Veracyte (VCYT) 10-Q 5 May 16 2016 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	Apr. 29, 2016
Document and Entity Information
Entity Registrant Name	VERACYTE, INC.
Entity Central Index Key	1,384,101
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		27,858,317
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q1

Condensed Balance Sheets

Condensed Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 47,456	$ 39,084
Accounts receivable, net of allowance of $131 and $117 as of March 31, 2016 and December 31, 2015, respectively	3,230	3,503
Supplies inventory	3,652	3,767
Prepaid expenses and other current assets	1,618	1,442
Restricted cash	238	118
Total current assets	56,194	47,914
Property and equipment, net	11,272	10,314
Finite-lived intangible assets, net	14,933	15,200
Goodwill	1,057	1,057
Restricted cash	603	603
Other assets	208	159
Total assets	84,267	75,247
Current liabilities:
Accounts payable	4,340	5,085
Accrued liabilities	7,021	8,689
Deferred Genzyme co-promotion fee	518	948
Total current liabilities	11,879	14,722
Long-term debt	24,452	4,990
Deferred rent, net of current portion	4,630	4,283
Total liabilities	$ 40,961	$ 23,995
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized, no shares issued and outstanding as of March 31, 2016 and December 31, 2015
Common stock, $0.001 par value; 125,000,000 shares authorized, 27,858,317 and 27,685,291 shares issued and outstanding as of March 31, 2016 and December 31, 2015, respectively	$ 28	$ 28
Additional paid-in capital	202,079	199,950
Accumulated deficit	(158,801)	(148,726)
Total stockholders' equity	43,306	51,252
Total liabilities and stockholders' equity	$ 84,267	$ 75,247

Condensed Balance Sheets (Paren

Condensed Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Condensed Balance Sheets
Accounts receivable, allowance (in dollars)	$ 131	$ 117
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	125,000,000	125,000,000
Common stock, shares issued	27,858,317	27,685,291
Common stock, shares outstanding	27,858,317	27,685,291

Condensed Statements of Operati

Condensed Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Condensed Statements of Operations and Comprehensive Loss
Revenue	$ 13,550	$ 11,218
Operating expenses:
Cost of revenue	6,279	4,566
Research and development	3,461	2,787
Selling and marketing	7,066	5,620
General and administrative	6,228	5,798
Intangible asset amortization	267
Total operating expenses	23,301	18,771
Loss from operations	(9,751)	(7,553)
Interest expense	(367)	(89)
Other income (expense), net	43	32
Net loss	(10,075)	(7,610)
Comprehensive loss	$ (10,075)	$ (7,610)
Net loss per common share, basic and diluted (in dollars per share)	$ (0.36)	$ (0.34)
Shares use to compute net loss per common share, basic and diluted (in shares)	27,817,993	22,539,723

Condensed Statements of Cash Fl

Condensed Statements of Cash Flows - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Operating activities
Net loss	$ (10,075,000)	$ (7,610,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	762,000	352,000
Bad debt expense	66,000	22,000
Genzyme co-promotion fee amortization	(430,000)	(474,000)
Stock-based compensation	1,496,000	1,223,000
Amortization and write-off of debt discount and issuance costs	92,000	11,000
Interest on debt balloon payment and prepayment penalty	206,000	19,000
Changes in operating assets and liabilities:
Accounts receivable	207,000	466,000
Supplies inventory	115,000	(36,000)
Prepaid expenses and other current assets	(176,000)	38,000
Other assets	(49,000)	(29,000)
Accounts payable	301,000	(356,000)
Accrued liabilities and deferred rent	(1,113,000)	(2,493,000)
Net cash used in operating activities	(8,598,000)	(8,867,000)
Investing activities
Purchases of property and equipment	(2,855,000)	(511,000)
Change in restricted cash	(120,000)	70,000
Net cash used in investing activities	(2,975,000)	(441,000)
Financing activities
Proceeds from the issuance of long-term debt, net of debt issuance costs	24,600,000
Payment of long-term debt	(5,000,000)
Payment of end-of-term debt obligation and prepayment penalty	(288,000)
Proceeds from the exercise of common stock options and employee stock purchases	633,000	92,000
Net cash provided by financing activities	19,945,000	92,000
Net increase (decrease) in cash and cash equivalents	8,372,000	(9,216,000)
Cash and cash equivalents at beginning of period	39,084,000	35,014,000
Cash and cash equivalents at end of period	47,456,000	25,798,000
Supplementary cash flow information of non cash investing and financing activities:
Purchases of property and equipment included in accounts payable and accrued liabilities	423,000	$ 195,000
Unpaid deferred debt issuance costs	$ 148,000

