Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | Apr. 26, 2019 | |
Document and Entity Information | ||
Entity Registrant Name | VERACYTE, INC. | |
Entity Central Index Key | 0001384101 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 41,642,603 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 |
Condensed Balance Sheets
Condensed Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 67,841 | $ 77,995 |
Accounts receivable | 16,615 | 13,168 |
Supplies | 3,768 | 3,402 |
Prepaid expenses and other current assets | 2,392 | 2,387 |
Total current assets | 90,616 | 96,952 |
Property and equipment, net | 8,114 | 8,940 |
Right-of-use assets - finance lease, net | 735 | 0 |
Right-of-use assets - operating lease | 9,630 | 0 |
Finite-lived intangible assets, net | 11,733 | 12,000 |
Goodwill | 1,057 | 1,057 |
Restricted cash | 603 | 603 |
Other assets | 1,049 | 1,086 |
Total assets | 123,537 | 120,638 |
Current liabilities: | ||
Accounts payable | 4,064 | 2,516 |
Accrued liabilities | 8,788 | 9,186 |
Current portion of long-term debt | 0 | 1,357 |
Current portion of finance lease liability | 233 | 0 |
Current portion of operating lease liability | 1,244 | 0 |
Total current liabilities | 14,329 | 13,059 |
Long-term debt | 12,854 | 23,925 |
Deferred rent, net of current portion | 0 | 3,899 |
Operating lease liability, net of current portion | 12,582 | 0 |
Total liabilities | 39,765 | 40,883 |
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, 2019 and December 31, 2018 | 0 | 0 |
Common stock, $0.001 par value; 125,000,000 shares authorized, 41,509,240 and 40,863,202 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively | 42 | 41 |
Additional paid-in capital | 319,733 | 313,800 |
Accumulated deficit | (236,003) | (234,086) |
Total stockholders’ equity | 83,772 | 79,755 |
Total liabilities and stockholders’ equity | $ 123,537 | $ 120,638 |
Condensed Balance Sheets (Paren
Condensed Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in usd per share) | $ 0.001 | $ 0.001 |
Preferred stock, authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, issued (in shares) | 0 | 0 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Common stock, par value (in usd per share) | $ 0.001 | $ 0.001 |
Common stock, authorized (in shares) | 125,000,000 | 125,000,000 |
Common stock, issued (in shares) | 41,509,240 | 40,863,202 |
Common stock, outstanding (in shares) | 41,509,240 | 40,863,202 |
Condensed Statements of Operati
Condensed Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income Statement [Abstract] | ||
Revenue | $ 29,529 | $ 20,041 |
Operating expenses: | ||
Cost of revenue | 8,513 | 7,867 |
Research and development | 3,435 | 3,675 |
Selling and marketing | 12,477 | 11,543 |
General and administrative | 6,904 | 5,644 |
Intangible asset amortization | 267 | 267 |
Total operating expenses | 31,596 | 28,996 |
Loss from operations | (2,067) | (8,955) |
Interest expense | (303) | (448) |
Other income, net | 453 | 226 |
Net loss | (1,917) | (9,177) |
Comprehensive loss | $ (1,917) | $ (9,177) |
Net loss per common share, basic and diluted (in usd per share) | $ (0.05) | $ (0.27) |
Shares used to compute net loss per common share, basic and diluted (in shares) | 41,168,593 | 34,271,254 |
Statements of Stockholders' Equ
Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Accumulated Deficit |
Balance at Dec. 31, 2017 | $ 37,225 | $ 34 | $ 248,278 | $ (211,087) |
Balance (in shares) at Dec. 31, 2017 | 34,210 | |||
Increase (Decrease) in Stockholders' Equity [Rollforward] | ||||
Issuance of common stock on exercise of stock options and vesting of restricted stock units | 108 | $ 0 | 108 | |
Issuance of common stock on exercise of stock options and vesting of restricted stock units (in shares) | 44 | |||
Issuance of common stock under employee stock purchase plan (ESPP) | 397 | 397 | ||
Issuance of common stock on employee stock purchase plan (ESPP) (in shares) | 73 | |||
Tax portion of vested restricted stock units | (30) | (30) | ||
Stock-based compensation expense (employee) | 1,083 | 1,083 | ||
Stock-based compensation expense (non-employee) | 1 | 1 | ||
Stock-based compensation expense (ESPP) | 91 | 91 | ||
Legal settlement from short-swing profits, net of tax | 310 | 310 | ||
Net loss | (9,177) | (9,177) | ||
Comprehensive loss | (9,177) | (9,177) | ||
Balance at Mar. 31, 2018 | 30,008 | $ 34 | 250,238 | (220,264) |
Balance (in shares) at Mar. 31, 2018 | 34,327 | |||
Balance at Dec. 31, 2018 | 79,755 | $ 41 | 313,800 | (234,086) |
Balance (in shares) at Dec. 31, 2018 | 40,863 | |||
Increase (Decrease) in Stockholders' Equity [Rollforward] | ||||
Issuance of common stock on exercise of stock options and vesting of restricted stock units | 4,240 | $ 1 | 4,239 | |
Issuance of common stock on exercise of stock options and vesting of restricted stock units (in shares) | 566 | |||
Issuance of common stock under employee stock purchase plan (ESPP) | 491 | 491 | ||
Issuance of common stock on employee stock purchase plan (ESPP) (in shares) | 80 | |||
Tax portion of vested restricted stock units | (556) | (556) | ||
Stock-based compensation expense (employee) | 1,598 | 1,598 | ||
Stock-based compensation expense (non-employee) | 20 | 20 | ||
Stock-based compensation expense (ESPP) | 141 | 141 | ||
Net loss | (1,917) | (1,917) | ||
Comprehensive loss | (1,917) | (1,917) | ||
Balance at Mar. 31, 2019 | $ 83,772 | $ 42 | $ 319,733 | $ (236,003) |
Balance (in shares) at Mar. 31, 2019 | 41,509 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Operating activities | ||
Net loss | $ (1,917) | $ (9,177) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 945 | 980 |
Gain on disposal of property and equipment | (16) | 0 |
Stock-based compensation | 1,759 | 1,175 |
Other income | 0 | (93) |
Amortization of debt issuance costs | 8 | 8 |
Interest on end-of-term debt obligation | 64 | 70 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (3,447) | (482) |
Supplies | (366) | 767 |
Prepaid expenses and other current assets | (11) | (239) |
Right-of-use assets - operating lease and operating lease liability | (80) | 0 |
Other assets | 37 | (140) |
Accounts payable | 1,726 | (510) |
Accrued liabilities and deferred rent | 287 | 228 |
Net cash used in operating activities | (1,011) | (7,413) |
Investing activities | ||
Purchases of property and equipment | (765) | (227) |
Proceeds from disposal of property and equipment | 16 | 0 |
Net cash used in investing activities | (749) | (227) |
Financing activities | ||
Payment of long-term debt | (12,500) | 0 |
Proceeds from legal settlement regarding short-swing profits | 0 | 403 |
Payment of finance lease liability | (75) | (71) |
Proceeds from the exercise of common stock options and employee stock purchases | 4,181 | 569 |
Net cash (used in) provided by financing activities | (8,394) | 901 |
Net decrease in cash, cash equivalents and restricted cash | (10,154) | (6,739) |
Cash, cash equivalents and restricted cash at beginning of period | 78,598 | 34,494 |
Cash, cash equivalents and restricted cash at end of period | 68,444 | 27,755 |
Supplementary cash flow information of non-cash investing and financing activities: | ||
Operating lease liability arising from obtaining right-of-use assets - operating lease | 14,118 | 0 |
Purchases of property and equipment included in accounts payable and accrued liabilities | 95 | 56 |
Interest paid on debt | 228 | 356 |
Total cash, cash equivalents and restricted cash | $ 78,598 | $ 34,494 |
Organization and Description of
