GRAIL, Inc. 10-Q

Item 1. Financial Statements GRAIL, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (amounts in thousands, except share and per share data) June 30, 2025 December 31, 2024 Assets Current assets: Cash and cash equivalents $ 127,427 $ 214,234 Short-term marketable securities 475,327 549,236 Accounts receivable, net (1) 16,313 20,312 Supplies (2) 19,739 18,632 Prepaid expenses and other current assets (3) 13,038 17,447 Total current assets 651,844 819,861 Property and equipment, net (4) 60,210 69,061 Operating lease right-of-use assets 60,033 66,373 Restricted cash 3,349 3,349 Intangible assets, net 1,919,723 2,016,890 Other non-current assets 7,392 7,773 Total assets $ 2,702,551 $ 2,983,307 Liabilities and stockholders’/member’s equity Current liabilities: Accounts payable (5) $ 6,283 $ 4,844 Accrued liabilities (6) 48,870 57,241 Operating lease liabilities, current portion 13,689 13,260 Other current liabilities 1,797 1,580 Total current liabilities 70,639 76,925 Operating lease liabilities, net of current portion 48,475 54,881 Deferred tax liability, net 266,174 345,860 Other non-current liabilities 2,620 2,236 Total liabilities 387,908 479,902 Preferred stock, par value of $ 0.001 per share; 50,000,000 shares authorized, no shares issued and outstanding as of June 30, 2025 and December 31, 2024 — — Common stock $ 0.001 par value per share, 1,500,000,000 shares authorized, 36,047,799 shares issued and outstanding as of June 30, 2025, 33,893,409 shares issued and outstanding as of December 31, 2024 36 34 Additional paid-in capital 12,335,832 12,305,250 Accumulated other comprehensive income 2,303 1,451 Accumulated deficit ( 10,023,528 ) ( 9,803,330 ) Total stockholders’/member’s equity 2,314,643 2,503,405 Total liabilities and stockholders’/member's equity $ 2,702,551 $ 2,983,307 (1) Includes related party accounts receivable, net of $ 37 and $ 65 , respectively. (2) Includes related party supplies of $ 1,803 and $ 3,130 , respectively. (3) Includes related party prepaid expenses and other current assets of $ 70 and $ 77 , respectively. (4) Includes related party property and equipment, net of $ 1,768 and $ 2,227 , respectively. (5) Includes related party accounts payable of $ 567 and nil , respectively. (6) Includes related party accrued liabilities of $ 50 and $ 104 , respectively. See accompanying notes to unaudited condensed consolidated financial statements. 2 Table of Contents GRAIL, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (amounts in thousands, except share and per share data) Three Months Ended Six Months Ended June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Revenue: Screening revenue (1) $ 34,379 $ 28,163 $ 63,512 $ 51,702 Development services revenue 1,165 3,807 3,869 6,989 Total revenue 35,544 31,970 67,381 58,691 Costs and operating expenses: Cost of screening revenue (exclusive of amortization of intangible assets) (2) 19,346 15,789 36,469 29,511 Cost of development services revenue (3) 501 621 1,672 2,057 Cost of revenue — amortization of intangible assets 33,472 33,472 66,944 66,944 Research and development (4) 46,626 94,196 100,251 195,821 Sales and marketing 28,539 40,989 63,518 87,808 General and administrative (5) 37,914 67,258 82,988 124,327 Goodwill and intangible assets impairment 28,000 1,420,936 28,000 1,420,936 Total costs and operating expenses 194,398 1,673,261 379,842 1,927,404 Loss from operations ( 158,854 ) ( 1,641,291 ) ( 312,461 ) ( 1,868,713 ) Other income: Interest income 6,809 2,805 14,588 5,706 Other income (expense), net ( 811 ) 5 ( 1,395 ) 47 Total other income, net 5,998 2,810 13,193 5,753 Loss before income taxes ( 152,856 ) ( 1,638,481 ) ( 299,268 ) ( 1,862,960 ) Benefit from income taxes 38,871 53,144 79,070 58,709 Net loss $ ( 113,985 ) $ ( 1,585,337 ) $ ( 220,198 ) $ ( 1,804,251 ) Net loss per share — Basic and Diluted $ ( 3.18 ) $ ( 51.06 ) $ ( 6.28 ) $ ( 58.11 ) Weighted-average shares of common stock used in computing net loss per share: 35,793,154 31,049,148 35,054,896 31,049,148 (1) I ncludes related party screening revenue of $ 52 and $ 129 for the three and six months ended June 30, 2025 and $ 108 and $ 237 for the three and six months ended June 30, 2024, respectively. (2) I ncludes related party cost of screening revenue of $ 1,176 and $ 2,687 for the three and six months ended June 30, 2025 and $ 3,457 and $ 6,126 for the three and six months ended June 30, 2024, respectively. (3) Includes related party cost of development services revenue of $ 19 and $ 182 for the three and six months ended June 30, 2025 and $ 71 and $ 116 for the three and six months ended June 30, 2024, respectively. (4) Includes related party research and development expenses of $ 578 and $ 1,974 for the three and six months ended June 30, 2025 and $ 5,310 and $ 10,112 for the three and six months ended June 30, 2024, respectively. (5) Includes related party general and administrative expenses of $ — and $ — for the three and six months ended June 30, 2025 and $ 52 and $ 103 for the three and six months ended June 30, 2024, respectively. See accompanying notes to unaudited condensed consolidated financia l statements. 3 Table of Contents GRAIL, Inc. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited) (amounts in thousands) Three Months Ended Six Months Ended June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Net loss $ ( 113,985 ) $ ( 1,585,337 ) $ ( 220,198 ) $ ( 1,804,251 ) Other comprehensive income (loss): Change in net unrealized gain on marketable securities ( 59 ) — ( 309 ) — Foreign currency translation adjustment 696 372 1,161 320 Comprehensive loss $ ( 113,348 ) $ ( 1,584,965 ) $ ( 219,346 ) $ ( 1,803,931 ) See accompanying notes to unaudited condensed consolidated financial statements. 4 Table of Contents GRAIL, Inc. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’/ MEMBER’S EQUITY (unaudited) (amounts in thousands, except share data) Common Stock Shares Amount Additional Paid in Capital Accumulated Other Comprehensive Income Accumulated Deficit Total Stockholders’ Equity Balance as of December 31, 2024 33,893,409 $ 34 $ 12,305,250 $ 1,451 $ ( 9,803,330 ) $ 2,503,405 Net loss — — — — ( 106,213 ) ( 106,213 ) Stock-based compensation expense — — 16,261 — — 16,261 Other comprehensive income — — — 215 — 215 Release of restricted stock units 1,403,449 1 ( 1 ) — — — Balance as of March 31, 2025 35,296,858 $ 35 $ 12,321,510 $ 1,666 $ ( 9,909,543 ) $ 2,413,668 Net loss — — — — ( 113,985 ) ( 113,985 ) Stock-based compensation expense — — 14,323 — — 14,323 Other comprehensive income — — — 637 — 637 Release of restricted stock units 750,941 1 ( 1 ) — — — Balance as of June 30, 2025 36,047,799 $ 36 $ 12,335,832 $ 2,303 $ ( 10,023,528 ) $ 2,314,643 See accompanying notes to unaudited condensed consolidated financial statements. 5 Table of Contents GRAIL, Inc. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’/ MEMBER’S EQUITY (unaudited) (amounts in thousands, except share data) Common Stock Shares Amount Member’s Equity Additional Paid in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’/Member’s Equity Balance as of December 31, 2023 — $ — $ 11,421,446 $ — $ 1,066 $ ( 7,776,325 ) $ 3,646,187 Net loss — — — — — ( 218,914 ) ( 218,914 ) Stock-based compensation expense — — 170 — — — 170 Other comprehensive loss — — — — ( 52 ) — ( 52 ) Contribution from member, net — — 312,000 — — — 312,000 Balance as of March 31, 2024 — $ — $ 11,733,616 $ — $ 1,014 $ ( 7,995,239 ) $ 3,739,391 Net loss — — — — — ( 1,585,337 ) ( 1,585,337 ) Stock-based compensation expense — — 156 640 — — 796 Other comprehensive income — — — — 372 — 372 Recognition of deferred tax liability in connection with the Spin-Off* — — ( 447,190 ) — — — ( 447,190 ) Reclassification of incentive plan liabilities to additional paid-in capital — — — 54,795 — — 54,795 Disposal funding received in connection with the Spin-Off* — — 932,300 — — — 932,300 Issuance of common stock in connection with the Spin-Off and reclassification of contribution from member, net* 31,049,148 31 ( 12,218,882 ) 12,218,851 — — — Balance as of June 30, 2024 31,049,148 $ 31 $ — $ 12,274,286 $ 1,386 $ ( 9,580,576 ) $ 2,695,127 See accompanying notes to unaudited condensed consolidated financial statements. ___________ * See Note 1 — Organization And Description Of Business for more information on the Spin-Off 6 Table of Contents GRAIL, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited) (amounts in thousands) Six Months Ended June 30, 2025 June 30, 2024 Cash flows from operating activities Net loss $ ( 220,198 ) $ ( 1,804,251 ) Adjustments to reconcile net loss