Organization and Description of

Organization and Description of Business	3 Months Ended
	Mar. 31, 2016
Organization and Description of Business
Organization and Description of Business	1. Organization and Description of Business Veracyte, Inc. (“Veracyte” or the “Company”) was incorporated in the state of Delaware on August 15, 2006 as Calderome, Inc. Calderome operated as an incubator until early 2008. On March 4, 2008, the Company changed its name to Veracyte, Inc. Veracyte is a molecular diagnostics company that uses genomic technology to resolve diagnostic ambiguity. The Company targets diseases in which large numbers of patients undergo invasive and costly diagnostic procedures that could have been avoided with a more accurate diagnosis from a cytology sample taken preoperatively. By improving preoperative diagnosis, the Company helps patients avoid such unnecessary invasive procedures and surgeries while reducing healthcare costs. The Company’s first commercial solution, the Afirma ® Thyroid FNA Analysis, centers on the proprietary Afirma Gene Expression Classifier (“GEC”). The Afirma GEC helps physicians reduce the number of unnecessary surgeries by employing a proprietary 142-gene signature to preoperatively determine whether thyroid nodules previously classified by cytopathology as indeterminate can be reclassified as benign. The Afirma GEC is offered directly or as part of a comprehensive solution that also includes cytopathology. Additionally, the Afirma Malignancy Classifiers were launched in May 2014. The Company currently markets and sells Afirma in the United States and select foreign countries through a co-promotion agreement with Genzyme Corporation, a subsidiary of Sanofi, as well as selectively through other distributors internationally. On March 9, 2016, the Company gave notice of termination of the U.S. Co-Promotion Agreement, effective September 9, 2016. In April 2015, the Company entered the lung cancer diagnostics market with the Percepta ® Bronchial Genomic Classifier, a genomic test to resolve ambiguity in lung cancer diagnosis. The Company has a second product in pulmonology under development designed to help in the preoperative assessment of patients suspected to have idiopathic pulmonary fibrosis (“IPF”). The Company’s operations are based in South San Francisco, California and Austin, Texas, and it operates in one segment in the United States. Basis of Presentation The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The financial statements include the accounts of the Company and its former wholly-owned subsidiary, which was dissolved in June 2015. For periods prior to the subsidiary dissolution, all intercompany accounts and transactions were eliminated in consolidation. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The condensed balance sheet as of March 31, 2016, the condensed statements of operations and comprehensive loss and the condensed statements of cash flows for the three months ended March 31, 2016 and 2015, are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of its financial position, operating results and cash flows for the periods presented. The condensed balance sheet at December 31, 2015 has been derived from audited financial statements. The results for the three months ended March 31, 2016 are not necessarily indicative of the results expected for the full fiscal year or any other period. Certain figures have been reclassified on the condensed balance sheet at December 31, 2015 to conform with the adoption of Accounting Standards Update (“ASU”) No. 2015-03, Simplifying the Presentation of Debt Issuance Costs. The accompanying interim period condensed financial statements and related financial information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. Use of Estimates The preparation of the unaudited interim financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates include: revenue recognition; contractual allowances; allowance for doubtful accounts; the useful lives of property and equipment; the recoverability of long-lived assets; the estimation of the fair value of intangible assets; stock options; income tax uncertainties, including a valuation allowance for deferred tax assets; and contingencies. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenue and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and assumptions. Concentrations of Credit Risk and Other Risks and Uncertainties The Company’s cash and cash equivalents are deposited with one major financial institution in the United States. Deposits in this institution may exceed the amount of insurance provided on such deposits. The Company has not experienced any losses on its deposits of cash and cash equivalents. Several of the components of the Company’s sample collection kit and test reagents are obtained from single-source suppliers. If these single-source suppliers fail to satisfy the Company’s requirements on a timely basis, it could suffer delays in being able to deliver its diagnostic solutions, a possible loss of revenue, or incur higher costs, any of which could adversely affect its operating results. The Company is also subject to credit risk from its accounts receivable related to its sales. The Company generally does not perform evaluations of customers’ financial condition and generally does not require collateral. Through March 31, 2016, all of the Company’s revenue has been derived from the sale of Afirma. To date, Afirma has been delivered primarily to physicians in the United States. The Company’s third-party payers in excess of 10% of revenue and their related revenue as a percentage of total revenue were as follows: Three Months Ended March 31, 2016 2015 Medicare % % United Healthcare % % Cigna % % % % As the number of payers reimbursing for Afirma increases, the percentage of revenue derived from Medicare and other significant third-party payers has changed and will continue to change as a percentage of total revenue. The Company’s significant third-party payers and their related accounts receivable balance as a percentage of total accounts receivable are as follows: March 31, 2016 December 31, 2015 Medicare % % United Healthcare % % Aetna % % Cigna % % No other third-party payer represented more than 10% of the Company’s accounts receivable balances as of those dates. Restricted Cash The Company had deposits of $238,000 and $118,000 as of March 31, 2016 and December 31, 2015, respectively, including amounts restricted from withdrawal and held by a bank in the form of collateral for irrevocable standby letters of credit totaling $118,000 held as security for the lease of the Company’s former headquarters and laboratory facility in South San Francisco that expired March 31, 2016. The deposits at March 31, 2016 also included $120,000 as a pledge for corporate credit cards. This restricted cash is included in current assets as of March 31, 2016. The Company also had deposits of $603,000 included in long-term assets as of March 31, 2016 and December 31, 2015, restricted from withdrawal and held by a bank in the form of collateral for an irrevocable standby letter of credit held as security for the lease of the Company’s new South San Francisco facility signed in April 2015. Allowance for Doubtful Accounts The Company estimates an allowance for doubtful accounts against its individual accounts receivable based on estimates of expected reimbursement consistent with historical payment experience in relation to the amounts billed. Bad debt expense is included in general and administrative expense on the Company’s statements of operations and comprehensive loss. Accounts receivable are written off against the allowance when there is substantive evidence that the account will not be paid. The balance of allowance for doubtful accounts as of March 31, 2016 and December 31, 2015 was $131,000 and $117,000, respectively. Bad debt expense was $66,000 and $22,000 for the three months ended March 31, 2016 and 2015, respectively and is included in general and administrative expenses in the accompanying condensed statements of operations. Write offs for doubtful accounts of $52,000 and $21,000 were recorded against the allowance for doubtful accounts during the three months ended March 31, 2016 and 2015, respectively. Fair Value of Financial Instruments The carrying amounts of certain financial instruments including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities approximate fair value due to their relatively short maturities. Revenue Recognition The Company recognizes revenue in accordance with the provision of ASC 954-605, Health Care Entities—Revenue Recognition. The Company’s revenue is generated from the provision of diagnostic services using the Afirma solution and the service is completed upon the delivery of test results to the prescribing physician, at which time the Company bills for the service. The Company recognizes revenue related to billings for Medicare and commercial payers on an accrual basis, net of contractual and other adjustments, when amounts that will ultimately be realized can be estimated. Contractual and other adjustments represent the difference between the list price (the billing rate) and the estimated reimbursement rate for each payer. Upon ultimate collection, the amount received from Medicare and commercial payers where reimbursement was estimated is compared to previous estimates and, if necessary, the contractual allowance is adjusted accordingly. Until a contract has been negotiated with a commercial payer or governmental program, the Afirma solution may or may not be covered by these entities’ existing reimbursement policies. In addition, patients do not enter into direct agreements with the Company that commit them to pay any portion of the cost of the tests in the event that their insurance declines to reimburse the Company. In the absence of an agreement with the patient or other clearly enforceable legal right to demand payment from the patient, the related revenue is only recognized upon the earlier of payment notification, if applicable, or cash receipt. The estimates of amounts that will ultimately be realized requires significant judgment by management. Some patients have out-of-pocket costs for amounts not covered by their insurance carrier, and the Company may bill the patient directly for these amounts in the form of co-payments and co-insurance in accordance with their insurance carrier and health plans. Some payers may not cover the Company’s GEC as ordered by the prescribing physician under their reimbursement policies. The Company pursues reimbursement from such patients on a case-by-case basis. In the absence of contracted reimbursement coverage or the ability to estimate the amount that will ultimately be realized for the Company’s services, revenue is recognized upon the earlier of receipt of third-party payer notification of payment or when cash is received. Revenue recognized when cash is received and on an accrual basis for the three months ended March 31, 2016 and 2015 was as follows (in thousands of dollars): Three Months Ended March 31, 2016 2015 Revenue recognized when cash is received $ $ Revenue recognized on an accrual basis Total $ $ Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers , requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. Adoption is permitted as early as the first quarter of 2017 and is required by the first quarter of 2018. The Company has not yet selected a transition method and is currently evaluating the potential effect of the updated standard on its financial statements. In August 2014, FASB issued ASU No. 2014-15, Presentation of Financial Statements Going Concern—Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern . The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments: (1) provide a definition of the term substantial doubt; (2) require an evaluation every reporting period including interim periods; (3) provide principles for considering the mitigating effect of management’s plans; (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans; (5) require an express statement and other disclosures when substantial doubt is not alleviated; and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). ASU 2014-15 will be effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016 with early adoption permitted. ASU 2014-15 will be effective for the Company beginning with its annual report for fiscal 2016 and interim periods thereafter. The Company does not anticipate that the adoption of this ASU will have a significant impact on its financial statements. In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs , to require debt issuance costs to be presented as an offset against debt outstanding. The update does not change current guidance on the recognition and measurement of debt issuance costs. The ASU is effective for interim and annual periods beginning after December 15, 2015. Adoption of the ASU is retrospective to each prior period presented. The Company has adopted this ASU and the retrospective adjustment of the prior period presentation was not material. In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes . The ASU requires that deferred tax assets and liabilities be classified as noncurrent in the statement of financial position, thereby simplifying the current guidance that requires an entity to separate deferred assets and liabilities into current and noncurrent amounts. This ASU will be effective for the Company beginning in the first quarter of fiscal year 2018 though early adoption is permitted. The Company early-adopted the ASU as of December 31, 2015 and the impact of adoption on its statement of financial position was not material. In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation , related to the tax effects of share-based awards. The ASU requires that all the tax effects of share-based awards be recorded through the income statement, thereby simplifying the current guidance that requires related tax deductions in excess of compensation cost (“Excess”) be recorded in equity and tax deficiencies, when compensation cost exceed tax deductions, be recorded in equity to the extent of the previously recognized Excess with the remainder to be recorded in income tax expense. The ASU will be effective for interim and annual periods beginning after December 15, 2016. The Company does not anticipate that the adoption of this ASU will have a significant impact on its financial statements.

Net Loss Per Common Share

Net Loss Per Common Share	3 Months Ended
	Mar. 31, 2016
Net Loss Per Common Share
Net Loss Per Common Share	2. Net Loss Per Common Share The following outstanding common stock equivalents have been excluded from diluted net loss per common share because their inclusion would be anti-dilutive: Three Months Ended March 31, 2016 2015 Shares of common stock subject to outstanding options Employee stock purchase plan — Total shares of common stock equivalents

Accrued Liabilities

Accrued Liabilities	3 Months Ended
	Mar. 31, 2016
Accrued Liabilities
Accrued Liabilities	3. Accrued Liabilities Accrued liabilities consisted of the following (in thousands of dollars): March 31, 2016 December 31, 2015 Accrued compensation expenses $ $ Accrued Genzyme co-promotion fees Accrued other Total accrued liabilities $ $

Fair Value Measurements

Fair Value Measurements	3 Months Ended
	Mar. 31, 2016
Fair Value Measurements
Fair Value Measurements	4. Fair Value Measurements The Company records its financial assets and liabilities at fair value. The carrying amounts of certain financial instruments of the Company, including cash and cash equivalents, prepaid expenses and other current assets, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities. The carrying value of the Company’s debt approximates its fair value because the interest rate approximates market rates that the Company could obtain for debt with similar terms. The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows: · Level I: Inputs which include quoted prices in active markets for identical assets and liabilities. · Level II: Inputs other than Level I that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. · Level III: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The fair value of the Company’s financial assets, which consist only of money market funds, was $46.5 million and $37.5 million as of March 31, 2016 and December 31, 2015, respectively, and are Level I assets as described above.

