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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 production facility and headquarters is located in San Francisco, California. The Company currently has more than 1,100 genes in production and provides a variety of diagnostic tests that can be used in multiple indications. The Company’s tests include multiple genes associated with hereditary cancer, neurological disorders, cardiovascular disorders, pediatric disorders, metabolic disorders and other hereditary conditions. The Company operates in one segment.
The Company has incurred substantial losses since its inception and expects to continue to incur operating losses in the near-term future. For the years ended December 31, 2016 and 2015, the Company had net losses of $100.3 million and $89.8 million, respectively. At December 31, 2016, the Company’s accumulated deficit was $275.2 million. To date, the Company has generated only limited revenue, and it may never achieve revenue sufficient to offset its expenses. The Company believes its existing cash and cash equivalents as of December 31, 2016, revenue from the sale of its tests and the net proceeds of the first term loan, which closed in March 2017, will be sufficient to meet its anticipated cash requirements for the 12-month period following the filing date of this report. The Company intends to generate sufficient cash from operations to fund its future operating needs, but there can be no assurance it will be able to do so.
The Company may need to raise additional funding to finance operations prior to achieving profitability. Company management regularly considers fundraising opportunities and will determine the timing, nature and amount of financings based upon various factors, including market conditions and management’s operating plans. The Company may in the future elect to finance operations by selling equity or debt securities or borrowing money. If additional funding is required, there can be no assurance that additional funds will be available to the Company on acceptable terms on a timely basis, if at all. If the Company is unable to successfully raise additional funding when needed, it will need to curtail planned activities to reduce costs. Doing so will likely have an unfavorable effect on the Company’s ability to execute on its business plan, and have an adverse effect on its business, results of operations and future prospects.
The Company had $92.6 million of cash, cash equivalents and investments as of December 31, 2016 and borrowed $40.0 million in March 2017 through a debt arrangement, as more fully discussed in Note 13. The Company has implemented the guidance in Financial Accounting Standards Board Accounting Standards Update No. 2014-15, Presentation of Financial Statements — Going Concern (Subtopic 205-40), and concluded that there are not conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year following the date that the December 31, 2016 financial statements are issued.
Initial Public Offering
In February 2015, the Company completed an initial public offering (“IPO”) of its common stock. In connection with its IPO, the Company sold 7,302,500 shares of common stock at $16.00 per share for aggregate net proceeds of $105.7 million after underwriting discounts and commissions and offering expenses payable by the Company. This includes the exercise in full by the underwriters of their option to purchase up to 952,500 additional shares of common stock at the same price to cover over-allotments. Upon the closing of the IPO, all shares of convertible preferred stock then outstanding converted into 23,521,889 shares of common stock.
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2. Summary of significant accounting policies
Principles of consolidation
The 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; the recoverability of long-lived assets; stock-based compensation expense; 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 and cash equivalents. 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 is also subject to credit risk from its accounts receivable related to its product sales. The Company does not perform evaluations of customers’ financial condition and does not require collateral.
As of December 31, 2016, substantially all of the Company’s revenue has been derived from sales of its assays. The majority of the Company’s accounts receivable arises from product sales in the United States. The majority of the Company’s tests to date have been delivered to physicians in the United States.
Significant customers are those that represent 10% or more of the Company’s total revenue for each year presented on the statements of operations. For each significant customer, revenue as a percentage of total revenue are as follows:
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December 31, |
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|||||||||
Customers |
2016 |
|
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2015 |
|
|
2014 |
|
|||
Customer A |
* |
|
|
* |
|
|
|
15 |
% |
||
Customer B |
* |
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|
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13 |
% |
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* |
|
||
Customer C |
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11 |
% |
|
* |
|
|
* |
|
|
* |
Less than 10% of total revenue |
Cash equivalents
The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market funds and U.S. government agency securities.
Marketable securities
All marketable securities have been classified as “available-for-sale” and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities. Management determines the appropriate classification of its investments in debt securities at the time of purchase and reevaluates such designation at each balance sheet date. Short-term marketable securities have maturities less than 365 days at the balance sheet date. Unrealized gains and losses are excluded from earnings and are reported as a component of other comprehensive income (loss). Realized gains and losses and declines in fair value judged to be other than temporary, if any, on available-for-sale securities are included in other income (expense), net. The cost of securities sold is based on the specific-identification method. Interest on marketable securities and premium and discount amortization are included in other income (expense), net.
Restricted cash
Restricted cash consists of money market funds that serve as: collateral for a security deposit for the Company’s lease agreement for a production facility and headquarters entered into in September 2015; collateral for a credit card agreement at one of the Company’s financial institutions; and for securing a letter of credit as collateral for a facility sublease agreement.
Internal-use software
The Company capitalizes third-party costs incurred in the application development stage to design and implement internal-use software. Maintenance and training costs relating to internal-use software are expensed as incurred. Capitalized internal-use software costs are recorded as property and equipment and are amortized over estimated useful lives of up to three years on a straight line basis. Amortization of capitalized internal-use software costs is recorded as sales and marketing expense.
During the years ended December 31, 2016, 2015 and 2014, the Company capitalized $0, $1.5 million and $550,000, respectively, of internal‑use software development costs. Internal‑use software amortization was $1.3 million, $718,000, and $152,000, in 2016, 2015 and 2014, respectively. The carrying value of capitalized internal-use software was $110,000 and $1.4 million at December 31, 2016 and 2015, respectively. The weighted average remaining useful life of capitalized internal-use software at December 31, 2016 was 1 month.
Leases
The Company rents its facilities under operating lease agreements and recognizes related rent expense on a straight-line basis over the term of the applicable lease agreement. Some of the lease agreements contain rent holidays, scheduled rent increases, lease incentives, and renewal options. Rent holidays and scheduled rent increases are included in the determination of rent expense to be recorded over the lease term. Lease incentives are recognized as a reduction of rent expense on a straight-line basis over the term of the lease. Renewals are not assumed in the determination of the lease term unless they are deemed to be reasonably assured at the inception of the lease. The Company recognizes rent expense beginning on the date it obtains the legal right to use and control the leased space.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight‑line method over the estimated useful lives of the assets, generally between three and seven years. Leasehold improvements are amortized using the straight‑line method over the shorter of the estimated useful life of the asset or the term of the lease. Amortization expense of assets acquired through capital leases is included in depreciation and amortization expense in the consolidated statements of operations. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheet and any resulting gain or loss is reflected in the statements of operations in the period realized.
The useful lives of the property and equipment are as follows:
Furniture and fixtures |
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7 years |
Automobiles |
|
7 years |
Laboratory equipment |
|
5 years |
Computer equipment |
|
3 years |
Software |
|
3 years |
Leasehold improvements |
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Shorter of lease term or estimated useful life |
Long‑lived assets
The Company reviews long‑lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss is recognized when the total estimated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Impairment, if any, is assessed using discounted cash flows or other appropriate measures of fair value. The Company recorded asset impairment losses of $1.0 million in 2016 relating to leasehold improvements and to the shutdown of the Company’s Chilean operations. All impairment losses were charged to general and administrative expense. There were no impairment losses recorded for any other period presented.
Fair value of financial instruments
The Company’s financial instruments consist principally of cash and cash equivalents, marketable securities, accounts payable, capital leases and debt relating to equipment financing. The carrying amounts of certain of these financial instruments, including cash and cash equivalents, and accounts payable, approximate fair value due to their short maturities. Based on borrowing rates available to the Company, the carrying value of capital leases approximates fair value.
See Note 4, “Fair value measurements” for further information on the fair value of the Company’s financial instruments.
Revenue recognition
Revenue is generated 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 was de minimis for all periods presented.
Revenue is recognized when persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured. The criterion for whether the fee is fixed or determinable and whether collectability is reasonably assured are based on management’s judgments. When evaluating collectability, in situations where contracted reimbursement coverage does not exist, the Company considers whether the Company has sufficient history to reliably estimate a payer’s individual payment patterns. The Company reviews the number of tests paid against the number of tests billed over at least several months of payment history and the payer’s outstanding balance for unpaid tests to determine whether payments are being made at a consistently high percentage of tests billed and at appropriate amounts given the amount billed. For most payers, the Company has not been able to demonstrate a predictable pattern of collectability, and therefore recognizes revenue when payment is received. For payers who have demonstrated a consistent pattern of payment of tests billed at appropriate amounts, the Company recognizes revenue, at estimated realizable amounts, upon delivery of test results.
Collaboration revenue related to achievement of specified milestones is recognized in accordance with ASC Topic 605-28, Revenue Recognition — Milestone Method. Under the milestone method, a payment that is contingent upon the achievement of a substantive milestone is recognized in its entirety in the period in which the milestone is achieved. A milestone is an event (i) that can be achieved based in whole or in part on either the Company’s performance or on the occurrence of a specific outcome resulting from the Company’s performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved, and (iii) that would result in additional payments being due to the Company. The determination that a milestone is substantive is judgmental and is made at the inception of the arrangement. Milestones are considered substantive when the consideration earned from the achievement of the milestone is (i) commensurate with either the Company’s performance to achieve the milestone or the enhancement of value of the item delivered as a result of a specific outcome resulting from the Company’s performance to achieve the milestone, (ii) relates solely to past performance and (iii) is reasonable relative to all deliverables and payment terms in the arrangement.
Cost of revenue
Cost of revenue reflects the aggregate costs incurred in delivering the genetic testing results to clinicians and includes expenses for personnel costs including stock-based compensation, materials and supplies, equipment and infrastructure expenses associated with testing, shipping and handling costs and allocated overhead including rent, equipment depreciation and utilities. Costs associated with performing the Company’s test are recorded as the test is processed regardless of whether and when revenue is recognized with respect to that test.
Income taxes
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.
Stock‑based compensation
The Company measures its stock-based payment awards made to employees and directors based on the estimated fair values of the awards and recognizes the compensation expense over the requisite service period. The Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock option awards and employee stock purchase plan (“ESPP”) purchases. The fair value of restricted stock unit (“RSU”) awards with time-based vesting terms is based on the grant date share price. The Company grants performance-based restricted stock unit (“PRSU”) awards to certain employees which vest upon the achievement of certain performance conditions, subject to the employees’ continued service relationship with the Company. The probability of vesting is assessed at each reporting period and compensation cost is adjusted based on this probability assessment. The Company recognizes such compensation expense on a straight-line basis.
