended December 31, 2019.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of ~~June~~September 30, ~~2019.~~2020. There was not any change in our internal control over financial reporting (as such term is defined in ~~Rules~~Rule 13a-15(f) under the Exchange Act) during the ~~quarter~~three months ended ~~June~~September 30, ~~2019~~2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

From time to time, we may be subject to legal proceedings. We are not currently a party to or aware of any proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

~~Investing~~We operate in ~~our common stock~~a rapidly changing environment that involves a ~~high degree~~number of ~~risk. Our risk factors~~risks that could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this report, the risks and uncertainties that we believe are most important for you to consider are discussed in Part I, Item 1A under the caption “Risk Factors” in our ~~Prospectus and incorporated herein by reference, and~~Annual Report on Form 10-K for the year ended December 31, 2019. Other than the factors set forth below, there have been no material changes to ~~such~~the risk ~~factors. You should carefully consider the risks and uncertainties we describe~~factors described in the ~~Prospectus, together with all~~Annual Report on Form 10-K for the year ended December 31, 2019. The risk factors may be important to understanding other ~~information~~statements in this report ~~including our~~and should be read in conjunction with the unaudited condensed financial statements and related notes in the “Financial Statements (Unaudited)”section of this report and with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this ~~report, before investing in our common stock. Any~~report. Because of ~~the~~such risk factors, ~~we describe in the Prospectus could adversely affect~~as well as other factors affecting our ~~business,~~ financial condition and operating results, past financial performance should not be considered to be a reliable indicator of ~~operations~~future performance, and investors should not use historical trends to anticipate results or ~~prospects. The market price of our common stock could decline if one or more of these risks or uncertainties actually occur, causing you to lose all or part of your investment~~trends in ~~our common stock. Additional~~future periods. Further, additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business, financial condition, operating results and prospects.

The COVID-19 pandemic has materially affected portions of our operations, including at our headquarters in Seattle and in our offices in South San Francisco, each subject to COVID-19 related government restrictions, and may affect the business or operations of our manufacturers, contract research organizations or other third parties with whom we conduct business.

Our business could be adversely affected by global pandemics or health epidemics in regions where we have concentrations of clinical trial sites or other business operations, and such pandemics or epidemics could cause significant disruption in the operations of third-party manufacturers, suppliers, general contractors and sub-contractors related to capital projects and contract research organizations upon whom we rely. For example, in December 2019, a novel strain of coronavirus, SARS-CoV-2, causing a disease referred to as COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 has spread to multiple countries and the World Health Organization has declared the outbreak a “pandemic.” In response to the pandemic, the U.S. government has periodically imposed restrictions on travel between the United States, Europe and certain other countries.

Most of our facilities and employees are based in Seattle, Washington at our corporate headquarters and are subject to a variety of restrictions designed to slow the spread of COVID-19, which have disrupted our normal operations. Similarly, our South San Francisco offices are subject to state and local restrictions that have disrupted our normal operations. With respect to our laboratory operations, we intend to continue to rely on the measures implemented in the first quarter of 2020 to reduce the risk of exposure of COVID-19 to the employees who continue to work on site, including the implementation of work-from-home policies for certain employees, as well as the implementation of shifts and zones to physically distance employees who remain on site. In addition, our laboratory staff processes samples from patients who have contracted, been exposed to, or recovered from COVID-19. We work with a variety of materials that could be hazardous to human health and intend to continue to adhere to the safety measures implemented to reduce the risk of exposure to our on-site staff. In the event of COVID-19 exposure to our employees, it is possible that all or a portion of our operations could be materially disrupted.

The effects of various government orders and our own operating policies related to COVID-19 may negatively impact productivity, disrupt our business and delay our clinical programs and corporate expansion initiatives, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations regarding our ability to conduct our business in the ordinary course. These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, operating results and financial condition.

Quarantines, stay-at-home orders and similar government orders, or the perception that such orders, shutdowns or other restrictions on business operations could occur, whether related to COVID-19 or other infectious diseases, could impact personnel at third-party manufacturing or supplier facilities in the United States and other countries, or the availability or cost of materials, such as reagents, which would disrupt our supply chain. With respect to our supply chain, we are experiencing longer lead times and in some cases scarcity of supplies used for COVID-19 diagnostics by other companies, which may adversely affect our sample processing and accordingly delay revenues.