Commitments and Contingencies

Commitments and Contingencies	3 Months Ended
	Mar. 31, 2016
Commitments and Contingencies
Commitments and Contingencies	5. Commitments and Contingencies Operating Leases The Company leases its headquarters and South San Francisco, California laboratory facilities under a non-cancelable lease agreement for approximately 59,000 square feet. The lease began in June 2015 and ends in March 2026 and contains extension of lease term and expansion options. In conjunction with this lease, the landlord provided funding of approximately $3.3 million for tenant improvements, all of which was received as of December 31, 2015. The Company incurred $3.6 million in addition to the landlord’s tenant allowance as of March 31, 2016 to complete the build-out of the facility. The Company had deposits of $603,000 included in long-term assets as of March 31, 2016, restricted from withdrawal and held by a bank in the form of collateral for an irrevocable standby letter of credit totaling $603,000 held as security for the lease of the new South San Francisco facility. The Company also leases laboratory space in Austin, Texas. The lease expires on July 31, 2018. The Company provided a cash security deposit of $75,000, which is included in other assets in the Company’s condensed balance sheets as of March 31, 2016 and December 31, 2015. Future minimum lease payments under non-cancelable operating leases as of March 31, 2016 are as follows (in thousands of dollars): Year Ending December 31, Amounts 2016 $ 2017 2018 2019 2020 Thereafter Total minimum lease payments $ The Company recognizes rent expense on a straight-line basis over the non-cancelable lease period. Facilities rent expense was $628,000 and $213,000 for the three months ended March 31, 2016 and 2015, respectively. Supplies Purchase Commitments The Company had non-cancelable purchase commitments with two suppliers to purchase a minimum quantity of supplies for approximately $813,000 at March 31, 2016. Debt Obligations See Note 6, Debt. Contingencies From time to time, the Company may be involved in legal proceedings arising in the ordinary course of business. The Company believes there is no litigation pending that could have, individually or in the aggregate, a material adverse effect on the Company’s financial position, results of operations or cash flows.

Debt

Debt	3 Months Ended
	Mar. 31, 2016
Debt
Debt	6. Debt Credit Agreement In March 2016, the Company entered into a credit agreement (the “Credit Agreement”) with Visium Healthcare Partners, LP (“Visium”). Under the Credit Agreement, two term loans are available to the Company with an aggregate principal amount of up to $40.0 million. The Company drew down the initial $25.0 million term loan (the “Initial Term Loan”) on March 30, 2016, of which $5.0 million was used to pay the outstanding balance of the Company’s existing long-term debt, which was cancelled at that date. On or prior to June 30, 2017, the Company may request the second term loan of up to $15.0 million (the “Second Term Loan” and together with the Initial Term Loan, the “Term Loans”). The maturity of the Term Loans is March 31, 2022. The Term Loans bear interest at a fixed rate of 12.0% per annum, payable quarterly at the end of each March, June, September and December. No principal payments will be due during an interest-only period, commencing on the funding date for the Initial Term Loan (the “Initial Borrowing Date”) and continuing through and including March 31, 2020. The Company is obligated to repay the outstanding principal amounts under the Term Loans in eight equal installments during the final two years under the Credit Agreement. For any quarterly interest payment through and including the 16th interest payment date after the Initial Borrowing Date, so long as no event of default has occurred and is then continuing, the Company may elect to pay interest in cash on the outstanding principal amounts of the Term Loans at a fixed rate of 9.0%, with the remaining 3.0% of the 12.0% interest paid-in-kind by adding such paid-in-kind interest to the outstanding principal amounts of the Term Loans. The Company may prepay the outstanding principal amount under the Term Loans subject to a minimum of $5.0 million of principal amount or a whole multiple of $1.0 million in excess thereof plus accrued and unpaid interest and a prepayment premium. The prepayment premium will be assessed on the principal amount repaid and will equal (i) 24.0% less the aggregate amount of all interest payments in cash, if the prepayment is made on or prior to March 31, 2018, (ii) 4.0%, if the prepayment is made after March 31, 2018 and on or prior to March 31, 2019, (iii) 2.0%, if the prepayment is made after March 31, 2019 and on or prior to March 31, 2020, and (iv) 1.0%, if the prepayment is made after March 31, 2020 and on or prior to March 31, 2021. After March 31, 2021 there is no prepayment premium. The Company’s obligations under the Credit Agreement are secured by a security interest in substantially all of its assets. The Credit Agreement contains customary representations, warranties, and events of default, as well as affirmative and negative covenants. The negative covenants include, among other provisions, covenants that limit or restrict the Company’s ability to incur liens, make investments, incur indebtedness, merge with or acquire other entities, dispose of assets, make dividends or other distributions to holders of its equity interests, engage in any material new line of business, or enter into certain transactions with affiliates, in each case subject to certain exceptions. To the extent the Company forms or acquires certain subsidiaries domiciled in the United States, those subsidiaries are required to be guarantors of the Company’s obligations under the Credit Agreement. As of March 31, 2016, the Company was in compliance with the loan covenants. Concurrent with entering into the Credit Agreement, the Company entered into an agreement with Visium pursuant to which, for a period of one year following the Initial Borrowing Date, Visium has the right to participate in certain future equity financings of the Company in an amount of up to $5.0 million with no preferential terms. As of March 31, 2016, the net debt obligation for the Credit Agreement was as follows (in thousands of dollars): March 31, 2016 Debt principal $ Deferred debt issuance costs ) Net debt obligation $ The carrying value of the debt approximates its fair value because the interest rate approximates market rates that the Company could obtain for debt with similar terms. The deferred debt issuance costs of $548,000 will be amortized until the Term Loans mature on March 31, 2022. For the three months ended March 31, 2016, interest expense was $8,000 and amortization of the deferred debt issuance costs was less than $1,000. Future principal payments under the Credit Agreement are as follows (in thousands of dollars): Year Ending December 31: 2020 $ Thereafter Total $ Loan and Security Agreement In June 2013, the Company entered into a loan and security agreement (“Original Loan”) with a financial institution. The Original Loan provided for term loans of up to $10.0 million in aggregate. The Company drew down $5.0 million in funds under the agreement in June 2013, and did not draw the remaining $5.0 million on or before the expiration date of March 31, 2014. The Company was required to repay the outstanding principal in 30 equal installments beginning 18 months after the date of the borrowing and was due in full in June 2017. The Original Loan had an interest rate of 6.06% per annum, carried prepayment penalties of 2.25% and 1.50% for prepayment within one and two years, respectively, and 0.75% thereafter. In December 2014, the Company amended certain terms and conditions of the Original Loan (“Amended Loan”). The Amended Loan provided for term loans of up to $15.0 million in aggregate, in three tranches of $5.0 million each. The Company borrowed $5.0 million under the first tranche in December 2014 and used the funds for repayment of the $5.0 million in principal outstanding under the Original Loan, in a cashless transaction. In addition, the Company paid the accrued but unpaid interest of $14,000 due on the Original Loan and the related end-of-term payment of $110,000. The Amended Loan waived the prepayment premium of $75,000 under the Original Loan and reduced the end-of-term payment of $225,000 under the Original Loan to $110,000. In November 2015, the Company further amended the loan to extend the availability of the second $5.0 million tranche under the Amended Loan through June 30, 2016 from December 31, 2015 originally. The Company could have borrowed the third $5.0 million tranche any time through June 30, 2016 after achieving the third tranche revenue milestone as defined in the Amended Loan. Under the Amended Loan borrowing, the Company was required to repay the outstanding principal in 24 equal installments beginning 24 months after the date of the borrowing and was due in full in December 2018. The first tranche of the Amended Loan bore interest at a rate of 5.00% per annum. The Amended Loan carried prepayment penalties of 2.00% and 1.00% for prepayment within one and two years, respectively, and no prepayment penalty thereafter. In connection with the Amended Loan, the Company paid approximately $45,000 in third-party fees. Interest expense on the loan and security agreement was as follows (in thousands of dollars): Three Months Ended March 31, 2016 2015 Nominal interest $ $ Amortization and write-off of debt discount and debt issuance costs Prepayment penalty — End-of-term payment interest Total $ $