Stock-based compensation expense for awards without a performance condition is recognized using the straight-line method. Stock-based compensation expense is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. As such, the Company’s stock-based compensation is reduced for the estimated forfeitures at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
The Company accounts for compensation expense related to stock options granted to non-employees based on the fair values estimated using the Black-Scholes model. Stock options granted to non-employees are re-measured at each reporting date until the award is vested.
Advertising
Advertising expenses are expensed as incurred. The Company recorded advertising expenses of $0.5 million, $0.4 million and $11,000 in 2016, 2015 and 2014, respectively.
Comprehensive loss
Comprehensive loss is composed of two components: net loss and other comprehensive loss. Other comprehensive loss refers to gains and losses that under U.S. GAAP are recorded as an element of stockholders’ equity (deficit), but are excluded from net loss. The Company’s other comprehensive loss consists of unrealized gains and losses on investments in available‑for‑sale securities.
Net loss per share attributable to common stockholders
Basic net loss per share attributable to common stockholders is calculated by dividing net loss attributable to common stockholders by the weighted‑average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted‑average number of common share equivalents outstanding for the period determined using the treasury stock method. Potentially dilutive securities consisting of convertible preferred stock, options to purchase common stock and restricted stock awards are considered to be common stock equivalents but were excluded from the calculation of diluted net loss per share attributable to common stockholders because their effect would be antidilutive for all periods presented. Common shares subject to repurchase are excluded from weighted‑average shares. For the years ended December 31, 2016, 2015 and 2014; zero, 4,659 and 23,903 shares subject to repurchase, respectively, are excluded from the basic loss per share calculation.
Recent accounting pronouncements
In December 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this ASU apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. ASU 2016-18 is effective for annual and interim periods beginning on or after December 15, 2018 and early adoption is permitted. The Company has elected to early adopt ASU 2016-18 effective January 1, 2017 and the adoption of this standard is not expected to have a material effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) — Classification of Certain Cash Receipts and Cash Payments. The ASU is intended to improve financial reporting by reducing diversity in practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for annual and interim periods beginning on or after December 15, 2016 and early adoption is permitted. The Company has elected to early adopt ASU 2016-15 effective January 1, 2017 and the adoption of this standard is not expected to have a material effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. ASU-2016-13 is effective for annual and interim periods beginning on or after December 15, 2019 and early adoption is permitted. The adoption of this standard is not expected to have a material effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting.
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies accounting for share-based payment award transactions. ASU-2016-09 is effective for annual and interim periods beginning on or after December 15, 2016 and early adoption is permitted. The Company will adopt ASU 2016-09 in the first quarter of 2017 and the adoption of this standard is not expected to have a material effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting.
In February 2016, the FASB issued ASU 2016-02, Leases (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. Lessor accounting under ASU 2016-02 is largely unchanged. ASU 2016-02 is effective for annual and interim periods beginning on or after December 15, 2018 and early adoption is permitted. Under ASU 2016-02, lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Lessees and lessors may not apply a full retrospective transition approach. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements, related disclosures and ongoing financial reporting. The Company has not yet selected an implementation date for ASU 2016-02.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August, 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606). ASU 2015-14 defers the effective date of ASU 2014-09 for public business entities by one year to annual reporting periods beginning after December 15, 2017. Therefore, the new standard will become effective for the Company on January 1, 2018 and early application is permitted for periods beginning on or after January 1, 2017. The new standard permits the use of two methods of adoption: retrospectively to each prior reporting period presented (the full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). The Company plans to implement ASU 2014-09 effective January 1, 2018 using the modified retrospective method. While the Company continues to evaluate the effect that ASU 2014-09 will have on its consolidated financial statements, related disclosures and ongoing financial reporting, it anticipates the adoption of ASC 2014-09 will result in changes in the timing of revenue recognition. The Company currently recognizes revenue for the majority of third-party payers on a cash basis. Under ASU 2014-09, the Company anticipates it will recognize revenue from third-party payers, with whom it has contracts, on an accrual basis. Therefore, the timing of revenue recognition for third-party payers will be accelerated under ASC-2014-09, in comparison to the Company’s current revenue recognition practices.
In August 2014, the FASB issued ASU No. 2014-15 (Subtopic 205- 40), Presentation of Financial Statements—Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), which provides guidance about management’s responsibility to evaluate whether there is substantial doubt about the Company’s ability to continue as a going concern and to provide related footnote disclosure. ASU 2014-15 was effective in the fourth quarter of 2016. The adoption of this standard did not have an effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting. However, in future periods, the Company may be required to provide additional footnote disclosure pursuant to ASU 2014-15, if there is substantial doubt about the Company’s ability to continue as a going concern.
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3. Balance sheet components
Cash equivalents and marketable securities
The following is a summary of cash equivalents and marketable securities (in thousands).
|
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December 31, 2016 |
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|||||||||||||
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Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Estimated Fair Value |
|
||||
Money market funds |
|
$ |
19,457 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
19,457 |
|
U.S. treasury notes |
|
|
11,515 |
|
|
|
2 |
|
|
|
— |
|
|
|
11,517 |
|
U.S. government agency securities |
|
|
14,283 |
|
|
|
— |
|
|
|
(2 |
) |
|
|
14,281 |
|
|
|
$ |
45,255 |
|
|
$ |
2 |
|
|
$ |
(2 |
) |
|
$ |
45,255 |
|
Reported as: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14,760 |
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Restricted cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,697 |
|
Marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,798 |
|
Total cash equivalents, restricted cash and marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
45,255 |
|
|
|
December 31, 2015 |
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|||||||||||||
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Estimated Fair Value |
|
||||
Money market funds |
|
$ |
39,998 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
39,998 |
|
U.S. treasury notes |
|
|
4,006 |
|
|
|
— |
|
|
|
— |
|
|
|
4,006 |
|
U.S. government agency securities |
|
|
65,586 |
|
|
|
1 |
|
|
|
(16 |
) |
|
|
65,571 |
|
|
|
$ |
109,590 |
|
|
$ |
1 |
|
|
$ |
(16 |
) |
|
$ |
109,575 |
|
Reported as: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
50,964 |
|
Restricted cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,831 |
|
Marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,780 |
|
Total cash equivalents, restricted cash and marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
109,575 |
|
At December 31, 2016, the remaining contractual maturities of available‑for‑sale securities were less than one year. For the years ended December 31, 2016 and 2015, there were no realized gains or losses on available‑for‑sale securities.
Property and equipment, net
Property and equipment consisted of the following (in thousands):
|
|
December 31, 2016 |
|
|
December 31, 2015 |
|
||
Leasehold improvements |
|
$ |
1,256 |
|
|
$ |
2,548 |
|
Laboratory equipment |
|
|
13,644 |
|
|
|
10,461 |
|
Equipment under capital lease |
|
|
5,871 |
|
|
|
8,224 |
|
Computer equipment |
|
|
2,514 |
|
|
|
2,397 |
|
Software |
|
|
2,489 |
|
|
|
2,368 |
|
Furniture and fixtures |
|
|
238 |
|
|
|
210 |
|
Automobiles |
|
|
20 |
|
|
|
20 |
|
Construction-in-progress |
|
|
12,229 |
|
|
|
1,202 |
|
Total property and equipment, gross |
|
|
38,261 |
|
|
|
27,430 |
|
Accumulated depreciation and amortization |
|
|
(14,468 |
) |
|
|
(8,721 |
) |
Total property and equipment, net |
|
$ |
23,793 |
|
|
$ |
18,709 |
|
Depreciation and amortization expense was $6.6 million, $5.3 million and $2.3 million for the years ended December 31, 2016, 2015 and 2014, respectively.
Accrued liabilities
Accrued liabilities consisted of the following (in thousands):
|
|
December 31, 2016 |
|
|
December 31, 2015 |
|
||
Accrued compensation and related expenses |
|
$ |
3,072 |
|
|
$ |
2,307 |
|
Accrued laboratory materials purchases |
|
|
338 |
|
|
|
426 |
|
Accrued professional services |
|
|
446 |
|
|
|
272 |
|
Accrued construction in progress |
|
|
1,215 |
|
|
|
— |
|
Lease incentive obligation, current |
|
|
468 |
|
|
|
— |
|
Other |
|
|
1,172 |
|
|
|
1,248 |
|
Total accrued liabilities |
|
$ |
6,711 |
|
|
$ |
4,253 |
|
Other long-term liabilities
Other long-term liabilities consisted of the following (in thousands):
|
|
December 31, 2016 |
|
|
December 31, 2015 |
|
||
Lease incentive obligation, non-current |
|
$ |
4,243 |
|
|
$ |
107 |
|
Deferred rent, non-current |
|
|
3,419 |
|
|
|
98 |
|
Other non-current liabilities |
|
|
175 |
|
|
|
138 |
|
Total other long-term liabilities |
|
$ |
7,837 |
|
|
$ |
343 |
|
|
4. Fair value measurements
Financial assets and liabilities are recorded at fair value. The carrying amounts of certain of the Company’s financial instruments, including cash equivalents, and accounts payable, are valued at cost, which approximates fair value due to their short maturities. 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 briefly 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 December 31, 2016 and 2015 (in thousands):
|
|
December 31, 2016 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
19,457 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
19,457 |
|
U.S. treasury notes |
|
|
11,517 |
|
|
|
— |
|
|
|
— |
|
|
|
11,517 |
|
U.S. government agency securities |
|
|
— |
|
|
|
14,281 |
|
|
|
— |
|
|
|
14,281 |
|
Total financial assets |
|
$ |
30,974 |
|
|
$ |
14,281 |
|
|
$ |
— |
|
|
$ |
45,255 |
|
|
|
December 31, 2015 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
39,998 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
39,998 |
|
U.S. treasury notes |
|
|
4,006 |
|
|
|
— |
|
|
|
— |
|
|
|
4,006 |
|
U.S. government agency securities |
|
|
— |
|
|
|
65,571 |
|
|
|
— |
|
|
|
65,571 |
|
Total financial assets |
|
$ |
44,004 |
|
|
$ |
65,571 |
|
|
$ |
— |
|
|
$ |
109,575 |
|
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.
