Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2018	Nov. 02, 2018
Document And Entity Information [Abstract]
Entity Registrant Name	Invitae Corp
Entity Central Index Key	0001501134
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Trading Symbol	NVTA
Entity Common Stock, Shares Outstanding		74,617,232
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 101,419	$ 12,053
Marketable securities	27,760	52,607
Accounts receivable	25,488	10,422
Prepaid expenses and other current assets	12,659	11,599
Total current assets	167,326	86,681
Property and equipment, net	29,287	30,341
Restricted cash	5,006	5,406
Marketable securities, non-current	367	5,983
Intangible assets, net	31,725	35,516
Goodwill	47,233	46,575
Other assets	3,456	576
Total assets	284,400	211,078
Current liabilities:
Accounts payable	8,044	8,606
Accrued liabilities	24,821	22,742
Capital lease obligation, current portion	1,857	2,039
Debt, current portion	8,135
Total current liabilities	42,857	33,387
Capital lease obligation, net of current portion	1,923	3,373
Debt, net of current portion	50,354	39,084
Other long-term liabilities	9,871	13,440
Total liabilities	105,005	89,284
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock	7	5
Accumulated other comprehensive loss	(46)	(171)
Additional paid-in capital	666,305	520,558
Accumulated deficit	(486,871)	(398,598)
Total stockholders’ equity	179,395	121,794
Total liabilities and stockholders’ equity	$ 284,400	$ 211,078

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Revenue:
Total revenue	$ 37,366	$ 18,148	$ 102,343	$ 42,822
Costs and operating expenses:
Cost of test revenue	20,441	13,274	58,964	33,093
Research and development	15,776	11,502	46,926	32,864
Selling and marketing	17,591	13,246	55,222	37,338
General and administrative	13,668	11,102	37,884	25,915
Total costs and operating expenses	67,476	49,124	198,996	129,210
Loss from operations	(30,110)	(30,976)	(96,653)	(86,388)
Other income (expense), net	231	(56)	2,066	(596)
Interest expense	(1,844)	(1,128)	(4,927)	(2,517)
Net loss before taxes	(31,723)	(32,160)	(99,514)	(89,501)
Income tax benefit		(4,758)		(6,614)
Net loss	$ (31,723)	$ (27,402)	$ (99,514)	$ (82,887)
Net loss per share, basic and diluted	$ (0.45)	$ (0.57)	$ (1.56)	$ (1.86)
Shares used in computing net loss per share, basic and diluted	70,152,804	48,221,896	63,935,336	44,639,416
Test Revenue
Revenue:
Total revenue	$ 36,611	$ 17,310	$ 100,014	$ 40,597
Other Revenue
Revenue:
Total revenue	$ 755	$ 838	$ 2,329	$ 2,225

Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Statement Of Income And Comprehensive Income [Abstract]
Net loss	$ (31,723)	$ (27,402)	$ (99,514)	$ (82,887)
Other comprehensive income (loss):
Unrealized income (loss) on available-for-sale marketable securities, net of tax	63	(19)	125	(57)
Comprehensive loss	$ (31,660)	$ (27,421)	$ (99,389)	$ (82,944)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash flows from operating activities:
Net loss	$ (99,514)	$ (82,887)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	10,268	5,876
Stock-based compensation	15,711	14,387
Amortization of debt issuance costs	681	326
Amortization of premium on marketable securities	9	108
Impairment losses	1,883
Loss on disposal of assets		268
Loss on sales of available-for-sale securities	24
Remeasurements of liabilities associated with business combinations	593	556
Benefit from income taxes		(6,614)
Changes in operating assets and liabilities net of effects of business combination:
Accounts receivable	(4,483)	(1,801)
Prepaid expenses and other current assets	(1,060)	1,761
Other assets	(555)	(45)
Accounts payable	(1,226)	1,278
Accrued expenses and other liabilities	922	61
Net cash used in operating activities	(76,747)	(66,726)
Cash flows from investing activities:
Purchases of marketable securities	(1,575)	(94,563)
Proceeds from sales of marketable securities	19,965
Proceeds from maturities of marketable securities	10,957	52,918
Acquisition of businesses, acquired cash		1,489
Purchases of property and equipment	(4,258)	(4,115)
Other	(500)
Net cash provided by (used in) in investing activities	24,589	(44,271)
Cash flows from financing activities:
Proceeds from public offerings of common stock, net of issuance costs	112,480
Proceeds from issuance of common stock	10,732	71,687
Proceeds from loan and security agreement	19,544	39,661
Loan payments		(30,457)
Capital lease principal payments	(1,632)	(2,153)
Net cash provided by financing activities	141,124	78,738
Net increase (decrease) in cash, cash equivalents and restricted cash	88,966	(32,259)
Cash, cash equivalents and restricted cash at beginning of period	17,459	71,522
Cash, cash equivalents and restricted cash at end of period	106,425	39,263
Supplemental cash flow information of non-cash investing and financing activities:
Equipment acquired through capital leases		4,849
Purchases of property and equipment in accounts payable and accrued liabilities	1,607	2,022
Amounts related to co-development agreement recognized in other assets	2,750
Amounts related to co-development agreement recognized in accrued liabilities	2,500
Warrants issued pursuant to loan and security agreement	383	740
Common stock issued for acquisition of businesses	$ 6,443	22,876
Consideration payable for acquisition of businesses		$ 12,436

Organization and description of business	9 Months Ended
Organization and description of business	Sep. 30, 2018
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Organization and description of business	1. Organization and description of business Invitae Corporation (the “Company”) was incorporated in the State of Delaware on January 13, 2010, as Locus Development, Inc. and changed its name to Invitae Corporation in 2012. The Company utilizes an integrated portfolio of laboratory processes, software tools and informatics capabilities to process DNA-containing samples, analyze information about patient-specific genetic variation and generate test reports for clinicians and their patients. The Company’s headquarters and main production facility is located in San Francisco, California. The Company currently has more than 20,000 genes in production and provides a variety of diagnostic tests that can be used in multiple indications. The Company’s tests include genes associated with hereditary cancer, neurological disorders, cardiovascular disorders, pediatric disorders, metabolic disorders and other hereditary conditions. In addition, and as a result of the acquisitions of Good Start Genetics (“Good Start”) in August 2017 and CombiMatrix Corporation (“CombiMatrix”) in November 2017, the Company’s services also include screening and testing in reproductive health, including preimplantation and carrier screening for inherited disorders, prenatal diagnosis, miscarriage analysis and pediatric developmental disorders. The Company operates in one segment. Basis of presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation. The 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, 2017. The results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results expected for the full fiscal year or any other periods.

Summary of significant accounting policies

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Summary of significant accounting policies

2. Summary of significant accounting policies

Principles of consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company believes judgment is involved in determining revenue recognition (See Note 3, “Revenue, accounts receivable and deferred revenue” for further information); the acquisition-date fair value of intangible assets; the fair value of contingent consideration associated with acquisitions; the recoverability of long-lived assets; impairment of goodwill and intangible assets; stock-based compensation expense; the fair value of its convertible notes; and income tax uncertainties. 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. Actual results could differ materially from those estimates and assumptions.

Concentrations of credit risk and other risks and uncertainties

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents, marketable securities and accounts receivable. The Company’s cash and cash equivalents are held by financial institutions in the United States. Such deposits may exceed federally insured limits.

The Company’s 10% or greater customers and their related revenue as a percentage of total revenue were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Medicare		24.6	%	*				19.7	%	*
United Healthcare		10.0	%		13.7	%	*			*
* Less than 10% of total revenue

The Company’s significant customers and their related accounts receivable balance as percentage of total accounts receivable were as follows:

September 30, 2018

December 31,

2017

Medicare

10.5

%

13.1

%

Accounts receivable

The Company receives payment for its tests from partners, patients, institutional customers and third-party payers. See Note 3, “Revenue, accounts receivable and deferred revenue” for further information.

Business combinations

The tangible and identifiable intangible assets acquired and liabilities assumed in a business combination are recorded based on their estimated fair values as of the business combination date, including identifiable intangible assets which either arise from a contractual or legal right or are separable from goodwill. The Company bases the estimated fair value of identifiable intangible assets acquired in a business combination on independent valuations that use information and assumptions provided by management, which consider management’s estimates of inputs and assumptions that a market participant would use. Any excess purchase price over the estimated fair value assigned to the net tangible and identifiable intangible assets acquired and liabilities assumed is recorded to goodwill. The use of alternative valuation assumptions, including estimated revenue projections, growth rates, cash flows, discount rates, estimated useful lives and probabilities surrounding the achievement of contingent milestones could result in different purchase price allocations and amortization expense in current and future periods.

In circumstances where an acquisition involves a contingent consideration arrangement that meets the definition of a liability under FASB Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity, the Company recognizes a liability equal to the fair value of the contingent payments the Company expects to make as of the acquisition date. The Company remeasures this liability each reporting period and records changes in the fair value as a component of operating expenses.

Transaction costs associated with acquisitions are expensed as incurred in general and administrative expenses. Results of operations and cash flows of acquired companies are included in the Company’s operating results from the date of acquisition.

Goodwill

In accordance with ASC 350, Intangibles-Goodwill and Other (“ASC 350”), the Company’s goodwill is not amortized but is tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Under ASC 350, the Company performs annual impairment reviews of its goodwill balance during the fourth fiscal quarter. In testing for impairment, the Company compares the fair value of its reporting unit to its carrying value including the goodwill of that unit. If the carrying value, including goodwill, exceeds the reporting unit’s fair value, the Company will recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit.

The Company did not incur any goodwill impairment losses in any of the periods presented.