Stockholders' Equity

Stockholders' Equity	3 Months Ended
	Mar. 31, 2016
Stockholders' Equity
Stockholders' Equity	7. Stockholders’ Equity Common Stock The Company had reserved shares of common stock for issuance as follows: March 31, 2016 December 31, 2015 Options issued and outstanding Options available for grant under stock option plans Common stock available for the Employee Stock Purchase Plan Total

Stock Incentive Plans

Stock Incentive Plans	3 Months Ended
	Mar. 31, 2016
Stock Incentive Plans
Stock Incentive Plans	8. Stock Incentive Plans The following table summarizes activity under the Company’s stock option plans (aggregate intrinsic value in thousands): Shares Available for Grant Stock Options Outstanding Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value Balance—December 31, 2015 $ $ Additional options authorized — Granted ) Canceled ) Exercised — ) Balance—March 31, 2016 $ $ Options vested and exercisable—March 31, 2016 $ $ Options vested and expected to vest—March 31, 2016 $ $ The aggregate intrinsic value was calculated as the difference between the exercise price of the options to purchase common stock and the fair market value of the Company’s common stock, which was $5.40 per share as of March 31, 2016. The weighted average fair value of options to purchase common stock granted was $3.36 and $5.37 for the three months ended March 31, 2016 and 2015, respectively. The weighted-average fair value of stock options exercised was $1.71 and $2.50 for the three months ended March 31, 2016 and 2015, respectively. The intrinsic value of stock options exercised was $365,000 and $145,000 for the three months ended March 31, 2016 and 2015, respectively. Stock-based Compensation The following table summarizes stock-based compensation expense related to stock options and pursuant to the employee stock purchase plan (“ESPP”) for the three months ended March 31, 2016 and 2015, and are included in the condensed statements of operations and comprehensive loss as follows (in thousands of dollars): Three Months Ended March 31, 2016 2015 Cost of revenue $ $ Research and development Selling and marketing General and administrative Total stock-based compensation expense $ $ As of March 31, 2016, the Company had $13.2 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over an estimated weighted-average period of 2.92 years. The estimated grant-date fair value of employee stock options was calculated using the Black-Scholes option-pricing model, based on the following assumptions: Three Months Ended March 31, 2016 2015 Weighted-average volatility 55.88 – 56.36% 66.06 – 68.82% Weighted-average expected term (years) 6.08 – 6.23 6.08 – 6.08 Risk-free interest rate 1.32 – 1.77% 1.55 – 1.79% Expected dividend yield — — The estimated grant date fair value of the ESPP shares was calculated using the Black-Scholes option-pricing model, based on the following assumptions: Three Months Ended March 31, 2016 Weighted-average volatility 67.71 – 75.72% Weighted-average expected term (years) 0.49 – 1.00 Risk-free interest rate 0.47 – 0.47% Expected dividend yield — There were no stock options granted to non-employees during the three months ended March 31, 2016 and 2015, respectively.

Genzyme Co-promotion Agreement

Genzyme Co-promotion Agreement	3 Months Ended
	Mar. 31, 2016
Genzyme Co-promotion Agreement
Genzyme Co-promotion Agreement	9. Genzyme Co-Promotion Agreement In January 2012, the Company and Genzyme Corporation (“Genzyme”) executed a co-promotion agreement for the co-exclusive rights and license to promote and market the Company’s Afirma thyroid diagnostic solution in the United States and in 40 named countries. In exchange, the Company received a $10.0 million upfront co-promotion fee from Genzyme in February 2012. Under the terms of the agreement, Genzyme will receive a percentage of U.S. cash receipts that the Company has received related to Afirma as co-promotion fees. The percentage was 50% in 2012, 40% from January 2013 through February 2014, and 32% beginning in February 2014. In November 2014, the Company signed an Amended and Restated U.S. Co-Promotion Agreement (“Amended Agreement”) with Genzyme. Under the Amended Agreement, the co-promotion fees Genzyme will receive as a percentage of U.S. cash receipts were reduced from 32% to 15% beginning January 1, 2015. Through August 11, 2014, the Company amortized the $10.0 million upfront co-promotion fee straight-line over a four-year period, which was management’s best estimate of the life of the agreement, in part because after that period either party could have terminated the agreement without penalty. Effective August 12, 2014, the Company extended the amortization period from January 2016 to June 2016, the modified earliest period either party could terminate the agreement without penalty. The Company accounted for the change in accounting estimate prospectively. Either party may terminate the agreement with six months prior notice, however, under the Amended Agreement, neither party can terminate the agreement for convenience prior to June 30, 2016. The agreement with Genzyme expires in 2027. On March 9, 2016, the Company gave Genzyme notice of termination of the Amended Agreement effective September 9, 2016. The balance of the unamortized up-front co-promotion fee was $518,000 at March 31, 2016 and the amortization of the upfront co-promotion fee has been further extended to September 2016. In February 2015, the Company entered into an Ex-U.S. Co-promotion Agreement with Genzyme for the promotion of the Afirma GEC test with exclusivity in five countries outside the United States initially and in other countries agreed to from time to time. The agreement commenced on January 1, 2015 and continues until December 31, 2019, with extension of the agreement possible upon agreement of the parties. Country-specific terms have been established under this agreement for Brazil and Singapore and a right of first negotiation has been established for Canada, the Netherlands and Italy. The Company pays Genzyme 25% of net revenue from the sale of the Afirma GEC test in Brazil and Singapore over a five-year period commencing January 1, 2015. Beginning in the fourth year of the agreement, if the Company terminates the agreement for convenience, the Company may be required to pay a termination fee contingent on the number of GEC billable results generated. The Company incurred $2.1 million and $1.7 million in co-promotion expense, excluding the amortization of the up-front co-promotion fee, for the three months ended March 31, 2016 and 2015, respectively, and is included in selling and marketing expenses in the condensed statements of operations and comprehensive loss. The Company’s outstanding obligations to Genzyme totaled $2.1 million as of March 31, 2016 and December 31, 2015, and are included in accrued liabilities on the Company’s condensed balance sheets. The Company amortized $431,000 and $474,000 of the $10.0 million up-front co-promotion fee the three months ended March 31, 2016 and 2015, respectively, which is reflected as a reduction to selling and marketing expenses in the condensed statements of operations and comprehensive loss.

Thyroid Cytopathology Partners

Thyroid Cytopathology Partners	3 Months Ended
	Mar. 31, 2016
Thyroid Cytopathology Partners
Thyroid Cytopathology Partners	10. Thyroid Cytopathology Partners In 2010, the Company entered into an arrangement with Pathology Resource Consultants, P.A. (“PRC”) to set up and manage a specialized pathology practice to provide testing services to the Company. There is no direct monetary compensation from the Company to PRC as a result of this arrangement. The Company’s service agreement is with the specialized pathology practice, Thyroid Cytopathology Partners, (“TCP”), and is effective through December 31, 2015, and thereafter automatically renews every year unless either party provides notice of intent not to renew at least 12 months prior to the end of the then-current term. Under the service agreement, the Company pays TCP based on a fixed price per test schedule, which is reviewed periodically for changes in market pricing. Subsequent to December 2012, an amendment to the service agreement allows TCP to use a portion of the Company’s facility in Austin, Texas. The Company does not have an ownership interest in or provide any form of financial or other support to TCP. The Company has concluded that TCP represents a variable interest entity and that the Company is not the primary beneficiary as it does not have the ability to direct the activities that most significantly impact TCP’s economic performance. Therefore, the Company does not consolidate TCP. All amounts paid to TCP under the service agreement are expensed as incurred and included in cost of revenue in the condensed statements of operations and comprehensive loss. The Company incurred $1.3 million and $1.1 million for the three months ended March 31, 2016 and 2015, respectively, in cytopathology testing and evaluation services expenses with TCP. The Company’s outstanding obligations to TCP for cytopathology testing services were $889,000 and $820,000 as of March 31, 2016 and December 31, 2015, respectively, and are included in accounts payable on the Company’s condensed balance sheets. TCP reimburses the Company for a proportionate share of the Company’s rent and related operating expenses for the leased facility. TCP’s portion of rent and related operating expense for the subleased space at the Austin, Texas facility was $23,000 and $23,000 for the three months ended March 31, 2016 and 2015 and is included in other income, net in the Company’s condensed statements of operations and comprehensive loss.

