What changed in this filing

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Item 1A. Risk Factors

2024-05-09 compared with 2023-11-03 · 86 added, 69 removed, 919 unchanged (14% of the section changed)

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• our ability to achieve profitability for our business;

• our ability to repay our debt and fund our long-term planned operations;

• our ability to implement our expense reduction measures;

• our ability to repay our debt and fund our long-term operations;

• our ability to successfully leverage and integrate our acquisitions and future acquisitions;

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• current and future legal proceedings filed against us claiming intellectual property infringement;

• the potential adverse impact of health epidemics, including the ongoing COVID-19 pandemic;

• the potential adverse impact of health epidemics, including any resurgence of COVID-19 cases or other similar outbreaks;

• governmental regulations that burden operations or narrow the market for our products;

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We have made and expect to continue making substantial investments to develop new products and enhance our existing products through our acquisitions and research and development efforts.

For example, we recently announced our new Revio long-read sequencing system in the fourth quarter of 2022, and commenced commercial Revio shipments in the first quarter of 2023, and we also progressed development of and, in the quarter ended September 30, 2023, commenced commercial shipments of Onso, our SBB short-read platform.

For example, we commenced commercial shipments of Revio, our new long-read sequencing system in the first quarter of 2023, and commenced commercial shipments of Onso, our new SBB short-read platform, in the third quarter of 2023.

Our future success is substantially dependent on our ability to successfully develop and commercialize our products, including Revio and Onso, as well as acquired technologies, which are anticipated to be used in demanding scientific research that requires substantial levels of accuracy and precision.

In addition, we may not be successful in transitioning our Revio product from our prior generation products, or transitioning users of other third party short-read sequencing platforms to Onso, and could incur related obsolete inventory charges.

Customers may also be slower that we anticipate in making new capital equipment acquisitions, especially in the current economic environment.

However, due to challenges we may experience in developing and marketing our existing products and launching new products, we may not be able to effectively:

In addition, we may not be successful in transitioning our prior generation products to our Revio product, or transitioning users of other third party sequencing platforms to our portfolio of products, and could incur related obsolete inventory charges and losses on firm purchase commitments.

Customers may also be slower than we anticipate in making new capital equipment acquisitions, especially in the current economic environment.

Due to challenges we may experience in developing and marketing our existing products and launching new products, we may not be able to effectively:

• manage the timeliness of our new product introductions and the rate at which sales of our new products may cannibalize sales of our older products or manage sales and marketing of multiple sequencing platforms;

• drive adoption of our current and future products, including the Sequel II/IIe Systems, the Revio system, the Onso system, and products under development, including acquired technologies;

• drive adoption of our current and future products, including the Sequel II/IIe, Revio and Onso systems, and products under development;

• maintain our competitive position by continuing to attract and retain customers for our products;

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Accordingly, if we do not generate revenue as and when anticipated, we could suffer a material adverse effect on our business, financial conditions, results of operations and prospects.

We evaluate goodwill for impairment annually during the second quarter, and whenever events or changes in circumstances indicate that it is more likely than not that the fair value is less than the carrying value.

Events that would indicate impairment and trigger an interim impairment test include, but are not limited to, unexpected adverse business conditions, economic factors, unanticipated technological changes or competitive activities, loss of key personnel and acts by governments or courts.

The occurrence of any of these events, may require us to record future goodwill impairment charges.

We have incurred losses to date, and we expect to continue to incur significant losses as we develop our business and may never achieve profitability.

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We expect to continue to incur substantial losses and negative cash flow from operations for the foreseeable future.

Although we announced expense reduction plans during the second quarter of 2024, we do not expect to be profitable in 2024, and there can be no assurance that these expense reduction measures will be successful in helping us achieve profitability.

Our net losses since inception and our expectation of incurring substantial losses and negative cash flow for the foreseeable future could:

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An impairment in value of our tangible or intangible assets could also be recorded as a result of weaker economic conditions.

Our expense reduction measures could be disruptive to our operations and adversely affect our results of operations and financial condition, and we may not realize some or all of the anticipated benefits of these initiatives, whether in the time frame anticipated or at all.

During the second quarter of 2024, we announced plans to reduce certain of our annualized run-rate operating expenses by the end of the year, with the intent of better aligning our organizational structure and resources with our strategic initiatives.

Our expense reduction measures comprise, among other things, workforce reductions, facilities downsizing and a refined pipeline of development activities.

The implementation of these expense reduction measures, including the impact of workforce reductions, could impair our ability to invest in developing, marketing and selling new and existing products, be disruptive to our operations, make it difficult to attract or retain employees, result in higher than anticipated charges, divert the attention of management, result in a loss of accumulated knowledge, impact our customer and supplier relationships, and otherwise adversely affect our results of operations and financial condition.

In addition, our ability to complete our expense reduction measures and achieve the anticipated benefits within the expected time frame is subject to estimates and assumptions and may vary materially from our expectations, including as a result of factors that are beyond our control.

Furthermore, our efforts to stabilize our business may not be successful.