There were no transfers between Level 1 and Level 2 during the periods presented.
The fair value of the Company’s outstanding debt is estimated using the net present value of the payments, discounted at an interest rate that is consistent with market interest rates, which is a Level 2 input. The carrying amount and the estimated fair value of the Company’s outstanding debt at December 31, 2016, and 2015, are as follows (in thousands):
|
|
December 31, 2016 |
|
|
December 31, 2015 |
|
||||||||||
|
|
Carrying Amount |
|
|
Fair Value |
|
|
Carrying Amount |
|
|
Fair Value |
|
||||
Debt |
|
$ |
12,102 |
|
|
$ |
11,905 |
|
|
$ |
7,040 |
|
|
$ |
6,952 |
|
|
5. Commitments and contingencies
Operating Leases
As of December 31, 2016, the Company leases office and laboratory facilities in California and Massachusetts under non-cancelable operating lease agreements with lease periods expiring between 2017 and 2026. All of the Company’s lease agreements include scheduled rent increases over the terms of the leases. Rent increases, including the impact of rent holidays, are recognized as deferred rent and are amortized on a straight-line basis over the term of the original lease. Leasehold improvement allowances from landlords are recognized as lease incentive obligations and are amortized on a straight-line basis over the term of the original lease.
The Company has subleased office facilities in Palo Alto, California and Cambridge Massachusetts. Future minimum rental receipts under these subleases totaled $0.8 million at December 31, 2016.
In September 2015, the Company entered into a lease agreement for a production facility and headquarters in San Francisco, California. This lease expires in July 2026 and the Company may renew the lease for an additional ten years. The Company has 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 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 will receive 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 has made to the facility. The assets purchased with the lease incentive are included in property and equipment, net, in the Company’s 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. At December 31, 2016, all of the incentive had been utilized by the Company. Aggregate future minimum lease payments for the new facility at December 31, 2016 were approximately $69.7 million.
In addition to the security deposit of approximately $4.6 million for the new production facility and headquarters, the Company has provided, as collateral for other leases, security deposits of $0.8 million at December 31, 2016 and at December 31, 2015, which are included in other assets in the Company’s consolidated balance sheets.
Future minimum payments under non‑cancelable operating leases as of December 31, 2016 are as follows (in thousands):
Year ending December 31, |
|
Amounts |
|
|
2017 |
|
$ |
7,043 |
|
2018 |
|
|
6,898 |
|
2019 |
|
|
6,946 |
|
2020 |
|
|
6,917 |
|
2021 |
|
|
7,079 |
|
Thereafter |
|
|
37,137 |
|
Total minimum lease payments |
|
$ |
72,020 |
|
Rent expense was $8.6 million, $3.7 million and $1.4 million for the years ended December 31, 2016, 2015 and 2014, respectively.
Equipment Financing
In July 2015, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with a bank under which term loans for purchases of equipment up to an aggregate of $15.0 million were available in tranches not to exceed $2.5 million. At December 31, 2016, the Company had borrowed the full $15.0 million available under the Loan Agreement. The term loans under the Loan Agreement bear interest at a floating rate equal to 0.25% below the prime rate as published in the Wall Street Journal effective on the date the change in the prime rate becomes effective. At December 31, 2016, the interest rate on borrowings under the Loan Agreement was 3.5%. The Company is required to repay the outstanding principal and accrued but unpaid interest on each tranche in equal monthly installments beginning one month after each advance and ending on July 17, 2020 (the “Term Date”). The Company may, at its option, prepay the borrowings by paying the lender a prepayment premium.
The Company’s obligations under the Loan Agreement are subject to covenants, including covenants to maintain a minimum liquidity level with the bank, and additional covenants limiting 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 December 31, 2016, the Company was in compliance with all covenants under the Loan Agreement. The Company’s obligations under the Loan Agreement are secured by a security interest on substantially all of its assets, excluding its intellectual property and certain other assets.
At December 31, 2016, obligations under the Loan Agreement were $12.1 million. Debt issuance costs related to the Loan Agreement of $47,000 were recorded as a direct deduction from the debt liability and are being amortized to interest expense over the term of the Loan Agreement. Future payments under the Loan Agreement as of December 31, 2016 are as follows (in thousands):
Year ending December 31, |
|
Amounts |
|
|
2017 |
|
$ |
3,728 |
|
2018 |
|
|
3,619 |
|
2019 |
|
|
3,509 |
|
2020 |
|
|
1,997 |
|
Total remaining debt payments |
|
|
12,853 |
|
Less: amount representing debt discount |
|
|
(34 |
) |
Less: amount representing interest |
|
|
(717 |
) |
Present value of remaining debt payments |
|
|
12,102 |
|
Less: current portion |
|
|
(3,381 |
) |
Total non-current debt obligation |
|
$ |
8,721 |
|
Capital leases
The Company has entered into various capital lease agreements to obtain lab equipment. The term of the capital leases is typically three years with interest rates ranging from 3.8% to 4.3%. The 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 consolidated balance sheets. Future payments under the capital leases as of December 31, 2016 are as follows (in thousands):
Year ending December 31, |
|
Amounts |
|
|
2017 |
|
$ |
1,350 |
|
2018 |
|
|
269 |
|
Total capital lease obligations |
|
|
1,619 |
|
Less: amount representing interest |
|
|
(44 |
) |
Present value of net minimum capital lease payments |
|
|
1,575 |
|
Less: current portion |
|
|
(1,309 |
) |
Total non-current capital lease obligations |
|
$ |
266 |
|
Interest expense related to capital leases was $103,000, $141,000 and $61,000 for the years ended December 31, 2016, 2015 and 2014, respectively.
Property and equipment under capital leases was $5.9 million and $8.2 million as of December 31, 2016 and 2015, respectively. Accumulated depreciation and amortization, collectively, on these assets was $2.4 million and $2.8 million as of December 31, 2016 and 2015, respectively.
Guarantees and indemnifications
As permitted under Delaware law and in accordance with the Company’s bylaws, the Company indemnifies its officers and directors 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 currently holds 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 has not recorded any liabilities associated with these indemnification agreements as of December 31, 2016 or 2015.
Contingencies
The Company was not a party to any other material legal proceedings at December 31, 2016, 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.
|
6. Convertible preferred stock
Convertible preferred stock as of December 31, 2014 consisted of the following (in thousands, except share and per share data):
|
|
Shares Authorized |
|
|
Original issue price |
|
|
Shares issued and outstanding |
|
|
Proceeds, net of issuance costs |
|
||||
Series A |
|
|
11,693,179 |
|
|
$ |
0.44 |
|
|
|
11,693,179 |
|
|
$ |
5,109 |
|
Series B |
|
|
4,181,818 |
|
|
|
0.55 |
|
|
|
4,181,818 |
|
|
|
2,253 |
|
Series C |
|
|
31,112,750 |
|
|
|
0.95 |
|
|
|
31,112,750 |
|
|
|
29,393 |
|
Series D |
|
|
8,000,000 |
|
|
|
1.25 |
|
|
|
8,000,000 |
|
|
|
9,933 |
|
Series E |
|
|
26,143,777 |
|
|
|
1.53 |
|
|
|
26,143,777 |
|
|
|
39,886 |
|
Series F |
|
|
60,000,000 |
|
|
|
2.00 |
|
|
|
60,000,000 |
|
|
|
115,731 |
|
Balance at December 31, 2014 |
|
|
141,131,524 |
|
|
|
|
|
|
|
141,131,524 |
|
|
$ |
202,305 |
|
Upon the closing of the IPO in February 2015, the 141,131,524 shares of convertible preferred stock then outstanding converted into 23,521,889 shares of common stock.
|
7. Stockholders’ equity (deficit)
Common stock
The holders of each share of common stock have one vote for each share of stock. The common stockholders are also entitled to receive dividends whenever funds and assets are legally available and when declared by the Board of Directors.
In November 2016, the Company completed an underwritten public offering of 8,433,332 shares of its common stock at an offering price of $6.00 per share for gross proceeds of $50.6 million. The Company received net proceeds from the offering of approximately $47.1 million, after deducting the underwriters’ discounts and commissions and offering expenses.
As of December 31, 2016 and 2015, the Company had reserved shares of common stock, on an as‑if converted basis, for issuance as follows:
|
|
As of December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Options issued and outstanding |
|
|
4,490,662 |
|
|
|
3,659,713 |
|
RSU awards issued and outstanding |
|
|
1,421,757 |
|
|
|
— |
|
Shares available for grant under stock option plan |
|
|
1,375,766 |
|
|
|
2,268,938 |
|
Shares reserved for issuance under the 2015 Employee Stock Purchase Plan |
|
|
274,686 |
|
|
|
325,000 |
|
Total |
|
|
7,562,871 |
|
|
|
6,253,651 |
|
|
8. Stock 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 IPO. The 2015 Plan had 4,370,452 shares of common stock reserved for future issuance at the time of its effectiveness, which included 120,452 shares under the 2010 Plan which 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 may be earned based on the achievement of specified performance conditions measured over a period of approximately 12 months. Holders of PRSUs may receive 0% to 100% of the target number of PRSUs originally granted. Stock-based compensation expense associated with PRSU grants is recorded when the performance conditions are determined to be probable. Fully vested restricted stock units were awarded, in February 2017, upon the Audit Committee’s determination of the level of achievement.