Income Taxes

Income Taxes	3 Months Ended
	Mar. 31, 2016
Income Taxes
Income Taxes	11. Income Taxes The Company did not record a provision or benefit for income taxes during and three months ended March 31, 2016 and 2015, respectively. The Company continues to maintain a full valuation allowance against its net deferred tax assets. As of March 31, 2016, the Company had unrecognized tax benefits of $1.9 million, none of which would currently affect the Company’s effective tax rate if recognized due to the Company’s net deferred tax assets being fully offset by a valuation allowance. The Company does not anticipate that the amount of unrecognized tax benefits relating to tax positions existing at March 31, 2016 will significantly increase or decrease within the next 12 months. There was no interest expense or penalties related to unrecognized tax benefits recorded through March 31, 2016. A number of years may elapse before an uncertain tax position is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, the Company believes that its reserves for income taxes reflect the most likely outcome. The Company adjusts these reserves, as well as the related interest, in light of changing facts and circumstances. Settlement of any particular position could require the use of cash.

Organization and Description 17

Organization and Description of Business (Policies)	3 Months Ended
	Mar. 31, 2016
Organization and Description of Business
Basis of Presentation	Basis of Presentation The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The financial statements include the accounts of the Company and its former wholly-owned subsidiary, which was dissolved in June 2015. For periods prior to the subsidiary dissolution, all intercompany accounts and transactions were eliminated in consolidation. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The condensed balance sheet as of March 31, 2016, the condensed statements of operations and comprehensive loss and the condensed statements of cash flows for the three months ended March 31, 2016 and 2015, are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of its financial position, operating results and cash flows for the periods presented. The condensed balance sheet at December 31, 2015 has been derived from audited financial statements. The results for the three months ended March 31, 2016 are not necessarily indicative of the results expected for the full fiscal year or any other period. Certain figures have been reclassified on the condensed balance sheet at December 31, 2015 to conform with the adoption of Accounting Standards Update (“ASU”) No. 2015-03, Simplifying the Presentation of Debt Issuance Costs. The accompanying interim period condensed financial statements and related financial information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.
Use of Estimates	Use of Estimates The preparation of the unaudited interim financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates include: revenue recognition; contractual allowances; allowance for doubtful accounts; the useful lives of property and equipment; the recoverability of long-lived assets; the estimation of the fair value of intangible assets; stock options; income tax uncertainties, including a valuation allowance for deferred tax assets; and contingencies. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenue and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and assumptions.
Concentrations of Credit Risk and Other Risks and Uncertainties	Concentrations of Credit Risk and Other Risks and Uncertainties The Company’s cash and cash equivalents are deposited with one major financial institution in the United States. Deposits in this institution may exceed the amount of insurance provided on such deposits. The Company has not experienced any losses on its deposits of cash and cash equivalents. Several of the components of the Company’s sample collection kit and test reagents are obtained from single-source suppliers. If these single-source suppliers fail to satisfy the Company’s requirements on a timely basis, it could suffer delays in being able to deliver its diagnostic solutions, a possible loss of revenue, or incur higher costs, any of which could adversely affect its operating results. The Company is also subject to credit risk from its accounts receivable related to its sales. The Company generally does not perform evaluations of customers’ financial condition and generally does not require collateral. Through March 31, 2016, all of the Company’s revenue has been derived from the sale of Afirma. To date, Afirma has been delivered primarily to physicians in the United States. The Company’s third-party payers in excess of 10% of revenue and their related revenue as a percentage of total revenue were as follows: Three Months Ended March 31, 2016 2015 Medicare % % United Healthcare % % Cigna % % % % As the number of payers reimbursing for Afirma increases, the percentage of revenue derived from Medicare and other significant third-party payers has changed and will continue to change as a percentage of total revenue. The Company’s significant third-party payers and their related accounts receivable balance as a percentage of total accounts receivable are as follows: March 31, 2016 December 31, 2015 Medicare % % United Healthcare % % Aetna % % Cigna % % No other third-party payer represented more than 10% of the Company’s accounts receivable balances as of those dates.
Restricted Cash	Restricted Cash The Company had deposits of $238,000 and $118,000 as of March 31, 2016 and December 31, 2015, respectively, including amounts restricted from withdrawal and held by a bank in the form of collateral for irrevocable standby letters of credit totaling $118,000 held as security for the lease of the Company’s former headquarters and laboratory facility in South San Francisco that expired March 31, 2016. The deposits at March 31, 2016 also included $120,000 as a pledge for corporate credit cards. This restricted cash is included in current assets as of March 31, 2016. The Company also had deposits of $603,000 included in long-term assets as of March 31, 2016 and December 31, 2015, restricted from withdrawal and held by a bank in the form of collateral for an irrevocable standby letter of credit held as security for the lease of the Company’s new South San Francisco facility signed in April 2015.
Allowance for Doubtful Accounts	Allowance for Doubtful Accounts The Company estimates an allowance for doubtful accounts against its individual accounts receivable based on estimates of expected reimbursement consistent with historical payment experience in relation to the amounts billed. Bad debt expense is included in general and administrative expense on the Company’s statements of operations and comprehensive loss. Accounts receivable are written off against the allowance when there is substantive evidence that the account will not be paid. The balance of allowance for doubtful accounts as of March 31, 2016 and December 31, 2015 was $131,000 and $117,000, respectively. Bad debt expense was $66,000 and $22,000 for the three months ended March 31, 2016 and 2015, respectively and is included in general and administrative expenses in the accompanying condensed statements of operations. Write offs for doubtful accounts of $52,000 and $21,000 were recorded against the allowance for doubtful accounts during the three months ended March 31, 2016 and 2015, respectively.
Fair Value of Financial Instruments	Fair Value of Financial Instruments The carrying amounts of certain financial instruments including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities approximate fair value due to their relatively short maturities.
Revenue Recognition	Revenue Recognition The Company recognizes revenue in accordance with the provision of ASC 954-605, Health Care Entities—Revenue Recognition. The Company’s revenue is generated from the provision of diagnostic services using the Afirma solution and the service is completed upon the delivery of test results to the prescribing physician, at which time the Company bills for the service. The Company recognizes revenue related to billings for Medicare and commercial payers on an accrual basis, net of contractual and other adjustments, when amounts that will ultimately be realized can be estimated. Contractual and other adjustments represent the difference between the list price (the billing rate) and the estimated reimbursement rate for each payer. Upon ultimate collection, the amount received from Medicare and commercial payers where reimbursement was estimated is compared to previous estimates and, if necessary, the contractual allowance is adjusted accordingly. Until a contract has been negotiated with a commercial payer or governmental program, the Afirma solution may or may not be covered by these entities’ existing reimbursement policies. In addition, patients do not enter into direct agreements with the Company that commit them to pay any portion of the cost of the tests in the event that their insurance declines to reimburse the Company. In the absence of an agreement with the patient or other clearly enforceable legal right to demand payment from the patient, the related revenue is only recognized upon the earlier of payment notification, if applicable, or cash receipt. The estimates of amounts that will ultimately be realized requires significant judgment by management. Some patients have out-of-pocket costs for amounts not covered by their insurance carrier, and the Company may bill the patient directly for these amounts in the form of co-payments and co-insurance in accordance with their insurance carrier and health plans. Some payers may not cover the Company’s GEC as ordered by the prescribing physician under their reimbursement policies. The Company pursues reimbursement from such patients on a case-by-case basis. In the absence of contracted reimbursement coverage or the ability to estimate the amount that will ultimately be realized for the Company’s services, revenue is recognized upon the earlier of receipt of third-party payer notification of payment or when cash is received. Revenue recognized when cash is received and on an accrual basis for the three months ended March 31, 2016 and 2015 was as follows (in thousands of dollars): Three Months Ended March 31, 2016 2015 Revenue recognized when cash is received $ $ Revenue recognized on an accrual basis Total $ $
Recent Accounting Pronouncements	Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers , requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. Adoption is permitted as early as the first quarter of 2017 and is required by the first quarter of 2018. The Company has not yet selected a transition method and is currently evaluating the potential effect of the updated standard on its financial statements. In August 2014, FASB issued ASU No. 2014-15, Presentation of Financial Statements Going Concern—Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern . The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments: (1) provide a definition of the term substantial doubt; (2) require an evaluation every reporting period including interim periods; (3) provide principles for considering the mitigating effect of management’s plans; (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans; (5) require an express statement and other disclosures when substantial doubt is not alleviated; and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). ASU 2014-15 will be effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016 with early adoption permitted. ASU 2014-15 will be effective for the Company beginning with its annual report for fiscal 2016 and interim periods thereafter. The Company does not anticipate that the adoption of this ASU will have a significant impact on its financial statements. In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs , to require debt issuance costs to be presented as an offset against debt outstanding. The update does not change current guidance on the recognition and measurement of debt issuance costs. The ASU is effective for interim and annual periods beginning after December 15, 2015. Adoption of the ASU is retrospective to each prior period presented. The Company has adopted this ASU and the retrospective adjustment of the prior period presentation was not material. In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes . The ASU requires that deferred tax assets and liabilities be classified as noncurrent in the statement of financial position, thereby simplifying the current guidance that requires an entity to separate deferred assets and liabilities into current and noncurrent amounts. This ASU will be effective for the Company beginning in the first quarter of fiscal year 2018 though early adoption is permitted. The Company early-adopted the ASU as of December 31, 2015 and the impact of adoption on its statement of financial position was not material. In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation , related to the tax effects of share-based awards. The ASU requires that all the tax effects of share-based awards be recorded through the income statement, thereby simplifying the current guidance that requires related tax deductions in excess of compensation cost (“Excess”) be recorded in equity and tax deficiencies, when compensation cost exceed tax deductions, be recorded in equity to the extent of the previously recognized Excess with the remainder to be recorded in income tax expense. The ASU will be effective for interim and annual periods beginning after December 15, 2016. The Company does not anticipate that the adoption of this ASU will have a significant impact on its financial statements.