Organization and Description of Business | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Organization and Description of Business | Organization and Description of Business Veracyte, Inc. (“Veracyte” or the “Company”) is a leading genomic diagnostics company that is creating value through innovation. The Company was founded in 2008 with a mission to improve diagnostic accuracy. Today, through its innovative scientific platform, Veracyte is serving this critical medical need and expanding its offerings further along the clinical continuum of care to advance early detection of disease and inform treatment decisions. The Company utilizes its scientific platform, which uses RNA whole-transcriptome sequencing combined with machine learning, to discover and develop its products. Veracyte 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. The Company’s operations are based in South San Francisco, California and Austin, Texas, and it operates in one segment. The Company currently offers the following products in three clinical indications: Afirma Genomic Sequencing Classifier ("GSC") and Xpression Atlas - The Company’s Afirma offering, consisting of the Afirma GSC and the Afirma Xpression Atlas, provides a comprehensive solution in thyroid nodule diagnosis and is intended to provide physicians with clinically actionable results from a single fine needle aspiration ("FNA") biopsy. The Afirma GSC is used to identify patients with benign thyroid nodules among those with indeterminate cytopathology results so that these patients can avoid unnecessary thyroid surgery. The Afirma Xpression Atlas provides genomic alteration content from the same test to help physicians decide with greater confidence on surgery strategy and treatment options for their patients. Percepta Bronchial Genomic Classifier - The Percepta classifier improves lung cancer diagnosis by enhancing the performance of diagnostic bronchoscopies, thus identifying more patients with lung nodules who are at low risk of cancer and may avoid further, invasive procedures. The test is built upon foundational "field of injury" science - through which genomic changes associated with lung cancer in current and former smokers can be identified with a simple brushing of a person's airway - without the need to sample the often hard-to-reach nodule directly. Envisia Genomic Classifier - The Envisia classifier improves diagnosis of idiopathic pulmonary fibrosis ("IPF") by helping physicians better differentiate IPF from other interstitial lung diseases without the need for surgery. The test identifies the genomic pattern of usual interstitial pneumonia, a hallmark of IPF, with high accuracy on patient samples that are obtained through transbronchial biopsy, a nonsurgical procedure that is commonly used in lung evaluation. The Company’s approach also provides multiple opportunities for partnerships with biopharmaceutical companies. In developing its products, the Company has built or gained access to unique biorepositories that include extensive clinical cohorts and whole genome RNA sequencing data that it believes are important to the development of new targeted therapies, determining clinical trial eligibility and guiding treatment selection. All of the Company's testing services are made available through its clinical reference laboratories located in South San Francisco, California and Austin, Texas. Basis of Presentation The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. Certain information and note disclosures normally included in 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, 2019 , the condensed statements of operations and comprehensive loss for the three months ended March 31, 2019 and 2018 , the condensed statements of stockholders' equity for the three months ended March 31, 2019 and 2018 , and the condensed statements of cash flows for the three months ended March 31, 2019 and 2018 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, 2018 has been derived from audited financial statements. The results for the three months ended March 31, 2019 are not necessarily indicative of the results expected for the full year or any other period. 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, 2018 . Use of Estimates The preparation of 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; the useful lives of property and equipment; the recoverability of long-lived assets; the incremental borrowing rate for leases; 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. Issuance of Common Stock in a Public Offering In July 2018, the Company issued and sold 5,750,000 shares of common stock in a registered public offering, including the underwriters' exercise in full of their option to purchase an additional 750,000 shares, at a price to the public of $10.25 per share. The Company's net proceeds from the offering were approximately $55.0 million , after deducting underwriting commissions and offering expenses of $3.9 million . Concentrations of Credit Risk and Other Risks and Uncertainties The majority of 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, 2019 , most 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, 2019 2018 Medicare 21 % 29 % UnitedHealthcare 11 % 13 % 32 % 42 % On December 28, 2018, the Company entered into a diagnostics development agreement with Johnson & Johnson Services, Inc. ("JJSI") for which the Company recognized $3.8 million of revenue for the provision of data, which represents 12.9% of total revenue for the three months ended March 31, 2019. The Company’s third-party payers in excess of 10% of accounts receivable and their related accounts receivable balance as a percentage of total accounts receivable were as follows: March 31, December 31, 2018 Medicare 14 % 20 % UnitedHealthcare 12 % 11 % Restricted Cash The Company had deposits of $603,000 included in long-term assets as of March 31, 2019 and December 31, 2018 , 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 South San Francisco facility. Revenue Recognition The Company commenced recognizing revenue in accordance with the provisions of ASC 606, Revenue from Contracts with Customers , or ASC 606, starting January 1, 2018. Prior to January 1, 2018, the Company recognized revenue in accordance with the provisions of ASC 954-605, Health Care Entities - Revenue Recognition , or ASC 954. Revenue from Diagnostic Services Most of the Company’s revenue is generated from the provision of diagnostic services. These services are completed upon the delivery of test results to the prescribing physician, at which time the Company bills for the services. The Company recognizes revenue related to billings based on estimates of the amount that will ultimately be realized. In determining the amount to accrue for a delivered test, the Company considers factors such as payment history, payer coverage, whether there is a reimbursement contract between the payer and the Company, payment as a percentage of agreed upon rate (if applicable), amount paid per test and any current developments or changes that could impact reimbursement. These estimates require significant judgment by management. The Company adopted ASC 606 on January 1, 2018 using the modified retrospective method, which requires a cumulative catch-up adjustment as if the Company had recognized revenue under ASC 606 from January 1, 2016. Prior to January 1, 2018, the Company recognized revenue in accordance with ASC 954 and recognized revenue for tests delivered on an accrual basis when amounts that will ultimately be realized could be reasonably estimated, and on the cash basis when there was insufficient information to estimate revenue accruals. The adoption of ASC 606 did not have a material impact on the Company's statement of operations or financial position. During the three months ended March 31, 2019, the Company changed its revenue estimates due to actual and anticipated cash collections for tests delivered in prior quarters and recognized additional revenue of $0.6 million , of which $0.4 million had been collected as of March 31, 2019. This resulted in a decrease in the Company's loss from operations of $0.6 million and a decrease in loss per share of $0.02 for the three months ended March 31, 2019. Arrangements with Multiple-Performance Obligations From time to time, the Company enters into arrangements for research and development and/or commercialization services. Such arrangements may require the Company to deliver various rights, services and/or samples, including intellectual property rights/licenses, R&D services, and/or commercialization services. The underlying terms of these arrangements generally provide for consideration to the Company in the form of nonrefundable upfront license fees, development and commercial performance milestone payments, royalty payments, and/or profit sharing. In arrangements involving more than one performance obligation, each required performance obligation is evaluated to determine whether it qualifies as a distinct performance obligation based on whether (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available and (ii) the good or service is separately identifiable from other promises in the contract. The consideration under the arrangement is then allocated to each separate distinct performance obligation based on its respective relative stand-alone selling price. The estimated selling price of each deliverable reflects the Company's best estimate of what the selling price would be if the deliverable was regularly sold by the Company on a stand-alone basis or using an adjusted market assessment approach if selling price on a stand-alone basis is not available. The consideration allocated to each distinct performance obligation is recognized as revenue when control of the related goods or services is transferred. Consideration associated with at-risk substantive performance milestones is