At December 31, 2016, 530,005 PRSUs were outstanding, with a total grant date fair value of $3.5 million. Based on its evaluation of the probability of achieving performance conditions at December 31, 2016, the Company recorded stock-based compensation expense of $1.9 million for the year ended December 31, 2016 related to the 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, 2015 |
|
|
2,268,938 |
|
|
|
3,659,713 |
|
|
$ |
7.38 |
|
|
|
8.89 |
|
|
$ |
7,099 |
|
Additional shares reserved |
|
|
1,277,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted |
|
|
(1,501,461 |
) |
|
|
1,501,461 |
|
|
$ |
9.73 |
|
|
|
|
|
|
|
|
|
Options cancelled |
|
|
426,596 |
|
|
|
(426,596 |
) |
|
$ |
9.36 |
|
|
|
|
|
|
|
|
|
Options exercised |
|
|
|
|
|
|
(243,916 |
) |
|
$ |
3.03 |
|
|
|
|
|
|
|
|
|
RSUs granted |
|
|
(677,267 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRSUs granted |
|
|
(575,064 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs cancelled |
|
|
111,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRSUs cancelled |
|
|
45,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2016 |
|
|
1,375,766 |
|
|
|
4,490,662 |
|
|
$ |
8.21 |
|
|
|
8.11 |
|
|
$ |
5,312 |
|
Options exercisable at December 31, 2016 |
|
|
|
|
|
|
1,611,780 |
|
|
$ |
6.42 |
|
|
|
6.81 |
|
|
$ |
4,096 |
|
Options vested and expected to vest at December 31, 2016 |
|
|
|
|
|
|
4,008,578 |
|
|
$ |
8.07 |
|
|
|
8.01 |
|
|
$ |
5,170 |
|
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 $6.18, $6.26 and $4.68 per share in the years ended December 31, 2016, 2015 and 2014, respectively. The weighted‑average fair value of RSUs granted was $9.80 and $10.72, in the years ended December 31, 2016 and 2015, respectively. No RSUs were granted in 2014.
The total grant date fair value of stock options vested was $5.6 million, $2.1 million and $494,000 in the years ended December 31, 2016, 2015 and 2014, respectively.
The intrinsic value of options to purchase common stock exercised was $1.4 million, $1.2 million and $644,000 in the years ended December 31, 2016, 2015 and 2014, respectively.
The following table summarizes RSU activity for the year ended December 31, 2016:
|
|
Number of Shares |
|
|
Weighted- Average Grant Date Fair Value |
|
||
Balance at December 31, 2015 |
|
|
482,818 |
|
|
$ |
10.71 |
|
RSUs granted |
|
|
677,267 |
|
|
$ |
9.80 |
|
PRSUs granted |
|
|
575,064 |
|
|
$ |
6.52 |
|
RSUs vested |
|
|
(156,810 |
) |
|
$ |
10.55 |
|
RSUs cancelled |
|
|
(111,523 |
) |
|
$ |
10.31 |
|
PRSUs cancelled |
|
|
(45,059 |
) |
|
$ |
6.40 |
|
Balance at December 31, 2016 |
|
|
1,421,757 |
|
|
$ |
8.77 |
|
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. The initial ESPP purchase period commenced in November 2015, and in 2016, 369,674 shares of common stock were purchased pursuant to the ESPP. At December 31, 2016, cash received from payroll deductions pursuant to the ESPP was $326,000.
The ESPP provides for automatic annual increases in shares available for grant, beginning on January 1, 2016 and continuing through January 1, 2025. At December 31, 2016, a total of 274,686 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.
In 2016, the Company modified certain stock options and RSU awards. The terms of the stock option modifications included acceleration of vesting and extensions of post-termination exercise periods. The terms of the RSU award modifications included acceleration of vesting. A total of 14 employees were affected by the stock option and RSU modifications and the total incremental compensation cost relating to these modifications was $323,000.
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 and did not have any trading history for its common stock, the expected volatility was estimated based on the average volatility for comparable publicly traded biopharmaceutical companies over a period equal to the expected term of the stock option grants. When selecting comparable publicly traded companies in a similar industry 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 valuation model based on the following assumptions:
|
|
Year Ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
Expected term (in years) |
|
6.03 |
|
|
6.03 |
|
|
6.03 |
|
|||
Expected volatility |
|
|
71.42% |
|
|
|
68.2 – 79.7 |
% |
|
|
83.8 – 86.6 |
% |
Risk-free interest rate |
|
|
1.37% |
|
|
|
1.28 – 1.86 |
% |
|
|
1.53 – 1.91 |
% |
Dividend yield |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock‑based compensation related to stock options granted to non‑employees is recognized as the stock options are earned. 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:
|
|
Year Ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
Expected term (in years) |
|
|
6.25 – 10.00 |
|
|
|
7.25 – 9.82 |
|
|
|
9.37 – 9.40 |
|
Expected volatility |
|
|
76.92% |
|
|
|
69.9 – 78.70% |
|
|
|
83.80% |
|
Risk-free interest rate |
|
|
1.55 – 2.37% |
|
|
|
1.86 – 2.25% |
|
|
|
1.99 – 2.41% |
|
Dividend yield |
|
|
— |
|
|
|
— |
|
|
|
— |
|
The fair value of shares purchases pursuant to the ESPP is estimated using the Black‑Scholes option pricing model. For the years ended December 31, 2016 and 2015, the weighted average grant date fair value per share for the ESPP was $2.66 and $2.17, respectively and stock‑based compensation expense for the ESPP was $0.9 million and $102,000, respectively.
The fair value of the shares purchased pursuant to the ESPP was estimated using the following assumptions:
|
|
Year Ended December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Expected term (in years) |
|
|
0.50 |
|
|
|
0.50 |
|
Expected volatility |
|
|
66.31 |
% |
|
|
74.13 |
% |
Risk-free interest rate |
|
|
0.50 |
% |
|
|
0.33 |
% |
Dividend yield |
|
— |
|
|
— |
|
The following table summarizes stock‑based compensation expense for the years ended December 31, 2016, 2015 and 2014 included in the statements of operations as follows (in thousands):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
Cost of revenue |
|
$ |
1,353 |
|
|
$ |
368 |
|
|
$ |
102 |
|
Research and development |
|
|
4,976 |
|
|
|
1,545 |
|
|
|
382 |
|
Selling and marketing |
|
|
1,709 |
|
|
|
688 |
|
|
|
216 |
|
General and administrative |
|
|
2,661 |
|
|
|
876 |
|
|
|
271 |
|
Total stock-based compensation expense |
|
$ |
10,699 |
|
|
$ |
3,477 |
|
|
$ |
971 |
|
As of December 31, 2016, unrecognized compensation expense related to unvested options, net of estimated forfeitures, was $13.0 million, which the Company expects to recognize on a straight‑line basis over a weighted‑ average period of 2.8 years. Unrecognized compensation expense related to RSUs at December 31, 2016 was $6.3 million, which the Company expects to recognize on a straight‑line basis over a weighted‑ average period of 2.1 years. Unrecognized compensation expense related to PRSUs at December 31, 2016 was $0.4 million, which the Company expects to recognize on a straight-line basis over a weighted-average period of two months. There was no capitalized stock‑based employee compensation as of December 31, 2016.
|
9. Income taxes
The Company did not record a provision or benefit for income taxes during the years ended December 31, 2016, 2015 and 2014. The components of loss before income taxes by U.S. and foreign jurisdictions are as follows (in thousands):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
United States |
|
$ |
99,793 |
|
|
$ |
88,112 |
|
|
$ |
46,328 |
|
Foreign |
|
|
463 |
|
|
|
1,670 |
|
|
|
1,164 |
|
Total |
|
$ |
100,256 |
|
|
$ |
89,782 |
|
|
$ |
47,492 |
|
The following table presents a reconciliation of the tax expense computed at the statutory federal rate and the Company’s tax expense for the periods presented:
|
|
Year Ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
U.S. federal taxes at statutory rate |
|
|
34.0 |
% |
|
|
34.0 |
% |
|
|
34.0 |
% |
State taxes (net of federal benefit) |
|
|
1.4 |
|
|
|
0.8 |
|
|
|
0.7 |
|
Stock-based compensation |
|
|
(1.7 |
) |
|
|
0.0 |
|
|
|
0.0 |
|
Non-deductible expenses |
|
|
0.2 |
|
|
|
(0.8 |
) |
|
|
(0.7 |
) |
Foreign tax differential |
|
|
(0.2 |
) |
|
|
(0.2 |
) |
|
|
(0.8 |
) |
Other |
|
|
1.1 |
|
|
|
0.0 |
|
|
|
0.0 |
|
Change in valuation allowance |
|
|
(34.8 |
) |
|
|
(33.8 |
) |
|
|
(33.2 |
) |
Total |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets are as follows (in thousands):
|
|
As of December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
|
|
Net operating loss carryforwards |
|
$ |
76,353 |
|
|
$ |
53,123 |
|
Tax credits |
|
|
13 |
|
|
|
13 |
|
Accruals and other |
|
|
17,696 |
|
|
|
7,612 |
|
Gross deferred tax assets |
|
|
94,062 |
|
|
|
60,748 |
|
Valuation allowance |
|
|
(93,666 |
) |
|
|
(60,304 |
) |
Net deferred tax assets |
|
|
396 |
|
|
|
444 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Property and equipment |
|
|
(396 |
) |
|
|
(444 |
) |
Total deferred tax liabilities |
|
|
(396 |
) |
|
|
(444 |
) |
Net deferred tax assets |
|
$ |
— |
|
|
$ |
— |
|
The Company has established a full valuation allowance against its deferred tax assets due to the uncertainty surrounding realization of such assets. The valuation allowance increased by $33.4 million and $30.8 million during the years ended December 31, 2016 and 2015, respectively.
As of December 31, 2016, the Company had net operating loss carryforwards of approximately $217.4 million and $51.4 million available to reduce future taxable income, if any, for Federal and state income tax purposes, respectively. The Company tracks a portion of its deferred tax assets attributable to stock option benefits in a separate memo account. Therefore these amounts are not included in the Company’s gross or net deferred tax assets. The benefit of these stock options will not be recorded in equity unless it reduces taxes payable. As of December 31, 2016, the portion of the Federal and state net operating loss related to stock option benefits is approximately $420,000. The U.S. Federal and California state net operating loss carryforwards will begin to expire in 2030.