Fair value of financial instruments

The Company’s financial instruments consist principally of cash and cash equivalents, marketable securities, accounts payable, accrued liabilities, capital leases and debt. The carrying amounts of certain of these financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued and other current liabilities approximate their current fair value due to the relatively short-term nature of these accounts. Based on borrowing rates available to the Company, the carrying value of capital leases approximates fair value.

See Note 7, “Fair value measurements” for disclosure of the fair value of debt and further information on the fair value of the Company’s financial instruments.

Variable interest entity

The Company has a variable interest in a variable interest entity (“VIE”) through an investment in convertible notes issued by the VIE. The convertible notes do not provide the Company with voting rights in the VIE or with power to direct the activities of the VIE which most significantly affect its economic performance. The Company is not the VIE’s primary beneficiary and does not consolidate the VIE. The Company will continue to assess its investment and future commitments to the VIE. To the extent its relationship with the VIE changes, the Company may be required to consolidate the VIE in future periods.

See Note 7, “Fair value measurements” and Note 8, “Investment in privately held company” for additional disclosures related to the convertible notes, which are recorded as available-for-sale securities.

Revenue recognition

The Company recognizes revenue when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. All revenues are generated from contracts with customers.

Test revenue is generated primarily from the sale of tests that provide analysis and associated interpretation of the sequencing of parts of the genome. Revenue associated with subsequent re-requisition services and family variant tests was de minimis for all periods presented.

Other revenue consists primarily of revenue from genome network subscription services which is recognized on a straight-line basis over the subscription term, and revenue from collaboration agreements.

Cost of test revenue

Cost of test revenue reflects the aggregate costs incurred in delivering the genetic testing results to clinicians and includes expenses for personnel-related costs including stock-based compensation, materials and supplies, equipment and infrastructure expenses associated with testing and allocated overhead including rent, equipment depreciation and utilities.

Net loss per common share

Basic net loss per common share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method. Potentially dilutive securities, consisting of preferred stock, options to purchase common stock, common stock warrants, RSUs and PRSUs, are considered to be common stock equivalents and were excluded from the calculation of diluted net loss per share because their effect would be antidilutive for all periods presented.

Recent accounting pronouncements

The Company evaluates all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB") for consideration of their applicability. ASUs not included in the disclosures in this report were assessed and determined to be either not applicable or are not expected to have a material impact on the Company’s condensed consolidated financial statements.

Recently issued accounting pronouncements not yet adopted

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other-Internal-Use Software, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The Company is currently evaluating the effect that adoption of this ASU will have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements on fair value measurements. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The Company is currently evaluating the effect that adoption of this ASU will have on its consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Under the new guidance, the accounting for share-based payments to nonemployees and employees will be substantially aligned. ASU 2018-07 is effective for annual and interim periods beginning after December 15, 2018 and early adoption is permitted. The adoption of ASU 2018-07 is not expected to have a significant effect upon the Company’s consolidated financial statements, related disclosures and ongoing financial reporting. The Company plans to implement ASU 2018-07 on January 1, 2019.

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220). Under the new guidance, entities will be permitted to reclassify tax effects stranded in accumulated other comprehensive income as a result of tax reform to retained earnings. ASU 2018-02 is effective for annual and interim periods beginning after December 15, 2018 and early adoption is permitted. When adopted, ASU 2018-02 requires all entities to make new disclosures, regardless of whether they elect to reclassify stranded amounts. The Company is evaluating the effect that ASU 2018-02 will have on its consolidated financial statements, related disclosures and ongoing financial reporting. The Company has not yet selected an implementation date for ASU 2018-02.

In June 2016, FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) which requires measurement and recognition of expected credit losses for financial assets. This guidance will become effective for the Company beginning in the first quarter of 2020 and must be adopted using a modified retrospective approach, with certain exceptions. The Company is currently evaluating the effect that adoption of this ASU will have on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and in July 2018 issued ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 2018-11, Leases (Topic 842): Targeted Improvements (the foregoing ASUs collectively referred to as “Topic 842”). Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases (with the exception of short-term leases) at the commencement date and also requires expanded disclosures about leasing arrangements. Topic 842 is effective for annual and interim periods beginning on or after December 15, 2018 and early adoption is permitted. Entities may initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

The Company is evaluating the effect that Topic 842 and related standards will have on its consolidated financial statements, related disclosures and ongoing financial reporting, but expects implementation of Topic 842 to result in the recognition of material right of use assets and corresponding lease liabilities in its consolidated balance sheets, principally relating to facilities leases. The Company plans to implement Topic 842 and related standards on January 1, 2019.

Recently adopted accounting pronouncements – Revenue recognition

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), designed to enable users of financial statements to better understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. On January 1, 2018, the Company adopted the provisions of Topic 606 using the modified retrospective method. From adoption to date, the Company has recognized all its revenue from contracts with customers within the scope of Topic 606. In connection with the adoption, the Company recognized the cumulative effect of initially applying this standard as an adjustment to retained earnings on the date of adoption. Comparative information prior to the date of adoption has not been restated and continues to be reported under the accounting standards in effect for those periods.

In connection with the adoption of Topic 606, the Company amended its revenue recognition policy to provide for the recognition of certain variable consideration related to diagnostic tests that was previously deferred pending cash collection. Under Topic 606, the Company records variable consideration based on an estimate of the consideration to which it will be entitled.

Revenue recognition

Adoption of Topic 606, "Revenue from Contracts with Customers"

On January 1, 2018, the Company adopted Topic 606 using the modified retrospective transition method. The provisions of Topic 606 were applied to all customer contracts that were not completed as of the date of adoption. Prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for those periods.

The Company recognizes revenue when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. All revenues are generated from contracts with customers.

Diagnostic tests

The majority of the Company’s revenue is generated from genetic testing services that provide analysis and associated interpretation of the sequencing of parts of the genome. Test orders are placed under written requisitions signed by the patient and/or medical provider, and the Company often enters into contracts with institutions (e.g., hospitals and clinics) and insurance companies that include pricing provisions under which such tests are billed. Billing terms are generally net thirty days.

While the transaction price of diagnostic tests is originally established either via contract or pursuant to the Company’s standard list price, the Company often provides concessions for tests billed to insurance carriers, and therefore the transaction price for patient insurance-billed tests is considered to be variable and revenue is recognized based on an estimate of the consideration to which the Company will be entitled at an amount for which it is probable that a reversal of cumulative consideration will not occur. Making these estimates requires significant judgments based upon such factors as length of payer relationship, historical payment patterns, changes in contract provisions and insurance reimbursement policies. These judgments are reviewed quarterly and revenue recognized is updated, as necessary, until the Company’s obligations are fully settled.

In connection with some diagnostic test orders, the Company offers limited re-requisition rights (“Re-Requisition Rights”) that are considered distinct at contract inception, and therefore certain diagnostic test orders contain two performance obligations, the performance of the original test and the Re-Requisition Rights. When Re-Requisition Rights are granted, the Company allocates the transaction price to each performance obligation based on the relative estimated standalone selling prices. In order to comply with loss contract rules, the allocations are adjusted, if necessary, to ensure the amount deferred for Re-Requisition Rights is no less than the estimated cost of fulfilling the Company’s related obligations.

The Company looks to transfer of control in assessing timing of recognition of revenue in connection with each performance obligation. In general, revenue in connection with diagnostic tests is recognized upon delivery of the underlying clinical report or when the report is made available on the Company’s web portal. Outstanding performance obligations pertaining to orders received but for which the underlying report has not been issued are generally satisfied within a thirty-day period. Revenue in connection with Re-Requisition Rights is recognized as the rights are exercised or expire unexercised, which is generally within ninety days of initial deferral.

Other contracts

The Company also enters into collaboration and genome network contracts. Collaboration agreements provide customers with diagnostic testing and related data aggregation reporting services that are provided over the contract term. Collaboration revenue is recognized as the testing and reporting services are delivered to the customer. Genome network offerings consist of subscription services related to a proprietary software platform designed to connect patients, clinicians, advocacy organizations, researchers and therapeutic developers to accelerate the understanding, diagnosis and treatment of hereditary disease. Such services are recognized on a straight-line basis over the subscription periods.

Amounts due under collaboration and genome network agreements are typically billable on net thirty-day terms.

Prior period reclassifications

Statement of cash flow amounts in prior periods have been reclassified to conform with current period presentation, which separates amortization of debt issuance costs from depreciation and amortization. Amortization of debt issuance costs in the nine months ended September 30, 2017 was $0.3 million.

Revenue, accounts receivable and deferred revenue

9 Months Ended

Sep. 30, 2018

Revenue From Contract With Customer [Abstract]

Revenue, accounts receivable and deferred revenue

3. Revenue, accounts receivable and deferred revenue

As described in Note 2, the Company adopted Topic 606 effective January 1, 2018. In connection with the adoption the Company utilized the following practical expedients and exemptions:

•

Certain information about remaining performance obligations is not disclosed because the underlying contracts have an original expected duration of one year or less.

•

Sales commissions are expensed when incurred because the amortization period would have been one year or less. Commission costs are recorded as a component of sales and marketing expenses.

•

No adjustments to promised consideration were made for financing as the Company expects, at contract inception, that the period between the transfer of a promised good or service and when the customer pays for that good or service will be one year or less.

The adoption of Topic 606 resulted in a cumulative-effect adjustment to accounts receivable and accumulated deficit of $11.2 million as of January 1, 2018 primarily related to the recognition of uncollected diagnostic test variable consideration as of the date of adoption. Test revenue without adoption of Topic 606 for the three and nine months ended September 30, 2018 includes cash collections related to accounts receivable recorded as of January 1, 2018 in connection with the Topic 606 cumulative-effect adjustment.