to net cash used by operating activities: Amortization of intangibles assets 69,167 69,167 Depreciation 9,287 10,218 Stock-based compensation expense 30,379 55,053 Cash payment for equity awards — ( 53,807 ) Deferred income taxes ( 79,070 ) ( 57,949 ) Amortization of discount on marketable securities ( 11,811 ) — Goodwill and intangible assets impairment 28,000 1,420,936 Credit loss expense 412 — Other 1,094 361 Changes in operating assets and liabilities: Accounts receivable, net (1) 3,587 3,536 Supplies (2) ( 902 ) ( 3,811 ) Operating lease right-of-use assets and liabilities, net 363 1,586 Prepaid expenses and other assets (3) 4,790 ( 2,527 ) Accounts payable (4) 1,405 ( 3,314 ) Accrued and other liabilities (5) ( 8,480 ) ( 14,283 ) Net cash used in operating activities ( 171,977 ) ( 379,085 ) Cash flows from investing activities Purchases of property and equipment ( 431 ) ( 3,934 ) Purchases of marketable securities ( 502,489 ) — Proceeds from maturities of marketable securities 587,900 — Net cash provided by (used in) investing activities 84,980 ( 3,934 ) Cash flows from financing activities Cash funding received from Illumina — 1,244,300 Net cash provided by financing activities — 1,244,300 Effect of exchange rate changes on cash, cash equivalents, and restricted cash 190 ( 30 ) Net (decrease) increase in cash, cash equivalents, and restricted cash ( 86,807 ) 861,251 Cash, cash equivalents and restricted cash — beginning of period 217,583 101,512 Cash, cash equivalents and restricted cash — end of period $ 130,776 $ 962,763 Represented by: Cash and cash equivalents $ 127,427 $ 958,845 Restricted cash 3,349 3,918 Total $ 130,776 $ 962,763 Supplemental cash flow information: Property and equipment included in accounts payable and accrued liabilities ( 127 ) ( 628 ) Operating cash flows paid for operating leases, net ( 8,671 ) ( 10,043 ) (1) Includes changes in related party accounts receivable of $ 28 and $ 48 , respectively. (2) Includes changes in related party supplies of $ 1,327 and $( 403 ), respectively. (3) Includes changes in related party prepaid and other current assets of $ 7 and $( 18 ), respectively. (4) Includes changes in related party accounts payable of $ 567 and $( 828 ), respectively. (5) Includes changes in related party accrued liabilities of $( 54 ) and $( 95 ), respectively. See accompanying notes to unaudited condensed consolidated financial statements. 7 Table of Contents GRAIL, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS GRAIL, Inc. (“GRAIL” or the “Company”), headquartered in Menlo Park, Californi a , is an innovative commercial-stage healthcare company focused on saving lives and shifting the paradigm of early cancer detection. The Company’s Galleri blood test is a commercially available screening test for early detection of multiple types of cancer. GRAIL’s common stock is listed under the ticker symbol “GRAL” on the Nasdaq Stock Exchange. GRAIL was previously acquired by Illumina, Inc. (”Illumina”) in August 2021, at which point it became a 100 % owned subsidiary of Illumina, and held separate as a part of binding hold separate commitments implemented pursuant to orders issued by the European Commission (the “Acquisition”). GRAIL separated from Illumina on June 24, 2024, as described below. GRAIL was a limited liability company (“LLC”) from August 19, 2021 to June 21, 2024 when it was converted into a corporation (the “Conversion”) in anticipation of such separation. Separation from Illumina On June 24, 2024, (the “Distribution Date”), Illumina completed the previously announced spin-off of GRAIL (the “Spin-Off”). The Spin-Off was completed through a distribution of 85.5 % of the Company’s outstanding common stock to the holders of record of Illumina’s common stock as of the close of business on June 13, 2024 (the “Distribution”), which resulted in the distribution of 31.0 million shares of common stock. As a result of the Distribution, the Company became an independent public entity. Illumina’s ownership of GRAIL reduced to 4,502,126 shares of common stock representing 14.5 % ownership of the Company after the Spin-Off. Unless the context otherwise requires, references to the “Company” or “GRAIL”, refer to (i) GRAIL, LLC prior to the Conversion and (ii) GRAIL, Inc. and its subsidiaries following the Conversion. In co nnection with the Spin-Off, the Company entered into or adopted agreements that provide a framework for the relationship between the Company and Illumina, including, but not limited to the following: • Separation and Distribution Agreement — governed the terms and conditions of the Spin-Off and sets forth aspects of the Company’s and Illumina’s relationship following the Spin-Off. See Note 8 — Legal And Regulatory Proceedings for more information regarding the contingencies related to this agreement. • Tax Matters Agreement — governs the respective rights, responsibilities and obligations of Illumina and the Company after the Spin-Off with respect to all tax matters and includes restrictions to preserve the tax-free status of the Distribution. See Note 11 — Taxes for more information regarding income taxes and Note 8 — Legal And Regulatory Proceedings regarding the contingencies related to this agreement. • Employee Matters Agreement — addressed employment, compensation, and benefits matters, including the allocation and treatment of assets and liabilities relating to employees and compensation and benefits plan s and programs in which GRAIL employees participate, as well as the treatment of cash-based incentive awards in connection with the Spin-Off. See Note 7 — Stock-Based Compensation for further details regarding the treatment of equity awards. • Stockholder and Registration Rights Agreement — governs the respective rights, responsibilities and obligations of Illumina and the Company after the Spin-Off with respect to Illumina’s continuing ownership of GRAIL common stock. • Supply and Commercialization Agreement Amendment — amends the Company’s supply and commercialization agreement with Illumina, which governs the ongoing supply and commercial relationship, including licensing, royalty payments and intellectual property between GRAIL and Illumina. See Note 13 — Related Party Transactions for more information regarding the royalty arrangements with Illumina. Illumina provided the Company with disposal funding (the “Disposal Funding”) in the amount of $ 932.3 million in accordance with the Separation and Distribution Agreement, subject to a clawback feature in the event 8 Table of Contents GRAIL, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) that the Company (i) consummates a change in control transaction, sells or licenses substantially all of its assets or adopts a plan of liquidation (collectively, a “GRAIL Change of Control”), or (ii) (1) pays any dividend on, or makes any other distribution in respect of, any shares of its capital stock or other equity or voting interests (other than a stock dividend or a stock split), or otherwise consummates a return of capital from the Company to any of its equity holders or (2) redeems, purchases or otherwise acquires any of its outstanding shares of capital stock or other equity or voting interests (other than the acquisition of any shares in order to effectuate a “net settlement” transaction for the purposes of satisfying tax withholding obligations arising in connection with the grant, vesting, exercise and/or settlement of any outstanding incentive equity awards of GRAIL held by its current or former employees), in each case, prior to September 24, 2025 (the 15 -month anniversary of the Distribution Date). If the Company consummates a transaction described in the foregoing clause (i), the Company must return to Illumina a cash amount decreasing over time calculated by reference to the number of months which have elapsed since the Distribution Date at the time of the public announcement of the event giving rise to the change of control. If the Company consummates a transaction described in the foregoing clause (ii), the Company must return to Illumina a cash amount equal to the payments made by the Company in connection with such transaction. The amount of clawback payments made cannot exceed the amount of the initial disposal funding. See Note 8 — Legal And Regulatory Proceedings — Contingencies for details. Our Ability to Continue as a Going Concern The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company’s ability to manage its net loss and to become profitable and operate profitably, to manage the Company’s negative cash flows from operations and to generate positive cash flows from operations, and the Company’s ability to obtain financing to support working capital requirements. The Company had $ 130.8 million of cash, cash equivalents and restricted cash and $ 475.3 million of short-term marketable securities as of June 30, 2025. The Company believes that its existing cash , cash equivalents and short-term marketable securities will be sufficient to meet its working capital and capital expenditure needs for at least the next 12 months, as of the date these unaudited condensed consolidated financial statements were filed. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The accompanying unaudited condensed consolidated financial statements represent the historical operations of the standalone GRAIL legal entity and include purchase accounting adjustments and certain tax adjustments as if the Company filed a separate income tax return and was not included in Illumina’s consolidated return for the period of time the Company was owned by Illumina. All revenues and costs as well as assets and liabilities directly associated with the business activity of the Company are included in the unaudited condensed consolidated financial statements. Certain a ssets and liabilities were reflected at fair value under the new basis of accounting established at the closing of Illumina’s acquisition of the Company in August 2021 (“the Acquisition”). Management considered the need to allocate any historical shared costs incurred by the parent, Illumina, to the accompanying unaudited condensed consolidated financial statements. As previously discussed, the European Commission adopted an order requiring Illumina and GRAIL to be held and operated as distinct and separate entities. As no integration ever occurred, management concluded that no material allocations were required. Prior to the Spin-Off, the Company had generated net operating loss carryforwards for federal and state tax purposes, however, as a single member LLC disregarded for tax purposes, these tax attributes are the sole property of Illumina and remained the assets of Illumina following the Spin-off in accordance with the Internal Revenue Code. However, amounts recognized by the Company are not necessarily representative of the amounts that would have been reflected in the financial statements had the Company operated independently of 9 Table of Contents GRAIL, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) the parent. Related party transactions with Illumina are discussed further in Note 13 — Related Party Transactions . These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information and pursuant to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. These unaudited condensed consolidated financial statements, reflect all normal recurring adjustments that are necessary to present the results fairly, and include the accounts of the Company and its wholly owned subsidiaries for the interim periods presented. All intercompany balances have been eliminated in consolidation. The results for the interim periods presented are not necessarily indicative of the results expected for any future period. The following information should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2024 Form 10-K. Significant Accounting Policies During the six months ended June 30, 2025, there were no material changes to the Company’s significant accounting policies disclosed in Note 2 — Summary of Significant Accounting Policies , within the consolidated financial statements for the year ended December 31, 2024 included in its 2024 Form 10-K, except as described below. Intangible Assets Intangible assets identified in the Acquisition include GRAIL trade names, developed technology, and GRAIL in-process research and development (“IPR&D”) and were measured at fair value as of the closing date of Illumina’s acquisition of GRAIL (“Closing Date”). The Company’s trade names, GRAIL and Galler i , have brand recognition in the market related to the services GRAIL provides customers and the research and development activities GRAIL performs. GRAIL’s developed technology includes intangible assets related to Galler i , its multi-cancer early detection test that was launched as a laborator y -developed test (“LDT”) in 2021, as well as a diagnostic aid for cancer (“DAC”) test. The developed technology underpins both Galler i , designed as a cancer screening test for asymptomatic individuals over 50 years of age, and DAC that is being designed to accelerate diagnostic resolution for patients for whom there is a clinical suspicion of cancer. The cost of identifiable intangible assets with finite lives, such as trade names and developed technology assets, are amortized on a straight-line basis over the assets’ respective estimated useful lives of 9 years and 18 years, respectively. The Company’s IPR&D includes assets related to GRAIL’s development of a minimal residual disease (“MRD”) test, a post-diagnostic test, that is currently under development. IPR&D is considered indefinit e -lived and therefore is not amortized until completed and placed into service, at which point it will begin to be amortized over its estimated useful life or expensed upon abandonment of the associated research and development efforts. While IPR&D is not amortize d , it is reviewed for impairment at least annually, or more frequently if events or circumstances indicate a potential for impairment. IPR&D is considered impaired if the carrying value of the reporting unit or IPR&D asset exceeds its respective fair value. During the indefinite-lived intangible asset impairment review, the Company assesses the qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible asset fair value is less than the carrying amount. The qualitative factors considered include, but are not limited to, macroeconomic conditions, industry and market considerations, and the Company’s overall financial performance. If the Company determines that it is not more likely than not that the intangible asset is less than the carrying amount, no additional assessment is necessary. If the carrying amount of the intangible asset exceeds its fair value, the Company records an impairment loss based on the excess. The Company may elect to bypass the qualitative assessment in a period and proceed to perform the quantitative indefinite-lived intangible asset impairment test. 10 Table of Contents GRAIL, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Stock- Based Compensation Expense - 2024 Employee Stock Purchase Plan The fair value of shares to be issued under the Company’s 2024 Employee Stock Purchase Plan (“ESPP”), is derived using the Black-Scholes-Merton option-pricing model at the commencement of six-month purchase periods in May and November of each year. The Company’s first offering period began in May 2025 with the first purchase date expected to take place in November 2025. Stock-based compensation for the ESPP is expensed using a straight-line attribution method over the offering period. Additionally, forfeitures are accounted for as incurred. Concentration Risk Significant customers are those that represent more than ten percent of total revenue or accounts receivable, net balances for the periods and as of each condensed consolidated balance sheet date presented, respectively. Revenue from a major customer that amounts to 10% or more of total revenue is as follows: Three Months Ended Six Months Ended June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Customer A * 10 % * 10 % *less than 10% Customers that accounted for 10% or more of total accounts receivable balance are as follows: As of June 30, 2025 December 31, 2024 Customer A * 32 % Customer B 12 % * *less than 10% Reclassification Certain amounts relating to related party transactions in the unaudited condensed consolidated statements of operations and statements of cash flows for the respective periods ended June 30, 2024 have been conformed to the current period presentation of related party transactions. Accounting Pronouncements Not Yet Adopted In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This update improves income tax disclosure requirements, primarily through enhanced transparency and decision usefulness of disclosures. This guidance is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted, and can be applied on either a prospective or retroactive basis. The Company is currently evaluating the potential impact of this guidance on its condensed consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures. This update intends to improve financial reporting by requiring disclosure of additional information about specific expense categories. This guidance is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and the guidance is to be applied prospectively and may be applied retrospectively. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures. 11 Table of Contents GRAIL, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 3. REVENUE The following table presents the Company’s revenue disaggregated by geographic areas based on the customers’ locations: Three Months Ended Six Months Ended (in thousands) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 United States Screening $ 34,208 $ 28,163 $ 62,912 $ 51,702 Development Services — 500 255 665 International (1) Screening 171 — 600 — Development Services 1,165 3,307 3,614 6,324 Total $ 35,544 $ 31,970 $ 67,381 $ 58,691 _________ (1) International region includes revenue earned from customers located outside of the United States. The following table presents the Company’s revenue disaggregated by revenue source: Three Months Ended Six Months Ended (in thousands) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Screening Commercial $ 33,472 $ 28,163 $ 62,253 $ 51,702 Government (1) $ 907 $ — $ 1,259 $ — Development Services Commercial $ 1,165 $ 3,807 $ 3,869 $ 6,989 Total $ 35,544 $ 31,970 $ 67,381 $ 58,691 _________ (1) Government screening revenue primarily consists of revenue earned as part of the Company’s Galleri-Medicare clinical study. NOTE 4. GOODWILL AND INTANGIBLE ASSETS Due to the application of pushdown accounting, the Company’s balance sheet includes goodwill and intangible assets recognized by Illumina in connection with Illumina’s acquisition of the Company. Goodwill Impairment Goodwill represents the excess of purchase price Illumina paid over the fair value of the net identifiable assets acquired upon the acquisition of the Company. During the three months ended June 30, 2024, prior to the Spin-Off, the approval of the Spin-Off by Illumina’s board of directors represented a potential indicator of impairment, which also aligned with the timing of Illumina’s annual goodwill impairment test date for 2024. The assessment was performed using a market approach to determine the fair value of goodwill which utilized the valuation ranges prepared by the divestment financial advisors engaged by Illumina in connection with the Spin-Off. The valuation ranges were determined using revenue multiples from public company peers for comparable companies. The implied discount rate for the goodwill impairment assessment was 51.5 %. These estimates and assumptions represent a Level 3 measurement because they include unobservable inputs that are supported by little or no market activity and reflect Company-determined and judgmental factors for these assumptions in measuring fair value. The assumptions in the assessment of an impairment analysis are inherently subjective due to uncertainty and any 12 Table of Contents GRAIL, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) slight changes in these rates and assumptions could have a significant impact on the concluded value of goodwill. The Company recognized a goodwill impairment of $ 888.9 million as a result of the impairment assessment, primarily due to changes to the forecast of GRAIL’s value and the method for valuing GRAIL . Intangible Assets Intangible assets identified in the Acquisition include trade names, developed technology, and IPR&D and were measured at fair value as of the closing date of Illumina’s acquisition of the Company ( “Closing Date”) . The following roll-forward indicates the fair values assigned to finite-lived intangible assets from the Acquisition and the resulting amortization: As of June 30, 2025 December 31, 2024 (in thousands) Gross Carrying Amount Accumulated Amortization Net Intangible Assets Gross Carrying Amount Accumulated Amortization Net Intangible Assets Developed Technologies $ 2,410,000 $ ( 513,241 ) $ 1,896,759 $ 2,410,000 $ ( 446,297 ) $ 1,963,703 Trade Names 40,000 ( 17,036 ) 22,964 40,000 ( 14,813 ) 25,187 Total Finite-Lived Intangible Assets $ 2,450,000 $ ( 530,277 ) $ 1,919,723 $ 2,450,000 $ ( 461,110 ) $ 1,988,890 The following roll-forward indicates the carrying value of the indefinite-lived intangible asset from the Acquisition and the impairment expenses recorded: (in thousands) IPR&D Balance as of January 1, 2024 560,000 Impairment ( 532,000 ) Balance as of December 31, 2024 28,000 Impairment ( 28,000 ) Balance as of June 30, 2025 — In conjunction with Illumina’s Q2 2024 goodwill impairment assessment, the IPR&D intangible asset of the GRAIL reporting unit was evaluated for potential impairment by Illumina prior to the Spin-Off. The evaluation for a potential impairment of the IPR&D intangible asset was performed by comparing its carrying value to the assessed estimated fair value, which was determined by the income approach, using a discounted cash flow model. Estimates and assumptions used in the income approach included projected cash flows and a discount rate. The discount rate selected at the time of the IPR&D intangible impairment assessment was 46.5 %. Based on the impairment test performed, Illumina assessed and determined that the carrying value of GRAIL’s IPR&D intangible asset exceeded its estimated fair value. As a result of push down accounting, the Company recognized an impairment of $ 420.0 million primarily due to changes to revenue projections and the discount rate utilized. Subsequent to the Spin-Off, the Company performed a portfolio review and determined to decrease investment in the development of the IPR&D asset, which impacted the amount and timing of expected future cash flows attributable to IPR&D. This determination was driven by the impact of the Company’s post-Spin-Off capital structure, constitution of the Company’s Board at the time of the Spin-Off as the key decision maker for the determination, and increased ability to revisit the Company’s business strategy and portfolio as a standalone public company without regulatory oversight. This represented a potential impairment indicator. An impairment assessment was performed using a discounted cash flow model utilizing the updated projected cash flows and discount rate. The discount rate selected was 20 % . Based on the impairment test performed, the Company assessed and determined that the carrying value of the IPR&D intangible asset exceeded its estimated fair value. As a result, the Company recognized an additional impairment of $ 112.0 million , primarily due to a decrease in projected cash flows. 13 Table of Contents GRAIL, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) In Q2 2025, the Company identified a change in market conditions in relation to its IPR&D asset which is in development. The change is expected to impact the amount of future cash flows attributable to the technology underlying the IPR&D asset. This represented a potential impairment indicator. An impairment assessment was performed using a discounted cash flow model utilizing the updated projected cash flows and discount rate. The discount rate selected was 21 % . Based on the impairment test performed, the Company assessed and determined that the carrying value of the IPR&D intangible asset exceeded its estimated fair value. As a result, the Company recognized an impairment of $ 28.0 million, resulting in write off of the entire carrying value of the IPR&D asset. The estimates and assumptions updated in each of these evaluations represent a Level 3 measurement because they include unobservable inputs that are supported by little or no market activity and reflect Company- determined and judgmental factors for these assumptions in measuring a fair value. The assumptions in the assessment of an impairment analysis are inherently subjective due to uncertainty and any slight changes in these rates and assumptions could have a significant impact on the concluded value of the IPR&D intangible asset. The IPR&D intangible asset is not currently subject to amortization. Amortization expense related to finite-lived intangible assets was $ 34.6 million for the three month periods ended June 30, 2025 and 2024 and $ 69.2 million for the six month periods ended June 30, 2025 and 2024. The estimated future annual amortization of finite-lived intangible assets is shown in the following table. Actual amortization expense to be reported in future periods could differ from these estimates as a result of acquisitions, divestitures, and asset impairments, among other factors. (in thousands) Estimated Annual Amortization Remainder of 2025 $ 69,166 2026 138,333 2027 