# Natera, Inc. (NTRA) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Natera, Inc.'s 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1604821/000155837024002083/ntra-20231231x10k.htm
Accession: 0001558370-24-002083
Filing date: 2024-02-29
Report date: 2023-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/NTRA/
All MD&A years: /company/NTRA/mda/
Previous year: /company/NTRA/mda/fy2022/ (FY 2022)
Next year: /company/NTRA/mda/fy2024/ (FY 2024)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and related notes included in Part II, Item 8 of this report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in “Risk Factors” included elsewhere in this report.

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Overview

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

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We currently provide a comprehensive suite of products in women’s health, as well as our oncology and organ health products, and our Constellation cloud-based platform. We generate a majority of our revenues from the sale of Panorama, our non-invasive prenatal test, or NIPT, as well as Horizon, our Carrier Screening, or HCS, test. In addition to Panorama and Horizon, our product offerings in women’s health include Spectrum Preimplantation Genetics, our Anora miscarriage test, and Vistara single-gene NIPT, as well as our Empower hereditary cancer screening test, which we also plan to offer to oncologists through our oncology sales channel. We also offer our Signatera molecular residual disease test for oncology applications, which we commercialize as a test run in our CLIA (as defined below) laboratory and offer on a research use only basis to research laboratories and pharmaceutical companies; and our Prospera organ transplant assessment tests.

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

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In addition to offering tests to be performed at our laboratories, either directly or through our laboratory distribution partners, we also establish licensing arrangements with laboratories under Constellation, our cloud-based distribution model, whereby our laboratory licensees run the molecular workflows themselves and then access our bioinformatics algorithms through our cloud-based software. This cloud-based distribution model results in lower revenues and gross profit per test than cases in which we process a test ourselves; however, because we do not incur the costs of processing the tests, our costs per test under this model are also lower. We began entering into these licensing arrangements starting in the fourth quarter of 2015.

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The principal focus of our commercial operations is to offer our tests through both our direct sales force and laboratory distribution partners, and our Constellation licensees under our cloud-based distribution model. The number of tests that we accession is a key indicator that we use to assess our business. A test is accessioned when we receive the test at our laboratory, the relevant information about the test is entered into our computer system, and the test sample is routed into the appropriate workflow. This number is a subset of the number of tests that we process, which includes tests distributed through our Constellation licensees. The number of tests that we process is a key metric as it tracks overall

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volume growth, particularly as our laboratory partners may transition from sending samples to our laboratory to our cloud-based distribution model, as a result of which our tests accessioned would decrease but our tests processed would remain unchanged.

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During the year ended December 31, 2023, we processed approximately 2,496,100 tests, comprised of approximately 2,426,500 tests accessioned in our laboratories. During the year ended December 31, 2022, we processed approximately 2,066,500 tests, comprised of approximately 2,004,000 tests accessioned in our laboratories. During the year ended December 31, 2021, we processed approximately 1,570,000 tests, comprised of approximately 1,513,400 tests accessioned in our laboratories. This increase in volume represents continuous commercial growth of Panorama and HCS, both as tests performed in our laboratories as well as through our Constellation software platform.

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The percent of our revenues attributable to our U.S. direct sales force were 91%, 89% and 89% for the years ended December 31, 2023, 2022, 2021, respectively. The percent of our revenues attributable to U.S. laboratory partners for the year ended the year ended December 31, 2023, 2022, 2021, was 6%, 7% and 5%, respectively. The percent of our revenues attributable to international laboratory partners and other international sales was 3%, 4% and 6% for the years ended December 31, 2023, 2022 and 2021, respectively.

