What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-08 compared with 2023-08-08 · 146 added, 113 removed, 177 unchanged (59% of the section changed)

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The HD-X has been designed to deliver significant productivity and operational efficiency improvements, as well as greater user flexibility.

By June 30, 2023, approximately 81% of the HD instrument installed base was HD-X instruments.

By September 30, 2023, approximately 81% of the HD instrument installed base was HD-X instruments.

With our acquisition of Aushon BioSystems, Inc.

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researchers and biopharmaceutical and diagnostics companies world-wide in the detection of Nf-L to advance the development of therapeutics and diagnostics for neurodegenerative conditions.

We also provide contract research services for customers through our CLIA-certified Accelerator Laboratory.

The Accelerator Laboratory provides customers with access to Simoa technology, and supports multiple projects and services, including sample testing, homebrew assay development, and custom assay development.

We also provide contract research services for customers and Laboratory Developed Test (“LDT”) services through our CLIA-certified Accelerator Laboratory (the “Acceleratory Laboratory”).

To date, we have completed over 2,200 projects for more than 470 customers from all over the world using our Simoa platforms.

We sell our instruments, consumables and services to the life science, pharmaceutical, and diagnostics industries through a direct sales force and support organizations in North America and Europe, and through distributors or sales agents in other select markets, including Australia, Brazil, China, Czech Republic, India, Hong Kong, Israel, Japan, New Zealand, Qatar, Saudi Arabia, Singapore, South Africa, South Korea, Taiwan, and the United Arab Emirates.

We sell our instruments, consumables, and services to the life science, pharmaceutical, and diagnostics industries through a direct sales force and support organizations in North America and Europe, and through distributors and sales agents in other select markets, including Australia, Brazil, China, Czech Republic, India, Hong Kong, Israel, Japan, New Zealand, Qatar, Saudi Arabia, Singapore, South Africa, South Korea, Taiwan, and the United Arab Emirates.

In addition, Uman sells Nf-L antibodies and Nf-L ELISA kits directly, and in conjunction with us and another distributor, worldwide.

We have an extensive base of customers in academic and governmental research institutions, as well as pharmaceutical, biotechnology, and contract research companies.

As of June 30, 2023, we had cash and cash equivalents of $329.5 million.

As of September 30, 2023, we had cash, cash equivalents, and marketable securities of $327.7 million.

Since our inception, we have incurred annual net losses.

Our net losses were $6.1 million and $12.2 million for the three and six months ended June 30, 2023 and $24.9 million and $43.1 million for the three and six months ended June 30, 2022, respectively.

As of June 30, 2023, we had an accumulated deficit of $414.3 million and stockholders' equity of $355.4 million.

Our net losses were $7.8 million and $19.9 million for the three and nine months ended September 30, 2023, respectively, and $35.1 million and $78.1 million for the three and nine months ended September 30, 2022, respectively.

As of September 30, 2023, we had an accumulated deficit of $422.1 million and stockholders’ equity of $353.4 million.

We expect to continue to incur significant expenses and operating losses at least through the next 24 months.

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● seek Premarket Approval (“PMA”) or 510(k) clearance from the FDA for our existing products or new products if or when we decide to market products for use in the prevention, diagnosis, or treatment of a disease or other condition;

● hire additional personnel and grow our employee headcount;

● hire additional personnel to support our growth and research and development;

● strategically acquire and integrate companies or technologies that may be complementary to our business;

● intend to invest in our diagnostics business in support of the launch of LucentAD and other diagnostics initiatives;

● enter into collaboration arrangements, if any, or in-license other products and technologies;

● intend to invest in our diagnostics business in support of the launch of Lucent Diagnostics, LDTs and other diagnostics initiatives;

● enter into collaboration arrangements, or in-license other products and technologies;

● add operational, financial, and management information systems.

Recent Business Developments

In July 2023, we launched LucentAD, a blood-based biomarker test to assist in the evaluation of patients experiencing cognitive symptoms consistent with the early signs of Alzheimer’s disease.

The test has not been cleared or approved by the FDA.

In October 2023, we entered into a license agreement with Janssen Sciences Ireland UC, a Johnson & Johnson Company (“J&J”).

The agreement grants us worldwide, non-exclusive rights to J&J’s p-Tau 217 antibodies and assay designs for use in clinical research and diagnostic products, including in the production of Simoa p-Tau 217 research-use only assay kits for global distribution.

Under this license, we are required to pay royalties on net sales of the licensed products and service activities.

In July 2023, we launched Lucent Diagnostics, a new healthcare provider-facing portal to meet the future needs of patients at the same time a therapy for disease becomes more widely available.

In the second half of 2023, we have launched initial blood-based biomarker LDTs, LucentAD and LucentAD p-Tau 217, to assist in the evaluation of patients experiencing cognitive symptoms consistent with the early signs of Alzheimer’s disease.

These tests have not been cleared or approved by the FDA.

We do not expect material revenues from these tests until 2024 or later.