The effect of the adoption of Topic 606 on financial statement line items in the Company’s condensed consolidated statement of operations for the three and nine months ended September 30, 2018, and the Company’s condensed consolidated balance sheet as of September 30, 2018 was as follows (in thousands, except per share amounts):

	Three Months Ended September 30, 2018
				Without			Effect of
				Adoption of			Adoption
	As Reported			Topic 606			Higher/(Lower)
Test revenue	$	36,611		$	35,120		$	1,491
Net loss	$	(31,723	)	$	(33,214	)	$	1,491
Net loss per share, basic and diluted	$	(0.45	)	$	(0.47	)	$	0.02

	Nine Months Ended September 30, 2018
				Without			Effect of
				Adoption of			Adoption
	As Reported			Topic 606			Higher/(Lower)
Test revenue	$	100,014		$	98,631		$	1,383
Net loss	$	(99,514	)	$	(100,897	)	$	1,383
Net loss per share, basic and diluted	$	(1.56	)	$	(1.58	)	$	0.02

	As of September 30, 2018
				Without			Effect of
				Adoption of			Adoption
	As Reported			Topic 606			Higher/(Lower)
Accounts receivable, net	$	25,488		$	12,198		$	13,290
Accumulated deficit	$	(486,871	)	$	(499,494	)	$	12,623
Stockholders' equity	$	179,395		$	166,772		$	12,623

Disaggregation of revenue

Test revenue is generated from sales of diagnostic tests to three groups of customers: institutions, such as hospitals and clinics, patients who pay directly, and patients’ insurance carriers. Amounts billed and collected, and the timing of collections, vary based on whether the payer is an institution, an insurance carrier or a patient. Accordingly, for purposes of complying with the disclosure requirements of Topic 606, test revenue is disaggregated between these three payer groups. Further, other revenue, consisting principally of revenue recognized under collaboration and genome network agreements, is disaggregated from diagnostic test revenue.

The following table includes the Company’s revenues as disaggregated by payer category (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017 ⁽¹⁾		2018		2017 ⁽¹⁾
Test revenue:
Institutions	$	8,958	$	5,242	$	24,761	$	10,461
Patient - direct		3,280		1,762		9,705		3,368
Patient - insurance		24,373		10,306		65,548		26,768
Total test revenue		36,611		17,310		100,014		40,597
Other revenue		755		838		2,329		2,225
Total revenue	$	37,366	$	18,148	$	102,343	$	42,822

⁽¹⁾ As noted above, prior period amounts are presented as originally reported based upon the accounting standards in effect for those periods.

Included in revenue in the Company’s condensed consolidated statement of operations for the nine months ended September 30, 2018 was $0.3 million that was included in deferred revenue at January 1, 2018.

The Company recognizes revenue related to billings based on estimates of the amount that will ultimately be realized. The estimate of the transaction price of test revenue is based on many factors such as length of payer relationship, historical payment patterns, changes in contract provisions and insurance reimbursement policies. Cash collections for certain diagnostic tests delivered may differ from rates originally estimated. As a result of new information, the Company updated its estimate of the amounts to be recognized for previously delivered tests which resulted in an additional $1.5 million and $3.8 million of test revenue for the three and nine months ended September 30, 2018, respectively. These changes in estimates decreased the Company’s loss from operations by $1.5 million and $3.8 million and decreased basic and diluted net loss per share by approximately $0.02 and $0.06 for the three and nine months ended September 30, 2018, respectively.

Accounts receivable, net

The majority of the Company’s accounts receivable represents amounts billed to institutions (e.g., hospitals, clinics) and estimated amounts to be collected from third-party insurance payers for diagnostic test revenue recognized. Also included is amounts due under the terms of collaboration and genome network agreements for diagnostic testing and data aggregation reporting services provided and proprietary platform access rights transferred.

Deferred revenues

The Company records deferred revenues when cash payments are received or due in advance of its performance related to one or more performance obligations. The amounts deferred to date primarily consist of consideration received pertaining to the estimated exercise of certain Re-Requisition Rights. In order to comply with loss contract rules, the Company’s Re-Requisition Rights revenue deferral is no less than the estimated cost of fulfilling its related obligations. The Company recognizes revenue related to Re-Requisition Rights as the rights are exercised or expire unexercised, which is generally within 90 days of initial deferral.

Business combinations

9 Months Ended

Sep. 30, 2018

Business Combinations [Abstract]

Business combinations

4. Business combinations

AltaVoice

On January 6, 2017, the Company acquired AltaVoice (formerly Patient Crossroads, Inc.), a privately owned patient-centered data company with a global platform for collecting, curating, coordinating and delivering safeguarded data from patients and clinicians. The acquisition, complemented by several other strategic partnerships, expands the Company's genome network, designed to connect patients, clinicians, advocacy organizations, researchers and therapeutic developers to accelerate the understanding, diagnosis and treatment of hereditary disease. Pursuant to the terms of the Stock Purchase Agreement entered into on January 6, 2017, the Company acquired all of the outstanding shares of AltaVoice for total purchase consideration of $12.4 million, payable in the Company’s common stock, as follows:

(a)

payment of $5.5 million through the issuance of 641,126 shares of the Company’s common stock;

(b)

payment of $5.0 million in the Company’s common stock, payable on March 31, 2018, with the common shares deliverable equal to $5.0 million divided by the trailing average share price of the Company’s common stock for the 30 days preceding March 31, 2018. This payment was made on April 2, 2018 through the issuance of 716,332 shares of the Company’s common stock;

(c)

payment of $5.0 million in the Company’s common stock, which was contingently payable on March 31, 2018 if a milestone based on a certain threshold of revenue was achieved during 2017, with the shares deliverable equal to $5.0 million divided by the trailing average share price of the Company’s common stock for the 30 days preceding March 31, 2018. As the foregoing milestone was not achieved, there is a new contingent milestone based on achieving a revenue target during 2017 and 2018. Should the new milestone revenue target be achieved, on March 31, 2019, a payment of up to $5.0 million in the Company’s common stock will be payable. The actual payout is dependent upon the 2017 and 2018 revenue target (capped at $14.0 million) times 75% less $5.5 million. This formula in effect caps the possible payout amount at $5.0 million in the Company’s common shares. The number of shares to be issued will be equal to the payout amount divided by the trailing average share price of the Company’s common stock for the 30 days preceding March 31, 2019.

The first payment of $5.5 million was classified as equity. The second payment was discounted to $4.7 million as of the acquisition date, recorded as a liability, and was accreted to fair value at each reporting date until the extinguishment of the liability on April 2, 2018. The third payment, representing contingent consideration, was determined to have a fair value of $2.2 million as of the acquisition date and was recorded as a liability. In accordance with ASC Topic 805, Business Combinations, the contingent consideration of $2.2 million will be remeasured to fair value at each reporting date until the contingency is resolved, with changes in fair value recognized in earnings.

For the second payment, the acquisition-date fair value was $4.7 million, and the Company recorded accretion gains (losses) of $0.0 million and $(0.1) million in other income (expense), net, for the three months ended September 30, 2018 and 2017, respectively and $1.6 million and $(0.2) million for the nine months ended September 30, 2018 and 2017, respectively. The accretion gains in 2018 resulted from an adjustment to the value of the second payment as of March 31, 2018, and principally reflected the difference between the value of the common shares deliverable, based upon the closing price of the Company’s stock on March 29, 2018, and the value per share used to calculate the number of common shares deliverable. The accretion losses in 2017 resulted from adjustments to the discounted value of the second payment, reflecting the passage of time.

For the third payment, whose contingent acquisition-date fair value was $2.2 million, the Company recorded remeasurement losses of $0.1 million and $0.1 million in operating expense for the three months ended September 30, 2018 and 2017, respectively and $1.0 million and $0.4 million in operating expense for the nine months ended September 30, 2018 and 2017, respectively. The remeasurement losses in 2018 reflect updated estimations of fair value of the third payment, based upon achieving a revenue target during 2017 and 2018, as the milestone based on a certain threshold of revenue to be achieved during 2017 was not met. The principal inputs affecting those estimations have been updates to the Company’s revenue forecasts and the passage of time.

Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. While the Company believes that its estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill. The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

Cash	$	54
Accounts receivable		274
Prepaid expense and other assets		52
Non-compete agreement		286
Developed technology		570
Customer relationships		3,389
Total identifiable assets acquired		4,625
Accounts payable		(28	)
Deferred revenue		(202	)
Accrued expenses		(21	)
Deferred tax liability		(1,422	)
Total liabilities assumed		(1,673	)
Net identifiable assets acquired		2,952
Goodwill		9,432
Net assets acquired	$	12,384

Acquisition-related intangibles included in the above table are finite-lived. Customer relationships are being amortized on an accelerated basis, utilizing free cash flows, over a period of ten years. All other acquisition-related intangibles are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):

	Gross Purchased Intangible Assets		Estimated Useful Life (in Years)
Non-compete agreement	$	286		5
Developed technology		570		6
Customer relationships		3,389		10
	$	4,245

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The acquisition of AltaVoice resulted in $9.4 million of goodwill. The Company believes this goodwill consists principally of expected synergies to be realized by combining capabilities, technology and data to accelerate the use of genetic information for the diagnosis and treatment of hereditary diseases. In accordance with ASC 350, goodwill will not be amortized but will be tested for impairment at least annually. Goodwill created as a result of the acquisition is not deductible for tax purposes. Concurrent with the acquisition, the Company recorded additional goodwill of $1.4 million relating to the tax consequence of recognizing the fair value of the acquisition-related intangibles, with an equal offset to deferred tax liability. The Company has finalized its assessment of fair value of the assets and liabilities assumed at the acquisition date.