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For the year ended December 31, 2023, total revenues were $1,082.6 million, compared to $820.2 million and $625.5 million in the years ended December 31, 2022 and 2021, respectively. Product revenues generated from our testing accounted for $1,068.5 million or 99% of total revenues for the year ended December 31, 2023, compared to $797.3 million or 97% of total revenues for the year ended December 31, 2022 and $580.1 million or 93% of total revenues for the year ended December 31, 2021. For the years ended December 31, 2023, 2022, and 2021, there were no customers exceeding 10% of the total revenues on an individual basis. Revenues from customers outside the United States were $34.9 million, representing 3% of total revenues for the year ended December 31, 2023. For the year ended December 31, 2022, revenues from customers outside the United States were $34.4 million, representing approximately 4% of total revenues. For the year ended December 31, 2021, revenues from customers outside the United States were $34.6 million, representing approximately 6% of total revenues.

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Our net losses for the years ended December 31, 2023, 2022, and 2021, were $434.8 million, $547.8 million, and $471.7 million, respectively. This included non-cash stock compensation expense of $191.8 million, $152.4 million, and $115.2 million for the years ended December 31, 2023, 2022, and 2021, respectively. As of December 31, 2023, we had an accumulated deficit of $2.4 billion.

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Components of the Results of Operations

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The section of this Management’s Discussion and Analysis generally discusses year-to-year comparisons between 2023 and 2022. Discussions of year-to-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 1, 2023.

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Revenues

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Product Revenues

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

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

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

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

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

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Licensing and Other Revenues

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Revenues recognized from tests processed through our Constellation model, and from our strategic partnership agreements (which during the three years ended December 31, 2023, 2022 and 2021 comprised the Qiagen, BGI Genomics Co. Ltd., and Foundation Medicine, Inc. agreements) are reported in licensing and other revenues. We also recognize licensing revenues through the licensing and the provisioning of services to support the use of our proprietary technology by licensees under our cloud-based distribution model. As of December 31, 2023, we are recognizing revenues on 15 licensing and service arrangements with laboratories under our Constellation model.

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

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Cost of Product Revenues

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

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

Cost of Licensing and Other Revenues

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

We currently have 15 revenue generating licensing and service agreements with laboratories under our Constellation distribution model. We consider our cost of licensing and other revenues for the Constellation software platform to be relatively low, and therefore we expect its associated gross margin is higher. We expect our cost of licensing will increase in relation to volume growth.

Expenses

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Research and Development

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

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Selling, General and Administrative

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

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Interest Expense

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

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Interest Income and Other (Expense) Income, Net

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

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Critical Accounting Policies

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

Recent Accounting Pronouncements

We believe that the impact of accounting standards updates recently issued that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

Revenue Recognition

We recognize revenues when, or as, performance obligations in the contracts are satisfied, in the amount reflecting the expected consideration to be received from the goods or services transferred to the customers.

Product Revenues

Product revenues are derived by performing genetic testing services and our performance obligation is complete when test results are delivered to a clinic or patient, who are considered the customer for such services. We enter into contracts with insurance carriers with primarily payment terms related to tests provided to the patients who have health insurance coverage. Insurance carriers are considered to be third-party payers on behalf of the patients, and the patients are considered as the customers who receive genetic test services. Tests may be billed to insurance carriers, patients, or a combination of insurance carriers and patients. Further, we sell tests to a number of domestic and international laboratory partners and identify the laboratory partners as customers provided that there is a test services agreement between us and them.

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Licensing and Other Revenues

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We recognize licensing revenues from our Constellation cloud-based distribution model, pursuant to which we grant licenses to laboratories to access our proprietary bioinformatics algorithms through our cloud-based software to analyze the results of molecular workflows that such licensees develop and perform in their laboratories.  In addition, the royalties we receive from our arrangement with a prenatal paternity licensee are recognized Constellation revenues.

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We also recognize revenues from our strategic partnership agreements. The performance obligations are unique in each agreement and would typically require the license of intellectual property, development services, support services, and future test work. We also record revenues from the sale of IVD kits in licensing and other revenues.