Organization and Description 18

Organization and Description of Business (Tables)	3 Months Ended
	Mar. 31, 2016
Revenue Recognition
Schedule of Revenue recognized when cash is received and on an accrual basis	Revenue recognized when cash is received and on an accrual basis for the three months ended March 31, 2016 and 2015 was as follows (in thousands of dollars): Three Months Ended March 31, 2016 2015 Revenue recognized when cash is received $ $ Revenue recognized on an accrual basis Total $ $
Revenue concentration risk | Revenue
Concentration Risk
Schedule of the Company's third-party payers as a percentage of total	Three Months Ended March 31, 2016 2015 Medicare % % United Healthcare % % Cigna % % % %
Gross receivables concentration risk | Accounts receivable
Concentration Risk
Schedule of the Company's third-party payers as a percentage of total	March 31, 2016 December 31, 2015 Medicare % % United Healthcare % % Aetna % % Cigna % %

Net Loss Per Common Share (Tabl

Net Loss Per Common Share (Tables)	3 Months Ended
	Mar. 31, 2016
Net Loss Per Common Share
Schedule of outstanding shares of common stock equivalents that have been excluded from diluted net loss per common share	Three Months Ended March 31, 2016 2015 Shares of common stock subject to outstanding options Employee stock purchase plan — Total shares of common stock equivalents

Accrued Liabilities (Tables)

Accrued Liabilities (Tables)	3 Months Ended
	Mar. 31, 2016
Accrued Liabilities
Schedule of accrued liabilities	Accrued liabilities consisted of the following (in thousands of dollars): March 31, 2016 December 31, 2015 Accrued compensation expenses $ $ Accrued Genzyme co-promotion fees Accrued other Total accrued liabilities $ $

Commitments and Contingencies (

Commitments and Contingencies (Tables)	3 Months Ended
	Mar. 31, 2016
Commitments and Contingencies
Schedule of future minimum lease payments under non-cancelable operating leases	Future minimum lease payments under non-cancelable operating leases as of March 31, 2016 are as follows (in thousands of dollars): Year Ending December 31, Amounts 2016 $ 2017 2018 2019 2020 Thereafter Total minimum lease payments $

Debt (Tables)

Debt (Tables)	3 Months Ended
	Mar. 31, 2016
Debt
Schedule of net debt obligation	As of March 31, 2016, the net debt obligation for the Credit Agreement was as follows (in thousands of dollars): March 31, 2016 Debt principal $ Deferred debt issuance costs ) Net debt obligation $
Schedule of future principal payments under the Credit agreement	Future principal payments under the Credit Agreement are as follows (in thousands of dollars): Year Ending December 31: 2020 $ Thereafter Total $
Schedule of interest expense on debt	Interest expense on the loan and security agreement was as follows (in thousands of dollars): Three Months Ended March 31, 2016 2015 Nominal interest $ $ Amortization and write-off of debt discount and debt issuance costs Prepayment penalty — End-of-term payment interest Total $ $

Stockholders' Equity (Tables)

Stockholders' Equity (Tables)	3 Months Ended
	Mar. 31, 2016
Stockholders' Equity
Schedule of reserved shares of common stock for issuance	March 31, 2016 December 31, 2015 Options issued and outstanding Options available for grant under stock option plans Common stock available for the Employee Stock Purchase Plan Total

Stock Incentive Plans (Tables)

Stock Incentive Plans (Tables)	3 Months Ended
	Mar. 31, 2016
Stock Incentive Plans
Summary of activity under the Company's stock option plans	The following table summarizes activity under the Company’s stock option plans (aggregate intrinsic value in thousands): Shares Available for Grant Stock Options Outstanding Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value Balance—December 31, 2015 $ $ Additional options authorized — Granted ) Canceled ) Exercised — ) Balance—March 31, 2016 $ $ Options vested and exercisable—March 31, 2016 $ $ Options vested and expected to vest—March 31, 2016 $ $
Summary of stock-based compensation expense	The following table summarizes stock-based compensation expense related to stock options and pursuant to the employee stock purchase plan (“ESPP”) for the three months ended March 31, 2016 and 2015, and are included in the condensed statements of operations and comprehensive loss as follows (in thousands of dollars): Three Months Ended March 31, 2016 2015 Cost of revenue $ $ Research and development Selling and marketing General and administrative Total stock-based compensation expense $ $
Schedule of assumptions used to calculate estimated grant date fair value of stock options using the Black-Scholes option-pricing valuation model	Three Months Ended March 31, 2016 2015 Weighted-average volatility 55.88 – 56.36% 66.06 – 68.82% Weighted-average expected term (years) 6.08 – 6.23 6.08 – 6.08 Risk-free interest rate 1.32 – 1.77% 1.55 – 1.79% Expected dividend yield — —
Schedule of grant date fair value of the ESPP shares was calculated using Black Scholes option	Three Months Ended March 31, 2016 Weighted-average volatility 67.71 – 75.72% Weighted-average expected term (years) 0.49 – 1.00 Risk-free interest rate 0.47 – 0.47% Expected dividend yield —

Organization and Description 25

Organization and Description of Business - Operating Segments (Details)	3 Months Ended
	Mar. 31, 2016segment
Organization and Description of Business
Number of operating segments	1

Organization and Description 26

Organization and Description of Business - Credit Risk (Details) - item	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Concentrations of Credit Risk and Other Risks and Uncertainties
Number of major financial institutions with which the company's cash and cash equivalents are deposited	1
Revenue | Revenue concentration risk
Concentrations of Credit Risk and Other Risks and Uncertainties
Concentrations of credit risk (as a percent)	50.00%	53.00%
Revenue | Revenue concentration risk | Medicare
Concentrations of Credit Risk and Other Risks and Uncertainties
Concentrations of credit risk (as a percent)	31.00%	24.00%
Revenue | Revenue concentration risk | United Healthcare
Concentrations of Credit Risk and Other Risks and Uncertainties
Concentrations of credit risk (as a percent)	13.00%	14.00%
Revenue | Revenue concentration risk | Cigna
Concentrations of Credit Risk and Other Risks and Uncertainties
Concentrations of credit risk (as a percent)	6.00%	15.00%
Accounts receivable | Gross receivables concentration risk | Medicare
Concentrations of Credit Risk and Other Risks and Uncertainties
Concentrations of credit risk (as a percent)	42.00%		31.00%
Accounts receivable | Gross receivables concentration risk | United Healthcare
Concentrations of Credit Risk and Other Risks and Uncertainties
Concentrations of credit risk (as a percent)	19.00%		25.00%
Accounts receivable | Gross receivables concentration risk | Aetna
Concentrations of Credit Risk and Other Risks and Uncertainties
Concentrations of credit risk (as a percent)	16.00%		23.00%
Accounts receivable | Gross receivables concentration risk | Cigna
Concentrations of Credit Risk and Other Risks and Uncertainties
Concentrations of credit risk (as a percent)	10.00%		8.00%