We are not cash flow positive and may not have sufficient cash to make required payments under the terms of our debt or fund our long-term planned operations.

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We have incurred significant debt, and we may incur additional debt, in the future.

As of September 30, 2023, we had outstanding approximately $459.0 million aggregate principal amount of 1.50% convertible senior notes due 2028 (the “2028 Notes”) and $441.0 million aggregate principal amount of our 1.375% convertible senior notes due 2030 (the “2030 Notes” and, together with the 2028 Notes, the “Notes”).

As of March 31, 2024, we had outstanding approximately $459.0 million aggregate principal amount of 1.50% convertible senior notes due 2028 (the “2028 Notes”) and $441.0 million aggregate principal amount of our 1.375% convertible senior notes due 2030 (the “2030 Notes” and, together with the 2028 Notes, the “Notes”).

We may not have sufficient cash to make required payments under the terms of this debt, and should this occur, debt holders have rights senior to common stockholders to make claims on our assets.

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We also may have to reduce sales, marketing, engineering, customer support or other resources devoted to our existing or new products, or we may need to cease operations.

Any of these actions could materially impede our ability to achieve our business objectives and could materially harm our operating results.

Any of these actions could materially impede our ability to achieve our business objectives and could materially harm our operating results, and there can be no assurance that any of these actions would be successful.

If our cash, cash equivalents and investments are insufficient to fund our projected operating requirements and we are unable to raise capital, it could have a material adverse effect on our business, financial condition and results of operations and prospects.

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If we are unable to successfully develop and timely manufacture our current and future products, including with respect to SMRT Cells, Sequel II/IIe Systems, Revio, Onso, and other SMRT Cell, HiFi, and SBB products under development, and related products, our business may be adversely affected.

In light of the highly complex technologies involved in our products, there can be no assurance that we will be able to manufacture and commercialize our current and future products on a timely basis or continue providing adequate support for our existing products.

Considering the highly complex technologies involved in our products, there can be no assurance that we will be able to manufacture and commercialize our current and future products on a timely basis or continue providing adequate support for our existing products.

The commercial success of our products, including the Sequel, Sequel II/IIe, Revio and Onso Systems, and the products under development, including acquired technologies, depends on a number of factors, including performance and reliability of the systems, our anticipating and effectively addressing customer preferences and demands, the success of our sales and marketing efforts, effective forecasting and management of product demand, purchase commitments and inventory levels, effective management of manufacturing and supply costs, and the quality of our products, including consumables such as SMRT Cells and reagents.

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Our production of the SMRT Cells for the Sequel and Sequel II/IIe Systems has been and may in the future, including with respect to the Revio system, be below desired levels and yields, and we have experienced and may experience in the future manufacturing delays, product or quality defects, SMRT Cell variability, and other issues.

For example, the COVID-19 pandemic has impacted and could result in more pronounced impacts to our manufacturing and our ability to supply products.

For example, the COVID–19 pandemic has impacted and, any resurgence of COVID-19, or the outbreak of other similar health epidemics could result in more pronounced impacts to our manufacturing and our ability to supply products.

The performance of our consumables is critical to our customers’ successful utilization of our products, and any defects or performance issues with our consumables would adversely affect our business.

All of the foregoing could materially negatively impact our ability to sell our products or result in other material adverse effects on our business, operations, financial condition, operations and prospects.

All of the foregoing could have a material adverse effect on our ability to sell our products or result in other material adverse effects on our business, operations, financial condition, operations and prospects.

The development of our products is complex and costly.

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If we are unable to do so or are delayed, then this could materially and adversely affect our business, operations, financial condition, and prospects.

We must successfully manage new product introductions and transitions, including with respect to the SMRT Cell, the Sequel II/IIe, Revio and Onso Systems, and the development of acquired technologies, and we may incur significant costs during these transitions and development, and these efforts may not result in the benefits we anticipate.

We must successfully manage new product introductions and transitions, including with respect to the Revio and Onso Systems and each of their related consumables, and the development of acquired technologies, and we may incur significant costs during these transitions and development, and these efforts may not result in the benefits we anticipate.

If our products and services fail to deliver the performance, scalability or results expected by our current and future customers, or are not delivered on a timely basis, our reputation and credibility may suffer, our current and future sales and revenue may be materially harmed and our business may not succeed.

For instance, if we are not able to realize the benefits we anticipate from the development and commercialization of the SMRT Cell, Sequel II/IIe Systems, the Revio HiFi long-read sequencing system, and the Onso SBB short-read sequencing system, and any future products that may be developed for research, medical and clinical uses, including acquired technologies, it could have a material adverse effect on our business, financial condition and results of operations.

For instance, if we are not able to successfully execute on the commercialization of the Revio HiFi long-read sequencing system, and the Onso SBB short-read sequencing system, and each of their related consumables, and any future products that may be developed for research, medical and clinical uses, including acquired technologies, it could have a material adverse effect on our business, financial condition and results of operations.

