Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this report. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on February 28, 2025.

Overview

We are a diagnostics company with proprietary molecular and bioinformatics technology that we are applying to change disease management worldwide. Our cell-free DNA, or cfDNA, technology combines our novel molecular assays, which reliably measure many informative regions across the genome, from samples as small as a single cell, with our statistical algorithms that incorporate data available from the broader scientific community to identify genetic variations, covering a wide range of serious conditions with high accuracy and coverage. We aim to make personalized genetic testing and diagnostics part of the standard of care to protect health and inform earlier and more targeted interventions that help lead to longer, healthier lives.

We currently provide a comprehensive suite of products in women's health, oncology and organ health, as well as our Constellation cloud-based platform. We generate the majority of our revenues from the sale of Panorama, our non-invasive prenatal test ("NIPT") and Horizon, our genetic carrier screening test. In addition to Panorama, our product offerings in women's health also include Spectrum preimplantation genetic testing, our IVF embryo screening; Anora, our test to help determine underlying reasons for occurrence of miscarriage, Vistara, our single-gene NIPT that screens for conditions that may affect quality of life, and Fetal Focus, our noninvasive prenatal test for inherited conditions. Our product offerings in organ health include Prospera, a transplant rejection assessment test that evaluates risk of rejection in kidney transplants. In oncology, in addition to Horizon, we also offer Empower, our hereditary cancer screening test, which we also plan to offer to oncologists through our oncology sales channel; and Signatera, our molecular residual disease test for oncology applications, which we commercialized as a test run in our CLIA (as defined below) laboratory and offer on a research use only basis to research laboratories and pharmaceutical companies.

We process tests in our laboratories certified under the Clinical Laboratory Improvement Amendments of 1988, or CLIA, in Austin, Texas and San Carlos, California. A portion of our testing is performed by third-party laboratories. Our customers include independent laboratories, national and regional reference laboratories, medical centers and physician practices for our screening tests, and research laboratories and pharmaceutical companies. We market and sell our tests through our direct sales force and, for our women's health tests, through our laboratory distribution partners. We bill clinics, laboratory distribution partners, patients, pharmaceutical companies and insurance payers for the tests we perform. In cases where we bill laboratory distribution partners, our partners in turn bill clinics, patients and insurers. The majority of our revenue comes from insurers with whom we have in-network contracts. Such insurers reimburse us for our tests pursuant to our in-network contracts with them, based on positive coverage determinations, which means that the insurer has determined that the test in general is medically necessary for this category of patient.

In addition to offering tests to be performed at our laboratories, either directly or through our laboratory distribution partners, we also establish licensing arrangements with laboratories under Constellation, our cloud-based distribution model, whereby our laboratory licensees run the molecular workflows themselves and then access our bioinformatics algorithms through our cloud-based software. This cloud-based distribution model results in lower revenues and gross profit per test than cases in which we process a test ourselves; however, because we do not incur the costs of processing the tests, our costs per test under this model are also lower.

The number of tests we accession when a sample is received, entered into our computer system, and routed for processing -is a key business metric. It is a subset of total tests processed, which also includes tests distributed through our Constellation licensees. As our laboratory partners transition to our cloud-based distribution model, accessioned tests will decrease while processed tests continue to reflect overall volume growth.

During the nine months ended September 30, 2025, we processed approximately 2,601,900 tests, comprised of approximately 2,559,800 tests accessioned in our laboratory, compared to approximately 2,271,800 tests processed, comprised of approximately 2,223,500 tests accessioned in our laboratory, during the nine months ended September 30, 2024. This increase in volume primarily represents continued commercial growth of Signatera, Panorama and Horizon, both as tests performed in our laboratory as well as through our Constellation software platform.

The percent of our revenues attributable to our U.S. direct sales force for the nine months ended September 30, 2025 was 96%, an increase compared to 94% for the nine months ended September 30, 2024. The percent of our revenues attributable to U.S. laboratory distribution partners for the nine months ended September 30, 2025 was 2%, a decrease compared to 3% from the same period in the prior year. Our ability to increase our revenues and gross profit will depend on our ability to further penetrate the U.S. market with our direct sales force. The percent of our revenues attributable to international laboratory distribution partners and other international sales for the nine months ended September 30, 2025 and 2024 was 2% and 3%, respectively.