recognized as revenue when it is probable that a significant reversal of the cumulative revenue recognized will not occur. Should there be royalties, the Company utilizes the sales and usage-based royalty exception in arrangements that resulted from the license of intellectual property, recognizing revenues generated from royalties or profit sharing as the underlying sales occur. Collaborative Arrangements The Company enters into collaborative arrangements with partners that fall under the scope of ASC Topic 808, Collaborative Arrangements , or ASC 808. While these arrangements are in the scope of ASC 808, the Company may analogize to ASC 606 for some aspects of the arrangements. The Company analogizes to ASC 606 for certain activities within the collaborative arrangement for the delivery of a good or service (i.e., a unit of account) that is part of its ongoing major or central operations. The terms of the Company’s collaborative arrangements typically include one or more of the following: (i) up-front fees; (ii) milestone payments related to the achievement of development, regulatory, or commercial goals; and (iii) royalties on net sales of licensed products. Each of these payments may result in collaboration revenues or an offset against research and development expense. As part of the accounting for these arrangements, the Company must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation which determines how the transaction price is allocated among the performance obligations. Generally, the estimation of the stand-alone selling price may include such estimates as, independent evidence of market price, forecasted revenues or costs, development timelines, discount rates, and probabilities of technical and regulatory success. The Company evaluates each performance obligation to determine if they can be satisfied at a point in time or over time, and it measures the services delivered to the collaborative partner which are periodically reviewed based on the progress of the related program. The effect of any change made to an estimated input component and, therefore revenue or expense recognized, would be recorded as a change in estimate. In addition, variable consideration (e.g., milestone payments) must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price. Up-front Fees: If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from the transaction price allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time. Milestone Payments: At the inception of each arrangement that includes milestone payments (variable consideration), the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s or the collaborative partner’s control, such as non-operational developmental and regulatory approvals, are generally not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of milestones that are within its or the collaborative partner’s control, such as operational developmental milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenues and earnings in the period of adjustment. Revisions to the Company’s estimate of the transaction price may also result in negative collaboration revenues and earnings in the period of adjustment. Services Agreement with Loxo Oncology On April 9, 2018, the Company entered into an agreement with Loxo Oncology, Inc. ("Loxo") whereby the Company agreed to provide certain tissue samples and other services in exchange for agreed-upon fees. The agreement has a term of one year with an automatic renewal of one year and Loxo may terminate the agreement at any time with at least 90 days' notice. The Company evaluated the accounting for this agreement under ASC 606 and concluded the performance obligations thereunder are the delivery of tissue samples and performance of services, both of which are distinct. For the three months ended March 31, 2019, the Company recognized revenue of $90,000 for the delivery of tissue samples and $250,000 for the performance of services. There was no deferred revenue related to this agreement at either March 31, 2019 or December 31, 2018 . Diagnostic Development Agreement with Johnson & Johnson On December 28, 2018, the Company entered into a diagnostics development agreement with JJSI (i) to cooperate on a program to enable the Company to use JJSI samples and clinical data to develop a next generation bronchial genomic classifier diagnostic for lung cancer diagnosis (“Percepta v.2") and a nasal genomic classifier diagnostic for lung cancer (“NasaRISK”) and (ii) for JJSI to use Veracyte data generated in two Veracyte development programs for therapeutic purposes and for purposes of developing a companion diagnostic product used in conjunction with a JJSI therapeutic. The Company granted a license to JJSI with the right to use data and under the Company's intellectual property rights for JJSI's therapeutic purposes, including the development and commercialization of a companion diagnostic for its products, from the Percepta v.2 and NasaRISK programs. The license granted to JJSI is not distinct from other performance obligations as JJSI receives benefit only when other performance obligations are met. The Company will provide data from its RNA whole-transcriptome sequencing platform to JJSI in exchange for $7.0 million in payments from JJSI. The Company is also entitled to additional payments from JJSI of up to $13.0 million , conditioned upon the achievement of certain milestones relating to the development and reimbursement of Percepta v.2 and NasaRISK. For a period of ten years commencing with the first commercial sale of Percepta v.2 and NasaRISK, respectively, the Company will make payments to JJSI of one percent of net cash collections for Percepta v.2 and in the low-single digits of net cash collections for NasaRISK, depending on the number and timing of JJSI samples and associated clinical data the Company receives from JJSI. The JJSI agreement is considered to be within the scope of ASC 808, as the parties are active participants and exposed to the risks and rewards of the collaborative activity. The Company evaluated the terms of the JJSI agreement and has analogized to ASC 606 for the delivery of data from its RNA whole-transcriptome sequencing platform to JJSI under the collaborative arrangement, which the Company believes is a distinct service for which JJSI meets the definition of a customer. Using the concepts of ASC 606, the Company has identified the delivery of data as its only performance obligation. The Company further determined that the transaction price under the arrangement was the $7.0 million in payments which was allocated to the obligation to deliver data. The $13.0 million in future potential payments is considered variable consideration because the Company determined that the potential payments are contingent upon regulatory and commercialization milestones that are uncertain to occur and, as such, were not included in the transaction price, and will be recognized accordingly as each potential payment becomes probable. During the three months ended March 31, 2019, the Company received $5.0 million from JJSI and recognized $3.8 million for the provision of data. The remaining $1.2 million balance is recorded as deferred revenue under accrued liabilities on the Company's condensed balance sheet as of March 31, 2019 and will be recognized as data is delivered and the related performance obligation is satisfied. Legal Settlement In March 2018, the Company received $0.4 million as a settlement with an institutional investor that was a beneficial owner of the Company's common stock related to the disgorgement of short-swing profits pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended. The settlement of $0.4 million was recognized as additional paid-in capital. Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-2, Leases (Topic 842) . This ASU is aimed at making leasing activities more transparent and comparable, and requires substantially all leases be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases. The ASU is effective for interim and annual periods beginning after December 15, 2018. Additionally, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements , which offers an additional transition method whereby entities may apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings rather than application of the new leases standard at the beginning of the earliest period presented in the financial statements. The Company elected this transition method and adopted ASC 842 on January 1, 2019 and as a result, recorded operating lease right-of-use ("ROU") assets of $9.8 million , including offsetting deferred rent of $4.3 million , along with the associated operating lease liabilities of $14.1 million . On January 1, 2019, the Company had a finance lease ROU of $0.8 million and associated finance lease liabilities of $0.3 million for leases classified as finance leases prior to the adoption of ASC 842. The adoption of ASC 842 had an immaterial impact on the Company's condensed statement of operations and comprehensive loss, condensed statement of stockholders' equity and condensed statement of cash flows for the three-month period ended March 31, 2019. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard which allowed it to carry forward the historical lease classification. Additional information and disclosures required by this new standard are contained in Note 5, Commitments and Contingencies. In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808). Under this ASU, transactions in collaborative arrangements are to be accounted for under ASC 606 if the counterparty is a customer for a good or service (or bundle of goods and services) that is a distinct unit of account. Also, entities are precluded from presenting consideration from transactions with a counterparty that is not a customer together with revenue recognized from ASC 606. This ASU is effective for all interim and annual reporting periods beginning on or after December 15, 2019, with early adoption permitted. The Company is currently evaluating the potential effect of this standard on its financial statements. |
Net Loss Per Common Share
Net Loss Per Common Share | 3 Months Ended |
Mar. 31, 2019 | |
Earnings Per Share [Abstract] | |
Net Loss Per Common Share | Net Loss Per Common Share Basic net loss per common share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method. 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, 2019 2018 Shares of common stock subject to outstanding options 5,670,819 5,991,158 Employee stock purchase plan 25,672 25,693 Restricted stock units 538,759 192,806 Total common stock equivalents 6,235,250 6,209,657 |
Accrued Liabilities
Accrued Liabilities | 3 Months Ended |
Mar. 31, 2019 | |
Payables and Accruals [Abstract] | |
Accrued Liabilities | Accrued Liabilities Accrued liabilities consisted of the following (in thousands of dollars): March 31, December 31, Accrued compensation expenses $ 4,951 $ 6,412 Accrued other 3,837 2,774 Total accrued liabilities $ 8,788 $ 9,186 |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 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 fair value of the Company’s debt is estimated using the net present value of the payments, discounted at an interest rate that is consistent with market interest rates, which is a Level II input. 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; and • 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 includes money market funds and a deposit for the lease of the Company's South San Francisco facility. Money market funds, included in cash and cash equivalents in the accompanying condensed balance sheets, were $67.3 million and $76.6 million as of March 31, 2019 and December 31, 2018 , respectively, and are Level I assets as described above. The deposit for the lease, included in restricted cash in the accompanying condensed balance sheets, was $603,000 as of March 31, 2019 and December 31, 2018 , and is a Level I asset as described above. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Operating Leases The Company leases its headquarters and laboratory facilities in South San Francisco, California 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. The Company had deposits of $603,000 included in long-term assets as of March 31, 2019 and December 31, 2018 , 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 South San Francisco facility. The Company also leases laboratory and office space in Austin, Texas under a lease that expires in January 2029 and includes options for expansion and early termination in 2025. The Company provided a cash security deposit for this lease of $139,000 , included in other assets in the Company’s condensed balance sheets as of March 31, 2019 and December 31, 2018 . The Company determined its operating lease liabilities for the two operating leases mentioned above using a discount rate of 7.53% based on the rate that the Company would have to pay to borrow on a collateralized basis for a similar lease an amount equal to the lease payments in a similar economic environment. Operating lease liabilities along with the associated right-of-use assets as of March 31, 2019 are disclosed in the accompanying condensed balance sheets. After the adoption of ASC 842, the Company classified its deferred rent for tenant improvements with its operating lease right-of-use assets on the condensed balance sheets. Future minimum lease payments under non-cancelable operating leases as of March 31, 2019 are as follows (in thousands of dollars): Year Ending December 31, Remainder of 2019 $ 1,671 2020 2,332 2021 2,401 2022 2,472 2023 2,543 Thereafter 6,841 Total minimum lease payments $ 18,260 The Company recognizes operating lease expense on a straight-line basis over the non-cancelable lease period. Operating lease expense was $476,000 for the three months ended March 31, 2019 and 2018 . Finance Lease The Company entered into a finance lease in December 2016 for $1.2 million of laboratory equipment which ends in December 2019. The Company paid an upfront amount of $330,000 and the present value of the total future minimum lease payments at the inception of the lease was $874,000 . As of March 31, 2019 , the future minimum lease payments are $238,000 for the remainder of 2019. The interest expense and related amortization of laboratory equipment are recorded in the statements of operations for nominal amounts. After the adoption of ASC 842, this finance lease remained a finance lease and the Company did not change the discount rate to determine the lease liability nor the amortization life of the related right-of-use assets. Contingencies From time to time, the Company may be involved in legal proceedings arising in the ordinary course of business. The Company assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in its financial statements. An estimated loss contingency is accrued in the financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company believes there is no litigation pending that could have, either individually or in the aggregate, a material adverse effect on the Company’s financial statements. |
Debt
Debt | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Debt | Debt Loan and Security Agreement On November 3, 2017, the Company entered into a loan and security agreement (the "Loan and Security Agreement"), with Silicon Valley Bank. The Loan and Security Agreement allows the Company to borrow up to $35.0 million , with a $25.0 million advance term loan (the "Term Loan Advance"), and a revolving line of credit of up to $10.0 million (the "Revolving Line of Credit"). The Term Loan Advance was advanced upon the closing of the Loan and Security Agreement and was used to pay the outstanding balance of the Company’s existing long-term debt, which was canceled at that date. The Company had not drawn on the Revolving Line of Credit as of March 31, 2019 . Borrowings under the Loan and Security Agreement mature on October 1, 2022. Amounts may be borrowed and repaid under the Revolving Line of Credit up until the earliest of full repayment or maturity of the Loan and Security Agreement, termination of the Loan and Security Agreement, or October 1, 2022. In January 2019, the Company prepaid $12.5 million of the principal amount of the Term Loan Advance. This did not trigger any prepayment premium because it was a partial, not full, repayment of the principal amount. The Term Loan Advance bears interest at a variable rate equal to (i) the thirty-day U.S. London Interbank Offer Rate ("LIBOR") plus (ii) 4.20% , with a minimum rate of 5.43% per annum. Principal amounts outstanding under the Revolving Line of Credit bear interest at a variable rate equal to (i) LIBOR plus (ii) 3.50% , with a minimum rate of 4.70% per annum. The effective interest rate for the Term Loan Advance was 9.39% as of March 31, 2019 . The Company may prepay the outstanding principal amount under the Term Loan Advance plus accrued and unpaid interest and, if the Term Loan Advance is repaid in full, a prepayment premium. The prepayment premium will be (i) $750,000 if prepayment is made prior to November 3, 2018, (ii) $500,000 if the prepayment is made after November 3, 2018 but on or before November 3, 2019, or (iii) $250,000 if the prepayment is made after November 3, 2019. In addition, a final payment on the Term Loan Advance in the amount of $1.2 million is due upon