On September 21, 2022, we entered into a contract with the National Institutes of Health (the “NIH”) with a total award value of $1.7 million (the “NIH Grant”).

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Receipt of the award value occurs throughout the term of the contract period and after we submit for reimbursement of activities related to the grant.

As of June 30, 2023, we had not received any of the award value.

During the three and six months ended June 30, 2023, grant revenue recognized and research and development expense incurred were immaterial.

As of September 30, 2023, we had received $0.5 million of the award value.

During the three months ended September 30, 2023, grant revenue recognized and research and development expense incurred under the NIH Grant were not material.

During the nine months ended September 30, 2023, grant revenue recognized and research and development expense incurred under the NIH Grant were $0.5 million and $0.4 million, respectively.

On March 24, 2022, we entered into a contract with the Alzheimer’s Drug Discovery Foundation (the “ADDF”) with a total funding value of $2.3 million (the “ADDF Grant”).

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The ADDF Grant restricts our use of the granted funds solely for activities related to our Alzheimer’s diagnostic test development project and the contract period runs through June 2024.

Receipt of the contract funding was subject to achievement of predefined milestones and as of June 30, 2023, we had received the total funding value of $2.3 million.

During the three and six months ended June 30, 2023 and 2022, grant revenue recognized and research and development expense incurred were immaterial.

Receipt of the contract funding was subject to achievement of predefined milestones and as of September 30, 2023, we had received the total funding value of $2.3 million.

During the three and nine months ended September 30, 2023, grant revenue recognized and research and development expenses incurred under the ADDF Grant were $0.3 million and $0.4 million, respectively.

On February 25, 2022, we entered into a Master Collaboration Agreement with Eli Lilly and Company (“Lilly”) establishing a framework for future projects focused on the development of Simoa immunoassays (the “Lilly Collaboration Agreement”).

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In connection with the Lilly Collaboration Agreement, we received a non-refundable up-front payment of $5.0 million during the first quarter of 2022, which was recognized over a one-year period.

In addition, under the statement of work, we receive $1.5 million per calendar, which began in the first quarter of 2022.

In addition, under the statement of work, we receive $1.5 million per calendar quarter, which began in the first quarter of 2022.

The statement of work automatically renews on a quarterly basis until Lilly provides a termination notice in accordance with the terms of the Lilly Collaboration Agreement.

As of June 30, 2023, the Lilly Collaboration Agreement and the statement of work were still in effect.

As of September 30, 2023, the Lilly Collaboration Agreement and the statement of work were still in effect.

Concurrent with the execution of the Lilly Collaboration Agreement, we entered into a Technology License Agreement (the “Lilly License”) under which Lilly granted us a non-exclusive license to Lilly’s proprietary pTau217 antibody technology for use in research use only products and services and future in vitro diagnostics applications within the field of Alzheimer’s disease.

In consideration of the Lilly License, we paid an upfront fee, are required to make milestone payments based on the achievement of predetermined regulatory and commercial events, and will pay royalties on net sales of licensed products.

We recognized revenue from the Lilly Collaboration Agreement of $1.5 million and $3.0 million during the three and six months ended June 30, 2023, respectively, and $2.7 million and $5.4 million during the three and six months ended June 30, 2022, respectively.

We recognized revenue from the Lilly Collaboration Agreement of $1.5 million and $4.5 million during the three and nine months ended September 30, 2023, respectively.

Restructuring and Strategic Re-Alignment

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The Restructuring Plan included the elimination of 119 positions and other cost-saving measures.

During the nine months ended September 30, 2022, we incurred approximately $3.4 million of expenses related to the Restructuring Plan.

These expenses were substantially for cash payments of severance and employee benefits, $3.1 million of which was paid as of September 30, 2022.

Total restructuring expenses incurred in 2022 under the Restructuring Plan were $3.8 million.

As a result of the Restructuring Plan, we performed an impairment assessment of our goodwill, long-lived assets, including operating lease right-of-use assets, and intangibles.

The assessments resulted in us recording an impairment charge of $25.6 million during the year ended December 31, 2022.

The impairment charge included (1) $16.3 million associated with the right-of-use asset and property and equipment at leased facilities, (2) $8.2 million of goodwill (refer to Note 11 – Goodwill in the Notes to Consolidated Financial Statements), and (3) $1.1 million for software costs related to projects that were rationalized as part of the Restructuring Plan.

There were no impairment charges recorded associated with the Restructuring Plan during the three and six months ended June 30, 2023.

There were no material changes to the Restructuring Plan or the exit and disposal costs in 2023.

Overall, as a result of the Restructuring Plan, we expect to realize estimated annualized operating expense savings of approximately $25 million.

Comparison of Results of Operations for the Three Months Ended June 30, 2023 and 2022 (in thousands, except percentages):

Three Months Ended June 30,

The assessments resulted in us recording an impairment charge of $16.9 million during the three and nine months ended September 30, 2022.