For the nine months ended September 30, 2025, total revenues were $1,640.6 million compared to $1,220.9 million in the nine months ended September 30, 2024. Product revenues accounted for $1,634.7 million, nearly 100% of total revenues for the nine months ended September 30, 2025 compared to $1212.2 million, representing 99% of total revenues for the nine months ended September 30, 2024. For the nine months ended September 30, 2025 and 2024, no customers exceeded 10% of the total revenues on an individual basis. Revenues from customers outside the United States were $28.1 million, representing approximately 2% of total revenues for the nine months ended September 30, 2025. For the nine months ended September 30, 2024, revenues from customers outside the United States were $30.3 million, representing approximately 3% total revenues. Most of our revenues have been denominated in U.S. dollars, though we generate some revenue in foreign currency, primarily denominated in Euros and Singapore Dollars.

Our net loss for the nine months ended September 30, 2025 and 2024 was $255.4 million and $136.7 million, respectively. This included non-cash stock compensation expense of $261.8 million and $202.5 million for the nine months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, we had an accumulated deficit of $2.8 billion.

Components of the Results of Operations

Revenues

Product Revenues

We generate revenues from the sale of our tests, primarily from the sale of our Panorama and Horizon tests. Our two primary distribution channels are our direct sales force and our laboratory partners. In cases where we promote our tests through our direct sales force, we generally bill directly to a patient, clinic or insurance carrier, or a combination of the insurance carrier and patient, for the fees.

Sales of our clinical tests are recorded as product revenues. Revenues recognized from tests processed through our Constellation model, and from our strategic partnership agreements are reported in licensing and other revenues.

In cases where we sell our tests through our laboratory partners, the majority of our laboratory partners bill the patient, clinic or insurance carrier for the performance of our tests, and we are entitled to either a fixed price per test or a percentage of their collections.

Our ability to increase our revenues will depend on our ability to further penetrate the domestic and international markets and, in particular, generate sales through our direct sales force, develop and commercialize additional tests, obtain reimbursement from additional third-party payers and increase our reimbursement rates for tests performed. For example, our financial performance depends on reimbursement for microdeletions testing. Many third-party payers do not currently reimburse for microdeletions screening in part because there has historically been limited published data on the performance of microdeletions screening tests, with our single nucleotide polymorphism-based Microdeletion and Aneuploidy RegisTry, or SMART study results only being published in early 2022.

Entering into in-network contracts continues to be an important part of our business strategy, as we believe that in-network coverage of our tests by third-party payers is crucial to our growth and long-term success, as in-network pricing is more predictable than out-of-network pricing, enables us to develop stable, long-term relationships with third-party payers, and provides access to a larger population of covered lives. However, the negotiated fees under our contracts with third-party payers are typically lower than the list price of our tests, and in some cases, the third-party payers that we contract with have negative coverage determinations for some of our offerings, in particular Panorama for microdeletions screening. Therefore, being in network with third-party payers has in the past had, and may in the future have, an adverse impact on our revenues and gross margins. We intend to mitigate any impact by driving more business from our most profitable accounts.

Licensing and Other Revenues

Revenues recognized from tests processed through our Constellation model and from our strategic partnership agreements are reported in licensing and other revenues. We also recognize licensing revenues through the licensing and the provisioning of services to support the use of our proprietary technology by licensees under our cloud-based distribution model.

Our strategy to offer access to our algorithm to laboratory licensees via our Constellation cloud-based software platform may also cause our revenues to decrease because we do not process the tests and perform the molecular biology analysis in our own laboratory under this model, and therefore are not able to charge as high an amount and, as a result, realize lower revenues per test than when we perform the entire test ourselves.

Cost of Product Revenues

The components of our cost of product revenues are material and service costs, impairment charges associated with testing equipment, personnel costs, including stock-based compensation expense, equipment and infrastructure expenses associated with testing samples, electronic medical records, order and delivery systems, shipping charges to transport samples, costs incurred from third party test processing fees, and allocated overhead such as rent, information technology costs, equipment depreciation and utilities. Costs associated with Whole Exome Sequencing, are also included, as well as labor costs, relating to our Signatera CLIA and Signatera research use only offerings. Costs associated with performing tests are recorded when the test is accessioned. We expect cost of product revenues in absolute dollars to increase as the number of tests we perform increases.