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Stock-Based Compensation Attributable to Performance-Based Awards

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Stock-based compensation expense for stock options with performance metrics is calculated based upon probability of achievement of the metrics specified in the grant. The fair value is recognized as expense over the requisite service period, which is generally the vesting period of the respective awards. No compensation cost is recognized on stock options for employees and non-employees who do not render the requisite service and therefore forfeit their rights to the stock options. The measurement of stock-based compensation is subject to periodic adjustments as the underlying equity instruments vest, and the resulting change in value, if any, is recognized in our statements of operations and comprehensive loss during the period that the related services are rendered.

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Results of Operations

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Comparison of the years ended December 31, 2023, 2022, and 2021

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Revenues

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Total revenues are comprised of product revenues, which are primarily driven by sales of our Panorama and HCS tests, and licensing and other revenues, which primarily includes development licensing revenue, licensing of our Constellation software to our licensees. Total revenues for the year ended December 31, 2023 increased by $262.3 million, or 32.0%, when compared to the year ended December 31, 2022.

We derive our revenues from tests based on units reported to customers—tests delivered with a result. All reported units are either accessioned in our laboratories or processed outside of our laboratories. As noted in “Overview,” the number of tests that we process is a key metric as it tracks overall volume growth. During the year ended December 31, 2023, total reported units were approximately 2,388,200, comprised of approximately 2,323,400 tests reported in our laboratories. Comparatively, during the year ended December 31, 2022, total reported units were approximately 1,919,600, comprised of approximately 1,861,000 tests reported in our laboratories. During the year ended December 31, 2023 and 2022, total oncology units processed were approximately 340,700 and 196,400, respectively.

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Product Revenues

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During the year ended December 31, 2023, product revenues increased by $271.2 million, or 34.0% compared to the year ended December 31, 2022, as a result of the continued revenue growth from increased test volumes as well as average selling price improvements.

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Licensing and Other Revenues

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Licensing and other revenues decreased by $8.9 million, or 38.7%, during the year ended December 31, 2023 compared to the year ended December 31, 2022. The decrease was primarily due to a decrease in revenue from our collaborative agreements.

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Cost of Product Revenues

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During the year ended December 31, 2023, cost of product revenues increased by $134.9 million or 29.7% when compared to the year ended December 31, 2022, primarily due to higher costs related to inventory consumption of $42.1 million driven by an increase in accessioned cases, a $42.5 million increase in third-party fees, a $6.1 million increase in shipping related charges, a $10.7 million increase in equipment and related depreciation expense, and a $33.5 million increase in labor, overhead, and other related costs driven by headcount growth and product support.

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Cost of Licensing and Other Revenues

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Cost of licensing and other revenues for the year ended December 31, 2023, when compared to the year ended December 31, 2022, decreased by approximately $1.4 million, or 51.7%, primarily due to a net decrease in costs to support our collaborative agreements.

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Expenses

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Research and Development

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Research and development expenses during the year ended December 31, 2023 increased by $4.3 million, or 1.3%, when compared to the year ended December 31, 2022. The increase was driven by a $27.7 million increase in salary and related expenditures, which includes a $20.4 million increase in stock-based compensation expense, and a $3.6 million net increase in office, facilities, and other expenses. This was offset by a $12.7 million decrease in IPR&D expense mainly related to the milestone payments for the September 2021 acquisition, a $7.7 million decrease in consulting expenses, and a $6.6 million decrease in lab and clinical trial related expenses.

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Selling, General and Administrative

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Selling, general and administrative expenses increased by $29.7 million, or 5.0%, in the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was attributable to a $18.0 million increase in consulting and legal expenses, a $16.0 million increase in third party billing expenses, and a net increase of $8.0 million in salary and related compensation expenditures primarily related to an increase in stock-based compensation expense. This was offset by a $9.1 million decrease in marketing costs and a $3.2 million net decrease in travel, facilities, office and other costs.

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Interest Expense

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Interest expense increased by $3.3 million, 35.6%, in the year ended December 31, 2023 compared to the same period in the prior year due to an increase in interest rate as well as a $30.0 million drawdown from November 2022 for the UBS Credit Line.