As of December 31, 2016, the Company did not have any net operating loss carryforwards for foreign income tax purposes.
As of December 31, 2016, the Company had research and development credit carryforwards of approximately $3.9 million and $3.9 million available to reduce its future tax liability, if any, for Federal and California state income tax purposes, respectively. The Federal credit carryforwards begin to expire in 2030. California credit carryforwards have no expiration date. As of December 31, 2016, the Company has other tax credits of $0 that have no expiration period for the majority of the credits.
Utilization of the net operating loss carryforwards and credits may be subject to an annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization. No Section 382 study has been completed as of December 31, 2016.
As of December 31, 2016, the Company had unrecognized tax benefits of $7.8 million, none of which would currently affect the Company’s effective tax rate if recognized due to the Company’s deferred tax assets being fully offset by a valuation allowance. The Company has not accrued interest and penalties related to the unrecognized tax benefits reflected in the financial statements for the years ended December 31, 2016, 2015 and 2014. Unrecognized tax benefits are not expected to change in the next 12 months.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
|
|
Year ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
Unrecognized tax benefits, beginning of period |
|
$ |
11,429 |
|
|
$ |
5,661 |
|
|
$ |
2,100 |
|
Gross increases—current period tax positions |
|
|
782 |
|
|
|
2,993 |
|
|
|
1,874 |
|
Gross increases—prior period tax positions |
|
|
(4,420 |
) |
|
|
2,775 |
|
|
|
1,687 |
|
Unrecognized tax benefits, end of period |
|
$ |
7,791 |
|
|
$ |
11,429 |
|
|
$ |
5,661 |
|
The Company’s policy is to include penalties and interest expense related to income taxes as a component of tax expense. There was no interest expense or penalties related to unrecognized tax benefits recorded through December 31, 2016.
The Company’s major tax jurisdictions are the United States and California. All of the Company’s tax years will remain open for examination by the Federal and state tax authorities for three and four years, respectively, from the date of utilization of the net operating loss or research and development credit. The Company does not have any tax audits pending.
|
11. Geographic information
Revenue by country is determined based on the billing address of the customer. The following presents revenue by country for December 31, 2016, 2015 and 2014 (in thousands):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
United States |
|
$ |
20,758 |
|
|
$ |
5,432 |
|
|
$ |
1,067 |
|
Canada |
|
|
2,526 |
|
|
|
2,112 |
|
|
|
310 |
|
Rest of world |
|
|
1,764 |
|
|
|
834 |
|
|
|
227 |
|
Total revenue |
|
$ |
25,048 |
|
|
$ |
8,378 |
|
|
$ |
1,604 |
|
Long‑lived assets (net) by location are summarized as follows (in thousands):
|
|
December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
United States |
|
$ |
23,793 |
|
|
$ |
17,180 |
|
|
$ |
13,858 |
|
Chile |
|
|
— |
|
|
|
1,529 |
|
|
|
1,814 |
|
Total long-lived assets, net |
|
$ |
23,793 |
|
|
$ |
18,709 |
|
|
$ |
15,672 |
|
|
12. Selected Quarterly Data (Unaudited)
The following table contains quarterly financial information for 2016 and 2015. The Company believes that the following information reflects all normal recurring adjustments necessary for a fair statement of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period.
During the quarter ended September 30, 2016, the Company identified immaterial classification errors in the condensed consolidated financial statements for the quarters ended March 31, 2016 and June 30, 2016, related to the classification of asset impairment charges. Based on a quantitative and qualitative analysis of the errors as required by authoritative guidance, management concluded the errors had no material effect on any of the Company’s previously issued financial statements, were immaterial to the Company’s results for the first and second quarters of 2016, did not affect the full year’s results for 2016 and had no effect on the trend of financial statements.
As a result of the immaterial classification errors discussed above, the unaudited selected quarterly data for the quarters ended March 31, 2016 and June 30, 2016 reflect the following immaterial reclassification adjustments related to prior periods: reclassification for asset impairment charges from other income (expense) to general and administrative expense of $0.2 million for the quarter ended March 31, 2016; and reclassification impairment charges from other income (expense) to general and administrative expense of $0.7 million for the quarter ended June 30, 2016.
|
|
Three Months Ended |
|
|||||||||||||||||||||||||||||
(In thousands, except per share amounts) |
|
Dec 31, 2016 |
|
|
Sept 30, 2016 |
|
|
June 30, 2016 |
|
|
Mar 31, 2016 |
|
|
Dec 31, 2015 |
|
|
Sept 30, 2015 |
|
|
June 30, 2015 |
|
|
Mar 31, 2015 |
|
||||||||
Revenue |
|
$ |
9,236 |
|
|
$ |
6,276 |
|
|
$ |
5,581 |
|
|
$ |
3,955 |
|
|
$ |
3,161 |
|
|
$ |
2,187 |
|
|
$ |
1,801 |
|
|
$ |
1,229 |
|
Loss from operations |
|
$ |
(24,952 |
) |
|
$ |
(24,906 |
) |
|
$ |
(24,835 |
) |
|
$ |
(25,490 |
) |
|
$ |
(24,291 |
) |
|
$ |
(22,456 |
) |
|
$ |
(24,125 |
) |
|
$ |
(18,605 |
) |
Net loss |
|
$ |
(24,848 |
) |
|
$ |
(24,971 |
) |
|
$ |
(24,847 |
) |
|
$ |
(25,590 |
) |
|
$ |
(24,360 |
) |
|
$ |
(22,527 |
) |
|
$ |
(24,258 |
) |
|
$ |
(18,637 |
) |
Net loss attributable to common stockholders |
|
$ |
(24,848 |
) |
|
$ |
(24,971 |
) |
|
$ |
(24,847 |
) |
|
$ |
(25,590 |
) |
|
$ |
(24,360 |
) |
|
$ |
(22,527 |
) |
|
$ |
(24,258 |
) |
|
$ |
(18,637 |
) |
Net loss per share attributable to common stockholders, basic and diluted |
|
$ |
(0.69 |
) |
|
$ |
(0.77 |
) |
|
$ |
(0.77 |
) |
|
$ |
(0.80 |
) |
|
$ |
(0.76 |
) |
|
$ |
(0.71 |
) |
|
$ |
(0.76 |
) |
|
$ |
(1.09 |
) |
|
13. Subsequent Events
In January 2017, the Company acquired AltaVoice (formerly PatientCrossroads), a privately owned, patient-centered data company with a global platform for collecting, curating, coordinating, and delivering safeguarded data from patients and clinicians. The Company believes the acquisition will expand its genome network, which is designed to connect patients, clinicians, advocacy organizations, researchers, and therapeutic developers to accelerate the understanding, diagnosis, and treatment of hereditary disease.
The Company acquired all of the outstanding stock of AltaVoice from its shareholders. In connection with the acquisition, the Company paid $5,000,000 worth of its common stock, 641,126 shares, on January 23, 2017. In addition, the Company will pay the following additional consideration to the AltaVoice shareholders:
|
(a) |
$5,000,000 payable in shares of the Company’s common stock payable on March 31, 2018, based on the average share price of the Company’s common stock for the 30 days preceding March 31, 2018; and |
|
(b) |
Up to $5,000,000 payable in shares of the Company’s common stock if certain future revenue milestones are met. |
On March 15, 2017, the Company entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with a lender pursuant to which the Company borrowed an initial term loan of $40.0 million, and received net proceeds of approximately $39.7.0 million. Subject to certain conditions, the Company will also be eligible to borrow a second term loan of $20.0 million in the first quarter of 2018.
Term loans under the Loan and Security 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 a warrant to purchase 116,845 shares of common stock at an exercise price of $10.27 per share. The warrants have a term of ten years from the date of issuance and include a cashless exercise provision.
The Company’s obligations under the Loan and Security Agreement are subject to 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 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. The Company’s obligations under the Loan and Security Agreement are secured by a security interest on substantially all of the Company’s assets, excluding its intellectual property.
In connection with entering into the Loan and Security Agreement, the Company terminated its Loan Agreement entered into in July 2015 with a different lender and repaid in full the balance of its obligations under such agreement, approximately $12.1 million.
|
Principles of consolidation
The 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; the recoverability of long-lived assets; stock-based compensation expense; 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 and cash equivalents. 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 is also subject to credit risk from its accounts receivable related to its product sales. The Company does not perform evaluations of customers’ financial condition and does not require collateral.
As of December 31, 2016, substantially all of the Company’s revenue has been derived from sales of its assays. The majority of the Company’s accounts receivable arises from product sales in the United States. The majority of the Company’s tests to date have been delivered to physicians in the United States.
Significant customers are those that represent 10% or more of the Company’s total revenue for each year presented on the statements of operations. For each significant customer, revenue as a percentage of total revenue are as follows:
|
December 31, |
|
|||||||||
Customers |
2016 |
|
|
2015 |
|
|
2014 |
|
|||
Customer A |
* |
|
|
* |
|
|
|
15 |
% |
||
Customer B |
* |
|
|
|
13 |
% |
|
* |
|
||
Customer C |
|
11 |
% |
|
* |
|
|
* |
|
|
* |
Less than 10% of total revenue |
Cash equivalents
The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market funds and U.S. government agency securities.
Marketable securities
All marketable securities have been classified as “available-for-sale” and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities. Management determines the appropriate classification of its investments in debt securities at the time of purchase and reevaluates such designation at each balance sheet date. Short-term marketable securities have maturities less than 365 days at the balance sheet date. Unrealized gains and losses are excluded from earnings and are reported as a component of other comprehensive income (loss). Realized gains and losses and declines in fair value judged to be other than temporary, if any, on available-for-sale securities are included in other income (expense), net. The cost of securities sold is based on the specific-identification method. Interest on marketable securities and premium and discount amortization are included in other income (expense), net.
Restricted cash
Restricted cash consists of money market funds that serve as: collateral for a security deposit for the Company’s lease agreement for a production facility and headquarters entered into in September 2015; collateral for a credit card agreement at one of the Company’s financial institutions; and for securing a letter of credit as collateral for a facility sublease agreement.