In addition, the introduction of future products, including with respect to future long-read and short-read products, and related consumables, has and may in the future lead to our limiting or ceasing development of further enhancements to our existing products as we focus our resources on new products, and has resulted and could in the future result in reduced marketplace acceptance and loss of sales of our existing products, materially adversely affecting our revenue and operating results.

The introduction of new products, including the recent announcement of our Revio system, has had and may in the future also have a negative impact on our revenue in the near-term as our current and future customers have delayed or cancelled and may in the future delay or cancel orders of existing products in anticipation of new products and we may also be pressured to decrease prices for our existing products.

The introduction of new products, including the recent commercialization of our Revio and Onso systems, has had and may in the future also have a negative impact on our revenue in the near-term as our current and future customers have delayed or cancelled and may in the future delay or cancel orders of existing products in anticipation of new products and we may also be pressured to decrease prices for our existing products.

Our experience in managing product transitions is limited, and we have experienced, and may in the future experience, difficulty in managing or forecasting customer reactions, purchasing decisions or transition requirements with respect to newly launched products.

We have incurred and may continue to incur significant costs in completing these transitions, including costs of write-downs of our products, as current or future customers transition to new products.

If we do not successfully manage these product transitions, including with respect to the SMRT Cell, Sequel II/IIe Systems, the Revio and Onso Systems, and any future long-read and short-read products, our business, operations, financial condition, and prospects may be materially and adversely affected.

Our business may be adversely affected by health epidemics, including any resurgence of COVID-19 cases or other outbreaks.

If we do not successfully manage these product transitions, including with respect to the Revio and Onso Systems and each of their related consumables, and any future long-read and short-read products, our business, operations, financial condition, and prospects may be materially and adversely affected.

Our business may be adversely affected by health epidemics, including any resurgence of COVID-19 cases or other similar outbreaks.

Our business has been and could be further adversely impacted by the effects of COVID-19 or other epidemics or pandemics.

Although it is not possible at this time to estimate the impact that health epidemics, including the results of the COVID-19 pandemic and any future resurgence of COVID-19 cases or other outbreaks, could have on our business, any pandemic or public health outbreaks or related disruptions and the measures taken by the governments of countries affected could disrupt the supply chain and the manufacture of our products.

Although it is not possible at this time to estimate the impact that health epidemics, including the results of the COVID-19 pandemic and any future resurgence of COVID-19 cases or other similar outbreaks, could have on our business, any pandemic or public health outbreaks or related disruptions and the measures taken by the governments of countries affected could disrupt the supply chain and the manufacture of our products.

Our manufacturing partners and suppliers have been and could continue to be disrupted by conditions related to COVID-19 or other epidemics or pandemics, possibly resulting in disruption to the production of our products.

If our manufacturing partners or suppliers are unable or fail to fulfill their obligations to us for any reason, we may not be able to manufacture our products and satisfy customer demand or our obligations under sales agreements in a timely manner, and our business could be harmed as a result.

There is significant uncertainty relating to the long-term effect of COVID-19 on our business.

There is significant uncertainty relating to the long-term effect of COVID-19 or other epidemics or pandemics on our business.

Infections may resurge or become more widespread and any ensuing disruptions to business activities or supply chains could have a negative impact on our business, financial condition, and operating results.

Because our semiconductor manufacturers are located in a region where immunization rates in certain communities may be low, new and emerging variants of COVID-19 could impact workforce availability at those locations and disrupt supply.

For example, the Chinese government may re-impose lockdowns or similar measures to combat the spread of COVID-19 and such measures have had, and may continue to have in the future, a negative impact on manufacturing and/or supply chains, as well as customer demand for our products and demand through certain distributors.

Because our semiconductor manufacturers are located in a region where immunization rates in certain communities may be low, new and emerging variants of COVID-19 or other epidemics or pandemics could impact workforce availability at those locations and disrupt supply.

For example, the Chinese government may re-impose lockdowns or similar measures to combat the spread of health epidemics such as COVID-19 or other similar outbreaks and such measures have had, and may continue to have in the future, a negative impact on manufacturing and/or supply chains, as well as customer demand for our products and demand through certain distributors.

For example, the COVID-19 pandemic caused us to modify our business practices, including limiting certain of our commercial operations and limiting certain employees from working in the office.

We offered, and if there is a resurgence of COVID-19 or other outbreak, we may again offer a significant percentage of our employees flexibility in the amount of time they work in an office, which could adversely impact the productivity of certain employees and harm our business, including our future operating results.

We offered, and if there is a resurgence of COVID-19 or other similar outbreaks, we may again offer a significant percentage of our employees flexibility in the amount of time they work in an office, which could adversely impact the productivity of certain employees and harm our business, including our future operating results.

This may also present risks for our strategy and may present operational, cybersecurity, and workplace culture challenges that may adversely affect our business.

Even after the COVID-19 pandemic has further subsided, we may continue to experience an adverse impact to our business as a result of its global economic impact, including recessionary effects and inflationary pressures.