The spread of COVID-19, which has caused significant worldwide economic volatility, uncertainty and disruption, may materially affect us economically. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.

The global pandemic of COVID-19 continues to rapidly evolve. The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, clinical trials, corporate expansion plans and other initiatives, or the impacts to healthcare systems or the global economy as a whole. However, these effects could have a material impact on our operations, and we will continue to monitor the COVID-19 situation closely.

The COVID-19 pandemic could adversely impact portions of our business that rely on research and development activities or clinical trials and delay or disrupt our pipeline, which may adversely impact revenue.

The extent to which the COVID-19 pandemic may impact our business with respect to research and development and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

As the COVID-19 pandemic continues to spread around the globe, we will likely experience disruptions that could severely impact our business with respect to research and development and clinical trials, including:

For example, we launched our ImmuneSENSE study of acute Lyme disease in July 2020. As of September 30, 2020, we had 467 participants enrolled, fewer than initially projected, and the lower enrollment may extend the expected commercial timeline for launch of an acute Lyme diagnostic test. In addition to a timeline delay, there will be incremental costs related to an extended enrollment period. ImmuneSENSE Lyme and other studies in the future may be adversely affected by delays or difficulties in enrollment and related increased costs while the COVID-19 pandemic continues.

In addition, regulatory milestones represent a substantial part of our business strategy and are a key component of development revenue. The disruptions set forth above may materially affect our ability to achieve regulatory milestones, resulting in delays in our clinical pipeline and a material adverse effect on revenues.

Due to the ongoing uncertainties related to the COVID-19 pandemic, we may also experience variability in revenue in the near term as restrictions in our customers’ abilities to procure samples for their research initiatives change, as customer initiatives evolve and as clinical testing is impacted. Additionally, if our sample volume throughput is reduced as a result of the COVID-19 pandemic or otherwise, cost of revenue as a percentage of total revenue may be adversely impacted due to fixed overhead costs.

Our efforts to discover and develop products and services related to COVID-19 may not be successful from either a platform extension or commercialization perspective.

We are seeking to leverage our immune medicine platform to discover and develop potential antibody therapies and diagnostics for COVID-19. In July 2020, we entered into an option for Amgen, Inc. to develop and commercialize any neutralizing antibodies we discover. In addition, we extended our collaboration with Microsoft to pursue a diagnostic signal for COVID-19. In August 2020, we launched immunoSEQ T-MAP COVID, a proprietary research product and data analysis service to measure the T cell immune response to vaccines being developed by third parties and track the persistence of that response over time. Our efforts in this area are early and continue to evolve and mature as we augment our databases and pool of knowledge.

Our efforts to discover, develop and commercialize these products and services, or other potential antibody therapies and diagnostics for COVID-19, involve a high degree of risk, and our efforts may fail for many reasons, including:

Additionally, the market for COVID-19 products and services is highly time-sensitive and competitive. Even if we are successful in developing effective COVID-19 antibody therapies and diagnostics and securing the regulatory approvals or clearances, we may not be able to bring them to market in a timely fashion or, conversely, be able to fulfill all existing or future demand for such products and services. Current or future antibody therapies, diagnostics or related services once brought to market may not achieve commercial success. Our investments in the discovery and development of products and services related to COVID-19 may not be accretive to our future financial results and if we determine that any product or service is unlikely to succeed, we may abandon them without any return on our investment.

~~During the quarter ended June 30, 2019, we had the following unregistered securities transactions:~~

The issuances of the securities described above were exempt from registration pursuant to Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering or Rule 701 promulgated under the Securities Act as transactions pursuant to compensatory benefit plans. The shares of common stock issued upon the exercise of options are deemed to be restricted securities for purposes of the Securities Act.Not applicable.