The impairment charge included (1) $8.2 million of goodwill (refer to Note 12 − Goodwill in the Notes to Consolidated Financial Statements), (2) $7.7 million associated with the right-of-use asset and property and equipment at leased facilities no longer being utilized, and (3) $1.0 million for software costs related to projects that were rationalized as part of the Restructuring Plan.

During the nine months ended September 30, 2023, there were no material changes to the Restructuring Plan or the related exit and disposal costs.

Overall, as a result of the Restructuring Plan, we expect to realize estimated annualized operating expense savings in 2023 of approximately $25.0 million.

Comparison of Results of Operations for Three Months Ended September 30, 2023 and 2022:

The following table sets forth select Consolidated Statements of Operations data, and such data as a percentage of total revenues (in thousands, except percentages):

Three Months Ended September 30,

Increase (Decrease)

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Total revenues

Cost of goods sold and services:

Costs of goods sold and services:

Cost of product revenue

Cost of service revenue

Cost of service and other revenue

Total costs of goods sold and services

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Other lease costs

Restructuring

Impairment and restructuring

Total operating expenses

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Interest income, net

Other expense, net

Other income (expense), net

Loss before income taxes

Income tax expense, net

Total revenues increased $7.5 million, or 32%, to $31.0 million for the three months ended June 30, 2023, compared to $23.5 million for the three months ended June 30, 2022.

Product revenue of $19.7 million for the three months ended June 30, 2023 consisted of instrument sales of $3.5 million and sales of consumables and other products of $16.2 million.

This represented an increase of $4.9 million, or 33%, as compared to product revenue of $14.8 million for the three months ending June 30, 2022, which consisted of $5.6 million in instrument sales and $9.2 million in sales of consumables and other products.

The increase in product revenue resulted primarily from (1) increased sales of consumables, (2) increased average selling prices, and (3) a one-time increase from the receipt of ordinary shares from UltraDx with a fair value of $1.0 million that was accounted as variable consideration under the UltraDx Agreement (as a Level 3 financial asset with minimal market activity or other data available, the fair value was determined primarily using the third-party purchase price of similar instruments issued by UltraDx).

These increases were partially offset by lower instrument sales due to reduced demand in certain markets.

We expect this instrument trend to continue for the remainder of 2023.

Service revenue was $10.6 million for the three months ended June 30, 2023, compared to $8.5 million for the three months ended June 30, 2022, an increase of $2.1 million, or 23%, primarily due to increased Accelerator Laboratory revenue, partially offset by lower revenue recognized from the Lilly Collaboration Agreement.

Collaboration and license revenue was $0.6 million for the three months ended June 30, 2023, compared to $0.1 million for the three months ended June 30, 2022, an increase of $0.5 million, or 584%.

This was due to a one-time increase from the expiration of a previously paid for option to expand the scope of the Abbott License Agreement.

Grant revenue was $0.2 million for the three months ended June 30, 2023, compared to $0.1 million for the three months ended June 30, 2022.

Income tax expense

Total revenues increased $4.7 million, or 18%, to $31.3 million for the three months ended September 30, 2023, compared to $26.6 million for the three months ended September 30, 2022.

Product revenue of $19.7 million for the three months ended September 30, 2023 consisted of instrument sales of $3.7 million and sales of consumables and other products of $16.0 million.

This represented an increase of $2.0 million, or 11%, compared to product revenue of $17.7 million for the three months ended September 30, 2022, which consisted of $7.8 million in instrument sales and $9.9 million in sales of consumables and other products.

The increase in product revenue was primarily due to a $6.1 million increase in sales of consumables and increased average selling prices.

This increase was partially offset by a $4.1 million decrease in instrument sales due to reduced demand, which is a trend we expect to continue for the remainder of 2023.

Service revenue was $10.9 million for the three months ended September 30, 2023, compared to $8.4 million for the three months ended September 30, 2022, an increase of $2.6 million, or 31%.

This increase was primarily due to a $3.3 million increase in Accelerator Laboratory revenue due to higher volumes of sample testing and assay development services, which was partially offset by a $1.2 million decrease in revenue recognized from the Lilly Collaboration Agreement.

Collaboration and license revenue was $0.2 million for the three months ended September 30, 2023, compared to $0.3 million for the three months ended September 30, 2022, a decrease of $0.1 million, or 21%.

Grant revenue was $0.5 million for the three months ended September 30, 2023, compared to $0.3 million for the three months ended September 30, 2022, an increase of $0.2 million, or 77%.

Cost of Goods Sold and Services

Cost of goods sold and services decreased $2.9 million, or 20%, to $11.9 million for the three months ended June 30, 2023 compared to $14.8 million for the three months ended June 30, 2022, primarily due to decreased cost of product revenue.

Cost of product revenue decreased $2.7 million, or 27%, to $7.2 million for the three months ended June 30, 2023, compared to $9.9 million for the three months ended June 30, 2022, as a result of improved inventory management and lower instrument sales.

Cost of service revenue decreased $0.2 million, or 4%, to $4.7 million for the three months ended June 30, 2023, compared to $4.9 million for the three months ended June 30, 2022 as a result of decreased lab services expenses.