138,333 2028 138,333 2029 138,333 2030 and thereafter 1,297,225 Total $ 1,919,723 NOTE 5. BALANCE SHEET COMPONENTS The following tables present financial information of certain condensed consolidated balance sheet components: As of Accounts receivable, net June 30, 2025 December 31, 2024 (in thousands) Trade accounts receivable, gross $ 21,118 $ 24,099 Allowance for credit losses ( 4,805 ) ( 3,787 ) Total accounts receivable, net $ 16,313 $ 20,312 14 Table of Contents GRAIL, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) As of Accrued liabilities June 30, 2025 December 31, 2024 (in thousands) Accrued compensation expenses $ 22,415 $ 34,530 Accrued clinical studies and research and development expenses 13,278 13,027 Accrued legal and professional service expenses 5,209 2,966 Accrued other expenses 7,968 6,718 Total accrued liabilities $ 48,870 $ 57,241 NOTE 6. FAIR VALUE MEASUREMENTS, CASH EQUIVALENTS AND MARKETABLE SECURITIES The following tables represent the fair value hierarchy for the Company’s financial assets measured at fair value on a recurring basis as of June 30, 2025 and December 31, 2024: June 30, 2025 (in thousands) Fair Value Level 1 Level 2 Level 3 Financial Assets: Money market funds $ 125,296 $ 125,296 $ — $ — Total cash equivalents 125,296 125,296 — — U.S. government treasury bills 475,327 475,327 — — Total short-term marketable securities 475,327 475,327 — — Total $ 600,623 $ 600,623 $ — $ — December 31, 2024 (in thousands) Fair Value Level 1 Level 2 Level 3 Financial Assets: Money market funds $ 94,697 $ 94,697 $ — $ — U.S. government treasury bills 117,442 117,442 — — Total cash equivalents 212,139 212,139 — — U.S. government treasury bills 549,236 549,236 — — Total short-term marketable securities 549,236 549,236 — — Total $ 761,375 $ 761,375 $ — $ — The following tables summarize the Company’s cash equivalents and marketable securities’ amortized costs, gross unrealized gains, gross unrealized losses and estimated fair values by significant investment category: June 30, 2025 (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Money market funds $ 125,296 $ — $ — $ 125,296 U.S. government treasury bills 475,370 — ( 43 ) 475,327 Total $ 600,666 $ — $ ( 43 ) $ 600,623 15 Table of Contents GRAIL, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) December 31, 2024 (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Money market funds $ 94,697 $ — $ — $ 94,697 U.S. government treasury bills 666,412 266 — 666,678 Total $ 761,109 $ 266 $ — $ 761,375 All of the Company’s marketable securities had maturities of less than one year. The Company had 7 securities with a fair value of $ 291.7 million in an unrealized loss position as of June 30, 2025 and no securities in unrealized loss position as of December 31, 2024. None of the Company’s marketable securities had been in an unrealized loss position for more than one year as of June 30, 2025 and December 31, 2024. The Company evaluates investments that are in an unrealized loss position for impairment as a result of credit loss. It was determined that no credit losses exist as of June 30, 2025 and December 31, 2024 because the change in market value for those securities that were in an unrealized loss position resulted from fluctuating interest rates rather than a deterioration of the credit worthiness of the issuers. The Company does not intend to sell the money market funds and short term investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis. NOTE 7. STOCK-BASED COMPENSATION Stock-based compensation expense, which includes expense for both equity and liability-classified awards, reported in the condensed consolidated statements of operations, was as follows: Three Months Ended Six Months Ended (in thousands) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Cost of screening revenue (exclusive of amortization of intangible assets) $ 417 $ 451 $ 1,162 $ 921 Cost of development services revenue — 12 17 23 Research and development 3,716 9,625 7,759 21,068 Sales and marketing 2,756 4,889 5,801 10,352 General and administrative 7,279 10,970 15,640 22,689 Stock-based compensation expense, before taxes 14,168 25,947 30,379 55,053 Related income tax benefits ( 900 ) ( 6,300 ) ( 5,294 ) ( 13,368 ) Stock-based compensation expense, net of taxes $ 13,268 $ 19,647 $ 25,085 $ 41,685 2024 Incentive Award Plan The GRAIL, Inc. 2024 Incentive Award Plan (the “2024 Plan”) was adopted by GRAIL and approved by Illumina, in its capacity as GRAIL’s sole stockholder, in May 2024. The 2024 Plan authorizes the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, performance-based awards, and other stock or cash based awards. The maximum number of shares authorized for issuance under the 2024 Plan increased by 1,694,670 shares to 10,351,487 shares on January 1, 2025 pursuant to the annual automatic evergreen increase provision of the 2024 Plan. As of June 30, 2025, approximately 382,005 shares remained available for future grants under the 2024 Plan. 16 Table of Contents GRAIL, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 2024 Inducement Award Plan The GRAIL, Inc. 2024 Inducement Award Plan (the “2024 Inducement Plan”) was adopted by GRAIL’s board of directors on August 9, 2024. The 2024 Inducement Plan is used exclusively for the grant of equity awards to prospective employees who (i) were not previously employees of GRAIL, or (ii) are returning to GRAIL following a bona fide period of non-employment, in any case, in connection with and as an inducement material to such prospective employee’s entering into employment with GRAIL pursuant to Nasdaq Listing Rule 5635(c)(4). This plan authorizes the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, performance-based awards, and other stock or cash based awards. On May 14, 2025, GRAIL registered an additional 500,000 shares of common stock that may be offered under the 2024 Inducement Plan. The 2024 Inducement Plan does not have a specified limit on the number of shares authorized for issuance. A summary of the Company’s restricted stock unit activity, issued under the 2024 Plan and 2024 Inducement Plan, is as follows: Restricted Stock Units Weighted-Average Grant-Date Fair Value Per Share (Units in thousands) Outstanding at January 1, 2025 5,523 $ 14.22 Awarded 2,316 $ 39.89 Released ( 2,154 ) $ 15.36 Forfeited ( 396 ) $ 20.41 Outstanding at June 30, 2025 5,289 $ 24.53 Cash-Based Equity Awards and 2024 Transition Incentive Award In connection with the Spin-Off in June 2024, outstanding cash-based equity incentive award (the “Cash-Based Equity Awards”) and certain Cash-Based Equity Awards granted to GRAIL employees, including executives, for retention purposes in the second quarter of 2024 (the “2024 Transition Incentive Awards”) were converted into Company restricted stock units in accordance with the Employee Matters Agreement by dividing the aggregate award value by the volume-weighted average share price over the first four trading days following the Spin-Off. As a result of the modification, the Cash-Based Equity Awards and 2024 Transition Awards, which were liability-classified awards prior to the Spin-Off, were reclassified as equity-classified awards. The Cash-Based Equity Awards and the 2024 Transition Incentive Awards in the amount of $ 50.3 million and $ 4.4 million, respectively, were reclassified to Additional Paid-In Capital and converted into 4.0 million and 2.5 million RSUs, respectively. See Note 7 - Stock-based compensation in the Company’s Annual Report on Form 10-K (filed on March 5, 2025) for the year ended December 31, 2024 for further details. 