Internal-use software
The Company capitalizes third-party costs incurred in the application development stage to design and implement internal-use software. Maintenance and training costs relating to internal-use software are expensed as incurred. Capitalized internal-use software costs are recorded as property and equipment and are amortized over estimated useful lives of up to three years on a straight line basis. Amortization of capitalized internal-use software costs is recorded as sales and marketing expense.
During the years ended December 31, 2016, 2015 and 2014, the Company capitalized $0, $1.5 million and $550,000, respectively, of internal‑use software development costs. Internal‑use software amortization was $1.3 million, $718,000, and $152,000, in 2016, 2015 and 2014, respectively. The carrying value of capitalized internal-use software was $110,000 and $1.4 million at December 31, 2016 and 2015, respectively. The weighted average remaining useful life of capitalized internal-use software at December 31, 2016 was 1 month.
Leases
The Company rents its facilities under operating lease agreements and recognizes related rent expense on a straight-line basis over the term of the applicable lease agreement. Some of the lease agreements contain rent holidays, scheduled rent increases, lease incentives, and renewal options. Rent holidays and scheduled rent increases are included in the determination of rent expense to be recorded over the lease term. Lease incentives are recognized as a reduction of rent expense on a straight-line basis over the term of the lease. Renewals are not assumed in the determination of the lease term unless they are deemed to be reasonably assured at the inception of the lease. The Company recognizes rent expense beginning on the date it obtains the legal right to use and control the leased space.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight‑line method over the estimated useful lives of the assets, generally between three and seven years. Leasehold improvements are amortized using the straight‑line method over the shorter of the estimated useful life of the asset or the term of the lease. Amortization expense of assets acquired through capital leases is included in depreciation and amortization expense in the consolidated statements of operations. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheet and any resulting gain or loss is reflected in the statements of operations in the period realized.
The useful lives of the property and equipment are as follows:
Furniture and fixtures |
|
7 years |
Automobiles |
|
7 years |
Laboratory equipment |
|
5 years |
Computer equipment |
|
3 years |
Software |
|
3 years |
Leasehold improvements |
|
Shorter of lease term or estimated useful life |
Long‑lived assets
The Company reviews long‑lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss is recognized when the total estimated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Impairment, if any, is assessed using discounted cash flows or other appropriate measures of fair value. The Company recorded asset impairment losses of $1.0 million in 2016 relating to leasehold improvements and to the shutdown of the Company’s Chilean operations. All impairment losses were charged to general and administrative expense. There were no impairment losses recorded for any other period presented.
Fair value of financial instruments
The Company’s financial instruments consist principally of cash and cash equivalents, marketable securities, accounts payable, capital leases and debt relating to equipment financing. The carrying amounts of certain of these financial instruments, including cash and cash equivalents, and accounts payable, approximate fair value due to their short maturities. Based on borrowing rates available to the Company, the carrying value of capital leases approximates fair value.
See Note 4, “Fair value measurements” for further information on the fair value of the Company’s financial instruments.
Revenue recognition
Revenue is generated 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 was de minimis for all periods presented.
Revenue is recognized when persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured. The criterion for whether the fee is fixed or determinable and whether collectability is reasonably assured are based on management’s judgments. When evaluating collectability, in situations where contracted reimbursement coverage does not exist, the Company considers whether the Company has sufficient history to reliably estimate a payer’s individual payment patterns. The Company reviews the number of tests paid against the number of tests billed over at least several months of payment history and the payer’s outstanding balance for unpaid tests to determine whether payments are being made at a consistently high percentage of tests billed and at appropriate amounts given the amount billed. For most payers, the Company has not been able to demonstrate a predictable pattern of collectability, and therefore recognizes revenue when payment is received. For payers who have demonstrated a consistent pattern of payment of tests billed at appropriate amounts, the Company recognizes revenue, at estimated realizable amounts, upon delivery of test results.
Collaboration revenue related to achievement of specified milestones is recognized in accordance with ASC Topic 605-28, Revenue Recognition — Milestone Method. Under the milestone method, a payment that is contingent upon the achievement of a substantive milestone is recognized in its entirety in the period in which the milestone is achieved. A milestone is an event (i) that can be achieved based in whole or in part on either the Company’s performance or on the occurrence of a specific outcome resulting from the Company’s performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved, and (iii) that would result in additional payments being due to the Company. The determination that a milestone is substantive is judgmental and is made at the inception of the arrangement. Milestones are considered substantive when the consideration earned from the achievement of the milestone is (i) commensurate with either the Company’s performance to achieve the milestone or the enhancement of value of the item delivered as a result of a specific outcome resulting from the Company’s performance to achieve the milestone, (ii) relates solely to past performance and (iii) is reasonable relative to all deliverables and payment terms in the arrangement.
Cost of revenue
Cost of revenue reflects the aggregate costs incurred in delivering the genetic testing results to clinicians and includes expenses for personnel costs including stock-based compensation, materials and supplies, equipment and infrastructure expenses associated with testing, shipping and handling costs and allocated overhead including rent, equipment depreciation and utilities. Costs associated with performing the Company’s test are recorded as the test is processed regardless of whether and when revenue is recognized with respect to that test.
Income taxes
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.
Stock‑based compensation
The Company measures its stock-based payment awards made to employees and directors based on the estimated fair values of the awards and recognizes the compensation expense over the requisite service period. The Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock option awards and employee stock purchase plan (“ESPP”) purchases. The fair value of restricted stock unit (“RSU”) awards with time-based vesting terms is based on the grant date share price. The Company grants performance-based restricted stock unit (“PRSU”) awards to certain employees which vest upon the achievement of certain performance conditions, subject to the employees’ continued service relationship with the Company. The probability of vesting is assessed at each reporting period and compensation cost is adjusted based on this probability assessment. The Company recognizes such compensation expense on a straight-line basis.
Stock-based compensation expense for awards without a performance condition is recognized using the straight-line method. Stock-based compensation expense is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. As such, the Company’s stock-based compensation is reduced for the estimated forfeitures at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
The Company accounts for compensation expense related to stock options granted to non-employees based on the fair values estimated using the Black-Scholes model. Stock options granted to non-employees are re-measured at each reporting date until the award is vested.
Advertising
Advertising expenses are expensed as incurred. The Company recorded advertising expenses of $0.5 million, $0.4 million and $11,000 in 2016, 2015 and 2014, respectively.
Comprehensive loss
Comprehensive loss is composed of two components: net loss and other comprehensive loss. Other comprehensive loss refers to gains and losses that under U.S. GAAP are recorded as an element of stockholders’ equity (deficit), but are excluded from net loss. The Company’s other comprehensive loss consists of unrealized gains and losses on investments in available‑for‑sale securities.
Net loss per share attributable to common stockholders
Basic net loss per share attributable to common stockholders is calculated by dividing net loss attributable to common stockholders by the weighted‑average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted‑average number of common share equivalents outstanding for the period determined using the treasury stock method. Potentially dilutive securities consisting of convertible preferred stock, options to purchase common stock and restricted stock awards are considered to be common stock equivalents but were excluded from the calculation of diluted net loss per share attributable to common stockholders because their effect would be antidilutive for all periods presented. Common shares subject to repurchase are excluded from weighted‑average shares. For the years ended December 31, 2016, 2015 and 2014; zero, 4,659 and 23,903 shares subject to repurchase, respectively, are excluded from the basic loss per share calculation.
Recent accounting pronouncements
In December 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this ASU apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. ASU 2016-18 is effective for annual and interim periods beginning on or after December 15, 2018 and early adoption is permitted. The Company has elected to early adopt ASU 2016-18 effective January 1, 2017 and the adoption of this standard is not expected to have a material effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) — Classification of Certain Cash Receipts and Cash Payments. The ASU is intended to improve financial reporting by reducing diversity in practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for annual and interim periods beginning on or after December 15, 2016 and early adoption is permitted. The Company has elected to early adopt ASU 2016-15 effective January 1, 2017 and the adoption of this standard is not expected to have a material effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. ASU-2016-13 is effective for annual and interim periods beginning on or after December 15, 2019 and early adoption is permitted. The adoption of this standard is not expected to have a material effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting.
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies accounting for share-based payment award transactions. ASU-2016-09 is effective for annual and interim periods beginning on or after December 15, 2016 and early adoption is permitted. The Company will adopt ASU 2016-09 in the first quarter of 2017 and the adoption of this standard is not expected to have a material effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting.
In February 2016, the FASB issued ASU 2016-02, Leases (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. Lessor accounting under ASU 2016-02 is largely unchanged. ASU 2016-02 is effective for annual and interim periods beginning on or after December 15, 2018 and early adoption is permitted. Under ASU 2016-02, lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Lessees and lessors may not apply a full retrospective transition approach. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements, related disclosures and ongoing financial reporting. The Company has not yet selected an implementation date for ASU 2016-02.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August, 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606). ASU 2015-14 defers the effective date of ASU 2014-09 for public business entities by one year to annual reporting periods beginning after December 15, 2017. Therefore, the new standard will become effective for the Company on January 1, 2018 and early application is permitted for periods beginning on or after January 1, 2017. The new standard permits the use of two methods of adoption: retrospectively to each prior reporting period presented (the full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). The Company plans to implement ASU 2014-09 effective January 1, 2018 using the modified retrospective method. While the Company continues to evaluate the effect that ASU 2014-09 will have on its consolidated financial statements, related disclosures and ongoing financial reporting, it anticipates the adoption of ASC 2014-09 will result in changes in the timing of revenue recognition. The Company currently recognizes revenue for the majority of third-party payers on a cash basis. Under ASU 2014-09, the Company anticipates it will recognize revenue from third-party payers, with whom it has contracts, on an accrual basis. Therefore, the timing of revenue recognition for third-party payers will be accelerated under ASC-2014-09, in comparison to the Company’s current revenue recognition practices.