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Interest and Other Income

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Interest and other income increased by $20.8 million, or 588.3%, in the year ended December 31, 2023, compared to the same period in the prior year, primarily due to higher interest rates and greater average cash and investment balances.

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Liquidity and Capital Resources

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We have incurred net losses each year since our inception. For the year ended December 31, 2023, we had a net loss of $434.8 million, and we expect to continue to incur losses in future periods as we continue to devote a substantial portion of our resources to our research and development and commercialization efforts for our existing and new products. As of December 31, 2023, we had an accumulated deficit of $2.4 billion. As of December 31, 2023, we had $642.1 million in cash and cash equivalents and restricted cash, $236.9 million in marketable securities, $80.4 million of outstanding balance of the Credit Line including accrued interest, and $287.5 million outstanding principal balance on the Convertible Notes. As of December 31, 2023, we have $20.0 million available on the Credit Line.

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

In September 2023, we completed an underwritten equity offering and sold 4,550,000 shares of our common stock at a price of $55 per share to the public. Before offering expenses of approximately $0.4 million, we received proceeds of approximately $235.8 million net of the underwriting discount. In November 2022, we completed an underwritten equity offering and sold 13,144,500 shares of our common stock at a price of $35 per share to the public. Before offering expenses of approximately $0.5 million, we received proceeds of approximately $433.2 million net of the underwriting discount. In July 2021, we completed an additional underwritten equity offering and sold 5,175,000 shares of our common stock at a price of $113 per share to the public. Before offering expenses of $0.4 million, we received proceeds of $551.2 million net of the underwriting discount. As cash flows from our operations are currently negative, our contractual obligations and other commitments are satisfied by the equity financing described above, our convertible note financing conducted in April 2020 described below, the Credit Facility described below, and our product, licensing, and other sales. For our commitments, refer to the “Contractual Obligations and Other Commitments” section below.

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

Based on our current business plan, we believe that our existing cash and marketable securities will be sufficient to meet our anticipated cash requirements for at least 12 months after February 28, 2024.

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Credit Line Agreement

In September 2015, we entered into a Credit Line with UBS, or the Credit Line, providing for a $50.0 million revolving line of credit which could be drawn in increments at any time. The Credit Line was amended in July 2017 and bears interest at 30-day LIBOR plus 1.10%, and it is secured by a first priority lien and security interest in our money market and marketable securities held in our managed investment account with UBS. UBS has the right to demand full or partial payment of the Credit Line obligations and terminate it, in its discretion and without cause, at any time. The interest rate was subsequently changed to the 30-day Secured Overnight Financing Rate, or SOFR, average, plus 1.21%. The SOFR rate is variable. The Credit Line was subsequently increased from $50.0 million to $150.0 million. In June 2023, the Credit Line decreased to $100.0 million. In October 2023, the interest rate for the Credit Line was subsequently changed to the 30-day SOFR average, plus 0.5%. As of December 31, 2023, the total principal amount outstanding with accrued interest was $80.4 million and $20.0 million is remaining as available under the Credit Line.

Convertible Notes

In April 2020, we issued $287.5 million aggregate principal amount of Convertible Notes in a private placement offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

​

The Convertible Notes are senior, unsecured obligations of the Company and bear interest at a rate of 2.25% per year, payable in cash semi-annually in arrears in May and November of each year, beginning in November 2020. The Convertible Notes mature in May 2027, unless earlier converted, repurchased or redeemed in accordance with their terms. Upon conversion, the Convertible Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

​

We received net proceeds from the Convertible Notes of $278.3 million, after deducting the initial purchasers’ discounts and debt issuance costs. We used approximately $79.2 million of the net proceeds from the Convertible Notes offering to repay our obligations under the 2017 Term Loan with OrbiMed in 2020.