Cost of goods sold and services decreased $2.2 million, or 14%, to $13.6 million for the three months ended September 30, 2023, compared to $15.7 million for the three months ended September 30, 2022.

Cost of product revenue decreased $2.2 million, or 21%, to $8.3 million for the three months ended September 30, 2023, compared to $10.5 million for the three months ended September 30, 2022.

The decrease was primarily due to improvement in inventory management and manufacturing processes and lower instrument sales.

These decreases were partially offset by product revenue related increases, including compensation and benefit costs from increased headcount and an increase in royalty fees.

Cost of service revenue was consistent with the prior period at $5.2 million for each of the three months ended September 30, 2023 and September 30, 2022, primarily due to the increase in Accelerator Laboratory revenue at higher margins.

Research and Development

Research and development expense decreased $0.7 million, or 10%, to $5.9 million for the three months ended June 30, 2023, as compared to $6.6 million for the three months ended June 30, 2022, primarily due to the reduction in headcount in connection with the Restructuring Plan.

Research and development expense increased $0.6 million, or 9%, to $7.2 million for the three months ended September 30, 2023, compared to $6.6 million for the three months ended September 30, 2022.

The increase was primarily due to professional services fees to enable product development.

Selling, General, and Administrative

Selling, general and administrative expense decreased $5.4 million, or 20%, to $21.6 million for the three months ended June 30, 2023, as compared to $27.0 million for the three months ended June 30, 2022, primarily due to the reduction in headcount in connection with the Restructuring Plan.

Included within selling, general, and administrative expense are $1.6 million and $1.9 million of shipping and handling costs for product sales for the three months ended June 30, 2023 and 2022, respectively.

Selling, general and administrative expense increased $3.6 million, or 18%, to $23.6 million for the three months ended September 30, 2023, compared to $20.0 million for the three months ended September 30, 2022.

The increase was primarily due to (1) a $1.5 million increase in professional services and consulting fees related to our efforts to remediate the previously disclosed material weaknesses identified in 2022 and other services, (2) a $1.3 million increase in stock-based compensation expense, which was lower in the three months ended September 30, 2022 due to equity award forfeitures recorded from eliminating positions as part of the Restructuring Plan, and (3) a $0.6 million increase in shipping and handling costs for consumables and other products due to increased volume.

Included within selling, general, and administrative expense are $2.6 million and $1.6 million of shipping and handling costs for product sales for the three months ended September 30, 2023 and 2022, respectively.

Other Lease Costs

During the three months ended June 30, 2023, we incurred other lease costs of $1.2 million.

Other lease costs increased $0.1 million, or 24% to $0.8 million for the three months ended September 30, 2023, compared to $0.6 million for the three months ended September 30, 2022.

As part of the Restructuring Plan, we are not utilizing the leased office and laboratory facilities in Bedford, Massachusetts and are evaluating alternatives, including sub-leasing the facilities .

Other lease costs include amortization of the related operating lease right-of-use assets and other leased facility operating expenses from periods after the impairment and the determination that the facilities would not be utilized.

There were no similar charges for the three months ended June 30, 2022.

The increase is primarily due to the expenses incurred while not utilizing the space for the full third quarter of 2023, compared to the expenses incurred while not utilizing the space for one and a half months in the third quarter of 2022 after the Restructuring Plan was implemented.

Expenses incurred prior to the Restructuring Plan were recorded in selling, general, and administrative on the Consolidated Statements of Operations.

Impairment and Restructuring Expense

There were no impairment and restructuring costs for the three months ended September 30, 2023 compared to $20.3 million incurred in the three months ended September 30, 2022.

This decrease was due to the implementation of the Restructuring Plan in August 2022 which did not repeat in 2023.

The costs incurred included (1) $8.2 million of goodwill impairment charges, (2) $7.7 million of long-lived asset impairment charges associated with the Bedford, Massachusetts facilities that we are no longer utilizing, (3) $1.0 million of software costs related to projects that were rationalized as part of the Restructuring Plan, and (4) $3.4 million of restructuring expenses primarily for severance and one-time termination benefits in connection with the elimination of 119 positions across the Company.

Interest Income, Net

Interest income, net was $3.9 million for the three months ended June 30, 2023, as compared to $0.6 million for the three months ended June 30, 2022, primarily due to higher interest rates earned on cash and cash equivalents.

Other Expense, Net

Other expense, net was ($0.2) million in the three months ended June 30, 2023, as compared to ($0.4) million in the three months ended June 30, 2022.

Income Tax Expense, Net

Income tax expense, net was ($0.2) million for the three months ended June 30, 2023, as compared to ($0.1) million for the three months ended June 30, 2022, consisting primarily of a provision recorded on the operating results of our foreign subsidiaries.

Comparison of Results of Operations for the Six Months Ended June 30, 2023 and 2022 (in thousands, except percentages):

Interest income, net increased $2.5 million, or 144%, to $4.2 million for the three months ended September 30, 2023, as compared to $1.7 million for the three months ended September 30, 2022, primarily due to (1) higher interest rates earned on cash and cash equivalents, and (2) higher interest rates and accretion of discounts from the purchase of marketable securities.