the earlier of the maturity date of the Term Loan Advance or its payment in full. The Loan and Security Agreement contains customary representations, warranties, and events of default such as a material adverse change in our business, operations or financial condition, 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 new line of business, or enter into certain transactions with affiliates, in each case subject to certain exceptions. The Company’s obligations under the Loan and Security Agreement are secured by substantially all of its assets (excluding intellectual property), subject to certain customary exceptions. The Loan and Security Agreement also requires the Company to achieve certain revenue levels tested quarterly on a trailing twelve-month basis. However, failure to maintain the revenue levels will not be considered a default if the sum of the Company’s unrestricted cash and cash equivalents maintained with Silicon Valley Bank and amount available under the Revolving Line of Credit is at least $40.0 million . As of March 31, 2019 , the Company was in compliance with the loan covenants. As of March 31, 2019 , the net debt obligation for borrowings made under the Loan and Security Agreement was as follows (in thousands of dollars): March 31, 2019 December 31, 2018 Debt principal $ 12,500 $ 25,000 End-of-term debt obligation 429 365 Unamortized debt issuance costs (75 ) (83 ) Net debt obligation $ 12,854 $ 25,282 Future principal and end-of-term debt obligation payments due under the Loan and Security Agreement are as follows (in thousands of dollars): Year Ending December 31, 2019 $ — 2020 — 2021 5,556 2022 8,132 Total $ 13,688 The end-of-term debt obligation accretes over the term of the Loan and Security Agreement until maturity and is included in interest expense in the Company's condensed statements of operations and comprehensive loss. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2019 | |
Equity [Abstract] | |
Stockholders' Equity | Stockholders’ Equity Common Stock The Company had reserved shares of common stock for issuance as follows: March 31, December 31, 2018 Stock options and restricted stock units issued and outstanding 6,733,949 6,235,258 Stock options and restricted stock units available for grant under stock option plans 2,141,658 1,571,658 Common stock available for the Employee Stock Purchase Plan 229,218 309,419 Total 9,104,825 8,116,335 |
Thyroid Cytopathology Partners
Thyroid Cytopathology Partners | 3 Months Ended |
Mar. 31, 2019 | |
Thyroid Cytopathology Partners | |
Thyroid Cytopathology Partners | Thyroid Cytopathology Partners The Company has an agreement with a specialized pathology practice, Thyroid Cytopathology Partners, ("TCP"), to provide testing services to the Company (the "TCP Agreement"). The TCP Agreement is effective through October 31, 2022, 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 TCP Agreement, the Company pays TCP based on a fixed price per test schedule which is reviewed periodically for changes in market pricing, and the TCP Agreement includes a clause allowing TCP to sublease 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 previously concluded that TCP represents a variable interest entity as a result of the facility arrangement clause, but 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, and therefore does not consolidate TCP. On February 14, 2019, the TCP Agreement was amended to remove the facility clause. Accordingly, the Company believes TCP was no longer a variable interest entity as of that date. TCP's portion of rent and related operating expenses reimbursed to the Company for the shared space at the Austin, Texas facility was $11,000 and $32,000 for the three months ended March 31, 2019 and 2018 , respectively, 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, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company did not record a provision or benefit for income taxes during the three months ended March 31, 2019 and 2018 . The Company continues to maintain a full valuation allowance against its net deferred tax assets. As of March 31, 2019 , the Company had unrecognized tax benefits of $2.8 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, 2019 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, 2019 . 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, with consideration of changing facts and circumstances. Settlement of any particular position could require the use of cash. |
Organization and Description _2
Organization and Description of Business (Policies) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
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, or GAAP. Certain information and note disclosures normally included in 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, 2019 , the condensed statements of operations and comprehensive loss for the three months ended March 31, 2019 and 2018 , the condensed statements of stockholders' equity for the three months ended March 31, 2019 and 2018 , and the condensed statements of cash flows for the three months ended March 31, 2019 and 2018 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, 2018 has been derived from audited financial statements. The results for the three months ended March 31, 2019 are not necessarily indicative of the results expected for the full year or any other period. 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, 2018 . |
Use of Estimates | Use of Estimates The preparation of 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; the useful lives of property and equipment; the recoverability of long-lived assets; the incremental borrowing rate for leases; 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 majority of 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. |
Restricted Cash | Restricted Cash The Company had deposits of $603,000 included in long-term assets as of March 31, 2019 and December 31, 2018 , 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 South San Francisco facility. |
Revenue Recognition | Revenue Recognition The Company commenced recognizing revenue in accordance with the provisions of ASC 606, Revenue from Contracts with Customers , or ASC 606, starting January 1, 2018. Prior to January 1, 2018, the Company recognized revenue in accordance with the provisions of ASC 954-605, Health Care Entities - Revenue Recognition , or ASC 954. Revenue from Diagnostic Services Most of the Company’s revenue is generated from the provision of diagnostic services. These services are completed upon the delivery of test results to the prescribing physician, at which time the Company bills for the services. The Company recognizes revenue related to billings based on estimates of the amount that will ultimately be realized. In determining the amount to accrue for a delivered test, the Company considers factors such as payment history, payer coverage, whether there is a reimbursement contract between the payer and the Company, payment as a percentage of agreed upon rate (if applicable), amount paid per test and any current developments or changes that could impact reimbursement. These estimates require significant judgment by management. The Company adopted ASC 606 on January 1, 2018 using the modified retrospective method, which requires a cumulative catch-up adjustment as if the Company had recognized revenue under ASC 606 from January 1, 2016. Prior to January 1, 2018, the Company recognized revenue in accordance with ASC 954 and recognized revenue for tests delivered on an accrual basis when amounts that will ultimately be realized could be reasonably estimated, and on the cash basis when there was insufficient information to estimate revenue accruals. The adoption of ASC 606 did not have a material impact on the Company's statement of operations or financial position. During the three months ended March 31, 2019, the Company changed its revenue estimates due to actual and anticipated cash collections for tests delivered in prior quarters and recognized additional revenue of $0.6 million , of which $0.4 million had been collected as of March 31, 2019. This resulted in a decrease in the Company's loss from operations of $0.6 million and a decrease in loss per share of $0.02 for the three months ended March 31, 2019. Arrangements with Multiple-Performance Obligations From time to time, the Company enters into arrangements for research and development and/or commercialization services. Such arrangements may require the Company to deliver various rights, services and/or samples, including intellectual property rights/licenses, R&D services, and/or commercialization services. The underlying terms of these arrangements generally provide for