In August 2014, the FASB issued ASU No. 2014-15 (Subtopic 205- 40), Presentation of Financial Statements—Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), which provides guidance about management’s responsibility to evaluate whether there is substantial doubt about the Company’s ability to continue as a going concern and to provide related footnote disclosure. ASU 2014-15 was effective in the fourth quarter of 2016. The adoption of this standard did not have an effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting. However, in future periods, the Company may be required to provide additional footnote disclosure pursuant to ASU 2014-15, if there is substantial doubt about the Company’s ability to continue as a going concern.
|
|
December 31, |
|
|||||||||
Customers |
2016 |
|
|
2015 |
|
|
2014 |
|
|||
Customer A |
* |
|
|
* |
|
|
|
15 |
% |
||
Customer B |
* |
|
|
|
13 |
% |
|
* |
|
||
Customer C |
|
11 |
% |
|
* |
|
|
* |
|
|
* |
Less than 10% of total revenue |
Furniture and fixtures |
|
7 years |
Automobiles |
|
7 years |
Laboratory equipment |
|
5 years |
Computer equipment |
|
3 years |
Software |
|
3 years |
Leasehold improvements |
|
Shorter of lease term or estimated useful life |
|
The following is a summary of cash equivalents and marketable securities (in thousands).
|
|
December 31, 2016 |
|
|||||||||||||
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Estimated Fair Value |
|
||||
Money market funds |
|
$ |
19,457 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
19,457 |
|
U.S. treasury notes |
|
|
11,515 |
|
|
|
2 |
|
|
|
— |
|
|
|
11,517 |
|
U.S. government agency securities |
|
|
14,283 |
|
|
|
— |
|
|
|
(2 |
) |
|
|
14,281 |
|
|
|
$ |
45,255 |
|
|
$ |
2 |
|
|
$ |
(2 |
) |
|
$ |
45,255 |
|
Reported as: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14,760 |
|
Restricted cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,697 |
|
Marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,798 |
|
Total cash equivalents, restricted cash and marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
45,255 |
|
|
|
December 31, 2015 |
|
|||||||||||||
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Estimated Fair Value |
|
||||
Money market funds |
|
$ |
39,998 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
39,998 |
|
U.S. treasury notes |
|
|
4,006 |
|
|
|
— |
|
|
|
— |
|
|
|
4,006 |
|
U.S. government agency securities |
|
|
65,586 |
|
|
|
1 |
|
|
|
(16 |
) |
|
|
65,571 |
|
|
|
$ |
109,590 |
|
|
$ |
1 |
|
|
$ |
(16 |
) |
|
$ |
109,575 |
|
Reported as: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
50,964 |
|
Restricted cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,831 |
|
Marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,780 |
|
Total cash equivalents, restricted cash and marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
109,575 |
|
Property and equipment consisted of the following (in thousands):
|
|
December 31, 2016 |
|
|
December 31, 2015 |
|
||
Leasehold improvements |
|
$ |
1,256 |
|
|
$ |
2,548 |
|
Laboratory equipment |
|
|
13,644 |
|
|
|
10,461 |
|
Equipment under capital lease |
|
|
5,871 |
|
|
|
8,224 |
|
Computer equipment |
|
|
2,514 |
|
|
|
2,397 |
|
Software |
|
|
2,489 |
|
|
|
2,368 |
|
Furniture and fixtures |
|
|
238 |
|
|
|
210 |
|
Automobiles |
|
|
20 |
|
|
|
20 |
|
Construction-in-progress |
|
|
12,229 |
|
|
|
1,202 |
|
Total property and equipment, gross |
|
|
38,261 |
|
|
|
27,430 |
|
Accumulated depreciation and amortization |
|
|
(14,468 |
) |
|
|
(8,721 |
) |
Total property and equipment, net |
|
$ |
23,793 |
|
|
$ |
18,709 |
|
Accrued liabilities consisted of the following (in thousands):
|
|
December 31, 2016 |
|
|
December 31, 2015 |
|
||
Accrued compensation and related expenses |
|
$ |
3,072 |
|
|
$ |
2,307 |
|
Accrued laboratory materials purchases |
|
|
338 |
|
|
|
426 |
|
Accrued professional services |
|
|
446 |
|
|
|
272 |
|
Accrued construction in progress |
|
|
1,215 |
|
|
|
— |
|
Lease incentive obligation, current |
|
|
468 |
|
|
|
— |
|
Other |
|
|
1,172 |
|
|
|
1,248 |
|
Total accrued liabilities |
|
$ |
6,711 |
|
|
$ |
4,253 |
|
Other long-term liabilities consisted of the following (in thousands):
|
|
December 31, 2016 |
|
|
December 31, 2015 |
|
||
Lease incentive obligation, non-current |
|
$ |
4,243 |
|
|
$ |
107 |
|
Deferred rent, non-current |
|
|
3,419 |
|
|
|
98 |
|
Other non-current liabilities |
|
|
175 |
|
|
|
138 |
|
Total other long-term liabilities |
|
$ |
7,837 |
|
|
$ |
343 |
|
|
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 December 31, 2016 and 2015 (in thousands):
|
|
December 31, 2016 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
19,457 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
19,457 |
|
U.S. treasury notes |
|
|
11,517 |
|
|
|
— |
|
|
|
— |
|
|
|
11,517 |
|
U.S. government agency securities |
|
|
— |
|
|
|
14,281 |
|
|
|
— |
|
|
|
14,281 |
|
Total financial assets |
|
$ |
30,974 |
|
|
$ |
14,281 |
|
|
$ |
— |
|
|
$ |
45,255 |
|
|
|
December 31, 2015 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
39,998 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
39,998 |
|
U.S. treasury notes |
|
|
4,006 |
|
|
|
— |
|
|
|
— |
|
|
|
4,006 |
|
U.S. government agency securities |
|
|
— |
|
|
|
65,571 |
|
|
|
— |
|
|
|
65,571 |
|
Total financial assets |
|
$ |
44,004 |
|
|
$ |
65,571 |
|
|
$ |
— |
|
|
$ |
109,575 |
|
The carrying amount and the estimated fair value of the Company’s outstanding debt at December 31, 2016, and 2015, are as follows (in thousands):
|
|
December 31, 2016 |
|
|
December 31, 2015 |
|
||||||||||
|
|
Carrying Amount |
|
|
Fair Value |
|
|
Carrying Amount |
|
|
Fair Value |
|
||||
Debt |
|
$ |
12,102 |
|
|
$ |
11,905 |
|
|
$ |
7,040 |
|
|
$ |
6,952 |
|
|
Future minimum payments under non‑cancelable operating leases as of December 31, 2016 are as follows (in thousands):
Year ending December 31, |
|
Amounts |
|
|
2017 |
|
$ |
7,043 |
|
2018 |
|
|
6,898 |
|
2019 |
|
|
6,946 |
|
2020 |
|
|
6,917 |
|
2021 |
|
|
7,079 |
|
Thereafter |
|
|
37,137 |
|
Total minimum lease payments |
|
$ |
72,020 |
|
Future payments under the Loan Agreement as of December 31, 2016 are as follows (in thousands):
Year ending December 31, |
|
Amounts |
|
|
2017 |
|
$ |
3,728 |
|
2018 |
|
|
3,619 |
|
2019 |
|
|
3,509 |
|
2020 |
|
|
1,997 |
|
Total remaining debt payments |
|
|
12,853 |
|
Less: amount representing debt discount |
|
|
(34 |
) |
Less: amount representing interest |
|
|
(717 |
) |
Present value of remaining debt payments |
|
|
12,102 |
|
Less: current portion |
|
|
(3,381 |
) |
Total non-current debt obligation |
|
$ |
8,721 |
|
Future payments under the capital leases as of December 31, 2016 are as follows (in thousands):
Year ending December 31, |
|
Amounts |
|
|
2017 |
|
$ |
1,350 |
|
2018 |
|
|
269 |
|
Total capital lease obligations |
|
|
1,619 |
|
Less: amount representing interest |
|
|
(44 |
) |
Present value of net minimum capital lease payments |
|
|
1,575 |
|
Less: current portion |
|
|
(1,309 |
) |
Total non-current capital lease obligations |
|
$ |
266 |
|
|
Convertible preferred stock as of December 31, 2014 consisted of the following (in thousands, except share and per share data):
|
|
Shares Authorized |
|
|
Original issue price |
|
|
Shares issued and outstanding |
|
|
Proceeds, net of issuance costs |
|
||||
Series A |
|
|
11,693,179 |
|
|
$ |
0.44 |
|
|
|
11,693,179 |
|
|
$ |
5,109 |
|
Series B |
|
|
4,181,818 |
|
|
|
0.55 |
|
|
|
4,181,818 |
|
|
|
2,253 |
|
Series C |
|
|
31,112,750 |
|
|
|
0.95 |
|
|
|
31,112,750 |
|
|
|
29,393 |
|
Series D |
|
|
8,000,000 |
|
|
|
1.25 |
|
|
|
8,000,000 |
|
|
|
9,933 |
|
Series E |
|
|
26,143,777 |
|
|
|
1.53 |
|
|
|
26,143,777 |
|
|
|
39,886 |
|
Series F |
|
|
60,000,000 |
|
|
|
2.00 |
|
|
|
60,000,000 |
|
|
|
115,731 |
|
Balance at December 31, 2014 |
|
|
141,131,524 |
|
|
|
|
|
|
|
141,131,524 |
|
|
$ |
202,305 |
|
|
|
|
As of December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Options issued and outstanding |
|
|
4,490,662 |
|
|
|
3,659,713 |
|
RSU awards issued and outstanding |