Other Income (Expense), Net

Other income (expense), net was $2.0 million for the three months ended September 30, 2023, as compared to ($0.1) million for the three months ended September 30, 2022.

The $2.1 million increase was primarily due to the recognition of $2.4 million receivable under the Employee Retention Credit established by the Coronavirus Aid, Relief, and Economic Security Act in 2021.

Income Tax (Expense) Benefit, Net

Income tax (expense) benefit, net was consistent with the prior period with a $0.1 million increase, or 182%, to ($0.2) million for the three months ended September 30, 2023, as compared to ($0.1) million for the three months ended September 30, 2022.

Comparison of Results of Operations for the Nine Months Ended September 30, 2023 and 2022:

The following table sets forth select Consolidated Statements of Operations data, and such data as a percentage of total revenues (in thousands, except percentages):

Six Months Ended June 30,

Nine Months Ended September 30,

Increase (Decrease)

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Grant revenue

Total revenue

Cost of goods sold and services:

Total revenues

Costs of goods sold and services:

Cost of product revenue

Cost of service revenue

Cost of service and other revenue

Total costs of goods sold and services

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Other lease costs

Restructuring

Impairment and restructuring

Total operating expenses

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Interest income, net

Other expense, net

Other income (expense), net

Loss before income taxes

Income tax (expense) benefit, net

Total revenues increased $6.4 million, or 12%, to $59.5 million for the six months ended June 30, 2023, compared to $53.1 million for the six months ended June 30, 2022.

Product revenue of $39.0 million for the six months ended June 30, 2023 consisted of instrument sales of $8.8 million and sales of consumables and other products of $30.2 million.

This represented an increase of $3.5 million, or 10%, as compared to product revenue of $35.4 million for the six months ending June 30, 2022, which consisted of $11.8 million in instrument sales and $23.6 million in sales of consumables and other products.

The increase in product revenue resulted primarily from (1) increased sales of consumables, (2) increased average selling prices, and (3) a one-time increase from the receipt of ordinary shares of UltraDx with a fair value of $1.0 million that was accounted for as variable consideration under the UltraDx Agreement (as a Level 3 financial asset with minimal market activity or other data available, the fair value was determined primarily using the third-party purchase price of similar instruments issued by UltraDx).

These increases were partially offset by lower instrument sales due to reduced demand in certain markets.

We expect this instrument trend to continue for the remainder of 2023.

Service revenue was $19.1 million for the six months ended June 30, 2023, compared to $17.4 million for the six months ended June 30, 2022, an increase of $1.7 million, or 10%, primarily due to increased Accelerator Laboratory revenue, partially offset by lower revenue recognized from the Lilly Collaboration Agreement.

Collaboration and license revenue was $1.0 million for the six months ended June 30, 2023, compared to $0.2 million for the six months ended June 30, 2022, an increase of $0.8 million, or 460%.

This was primarily due to a one-time increase from the expiration of a previously paid for option to expand the scope of the Abbott License Agreement.

Grant revenue was $0.4 million for the six months ended June 30, 2023, compared to $0.1 million for the six months ended June 30, 2022.

Income tax expense

Total revenues increased $11.1 million, or 14%, to $90.8 million for the nine months ended September 30, 2023, compared to $79.7 million for the nine months ended September 30, 2022.

Product revenue of $58.6 million for the nine months ended September 30, 2023 consisted of instrument sales of $12.4 million and sales of consumables and other products of $46.2 million.

This represented an increase of $5.5 million, or 10%, compared to product revenue of $53.1 million for the nine months ended September 30, 2022, which consisted of $19.6 million in instrument sales and $33.5 million in sales of consumables and other products.

The increase in product revenue was primarily due to a $12.7 million increase in sales of consumables and increased average selling prices.

These increases were partially offset by a $7.2 million decrease in instrument sales due to reduced demand, which is a trend we expect to continue for the remainder of 2023.

Included in consumables and other product revenue for the nine months ended September 30, 2023 is $0.8 million of one-time revenue, which includes the immaterial fair value adjustment recorded during the third quarter, from the receipt of ordinary shares from UltraDx Limited (“UltraDx”) that was accounted as variable consideration under the UltraDx Agreement (as a Level 3 financial asset with minimal market activity or other data available, the fair value of the ordinary shares was determined primarily using the third-party purchase price of similar instruments issued by UltraDx).

Service revenue was $30.1 million for the nine months ended September 30, 2023, compared to $25.7 million for the nine months ended September 30, 2022, an increase of $4.3 million, or 17%.

This increase was primarily due to a $6.7 million increase in Accelerator Laboratory revenue due to higher volumes of sample testing and assay development services and a $1.0 million increase in extended service-type warranties, which were partially offset by a $3.7 million decrease in revenue recognized from the Lilly Collaboration Agreement.