consideration to the Company in the form of nonrefundable upfront license fees, development and commercial performance milestone payments, royalty payments, and/or profit sharing. In arrangements involving more than one performance obligation, each required performance obligation is evaluated to determine whether it qualifies as a distinct performance obligation based on whether (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available and (ii) the good or service is separately identifiable from other promises in the contract. The consideration under the arrangement is then allocated to each separate distinct performance obligation based on its respective relative stand-alone selling price. The estimated selling price of each deliverable reflects the Company's best estimate of what the selling price would be if the deliverable was regularly sold by the Company on a stand-alone basis or using an adjusted market assessment approach if selling price on a stand-alone basis is not available. The consideration allocated to each distinct performance obligation is recognized as revenue when control of the related goods or services is transferred. Consideration associated with at-risk substantive performance milestones is recognized as revenue when it is probable that a significant reversal of the cumulative revenue recognized will not occur. Should there be royalties, the Company utilizes the sales and usage-based royalty exception in arrangements that resulted from the license of intellectual property, recognizing revenues generated from royalties or profit sharing as the underlying sales occur. Collaborative Arrangements The Company enters into collaborative arrangements with partners that fall under the scope of ASC Topic 808, Collaborative Arrangements , or ASC 808. While these arrangements are in the scope of ASC 808, the Company may analogize to ASC 606 for some aspects of the arrangements. The Company analogizes to ASC 606 for certain activities within the collaborative arrangement for the delivery of a good or service (i.e., a unit of account) that is part of its ongoing major or central operations. The terms of the Company’s collaborative arrangements typically include one or more of the following: (i) up-front fees; (ii) milestone payments related to the achievement of development, regulatory, or commercial goals; and (iii) royalties on net sales of licensed products. Each of these payments may result in collaboration revenues or an offset against research and development expense. As part of the accounting for these arrangements, the Company must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation which determines how the transaction price is allocated among the performance obligations. Generally, the estimation of the stand-alone selling price may include such estimates as, independent evidence of market price, forecasted revenues or costs, development timelines, discount rates, and probabilities of technical and regulatory success. The Company evaluates each performance obligation to determine if they can be satisfied at a point in time or over time, and it measures the services delivered to the collaborative partner which are periodically reviewed based on the progress of the related program. The effect of any change made to an estimated input component and, therefore revenue or expense recognized, would be recorded as a change in estimate. In addition, variable consideration (e.g., milestone payments) must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price. Up-front Fees: If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from the transaction price allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time. Milestone Payments: At the inception of each arrangement that includes milestone payments (variable consideration), the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s or the collaborative partner’s control, such as non-operational developmental and regulatory approvals, are generally not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of milestones that are within its or the collaborative partner’s control, such as operational developmental milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenues and earnings in the period of adjustment. Revisions to the Company’s estimate of the transaction price may also result in negative collaboration revenues and earnings in the period of adjustment. Services Agreement with Loxo Oncology On April 9, 2018, the Company entered into an agreement with Loxo Oncology, Inc. ("Loxo") whereby the Company agreed to provide certain tissue samples and other services in exchange for agreed-upon fees. The agreement has a term of one year with an automatic renewal of one year and Loxo may terminate the agreement at any time with at least 90 days' notice. The Company evaluated the accounting for this agreement under ASC 606 and concluded the performance obligations thereunder are the delivery of tissue samples and performance of services, both of which are distinct. For the three months ended March 31, 2019, the Company recognized revenue of $90,000 for the delivery of tissue samples and $250,000 for the performance of services. There was no deferred revenue related to this agreement at either March 31, 2019 or December 31, 2018 . Diagnostic Development Agreement with Johnson & Johnson On December 28, 2018, the Company entered into a diagnostics development agreement with JJSI (i) to cooperate on a program to enable the Company to use JJSI samples and clinical data to develop a next generation bronchial genomic classifier diagnostic for lung cancer diagnosis (“Percepta v.2") and a nasal genomic classifier diagnostic for lung cancer (“NasaRISK”) and (ii) for JJSI to use Veracyte data generated in two Veracyte development programs for therapeutic purposes and for purposes of developing a companion diagnostic product used in conjunction with a JJSI therapeutic. The Company granted a license to JJSI with the right to use data and under the Company's intellectual property rights for JJSI's therapeutic purposes, including the development and commercialization of a companion diagnostic for its products, from the Percepta v.2 and NasaRISK programs. The license granted to JJSI is not distinct from other performance obligations as JJSI receives benefit only when other performance obligations are met. The Company will provide data from its RNA whole-transcriptome sequencing platform to JJSI in exchange for $7.0 million in payments from JJSI. The Company is also entitled to additional payments from JJSI of up to $13.0 million , conditioned upon the achievement of certain milestones relating to the development and reimbursement of Percepta v.2 and NasaRISK. For a period of ten years commencing with the first commercial sale of Percepta v.2 and NasaRISK, respectively, the Company will make payments to JJSI of one percent of net cash collections for Percepta v.2 and in the low-single digits of net cash collections for NasaRISK, depending on the number and timing of JJSI samples and associated clinical data the Company receives from JJSI. The JJSI agreement is considered to be within the scope of ASC 808, as the parties are active participants and exposed to the risks and rewards of the collaborative activity. The Company evaluated the terms of the JJSI agreement and has analogized to ASC 606 for the delivery of data from its RNA whole-transcriptome sequencing platform to JJSI under the collaborative arrangement, which the Company believes is a distinct service for which JJSI meets the definition of a customer. Using the concepts of ASC 606, the Company has identified the delivery of data as its only performance obligation. The Company further determined that the transaction price under the arrangement was the $7.0 million in payments which was allocated to the obligation to deliver data. The $13.0 million in future potential payments is considered variable consideration because the Company determined that the potential payments are contingent upon regulatory and commercialization milestones that are uncertain to occur and, as such, were not included in the transaction price, and will be recognized accordingly as each potential payment becomes probable. During the three months ended March 31, 2019, the Company received $5.0 million from JJSI and recognized $3.8 million for the provision of data. The remaining $1.2 million balance is recorded as deferred revenue under accrued liabilities on the Company's condensed balance sheet as of March 31, 2019 and will be recognized as data is delivered and the related performance obligation is satisfied. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-2, Leases (Topic 842) . This ASU is aimed at making leasing activities more transparent and comparable, and requires substantially all leases be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases. The ASU is effective for interim and annual periods beginning after December 15, 2018. Additionally, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements , which offers an additional transition method whereby entities may apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings rather than application of the new leases standard at the beginning of the earliest period presented in the financial statements. The Company elected this transition method and adopted ASC 842 on January 1, 2019 and as a result, recorded operating lease right-of-use ("ROU") assets of $9.8 million , including offsetting deferred rent of $4.3 million , along with the associated operating lease liabilities of $14.1 million . On January 1, 2019, the Company had a finance lease ROU of $0.8 million and associated finance lease liabilities of $0.3 million for leases classified as finance leases prior to the adoption of ASC 842. The adoption of ASC 842 had an immaterial impact on the Company's condensed statement of operations and comprehensive loss, condensed statement of stockholders' equity and condensed statement of cash flows for the three-month period ended March 31, 2019. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard which allowed it to carry forward the historical lease classification. Additional information and disclosures required by this new standard are contained in Note 5, Commitments and Contingencies. In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808). Under this ASU, transactions in collaborative arrangements are to be accounted for under ASC 606 if the counterparty is a customer for a good or service (or bundle of goods and services) that is a distinct unit of account. Also, entities are precluded from presenting consideration from transactions with a counterparty that is not a customer together with revenue recognized from ASC 606. This ASU is effective for all interim and annual reporting periods beginning on or after December 15, 2019, with early adoption permitted. The Company is currently evaluating the potential effect of this standard on its financial statements. |
Organization and Description _3
Organization and Description of Business (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Schedule of the Company's third-party payers as a percentage of total | The Company’s third-party payers in excess of 10% of accounts receivable and their related accounts receivable balance as a percentage of total accounts receivable were as follows: March 31, December 31, 2018 Medicare 14 % 20 % UnitedHealthcare 12 % 11 % 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, 2019 2018 Medicare 21 % 29 % UnitedHealthcare 11 % 13 % 32 % 42 % |
Net Loss Per Common Share (Tabl
Net Loss Per Common Share (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Earnings Per Share [Abstract] | |
Schedule of outstanding shares of common stock equivalents that have been excluded from diluted 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, 2019 2018 Shares of common stock subject to outstanding options 5,670,819 5,991,158 Employee stock purchase plan 25,672 25,693 Restricted stock units 538,759 192,806 Total common stock equivalents 6,235,250 6,209,657 |
Accrued Liabilities (Tables)
Accrued Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Payables and Accruals [Abstract] | |
Schedule of accrued liabilities | Accrued liabilities consisted of the following (in thousands of dollars): March 31, December 31, Accrued compensation expenses $ 4,951 $ 6,412 Accrued other 3,837 2,774 Total accrued liabilities $ 8,788 $ 9,186 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future minimum lease payments under non-cancelable operating leases | Future minimum lease payments under non-cancelable operating leases as of March 31, 2019 are as follows (in thousands of dollars): Year Ending December 31, Remainder of 2019 $ 1,671 2020 2,332 2021 2,401 2022 2,472 2023 2,543 Thereafter 6,841 Total minimum lease payments $ 18,260 |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of debt obligation for borrowings | As of March 31, 2019 , the net debt obligation for borrowings made under the Loan and Security Agreement was as follows (in thousands of dollars): March 31, 2019 December 31, 2018 Debt principal $ 12,500 $ 25,000 End-of-term debt obligation 429 365 Unamortized debt issuance costs (75 ) (83 ) Net debt obligation $ 12,854 $ 25,282 |
Schedule of debt obligation payments | Future principal and end-of-term debt obligation payments due under the Loan and Security Agreement are as follows (in thousands of dollars): Year Ending December 31, 2019 $ — 2020 — 2021 5,556 2022 8,132 Total $ 13,688 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Equity [Abstract] | |
Schedule of reserved shares of common stock for issuance | The Company had reserved shares of common stock for issuance as follows: March 31, December 31, 2018 Stock options and restricted stock units issued and outstanding 6,733,949 6,235,258 Stock options and restricted stock units available for grant under stock option plans 2,141,658 1,571,658 Common stock available for the Employee Stock Purchase Plan 229,218 309,419 Total 9,104,825 8,116,335 |
Organization and Description _4
Organization and Description of Business - Narrative (Details) | Apr. 09, 2018 | Jul. 31, 2018USD ($)$ / sharesshares | Mar. 31, 2018USD ($) | Mar. 31, 2019USD ($)financial_institutionsegmentproduct$ / shares | Mar. 31, 2018USD ($)$ / shares | Jan. 01, 2019USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2016USD ($) |
Cash and Cash Equivalents [Line Items] | ||||||||
Number of operating segments | segment | 1 | |||||||
Number of products | product | 3 | |||||||
Number of shares issued and sold (in shares) | shares | 5,750,000 | |||||||
Price per share (in usd per share) | $ / shares | $ 10.25 | |||||||
Proceeds from the issuance of common stock in a public offering, net of costs | $ 55,000,000 | |||||||
Stock issuance costs | $ 3,900,000 | |||||||
Number of major financial institutions with which the company's cash and cash equivalents are deposited | financial_institution | 1 | |||||||
Long term deposit consisting of letter of credit serving as security for lease | $ 603,000 | $ 603,000 | ||||||
Revenue | 29,529,000 | $ 20,041,000 | ||||||
Cost of revenue | 8,513,000 | 7,867,000 | ||||||
Loss from operations | $ (2,067,000) | $ (8,955,000) | ||||||
Net income (loss) per common share, basic and diluted (in usd per share) | $ / shares | $ (0.05) | $ (0.27) | ||||||
Litigation settlement, amount awarded from other party | $ 400,000 | |||||||
Right-of-use assets - operating lease | $ 9,630,000 | 0 | ||||||
Right-of-use assets - finance lease, net | 735,000 | 0 | ||||||
Finance lease liability | $ 1,200,000 | |||||||
Accrued Income Receivable | ||||||||
Cash and Cash Equivalents [Line Items] | ||||||||
Loss from operations | $ 600,000 | |||||||
Net income (loss) per common share, basic and diluted (in usd per share) | $ / shares | $ (0.02) | |||||||
Headquarters and laboratory facilities, South San Francisco, lease signed April 2015 | ||||||||
Cash and Cash Equivalents [Line Items] | ||||||||
Long term deposit consisting of letter of credit serving as security for lease | $ 603,000 | 603,000 | ||||||
Diagnostic Services | ||||||||
Cash and Cash Equivalents [Line Items] | ||||||||
Revenue | 400,000 | |||||||
Diagnostic Services | Accrued Income Receivable | ||||||||
Cash and Cash Equivalents [Line Items] | ||||||||
Revenue | 600,000 | |||||||
Tissue Samples | ||||||||
Cash and Cash Equivalents [Line Items] | ||||||||
Contract with customer, revenue recognized | 90,000 | |||||||
Contract agreement term | 1 year | |||||||
Automatic renewal period of contract agreement | 1 year | |||||||
Other Services | ||||||||
Cash and Cash Equivalents [Line Items] | ||||||||
Contract with customer, revenue recognized | 250,000 | |||||||
Over-Allotment Option | ||||||||
Cash and Cash Equivalents [Line Items] | ||||||||
Number of shares issued and sold (in shares) | shares | 750,000 | |||||||
Biopharmaceutical Company | ||||||||
Cash and Cash Equivalents [Line Items] | ||||||||
Deferred revenue | 0 | $ 0 | ||||||
Accounting Standards Update 2016-02 | ||||||||
Cash and Cash Equivalents [Line Items] | ||||||||
Deferred revenue | $ 4,300,000 | |||||||
Right-of-use assets - operating lease | 9,800,000 | |||||||
Operating lease liability | 14,100,000 | |||||||
Right-of-use assets - finance lease, net | 800,000 | |||||||
Finance lease liability | $ 300,000 | |||||||