Specifically, difficult macroeconomic conditions, such as decreases in discretionary capital expenditure spending, changes to the government funding environment, a reduction in or the lapsing of COVID-19-related governmental stimulus measures, increased and prolonged unemployment or a decline in consumer confidence as a result of the COVID-19 pandemic, as well as limited or significantly reduced points of access of our products, could have a continuing adverse effect on the demand for some of our products and, consequently, related maintenance and support services.

The degree of impact of COVID-19 on our business will depend on several factors, such as the duration and the extent of the pandemic, the risk of waning immunity among persons already vaccinated and an increase in fatigue or skepticism with respect to initial or booster vaccinations, as well as actions taken by governments, businesses, and consumers in response to the pandemic, all of which continue to evolve and remain uncertain at this time.

Specifically, difficult macroeconomic conditions, such as decreases in discretionary capital expenditure spending, changes to the government funding environment, a reduction in or the lapsing of COVID-19-related governmental stimulus measures, increased and prolonged unemployment or a decline in consumer confidence as a result of the COVID-19 pandemic or other epidemics or pandemics, as well as limited or significantly reduced points of access of our products, could have a continuing adverse effect on the demand for some of our products and, consequently, related maintenance and support services.

The degree of impact of COVID-19 or other epidemics or pandemics on our business will depend on several factors, such as the duration and the extent of the pandemic, the risk of waning immunity among persons already vaccinated and an increase in fatigue or skepticism with respect to initial or booster vaccinations, as well as actions taken by governments, businesses, and consumers in response to the pandemic, all of which continue to evolve and remain uncertain at this time.

Significant changes to our leadership team and the resulting management transitions might harm our future operating results.

We have experienced significant changes to our leadership team.

Our President and Chief Executive Officer Christian O.

Henry was appointed effective September 14, 2020, succeeding Dr.

Michael Hunkapiller who retired on December 31, 2020.

Our Chief Financial Officer Susan G.

Kim was appointed effective September 28, 2020, succeeding Susan K.

Barnes who retired on August 7, 2020.

Our Chief Operating Officer Mark Van Oene was appointed effective January 8, 2021.

Jeff Eidel was appointed Chief Commercial Officer effective August 16, 2022, succeeding Peter Fromen who resigned effective May 20, 2022.

Also, our Vice President and Chief Accounting Officer Michele Farmer was appointed effective May 17, 2021, and our Chair of the Board Dr.

Milligan was appointed effective September 14, 2020.

We have experienced significant changes to our leadership team since 2020, including the appointment of our current President and Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Chief Commercial Officer, Vice President and Chief Accounting Officer, and Chair of the Board.

Although we believe these leadership transitions are in the best interest of our stakeholders, these transitions may result in the loss of personnel with deep institutional or technical knowledge.

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In addition, our competitors may seek to use this transition and the related potential disruptions to gain a competitive advantage over us.

Furthermore, these changes increase our dependency on the other members of our leadership team that remain with us, who are not contractually obligated to remain employed with us and may leave at any time.

Furthermore, these changes may increase our dependency on the other members of our leadership team that remain with us, who are not contractually obligated to remain employed with us and may leave at any time.

Any such departure could be particularly disruptive given that we are already experiencing leadership transitions and, to the extent we experience additional management turnover, competition for top management is high such that it may take some time to find a candidate that meets our requirements.

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Our industry, is characterized by high demand and intense competition for talent, and the turnover rate has been and may continue to be high.

Our employees can leave our company with little to no prior notice and would be free to work for a competitor.

We compete for qualified management and scientific personnel with other life science companies, academic institutions and research institutions, particularly those focusing on genomics.

This competition had been exacerbated by the increase in employee resignations in 2021 and 2022, that had been experienced by us and reported by employers nationwide.

In addition, we have experienced significant turnover in our senior management team in recent periods.

To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have issued stock options and restricted stock units that vest over time.

The value to employees of stock options and restricted stock units that vest over time may be significantly affected by movements in our stock price that are beyond our control and may at any time be insufficient to counteract more lucrative offers from other companies.

We may face challenges in retaining and recruiting such individuals due to sustained declines in our stock price that could reduce the retention value of equity awards.

We also compete for qualified sales personnel to support the commercialization of our existing and new products.

Workforce reductions, such as the workforce reduction we began implementing during the second quarter of 2024, and other expense reduction efforts may be negatively received by potential or current employees, and accordingly result in attrition or difficulty in recruiting desirable candidates.

Additionally, we may face challenges in retaining and recruiting key personnel due to sustained declines in our stock price that could reduce the retentive value of stock options, restricted stock units and other equity awards we issue as compensation.

We may not be able to provide adequate cash or other incentives to adequately counterbalance any negative perceptions about the value of our equity awards.

Moreover, the value of any equity awards that we do grant to our personnel may be significantly affected by movements in our stock price that are beyond our control.

The loss of qualified employees, or an inability to attract, retain, and motivate employees, could prevent us from pursuing collaborations and materially and adversely affect our support of existing products, product development and launches, business growth prospects, results of operations and financial condition.

In addition, we will need to continue to recruit, hire and retain sales personnel to support the commercialization of our existing and new products.