Ommdom

On June 11, 2017, the Company acquired Ommdom, Inc. (“Ommdom”), a privately held company that develops, commercializes and sells hereditary risk assessment and management software, including CancerGene Connect, a cancer genetic counseling platform. The acquisition expands Invitae’s suite of genome management offerings designed to help patients and clinicians use genetic information as part of mainstream medical care. CancerGene Connect is a platform for collecting and managing genetic family histories. The platform uses a cloud-based, mobile friendly patient interface to gather family history information from patients prior to a clinician appointment. Then, analysis tools analyze patients’ predisposition to disease and provide actionable analysis to inform therapeutic decisions, such as genetic testing or treatment approaches. In addition, the platform provides clinicians with the ability to look beyond the individual to understand trends across all of their patients.

Pursuant to the terms of a Stock Exchange Agreement, the Company acquired all of the outstanding shares of Ommdom for consideration of $6.1 million, payable entirely in the Company’s common stock. There was no cash consideration nor any contingent payments associated with the acquisition, other than a hold-back amount of $0.6 million. Per the terms of the agreement, the Company was obligated to issue shares of its common stock as follows:

(a)

payment of $5.5 million through the issuance of 600,108 shares of the Company’s common stock on the acquisition date; and

(b)

payment of $0.6 million through the issuance of 66,582 shares of the Company’s common stock, representing a hold-back amount, and payable on the twelve-month anniversary of the acquisition date. This payment was made on June 11, 2018.

The first payment of $5.5 million was classified as equity. The second payment of $0.6 million was recorded as a stock payable liability on the acquisition date and was reclassified to equity upon the issuance of 66,582 shares of the Company’s common stock on June 11, 2018.

Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. While the Company believes that its estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill. The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

Cash	$	53
Accounts receivable		10
Prepaid expense and other assets		4
Trade name		13
Developed technology		2,335
Customer relationships		147
Total identifiable assets acquired		2,562
Accounts payable		(16	)
Accrued expenses		(17	)
Deferred tax liability		(434	)
Total liabilities assumed		(467	)
Net identifiable assets acquired		2,095
Goodwill		4,045
Net assets acquired	$	6,140

Finite-lived intangibles included in the above table are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):

	Gross Purchased Intangible Assets		Estimated Useful Life (in Years)
Trade name	$	13		5
Developed technology		2,335		5
Customer relationships		147		5
	$	2,495

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The acquisition of Ommdom resulted in the recognition of $4.0 million of goodwill. The Company believes this goodwill consists principally of expected synergies to be realized by expanding the Company’s suite of genome management offerings designed to help patients and clinicians use genetic information as part of mainstream medical care. In accordance with ASC 350, goodwill will not be amortized but rather will be tested for impairment at least annually. Goodwill created as a result of the acquisition is not deductible for tax purposes. Concurrent with the acquisition, the Company recorded additional goodwill of $0.4 million relating to the tax consequence of recognizing the fair value of the acquisition-related intangibles, with an equal offset to deferred tax liability. The Company has finalized its assessment of fair value of the assets and liabilities assumed at acquisition date.

Good Start Genetics

On August 4, 2017, the Company acquired 100% of the fully diluted equity of Good Start, a privately held molecular diagnostics company focused on preimplantation and carrier screening for inherited disorders. The acquisition of Good Start is intended to further Invitae’s plan to create a comprehensive genetic information platform providing high-quality, affordable genetic information coupled with world-class clinical expertise to inform healthcare decisions throughout every stage of an individual’s life. The purchase consideration for the Good Start acquisition consisted of the assumption of the net liabilities of Good Start of $24.4 million at the acquisition date.

Immediately subsequent to the acquisition of Good Start, the Company paid $18.4 million in cash to settle outstanding notes payable, accrued interest and related costs. In addition, and immediately subsequent to the acquisition, the Company settled outstanding convertible promissory notes payable through:

(a)

payment of $11.9 million through the issuance of 1,148,283 shares of the Company’s common stock; and

(b)

payment of $3.6 million through the issuance of 343,986 shares of the Company’s common stock, representing a hold-back amount payable on the one-year anniversary of the acquisition date. In September 2018, the Company issued 250,044 shares in partial payment of the hold-back amount payable. The remainder of the hold-back amount payable, approximately $1.5 million, will be settled upon resolution of outstanding claims from Good Start customers.

Also in connection with the acquisition of Good Start and immediately subsequent to the acquisition, the Company paid bonuses to certain members of Good Start’s management team through:

(a)

payment of $0.9 million through the issuance of 83,025 shares of the Company’s common stock; and

(b)

payment of $0.4 million through the issuance of 37,406 shares of the Company’s common stock, representing a hold-back amount payable on the one-year anniversary of the acquisition date.

These bonus payments were recorded as general and administrative expense.

Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. While the Company believes that its estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill.

At acquisition date, the Company also recorded $4.8 million as a provisional amount for a deferred tax liability because certain information and analysis related to Good Start’s historical net operating losses that could have affected the Company’s initial valuation was still being obtained or reviewed at that time. This provisional amount for the deferred tax liability was subsequently reversed during the fourth quarter of 2017 based on the results of further analysis of Good Start’s historical net operating losses.

The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

Cash and restricted cash	$	1,381
Accounts receivable		2,246
Prepaid expense and other assets		1,579
Property and equipment		1,320
Trade name		460
Developed technology		5,896
Customer relationships		7,830
Total identifiable assets acquired		20,712
Accounts payable		(5,418	)
Accrued expenses		(6,802	)
Notes payable		(17,904	)
Convertible promissory notes payable		(15,430	)
Other liabilities		(222	)
Total liabilities assumed		(45,776	)
Net identifiable assets acquired		(25,064	)
Goodwill		25,064
Net assets acquired	$	—

In March 2018, June 2018, and September 2018 the Company recorded adjustments to its accounting for the amount recorded as accounts receivable at acquisition. Accordingly, the fair value of accounts receivable was decreased by $0.4 million on March 31, 2018, $0.3 million on June 30, 2018, and $0.1 million on September 30, 2018, with corresponding increases to goodwill.

Customer relationships are being amortized on an accelerated basis, utilizing free cash flows, over a period of eight years. All other finite-lived intangibles included in the above table are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):

	Gross Purchased Intangible Assets		Estimated Useful Life (in Years)
Trade name	$	460		3
Developed technology		5,896		5
Customer relationships		7,830		8
	$	14,186

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The acquisition of Good Start resulted in the recognition of $25.1 million of goodwill. The Company believes this goodwill consists principally of expected synergies to be realized by expanding the Company’s suite of genome management offerings designed to help patients and clinicians use genetic information as part of mainstream medical care. In accordance with ASC 350, goodwill will not be amortized but rather will be tested for impairment at least annually. Goodwill created as a result of the acquisition is not deductible for tax purposes. The Company has finalized its assessment of fair value of the assets and liabilities assumed at the acquisition date.

CombiMatrix

On November 14, 2017, the Company completed its acquisition of CombiMatrix in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of July 31, 2017 (the “Merger Agreement”), by and among the Company, Coronado Merger Sub, Inc., a wholly-owned subsidiary of the Company (“Merger Sub”), and CombiMatrix, pursuant to which Merger Sub merged with and into CombiMatrix, with CombiMatrix surviving as a wholly-owned subsidiary of the Company (the “Merger”).

At the closing of the Merger, the Company issued shares of its common stock to (i) CombiMatrix’s common stockholders, at an exchange ratio of 0.8692 of a share of the Company’s common stock (the “Merger Exchange Ratio”) for each share of CombiMatrix common stock outstanding immediately prior to the Merger, (ii) CombiMatrix’s Series F preferred stockholders, at the Merger Exchange Ratio for each share of CombiMatrix common stock underlying Series F preferred stock outstanding immediately prior to the Merger, (iii) holders of outstanding and unexercised in-the-money CombiMatrix stock options, which were fully accelerated to the extent of any applicable vesting period and converted into the right to receive the number of shares of the Company’s common stock equal to the Merger Exchange Ratio multiplied by the number of shares of CombiMatrix common stock issuable upon exercise of such option, minus the number of shares of the Company’s common stock determined by dividing the aggregate exercise price for such option by $9.491 (the “Invitae Trailing Average Share Value”), and (iv) holders of outstanding and unsettled CombiMatrix restricted stock units, which were fully accelerated to the extent of any applicable vesting period and converted into the right to receive a number of shares of the Company’s common stock determined by multiplying the number of shares of CombiMatrix common stock that were subject to such restricted stock unit by the Merger Exchange Ratio.

In addition, at the closing of the Merger, (a) all outstanding and unexercised out-of-the money CombiMatrix stock options were cancelled and terminated without the right to receive any consideration, (b) all CombiMatrix Series D Warrants and Series F Warrants outstanding and unexercised immediately prior to the closing of the Merger were assumed by the Company and converted into warrants to purchase the number of shares of the Company’s common stock determined by multiplying the number of shares of CombiMatrix common stock subject to such warrants by the Merger Exchange Ratio, and with the exercise price adjusted by dividing the per share exercise price of the CombiMatrix common stock subject to such warrants by the Merger Exchange Ratio, and (c) certain entitlements under CombiMatrix’s executive compensation transaction bonus plan (the “Transaction Bonus Plan”) were paid in shares of the Company’s common stock or RSUs to be settled in shares of the Company’s common stock. All outstanding and unexercised CombiMatrix Series A, Series B, Series C, Series E, and PIPE warrants were repurchased by CombiMatrix prior to closing pursuant to that certain CombiMatrix Common Stock Purchase Warrants Repurchase Agreement dated July 11, 2016.