Johnson & Johnson | ||||||||
Cash and Cash Equivalents [Line Items] | ||||||||
Revenue | $ 5,000,000 | |||||||
Contract agreement term | 10 years | |||||||
Deferred revenue | $ 1,200,000 | |||||||
Contractual proceeds | 13,000,000 | |||||||
Receivable from agreement | $ 7,000,000 | |||||||
Percentage of net cash collections, fee | 1.00% | |||||||
Johnson & Johnson | Provision of Data | ||||||||
Cash and Cash Equivalents [Line Items] | ||||||||
Revenue | $ 3,800,000 | |||||||
Johnson & Johnson | Provision of Data | Revenue | ||||||||
Cash and Cash Equivalents [Line Items] | ||||||||
Concentration risk percentage | 12.90% |
Organization and Description _5
Organization and Description of Business - Credit Risk (Details) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2017 | |
Revenue | Revenue concentration risk | |||
Concentrations of Credit Risk and Other Risks and Uncertainties | |||
Concentrations of credit risk (as a percent) | 32.00% | 42.00% | |
Revenue | Revenue concentration risk | Medicare | |||
Concentrations of Credit Risk and Other Risks and Uncertainties | |||
Concentrations of credit risk (as a percent) | 21.00% | 29.00% | |
Revenue | Revenue concentration risk | UnitedHealthcare | |||
Concentrations of Credit Risk and Other Risks and Uncertainties | |||
Concentrations of credit risk (as a percent) | 11.00% | 13.00% | |
Accounts receivable | Gross receivables concentration risk | Medicare | |||
Concentrations of Credit Risk and Other Risks and Uncertainties | |||
Concentrations of credit risk (as a percent) | 14.00% | 20.00% | |
Accounts receivable | Gross receivables concentration risk | UnitedHealthcare | |||
Concentrations of Credit Risk and Other Risks and Uncertainties | |||
Concentrations of credit risk (as a percent) | 12.00% | 11.00% |
Net Loss Per Common Share (Deta
Net Loss Per Common Share (Details) - shares | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Outstanding shares of common stock equivalents that have been excluded from diluted net loss per common share | ||
Total common stock equivalents (in shares) | 6,235,250 | 6,209,657 |
Shares of common stock subject to outstanding options (in shares) | ||
Outstanding shares of common stock equivalents that have been excluded from diluted net loss per common share | ||
Total common stock equivalents (in shares) | 5,670,819 | 5,991,158 |
Employee stock purchase plan (in shares) | ||
Outstanding shares of common stock equivalents that have been excluded from diluted net loss per common share | ||
Total common stock equivalents (in shares) | 25,672 | 25,693 |
Restricted stock units (in shares) | ||
Outstanding shares of common stock equivalents that have been excluded from diluted net loss per common share | ||
Total common stock equivalents (in shares) | 538,759 | 192,806 |
Accrued Liabilities (Details)
Accrued Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Payables and Accruals [Abstract] | ||
Accrued compensation expenses | $ 4,951 | $ 6,412 |
Accrued other | 3,837 | 2,774 |
Total accrued liabilities | $ 8,788 | $ 9,186 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Fair value measurements | ||
Restricted cash | $ 603 | $ 603 |
Headquarters and laboratory facilities, South San Francisco, lease signed April 2015 | ||
Fair value measurements | ||
Restricted cash | 603 | 603 |
Level I | Headquarters and laboratory facilities, South San Francisco, lease signed April 2015 | ||
Fair value measurements | ||
Restricted cash | 603 | 603 |
Level I | Money market funds | ||
Fair value measurements | ||
Financial assets | $ 67,300 | $ 76,600 |
Commitments and Contingencies -
Commitments and Contingencies - Operating Lease (Details) ft² in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2019USD ($)ft² | Dec. 31, 2018USD ($) | |
Operating Leases | ||
Operating lease, discount rate | 7.53% | |
Future minimum lease payments under non-cancelable operating leases | ||
Remainder of 2019 | $ 1,671 | |
2020 | 2,332 | |
2021 | 2,401 | |
2022 | 2,472 | |
2023 | 2,543 | |
Thereafter | 6,841 | |
Total minimum lease payments | 18,260 | |
Facilities rent expense | $ 476 | |
Headquarters and laboratory facilities, South San Francisco, lease signed April 2015 | ||
Operating Leases | ||
Amount of space leased (in square feet) | ft² | 59 | |
Security deposit | $ 603 | $ 603 |
Laboratory facilities, Austin, Texas | Other assets | ||
Operating Leases | ||
Security deposit | $ 139 | $ 139 |
Commitments and Contingencies_2
Commitments and Contingencies - Finance Lease (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2016 |
Commitments and Contingencies Disclosure [Abstract] | ||
Finance lease liability | $ 1,200 | |
Upfront payment | 330 | |
Present value of future minimum payments | $ 874 | |
Payment for 2019 | $ 238 |
Debt - Narrative (Details)
Debt - Narrative (Details) - USD ($) | 1 Months Ended | 3 Months Ended | ||
Jan. 31, 2019 | Mar. 31, 2019 | Mar. 31, 2018 | Nov. 03, 2017 | |
Debt Instrument [Line Items] | ||||
Repayments of long-term debt | $ 12,500,000 | $ 0 | ||
Silicon Valley Bank | Line of credit | ||||
Debt Instrument [Line Items] | ||||
Maximum borrowing capacity | $ 35,000,000 | |||
Liquidity requirement, minimum | $ 40,000,000 | |||
Secured debt | Silicon Valley Bank | Line of credit | ||||
Debt Instrument [Line Items] | ||||
Maximum borrowing capacity | 25,000,000 | |||
Effective interest rate (as a percent) | 9.39% | |||
Balloon payment to be paid | 1,200,000 | |||
Secured debt | Silicon Valley Bank | Line of credit | London Interbank Offered Rate (LIBOR) | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate | 4.20% | |||
Secured debt | Silicon Valley Bank | Line of credit | London Interbank Offered Rate (LIBOR) | Minimum | ||||
Debt Instrument [Line Items] | ||||
Interest rate (as a percent) | 5.43% | |||
Revolving credit facility | Silicon Valley Bank | Line of credit | ||||
Debt Instrument [Line Items] | ||||
Maximum borrowing capacity | $ 10,000,000 | |||
Repayments of long-term debt | $ 12,500,000 | |||
Revolving credit facility | Silicon Valley Bank | Line of credit | London Interbank Offered Rate (LIBOR) | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate | 3.50% | |||
Revolving credit facility | Silicon Valley Bank | Line of credit | London Interbank Offered Rate (LIBOR) | Minimum | ||||
Debt Instrument [Line Items] | ||||
Interest rate (as a percent) | 4.70% | |||
Debt prepayment tranche one | Revolving credit facility | Silicon Valley Bank | Line of credit | London Interbank Offered Rate (LIBOR) | ||||
Debt Instrument [Line Items] | ||||
Prepayment premium | $ 750,000 | |||
Debt prepayment tranche two | Revolving credit facility | Silicon Valley Bank | Line of credit | London Interbank Offered Rate (LIBOR) | ||||
Debt Instrument [Line Items] | ||||
Prepayment premium | 500,000 | |||
Debt prepayment tranche three | Revolving credit facility | Silicon Valley Bank | Line of credit | London Interbank Offered Rate (LIBOR) | ||||
Debt Instrument [Line Items] | ||||
Prepayment premium | $ 250,000 |
Debt - Debt Obligation for Borr
Debt - Debt Obligation for Borrowings (Details) - Line of credit - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Debt Instrument [Line Items] | ||
Debt principal | $ 12,500 | $ 25,000 |
End-of-term debt obligation | 429 | 365 |
Unamortized debt issuance costs | (75) | (83) |
Net debt obligation | $ 12,854 | $ 25,282 |
Debt - Debt Obligation Payments
Debt - Debt Obligation Payments (Details) - Line of credit $ in Thousands | Mar. 31, 2019USD ($) |
Future principal payments | |
2019 | $ 0 |
2020 | 0 |
2021 | 5,556 |
2022 | 8,132 |
Total | $ 13,688 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - shares | Mar. 31, 2019 | Dec. 31, 2018 |
Common Stock | ||
Options issued and outstanding (in shares) | 6,733,949 | 6,235,258 |
Total number of shares reserved for issuance (in shares) | 9,104,825 | 8,116,335 |
Shares of common stock subject to outstanding options (in shares) | ||
Common Stock | ||
Shares available for issuance (in shares) | 2,141,658 | 1,571,658 |
ESPP (in shares) | ||
Common Stock | ||
Shares available for issuance (in shares) | 229,218 | 309,419 |
Thyroid Cytopathology Partners
Thyroid Cytopathology Partners (Details) - Thyroid Cytopathology Partners - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2017 | |
Thyroid Cytopathology Partners | |||
Notice of intent not to renew period | 12 months | ||
Reduction to rent expense for TCP's portion of costs for subleased space | $ 11 | $ 32 |
Income Taxes (Details)
Income Taxes (Details) | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Income Tax Disclosure [Abstract] | |
Unrecognized tax benefit | $ 2,800,000 |
Interest expense or penalties related to unrecognized tax benefits | $ 0 |