Our employees could leave our company with little or no prior notice and would be free to work for a competitor.

In addition, changes to U.S.

Further, changes to U.S.

immigration policies, particularly to H-1B and other visa programs, could restrain the flow of technical and professional talent into the U.S.

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In addition, we do not have “key person” life insurance policies covering any member of our management team or other key personnel.

Further, our vaccination and return to office protocols related to COVID-19 may also impact the recruitment and retention of key employees.

The loss of any of these individuals or any inability to attract or retain qualified personnel, including scientists, engineers, sales personnel and others, could prevent us from pursuing collaborations and materially and adversely affect our support of existing products, product development and introductions, business growth prospects, results of operations and financial condition.

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If we are unable to source these product components from sole-source third-party manufacturing and supply collaborators for any reason, including in connection with acts of terrorism, hostilities, military conflict and acts of war, including between China and Taiwan, or secure a sufficient supply of these product components on a timely basis, or if these components do not meet our expectations or specifications for quality and functionality, our operations and manufacturing would be materially and adversely affected, we could be unable to meet customer demand and our business and results of operations may be materially and adversely affected.

The operations of our third-party manufacturing partners and suppliers have been and could continue to be disrupted by conditions unrelated to our business or operations or that are beyond our control, including but not limited to international trade restrictions, inflation, supply chain disruptions, and conditions related to COVID-19 or other epidemics or pandemics.

The operations of our third-party manufacturing partners and suppliers have had and may in the future be disrupted by conditions unrelated to our business or operations or that are beyond our control, including but not limited to international trade restrictions, inflation, supply chain disruptions, and conditions related to COVID-19 or other epidemics or pandemics.

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We may not be able to secure enough components at reasonable prices or of acceptable quality to build new products in a timely manner in the quantities or configurations needed.

For example, the Chinese government may re-impose lockdowns or similar measures to combat the spread of COVID-19 and these measures have had, and may continue to have in the future, a negative impact on manufacturing and/or supply chains, in addition to customer demand for our products and demand through certain distributors.

If as a result of global economic or political instability, such as the political uncertainty associated with the Israel and Hamas conflict, an escalation of the war in Ukraine, potential uncertainty related to Taiwan and its relationship with China, other disease outbreaks, or supply issues, we or our contractors could experience shortages, business disruptions or delays for materials sourced or manufactured in the affected countries, and their ability to supply us with instruments or product components may be affected.

For example, the Chinese government may re-impose lockdowns or similar measures to combat the spread of COVID-19 or other similar outbreaks and these measures have had, and may continue to have in the future, a negative impact on manufacturing and/or supply chains, in addition to customer demand for our products and demand through certain distributors.

If as a result of global economic or political instability, such as the political uncertainty in the Middle East associated with the Israel and Hamas conflict, an escalation of the war in Ukraine, potential uncertainty related to Taiwan and its relationship with China, other disease outbreaks, or supply issues, we or our contractors could experience shortages, business disruptions or delays for materials sourced or manufactured in the affected countries, and their ability to supply us with instruments or product components may be affected.

From time to time, certain components of our systems and reagents may reach the end of their life cycles or become obsoleted by our suppliers, and we would have to procure alternative sources for these end-of-life products.

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If any of these events occur, our business and operating results could be harmed.

Accordingly, if any of the foregoing occurs, our ability to commercialize our products, revenue and gross margins could suffer until lockdowns from COVID-19 infections are reduced, supply issues or business disruptions are resolved and/or other sources can be developed.

Accordingly, if any of the foregoing occurs, our ability to commercialize our products, revenue and gross margins could suffer until lockdowns from COVID-19 or other epidemics or pandemics infections are reduced, supply issues or business disruptions are resolved and/or other sources can be developed.

In addition, because our semiconductor suppliers are in regions that may have communities with low vaccination rates, any variants of COVID-19 that evolve in the future or other outbreaks could lead to increased infections among workers that could further disrupt the supply chain.

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There is also no assurance that we will be able to increase manufacturing yields and decrease costs, particularly if high rates of inflation continue, or that we will be successful in forecasting customer demand or manufacturing and supply costs, or that product supplies, including reagents or integrated chips, will not be limited or interrupted, or will be of satisfactory quality or continue to be available at acceptable prices.

Furthermore, while we are undertaking efforts to increase our manufacturing scale and capability, we may not be able to increase manufacturing to meet anticipated demand or may experience downtime in our manufacturing facilities, including, for example, if we experience increased cases of COVID-19 or other outbreaks among our employees, or if our suppliers are unable to meet our increased demand at a time when the supply chain is under duress due to potential dislocations and disruptions in product and employee availability due to COVID-19 or other outbreaks.

Furthermore, while we are undertaking efforts to increase our manufacturing scale and capability, we may not be able to increase manufacturing to meet anticipated demand or may experience downtime in our manufacturing facilities, including, for example, if our suppliers are unable to meet our increased demand at a time when the supply chain is under duress due to potential dislocations and disruptions in product and employee availability (whether due to health epidemics or pandemics or otherwise).