As we continue to achieve scale, we have increased our focus on more efficient use of labor, automation, and DNA sequencing. For example, we updated the molecular and bioinformatics process for Panorama to further reduce the sequencing reagents, test steps and associated labor costs required to obtain a test result, while increasing the accuracy of the test to allow it to run with lower fetal fraction input. These improvements also reduced the frequency of the need to require blood redraws from the patient.

Cost of Licensing and Other Revenues

The components of our cost of licensing and other revenues are material costs associated with test kits sold to Constellation clients, development and support services relating to our strategic partnership agreements and other costs.

We consider our cost of licensing and other revenues for the Constellation software platform to be relatively low, and therefore we expect its associated gross margin is higher. We expect our cost of licensing will increase in relation to volume growth.

Expenses

Research and Development

Research and development expenses include costs incurred to develop our technology, collect clinical samples and conduct clinical studies to develop and support our products. These costs consist of personnel costs, including stock-based compensation expense; prototype materials; laboratory supplies; consulting costs; regulatory costs; electronic medical record set up costs; and costs associated with setting up and conducting clinical studies at domestic and international sites and allocated overhead, including rent, information technology, equipment depreciation and utilities. We expense all research and development costs in the periods in which they are incurred. We expect our research and development expenses to increase in absolute dollars as we continue to invest in research and development activities related to developing enhanced and new products.

Selling, General and Administrative

Selling, general and administrative expenses include executive, selling and marketing, legal, finance and accounting, human resources, billing and client services. These expenses consist of personnel costs, including stock-based compensation expense; direct marketing expenses; audit and legal expenses; consulting costs; training and medical education activities; payer outreach programs and allocated overhead, including rent, information technology, equipment depreciation, and utilities.

Interest Expense

Interest expense is attributable to borrowing under our Convertible Senior Notes (the "Convertible Notes") and our credit line with UBS (the "Credit Line"), including the amortization of debt discounts.

Interest Income and Other (Expense) Income, Net

Interest income and other (expense) income, net is comprised of interest earned on our cash; realized gains and losses on investments and assets; sublease rental income; and warrant preferred shares and foreign currency remeasurement gains and losses.

Critical Accounting Policies

Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated, and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We consider our critical accounting policies and estimates to be revenue recognition and stock-based compensation attributable to performance-based awards.

There have been no material changes to our other critical accounting policies and estimates as compared to the disclosures in our Annual Report on Form 10-K for the year ended December 31, 2024.

Recent Accounting Pronouncements

In December 2023, ASU 2023-09, Income Taxes - Improvements to Income Tax Disclosures, was issued, which requires enhanced disclosures in connection with an entity's effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. The standard is effective for annual periods beginning after December 15, 2024. We do not expect the adoption of this standard to have a significant impact on our consolidated financial statements.

In November 2024, ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) was issued which requires disaggregation of any relevant expense caption presented on the face of the income statement for certain expense categories. The new guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the impact of the guidance on our consolidated financial statements.

In July 2025, ASU 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, was issued, which introduces a practical expedient to calculating current expected credit loss by assuming that the current conditions as of the balance sheet date will not change for the remaining life of the asset. This update is effective for fiscal years beginning after December 15, 2025. We are currently evaluating the impact the adoption of the guidance will have on our consolidated financial statements.

In September 2025, ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software was issued, which amends the guidance in ASC 350-40, Intangibles-Goodwill and Other-Internal-Use Software. The amendments modernize the recognition and disclosure framework for internal-use software costs, removing the previous "development stage" model and introducing a more judgment-based approach. This ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and for interim periods within those annual reporting periods. Early adoption is permitted. We are currently evaluating the impact the guidance will have on our consolidated financial statements.

In September 2025, ASU 2025-07, "Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract" was issued. The new guidance excludes non-exchange-traded contracts with underlyings based on operations or activities specific to one of the parties to the contract from derivative accounting. This guidance is effective for fiscal years and interim periods beginning after December 15, 2026, with early adoption permitted. These requirements may be applied prospectively or on a modified retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings. Early adoption is permitted. We are currently evaluating the impact the guidance will have on our consolidated financial statements.