2024 Employee Stock Purchase Plan The ESPP was adopted by GRAIL and approved by Illumina’s Board of Directors, in its capacity as GRAIL’s sole stockholder, in May 2024. The maximum number of shares authorized for issuance under the ESPP increased by 338,934 shares to 752,955 shares on January 1, 2025 pursuant to the annual automatic evergreen increase provision of the ESPP. As of June 30, 2025, 752,955 shares were available for issuance under the ESPP. 17 Table of Contents GRAIL, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Under the ESPP as currently implemented, eligible employees are offered shares through a six-month offering period commencing in May and November of each year. Employees who participate in the ESPP may elect to have up to 15 % of their eligible compensation withheld to purchase shares of the Company’s common stock. The purchase price of the Company’s common stock will be equal to 85 % of the lower of the fair market value of the Company’s common stock on the beginning of each offering period or the fair market value of the Company’s common stock on the end of the six-month offering period. The Company’s first offering period began in May 2025 with the first purchase date expected to take place in November 2025. No shares were offered under the ESPP during the three- and six-month periods ended June 30, 2024. No shares were issued under the ESPP during the three- and six-month periods ended June 30, 2025 or the three- and six-month periods ended June 30, 2024. The fair value of employee stock purchase rights under the ESPP have been estimated with the following assumptions using the Black-Scholes-Merton option-pricing model: Three and Six Months Ended June 30, 2025 Weighted-average assumptions: Expected life (in years) 0.5 Risk-free interest rate 4.2 % Expected volatility 108.7 % Expected dividend 0 % Weighted-average estimated grant date fair value per share $ 17.68 The expected term represents the term from the first day of the offering period to the purchase date. The risk-free interest rate assumption was based upon observed interest rates on Treasury bills appropriate for the expected term. The expected stock price volatility assumption was estimated using the average of the Company’s historical volatility and average volatility of the Company’s peer companies. The average of the Company’s peer companies and its own volatility is more representative of future stock price trends than the Company’s historical volatility due to its limited history as a public company. Expected dividend yield was 0 % as the Company has not paid and does not anticipate paying dividends on its common stock. As of June 30, 2025, unrecognized compensation costs related to the ESPP was $ 1.9 million and is expected to be recognized over a weighted average period of 0.4 years. Performance-Based Award During the quarter ended June 30, 2025, the Company granted performance-based restricted stock unit (“PSU”) awards under the 2024 Plan with vesting conditions tied to achievement of Company-specific performance and continued service. One-third of the PSUs subject to the awards vest upon the achievement of a Company-specific performance condition and the remaining two-thirds of the PSUs subject to the awards vest in substantially equal installments upon each of the first and second anniversaries of the initial vesting date, in each case, subject to the holder’s continued service with the Company through the applicable vesting date. The PSU awards have an aggregate potential value of up to $ 1.0 million and expire, to the extent unvested, in May 2035. As of June 30, 2025, it was not probable that the performance conditions associated with the PSU awards will be achieved and, therefore, no stock-based compensation expense has been recognized in the unaudited condensed consolidated financial statements. The Company also has one performance-based award outstanding for a former employee for which vesting is based on future revenues. The award has an aggregate potential value of up to $ 78.0 million and expires, to the extent unvested, in August 2030. One-fourth of the total potential value of the award vests immediately upon the achievement of cumulative net revenues in any period of four consecutive fiscal quarters of $ 500.0 million, $ 750.0 million, $ 1.5 billion, and $ 2.0 billion. The Company assesses the probability of achieving the performance conditions associated with the award on a quarterly basis at each reporting period. If and to the extent that the liability becomes due and payable prior to 12:01 a.m. Eastern Time December 24, 2026 (the “Disposal Funding 18 Table of Contents GRAIL, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Period”) and paid by GRAIL, in cash, during the Disposal Funding Period, Illumina shall reimburse GRAIL all or such portion of the liability paid by GRAIL in accordance of the terms of the Separation and Distribution Agreement. As of June 30, 2025, it was not probable that the performance conditions associated with the award will be achieved and, therefore, no stock-based compensation expense, or corresponding loss recovery asset or liability, has been recognized in the unaudited condensed consolidated financial statements. NOTE 8. LEGAL AND REGULATORY PROCEEDINGS The Company is subject to various claims, complaints, regulatory proceedings, and legal actions that arise from time to time in the ordinary course of business. SEC Inquiry Letter GRAIL may also be a party or otherwise involved in new litigation proceedings regarding the Acquisition. For example, in July 2023, Illumina was informed that the staff of the SEC was conducting an investigation relating to Illumina and was requesting documents and communications primarily related to Illumina’s acquisition of GRAIL and certain statements and disclosures concerning GRAIL, its products and the acquisition, and related to the conduct and compensation of certain members of Illumina and GRAIL management, among other things. GRAIL has cooperated with the SEC in this investigation. On May 9, 2025, the Company confirmed with the SEC that the SEC has closed its investigation into this matter. Federal Securities Class Actions On November 11, 2023, the first of three securities class action complaints was filed against Illumina and certain of its current and former executive officers in the United States District Court for the Southern District of California. The first-filed case is captioned Kangas v. Illumina, Inc. et al., the second-filed case is captioned Roy v. Illumina, Inc. et al., and the third-filed case is captioned Louisiana Sheriffs’ Pension & Relief Fund v. Illumina, Inc. et al. (collectively, the “Actions”). The complaints generally allege, among other things, that defendants made materially false and misleading statements and omitted material facts relating to Illumina’s acquisition of Grail. The complaints seek unspecified damages, interest, fees, and costs. On January 9, 2024, four movants filed motions to consolidate the Actions and to appoint a lead plaintiff (“Lead Plaintiff Motions”). On April 11, 2024, the Court issued an order consolidating the Actions into a single action (captioned in re Illumina, Inc. Securities Litigation No. 23-cv-2082-LL-MMP), and appointed Universal-Investment-Gesellschaft mbH, UI BVK Kapitalverwaltungsgesellschaft mbH, and ACATIS Investment Kapitalverwaltungsgesellschaft mbH as lead plaintiffs. (the “Lead Plaintiffs”). On June 21, 2024, the Lead Plaintiffs filed a consolidated amended complaint. The amended complaint alleges that GRAIL, in addition to Illumina, and certain of their respective current and former directors and others violated sections 10(b) and 20(a) of the Securities Exchange Act and SEC Rule 10b-5 in connection with Illumina's acquisition of GRAIL and disclosures concerning the same. GRAIL has an indemnification obligation for certain current and former directors and officers involved in the matter pursuant to indemnification agreements entered into by these individuals and GRAIL. On September 13, 2024 the plaintiffs further amended the complaint. On November 12, 2024, the Company moved to dismiss Lead Plaintiffs’ second amended complaint for failure to state a claim under Sections 10(b) and 20(a) of the Exchange Act. Lead Plaintiffs filed their opposition to the motion to dismiss on December 20, 2024, and the Company filed its reply in support of its motion to dismiss on February 3, 2025. The motion to dismiss is currently pending before the federal district court. The Company denies the allegations in the complaints and intends to vigorously defend the litigation. In light of the fact that the lawsuits are in an early stage, the Company cannot predict the ultimate outcome of the suits. Other Legal Matters Legal matters include various claims, complaints, and legal actions that arise from time to time. In addition to direct involvement in legal matters, the Company has entered into indemnification agreements with each of its current and former directors, executive officers, and certain other officers to provide these directors and officers, and has certain indemnification obligations under the Company’s charter and bylaws to these individuals, which may give rise to liability for the Company even if the Company is not directly named. The Company has indemnification obligations in respect of the Actions and with respect to other legal matters that may arise, or have arisen, from time to time. There can be no assurance that existing or future legal proceedings arising in the 19 Table of Contents GRAIL, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) ordinary