An inability to manufacture products and components that consistently meet specifications, in necessary quantities and at commercially acceptable costs, will have a negative impact, and may have a material adverse effect on our business, product development timelines, financial condition and results of operations.

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The future growth of the market for our current and future products depends on many factors beyond our control, including recognition and acceptance of our products by the research and scientific communities, the growth, prevalence and costs of competing products and solutions and the development of robust ecosystems supporting our products and their methodologies.

For example, the market acceptance and growth of long-read sequencing technologies, like our Revio system, depends on a variety of factors, including the availability and cost-effectiveness of related tools for high-quality sample collection and preparation and advanced bioinformatic tools to process results, as well as the perceived advantages and disadvantages of long-read sequencing compared to short-read or other sequencing technologies;

as well as the perceived advantages and disadvantages of long-read sequencing compared to short-read or other sequencing technologies:

consequently, if potential customers conclude the costs of adopting long-read sequencing technologies outweigh the benefits, the market for our Revio systems may be negatively impaired.

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There are a significant number of companies offering nucleic acid sequencing products and/or services, including Illumina, BGI Genomics (also known as MGI or Complete Genomics), Thermo, ONT Ltd., Roche, Bionano, and Qiagen.

Other companies recently entering the market include Ultima Genomics, Element Biosciences and Singular Genomics.

Other companies recently entering the market include Ultima, Element and Singular.

Many of these companies currently have greater name recognition, more substantial intellectual property portfolios, longer operating histories, significantly greater financial, technical, research and/or other resources, more experience in new product development, larger and more established manufacturing capabilities and marketing, sales, and support functions, and/or more established distribution channels to deliver products to customers than we do.

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For example, for the years ended December 31, 2022 and 2021, one of our customers, who is our primary distributor in China, accounted for approximately 12% and 13% of our total revenue, respectively.

For the year ended December 31, 2023, no single customer accounted for 10% or greater of our total revenue.

Many of these customers make large purchases on a purchase-order basis rather than pursuant to long-term contracts.

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Their spending budgets can have a significant effect on the demand for our products.

Spending budgets are based on a wide variety of factors, including the allocation of available resources to make purchases, funding from government sources which is highly uncertain and subject to change, the spending priorities among various types of research equipment, policies regarding capital expenditures during economically uncertain periods and the potential impacts of COVID-19 or other outbreaks.

Any decrease in capital spending or change in spending priorities of our current and potential customers could significantly reduce the demand for our products.

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We may not receive revenue from these orders, and any order backlog we report may not be indicative of our future revenue.

Many events can cause an order to be delayed or not completed at all, some of which may be out of our control, including the potential impacts from COVID-19 or other outbreaks and our suppliers, especially our sole source suppliers, not being able to provide us with products or components.

Many events can cause an order to be delayed or not completed at all, some of which may be out of our control, including the potential impacts from health epidemics or pandemics and our suppliers, especially our sole source suppliers, not being able to provide us with products or components.

If we delay fulfilling customer orders or if customers reconsider their orders, those customers may seek to cancel or modify their orders with us.

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Following the establishment of the relationship, the negotiation of purchase terms can be time-consuming, including as a result of seasonal factors, as discussed below, and a potential customer may require an extended evaluation and testing period.

Our sales cycles may also lengthen, and those sales cycles may result in lower units sold per cycle, as we introduce our Revio and Onso instruments and their associated consumables to the market, as our customers may have additional administrative, technical or other requirements associated with transitioning to new products and technologies.

Our sales cycles may also lengthen, and those sales cycles may result in lower units sold per cycle, as we continue to introduce our Revio and Onso instruments and their associated consumables to the market, as our customers may have additional administrative, technical or other requirements associated with transitioning to new products and technologies.

In anticipation of product orders, we may incur substantial costs before the sales cycle is complete and before we receive any customer payments.

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For example, for the years ended December 31, 2022 and 2021, one of our customers, who is our primary distributor in China, accounted for approximately 12% and 13% of our total revenue, respectively.

For the year ended December 31, 2023, no single customer accounted for 10% or greater of our total revenue.

In addition, certain c omponents, some of which are critical components, of our products are manufactured in China.

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Any such changes could directly and adversely impact our financial results and results of operations.

For more information, see “— Enhanced trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers may materially harm our business, ” below .

For more information, see “— Enhanced trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers may materially harm our business.

Other risks could include:

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• general economic, industry and market conditions;

• the impact of catastrophic events, including health epidemics or pandemics and military or other armed conflicts;

• the regulatory environment in which we operate;

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• changes or trends in new technologies and industry standards.

and the potential impacts of COVID-19 or other outbreaks.

Consequently, it is possible that in some quarters our operating results will fall below the expectations of securities analysts or investors.

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• foreign currency exchange, longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;

• changes in social, economic, and political conditions or in laws, regulations and policies governing foreign trade, manufacturing, research and development, and investment both domestically as well as in the other countries and jurisdictions in which we operate and into which we may sell our products including as a result of the separation of the United Kingdom from the European Union (“Brexit”) and ongoing geopolitical tensions related to the political uncertainty and military actions associated with the Israel and Hamas conflict, the war in Ukraine, resulting sanctions imposed by the U.S.