Results of Operations

Comparison of the three months ended September 30, 2025 and 2024

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Revenues

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Total revenues are comprised of product revenues, which are primarily driven by sales of our Panorama and Horizon tests, oncology testing, and licensing and other revenues, which primarily includes development licensing revenue and licensing of our Constellation software. Total revenues for the three months ended September 30, 2025 increased by $152.4 million, or 34.7%, when compared to the three months ended September 30, 2024.

We derive our revenues from tests based on units reported to customers-tests delivered with a result. All reported units are either accessioned in our laboratory or processed outside of our laboratory. As noted in the section titled "Overview" above, the number of tests that we process is a key metric as it tracks our overall volume growth. During the three months ended September 30, 2025, total reported units were approximately 832,900, comprised of approximately 819,900 tests reported in our laboratory. Comparatively, during the three months ended September 30, 2024, total reported units were approximately 750,100, which is comprised of approximately 735,900 tests reported in our laboratory. During the three months ended September 30, 2025 and 2024, total oncology units processed were approximately 211,000 and 137,100, respectively.

Product Revenues

During the three months ended September 30, 2025, product revenues increased by $154.1 million, or 35.3%, compared to the three months ended September 30, 2024, primarily due to continued revenue growth from increased test volumes, and average selling price improvements.

Licensing and Other Revenues

Licensing and other revenues decreased by $1.6 million, or 45.3%, during the three months ended September 30, 2025 when compared to the three months ended September 30, 2024. The decrease was primarily due to a decrease in revenue from our collaborative agreements.

Cost of Product Revenues

During the three months ended September 30, 2025, cost of product revenues increased compared to the three months ended September 30, 2024 by approximately $39.6 million, or 23.6%, primarily due to a $9.2 million increase in third-party fees, higher costs related to inventory consumption of $14.9 million driven by an increase in accessioned cases, and a $15.5 million increase in equipment and related depreciation expense, labor, overhead, shipping and other related costs driven by headcount growth and product support.

Cost of Licensing and Other Revenues

The cost of licensing and other revenues for the three months ended September 30, 2025, slightly increased compared to the three months ended September 30, 2024, primarily due to a net increase in costs to support our collaborative agreements.

Expenses

Research and Development

Research and development expenses during the three months ended September 30, 2025, increased by $76.5 million, or 78.9%, when compared to the three months ended September 30, 2024. The increase was attributable to a $35.1 million increase in salary and related compensation expenditures, (including a $8.5 million increase in stock-based compensation expense), a $27.8 million increase in lab and clinical trial-related expenses, a $6.9 million increase in consulting expenses, a $4.5 million increase in office related expenses, and a $2.2 million net increase in travel, facilities, and other expenses.

Selling, General and Administrative

Selling, general, and administrative expenses increased by $94.4 million, or 44.1%, during the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The increase was attributable to a $58.4 million increase in salary and related compensation expenditures (including a $9.8 million increase in stock-based compensation expense), a $10.0 million increase in consulting expenses, a $11.4 million increase in marketing expenses, a $5.1 million increase in legal related expenses, and a $9.5 million net increase in travel, facilities, office and other costs.

Interest Expense

Interest expense decreased by $2.1 million in the three months ended September 30, 2025 compared to the same period in the prior year, due to the redemption of the Convertible Notes in October 2024.

Interest and Other Income

Interest and other income for the three months ended September 30, 2025, decreased $0.3 million compared to the same period in the prior year, primarily due to lower interest income driven by lower interest rates.

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Comparison of the nine months ended September 30, 2025 and 2024

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Revenues

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Total revenues are comprised of product revenues, which are primarily driven by sales of our Panorama and Horizon tests, oncology testing, and licensing and other revenues, which predominantly includes development licensing revenue and licensing of our Constellation software. Total revenues for the nine months ended September 30, 2025 increased by $419.8 million, or 34.4%, when compared to the nine months ended September 30, 2024.