Pursuant to the Merger Agreement, the Company issued an aggregate of 2,703,389 shares of its common stock as follows:

(a)

payment of $20.5 million through the issuance of 2,611,703 shares of the Company’s common stock to holders of CombiMatrix common stock outstanding;

(b)

payment of $0.7 million through the issuance of 85,219 shares of the Company’s RSUs to holders of outstanding and unsettled CombiMatrix restricted stock units;

(c)

payment of $0.1 million through the issuance of 3,323 shares of the Company’s common stock to holders of outstanding and unexercised in-the-money CombiMatrix stock options; and

(d)

payment of $0.1 million through the issuance of 3,144 shares of the Company’s common stock to holders of CombiMatrix Series F preferred stock.

In addition, and pursuant to the Merger Agreement, the Company issued warrants to purchase an aggregate of 2,077,273 shares of its common stock as follows:

(a)

payment of $7.4 million through the issuance of warrants to purchase a total of 1,739,689 shares of the Company’s common stock in exchange for all outstanding CombiMatrix Series F warrants; and

(b)

payment of $1,000 through the issuance of warrants to purchase a total of 337,584 shares of the Company’s common stock in exchange for all outstanding CombiMatrix Series D warrants.

In connection with the acquisition of CombiMatrix, the Company paid bonuses to certain members of CombiMatrix’s management team through:

(a)

payment of $1.7 million through the issuance of common stock and RSUs totaling 214,976 shares of the Company’s common stock to settle payments pursuant to CombiMatrix’s executive compensation transaction bonus plan (the “Transaction Bonus Plan”), recorded as post-combination compensation expense and included in general and administrative expense; and

(b)

payment of $0.2 million through the issuance of 22,966 shares of the Company’s common stock to settle payments pursuant to the Transaction Bonus Plan, recorded as an assumed liability at the acquisition date.

Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. The amount recorded as deferred tax liability, $0 at December 31, 2017, is provisional because certain information and analysis related to CombiMatrix’s tax attributes and ownership change history that may affect the Company’s valuation is still being obtained or reviewed. Thus, the provisional measurement of fair value discussed above is subject to change. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date. While the Company believes that its estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill. The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

Cash and restricted cash	$	1,333
Accounts receivable		4,118
Prepaid expense and other assets		1,299
Property and equipment		437
Other assets - non current		30
Favorable leases		247
Trade name		103
Patent licensing agreement		496
Developed technology		3,162
Customer relationships		12,397
Total identifiable assets acquired		23,622
Accounts payable		(276	)
Accrued expenses		(3,925	)
Other liabilities		(180	)
Total liabilities assumed		(4,381	)
Net identifiable assets acquired		19,241
Goodwill		8,692
Net assets acquired	$	27,933

Customer relationships are being amortized on an accelerated basis, utilizing free cash flows, over a period of 11 years. All other finite-lived intangibles included in the above table are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):

	Gross Purchased Intangible Assets		Estimated Useful Life (in Years)
Favorable leases	$	247		2
Trade name		103		1
Patent licensing agreement		496		15
Developed technology		3,162		4
Customer relationships		12,397		11
	$	16,405

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The acquisition of CombiMatrix resulted in the recognition of $8.7 million of goodwill. The Company believes this goodwill consists principally of expected synergies to be realized by expanding the Company’s suite of genome management offerings designed to help patients and clinicians use genetic information as part of mainstream medical care. In accordance with ASC 350, goodwill will not be amortized but rather will be tested for impairment at least annually. Goodwill created as a result of the acquisition is not deductible for tax purposes.

Goodwill and intangible assets

9 Months Ended

Sep. 30, 2018

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and intangible assets

5. Goodwill and intangible assets

Goodwill

Details of the Company’s goodwill for the nine months ended September 30, 2018 are as follows (in thousands):

	AltaVoice		Ommdom		Good Start		CombiMatrix		Total
Balance as of December 31, 2017	$	9,432	$	4,045	$	24,406	$	8,692	$	46,575
Goodwill adjustment		—		—		658				658
Balance as of September 30, 2018	$	9,432	$	4,045	$	25,064	$	8,692	$	47,233

Intangible Assets

The following table presents details of the Company’s finite-lived intangible assets as of September 30, 2018 (in thousands):

	Cost		Accumulated Amortization			Net		Weighted Average Useful Life (in Years)		Weighted Average Estimated Remaining Useful Life (in Years)
Customer relationships	$	23,763	$	(2,262	)	$	21,501		10.0		8.9
Developed technology		11,963		(2,847	)		9,116		4.8		3.7
Non-compete agreement		286		(100	)		186		5.0		3.3
Trade name		576		(273	)		303		2.7		1.6
Patent licensing agreement		496		(29	)		467		15.0		14.2
Favorable leases		247		(95	)		152		2.0		1.3
	$	37,331	$	(5,606	)	$	31,725		8.2		7.1

Acquisition-related intangibles included in the above table are finite-lived and are being amortized on an accelerated basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are realized. Amortization expense was $1.3 million and $0.6 million for the three months ended September 30, 2018 and 2017, respectively, and $3.8 million and $0.8 million for the nine months ended September 30, 2018 and 2017, respectively. Intangible assets are carried at cost less accumulated amortization. Amortization expense is recorded to research and development, sales and marketing and general and administrative expense.

The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of September 30, 2018 (in thousands):

	Amount
2018	$	1,262
2019		5,250
2020		5,525
2021		5,829
2022		4,123
Thereafter		9,736
Total estimated future amortization expense	$	31,725

Balance sheet components

9 Months Ended

Sep. 30, 2018

Balance Sheet Related Disclosures [Abstract]

Balance sheet components

6. Balance sheet components

Property and equipment, net

Property and equipment consisted of the following (in thousands):

	September 30, 2018			December 31, 2017
Leasehold improvements	$	12,984		$	12,623
Laboratory equipment		22,870			17,705
Equipment under capital lease		6,956			11,446
Computer equipment		4,251			4,023
Software		2,580			2,520
Furniture and fixtures		659			569
Automobiles		20			20
Construction-in-progress		3,012			965
Total property and equipment, gross		53,332			49,871
Accumulated depreciation and amortization		(24,045	)		(19,530	)
Total property and equipment, net	$	29,287		$	30,341

Depreciation expense was $2.1 million and $1.8 million for the three months ended September 30, 2018 and 2017, respectively, and $6.5 million and $5.1 million for the nine months ended September 30, 2018 and 2017, respectively.

Accrued liabilities

Accrued liabilities consisted of the following (in thousands):

	September 30, 2018		December 31, 2017
Accrued compensation and related expenses	$	6,498	$	7,406
Liabilities associated with business combinations		6,229		9,497
Liability associated with co-development agreement		2,500		—
Deferred revenue		869		307
Other		8,725		5,532
Total accrued liabilities	$	24,821	$	22,742

Other long-term liabilities

Other long-term liabilities consisted of the following (in thousands):

	September 30, 2018		December 31, 2017
Lease incentive obligation, non-current	$	3,465	$	3,831
Deferred rent, non-current		5,441		5,153
Liabilities associated with business combination		—		3,779
Other non-current liabilities		965		677
Total other long-term liabilities	$	9,871	$	13,440

Fair value measurements

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Fair value measurements

7. Fair value measurements

Financial assets and liabilities are recorded at fair value. 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 authoritative guidance establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity.

The three-level hierarchy for the inputs to valuation techniques is summarized as follows:

Level 1—Observable inputs such as quoted prices (unadjusted) for identical instruments in active markets.

Level 2—Observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or model-derived valuations whose significant inputs are observable.

Level 3—Unobservable inputs that reflect the reporting entity’s own assumptions.

The following tables set forth the fair value of the Company’s consolidated financial instruments that were measured at fair value on a recurring basis as of September 30, 2018 and December 31, 2017 (in thousands):

	September 30, 2018
	Amortized		Unrealized					Estimated
	Cost		Gains		Losses			Fair Value		Level 1		Level 2		Level 3
Financial assets:
Money market funds	$	91,840	$	—	$	—		$	91,840	$	91,840	$	—	$	—
Certificates of deposit		300		—		—			300		—		300		—
U.S. treasury notes		2,001		—		(3	)		1,998		1,998		—		—
U.S. government agency securities		25,506		—		(43	)		25,463		—		25,463		—
Convertible note		367		—		—			367		—		—		367
Total financial assets	$	120,014	$	—	$	(46	)	$	119,968	$	93,838	$	25,763	$	367

Financial liabilities:
Contingent consideration								$	4,767	$	—	$	—	$	4,767
Total financial liabilities								$	4,767	$	—	$	—	$	4,767

												September 30, 2018
Reported as:
Cash equivalents												$			86,835
Restricted cash															5,006
Marketable securities															28,127
Total cash equivalents, restricted cash, and marketable securities												$			119,968

Accrued liabilities												$			4,767

	December 31, 2017
	Amortized		Unrealized					Estimated
	Cost		Gains		Losses			Fair Value		Level 1		Level 2		Level 3
Financial assets:
Money market funds	$	5,998	$	—	$	—		$	5,998	$	5,998	$	—	$	—
Certificates of deposit		300		—		—			300		—		300		—
U.S. treasury notes		12,010		—		(19	)		11,991		11,991		—		—
U.S. government agency securities		46,451		—		(152	)		46,299		—		46,299		—
Total financial assets	$	64,759	$	—	$	(171	)	$	64,588	$	17,989	$	46,599	$	—

Financial liabilities:
Contingent consideration								$	3,779	$	—	$	—	$	3,779
Total financial liabilities								$	3,779	$	—	$	—	$	3,779

												December 31, 2017
Reported as:
Cash equivalents												$			592
Restricted cash															5,406
Marketable securities															58,590
Total cash equivalents, restricted cash, and marketable securities												$			64,588

Accrued liabilities												$			3,779

There were no transfers between Level 1, Level 2 and Level 3 during the periods presented. The total fair value of investments with unrealized losses at September 30, 2018 was $27.5 million. None of the available-for-sale securities held as of September 30, 2018 has been in a continuous unrealized loss position for more than one year. At September 30, 2018, unrealized losses on available-for-sale investments are not attributed to credit risk and are considered to be temporary. The Company believes it is more likely than not that investments in an unrealized loss position will be held until maturity or the recovery of the cost basis of the investment. To date, the Company has not identified any other-than-temporary declines in market value and thus has not recorded any impairment charges on its financial assets other than on its convertible notes which are described in Note 8, “Investment in privately held company.”