Organization and Description 27

Organization and Description of Business - Restricted Cash and Allowance for Doubtful Accounts (Details) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Restricted Cash
Cash reserved to cover liabilities associated with Merger	$ 238,000		$ 118,000
Long term deposit consisting of letter of credit serving as security for lease	603,000		603,000
Activity of allowance for doubtful accounts
Allowance for doubtful accounts	131,000		117,000
Bad debt expense	66,000	$ 22,000
Write-offs for doubtful accounts	52,000	$ 21,000
Headquarters and laboratory facility, South San Francisco, Lease expiring 2016
Restricted Cash
Cash reserved to cover liabilities associated with Merger	238,000		118,000
Amount held as security for lease	118,000		118,000
Pledge for corporate credit cards	120,000
Headquarters and laboratory facilities, South San Francisco, Lease signed April 2015
Restricted Cash
Long term deposit consisting of letter of credit serving as security for lease	603,000		$ 603,000
Amount held as security for lease	$ 603,000

Organization and Description 28

Organization and Description of Business - Revenue Recongition (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenue Recognition
Revenue recognized when cash is received	$ 5,324	$ 5,832
Revenue recognized on an accrual basis	8,226	5,386
Total	$ 13,550	$ 11,218

Net Loss Per Common Share (Deta

Net Loss Per Common Share (Details) - shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Outstanding shares of common stock equivalents that have been excluded from diluted net loss per common share
Total shares of common stock equivalents (in shares)	5,308,007	4,270,198
Options
Outstanding shares of common stock equivalents that have been excluded from diluted net loss per common share
Total shares of common stock equivalents (in shares)	5,283,180	4,270,198
Employee stock purchase plan
Outstanding shares of common stock equivalents that have been excluded from diluted net loss per common share
Total shares of common stock equivalents (in shares)	24,827

Accrued Liabilities (Details)

Accrued Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Accrued Liabilities
Accrued compensation expenses	$ 2,703	$ 4,212
Accrued Genzyme co-promotion fees	2,055	2,089
Accrued other	2,263	2,388
Total accrued liabilities	$ 7,021	$ 8,689

Fair Value Measurements (Detail

Fair Value Measurements (Details) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Recurring | Level I | Money market funds
Fair value measurements
Financial Assets	$ 46.5	$ 37.5

Commitments and Contingencies32

Commitments and Contingencies (Details)	1 Months Ended	3 Months Ended
	Jun. 30, 2015ft²	Mar. 31, 2016USD ($)item	Mar. 31, 2015USD ($)	Dec. 31, 2015USD ($)
Operating Leases
Long term deposit consisting of letter of credit serving as security for lease		$ 603,000		$ 603,000
Future minimum lease payments under non-cancelable operating leases
2,016		1,570,000
2,017		2,143,000
2,018		2,102,000
2,019		2,026,000
2,020		2,082,000
Thereafter		11,956,000
Total minimum lease payments		21,879,000
Facilities rent expense		$ 628,000	$ 213,000
Supplies Purchase Commitments
Number of suppliers | item		2
Non-cancelable purchase commitment		$ 813,000
Headquarters and laboratory facilities, South San Francisco, Lease signed April 2015
Operating Leases
Amount of space leased | ft²	59,000
Amount of funding provided by landlord for tenant improvements		3,300,000
Estimated amount of improvements expected in addition to landlord's tenant allowance		3,600,000
Security deposit		603,000
Long term deposit consisting of letter of credit serving as security for lease		603,000		603,000
Laboratory facilities, Austin, Texas | Other assets
Operating Leases
Security deposit		$ 75,000		$ 75,000

Debt (Details)

Debt (Details)	Mar. 30, 2016USD ($)	Mar. 31, 2016USD ($)loaninstallment	Nov. 30, 2015USD ($)	Dec. 31, 2014USD ($)trancheinstallment	Jun. 30, 2013USD ($)installment	Mar. 31, 2016USD ($)loaninstallment	Mar. 31, 2015USD ($)	Dec. 01, 2014USD ($)	Nov. 30, 2014USD ($)	Mar. 31, 2014USD ($)
Debt
Repayment of long-term debt						$ 5,000,000
Interest expense						367,000	$ 89,000
Interest expense on debt
End-of-term payment interest						$ 206,000	19,000
Credit Agreement | Visium
Debt
Number of term loans | loan		2				2
Maximum borrowing capacity		$ 40,000,000				$ 40,000,000
Interest rate (as a percent)		12.00%				12.00%
Number of installments | installment		8				8
Term of debt with equal quarterly installments		2 years
Rate for which Company may elect to pay interest in cash (as a percent)		9				9
Remaining percentage for which interest is paid-in-kind		3				3
Whole multiple in excess of minimum prepayment		$ 1,000,000
Prepayment premium for prepayment made on or prior to March 31, 2018 (as a percent)		24
Prepayment premium for prepayment made after March 31, 2018 and on or prior to March 31, 2019 (as a percent)		4
Prepayment premium for prepayment made after March 31, 2019 and on or prior to March 31, 2020 (as a percent)		2
Prepayment premium for prepayment made after March 31, 2020 and on or prior to March 31, 2021 (as a percent)		1
Prepayment premium for prepayment made after March 31, 2021 (as a percent)		0
Period for which lender has rights to participate in equity financings		1 year
Debt principal		$ 25,000,000				$ 25,000,000
Deferred debt issuance costs		(548,000)				(548,000)
Net debt obligation		24,452,000				24,452,000
Interest expense						8,000
Amortization of deferred debt issuance costs						1,000
Future principal payments
2,020		9,375,000				9,375,000
Thereafter		15,625,000				15,625,000
Total		25,000,000				25,000,000
Credit Agreement | Visium | Minimum
Debt
Prepayment allowed		5,000,000
Credit Agreement | Visium | Maximum
Debt
Maximum amount allowed to participate in future equity financings		5,000,000				5,000,000
Credit Agreement | Visium | Initial Term Loan
Debt
Drawn down initial term loan	$ 25,000,000
Repayment of long-term debt	$ 5,000,000
Credit Agreement | Visium | Second Term Loan | Maximum
Debt
Maximum borrowing capacity		$ 15,000,000				15,000,000
Term Loans
Debt
Maximum borrowing capacity				$ 15,000,000	$ 10,000,000
Number of installments | installment				24
Period after which debt is repayable				24 months
Prepayment penalties for prepayment within one year of the loan origination (as a percent)				2.00%
Prepayment penalties for prepayment within two years of the loan origination (as a percent)				1.00%
Prepayment penalties for prepayment after two years of the loan origination (as a percent)				0.00%
Number of tranches | tranche				3
Cash paid for interest on debt				$ 14,000
End-of term payment				110,000
Amount of prepayment premium waived									$ 75,000
Amount of end of term payment								$ 110,000	$ 225,000
Third-party fees paid				45,000
Interest expense on debt
Nominal interest						62,000	63,000
Amortization and write-off of debt discount and debt issuance costs						91,000	7,000
Prepayment penalty						50,000
End-of-term payment interest						156,000	19,000
Total						$ 359,000	$ 89,000
Term Loans | Term Loan Due 2017
Debt
Amount drawn down					$ 5,000,000
Amount not drawn										$ 5,000,000
Interest rate (as a percent)					6.06%
Number of installments | installment					30
Period after which debt is repayable					18 months
Prepayment penalties for prepayment within one year of the loan origination (as a percent)					2.25%
Prepayment penalties for prepayment within two years of the loan origination (as a percent)					1.50%
Prepayment penalties for prepayment after two years of the loan origination (as a percent)					0.75%
Repayment of debt				5,000,000
Term Loans | Term Loan Tranche One
Debt
Maximum borrowing capacity				5,000,000
Amount drawn down				$ 5,000,000
Interest rate (as a percent)				5.00%
Term Loans | Term Loan Tranche Two
Debt
Maximum borrowing capacity				$ 5,000,000
Amount drawn down			$ 5,000,000
Term Loans | Term Loan Tranche Three
Debt
Maximum borrowing capacity				$ 5,000,000