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We derive our revenues from tests based on units reported to customers-tests delivered with a result. All reported units are either accessioned in our laboratory or processed outside of our laboratory. As noted in the section titled "Overview" above, the number of tests that we process is a key metric, as it tracks overall volume growth. During the nine months ended September 30, 2025, total reported units were approximately 2,450,100, comprised of approximately 2,410,600 tests reported in our laboratory. Comparatively, during the nine months ended September 30, 2024, total reported units were approximately 2,154,700, which is comprised of approximately 2,109,200 tests reported in our laboratory. During the nine months ended September 30, 2025 and 2024, total oncology units processed were approximately 567,500 and 377,400, respectively.

Product Revenues

During the nine months ended September 30, 2025, product revenues increased by $422.5 million, or 34.9% compared to the nine months ended September 30, 2024, primarily as a result of the continued revenue growth from increased test volumes, and average selling price improvements.

Licensing and Other Revenues

Licensing and other revenues decreased by $2.7 million, or 31.4%, during the nine months ended September 30, 2025 when compared to the nine months ended September 30, 2024. The decrease was primarily due to the termination of certain collaborative agreements.

Cost of Product Revenues

During the nine months ended September 30, 2025, cost of product revenues increased compared to the nine months ended September 30, 2024 by approximately $95.1 million, or 19.2%, due to a $17.0 million increase in third-party fees, higher costs related to inventory consumption of $38.9 million driven by an increase in accessioned cases, and a $39.2 million increase in shipping, equipment and related depreciation expense, labor, overhead, and other related costs driven by headcount growth and product support.

Cost of Licensing and Other Revenues

Cost of licensing and other revenues for the nine months ended September 30, 2025, when compared to the nine months ended September 30, 2024, increased by $0.5 million, or 48.0%, primarily due to a net increase in costs to support our collaborative agreements.

Expenses

Research and Development

Research and development expenses during the nine months ended September 30, 2025, increased by $174.2 million, or 63.4%, when compared to the nine months ended September 30, 2024. The increase was attributable to an increase of $92.0 million in salary and related compensation expenditures (including a $23.4 million increase in stock-based compensation expense), a $15.7 million increase in consulting expenses, a $12.9 million increase in office related expenses, a $45.3 million increase in lab related and clinical trial expenses, a $4.8 million net increase in facilities related expenses and a $3.5 million increase in travel and other expenses.

Selling, General and Administrative

Selling, general and administrative expenses increased by $279.6 million, or 46.1%, during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The increase was attributable to an increase of $156.4 million in salary and related compensation expenditures (including a $30.6 million increase in stock-based compensation expense), a $38.1 million increase in consulting expenses, a $20.4 million increase in marketing expenses, a $5.9 million increase in travel related costs, a $11.5 million increase in office costs, a $6.9 million increase in vendor expenses, a $35.8 million increase in legal related expenses, and a $4.6 million increase in facilities and other costs.

Interest Expense

Interest expense decreased $6.3 million, or 67.2%, in the nine months ended September 30, 2025 compared to the same period in the prior year due to the redemption of the Convertible Notes in October 2024.

Interest and Other Income

Interest and other income for the nine months ended September 30, 2025, increased $3.1 million compared to the same period in the prior year, primarily due to higher interest income driven by greater cash and investment balances.

Liquidity and Capital Resources

We have incurred net losses each year since our inception. For the nine months ended September 30, 2025, we had a net loss of $255.4 million, and we expect to continue to incur losses in future periods as we continue to devote a substantial portion of our resources to our research and development and commercialization efforts for our existing and new products. As of September 30, 2025, we had an accumulated deficit of $2.8 billion. As of September 30, 2025, we had $1.0 billion in cash and cash equivalents and restricted cash, $1.0 million in marketable securities, and $80.3 million of outstanding balance under the Credit Line, including accrued interest. As of September 30, 2025, we had $20.0 million remaining and available on the Credit Line.

While we have introduced multiple products that are generating revenues, these revenues have not been sufficient to fund all operations. Accordingly, we have funded the portion of operating costs that exceeds revenues through a combination of equity issuances, debt, and other financings. We expect to develop and commercialize future products and continue to invest in the growth of our business, and consequently, we will need to generate additional revenues to achieve future profitability and may need to raise additional equity or incur additional debt. If we raise additional funds by issuing equity securities, our stockholders would experience dilution. Additional debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any additional debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders and require significant debt service payments, which diverts resources from other activities. Additional financing may not be available at all, or in amounts or on terms acceptable to us. If we are unable to obtain additional financing, we may be required to delay the development and commercialization of our products and significantly scale back our business and operations.