At September 30, 2018, the remaining contractual maturities of available-for-sale securities ranged from zero to five months.

The following tables present the Company’s Level 3 financial instruments that are measured at fair value on a recurring basis (in thousands):

	Level 3
	Contingent Consideration Liability
Balance as of December 31, 2017	$	3,779
Change in estimate of fair value		988
Balance as of September 30, 2018	$	4,767

	Level 3
	Convertible Note
Balance as of December 31, 2017	$	—
Convertible note		367
Balance as of September 30, 2018	$	367

The Company’s debt securities of U.S. government agency entities are classified as Level 2 as they are valued based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs obtained from various third-party data providers, including but not limited to benchmark yields, interest rate curves, reported trades, broker/dealer quotes and reference data.

The Company’s convertible note receivable is classified as Level 3 as it is valued based upon market interest rates for similar debt instruments, estimates of the debtor’s ability to repay the note and estimates of the likelihood of future events occurring which would trigger repayment of the note, all of which were significant inputs in the Level 3 measurement not supported by market activity.

As of September 30, 2018, the Company had a contingent obligation up to $5.0 million payable in the Company’s common stock to the former owners of AltaVoice in conjunction with the Company’s acquisition of AltaVoice in January 2017. The amount of the contingent obligation is dependent upon future revenues attributable to AltaVoice. If revenue attributable to AltaVoice for the combined period of 2017 and 2018 is at least $10 million, the Company will make a payment of up to $5.0 million in the Company’s common stock on March 31, 2019. The Company estimated the fair value of the contingent obligation at $2.2 million at the acquisition date of January 6, 2017, based on a Monte Carlo simulation, as well as estimates of the 30-day trailing price of its stock at certain dates, its volatility assumptions and its revenue forecasts, all of which were significant inputs in the Level 3 measurement not supported by market activity. The value of the contingent obligation is remeasured to fair value at each reporting date. Changes to revenue forecasts can significantly affect the estimated fair value of the contingent obligation. Changes in estimated fair value are recorded quarterly as general and administrative expense until the contingent obligation is paid or expires. The total of changes in the fair value of the contingent obligation between the acquisition date and September 30, 2018 was an increase of $2.6 million.

The fair value of the Company’s outstanding debt is estimated using the net present value of future debt payments, discounted at an interest rate that is consistent with market interest rates, which is a Level 2 input. The carrying amount and the estimated fair value of the Company’s outstanding debt at September 30, 2018 and December 31, 2017, are as follows (in thousands):

September 30, 2018

December 31, 2017

Carrying

Amount

Fair

Value

Carrying

Amount

Fair

Value

Debt

$

58,489

$

60,805

$

39,084

$

40,526

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Investment in Privately Held Company	9 Months Ended
Investment in Privately Held Company	Sep. 30, 2018
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Investment in Privately Held Company	8. Investment in privately held company On March 15, 2018, the Company entered into a collaboration agreement with KEW, Inc. (“KEW”), a privately held comprehensive genomic profiling company. The Company determined it has a variable interest in a VIE through its investment in a convertible note issued by KEW. During the three and nine months ended September 30, 2018, the Company incurred losses relating to this collaboration agreement with KEW of $1.9 million which were recognized in general and administrative expenses in the Company’s consolidated statements of operations. As of September 30, 2018, the Company must continue to purchase incremental $0.2 million convertible notes each month for three months and make monthly payments of $0.2 million for the right of first refusal for three months.

Commitments and contingencies

9 Months Ended

Sep. 30, 2018

Commitments And Contingencies Disclosure [Abstract]

Commitments and contingencies

9. Commitments and contingencies

Operating leases

In September 2015, the Company entered into a lease agreement for a headquarters and production facility in San Francisco, California. This lease expires in July 2026 and the Company may renew the lease for an additional ten years. The Company determined the lease term to be a ten-year period expiring in 2026. The lease term commenced when the Company took occupancy of the facility in February 2016. In connection with the execution of the lease, the Company provided a security deposit of approximately $4.6 million which is included in restricted cash in the Company’s condensed consolidated balance sheets. Minimum annual rent under the lease is subject to increases based on stated rental adjustment terms. In addition, per the terms of the lease, the Company received a $5.2 million lease incentive in the form of reimbursement from the landlord for a portion of the costs of leasehold improvements the Company made to the facility. The assets purchased with the lease incentive are included in property and equipment, net, in the Company’s condensed consolidated balance sheets and the lease incentive is recognized as a reduction of rental expense on a straight-line basis over the term of the lease. Aggregate future minimum lease payments for the San Francisco facility at September 30, 2018 were approximately $59.4 million.

Future minimum payments under non-cancelable operating leases as of September 30, 2018 are as follows (in thousands):

	Amounts
2018 (remainder of year)	$	2,422
2019		9,690
2020		9,570
2021		9,787
2022		9,712
Thereafter		29,845
Total minimum lease payments	$	71,026

Rent expense was $2.4 million and $2.1 million for the three months ended September 30, 2018 and 2017, respectively and $7.1 million and $6.1 million for the nine months ended September 30, 2018 and 2017, respectively.

Debt financing

In July 2015, the Company entered into a Loan and Security Agreement (the “2015 Loan Agreement”) with a bank under which term loans were available for purchases of equipment up to an aggregate of $15.0 million.

On March 15, 2017, the Company entered into a Loan and Security Agreement (the “2017 Loan Agreement”) with a lender pursuant to which the Company borrowed an initial term loan of $40.0 million, and received net proceeds of approximately $39.7 million. In connection with entering into the 2017 Loan Agreement, the Company terminated the 2015 Loan Agreement and repaid in full the balance of its obligations under that agreement, approximately $12.1 million. The payment to the lender under the 2015 Loan Agreement included a prepayment premium of $0.7 million, which was classified as extinguishment of debt and included in other income (expense), net.

Subject to certain conditions, the Company was eligible to borrow a second term loan pursuant to the 2017 Loan Agreement of $20.0 million in the first quarter of 2018 and did so on March 12, 2018, receiving net proceeds of approximately $19.8 million.

In February 2018 and June 2018, the Company entered into amendments to the 2017 Loan Agreement (the “2018 Amendments”) pursuant to which the Company, subject to certain conditions, is eligible to borrow a third term loan of $20.0 million, during the period from April 2, 2018 to December 31, 2018. If the third term loan becomes available and is not fully drawn, a fee of 1% will be applied to the difference between $20.0 million and the amount drawn. The 2018 Amendments added a quarterly covenant to achieve certain accession volumes. Substantially all other terms of the 2017 Loan Agreement as amended by the 2018 Amendments (the “Amended 2017 Loan Agreement”) are consistent with the terms of the 2017 Loan Agreement.

Term loans under the Amended 2017 Loan Agreement bear interest at a floating rate equal to an index rate plus 7.73%, where the index rate is the greater of 0.77% or the 30-day U.S. Dollar London Interbank Offered Rate (“LIBOR”) as reported in The Wall Street Journal, with the floating rate resetting monthly subject to a floor of 8.5%. The Company can make monthly interest-only payments until May 1, 2019 (or, subject to certain conditions, May 1, 2020), and thereafter monthly payments of principal and interest are required to fully amortize the borrowed amount by a final maturity date of March 1, 2022. A fee of 5% of each funded draw is due at the earlier of prepayment or loan maturity, a facility fee of 0.5% is due upon funding for each draw, and a prepayment fee of between 1% and 3% of the outstanding balance will apply in the event of a prepayment. Concurrent with each term loan, the Company will grant to the lender a warrant to acquire shares of the Company’s common stock equal to the quotient of 3% of the funded amount divided by a per share exercise price equal to the lower of the average closing price for the previous ten days of trading (calculated on the day prior to funding) or the closing price on the day prior to funding. In connection with the initial term loan, the Company granted the lender warrants to purchase 116,845 shares of common stock at an exercise price of $10.27 per share. The Company classified these warrants as equity and determined their fair value to be $0.7 million. In connection with the second term loan, the Company granted the lender warrants to purchase 85,482 shares of common stock at an exercise price of $7.02 per share. The Company classified these warrants as equity and determined their fair value to be $0.4 million. All warrants issued pursuant to the Amended 2017 Loan Agreement have a term of ten years from the date of issuance and include a cashless exercise provision.

The Company’s obligations under the Amended 2017 Loan Agreement are subject to quarterly covenants to achieve certain revenue levels and accessioned test volumes as well as additional covenants, including limits on the Company’s ability to dispose of assets, undergo a change in control, merge with or acquire other entities, incur debt, incur liens, pay dividends or other distributions to holders of its capital stock, repurchase stock and make investments, in each case subject to certain exceptions. At September 30, 2018, the Company was in compliance with all covenants under the Amended 2017 Loan Agreement. The Company’s obligations under the Amended 2017 Loan Agreement are secured by a security interest on substantially all the Company’s assets, excluding its intellectual property.