Collaboration and license revenue was $1.2 million for the nine months ended September 30, 2023, compared to $0.5 million for the nine months ended September 30, 2022, an increase of $0.8 million, or 158%.

The increase was primarily due to a $0.5 million one-time increase from the expiration of a previously paid for option to expand the scope of the Abbott License Agreement.

Grant revenue was $0.9 million for the nine months ended September 30, 2023, compared to $0.4 million for the nine months ended September 30, 2022, an increase of $0.5 million or 146%.

This increase was due to the receipt of a portion of the NIH Grant.

Cost of Goods Sold and Services

Cost of goods sold and services decreased $6.4 million, or 21%, to $23.4 million for the six months ended June 30, 2023 compared to $29.8 million for the six months ended June 30, 2022, primarily due to improved inventory management and lower instrument sales.

Cost of product revenue decreased $6.4 million, or 31%, to $14.3 million for the six months ended June 30, 2023, compared to $20.7 million for the six months ended June 30, 2022, as a result of improved inventory management and lower instrument sales.

The increase in cost of service revenue was immaterial for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.

Cost of goods sold and services decreased $8.5 million, or 19%, to $37.0 million for the nine months ended September 30, 2023 compared to $45.5 million for the nine months ended September 30, 2022.

Cost of product revenue decreased $8.6 million, or 27%, to $22.6 million for the nine months ended September 30, 2023, compared to $31.2 million for the nine months ended September 30, 2022.

The decrease was primarily due to improvement in inventory management and manufacturing processes and lower instrument sales.

Cost of service revenue was consistent with the prior period with an increase of $0.1 million, or less than 1%, to $14.4 million for the nine months ended September 30, 2023, compared to $14.3 million for the nine months ended September 30, 2022, primarily due to the increase in Accelerator Laboratory revenue at higher margins.

Research and Development

Research and development expense decreased $3.0 million, or 22%, to $10.7 million for the six months ended June 30, 2023, as compared to $13.7 million for the six months ended June 30, 2022, primarily due to the reduction in headcount in connection with the Restructuring Plan.

Research and development expense decreased $2.4 million, or 12%, to $17.9 million for the nine months ended September 30, 2023, compared to $20.3 million for the nine months ended September 30, 2022.

This decrease was primarily due to a decrease in compensation and benefit costs related to the reduction in headcount from the Restructuring Plan, which was partially offset by an increase in license fees and professional services to enable product development.

Selling, General, and Administrative

Selling, general and administrative expense decreased $10.3 million, or 19%, to $42.5 million for the six months ended June 30, 2023, as compared to $52.8 million for the six months ended June 30, 2022, primarily due to the reduction in headcount in connection with the Restructuring Plan.

Included within selling, general and administrative expense are $3.5 million and $3.6 million of shipping and handling costs for product sales for the six months ended June 30, 2023 and 2022, respectively.

Selling, general and administrative expense decreased $6.7 million, or 9%, to $66.1 million for the nine months ended September 30, 2023, compared to $72.7 million for the nine months ended September 30, 2022.

The decrease was primarily due to a decrease in compensation and benefit costs related to the reduction in headcount in from the Restructuring Plan and a full nine months of facilities costs from the leased office and laboratory facilities we are no longer utilizing being recorded in other lease costs instead of selling, general, and administrative expenses on the Consolidated Statements of Operations.

These decreases were partially offset by an increase in professional services and consulting fees related to our efforts to remediate the previously disclosed material weaknesses identified in 2022 and other services, and a increase in shipping and handling costs for consumables and other products due to higher volume.

Included within selling, general and administrative expense are $6.0 million and $5.3 million of shipping and handling costs for product sales for the nine months ended September 30, 2023 and 2022, respectively.

Other Lease Costs

During the six months ended June 30, 2023, we incurred other lease costs of $1.9 million.

As part of the Restructuring Plan, we are not utilizing the leased office and laboratory facilities in Bedford, Massachusetts and are evaluating alternatives, including sub-leasing the facilities .

Other lease costs increased $2.1 million, or 343%, to $2.7 million for the nine months ended September 30, 2023, compared to $0.6 million for the nine months ended September 30, 2022.

As part of the Restructuring Plan, we are not utilizing the leased office and laboratory facilities in Bedford, Massachusetts and are

evaluating alternatives, including sub-leasing the facilities .

Other lease costs include the amortization of the related operating lease right-of-use assets and other leased facility operating expenses from periods after the impairment and the determination that the facilities would not be utilized.

There were no similar charges for the six months ended June 30, 2022.

The increase is primarily due to the expenses incurred while not utilizing the space for the full nine months of 2023, compared to the expenses incurred while not utilizing the space for one and a half months in the third quarter of 2022 after the Restructuring Plan was implemented.

Expenses incurred prior to the Restructuring Plan were recorded in selling, general, and administrative on the Consolidated Statements of Operations.

Impairment and Restructuring Expense

There were no impairment and restructuring costs for the nine months ended September 30, 2023, compared to $20.3 million for the nine months ended September 30, 2022.