• changes in social, economic, and political conditions or in laws, regulations and policies governing foreign trade, manufacturing, research and development, and investment both domestically as well as in the other countries and jurisdictions in which we operate and into which we may sell our products including as a result of the separation of the United Kingdom from the European Union (“Brexit”) and ongoing geopolitical tensions related to the political uncertainty and military actions associated with the war in Ukraine, resulting sanctions imposed by the U.S.

and other countries, and retaliatory actions taken by Russia in response to such sanctions;

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• operating results below the expectations of securities analysts or investors;

• general economic and market conditions, which could be impacted by various events including COVID-19, other outbreaks or interest rate fluctuations, increases in fuel prices, foreign currency fluctuations, international tariffs, acts of terrorism, hostilities or the perception that hostilities may be imminent, military conflict and acts of war, including further political uncertainty and military actions associated with the Israel and Hamas conflict and, the war in Ukraine, as well as responses to such events including sanctions or other restrictive actions, by the United States and/or other countries.

• general economic and market conditions, which could be impacted by various events including health epidemics or pandemics, interest rate fluctuations, increases in fuel prices, foreign currency fluctuations, international tariffs, acts of terrorism, hostilities or the perception that hostilities may be imminent, military conflict and acts of war, including further political uncertainty and military actions associated with the war in Ukraine and the related response, including sanctions or other restrictive actions, by the United States and/or other countries.

If any of the forgoing occurs, it would cause our stock price or trading volume to decline.

Stock markets in general and the market for companies in our industry in particular have experienced price and volume fluctuations, which have been exacerbated by the COVID-19 pandemic, and current macroeconomic trends and geopolitical events, and have affected and continue to affect the market prices of equity securities of many companies.

Stock markets in general and the market for companies in our industry in particular have experienced price and volume fluctuations;

these fluctuations have been, and may continue to be, exacerbated by and current macroeconomic trends and geopolitical events.

These fluctuations often have been unrelated or disproportionate to the operating performance of those companies.

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We may not have the ability to raise the funds necessary to settle conversions of the Notes in cash or to repurchase the Notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the Notes.

As of September 30, 2023, we had outstanding approximately $459.0 million aggregate principal amount of our 2028 Notes and $441.0 million aggregate principal amount of our 2030 Notes.

As of March 31, 2024, we had outstanding approximately $459.0 million aggregate principal amount of our 2028 Notes and $441.0 million aggregate principal amount of our 2030 Notes.

The 2028 Notes will mature on February 15, 2028, subject to earlier conversion, redemption or repurchase, including upon a fundamental change.

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Unfavorable global economic or political conditions could adversely affect our business, financial condition or results of operations.

General conditions in the global economy and in the global financial markets could adversely affect our results of operations, including the potential effects from the COVID-19 pandemic or other outbreaks as discussed above, and the overall demand for nucleic acid sequencing products may be particularly vulnerable to unfavorable economic conditions.

A global financial crisis, inflation or a global or regional political disruption, as well as acts of terrorism, hostilities, military conflict and acts of war, including any further political uncertainty and military actions associated with the Israel and Hamas conflict and the war in Ukraine, as well as the related responses, could cause extreme volatility in the capital and credit markets.

General conditions in the global economy and in the global financial markets could adversely affect our results of operations, including the potential effects from the COVID-19 pandemic or other similar outbreaks as discussed above, and the overall demand for nucleic acid sequencing products may be particularly vulnerable to unfavorable economic conditions.

A global financial crisis, inflation or a global or regional political disruption, as well as acts of terrorism, hostilities, military conflict and acts of war, including any further political uncertainty and military actions in the Middle East associated with the Israel and Hamas conflict and the war in Ukraine, as well as the related responses, could cause extreme volatility in the capital and credit markets.

A severe or prolonged economic downturn or political disruption could result in a variety of risks to our business, including weakened demand for our products and our ability to raise additional capital when needed on acceptable terms, if at all.

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International operations entail a variety of other risks, including, without limitation:

• limits to travel, which could result from further outbreaks of COVID-19 or other pandemics or epidemics;

• potential limits to travel as a result of COVID-19 or other epidemics or pandemics;

• challenges in staffing and managing foreign operations;

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• restrictions on both inbound and outbound cross-border investment, including enhanced oversight by the Committee on Foreign Investment in the United States (“CFIUS”) and substantial restrictions on investment from China;

and foreign government trade restrictions, including those which may impose restrictions on the importation, exportation, re-exportation, sale, shipment or other transfer of programming, technology, components, including semiconductors, and/or services to foreign persons;

• changes in diplomatic and trade relationships, including new tariffs, trade protection measures, import or export licensing requirements, trade embargoes, sanctions, and other trade barriers;

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Our IT systems, including those used in our products, may be vulnerable to damage from a variety of sources, including telecommunications or network failures, power loss, natural disasters, human acts, computer viruses, ransomware, computer denial-of-service attacks, unauthorized access to customer or employee data or company trade secrets, and other attempts to harm our systems.