Our contractual obligations and other commitments have been satisfied by equity offerings, our convertible note financing conducted in April 2020 described below, the Credit Line described below, and our product, licensing, and other sales. For our commitments, refer to the "Contractual Obligations and Other Commitments" section below.

Refer to additional disclosures associated with risks and our ability to generate and obtain adequate amounts of cash to meet capital requirements for both short-term and long-term obligations.

Based on our current business plan, we believe that our existing cash, cash equivalents, and marketable securities will be sufficient to meet our anticipated cash requirements for at least 12 months after the date of issuance of the accompanying financial statements.

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Credit Line Agreement

In September 2015, we entered into a Credit Line with UBS, or the Credit Line, providing for a $50.0 million revolving line of credit which could be drawn in increments at any time. The Credit Line was amended in July 2017 and bears interest at 30-day LIBOR plus 1.10%, and it is secured by a first priority lien and security interest in our money market and marketable securities held in our managed investment account with UBS. UBS has the right to demand full or partial payment of the Credit Line obligations and terminate it, in its discretion and without cause, at any time. The interest rate was subsequently changed to the 30-day Secured Overnight Financing Rate (or "SOFR") average, plus 1.21%. The SOFR rate is variable. The Credit Line was subsequently increased from $50.0 million to $150.0 million. In June 2023, the Credit Line decreased to $100.0 million. In October 2023, the interest rate for the Credit Line was subsequently changed to the 30-day SOFR average, plus 0.5%. As of September 30, 2025, the total principal amount outstanding with accrued interest was $80.3 million, and $20.0 million is remaining as available under the Credit Line.

Convertible Notes

In April 2020, we issued $287.5 million aggregate principal amount of Convertible Notes in a private placement offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. We received net proceeds from the Convertible Notes of $278.3 million, after deducting the initial purchasers' discounts and debt issuance costs. We used approximately $79.2 million of the net proceeds from the Convertible Notes offering to repay our obligations under our credit agreement with OrbiMed Royalty Opportunities II, LP.

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The Convertible Notes were senior, unsecured obligations of the Company and bore interest at a rate of 2.25% per year, payable in cash semi-annually in arrears in May and November of each year, beginning in November 2020. The Convertible Notes mature in May 2027, unless earlier converted, repurchased or redeemed in accordance with their terms. Upon conversion, the Convertible Notes were convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. On July 19, 2024, we elected to exercise our optional redemption right to redeem all $287.5 million aggregate principal amount of our outstanding 2.25% Convertible Notes due 2027 and instructed Wilmington Trust, National Association, as trustee under the Indenture Agreement governing the Convertible Notes, to issue a redemption notice to registered holders of the Convertible Notes. The Redemption Date fixed for the redemption of the Convertible Notes was October 11, 2024. The redemption price for the Convertible Notes was equal to 100% of the principal amount of the Convertible Notes redeemed plus accrued and unpaid interest to, but excluding, the Redemption Date. We elected physical settlement with shares of our common stock as the settlement method to apply to all conversions of the Convertible Notes. On the Redemption Date, $287.4 million of Convertible Notes were converted for approximately 7.5 million shares of our common stock under the terms of the redemption notice. The remaining Convertible Notes not converted under the redemption notice were redeemed in exchange for cash at face value plus any accrued interest totaling $0.1 million.

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Cash Flows

The following table summarizes our condensed consolidated cash flows for the periods indicated:

Cash Provided by Operating Activities

Cash provided by operating activities during the nine months ended September 30, 2025 was $141.4 million. The net loss of $255.4 million includes $301.7 million in non-cash charges resulting from $29.4 million of depreciation and amortization, $261.8 million of stock-based compensation expense, and $14.8 million of non-cash lease expense, offset by a $3.2 million change in fair value of warrants and preferred stock and a $1.1 million decrease in non-cash expense recovery. Operating assets had cash outflows of $1.0 million resulting from a $19.9 million increase in inventory and a $9.0 million increase in prepaid expenses and other assets, offset by a $27.8 million decrease in accounts receivable and a $0.1 million decrease in operating lease right-of-use assets. Operating liabilities had cash inflows of $96.1 million resulting from a $12.3 million increase in accounts payable, a $48.2 million increase in accrued compensation, a $48.2 million increase in other accrued liabilities, and a $1.6 million increase in deferred revenue, offset by a $14.2 million decrease in lease liabilities.