This decrease was due to the implementation of the Restructuring Plan in August 2022 which did not repeat in 2023.

Interest Income, Net

Interest income, net was $7.3 million for the six months ended June 30, 2023, as compared to $0.6 million for the six months ended June 30, 2022, due to higher interest rates earned on cash and cash equivalents.

Other Expense, Net

Other expense, net was ($0.1) million for the six months ended June 30, 2023, as compared to ($0.6) million for the six months ended June 30, 2022, primarily due to changes in foreign exchange rates.

Income Tax (Expense) Benefit, Net

Income tax (expense) benefit, net was ($0.4) million for the six months ended June 30, 2023, as compared to $0.1 million for the six months ended June 30, 2022, primarily due to recording a provision for the operating results of our foreign subsidiaries.

Interest income, net increased $9.2 million, or 397%, to $11.5 million for the nine months ended September 30, 2023, compared to $2.3 million for the nine months ended September 30, 2022.

This increase was primarily due to higher interest rates earned on cash, cash equivalents and marketable securities, and the accretion of discounts from the purchase of marketable securities.

Other Income (Expense), Net

Other income (expense), net increased $2.6 million or 379%, to $1.9 million for the nine months ended September 30, 2023, as compared to ($0.7) million for the nine months ended September 30, 2022.

The increase was primarily due to recognizing $2.4 million receivable under the Employee Retention Credit established by the Coronavirus Aid, Relief, and Economic Security Act in 2021.

Income Tax Expense, Net

Income tax expense, net was ($0.6) million for the nine months ended September 30, 2023 , as compared to less than ($0.1) million for the nine months ended September 30, 2022.

Liquidity and Capital Resources

Our principal sources of liquidity are cash, cash equivalents, and funds generated from sales of our products and services.

As of June 30, 2023, we had cash and cash equivalents of $329.5 million.

Our principal sources of liquidity are cash, cash equivalents, marketable securities, and funds generated from sales of our products and services.

As of September 30, 2023, we had cash and cash equivalents of $201.3 million and marketable securities of $126.4 million.

Historically we have also financed our operations through equity offerings and borrowings from credit facilities.

As discussed in Note 2 − Significant Accounting Policies and Note 5 − Marketable Securities in the Notes to Consolidated Financial Statements, during the third quarter of 2023 we invested available cash and cash equivalents in a portfolio of marketable securities.

These securities are currently classified as available-for-sale and recorded in current assets on the Consolidated Balance Sheets based on their highly liquid nature and because we may use them in our current operations.

Our marketable securities are required to be recorded at fair value each reporting period.

The fair value is determined utilizing quoted prices in active markets in cases that such information exists (i.e.

Level 1 fair value inputs), or third party pricing services and other market observable data (i.e.

Level 2 fair value inputs).

The following table summarizes our cash flows (in thousands):

Six Months Ended June 30,

Increase (Decrease)

Nine Months Ended September 30,

Net cash used in operating activities

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We expect negative cash flows from operating activities may continue in the future.

Net cash used in operating activities was $8.9 million during the six months ended June 30, 2023 which primarily consisted of the net loss of $12.2 million, offset by non-cash charges of $8.1 million of stock-based compensation expense, $2.8 million of depreciation and amortization expense, and non-cash lease expense of $1.0 million.

Cash used as a result of changes in operating assets and liabilities of $9.5 million was primarily due to an increase in accounts receivable of $5.8 million, a decrease in operating lease liabilities of $1.6 million, a decrease in accrued compensation and benefits, other accrued expenses and other current liabilities of $1.3 million and an increase in inventory of $1.2 million.

These decreases were primarily offset by an increase in deferred revenue of $1.7 million and $0.9 million received on the tenant improvement allowance associated with our leased facilities in Bedford, Massachusetts.

Net cash used in operating activities was $29.6 million during the six months ended June 30, 2022.

The net cash used in operating activities primarily consisted of the net loss of $43.1 million, offset by non-cash charges of $9.0 million of stock-based compensation expense, $2.8 million of depreciation and amortization expense, and $1.4 million received on the tenant improvement allowance associated with our leased facility in Bedford, Massachusetts.

Net cash used in operating activities was $12.9 million during the nine months ended September 30, 2023.

The $31.3 million reduction in net cash used in operating activities from $44.2 million during the nine months ended September 30, 2022 was primarily driven by an overall reduction in our net loss, adjusted for non-cash items, consisting of revenue growth, a full nine months of reduced expenses resulting from the Restructuring Plan implemented in the third quarter of 2022, continued improvements in our inventory management and manufacturing processes leading to improved gross margin, and increased interest income from investing in marketable securities and rising interest rates.

Net Cash Used in Investing Activities

Our primary investing activities consist of capital expenditures for the purchase of equipment to support our expanding infrastructure and work force.

Our primary investing activities consist of purchases of marketable securities and capital expenditures for the purchase of equipment to support our expanding infrastructure and work force.

We expect to continue to incur additional capital expenditures related to these efforts in future periods.