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Cash Flows

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

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended","\u200b"],["\u200b","\u200b","December 31,","\u200b"],["\u200b","","2023","","2022","\u200b","2021"],["\u200b","\u200b","(in thousands)"],["Cash used in operating activities","\u200b","$","(246,955)","\u200b","$","(431,501)","\u200b","$","(335,236)","\u200b"],["Cash provided by (used in) investing activities","\u200b","","168,498","\u200b","","330,338","\u200b","\u200b","(205,193)","\u200b"],["Cash provided by financing activities","\u200b","","254,461","\u200b","","482,640","\u200b","\u200b","576,188","\u200b"],["Net change in cash, cash equivalents and restricted cash","\u200b","","176,004","\u200b","\u200b","381,477","\u200b","\u200b","35,759","\u200b"],["Cash, cash equivalents and restricted cash, beginning of period","\u200b","","466,091","\u200b","","84,614","\u200b","\u200b","48,855","\u200b"],["Cash, cash equivalents and restricted cash, end of year","\u200b","$","642,095","\u200b","$","466,091","\u200b","$","84,614","\u200b"]]
[[/GREPCENT_TABLE]]

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Cash Used in Operating Activities

​

Cash used in operating activities during the year ended December 31, 2023 was $247.0 million. The net loss of $434.8 million includes $235.8 million in non-cash charges resulting from $24.1 million of depreciation and amortization, $2.7 million milestone expense for in-process research and development, $14.5 million of non-cash lease expense, $191.8 million of stock-based compensation expense, $1.1 million premium amortization and discount accretion on investment securities, $0.3 million in foreign exchange adjustment, and $1.3 million for amortization of debt discount. Operating assets had cash outflows of $57.0 million resulting from $33.9 million in increases in accounts receivable, $5.4 million in increases in inventory, and $26.1 million in increases in prepaid expenses and other current assets, offset by $8.4 million

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from cash inflows in operating lease right-of-use assets. Operating liabilities resulted in cash inflows of $9.0 million resulting from a $21.6 million increase in accrued compensation, a $10.3 million increase in other accrued liabilities, and a $5.0 million increase in deferred revenue, offset by a $15.5 million decrease in accounts payable and a $12.4 million decrease in operating lease liabilities.

Cash used in operating activities during the year ended December 31, 2022 was $431.5 million. The net loss of $547.8 million includes $199.3 million in non-cash charges resulting from $16.7 million of depreciation and amortization, $9.3 million milestone expense for in-process research and development, $13.8 million of non-cash lease expense, $152.4 million of stock-based compensation expense, $4.8 million premium amortization and discount accretion on investment securities, $0.9 million loss on investments, $1.3 million for amortization of debt discount and issuance cost, and $0.3 million in non-cash interest expense. Operating assets had cash outflows of $131.4 million resulting from $122.3 million in increases in accounts receivable, $8.5 million in increases in inventory, and $1.2 million in increases in prepaid expenses and other current assets, offset by $0.6 million from cash inflows in operating lease right-of-use assets. Operating liabilities resulted in cash inflows of $48.4 million resulting from a $5.5 million increase in accounts payable, a $3.1 million increase in accrued compensation, a $47.7 million increase in other accrued liabilities, a $2.1 million increase in deferred revenue offset by a $10.0 million decrease in operating lease liabilities.

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Cash Provided by Investing Activities

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Cash provided by investing activities for the year ended December 31, 2023 totaled $168.5 million, which was comprised of $306.0 million proceeds of investments maturities, offset by $98.3 million purchases of new investments and $39.2 million in cash paid for the purchase of property and equipment.

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Cash provided by investing activities for the year ended December 31, 2022 totaled $330.3 million, which was comprised of $248.4 million in proceeds from sale of investments and $216.5 million proceeds of investments maturities, offset by $86.9 million purchases of new investments and $47.7 million in cash paid for the purchase of property and equipment.