Cash provided by operating activities during the nine months ended September 30, 2024 was $82.8 million. The net loss of $136.7 million includes $240.2 million in non-cash charges resulting from $23.2 million of depreciation and amortization, $202.5 million of stock-based compensation expense, $11.2 million of non-cash lease expense, $0.9 million for amortization of debt discount and issuance cost, $0.4 million for foreign exchange adjustment, and $2.7 million of non-cash interest expense offset by a $0.6 million decrease in amortization of premiums and accretion of purchase discounts on investment securities and a $0.1 million decrease in non-cash expense recovery. Operating assets had cash outflows of $22.9 million resulting from a $28.6 million increase in accounts receivable, an $8.0 million increase in inventory, offset by a $13.7 million decrease in prepaid expenses and other assets. Operating liabilities resulted in cash inflows of $2.2 million resulting from a $10.8 million increase in accounts payable and a $27.3 million increase in accrued compensation offset by a $12.5 million decrease in lease liabilities, a $22.5 million decrease in other accrued liabilities, and a $0.9 million decrease in deferred revenue.

Cash (Used in) Provided by Investing Activities

Cash used by investing activities for the nine months ended September 30, 2025 totaled $60.6 million, comprised of $70.1 million in acquisitions of property and equipment and $12.5 million in acquisition of intangible assets offset by $22.0 million from proceeds of investments maturities.

Cash provided by investing activities for the nine months ended September 30, 2024 totaled $148.7 million, which was comprised of $24.8 million from proceeds from sale of investments and $307.4 million from proceeds of investments maturities, offset by $122.0 million in purchasing of new investments, $48.3 million in acquisitions of property and equipment, $2.7 million for investment in related party, and $10.5 million in asset acquisition.

Cash Provided by Financing Activities

Cash provided by financing activities for the nine months ended September 30, 2025, totaled $15.1 million which was comprised of $2.9 million from proceeds from the exercise of stock options and $12.2 million from the issuance of common stock under the employee stock purchase plan.

Cash provided by financing activities for the nine months ended September 30, 2024, totaled $19.2 million which was comprised of $10.3 million from proceeds from the exercise of stock options and $8.9 million from the issuance of common stock under the employee stock purchase plan.

Contractual Obligations and Other Commitments

We have entered into arrangements that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods. Such arrangements include those related to our lease commitments, Credit Line, commercial supply agreements and other agreements. Our purchase requirements are expected to be met through the normal course of business.

Credit Line

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The short-term debt obligations consist of the $80.3 million principal amount drawn from the Credit Line with UBS and applicable interest. The Credit Line was amended in July 2017 and bears interest at 30-day LIBOR plus 1.10%, and it is secured by a first priority lien and security interest in our money market and marketable securities held in our managed investment account with UBS. The interest rate was subsequently changed to the 30-day SOFR average, plus 1.21%. The SOFR rate is variable. UBS has the right to demand full or partial payment of the Credit Line obligations and terminate it, in its discretion and without cause, at any time. In October 2023, the interest rate was subsequently changed to the 30-day SOFR average, plus 0.5%. Please refer to Note 10, Debt, for further details.

Inventory purchase and other contractual obligations

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We enter into contracts in the normal course of business with various third parties for clinical trials, preclinical research studies, testing, manufacturing, and other services for operational purposes. Payments due upon cancellation generally consist only of payments for services provided or expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation. These payments have not been included separately within these contractual and other obligations disclosures. Please refer to Note 8, Commitments and Contingencies in the Notes to Unaudited Interim Condensed Consolidated Financial Statements for further details.

Operating leases

Our lease commitments consist of $0.6 million of payments, which will be paid over the terms of the leases. The leases have not commenced under Accounting Standards Codification, or ASC, Topic 842, Leases, as of September 30, 2025. As a result, these leases are not reflected within the consolidated balance sheets.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements during the periods presented.