On July 1, 2019, we closed our ~~IPO,~~initial public offering, in which we issued and sold 17,250,000 shares of our common stock, ~~(including~~including the full exercise of the underwriters’ ~~overallotment option)~~over-allotment option, at a public offering price of $20.00 per share for an aggregate offering price of $345.0 million. Net proceeds to us were $316.0 million after deducting aggregate underwriting discounts and commissions of $24.2 million and estimated offering expenses of $4.8 million. Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and BofA Securities, Inc. acted as joint lead book-running managers for the offering. Cowen and Company, LLC and Guggenheim Securities, LLC acted as book-running managers for the offering. William Blair & Company, L.L.C. and BTIG, LLC acted as co-managers for the offering. All of the shares of common stock issued and sold in the offering were registered under the Securities Act of 1933, as amended (“Securities Act”) pursuant to a registration statement on Form S-1 (File No. 333-231838), which was declared effective by the SEC on June 26, 2019. ~~Following~~

Cash used since the ~~sale~~initial public offering is described elsewhere in the “Management’s Discussion and Analysis of ~~these shares, the offering terminated. No payments were made by us to directors, officers or persons owning 10% or more~~Financial Condition and Results of ~~any class~~Operations” section of our ~~equity securities or to any~~periodic reports filed with the SEC. As of ~~our affiliates. There~~September 30, 2020, there has been no material change in the planned use of proceeds from our ~~IPO~~initial public offering as described in our ~~Prospectus. As~~prospectus dated June 26, 2019 filed with the SEC on June 27, 2019 in connection with our ~~IPO closed after the period covered by this report, none of the proceeds from our IPO were used during the period covered by this report.~~initial public offering.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Washington	27-0907024
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1551 Eastlake Avenue East, Suite 200 Seattle, Washington	98102
(Address of principal executive offices)	(Zip Code)

		Page
PART I.	FINANCIAL INFORMATION	4
Item 1.	Financial Statements (Unaudited)	4
	Condensed Balance Sheets	4
	Condensed Statements of Operations	5
	Condensed Statements of Comprehensive Loss	6
	CondensedStatements of Convertible Preferred StockandShareholders’~~Deficit~~ (Deficit) Equity	7
	Condensed Statements of Cash Flows	9
	Notes to Unaudited Condensed Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2526
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3638
Item 4.	Controls and Procedures	3638
PART II.	OTHER INFORMATION	3739
Item 1.	Legal Proceedings	3739
Item 1A.	Risk Factors	3739
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3741
Item 3.	Defaults Upon Senior Securities	3741
Item 4.	Mine Safety Disclosures	3842
Item 5.	Other Information	3842
Item 6.	Exhibits	3842
Signatures		3943

	December 31, 2018									December 31, 2019
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value		Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
Short-term marketable securities
Commercial paper	$	16,887	$	—	$	—		$	16,887	$	121,866	$	—	$	—		$	121,866
U.S. government debt and agency securities		85,722		—		(99	)		85,623		285,963		394		(1	)		286,356
Corporate bonds		7,486		—		(8	)		7,478		71,962		109		(3	)		72,068
Total short-term marketable securities	$	110,095	$	—	$	(107	)	$	109,988	$	479,791	$	503	$	(4	)	$	480,290
Long-term marketable securities
U.S. government debt and agency securities										$	90,750	$	146	$	(9	)	$	90,887
Corporate bonds											14,513		35		—			14,548
Total long-term marketable securities										$	105,263	$	181	$	(9	)	$	105,435

	June 30, 2019
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		September 30, 2020
	(unaudited)							Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Acquired developed technology	$	20,000	$	(7,462	)	$	12,538	$	20,000	$	(9,552	)	$	10,448
Purchased intellectual property		325		(79	)		246		325		(120	)		205
Balance at June 30, 2019	$	20,325	$	(7,541	)	$	12,784
Balance at September 30, 2020								$	20,325	$	(9,672	)	$	10,653

	December 31, 2018							December 31, 2019
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Acquired developed technology	$	20,000	$	(6,636	)	$	13,364	$	20,000	$	(8,301	)	$	11,699
Purchased intellectual property		325		(63	)		262		325		(96	)		229
Balance at December 31, 2018	$	20,325	$	(6,699	)	$	13,626
Balance at December 31, 2019								$	20,325	$	(8,397	)	$	11,928