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Cash Provided by Financing Activities

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Cash provided by financing activities for the year ended December 31, 2023 totaled $254.4 million comprised of $235.4 million net proceeds from our equity offering completed in the third quarter of 2023, $15.1 million in issuance of common stock under the employee stock purchase plan, and $3.9 million cash proceeds from the exercise of stock options.

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Cash provided by financing activities for the year ended December 31, 2022 totaled $482.6 million comprised of $433.2 million net proceeds from our equity offering completed in the fourth quarter of 2022, $30.0 million proceeds from Credit Line, $13.0 million in issuance of common stock under the employee stock purchase plan, and $6.4 million cash proceeds from the exercise of stock options.

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Contractual Obligations and Other Commitments

​

We have entered into arrangements that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods. Such arrangements include those related to our lease commitments, Credit Line (as defined below), Convertible Notes, commercial supply agreements and other agreements.

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Credit Line

​

The short-term debt obligations consist of the $80.4 million principal amount drawn from the UBS Credit Line, or the Credit Line, and applicable interest. The Credit Line was amended in July 2017 and bears interest at 30-day LIBOR plus 1.10%, and it is secured by a first priority lien and security interest in our money market and marketable securities held in our managed investment account with UBS. We are required to maintain a minimum of at least $150.0 million in our UBS accounts as collateral which has been classified as short-term investments in the consolidated balance sheet. The interest rate was subsequently changed to the 30-day SOFR average, plus 1.21%. The SOFR rate is variable. UBS has the right to demand full or partial payment of the Credit Line obligations and terminate it, in its discretion and without cause,

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at any time. In October 2023, the interest rate was subsequently changed to the 30-day SOFR average, plus 0.5%. Please refer to Note 10, Debt, for further details.

​

Convertible Notes

​

The long-term debt obligations consist of the $287.5 million principal amount from a private placement offering to qualified institutional buyers and applicable interest. The Convertible Notes are senior, unsecured obligations of the Company and bear interest at a rate of 2.25% per year, payable in cash semi-annually in arrears in May and November of each year, beginning in November 2020. The Convertible Notes mature in May 2027, unless earlier converted, repurchased or redeemed in accordance with their terms. Upon conversion, the Convertible Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. Please refer to Note 10, Debt, for further details.

​

Inventory purchase and other contractual obligations

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

​

The following table summarizes our unconditional purchase and contractual commitments as of December 31, 2023:

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Payments Due by Period"],["\u200b","","\u200b","","Less Than","","1 to 3","","3 to 5","","More Than"],["\u200b","\u200b","Total","\u200b","1 Year","\u200b","Years","\u200b","Years","\u200b","5 Years"],["\u200b","\u200b","(in thousands)"],["Short-term debt obligations(1)","\u200b","","80,000","\u200b","","80,000","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b"],["Long-term debt obligations(2)","\u200b","\u200b","287,500","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","287,500","\u200b","\u200b","\u2014","\u200b"],["Interest accrued on debt(3)","\u200b","\u200b","1,480","\u200b","\u200b","1,480","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b"],["Inventory purchase and other contractual obligations(4)","\u200b","","94,533","\u200b","","58,875","\u200b","","17,658","\u200b","","18,000","\u200b","","\u2014","\u200b"],["Total","\u200b","$","463,513","\u200b","$","140,355","\u200b","$","17,658","\u200b","$","305,500","\u200b","$","\u2014","\u200b"]]
[[/GREPCENT_TABLE]]

​

​

[[GREPCENT_TABLE]]
[["","(1)","Represents proceeds drawn from our Credit Line."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(2)","Represents the principal amount of our Convertible Notes due 2027."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(3)","Represents interest accrued on our Convertible Notes and Credit Line."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(4)","Represents various inventory purchase and other contractual obligations. Please refer to contractual commitments disclosures provided in Note 8, Commitments and Contingencies for additional information."]]
[[/GREPCENT_TABLE]]

​

Off-Balance Sheet Arrangements

​

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

​