|
|
1,421,757 |
|
|
|
— |
|
Shares available for grant under stock option plan |
|
|
1,375,766 |
|
|
|
2,268,938 |
|
Shares reserved for issuance under the 2015 Employee Stock Purchase Plan |
|
|
274,686 |
|
|
|
325,000 |
|
Total |
|
|
7,562,871 |
|
|
|
6,253,651 |
|
|
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, 2015 |
|
|
2,268,938 |
|
|
|
3,659,713 |
|
|
$ |
7.38 |
|
|
|
8.89 |
|
|
$ |
7,099 |
|
Additional shares reserved |
|
|
1,277,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted |
|
|
(1,501,461 |
) |
|
|
1,501,461 |
|
|
$ |
9.73 |
|
|
|
|
|
|
|
|
|
Options cancelled |
|
|
426,596 |
|
|
|
(426,596 |
) |
|
$ |
9.36 |
|
|
|
|
|
|
|
|
|
Options exercised |
|
|
|
|
|
|
(243,916 |
) |
|
$ |
3.03 |
|
|
|
|
|
|
|
|
|
RSUs granted |
|
|
(677,267 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRSUs granted |
|
|
(575,064 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs cancelled |
|
|
111,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRSUs cancelled |
|
|
45,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2016 |
|
|
1,375,766 |
|
|
|
4,490,662 |
|
|
$ |
8.21 |
|
|
|
8.11 |
|
|
$ |
5,312 |
|
Options exercisable at December 31, 2016 |
|
|
|
|
|
|
1,611,780 |
|
|
$ |
6.42 |
|
|
|
6.81 |
|
|
$ |
4,096 |
|
Options vested and expected to vest at December 31, 2016 |
|
|
|
|
|
|
4,008,578 |
|
|
$ |
8.07 |
|
|
|
8.01 |
|
|
$ |
5,170 |
|
The following table summarizes RSU activity for the year ended December 31, 2016:
|
|
Number of Shares |
|
|
Weighted- Average Grant Date Fair Value |
|
||
Balance at December 31, 2015 |
|
|
482,818 |
|
|
$ |
10.71 |
|
RSUs granted |
|
|
677,267 |
|
|
$ |
9.80 |
|
PRSUs granted |
|
|
575,064 |
|
|
$ |
6.52 |
|
RSUs vested |
|
|
(156,810 |
) |
|
$ |
10.55 |
|
RSUs cancelled |
|
|
(111,523 |
) |
|
$ |
10.31 |
|
PRSUs cancelled |
|
|
(45,059 |
) |
|
$ |
6.40 |
|
Balance at December 31, 2016 |
|
|
1,421,757 |
|
|
$ |
8.77 |
|
The following table summarizes stock‑based compensation expense for the years ended December 31, 2016, 2015 and 2014 included in the statements of operations as follows (in thousands):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
Cost of revenue |
|
$ |
1,353 |
|
|
$ |
368 |
|
|
$ |
102 |
|
Research and development |
|
|
4,976 |
|
|
|
1,545 |
|
|
|
382 |
|
Selling and marketing |
|
|
1,709 |
|
|
|
688 |
|
|
|
216 |
|
General and administrative |
|
|
2,661 |
|
|
|
876 |
|
|
|
271 |
|
Total stock-based compensation expense |
|
$ |
10,699 |
|
|
$ |
3,477 |
|
|
$ |
971 |
|
The fair value of the shares purchased pursuant to the ESPP was estimated using the following assumptions:
|
|
Year Ended December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Expected term (in years) |
|
|
0.50 |
|
|
|
0.50 |
|
Expected volatility |
|
|
66.31 |
% |
|
|
74.13 |
% |
Risk-free interest rate |
|
|
0.50 |
% |
|
|
0.33 |
% |
Dividend yield |
|
— |
|
|
— |
|
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 valuation model based on the following assumptions:
|
|
Year Ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
Expected term (in years) |
|
6.03 |
|
|
6.03 |
|
|
6.03 |
|
|||
Expected volatility |
|
|
71.42% |
|
|
|
68.2 – 79.7 |
% |
|
|
83.8 – 86.6 |
% |
Risk-free interest rate |
|
|
1.37% |
|
|
|
1.28 – 1.86 |
% |
|
|
1.53 – 1.91 |
% |
Dividend yield |
|
|
— |
|
|
|
— |
|
|
|
— |
|
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:
|
|
Year Ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
Expected term (in years) |
|
|
6.25 – 10.00 |
|
|
|
7.25 – 9.82 |
|
|
|
9.37 – 9.40 |
|
Expected volatility |
|
|
76.92% |
|
|
|
69.9 – 78.70% |
|
|
|
83.80% |
|
Risk-free interest rate |
|
|
1.55 – 2.37% |
|
|
|
1.86 – 2.25% |
|
|
|
1.99 – 2.41% |
|
Dividend yield |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
The components of loss before income taxes by U.S. and foreign jurisdictions are as follows (in thousands):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
United States |
|
$ |
99,793 |
|
|
$ |
88,112 |
|
|
$ |
46,328 |
|
Foreign |
|
|
463 |
|
|
|
1,670 |
|
|
|
1,164 |
|
Total |
|
$ |
100,256 |
|
|
$ |
89,782 |
|
|
$ |
47,492 |
|
The following table presents a reconciliation of the tax expense computed at the statutory federal rate and the Company’s tax expense for the periods presented:
|
|
Year Ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
U.S. federal taxes at statutory rate |
|
|
34.0 |
% |
|
|
34.0 |
% |
|
|
34.0 |
% |
State taxes (net of federal benefit) |
|
|
1.4 |
|
|
|
0.8 |
|
|
|
0.7 |
|
Stock-based compensation |
|
|
(1.7 |
) |
|
|
0.0 |
|
|
|
0.0 |
|
Non-deductible expenses |
|
|
0.2 |
|
|
|
(0.8 |
) |
|
|
(0.7 |
) |
Foreign tax differential |
|
|
(0.2 |
) |
|
|
(0.2 |
) |
|
|
(0.8 |
) |
Other |
|
|
1.1 |
|
|
|
0.0 |
|
|
|
0.0 |
|
Change in valuation allowance |
|
|
(34.8 |
) |
|
|
(33.8 |
) |
|
|
(33.2 |
) |
Total |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets are as follows (in thousands):
|
|
As of December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
|
|
Net operating loss carryforwards |
|
$ |
76,353 |
|
|
$ |
53,123 |
|
Tax credits |
|
|
13 |
|
|
|
13 |
|
Accruals and other |
|
|
17,696 |
|
|
|
7,612 |
|
Gross deferred tax assets |
|
|
94,062 |
|
|
|
60,748 |
|
Valuation allowance |
|
|
(93,666 |
) |
|
|
(60,304 |
) |
Net deferred tax assets |
|
|
396 |
|
|
|
444 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Property and equipment |
|
|
(396 |
) |
|
|
(444 |
) |
Total deferred tax liabilities |
|
|
(396 |
) |
|
|
(444 |
) |
Net deferred tax assets |
|
$ |
— |
|
|
$ |
— |
|
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
|
|
Year ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
Unrecognized tax benefits, beginning of period |
|
$ |
11,429 |
|
|
$ |
5,661 |
|
|
$ |
2,100 |
|
Gross increases—current period tax positions |
|
|
782 |
|
|
|
2,993 |
|
|
|
1,874 |
|
Gross increases—prior period tax positions |
|
|
(4,420 |
) |
|
|
2,775 |
|
|
|
1,687 |
|
Unrecognized tax benefits, end of period |
|
$ |
7,791 |
|
|
$ |
11,429 |
|
|
$ |
5,661 |
|
|
Revenue by country is determined based on the billing address of the customer. The following presents revenue by country for December 31, 2016, 2015 and 2014 (in thousands):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
United States |
|
$ |
20,758 |
|
|
$ |
5,432 |
|
|
$ |
1,067 |
|
Canada |
|
|
2,526 |
|
|
|
2,112 |
|
|
|
310 |
|
Rest of world |
|
|
1,764 |
|
|
|
834 |
|
|
|
227 |
|
Total revenue |
|
$ |
25,048 |
|
|
$ |
8,378 |
|
|
$ |
1,604 |
|
Long‑lived assets (net) by location are summarized as follows (in thousands):
|
|
December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
United States |
|
$ |
23,793 |
|
|
$ |
17,180 |
|
|
$ |
13,858 |
|
Chile |
|
|
— |
|
|
|
1,529 |
|
|
|
1,814 |
|
Total long-lived assets, net |
|
$ |
23,793 |
|
|
$ |
18,709 |
|
|
$ |
15,672 |
|
|
|
|
Three Months Ended |
|
|||||||||||||||||||||||||||||
(In thousands, except per share amounts) |
|
Dec 31, 2016 |
|
|
Sept 30, 2016 |
|
|
June 30, 2016 |
|
|
Mar 31, 2016 |
|
|
Dec 31, 2015 |
|
|
Sept 30, 2015 |
|
|
June 30, 2015 |
|
|
Mar 31, 2015 |
|
||||||||
Revenue |
|
$ |
9,236 |
|
|
$ |
6,276 |
|
|
$ |
5,581 |
|
|
$ |
3,955 |
|
|
$ |
3,161 |
|
|
$ |
2,187 |
|
|
$ |
1,801 |
|
|
$ |
1,229 |
|
Loss from operations |
|
$ |
(24,952 |
) |
|
$ |
(24,906 |
) |
|
$ |
(24,835 |
) |
|
$ |
(25,490 |
) |
|
$ |
(24,291 |
) |
|
$ |
(22,456 |
) |
|
$ |
(24,125 |
) |
|
$ |
(18,605 |
) |
Net loss |
|
$ |
(24,848 |
) |
|
$ |
(24,971 |
) |
|
$ |
(24,847 |
) |
|
$ |
(25,590 |
) |
|
$ |
(24,360 |
) |
|
$ |
(22,527 |
) |
|
$ |
(24,258 |
) |
|
$ |
(18,637 |
) |
Net loss attributable to common stockholders |
|
$ |
(24,848 |
) |
|
$ |
(24,971 |
) |
|
$ |
(24,847 |
) |
|
$ |
(25,590 |
) |
|
$ |
(24,360 |
) |
|
$ |
(22,527 |
) |
|
$ |
(24,258 |
) |
|
$ |
(18,637 |
) |
Net loss per share attributable to common stockholders, basic and diluted |
|
$ |
(0.69 |
) |
|
$ |
(0.77 |
) |
|
$ |
(0.77 |
) |
|
$ |
(0.80 |
) |
|
$ |
(0.76 |
) |
|
$ |
(0.71 |
) |
|
$ |
(0.76 |
) |
|
$ |
(1.09 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|