	Convertible preferred stock					Common stock				Additional paid-in			Accumulated other comprehensive			Accumulated			Total shareholders’
	Shares		Amount			Shares		Amount		capital			(loss) income			deficit			deficit
Balance as of March 31, 2018 (unaudited)		92,745,734	$	561,396			12,301,844	$	1	$	28,620		$	(283	)	$	(261,950	)	$	(233,612	)
Issuance of common stock for cash upon exercise of stock options (unaudited)		—		—			245,000		—		415			—			—			415
Issuance of Series E-1 convertible preferred stock for cash upon exercise of Series E-1 convertible preferred stock options at fair value (unaudited)		44,360		35			—		—		—			—			—			—
Vested Series E-1 convertible preferred stock option forfeitures (unaudited)		—		(767	)		—		—		476			—			291			767
Series E-1 convertible preferred stock option share-based compensation (unaudited)		—		—			—		—		1			—			—			1
Adjustment to redemption value for vested Series E-1 convertible preferred stock options (unaudited)		—		1			—		—		(1	)		—			—			(1	)
Change in redemption value for vested Series E-1 convertible preferred stock options (unaudited)		—		2			—		—		—			—			(2	)		(2	)
Common stock option share-based compensation (unaudited)		—		—			—		—		2,447			—			—			2,447
Other comprehensive income (unaudited)		—		—			—		—		—			43			—			43
Net loss (unaudited)		—		—			—		—		—			—			(12,493	)		(12,493	)
Balance as of June 30, 2018 (unaudited)		92,790,094	$	560,667			12,546,844	$	1	$	31,958		$	(240	)	$	(274,154	)	$	(242,435	)

Balance as of March 31, 2019 (unaudited)		93,023,694	$	561,210			12,930,536	$	1	$	40,981		$	92		$	(314,548	)	$	(273,474	)
Issuance of common stock for cash upon exercise of stock options (unaudited)		—		—			794,845		—		1,847			—			—			1,847
Issuance of Series E-1 convertible preferred stock for cash upon exercise of Series E-1 convertible preferred stock options at fair value (unaudited)		16,043		11			—		—		—			—			—			—
Change in redemption value for vested Series E-1 convertible preferred stock options (unaudited)		—		710			—		—		—			—			(710	)		(710	)
Common stock option share-based compensation (unaudited)		—		—			—		—		3,332			—			—			3,332
Other comprehensive income (unaudited)		—		—			—		—		—			290			—			290
Net loss (unaudited)		—		—			—		—		—			—			(15,659	)		(15,659	)
Balance as of June 30, 2019 (unaudited)		93,039,737	$	561,931			13,725,381	$	1	$	46,160		$	382		$	(330,917	)	$	(284,374	)

Balance as of December 31, 2017	92,656,029	$	561,333		12,208,731	$	1	$	24,972		$	(166	)	$	(249,423	)	$	(224,616	)
Adjustments to accumulated deficit for adoption of guidance on accounting for share-based payment transactions (unaudited)	—		—		—		—		140			—			(140	)		—
Issuance of common stock for cash upon exercise of stock options (unaudited)	—		—		338,113		—		823			—			—			823
Issuance of Series E-1 convertible preferred stock for cash upon exercise of Series E-1 convertible preferred stock options at fair value (unaudited)	134,065		100		—		—		—			—			—			—
Vested Series E-1 convertible preferred stock option forfeitures (unaudited)	—		(767	)	—		—		476			—			291			767
Series E-1 convertible preferred stock option share-based compensation (unaudited)	—		—		—		—		3			—			—			3
Adjustment to redemption value for vested Series E-1 convertible preferred stock options (unaudited)	—		3		—		—		(3	)		—			—			(3	)
Change in redemption value for vested Series E-1 convertible preferred stock options (unaudited)	—		(2	)	—		—		—			—			2			2
Common stock option share-based compensation (unaudited)	—		—		—		—		5,547			—			—			5,547
Other comprehensive loss (unaudited)	—		—		—		—		—			(74	)		—			(74	)
Net loss (unaudited)	—		—		—		—		—			—			(24,884	)		(24,884	)
Balance as of June 30, 2018 (unaudited)	92,790,094	$	560,667		12,546,844	$	1	$	31,958		$	(240	)	$	(274,154	)	$	(242,435	)

Balance as of December 31, 2018	92,790,094	$	560,858		12,841,536	$	1	$	37,902		$	(107	)	$	(295,908	)	$	(258,112	)
Issuance of common stock for cash upon exercise of stock options (unaudited)	—		—		883,845		—		1,880			—			—			1,880
Issuance of Series E-1 convertible preferred stock for cash upon exercise of Series E-1 convertible preferred stock options at fair value (unaudited)	249,643		109		—		—		—			—			—			—
Change in redemption value for vested Series E-1 convertible preferred stock options (unaudited)	—		964		—		—		—			—			(964	)		(964	)
Common stock option share-based compensation (unaudited)	—		—		—		—		6,378			—			—			6,378
Other comprehensive income (unaudited)	—		—		—		—		—			489			—			489
Net loss (unaudited)	—		—		—		—		—			—			(34,045	)		(34,045	)
Balance as of June 30, 2019 (unaudited)	93,039,737	$	561,931		13,725,381	$	1	$	46,160		$	382		$	(330,917	)	$	(284,374	)

	June 30, 2019
	Level 1		Level 2		Level 3		Total		September 30, 2020
	(unaudited)								Level 1		Level 2		Level 3		Total
Financial assets
Money market funds	$	35,695	$	—	$	—	$	35,695	$	495,115	$	—	$	—	$	495,115
Commercial paper		—		88,161		—		88,161
U.S. government debt and agency securities		—		273,713		—		273,713		—		340,836		—		340,836
Corporate bonds		—		22,661		—		22,661		—		13,634		—		13,634
Total financial assets	$	35,695	$	384,535	$	—	$	420,230	$	495,115	$	354,470	$	—	$	849,585
Financial liabilities
Convertible preferred stock warrant liability	$	—	$	—	$	2,602	$	2,602
Total financial liabilities	$	—	$	—	$	2,602	$	2,602

	June 30, 2019			December 31, 2018
	(unaudited)
Fair value estimate	$	48.30		$	8.27
Expected term (in years)		1.81			2.31
Risk-free interest rate		1.8	%		2.5	%
Expected volatility		61.1	%		55.3	%
Expected dividend yield		—			—

	Less Than 12 Months				12 Months Or Greater
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(unaudited)
Short-term marketable securities
U.S. government debt and agency securities	$	—	$	—	$	4,997	$	(1	)
Total short-term marketable securities	$	—	$	—	$	4,997	$	(1	)

2019	$	856
2020		1,698
2020 (excluding the nine months ended September 30, 2020)			$	428
2021		1,698		1,699
2022		1,698		1,699
2023		1,698		1,699
2024				1,703
Thereafter		5,136		3,425
Total future amortization expense	$	12,784	$	10,653

Deferred revenue balance at December 31, 2018	$	13,399
Additions to deferred revenue during the period (unaudited)		308,055
Revenue recognized during the period (unaudited)		(19,341	)
Deferred revenue balance at June 30, 2019 (unaudited)	$	302,113

Deferred revenue balance at December 31, 2019	$	280,326
Additions to deferred revenue during the period		19,859
Revenue recognized during the period		(47,140	)
Deferred revenue balance at September 30, 2020	$	253,045

Weighted-average remaining lease term (in years)			9.66
Weighted-average discount rate			4.6	%

2019	$	1,781
2020		3,819
2020 (excluding the nine months ended September 30, 2020)			$	1,532
2021		3,917		6,887
2022		4,017		6,886
2023		2,295		6,450
2024				5,956
Thereafter		2,315		30,979
Total future minimum lease payments	$	18,144
Total undiscounted lease payments				58,690
Less:
Imputed interest rate				(11,682	)
Tenant improvement receivables				(673	)
Total operating lease liabilities			$	46,335
Less: current portion				(3,969	)
Operating lease liabilities, less current portion			$	42,366

	Shares Authorized		Shares Issued and Outstanding		Amount			Liquidation Preference
Series A		4,550,000		4,550,000	$	12,405		$	4,550
Series B		5,645,706		5,645,706		16,018			9,669
Series C		4,804,227		4,747,352		14,425			12,521
Series D		19,269,117		19,269,117		106,905			106,999
Series E		15,524,350		15,524,350		93,698			93,750
Series E-1		17,407,441		16,854,887		73,640	⁽¹⁾		101,785
Series F		21,761,676		21,761,676		195,013			195,100
Series F-1		4,800,000		4,686,649		49,827			50,000
Total convertible preferred stock		93,762,517		93,039,737	$	561,931		$	574,374