At September 30, 2018, obligations under the Amended 2017 Loan Agreement were $60.0 million. Debt issuance costs related to the Amended 2017 Loan Agreement totaling $0.6 million and the fair value of warrants totaling $1.1 million were recorded as direct deductions from the debt liability and are being amortized to interest expense over the term of the Amended 2017 Loan Agreement. Future payments under the Amended 2017 Loan Agreement as of September 30, 2018 are as follows (in thousands):

	Amounts
2018 (remainder of year)	$	1,493
2019		19,302
2020		24,260
2021		22,196
2022		8,229
Thereafter		—
Total remaining debt payments		75,480
Less: amount representing debt discount		(1,511	)
Less: amount representing interest		(15,480	)
Present value of remaining debt payments		58,489
Less: current portion		(8,135	)
Total non-current debt obligation	$	50,354

Interest expense related to the Amended 2017 Loan Agreement and the 2015 Loan Agreement totaled $1.8 million and $1.1 million for the three months ended September 30, 2018 and 2017, respectively and $4.7 million and $1.3 million for the nine months ended September 30, 2018 and 2017, respectively.

Capital leases

The Company has entered into various capital lease agreements to obtain laboratory equipment. The terms of the capital leases are typically three years and interest rates for capital leases outstanding at September 30, 2018 ranged from 5.2% to 8.8%. The capital leases are secured by the underlying equipment. The portion of the future payments designated as principal repayment was classified as a capital lease obligation on the condensed consolidated balance sheets.

Future payments under capital leases at September 30, 2018 are as follows (in thousands):

	Amounts
2018 (remainder of year)	$	522
2019		2,087
2020		1,394
2021		21
Total capital lease obligations		4,024
Less: amount representing interest		(244	)
Present value of net minimum capital lease payments		3,780
Less: current portion		(1,857	)
Total non-current capital lease obligations	$	1,923

Interest expense related to capital leases was $0.1 million for the three months ended September 30, 2018 and 2017 and $0.2 million and $0.1 million for the nine months ended September 30, 2018 and 2017, respectively.

Property and equipment under capital leases was $7.0 million and $11.4 million as of September 30, 2018 and December 31, 2017, respectively. Accumulated depreciation on these assets was $1.6 million and $3.0 million at September 30, 2018 and December 31, 2017, respectively.

Other commitments

In the normal course of business, the Company enters into various purchase commitments primarily related to service agreements and laboratory supplies. At September 30, 2018, the Company’s total future payments under noncancelable unconditional purchase commitments having a remaining term of over one year were $8.3 million.

At September 30, 2018, the Company was committed to make a minimum of three monthly payments of $0.5 million relating to its collaboration agreement with KEW. (See Note 8, “Investment in privately held company” for further information.)

In September 2018, the Company entered into a co-development agreement with a privately held genetics testing company focused on single molecule digital array detection platforms. The co-development agreement grants the Company the right of first refusal to enter into an agreement for an acquisition of the entity in return for total fees of $3.0 million over the term of the agreement, of which $0.5 million has been paid by the Company as of September 30, 2018. The unpaid fees of $2.5 million were recorded as an accrued liability in the Company’s consolidated balance sheets as of September 30, 2018.

Guarantees and indemnifications

As permitted under Delaware law and in accordance with the Company’s bylaws, the Company indemnifies its directors and officers for certain events or occurrences while the officer or director is or was serving in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company maintains director and officer liability insurance. This insurance allows the transfer of the risk associated with the Company’s exposure and may enable it to recover a portion of any future amounts paid. The Company believes the fair value of these indemnification agreements is minimal. Accordingly, the Company did not record any liabilities associated with these indemnification agreements at September 30, 2018 or December 31, 2017.

Contingencies

The Company was not a party to any material legal proceedings at September 30, 2018, or at the date of this report. The Company may from time to time become involved in various legal proceedings arising in the ordinary course of business, and the resolution of any such claims could be material.

Stockholders' Equity	9 Months Ended
Stockholders' Equity	Sep. 30, 2018
Stockholders Equity Note [Abstract]
Stockholders' Equity	10. Stockholders’ equity 2018 Sales Agreement On August 9, 2018, the Company entered into a Common Stock Sales Agreement (the “2018 Sales Agreement”) with Cowen and Company, LLC (“Cowen”), under which the Company may offer and sell from time to time at its sole discretion shares of its common stock through Cowen as its sales agent, in an aggregate amount not to exceed $75 million. Cowen may sell the shares by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act, including without limitation sales made directly on The New York Stock Exchange, and also may sell the shares in privately negotiated transactions, subject to the Company’s prior approval. The Company will pay Cowen a commission equal to 3% of the gross proceeds of the sales price of all shares sold through it as sales agent under the 2018 Sales Agreement. For the three and nine months ended September 30, 2018, the Company sold a total of 4,325,134 shares of common stock under the 2018 Sales Agreement for aggregate gross proceeds of $61.1 million and net proceeds of $59.0 million. Public offering In April 2018, the Company sold, in an underwritten public offering, an aggregate of 12,777,777 shares of its common stock at a price of $4.50 per share, for gross proceeds of $57.5 million and net proceeds of $53.5 million. Warrant exercises During the three and nine months ended September 30, 2018, the Company received $3.3 million and $6.5 million, respectively, from exercises of warrants issued pursuant the acquisition of CombiMatrix (See Note 4, “Business combinations”).

Stock incentive plans

9 Months Ended

Sep. 30, 2018

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock incentive plans

11. Stock incentive plans

Stock incentive plans

In 2010, the Company adopted the 2010 Incentive Plan (the “2010 Plan”). The 2010 Plan provides for the granting of stock-based awards to employees, directors and consultants under terms and provisions established by the Board of Directors. Under the terms of the 2010 Plan, options may be granted at an exercise price not less than fair market value. For employees holding more than 10% of the voting rights of all classes of stock, the exercise prices for incentive and nonstatutory stock options must be at least 110% of fair market of the common stock on the grant date, as determined by the Board of Directors. The terms of options granted under the 2010 Plan may not exceed ten years.

In January 2015, the Company adopted the 2015 Stock Incentive Plan (the “2015 Plan”), which became effective upon the closing of the Company’s initial public offering (“IPO”). Shares outstanding under the 2010 Plan were transferred to the 2015 Plan upon effectiveness of the 2015 Plan. The 2015 Plan provides for automatic annual increases in shares available for grant, beginning on January 1, 2016 through January 1, 2025. In addition, shares subject to awards under the 2010 Plan that are forfeited or terminated will be added to the 2015 Plan. The 2015 Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, stock units, stock appreciation rights and other forms of equity compensation, all of which may be granted to employees, including officers, non-employee directors and consultants. Additionally, the 2015 Plan provides for the grant of cash-based awards.

Options granted generally vest over a period of four years. Typically, the vesting schedule for options granted to newly hired employees provides that 1/4 of the award vests upon the first anniversary of the employee’s date of hire, with the remainder of the award vesting monthly thereafter at a rate of 1/48 of the total shares subject to the option. All other options typically vest in equal monthly installments over the four-year vesting schedule.

RSUs generally vest over a period of three years. Typically, the vesting schedule for RSUs provides that one third of the award vests upon each anniversary of the grant date.

In February 2016, the Company granted PRSUs under the 2015 Plan, which PRSUs could be earned based on the achievement of specified performance conditions measured over a period of approximately 12 months. In February 2017, upon the Audit Committee’s determination of the level of achievement, 352,045 fully vested stock units were awarded to holders of PRSUs.

Based on its evaluations of the probability of achieving performance conditions, the Company recorded stock-based compensation expense of $0.4 million for the nine months ended September 30, 2018 and 2017 related to PRSUs. There was no stock-based compensation expense recorded for either three-month period ended September 30, 2018 or 2017 nor for the nine month period ended September 30, 2018 in relation to PRSUs.

Activity under the 2010 Plan and the 2015 Plan is set forth below (in thousands, except share and per share amounts and years):

	Shares Available For Grant			Stock Options Outstanding			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Balances at December 31, 2017		2,397,234			4,114,874		$	8.51		7.63	$	5,128
Additional shares reserved		754,363			—
Options granted		(260,000	)		260,000			8.50
Options cancelled		158,823			(158,823	)		9.34
Options exercised		—			(326,317	)		7.85
RSUs granted		(3,088,104	)		—
RSUs cancelled		319,226			—
Balances at September 30, 2018		281,542			3,889,734		$	8.53		7.12	$	31,901
Options exercisable at September 30, 2018					2,579,154		$	8.16		6.66	$	22,097
Options vested and expected to vest at September 30, 2018					3,704,312		$	8.51		7.06	$	30,465

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock for stock options that were in-the-money.

The weighted-average fair value of options to purchase common stock granted was $4.87 and $5.97 in the nine months ended September 30, 2018, and 2017, respectively. The weighted-average fair value of RSUs granted was $6.99 and $10.21 in the nine months ended September 30, 2018 and 2017, respectively.

The total grant-date fair value of options to purchase common stock vested was $15.9 million and $5.1 million in the nine months ended September 30, 2018 and 2017, respectively.

The intrinsic value of options to purchase common stock exercised was $1.5 million and $1.8 million in the nine months ended September 30, 2018 and 2017, respectively.

The following table summarizes RSU activity for the nine months ended September 30, 2018:

	Number of Shares			Weighted- Average Grant Date Fair Value
Balance at December 31, 2017		2,387,120		$	9.91
RSUs granted		3,088,104		$	6.99
RSUs vested		(1,117,944	)	$	8.84
RSUs cancelled		(319,226	)	$	8.92
Balance at September 30, 2018		4,038,054		$	8.06

2015 employee stock purchase plan

In January 2015, the Company adopted the 2015 Employee Stock Purchase Plan (the “ESPP”), which became effective upon the closing of the IPO. Employees participating in the ESPP may purchase common stock at 85% of the lesser of the fair market value of common stock on the purchase date or last trading day preceding the offering date. At September 30, 2018, cash received from payroll deductions pursuant to the ESPP was $1.4 million.