Cash used towards capital expenditures can be partially offset by proceeds from grants with

third parties to purchase assets (refer to the section titled “Grant Revenue” in Note 3 – Revenue and Related Matters in the Notes to Consolidated Financial Statements for more information).

We used $0.8 million and $5.9 million in cash in investing activities during the six months ended June 30, 2023 and June 30, 2022, respectively, for purchases of property and equipment.

The purchases during the six months ended June 30, 2022 were partially offset by $0.5 million in grant proceeds under the RADx Grant.

Cash used towards capital expenditures can be partially offset by proceeds from grants with third parties to purchase assets (refer to the section titled “Grant Revenue” in Note 3 − Revenue and Related Matters in the Notes to Consolidated Financial Statements for more information).

Net cash used in investing activities was $126.8 million during the nine months ended September 30, 2023, which consisted of the purchase of $125.2 million of marketable securities and $1.6 million of purchases of property and equipment.

Net cash used in investing activities was $9.6 million during the nine months ended September 30, 2022, which consisted of $10.1 million of purchases of property and equipment which were partially offset by $0.5 million in grant proceeds under the RADx Grant.

Net Cash Provided by Financing Activities

Our primary financing activities are proceeds from sales of our common stock.

Financing activities provided $0.7 million and $1.2 million of cash during the six months ended June 30, 2023 and June 30, 2022, respectively, from the proceeds of common stock issued.

Financing activities provided $2.5 million and $1.6 million of cash during the nine months ended September 30, 2023 and 2022, respectively.

Capital Resources

We have not achieved profitability on an annual basis since our inception, and we expect to continue to incur net losses in the future.

We also expect that our operating expenses will increase as we continue to increase our marketing efforts to drive adoption of our commercial products, as well as our investment in improving the quality of our products and services.

Our liquidity requirements have consisted, and we expect that they will continue to consist, of sales and marketing expenses, research and development expenses, working capital, and general corporate expenses.

We believe cash generated from product and services sales along with our current cash and cash equivalents will be sufficient to meet our anticipated operating cash requirements for at least 12 months from the date of this Quarterly Report on Form 10-Q.

In the future, we expect our operating and capital expenditures to increase as we increase headcount, expand our sales and marketing activities, and grow our customer base.

Our estimates of the period of time through which our financial resources will be adequate to support our operations and the costs to support research and development and our sales and marketing activities are forward-looking statements and involve risks and uncertainties.

We believe cash generated from product and services sales, along with our current cash, cash equivalents, and marketable securities, will be sufficient to meet our anticipated operating cash requirements for at least 12 months from the date of this Quarterly Report on Form 10-Q.

In the future, we expect our operating and capital expenditures to increase as we increase headcount, expand our sales, marketing, and research and development activities, and grow our customer base.

Our estimates of the period of time through which our financial resources will be adequate to support our operations and the costs to expand our business are forward-looking statements and involve risks and uncertainties.

Actual results could vary materially and negatively as a result of a number of factors, including the factors discussed in the section titled “Part I, Item 1A.

Risk Factors” of our Annual Report on Form 10-K.

We have based our estimates on assumptions that may prove to be wrong and we could utilize our available capital resources sooner than we currently expect.

We have based our estimates on assumptions that may change or not materialize and we could utilize our available capital resources sooner than we currently expect.

Our future funding requirements will depend on many factors, including but not limited to:

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● the cost and timing of establishing additional sales, marketing, and distribution capabilities;

● the extent to which we achieve intended cost savings, revenue improvement, and related benefits from our Restructuring Plan;

● the extent to which we achieve revenue improvement and related benefits from our Restructuring Plan;

● the extent to which we are able to successfully complete our assay improvement program to enhance product quality;

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Future debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt.

or equity financing that we raise may contain terms that are not favorable to us or our stockholders.

Any debt or equity financing that we raise may contain terms that are not favorable to us or our stockholders.

If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products or grant licenses on terms that are not favorable to us.

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We also may have to reduce marketing, customer support or other resources devoted to our products, or cease operations.

If the conditions for raising capital are favorable, we may seek to finance future cash needs through public or private equity or debt offerings or other financings.

If the conditions for raising capital are favorable, we may seek to finance future cash needs through public or private equity, debt offerings, or other financings.

Contractual Obligations and Commitments

As of June 30, 2023, there have been no material changes to our contractual obligations and commitments from those described in the section titled “Part II, Item 7.

As of September 30, 2023, there have been no material changes to our contractual obligations and commitments from those described in the section titled “Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K.

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GAAP Financial Measures to Non-GAAP Financial Measures:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

GAAP gross profit

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Quantitative and Qualitative Disclosures About Market Risk

At June 30, 2023, there have been no material changes to the market risk information from those described in the section titled “Part II, Item 7A.

As of September 30, 2023, there have been no material changes to the market risk information from those described in the section titled “Part II, Item 7A.

Quantitative and Qualitative Disclosures About Market Risk” included in our Annual Report on Form 10-K.

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 2. Management’s Discussion and Analysis