Shares ~~to be issued~~issuable upon ~~conversion~~the exercise of ~~all series~~outstanding common stock options and the vesting of ~~convertible preferred~~outstanding common restricted stock units granted			~~93,039,737~~15,567,900
Shares available for future grant under the 2019 Equity Incentive Plan			18,787,301
Shares available for future grant under the Employee Stock Purchase Plan			2,804,298
Shares to be issued upon exercise of ~~outstanding~~a common stock ~~options~~			~~17,681,436~~
~~Shares available for future stock option grants~~			~~3,155,968~~
~~Shares to be issued upon exercise of outstanding Series E-1 convertible preferred stock options~~			~~15,034~~
~~Shares to be issued upon conversion of Series C convertible preferred stock in connection with~~ warrant ~~exercise~~			56,875
~~Shares to be issued upon conversion of common stock warrants~~			~~55,032~~
~~Shares~~Total shares of common stock reserved for future issuance			~~114,004,082~~37,216,374

	Shares Available for Grant			Shares Subject to Outstanding Options			Weighted- Average Exercise Price per Share		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2018		6,827,996			14,893,253		$	4.59	$	39,864
Options granted (unaudited)		(3,890,331	)		3,890,331			7.55
Forfeited or cancelled (unaudited)		218,303			(218,303	)		6.19
Exercised (unaudited)		—			(883,845	)		2.13
Outstanding at June 30, 2019 (unaudited)		3,155,968			17,681,436			5.35		759,479

	Shares Available for Grant
Shares available for grant at December 31, 2019		15,396,254
2019 Plan reserve increase on January 1, 2020		6,261,907
Options and restricted stock units granted		(3,070,331	)
Options and restricted stock units forfeited, cancelled or expired		199,471
Shares available for grant at September 30, 2020		18,787,301

	Convertible Preferred Shares Subject to Outstanding Options			Weighted- Average Exercise Price per Share		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2018		264,677		$	0.44	$	1,826
Options granted (unaudited)		—			—
Forfeited or cancelled (unaudited)		—			—
Exercised (unaudited)		(249,643	)		0.44
Outstanding at June 30, 2019 (unaudited)		15,034			0.49		719

	Adaptive 2009 Equity Incentive Plan
	Six Months Ended June 30,
	2019			2018			Nine Months Ended September 30,
	(unaudited)						2020		2019
Grant date fair value	$	8.55		$	6.55		$17.68 - $48.54		$7.80 - $47.81
Expected term (in years)		6.06			6.16		5.27 - 6.08		5.27 - 6.08
Risk-free interest rate		2.4	%		2.7	%	0.4% - 1.7%		1.4% - 2.5%
Expected volatility		67.9	%		69.2	%	70.5% - 73.0%		64.3% - 72.9%
Expected dividend yield		—			—			—		—

2019	$	1,431
2020		3,053
2021		5,802
2022		9,706
2023		9,975
Thereafter		105,270
Total future minimum lease payments	$	135,237

	Three Months Ended June 30,				Change					Percent of Revenue						Three Months Ended September 30,				Change						Percent of Revenue
(in thousands, except percentages)	2019		2018		$		%			2019			2018			2020		2019		$			%			2020			2019
	(unaudited)
Revenue
Sequencing revenue	$	11,865	$	8,281	$	3,584		43	%		54	%		72	%	$	11,276	$	11,683	$	(407	)		(3	)%		43	%		45	%
Development revenue		10,273		3,287		6,986		213			46			28			15,023		14,375		648			5			57			55
Total revenue	$	22,138	$	11,568	$	10,570		91	%		100	%		100	%	$	26,299	$	26,058	$	241			1			100	%		100	%

	Three Months Ended June 30,							Three Months Ended September 30,
(in thousands)	2019		2018		Change			2020		2019		Change
	(unaudited)
Research and development materials and allocated production laboratory expenses	$	7,589	$	3,605	$	3,984		$	13,095	$	10,313	$	2,782
Personnel expenses		6,765		4,344		2,421			11,447		7,146		4,301
Allocable facilities and information technology expenses		783		815		(32	)		1,468		900		568
Software and cloud services expenses		462		244		218			976		810		166
Depreciation and other expenses		928		444		484			3,328		1,337		1,991
Total	$	16,527	$	9,452	$	7,075		$	30,314	$	20,506	$	9,808