The ESPP provides for automatic annual increases in shares available for grant, beginning on January 1, 2016 and continuing through January 1, 2025. At September 30, 2018, a total of 567,707 shares of common stock are reserved for issuance under the ESPP.

Stock-based compensation

The Company uses the grant date fair value of its common stock to value both employee and non-employee options when granted. The Company revalues non-employee options each reporting period using the fair market value of the Company’s common stock as of the last day of each reporting period.

In determining the fair value of stock options and ESPP purchases, the Company uses the Black-Scholes option-pricing model and, for stock options, the assumptions discussed below. Each of these inputs is subjective and its determination generally requires significant judgment. The fair value of RSU and PRSU awards is based on the grant date share price. Compensation cost is recognized as expense on a straight-line basis over the vesting period for options and RSUs and on an accelerated basis for PRSUs.

Expected term—The expected term represents the period that the Company’s stock-based awards are expected to be outstanding and is determined using the simplified method (based on the midpoint between the vesting date and the end of the contractual term).

Expected volatility—Because the Company was privately held until February 2015 and did not have any trading history for its common stock prior to its IPO, the expected volatility was estimated based on the average volatility for comparable publicly-traded life sciences companies, including molecular diagnostic companies, over a period equal to the expected term of the stock option grants. When selecting comparable companies on which it has based its expected stock price volatility, the Company selected companies with comparable characteristics to it, including enterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected life of the stock-based awards. The historical volatility data was computed using the daily closing prices for the selected companies’ common stock during the equivalent period of the calculated expected term of the stock-based awards. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

Risk-free interest rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option.

Dividend yield—The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock. Therefore, the Company used an expected dividend yield of zero.

The fair value of share-based payments for options granted to employees and directors was estimated on the date of grant using the Black-Scholes option-pricing model based on the following assumptions:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Expected term (in years)		6.00		—		6.00		6.03
Expected volatility	59.63%			—	59.58%		72.64%
Risk-free interest rate	2.82%			—	2.80%		2.01%

No stock options were granted in the three month period ended September 30, 2017.

Stock-based compensation related to stock options granted to non-employees is recognized as the stock options vest. The fair value of the stock options granted is calculated at each reporting date using the Black-Scholes option-pricing model based on the following assumptions:

	As of September 30,
	2018		2017
Expected term (in years)		—	8.50 – 8.58
Expected volatility		—	69.90 – 78.70%
Risk-free interest rate		—	1.83 – 2.04%

No stock options granted to non-employees vested in the nine months ended September 30, 2018.

The following table summarizes stock-based compensation expense for the three and nine months ended September 30, 2018 and 2017 included in the condensed consolidated statements of operations (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Cost of revenue	$	747	$	404	$	2,320	$	1,606
Research and development		1,722		1,096		5,237		4,853
Selling and marketing		1,172		780		3,690		2,985
General and administrative		1,565		2,500		4,464		4,943
Total stock-based compensation expense	$	5,206	$	4,780	$	15,711	$	14,387

At September 30, 2018, unrecognized compensation expense related to unvested stock options, net of estimated forfeitures, was $5.6 million, which the Company expects to recognize on a straight-line basis over a weighted-average period of 1.9 years. Unrecognized compensation expense related to RSUs at September 30, 2018, net of estimated forfeitures, was $24.4 million, which the Company expects to recognize on a straight-line basis over a weighted-average period of 2.3 years. At September 30, 2018, there was no capitalized stock-based employee compensation.

Net loss per common share

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Net loss per common share

12. Net loss per common share

The following table presents the calculation of basic and diluted net loss per share for the three and nine months ended September 30, 2018 and 2017 (in thousands, except share and per share amounts):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Net loss	$	(31,723	)	$	(27,402	)	$	(99,514	)	$	(82,887	)
Shares used in computing net loss per share, basic and diluted		70,152,804			48,221,896			63,935,336			44,639,416
Net loss per share, basic and diluted	$	(0.45	)	$	(0.57	)	$	(1.56	)	$	(1.86	)

The following common stock equivalents have been excluded from diluted net loss per share for the three and nine months ended September 30, 2018 and 2017 because their inclusion would be anti-dilutive:

	September 30,
	2018		2017
Shares of common stock subject to outstanding options		3,889,734		4,264,222
Shares of common stock subject to outstanding warrants		949,328		116,845
Shares of common stock subject to outstanding RSUs		4,038,054		2,185,134
Shares of common stock pursuant to ESPP		250,410		142,947
Shares of common stock underlying Series A convertible preferred stock		3,458,823		3,458,823
Total shares of common stock equivalents		12,586,349		10,167,971

Geographic information

9 Months Ended

Sep. 30, 2018

Segments Geographical Areas [Abstract]

Geographic information

13. Geographic information

Revenue by country is determined based on the billing address of the customer. The following presents revenue by country for the three and nine months ended September 30, 2018 and 2017 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
United States	$	34,906	$	16,640	$	95,712	$	38,745
Canada		1,052		825		3,156		2,281
Rest of world		1,408		683		3,475		1,796
Total revenue	$	37,366	$	18,148	$	102,343	$	42,822

All long-lived assets at September 30, 2018 and December 31, 2017, were located in the United States.

Subsequent Events

9 Months Ended

Sep. 30, 2018

Subsequent Events [Abstract]

Subsequent Events

14. Subsequent events

On November 6, 2018, the Company and certain of its subsidiaries, as guarantors, entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with INN SA LLC, as collateral agent, and certain funds managed by Oberland Capital Management LLC, as purchasers (the “Oberland Funds” and, together with other purchasers party thereto from time to time, the “Purchasers”), pursuant to which the Company may sell to the Purchasers, and the Purchasers may buy from the Company, notes (the “Notes”) in an aggregate principal amount not to exceed $200.0 million, consisting of:

(i)

an initial sale of $75.0 million principal amount of Notes;

(ii)

at the option of the Company, a second sale of $25.0 million principal amount of Notes, at any time through June 30, 2019;

(iii)

at the option of the Company, a third sale of up to $50.0 million principal amount of Notes, in increments of $25.0 million, to be borrowed at any time during the period beginning on July 1, 2019 and ending on December 31, 2019; and

(iv)

at the option of the Company, but subject to the approval of the Purchasers, a fourth sale of up to $50.0 million principal amount of Notes, in no more than three increments of at least $10.0 million, at any time through December 31, 2019, for certain permitted acquisitions and related expenses.

Pursuant to the Note Purchase Agreement, on November 6, 2018 (the “Closing Date”), the Company sold Notes in an aggregate principal amount of $75.0 million, and received net proceeds of approximately $10.3 million after terminating and repaying the balance of its obligations under the 2017 Loan Agreement of approximately $64.7 million, but before payment of certain expenses payable by the Company.

The outstanding principal amount of the Notes bear interest at a rate of 8.75% annually, payable quarterly until the date which is 84 months after the Closing Date or the date on which all amounts owing to the Purchasers under the Note Purchase Agreement have been paid in full. In addition, beginning on January 1, 2020 and continuing until the maturity date, the Purchasers will receive 0.50% of the annual net revenues of the Company, payable quarterly and subject to a maximum annual amount of such payments of $1.625 million. The outstanding principal amount of the Notes, interest accrued thereon and any other amounts owing to the Purchasers under the Note Purchase Agreement will be due in full on the maturity date.

All of the Notes may be repaid prior to the full term at the option of the Company. Similarly, the Purchasers can demand repayment of the Notes prior to the full term in the event of a change of control of the Company or an event of default under the Note Purchase Agreement. If prepaid prior to the full term, the amount due will be: (a) 117.5% of the principal amount of the Notes if payment is made within 12 months after the Closing Date; (b) thereafter, 132.5% of the principal amount of the Notes if payment is made within 24 months after the Closing Date; (c) thereafter, 145.0% of the principal amount of the Notes if payment is made within 36 months after the Closing Date; and (d) thereafter, the amount necessary to generate an internal rate of return of 11.0% to the Purchasers, minus in the case of clause (a), (b) and (c) the sum of (i) all regularly scheduled interest paid prior to such date with respect to the Notes (excluding any default interest), plus (ii) all payments in respect of annual net revenues prior to such date, and calculated, in the case of clause (d), taking into account such sum.

The Company’s Note Purchase Agreement contains quarterly covenants to achieve certain revenue levels as well as additional covenants, including limits on the Company’s ability to dispose of assets, undergo a change of control, merge with or acquire other entities, incur debt, incur liens, pay dividends or other distributions to holders of its capital stock, repurchase stock and make investments, in each case subject to certain exceptions. The Company’s obligations under the Note Purchase Agreement are secured by a security interest on substantially all of its and certain of its subsidiaries’ assets.

In connection with the Note Purchase Agreement, on November 6, 2018, the Company entered into a Securities Purchase Agreement with the Oberland Funds, pursuant to which the Oberland Funds purchased 373,524 shares of the Company’s common stock, $0.0001 par value per share, at a price of $13.386 per share.

Summary of significant accounting policies (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Principles of consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company believes judgment is involved in determining revenue recognition (See Note 3, “Revenue, accounts receivable and deferred revenue” for further information); the acquisition-date fair value of intangible assets; the fair value of contingent consideration associated with acquisitions; the recoverability of long-lived assets; impairment of goodwill and intangible assets; stock-based compensation expense; the fair value of its convertible notes; and income tax uncertainties. 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. Actual results could differ materially from those estimates and assumptions.

Concentrations of credit risk and other risks and uncertainties

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents, marketable securities and accounts receivable. The Company’s cash and cash equivalents are held by financial institutions in the United States. Such deposits may exceed federally insured limits.

The Company’s 10% or greater customers and their related revenue as a percentage of total revenue were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Medicare		24.6	%	*				19.7	%	*
United Healthcare		10.0	%		13.7	%	*			*
* Less than 10% of total revenue