Stockholders' Equity (Details)

Stockholders' Equity (Details) - shares	Mar. 31, 2016	Dec. 31, 2015
Common Stock
Options issued and outstanding (in shares)	5,283,180	4,179,521
Shares available for issuance	961,818	1,058,359
Total number of shares reserved for issuance	6,929,270	5,987,880
Options
Common Stock
Shares available for issuance	961,818	1,058,359
ESPP
Common Stock
Shares available for issuance	684,272	750,000

Stock Incentive Plans - Activit

Stock Incentive Plans - Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Shares Available for Grant
Balance at the beginning of the period (in shares)	1,058,359
Additional options authorized (in shares)	1,107,411
Granted (in shares)	(1,259,650)
Canceled (in shares)	55,698
Balance at the end of the period (in shares)	961,818	1,058,359
Stock Options Outstanding
Balance at beginning of the period (in shares)	4,179,521
Granted (in shares)	1,259,650
Canceled (in shares)	(48,693)
Exercised (in shares)	(107,298)
Balance at the end of the period (in shares)	5,283,180	4,179,521
Options vested and exercisable at the end of the period (in shares)	2,159,237
Options vested and expected to vest at the end of the period (in shares)	4,951,621
Weighted Average Exercise Price
Balance at beginning of the period (in dollars per share)	$ 8.03
Granted (in dollars per share)	6.27
Canceled (in dollars per share)	12.94
Exercised (in dollars per share)	2.85
Balance at the end of the period (in dollars per share)	7.68	$ 8.03
Options vested and exercisable at the end of the period (in dollars per share)	6.66
Options vested and expected to vest at the end of the period (in dollars per share)	$ 7.67
Weighted Average Remaining Contractual Life
Balance	8 years 1 month 6 days	7 years 6 months
Options vested and exercisable at the end of the period	6 years 6 months 29 days
Options vested and expected to vest at the end of the period	8 years 7 days
Aggregate Intrinsic Value
Balance at the beginning of the period (in dollars)	$ 6,511
Balance at the end of the period (in dollars)	3,355	$ 6,511
Options vested and exercisable at the end of the period (in dollars)	3,214
Options vested and expected to vest at the end of the period (in dollars)	$ 3,345

Stock Incentive Plans - Additio

Stock Incentive Plans - Additional Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Stock Incentive Plans
Share Price	$ 5.40
Weighted average fair value of options to purchase common stock granted (in dollars per share)	3.36	$ 5.37
Weighted average fair value of stock options exercised (in dollars per share)	$ 1.71	$ 2.50
Intrinsic value of stock options exercised (in dollars)	$ 365,000	$ 145,000

Stock Incentive Plans - Stock-b

Stock Incentive Plans - Stock-based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Stock-based compensation
Granted (in shares)	1,259,650
Stock-based Compensation
Stock-based compensation
Share-based compensation expense (in dollars)	$ 1,496	$ 1,223
Unrecognized compensation expense (in dollars)	$ 13,200
Period over which unrecognized compensation expense expected to be recognized	2 years 11 months 1 day
Stock-based Compensation | Cost of revenue
Stock-based compensation
Share-based compensation expense (in dollars)	$ 30	17
Stock-based Compensation | Research and development
Stock-based compensation
Share-based compensation expense (in dollars)	300	253
Stock-based Compensation | Selling and marketing
Stock-based compensation
Share-based compensation expense (in dollars)	408	269
Stock-based Compensation | General and administrative
Stock-based compensation
Share-based compensation expense (in dollars)	$ 758	$ 684
Stock-based Compensation, employees
Assumptions used to calculate estimated fair value of stock options using the Black-Scholes option-pricing valuation model
Weighted-average volatility, low end of range (as a percent)	55.88%	66.06%
Weighted-average volatility, high end of range (as a percent)	56.36%	68.82%
Risk-free interest rate, low end of range (as a percent)	1.32%	1.55%
Risk-free interest rate, high end of range (as a percent)	1.77%	1.79%
Stock-based Compensation, employees | Minimum
Assumptions used to calculate estimated fair value of stock options using the Black-Scholes option-pricing valuation model
Weighted-average expected term	6 years 29 days	6 years 29 days
Stock-based Compensation, employees | Maximum
Assumptions used to calculate estimated fair value of stock options using the Black-Scholes option-pricing valuation model
Weighted-average expected term	6 years 2 months 23 days	6 years 29 days
Stock-based Compensation, non-employees
Stock-based compensation
Granted (in shares)	0	0
ESPP
Assumptions used to calculate estimated fair value of stock options using the Black-Scholes option-pricing valuation model
Weighted-average volatility, low end of range (as a percent)	67.71%
Weighted-average volatility, high end of range (as a percent)	75.72%
Risk-free interest rate, low end of range (as a percent)	0.47%
Risk-free interest rate, high end of range (as a percent)	0.47%
ESPP | Minimum
Assumptions used to calculate estimated fair value of stock options using the Black-Scholes option-pricing valuation model
Weighted-average expected term	5 months 27 days
ESPP | Maximum
Assumptions used to calculate estimated fair value of stock options using the Black-Scholes option-pricing valuation model
Weighted-average expected term	1 year

Genzyme Co-promotion Agreement

Genzyme Co-promotion Agreement (Details)

Jan. 01, 2015

Feb. 29, 2012USD ($)

Mar. 31, 2016USD ($)

Mar. 31, 2015USD ($)

Dec. 31, 2014

Dec. 31, 2015USD ($)

Dec. 31, 2012

Feb. 27, 2014

Mar. 31, 2016USD ($)

Aug. 11, 2014

Feb. 28, 2015country

Jan. 31, 2012country

Genzyme Co-promotion Agreement

Amortization of up-front co-promotion fee

$ 430,000

$ 474,000

Co-promotion agreement | Genzyme

Genzyme Co-promotion Agreement

Co-promotion expenses

2,100,000

1,700,000

Outstanding obligation to Genzyme

2,100,000

$ 2,100,000

$ 2,100,000

Amortization of up-front co-promotion fee

431,000

$ 474,000

Co-promotion agreement | Genzyme | Accrued liabilities

Genzyme Co-promotion Agreement

Outstanding obligation to Genzyme

2,100,000

$ 2,100,000

Afirma thyroid diagnostic solution co-promotion agreement | Genzyme

Genzyme Co-promotion Agreement

Number of countries outside United States for exclusive promotion under the agreement | country

40

Co-promotion fee received from Genzyme

$ 10,000,000

Co-promotion fees as a percentage of cash receipts

32.00%

50.00%

40.00%

32.00%

Straight-line amortization period of co-promotion fee

4 years

Unamortized up-front co-promotion fee

$ 518,000

$ 518,000

Co-promotion fees as a percentage of cash receipts for remaining periods

15.00%

15.00%

Ex-U.S. Co-Promotion Agreement | Genzyme

Genzyme Co-promotion Agreement

Number of countries outside United States for exclusive promotion under the agreement | country

5

Co-promotion fee paid as a percentage of net revenue

25.00%

Period of agreement

5 years

Thyroid Cytopathology Partners

Thyroid Cytopathology Partners (Details) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Thyroid Cytopathology Partners
Outstanding obligations	$ 4,340,000		$ 5,085,000
Thyroid Cytopathology Partners
Thyroid Cytopathology Partners
Notice of intent not to renew period	12 months
Expenses for cytopathology testing and evaluation services	$ 1,300,000	$ 1,100,000
Outstanding obligations	889,000		$ 820,000
Reduction to rent expense for TCP's portion of costs for subleased space	$ 23,000	$ 23,000

Income Taxes (Details)

Income Taxes (Details) $ in Millions	3 Months Ended
	Mar. 31, 2016USD ($)
Income Taxes
Unrecognized tax benefit	$ 1.9
Unrecognized tax benefits, which if recognized, would affect the effective tax rate	0
Interest expense or penalties related to unrecognized tax benefits	$ 0