	Six Months Ended June 30,				Change					Percent of Revenue						Nine Months Ended September 30,				Change						Percent of Revenue
(in thousands, except percentages)	2019		2018		$		%			2019			2018			2020		2019		$			%			2020			2019
	(unaudited)
Revenue
Sequencing revenue	$	17,948	$	14,061	$	3,887		28	%		52	%		66	%	$	28,730	$	29,631	$	(901	)		(3	)%		42	%		49	%
Development revenue		16,856		7,222		9,634		133			48			34			39,467		31,231		8,236			26			58			51
Total revenue	$	34,804	$	21,283	$	13,521		64	%		100	%		100	%	$	68,197	$	60,862	$	7,335			12			100	%		100	%


		Incorporated by Reference
Exhibit Number	Exhibit Title	Form	File No.	Exhibit	Filing Date	Filed Herewith
3.1	Amended and Restated Articles of Incorporation	8-K	001-38957	3.1	7/1/2019
3.2	Amended and Restated Bylaws	8-K	001-38957	3.2	7/1/2019
4.1	Seventh Amended and Restated Investors’ Rights Agreement among the Registrant and certain of its shareholders, dated May 30, 2019	S-1	333-231838	4.1	5/30/2019
10.1†	Master Terms & Conditions of Sale between Illumina, Inc. and the Registrant, dated May 28, 2019	S-1/A	333-231838	10.3	6/17/2019
10.2	Amended and Restated Side Letter Agreement among Viking Global Equities LP, Viking Global Equities II LP, VGE III Portfolio Ltd., Viking Long Fund Master Ltd. and the Registrant, dated May 8, 2019	S-1	333-231838	10.5	5/30/2019
10.3	Form of Amended and Restated Employment Agreement between the Registrant and certain of its executive officers	S-1	333-231838	10.7	5/30/2019
10.4	Form of Amended and Restated Employment Agreement between the Registrant and each of Lance Baldo, MD and Francis T. Lo	S-1	333-231838	10.8	5/30/2019
10.5	Form of Restated Non-Employee Director Change in Control Agreement between the Registrant and each of its non-employee directors	S-1	333-231838	10.9	5/30/2019
10.6	Executive Severance Agreement between the Registrant and Chad Cohen, dated May 1, 2019	S-1	333-231838	10.10	5/30/2019
10.7	Executive Severance Agreement between the Registrant and Lance Baldo, MD, dated April 22, 2019	S-1	333-231838	10.11	5/30/2019
10.8	Executive Severance Agreement between the Registrant and Charles Sang, dated May 1, 2019	S-1	333-231838	10.12	5/30/2019
10.9	Form of Indemnification Agreement between the Registrant and each of its directors and executive officers	S-1	333-231838	10.13	5/30/2019
10.10	Adaptive Biotechnologies Corporation Non-Employee Director Compensation Policy	S-1/A	333-231838	10.14	6/17/2019
10.11	Adaptive Biotechnologies Corporation 2009 Equity Incentive Plan and form of award agreement thereunder	S-1	333-231838	10.15	5/30/2019
10.12	Adaptive Biotechnologies Corporation 2019 Equity Incentive Plan and form of award agreement thereunder					X
31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
31.2	Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1*	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
32.2*	Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X


~~101.INS~~	~~XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.~~	X
~~101.SCH~~	~~XBRL Taxonomy Extension Schema Document~~	X
~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document~~	X
~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase Document~~	X
~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase Document~~	X
~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document~~	X


†	Portions of this exhibit have been omitted pursuant to Item 601 of Regulation S-K promulgated under the Securities Act because the information is not material and would be competitively harmful if publicly disclosed.
*	This certification is deemed not filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

	Adaptive Biotechnologies Corporation

Date: ~~August 13, 2019~~November 10, 2020	By:	/s/ Chad Robins
		Chad Robins
		Chief Executive Officer and Director (Principal Executive Officer)

Date: ~~August 13, 2019~~November 10, 2020	By:	/s/ Chad Cohen
		Chad Cohen
		Chief Financial Officer (Principal Financial and Accounting Officer)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company