course of business or otherwise will not have a material adverse effect on the Company’s business, financial position, results of operations, or cash flows. The company is involved in various lawsuits and claims arising in the ordinary course of business, including actions with respect to employment matters. In connection with these matters, the Company assesses, on a regular basis, the probability and range of possible loss based on the developments in these matters. A liability is recorded in the unaudited condensed consolidated financial statements if it is believed to be probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Since litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about future events. The Company regularly reviews outstanding legal matters to determine the adequacy of the liabilities accrued and related disclosures. The Company may change its estimates if its assessment of the various factors changes and the amount of ultimate loss may differ from estimates, resulting in a material effect on the Company’s business, financial condition, results of operations, and/or cash flows. As of June 30, 2025, the Company is unable to estimate a range of possible loss in excess of the amounts accrued . Contingencies Contingencies primarily correspond to claims arising in the ordinary course of business. If necessary, these contingencies will be accrued, to the extent believed to be reasonably estimable to resolve the matter. The accrued contingency amounts are included in other current liabilities. Should the Company not be able to secure the terms it expects, these estimates may change and will be recognized in the period in which they are identified. In connection with the Spin-Off, Illumina provided the Company with disposal funding in the amount of $ 932.3 million in accordance with the Separation and Distribution Agreement, subject to a clawback feature. The clawback is triggered if, prior to September 24, 2025 (the 15 -month anniversary of the Distribution Date), the Company (i) consummates a change in control of the Company or (ii) (1) pays any dividend on, or makes any other distribution in respect of, any shares of its capital stock or other equity or voting interests (other than a stock dividend or a stock split), or otherwise consummates a return of capital from GRAIL to any of its equity holders or (2) redeems, purchases or otherwise acquires any of its outstanding shares of capital stock or other equity or voting interests (other than the acquisition of any shares in order to effectuate a “net settlement” transaction for the purposes of satisfying tax withholding obligations arising in connection with the grant, vesting, exercise and/or settlement of any outstanding incentive equity awards of GRAIL held by its current or former employees). If the Company consummates a transaction described in the foregoing clause (i), the Company must return to Illumina a cash amount decreasing over time calculated by reference to the number of months which have elapsed since the Distribution Date at the time of the public announcement of the event giving rise to the change of control. If the Company consummates a transaction described in the foregoing clause (ii), the Company must return to Illumina a cash amount equal to the payments made by the Company in connection with such transaction. The amount of clawback payments made cannot exceed the amount of the initial disposal funding. As of June 30, 2025 , no contingency liability was recorded as the contingent loss is not probable. On June 21, 2024, in connection with the Spin-Off, Illumina and the Company also entered into the Tax Matters Agreement to govern the respective rights, responsibilities and obligations of Illumina and the Company after the Spin-Off with respect to all tax matters and will include restrictions to preserve the tax-free status of the Distribution. The Tax Matters Agreement included a number of restrictions on the Company to preserve the intended tax treatment of the Spin-Off. Breach of any covenant or representation contained in the Tax Matters Agreement will result in liability to specific separation taxes. As of June 30, 2025 , as it was not probable that the Company will breach the agreement, no contingent liability was recorded in connection with the Tax Matters Agreement. NOTE 9. RESTRUCTURING On August 9 , 2024, following a portfolio review, the Company’s Board of Directors approved a restructuring plan (“Restructuring Plan”) designed to re-prioritize the Company’s resources to focus on its core multi-cancer early detection (“MCED”) business and reduce overall spend as the Company progresses towards completion of registrational studies and premarket approval application (“PMA”) submission . The Restructuring Plan was 20 Table of Contents GRAIL, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) substantially completed in the fourth quarter of 2024, and the Company incurred $ 18.3 million of total restructuring charges from August 9, 2024 through December 31, 2024, consisting primarily of employee severance, benefits, payroll taxes, asset impairments and other associated costs. The following table presents the total restructuring charges by function for the period indicated: Three Months Ended June 30, 2025 Six Months Ended June 30, 2025 (in thousands) Severance and related benefit costs Other Costs Total Severance and related benefit costs Other Costs Total Research and development $ — $ — $ — $ ( 47 ) $ 111 $ 64 Sales and marketing — — — ( 83 ) — ( 83 ) General and administrative — — — ( 31 ) 16 ( 15 ) Total $ — $ — $ — $ ( 161 ) $ 127 $ ( 34 ) As of June 30, 2025, the Company had no remaining restructuring liability. The following table summarizes the restructuring-related liabilities: (in thousands) Severance and related benefit costs Other Costs Total Amount recorded in accrued liabilities as of December 31, 2024 $ 806 $ 222 $ 1,028 Restructuring charges (adjustments), net ( 161 ) 127 ( 34 ) Cash payments made ( 645 ) ( 349 ) ( 994 ) Amount recorded in accrued liabilities as of June 30, 2025 $ — $ — $ — NOTE 10. NET LOSS PER SHARE Prior to the completion of the Spin-Off from Illumina, the Company had no common shares issued and outstanding. In connection with the Spin-Off, on June 24, 2024, there were 31.0 million shares of GRAIL common stock distributed to Illumina stockholders. This share amount is utilized for the calculation of basic and diluted earnings per share for all periods presented prior to the Spin-Off. For the three and six months ended June 30, 2024, 31.0 million shares are treated as issued and outstanding for purposes of calculating historical earnings per share. The following table presents the calculation of the Company’s basic and diluted net loss per share to common stockholders: Three Months Ended Six Months Ended (in thousands, except share and per share data) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Numerator Net loss $ ( 113,985 ) $ ( 1,585,337 ) $ ( 220,198 ) $ ( 1,804,251 ) Denominator Weighted average shares of common stock—basic and diluted 35,793,154 31,049,148 35,054,896 31,049,148 Net loss per share to common stockholders Basic $ ( 3.18 ) $( 51.06 ) $ ( 6.28 ) $ ( 58.11 ) Diluted $ ( 3.18 ) $( 51.06 ) $ ( 6.28 ) $ ( 58.11 ) 21 Table of Contents GRAIL, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share, as the inclusion of all potential shares of common stock outstanding would have been anti-dilutive. The following common stock equivalents were excluded from the calculation of diluted net loss per share for the periods presented as they had an anti-dilutive effect: Three and Six Months Ended June 30, 2025 June 30, 2024 Unvested restricted stock units 5,261,148 6,564,282 Employee stock purchase plan 145,433 — Shares subject to options to purchase common stock 104,315 104,315 Total 5,510,896 6,668,597 NOTE 11. TAXES For interim financial statement purposes, U.S. GAAP provision (benefit) for taxes related to ordinary income is determined by applying an estimated annual effective income tax rate against a company’s ordinary income, subject to certain limitations on the benefit of losses. Provision (benefit) for taxes related to items not characterized as ordinary income is recognized as a discrete item when incurred. The estimation of the Company’s income tax provision requires the use of management forecasts and other estimates, application of statutory income tax rates, and an evaluation of valuation allowances. The Company’s estimated annual effective income tax rate may be revised, if necessary, in each interim period. The worldwide effective income tax rate for the six months ended June 30, 2025 and June 30, 2024 was 26.40 % and 3.37 %, respectively. The increase for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024 primarily relates to the Company’s 2024 valuation allowance impacts against pre-tax losses prior to the Spin-off. The effective tax rate was higher than the 21% U.S. federal statutory rate for the six months ended June 30, 2025, primarily due to state taxes, offset by discrete tax benefits from stock-based compensation. The Company accounts for uncertain tax positions using a more-likely-than-not threshold for recognizing and resolving uncertain tax positions. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Interest and penalties related to unrecognized tax benefits are included within income tax expense. For the three months ended June 30, 2025, the Company recorded income tax expense related to its Federal and California research and development credits of $ 0.2 million and $ 0.1 million, respectively. The Company files income tax returns in the U.S. federal jurisdiction and various states. As of the date of this filing, the Company is not currently under examination by income tax authorities in federal, state, or other jurisdictions. All tax returns will remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating loss or credits. As discussed in Note 1 — Organization And Description Of Business , prior to the Spin-Off, for tax purposes, the Company operated as a subsidiary of Illumina and not as a separately regarded taxable entity. Accordingly, the effective worldwide income tax rate for the period prior to the Spin-Off was calculated using the separate return method as if the Company filed income tax returns on both a standalone basis and on a carve-out basis. 22 Table of Contents GRAIL, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 12. SEGMENT INFORMATION The Company operates and manages its business as one reportable operating segment which provides multi-cancer early detection testing and services. The Company's chief operating decision maker (“CODM”) is the chief executive officer. The chief operating decision maker reviews financial information on an aggregate basis for the purposes of evaluating financial performance and allocating resources based on net income (loss), adjusted gross margin and adjusted EBITDA. Net income (loss) is the measure of segment profit most consistent with U.S. GAAP that is regularly reviewed by the CODM to allocate resources and assess performance. The CODM does not evaluate operating segment performance using asset information. The following table is representative of the significant expense categories regularly provided to the CODM when managing the Company’s single reporting segment. A reconciliation to the consolidated net loss for the three and six months ended June 30, 2025 and June 30, 2024 is included in the table below: Three Months Ended Six Months Ended (in thousands) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Revenue: Screening revenue $ 34,379 $ 28,163 $ 63,512 $ 51,702 Development services revenue 1,165 3,807 3,869 6,989 Total revenue 35,544 31,970 67,381 58,691 Costs and operating expenses: Cost of screening revenue (exclusive of amortization of intangible assets) (1) 19,346 15,789 36,469 29,511 Cost of development services revenue (1) 501 621 1,672 2,057 Compensation 56,209 82,116 119,726 171,737 Depreciation and intangible assets amortization expense 39,175 39,389 78,454 79,385 Stock-based compensation 13,751 25,485 29,200 54,110 Professional services 9,327 25,593 18,522 41,077 Cloud computing and information technology 7,048 8,146 14,438 16,520 Clinical studies 6,263 16,327 12,185 31,232 Laboratory supplies and research collaborations 4,607 12,026 9,136 29,437 Facilities 1,674 6,414 4,194 11,166 Other segment expenses (2) 8,497 20,419 27,846 40,236 Goodwill and intangible assets impairment 28,000 1,420,936 28,000 1,420,936 Total costs and operating expenses 194,398 1,673,261 379,842 1,927,404 Loss from Operations ( 158,854 ) ( 1,641,291 ) ( 312,461 ) ( 1,868,713 ) Other income (expense): Interest income 6,809 2,805 14,588 5,706 Other income (expense), net ( 811 ) 5 ( 1,395 ) 47 Benefit from income taxes 38,871 53,144 79,070 58,709 Net Loss $ ( 113,985 ) $ ( 1,585,337 ) $ ( 220,198 ) $ ( 1,804,251 ) (1) Cost of screening revenue (exclusive of amortization of intangible assets) and cost of development services revenue include stock-based compensation expense. See Note 7 — Stock-Based Compensation for further details. (2) Other segment expenses primarily includes costs related to contractors and temporary labor, marketing expenses, legal expenses, and credit loss expense 23 Table of Contents GRAIL, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 13. RELATED PARTY TRANSACTIONS Illumina Purchases and Sales The Company was a subsidiary of Illumina, Inc. between August 19, 2021 to June 23, 2024. Subsequent to the Spin-Off, Illumina retained a 14.5 % stake in the Company. As of June 30, 2025, Illumina held 4,502,126 shares of common stock representing a 12.5 % stake in the Company. Illumina is both a customer of the Company and a major supplier of the Company’s reagents and capital equipment. Goods and services transactions with Illumina are invoiced and paid when due. Goods and services transactions with Illumina have been reflected in the unaudited condensed consolidated financial statements as follows: (in thousands) June 30, 2025 December 31, 2024 Accounts receivable $ 37 $ 65 Supplies 1,803 3,130 Prepaid expenses and other current assets 70 77 Property and equipment, net 1,768 2,227 Accounts payable 567 — Accrued liabilities 50 104 Three Months Ended Six Months Ended (in thousands) June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 Screening revenue $ 52 $ 108 $ 129 $ 237 Cost of screening revenue 1,176 3,457 2,687 6,126 Cost of development services revenue 19 71 182 116 Operating expenses—Research and development 578 5,310 1,974 10,112 Operating expenses—General and administrative — 52 — 103 In June 2024, the Company entered into an amendment to its Supply and Commercialization Agreement with Illumina. Under the terms of the amended agreement, regardless of whether its products incorporate any Illumina technology, the Company has agreed to pay to Illumina a high single-digit royalty, subject to certain reductions, in perpetuity on net sales generated by its products or revenues otherwise generated or received by the Company, subject to certain exceptions, in the field of oncology. Per the terms of the Separation and Distribution Agreement with Illumina, the royalty arrangement is suspended until the earlier of December 24, 2026 or any earlier change of control of the Company, at which time a high-single digit royalty payments will be payable. 24 Table of Contents GRAIL, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Contributions from Member, Net The following related party transactions between the Company and Illumina have been included in these unaudited condensed consolidated financial statements. As there was no intercompany loan agreement between Illumina and GRAIL and because these transactions had no history of being settled and were not settled per the terms of the Separation and Distribution Agreement, the total net effect of these transactions are reflected in the condensed consolidated statements of cash flows as cash provided by financing activities and in the condensed consolidated balance sheets as contributions from member, net, in member’s equity. The following table presents the components of the net transfers to and from Illumina prior to the Spin-Off: Six Months Ended (in thousands) June 30, 2024 Cash funding received from Illumina $ 1,244,300 Total contributions from member, net $ 1,244,300 NOTE 14. SUBSEQUENT EVENTS On July 4, 2025, the president signed into law the H.R.1, One Big Beautiful Bill Act (“the Act”). Among other things, the Act allows for the immediate expensing of domestic research and development expenditures, permanent 100% bonus depreciation on fixed assets placed in service after January 19, 2025, alters the calculation of the 163(j) limitation on the deductibility of interest expense, modifies the limitation on deductions for charitable contributions and expands the application of 162(m) limitations on the deductibility of executive compensation. These provisions are not expected to have a material impact on the company’s financial statements, however the Company will monitor the potential impact as additional guidance is available. 25