Furthermore, there may be a heightened risk of potential cybersecurity incidents and security breaches to which we could be vulnerable by state-sponsored or affiliated actors or others in connection with the political uncertainty and military actions associated with the Israel and Hamas conflict and the war in Ukraine.

Furthermore, there may be a heightened risk of potential cybersecurity incidents and security breaches to which we could be vulnerable by state-sponsored or affiliated actors or others in connection with the political uncertainty and military actions in the Middle East associated with the Israel and Hamas conflict and the war in Ukraine.

Certain of our systems are not redundant, and our disaster recovery planning is not sufficient for every eventuality.

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We engage third-party vendors and service providers to store and otherwise process some of our data, including sensitive and personal information.

Our vendors and service providers may also be the targets of the risks described above, including cyberattacks, malicious software, ransomware, phishing schemes, and fraud.

Our vendors and service providers may also be the targets of the risks described above, including cyber-attacks, malicious software, ransomware, phishing schemes, and fraud.

Our ability to monitor our vendors and service providers’ data security is limited, and, in any event, third parties may be able to circumvent those security measures, resulting in the unauthorized access to, misuse, disclosure, loss or destruction of our data, including sensitive and personal information, and disruption of our or third-party service providers’ systems.

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The successful assertion of one or more large claims against us that exceed available insurance coverage, the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, or denials of coverage, could have a material adverse effect on our business, including our financial condition, results of operations and reputation.

Our use of artificial intelligence and machine learning technologies may result in reputational harm or liability.

We have incorporated and may continue to incorporate additional artificial intelligence and machine learning, or AIML, technologies into our sequencing platforms, marketing programs, and analysis software, including Revio and otherwise within our business, and these solutions and features are advantageous to describing, enhancing, and maximizing the capabilities of our differentiated technologies and to our future growth over time.

We rely and expect to rely on AIML technologies such as basecalling, variant calling, epigenetic analysis and tertiary analysis, but there can be no assurance that we will realize the desired or anticipated benefits from AIML or any at all.

We may also fail to properly implement or utilize AIML technologies.

Our competitors or other third parties may incorporate AIML into their products, platforms, software and services or otherwise within their business more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations.

Additionally, our use of AIML technologies may expose us to additional claims, demands and proceedings by private parties and regulatory authorities and subject us to legal liability as well as brand and reputational harm.

For example, if output from AIML technologies or that they assist in producing are or are alleged to be deficient, inaccurate, or biased, or for such output, or such technologies or their development or deployment, including the collection, use, or other processing of data used to train or create such AIML technologies, to alleged to infringe upon or to have misappropriated third-party intellectual property rights or to violate applicable laws, regulations, or other actual or asserted legal obligations to which we are or may become subject, then our business, financial condition, and results of operations may be adversely affected.

The legal, regulatory, and policy environments around AIML are evolving rapidly, and we may become subject to new and evolving legal and other obligations.

These and other developments may require us to make significant changes to our use of AIML, including by limiting or restricting our use of AIML, and may require us to make significant changes to our policies and practices, which may necessitate expenditure of significant time, expense, and other resources, AIML also presents emerging ethical issues, and if our use of AIML becomes controversial, we may experience brand or reputational harm.

We are currently subject to, and may in the future become subject to additional, U.S.

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Additionally, public interest and legislative pressure related to public companies’ ESG practices continues to grow.

For example, the SEC has adopted final rules regarding climate-related disclosures in public companies’ periodic reporting.

If our ESG practices fail to meet regulatory requirements or investor or other industry stakeholders' evolving expectations and standards for responsible corporate citizenship in areas including environmental stewardship, support for local communities, board and employee diversity, human capital management, employee health and safety practices, product quality, supply chain management, corporate governance and transparency, and employing ESG strategies in our operations, our brand, reputation and employee retention may be negatively impacted and customers and suppliers may be unwilling to do business with us.

In addition, as we work to align our ESG practices with industry standards, we will likely continue to expand our disclosures in these areas and doing so may result in additional costs and require additional resources to monitor, report, and comply with our various ESG practices.

If we fail to adopt ESG standards or practices as quickly as stakeholders desire, report on our ESG efforts or practices accurately, or satisfy the expectations of stakeholders, our reputation, business, financial performance, and growth may be adversely impacted.

In addition, ESG reporting and disclosure may result in additional costs and require additional resources to monitor, report, and comply with our various ESG practices as well as additional attention from our board of directors and management.

If we fail to adopt ESG standards or practices as quickly as stakeholders desire, report on our ESG efforts or practices accurately, or satisfy the expectations of stakeholders, or comply with applicable regulatory requirements, our reputation, business, financial performance, and growth may be adversely impacted.

Unregistered Sales of Equity Securities and Use of Proceeds

Defaults Upon Senior Securities

Mine Safety Disclosures

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors