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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 10-K
__________________________
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-39035
__________________________
10x Genomics, Inc.
(Exact Name of Registrant as Specified in Its Charter)
__________________________
Delaware
45-5614458
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
6230 Stoneridge Mall Road
Pleasanton, California
94588
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (925) 401-7300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol
Name of each exchange
on which registered
Class A common stock, par value $0.00001 per
share
TXG
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
__________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued
its audit report. Yes ☒ No ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Aggregate market value of registrant's common stock held by non-affiliates of the registrant, based upon the closing price of a share of the registrant's common
stock on June 30, 2024 (the last business day of the registrant's most recently completed second quarter) as reported by Nasdaq on that date was $1.8 billion.
As of January 31, 2025, the registrant had 108,245,008 shares of Class A common stock, $0.00001 par value per share, outstanding and 14,056,833 shares of
Class B common stock, $0.00001 par value per share, outstanding.
Portions of the registrant’s Definitive Proxy Statement relating to the registrant’s 2025 Annual Meeting of Shareholders are incorporated by reference into Part
III of this Annual Report on Form 10-K where indicated. Such Definitive Proxy Statement will be filed with the Securities and Exchange Commission within
120 days after the end of the registrant’s fiscal year ended December 31, 2024.
Table of Contents
Table of Contents
Page
PART I
Item 1.
Business
3
Item 1A.
Risk Factors
12
Item 1B.
Unresolved Staff Comments
58
Item 1C.
Cybersecurity
58
Item 2.
Properties
59
Item 3.
Legal Proceedings
59
Item 4.
Mine Safety Disclosures
59
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
60
Item 6.
[Reserved]
61
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
62
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
74
Item 8.
Financial Statements and Supplementary Data
76
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
109
Item 9A.
Controls and Procedures
109
Item 9B.
Other Information
110
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
111
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
112
Item 11.
Executive Compensation
112
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
112
Item 13.
Certain Relationships and Related Transactions, and Director Independence
112
Item 14.
Principal Accounting Fees and Services
112
PART IV
Item 15.
Exhibits, Financial Statement Schedules
113
Item 16.
Form 10-K Summary
116
Signatures
117
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10x Genomics, Inc.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Annual Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995 as contained in Section 27A of the Securities Act of 1933, as amended , and Section 21E of the Securities Exchange Act of 1934, as amended ,
which are subject to those sections’ “safe harbor.” All statements, other than historical facts, may be forward-looking statements. Forward-looking terminology
such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “see,” “estimate,”
“predict,” “potential,” “would,” “likely,” “seek” or “continue” or variations of these terms or similar terminology generally can identify forward-looking
statements, but the absence of these words is not determinative. These forward-looking statements include statements regarding 10x Genomics, Inc.’s
expectations regarding our plans, objectives, goals, beliefs, business strategies, results of operations, financial position, sufficiency of our capital resources,
business outlook, future events, business conditions, key business metrics and key factors affecting our performance, gross margin trends, expected future
investments including anticipated capital expenditures, anticipated size of market opportunities and our ability to capture them, expected uses, performance and
benefits of our products and services, business trends and other information. These statements are based on management’s expectations, forecasts, beliefs,
opinions, assumptions and information available at the time of filing and should not be relied upon as 10x Genomics, Inc.’s views as of any subsequent date.
Actual outcomes and results could differ materially from these statements due to several factors. 10x Genomics, Inc. disclaims any obligation to update any
published forward-looking statements except as required by law.
The material risks, uncertainties and other factors that could affect 10x Genomics, Inc.’s financial and operating results and cause actual results to differ from
those indicated by the forward-looking statements made include those described in the section titled “Risk Factors” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in this Annual Report. Our periodic filings are accessible on the U.S. Securities and Exchange
Commission's website at www.sec.gov. Although we believe the expectations reflected in the forward-looking statements are reasonable, new risks and
uncertainties may emerge, and it is not possible for us to predict their impact on the forward-looking statements contained in this Annual Report. Moreover, the
information the forward-looking statements are based upon may be limited or incomplete, and may not be based upon all potentially relevant information. We
cannot guarantee future events, circumstances, results, performance or achievements. In light of the foregoing, investors are urged not to place undue reliance
on any forward-looking statement or third-party data in reaching any conclusion or making any investment decision about any securities of the Company.
Unless otherwise stated or the context otherwise indicates, references to “we,” “us,” “our,” “the Company,” “10x” and similar references refer to 10x
Genomics, Inc. and its subsidiaries.
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Channels for Disclosure of Information
Investors and others should note that we may announce material information to the public through filings with the SEC, our website
(https://www.10xGenomics.com), press releases, public conference calls, public webcasts and our social media accounts, (https://X.com/10xGenomics,
https://www.facebook.com/10xGenomics,
https://www.linkedin.com/company/10xgenomics,
https://www.youtube.com/@10xGenomics_,
https://www.facebook.com/10xGenomics and https://bsky.app/profile/10xgenomics.bsky.social). We use these channels to communicate with our customers
and the public about the Company, our products, our services, our financial results, business developments and other matters. We encourage our investors, the
media and others to review the information disclosed through such channels as such information could be deemed to be material information. The information
on such channels, including on our website and our social media accounts, is not incorporated by reference in this Annual Report and shall not be deemed to be
incorporated by reference into any other filing under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Please note that this list of disclosure channels may be updated from time to time.
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PART I
Item 1. Business.
Overview
Our mission is to accelerate the mastery of biology to advance human health. We are a life sciences technology company focused on building innovative
products and solutions to interrogate, understand and master biology. Our integrated solutions include instruments, consumables and software for analyzing
biological systems at a resolution and scale that matches the complexity of biology. We have built deep expertise across diverse disciplines including chemistry,
biology, hardware and software. Innovations in all of these areas have enabled the deployment of our rapidly expanding suite of products, which allow our
customers to interrogate biological systems at previously inaccessible resolution and scale. Our products have enabled researchers to make fundamental
discoveries across multiple areas of biology, including oncology, immunology and neuroscience.
Since launching our first product in mid-2015 through December 31, 2024, we have sold 7,039 instruments to researchers around the world, including
academic and translational researchers and biopharmaceutical companies. Our revenue was $610.8 million and $618.7 million for the years ended 2024 and
2023, respectively, representing a year-over-year decrease of 1%. We generated net losses of $182.6 million and $255.1 million for the years ended 2024 and
2023, respectively. In the years ended December 31, 2024 and 2023, we sold 1,073 and 1,336 instruments and 357,100 and 347,000 consumable reactions,
respectively.
Our portfolios
Resolution and Scale are the imperatives that underlie our products and technology. First, our solutions are designed to enable understanding biology at the
right level of biological resolution, such as at the level of the single cell or at high spatial resolution of tissues and organs. Second, we believe that high
resolution tools only become truly powerful when they are built into technologies with tremendous scale. Our products enable measuring up to millions of
single cells or tissue sample positions. Each of our platforms is designed to interrogate a major class of biological information enabling researchers to
understand the complexities of biology at a spatial and cellular level. Collectively, our platforms enable researchers to interrogate, understand and master
biology at the appropriate resolution and scale.
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Our single cell portfolio
Our single cell portfolio, powered by our Chromium platform, includes microfluidic chips and related consumables and our Chromium X Series and legacy
Chromium instruments. Chromium enables high-throughput analysis of individual biological components. Our Chromium instruments serve as precisely
engineered reagent delivery systems, partitioning samples into individual components which can exceed one million. Each partition is paired with proprietary
gel beads bearing unique barcodes that allow researchers to identify the contents of each partition and distinguish them from contents of other partitions. Once
biological material in each partition is barcoded, they can then be pooled and sequenced together. Partitioning and barcoding gives researchers the ability to
measure many discrete biological materials and/or perform many different experiments in parallel, providing tremendous resolution and scale. Chromium
enables multiomic readouts including gene expression, protein (cell surface and intracellular), chromatin, V(D)J, CRISPR/guide RNAs (gRNAs) and antigens,
has broad sample compatibility (formalin-fixed paraffin-embedded (FFPE), fresh, fresh frozen, paraformaldehyde (PFA) fixed tissue, DSP/methanol fixed
peripheral blood mononuclear cells (PBMCs) and whole blood) and delivers high performance including high cell recovery rates (CRE), high sensitivity,
robustness and reproducibility.
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Our spatial portfolio
Our spatial portfolio is powered by our Visium and Xenium platforms and aims to bring together the worlds of histology and genomics.
Our Visium platform. Our Visium platform empowers researchers to identify where biological components are located and how they are arranged with respect
to each other, otherwise referred to as “spatial analysis.” Our Visium platform uses high density DNA arrays which have DNA barcode sequences that encode
the physical location of biological analytes within a sample, such as a tissue section, allowing the spatial location of the analytes to be “read out” using
sequencing to create a visual map of the analytes across the sample. Similar to partitioning, spatial barcoding with large numbers of oligos on an array can
unlock tremendous insights, providing high resolution molecular information to visualize the whole transcriptome and protein expression, paired with same
section hematoxylin and eosin (H&E) or infrared (IR) imaging data, across biological tissues. The Visium platform includes our Spatial Gene Expression, HD
Spatial Gene Expression and Spatial Gene and Protein Expression assays as well as the Visium CytAssist, an instrument designed to simplify and optimize the
Visium solution workflow by facilitating the transfer of transcriptomic analytes from standard glass slides to Visium slides.
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Our Xenium platform. Our Xenium platform for in situ analysis is designed to give scientists the ability not only to locate and type cells in their tissue context,
but also to address a variety of specific questions based on previous knowledge of their sample potentially discovered using our Chromium and Visium
platforms. Our Xenium Analyzer instrument enables researchers to detect and preserve the cellular location of hundreds of RNA targets directly in a fresh
frozen or FFPE tissue section without the need for conventional sequencing, providing researchers with a detailed map of gene expression patterns without
sacrificing resolution or target number. Xenium uses circularizable probes specific to target transcripts followed by enzymatic amplification to create a target
for fluorescent probe hybridization. On the Xenium Analyzer, microscope images of the tissue detect the location of each fluorescent probe, which is then
removed. Successive rounds of fluorescent probe hybridization, imaging and removal creates a unique optical signature that reveals the identity of the RNA at a
location within each cell of a tissue. Available Xenium consumables include curated, validated and fit-for-purpose gene panels along with the ability to design
custom gene sets.
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Our software
Our software is essential to accelerating the mastery of biology. As our portfolios unlock new levels of resolution and scale, they generate entirely new types of
data at greater volumes and complexity than ever before. Cell Ranger, introduced alongside our Chromium platform, has become a trusted scRNA-seq
processing pipeline in scientific literature. We have extended the same principles of accessibility, scalability and reliability across all our platforms, ensuring
that researchers can move from raw data to discovery with ease. Today, we provide a comprehensive and scalable software ecosystem that supports every stage
of the research workflow, from experiment planning to data processing to visualization and exploration. By removing barriers to adoption, our tools help
researchers generate high-quality data, achieve repeatable success and seamlessly scale their experiments. Loupe Browser (Chromium and Visium) enables
intuitive single-cell, spatial and multiomic data visualization, helping researchers explore gene expression, cellular interactions and more—turning complex
datasets into interactive insights that accelerate discovery. Xenium Explorer enables intuitive in situ data visualization, allowing researchers to explore
subcellular gene expression, spatial organization and tissue-scale patterns with ease. It transforms complex imaging and transcriptomic data into interactive
insights, accelerating discovery in spatial biology.
Our market opportunity
We believe much of the $75 billion annual global life sciences research tools market is ultimately accessible to us due to our ability to answer a broad diversity
of biological questions. We estimate a total addressable market of more than $21 billion annually, assuming every lab or company in the global life sciences
research tools market was to adopt our solutions at spend levels comparable to our existing users. We estimate a serviceable addressable market of more than
$13 billion annually, assuming every lab or company in the global life sciences research tools market that is currently using single cell, spatial or adjacent
research techniques was to adopt our solutions at spend levels comparable to our existing users. We also expect to pursue additional opportunities that may
further expand our opportunity, including new versions and potential applications of our single
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cell, spatial and in situ technologies in the future. Our estimates are based on our own and third-party analyses of our potential opportunities. See the section
titled “Risk Factors — The size of the market for our solutions may be smaller than estimated and new opportunities may not develop as quickly as we expect,
or at all, limiting our ability to successfully sell our solutions.”
Peer-reviewed scientific publications using our products
To date, we estimate that more than 10,000 peer-reviewed articles have been published based on data generated using our products. More than 900 of these
articles were published in three of the most highly regarded journals: Cell, Nature and Science. Underscoring the reach of our products, these publications
cover a wide range of research and applied areas from cell biology to cardiovascular health to infectious disease to neuroscience. According to our estimates,
the top three areas of publication are oncology, immunology and developmental biology.
Research and development
The success of our products is founded on how we approach product development. We work closely with our customers, many of whom are thought leaders in
genomics and medicine, to identify future frontiers and unmet needs. Once we identify the correct opportunities, which we create through both organic
development by our in-house teams and targeted acquisitions of technologies that i to accelerate our ability to bring new products and new versions of existing
products to researchers, we have the discipline to focus on execution and have a track record of bringing successful products across multiple portfolios to
market. Multidisciplinary, cross-functional collaboration and technological innovation are central to our product development process. Our employees are
deeply scientifically oriented, having the relevant scientific expertise embedded not only within research and development, but also within the management
team and throughout the company. We have built teams with deep expertise across diverse disciplines including chemistry, molecular biology, microfluidics,
hardware, computational biology and software engineering. We plan to focus our research and development efforts on improving the performance of our
existing technologies, developing new solutions and new versions of existing solutions for our portfolios, improving and developing new capabilities for our
instruments, developing combined software and workflows across multiple solutions and investigating and developing new technologies.
Commercial organization and strategy
Since launching our first product in mid-2015, we have expanded our commercial operations and now sell our products in over 50 countries. Our customers
primarily include academic, government, biopharmaceutical, biotechnology and other institutions focused on life sciences research. We sell our products
primarily through our own direct sales force in North America and certain regions of Europe. As of December 31, 2024, our commercial organization consisted
of 491 full time employees, many with PhD degrees and many with significant industry experience. We sell our products through third-party distributors in
certain regions of Asia, Europe, Oceania, Central America, South America, the Middle East and Africa.
For the years ended December 31, 2024 and 2023, no single customer, including distributors, represented greater than 10% of our business. For the years ended
December 31, 2024 and 2023, sales to academic institutions represented approximately 67% and 65% of our direct sales revenue, respectively. We expect that
sales to biopharmaceutical companies will represent a growing proportion of our revenue in the future.
Our sales and marketing efforts are targeted at the principal investigators, research scientists, department heads, research laboratory directors and core facility
directors at leading academic institutions, biopharmaceutical companies and publicly and privately funded research institutions who control buying decisions.
We increase awareness of our products among our target customers through direct sales calls, trade shows, seminars, academic conferences, web presence,
social media and other forms of marketing. We supplement these traditional marketing efforts by fostering an active online community of users of our products
consisting of communities, forums and blogs with internally generated and user-generated content. We also provide education and training resources, both
online and in person.
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Suppliers and manufacturing
Our Pleasanton, California, Singapore and Taiwan manufacturing operations are ISO 9001:2015 certified, which covers design, development, manufacturing,
distribution, service and sales. We obtain some components of our instruments and consumables from third-party suppliers. While some of these components
are sourced from a single supplier, we have qualified second sources for some, but not all, of our components including critical reagents, enzymes and
oligonucleotides. We believe that having dual sources for our components helps reduce the risk of a production delay caused by a disruption in the supply of a
critical component. For further discussion of the risks relating to our third-party suppliers, see the section titled “Risk Factors—Risks related to our business
and industry—We and our customers are dependent on single source and sole source suppliers for some of the equipment, components and materials used in
our products and in conjunction with our products and the loss of any of these suppliers could harm our business."
Consumables
The majority of our consumable products are manufactured at our facilities. These manufacturing operations include, among other operations, gel bead
generation, surfactant synthesis and emulsion oil formulation, reagent formulation and tube filling, certain of our microfluidic chips, kit assembly and
packaging as well as analytical and functional quality control testing.
Instruments
We outsource manufacturing for our Chromium, Visium and Xenium instruments to qualified contract manufacturers who have represented to us that they
maintain ISO 13485 certification. We perform optical and final assembly, instrument integration and testing of our Xenium instrument in-house.
Human Capital
At 10x, our success begins with our people. We are led by a talented, global and diverse team of scientists, software developers and subject matter experts who
help drive adoption of our products and support our vision. We have built a multidisciplinary team with talent and expertise across a diverse set of areas such as
chemistry, molecular biology, microfluidics, hardware, computational biology and software engineering, and have supplemented this diverse technical
experience with our operational team with expertise in manufacturing, legal, sales, marketing, customer service, human resources and finance. As of
December 31, 2024, we employed a total of 1,306 individuals, 961 of whom were employed in the United States and 345 of whom were employed outside the
United States.
As of December 31, 2024, our employees included 410 in research and development, 491 in sales, marketing and support, 213 in general and administrative
and 192 in manufacturing, many of whom hold PhDs in their respective disciplines. Additionally, most of our senior management team and the members of our
board of directors hold PhDs and/or other advanced degrees. Our Company's scientific expertise is therefore embedded within the management team and
throughout the organization, and our employees are highly motivated by our mission. We emphasize employee development and training, and aim to provide
employees with competitive compensation.
We have never experienced a work stoppage. In addition, none of our U.S. employees are represented by a labor union or covered under a collective bargaining
agreement. In our international territories, apart from standard industry-wide labor unions and compulsory collective bargaining agreements, none of our
employees are represented by a labor union or subject to a collective bargaining agreement. We consider our relationship with our employees to be positive.
Competition
The life sciences industry is highly competitive. Companies, both established and early stage, have introduced products for, among other things, genomics
analysis, single cell analysis, spatial analysis and in situ analysis. We also compete with companies that offer existing tools and technologies for life science
research, such as bulk sequencing, flow cytometry, polymerase chain reactions (PCR), immunofluorescence, immunohistochemistry and other imaging and
cell-based assays, that are replaced by our products. Additional companies, including both early stage and established, have indicated that they are designing,
manufacturing and marketing products to compete with us or that they intend to do so in the future. Some of these companies may have substantially greater
financial and other resources than we do, including larger research and development staff or larger, more established marketing, distribution, service and sales
organizations. In addition, they may have greater name recognition than we do. Other competitors are in the process of developing novel technologies for the
life sciences market which may lead to products
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that rival or replace our products. We expect new competitors to continue to emerge and the intensity of competition to continue to increase.
We believe we are differentiated from our competitors for many reasons, including the capabilities and performance of our products, our advanced proprietary
technologies protected by substantial intellectual property, our rigorous product development processes and scalable infrastructure and our superior customer
experience and multidisciplinary teams.
For further discussion of the risks we face relating to competition, see the section titled “Risk Factors—Risks related to our business and industry—Our
industry is highly competitive. If we fail to compete effectively, our business and operating results will suffer.”
Government regulation
The development, research, testing, manufacturing, marketing, post-market surveillance, distribution, packaging, import, export, sales, advertising, promotion
and labeling of medical devices are subject to regulation in the United States by the U.S. Food and Drug Administration (“FDA”) under the Federal Food,
Drug, and Cosmetic Act (“FDC Act”) and outside the United States by comparable state and international agencies such as the national competent authorities of
the European Union (“EU”) member states and the Medicines and Healthcare products Regulatory Agency in the United Kingdom. The FDC Act defines a
medical device to include, among other things, any instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent or other similar or related
article, including any component part or accessory, which is (1) intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation,
treatment or prevention of disease, in man or other animals, or (2) intended to affect the structure or any function of the body of man or other animals and
which does not achieve any of its primary intended purposes through chemical action within or on the body of man or other animals and which is not
dependent upon being metabolized for the achievement of any of its primary intended purposes. Pursuant to its authority under the FDC Act, the FDA has
jurisdiction over medical devices, which are defined to include, among other things, in vitro diagnostic devices (“IVDs”). In the EU, until May 25, 2022, IVDs
were regulated by Directive 98/79/EC (“EU IVDD”), which has been repealed and replaced by Regulation (EU) No 2017/746 (“EU IVDR”). The EU IVDR
establishes a modernized and more robust EU legislative framework, with the aim of ensuring better protection of public health and patient safety. Unlike the
EU IVDD, the EU IVDR is directly applicable in all EU member states without the need for member states to implement into national law. This aims at
reducing the risk of discrepancies in interpretation across the different European markets. The EU IVDR became applicable on May 26, 2022. The EU IVDR
defines an IVD as “any medical device which is a reagent, reagent product, calibrator, control material, kit, instrument, apparatus, piece of equipment, software
or system, whether used alone or in combination, intended by the manufacturer to be used in vitro for the examination of specimens, including blood and tissue
donations, derived from the human body, solely or principally for the purpose of providing information on one or more of the following: (a) concerning a
physiological or pathological process or state; (b) concerning congenital physical or mental impairments; (c) concerning the predisposition to a medical
condition or a disease; (d) to determine the safety and compatibility with potential recipients; (e) to predict treatment response or reactions; (f) to define or
monitor therapeutic measures.” National competent authorities of the EU member states enforce compliance with medical devices (including IVDs)
requirements. The EU rules are generally applicable in the European Economic Area (“EEA”) (which consists of the 27 EU member states plus Norway,
Liechtenstein and Iceland).
We believe that our current products are not medical devices within the meaning of the FDC Act and foreign regulations applicable in countries where we
market our products, such as the EU IVDR in the EU, but we nevertheless market our products for research use only (“RUO”). IVDs that are marketed for
RUO are not intended for use in a clinical investigation or for clinical diagnostic use outside an investigation and must be labeled “For Research Use Only. Not
for use in diagnostic procedures.” Products that are intended for RUO and are properly labeled as RUO are exempt from compliance with the FDA’s
requirements applicable to medical devices more generally, including the requirements for clearance or approval and compliance with manufacturing
requirements known as the Quality System Regulation. In the EU, the EU IVDR clearly indicates that it does not apply to “products or general laboratory use
or research-use only products, unless such products, in view of their characteristics, are specifically intended by their manufacturer to be used for in vitro
diagnostic examination," and that “a device intended to be used for research purposes, without any medical objective, shall not be deemed to be a device for
performance study.” To be categorized as an RUO product, the product must have no intended medical purpose or objective. Consequently, products labeled as
RUO are essentially not subject to compliance with the EU IVDR requirements such as conformity with general, safety and performance requirements laid
down in the EU IVDR. Depending on the products in question, other regulations may be applicable to the RUO products. A product labeled RUO but intended
to be used diagnostically may be viewed by the FDA or foreign authorities as adulterated and misbranded under the FDC Act or foreign regulations and subject
to FDA or foreign authorities enforcement action. The FDA or foreign authorities may consider the totality of the circumstances surrounding distribution and
use of an RUO product, including how the product is marketed, when determining its intended use.
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Although we currently market our products as RUO, we may in the future develop products intended to be used for clinical or diagnostic purposes, which
would result in the application of a more onerous set of FDA and foreign regulatory requirements. Generally, unless an exemption applies, each new or
significantly modified medical device we may seek to commercially distribute in the United States will require either a premarket notification to the FDA
requesting permission for commercial distribution under Section 510(k) of the FDC Act, also referred to as a 510(k) clearance, or approval from the FDA of an
application for premarket approval (“PMA”). In the EU, there is currently no premarket government review of medical devices (including IVDs). However, all
IVDs placed on the EU market must meet general, safety and performance requirements laid down in Annex I to the EU IVDR including the requirement that
an IVD must be designed and manufactured in such a way that, during normal conditions of use, it is suitable for its intended purpose. IVDs must be safe and
effective and must not compromise the clinical condition or safety of patients, or the safety and health of users and, where applicable, other persons, provided
that any risks which may be associated with their use constitute acceptable risks when weighed against the benefits to the patient and are compatible with a
high level of protection of health and safety, taking into account the generally acknowledged state of the art. Compliance with general, safety and performance
requirements of the EU IVDR is a prerequisite for European conformity marking (“CE mark”) without which IVDs cannot be marketed or sold in the EU. The
510(k) clearance, PMA and CE mark processes can be resource intensive, expensive and lengthy, and require payment of significant (user) fees. Medical
devices are also subject to post-market requirements. Failure to comply with applicable regulations can result in enforcement actions such as warning letters,
fines, injunctions, civil or criminal penalties, termination of distribution, recalls or seizures of products, delays in the introduction of products into the market,
total or partial suspension of production, refusal to grant future clearances, approvals or certifications or withdrawals or suspensions of existing clearances,
approvals or certifications.
Intellectual property
Our success depends in part on our ability to obtain, maintain, enforce and defend intellectual property rights owned or licensed to us that are directed to our
products and technology. We utilize a variety of intellectual property protection strategies, including patents, trademarks, trade secrets, copyright and other
methods of protecting proprietary information. Worldwide we own or exclusively in-license over 1,290 issued or allowed patents and 1,300 pending patent
applications as of December 31, 2024. We also license additional patents on a non-exclusive and/or territory restricted basis.
We seek trademark registration to protect key trademarks such as our 10X, 10X GENOMICS, CHROMIUM, VISIUM and XENIUM marks, however, we have
not yet registered all of our trademarks in all of our current and potential markets. We own registered trademarks on 10X GENOMICS and product related
brand names in the United States and worldwide.
Pursuant to certain license agreements, we in-license rights under certain U.S. and foreign patents and patent applications from third parties directed to our
products and technology. Some of these agreements grant us an exclusive right to practice the licensed intellectual property rights in a specific field and/or
territory, and are subject to customary restrictions. We may also be obligated to pay our licensors certain milestones, royalties and/or other contingent
payments. Subject to customary termination rights, such exclusive license agreements typically will expire upon the last valid claim included in the licensed
patents expires or, in some cases, upon our failure to achieve specified sales volume thresholds. Certain of these agreements also require that any products that
are covered by the licensed patents be substantially manufactured in the United States.
In September 2013, we entered into an exclusive license agreement with the President and Fellows of Harvard University (“Harvard”), pursuant to which we
in-license exclusive, worldwide rights under certain of Harvard’s patents and patents applications in the field of sequencing sample preparation and single cell
analysis (“Harvard Agreement”). Subject to the terms of the Harvard Agreement, we are required to pay Harvard a low single-digit royalty percentage, based
on the net revenue of certain products that are covered by the patents and patent applications licensed under the Harvard Agreement, payable until the last to
expire of the valid claims included in such licensed patents and patent applications. The Harvard Agreement is projected to expire in 2034.
In September 2020, we entered into an exclusive license agreement with The Board of Trustees of the Leland Stanford Junior University (“Stanford”), pursuant
to which we in-license exclusive, worldwide rights under certain of Stanford’s patents and patents applications directed to ATAC-seq technology in all field of
use (“Stanford Agreement”). Subject to the terms of the Stanford Agreement, we are required to pay Stanford a low single-digit royalty percentage based on the
net revenue of certain ATAC-seq products that are covered by the patents and patent applications licensed under the Stanford Agreement, payable until the last
to expire of the valid claims included in such licensed patents and patent applications. The initial exclusivity period of the Stanford Agreement terminates in
2025, provided, we have the option to extend the exclusivity period for additional one-year terms if we meet certain minimum sales thresholds beginning in
2025. If the exclusivity period ends or we fail to extend the exclusivity period, we retain a non-exclusive license under the licensed patents and patent
applications. The Stanford Agreement is projected to expire in 2038.
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For the years ended December 31, 2024 and 2023, we made aggregate contingent and royalty payments under the Spatial Transcriptomics acquisition
agreement, Stanford license agreement and Harvard license agreement, collectively, of approximately $9.2 million and $15.4 million, respectively. We expect
such payments to decrease in 2025.
The patents we own expire beginning in 2030 and the patents we exclusively in-license expire beginning in 2028.
We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost-effective. We cannot provide any
assurance that any of our current or future patent applications will result in the issuance of patents, or that any of our current or future issued patents will
effectively protect any of our products or technology from infringement or prevent others from developing, manufacturing or commercializing products or
technology that infringe, breach or violate our intellectual property rights.
For further discussion of the risks relating to intellectual property, see the sections titled “Risk Factors—Risks related to our intellectual property, information
technology and data security” and “Risk Factors—Risks related to litigation and our intellectual property.”
Data Privacy and Security
Numerous state, federal and foreign laws, regulations and standards govern the collection, use, access to, confidentiality and security of health-related and other
personal information, and could apply now or in the future to our operations or the operations of our partners. In the United States, numerous federal and state
laws and regulations, including data breach notification laws, health information privacy and security laws and consumer protection laws and regulations
govern the collection, use, disclosure, and protection of health-related and other personal information. In addition, certain foreign laws govern the privacy and
security of personal data, including health-related data. Privacy and security laws, regulations and other obligations are constantly evolving, may conflict with
each other to complicate compliance efforts, and can result in investigations, proceedings or actions that lead to significant civil and/or criminal penalties and
restrictions on data processing.
Corporate information
We were incorporated in the State of Delaware on July 2, 2012 under the name Avante Biosystems, Inc. We changed our name to 10X Technologies, Inc. in
September 2012 and to 10x Genomics, Inc. in November 2014. Our principal executive offices are located at 6230 Stoneridge Mall Road, Pleasanton,
California 94588, and our telephone number is (925) 401-7300. We completed our initial public offering in September 2019, and our Class A common stock is
listed on the Nasdaq Global Select Market under the symbol “TXG.”
Available information
Our website is located at https://www.10xgenomics.com, and our investor relations website is located at https://investors.10xgenomics.com. We have used, and
intend to continue to use, our investor relations website as a means of disclosing material non-public information and for complying with our disclosure
obligations under Regulation FD. The following filings are available through our investor relations website as soon as reasonably practicable after we file them
with, or furnish them to, the Securities and Exchange Commission (“SEC”): Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K and our Proxy Statement for our annual meeting of stockholders. These filings are also available for download free of charge through a link on
our investor relations website. The SEC also maintains an internet website at www.sec.gov that contains reports, proxy statements and other information about
issuers, like us, that file electronically with the SEC. The contents of these websites are not incorporated into this filing. Further, our references to the URLs for
these websites are intended to be inactive textual references only.
Item 1A. Risk Factors.
Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information
in this Annual Report, including our financial statements and the related notes and the section titled “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in this Annual Report, before deciding whether to invest in our Class A common stock. The occurrence of any of the
events or developments described below could harm our business, financial condition, results of operations, cash flows and prospects. In such an event, the
market price of our Class A common stock could decline and you may lose all or part of your investment. The risks and uncertainties described below are not
the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business
operations and the market price of our Class A common stock. In addition, you should consider the interrelationship and compounding effects of multiple risks
occurring simultaneously.
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Summary Risk Factors
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business,
financial condition, results of operations, cash flows and prospects. These risks are discussed more fully below and include, but are not limited to, risks related
to:
Risks related to our business and industry:
•
Fluctuations in our operating results due to a variety of factors;
•
Our dependency on the availability of government funding to and research and development spending by research institutions;
•
Our ability to compete effectively;
•
Our pricing strategy;
•
Existing, enhanced or new trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers;
•
Our ability to increase penetration into our existing customer segments and to maintain and increase the effectiveness of our commercial organization;
•
The size of the market for our solutions;
•
The complexity of data generated by our products;
•
Our ability to effectively manage product transitions and forecast customer demand, including for both existing and newly introduced products;
•
Our ability to generate sufficient revenue, to attain cash flows from operating activities in excess of our capital investment requirements and to achieve
and maintain profitability;
•
Our ability to consistently manufacture our products to necessary specifications in necessary quantities and at acceptable cost and performance level;
•
Our ability to develop new products or new versions of existing products and enhance the capabilities of our existing products;
•
Our dependency on revenue generated from the sale of our Chromium solutions;
•
Doing business internationally, including in China and elsewhere in the Asia-Pacific region, and exposure to interest and foreign currency exchange
rates;
•
The ability of suppliers to meet our needs and the needs of our customers;
•
The complexity of our operations and manufacturing our products, including in sourcing raw materials and preventing errors and defects in our
solutions;
•
Our limited operating history, losses since inception, fluctuations in revenue and management of growth; and
•
The success of our products in achieving and sustaining scientific acceptance and generating revenue.
Risks related to our regulatory environment and taxation:
•
Our products could become subject to more onerous government regulation;
•
Changes in tax laws or regulations that are applied adversely to us or our customers; and
•
Ethical, legal, privacy and social concerns or governmental restrictions surrounding the use of the genomic and multiomic information and gene
editing.
Risks related to our intellectual property, information technology and data security:
•
Our ability to obtain, maintain and protect our intellectual property rights; and
•
Our dependence on certain intellectual property rights that are licensed to us.
Risks related to litigation and our intellectual property:
•
Our potential involvement in lawsuits in connection with intellectual property rights; and
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•
Our ability to effectively protect and enforce our intellectual property rights.
Risks related to ownership of our Class A common stock:
•
The multi-class structure of our common stock; and
•
The requirement of our bylaws that the State of Delaware is the exclusive forum for substantially all disputes between us and our shareholders.
General risks:
•
Our ability to meet our publicly announced guidance or other expectations about our business; and
•
The volatility of the market price of our Class A common stock.
The summary risk factors described above should be read together with the text of the full risk factors below in this section titled “Risk Factors” and the other
information set forth in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes, as well as in other documents
that we file with the SEC. The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not
precisely known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, results of operations
and future prospects.
Risks related to our business and industry
Our operating results have in the past fluctuated significantly and may continue to fluctuate significantly in the future, which makes our future operating
results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide.
Our quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to predict our future operating results. These fluctuations
may occur due to a variety of factors, many of which are outside of our control, including, but not limited to:
•
delays in, changes in terms of, or reduction of governmental funding of life sciences research, generally, or of research projects which could utilize our
solutions, specifically, or other changes that impact budgets, budget cycles or seasonal or other spending patterns of our customers, including potential
freezes of, reductions in or reduced availability of National Institutes of Health (NIH) or other funding for our customers;
•
modifications to our commercial processes and organization, including changes we made to our commercial processes and organization to increase
effectiveness;
•
the timing and magnitude of our price changes, including the effects of potentially lowering prices for certain of our products in 2025;
•
the effects of competition, including competition with both new and existing companies offering products that compete or intend to compete with our
products and may offer performance, price or other advantages as well as researchers developing their own solutions;
•
enhanced trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers, including retaliatory measures taken by trade
partners;
•
the effects of inflation on us or our customers, manufacturers and suppliers, including increases in the cost of labor and materials, including as a result of
tariffs imposed by the United States which are currently, or in the future, under consideration, proposed or enacted;
•
excess capacity expenses and inventory write-downs;
•
fluctuations in demand for our products, which may vary significantly, our ability to accurately forecast demand, and our ability to increase penetration
with our existing customers and to expand to new customers;
•
changes in general market conditions and other factors, including factors unrelated to our operating performance or the performance of our competitors;
•
changes in volume and product mix, particularly from products with lower gross margins than other products that we sell, or changes in costs related to
our instruments and consumables, including products which incur royalty payment obligations at higher rates than other products we sell;
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•
the success of our recently introduced and recently announced products and new versions of existing products, and our ability to generate revenue for
such products, and the introduction of new products or product enhancements by us or others in our industry including the timing of such introductions;
•
disruptions in customers’ on-going experiments or interruptions in the ability of our customers to complete research projects;
•
investment decisions we make with respect to the allocation of our resources, including regarding product development or to support our commercial
organization;
•
risks related to our business and demand for our products in China and elsewhere in the Asia-Pacific region, including competition or other factors;
•
differences in purchasing patterns across our customer base or across our two portfolios and variances in consumables spending for each of our
portfolios;
•
higher than anticipated warranty costs;
•
the timing and amount of expenditures that we may incur to acquire, develop or commercialize additional products and technologies or for other
purposes;
•
the timing and amount of expenditures (including success fees) related to litigation, as well as the outcomes of and related rulings in the litigation and
administrative proceedings which may vary substantially from quarter to quarter;
•
the outcome of any current or future litigation or governmental investigations involving us or other third parties;
•
our ability and the ability of our partners to successfully manufacture our instruments and consumables in necessary quantities at necessary quality,
including due to the impacts of supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages;
•
shortages, delays, production problems, distribution and quality issues with the materials we purchase for manufacturing, which could impact our ability
to manufacture and ship our instruments, consumables and related components;
•
our inability or the inability of our customers to source our products or necessary equipment, components and materials used in our products or in
conjunction with our products, including shortages of consumables or other components and materials used in gene sequencing (which occurred in
2024), because of issues with suppliers, including supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages;
•
our dependence and the dependence of our customers on single source and sole source suppliers for some of the equipment, components and materials
used in our products or in conjunction with our products;
•
changes in customer payment timing trends including potential increases in the days sales outstanding (DSO);
•
expenses related to our facilities and real estate;
•
our ability to successfully integrate personnel, technology and other assets that we acquire into our company;
•
difficulties encountered by our commercial carriers in delivering our instruments or consumables, whether as a result of external factors such as weather,
customs or import processes, transportation bottlenecks, port lockdowns or slowdowns or fuel shortages or internal issues such as labor disputes or
difficulties hiring and retaining adequate staffing;
•
reductions in or other difficulties relating to staffing, capacity, shutdowns or slowdowns of laboratories and other institutions, such as reduced or delayed
spending on instruments or consumables due to reductions in or other difficulties relating to staffing, capacity, shutdowns or slowdowns of laboratories
and other institutions in which our instruments and solutions are used;
•
our reputation or public perception of us;
•
the impacts of geopolitical issues, infectious disease, epidemics or pandemics on our business operations and on the business operations of our
customers, manufacturers and suppliers; and
•
the other factors described in this “Risk Factors” section.
The cumulative effects of the factors discussed above could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a
result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our
future performance.
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This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors at any time. If our
revenue or operating results fall below the expectations of analysts or investors or below any guidance we may provide, or if the guidance we provide is below
the expectations of analysts or investors, the price of our Class A common stock could decline substantially. Such a stock price decline could occur even when
we have met or exceeded any previously publicly stated guidance we may provide.
Our business is significantly dependent on researchers who rely heavily on government funding, including NIH grants, and any reduction in, modification
of the terms of or delay in such funding could adversely affect our sales and financial performance.
A substantial portion of our revenue is derived from sales to academic institutions, research organizations and other entities that rely heavily on government
funding, including grants from the National Institutes of Health (NIH) and other government agencies. Government funding is subject to annual appropriations
and budgetary constraints, and there is no assurance that such funding will continue at current levels or at all. Changes in government budgets, priorities or
policies could result in reduced or delayed funding for our customers' research. If researchers experience reductions or delays in government funding, or
modifications of the terms or conditions of funding, they may reduce or delay their purchases of our products and services, which could have a material adverse
effect on our business, financial condition and results of operations.
Any changes in government regulations or policies that affect the terms of research funding could impact our customers’ ability to secure funding and,
consequently, their demand for our products and services. For example, on February 7, 2025, the NIH imposed a standard indirect rate of 15% across all NIH
grants for indirect costs, defined as “facilities” and “administration,” in lieu of a separately negotiated rate for indirect costs in every grant. Indirect costs
represented $9 billion of the $35 billion in grants awarded by the NIH in 2023, which is more than 25% of total grant dollars awarded by the NIH. Research
institutions may face increased financial pressure due to this change or any future caps on indirect costs. The imposition of this cap, or other changes to grant
terms and conditions, could lead to reduced funding available for purchasing research supplies and equipment, thereby negatively impacting our sales.
In addition, various state, federal and international agencies that provide grants and other funding may be subject to budgetary or other constraints that could
result in spending reductions, reduced grant making, reduced allocations or budget cutbacks, which could jeopardize the ability of researchers to purchase our
products. For example, congressional appropriations to the NIH have generally increased year-over-year in recent years, but the NIH also experiences
occasional year-over-year decreases in appropriations. There is no guarantee that NIH appropriations will not decrease in the future. For example, in January
2025 the Executive Office of the President’s Office of Management and Budget (OMB) issued a memorandum “temporarily paus[ing] all activities related to
obligation or disbursement of all Federal financial assistance...” which may have the effect of preventing customers or potential customers from accessing
grants or funding. Further, in January 2025 a number of scientific gatherings and panels across federal science agencies, including several meetings of NIH
study sections which review applications for fellowships and grants, were canceled pursuant to agency notices. These meetings can be hard to reschedule and
can substantially delay grant approvals. Any cancellations or pauses in the ability of NIH or other funding bodies to make and execute decisions to fund
research which uses our products could delay or prevent researchers from purchasing our products, negatively impacting our financial results. A decrease in the
amount of, or delay in the approval of, appropriations to or disbursements from the NIH or other funding organizations, such as the Medical Research Council
in the United Kingdom, could result in less funding available for life sciences research. Reductions, delays or modified grant terms could also result in a
decrease the aggregate amount of grants awarded or funding disbursed for life sciences research or the redirection of existing funding to other projects or
priorities, any of which in turn could cause our customers and potential customers to reduce or delay purchases of our products. Our operating results may
fluctuate substantially due to any such reductions and delays. Any decrease in our customers’ budgets or expenditures, or in the size, scope or frequency of their
capital or operating expenditures could materially and adversely affect our business, operating results and financial condition.
Our business currently depends significantly on research and development spending by research institutions, a reduction in which could limit demand for
our products and materially and adversely affect our business and operating results.
A large portion of our revenue comes from sales of Chromium, Visium and Xenium products to research institutions. As a result, the demand for our products
will depend upon research priorities and purchasing patterns of these customers, the ability of such customers to adequately staff, access and utilize labs and
conduct research, the research and development budgets of these customers and the ability of such customers to receive funding for research, all of which are
impacted by factors beyond our control, such as:
•
decreases or delays in funding of research and development;
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•
changes in, restrictions upon, availability of, delays or interruptions to funding or other incentives for our customers including administrative or other
delays in funding or incentive award processes, changes in the amount of funds or other incentives allocated to different areas of research, changes that
have the effect of increasing the length of the funding or incentive award process;
•
competitor product offerings or pricing;
•
changes in our customers' research priorities;
•
macroeconomic conditions including regional, national or global economic downturns, inflation, interest rate or currency fluctuations, trade policies and
tariffs, regulatory changes, political instability, labor market conditions, supply chain disruptions and technological changes;
•
risks related to our business in China and elsewhere in the Asia-Pacific region, including macroeconomic conditions, local competition or other factors:
•
scientists’ and customers’ opinions of the utility of our products or services;
•
our inability or the inability of our customers to source products or necessary equipment, components and materials used in our products or in
conjunction with our products because of issues with suppliers or distribution networks, including supply chain disruptions, logistics, shipping and other
distribution disruptions and labor shortages;
•
citation of new products, new versions of existing products or services in published research;
•
changes in the regulatory environment;
•
differences in budgetary cycles;
•
delays in spending while customers or potential customers assess and validate newly introduced products or versions of our products prior to purchasing;
•
market-driven pressures to consolidate operations and reduce costs;
•
reductions in or other difficulties relating to staffing, capacity, slowdowns or shutdowns of laboratories or other institutions in which our solutions are
used, including reduced or delayed spending on instruments or consumables due to reductions in or other difficulties relating to staffing, capacity,
slowdowns or shutdowns of laboratories or other institutions in which our solutions are used; and
•
market acceptance of relatively new technologies, such as ours.
Our industry is highly competitive. If we fail to compete effectively, our business and operating results will suffer.
We face significant competition. We currently compete with both established and early-stage companies that have introduced products for, among other things,
genomics analysis, single cell analysis, spatial analysis and in situ analysis. We also compete with companies that offer existing tools and technologies for life
science research, such as bulk sequencing, flow cytometry, PCR, immunofluorescence, immunohistochemistry and other imaging and cell-based assays, that
are replaced by our products. There are additional companies, including both early stage and established, that have indicated that they are designing,
manufacturing and marketing products to compete with us or that they intend to do so in the future. Some of these companies may have substantially greater
financial and other resources than we do, including larger research and development staff or larger, more established marketing, distribution, service and sales
organizations. In addition, they may have greater name recognition than we do. Established companies with multiple product lines may give away or sell
products at a significant discount that compete with ours in order to drive adoption and usage of other products they sell. If we are forced to reduce the prices
on our products in response, it could negatively impact our revenue and financial results.
In addition, other competitors are in the process of developing novel technologies which may lead to products that rival or replace our products. We expect new
competitors to continue to emerge and the intensity of competition with both new and existing competitors to continue to increase.
We also face competition from researchers developing their own solutions. The area in which we compete involves rapid innovation and some of our customers
have in the past, and more may in the future, elect to create their own platform or assays rather than rely on a third-party supplier such as ourselves. This is
particularly true for the largest research centers and labs which are continually testing and trying new technologies, whether from a third-party vendor or
developed internally. We also compete for the resources our customers allocate for purchasing a wide range of products used to analyze biological systems,
some of which are additive to or complementary with our own but not directly competitive.
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Our products may not compete favorably or be successful in the face of increasing competition from products and technologies introduced by our existing
competitors, companies entering our segments or developed by our customers internally. In addition, our competitors may have or will in the future develop
products or technologies that currently or in the future will enable them to produce competitive products with greater capabilities or at lower costs than ours or
that are able to run comparable experiments at lower costs. Any failure to compete effectively could materially and adversely affect our business, financial
condition and operating results.
Price reductions, discounting or future price changes may negatively impact our financial results if we are unable to achieve offsetting benefits.
We have recently taken a number of steps to lower the cost of single cell experiments through the introduction of new products and new versions of existing
products that deliver lower price per cell and per sample and we may in the future choose to implement strategic price reductions or discounting of our products
and services. While we believe these actions will drive increased customer adoption, they will also result in lower revenue per unit sold. While we plan to
offset these reductions through increased sales volume, operational cost savings and improved operating leverage, our ability to do so will be dependent upon
whether our customers increase their usage of our products, and there can be no assurance that these offsetting measures will be successful or will occur in the
same time period as the price reductions. We may experience corresponding increases in demand or customers may push out purchases to future periods in
anticipation of future product introductions or price reductions or discounting, which would negatively impact our financial results.
If we are unable to fully offset the impact of lower cost of experiments or lower pricing or discounting through these initiatives, our revenue, gross margins,
operating income and overall financial results could be adversely affected. The negative impact could be particularly pronounced if:
•
the anticipated increase in sales volume fails to materialize or is lower than expected;
•
our cost reduction and efficiency initiatives do not generate the projected savings;
•
competitive pressures require us to implement price reductions more extensively or rapidly than planned;
•
we experience delays in implementing operational improvements and cost control measures; or
•
macroeconomic conditions or other factors negatively impact customer demand or purchasing patterns.
The success of our pricing strategy depends on numerous factors, many of which are outside our control. If we are unable to successfully execute our pricing
strategy while maintaining our profitability, our business, financial condition, results of operations and prospects may be materially and adversely affected.
Enhanced trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers may materially harm our business.
We are continuing to expand our international operations as part of our growth strategy and have experienced an increasing concentration of sales in certain
regions outside the United States, including in the Asia-Pacific region. For the years ended December 31, 2024 and 2023, sales outside of North America
constituted a substantial component of our total sales revenue and our largest markets outside of North America were China and Germany. There is currently
significant uncertainty about the future relationship between the United States and its trade partners, most significantly China, with respect to trade policies,
treaties, government regulations and tariffs and the United States has stated it is considering tariffs or other restrictions on goods from a number of other
countries.
This may subject our business to retaliatory measures taken by trade partners, including China or other countries which would have an adverse impact on our
financial results. Such measures could include restrictions on our ability to sell or import our products into other countries or increase the prices of our
products. For example, in February 2025, the United States increased tariffs on goods imported into the United States from China by 10%, and China
responded by imposing a 15% tariff on coal and liquified natural gas products and a 10% tariff on crude oil, agricultural machinery and certain automobiles.
These tariffs could increase our costs, negatively impacting our financial results. It is possible further tariffs may be imposed that could cover imports of the
export or sale of our products. Our business may be adversely impacted by retaliatory trade measures taken by trade partners, which could materially harm our
business, financial condition and results of operations. The nature of the dispute between the United States and its trade partners is evolving and additional
products such as ours could become subject to tariffs, which could adversely affect the marketability of our products and our results of operations. Further, the
continued threats of tariffs, trade restrictions and trade barriers could have a generally disruptive impact on the global economy, including increases in inflation
and interest rates, and, therefore, negatively impact our sales. Given the relatively fluid regulatory environment between
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the United States and its trade partners and uncertainty how each will act with respect to tariffs, international trade agreements and policies, there could be
additional tax or other regulatory changes in the future. Any such changes could directly or indirectly adversely impact our financial results and results of
operations.
In February 2025, China’s Ministry of Commerce (MOFCOM) added Illumina, Inc., the largest sequencer manufacturer, to MOFCOM’s Unreliable Entity List,
potentially in response to tariffs imposed by the United States. In connection with this designation, MOFCOM may impose restrictions or prohibitions on
Illumina’s China-related import or export activities, investments in China, relevant personnel or transportation entering China, work permits, stay or residence
status, fines or other penalties. Our Chromium and Visium products are often utilized with Illumina sequencers by researchers conducting single cell or spatial
experiments. As a result of Illumina’s designation by MOFCOM as an “unreliable entity,” it may now be difficult or impossible for certain users or potential
users of our products in China to access or utilize Illumina’s products, including in connection with planned or potential Chromium or Visium experiments, and
our business in China may suffer as a result. If China were to expand the Unreliable Entity List to include other life sciences companies, including 10x, our
business in China, which represented approximately ten percent of our total revenue in 2024, could be materially impacted or eliminated.
In recent years, the United States government has a renewed focus on export control matters. For example, the Export Control Reform Act of 2018 and
regulatory guidance thereunder have imposed additional controls and may result in the imposition of further additional controls, on the export of certain
“emerging and foundational technologies.” Our current and future products may be subject to these heightened regulations, which could increase our
compliance costs.
Trade actions, including the imposition of new, or changes in existing, tariffs, trade restrictions, trade barriers, export controls, antitrust investigations or
retaliatory measures taken by trade partners in response to U.S. trade practices could adversely impact our business, financial condition and results of
operations.
Our future success is dependent upon our ability to increase penetration in our existing customer segments.
Our customer base includes academic, government, biopharmaceutical, biotechnology and other institutions. Our success will depend upon our ability to
increase our penetration among these customers, to expand to new customers and to expand our opportunities by developing and marketing new products as
well as new versions of and new applications for existing products. We regularly introduce new versions of existing products, and our future success will
partially depend on our ability to commercialize these products and gain customer acceptance of these products. We may not be able to further penetrate our
existing customers or expand to new customers. Any failure to increase penetration with existing customers and expand to new customers could adversely
impact our operating results.
Our past or future efforts to maintain and increase the effectiveness of our commercial organization may not succeed.
We have in the past needed to, and may in the future need to, identify, adopt and adhere to new or modified commercial processes to maintain and increase the
effectiveness of our commercial organization. In 2024, we modified our commercial processes and organization to increase effectiveness. While we believe
such changes will serve the long term best interests of the Company, we believe that in the short term these changes negatively impacted our financial results in
2024 and may continue to negatively impact our results in the future. There is no guarantee that the modifications we have made to our commercial processes
and organization will result in increased effectiveness. If the modifications to our commercial processes and organization do not result in increased
effectiveness, our business, results of operations and growth prospects may be harmed.
Additionally, we may face difficulties identifying, recruiting, training and retaining qualified personnel to staff and manage our commercial organization.
Certain of our products, certain customers or certain segments, including biopharmaceutical or translational segments, may require personnel with different
skills or experience than those we currently employ in our commercial organization. For example, our restructuring left a number of territories without sales
coverage, and we are hiring to fill those positions. We are also in the process of building a team of specialized commercial staff focused on sales of our Xenium
products. If we are unable to quickly fill vacant roles and ramp new personnel, our financial results may be negatively impacted.
The size of the market for our solutions may be smaller than estimated and new opportunities may not develop as quickly as we expect, or at all, limiting
our ability to successfully sell our solutions.
The demand for genomics products continues to evolve, making it difficult to predict with any accuracy the total potential demand for our solutions. Our
estimates of the annual total addressable market and annual serviceable addressable market for our current and future solutions are based on a number of
internal and third-party estimates and assumptions. In particular, our market estimates are based on assumptions regarding the size of the global life sciences
research tools market, the number of labs and companies participating in such market and currently using single cell, spatial or adjacent research techniques
and the anticipated spend levels of such potential customers were they to adopt our solutions. Underlying our market estimates are a number of
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estimates and assumptions, including the assumption that government or other sources of funding will continue to be available to life sciences researchers at
times and in amounts necessary to allow them to purchase our solutions.
In addition, our growth strategy involves launching new solutions and expanding sales of existing solutions into new areas in which we have limited or no
experience. We also expect to pursue additional opportunities that will further expand our opportunity, including new products and new potential applications
of our single cell, spatial and in situ technologies in the future. Sales of new or existing solutions into new opportunities may take several years to develop and
mature and we cannot be certain that these opportunities will develop as we expect. For example, new life sciences technology is often not adopted until a
sufficient amount of research conducted using such technology has been published in peer-reviewed publications. Because there can be a considerable delay
between the launch of a new life sciences product, new version or a new application of an existing life science product and publication of research using such
product, new life sciences products, versions or applications do not generally contribute a meaningful amount of revenue in the year they are introduced. In
certain situations, new life sciences products, versions or applications, even if sufficiently covered in peer-reviewed publications, may not be adopted until the
consistency and accuracy of such technology, method or device has been proven. As a result, the sizes of the commercial opportunities available for new
products, versions and applications are even more difficult to predict.
While we believe our assumptions and the data underlying our market estimates for our solutions are reasonable, these assumptions and estimates may not be
correct and the conditions supporting our assumptions or estimates, or those underlying the third-party data we have used, may change at any time, thereby
reducing the accuracy of our estimates. As a result, our estimates of the annual total addressable market and annual serviceable addressable market for our
solutions may be incorrect.
The future growth of our current and future solutions depends on many factors beyond our control including, among other factors, recognition and acceptance
of our solutions by the scientific community as best practice and the growth, prevalence and costs of competing products and solutions. Such recognition and
acceptance may not occur in the near term, or at all. If demand for our current and future solutions are smaller than estimated or do not develop as we expect,
our growth may be limited and our business, financial condition and operational results may be adversely affected.
Our products generate large-scale complex data which requires advanced analytics to interpret.
Our products generate highly complex data that can present significant challenges in terms of understanding and interpretation, particularly for customers who
may lack bioinformatics expertise or dedicated computational resources. The advanced nature of the data generated by our products requires a certain level of
expertise to analyze and interpret effectively. Some of our customers may lack the necessary technical skills or resources to fully understand and utilize the
data. As a result, they may experience difficulties in deriving actionable insights, which could delay additional usage of our products or diminish their
perceived value.
To address the complexity of data, we may need to provide extensive training and support to our customers. Despite these investments, there is no guarantee
that customers will achieve the necessary level of proficiency or efficiency in analyzing data. Providing ongoing customer education and technical assistance
may increase operational costs, and place additional demands on our customer support teams. If customers struggle to extract meaningful insights from their
data, this could reduce the perceived value of our solutions and slow adoption of our solutions. If customers encounter difficulties with data analysis, it could
negatively impact their satisfaction with our products, lead to delays in reordering our products or services desire or lead them to decide not to purchase
additional products or services, any of which would negatively impact our financial results.
Our failure to effectively manage product transitions or accurately forecast customer demand could result in excess or obsolete inventory and resulting
charges.
Because the market for our products is characterized by rapid technological advances, we frequently introduce new products or new versions of existing
products designed for improved ease-of-use, improved performance or additional features and functionality. At times, we preannounce products and services, in
some cases before such products and services have been fully developed or tested, and risk failing to meet expectations when and if such products and services
become available. The risks associated with the introduction of new products or new versions include the difficulties of predicting customer demand and
effectively managing inventory levels to ensure adequate supply of the new product or new versions and avoiding excess supply of the legacy product,
including legacy versions of our instruments which are supplanted by new versions. For example, we recorded charges of $11.3 million and $7.8 million in
2024 and 2023 related to excess and obsolete inventory. In addition, in the past supply chain disruptions, logistics, shipping and other distribution disruptions
and labor shortages have made it more difficult to predict customer demand and effectively manage inventory levels for our instruments and consumables. At
times the risk that we will not be able to source the necessary equipment, components and materials to manufacture our products led us, and may
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again lead us, to carry higher inventory. Further, differences in purchasing patterns across our customer base could negatively impact our ability to accurately
forecast demand.
We may strategically enter into non-cancelable commitments with vendors to purchase materials for our products in advance of demand to take advantage of
favorable pricing, address concerns about the availability of future supplies or build safety stock to help ensure customer shipments are not delayed should we
experience higher than anticipated demand for materials with long lead times. During periods of decreased demand, which in the past have occurred and which
may occur again, these non-cancelable commitments could result in additional inventory-related charges.
These factors may result in excess or obsolete inventory charges adversely impacting our financial results and condition.
We may be unable to consistently manufacture our instruments and consumables to the necessary specifications or in quantities necessary to meet demand
at an acceptable cost or at an acceptable performance level.
Our products are integrated solutions with many different components that work together. As such, a quality defect in a single component can compromise the
performance of the entire solution. Certain of our consumables are manufactured at our Pleasanton, California, Singapore, Taiwan and other facilities using
complex processes, sophisticated equipment and strict adherence to specifications and quality systems procedures. Our Chromium, Visium CytAssist and
Xenium instruments are manufactured by our third-party manufacturers at their facilities. In order to successfully generate revenue from our products, we need
to manufacture products that meet our specifications before we allow them to be shipped and to supply our customers with products that meet their
expectations for quality and functionality in accordance with established specifications. In order to ensure we are able to meet these expectations, our
Pleasanton, California, Singapore and Taiwan manufacturing facilities, as well as the facilities of our third-party manufacturers, have obtained International
Organization for Standardization (“ISO”) quality management certifications and employ other quality control measures. On occasion, our customers have
experienced quality control and manufacturing defects and may again in the future.
Additionally, as we continue to evolve and introduce new products and new versions of existing products, and as our products incorporate increasingly
sophisticated technology, it will be increasingly difficult to ensure our products are produced in the necessary quantities without sacrificing quality and in the
necessary timeframes. There is no assurance that we or our third-party manufacturers will be able to continue to manufacture our products so that they
consistently achieve the product specifications, quality and volumes that meet our requirements or our customers' expectations.
Certain of the raw and other materials we use and certain of our consumables have a shelf life, after which their performance is not ensured. In the past the
expiration of raw and other materials have increased, and may in the future increase, our operational costs and cause delays in manufacturing adequate volumes
of our products within the timeframes required. Shipments of defective instruments or consumables to customers resulting in recalls and warranty replacements
have increased, and may in the future increase, our costs, and depending upon current inventory levels and the availability and lead time for additional
inventory, could lead to availability issues. Any design issues, unforeseen manufacturing problems, such as contamination of our third-party manufacturer's
facilities, equipment malfunctions, aging components, quality issues with components and materials sourced from third-party suppliers, or failures to strictly
follow procedures or meet specifications, may have a material adverse effect on our brand, business, financial condition and operating results and could result
in us or our third-party manufacturers losing ISO quality management certifications. If we or our third-party manufacturers fail to manufacture products
without defects that meet our specifications or maintain ISO quality management certifications, our customers might choose not to purchase products from us.
Furthermore, we or our third-party manufacturers may not be able to increase manufacturing to meet anticipated demand or may experience downtime.
In addition, as we increase manufacturing capacity, we have needed, and in the future may need, also to make corresponding improvements to other operational
functions, such as our customer service and billing systems, compliance programs and our internal quality assurance programs. We have needed and may in the
future need additional equipment, manufacturing and warehouse space and trained personnel to process higher volumes of products. We cannot assure you that
such increases in scale, related improvements and quality assurance will be successfully implemented or that equipment, manufacturing and warehouse space
and appropriate personnel will be available or that they will realize their intended benefits. As we develop additional products, we may need to bring new
equipment online, implement new systems, technology, controls and procedures and hire personnel with different qualifications. Our ability to increase our
manufacturing capacity at our Pleasanton, California, Singapore, Taiwan and other locations is complicated by the use of our proprietary equipment that is not
readily available from third-party manufacturers.
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The risk of manufacturing defects or quality control issues is generally higher for new products and new versions of existing products, whether produced by us
or a third-party manufacturer, products that are transitioned from one manufacturer to another, particularly if manufacturing is transitioned or initiated with a
manufacturer we have not worked with in the past, and products that are transferred from one manufacturing facility to another. Our current product roadmap
calls for the introduction of new products and new versions of existing products, which may require that we utilize manufacturers with which we have little or
no prior manufacturing experience, which could increase the risk of manufacturing defects or quality control issues. The expansion of our manufacturing
capabilities has increased and in the future could increase the risk of manufacturing defects or quality control issues in the consumables we manufacture. We
and our third-party manufacturers may not be able to launch new products or new versions of existing products on time, transition manufacturing of existing
products to new manufacturers, transition our manufacturing capabilities to a new location or transition manufacturing of any additional consumables in-house
without manufacturing defects or other issues.
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, financial condition and results of operations.
Our instruments, consumables and related components are specialized, complex and difficult to manufacture. We could experience production problems
that impact our ability to manufacture and ship our instruments, consumables and related components, which would materially and adversely affect our
business, financial condition and results of operations.
The manufacturing processes we and our third-party manufacturers use to produce our instruments, consumables and related components are specialized and
highly complex and require high-quality components. We may have quality variations, supply issues, backorders, delays, shortages or production difficulties of
needed components and may require components that are difficult to obtain or manufacture in necessary quantities and at necessary quality, in a timely manner
or in accordance with regulatory requirements.
Such issues, issues with our manufacturing processes or the manufacturing processes of our third-party manufacturers, shipping issues, inaccurate demand
forecasts or other production issues could result in our inability to produce our products in sufficient volumes and at sufficient quality to meet demand, supply
our products to our customers and for our research and development needs, backorders, insufficient inventory, excess inventory, shipping delays, product
deficiencies or other operational failures. For example, in the past the COVID-19 pandemic disrupted air, sea and other travel in the United States and globally.
Similar disruptions in the future could reduce or eliminate our ability to receive components or supply our customers. Many other factors could cause
production or shipping delays or interruptions, including difficulties in transporting materials, equipment, raw material or other shortages, raw material failures,
spoilage, equipment malfunctions, facility contamination, labor problems, natural disasters, tariffs, trade disputes and other trade restrictions, infectious
disease, conflict, war, civil unrest, epidemics or pandemics, disruption in utility services, terrorist activities or circumstances beyond our control. Additionally,
we and our third-party manufacturers may encounter problems in hiring and retaining the experienced specialized personnel needed to develop and operate our
manufacturing processes or the manufacturing processes of our third-party manufacturers, which could result in backorders, shortages, delays in our production
or difficulties in maintaining compliance with applicable regulatory requirements.
These issues, or any other problems with the production or timely manufacture and shipment of our instruments, consumables and related components, could
materially harm our business, financial condition and results of operations.
Undetected errors or defects in our solutions could harm our reputation and decrease market acceptance of our solutions.
Our instruments and consumables, as well as the software that accompanies them, have in the past and may again in the future contain undetected errors or
defects due to design, manufacturing, delivery or other issues. Disruptions or other performance problems with our products or software may adversely impact
our customers’ research or business, harm our reputation and result in reduced revenue or increased costs associated with product repairs or replacements. If
that occurs, we may also incur significant costs, the attention of our key personnel could be diverted or other significant customer relations problems may arise.
We have and may again in the future also be subject to warranty claims related to errors or defects in our solutions, and in the future we may be subject to
breach of contract for damages related to such errors or defects.
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We may not be able to develop new products or new versions of existing products, enhance the capabilities of our existing products to keep pace with
rapidly changing technology and customer requirements or successfully manage the transition to new product offerings, any of which could have a
material adverse effect on our business and operating results.
Our success depends on our ability to develop new products. new versions and applications for our technology while improving the performance and cost-
effectiveness of our existing products, in each case in ways that address current and anticipated customer requirements. Such success is dependent upon several
factors, including feasibility, competition among our products for Company resources and in customer purchasing decisions, functionality, competitive pricing
and integration with existing and emerging technologies. The development timelines of certain potential new products or new versions may be delayed or
precluded due to prioritization of other new products or versions. New technologies, techniques or products offered by others could emerge that might offer
better combinations of price and performance or better address customer requirements as compared to our current or future products or in some cases our own
new products or new versions of existing products could erode sales or supplant the demand for other products we sell. In addition, while we have invested,
and expect to continue to invest, significantly in research and development and the commercialization of both new products and new versions of existing
products, investment decisions we make or have made with respect to the allocation of our substantial but finite resources, including regarding product
development or to support our commercial organization, may not be successful or realize their anticipated benefits.
Existing and potential customers for our current and future products, including customers interested in genomics, single cell analysis, spatial analysis or in situ
solutions, are accustomed to rapid technological change and innovation. Competitors may be able to respond more quickly and effectively than we can to new
or changing opportunities, technologies, standards or customer requirements. Due to the significant lead time involved in bringing a new product or version to
market, we are required to make a number of assumptions and estimates regarding the technical or commercial feasibility of a new product or version,
including assumptions and estimates regarding our or our partners’ ability to design and manufacture potential solutions, the biological analytes that researchers
will want to measure, the appropriate method of measuring such analytes, how researchers intend to use the resulting data and the scope and type of data that
will be most useful to researchers. As a result, it is possible that we may fail to introduce certain products which we intended (and in some cases may have
publicly announced our intention) to bring to market or we may introduce a new product or a new version of an existing product that fails to meet the
performance or price expectations of our customers, uses technologies or methods of analysis that have been displaced by the time of launch, competes with
one or more of our other products in a way which harms our business, addresses an opportunity that no longer exists or is smaller than anticipated, targets
biological analytes or produces data that provides less utility to researchers than anticipated or otherwise is not competitive at the time of launch. Additionally,
even if we are successful in introducing new products or new versions of existing products which are embraced by our customers and the research community,
such introductions may result in decreased demand for our existing products which are not offset by increases in demand for our new products or versions, at
least temporarily. Our revenues may suffer while customers transition their research to utilize our new products or new versions of existing products, as such
transitions can be lengthy and require significant time to reach purchasing levels equivalent to those of our existing products.
Because our Chromium and Visium solutions are used with third-party sequencers to conduct an experiment, we also expect competition from third-party
sequencer manufacturers as researchers and labs look to reduce the total cost of any given experiment. For example, if a third-party sequencer manufacturer
were successful in providing functionality akin to our products, they potentially could be able to deliver a solution that is capable of running comparable
experiments with a total experiment cost that would be less than the cost of running such experiments using our products together with third-party sequencers.
The integration of competing products with sequencing products could also create a “stickiness” effect advantaging such a third-party sequencer manufacturer,
where a potential 10x customer could choose a competing product due to perceived or actual ease of use, simplified workflow or lower overall cost.
Conversely, if genome sequencing falls out of favor as a preferred approach for genomic research, whether through the development of alternative solutions or
real or perceived problems with sequencing itself or if our Chromium and Visium products are not compatible with third-party sequencers used by our
customers or potential customers, the utility of our products which are used in conjunction with third-party sequencers could be significantly impacted. It is
critical to our success that we anticipate changes such as these in technology and customer requirements and successfully introduce new, enhanced and
competitive technologies to meet our customers’ and prospective customers’ needs on a timely and cost-effective basis. If we do not successfully innovate and
introduce new technology into our product lines, our business and operating results will be adversely impacted.
Our ability to attract new customers and increase revenue from existing customers depends in large part on our ability to enhance and improve our existing
solutions and to introduce compelling new solutions. The success of any enhancement to our solutions depends on several factors, including technical
specifications, timely completion and delivery, competitive pricing and features, adequate quality testing, integration with existing technologies and overall
market acceptance. Any new solution that we develop
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may not be introduced in a timely or cost-effective manner, may contain errors, vulnerabilities or bugs, or may not achieve the market acceptance necessary to
generate significant revenue. If we are unable to successfully develop new solutions, enhance our existing solutions to meet customer requirements or
expectations, or otherwise gain market acceptance, our business, results of operations and financial condition could be harmed.
Our ability to attract new customers and increase revenue from existing customers also depends on our ability to deliver any enhanced or new solutions to our
customers in a format where they can be easily and consistently deployed by most or all users without significant customer service or training. If our customers
believe that deploying our enhanced or new solutions would be overly time-consuming, confusing or technically challenging, or require significant training or
retraining, then our ability to grow our business would be substantially harmed. We aim to create and deliver repeatable, user-friendly, prescriptive approaches
to deployment that allow users of all kinds to effectively and easily deploy our solutions, and if we fail to do so, our business and results of operations could be
harmed.
The typical development cycle of new life sciences products or new versions of existing products can be lengthy and complicated and may require new
scientific discoveries or advancements and complex technology and engineering. Such developments may involve external suppliers and service providers,
making the management of development projects complex and subject to risks and uncertainties regarding timing, timely delivery of required components or
services and satisfactory technical performance of such components or assembled products.
We are significantly dependent upon revenue generated from the sale of our Chromium solutions, and in particular our Universal Gene Expression
solutions.
We currently generate the majority of our revenue from the sale of our instruments and consumables for our Chromium platform. There can be no assurance
that we will be able to sustain or increase the success we have historically achieved with our Chromium solutions. For example, revenue from single cell
solutions decreased year-over-year in 2024. In addition, we may not be able to design future Chromium products that will meet the needs of our customers or
become and remain commercially successful. Our expectations are based on the continued success of our existing solutions and the future success of new
products and new versions of existing products that we launch. Revenue from our single cell solutions decreased year-over-year in 2024 which adversely
impacted our financial results, and if revenue from our single cell solutions continues to decrease, remains flat or does not increase in line with our
expectations, our revenue and financial results could be materially and adversely impacted.
Doing business internationally creates operational and financial risks for our business.
We currently serve thousands of researchers in many countries and plan to continue to expand to new international jurisdictions as part of our growth strategy.
For the years ended December 31, 2024 and 2023, approximately 43% and 40%, respectively, of our revenue was generated from sales to customers located
outside of North America. We believe that a significant portion of our future revenue will come from international sources. We sell directly in North America
and certain regions of Asia, Oceania and Europe and have a significant portion of our sales and customer service personnel in the United States. We sell our
products through third-party distributors in certain regions of Asia, Europe, Oceania, Central America, South America, the Middle East and Africa. As a
result, we or our distribution partners may be subject to additional regulations. Conducting operations on an international scale requires close coordination of
activities across multiple jurisdictions and time zones. If we fail to coordinate and manage these activities effectively, our business, financial condition or
results of operations could be materially and adversely affected and failure to comply with laws and regulations applicable to business operations in foreign
jurisdictions may also subject us to significant liabilities and other penalties. International operations entail a variety of other risks, including, without
limitation:
•
variances in demand for our products across regions, including in China and elsewhere in the Asia-Pacific region;
•
challenges in staffing and managing foreign operations, including executing our commercial goals and our dependence on our distributors in certain
regions;
•
tariffs or other restrictions imposed by the United States on goods from other countries and tariffs or other restrictions imposed by other countries on
United States goods, or increases in existing tariffs;
•
changes in diplomatic and trade relationships, including new or enhanced tariffs or duties, trade protection measures, import or export licensing
requirements, trade embargoes and other trade barriers;
•
currency fluctuations;
•
potentially longer sales cycles and more time required to engage and educate customers on the benefits of our products outside of the United States;
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•
complexities associated with managing third-party contract manufacturers and suppliers located outside of the United States;
•
United States 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 and/or services to foreign persons or entities;
•
reduced protection for intellectual property rights in some countries and practical difficulties of enforcing intellectual property or other legal rights
abroad;
•
deterioration of political relations between the United States and China, the United States and Russia or other nations or political organizations, which
could have a material adverse effect on our sales and operations in these countries;
•
changes in social, political and economic conditions or in laws, regulations and policies governing foreign trade, manufacturing, development and
investment both domestically as well as in the other countries and jurisdictions into which we sell our products;
•
difficulties in obtaining export licenses or in overcoming other trade barriers and restrictions resulting in delivery delays or our inability to manufacture
or sell our products in certain countries;
•
natural disasters, infectious diseases, conflict, geopolitical turmoil, war, civil unrest, epidemics, pandemics or major catastrophic events;
•
increased financial accounting and reporting burdens and complexities;
•
the potential need for localized software, documentation and post-sales support;
•
higher levels of credit risk and payment fraud and longer payment cycles associated with, and increased difficulty of payment collections from certain
international customers; and
•
significant taxes or other burdens of complying with a variety of foreign laws, including laws relating to privacy and data protection such as the
European Union General Data Protection Regulation (“GDPR”).
In conducting our international operations, we are subject to United States laws relating to our international activities, such as the Foreign Corrupt Practices Act
of 1977, as well as foreign laws relating to our activities in other countries, such as the United Kingdom Bribery Act of 2010. Additionally, our business must
be conducted in compliance with applicable economic and trade sanctions laws and regulations, such as those administered and enforced by the U.S.
Department of Treasury’s Office of Foreign Assets Control, the U.S. Department of State, the U.S. Department of Commerce, the United Nations Security
Council and other relevant sanctions authorities. These laws generally prohibit, unless authorized by the relevant authority or otherwise exempt from the
regulations, the conduct of business with persons, countries, regions, and governments that are targeted by “sanctions,” including but not limited to persons
listed on the United States Department of Commerce’s List of Denied Persons and the United States Department of Treasury’s Specially Designated Nationals
and Blocked Persons List, and the areas subject to trade embargoes by the United States (currently, Cuba, Iran, Syria, North Korea, and the Crimea region of
Ukraine). Our global operations expose us to the risk of violating, or being accused of violating, these laws and regulations. Failure to comply may subject us
to reputational harm, claims or significant financial and/or other penalties in the United States and/or foreign countries that could materially and adversely
impact our operations or financial condition, including criminal fines, imprisonment, civil fines, disgorgement of profits, injunctions and debarment from
government contracts, as well as other remedial measures. Investigations of alleged violations can be expensive and disruptive.
These risks have become increasingly prevalent as we have expanded our sales into countries that are generally recognized as having a higher risk of corruption
and sanctions risks. As a result of the crisis in Ukraine both the United States and the European Union have implemented sanctions against certain Russian
individuals and entities. While at this time we no longer do business in Russia, our previous business there could expose us to risks that could adversely affect
our business, financial condition, results of operations, cash flows or the market price of our securities, including tariffs, economic sanctions and import-export
restrictions.
Violations of complex foreign and United States laws and regulations could result in fines and penalties, criminal sanctions against us, our officers or our
employees, prohibitions on the conduct of our business and on our ability to offer our products and services in one or more countries, and could also materially
affect our brand, our international growth efforts, our ability to attract and retain employees, our business and our operating results. Even if we implement
policies or procedures designed to ensure compliance with these laws and regulations, there can be no assurance that our distribution partners, our employees,
contractors or agents will not violate our policies and subject us to potential claims or penalties.
Our business in China subjects us to unique commercial, operational, competitive and regulatory risks.
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Weakening economic conditions in China, our dependence on local distributors and other third parties to commercialize our products in China, and local
competition and trade tensions between the United States and China (including recent U.S. tariffs imposed or threatened to be imposed on China and any
potential retaliatory actions taken by China), among other factors, have in the past resulted, and may again result, in difficulty generating revenue for sales of
our products in China. In February 2025, the United States increased tariffs on goods imported into the United States from China by 10%, and China responded
by imposing a 15% tariff on coal and liquified natural gas products and a 10% tariff on crude oil, agricultural machinery and certain automobiles. If
maintained, the newly announced tariffs and the potential escalation of trade disputes could directly impact our Chinese operations and sales and indirectly
impact our business by restricting or otherwise adversely affecting the operations of our distributors, suppliers and other third parties. For example, in February
2025, China’s Ministry of Commerce (MOFCOM) added Illumina, Inc., the largest sequencer manufacturer, to MOFCOM’s Unreliable Entity List, potentially
in response to tariffs imposed by the United States. In connection with this designation, MOFCOM may impose restrictions or prohibitions on Illumina’s
China-related import or export activities, investments in China, relevant personnel or transportation entering China, work permits, stay or residence status, fines
or other penalties. Our Chromium and Visium products are often utilized with Illumina sequencers by researchers conducting single cell or spatial experiments.
As a result of Illumina’s designation by MOFCOM as an “unreliable entity,” it may now be difficult or impossible for certain users or potential users of our
products in China to access or utilize Illumina’s products, including in connection with planned or potential Chromium or Visium experiments, and our
business in China may suffer as a result. If China were to expand the Unreliable Entity List to include other life sciences companies, including 10x, our
business in China, which represented approximately ten percent our total revenue in 2024, could be materially impacted or eliminated.
Additionally, we believe that in the past certain of our distributors in China held excess inventory of certain of our products, in part due to fluctuations in
customer purchasing patterns in China due to COVID-19, which we believe resulted in lower than anticipated sales of our products to our distributors in China
in 2023 as such distributors sold off such excess inventory. Excess inventory held by our distributors, in China or elsewhere, may negatively impact our
revenues in the future.
Our ability to sell our products in China may be negatively impacted by evolving laws and regulations in the U.S. and China. Certain risks and uncertainties of
doing business in China are within the control of the Chinese government, and Chinese law regulates the scope of our investments and business conducted
within China. The Chinese government requires compliance with significant technical and other regulatory requirements and may adopt new regulations that
may impact entities operating in China, including us, our distributors, suppliers and other third parties, potentially with little advance notice, which may
directly or indirectly impact our sales and operations in China. These actions may increase the cost of doing business in China or limit how we may do business
in China, which could materially and adversely affect our business.
In addition, we have suppliers, employees and manufacturing operations in Taiwan. As a result, our business could be materially and negatively impacted by
adverse changes in China-Taiwan relations. Accordingly, further deterioration in military, political and economic relations between China and Taiwan, as well
as the ongoing geopolitical and economic uncertainty between the U.S. and China and other geopolitical risks with respect to China and Taiwan, may cause
disruptions in our ability to source products or materials from or to China and Taiwan, which may, directly or indirectly, harm our business.
We and our customers are dependent on single source and sole source suppliers for some of the equipment, components and materials used in our products
and in conjunction with our products and the loss of any of these suppliers could harm our business.
We do not have long-term contracts with our suppliers for many of the services, equipment, materials and components we use for the manufacture and delivery
of our products. We also rely on single suppliers for certain equipment, materials and components. In many cases we do not have long term contracts with these
suppliers, and even in the cases where we do, some such contracts include significant qualifications that would make it extremely difficult for us to force the
supplier to provide us with their services, equipment, materials or components should they choose not to do so. We are therefore subject to the risk that these
third-party suppliers will not be able or willing to continue to provide us with equipment, materials and components that meet our needs, specifications, quality
standards and delivery schedules. Factors that could impact our suppliers’ willingness and ability to continue to provide us with the required equipment,
materials and components include shortages, alternative priorities, logistics, tariffs or other trade restrictions impacting our suppliers, shipping or other
distribution difficulties, disruption at or affecting our suppliers’ facilities, such as difficulties hiring and retaining adequate staffing, work stoppages or natural
disasters, infectious disease, epidemics or pandemics, adverse weather or other conditions that affect their supply, the financial condition of our suppliers,
disagreements, disputes or deterioration in our relationships with these suppliers or the decision by such suppliers to introduce products that compete directly
with our solutions. If we are not able to obtain equipment, materials and components that meet our needs, specifications, quality standards and delivery
schedule on satisfactory terms, our business will be harmed. Any increase in equipment, material and component costs or decrease in availability could reduce
our sales, harm our gross margins or prevent us from timely delivering our products to our customers.
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For example, we depend on a limited number of suppliers for enzymes and amplification mixes used in our consumables. In some cases, these manufacturers
are the sole source of certain necessary enzymes and reagents. We do not have long-term contracts with many of these sole source suppliers. Lead times for
some of these components can be several months or more and in the past have been, and in the future could be, extended due to supply chain disruptions, labor
shortages or other factors. In the event that demand increases, a manufacturing ‘lot’ does not meet our specifications, we fail to forecast and place purchase
orders sufficiently in advance or other issues surface in our supply chain, a material shortage may occur. Some of the components and formulations are
proprietary to our vendors, thereby making second sourcing and development of a replacement difficult. Furthermore, such vendors may have intellectual
property rights that could prevent us from sourcing such reagents from other vendors. Some vendors could choose to use their enzymes, amplification mixes or
other components to create products that directly compete with our consumables and end our current supplier-customer relationship. If enzymes and reagents
become unavailable from our current suppliers and we are unable to find acceptable substitutes for these suppliers, we may be required to produce them
internally or change our product designs.
While we make the majority of our equipment in-house, we have not qualified secondary sources for all equipment, materials or components that we source
through a single supplier and qualification of a secondary supplier may not prevent future supply issues. Labor shortages, logistics, shipping or other
distribution operations difficulties or disruption in the supply of equipment, materials or components could impair our ability to sell our products and meet
customer demand, and also could delay the launch of new products or new versions of existing products, any of which could harm our business and results of
operations. If we were to have to change suppliers, the new supplier may not be able to provide us equipment, materials or components in a timely manner and
in adequate quantities that are consistent with our quality standards and on satisfactory pricing terms. In addition, alternative sources of supply may not be
available for equipment or materials.
While we have taken steps to mitigate potential supply chain and transportation infrastructure system issues, the impact of supply chain disruptions, logistics,
shipping and other distribution disruptions, labor shortages or other factors may exacerbate the risks described in this risk factor and could cause certain of our
suppliers to reduce their ability to meet our or our customers' needs, be unable to operate temporarily or even go out of business permanently. The realization of
any of these risks could prevent us from producing, selling or delivering our products, reduce our sales and harm our gross margins or permanently cause a
change in one or more of our products that may not be accepted by our customers or cause us to eliminate that product altogether. In addition, our suppliers or
customers may face difficulties in procuring or delivering, or in some cases may be unable to procure or deliver, the equipment, materials or components from
their own suppliers necessary to supply us with products, equipment, components or materials or conduct experiments using our solutions. For example:
•
tariffs, trade disputes and other trade restrictions could have a material impact on the ability of suppliers to meet our or our customers’ needs;
•
competition for shipping and air transport in the past impacted, and in the future may impact, our ability to timely deliver products to our customers;
•
energy shortages and other issues in the past impacted, and in the future may impact, factory production of upstream components utilized by us or our
suppliers;
•
shortages of non-10x sequencing consumables in the past impacted, and in the future may impact, the workflows of our customers and their ability to
complete their experiments;
•
plastic component shortages, including of pipette tips utilized by our customers to complete their experiments, in the past impacted, and in the future
may impact, the availability of plastic components used by us and our customers in connection with our products;
•
shortages of certain chemicals, oils and beads utilized in our microfluidic chips in the past impacted, and in the future may impact, our ability to carry
a buffer of inventory to safeguard against continuous significant shortages of such materials;
•
semiconductor chip shortages in the past impacted, and in the future may impact, the availability of semiconductor chips utilized in our instruments
and in the manufacture of certain of our products; and
•
the storage and distribution of vaccines in the past impacted, and in the future may impact, the availability of cold storage for components and
materials used by us and our customers in connection with our products.
Certain disruptions in supply of, and changes in the competitive environment for, raw materials integral to the manufacturing of our products may
adversely affect our profitability.
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We use a broad range of materials and supplies, including metals, chemicals and electronic components, in our products. A significant disruption in the supply
of materials could decrease production and shipping levels, materially increase our operating costs and materially adversely affect our profit margins. Shortages
of materials or interruptions in production and transportation systems, labor strikes, work stoppages, infectious disease, epidemics or pandemics, geopolitical
issues (including tariffs, trade disputes and other trade restrictions), conflict, war, civil unrest, acts of terrorism or other interruptions to or difficulties in the
employment of labor or transportation that adversely impact equipment, materials and components we require for the production of our products, may
adversely affect our ability to maintain production of our products and generate revenue. In addition, a significant prolonged increase in inflation could
negatively impact the cost of materials and components. Even if in some cases we are able to pass some or all such cost increases to customers by increasing
the selling prices of our products, higher product prices may also result in a reduction in sales volumes.
Unforeseen end-of-life or unavailability of certain components, such as enzymes, could force us to purchase materials on the spot market at higher cost or
require us to modify our product specifications to accommodate replacement components which could be costly or delay product shipments. If we were to
experience a significant disruption in the supply of, or prolonged shortage of, critical components from any of our suppliers and could not procure the
components from other sources, we would be unable to manufacture our products and to ship such products to our customers in a timely fashion, which would
adversely affect our sales, margins and customer relations.
Our limited operating history and fluctuations in revenue make it difficult to evaluate our future prospects and the risks and challenges we may encounter.
We launched our first product in mid-2015 and have historically experienced revenue growth, though our revenue decreased year-over-year in 2024. In
addition, we operate in highly competitive markets characterized by rapid technological advances and our business has, and we expect it to continue, to evolve
over time to remain competitive. Our limited operating history, evolving business and fluctuations in revenue make it difficult to evaluate our future prospects
and the risks and challenges we may encounter and may increase the risk that we will not continue to grow at or near historical rates.
If we fail to address the risks and difficulties that we face, including those described elsewhere in this “Risk Factors” section, our business, financial condition
and results of operations could be adversely affected. We have encountered in the past, and will encounter in the future, risks and uncertainties frequently
experienced by companies with limited operating histories in rapidly changing industries. If our assumptions regarding these risks and uncertainties, which we
use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our results of operations could differ materially
from our expectations and our business, financial condition and results of operations could be materially and adversely affected.
If our existing and new products or new versions of existing products fail to achieve and sustain sufficient scientific acceptance, we will not generate
expected revenue and our prospects may be harmed.
The life sciences scientific community is comprised in part of a small number of early adopters and key opinion leaders who significantly influence the rest of
the community. The success of life sciences products is due, in large part, to acceptance by the scientific community and their adoption of certain products as
best practice in the applicable field of research. The current system of academic and scientific research views publishing in a peer-reviewed journal as a
measure of success. In such journal publications, the researchers will describe not only their discoveries but also the methods and typically the products used to
fuel such discoveries. We believe mentions in peer-reviewed journal publications is a good barometer for the general acceptance of our products as best
practices. The number of times our products were mentioned in peer-reviewed publications has increased significantly since launching our first product in
2015. During this time, our revenue has also increased significantly. Ensuring that early adopters and key opinion leaders publish research involving the use of
our products is important to ensuring our products gain widespread acceptance and market growth. Continuing to maintain good relationships with such key
opinion leaders is vital to growing our market. Our products may not continue to be mentioned in peer-reviewed articles with frequency. Any new products or
new versions of existing products that we introduce in the future may not be mentioned in peer-reviewed articles. If too few researchers describe the use of our
products, too many researchers shift to a competing product and publish research outlining their use of that product or too many researchers negatively describe
the use or usability of our products in publications, our existing and potential customers may be driven away from our products, which could harm our
operating results.
If we do not sustain or successfully manage our growth and anticipated growth, our business and prospects will be harmed.
We have historically experienced rapid organizational growth and we expect that future growth will place significant strains on our management, operational
and manufacturing systems and processes, financial systems and internal controls and other aspects of our business. For example, we consummated two
acquisitions in each of 2018 and 2020, one in 2021 and another in 2023, and we intend to continue to make investments that meet management’s criteria to
expand or add key technologies that we believe
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will facilitate the commercialization of new products or new versions of existing products in the future. We intend to launch additional new products and new
versions of existing products in the near future. Further development and commercialization of our current and future products are key elements of our strategy.
Developing and launching new products and innovating and improving our existing products have required us to hire and retain additional scientific, sales and
marketing, software, manufacturing, distribution and quality assurance personnel. As a result, we have experienced rapid headcount growth from 110
employees as of December 31, 2015 to 1,306 employees as of December 31, 2024. As we have grown, our employees have become more geographically
dispersed. We may face challenges integrating, developing and motivating our employee base, including as a result of certain of our employees working
remotely. In addition, certain members of our management have not previously worked together for an extended period of time, do not have experience
managing a public company or do not have experience managing a global business, which may affect how they manage our business. To effectively manage
our business, we must continue to improve our systems and processes and continue to effectively expand, train and manage our personnel. As our organization
continues to evolve, we may find it increasingly difficult to maintain the benefits of our corporate culture, including our ability to quickly develop and launch
new and innovative products or versions. If we do not successfully manage our anticipated organizational growth, our business, results of operations and
growth prospects will be harmed.
We have incurred significant losses since inception, we expect to incur losses in the future and we may not be able to generate sufficient revenue to achieve
and maintain cash flows from operating activities in excess of our capital investment requirements or profitability.
We have incurred significant losses since we were formed in 2012 and expect to incur losses in the future. We incurred net losses of $182.6 million and $255.1
million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $1.5 billion. We expect that
our losses will continue in the near term as we continue to invest significantly in research and development and the commercialization of both new products
and improved versions of existing products. We also expect that our operating expenses will continue to increase as we grow our business. To date, we have
financed our operations principally from equity offerings, revenue from sales of our products and the incurrence of indebtedness. There can be no assurance
that our revenue and gross profit will increase sufficiently such that our net losses decline, or that we attain cash flows from operating activities in excess of our
capital investment requirements on a sustained basis or attain profitability, in the future. Further, our limited operating history and fluctuations in revenue over
the last several years make it difficult to effectively plan for and model future revenue and operating expenses. Our ability to achieve or sustain profitability is
based on numerous factors, many of which are beyond our control, including general economic, industry and market conditions, customer purchasing
decisions, the impact of market acceptance of our products, future product development, our market penetration and margins and current and future litigation.
Additionally, inflationary pressures could adversely impact our financial results. Our operating costs have increased, and may continue to increase, due to the
recent growth in inflation, which may be exacerbated by tariffs imposed by the United States which are currently, or in the future, under consideration,
proposed or enacted. We may not fully offset these cost increases by raising prices for our instruments and consumables, which could result in downward
pressure on our margins. Further, while we anticipate lowering prices on certain of our products in 2025, our customers may choose to reduce their business
with us if in the future we increase our pricing. Additionally, changes in our product mix may negatively affect our gross margins. We may never be able to
generate sufficient revenue to achieve or sustain cash flows from operating activities in excess of our capital investment requirements or profitability and our
historical growth should not be considered indicative of our future performance. Our failure to achieve, return to or maintain growth, cash flows from operating
activities in excess of our capital investment requirements or profitability could negatively impact the value of our Class A common stock.
Our results of operations could be materially adversely affected by fluctuations in foreign currency exchange rates.
Historically, most of our revenue has been denominated in U.S. dollars, although we have sold our products and services in local currency outside of the United
States, principally the euro. For the years ended December 31, 2024 and 2023, approximately 27% and 23%, respectively, of our sales were denominated in
currencies other than U.S. dollars. Our expenses are generally denominated in the currencies in which our operations are located. As our operations in countries
outside of the United States grow, our results of operations and cash flows will become increasingly subject to fluctuations due to changes in foreign currency
exchange rates, which could harm our business in the future. During periods of economic crises, foreign currencies may be devalued significantly against the
U.S. dollar, reducing our margins. In addition, because we conduct business in currencies other than U.S. dollars, but report our results of operations in U.S.
dollars, we also face remeasurement exposure to fluctuations in currency exchange rates, which could hinder our ability to predict our future results and
earnings and could materially impact revenue and our results of operations. We do not currently maintain a program to hedge foreign currency exposures and
even if in the future we implement a program to hedge such exposures, we may not be successful in mitigating the effects of fluctuations in foreign currency
exchange rates.
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Due to our exposure to currencies other than U.S. dollars, an increase in the value of certain currencies against the U.S. dollar could increase our costs by
increasing labor and other costs that are denominated in local currency. There can be no assurance that any future hedging activities which are designed to
partially offset this impact, will be successful. In addition, our currency hedging activities, if any, in the future, could themselves be subject to risk. These could
include risks related to counterparty performance under future hedging contracts and risks related to currency fluctuations.
We depend on our key personnel and other highly qualified personnel, and if we are unable to recruit, train, retain and ensure the health and safety of our
personnel, we may not achieve our goals.
Our future success depends on our ability to recruit, train, retain and motivate key personnel, including our senior management, research and development,
manufacturing and sales, customer service and marketing personnel. In particular, Dr. Saxonov, our Chief Executive Officer and one of our co-founders, and
Dr. Hindson, our Chief Scientific Officer, President and one of our co-founders, are critical to our vision, strategic direction, culture and products. Competition
for qualified personnel is intense, particularly in the San Francisco Bay Area. As we grow, we may continue to make changes to our management team, which
could make it difficult to execute on our business plans and strategies. New hires, including executive hires, often require significant training and, in most
cases, take significant time before they achieve full productivity. Our failure to successfully integrate our personnel into our business could adversely affect our
business. Additionally, some of our employees work remotely and because of the challenges of working remotely, including collaborating with and managing
employees, it may take significant time before our teams can achieve full productivity, if at all, and it may take significantly longer for new hires to achieve full
productivity, if at all.
We do not maintain key person life insurance for any of our employees. Additionally, we have not entered into fixed term contracts with almost any of our
employees, including Drs. Saxonov and Hindson, and as a result, almost any of our employees could leave our company with little or no prior notice which
could harm our business.
Many of our scientific personnel in the United States are qualified foreign nationals whose ability to live and work in the United States is contingent upon the
continued availability of appropriate visas. We expect to continue to rely on foreign nationals to fill part of our recruiting needs. As a result, changes to United
States immigration policies could restrain the flow of technical and professional talent into the United States and may inhibit our ability to hire qualified
personnel. Additionally, our current or future employees may be negatively affected by delays, disruptions or changes in United States immigration policies.
The current United States administration has made restricting immigration and reforming the work visa process a priority and these efforts may adversely affect
our ability to find qualified personnel.
Our continued success depends, in part, on attracting, retaining and motivating highly trained sales personnel, including individuals with the necessary
scientific background and ability to understand our systems at a technical level to effectively identify and sell to potential new customers. In addition, the
continued development of complementary software tools, such as our analysis tools and visualization software, requires us to compete for highly trained
software engineers in the San Francisco Bay Area and elsewhere and for highly trained customer service personnel globally. We also compete for
computational biologists and qualified scientific personnel with other life sciences companies, academic institutions and research institutions. This competition
affects both our ability to retain key employees and hire new ones. In August 2022 we conducted a reduction in force in order to decrease costs and maintain a
streamlined organization to support the business and in December 2023, we committed to a restructuring plan related to the closure of one of our research and
development facilities. In order to be successful and build our framework for future growth, we must continue to execute and deliver on our initiatives with
fewer employees and losses of intellectual capital. We must also attract, retain, train and motivate key employees including highly qualified management,
scientific, manufacturing, sales, marketing and other personnel who are critical to our business. Additionally, we compete with both companies that may have
greater financial resources than we do and early stage companies that promise short-term growth opportunities. We may not be able to attract, retain, train or
motivate qualified employees in the future and our inability to do so could materially harm our operating results and prospects of success.
If our facilities or our third-party manufacturers’ facilities become unavailable or inoperable, our research and development programs could be adversely
impacted and manufacturing of our instruments and consumables could be interrupted.
The manufacturing process for our instruments takes place at our third-party manufacturers' facilities. Many of our consumables are manufactured at our
facilities in Pleasanton, California, Singapore, Taiwan or other of our facilities using proprietary equipment. Certain raw materials, such as oligonucleotides and
enzymes, are custom manufactured by outside partners. We periodically review the manufacturing capacity of our consumables and we expect to continue to
manufacture an increasing amount of consumables in-house. Our Pleasanton facilities also house the majority of our research and development and quality
assurance teams. Our Chromium, Visium CytAssist and Xenium instruments are manufactured by our partners at their facilities, while we perform optical and
final assembly, instrument integration and testing of our Xenium instrument in-house. The facilities
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and the equipment we and our third-party manufacturers use to manufacture our instruments and consumables and that we use in our research and development
programs would be costly to replace and could require substantial lead times to repair or replace.
Our facilities are vulnerable to natural disasters and catastrophic events. For example, our Pleasanton facilities are located near earthquake fault zones and are
vulnerable to damage from earthquakes. Our facilities are vulnerable to other types of disasters, including fires, floods, infectious disease, epidemics or
pandemics, power loss, conflict, war, civil unrest, communications failures and similar events. If any disaster or catastrophic event were to occur, our ability to
operate our business would be seriously, or potentially completely, impaired. If our facilities or any of our third-party manufacturers’ facilities become
unavailable or understaffed for any reason, we cannot provide assurances that we will be able to secure alternative manufacturing facilities with the necessary
capabilities and equipment on acceptable terms, if at all. Additionally, potential issues with our ability to hire staff or the health and safety of our manufacturing
staff could decrease the effectiveness of our manufacturing operations and adversely affect our business and operating results. The inability to manufacture our
instruments and/or consumables, combined with potential limited inventory of manufactured instruments and consumables, may result in the loss of customers
or harm our reputation, and we may be unable to reestablish relationships with those customers in the future. Because certain of our consumables and the raw
materials we use to manufacture consumables are perishable and must be kept in temperature controlled storage, the loss of power to our facilities, mechanical
or other issues with our storage facilities or other events that impact our temperature controlled storage could result in the loss of some or all of such
consumables and raw materials and we may not be able to replace them without disruption to our customers or at all.
A substantial percentage of our revenue comes from sales to academic institutions, whose research often requires long uninterrupted studies performed on a
consistent basis over time; thus interruptions in our ability to supply consumables could be particularly damaging to these studies and our reputation. In
addition, the budgetary planning and approval process for academic research programs can be lengthy and begin well in advance of the planned purchase of our
instrument and/or consumables. If our products become unavailable during the planning process, researchers may use alternative products.
If our research and development programs were disrupted by a disaster or catastrophe or for other reasons, the launch of new products or new versions of
existing products and the timing of improvements to existing products could be significantly delayed and could adversely impact our ability to compete with
other available products and solutions. If our or our third-party manufacturers’ capabilities are impaired, we may not be able to manufacture and ship our
products in a timely manner, which would adversely impact our business. Although we possess insurance for damage to our property and the disruption of our
business, this insurance may not be sufficient to cover all of our potential losses, may not cover every potential type of loss event (including earthquakes as we
do not carry earthquake insurance coverage) and may not continue to be available to us on acceptable terms, or at all.
We rely exclusively on commercial carriers to transport our products, including perishable consumables, to our customers in a timely and cost-efficient
manner and if delivery of our products is disrupted, our business will be harmed.
Our business depends on our ability to quickly and reliably deliver our products and in particular, our consumables, to our customers. The majority of our
consumables are perishable and must be kept below certain temperatures. As such, we ship our refrigerated consumables on dry ice and only ship such
consumables on certain days of the week to reach customers on a timely basis. Disruptions in the delivery of our products, whether due to hiring difficulties or
labor disruptions, fuel shortages, dry ice shortages, bad weather, natural disasters, infectious disease, conflict, war, civil unrest, epidemics or pandemics,
terrorist acts or threats or for other reasons could result in delivery delays or our customers receiving consumables that are not fit for usage, and if used, could
result in inaccurate results or ruined experiments. For example, certain of our customers were negatively impacted by a process breakdown in our logistics
cold-chain that resulted in product spoilage which delayed purchases by affected customers, negatively impacting our revenue in 2022. While we work with
customers to replace any consumables impacted by delivery disruptions, our reputation and our business may be adversely impacted if customers receive
consumables that are not fit for usage. In addition, if we are unable to continue to obtain delivery services on commercially reasonable terms, our operating
results may be adversely affected.
In addition, in the past both shipping and air transport have been negatively impacted in terms of speed and capacity. If we cannot supply our products to our
customers in a timely manner, our customers may delay or cancel their orders. Furthermore, even if we have inventory, if we do not have adequate inventory of
products in the geographic regions in which they are ordered, we may not be able to deliver products to our customers in a timely manner and customers may
delay or cancel their orders. Should we or our commercial carriers encounter difficulties in delivering our instruments or consumables to customers, it could
adversely impact our ability to recognize revenue for those products and accordingly adversely affect our financial results for that period and such impact could
be particularly acute at the end of any financial quarter.
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Costs or other factors related to our facilities and real estate could adversely impact our business.
We may decide to reduce our real estate commitments but be unable to do so. Our real estate leases, which generally obligate us for long periods, subject us to
potential financial risk. Our real estate strategy may have committed, and may in the future commit, us to leases or other agreements or arrangements requiring
us to incur costs for facilities we later determine are unnecessary for our business. While we have the right to terminate or sublease some of our leases under
specified conditions, we may not be able to terminate or sublease certain of our leases if or when we would like to do so or we may incur substantial costs to
terminate or sublease such leases. In some cases, we have been unsuccessful, and in the future again may be unsuccessful, in terminating or subleasing certain
of our leases even if we have determined the facilities subject to these leases are unnecessary for our business and we have incurred, and may in the future
incur, costs for such facilities despite not fully utilizing them. If we decide or are required to permanently vacate facilities we lease, we are typically required to
continue to perform obligations under the applicable leases, which generally include, among other obligations, paying rent and certain expenses for the balance
of the lease term, and the performance of any of these obligations may be significant. When we assign leases or sublease to third parties, or if we vacate
facilities we lease, we can remain liable on the lease obligations for the balance of the term and we could be contingently liable if the assignee does not perform
their obligations to us or third parties. Additionally, if we may decide to sublease certain of our facilities to third parties, we may be unable to find suitable
sublease arrangements for leased facilities that we do not wish to occupy ourselves.
In the past we have expanded, and in the future we may expand, our facilities in the locations where we operate or may operate in the future. For example, in
2023 we completed construction of a new facility on land we own located in Pleasanton, California. We believe that maintaining our existing facilities is
necessary to maintain our operations and that, in the future, new facilities may be necessary to support our business. Our ability to maintain our existing
facilities, build out new or existing facilities and open new operating facilities depends on our ability to identify attractive locations, negotiate leases, subleases,
real estate purchase agreements or other agreements on acceptable terms, identify and obtain adequate utility and water sources and comply with environmental
regulations, zoning laws and other similar factors. We may not maintain the level of cash flow or access financing opportunities necessary to support our real
estate strategy. Our facilities projects may increase demands on our operational, financial, managerial and administrative resources.
Costs or other factors related to our facilities and real estate ensuing from these and other risks related to our facilities and real estate may adversely impact our
business results and financial condition.
If we fail to offer high-quality customer service, our business and reputation could suffer.
We differentiate ourselves from our competition in part through our commitment to an exceptional customer experience. Accordingly, high-quality customer
service is important for the growth of our business and any failure to maintain such standards of customer service, or a related market perception, could affect
our ability to sell products to existing and prospective customers. Additionally, we believe our customer service team has a positive influence on recurring
consumables revenue. Providing an exceptional customer experience requires significant time and resources from our customer service team, and failure to
manage our customer service organization adequately or impacts on our ability to provide an exceptional customer experience may adversely impact our
business results and financial condition.
Customers utilize our service teams and online content for help with a variety of topics, including how to use our products efficiently, how to integrate our
products into existing workflows, how to determine which of our other products may be needed for a given experiment and how to resolve technical, analysis
and operational issues if and when they arise. As we introduce new products and new versions of existing products, we expect utilization of our customer
service teams to increase. In particular, the introduction of new products or new versions that utilize different workflows or variations on existing workflows
may require additional customer service efforts to ensure customers use such products correctly and efficiently. While we have developed significant resources
for remote training, including an extensive library of online videos, we may need to rely more on these resources for future customer training or we may
experience increased expenses to enhance our online and remote solutions. If our customers do not adopt these resources, we may be required to increase the
staffing of our customer service team, which would increase our costs. Also, as our business scales, we may need to engage third-party customer service
providers, which could increase our costs and negatively impact the quality of the customer experience if such third parties are unable to provide service levels
equivalent to ours.
The number of our customers has grown significantly and such growth, as well as any future growth, will put additional pressure on our customer service
organization. We may be unable to hire qualified staff quickly enough or to the extent necessary to accommodate increases in demand.
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In addition, as we continue to grow our operations and reach a global customer base, we need to be able to provide efficient customer service that meets our
customers’ needs globally at scale. In geographies where we sell through distributors, we rely on those distributors to provide customer service. If these third-
party distributors do not provide a high-quality customer experience, our business operations and reputation may suffer.
Our management uses certain key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate
financial projections and make strategic decisions and such metrics may not accurately reflect all of the aspects of our business needed to make such
evaluations and decisions, in particular as our business continues to grow.
In addition to our consolidated financial results, our management regularly reviews a number of operating and financial metrics to evaluate our business,
measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We believe that these metrics are
representative of our current business; however, these metrics may not accurately reflect all aspects of our business and we anticipate that these metrics may
change or may be substituted for additional or different metrics as our business evolves and as we introduce new products and new versions of existing
products. If our management fails to review other relevant information or change or substitute the key business metrics they review as our business evolves and
we introduce new products or new versions of existing products, their ability to accurately formulate financial projections and make strategic decisions may be
compromised and our business, financial results and future growth prospects may be adversely impacted.
Investments and acquisitions could disrupt our business, cause dilution to our stockholders and otherwise harm our business.
Over the years, we have acquired technologies and associated intellectual property rights across a broad range of emerging areas within biology and life
sciences. We believe we are successfully integrating the technologies we have acquired into our business, but the long-term success of these acquisitions is not
guaranteed. We regularly review investment, acquisition and technology licensing opportunities, and we may invest in or acquire additional real estate or
additional businesses and legal entities to add specialized employees, products or technologies as well as pursue technology licenses or investments in
complementary businesses. Our previous acquisitions and any future transactions could be material to our financial condition and operating results and expose
us to many risks, including:
•
increases in our expenses and reductions in our cash available for operations and other uses;
•
difficulties integrating acquired personnel, technologies and operations into our existing business;
•
failure to realize anticipated benefits or synergies from such a transaction;
•
unanticipated costs of or legal exposure related to complying with existing and future laws and regulations, including land use, antitrust, environmental
or hazardous waste-related laws and regulations;
•
disruption in our relationships with customers, distributors, manufacturers, suppliers or other third parties as a result of such a transaction;
•
unanticipated liabilities related to acquired real estate or companies, including liabilities related to acquired intellectual property or litigation relating
thereto;
•
diversion of management time and focus from operating our business;
•
possible write-offs or impairment charges relating to acquired businesses; and
•
potential higher taxes if our tax positions relating to certain acquisitions were challenged.
Foreign acquisitions, such as our acquisitions of Spatial Transcriptomics Holdings AB, CartaNA AB, Tetramer Shop ApS and Centrillion Technologies Taiwan
Co. Ltd., involve unique risks in addition to those mentioned above, including those related to integration of operations across different cultures and languages,
currency risks and the particular economic, political and regulatory risks associated with specific countries. Even if we identify a strategic transaction that we
wish to pursue, we may be prohibited from consummating such transaction due to the terms of future indebtedness we may incur or due to circumstances
outside our control including regulatory approval considerations.
Future investments, acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent
liabilities or amortization expenses or write-offs of goodwill, any of which could harm our financial condition. We cannot predict the number, timing or size of
future investments, acquisitions or dispositions or the effect that any such transactions might have on our operating results.
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Seasonality may cause fluctuations in our revenue and results of operations.
We operate on a December 31st year end and believe that there are significant seasonal factors which may cause sales of our products to vary on a quarterly or
yearly basis and increase the magnitude of quarterly or annual fluctuations in our operating results. We believe that this seasonality results from a number of
factors, including the procurement and budgeting cycles of many of our customers, especially government- or grant-funded customers, whose cycles often
coincide with government fiscal year ends. Furthermore, the academic budgetary cycle similarly requires grantees to ‘use or lose’ their grant funding, which
seems to be tied disproportionately to the end of the calendar year, historically driving sales higher during the fourth quarter. Similarly, our biopharmaceutical
customers typically have calendar year fiscal years which also result in a disproportionate amount of their purchasing activity occurring during our fourth
quarter. Our international customers also have different purchasing patterns due to procurement or budgeting cycles, holidays or other factors which may result
in a disproportionate amount of their purchasing activity occurring in specific periods. These factors have contributed, and may contribute in the future, to
substantial fluctuations in our quarterly operating results. Because of these fluctuations, it is possible that in some quarters our operating results will fall below
the expectations of securities analysts or investors. If that happens, the market price of our Class A common stock would likely decrease. These fluctuations,
among other factors, also mean that our operating results in any particular period may not be relied upon as an indication of future performance. Seasonal or
cyclical variations in our sales have in the past, and may in the future, become more or less pronounced over time, and have in the past materially affected, and
may in the future materially affect, our business, financial condition, results of operations and prospects. Other fluctuations, including spikes in customer
demand for our products in demand for our products, may make it harder for us to distribute our products in a timely manner.
Our reliance on distributors for sales of our products in certain geographies outside of the United States could limit or prevent us from selling our products
and impact our revenue.
We sell our products through third-party distributors in certain regions of Asia, Europe, Oceania, Central America, South America, the Middle East and Africa.
We intend to continue to grow our business internationally and to do so we must attract additional distributors and retain existing distributors to maximize the
commercial opportunity for our products. There is no guarantee that we will be successful in attracting or retaining desirable sales and distribution partners, that
such partners will agree to our terms and conditions of sale or that we will be able to enter into such arrangements on favorable terms. Additionally, excess
inventory held by our distributors may reduce or delay purchases by such distributors. For example, we believe that in the past certain of our distributors in
China held excess inventory of certain of our products, in part due to fluctuations in customer purchasing patterns in China due to COVID-19, which we
believe resulted in lower than anticipated sales of our products to our distributors in China in 2023 as such distributors sold off such excess inventory.
Our distribution relationships are non-exclusive. As such, our distributors may not commit the necessary resources to market our products to the level of our
expectations or may choose to favor marketing the products of our competitors. If current or future distributors do not or are unable to perform adequately or if
we are unable to enter into effective arrangements with distributors in particular geographic areas, our revenues could be significantly impacted. Additionally,
our business, financial condition and results of operations could be materially and adversely affected if we are unsuccessful in selling directly to customers who
previously purchased our products from third-party distributors or if our efforts in certain regions to sell directly to certain customers previously served by our
distributors negatively impacts our relationships with and the performance of our distributors in such regions or elsewhere.
Uncertain economic or social conditions may adversely impact demand for our products or cause our customers, vendors and suppliers to suffer financial
hardship, which could adversely impact our business.
Our business could be negatively impacted by reduced demand for our products related to one or more significant local, regional or global economic or social
disruptions. These disruptions have included and may in the future include a slow-down, recession or inflationary pressures in the general economy, reduced
market growth rates, tighter credit markets for us, our suppliers, vendors or customers, a significant shift in government policies (including funding for
scientific research or changes in laws or policies governing the terms of foreign trade, in particular increased trade restrictions, tariffs or taxes on imports or
exports), significant social unrest, or the deterioration of economic relations between countries (such as the U.S. and China) or regions. Additionally, these and
other economic conditions may cause our suppliers, distributors, contractors or other third-party suppliers or manufacturers to suffer financial or operational
difficulties that they cannot overcome, resulting in their inability to provide us with the materials and services we need, in which case our business and results
of operations could be adversely affected.
Inflationary pressures, and changes in foreign currency exchange rates, interest rates and market value of our investments, including marketable
securities, could have a significant effect on results.
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We, our suppliers and our customers are exposed to inflationary pressure and a variety of market risks, including the effects of increases in energy and raw
material prices, foreign currency exchange rates and interest rates. Such risks are inherently unpredictable and difficult to mitigate and may be exacerbated by
tariffs imposed by the United States which are currently, or in the future, under consideration, proposed or enacted. As a result, significant increases in energy
and raw material prices, foreign currency exchange rates or interest rates as well as increased material, freight, logistics, and similar costs could have an
adverse effect on our financial condition or results of operations. For example, interest rates have increased significantly as central banks in developed
countries attempt to subdue inflation while government deficits and debt remain at high levels in many global markets. Higher government deficits and debt,
tighter monetary policy and potentially higher interest rates may drive a higher cost of capital for our business.
AI and machine learning technologies may expose us to significant risks, including development and deployment challenges, regulatory uncertainties,
competition for investor research and potential hard-to-predict changes to our business, which could adversely affect our business, results of operations
and financial condition.
We use artificial intelligence (“AI”), machine learning and automated decision-making technologies (collectively, “AI Technologies”) in our business and are
making targeted investments in this area.
Increased investment may be required in the future to continuously improve our use of AI Technologies. As with many technological innovations, there are
significant risks involved in developing, maintaining and deploying these technologies and there can be no assurance that the usage of or our investments in
such technologies will always enhance our products or services or be beneficial to our business, including our efficiency or profitability.
Further, the regulatory framework for AI Technologies is rapidly evolving as many federal, state and foreign government bodies and agencies have introduced
or are currently considering additional laws and regulations. Additionally, existing laws and regulations may be interpreted in ways that could affect the
operation of our AI Technologies, or could be rescinded or amended as new administrations take differing approaches to evolving AI Technologies. As a result,
implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet completely determine the
impact future laws, regulations, standards or market perception of their requirements may have on our business and may not always be able to anticipate how to
respond to these laws or regulations.
Additionally, in recent years both public and private investment in AI Technologies has increased substantially, and because investment markets and investor
attention are finite, focus of the investment community on opportunities related to AI Technologies may divert investor attention and resources away from us
and our industry. Further, in the future AI Technologies may meaningfully change fundamental aspects of our business including, for example, our cost
structure, how we sell our products or how customers or potential customers conduct their experiments. The ways in which AI Technologies could affect us are
uncertain and difficult to predict at present and in the future may significantly impact our business, results of operations and financial condition.
If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate
financial statements or comply with applicable regulations could be impaired.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, as amended (“SOX”), and the rules
and regulations of the applicable listing standards of the Nasdaq Global Select Market (“Nasdaq”). We expect that the requirements of these rules and
regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly, and
place significant strain on our personnel, systems and resources.
SOX requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are
continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the
reports that we file with the SEC is accurately recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that
information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. We
are also continuing to improve our internal control over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and
procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources including
accounting-related costs and significant management oversight.
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Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in
our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or
any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations
and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial
reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation
reports regarding the effectiveness of our internal control over financial reporting that we are required to include in our periodic reports. Ineffective disclosure
controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other
information, which would likely have a negative effect on the trading price of our Class A common stock. In addition, if we are unable to continue to meet
these requirements, we may not be able to remain listed on Nasdaq.
We cannot provide any assurance that significant deficiencies or material weaknesses in our internal controls over financial reporting will not be identified in
the future. If we fail to remediate any significant deficiencies or material weaknesses that may be identified in the future or encounter problems or delays in the
implementation of internal controls over financial reporting, we may be unable to conclude that our internal controls over financial reporting are effective. Any
failure to develop or maintain effective controls or any difficulties encountered in our implementation of our internal controls over financial reporting could
result in material misstatements that are not prevented or detected on a timely basis, which could potentially subject us to sanctions or investigations by the
SEC or other regulatory authorities.
We are required to have an audit of the effectiveness of our internal control over financial reporting. Even if our management concludes that our internal
control over financial reporting is effective, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied
with the level at which our internal control over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls
and internal control over financial reporting could materially and adversely affect our business, results of operations and financial condition and could cause a
decline in the trading price of our Class A common stock.
The illegal distribution and sale by third parties of stolen, counterfeit or unfit versions of our products could have a negative impact on our reputation and
business.
Third parties might illegally distribute and sell stolen, counterfeit or unfit versions of our products, which do not meet our rigorous manufacturing, distribution
and quality standards. As we expand our business internationally, we expect to encounter counterfeit versions of our products, including our consumables. A
researcher who receives and uses counterfeit consumables could obtain erroneous results, experience failed experiments or potentially damage his or her
instrument. Our reputation and business could suffer harm as a result of counterfeit products sold under our brand name. Inventory that is stolen from
warehouses, plants or while in-transit, and that is subsequently improperly stored and sold through unauthorized channels, could adversely impact our
customers’ experiments, our reputation and our business.
The investment of marketable securities is subject to risks which may cause losses and affect the liquidity of these investments.
From time to time, we have and may invest portions of excess cash and cash equivalents in marketable securities. We have and may invest in liquid,
investment-grade marketable securities such as corporate bonds, commercial paper, asset-backed securities, U.S. treasury securities, money market funds, and
other cash equivalents. We currently, and expect to continue, to follow an established investment policy and set of guidelines to monitor and help mitigate our
exposure to liquidity and credit risks which set forth credit quality standards and limit our exposure to any one issuer as well as our maximum exposure to
various asset classes. However, these investments are subject to general credit, liquidity, market and interest rate risks. We may realize losses in the fair value
of these investments, which could include a complete loss of these investments, which would have a negative effect on our consolidated financial statements. In
addition, should our investments cease paying or reduce the amount of interest paid to us, our interest income would decrease. Interest rate fluctuations can
negatively impact the returns on our fixed-income investments.
Indebtedness may impair our financial and operating flexibility.
We may incur indebtedness in the future. The debt instruments governing such indebtedness could contain restrictive provisions. If we incur debt, a portion of
our cash flows would likely be needed to satisfy our debt service obligations. In the event that additional financing is required, we may not be able to raise it on
terms acceptable to us or at all. As a result, we would be more vulnerable to general adverse economic, industry and capital markets conditions in addition to
the risks associated with indebtedness described in this risk factor.
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Risks related to our regulatory environment and taxation
Our products could become subject to more onerous regulation by the U.S. Food and Drug Administration (“FDA”) or other regulatory agencies in the
future, which could increase our costs and delay or prevent commercialization of our products, thereby materially and adversely affecting our business,
financial condition, results of operations and prospects.
We make certain of our products available to customers as research-use-only (“RUO”) products. RUO products are regulated by the FDA as medical devices,
and include in vitro diagnostic products in the laboratory research phase of development that are being shipped or delivered for an investigation that is not
subject to the FDA’s investigational device exemption requirements. Although medical devices are subject to stringent FDA oversight, products that are
intended for RUO and are labeled as RUO are exempt from compliance with most FDA requirements, including premarket clearance or approval,
manufacturing requirements, and others. A product labeled RUO but which is actually intended for clinical diagnostic use may be viewed by the FDA as
adulterated and misbranded under the Federal Food, Drug, and Cosmetic Act (“FDC Act”), and subject to FDA enforcement action. In the EU, under
Regulation (EU) No 2017/746 (“EU IVDR”), RUO products which are intended to be used for research purposes, without any medical objective, are not
regarded as devices for performance evaluation used in diagnostic procedures. More importantly, the EU IVDR expressly provides that products intended for
RUO are excluded from the scope of the Regulation. A material intended for RUO, without any medical purpose or objective, is therefore not considered as an
in vitro diagnostic medical device (“IVD”) and is not subject to compliance with IVD requirements. However, depending on the type of RUO products in
question, requirements to market some products may be tighter under the EU IVDR such as for laboratory developed tests. Depending on the product in
question, other regulations may be applicable to the RUO products. The FDA has indicated that when determining the intended use of a product labeled RUO,
the FDA will consider the totality of the circumstances surrounding distribution and use of the product, including how the product is marketed and to whom.
The FDA and foreign authorities could disagree with our assessment that our products are properly marketed as RUOs, or could conclude that products labeled
as RUO are actually intended for clinical diagnostic use, and could take enforcement action against us, including requiring us to stop distribution of our
products until we are in compliance with applicable regulations, which would reduce our revenue, increase our costs and adversely affect our business,
prospects, results of operations and financial condition. In the event that the FDA or foreign authorities requires us to obtain marketing authorization or
certification of our RUO products in the future, there can be no assurance that these authorities will grant any clearance, approval or certification requested by
us in a timely manner, or at all.
We may also in the future decide to develop products that are intended for clinical or diagnostic uses. In the United States, before we can market a new medical
device, or a new use of, new claim for or significant modification to an existing product, we must first receive either clearance under Section 510(k) of the FDC
Act, or approval of a premarket approval application from the FDA, unless an exemption applies. In the EU, there is currently no premarket government review
of medical devices (including IVDs). However, the EU requires that all IVDs placed on the market in the EU must meet general, safety and performance
requirements of the EU IVDR including the requirement that an IVD must be designed and manufactured in such a way that, during normal conditions of use,
it is suitable for its intended purpose. IVDs must be safe and effective and must not compromise the clinical condition or safety of patients, or the safety and
health of users and – where applicable – other persons, provided that any risks which may be associated with their use constitute acceptable risks when
weighed against the benefits to the patient and are compatible with a high level of protection of health and safety, taking into account the generally
acknowledged state of the art. Compliance with general, safety and performance requirements laid down in Annex I to the EU IVDR is a prerequisite for
European conformity marking (“CE mark”) without which IVDs cannot be marketed or sold in the EU. The EU regulatory landscape concerning IVDs recently
evolved. On May 26, 2022, the EU IVDR became applicable, and repealed and replaced the EU IVDD. Unlike the EU IVDD, the EU IVDR is directly
applicable in all EU member states without the need for member states to implement into national law. This aims at reducing the risk of discrepancies in
interpretation across the different European markets. The EU IVDR may impose increased compliance obligations for us if we decide to market products for
clinical or diagnostic uses and impact our development plans. The EU IVDR does not apply in Great Britain (England, Scotland and Wales) since it came into
effect after the United Kingdom’s departure from the EU, and consequently, the regulatory framework for IVDs in Great Britain continues to be largely based
on the requirements of the EU IVDD as implemented by national law. However under the terms of the Northern Ireland Protocol the EU IVDR does apply in
Northern Ireland. The Medicines and Healthcare products Regulatory Agency (“MHRA”) has confirmed that it will introduce changes to the legislation
applicable in Great Britain, and has stated that it expects the core elements of the new regime to apply from July 2025. Until the final legislation and
accompanying guidance has been published there will remain uncertainty as to the future IVD regulatory requirements in Great Britain. In addition, the process
of obtaining approval or clearance from the FDA or certification from notified bodies in the EU or approved bodies in the United Kingdom for new products,
or with respect to enhancements or modifications to existing products, could take a significant period of time, require the expenditure of substantial resources,
involve rigorous pre-clinical and clinical testing, require changes to products or result in limitations on the indicated uses of products. There can be no
assurance that we will receive the required approvals, clearances or certifications for any new products or for modifications to our existing products on a timely
basis or that any approval, clearance or certification will not be subsequently withdrawn or conditioned upon
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extensive post-market study requirements. Moreover, even if we receive FDA clearance or approval or certification from foreign bodies of new products or
modifications to existing products, we will be required to comply with extensive regulations relating to the development, research, clearance, approval,
certification, distribution, marketing, advertising and promotion, manufacture, adverse event reporting, recordkeeping, import and export of such products,
which may substantially increase our operating costs and have a material impact on our business, profits and results of operations. Failure to comply with
applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as: warning letters, fines, injunctions, civil
penalties, termination of distribution, recalls or seizures of products, delays in the introduction of products into the market, total or partial suspension of
production, refusal to grant future clearances, approvals or certifications, withdrawals or suspensions of existing clearances, approvals or certifications,
resulting in prohibitions on sales of our products, and in the most serious cases, criminal penalties. Occurrence of any of the foregoing could harm our
reputation, business, financial condition, results of operations and prospects.
We are subject to risks related to taxation in multiple jurisdictions and changes in tax laws or regulations that are applied adversely to us or our customers
may have a material adverse effect on our business, cash flow, financial condition or results of operations.
We are subject to income taxes in both the United States and foreign jurisdictions. Significant judgments based on interpretations of existing tax laws or
regulations are required in determining our provision for income taxes. Our effective income tax rate could be adversely affected by various factors, including,
but not limited to, changes in the mix of earnings in tax jurisdictions with different statutory tax rates, changes in the valuation of deferred tax assets and
liabilities, changes in the level of non-deductible expenses (including share-based compensation), changes in the location of our operations, changes in our
future levels of research and development spending, changes in tax benefits from share based compensation, mergers and acquisitions or the result of
examinations by various tax authorities. Although we believe our tax estimates are reasonable, if the United States Internal Revenue Service or any other taxing
authority disagrees with the positions taken on our tax returns, we could have additional tax liability, including interest and penalties. If material, payment of
such additional amounts upon final adjudication of any disputes could have a material impact on our results of operations and financial position.
New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our domestic and
international business operations and our business and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be
interpreted, changed, modified or applied adversely to us. For example, beginning in 2022, the Tax Cuts and Jobs Act of 2017 (the “TCJA”) requires U.S.
research and experimental expenditures to be capitalized and amortized ratably over a five-year period. Any such expenditures attributable to research
conducted outside the United States must be capitalized and amortized over a 15-year period. In addition, the Inflation Reduction Act of 2022 recently became
law and imposes a minimum tax on certain corporations with book income of at least $1 billion, subject to certain adjustments, and a 1% excise tax on certain
stock buybacks and similar corporate actions. With the change in the U.S. Executive and Legislative branches in 2025, the likelihood of any proposed changes
to the tax law being enacted or implemented is unclear, and we are currently unable to predict whether such changes will occur. If any such changes are
implemented, we are currently unable to predict the ultimate impact on our business and therefore there can be no assurance our business will not be adversely
affected.
In addition, the Organization for Economic Co-Operation and Development has released guidance and blueprints covering various topics, including a global
minimum effective tax rate of 15% on certain corporate groups known as “Pillar Two," and rules governing transfer pricing, country-by-country reporting and
definitional changes to permanent establishment that could ultimately impact our tax liabilities as those guidance and blueprints are potentially implemented in
various jurisdictions. For example, on December 12, 2022, the European Union member states agreed to implement the “Pillar Two” global corporate minimum
tax rate as of January 1, 2024. In addition, various other countries where we do business have implemented or plan to implement the “Pillar Two” global
corporate minimum tax rate and are also actively considering changes to their tax laws to adopt certain parts of the OECD’s proposals. The enactment of this
and similar legislation could significantly increase our tax obligations in many countries where we do business.
Our ability to use net operating losses to offset future taxable income may be subject to certain limitations.
Our ability to utilize our net operating loss carryforwards and research and development credit carryforwards for income tax savings is subject to certain
conditions and may be subject to certain limitations in the future due to ownership changes as described below. As such, there can be no assurance that we will
be able to utilize such carryforwards. We have experienced a history of losses and a lack of future taxable income would adversely affect our ability to utilize
our net operating loss carryforwards and research and development credit carryforwards.
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Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change,” the
corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-
change income may be limited. In general, an “ownership change” will occur if there is a cumulative change in our ownership by certain significant
shareholders that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. A portion of our net operating loss
carryforwards and other tax attributes may be subject to limitation under Section 382 of the Code as a result of previous ownership changes and such
limitations may result in expiration of a portion of our net operating loss carryforwards or other tax attributes before utilization. Our ability to use net operating
loss carryforwards, research and development credit carryforwards and other tax attributes to reduce future taxable income and liabilities may be further limited
as a result of future changes in stock ownership. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards or
other pre-change tax attributes to offset United States federal and state taxable income may be subject to limitations, which could potentially result in increased
future tax liability to us.
Ethical, legal, privacy and social concerns or governmental restrictions surrounding the use of the genomic and multiomic information and gene editing
could reduce demand for our products.
While we do not make gene sequencing or gene editing products, our products are used to better understand genomic information that could further gene
editing endeavors. For example, certain of our solutions allow users to examine cells that have been genetically perturbed using clustered regularly interspaced
short palindromic repeats (“CRISPR”) gene editing technology. Advances in genome editing or gene therapy, such as CRISPR Cas9 technology have been
subject to negative publicity and increased regulatory scrutiny, in part due to the underlying ethical, legal, privacy and social concerns regarding the use or
potential misuse of such technology. Governmental authorities could, for safety, social or other purposes, call for limits on or regulation of technologies and
products used in the genome editing or gene therapy fields. Such concerns or governmental restrictions could limit the use of our products. Because the science
and technology of genome editing or gene therapy is incredibly complex, any regulations or restrictions placed on such technology or aimed at curtailing its
usage could, intentionally or inadvertently, limit or restrict the usage of our products. Any such restrictions or any reduction in usage of our products as a result
of concerns regarding the usage of genome editing technology could have a material adverse effect on our business, financial condition and results of
operations.
Risks related to our intellectual property, information technology and data security
Our success will depend on our ability to obtain, maintain and protect our intellectual property rights.
Our success and ability to compete depends in part on our ability to obtain, maintain and enforce issued patents, trademarks and other intellectual property
rights and proprietary technology in the United States and elsewhere. If we cannot adequately obtain, maintain and enforce our intellectual property rights and
proprietary technology, competitors may be able to use our technologies or the goodwill we have acquired in the marketplace and erode or negate any
competitive advantage we may have and our ability to compete, which could harm our business and ability to achieve profitability and/or cause us to incur
significant expenses.
We rely on a combination of contractual provisions, confidentiality procedures and patent, trademark, copyright, trade secret and other intellectual property
laws to protect the proprietary aspects of our products, brands, technologies, trade secrets, know-how and data. These legal measures afford only limited
protection, and competitors or others may gain access to or use our intellectual property rights and proprietary information. In addition, patents have a limited
lifespan. In the United States, for example, the natural expiration of a utility patent is generally 20 years from the earliest effective non-provisional filing date.
Our success will depend, in part, on preserving our trade secrets, maintaining the security of our data and know-how and obtaining, maintaining and enforcing
other intellectual property rights. We may not be able to obtain, maintain and/or enforce our intellectual property or other proprietary rights necessary to our
business or in a form that provides us with a competitive advantage.
Failure to obtain, maintain and/or enforce intellectual property rights necessary to our business and failure to protect, monitor and control the use of our
intellectual property rights could negatively impact our ability to compete and cause us to incur significant expenses. The intellectual property laws and other
statutory and contractual arrangements in the United States and other jurisdictions we depend upon may not provide sufficient protection in the future to
prevent the infringement, use, violation or misappropriation of our patents, trademarks, data, technology and other intellectual property rights by others, and
may not provide an adequate remedy if our intellectual property rights are infringed, misappropriated or otherwise violated by others.
We rely in part on our portfolio of issued patents and pending patent applications in the United States and other countries to protect our intellectual property
and competitive position. However, it is also possible that we may fail to identify patentable aspects of inventions made in the course of the development,
manufacture and commercialization activities conducted by or on behalf of us before it is too late to obtain patent protection on such inventions. If we fail to
timely file for patent protection in any
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jurisdiction, we may be precluded from doing so at a later date. Although we enter into non-disclosure and confidentiality agreements with parties who have
access to patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, suppliers,
consultants, advisors and other third parties, any of these parties may breach the agreements and disclose such output before a patent application is filed,
thereby jeopardizing our ability to seek patent protection. Furthermore, publications of discoveries in the scientific literature often lag behind the actual
discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at
all. Therefore, we cannot be certain that we were the first to make the inventions claimed in any of our patents or pending patent applications, or that we were
the first to file for patent protection of such inventions. Moreover, should we become a licensee of a third party’s patents or patent applications, depending on
the terms of any future in-licenses to which we may become a party, we may not have the right to control the preparation, filing and prosecution of patent
applications, or to maintain or enforce the patents, covering technology in-licensed from third parties. Therefore, these patents and patent applications may not
be prosecuted, maintained and/or enforced in a manner consistent with the best interests of our business. While we generally apply for patents in those
countries where we intend to make, have made, use, import, offer for sale or sell our products, we may not accurately predict all of the countries where patent
protection will ultimately be desirable. Furthermore, the issuance of a patent does not give us the right to practice the patented invention. Third parties may
have blocking patents that could prevent us from importing, manufacturing and/or commercializing our own products or services, or otherwise practicing our
own technology. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.
The patent positions of companies, including our patent position, may involve complex legal and factual questions that have been the subject of much litigation
in recent years, and, therefore, the scope of any patent claims that we have or may obtain cannot be predicted with certainty. Accordingly, we cannot provide
any assurances about which of our patent applications will issue, the breadth of any resulting patent, whether any of the issued patents will be found to be
infringed, invalid or unenforceable or will be threatened or challenged by third parties, that any of our issued patents have, or that any of our currently pending
or future patent applications that mature into issued patents will include, claims with a scope sufficient to protect our products, services or technology. Our
pending and future patent applications may not result in the issuance of patents or, if issued, may not issue in a form that will be advantageous to us. The
coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. We cannot
offer any assurances that the breadth of our issued patents will be sufficient to stop a competitor from developing, manufacturing and commercializing a
product or technologies in a non-infringing manner that would be competitive with one or more of our products or technologies, or otherwise provide us with
any competitive advantage. Furthermore, any successful challenge to these patents or any other patents owned by or licensed to us after patent issuance could
deprive us of rights necessary for our commercial success. Further, there can be no assurance that we will have adequate resources to enforce our patents.
Though an issued patent is presumed valid and enforceable, its issuance is not conclusive as to its validity or its enforceability and it may not provide us with
adequate proprietary protection or competitive advantages against competitors with similar products or services. Patents, if issued, may be challenged, deemed
unenforceable, invalidated, narrowed or circumvented. Proceedings challenging our patents or patent applications could result in either loss of the patent, or
denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. Any successful challenge to our
patents and patent applications could deprive us of exclusive rights necessary for our commercial success. In addition, defending such challenges in such
proceedings may be costly. Thus, any patents that we may own may not provide the anticipated level of, or any, protection against competitors. Furthermore, an
adverse decision may result in a third party receiving a patent right sought by us, which in turn could affect our ability to develop, manufacture or
commercialize our products or technologies.
Some of our patents and patent applications may in the future be co-owned with third parties. If we are unable to obtain an exclusive license to any such third-
party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our
competitors, and our competitors could market competing products, services and technology. In addition, we may need the cooperation of any such co-owners
of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:
•
others will not develop, manufacture and/or commercialize similar or alternative products or technologies that do not infringe our patents;
•
any patents issued to us will provide a basis for an exclusive market for our commercially viable products or technologies, will provide us with any
competitive advantages or will not be challenged by third parties;
•
any of our challenged patents will be found to ultimately be valid and enforceable;
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•
any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our products or services;
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any of our pending patent applications will issue as patents;
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we will be able to successfully manufacture and commercialize our products on a substantial scale before relevant patents we may have expire;
•
we were the first to make the inventions covered by each of our patents and pending patent applications;
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we were the first to file patent applications for these inventions;
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we will develop additional proprietary technologies or products that are separately patentable; or
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our commercial activities or products will not infringe upon the patents of others.
If we cannot successfully enforce our intellectual property rights, the commercial value of our products and technologies will be adversely affected and our
competitive position may be harmed.
Third parties, including our competitors, may currently, or in the future, infringe, misappropriate or otherwise violate our issued patents or other intellectual
property rights, and we may file lawsuits or initiate other proceedings to protect or enforce our patents or other intellectual property rights, which could be
expensive, time-consuming and unsuccessful. We regularly monitor for unauthorized use of our intellectual property rights and, from time to time, analyze
whether to seek to enforce our rights against potential infringement, misappropriation or violation of our intellectual property rights. However, the steps we
have taken, and are taking, to protect our proprietary rights may not be adequate to enforce our rights as against such infringement, misappropriation or
violation of our intellectual property rights. In certain circumstances it may not be practicable or cost-effective for us to enforce our intellectual property rights
fully, particularly in certain developing countries or where the initiation of a claim might harm our business relationships. We may also be hindered or
prevented from enforcing our rights with respect to a government entity or instrumentality because of the doctrine of sovereign immunity. Our ability to
enforce our patent or other intellectual property rights depends on our ability to detect infringement. It may be difficult to detect infringers who do not advertise
the components or methods that are used in connection with their products or technologies. Moreover, it may be difficult or impossible to obtain evidence of
infringement in a competitor’s or potential competitor’s product or technologies. Thus, we may not be able to detect unauthorized use of, or take appropriate
steps to enforce, our intellectual property rights. Any inability to meaningfully enforce our intellectual property rights could harm our ability to compete and
reduce demand for our products and technologies. We have in the past and may in the future become, involved in lawsuits to protect or enforce our intellectual
property rights. An adverse result in any litigation proceeding could harm our business. In any lawsuit we bring to enforce our intellectual property rights, a
court may refuse to stop the other party from using the technology at issue on grounds that our intellectual property rights do not cover the technology in
question. Any claims we assert against perceived infringers could also provoke these parties to assert counterclaims against us alleging that we infringe,
misappropriate or otherwise violate their intellectual property rights. If we initiate legal proceedings against a third party to enforce a patent covering a product
or technology, the defendant could counterclaim that such patent is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims
alleging invalidity or unenforceability are common, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a
patent. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of patentable subject matter,
novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the
patent withheld relevant information from USPTO, or made a misleading statement, during prosecution. Mechanisms for such challenges include re-
examination, post-grant review, inter partes review, interference proceedings, derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g.,
opposition proceedings). In a patent or other intellectual property infringement proceeding, a court may decide that a patent or other intellectual property right
of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims or other intellectual property narrowly or refuse to stop the other party from
using the technology at issue on the grounds that our patents or other intellectual property do not cover the technology in question. Furthermore, even if our
patents or other intellectual property rights are found to be valid and infringed, a court may refuse to grant injunctive relief against the infringer and instead
grant us monetary damages and/or ongoing royalties. Such monetary compensation may be insufficient to adequately offset the damage to our business caused
by the infringer’s competition in the market. An adverse result in any litigation or administrative proceeding could put one or more of our patents or other
intellectual property rights at risk of being invalidated or interpreted narrowly, which could adversely affect our competitive business position, financial
condition and results of operations. Moreover, even if we are successful in any litigation, we may incur significant expense in connection with such
proceedings, and the amount of any monetary damages may be inadequate to compensate us for damage as a result of the infringement and the proceedings.
We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property rights.
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We may also be subject to claims that our former employees, contractors or collaborators, or other third parties have an ownership interest in our current or
future patents, patent applications, or other intellectual property rights, including as an inventor or co-inventor. We may be subject to ownership or inventorship
disputes in the future arising, for example, from conflicting obligations of employees, consultants or others who were or are involved in developing our
products or services. Although it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual
property rights to execute agreements assigning such intellectual property rights to us, we may be unsuccessful in executing such an agreement with each party
who, in fact, conceives or develops intellectual property rights that we regard as our own, and we cannot be certain that our agreements with such parties will
be upheld in the face of a potential challenge, or that they will not be breached, for which we may not have an adequate remedy. The assignment of intellectual
property rights may not be self-executing, or the assignment agreements may be breached, and litigation may be necessary to defend against these and other
claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable
intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property rights, and other owners may be able to license their
rights to other third parties, including our competitors. Such an outcome could have a material adverse effect on our business. Even if we are successful in
defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
Additionally, we may be subject to claims from third parties challenging ownership interest in or inventorship of intellectual property rights we regard as our
own, based on claims that our agreements with employees or consultants obligating them to assign their intellectual property rights to us are ineffective or in
conflict with prior or competing contractual obligations to assign inventions and intellectual property rights to another employer, to a former employer, or to
another person or entity. Litigation may be necessary to defend against such claims, and it may be necessary or we may desire to obtain a license to such third
party’s intellectual property rights to settle any such claim; however, there can be no assurance that we would be able to obtain such license on commercially
reasonable terms, if at all. If our defense to those claims fails, in addition to paying monetary damages or a settlement payment, a court could prohibit us from
using technologies, features or other intellectual property rights that are essential to our products or technologies, if such technologies or features are found to
incorporate or be derived from the trade secrets or other proprietary information of another person or entity, including another or former employers. An
inability to incorporate technologies, features or other intellectual property rights that are important or essential to our products or services could have a
material adverse effect on our business, financial condition, results of operations, and competitive position, and may prevent us from developing,
manufacturing and/or commercializing our products or technologies. In addition, we may lose valuable intellectual property rights or personnel. Even if we are
successful in defending against these claims, litigation could result in substantial costs and could be a distraction to management and our employees. Any
litigation or the threat thereof may adversely affect our ability to hire employees or contract with independent sales representatives. A loss of key personnel or
their work product could hamper or prevent our ability to develop, manufacture and/or commercialize our products or services, which could materially and
adversely affect our business, financial condition and results of operations.
We depend on certain intellectual property rights that are licensed to us. We may be unsuccessful in licensing or acquiring intellectual property rights from
third parties that may be necessary to develop, manufacture and/or commercialize our current and/or future products or technologies.
Various proprietary technologies that are used in a substantial majority of our consumables are protected by intellectual property rights that we in-license from
third parties. Our rights to use such intellectual property rights in our business are subject to the continuation of and our compliance with the terms of the
license agreements between us and each of our licensors.
A third party may hold intellectual property rights, including patent rights, that are important or necessary to the development, manufacture and/or
commercialization of our current and/or future products or technologies, in which case we would need to acquire or obtain a license to such intellectual
property rights from such third party. A third party that perceives us to be a competitor may be unwilling to assign or license its intellectual property rights to
us. In addition, the licensing or acquisition of third-party intellectual property rights is a competitive area, and other companies may also pursue similar
strategies to license or acquire such third party’s intellectual property rights. Some of these companies may have a competitive advantage over us due to their
size, capital resources and greater development, manufacturing and commercialization capabilities. We also may be unable to license or acquire third party
intellectual property rights on commercially reasonable terms that would allow us to make an appropriate return on our investment, or we may be unable to
obtain any such license or acquisition at all. If we are unable to successfully license or acquire necessary third-party intellectual property rights, we may not be
able to develop, manufacture or commercialize our current and/or future products or technologies, which could have a material adverse effect on our business,
financial condition and results of operations.
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If we fail to execute invention assignment agreements with our employees and contractors involved in the development of intellectual property rights or are
unable to protect the confidentiality of our trade secrets, the value of our products and technologies and our business and competitive position could be
harmed.
In addition to patent protection, we also rely on other intellectual property rights, including protection of copyright, trade secrets, know-how and/or other
proprietary information that is not patentable or that we elect not to patent.
However, trade secrets can be difficult to protect, and some courts are less willing or unwilling to protect trade secrets. To maintain the confidentiality of our
trade secrets and proprietary information, we rely heavily on confidentiality provisions that we have in contracts with our employees, consultants, collaborators
and other third parties. We generally enter into confidentiality and invention assignment agreements with our employees, consultants and third parties upon
their commencement of a relationship with us. However, we cannot guarantee that we have entered into such agreements with each party that may have or have
had access to our trade secrets or proprietary technology and processes and we may not enter into such agreements with all employees, consultants and third
parties who have been involved in the development of our intellectual property rights. Although we generally require all of our employees, consultants,
advisors and any third parties who have access to our proprietary know-how, information, or technology to enter into confidentiality agreements, we cannot
provide any assurances that all such agreements have been duly executed. In addition, despite the protections we do place on our intellectual property or other
proprietary rights, monitoring unauthorized use and disclosure of our intellectual property rights by employees, consultants and other third parties who have
access to such intellectual property or other proprietary rights is difficult, and we do not know whether the steps we have taken to protect our intellectual
property or other proprietary rights will be adequate. Therefore, we may not be able to prevent the unauthorized disclosure or use of our technical knowledge or
other trade secrets by such employees, consultants, advisors or third parties, despite the existence generally of these confidentiality restrictions. These
agreements may not provide meaningful protection against the unauthorized use or disclosure of our trade secrets, know-how or other proprietary information
in the event the unwanted use is outside the scope of the provisions of the contracts or in the event of any unauthorized use, misappropriation, or disclosure of
such trade secrets, know-how or other proprietary information that we fail to detect. There can be no assurances that such employees, consultants, advisors or
third parties will not breach their agreements with us, that we will have adequate remedies for any breach, or that our trade secrets will not otherwise become
known or independently developed by third parties, including our competitors. If any of our trade secrets were to be lawfully obtained or independently
developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to
compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.
The exposure of our trade secrets and other proprietary information would impair our competitive advantages and could have a material adverse effect on our
business, financial condition and results of operations. In particular, a failure to protect our proprietary rights may allow competitors to copy our technology,
which could adversely affect our pricing and market share.
Costly and time-consuming litigation could be necessary to enforce and determine the scope of our trade secret rights and related confidentiality and
nondisclosure provisions, and outcomes are unpredictable. Further, it is possible that others will independently develop the same or similar technology,
products or services or otherwise obtain access to our unpatented technology, and in such cases, we could not assert any trade secret rights against such parties.
If we fail to obtain or maintain trade secret protection, or if our competitors obtain our trade secrets or independently develop technology or products similar to
ours, our competitive market position could be materially and adversely affected. In addition, some courts are less willing or unwilling to protect trade secrets
and agreement terms that address non-competition are difficult to enforce in many jurisdictions and might not be enforceable in certain cases.
In addition to contractual measures, we try to protect the confidential nature of our proprietary information by maintaining physical security of our premises
and electronic security of our information technology systems. Such security measures may not, for example, in the case of misappropriation of a trade secret
by an employee, consultant or other third party with authorized access, provide adequate protection for our proprietary information. Our security measures may
not prevent an employee, consultant or other third party from misappropriating our trade secrets and providing them to a competitor, and recourse we take
against such misconduct may not provide an adequate remedy to protect our interests fully. Unauthorized parties may also attempt to copy or reverse engineer
certain aspects of our products or services that we consider proprietary. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can
be difficult, expensive and time-consuming, and the outcome is unpredictable. Further, we may not be able to obtain adequate remedies for any breach. While
we use commonly accepted security measures, trade secret violations are often a matter of state law in the United States, and the criteria for protection of trade
secrets can vary among different jurisdictions. If the steps we have taken to maintain our trade secrets are deemed inadequate, we may have insufficient
recourse against third parties for misappropriating the trade secret. In addition, trade secrets may be independently developed by others in a manner that could
prevent legal recourse by us. If any of our intellectual property rights or confidential or proprietary information, such as our trade secrets, were to be disclosed
or misappropriated, or if any such
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information was independently developed by a competitor, it could have a material adverse effect on our competitive position, business, financial condition,
results of operations and prospects.
We may be subject to claims that we or our employees have misappropriated the intellectual property rights of a third party, including trade secrets or
know-how, or are in breach of non-competition or non-solicitation agreements with our competitors.
We may be subject to claims that our employees or consultants have wrongfully used for our benefit or disclosed to us confidential information, including trade
secrets or know-how, of third parties. Many of our employees and consultants were previously employed at or engaged by other medical device companies,
including our competitors or potential competitors. Some of these employees and consultants may have executed confidential information non-disclosure and
inventions assignment agreements and non-competition agreements in connection with such previous employment or engagements. Although we try to ensure
that our employees and consultants do not use the intellectual property rights, proprietary information, know-how or trade secrets of others in their work for us,
we may be subject to claims that we or these individuals have, inadvertently or otherwise, misappropriated the intellectual property rights or disclosed the
alleged trade secrets or other proprietary information, of these former employers, clients or other third parties. To the extent that our employees or consultants
use intellectual property rights or proprietary information owned by others in their work for us, disputes may arise as to the rights in any related or resulting
know-how and inventions. Litigation may be necessary to defend against these claims. There is no guarantee of success in defending these claims, and even if
we are successful, litigation could result in substantial cost and be a distraction to our management and other employees.
Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements
imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
The U.S. Patent and Trademark Office, or USPTO, and various foreign governmental patent agencies require compliance with a number of procedural,
documentary, fee payment and other similar provisions during the patent application process. In addition, periodic maintenance fees, renewal fees, annuity fees
and various other government fees on issued patents often must be paid to the USPTO and foreign patent agencies over the lifetime of the patent and/or
applications and any patent rights we may obtain in the future. While an unintentional lapse of a patent or patent application can in many cases be cured by
payment of a late fee or by other means in accordance with the applicable rules, there are situations in which non-compliance can result in abandonment or
lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could
result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time
limits, non-payment of fees and failure to properly legalize and submit formal documents. If we or our patent licensors fail to maintain the patents and patent
applications covering our products, services or technology, we may not be able to stop a competitor from marketing products, services or technologies that are
the same as or similar to our products, services or technologies which would have a material adverse effect on our business, financial condition and results of
operations.
Changes in patent law or the organizational changes to the USPTO could diminish the value of our patents in general, thereby impairing our ability to
protect our current and future products, services or technologies, and could increase the uncertainties and costs surrounding the prosecution of our patent
applications and the enforcement or defense of our current or future patents.
Our ability to obtain patents and the breadth of any patents obtained is uncertain in part because, to date, some legal principles remain unresolved, and there has
not been a consistent policy regarding the breadth or interpretation of claims allowed in patents in the United States and other countries. Changes in either
patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property rights or narrow the
scope of our patent protection, which in turn could diminish the commercial value of our products, services and technologies.
Patent reform legislation may pass in the future that could lead to additional uncertainties and increased costs surrounding the prosecution, enforcement and
defense of our patents and applications. Furthermore, the U.S. Supreme Court and the U.S. Court of Appeals for the Federal Circuit have made, and will likely
continue to make, changes in how the patent laws of the United States are interpreted. The United States Supreme Court has ruled on several patent cases in
recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations.
In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to
the value of patents, once obtained. Depending on actions by the United States Congress, the federal courts and the USPTO, the laws and regulations governing
patents could change in unpredictable ways that would weaken
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our ability to obtain new patents or to enforce patents that we own or that we might obtain or license in the future. An inability to obtain, enforce, and defend
patents covering our proprietary technologies would materially and adversely affect our business prospects and financial condition.
For example, various courts, including the U.S. Supreme Court, have rendered decisions that impact the scope of patentability of certain inventions or
discoveries relating to the life sciences. Specifically, these decisions stand for the proposition that patent claims that recite laws of nature (for example, the
relationships between gene expression levels and the likelihood of risk of recurrence of cancer) are not themselves patentable unless those patent claims have
sufficient additional features that provide practical assurance that the processes are genuine inventive applications of those laws rather than patent drafting
efforts designed to monopolize the law of nature itself. What constitutes a “sufficient” additional feature is uncertain and has been subject to evolving
regulatory guidance which indicates that claims directed to a law of nature, a natural phenomenon or an abstract idea that do not meet the eligibility
requirements should be rejected as non-statutory, patent ineligible subject matter; however, method of treatment claims that practically apply natural
relationships should be considered patent eligible. We cannot assure you that our patent portfolio will not be negatively impacted by the current uncertain state
of the law, new court rulings or changes in guidance or procedures issued by the USPTO. From time to time, the U.S. Supreme Court, other federal courts, the
U.S. Congress or the USPTO may change the standards of patentability and validity of patents within the life sciences and any such changes could have a
negative impact on our business.
Similarly, foreign courts have made, and will likely continue to make, changes in how the patent laws in their respective jurisdictions are interpreted. Changes
in patent laws and regulations in other countries or jurisdictions, changes in the governmental bodies that enforce them, or changes in how the relevant
governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we own or may obtain in the
future. Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. In
addition, any protection afforded by foreign patents may be more limited than that provided under U.S. patent and intellectual property laws. We may
encounter significant problems in enforcing and defending our intellectual property both in the United States and abroad. For example, if the issuance in a
given country of a patent covering an invention is not followed by the issuance in other countries of patents covering the same invention, or if any judicial
interpretation of the validity, enforceability or scope of the claims or the written description or enablement in a patent issued in one country is not similar to the
interpretation given to the corresponding patent issued in other countries, our ability to protect our intellectual property rights in those countries may be limited.
Changes in either patent laws or in interpretations of patent laws in the United States and other countries may materially diminish the value of our intellectual
property rights or narrow the scope of our patent protection. We cannot predict future changes in the interpretation of patent laws or changes to patent laws that
might be enacted into law by U.S. and foreign legislative bodies. Those changes may materially affect our patents or patent applications and our ability to
obtain additional patent protection in the future. Any of the foregoing could have a material adverse effect on our competitive position, business, financial
condition, results of operations and prospects.
In June 2023, the European Unitary Patent system and the European Unified Patent Court (“UPC”) were launched. European patent applications now have the
option, upon grant of a patent, of becoming a Unitary Patent which is subject to the jurisdiction of the UPC. In addition, conventional European patents, both
already granted at the time the new system began and granted thereafter, are subject to the jurisdiction of the UPC, unless actively opted out. This was a
significant change in European patent practice, and deciding whether to opt-in or opt-out of Unitary Patent practice entail strategic and cost considerations. The
UPC provides third parties with a new forum to centrally revoke our European patents and makes it possible for a third party to obtain pan-European
injunctions against us. It will be several years before we will understand the scope of patent rights that will be recognized and the strength of patent remedies
that will be provided by the UPC. While we have the right to opt our patents out of the UPC over the first seven years of the court’s existence, doing so may
preclude us from realizing the benefits of the UPC. Moreover, the decision whether to opt-in or opt-out of Unitary Patent status will require coordinating with
co-applicants, if any, adding complexity to any such decision.
The legal systems in certain countries may also favor state-sponsored or companies headquartered in particular jurisdictions over our first-in-time patents and
other intellectual property protection. We are aware of incidents where such entities have stolen the intellectual property of domestic companies in order to
create competing products and we believe we may face such circumstances ourselves in the future. For example, through its “Annual Special 301 Report on
Intellectual Property,” the Office of the United States Trade Representative (“USTR”) has been reporting on the adequacy and effectiveness of intellectual
property protection in a number of foreign countries that are U.S. trading partners and their protection and enforcement of intellectual property rights. A
number of countries in which both we and our distributors operate have been identified in the reports as being on the Priority Watch List. Placement of a
country on the Priority Watch List indicates that particular problems exist in that country with respect to intellectual property protection, enforcement, or
market access for persons relying on intellectual property rights. Countries placed on the Priority Watch List are the focus of increased bilateral attention
concerning the specific problem
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areas. It is possible that we will not be able to enforce our intellectual property rights against third parties that misappropriate our proprietary technology in
those countries.
Additionally, organizational changes to the USPTO could increase the uncertainties, timing and costs related to the prosecution of our patent applications. For
example, in response to the deferred resignation program offered by the United States Office of Personnel Management to all employees of the United States
federal civil service on January 28, 2025, a number of USPTO employees have resigned or indicated their intent to resign, including USPTO Commissioner for
Patents Vaishali Udupa. Reductions in the staff available to process, review and make decisions regarding patent applications as well as complete other patent-
related activities could delay or prevent us from successfully prosecuting our current or future patent applications.
Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not
adequately protect our business or permit us to maintain our competitive advantage. For example:
•
others may independently develop, manufacture and commercialize products, services or technologies that are similar to or are alternatives or duplicates
of any of our products, services or technologies without infringing, misappropriating or otherwise violating our intellectual property rights;
•
issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors;
•
it is possible that our pending patent applications or those that we may own in the future will not lead to issued patents or even when they issue, the
scope of the claims may be narrowed;
•
our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned
from such activities to develop, manufacture and commercialize competitive products, services or technologies for sale in our major commercial
markets;
•
we, or current or future licensors or collaborators, might not have been the first to make the inventions covered by the issued patent or pending patent
application that we license or may own in the future;
•
we, or current or future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions;
•
we may not develop additional proprietary technologies that are patentable;
•
the intellectual property rights of others may harm our business; and
•
we may choose not to seek patent protection for some of our proprietary technology to maintain certain trade secrets or know-how, and a third party may
subsequently file a patent covering such trade secrets or know-how.
If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and our
competitive position may be harmed.
Our trademarks could be challenged, invalidated, infringed, and circumvented by third parties, and our trademarks could also be diluted, declared generic or
found to be infringing on other marks. If any of the foregoing occurs, we could be forced to re-brand our products, services or technologies, resulting in loss of
brand recognition and requiring us to devote resources to advertising and marketing new brands, and suffer other competitive harm. Third parties may also
adopt trademarks similar to ours, which could harm our brand identity and lead to market confusion. Further, there can be no assurance that competitors will
not infringe our trademarks or that we will have adequate resources to enforce our trademarks. At times, competitors may adopt trade names or trademarks
similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. Certain of our current or future trademarks may
become so well known by the public that their use becomes generic and they lose trademark protection. Over the long term, if we are unable to establish name
recognition based on our trademarks and trade names, then we may not be able to compete effectively. Any of the foregoing could have a material adverse
effect on our competitive position, business, financial condition, operating results and prospects.
We rely on our trademarks, trade names and brand names, such as our 10X, 10X GENOMICS, CHROMIUM, VISIUM and XENIUM marks, to distinguish our
products, services and technologies from the products, services and technologies of our competitors, and have registered or applied to register many of these
trademarks in the United States and certain countries outside the United States, however, we have not yet registered all of our trademarks in all of our current
and potential markets. There can be no assurance that our trademark applications will be approved for registration. During trademark registration proceedings,
we may receive rejections. Although we are given an opportunity to respond to those rejections, we may be unable to overcome such
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rejections. In addition, in proceedings before the USPTO and comparable agencies in many foreign jurisdictions, third parties may also oppose our trademark
applications and may seek to cancel trademark registrations or otherwise challenge our use of the trademarks. Opposition or cancellation proceedings may be
filed against our trademark filings in these agencies, and such filings may not survive such proceedings. While we may be able to continue the use of our
trademarks in the event registration is not available, particularly in the United States, where trademark rights are acquired based on use and not registration,
third parties may be able to enjoin the continued use of our trademarks if such parties are able to successfully claim infringement in court. In addition,
opposition or cancellation proceedings may be filed against our trademark applications and registrations and our trademarks may not survive such proceedings.
If we do not secure registrations for our trademarks, we may encounter more difficulty in enforcing them against third parties than we otherwise would. Our
trademarks or trade names may be infringed, circumvented, declared generic or determined to be violating or infringing on other marks.
Our solutions contain third-party open source software components and failure to comply with the terms of the underlying open source software licenses
could restrict our ability to sell our products.
Our solutions contain software tools licensed by third parties under open source software licenses. Use and distribution of open source software may entail
greater risks than use of third-party commercial software, as open source software licensors generally do not provide warranties or other contractual protections
regarding infringement claims or the quality of the code. Some open source software licenses contain requirements that the licensee make its source code
publicly available if the licensee creates modifications or derivative works using such open source software, depending on the type of open source software the
licensee uses and how the licensee uses it. If we combine our proprietary software with open source software in a certain manner, we could, under certain open
source software licenses, be required to make available the source code of certain of our proprietary software to the public for free. This could allow our
competitors to create similar products with less development effort and time and ultimately could result in a loss of product sales and revenue. In addition,
some companies that use third-party open source software have faced claims challenging their use of such open source software and their compliance with the
terms of the applicable open source license. We may be subject to suits by third parties claiming ownership of what we believe to be open source software, or
claiming non-compliance with the applicable open source licensing terms. Use of open source software may also present additional security risks because the
public availability of such software may make it easier for hackers and other third parties to compromise or attempt to compromise our technology platform
and systems.
Although we typically review our use of open source software to avoid subjecting our solutions to conditions we do not intend, the terms of many open source
software licenses have not been interpreted by United States courts, and there is a risk that these licenses could be construed in a way that could impose
unanticipated conditions or restrictions on our ability to commercialize our solutions. Moreover, our processes for monitoring and controlling our use of open
source software in our solutions may not be effective. If we are held to have breached the terms of an open source software license, we could be required to
seek licenses from third parties to continue offering our solutions on terms that are not economically feasible, to re-engineer our solutions, to discontinue the
sale of our solutions if re-engineering could not be accomplished on a timely basis, to pay statutory or other damages to the license holder or to make generally
available, in source code form, our proprietary code, any of which could adversely affect our business, operating results and financial condition.
We collect, process, store, share, disclose and use personal information and other data, which subjects us to governmental regulations and other legal
obligations related to privacy and security, and our actual or perceived failure to comply with such obligations could harm our business.
We collect, process, store, transmit, disclose and use information from our employees, customers and others, including personal information and other data,
some of which may be sensitive in nature. There are numerous federal, state and foreign laws and regulations regarding data protection, privacy and security.
We strive to comply with applicable laws, our posted policies and legal contractual obligations relating to privacy and data protection. However, the scope of
these laws is changing, is subject to differing interpretations, may be costly to comply with and may be inconsistent among countries and jurisdictions or
conflict with other rules. Our business, including our ability to operate and expand internationally, could be adversely affected if legislation or regulations are
adopted, interpreted or implemented in a manner that is inconsistent with our current business practices and that require changes to these practices.
The global data protection landscape is rapidly evolving and new laws and regulations are constantly being enacted such as China's "Personal Information
Protection Law" and Singapore's "Personal Data Protection Act." Violations of existing and new laws and regulations may subject companies to significant
penalties and fines, government investigations and/or enforcement actions, private litigation and other claims. Our operations abroad may also be subject to
increased scrutiny or attention from data protection authorities. For example, in Europe, the GDPR went into effect in May 2018 and imposes stringent
requirements for processing personal data of individuals within the European Economic Area ("EEA"). The processing of sensitive personal data,
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such as physical health conditions, may impose heightened compliance burdens under the GDPR and is a topic of active interest among foreign regulators. In
addition, the GDPR provides for breach reporting requirements, more robust regulatory enforcement and greater penalties for noncompliance than previous
data protection laws, including fines of up to €20 million or 4% of a noncompliant company’s global annual revenue for the preceding financial year,
whichever is greater. Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries outside the EEA that
have not been found to provide adequate protection to such personal data, including the United States, and the efficacy and longevity of current transfer
mechanisms between the EEA and the United States remains uncertain. Case law from, the Court of Justice of the EU (“CJEU”) states that reliance on the
standard contractual clauses, or SCCs - a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism -
alone may not necessarily be sufficient in all circumstances and that transfers must be assessed on a case-by-case basis. On July 10, 2023, the European
Commission adopted its Adequacy Decision in relation to the new EU-US Data Privacy Framework (“DPF”), rendering the DPF effective as a GDPR transfer
mechanism to U.S. entities self-certified under the DPF. We expect the existing legal complexity and uncertainty regarding international personal data transfers
to continue. As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used,
and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable
to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the
geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.
Since the beginning of 2021, we have also been subject to the UK data protection regime, which imposes separate but similar obligations to those under the
GDPR and comparable penalties, including fines of up to £17.5 million or 4% of a noncompliant company’s global annual revenue for the preceding financial
year, whichever is greater. On October 12, 2023, the UK Extension to the DPF came into effect (as approved by the UK Government), as a data transfer
mechanism from the UK to U.S. entities self-certified under the DPF. Other foreign jurisdictions, such as China and Russia, are increasingly implementing or
developing their own privacy regimes with complex and onerous compliance obligations and robust regulatory enforcement powers. As we continue to expand
into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business.
In the United States, the California Consumer Privacy Act of 2018 (the ”CCPA”), as amended by the California Privacy Rights Act (collectively,(the "CCPA"),
requires covered businesses that process the personal information of California residents to, among other things: (i) provide certain disclosures to California
residents regarding the business’s collection, use and disclosure of their personal information, (ii) receive and respond to requests from California residents to
access, delete and correct their personal information, or to opt out of certain disclosures of their personal information, and (iii) enter into specific contractual
provisions with services providers that process California resident personal information on the business’s behalf. Additional compliance investment and
potential business process changes may also be required. Similar laws have passed in other states and are continuing to be proposed at the state and federal
level, reflecting a trend toward more stringent privacy legislation in the United States. The enactment of such laws could have potentially conflicting
requirements that would make compliance challenging.
Furthermore, the Federal Trade Commission (“FTC”) has authority to initiate enforcement actions against entities that mislead customers about compliance
with the Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”), make deceptive statements about privacy and data sharing in
privacy policies, fail to limit third-party use of personal health information, fail to implement policies to protect personal health information or engage in other
unfair practices that harm customers or that may violate Section 5(a) of the FTC Act. The FTC and many state Attorneys General also continue to enforce
federal and state consumer protection laws against companies for online collection, use, dissemination and security practices that appear to be unfair or
deceptive. For example, according to the FTC, failing to take appropriate steps to keep consumers’ personal information secure can constitute unfair acts or
practices in or affecting commerce in violation of Section 5(a) of the FTC Act. The FTC expects a company’s data security measures to be reasonable and
appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to
improve security and reduce vulnerabilities.
Any failure or perceived failure by us or our vendors or partners to comply with these laws and regulations, our privacy and notice policies, our privacy-related
obligations to employees, customers or other third parties or privacy or security-related legal obligations, or any actual or perceived compromise of security
that results in the unauthorized access to or disclosure, alteration, theft, loss, transfer or use of personal or other information, including personally identifiable
information or other sensitive data, may result in governmental enforcement actions, fines and penalties, litigation or public statements critical of us by
consumer advocacy groups or others and could cause our customers, partners or others to lose trust in us, which could have an adverse effect on our business.
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If we or our critical third-party providers experience a significant disruption in our information technology systems or breaches of data security, our
business could be adversely affected.
We collect and maintain information in digital form that is necessary to conduct our business, and we are increasingly dependent on information technology
systems and infrastructure to operate our business. In the ordinary course of our business, we collect, store and transmit large amounts of confidential
information, including intellectual property, proprietary business information, preclinical and clinical trial data, health-related information and personal
information of our customers, employees and other related third parties (collectively, “Confidential Information”). It is critical that we do so in a secure manner
to maintain the confidentiality and integrity of such Confidential Information.
We rely on information technology systems to keep financial records, facilitate our research and development initiatives, manage our manufacturing operations,
maintain quality control, fulfill customer orders, maintain corporate records, communicate with staff and external parties and operate other critical functions.
We operate some of these systems but we also rely on third-party providers for a range of software, products and services that are critical to our operations and
business. Both our and our third-party providers’ information technology systems are vulnerable to attack, damage or disruption due to breakdown, malicious
intrusion, computer viruses, malware (e.g. ransomware) or other disruptive events, including but not limited to, natural disasters and catastrophes. In addition,
malicious code (such as viruses, worms and ransomware), bugs or vulnerabilities in our code, employee theft or misuse, human error, social engineering and
phishing scams, denial-of-service attacks and sophisticated nation-state and nation-state supported attacks (including advanced persistent threat intrusions), are
all increasingly common threats to companies like us.
Despite significant efforts to create security barriers to such threats, it is impossible for us to entirely mitigate these risks. If our security measures are
compromised as a result of third-party action, employee or customer error, malfeasance, stolen or fraudulently obtained log-in credentials or otherwise, our
reputation could be damaged, our business may be harmed and we could incur significant liability. If we were to experience a prolonged system disruption in
our information technology systems or those of certain of our vendors, it could negatively impact our ability to serve our customers, which could adversely
impact our business. If operations at our facilities were disrupted, it may cause a material disruption in our business if we are not capable of restoring
functionality on an acceptable timeframe. An attack or security incident that exposes Confidential Information to unauthorized persons could lead to the loss of
trade secrets or other intellectual property, or could lead to the exposure of personal data of our employees, customers and others, any of which could have a
material adverse effect on our business, reputation, financial condition and results of operations.
Concerns regarding data privacy and security may cause some of our customers to stop using our platform for Cloud Services or other product solutions. This
discontinuance in use could substantially harm our business, operating results and growth prospects. In addition, any access, disclosure, loss or unauthorized
use of information or data could result in legal claims or proceedings, regulatory investigations or actions, and other types of liability under laws that protect
the privacy and security of personal information, including federal, state and foreign data protection and privacy regulations, violations of which could result in
significant penalties and fines. In addition, although we seek to detect and investigate all data security incidents, security breaches and other incidents of
unauthorized access to our information technology systems and data can be difficult to detect and any delay in identifying such breaches or incidents may lead
to increased harm and legal exposure of the type described above.
We have not always been able in the past and may be unable in the future to anticipate or prevent techniques used to obtain unauthorized access or to
compromise our systems because the techniques used change frequently and are generally not detected until after an incident has occurred. We may also face
increased cybersecurity risks due to our reliance on internet technology when our employees are working remotely, which may create additional opportunities
for cybercriminals to exploit vulnerabilities. Cyberattacks and other malicious internet-based activity continue to increase and cloud-based platform providers
of services have been and are expected to continue to be targeted and threat actors are increasingly utilizing tools and techniques designed to evade controls, to
avoid detection and even to obfuscate or remove forensic evidence.
We have experienced cyberattacks and other security incidents and expect to continue to experience such events. The cost of investigating, mitigating,
responding to and remediating potential data security breaches and complying with applicable breach notification obligations to individuals, regulators,
partners and others could be significant. Our insurance policies may not be adequate to compensate us for the potential costs and other losses arising from
cybersecurity-related disruptions, failures, attacks or breaches. In addition, such insurance may not be available to us in the future on economically reasonable
terms, or at all. Further, defending a suit, regardless of its merit, could be costly, divert management attention and harm our reputation.
Threats involving the misuse or access of our network, systems, and information by our current or former employees, contractors, vendors, or partners, whether
intentional or unintentional, also pose a risk to the security of our network, systems, information and data. For example, we are subject to the risk that
employees may inadvertently share Confidential Information with unintended
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third parties, or that departing employees may take, or create their own information based on, our Confidential Information upon leaving the company. In
addition, any such insiders may be the victims of social engineering attacks that enable third parties to access our network, systems, and information using an
authorized person’s credentials. We and our network, systems, and information are also vulnerable to malicious acts by insiders, including leaking, modifying,
or deleting Confidential Information, or performing other acts that could materially interfere with our operations and business. While we provide regular
training to our employees regarding cybersecurity threats and best practices, we cannot ensure that such training or other efforts will prevent unauthorized
access to or sabotage of our network, systems, and information.
While we implement security measures designed to reduce these risks, there is no guarantee these measures will be adequate to safeguard all systems and
networks. Any failure to maintain performance, reliability, security and availability of our systems and networks may result in accidental or unlawful
destruction, damage, loss, unavailability, alteration, impairment, misuse, unauthorized disclosure of, or unauthorized access to our data, including personal or
proprietary information.
We rely on on-premise, co-located and third-party data centers and platforms to host our website and other online services, as well as for research and
development purposes and any interruptions of service or failures may impair and harm our business.
Our proprietary software is a crucial component of our solutions, as our software allows our end users to visualize genomic and multiomic information
provided by our instruments and reagents. Our software is generally downloadable free of charge from our website for installation and use by end users on their
computer systems. Our website is hosted with various third-party service providers located in the United States. We rely on on-premises, co-located and third-
party infrastructure in the San Francisco Bay Area and other regions in the United States to perform computationally demanding analysis tasks for our research
and development programs and for other business purposes.
In the event of any technical problems that may arise in connection with our on-premise, co-located or third-party data centers, we could experience
interruptions in our ability to provide products and services to our customers or in our internal functions, including research and development, which rely on
such services. Interruptions or failures may be caused by a variety of factors, including infrastructure changes, human or software errors, viruses, worms,
ransomware, security attacks, fraud, spikes in customer usage and denial of service issues. Interruptions or failures in our operations or services may reduce our
revenue, result in the loss of customers, adversely affect our ability to attract new customers or harm our reputation. Significant interruptions to our research
and development programs could cause us to delay the introduction of new products or new versions of existing products, which could adversely impact our
business, our results of operations and the competitiveness of our products.
Our current solutions are capable of generating large datasets, the analysis of which can be time consuming without access to a high-performance computing
system. The visualization of such data can also be computationally intensive. As we iterate and improve our products and as the related technologies advance,
our continued growth may require an ability to provide our customers with direct access to a high-performance computing system and/or alternative means of
obtaining our software. As a result, we expect our reliance on internal and third-party data centers to increase in the future.
Further, as we rely on third-party and public-cloud infrastructure, we will depend in part on third-party security measures to protect against unauthorized
access, cyberattacks and the mishandling of customer data. In addition, failures to meet customers’ expectations with respect to security and confidentiality of
their data and information could damage our reputation and affect our ability to retain customers, attract new customers and grow our business. In addition, a
cybersecurity event could result in significant increases in costs, including costs for remediating the effects of such an event, lost revenue due to a decrease in
customer trust and network downtime; increases in insurance coverage costs due to cybersecurity incidents; and damages to our reputation because of any such
incident.
We are subject to certain manufacturing restrictions related to licensed intellectual property rights that were developed with the financial assistance of
United States government grants.
Under the Bayh-Dole Act, the federal government retains a “nonexclusive, nontransferable, irrevocable, paid-up license” in inventions produced with its
financial assistance (“Government Funded Inventions”) for its own benefit. The Bayh-Dole Act provides federal agencies with march-in rights (“March-In
Rights”), which allows a government agency, in specified circumstances, to require the patent owner or successors in title to the patent directed to such
Government Funded Inventions (“Patent Owner”) to grant a “nonexclusive, partially exclusive, or exclusive license” to a “responsible applicant or applicants,”
which if exercised, would allow such government agency to require such Patent Owner to grant a non-exclusive, partially exclusive or exclusive license in any
field of use to a third-party designated by such agency. The Bayh-Dole Act also provides that the Patent Owner manufacture products embodying the respective
Government Funded Inventions domestically in accordance with certain requirements. If this domestic manufacturing requirement is not met, the government
agency that funded
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the relevant grant is entitled to exercise March-In Rights. We are subject to the Bayh-Dole Act with respect to certain licensed technologies that were developed
with United States government grants. Such licensed technologies are used, for example, in a substantial majority of our consumables. Further, we cannot be
sure that if we acquired intellectual property rights in the future it will be free from government rights or regulations pursuant to the Bayh-Dole Act.
If we own, co-own or in-license Government Funded Inventions that are critical to our business, our ability to enforce or otherwise exploit patents covering
such technology may be adversely affected. Further, the exercise of March-In Rights, the requirement that we grant additional licenses to third parties, or the
termination of our license of the relevant technologies could materially adversely affect our business, operations and financial condition. The restrictions of the
Bayh-Dole Act may also limit our ability to manufacture our products in locations where it may be otherwise more favorable for us to do so, which could limit
our ability to respond to competitive developments or otherwise adversely affect our results of operations. Any of the foregoing could have a material adverse
effect on our business, financial condition and results of operations.
Risks related to litigation and our intellectual property
We may become a party to intellectual property litigation or administrative proceedings that could be expensive, time-consuming, unsuccessful, and could
interfere with our ability to develop, manufacture and commercialize our products or technologies.
Our commercial success depends, in part, on our ability to develop, manufacture or commercialize our products and technologies without infringing,
misappropriating or otherwise violating the proprietary rights and intellectual property of third parties. Our industry has been characterized by extensive
litigation regarding patents, trademarks, trade secrets, and other intellectual property rights, and companies in the industry have used intellectual property
litigation to gain a competitive advantage. While we take steps to ensure that we do not infringe upon, misappropriate or otherwise violate the intellectual
property rights of others, there may be other more pertinent rights of which we are presently unaware.
Third parties may initiate, and have in the past initiated, legal proceedings alleging that we are infringing, misappropriating or otherwise violating their
intellectual property rights. The outcome of such proceedings are uncertain and could have a negative impact on the success of our business. It is possible that
U.S. and foreign patents and pending patent applications controlled by third parties may be alleged to cover our products and technologies, or that we may be
accused of misappropriating third parties’ trade secrets or infringing third parties’ trademarks. We have in the past, and may in the future become party to, or be
threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our products or technologies, including interference
proceedings, post grant review and inter partes review before the USPTO or equivalent foreign regulatory authority. Furthermore, we may also become
involved in other proceedings, such as reexamination, derivation or opposition proceedings before the USPTO or other jurisdictional body relating to our
intellectual property rights or the intellectual property rights of others. Third parties may assert infringement claims against us based on existing patents or
patents that may be granted in the future, regardless of their merit. Because patent applications can take many years to issue and because publication schedules
for pending applications vary by jurisdiction, there may be applications now pending of which we are unaware and which may result in issued patents, which
our current or future products or services infringe. Also, because the claims of published patent applications can change between publication and patent grant,
there may be published patent applications that may ultimately issue with claims that we infringe. There is a risk that third parties may choose to engage in
litigation with us to enforce or to otherwise assert their patent rights against us. Even if we believe such claims are without merit, a court of competent
jurisdiction could hold that these third-party patents are valid and enforceable, and infringed by the use of our products and/or technologies, which could have a
negative impact on the commercial success of our current and any future products or technologies. If we were to challenge the validity of any such third-party
U.S. patent in federal court, we would need to overcome a presumption of validity. As this burden is a high one requiring us to present clear and convincing
evidence as to the invalidity of any such U.S. patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such
U.S. patent. We will have similar burdens to overcome in foreign courts in order to successfully challenge a third-party claim of patent infringement.
Our defense of any litigation or interference proceedings may fail and, even if successful, defending such claims brought against us would cause us to incur
substantial expenses and distract our management and other employees. If such claims are successfully asserted against us, we could be forced to pay
substantial damages. Further, if a patent infringement or other intellectual property rights-related lawsuit were brought against us, we could be forced, including
by court order, to cease developing, manufacturing and/or commercializing the infringing product or technologies. In addition, we could be found liable for
monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right.
Although patent, trademark, trade secret, and other intellectual property disputes have often been settled through licensing or similar arrangements, costs
associated with such arrangements may be substantial and could include ongoing royalties. We may not be able to obtain licenses on commercially reasonable
terms, or at all, in which event our business would be materially and
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adversely affected. Even if we were able to obtain a license, the rights may be nonexclusive, which could result in our competitors and other third parties
gaining access to the same intellectual property. Ultimately, if we are unable to obtain such licenses or make any necessary changes to our products or services,
we could be forced to cease some aspect of our business operations, which could harm our business significantly.
A finding of infringement or an unfavorable interference or derivation proceedings outcome could prevent us from developing, manufacturing and/or
commercializing our products or technologies, or force us to cease some or all of our business operations, which could materially harm our business. Claims
that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business, financial
condition, results of operations and prospects. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately.
Some of our competitors may be able to sustain the costs of litigation or administrative proceedings more effectively than we can because of greater financial
resources and more mature and developed intellectual property portfolios. We could encounter delays in product introductions while we attempt to develop
alternative products or technologies.
If third parties assert infringement, misappropriation or other claims against our customers, these claims may require us to initiate or defend protracted and
costly litigation on behalf of our customers, regardless of the merits of these claims. If any of these claims succeed or settle, we may be forced to pay damages
or settlement payments on behalf of our customers or may be required to obtain licenses for the products they use. If we cannot obtain all necessary licenses on
commercially reasonable terms, our customers may be forced to stop using our products or technologies.
Our competitors, many of which have substantially greater resources and have made substantial investments in patent portfolios, trade secrets, trademarks, and
competing technologies, may have applied for or obtained, or may in the future apply for or obtain, patents or trademarks that will prevent, limit or otherwise
interfere with our ability to make, use, sell and/or export our products or to use our technologies or product names. As the number of competitors in our market
grows and the number of patents issued in this area increases, the possibility of patent infringement claims against us may increase. Moreover, individuals and
groups that are non-practicing entities, commonly referred to as “patent trolls,” purchase patents and other intellectual property assets for the purpose of
making claims of infringement in order to extract settlements. From time to time, we may receive threatening letters, notices or “invitations to license,” or may
be the subject of claims that our products and business operations infringe, misappropriate or otherwise violate the intellectual property rights of others. These
matters can be time-consuming, costly to defend in litigation, divert management’s attention and resources, damage our reputation and brand and cause us to
incur significant expenses or make substantial payments. Additionally, we purchase product components, including hardware and software, from suppliers, and
the design of these components may be outside of our direct control. These suppliers may not indemnify us in the event that a third party alleges the use of such
components infringes its intellectual property rights.
Any lawsuits relating to intellectual property rights could subject us to significant liability for damages and invalidate our intellectual property. Any potential
intellectual property litigation also could force us to do one or more of the following:
•
stop developing, making, selling or using products or technologies that allegedly infringe, misappropriate or otherwise violate the asserted intellectual
property right;
•
pay substantial damages or royalties to the party whose intellectual property rights we may be found to be infringing, misappropriating or otherwise
violating;
•
redesign those products, services or technologies that contain the allegedly infringing intellectual property, which could be costly, disruptive and
infeasible; and attempt to obtain a license to the relevant intellectual property rights from third parties, which may not be available on commercially
reasonable terms or at all, or from third parties who may attempt to license rights that they do not have;
•
lose the opportunity to license our intellectual property rights to others or to collect royalty payments based upon successful protection and assertion of
our intellectual property rights against others;
•
incur significant legal expenses; or
•
pay the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing, misappropriating or
otherwise violating.
Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms
include re-examination, post grant review, inter partes review and equivalent proceedings in foreign jurisdictions (for example, opposition proceedings). Such
proceedings could result in revocation of or amendment to our patents in such a way that they no longer cover our products or technologies. With respect to the
validity question, for example, we cannot be certain that there is no invalidating prior art, of which we, our patent counsel, and the patent examiner were
unaware
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during prosecution. If a third party were to prevail on a legal assertion of invalidity and/or unenforceability, we may lose at least part, and perhaps all, of the
patent protection on our products or technologies. Such a loss of patent protection would have a material adverse impact on our business, financial condition,
results of operations, and prospects.
Because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential
information could be compromised by disclosure during litigation. There could also be public announcements of the results of hearing, motions, or other
interim developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of shares of
our common stock. Even if we ultimately prevail, a court may decide not to grant an injunction against further infringing activity and instead award only
monetary damages, which may not be an adequate remedy. Furthermore, the monetary cost of such litigation and the diversion of the attention of our
management could outweigh any benefit we receive as a result of the proceedings. Uncertainties resulting from the initiation and continuation of patent
litigation or other proceedings could have a material adverse effect on our business. Any of the foregoing may cause us to incur substantial costs, and could
place a significant strain on our financial resources, divert the attention of management from our core business and harm our reputation.
We are involved in lawsuits to protect, enforce or defend our patents and other intellectual property rights, which are expensive, time consuming and could
ultimately be unsuccessful.
In the past we have initiated, and we are currently involved in, litigation to defend our technology including technology developed through our significant
investments in research and development. It is our general policy not to out-license our patents but to protect our sole right to own and practice them. There are
inherent uncertainties in these legal matters, some of which are beyond management’s control, making the ultimate outcomes difficult to predict. See Note 7,
Commitments and Contingencies, to the consolidated financial statements included in this Annual Report on Form 10-K for information regarding certain legal
proceedings in which we are involved. In addition to the litigation in Note 7, we may in the future be a party to other litigation or legal proceedings to protect,
enforce or defend our patents or other intellectual property, which, if resolved adversely to us, could invalidate or render unenforceable our intellectual property
or generally preclude us from restraining, enjoining or otherwise seeking to exclude competitors from commercializing products using technology developed or
used by us. For example, our patents and any patents which we in-license may be challenged, narrowed, invalidated or circumvented. If patents we own or
license are invalidated or otherwise limited, other companies may be better able to develop products that compete with ours, which would adversely affect our
competitive position, business prospects, results of operations and financial condition.
The following are examples of litigation and other adversarial proceedings or disputes that we could become a party to involving our patents or patents licensed
to us:
•
we have initiated, and in the future may initiate, litigation or other proceedings against third parties to enforce our patent rights;
•
third parties have initiated, and in the future may initiate, litigation or other proceedings seeking to invalidate patents owned by or licensed to us or to
obtain a declaratory judgment that their product or technology does not infringe our patents or patents licensed to us or that such patents are invalid or
unenforceable;
•
third parties have initiated, and in the future may initiate, oppositions, IPRs, post grant reviews or reexamination proceedings challenging the validity or
scope of our patent rights, requiring us and/or licensors to participate in such proceedings to defend the validity and scope of our patents;
•
there are, and in the future may be, more challenges or disputes regarding inventorship or ownership of patents currently identified as being owned by or
licensed to us; or
•
at our initiation or at the initiation of a third-party, the USPTO may initiate an interference between patents or patent applications owned by or licensed
to us and those of our competitors, requiring us and/or licensors to participate in an interference proceeding to determine the priority of invention, which
could jeopardize our patent rights.
Furthermore, many of our employees were previously employed at universities or other life sciences companies, including our competitors or potential
competitors. We or our employees may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other
proprietary information of their former employers without consent. Although no such claims are currently pending, litigation may be necessary to defend
against such claims if they arise in the future. If we fail to successfully defend such claims, in addition to paying monetary damages, we may be subject to
injunctive relief and lose valuable intellectual property rights. A loss of key research personnel work product could hamper or prevent our ability to
commercialize certain potential products, which could severely harm our business. Even if we are successful in defending against these claims, litigation could
result in substantial costs and be a distraction to management.
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Risks related to ownership of our Class A common stock
Sales of a substantial number of shares of our Class A common stock by our existing stockholders could cause the price of our Class A common stock to
decline.
Sales of a substantial number of shares of our Class A common stock in the public market could occur at any time. We have registered all shares of Class A
common stock that we may issue under our equity compensation and employee stock purchase plans. These shares can be freely sold in the public market upon
issuance and, if applicable, vesting, subject to our insider trading policy, where applicable, and applicable securities laws including volume limitations
applicable to affiliates under Rule 144 and Rule 701. Sales of Class A common stock in the public market may make it more difficult for us to sell equity
securities in the future at a time and at a price that we deem appropriate. These sales also could cause the trading price of our Class A common stock to fall and
make it more difficult for you to sell shares of our Class A common stock.
The multi-class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the
completion of our IPO, including our co-founders, and may depress the trading price of our Class A common stock.
Our Class A common stock has one vote per share and our Class B common stock has ten votes per share, except as otherwise required by law. Because of the
ten-to-one voting ratio between our Class B common stock and Class A common stock, the holders of our Class B common stock collectively control a
majority of the combined voting power of our common stock and therefore are able to control all matters submitted to our stockholders for approval, other than
matters that require a supermajority for approval. This concentrated control is expected to limit or preclude Class A stockholders' ability to influence certain
corporate matters requiring stockholder approval. In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock
that an investor may feel is in her or his best interest as one of our stockholders.
Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions,
such as certain transfers effected for estate planning purposes where sole dispositive power and exclusive voting control with respect to the shares of Class B
common stock is retained by the transferring holder and transfers between our co-founders. In addition, each outstanding share of Class B common stock held
by a stockholder who is a natural person, or held by the permitted entities of such stockholder (as described in our amended and restated certificate of
incorporation), will convert automatically into one share of Class A common stock upon the death of such natural person. In the event of the death or
permanent and total disability of a co-founder, shares of Class B common stock held by such co-founder or his permitted entities will convert to Class A
common stock, provided that the conversion will be deferred for nine months, or up to 18 months if approved by a majority of our independent directors,
following his death or permanent and total disability. Transfers between our co-founders are permitted transfers and will not result in conversion of the shares
of Class B common stock that are transferred. The conversion of Class B common stock to Class A common stock has had, and is expected to continue to have,
the effect, over time, of increasing the relative voting power of those individual holders of Class B common stock who retain their shares in the long term. To
date, such conversions have had the effect of increasing the relative voting power of our co-founders and certain of our directors and is expected to continue to
have such an effect if our co-founders and such directors retain their shares in the long term.
Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws might discourage, delay or prevent
a change in control of our company or changes in our management and, therefore, depress the trading price of our Class A common stock.
Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay or prevent a change in
control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an
interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our restated certificate of incorporation and
restated bylaws contain provisions that may make the acquisition of our company more difficult, including the following:
•
any transaction that would result in a change in control of our company requires the approval of a majority of our outstanding Class B common stock
voting as a separate class;
•
our multi-class common stock structure provides our holders of Class B common stock with the ability to significantly influence the outcome of matters
requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A common stock and Class B
common stock;
•
our board of directors is classified into three classes of directors with staggered three-year terms and directors are only able to be removed from office
for cause by the affirmative vote of holders of at least two-thirds of the voting power of our then outstanding capital stock;
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•
certain amendments to our amended and restated certificate of incorporation require the approval of stockholders holding two-thirds of the voting power
of our then outstanding capital stock;
•
any stockholder-proposed amendment to our amended and restated bylaws requires the approval of stockholders holding two-thirds of the voting power
of our then outstanding capital stock;
•
our stockholders are only able to take action at a meeting of stockholders and are not able to take action by written consent for any matter;
•
our stockholders are able to act by written consent only if the action is first recommended or approved by the board of directors;
•
vacancies on our board of directors are able to be filled only by our board of directors and not by stockholders;
•
only our chairman of the board of directors, chief executive officer or a majority of the board of directors are authorized to call a special meeting of
stockholders;
•
certain litigation against us can only be brought in Delaware;
•
our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established and shares of which may be
issued, without the approval of the holders of our capital stock; and
•
advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of
stockholders.
These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could also
discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they
desire, any of which, under certain circumstances, could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and
could also affect the price that some investors are willing to pay for our Class A common stock.
Our amended and restated bylaws designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all
disputes between us and our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors,
officers or employees.
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, (i) any derivative action or proceeding
brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, stockholders or employees to us or
our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation
or our amended and restated bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine of the law of the State of Delaware shall, to the
fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter
jurisdiction thereof, the federal district court of the State of Delaware. Our amended and restated bylaws further provide that, unless we consent in writing to
the selection of an alternative forum, the federal district courts of the United States are the exclusive forum for the resolution of any claims under the Securities
Act or any successor thereto. Nothing in our amended and restated bylaws precludes stockholders that assert claims under the Exchange Act, or any successor
thereto, from bringing such claims in state or federal court, subject to applicable law. Any person or entity purchasing or otherwise acquiring or holding any
interest in any of our securities shall be deemed to have notice of and consented to the foregoing forum selection provisions. These exclusive-forum provisions
may limit a stockholder’s ability to bring a claim in a judicial forum of such stockholder’s choosing for disputes with us or our directors, officers or other
employees, which may discourage lawsuits against us and our directors, officers and other employees and may result in increased costs for investors to bring a
claim. If a court were to find the exclusive-forum provisions in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur
additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations.
General risk factors
We may fail to meet our publicly announced guidance or other expectations about our business, which could cause our stock price to decline.
In the past we have provided, and in the future we may provide, guidance and other expectations regarding our expected financial and business performance.
Our guidance is based on a number of assumptions and does not reflect all possible impacts to our business including, for example, all potential impacts of
recently announced changes to government funding of research and the other risks discussed in this section titled Risk Factors. Correctly identifying key
factors affecting business conditions and predicting future events is inherently an uncertain process, and our guidance or the other expectations we set may not
ultimately
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be accurate and has in the past been inaccurate in certain respects. For example, we failed to meet our publicly announced expectations regarding full year
revenue in both 2022 and 2024. Further, in August 2022, we announced our goal to attain cash flows from operating activities in excess of our capital
investment requirements by the end of 2023. While we achieved this goal for the quarter ended December 31, 2023, we did not attain cash flows from
operating activities in excess of our capital investment requirements for the full year ended December 31, 2024 and we may not be able to maintain cash flows
from operating activities in excess of our capital investment requirements in the future on a sustained basis or at all due to a variety of factors, including if we
do not generate sufficient revenue or achieve our gross margin targets, if we acquire businesses or technologies (or complete expenditures related to previous
acquisitions) or if our spending is higher than anticipated. If our guidance varies from actual results or if we fail to meet other expectations regarding our
business, the market value of our Class A common stock could decline significantly.
The market price of our Class A common stock may be volatile, which could result in substantial losses for investors.
The trading price of our Class A common stock has been and may continue to be highly volatile and could be subject to wide fluctuations in response to various
factors, some of which are beyond our control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this report, these factors
include:
•
the timing of our launch of future products and degree to which the launch and commercialization thereof meets the expectations of securities analysts
and investors;
•
changes in the structure or funding of research at academic and research laboratories and institutions, including changes that would affect their ability to
purchase our instruments or consumables;
•
the success of existing or new competitive businesses or technologies;
•
announcements about new research programs or products of our competitors;
•
general economic, industry and market conditions;
•
volatility and variations in market conditions in the life sciences sector generally, or the genomics sector specifically;
•
whether our financial results meet our publicly announced expectations or the expectations of securities analysts or investors;
•
actual or anticipated changes in our estimates as to our financial results or development timelines, variations in our financial results or those of
companies that are perceived to be similar to us or changes in estimates or recommendations by securities analysts, if any, that cover our Class A
common stock or companies that are perceived to be similar to us;
•
investor perceptions of us or our industry;
•
the level of expenses related to any of our research and development programs or products;
•
litigation and governmental investigations involving us, our industry or both;
•
the outcomes of and related rulings in the litigation and administrative proceedings in which we are currently or may in the future become involved;
•
developments or disputes concerning patent applications, issued patents or other proprietary rights;
•
the recruitment or departure of key personnel;
•
regulatory or legal developments in the United States and other countries;
•
the announcement or expectation of additional financing efforts;
•
stock-based compensation expense;
•
the failure or discontinuation of any of our product development and research programs;
•
sales of our Class A common stock or Class B common stock by us, our insiders or other stockholders;
•
natural disasters, infectious diseases, conflict, war, civil unrest, epidemics or pandemics or resurgences or major catastrophic events; and
•
the other factors described in this “Risk Factors” section.
In recent years, stock markets in general, and the market for life sciences technology companies in particular (including companies in the genomics,
biotechnology, diagnostics and related sectors), have experienced significant price and volume fluctuations that have often been unrelated or disproportionate
to changes in the operating performance of the companies whose
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stock is experiencing those price and volume fluctuations. Broad market and industry factors may seriously affect the market price of our Class A common
stock, regardless of our actual operating performance. Volatility in our stock price also impacts the value of our equity compensation, which affects our ability
to recruit and retain employees. In the past, when the market price of a stock has been volatile, securities litigation has often been brought against that
company. Because of the potential volatility of our stock price, we may become the target of securities litigation in the future. Securities litigation could result
in substantial costs and divert management’s attention and resources from our business. We have currently obtained only director and officer liability coverage
(commonly referred to as “Side A” coverage). This means that while our directors and officers have direct insurance coverage for acts which the company is
not legally required or permitted to indemnify them, the company itself does not have coverage for amounts incurred in defending, among other things,
stockholder derivative or securities class action lawsuits or in the event of certain investigative actions, for amounts it must pay as a result of such suits or
amounts it must pay to indemnify our directors or officers. We are in essence self-insuring for these costs. Any costs incurred in connection with such litigation
could have a material adverse effect on our business, financial condition and results of operations.
Securities analysts may not publish favorable research or reports about our business or may publish no information at all, which could cause our stock
price or trading volume to decline.
The trading market of our common stock is influenced to some extent by the research and reports that industry or financial analysts publish about us and our
business. We do not control these analysts. The analysts who publish information about our common stock may have had relatively little experience with us or
our industry, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates. If any of the
analysts who cover us provide inaccurate or unfavorable research or issue an adverse opinion regarding our stock price, our stock price could decline. If one or
more of these analysts cease coverage of us or fail to publish reports covering us regularly, we could lose visibility in the market, which in turn could cause our
stock price or trading volume to decline. If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove
to be incorrect, our operating results could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a
decline in the market price of our common stock. For example, the market price of our common stock declined after our financial results for the quarters ended
June 30, 2022 and September 30, 2024 fell short of the expectations of securities analysts and investors.
The preparation of financial statements in conformity with generally accepted accounting principles in the United States ("GAAP") requires management to
make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. We base our estimates on
historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources. If our assumptions
change or if actual circumstances differ from our assumptions, our operating results may be adversely affected and could fall below our publicly announced
guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our common stock.
We have incurred and will continue to incur increased costs as a result of operating as a public company, and our management will be required to devote
substantial time to compliance initiatives and corporate governance practices, including maintaining an effective system of internal controls over financial
reporting.
We have incurred and will continue to incur significant legal, accounting and other expenses because the Dodd-Frank Wall Street Reform and Consumer
Protection Act, SOX, the listing requirements of Nasdaq and other applicable federal and Delaware rules and regulations impose various requirements on
public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices.
Our management and other personnel are required to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations
have increased our legal and financial compliance costs and have made some activities more time-consuming and costly. We cannot predict or estimate the
amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements also could make it more difficult for us
to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers. Moreover, these rules and regulations
often are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as
new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs
necessitated by ongoing revisions to disclosure and governance practices.
The rules and regulations applicable to us as a public company and recent trends in the insurance market have made it more expensive for us to obtain director
and officer liability insurance. We have currently obtained only director and officer liability
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coverage (commonly referred to as “Side A” coverage). This means that while our directors and officers have direct insurance coverage for acts which the
company is not legally required or permitted to indemnify them, the company itself does not have coverage for amounts incurred in defending, among other
things, stockholder derivative or securities class action lawsuits or in the event of certain investigative actions, for amounts it must pay as a result of such suits
or amounts it must pay to indemnify our directors or officers. We are in essence self-insuring for these costs. Any costs incurred in connection with such
litigation could have a material adverse effect on our business, financial condition and results of operations.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
Cybersecurity Risk Management and Strategy
We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity and availability of our critical
systems and information. Our cybersecurity risk management program includes a cybersecurity incident response plan.
We design and assess our program based on the Center For Internet Security (“CIS”) Controls. While this does not imply that we meet any particular technical
standards, specifications or requirements, we use the CIS Controls framework as a guide to help us identify, assess and manage cybersecurity risks relevant to
our business.
Our cybersecurity risk management program is integrated into our overall risk management program which includes insurance coverage for cybersecurity
incidents and shares common methodologies, reporting channels and governance processes that apply across the risk management program to other legal,
compliance, strategic, operational and financial risk areas.
Key elements of our cybersecurity risk management program include, but are not limited to, the following:
•
risk assessments designed to help identify material risks from cybersecurity threats to our critical systems and information;
•
a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls and (3) our response to
cybersecurity incidents;
•
the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security processes;
•
cybersecurity awareness training of our employees, including incident response personnel and senior management;
•
a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and
•
a third-party risk management process for key service providers based on our assessment of their criticality to our operations and respective risk
profile.
We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are
reasonably likely to materially affect us, including our operations, business strategy, results of operations or financial condition.
For more information, see the section titled “Risk Factor—Risks related to our intellectual property, information technology and data security—If we or our
critical third-party providers experience a significant disruption in our information technology systems or breaches of data security, our business could be
adversely affected.”
Cybersecurity Governance
Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee oversight of cybersecurity and other
information technology risks. The Audit Committee oversees management’s implementation of our cybersecurity risk management program.
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The Audit Committee receives periodic reports from management on our cybersecurity risks, including written reports. In addition, management updates the
Audit Committee, as necessary, regarding any material cybersecurity incidents, as well as any incidents with lesser impact potential.
The Audit Committee reports to the full Board regarding its activities, including those related to cybersecurity.
Our management team, including our Chief Legal Officer, President, Chief Financial Officer and Vice President of Data Analytics and Information Security is
responsible for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk
management program and supervises both our internal cybersecurity personnel and our external cybersecurity consultants. Our management team’s cumulative
experience includes decades of experience managing cybersecurity risks including serving in similar roles leading and overseeing cybersecurity programs at
other companies. Our Vice President of Data Analytics and Information Security has served in various roles in information technology and information security
for more than 10 years. He holds an undergraduate degree in engineering science from Harvard University and postgraduate degrees in computer science from
Massachusetts Institute of Technology. Our Chief Legal Officer has over 25 years of experience managing risks, including risks arising from cybersecurity
threats, at several large publicly-traded technology companies. Team members who support our information security program have relevant educational and
industry experience, including holding similar positions at large technology companies.
Our management team takes steps to stay informed about and monitor efforts to prevent, detect, mitigate and remediate cybersecurity risks and incidents
through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental,
public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in our information
technology environment.
Item 2. Properties.
Our global corporate headquarters, research and development facilities, and manufacturing and distribution centers are located in Pleasanton, California, where
we own approximately 148,000 square feet of space and lease approximately 300,000 square feet of space under leases expiring between June 2025 and June
2033, as well as a manufacturing and distribution center in Singapore and a manufacturing center in Taiwan. Including the Pleasanton leases, we lease
approximately 410,000 square feet globally. We believe that our current and planned facilities are sufficient to meet our ongoing needs and that, if we require
additional space, we will be able to obtain additional facilities on commercially reasonable terms.
Item 3. Legal Proceedings.
See Note 7, Commitments and Contingencies, to the consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K for
information regarding certain legal proceedings in which we are involved.
We are regularly subject to lawsuits, claims, arbitration proceedings, administrative actions and other legal and regulatory proceedings involving intellectual
property disputes, commercial disputes, competition and other matters, and we may become subject to additional types of lawsuits, claims, arbitration
proceedings, administrative actions, government investigations and legal and regulatory proceedings in the future and as our business grows, including
proceedings related to product liability or our acquisitions, securities issuances or our business practices, including public disclosures about our business. Our
success depends in part on our non-infringement of the patents or proprietary rights of third parties. In the past, third parties have asserted and may in the future
assert that we are employing their proprietary technology without authorization. We have been involved in multiple patent litigation matters and other
proceedings in the past and we expect that given the litigious history of our industry and the high profile of operating as a public company, third parties may
claim that our products infringe their intellectual property rights. We have also initiated litigation to defend our technology including technology developed
through our significant investments in research and development. It is our general policy not to out-license our patents but to protect our sole right to own and
practice them. There are inherent uncertainties in these legal matters, some of which are beyond management’s control, making the ultimate outcomes difficult
to predict.
For further discussion of the risks relating to intellectual property and our pending litigation, see the section titled “Risk Factors—Risks related to litigation and
our intellectual property” under Item 1A.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our Class A common stock is listed on the Nasdaq Global Select Market under the symbol “TXG.”
Holders of Common Stock
As of January 31, 2025, there were 32 holders of record of our Class A common stock and 19 holders of record of our Class B common stock. The actual
number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street
name by brokers and other nominees.
Dividend Policy
We have never declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings and do not expect to pay any
dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to
applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions,
general business conditions and other factors that our board of directors may deem relevant.
Stock Performance Graph
This graph below is not “soliciting material” or deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to liabilities
under that section, and shall not be deemed incorporated by reference into this Annual Report or into any other filing of 10x Genomics, Inc. under the
Securities Act except to the extent that we specifically incorporate this information by reference therein, whether made before or after the date hereof and
irrespective of any general incorporation language in any such filing.
The following graph compares the cumulative total return to stockholder return on our Class A common stock relative to the cumulative total returns of the
Nasdaq Composite Index, the Nasdaq Biotechnology Composite Index and the Russell 300 Medical Equipment and Services Sector Index. The Nasdaq
Composite Index and Nasdaq Biotechnology Composite Index have been included in the Stock Performance Graph of our Annual Reports in prior years, but
we added the Russell 300 Medical Equipment and Services Sector Index to the Stock Performance Graph for the first time in this Annual Report because upon
the completion of the applicable performance period, potential achievement of certain equity awards granted to certain of the Company’s executives in 2024
shall be determined in part based on the Company’s performance compared to members of such index. An investment of $100 is assumed to have been made in
our Class A common stock and each index at market close on September 12, 2019 (the first day of trading of our Class A Common Stock on the Nasdaq Global
Select Market) and its relative performance is tracked through December 31, 2024. Pursuant to applicable Securities and Exchange Commission rules, all
values assume reinvestment of the full amount of all dividends, however no dividends have been declared on our Class A common stock to date. The offering
price of our Class A common stock in our initial public offering (“IPO”), which had a closing stock price of $52.75 on September 12, 2019, was $39.00 per
share. The stockholder returns shown on the graph below are based on historical results and are not indicative of future performance, and we do not make or
endorse any predictions as to future stockholder returns.
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COMPARISON OF CUMULATIVE TOTAL RETURN
among 10x Genomics, Inc., the Nasdaq Composite Index, the Nasdaq Biotechnology Composite Index and the Russell 3000 Medical Equipment and Services
Sector Index
Cumulative Total Return
December 31, 2019
December 31, 2020
December 31, 2021
December 31, 2022
December 31, 2023
December 31, 2024
10x Genomics, Inc.
$
100
$
185.70
$
195.36 $
47.79 $
73.39 $
18.83
Nasdaq Composite Index
100
143.64
174.36
116.65
167.30
215.22
Nasdaq Biotechnology Composite Index
100
126.42
126.45
113.65
118.87
118.20
Russell 3000 Medical Equipment and
Services Sector Index
$
100
$
124.71
$
150.60 $
117.11 $
122.95 $
130.71
Securities Authorized for Issuance under Equity Compensation Plans
The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2025 Annual Meeting of Stockholders, which will
be filed with the SEC no later than 120 days after December 31, 2024.
Sales of Unregistered Securities
None.
Use of Proceeds
None.
Issuer Purchases of Equity Securities
None.
Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion of our financial condition and results of operations in conjunction with our audited consolidated financial statements
and the related notes and other financial information included elsewhere in this Annual Report and our audited consolidated financial statements and notes
thereto.
As discussed in the section titled “Special Note Regarding Forward-looking Statements,” the following discussion and analysis, in addition to historical
financial information, contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” under Part I, Item
1A above.
Overview
We are a life sciences technology company focused on building innovative products and solutions to interrogate, understand and master biology. Our
integrated solutions include instruments, consumables and software for analyzing biological systems at resolution and scale that matches the complexity of
biology. Our commercial product portfolio leverages our Chromium instruments and our Visium CytAssist and our Xenium Analyzer, which we refer to as
“Spatial instruments,” and our proprietary microfluidic chips, slides, reagents and other consumables for our Chromium, Visium and Xenium solutions, which
we refer to as “consumables.” We bundle our software with these products to guide customers through the workflow, from sample preparation through analysis
and visualization. Customers purchase instruments and consumables from us for use in their experiments. In addition to instrument and consumable sales, we
derive revenue from post-warranty service contracts for our instruments.
Since our inception in 2012, we have incurred net losses in each year. Our net losses were $182.6 million and $255.1 million for the years ended
December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $1.5 billion and cash and cash equivalents and
marketable securities totaling $393.4 million. We expect to continue to incur significant expenses for the foreseeable future and to incur operating losses in the
near term. We expect our expenses will modestly increase in connection with our ongoing activities, including in connection with our efforts to attract, hire and
retain qualified personnel.
Key business metrics
We regularly review a number of operating and financial metrics, including cumulative instruments sold and total consumables reactions, to evaluate our
business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We believe that these
metrics are representative of our current business; however, we anticipate these may change or may be substituted for additional or different metrics as our
business grows and as we introduce new products or new versions of existing products.
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Cumulative instruments sold
As of December 31,
2024
2023
2022
Chromium
5,808
5,180
4,411
Visium CytAssist
810
531
211
Xenium
421
255
8
Cumulative instruments sold
7,039
5,966
4,630
Our products are sold to academic and translational researchers and biopharmaceutical companies. Our Chromium and Visium CytAssist instruments are
user installable and do not require in-person training. Our Xenium instrument requires installation and we offer in-person training for its use. We believe
cumulative instruments sold is one of the indicators of our ability to drive customer adoption of our products. We define cumulative instruments sold as the
cumulative number of Chromium instruments, Visium CytAssists and Xenium Analyzers sold since inception.
Our quarterly instrument unit volumes can fluctuate due to a number of factors, including the procurement and budgeting cycles of many of our
customers, especially government and academic institutions where unused funds may be forfeited or future budgets reduced if purchases are not made by their
fiscal year end, and the purchasing patterns of international customers which vary due to procurement or budgeting cycles, holidays or other factors which may
result in a disproportionate amount of their purchasing activity occurring in specific periods. Similarly, our biopharmaceutical customers typically have
calendar year fiscal years which may result in a disproportionate amount of their purchasing activity occurring during our fourth quarter. We also believe the
timing of unit sales has been impacted and will continue to be impacted by the timing of product introductions and transitions which can either accelerate or
delay demand of existing and new products or new versions of existing products depending on the needs of individual researchers to conclude existing studies
or to use capabilities of new products or versions. Also, the timing and magnitude of our price changes can influence quarterly instrument unit volumes. For
example, we believe that historical announcements of price increases have caused customers to pull forward purchases of instruments. Conversely, we
anticipate that announced price decreases could postpone instrument purchases to future quarters. We therefore believe that an annual representation of
cumulative instruments sold is most appropriate for assessing trends in our business.
Total consumables reactions sold
Year ended December 31,
2024
2023
2022
Chromium
310,900
312,500
290,900
Visium
35,400
29,300
28,300
Xenium
10,800
5,200
100
Total consumable reactions
357,100
347,000
319,300
A consumable reaction is the reagent setup needed to perform an experiment using one of our solutions. Reactions represent the unit volumes that we
sell when a researcher purchases our consumables. As such, consumable reactions sold is an appropriate metric for assessing trends in our business. The figures
in the table above (rounded to the nearest hundred) represent the total consumable reactions, by product platform and in total, for the years ended December 31,
2024, 2023 and 2022.
Key factors affecting our performance
We believe that our financial performance has been and in the foreseeable future will continue to be primarily driven by the following factors. While
each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address in order to grow
and improve our results of operations. Our ability to successfully address the factors below is subject to various risks and uncertainties, including those
described under the heading “Risk Factors.”
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Instrument sales
Management focuses on instrument sales as an indicator of current business success and a leading indicator of likely future sales of consumables. We
expect the number of cumulative instruments sold to continue to grow as we increase penetration in our existing markets and expand into, or offer new features
and solutions that appeal to, new markets.
We plan to grow our instrument sales in the coming years through multiple strategies including expanding our sales efforts globally, adjusting prices for
our instruments and continuing to enhance the underlying technology and applications for life sciences research. We regularly solicit feedback from our
customers and focus our research and development efforts on enhancing the fleet of 10x instruments and enabling their ability to use additional applications
that address their needs, and we believe that these efforts help to drive sales of our instruments and consumables.
Recurring consumable revenue
We regularly assess trends relating to recurring consumable revenue based on our product offerings, our customer base and our understanding of how
our customers use our products. We sell additional instruments and launch additional consumables solutions, some of which do not require the use of a 10x
instrument, and adjust prices of our consumables to drive increased consumables usage by our existing customers and to gain new customers. Consumables
revenue on an absolute basis is expected to increase over time and remain the bulk of our revenue.
Pricing changes
We believe that price changes can affect purchasing decisions by our customers and potential customers. We believe that lowering prices for our
products can unlock elasticity of demand and increase purchases of both instruments and consumables. We expect to lower prices for certain of our products in
2025 and expect sales of our instruments and consumables to increase over time as a result of introducing lower prices for our instruments and consumables.
Revenue mix and gross margin
Our revenue is derived from sales of our instruments, consumables and services. There have been fluctuations in the mix between instruments and
consumables and amongst our consumables. Each of our consumables solutions is designed to allow researchers to study a different aspect of biology, such as
RNA, protein or epigenetics, at a resolution and scale that may be impractical or impossible using previously existing tools. As each of our solutions has been
introduced, they have been initially purchased by a small number of early adopters. As these early adopters successfully perform experiments and publish
scientific articles using our solutions, the utility of these solutions is more broadly understood and the solutions are then subsequently adopted by the larger
research community. The revenue contribution from these and other consumable products has varied and is expected to vary on a quarterly basis due to several
factors, including the publication of scientific papers demonstrating the value of the consumables, the availability of grants to fund research, budgetary timing,
our introduction of new product features or configurations and new consumables offerings and our own manufacturing capacity or the capacity of our partners.
For each of the years ended December 31, 2024, 2023 and 2022, our Chromium Universal Gene Expression consumables were our highest selling consumables
products.
Our margins are generally higher for those instruments and consumables that we sell directly to customers as compared to those that we sell through
distributors. We expect the mix of direct sales as compared to sales through distributors to remain relatively constant in the near term.
We expect our gross margin to trend lower due in part to change in product mix with newly introduced products and product versions, lower prices of
our products and the impacts of inflation including, among other impacts, employee compensation and benefits and increased supply chain costs.
Continued investment in growth
Historically, our revenue growth has been driven by the development of new solutions and quick adoption of our solutions by our customer base. We
intend to continue to make focused investments to support the growth of our business and therefore expect expenses to increase. Excluding acquisitions, we do
not expect our operating expenditures to meaningfully increase in 2025. As cost of revenue, operating expenses and capital expenditures fluctuate over time,
we may experience short-term, negative impacts to our results of operations and cash flows, but we are undertaking such investments in the belief that they will
contribute to long-term growth.
Acquisitions of key technologies
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We have made, and intend to continue to make, investments that meet management’s criteria to expand or add key technologies that we believe will
facilitate the commercialization of new products and new versions of existing products in the future. Such investments could take the form of an acquisition of
a business, asset acquisition or the exclusive or non-exclusive in-license of intellectual property rights. Any such acquisitions we make may affect our future
financial results. While we have not previously entered into material joint-development, partnership or joint-venture agreements, we may in the future decide to
do so and any such arrangements may limit our rights and the commercial opportunities of any jointly developed technology.
Components of Results of Operations
Revenue
We generate virtually all of our revenue through the sale of our instruments and consumables to customers. We also generate a small portion of our
revenue from instrument service agreements which relate to extended warranties. Our revenue is subject to fluctuation based on the foreign currency in which
our products are sold, principally for sales denominated in the euro, Great British pound and Japanese yen.
Our revenue from consumables includes sales of our Chromium, Visium and Xenium consumable products. Our consumables are designed to work
exclusively with our instruments. Our Chromium, Xenium and Visium consumables require the use of a 10x Genomics instrument, with the exception of our
Spatial Gene Expression v1 solution. Our instruments and consumables are generally sold without the right of return. Revenue is recognized as instruments and
consumables are shipped. Revenue is recognized net of any sales incentive, distributor rebates and commissions and any taxes collected from customers.
Instrument service agreements are typically entered into for a one-year term, with the coverage period beginning after the expiration of the standard one-year
warranty period. Revenue from the sale of instrument service agreements are recognized ratably over the coverage period.
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Cost of revenue, gross profit and gross margin
Cost of revenue. Cost of revenue primarily consists of manufacturing costs incurred in the production process including personnel and related costs,
costs of component materials, manufacturing overhead, packaging and delivery costs and allocated costs including facilities and information technology. In
addition, cost of revenue includes royalty costs for licensed technologies included in our products, warranty costs, provisions for slow-moving and obsolete
inventory and personnel and related costs and component costs incurred in connection with our obligations under our instrument service agreements. When
applicable, we record royalty accruals relating to sales of our products as cost of revenue.
Gross profit/gross margin. Gross profit is calculated as revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue.
Our gross profit and gross margins in future periods are expected to fluctuate from quarter to quarter and will depend on a variety of factors, including: market
conditions that may impact our pricing; sales mix changes among consumables, instruments and services; product mix changes between established products
and new products and new versions of existing products; impacts of inflation and increased supply chain costs; excess and obsolete inventories; royalties; our
cost structure for manufacturing operations relative to volume; and product warranty obligations. We currently anticipate that we will experience an increase in
absolute dollars of both revenue and cost of revenue as we grow our business.
Research and development. Research and development expense primarily consists of personnel and related costs, independent contractor costs,
laboratory supplies, equipment maintenance prototype and materials expenses, amortization of developed technology and intangibles and allocated costs
including facilities and information technology.
We plan to continue to modestly invest in our research and development efforts to enhance existing products and develop new products and new
versions of existing products. As a result of these and other initiatives, we expect research and development expense will modestly increase in absolute dollars
in future periods and vary from period to period as a percentage of revenue.
In-process research and development. In-process research and development consists of costs incurred to acquire intellectual property for research and
development. We expect these costs to be recognized, in most cases, only in periods during which we complete an acquisition of assets comprised in whole or
part of intellectual property for research and development. We periodically evaluate acquisitions of this nature.
Selling, general and administrative. Selling, general and administrative expense primarily consists of costs related to the selling and marketing of our
products, including sales incentives and advertising expenses and costs associated with our finance, accounting, legal, human resources and administrative
personnel. Related costs associated with these functions, such as attorney and accounting fees, recruiting services, administrative services, insurance, public
relations and communication activities, marketing programs and trade show appearances, travel, customer service costs, safety equipment purchases and
cleaning and allocated costs including facilities and information technology, are also included in selling, general and administrative expenses.
We expect to incur additional selling, general and administrative expenses due to continued investment in our sales, marketing and customer service
efforts to support the anticipated growth of our business. We expect infrastructure costs including allocated facilities and information technology costs to
remain flat in absolute dollars. As a result of these and other initiatives, we expect selling, general and administrative expenses to vary from period to period as
a percentage of revenue and increase in absolute dollars in future periods. We expect our stock-based compensation expense allocated to cost of revenue,
research and development expenses and selling, general and administrative expenses to decrease in absolute dollars.
Interest income
Interest income consists of interest earned on our cash and cash equivalents which are invested in bank deposits, money market funds and marketable
securities.
Other income (expense), net
Other income (expense), net primarily consists of realized and unrealized gains and losses related to foreign exchange rate remeasurements.
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Provision for income taxes
Our provision for income taxes consists primarily of foreign taxes. As we expand the scale and scope of our international business activities, any
changes in the U.S. and foreign taxation of such activities may increase our overall provision for income taxes in the future.
As of December 31, 2024, we had federal net operating loss (“NOL”) carryforwards of $638.7 million and federal tax credit carryforwards of $88.5
million. Our federal NOLs generated after December 31, 2017, which total $632.9 million, are carried forward indefinitely, while all of our other federal NOL
and tax credit carryforwards expire beginning in 2033. As of December 31, 2024, we had state NOL carryforwards of $424.5 million, which primarily expire
beginning in 2033. In addition, we had state tax credit carryforwards of $68.3 million, which carry forward indefinitely. Our ability to utilize such
carryforwards for income tax savings is subject to certain conditions and may be subject to certain limitations in the future due to ownership changes. As such,
there can be no assurance that we will be able to utilize such carryforwards. We have experienced a history of losses and a lack of future taxable income would
adversely affect our ability to utilize these NOL and tax credit carryforwards. We currently maintain a full valuation allowance against these tax assets.
Results of Operations
In this section, we discuss the results of our operations for the year ended December 31, 2024 compared to the year ended December 31, 2023. For a
discussion of the year ended December 31, 2023 compared to the year ended December 31, 2022, please refer to Part II, Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2023.
Year Ended December 31,
(in thousands)
2024
2023
2022
Revenue
$
610,785
$
618,727
$
516,409
Cost of revenue
196,303
209,414
120,386
Gross profit
414,482
409,313
396,023
Operating expenses:
Research and development
264,698
270,332
265,667
In-process research and development
—
60,980
—
Selling, general and administrative
344,343
343,330
298,300
Total operating expenses
609,041
674,642
563,967
Loss from operations
(194,559)
(265,329)
(167,944)
Other income (expense):
Interest income
18,448
16,906
6,647
Interest expense
(4)
(33)
(476)
Other expense, net
(1,585)
(307)
(198)
Total other income
16,859
16,566
5,973
Loss before provision for income taxes
(177,700)
(248,763)
(161,971)
Provision for income taxes
4,927
6,336
4,029
Net loss
$
(182,627)
$
(255,099)
$
(166,000)
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Revenue
Year Ended December 31,
Change
2024
2023
$
%
Instruments
Chromium
$
35,212 $
47,866 $
(12,654)
(26)%
Spatial
57,503
75,605
(18,102)
(24)%
Total instruments revenue
92,715
123,471
(30,756)
(25)%
Consumables
Chromium
372,308
420,316
(48,008)
(11)%
Spatial
121,124
59,237
61,887
104 %
Total consumables revenue
493,432
479,553
13,879
3 %
Services
24,638
15,703
8,935
57 %
Total revenue
$
610,785 $
618,727 $
(7,942)
(1)%
Revenue decreased $7.9 million, or 1%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023. Instruments revenue
decreased $30.8 million, or 25%, to $92.7 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to
lower volume of Chromium and Spatial instruments sold. Consumables revenue increased $13.9 million, or 3%, to $493.4 million for the year ended
December 31, 2024 as compared to the year ended December 31, 2023, primarily driven by growth in Spatial consumables sales, partially offset by lower
Chromium consumables sales due primarily to price decreases and changes in product mix. Service revenue increased $8.9 million, or 57%, for the year ended
December 31, 2024 as compared to year ended December 31, 2023, primarily driven by increased service plans for both Chromium and Spatial instruments.
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Cost of Revenue, Gross Profit and Gross Margin
Year Ended December 31,
Change
(dollars in thousands)
2024
2023
$
%
Cost of revenue
$
196,303
$
209,414
$
(13,111)
(6)%
Gross profit
$
414,482
$
409,313
$
5,169
1 %
Gross margin
68 %
66 %
Cost of revenue decreased $13.1 million, or 6%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023. The decrease
was primarily driven by lower manufacturing costs of $22.6 million due to decreased sales and change in product mix, partially offset by higher royalties of
$9.8 million.
Operating Expenses
Year Ended December 31,
Change
(dollars in thousands)
2024
2023
$
%
Research and development
$
264,698
$
270,332
$
(5,634)
(2)%
In-process research and development
—
60,980
(60,980)
N/A
Selling, general and administrative
344,343
343,330
1,013
— %
Total operating expenses
$
609,041
$
674,642
$
(65,601)
(10)%
Research and development expense decreased $5.6 million, or 2%, for the year ended December 31, 2024 as compared to the year ended December 31,
2023. The decrease was primarily driven by a decrease in allocated costs for facilities and information technology of $2.7 million, a decrease in personnel
expenses of $2.5 million, including a $6.5 million reduction in stock-based compensation expense, a decrease in depreciation and amortization of $1.4 million,
partially offset by an increase in other expenses of $0.8 million.
In-process research and development expense recorded during the year ended December 31, 2023 related to the January 2023 agreement to acquire
certain intangible and other assets from Centrillion Technologies, Inc. and Centrillion Technology Holdings Corp. which was accounted for as an asset
acquisition. In connection with the acquisition, we recognized an in-process research and development intangible asset of $61.0 million which did not have
alternative future use and therefore was recognized as an expense during the period. See Note 4 to the consolidated financial statements for further details.
There were no similar purchases in year ended December 31, 2024.
Selling, general and administrative expenses increased $1.0 million, or 0.3%, for the year ended December 31, 2024 as compared to the year ended
December 31, 2023. The increase was primarily driven by an increase in outside legal expenses of $21.2 million, an increase in allocated costs for facilities and
information technology to support operational expansion of $1.7 million, partially offset by a decrease in personnel expenses of $18.6 million, including a $21
million reduction in stock-based compensation expense, and a decrease in other expenses of $4.4 million.
Excluding acquisitions, we do not expect our operating expenditures to meaningfully increase in 2025.
Other Income (Expense), Net
Year Ended December 31,
Change
(dollars in thousands)
2024
2023
$
%
Interest income
$
18,448
$
16,906
$
1,542
9 %
Interest expense
(4)
(33)
29
(88)%
Other expense, net
(1,585)
(307)
(1,278)
416 %
Total other income
$
16,859
$
16,566
$
293
2 %
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Interest income increased by $1.5 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023. The increase was
primarily due to interest income generated from our investments in marketable securities and an increase in interest rates during the year ended December 31,
2024.
Other expense, net increased by $1.3 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023 and was driven
by realized and unrealized losses from foreign currency rate measurement fluctuations.
Provision for Income Taxes
The Company’s provision for income taxes was $4.9 million and $6.3 million, respectively, for the years ended December 31, 2024 and 2023. The
provision for income taxes decreased by $1.4 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023. The decrease
was primarily due to lower foreign income.
Liquidity and Capital Resources
As of December 31, 2024, we had approximately $393.4 million in cash and cash equivalents, and marketable securities which were primarily held in
U.S. banks. We have generated negative cumulative cash flows from operations since inception through the year ended December 31, 2024, and we have
generated losses from operations since inception as reflected in our accumulated deficit of $1.5 billion.
We currently anticipate making aggregate capital expenditures of between approximately $12 million and $17 million during the next 12 months, which
we expect to include, among other expenditures, equipment to be used for manufacturing and research and development.
Our future capital requirements will depend on many factors including our revenue growth rate, research and development efforts, investments in or
acquisitions of complementary or enhancing technologies or businesses, the timing and extent of additional capital expenditures to invest in existing and new
facilities, the expansion of sales and marketing and international activities, legal costs associated with defending and enforcing intellectual property rights and
the introduction of new products and new versions of existing products.
We take a long-term view in growing and scaling our business and we regularly review acquisition and investment opportunities, and we may in the
future enter into arrangements to acquire or invest in businesses, services and technologies, including intellectual property rights, and any such acquisitions or
investments could significantly increase our capital needs. We regularly review opportunities that meet our long-term growth objectives.
In January 2023, we signed an agreement to acquire certain intangible and other assets from Centrillion Technologies, Inc. and Centrillion Technology
Holdings Corp. for an upfront cash payment of $10.0 million relating to an intellectual property license. Upon the close of the transaction on July 14, 2023, we
paid additional cash consideration of $10.0 million upon acquiring the assets. Under the agreement, we are obligated to provide additional cash consideration if
certain technology development milestones are met. As of December 31, 2024, we have paid $41.3 million relating to the completion of development
milestones. Up to $15.0 million of cash consideration is due if an additional technology development milestone is met. Furthermore, we expect to pay cash
consideration tied to future sales milestones if such milestones are met.
We expect to continue to incur operating losses for the foreseeable future. We believe that our existing cash and cash equivalents and cash generated
from sales of our products will be sufficient to meet our anticipated cash needs for at least the next 12 months. However, our liquidity assumptions may prove
to be incorrect, and we could exhaust our available financial resources sooner than we currently expect. We maintain the majority of our cash and cash
equivalents in accounts with major U.S. and multi-national financial institutions, and our deposits at these institutions exceed insured limits. Market conditions
can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there
can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds
could adversely affect our business and financial position.
We intend to continue to evaluate market conditions and may in the future pursue additional sources of funding, such as mortgage or other financing, to
further enhance our financial position and to execute our business strategy. In addition, should prevailing economic, financial, business or other factors
adversely affect our ability to meet our operating cash requirements, we could be required to obtain funding though traditional or alternative sources of
financing. We cannot be certain that additional funds would be available to us on favorable terms when required, or at all.
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Sources of liquidity
Since our inception, we have financed our operations and capital expenditures primarily through sales of convertible preferred stock and common stock,
revenue from sales of our products and the incurrence of indebtedness. In September 2019, we completed our initial public offering for aggregate proceeds of
$410.8 million, net of offering costs, underwriter discounts and commissions. In September 2020, we completed a public offering of our Class A common stock
for aggregate proceeds of $482.3 million, net of offering costs, underwriting discounts and commissions.
Cash flow summary
The following table summarizes our cash flows for the periods indicated:
Year Ended December 31,
2024
2023
(in thousands)
Net cash provided (used in) by:
Operating activities
$
6,664
$
(15,197)
Investing activities
(32,631)
133,492
Financing activities
10,914
13,669
Effect of exchange rates changes on cash, cash equivalents, and restricted cash
(164)
(33)
Net (decrease) increase in cash, cash equivalents, and restricted cash
$
(15,217)
$
131,931
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Operating activities
The net cash provided by operating activities of $6.7 million for the year ended December 31, 2024 was due primarily to a net loss of $182.6 million,
partially offset by stock-based compensation expense of $140.7 million, depreciation and amortization of $35.9 million, net cash inflow from changes in
operating assets and liabilities of $1.3 million, lease and asset impairment charges of $3.1 million, amortization of leased right-of-use assets of $7.8 million,
and other non-cash expenses of $0.5 million. The net cash inflow from operating assets and liabilities was primarily due to a decrease in accounts receivable of
$27.0 million primarily due to reduced revenue, an increase in deferred revenue of $11.2 million, an increase in accrued compensation and other related
benefits of $3.7 million, and an increase in other noncurrent liabilities of $0.8 million. The net cash inflow from operating assets and liabilities was partially
offset by a decrease in accrued expenses and other current liabilities of $12.7 million, a decrease of $12.5 million due to payment of operating lease liabilities,
an increase in inventory of $9.8 million, a decrease in accounts payable of $3.4 million due to timing of vendor payments, an increase in prepaid expenses and
other current assets of $1.9 million, and an increase in other noncurrent assets of $1.1 million.
The net cash used in operating activities of $15.2 million for the year ended December 31, 2023 was due primarily to a net loss of $255.1 million,
partially offset by stock-based compensation expense of $167.0 million, depreciation and amortization of $35.5 million, net cash inflow from changes in
operating assets and liabilities of $17.3 million, asset impairment charges of $9.8 million, amortization of leased right-of-use assets of $8.1 million, realized
losses on sale of marketable securities of $1.7 million and other non-cash expenses of $0.4 million. The net cash inflow from operating assets and liabilities
was primarily due to an increase in accrued expenses and other current liabilities of $28.3 million primarily driven by $20.0 million of accrued purchase
consideration, an increase in deferred revenue of $10.9 million, a decrease in inventory of $7.9 million and an increase in other noncurrent liabilities of $1.3
million. The net cash inflow from operating assets and liabilities was partially offset by an increase in accounts receivable of $10.6 million primarily due to an
increase in revenue and timing of collections, a decrease of $8.7 million due to payment of operating lease liabilities, a decrease in accounts payable of $6.0
million due to timing of vendor payments, a decrease in accrued compensation and other related benefits of $2.6 million and an increase in prepaid expenses
and other current assets of $2.4 million.
Investing activities
The net cash used in investing activities of $32.6 million in the year ended December 31, 2024 was due to the purchase of marketable securities of $48.9
million, purchases of property and equipment and intangible assets of $12.4 million and $1.0 million, respectively, partially offset by the proceeds from sales
and maturities of marketable securities of $3.9 million and $25.8 million, respectively.
The net cash provided by investing activities of $133.5 million in the year ended December 31, 2023 was due to the proceeds from sales and maturities
of marketable securities of $100.2 million and $82.8 million, respectively, partially offset by purchases of property and equipment and intangible assets of
$48.6 million and $0.9 million, respectively.
Financing activities
The net cash provided by financing activities of $10.9 million in the year ended December 31, 2024 was primarily from proceeds of $10.9 million from
the issuance of common stock from the exercise of stock options and employee stock purchase plan purchases.
The net cash provided by financing activities of $13.7 million in the year ended December 31, 2023 was primarily from proceeds of $19.5 million from
the issuance of common stock from the exercise of stock options and employee stock purchase plan purchases partially offset by payments on financing
arrangements of $5.8 million.
Critical Accounting Policies and Estimates
Our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report are prepared in accordance with GAAP. We
believe that our accounting policies related to revenue recognition are important in understanding our consolidated financial position and results of operations.
The other accounting policies and estimates below also involve a significant degree of judgment and complexity. The preparation of consolidated financial
statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related
disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual
results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial
statement presentation, financial condition, results of operations and cash flows will be affected.
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For further information, see Note 2 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.
Revenue recognition
We generate revenue from sales of products and services, and our products consist of instruments and consumables. Revenue from product sales is
recognized when control of the product is transferred, which is generally upon shipment to the customer. Instrument service agreements, which relate to
extended warranties, are typically entered into for one-year terms, following the expiration of the standard one-year warranty period. Revenue for extended
warranties is recognized ratably over the term of the extended warranty period as a stand ready performance obligation. Revenue is recorded net of discounts,
distributor commissions and sales taxes collected on behalf of governmental authorities. Customers are invoiced generally upon shipment, or upon order for
services, and payment is typically due within 30 days. Cash received from customers in advance of product shipment or providing services is recorded as a
liability. Our contracts with our customers generally do not include rights of return or a significant financing component.
We regularly enter into contracts that include various combinations of products and services which are generally distinct and accounted for as separate
performance obligations. The recognition of revenue can be complex due to the volume of sales transactions including multiple performance obligations. The
transaction price is allocated to each performance obligation in proportion to its standalone selling price. We determine standalone selling price using average
selling prices with consideration of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely
upon prices set by management, adjusted for applicable discounts.
Inventory
Inventory is recorded at the lower of cost, determined on a first-in, first-out basis, or net realizable value. We use judgment to analyze and determine if
the composition of our inventory is obsolete, slow-moving, unsalable or otherwise carried above the net realizable value and frequently review such
determinations. We write down specifically identified unusable, obsolete, slow-moving or known unsalable inventory and inventory otherwise carried above
the net realizable value in the period that it is first recognized by using a number of factors including product expiration dates, open and unfulfilled orders and
sales forecasts. Any write-down of inventory to net realizable value establishes a new cost basis and will be maintained even if certain circumstances suggest
that the inventory is recoverable in subsequent periods. Costs associated with the write-down of inventory are recorded to cost of revenue on our consolidated
statements of operations. We make assumptions about future demand, market conditions and the release of new products and new versions of existing products
that may supersede old ones. However, if actual market conditions are less favorable than anticipated, additional inventory write-downs could be required. For
example, we recorded charges of $11.3 million and $7.8 million in the years ended December 31, 2024 and 2023, respectively, related to excess and obsolete
inventory.
Stock-based compensation
Our stock-based compensation relates to stock options, restricted stock units (“RSUs”), performance stock units (“PSUs”), market-based performance
stock awards ("PSAs") including performance stock options and performance RSUs granted pursuant to equity incentive plans, and stock purchase rights under
an Employee Stock Purchase Plan (“ESPP”). Stock-based compensation expense for stock-based awards are based on their grant date fair value. We determine
the fair value of RSUs based on the closing price of our stock price, which is listed on Nasdaq Stock Market LLC, at the date of the grant. We estimate the fair
value of stock option awards under an equity incentive plan and stock purchase right under an ESPP on the grant date using the Black-Scholes option-pricing
model. The fair values of stock-based awards, excluding PSAs, are recognized as compensation expense on a straight-line basis over the requisite service
period in which the awards are expected to vest and forfeitures are recognized as they occur.
The Black-Scholes model considers several variables and assumptions in estimating the fair value of stock-based awards. These variables include the per
share fair value of the underlying common stock, exercise price, expected term, risk-free interest rate, expected annual dividend yield and the expected stock
price volatility over the expected term. We calculate the expected term using the simplified method, which is the mid-point between the vesting and contractual
term. We determine expected volatility using the historical volatility of the stock price of similar publicly traded peer companies. The risk-free interest rate is
based on the yield available on U.S. Treasury zero-coupon issues similar in duration to the expected term of the equity-settled award.
During the year ended December 31, 2024, we granted PSUs to certain members of management which are subject to the
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achievement of certain performance conditions established by the Company’s Compensation Committee of the Board of Directors as described below:
i.
50% of target PSUs earned will be based on the Company’s compound annual growth rate (CAGR) of the Company’s Revenue over a two-year
performance period from January 1, 2024 to December 31, 2025. Holders may earn from 0% to 175% of the target amount of shares and earned PSUs
will then be subject to service-based vesting; and
ii.
50% of target PSUs earned will be based on the relative Total Shareholder Return (TSR) of the Company’s common stock as compared to the TSR of
the members of the Russell 3000 Medical Equipment and Services Sector Index over a three-year performance period from January 1, 2024 to
December 31, 2026. Depending on the results relative to the TSR market condition, the holders may earn from 0% to 200% of the target amount of
shares which will vest at the end of the performance period.
The PSUs will be forfeited if the performance conditions are not achieved at the end of the relative performance periods as described above. The vesting
of the PSUs can also be triggered upon certain change in control events or in the event of death or disability. The PSUs relating to CAGR components were not
deemed probable of vesting as of December 31, 2024, no expenses were recognized for 2024.
During the years ended December 31, 2023 and 2022, we issued market-based PSAs comprising performance restricted stock units (and in one case a
performance stock option). The PSAs consist of three separate tranches and the vesting of each tranche is subject to the Class A common stock closing price
being maintained at or above certain predetermined share price goals for each tranche. We estimated the value of the PSA awards granted using a Monte Carlo
simulation model, using assumptions including volatility, risk-free interest rate, cost of equity and dividends. We will recognize the compensation expense over
the derived service period using the accelerated attribution method commencing on the grant date. The derived service period is the median duration of the
successful stock price paths to meet the price goal for each tranche as simulated in the Monte Carlo valuation model. If the related market condition is achieved
earlier than its estimated derived service period, the stock-based compensation expense will be accelerated, and a cumulative catch-up expense will be recorded
during the period in which the market condition is met. None of the stock price thresholds for the PSAs had been met, resulting in no shares vesting or
becoming exercisable as of December 31, 2024.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due
to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in foreign currency exchange rates.
Interest Rate Risk
We have exposure to interest rate risk that relates primarily to our cash equivalents and marketable securities. All of our cash equivalents and marketable
securities are designated as available-for-sale and carried at fair market value. We invest in a number of securities including corporate bonds, U.S. agency
notes, asset-backed securities, commercial paper, U.S. treasuries and money market funds. We attempt to ensure the safety and preservation of our invested
principal funds by limiting default risk, market risk and reinvestment risk. We mitigate default risk by investing in high grade investment securities. The fair
market value of our fixed rate securities may be adversely impacted by increases in interest rates. For example, in 2024 we maintained our portfolio of fixed
income investments with short-term maturities to reduce risk and impact from rate changes. A hypothetical 100 basis-point (one percentage point) increase in
interest rates compared to rates at December 31, 2024 and December 31, 2023 would have adversely affected the fair value of our investment portfolio by
approximately $0.2 million and $0.1 million, respectively.
Foreign Currency Exchange Risk
Our reporting currency is the U.S. dollar and the functional currency of each of our subsidiaries is either its local currency or the U.S. dollar depending
on the circumstances. Historically, most of our revenue is denominated in U.S. dollars, although we sell our products and services in local currency outside of
the United States, principally the euro, Great British pound and Japanese yen. For the years ended December 31, 2024 and 2023, approximately 27% and 23%,
respectively, of our sales were denominated in currencies other than U.S. dollars. Our expenses are generally denominated in the currencies in which our
operations are located, which is primarily in the United States. We are exposed to gains or losses due to changes in foreign currency exchange rates. For
example, if the value of U.S. dollar increases relative to foreign currencies, we will incur losses on the remeasurement on customer receivables which are
denominated in foreign currencies. In addition, for our price lists
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denominated in foreign currencies, if the value of the U.S. dollar increases relative to the foreign currencies, the value of the revenue transactions when
translated or remeasured to our U.S. dollar reporting currency will be lower. We do not currently maintain a program to hedge exposures to non-U.S. dollar
currencies. We have performed a sensitivity analysis as of December 31, 2024 and 2023, using a modeling technique that measures the change in the amount of
non-U.S. dollar monetary assets arising from a hypothetical 10% movement in the levels of foreign currency exchange rates relative to the U.S. dollar, with all
other variables held constant. The sensitivity analysis indicated that a hypothetical 10% movement in foreign currency exchange rates would change the
amount of cash and cash equivalents and accounts receivable that we would report in U.S. Dollars as of December 31, 2024 and December 31, 2023 by
approximately $4.2 million and $3.8 million, respectively.
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Item 8. Financial Statements and Supplementary Data.
10x Genomics, Inc.
Index to Consolidated Financial Statements
Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID No. 42)
77
Consolidated Balance Sheets
79
Consolidated Statements of Operations
80
Consolidated Statements of Comprehensive Loss
81
Consolidated Statements of Stockholders’ Equity
82
Consolidated Statements of Cash Flows
83
Notes to Consolidated Financial Statements
84
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of 10x Genomics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of 10x Genomics, Inc. (the Company) as of December 31, 2024 and 2023, the related
consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31,
2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal
control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 12, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating
the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We
believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to
be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the
critical audit matter or on the accounts or disclosures to which it relates.
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Revenue Recognition
Description of the Matter
For the year ended December 31, 2024, the Company recognized revenues of $610.8 million. As discussed in Note
2 to the consolidated financial statements, the Company recognizes revenue when control of the products and
services is transferred to its customers in an amount that reflects the consideration it expects to receive from its
customers in exchange for those products and services.
Auditing the Company’s revenue recognition can be complex due to the volume of sales transactions including
multiple performance obligations.
How We Addressed the Matter
in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over the
allocation of the transaction price to performance obligations in revenue transactions. For example, we tested
management’s controls over establishing stand-alone selling price, and tested the automated system controls for the
application of the stand-alone selling price to the revenue transactions.
Our audit procedures included, among others, evaluating the allocation of consideration using stand-alone selling
price for a sample of individual sales transactions. For the sample, we inspected the customer contract, identified
the distinct performance obligation(s) in the contract, and recalculated the allocation of the transaction prices. For
the sample, we further tested the timing of revenue recognition based on evidence of transfer of control of the
goods to the customer or the recognition of revenue over time for extended warranty service performance
obligations.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2015.
San Jose, California
February 12, 2025
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10x Genomics, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share data)
December 31,
2024
2023
Assets
Current assets:
Cash and cash equivalents
$
344,067
$
359,284
Marketable securities
49,335
29,411
Accounts receivable, net
87,862
114,832
Inventory
83,107
73,706
Prepaid expenses and other current assets
20,016
18,789
Total current assets
584,387
596,022
Property and equipment, net
252,648
279,571
Operating lease right-of-use assets
57,290
65,361
Goodwill
4,511
4,511
Intangible assets, net
15,671
16,616
Other noncurrent assets
4,129
3,062
Total assets
$
918,636
$
965,143
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
12,909
$
15,738
Accrued compensation and related benefits
33,615
30,105
Accrued expenses and other current liabilities
41,165
56,648
Deferred revenue
20,658
13,150
Operating lease liabilities
9,286
11,521
Total current liabilities
117,633
127,162
Operating lease liabilities, noncurrent
73,327
83,849
Deferred revenue, noncurrent
12,513
8,814
Other noncurrent liabilities
5,029
4,275
Total liabilities
208,502
224,100
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred stock, $0.00001 par value; 100,000,000 shares authorized, no shares issued or outstanding as of
December 31, 2024 and 2023
—
—
Common stock, $0.00001 par value; 1,100,000,000 shares authorized (Class A 1,000,000,000, Class B
100,000,000); 122,291,837 (Class A 108,235,004, Class B 14,056,833) and 119,095,362 (Class A
105,038,529, Class B 14,056,833) shares issued and outstanding as of December 31, 2024 and 2023,
respectively
2
2
Additional paid-in capital
2,177,672
2,025,890
Accumulated deficit
(1,467,047)
(1,284,420)
Accumulated other comprehensive loss
(493)
(429)
Total stockholders’ equity
710,134
741,043
Total liabilities and stockholders’ equity
$
918,636
$
965,143
The accompanying notes are an integral part of these consolidated financial statements.
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10x Genomics, Inc.
Consolidated Statements of Operations
(In thousands, except share and per share data)
Year Ended December 31,
2024
2023
2022
Revenue
$
610,785
$
618,727
$
516,409
Cost of revenue
196,303
209,414
120,386
Gross profit
414,482
409,313
396,023
Operating expenses:
Research and development
264,698
270,332
265,667
In-process research and development
—
60,980
—
Selling, general and administrative
344,343
343,330
298,300
Total operating expenses
609,041
674,642
563,967
Loss from operations
(194,559)
(265,329)
(167,944)
Other income (expense):
Interest income
18,448
16,906
6,647
Interest expense
(4)
(33)
(476)
Other expense, net
(1,585)
(307)
(198)
Total other income
16,859
16,566
5,973
Loss before provision for income taxes
(177,700)
(248,763)
(161,971)
Provision for income taxes
4,927
6,336
4,029
Net loss
$
(182,627)
$
(255,099)
$
(166,000)
Net loss per share, basic and diluted
$
(1.52)
$
(2.18)
$
(1.46)
Weighted-average shares used to compute net loss per share, basic and diluted
120,451,550
117,165,036
113,858,684
The accompanying notes are an integral part of these consolidated financial statements.
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10x Genomics, Inc.
Consolidated Statements of Comprehensive Loss
(In thousands)
December 31,
2024
2023
2022
Net loss
$
(182,627)
$
(255,099)
$
(166,000)
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on available-for-sale marketable securities
206
2,210
(4,116)
Realized loss on available-for-sale marketable securities reclassified into net loss
3
1,718
—
Foreign currency translation adjustment
(273)
(22)
(241)
Other comprehensive income (loss), net of tax
(64)
3,906
(4,357)
Comprehensive loss
$
(182,691)
$
(251,193)
$
(170,357)
The accompanying notes are an integral part of these consolidated financial statements.
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10x Genomics, Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands, except share data)
Common Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
Shares
Amount
Balance as of December 31, 2021
112,514,977
$
2
$
1,680,865
$
(863,321)
$
22
$
817,568
Issuance of Class A common stock related to equity awards
2,680,032
—
21,226
—
—
21,226
Vesting of shares subject to repurchase, including early exercised
options
—
—
96
—
—
96
Stock-based compensation
—
—
137,210
—
—
137,210
Net loss
—
—
—
(166,000)
—
(166,000)
Other comprehensive loss
—
—
—
—
(4,357)
(4,357)
Balance as of December 31, 2022
115,195,009
2
1,839,397
(1,029,321)
(4,335)
805,743
Issuance of Class A common stock related to equity awards
3,900,353
—
19,483
—
—
19,483
Stock-based compensation
—
—
167,010
—
—
167,010
Net loss
—
—
—
(255,099)
—
(255,099)
Other comprehensive income
—
—
—
—
3,906
3,906
Balance as of December 31, 2023
119,095,362
2
2,025,890
(1,284,420)
(429)
741,043
Issuance of Class A common stock related to equity awards
3,196,475
—
10,914
—
—
10,914
Stock-based compensation
—
—
140,868
—
—
140,868
Net loss
—
—
—
(182,627)
—
(182,627)
Other comprehensive loss
—
—
—
—
(64)
(64)
Balance as of December 31, 2024
122,291,837
$
2
$
2,177,672
$
(1,467,047)
$
(493)
$
710,134
The accompanying notes are an integral part of these consolidated financial statements
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10x Genomics, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
2024
2023
2022
Operating activities:
Net loss
$
(182,627)
$
(255,099)
$
(166,000)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Stock-based compensation expense
140,749
166,950
136,848
Depreciation and amortization
35,879
35,512
25,368
Lease and asset impairment charges
3,054
9,845
—
Amortization of right-of-use assets
7,829
8,107
7,638
Realized loss on marketable securities
3
1,718
—
Other
523
427
1,957
Changes in operating assets and liabilities:
Accounts receivable
26,951
(10,613)
(18,948)
Inventory
(9,777)
7,871
(21,192)
Prepaid expenses and other current assets
(1,901)
(2,429)
(4,495)
Other noncurrent assets
(1,084)
(678)
925
Accounts payable
(3,354)
(6,017)
5,858
Accrued compensation and other related benefits
3,654
(2,637)
1,114
Deferred revenue
11,209
10,932
3,350
Accrued expenses and other current liabilities
(12,736)
28,301
3,336
Operating lease liability
(12,484)
(8,671)
(6,423)
Other noncurrent liabilities
776
1,284
(2,942)
Net cash provided by (used in) operating activities
6,664
(15,197)
(33,606)
Investing activities:
Proceeds from sales of marketable securities
3,856
100,191
49,117
Proceeds from maturities of marketable securities
25,782
82,825
18,528
Purchases of property and equipment
(12,393)
(48,601)
(131,661)
Purchase of intangible assets
(1,000)
(923)
—
Acquisition of business, net of cash acquired
—
—
(4,000)
Purchase of marketable securities
(48,876)
—
(282,871)
Net cash (used in) provided by investing activities
(32,631)
133,492
(350,887)
Financing activities:
Payments on technology license financing arrangement
—
(5,814)
(5,409)
Issuance of common stock from exercise of stock options and employee stock purchase plan purchases
10,914
19,483
21,226
Net cash provided by financing activities
10,914
13,669
15,817
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(164)
(33)
(44)
Net (decrease) increase in cash, cash equivalents, and restricted cash
(15,217)
131,931
(368,720)
Cash, cash equivalents, and restricted cash at beginning of year
359,284
227,353
596,073
Cash, cash equivalents, and restricted cash at end of year
$
344,067
$
359,284
$
227,353
Supplemental disclosures of cash flow information:
Cash paid for interest
$
—
$
436
$
841
Cash paid for taxes
$
5,641
$
4,927
$
3,925
Noncash investing and financing activities
Purchases of property and equipment included in accounts payable, accrued expenses and other current
liabilities
$
1,351
$
3,324
$
26,750
Right-of-use assets obtained in exchange for new operating lease liabilities
$
—
$
6,518
$
16,562
The accompanying notes are an integral part of these consolidated financial statements.
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10x Genomics, Inc.
Notes to Consolidated Financial Statements
1. Description of Business and Basis of Presentation
Organization and Description of Business
10x Genomics, Inc. (the “Company”) is a life sciences technology company focused on building innovative products and solutions to interrogate,
understand and master biological systems at resolution and scale that matches the complexity of biology. The Company’s integrated solutions include the
Company’s Chromium instruments and the Company's Visium CytAssist and Xenium Analyzer, which the Company refers to as “Spatial instruments,” and the
Company’s proprietary microfluidic chips, slides, reagents and other consumables for the Company’s Chromium, Visium and Xenium solutions, which the
Company refers to as “consumables.” The Company bundles its software with these products to guide customers through the workflow, from sample
preparation through analysis and visualization. The Company was incorporated in the state of Delaware in July 2012 and began commercial and manufacturing
operations and selling its instruments and consumables in 2015. The Company is headquartered in Pleasanton, California and has wholly-owned subsidiaries in
Asia, Europe, Oceania and North America.
Basis of Presentation
The consolidated financial statements, which include the Company’s accounts and the accounts of its wholly-owned subsidiaries, are prepared in
accordance with U.S. generally accepted accounting principles (or “GAAP”). All intercompany transactions and balances have been eliminated.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial statements, disclosure of contingent liabilities, and the reported amounts of revenue and
expense. These judgments, estimates and assumptions are used for, but not limited to, revenue recognition, inventory valuation and write-downs, accounting for
asset and business acquisitions and the valuation of stock-based compensation awards. The Company bases its estimates on various factors and information,
which may include, but are not limited to, history and prior experience, the Company’s forecasts and future plans, current economic conditions and information
from third-party professionals that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying value of assets and liabilities and recorded amounts of expenses that are not readily apparent from other sources. To the extent there are
material differences between the Company’s estimates and the actual results, the Company’s future consolidated results of operation may be affected.
Segment Information
The Company operates as a single operating segment. The Company’s chief operating decision maker, its Chief Executive Officer, manages the
Company’s operations on a consolidated basis for the purposes of allocating resources, making operating decisions and evaluating financial performance. The
measures of profitability and significant segment expenses reviewed by the CODM are consistent with the presentation and disclosure in these consolidated
financial statements.
Cash and Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents.
Cash equivalents consist of amounts invested in money market funds and are stated at fair value.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the consolidated balance sheets that sum to the
total of the same amounts shown in the consolidated statements of cash flows (in thousands):
Year Ended December 31,
2024
2023
2022
Cash and cash equivalents
$
344,067
$
359,284
$
219,746
Restricted cash
—
—
7,607
Total cash, cash equivalents and restricted cash
$
344,067
$
359,284
$
227,353
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Marketable Securities
The Company designates investments in debt securities as available-for-sale. Available-for-sale debt securities with original maturities of three months
or less from the date of purchase are classified within cash and cash equivalents. Available-for-sale debt securities with original maturities longer than three
months are available to fund current operations and are classified as marketable securities, within current assets on the balance sheet. Available-for-sale debt
securities are reported at fair value with the related unrealized gains and losses included in "Accumulated other comprehensive loss," a component of
stockholders’ equity, net of tax. Realized gains (losses) on the sale of marketable securities are determined using the specific-identification method and
recorded in “Other expense, net,” in the Consolidated Statements of Operations.
The available-for-sale debt securities are subject to a periodic impairment review. For investments in an unrealized loss position, the Company
determines whether a credit loss exists by considering information about the collectability of the instrument, current market conditions and reasonable and
supportable forecasts of economic conditions. The Company recognizes an allowance for credit losses, up to the amount of the unrealized loss when
appropriate, and writes down the amortized cost basis of the investment if it is more likely than not that the Company will be required or will intend to sell the
investment before recovery of its amortized cost basis. Allowances for credit losses and write-downs are recognized in “Other expense, net,” and unrealized
losses not related to credit losses are recognized in “Accumulated other comprehensive loss.” There are no allowances for credit losses for the periods
presented.
Fair Value of Financial Instruments
Cash equivalents are comprised of money market funds which are classified as Level 1 in the fair value hierarchy. Assets recorded at fair value on a
recurring basis in the balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is
defined as the exchange price that would be received for an asset in the principal or most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for
disclosure of fair value measurements as follows:
Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
Level 2 - Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or
similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for
substantially the full term of the related assets or liabilities; and
Level 3 - Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market
data.
The Company’s financial instruments consist of Level 1 and Level 2 assets. Where quoted prices are available in an active market, securities are
classified as Level 1. Money market funds are classified as Level 1. Level 2 assets include corporate bonds, asset-backed securities, commercial paper, U.S.
Government Treasury and agency securities, and debt securities in government-sponsored entities based upon quoted market prices for similar movements in
active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant
inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Where applicable, these
models project future cash flows and discount the future amounts to a present value using market-based observable inputs obtained from various third party-
data providers, including but not limited to, benchmark yields, interest rate curves, reported trades, broker/dealer quotes and reference data.
Accounts Receivable, Net
Accounts receivable consist of amounts due from customers for the sales of products and services. The Company reviews its accounts receivable and
provides allowances of specific amounts if collectability is no longer reasonably assured based on historical experience and specific customer collection issues.
The allowance for doubtful accounts was $0.1 million and $0.1 million as of December 31, 2024 and 2023, respectively.
Business Concentrations
The Company’s instruments are mostly assembled and tested by third party contract manufacturers in Asia and the United States. The Company’s
agreement with the contract manufacturers contains purchase commitments. In addition, the Company is reliant on several suppliers for key components for its
reagent kits. A significant disruption in the operations of the contract manufacturers or suppliers may impact the production of the Company’s products for a
substantial period of time, which could have a material adverse effect on its business, financial condition and results of operations.
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Concentrations
Financial instruments that potentially subject the Company to credit risk consist of cash equivalents, marketable securities (as described in this footnote
under the header “Marketable Securities” above) and accounts receivable. The Company’s cash and cash equivalents held with large financial institutions in the
United States and deposits exceed the Federal Deposit Insurance Corporation’s insurance limit. The Company performs periodic evaluations of the risks
associated with its investments and the relative credit standing of these financial institutions.
The Company performs ongoing credit evaluations of its customers’ financial condition. The Company does not require collateral from its customers but
may require upfront payments from certain customers. The Company has not experienced material credit losses to date. For the years ended December 31,
2024, 2023, and 2022, no single customer represented more than 10% of revenue. No customer or distributor represented more than 10% of the Company’s
outstanding accounts receivable as of December 31, 2024 or 2023.
Substantially all the Company’s long-lived assets are located in the United States.
Inventory
Inventory is recorded at the lower of cost, determined on a first-in, first-out basis, or net realizable value. The Company uses judgment to analyze and
determine if the composition of its inventory is obsolete, slow-moving, unsalable or otherwise carried above the net realizable value and frequently reviews
such determinations. The Company writes down specifically identified unusable, obsolete, slow-moving or known unsalable inventory and inventory otherwise
carried above the net realizable value in the period that it is first recognized by using a number of factors including product expiration dates, open and
unfulfilled orders and sales forecasts. Net realizable value is determined using the estimated selling prices in the ordinary course of business, less reasonably
predictable costs of completion, disposal and transportation. Any write-down of its inventory to net realizable value establishes a new cost basis and will be
maintained even if certain circumstances suggest that the inventory is recoverable in subsequent periods. Costs associated with the write-down of inventory are
recorded to cost of revenue on the Company’s consolidated statements of operations.
Leases
The Company determines if an arrangement is or contains a lease at inception by assessing whether the arrangement contains an identified asset and
whether it has the right to control the identified asset. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term
and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease liabilities are recognized at the lease
commencement date based on the present value of future lease payments over the lease term. ROU assets are based on the measurement of the lease liability
and also include any lease payments made prior to or on lease commencement and exclude lease incentives and initial direct costs incurred, as applicable.
The Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value
of future lease payments. The Company gives consideration to its credit risk, term of the lease and total lease payments and adjusts for the impacts of collateral,
as necessary, when calculating its incremental borrowing rates. The lease terms may include options to extend or terminate the lease when the Company is
reasonably certain it will exercise such options. Lease costs for the Company’s operating leases are recognized on a straight-line basis within operating
expenses and costs of goods sold over the reasonably assured lease term.
The Company evaluates ROU assets related to leases for indicators of impairment whenever events or changes in circumstances indicate that the
carrying amount of an ROU asset may not be recoverable. When a decision has been made to sublease that space, the Company evaluates the asset for
impairment and recognize the associated impact to the ROU asset and related expense, if applicable. The evaluation is performed at the lowest level of
identifiable cash flows for an asset group. Undiscounted cash flows expected to be generated by the related ROU assets are estimated over the ROU assets’
useful lives. If the evaluation indicates that the carrying amount of the ROU assets may not be recoverable, any potential impairment is measured based upon
the fair value of the related ROU asset or asset group as determined by appropriate valuation techniques. Refer to Note 7, Commitments and Contingencies -
Lease Agreements, to the Notes to Consolidated Financial Statements for further details.
The Company has elected to not separate lease and non-lease components for any leases within its existing classes of assets and, as a result, accounts for
any lease and non-lease components as a single lease component. The Company has also elected to not apply the recognition requirement to any leases within
its existing classes of assets with a term of 12 months or less.
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Property and Equipment, Net
Property and equipment is stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method based on the
estimated useful lives of the following assets:
Useful Life (Years)
Building
10
-
40
Laboratory equipment and machinery
3
-
5
Computer equipment
2
-
5
Furniture and fixtures
3
Leasehold improvements
1
-
10
Impairment of Long-Lived Assets
The Company evaluates long-lived assets, such as property and equipment and intangible assets, for impairment whenever events or changes in
circumstances indicate that the carrying value of an asset may not be recoverable. If indicators of impairment exist and the undiscounted future cash flows that
the assets are expected to generate are less than the carrying value of the assets, the Company reduces the carrying amount of the assets to their estimated fair
values based on a discounted cash flow approach or, when available and appropriate, to comparable market values. The Company recorded impairment charges
of $3.1 million and $9.8 million primarily relating to computer equipment, software, right-of-use assets, and intangible assets during the years ended
December 31, 2024 and 2023, respectively. There were no impairment losses recorded for the year ended December 31, 2022. Refer to Note 5, Other Financial
Statement Information, for further details.
Product Warranties
The Company generally provides a one-year warranty on its instruments. The Company reviews its exposure to estimated warranty obligations
associated with instrument sales and establishes an accrual based on historical product failure rates and actual warranty costs incurred. This expense is recorded
as a component of cost of revenue in the consolidated statements of operations.
Deferred Revenue
Deferred revenue consists of payments received in advance of revenue recognition primarily related to instrument service agreements, also referred to as
extended warranties. Revenue under these agreements is recognized over the related service period. Deferred revenue expected to be recognized during the 12
months following the balance sheet date is recorded as current portion of deferred revenue and the remaining portion is recorded as long-term.
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Revenue Recognition
The Company generates revenue from sales of products and services, and its products consist of instruments and consumables. Revenue from product
sales is recognized when control of the product is transferred, which is generally upon shipment to the customer. Instrument service agreements, which relate to
extended warranties, are typically entered into for one-year terms, following the expiration of the standard one-year warranty period. Revenue for extended
warranties is recognized ratably over the term of the extended warranty period as a stand ready performance obligation. Revenue is recorded net of discounts,
distributor commissions and sales taxes collected on behalf of governmental authorities. Customers are invoiced generally upon shipment, or upon order for
services, and payment is typically due within 30 days. Cash received from customers in advance of product shipment or providing services is recorded as a
contract liability. The Company’s contracts with its customers generally do not include rights of return or a significant financing component.
The Company regularly enters into contracts that include various combinations of products and services which are generally distinct and accounted for
as separate performance obligations. The transaction price is allocated to each performance obligation in proportion to its standalone selling price. The
Company determines standalone selling price using average selling prices with consideration of current market conditions. If the product or service has no
history of sales or if the sales volume is not sufficient, the Company relies upon prices set by management, adjusted for applicable discounts.
Cost of Revenue
Cost of revenue primarily consists of manufacturing costs incurred in the production process, including personnel and related costs, component
materials, labor and overhead, packaging and delivery costs and allocated costs including facilities and information technology. In addition, cost of product
revenue includes royalty costs for licensed technologies included in the Company’s products, warranty costs and provisions for slow-moving and obsolete
inventory.
Shipping and Handling Costs
Shipping and handling charged to customers are recorded as revenue. Shipping and handling costs are included in the Company’s cost of revenue.
Research and Development
Research and development costs are expensed in the period incurred. Research and development expense consists of personnel and related costs,
independent contractor costs, laboratory supplies, equipment maintenance, prototype and materials expenses, amortization of developed technology and
intangibles and allocated costs including facilities and information technology.
See Note 4 for discussion of in-process research and development included in the consolidated statements of operations.
Advertising Costs
Advertising costs are expensed as incurred. The Company incurred advertising costs of $3.9 million, $3.3 million and $3.7 million for the years ended
December 31, 2024, 2023 and 2022, respectively.
Stock-Based Compensation
The Company’s stock-based compensation expense relates to stock options, restricted stock units (“RSUs”), performance stock units (“PSUs”), market-
based performance stock awards ("PSAs") including performance stock options and performance RSUs granted pursuant to equity incentive plans and stock
purchase rights under an Employee Stock Purchase Plan (“ESPP”). Stock-based compensation expense for its stock-based awards is based on their grant date
fair value. The Company determines the fair value of RSUs based on the closing price of its stock, which is listed on the Nasdaq Global Select Market, at the
date of the grant (or on the most recent trading day prior to grant, if the date of grant is not a trading day). The Company estimates the fair value of stock option
awards under an equity incentive plan and stock purchase rights under an ESPP on the grant date using the Black-Scholes option-pricing model. The fair values
of stock-based awards excluding PSUs and PSAs are recognized as compensation expense on a straight-line basis over the requisite service period in which the
awards are expected to vest and forfeitures are recognized as they occur.
The Black-Scholes model considers several variables and assumptions in estimating the fair value of stock-based awards. These variables include the per
share fair value of the underlying common stock, exercise price, expected term, risk-free interest rate, expected annual dividend yield and the expected stock
price volatility over the expected term. The Company calculated the expected term using the simplified method, which is the mid-point between the vesting and
contractual term. Due to the short
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trading period of the Company's stock, the Company has estimated volatility by reference to the historical volatilities of the Company and that of similar
publicly traded peer companies. The risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon issues similar in duration to the
expected term of the equity-settled award.
For PSAs, the Company derives the valuation of the award and the requisite service period for each separately vesting portion of the award using a
Monte Carlo simulation model and the related compensation expense is recognized over the derived service period using the accelerated attribution method
commencing on the grant date. The derived service period is the median duration of the successful stock price paths to meet the respective escalating stock
price thresholds as simulated in the Monte Carlo valuation model which uses assumptions such as volatility, risk-free interest rate, cost of equity and dividend
estimated for the performance period of the PSAs. If the related market condition is achieved earlier than its estimated derived service period, the stock-based
compensation expense will be accelerated, and a cumulative catch-up expense will be recorded during the period in which the market condition is met.
For PSUs, management reassesses the probability of vesting at each reporting period, and any changes in estimates are recognized on a cumulative
catch-up basis for the stock-based compensation expense.
Foreign Currency
For foreign subsidiaries where the functional currency is the local currency, assets and liabilities are translated to the U.S. dollar using month-
end exchange rates, and revenue and expenses using average exchange rates. The adjustments resulting from these foreign currency translations are recorded in
“Accumulated other comprehensive loss.”
For entities where the functional currency is the U.S. dollar, monetary assets and liabilities are remeasured using exchange rates in effect at the balance
sheet dates and non-monetary assets and liabilities are remeasured at historical exchange rates. Revenue and expenses are remeasured at the average exchange
rates for the period. Gains or losses from foreign currency remeasurement are included in “Other expense, net” in the consolidated statements of operations.
The Company recognized foreign currency transaction losses of $2.1 million for the year ended December 31, 2024. The Company recognized foreign
currency transaction gains of $1.2 million and $0.2 million for the years ended December 31, 2023 and 2022, respectively.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes, in which deferred tax assets and liabilities are recognized for the future
tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply in the years in which those tax assets and liabilities are
expected to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. A
valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized.
The Company’s tax positions are subject to income tax audits. The Company recognizes the tax benefit of an uncertain tax position only if it is more
likely than not that the position is sustainable upon examination by the taxing authority, based on the technical merits. The tax benefit recognized is measured
as the largest amount of benefit which is more likely than not (greater than 50% likely) to be realized upon settlement with the taxing authority. The Company
recognizes interest accrued and penalties related to unrecognized tax benefits in its tax provision.
The Company calculates the current and deferred income tax provision based on estimates and assumptions that could differ from the actual results
reflected in income tax returns filed in subsequent years. Adjustments based on filed income tax returns are recorded when identified. The amount of income
tax paid is subject to examination by U.S. and foreign tax authorities. The estimate of the potential outcome of any uncertain tax issue is subject to
management’s assessment of the relevant risks, facts and circumstances existing at that time. To the extent the assessment of such tax position changes, the
change in estimate is recorded in the period in which the determination is made.
Net Loss Per Share
Net loss per share is computed using the two-class method required for multiple classes of common stock and participating securities. The rights,
including the liquidation and dividend rights and sharing of losses, of the Class A common stock and Class B common stock are identical, other than voting
rights. As the liquidation and dividend rights and sharing of losses are identical, the undistributed earnings are allocated on a proportionate basis and the
resulting net loss per share will, therefore, be the same for both Class A and Class B common stock on an individual or combined basis.
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Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period,
adjusted for outstanding shares that are subject to repurchase.
For the calculation of diluted net loss per share, basic net loss per share is adjusted by the effect of dilutive securities including awards under the
Company’s equity compensation plans. Diluted net loss per share is computed by dividing net loss by the weighted-average number of dilutive shares of
common stock outstanding. For periods in which the Company reports net losses, diluted net loss per share is the same as basic net loss per share because
potentially dilutive shares of common stock are not assumed to have been issued if their effect is anti-dilutive.
Recently Issued Accounting Pronouncement and Disclosure Rules
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes, which prescribes standardized categories and disaggregation of information in
the reconciliation of provision for income taxes, requires disclosure of disaggregated income taxes paid, and modifies other income tax-related disclosure
requirements. The updated standard is effective beginning with the Company’s fiscal year 2025 annual reporting period. Early adoption is permitted. The
Company is currently evaluating the impact that the updated standard will have on its related disclosures and will not early adopt this accounting standard.
3. Restructuring
On December 7, 2023, the Company committed to a restructuring plan related to the closure of one of its research and development facilities resulting in
restructuring charges of $2.5 million associated with this plan, comprised primarily of long-lived assets impairment costs and one-time employee termination
benefits which were recorded during the year ended December 31, 2023. Restructuring costs of $2.5 million were recorded in research and development and
general and administrative expenses during the year ended December 31, 2023 in the Company's consolidated statements of operations. The restructuring
activities were completed as of December 31, 2024.
On August 3, 2022, the Company implemented a reduction in force plan in order to decrease costs and maintain a streamlined organization to support
the business. Restructuring charges of $4.2 million associated with this plan, comprised primarily of severance-related costs, were recorded during the year
ended December 31, 2022. Restructuring costs of $0.3 million, $1.4 million and $2.5 million were recorded in cost of revenue, research and development
expense, and selling, general and administrative expense, respectively, during the year ended December 31, 2022 in the Company's consolidated statements of
operations. The restructuring activities were completed as of December 31, 2022.
The following table is a summary of restructuring costs related to the Company’s restructuring activities as of December 31, 2024 (in thousands):
Termination Benefits Costs
Long-lived Assets Impairment
Expenses
Total
Balance at January 1, 2022
$
—
$
—
$
—
Restructuring charge
4,216
—
4,216
Cash payments made
(3,385)
—
(3,385)
Non-cash charge
(616)
(616)
Balance at December 31, 2022
215
—
215
Restructuring charge
310
2,171
2,481
Cash payments made
(215)
—
(215)
Non-cash charge
—
(2,171)
(2,171)
Balance at December 31, 2023
310
—
310
Restructuring Charge
259
—
259
Cash payments made
(569)
—
(569)
Balance at December 31, 2024
$
—
$
—
$
—
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4. Acquisitions
2023 Acquisition
On January 28, 2023, the Company signed an agreement to acquire certain intangible and other assets from Centrillion Technologies, Inc. and
Centrillion Technology Holdings Corp. for an upfront cash payment of $10.0 million relating to an intellectual property license. Upon the close of the
transaction on July 14, 2023, the Company paid additional cash consideration of $10.0 million upon acquiring the assets. Under the agreement, the Company is
obligated to provide additional cash consideration if certain technology development milestones are met. As of December 31, 2023, the Company had paid
$21.3 million relating to the completion of development milestones. The Company paid an additional $20.0 million in January 2024 in relation to a
development milestone which was accrued in the Company's consolidated financial statements as of December 31, 2023. Up to $15.0 million of cash
consideration is due if an additional technology development milestone is met. Furthermore, the Company expects to pay cash consideration tied to future sales
milestones if such milestones are met.
The transaction was accounted for as an asset acquisition. In connection with this acquisition and milestone payments, the Company acquired an in-
process research and development intangible asset of $61.0 million during the year ended December 31, 2023 which did not have alternative future use and
therefore was recognized as an expense and included as a component of “In-process research and development” in the condensed consolidated statements of
operations. The Company also acquired an intangible asset of $0.2 million related to assembled workforce which is included in “Intangible assets, net” in the
consolidated balance sheets.
The following table summarizes the value of assets acquired and liabilities assumed (in thousands):
Assets Acquired and Liabilities Assumed
In-process research and development
$
60,980
Intangible assets - acquired workforce
200
Property and equipment
671
Operating lease liabilities
(1,496)
Other assets and liabilities, net
758
Total net assets acquired
$
61,113
5. Other Financial Statement Information
Available-for-sale Securities
Available-for-sale securities at December 31, 2024 consisted of the following (in thousands):
December 31, 2024
December 31, 2023
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Fair Value
Measurement
Cash equivalents:
Money market funds
$
322,012 $
— $
—
$ 322,012 $
348,539 $
—
$
— $
348,539
Level 1
Marketable securities:
Corporate debt securities
—
—
—
—
10,022
—
(51)
9,971
Level 2
Government debt
securities
49,317
18
—
49,335
18,152
—
(125)
18,027
Level 2
Asset-backed securities
—
—
—
—
1,425
—
(12)
1,413
Level 2
Total available-for-sale
securities
$
371,329 $
18 $
—
$ 371,347 $
378,138 $
—
$
(188) $
377,950
The contractual maturities of marketable securities as of December 31, 2024 were all less than one year.
The company incurred gross realized losses of $3.0 thousand and $1.7 million, from the sale of available-for-sales debt securities during the years ended
December 31, 2024 and 2023, respectively. The Company incurred no material gross realized
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gains or losses from available-for-sales debt securities for the years ended December 31, 2022. Realized gains (losses) on the sale of marketable securities are
recorded in “Other expense, net” in the condensed consolidated statements of operations.
The available-for-sale debt securities are subject to a periodic impairment review. For investments in an unrealized loss position, the Company
determines whether a credit loss exists by considering information about the collectability of the instrument, current market conditions and reasonable and
supportable forecasts of economic conditions. The Company recognizes an allowance for credit losses, up to the amount of the unrealized loss when
appropriate, and writes down the amortized cost basis of the investment if it is more likely than not that the Company will be required or will intend to sell the
investment before recovery of its amortized cost basis. Allowances for credit losses and write-downs are recognized in “Other expense, net,” and unrealized
losses not related to credit losses are recognized in “Accumulated other comprehensive loss.” There are no allowances for credit losses for the periods
presented.
Inventory
Inventory was comprised of the following (in thousands):
December 31,
2024
2023
Purchased materials
$
38,930
$
34,484
Work in progress
27,441
21,975
Finished goods
16,736
17,247
Inventory
$
83,107
$
73,706
Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
December 31,
2024
2023
Land
$
36,765
$
36,765
Building
147,094
146,044
Laboratory equipment and machinery
72,498
69,238
Computer equipment and software
14,953
16,379
Furniture and fixtures
9,586
10,979
Leasehold improvements
89,567
96,405
Construction in progress
5,152
7,252
Total property and equipment
375,615
383,062
Less: accumulated depreciation and amortization
(122,967)
(103,491)
Property and equipment, net
$
252,648
$
279,571
Depreciation expense was $33.9 million, $32.9 million and $22.8 million for the years ended December 31, 2024, 2023, and 2022, respectively.
During the year ended December 31, 2024, the Company recorded impairment charges of $2.1 million related to computer equipment and software of
which $0.3 million, $0.7 million and $1.1 million was classified in cost of revenue, research and development, and selling, general and administrative
expenses, respectively, in the consolidated statement of operations. The impairment charge was triggered by a decision to discontinue a productivity
engineering project.
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Intangible Assets, Net
Intangible assets, net consisted of the following (dollars in thousands):
December 31, 2024
December 31, 2023
Remaining Useful
Life in Years
Gross
Carrying
Amount
Accumulated
Amortization
Intangibles,
Net
Gross
Carrying
Amount
Accumulated
Amortization
Intangibles,
Net
Technology licenses
9.8
$
22,504
$
(8,016)
$
14,488
$
22,504
$
(6,546)
$
15,958
Developed technology
5.7
1,000
(92)
908
—
—
—
Customer relationships
0.9
945
(918)
27
945
(789)
156
Assembled workforce
1.1
1,328
(1,080)
248
1,328
(826)
502
Intangible assets, net
$
25,777
$
(10,106)
$
15,671
$
24,777
$
(8,161)
$
16,616
During the year ended December 31, 2023, the Company recorded impairment charges of $4.6 million related to its developed technology and
assembled workforce. No impairment losses were recognized for intangible assets during the years ended December 31, 2024 and December 31, 2022.
The estimated annual amortization of intangible assets for the next five years is shown below (in thousands):
Estimated
Annual
Amortization
2025
$
1,862
2026
1,667
2027
1,631
2028
1,631
2029
1,631
Thereafter
7,249
Total
$
15,671
Actual amortization expense to be reported in future periods could differ from these estimates as a result of acquisitions, divestitures and asset
impairments, among other factors.
Accrued Compensation and Related Benefits
Accrued compensation and related benefits were comprised of the following (in thousands):
December 31,
2024
2023
Accrued payroll and related costs
$
2,970
$
2,262
Accrued bonus
21,859
18,254
Accrued commissions
5,938
6,410
Other
2,848
3,179
Accrued compensation and related benefits
$
33,615
$
30,105
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities were comprised of the following (in thousands):
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December 31,
2024
2023
Accrued purchase consideration
$
—
$
20,000
Accrued legal and related costs
6,100
3,839
Accrued royalties for licensed technologies
7,042
5,455
Accrued property and equipment
644
3,199
Accrued professional services
5,315
6,577
Product warranties
8,615
8,116
Taxes payable
4,936
5,049
Other
8,513
4,413
Accrued expenses and other current liabilities
$
41,165
$
56,648
Product Warranties
Changes in the reserve for product warranties were as follows (in thousands):
Year Ended December 31,
2024
2023
Beginning of period
$
8,116
$
3,023
Amounts charged to cost of revenue
13,325
10,701
Repairs and replacements
(12,826)
(5,608)
End of period
$
8,615
$
8,116
Revenue and Deferred Revenue
As of December 31, 2024, the aggregate amount of remaining performance obligations related to separately sold extended warranty service agreements,
or allocated amounts for extended warranty service agreements bundled with sales of instruments, was $33.2 million, of which approximately $20.7 million is
expected to be recognized to revenue in the next 12 months, with the remainder thereafter. The contract liabilities of $33.2 million and $22.0 million as of
December 31, 2024 and 2023, respectively, consisted of deferred revenue related to extended warranty service agreements.
Year Ended December 31,
2024
2023
Beginning of period
$
21,964
$
11,032
Revenue recognized that was included in the contract liability at the beginning of the year
(11,407)
(6,588)
Revenue deferred excluding amounts recognized as revenue during the period
22,614
17,520
End of period
$
33,171
$
21,964
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The following table represents revenue by source for the periods indicated (in thousands). Spatial products include the Company’s Visium and Xenium
products:
Year Ended December 31,
2024
2023
2022
Instruments
Chromium
$
35,212 $
47,866 $
58,552
Spatial
57,503
75,605
13,844
Total instruments revenue
92,715
123,471
72,396
Consumables
Chromium
372,308
420,316
400,433
Spatial
121,124
59,237
35,155
Total consumables revenue
493,432
479,553
435,588
Services
24,638
15,703
8,425
Total revenue
$
610,785 $
618,727 $
516,409
The following table presents revenue by geography based on the location of the customer for the periods indicated (in thousands):
Year Ended December 31,
2024
2023
2022
Americas
United States
$
334,318 $
360,091 $
284,987
Americas (excluding United States)
13,447
13,101
8,791
Total Americas
347,765
373,192
293,778
Europe, Middle East and Africa
159,762
142,276
117,068
Asia-Pacific
China
57,300
50,965
64,356
Asia-Pacific (excluding China)
45,958
52,294
41,207
Total Asia-Pacific
103,258
103,259
105,563
Total revenue
$
610,785 $
618,727 $
516,409
6. Income Tax
Income (loss) before provision for income taxes were as follows (in thousands):
Year Ended December 31,
2024
2023
2022
United States
$
(187,720) $
(263,292) $
(172,038)
International
10,020
14,529
10,067
Total
$
(177,700) $
(248,763) $
(161,971)
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The provision for income taxes consisted of the following (in thousands):
Year Ended December 31,
2024
2023
2022
Current provision:
Federal
$
396 $
351 $
—
State
314
180
533
Foreign
3,508
6,252
3,360
Total current provision for income taxes
4,218
6,783
3,893
Deferred provision:
Federal
—
—
—
State
—
—
—
Foreign
709
(447)
136
Total deferred provision for income taxes
709
(447)
136
Provision for income taxes
$
4,927 $
6,336 $
4,029
A reconciliation of the federal statutory income tax provision to the effective income tax provision is as follows (in thousands):
Year Ended December 31,
2024
2023
2022
Income tax provision at federal statutory rate
$
(37,317)
$
(52,240) $
(34,014)
State taxes, net of federal benefit
(11,938)
(14,831)
(11,782)
Tax credits
(8,895)
(14,551)
(9,028)
Foreign taxes
2,148
3,888
1,522
Stock-based compensation
15,978
2,422
5,812
Change in valuation allowance
36,378
79,551
50,077
Acquisition related expenses
—
2,296
—
Waived deductions under Section 59A
8,190
—
—
Other
383
(199)
1,442
Total provision for income taxes
$
4,927
$
6,336 $
4,029
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Deferred income taxes reflect the net tax effect of temporary differences between amounts recorded for financial reporting purposes and amounts used
for tax purposes. The major components of deferred tax assets and liabilities are as follows (in thousands):
Year Ended December 31,
2024
2023
Deferred tax assets
Net operating loss carryforwards
$
161,681
$
166,607
Research and development tax credits
103,555
89,521
Accruals and reserves
12,302
10,610
Operating lease liability
19,628
22,000
Intangibles
35,966
39,117
Stock-based compensation
26,772
24,342
Capitalized research and development
136,267
108,255
Total deferred tax assets
496,171
460,452
Valuation allowance
(479,452)
(443,074)
Net deferred tax assets
$
16,719
$
17,378
Deferred tax liabilities
Property and equipment
(4,124)
(2,609)
Operating right-of-use assets
$
(13,510)
$
(14,975)
Total deferred tax liabilities
$
(17,634)
$
(17,584)
Net deferred tax liabilities
$
(915)
$
(206)
As of December 31, 2024 and 2023, the Company maintained a full valuation allowance on its U.S. net deferred tax assets. The U.S. deferred tax assets
predominantly relate to operating losses, tax credits and capitalized R&D intangibles. The U.S. valuation allowance was estimated based on an assessment of
both positive and negative evidence to determine whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a
jurisdiction-by-jurisdiction basis. The Company’s history of cumulative losses, along with expected future U.S. losses, required that a full valuation allowance
be recorded against all U.S. net deferred tax assets. The Company intends to maintain a full valuation allowance on U.S. net deferred tax assets until sufficient
positive evidence exists to support a reversal of the valuation allowance. The valuation allowance increased by $36.4 million and by $78.8 million for the years
ended December 31, 2024 and 2023, respectively.
As of December 31, 2024, the Company had federal net operating loss (NOL) carryforwards of $638.7 million and federal tax credit carryforwards of
$88.5 million. The federal NOL carryforwards generated after December 31, 2017 totaling $632.9 million are carried forward indefinitely, while all others,
along with the federal tax credit carryforwards, expire in years beginning in 2033. As of December 31, 2024, the Company had state NOL carryforwards of
$424.5 million, which begin to expire primarily in 2033. In addition, the Company had state tax credit carryforwards of $68.3 million, which do not expire.
Utilization of the net operating loss and tax credit carryforwards may be subject to an annual limitation due to the ownership change limitations provided
by the Internal Revenue Code of 1986, as amended, and similar state provisions. Any annual limitation may result in the expiration of net operating losses and
credits before utilization. If an ownership change occurred, utilization of the net operating loss and tax credit carryforwards could be significantly reduced.
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The total balance of unrecognized gross tax benefits, resulting primarily from research and development tax credits claimed on the Company’s annual
tax returns, were as follows (in thousands):
2024
2023
Unrecognized tax benefits at beginning of year
$
45,713
$
31,755
Reduction related to settlements with tax authorities
(285)
—
Reductions based on prior year tax provisions
(1,617)
—
Additions based on prior year tax provisions
467
3,511
Additions based on current year tax provisions
5,744
10,447
Unrecognized tax benefits at end of year
$
50,022
$
45,713
The total amount of unrecognized gross tax benefits was $50.0 million and $45.7 million as of December 31, 2024 and 2023, respectively, of which $2.9
million and $2.7 million, if recognized, would affect our effective tax rate, respectively.
The Company is subject to the examination of its income tax returns by the U.S. Internal Revenue Service and other domestic and foreign tax
authorities. The United States, California, and Sweden are considered as major jurisdictions. The Company has not been audited in such jurisdictions. Tax
examinations are expected to focus primarily on research and development tax credits and intercompany transfer pricing practices. Due to NOLs and tax credit
carryforwards, as of December 31, 2024, federal and California income tax returns for the years ended 2012 through the current period are open to
examination. Significant foreign income tax returns for the years 2019 through the current period are open to examination. Due to the number of years
remaining that are subject to examination, the Company is unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax
benefits.
It is reasonably possible that the Company's unrecognized tax benefits will change significantly over the next 12 months, likely due to increases related
to research and development tax credits. For U.S. uncertain tax positions, due to a full valuation allowance, such liabilities have been netted against deferred
tax attribute carryovers. As a result, if recognized, the unrecognized tax benefits would not materially impact income tax expense.
The Company includes interest and penalties related to income tax matters within the provision for income taxes. The total amount of gross interest and
penalties accrued was $1.6 million and $0.9 million for the years ended December 31, 2024 and 2023, respectively. The Company recognized interest and
penalty expenses of $0.7 million, $0.5 million and $0.2 million in 2024, 2023, and 2022, respectively.
The Company maintained undistributed earnings overseas as of December 31, 2024, and the Company believed the funds held by all non-U.S.
subsidiaries will be permanently reinvested outside of the U.S. However, if these funds were repatriated to the U.S. or used for U.S. operations, the Company
may be subject to withholding taxes in the foreign countries. The Company’s unrepatriated earnings are not subject to federal income tax in the U.S. when
distributed.
7. Commitments and Contingencies
Indemnification
From time to time, the Company has entered into indemnification provisions under certain agreements in the ordinary course of business, typically with
business partners, customers and suppliers. Pursuant to these agreements, the Company may indemnify, hold harmless and agree to reimburse the indemnified
parties on a case-by-case basis for losses suffered or incurred by the indemnified parties in connection with any patent or other intellectual property
infringement claim by any third party with respect to the Company’s products. The Company maintains product liability insurance coverage that would
generally enable it to recover a portion of the amounts paid. The Company has also agreed to indemnify its directors and executive officers for costs associated
with any fees, expenses, judgments, fines and settlement amounts incurred by them in any action or proceeding to which any of them are, or are threatened to
be, made a party by reason of their service as a director or officer (see “—Litigation” below). The Company also may be subject to indemnification obligations
by law with respect to the actions of its employees under certain circumstances and in certain jurisdictions.
Non-cancelable Purchase Commitments
The Company’s contract manufacturers make advance purchases of components based on the instrument unit forecasts and purchase orders placed by
the Company. To the extent these components are purchased by a contract manufacturer on the
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Company’s behalf and cannot be used by their other customers, the Company is obligated to purchase these components. In addition, certain supplier
agreements require the Company to make minimum annual purchases under the agreements. As of December 31, 2024, the Company has commitments to
make a total of $13.2 million in purchases over the next one year. To date, the Company has met the minimum purchase commitments.
As of December 31, 2024, the Company has entered into non-cancelable arrangements for subscription software services to make payments aggregating
to $19.6 million over the next five years.
Intellectual Property Licensing
In July 2021, the Company entered into a global settlement and patent cross license agreement with Bio-Rad Laboratories, Inc. pursuant to which both
parties granted each other a non-exclusive, worldwide, royalty-bearing license to develop products and services related to single cell analysis. Each company
shall pay to the other royalties from licensed products and licensed services through 2030.
The minimum commitments related to the Company's license arrangements aggregate to $14.6 million as of December 31, 2024 to be paid over the next
14 years.
Lease Agreements
The Company leases office, laboratory, manufacturing, distribution and server space with lease terms up to 10 years. These leases require monthly lease
payments that may be subject to annual increases throughout the lease term. Certain of these leases also include renewal options at the election of the Company
to renew or extend the lease. The Company evaluates renewal options at lease inception and on an ongoing basis and includes renewal options that it is
reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities.
On November 6, 2020, the Company entered into a Master Lease Agreement ("MLA") to lease additional office building space near the Company's
Pleasanton, California headquarters. All of the components of the MLA have commenced and are expected to terminate on June 30, 2033.
For the years ended December 31, 2024, 2023 and 2022, the Company incurred $12.6 million, $13.6 million and $13.1 million, respectively, of
operating lease costs and $0.5 million, $0.2 million and $0.4 million, respectively, of variable lease costs. The variable lease cost is comprised primarily of the
Company’s proportionate share of operating expenses, property taxes and insurance and is classified as lease cost due to the Company’s election to not separate
lease and non-lease components. The sublease income for the years ended December 31, 2024 and 2023 were $1.2 million and $0.5 million, respectively.
Cash paid for amounts included in the measurement of operating lease liabilities for the years ended December 31, 2024, 2023 and 2022 were $17.8
million, $15.2 million and $12.1 million, respectively, and were included in net cash used in operating activities in the Company’s consolidated statements of
cash flows.
The payments due under of the Company’s operating lease liabilities as of December 31, 2024 are as follows (in thousands):
Operating Leases
2025
$
13,883
2026
15,357
2027
15,569
2028
15,737
2029
14,310
Thereafter
26,331
Total lease payments
$
101,187
Less: imputed interest
(18,574)
Present value of operating lease liabilities
$
82,613
Operating lease liabilities, current
$
9,286
Operating lease liabilities, noncurrent
73,327
Total operating lease liabilities
$
82,613
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For the year ended December 31, 2024, the Company incurred approximately $1.0 million costs associated with exit activities related to the lease
expirations.
The following table summarizes additional information related to operating leases as of December 31, 2024:
December 31, 2024
December 31, 2023
Weighted-average remaining lease term:
Operating leases
6.8 years
7.5 years
Weighted-average discount rate:
Operating leases
5.8 %
5.9 %
Litigation
The Company is regularly subject to lawsuits, claims, arbitration proceedings, administrative actions and other legal and regulatory proceedings
involving intellectual property disputes, commercial disputes, competition and other matters, and the Company may become subject to additional types of
lawsuits, claims, arbitration proceedings, administrative actions, government investigations and legal and regulatory proceedings in the future. As of December
31, 2024, the Company has concluded that a loss is not probable and a contingent liability has not been recorded.
NanoString
On May 6, 2021, the Company filed suit against NanoString Technologies, Inc. (“NanoString”) in the U.S. District Court for the District of Delaware
alleging that NanoString’s GeoMx Digital Spatial Profiler and associated instruments and reagents infringe U.S. Patent Nos. 10,472,669, 10,662,467,
10,961,566, 10,983,113 and 10,996,219 (the “GeoMx Action”). On May 19, 2021, the Company filed an amended complaint additionally alleging that the
GeoMx products infringe U.S. Patent Nos. 11,001,878 and 11,008,607. On May 4, 2022, the Company filed an amended complaint in the GeoMx Action
additionally alleging that the GeoMx products infringe U.S. Patent No. 11,293,917 and withdrawing the Company’s claims of infringement of U.S. Patent No.
10,662,467. The Company is seeking, among other relief, injunctive relief and unspecified damages (including attorneys’ fees) in relation to NanoString’s
making, using, selling, offering to sell, exporting and/or importing in the United States the GeoMx Digital Spatial Profiler and associated instruments and
reagents. NanoString filed its answer to the GeoMx Action on May 18, 2022. A Markman hearing was held on February 17, 2023 and the Court issued its claim
construction order on February 28, 2023. On September 7, 2023, the Court issued an order granting the Company’s motion for summary judgment that the
asserted patents are not invalid for indefiniteness and denying NanoString’s motion for summary judgment that the asserted patents are invalid for
indefiniteness and lack of written description. On November 17, 2023, a jury found that NanoString willfully infringed the asserted patents and that the asserted
patents are valid. The jury awarded the Company more than $31 million in damages, consisting of approximately $25 million in lost profits and approximately
$6 million in royalties. Post-trial motions, including the Company’s motions for a permanent injunction, ongoing royalties, enhanced damages, attorneys’ fees
and pre- and post-judgment interest, are pending. NanoString filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code in the
U.S. bankruptcy court in Delaware on February 4, 2024, and the Court’s consideration of these post-trial motions was stayed due to the bankruptcy filing. In
May 2024, Bruker Corporation (“Bruker”) acquired certain assets and assumed certain liabilities of NanoString, including the litigation between 10x and
NanoString, and the NanoString product lines at issue. Post-trial briefing is complete following supplementation by the parties. On December 23, 2024, the
Court issued an opinion denying NanoString’s motion for judgement as a matter of law on invalidity, non-infringement and damages, and denied its request for
a new trial. In that opinion, the Court granted the Company’s motion for permanent injunction, supplemental damages, and pre-judgment and post-judgment
interest. Briefing with regard to the scope of the permanent injunction, supplemental damages, and pre- and post-judgment interest is ongoing. Due to the
uncertainties in collecting the jury award, the Company has not recorded a receivable from NanoString as of December 31, 2024.
On February 28, 2022, the Company filed a second suit against NanoString in the U.S. District Court for the District of Delaware alleging that
NanoString’s CosMx Spatial Molecular Imager and associated instruments, reagents and services infringe U.S. Patent Nos. 10,227,639 and 11,021,737 (the
“CosMx Action”). On May 12, 2022, the Company filed an amended complaint in the CosMx Action additionally alleging that the CosMx products
additionally infringe U.S. Patent Nos. 11,293,051, 11,293,052 and 11,293,054. NanoString filed its answer to the CosMx Action on May 26, 2022. On March 1,
2023, the Company filed a second amended complaint additionally alleging that the CosMx products infringe U.S. Patent No. 11,542,554. The Company is
seeking, among other relief, injunctive relief and unspecified damages (including attorneys’ fees) in relation to NanoString’s making, using, selling, offering to
sell, exporting and/or importing in the United States the CosMx Spatial Molecular Imager and associated instruments, reagents and services. NanoString filed
its answer to the second amended complaint on March 22, 2023.
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Discovery is in progress. A Markman hearing was held on January 10, 2024, and the Court issued its claim construction order on February 1, 2024.
On May 1, 2023, NanoString filed a motion in the CosMx Action to add antitrust, unfair competition, tort and contract counterclaims. NanoString seeks,
among other relief, injunction relief (including that the Company grant NanoString a license to the patents that the Company asserted against NanoString in the
CosMx Action) and unspecified damages (including attorneys’ fees). On July 10, 2023, the Court denied NanoString’s motion for leave to add a contract
counterclaim but otherwise granted the motion for leave to amend. On May 24, 2023, NanoString filed a motion to bifurcate its amended counterclaims and a
motion for expedited discovery. On June 6, 2023, the Court denied NanoString’s motion to bifurcate and granted its motion for expedited discovery. The
Company believes NanoString’s claims are meritless and intends to vigorously defend itself. Trial is scheduled for May 2025.
On August 16, 2022, NanoString filed a counterclaim in the CosMx Action alleging that the Company’s Visium products infringe U.S. Patent No.
11,377,689 (the “689 patent”). The Company filed its answer to NanoString’s counterclaim in the CosMx Action on August 30, 2022. On November 23, 2022,
the Company moved to sever claims relating to NanoString’s assertion of the 689 patent and consolidate those claims with the patent case NanoString filed
against the Company on October 20, 2022 (discussed below). On January 24, 2023, the Court granted the Company’s motion.
On October 20, 2022, NanoString filed suit against the Company in the U.S. District Court for the District of Delaware alleging that the Company’s
Visium products infringe U.S. Patent No. 11,473,142 (the “142 patent”), a continuation of the 689 patent (the “NanoString Action”). NanoString seeks, among
other relief, injunctive relief and unspecified damages (including attorneys’ fees) in relation to the Company’s making, using, selling, offering to sell, exporting
and/or importing in the United States Visium products and associated instruments, reagents and services. On January 24, 2023, the Court severed NanoString’s
claims with respect to the 689 patent from the CosMx Action and consolidated those claims with this action. NanoString filed an amended complaint on
January 27, 2023. The Company filed an answer to the NanoString Action on February 10, 2023. Discovery is in progress. A Markman hearing was held on
January 10, 2024, and the Court issued its claim construction order on February 1, 2024. Trial is scheduled for November 2024. The Company believes
NanoString’s claims in the NanoString Action are meritless and intends to vigorously defend itself.
On August 16 and September 25, 2023, the Company filed petitions for inter partes review (“IPR”) of the 689 patent and the 142 patent, respectively. On
February 1, 2024, IPR was instituted for the 689 patent. On September 5, 2024, trial was instituted for the 142 patent.
On January 30, 2024, NanoString filed a petition for IPR of U.S. Patent No. 11,542,554, which is asserted by the Company against NanoString in the
CosMx Action. On August 23, 2024, IPR was instituted for the 554 patent.
On March 9, 2022, the Company filed suit in the Munich Regional Court in Germany alleging that NanoString’s CosMx Spatial Molecular Imager and
associated instruments, reagents and services infringe EP Patent No. 2794928B1 (the “EP928 patent”) (the “Germany CosMx Action”). A hearing on
infringement was held on March 23, 2023. On May 17, 2023, the Munich Regional Court found that the CosMx products infringe the EP928 patent and issued
a permanent injunction requiring NanoString to stop selling and supplying CosMx instruments and reagents for RNA detection in Germany. The injunction
took effect on June 1, 2023. On May 25, 2023, NanoString filed an appeal of the Germany CosMx Action in the Munich Higher Regional Court. A hearing date
has not yet been set for this appeal. On October 30, 2023, NanoString requested that the Higher Regional Court temporarily stay enforcement of the injunction
pending the appeal. On December 20, 2023, the Higher Regional Court granted NanoString’s request conditioned upon NanoString posting a 2.3 million Euro
security deposit.
On July 29, 2022, NanoString filed a nullity action with the German Federal Patent Court challenging the validity of the EP 928 patent. On February 10,
2023, the Federal Patent Court issued a preliminary opinion upholding the validity of certain claims of the EP 928 patent directed to in situ analysis. On May 7,
2024, the German Federal Patent Court revoked the German part of the EP 928 patent. The Company strongly disagrees with this decision and will appeal the
decision.
On June 1, 2023, the Company filed requests for preliminary injunctions in the Munich Local Division of the Unified Patent Court (“UPC”) alleging that
NanoString’s CosMx Spatial Molecular Imager and associated instruments, reagents and services for RNA detection infringe the EP928 patent and EP Patent
No. 4108782 (the “EP782 patent”). Hearings were held for the EP 782 and EP 928 patents on September 5 and September 19, respectively. On September 19,
2023, the UPC granted the Company’s request for the EP782 patent and issued a preliminary injunction requiring NanoString to stop selling and supplying
CosMx instruments and reagents for RNA detection in all 17 UPC member states. On October 10, 2023, the UPC denied the Company’s preliminary injunction
request for the EP928 patent. On October 2, 2023, NanoString filed an appeal of the preliminary injunction for the EP782 patent in the UPC Court of Appeals.
A hearing was held before the UPC Court of Appeals on December 18, 2023. The UPC Court of Appeals overturned the preliminary injunction on February 26,
2024.
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On August 31 and September 18, 2023 we filed main requests in the Munich Local Division of the UPC alleging that NanoString's CosMx Spatial
Molecular Imager and associated instruments, reagents and services for RNA detection infringe the EP 782 and EP 928 patents, respectively. A hearing on the
main request for EP 782 is scheduled for September 2025. No hearing has yet been set for the main request with regard to EP 928.
On July 18, 2023, NanoString filed an opposition in the European Patent Office challenging the validity of the EP782 patent. A hearing is scheduled for
March 2025. On July 27, 2023, NanoString filed a revocation action in the Munich Central Division of the UPC challenging the validity of the EP928 patent. A
hearing in the revocation action took place on September 18, 2024. Following the hearing, the UPC revoked EP928. The Company strongly disagrees with this
decision and has appealed.
Vizgen
On May 3, 2022, the Company filed suit against Vizgen, Inc. (“Vizgen”) in the U.S. District Court for the District of Delaware alleging that Vizgen’s
MERSCOPE Platform and workflow and/or Vizgen’s Lab Services program, including associated instruments and reagents, infringe U.S. Patent Nos.
11,021,737, 11,293,051, 11,293,052, 11,293,054 and 11,299,767. The Company seeks, among other relief, injunctive relief and unspecified damages (including
attorneys’ fees) in relation to Vizgen’s making, using, selling, offering to sell, exporting and/or importing in the United States the MERSCOPE Platform and
workflow and/or Vizgen’s Lab Services program, including associated instruments and reagents. On July 25, 2022, Vizgen filed a motion to dismiss the
Company’s claims for willful and indirect infringement, which the Court denied on September 19, 2022. Discovery is in progress. A Markman hearing was
held on January 10, 2024, and the Court issued its claim construction order on February 1, 2024.
On August 30, 2022, Vizgen filed its answer and counterclaims alleging that the Company’s Xenium product infringes U.S. Patent No. 11,098,303 (the
“303 patent”). Vizgen seeks, among other relief, injunctive relief and unspecified damages (including attorneys’ fees) in relation to the Company’s making,
using, selling, offering to sell, exporting and/or importing in the United States Xenium products, including associated instruments and reagents. Vizgen also
filed counterclaims alleging that the Company tortiously interfered with Vizgen’s contractual and business relationship with Harvard and that the Company
engaged in unfair practices under Massachusetts state law. On October 27, 2022, the Company filed a partial answer and motion to dismiss the infringement
counterclaim and the tort counterclaims. On February 2, 2023, the Company’s motion to dismiss was denied. The Company believes Vizgen’s claims are
meritless and intends to vigorously defend itself.
On March 15, 2023, the Company filed an amended complaint additionally alleging that the MERSCOPE Platform and workflow and Vizgen’s Lab
Services program infringe U.S. Patent No. 11,549,136 and withdrawing its claim of infringement of U.S. Patent No. 11,293,054. On April 17, 2023, Vizgen
filed its answer adding amended counterclaims including antitrust, unfair competition, tort and contract counterclaims. Vizgen seeks, among other relief,
injunctive relief (including that the Company grant Vizgen a license to the patents that the Company asserted against Vizgen) and unspecified damages
(including attorneys’ fees). On May 18, 2023, the Company filed a motion to dismiss Vizgen’s amended counterclaims. On July 10, 2023, the Court granted the
Company’s motion to dismiss Vizgen’s contract counterclaim but otherwise denied the Company’s motion to dismiss. On November 5, 2024, the parties filed
cross-motions for summary judgment. The Company filed a motion for summary judgment on Vizgen’s antitrust, unfair competition, and tort counterclaims.
Vizgen filed a motion for summary judgment to limit the availability of damages and to invalidate the 737, 051, 052, and 136 patents. Vizgen also moved to
exclude two of the Company’s expert witnesses. On January 3, 2025, the Court granted the Company’s motion for summary judgment regarding Vizgen’s
antitrust, unfair competition, and tort counterclaims with the exception of a limited counterclaim of tortious interference. The Court denied Vizgen’s motion for
summary judgment and motion to exclude the Company’s expert witnesses. The Company believes Vizgen’s remaining tortious interference claim is meritless
and intends to vigorously defend itself.
Trial on the Company’s claims and on Vizgen’s non-patent counterclaims began on February 3, 2025. On February 5, 2025, the parties signed a binding
term sheet resolving the worldwide litigation between 10x, Vizgen and Harvard.
Parse
On August 24, 2022, the Company filed suit against Parse Biosciences, Inc. (“Parse”) in the U.S. District Court for the District of Delaware alleging that
Parse’s Evercode Whole Transcriptomics products and ATAC-seq products infringe U.S. Patent Nos. 10,155,981 (the “981 patent”), 10,697,013 (the “013
patent”), 10,240,197 (the “197 patent”), 10,150,995, 10,619,207 and 10,738,357. The Company seeks, among other relief, injunction relief and unspecified
damages (including attorneys’ fees) in relation to Parse’s making, using, selling, offering to sell, exporting and/or importing in the United States Parse’s
Evercode Whole Transcriptomics products and ATAC-seq products. On October 17, 2022, Parse filed a motion to dismiss alleging that the asserted claims are
directed to patent ineligible subject matter. The Court held a hearing on the motion to dismiss on November 22, 2022, and supplemental briefing was submitted
on December 15, 2022. On September 14, 2023, the Court denied the motion. Parse
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filed its answer on October 6, 2023. Discovery is in progress. A Markman hearing was held on February 21, 2024, and the Court issued its claim construction
order on May 3, 2024. Trial is scheduled for March 2025.
Between April 20 and June 21, 2023, Parse filed petitions for IPR of all of the patents asserted. On October 13, 2023, IPR was instituted on the 981
patent. The PTAB denied institution of Parse’s petitions for IPR on the other five asserted patents. On January 2 and 5, 2024, Parse filed rehearing requests
with the PTAB for the 197 and 013 patents, respectively. On February 5, 2024, the PTAB instituted IPRs for the 197 and 013 patents on Parse’s requests for
rehearing. On September 17, 2024, the PTAB found the challenged claims of the 981 patent unpatentable. The Company strongly disagrees with this decision
and has appealed. The final written decisions for the 197 and 013 patents are expected in February 2025.
On November 6, 2023, Parse filed a motion to stay the Delaware action pending the IPRs. On December 21, 2023, the court denied Parse’s motion to
stay. On February 8, 2024, Parse filed a renewed motion to stay. On February 20, 2024, the court denied Parse’s renewed motion to stay.
Curio
On December 1, 2023, the Company filed suit against Curio Bioscience, Inc. (“Curio”) in the U.S. District Court for the District of Delaware alleging
that the Curio Seeker Spatial Mapping Kit and associated products and services infringe U.S. Patent Nos. 10,480,022, 10,662,468, 11,001,879, 11,549,138, and
11,761,030. On February 1, 2024, Curio filed a motion to dismiss alleging that the asserted claims are directed to patent ineligible subject matter. The Court
denied that motion on May 9, 2024. On May 31 and June 20, 2024, Curio answered the Complaint and filed antitrust and unfair competition counterclaims. The
Company filed a motion to dismiss Curio’s unfair competition and antitrust counterclaims on July 5, 2024. The Company believes Curio’s counterclaims are
meritless and intends to vigorously defend itself. Trial is scheduled for May 2026.
On December 4, 2023, the Company filed a request for a preliminary injunction in the Dusseldorf Local Division of the UPC alleging that the Curio
Seeker Spatial Mapping Kit and associated products and services infringe EP Patent No. 2697391 (the “EP 391 patent”). A hearing was held on March 26,
2024. On April 30, 2024, the UPC granted the Company’s request and issued a preliminary injunction requiring Curio to stop offering, marketing, using or
possessing these Curio Seeker products and services in Germany, France and Sweden. Curio did not appeal the preliminary injunction. On March 25, 2024, the
Company filed a main request in the Dusseldorf Local Division of the UPC alleging that the Curio Seeker Spatial Mapping Kit and associated products and
services infringe the EP 391 patent. A hearing in the main action is expected in May 2025.
8. Capital Stock
The Company’s Amended and Restated Certificate of Incorporation authorizes it to issue 1,200,000,000 shares of capital stock consisting of
1,000,000,000 shares of Class A common stock, 100,000,000 shares of Class B common stock, and 100,000,000 shares of preferred stock.
Common Stock
The following table represents the number of shares of Class B common stock converted to shares of Class A common stock upon the election of the
holders of such shares during the years:
Year Ended December 31,
2024
2023
2022
Class B common stock converted to Class A common stock
—
4,610,422
979,210
The Company’s Class A common stock and Class B common stock have a par value of $0.00001 per share. Each share of Class B common stock has the
right to ten votes and each share of Class A common stock has the right to one vote per share. All other rights and privileges of Class A and Class B common
stock are equivalent. Class B common shares are convertible to Class A common shares at any time upon written notification and all Class B common shares
will convert upon the date specified by vote or written consent of the holders of a majority of the then outstanding Class B common stock, voting together as a
single class. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the Board of
Directors, subject to the prior rights of holders of all classes of stock outstanding having priority rights as to dividends.
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9. Equity Incentive Plans
Amended and Restated 2012 Stock Plan
Following the adoption of the 2019 Omnibus Incentive Plan in September 2019, any awards outstanding under the Amended and Restated 2012 Stock
Plan continue to be governed by their existing terms but no further awards may be granted under the Amended and Restated 2012 Stock Plan. As of
December 31, 2024, the number of shares of Class A common stock issuable under the Amended and Restated 2012 Stock Plan which includes shares issuable
upon the exercise of outstanding awards was 1,842,338.
2019 Omnibus Incentive Plan
The Omnibus Incentive Plan allows for the issuance of incentive stock options (“ISOs”), non-statutory stock options (“NSOs”) or restricted shares. ISOs
may be granted only to the Company’s employees (including officers and directors who are also considered employees). NSOs and restricted shares may be
granted to the Company’s employees and service providers. As of December 31, 2024, the number of shares of Class A common stock available for issuance
under the 2019 Omnibus Incentive Plan was 9,245,631 shares issuable in connection with outstanding awards and 19,637,882 shares reserved for issuance in
connection with grants of future awards.
The number of shares of Class A common stock reserved for issuance under the 2019 Omnibus Incentive Plan at the time the 2019 Omnibus Incentive
Plan was adopted in 2019 was 11,000,000. The Omnibus Incentive Plan provides that the total number of shares of the Company’s Class A common stock that
may be issued under the Omnibus Incentive Plan, including options authorized and options outstanding, is 11,000,000 (such share limit as increased from time
to time, the “Absolute Share Limit”). However, the Absolute Share Limit shall be increased on the first day of each calendar year commencing on January 1,
2021 and ending on January 1, 2029 in an amount equal to the lesser of (i) 5% of the total number of shares of common stock outstanding on the last day of the
immediately preceding fiscal year and (ii) such number of shares of the Company’s Class A common stock as determined by the Company’s board of
directors. However, if on January 1 of a calendar year, the Company’s board of directors has not either confirmed the 5% increase described in clause (i) or
approved a lesser number of shares of the Company’s Class A common stock for such calendar year, then the Company’s board of directors will be deemed to
have waived the automatic increase, and no such increase will occur for such calendar year. Of the Absolute Share Limit, no more than 11,000,000 shares of
Class A common stock may be issued in the aggregate pursuant to the exercise of incentive stock options granted under the Omnibus Incentive Plan.
Options under the Omnibus Incentive Plan have a contractual term of 10 years. The exercise price of an ISO and NSO shall not be less than 100% of the
fair market value of the shares on the date of grant.
Stock Options
A summary of the Company’s stock option activity under the Plans is as follows:
Outstanding
Options
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Term
(Years)
Aggregate
Intrinsic Value
Balance as of December 31, 2023
5,946,786
$
42.17
6.3
$
144,350,070
Exercised
(717,982)
5.91
Forfeited
(634,222)
60.04
Balance as of December 31, 2024
4,594,582
$
45.37
5.4
$
13,834,082
Vested and exercisable as of December 31, 2024
3,876,752
$
44.07
4.9
$
13,834,082
The Company did not grant stock options during the year ended December 31, 2024. The weighted-average grant date fair value of options granted
during the years ended December 31, 2023 and 2022 was $33.67, and $32.95 per share, respectively. The total intrinsic value of stock options exercised was
$12.3 million, $78.0 million and $89.5 million during the years ended December 31, 2024, 2023, and 2022, respectively. As of December 31, 2024, the total
unrecognized stock-based compensation related to stock options was $19.5 million, which will be recognized over a weighted-average period of approximately
two years.
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The fair value of each employee option grant was estimated on the date of grant using the Black-Scholes option pricing model and the following
assumptions for the periods indicated:
Year Ended December 31,
2023
2022
Expected volatility
70% – 71%
65% – 71%
Risk-free interest rate
3.7% – 4.6%
1.6% – 4.1%
Expected term
5.3 – 6.1 years
5.3 – 6.1 years
Expected dividend
—%
—%
Restricted Stock Units
Restricted stock units (“RSUs”) activity for the year ended December 31, 2024 is as follows:
Restricted Stock
Units
Weighted-Average
Grant Date Fair Value
(per share)
Balance as of December 31, 2023
5,334,134
$
48.26
Granted
4,294,529
29.71
Vested
(2,092,526)
53.10
Forfeited
(1,042,750)
41.32
Outstanding as of December 31, 2024
6,493,387
$
35.55
As of December 31, 2024, the total unrecognized stock-based compensation related to RSUs was $194.4 million, which will be recognized over a
weighted-average period of approximately three years.
Performance Stock Awards
In March 2024, the Company granted 219,168 performance stock units (“PSUs”) under the 2019 Plan to certain members of management which are
subject to the achievement of certain performance conditions established by the Company’s Compensation Committee of the Board of Directors as described
below:
i.
50% of target PSUs earned will be based on the Company’s compound annual growth rate (CAGR) of the Company’s Revenue over a two-year
performance period from January 1, 2024 to December 31, 2025. Holders may earn from 0% to 175% of the target amount of shares and earned PSUs
will then be subject to service-based vesting; and
ii.
50% of target PSUs earned will be based on the relative Total Shareholder Return (TSR) of the Company’s common stock as compared to the TSR of
the members of the Russell 3000 Medical Equipment and Services Sector Index over a three-year performance period from January 1, 2024 to
December 31, 2026. Depending on the results relative to the TSR market condition, the holders may earn from 0% to 200% of the target amount of
shares which will vest at the end of the performance period.
The PSUs will be forfeited if the performance conditions are not achieved at the end of the relative performance periods as described above. The vesting
of the PSUs can also be triggered upon certain change in control events or in the event of death or disability.
The weighted-average grant date fair values of the PSUs relating to CAGR and TSR components were $37.43 and $44.80 per share respectively. Stock-
based compensation expense recognized for the PSUs relating to TSR components were approximately $1.3 million for the year ended December 31, 2024.
The PSUs relating to CAGR components were not deemed probable of vesting as of December 31, 2024, and no expenses were recognized for 2024.
The Company estimated the fair values of shares granted under the market-based TSR PSUs using a Monte Carlo
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simulation model with the following assumptions:
Year Ended December 31, 2024
Expected volatility
66%
Risk-free interest rate
4.5%
Expected dividend yield
—%
In March 2023, the Company granted 172,842 performance restricted stock unit awards (“PSAs”) under the 2019 Plan to certain members of
management, which are subject to the achievement of certain escalating stock price thresholds established by the Company's Compensation Committee of the
Board of Directors.
The PSAs each vest in equal installments upon the achievement of escalating stock price thresholds of $72.14, $96.19 and $120.24 respectively,
calculated based on the volume-weighted average price per share of the Company’s Class A common stock over the immediately trailing 20 trading day period
for each respective threshold. The escalating stock price thresholds can be met any time prior to the fifth anniversary of the date of grant. The vesting of the
PSAs can also be triggered upon certain change in control events and achievement of certain change in control price thresholds, or in the event of death or
disability. The weighted-average grant date fair value of the PSAs was $43.13. Stock-based compensation expense recognized for these market-based awards
was approximately $1.7 million and $5.1 million for the years ended December 31, 2024 and 2023, respectively.
The Company estimates the fair values of shares granted under the PSAs using a Monte Carlo simulation model with the following assumptions:
Year Ended December 31,
2023
Expected volatility
71%
Risk-free interest rate
3.7%
Expected dividend
—%
In September 2022, the Company granted 709,025 PSAs including RSUs and a performance stock option under the 2019 Plan to certain members of
management, which are subject to the achievement of certain stock price thresholds established by the Company’s Compensation Committee of the Board of
Directors.
The PSAs consist of three separate tranches and the vesting of each tranche is subject to the Class A common stock closing price being maintained at or
above the predetermined share price goals of $60, $80 and $105 for each tranche, respectively, for a period of 20 consecutive trading days. The share price
goals can be met any time prior to the fourth anniversary of the date of grant. The vesting of the PSAs can also be triggered upon certain change in control
events and achievement of certain change in control price goals, or in the event of death or disability. The weighted-average grant date fair value of the PSAs
was $22.55. Stock-based compensation expense recognized for these market-based awards was approximately $2.4 million, $10.0 million and $3.3 million for
the years ended December 31, 2024, 2023 and 2022, respectively.
The Company estimated the fair values of shares under the Performance stock options using a Monte Carlo simulation model with the following
assumptions:
Year Ended December 31,
2022
Expected volatility
68%
Risk-free interest rate
3.4%
Expected dividend
—%
As of December 31, 2024, the performance criteria for the stock awards was not met and therefore no shares vested or become exercisable.
2019 Employee Stock Purchase Plan
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In July 2019, the Company’s board of directors adopted the 10x Genomics, Inc. 2019 Employee Stock Purchase Plan (the “ESPP”), which was
subsequently approved by the Company’s stockholders. The ESPP went into effect on September 11, 2019. Subject to any limitations contained therein, the
ESPP allows eligible employees to contribute, through payroll deductions, up to 15% of their eligible compensation to purchase the Company’s Class A
common stock at a discounted price per share. The ESPP generally provides for consecutive 6-month offering periods.
During the years ended December 31, 2024, 2023 and 2022, 385,967, 217,537, and 151,028 shares of Class A common stock, respectively, were issued
under the ESPP. The ESPP provides that the maximum number of shares of the Company’s Class A common stock made available for sale thereunder will be
3,686,671, which number will be automatically increased on the first day of each calendar year commencing on January 1, 2021 and ending on January 1, 2029
in an amount equal to the lesser of (i) 1% of the total number of shares of common stock outstanding on the last day of the immediately preceding fiscal year
and (ii) such number of shares of the Company’s Class A common stock as determined by the Company’s board of directors. However, if on January 1 of a
calendar year the Company’s board of directors has not either confirmed the 1% described in clause (i) or approved a lesser number of shares of the Company’s
Class A common stock for such calendar year, the Company’s board of directors will be deemed to have waived the automatic increase and no such increase
will occur for such calendar year. The maximum number of shares available under the ESPP (and any share limitations thereunder, as applicable) will
automatically be adjusted upon certain changes to the Company’s capital structure. As of December 31, 2024, there were 2,705,096 shares available for
issuance under the ESPP.
For the years ended December 31, 2024, 2023, and 2022 the weighted average grant date fair values of options granted under the ESPP, using the Black-
Scholes option pricing model, were $6.42, $16.91, and $33.74 respectively.
The following assumptions were used in estimating the fair values of shares under the ESPP:
Year Ended December 31,
2024
2023
2022
Expected volatility
49% – 80%
49% – 58%
81% – 92%
Risk-free interest rate
4.44% – 5.40%
5.24% – 5.41%
1.54% – 4.54%
Expected term (in years)
0.5
0.5
0.50
Expected dividend
—%
—%
—%
As of December 31, 2024, the total unrecognized stock-based compensation related to the ESPP was $1.5 million, which will be recognized over a
weighted-average period of approximately 0.4 years.
Stock-based Compensation
The Company recorded stock-based compensation expense in the consolidated statement of operations for the periods presented as follows (in
thousands):
Year Ended December 31,
2024
2023
2022
Cost of revenue
$
8,348
$
7,068
$
5,259
Research and development
66,315
72,804
59,211
Selling, general and administrative
66,086
87,078
72,378
Total stock-based compensation expense
$
140,749
$
166,950
$
136,848
10. Employee Benefit Plans
The Company has made available to all full-time United States employees a 401(k) retirement savings plan. Under this plan, employee and employer
contributions and accumulated plan earnings qualify for favorable tax treatment under Section 401(k) of the Internal Revenue Code. The Company matches
100% of the first 3% of the employee's eligible compensation, up to a maximum of two thousand dollars annually per employee. The Company contributed
$1.9 million, $1.8 million, and $2.0 million for the years ended December 31, 2024, 2023, and 2022 respectively.
11. Net Loss Per Share
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The following outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share for the periods
presented because including them would have had an anti-dilutive effect:
Year Ended December 31,
2024
2023
2022
Stock options to purchase common stock
4,594,582
5,946,786
7,964,557
Restricted stock units
6,493,387
5,334,134
5,836,192
Shares committed under ESPP
124,652
48,302
46,548
Total
11,212,621
11,329,222
13,847,297
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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the
effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report. Our disclosure controls and procedures are designed to ensure
that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief
Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in
evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer
have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2024.
Management’s Annual Report on Internal Control over Financial Reporting
Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer,
and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles, and includes those policies and
procedures that:
(1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally
accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and
directors of the Company; and
(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could
have a material effect on the financial statements.
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations.
Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns
resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of
such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting.
However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to
reduce, though not eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the
Company.
Management has used the 2013 framework set forth in the report titled “Internal Control-Integrated Framework” published by the Committee of Sponsoring
Organizations of the Treadway Commission to evaluate the effectiveness of the Company’s internal control over financial reporting. Management has
concluded that the Company’s internal control over financial reporting was effective as of December 31, 2024 at the reasonable assurance level. Our
independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on the Company’s internal control over financial reporting
as of December 31, 2024, which is included below.
Changes in Internal Control over Financial Reporting
There was not any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during the three
months ended December 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of 10x Genomics, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited 10x Genomics, Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our
opinion, 10x Genomics, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024,
based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, stockholders’ equity
and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and our report dated February 12, 2025 expressed an
unqualified opinion thereon.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
San Jose, California
February 12, 2025
Item 9B. Other Information.
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Table of Contents
Rule 10b5-1 Trading Plans
None of our directors or officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the
quarter ended December 31, 2024, as such terms are defined under Item 408(a) of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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Table of Contents
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer,
principal financial officer, principal accounting officer, controller, or persons performing similar functions. A current copy of the code is posted on the
Governance section of our investor relations website, which is located at www.investors.10xgenomics.com. If we make any substantive amendments to, or
grant any waivers from, the code of business conduct and ethics for our principal executive officer, principal financial officer, principal accounting officer,
controller or persons performing similar functions, or any officer or director, we will disclose the nature of such amendment or waiver on our website or in a
Current Report on Form 8-K.
We have an insider trading policy (the “Trading Policy”), governing the purchase, sale and other dispositions of our securities that applies to all of our
personnel, including directors, officers, employees and other covered persons. We believe that our Trading Policy is reasonably designed to promote
compliance with insider trading laws, rules and regulations and listing standards applicable to us. A copy of our Trading Policy is filed as Exhibit 19.1 to this
Form 10-K.
The remaining information required under this item is incorporated herein by reference to our definitive proxy statement (the “Proxy Statement”) pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended, which Proxy Statement is expected to be filed with Securities and Exchange
Commission not later than 120 days after the close of our fiscal year ended December 31, 2024.
Item 11. Executive Compensation.
The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services.
The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference.
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Table of Contents
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)
The following documents are filed as part of this Annual Report:
(1)
Financial Statements
The financial statements filed as part of this Annual Report are included in Part II, Item 8 of this Annual Report.
(2)
Financial Statement Schedules
Financial statement schedules have been omitted in this Annual Report because they are not applicable, not required under the instructions or the information
requested is set forth in the financial statements or related notes thereto.
(3)
List of Exhibits required by Item 601 of Regulation S-K
Incorporated by Reference
Exhibit
Number
Exhibit Title
Form
File No.
Exhibit
Filing Date
Filed Herewith
3.1
Amended and Restated Certificate of
Incorporation of the Registrant.
8‑K
001‑39035
3.1
9/16/2019
3.2
Amended and Restated Bylaws of the Registrant.
8‑K
001‑39035
3.2
11/3/2022
4.1
Form of Stock Certificate for Class A common
stock of the Registrant.
S‑l
333‑233361
4.2
8/19/2019
4.2
Description of the Registrant’s Securities.
10-K
001-39035
4.2
2/18/2022
10.1
Agreement for Purchase and Sale, dated August
10, 2020, between the Registrant and Equity One
(West Coast Portfolio) LLC.
10-Q
001-39035
10.7
8/12/2020
10.2
Amendment to Agreement for Purchase and Sale,
dated October 15, 2020, between Registrant and
Equity One (West Coast Portfolio) LLC.
10-Q
001-39035
10.3
11/12/2020
10.3
ReadCoor Merger Agreement.
10-K
333-39035
10.6
2/26/2021
10.4+
Amended and Restated 2012 Stock Plan and
forms of award agreements thereunder.
S-1/A
333-233361
10.10
9/3/2019
10.5+
2019 Omnibus Incentive Plan and forms of award
agreements thereunder.
S-1/A
333-233361
10.11
9/3/2019
10.5.1+
Form of 2019 Omnibus Incentive Plan Stock
Option Award Notice and Agreement.
10-Q
001-39035
10.1.1
10/29/2024
10.5.2+
Form of 2019 Omnibus Incentive Plan Restricted
Stock Unit Award Notice and Agreement.
10-Q
001-39035
10.1.2
10/29/2024
10.6+
2019 Employee Stock Purchase Plan and forms of
agreements.
10-Q
001-39035
10.4
11/12/2019
10.6.1+
Form of 2019 Employee Stock Purchase Plan
Subscription Agreement.
10-Q
001-39035
10.2.1
10/29/2024
10.6.2+
Form of 2019 Employee Stock Purchase Plan
Notice of Contribution Percentage Change or
Withdrawal.
10-K
333-39035
10.6.2
2/16/2023
10.7+
Amended and Restated Non-Employee Director
Compensation Policy.
10-Q
001-39035
10.1
8/8/2024
113
Table of Contents
Incorporated by Reference
Exhibit
Number
Exhibit Title
Form
File No.
Exhibit
Filing Date
Filed Herewith
10.8+
Form of At-Will Employment, Confidential
Information and Invention Assignment Agreement
X
10.9+
Form of Indemnification Agreement between the
Registrant and each of its directors and executive
officers.
S‑l/A
333‑233361
10.17
9/3/2019
10.10+
Employment Offer Letter by and between the
Registrant and Eric S. Whitaker.
S‑l
333‑233361
10.14
8/19/2019
10.11+
Employment Offer Letter by and between the
Registrant and Adam Taich dated August 7, 2024
10-Q
001-39035
10.3
10/29/2024
10.12
Lease Agreement dated August 2, 2018, between
the Registrant and 6200 Stoneridge Mall Road
investors LLC.
S‑l
333‑233361
10.3
8/19/2019
10.12.1
First Amendment to Lease Agreement, dated
May 20, 2019, between the Registrant and 6200
Stoneridge Mall Road Investors LLC.
S‑l
333‑233361
10.4
8/19/2019
10.12.2
Second Amendment to Lease Agreement, dated
July 24, 2020, between the Registrant and 6200
Stoneridge Mall Road Investors LLC.
10‑Q
001‑39035
10.6
8/12/2020
10.12.3
Third Amendment to Lease Agreement, dated June
10, 2021, between the Registrant and 6200
Stoneridge Mall Road Investors LLC.
8-K
001-39035
10.1
6/15/2021
10.13
Lease Agreement, dated November 6, 2020,
between the Registrant and 6200 Stoneridge Mall
Road Investors LLC.
10-Q
001-39035
10.4
11/12/2020
10.14#
License Agreement, dated September 26, 2013,
between the Registrant and the President and
Fellows of Harvard College.
S‑l
333‑233361
10.5
8/19/2019
10.14.1#
Amendment No. 1 to License Agreement, dated
October 25, 2018, between the Registrant and
President and Fellows of Harvard College.
S‑l
333‑233361
10.6
8/19/2019
10.15#
Exclusive (Equity) Agreement dated October 15,
2015, between Epinomics, Inc, and The Board of
Trustees of the Leland Stanford Junior University.
S‑l
333‑233361
10.7
8/19/2019
10.15.1
Amendment No. 1 to the License Agreement,
dated February 1, 2017, between Epinomics and
The Board of Trustees of the Leland Stanford
Junior University.
S‑l
333‑233361
10.8
8/19/2019
10.15.2#
Amendment No. 2 to the License Agreement,
dated July 27, 2018, between the Registrant and
The Board of Trustees of the Leland Stanford
Junior University.
S‑l
333‑233361
10.9
8/19/2019
10.16
Settlement and Patent Cross License Agreement,
dated July 26, 2021, by and between the
Registrant and Bio-Rad Laboratories, Inc.
8-K
001-39035
10.1
7/27/2021
10.17+
Form of Arbitration Agreement
X
114
Table of Contents
Incorporated by Reference
Exhibit
Number
Exhibit Title
Form
File No.
Exhibit
Filing Date
Filed Herewith
19.1
Amended and Restated Insider Trading Policy.
10-K
001-39035
19.1
2/15/2024
23.1
Consent of Independent Registered Public
Accounting Firm.
X
24.1
Power of Attorney (included in the signature page
to this Annual Report).
X
31.1
Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
X
31.2
Certification of Principal Financial and
Accounting Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
X
32.1*
Certification of Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
X
32.2*
Certification of Principal Financial and
Accounting Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
X
97.1
Policy for Recovery of Erroneously Awarded
Compensation.
10-K
001-39035
97.1
2/15/2024
101.INS
XBRL Instance Document - the instance document
does not appear in the Interactive Data File
because its XBRL tags are embedded within the
Inline XBRL document.
X
101.SCH
XBRL Taxonomy Extension Schema Document.
X
101.CAL
XBRL Taxonomy Extension Calculation Linkbase
Document.
X
101.DEF
XBRL Taxonomy Extension Definition Linkbase
Document.
X
101.LAB
XBRL Taxonomy Extension Label Linkbase
Document.
X
101.PRE
XBRL Taxonomy Extension Presentation
Linkbase Document.
X
104
Cover Page Interactive Data File - the Cover Page
Interactive Data File does not appear in the
Interactive Data File because its XBRL tags are
embedded within the Inline XBRL document.
X
+
Management contract or compensatory plan or arrangement.
#
Portions of this exhibit have been omitted pursuant to Item 601 of Regulation S-K promulgated under the Securities Act because the information (i) is not
material and (ii) would be competitively harmful if publicly disclosed.
*
This certification is deemed not filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be
deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.
115
Table of Contents
Item 16. Form 10-K Summary.
None.
116
Table of Contents
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
10x Genomics, Inc.
Date: February 12, 2025
By:
/s/ Serge Saxonov
Serge Saxonov
Chief Executive Officer and Director
(Principal Executive Officer)
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Serge Saxonov and Adam S. Taich, and
each of them, his or her true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Serge Saxonov
Chief Executive Officer and Director
February 12, 2025
Serge Saxonov
(Principal Executive Officer)
/s/ Benjamin J. Hindson
President and Director
February 12, 2025
Benjamin J. Hindson
/s/ Adam S. Taich
Chief Financial Officer
February 12, 2025
Adam S. Taich
(Principal Accounting and Financial Officer)
/s/ John R. Stuelpnagel
Chairman of the Board of Directors
February 12, 2025
John R. Stuelpnagel
/s/ Sridhar Kosaraju
Director
February 12, 2025
Sridhar Kosaraju
/s/ Alan Mateo
Director
February 12, 2025
Alan Mateo
/s/ Kim Popovits
Director
February 12, 2025
Kim Popovits
/s/ Shehnaaz Suliman
Director
February 12, 2025
Shehnaaz Suliman
/s/ Sarah Teichmann
Director
February 12, 2025
Sarah Teichmann
117
6230 Stoneridge Mall Road
Pleasanton, CA 94588-3260
925 401 7300
Exhibit 10.8
AT-WILL EMPLOYMENT, CONFIDENTIAL INFORMATION, AND INVENTION ASSIGNMENT AGREEMENT
This At-Will Employment, Confidential Information, and Invention Assignment Agreement (the “Agreement”) is entered into between the
undersigned employee (“Employee”) and 10x Genomics, Inc., for the benefit of 10x Genomics, Inc., and any of its parents, subsidiaries,
affiliates, successors, and assigns (collectively, the “Company”) and is effective as of the date signed by Employee. As a condition of and in
consideration of Employee’s employment (or continued employment), the compensation and benefits received as a result thereof, Employee’s
receipt of Confidential Information, and the other mutual promises and representations of Employee and the Company (collectively, the “Parties”)
made herein, the Parties agree as follows, subject to any applicable state-specific modifications in the Appendix:
1.
AT-WILL EMPLOYMENT
Nothing in this Agreement creates a contract for term employment, limits either party’s right to end the employment relationship, or modifies the
at-will nature of the employment relationship between the Parties.
2.
CONFIDENTIALITY
A.
Definition of Confidential Information. Employee understands that “Company Confidential Information” means information that the
Company has or will develop, acquire, create, compile, discover or own, that has value in or to the Company’s business which is not generally
known to the public or persons outside the Company through proper means and which the Company wishes to maintain as confidential,
regardless of whether such information is labeled, marked, or otherwise identified as Company Confidential Information. Company Confidential
Information includes information disclosed by the Company to Employee, directly or indirectly, by any means, including but not limited to in
writing, via drawing, or verbally. Company Confidential Information also includes information developed or learned by Employee during their
recruitment or employment by the Company, including through the inspection of Company premises, parts, equipment, or other Company
property. By way of example, Company Confidential Information includes any and all non-public information that relates to the actual or
anticipated business and/or products, research, or development of the Company, or to the Company’s technical data, trade secrets, or know-
how, including but not limited to the following: (i) research, product plans, or other information regarding the Company’s products, services, or
markets; (ii) customer lists or other information relating to Company customers (including but not limited to the identities or contact information of
decision-makers at a customer, as well as customer communications, non-public customer contract terms, customer preferences, historical
transaction data, and other information identifying facts and circumstances specific to the customer and relevant to sales or services); (iii)
software, hardware, or technology; (iv) developments, inventions, processes, formulas, designs, drawings, or engineering; and (v) marketing,
finances, or other Company business information.
Notwithstanding the foregoing, Company Confidential Information shall not include any such information which Employee can establish (i) was
publicly known or made generally available prior to the time of disclosure by Company to Employee; (ii) becomes publicly known or made
generally available after disclosure by Company to Employee through no wrongful action or omission by Employee; or (iii) is in Employee’s
rightful possession without confidentiality obligations, at the time of disclosure by Company as shown by Employee’s then-contemporaneous
written records.
B.
Nonuse, Nondisclosure, and other Confidentiality Obligations. Employee agrees that during and after employment by the Company,
Employee will hold in the strictest confidence and take all reasonable precautions to prevent any improper or unauthorized possession, use,
transmission, or disclosure of Company Confidential Information, and Employee will not possess, use, transmit, copy, download, store, or upload
Company Confidential Information for any purpose whatsoever other than for the benefit of the Company in the course of Employee’s
employment. Prior to any disclosure compelled by applicable law, Employee shall provide prior written notice to the Company’s President, Chief
Executive Officer, or Chief Legal Officer. Employee agrees that Employee obtains no title to any Company Confidential Information, and that as
between the Parties, the Company retains all Company Confidential Information as its sole property. Employee understands that, during
Employee’s employment, Employee’s improper or unauthorized possession, use, disclosure, or transmission of Company Confidential
Information, or any other improper or unauthorized action involving Company Confidential Information, may lead to disciplinary action, up to and
including immediate termination and legal action by the Company. Employee further agrees that any use or disclosure of Confidential Information
to directly or indirectly solicit Company customers, or to interrupt, disturb, or interfere with the Company’s relationships with its customers will
constitute a breach of Employee’s obligations in this Section 2.B.
(1 of 9)
The restrictions provided for in this Section 2.B shall not be construed to prohibit the use of general knowledge and experience customarily relied
upon in Employee’s trade or profession that is not specific to the particular business matters of the Company, such as its business transactions,
customers, employees, or products (existing or under development). Employee further understands that Employee’s obligations under this
Section 2.B shall continue after termination of Employee’s employment—except that, (i) if required by applicable law, the restrictions under this
Section 2.B will only apply for three years after the end of Employee’s employment with the Company, where information that does not qualify as
a trade secret is concerned, and (ii) the restrictions will continue to apply to trade secret information for as long as such information qualifies as a
trade secret.
Nothing in this Agreement shall prohibit any non-managerial, non-supervisory employees from engaging in protected concerted activity under
Section 7 of the National Labor Relations Act (“NLRA”) or similar state law such as joining, assisting, or forming a union, bargaining, lawful
picketing or striking, or participating in other activity for mutual aid or protection, or refusing to do so. Such protected activity includes using or
disclosing information acquired through lawful means regarding wages, hours, benefits, or other terms and conditions of employment, except
where the information was entrusted to the employee in confidence by the Company as part of the employee’s job duties. Furthermore, nothing
in this Agreement prevents Employee from discussing or disclosing information about unlawful acts in the workplace, such as harassment,
discrimination, or any other conduct that Employee has reason to believe is unlawful.
C.
Former-Employer and Other Third-Party Confidential Information. Employee agrees that Employee will not improperly use,
disclose, or induce the Company to use any proprietary information or trade secrets of any former employer or other person or entity that
Employee has an obligation to keep in confidence. Employee further agrees that Employee will not bring onto the Company’s premises or
transfer onto the Company’s technology systems any unpublished document, proprietary information, or trade secrets belonging to any such
third party unless disclosure to, and use by, the Company has been consented to in writing by such third party.
D.
Associated Third-Party Confidential Information. Employee recognizes that third parties associated with the Company include but
are not limited to the Company’s customers, suppliers, licensors, licensees, partners, or collaborators (“Associated Third Parties”). Employee
further recognizes that the Company has received and in the future will receive from Associated Third Parties their confidential or proprietary
information (“Associated Third-Party Confidential Information”) subject to the Company’s duty to maintain the confidentiality of such Associated
Third-Party Confidential Information and to use it only for certain limited purposes. By way of example, Associated Third-Party Confidential
Information may include the non-public habits or practices of Associated Third Parties, technology of Associated Third Parties, requirements of
Associated Third Parties, and information related to the business conducted between the Company and Associated Third Parties. Employee
agrees that, at all times during and after Employee’s employment by the Company, Employee owes the Company and its Associated Third
Parties a duty to hold all such Associated Third-Party Confidential Information in the strictest confidence, and not to improperly possess, use, or
disclose it to any person, firm, corporation, or other third party except as necessary in carrying out Employee’s work for the Company consistent
with the Company’s agreement with such Associated Third Parties. Employee further agrees to comply with any and all Company policies and
guidelines that may be adopted from time to time regarding Associated Third Parties and Associated Third-Party Confidential Information.
E.
State-Specific Modifications. Employee agrees that prior to signing this Agreement, Employee will read the state-specific modifications
in the Appendix which are incorporated by reference as if fully set forth herein.
F.
Defend Trade Secrets Act Notice of Immunity Rights. Employee acknowledges that the Company has provided the Employee with
notice of Employee’s immunity rights under the Defend Trade Secrets Act, 18 U.S.C. § 1833, which states as follows:
(1) Immunity. An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a
trade secret that (A) is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an
attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other
document filed in a lawsuit or other proceeding, if such filing is made under seal.
(2) Use of trade secret information in anti-retaliation lawsuit. An individual who files a lawsuit for retaliation by an employer for reporting a
suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court
proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret,
except pursuant to court order.
(At-Will Employment, Confidential Information, and Invention Assignment Agreement - 2 of 9)
3.
OWNERSHIP
A.
Assignment of Inventions. Employee agrees that all right, title, and interest in and to any and all material, notes, records, drawings,
designs, inventions, improvements, developments, discoveries, and trade secrets conceived, discovered, authored, invented, developed, or
reduced to practice by Employee, solely or in collaboration with others, during Employee’s employment by the Company (including during
Employee’s off-duty hours), or with the use of Company’s equipment, supplies, facilities, or Company Confidential Information, and any
copyrights, patents, trade secrets, mask work rights, or other intellectual property rights relating to the foregoing (collectively, “Inventions”), are
the sole property of 10x Genomics, Inc., except as provided below in Section 3.G. Employee also agrees to promptly make full written disclosure
to the Company of any Inventions. Employee assigns to 10x Genomics, Inc. all of Employee’s right, title, and interest in and to Inventions.
Employee agrees that this assignment includes a present conveyance to 10x Genomics, Inc. of ownership of Inventions that are not yet in
existence. Employee further acknowledges that all original works of authorship that are protectable by copyright constitute “works made for hire,”
as that term is defined in the United States Copyright Act, so long as Employee makes them, solely or jointly with others, within the scope of and
during the period of Employee’s employment by the Company. Employee understands and agrees that the decision whether or not to
commercialize or market any Inventions is within the Company’s sole discretion and for the Company’s sole benefit, and that no royalty or other
consideration will be due to Employee as a result of the Company’s efforts to commercialize or market any such Inventions.
B.
Pre-Existing Materials. Attached hereto as the Exhibit is a list describing all inventions, discoveries, original works of authorship,
developments, improvements, trade secrets, and other proprietary information or intellectual property rights that are owned by Employee or in
which Employee has an interest prior to, or separate from, Company employment (“Prior Inventions”). If no such list is attached, or if the list is
blank, Employee represents and warrants that there are no such Prior Inventions. Furthermore, Employee represents and warrants that if any
Prior Inventions are included on the Exhibit, they will not materially affect Employee’s ability to perform all obligations under this Agreement.
Employee will inform the Company in writing before incorporating such Prior Inventions into any Inventions or otherwise utilizing such Prior
Inventions in the course of Company employment, and the Company is hereby granted a nonexclusive, royalty-free, perpetual, irrevocable, and
transferable worldwide license (with the right to grant and authorize sublicenses) to make, have made, use, import, offer for sale, sell, reproduce,
distribute, modify, adapt, prepare derivative works of, display, perform, and otherwise exploit such Prior Inventions, without restriction, including,
without limitation, as part of or in connection with such Invention, and to practice any method related thereto. Employee agrees not to incorporate
any invention, improvement, development, concept, discovery, work of authorship, or other proprietary information owned by any third party into
any Invention without the Company’s prior written permission.
C.
Moral Rights. Any assignment to 10x Genomics, Inc. of Inventions includes all rights of attribution, paternity, integrity, modification,
disclosure and withdrawal, and any other rights throughout the world that may be known as or referred to as “moral rights,” “artist’s rights,” “droit
moral,” or the like (collectively, “Moral Rights”). To the extent that Moral Rights cannot be assigned under applicable law, Employee hereby
waives and agrees not to enforce any and all Moral Rights, including, without limitation, any limitation on subsequent modification, to the extent
permitted under applicable law.
D.
Maintenance of Records. Employee agrees to keep and maintain adequate, current, accurate, and authentic written records of all
Inventions that Employee makes (solely or jointly with others) while employed by the Company. Employee further agrees that such records will
be in the form of notes, sketches, drawings, electronic files, reports, or any other format that may be specified by the Company. At all times,
Employee agrees to make such records available to, and agrees that such records will remain the sole property of, 10x Genomics, Inc.
E.
Further Assurances. Employee agrees to assist the Company, or its designee, at the Company’s expense, in every proper way to
secure the Company’s rights in the Inventions in any and all countries. Such assistance may include, but is not limited to (i) Employee’s
disclosure to the Company of all pertinent information and data with respect to the Company’s rights in the Inventions, the execution of all
applications, specifications, oaths, assignments, and all other instruments that the Company shall deem proper or necessary to apply for,
register, obtain, maintain, defend, and enforce such rights, and to deliver, assign, and convey to 10x Genomics, Inc., its successors, assigns,
and nominees the sole and exclusive rights, title, and interest in and to all Inventions; and (ii) Employee’s testimony in a lawsuit or other
proceeding relating to such Inventions. For the avoidance of any doubt, Employee acknowledges and agrees that Employee’s obligations include
but are not limited to (i) executing, submitting, supplementing, or otherwise completing Invention Disclosure Forms; (ii) executing and submitting
patent assignments, declarations, or similar documents; and (iii) promptly and truthfully responding to Company inquiries regarding pending or
anticipated patent applications. Employee further agrees that Employee’s obligations under this Section 3.E shall continue after the termination
of Employee’s employment.
(At-Will Employment, Confidential Information, and Invention Assignment Agreement - 3 of 9)
F.
Attorney-in-Fact. Employee agrees that if, due to Employee’s unavailability, Employee’s medical or physical incapacity, or any other
reason, the Company is unable to secure Employee’s signature with respect to any Inventions—including, without limitation, for the purpose of
applying for or pursuing any application for any patents, mask work, or copyright registrations covering the Inventions assigned to 10x
Genomics, Inc. in Section 3.A—then Employee hereby irrevocably designates and appoints the Company and its duly authorized officers and
agents as Employee’s agent and attorney-in-fact. This power of attorney shall include acting for and on Employee’s behalf (i) to execute and file
any papers and oaths, and (ii) to perform all other lawfully permitted acts concerning such Inventions to further the prosecution and issuance of
patents, copyright, and mask work registrations. Such actions taken under this power of attorney shall have the same legal force and effect as if
executed by Employee. In addition, this power of attorney shall be deemed coupled with an interest, and shall therefore be irrevocable, even
upon Employee’s incapacity or death.
G.
Exception to Assignments. This Agreement’s assignment provisions are limited to only those inventions that can be lawfully assigned
by an employee to an employer. Some examples of state laws limiting the scope of assignable inventions are California Labor Code Section
2870, Delaware Code Title 19 Section 805, Illinois 765 ILCS 1060/1 through 1060/3, Kansas Statutes Section 44-130, Minnesota Statutes 13A
Section 181.78, Nevada Revised Statutes Section 600.500, New Jersey Revised Statutes Section 34:1B-265, New York Labor Law Section 203-
f, North Carolina General Statutes Section 66-57.1, Utah Code Sections 34-39-1 through 34-39-3, and Washington RCW Section 49.44.140.
Employee acknowledges that to the extent one of the foregoing laws applies, Employee’s invention assignment agreement will not
apply to an invention for which no equipment, supplies, facility, or trade secret information of the Company was used and which was
developed entirely on Employee’s own time, unless: (1) the invention relates directly to the business of the Company or to the
Company’s actual or demonstrably anticipated research or development; or (2) the invention results from any work performed by
Employee for the Company. To the extent that the controlling law is California Labor Code Section 2870, Illinois 765 ILCS 1060/1
through 1060/3, or New York Labor Law Section 203-f, then this same notice applies absent the word “directly” in part (1).
4.
CONFLICTING OBLIGATIONS
A.
Current Obligations. Employee agrees that, while employed by the Company, Employee will not engage in or undertake any other
employment, occupation, consulting relationship, or commitment that is directly related to the business in which the Company is now involved,
becomes involved, or has plans to become involved, nor will Employee engage in any other activities that conflict with Employee’s obligations to
the Company. By way of example and not limitation, Employee agrees not to solicit any of the prospective customers, customers, or other
Associated Third Parties of the Company for the purpose of diverting or attempting to divert any business away from the Company. This
provision does not preclude conduct protected by Section 7 of the NLRA such as joining or forming a union, engaging in collective bargaining, or
engaging in other concerted activity for mutual aid and protection.
B.
Prior Relationships. Employee represents and warrants that Employee has no other agreements, relationships, or commitments to any
other person or entity that conflict with the provisions of this Agreement, Employee’s obligations to the Company under this Agreement, or
Employee’s ability to become employed and perform the services for which Employee is being hired by the Company. Employee further agrees
that if Employee has signed an employment agreement, confidentiality agreement, non-solicitation agreement, or similar type of agreement with
any former employer or other entity, Employee will comply with the terms of any such agreement. Employee represents and warrants that after
undertaking a careful and thorough search (including searches of Employee’s computers, cell phones, electronic devices, and documents),
Employee has returned all property and confidential information belonging to all prior employers or other third parties or entities for which or
whom Employee has performed services. Moreover, Employee agrees to fully indemnify the Company, its directors, officers, agents, employees,
investors, shareholders, administrators, affiliates, divisions, subsidiaries, predecessor and successor corporations, and assigns for all verdicts,
judgments, settlements, and other losses incurred by any of them resulting from Employee’s breach of Employee’s obligations under any
agreement with a third party to which Employee is a party or of any other obligation to which Employee is bound, as well as any reasonable
attorney’s fees and costs, if the plaintiff in the action against the Company is the prevailing party, except as prohibited by law.
5.
RETURN OF COMPANY MATERIALS
Upon the Company’s request or Employee’s separation from Company employment, with the exception of personnel documents signed by
Employee for purposes of obtaining or holding employment, Employee will immediately deliver to the Company and will not disclose to anyone
else, recreate, access, or keep in Employee’s possession, custody, or control, any Company property, including any documents, proprietary
information, or other items (i) that the Company provides to Employee; (ii) that Employee develops, obtains, or otherwise possesses in
connection with Company employment; or (iii) that otherwise belong to the Company (“Company Property”). By way of example, Company
(At-Will Employment, Confidential Information, and Invention Assignment Agreement - 4 of 9)
Property includes but is not limited to (i) security badges; (ii) keys; (iii) security codes, passwords, or electronically stored information; (iv) mobile
phones; (v) computers of any kind, including laptop, desktop, or portable devices such as iPads; (vi) any other Company device or equipment;
(vii) credit cards; (viii) all forms of documents, including electronic documents; (ix) diskettes, thumb or USB drives, compact discs, or any other
storage media; (x) hardware; (xi) software; (xii) models, molds, and prototypes; (xiii) specifications; (xiv) charts; (xv) blueprints; (xvi) sketches or
drawings prepared using any method, including but not limited to computer-aided design; (xvii) photographs; (xviii) lab books, lists, notebooks, or
notes of any kind; (xix) files, data, or other records; (xx) policies or manuals; (xxi) proposals or reports; (xxii) electronic or hard-copy
correspondence; (xxiii) all tangible embodiments of the Inventions; (xxiv) any proprietary information of or regarding the Company, including but
not limited to financial data, customer information, product information, personnel documents or information, and marketing materials; (xxv) any
other Company Confidential Information or Associated Third-Party Confidential Information; and (xxvi) any reproductions of any of the foregoing
items, including, without limitation, those records maintained pursuant to Section 3.D.
6.
NOTIFICATION TO NEW EMPLOYER
In the event that Employee ceases to be employed by the Company, Employee hereby grants consent for the Company to notify Employee’s
new employer about Employee’s obligations under this Agreement.
7.
COMPANY POLICIES
Employee agrees to diligently adhere to all Company policies, including the Company’s Insider Trading Policy and the Company’s Code of
Business Conduct and Ethics. Employee understands that copies of the Company’s current policies will be made available to Employee, but may
be revised from time to time during Employee’s employment by the Company.
8.
REPRESENTATIONS
Without limiting Employee’s obligations under Section 3.E above, Employee agrees to execute any proper oath or verify any proper document
required to carry out the terms of this Agreement. Employee represents and warrants that Employee’s performance of all the terms of this
Agreement will not breach any agreement to keep in confidence information acquired by Employee in confidence or in trust prior to Employee’s
employment by the Company. Employee hereby represents and warrants that Employee has not entered into, and Employee will not enter into,
any oral or written agreement in conflict with this Agreement.
9.
AUDIT
Employee acknowledges that all information, data, and messages created, received, sent, or stored on any computer, technology system, email,
handheld device, telephone, voicemail, or other Company-owned or Company-managed technology that is used to conduct the business of the
Company (“Electronic Resources”) are the property of the Company. As such, to the extent permitted by law, the Company has the right to audit
and search Electronic Resources, without notice to Employee, to ensure that the Company is licensed to use the software on the Company’s
devices in compliance with the Company’s software licensing policies, to ensure compliance with the Company’s policies, and for any other
business-related purposes in the Company’s sole discretion. Employee understands that Employee is not permitted to add any unlicensed,
unauthorized, or non-compliant applications to the Electronic Resources, including, without limitation, open source or free software not
authorized by the Company. Employee warrants that Employee will refrain from copying unlicensed software onto the Company’s technology
systems or using unlicensed software or websites. Employee understands that it is Employee’s responsibility to comply with the Company’s
policies governing the use of the Electronic Resources to which Employee will have access in connection with Company employment.
The Company, in its sole discretion, will monitor in real-time any content of electronic communications transmitted by or through the Electronic
Resources, including, without limitation, any Electronic Resources administered by any third-party communications services provider. The
Company engages in these monitoring activities regardless of whether the electronic communication is for business or non-business purposes.
Employee consents to the terms of the U.S. Mobile Device Policy. Employee understands and agrees that use of a mobile device to perform
Company business is subject to compliance with that policy.
10.
MUTUAL ARBITRATION AGREEMENT
Employee understands and agrees that nothing in this Agreement shall supersede or take priority over the Mutual Arbitration Agreement or any
similar agreement to arbitrate that has been or shall be entered into by the Parties.
(At-Will Employment, Confidential Information, and Invention Assignment Agreement - 5 of 9)
11.
MISCELLANEOUS
A.
Governing Law and Consent to Personal Jurisdiction. This Agreement will be governed by the laws of (i) the state where Employee
primarily resides and works for the Company, or (ii) if Employee primarily works in a different state from where Employee primarily resides,
Employee’s primary state of residence (“Governing State”). Employee understands that Employee cannot have more than one Governing State
at the same time. The laws of Employee’s Governing State will control the interpretation and application of this Agreement without regard to any
conflicts of law principles of the Governing State or any other state to the contrary; provided, however, that if there is a Mutual Arbitration
Agreement or similar agreement to arbitrate between the Parties, then the Federal Arbitration Act (9 U.S.C. § 1 et seq.) shall control as to such
arbitration agreement (unless provided otherwise in the arbitration agreement) and all arbitration-related issues relating to this Agreement. As
concerns any legal claim that can be pursued in a court of law (subject to and after application of any arbitration agreement between the
Parties), Employee consents to the personal jurisdiction of the courts of proper subject matter jurisdiction located in Employee’s Governing
State, and Employee waives any objections to the exercise of jurisdiction over Employee by such courts (whether based on convenience, cost,
location of witnesses or evidence, or otherwise).
B.
Assignability. This Agreement will be binding upon Employee’s heirs, executors, assigns, administrators, and other legal
representatives, and will be for the benefit of the Company, its successors, and its assigns. There are no intended third-party beneficiaries to this
Agreement, except as may be expressly otherwise stated. Notwithstanding anything to the contrary herein, 10x Genomics, Inc. may assign this
Agreement and its rights and obligations under this Agreement to any successor to, or any assign of, all or substantially all of 10x Genomics,
Inc.’s relevant assets, whether by merger, consolidation, reorganization, reincorporation, sale of assets or stock, or otherwise.
C.
Entire Agreement. Except as provided in Section 10, this Agreement, together with the Exhibit and the state-specific modifications in
the Appendix herein, sets forth the entire agreement and understanding between the Parties with respect to the subject matter herein and
supersedes all prior written and oral agreements, discussions, or representations between the Parties; provided, however, should Employee be
subject to another agreement with the Company containing confidentiality and/or invention assignment provisions, the prior agreement shall
remain in full force and effect until this Agreement is executed by Employee, and if this Agreement is found to be unenforceable, for any reason,
then such prior agreement shall remain in place and survive to afford the Company the greatest protection allowed by law. Employee represents
and warrants that Employee is not relying on any statement or representation not contained in this Agreement.
D.
Severability. Each of Employee’s obligations under this Agreement shall be considered a separate and severable obligation. If a court
or arbitrator determines that any provision in this Agreement cannot be enforced as written due to any overbroad limitations (such as time,
geography, or scope of activity), unless prohibited by applicable law, the Parties agree that the court or arbitrator shall reform or modify the
limitations or enforce the limitations to such lesser extent as permitted by applicable law. If, despite the foregoing, any provision in this
Agreement is determined to be void or unenforceable, in whole or in part, then the remainder of this Agreement shall remain in full force and
effect.
E.
Modification, Amendment, and Waiver. Except as provided in Section 11.D, no modification of or amendment to this Agreement, nor
any waiver of any rights under this Agreement, will be effective unless in a writing signed by both Employee and the Company’s Chief Executive
Officer, Chief Legal Officer, or Chief People Officer.
F.
Survivorship. The rights and obligations of the Parties pursuant to this Agreement will survive the termination of the employment
relationship between the Parties, and shall, likewise, continue to apply and be valid notwithstanding any change in the Employee’s duties,
responsibilities, compensation, position, or title.
12.
PROTECTED CONDUCT
Nothing in this Agreement prohibits Employee from (i) opposing an event or conduct that Employee reasonably believes is a violation of law,
including criminal conduct, discrimination, harassment, retaliation, a safety or health violation, or other unlawful employment practices (whether
in the workplace or at a work-related event); (ii) reporting such an event or conduct to Employee’s attorney, law enforcement, or the relevant
government agency (such as the Department of Labor, Equal Employment Opportunity Commission, Occupational Safety and Health
Administration, National Labor Relations Board, Securities and Exchange Commission, or any applicable state or local agency on human rights);
(iii) disclosing sexual assault, sexual harassment, or other sexual misconduct (in the workplace, at work-related events, between employees,
between an employer and an employee, or otherwise); or (iv) making any truthful statements or disclosures required by law or otherwise
cooperating in an investigation conducted by any government agency (collectively, “Protected Conduct”). Furthermore, nothing requires notice to
or approval from the
(At-Will Employment, Confidential Information, and Invention Assignment Agreement - 6 of 9)
Company before engaging in such Protected Conduct. Nothing in this Agreement shall prohibit any non-managerial, non-supervisory employees
from engaging in protected concerted activity under Section 7 of the NLRA or similar state law such as joining, assisting, or forming a union,
bargaining, lawful picketing or striking, or participating in other activity for mutual aid or protection, or refusing to do so. Such protected activity
includes using or disclosing information acquired through lawful means regarding wages, hours, benefits, or other terms and conditions of
employment, except where the information was entrusted to the employee in confidence by the Company as part of the employee’s job duties.
AGREED BY THE PARTIES
10X GENOMICS, INC.:
[COMPANY REPRESENTATIVE NAME]
EMPLOYEE:
I have carefully read and understand this Agreement, including the state-specific modifications in the Appendix. By signing below
using an electronic signature, I am agreeing to this Agreement’s terms. Additionally, I authorize the use of an electronic signature to
show my acceptance and assent to this Agreement, and I understand and acknowledge that an electronic signature is as valid and has
the same legal effect as an ink signature.
[EMPLOYEE NAME] DATE
(At-Will Employment, Confidential Information, and Invention Assignment Agreement - 7 of 9)
EXHIBIT
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
Title
Date
Identifying Number or Brief Description
Additional Sheets Attached
[EMPLOYEE NAME] DATE
(At-Will Employment, Confidential Information, and Invention Assignment Agreement - 8 of 9)
APPENDIX
The following shall apply to modify provisions of the Agreement, where applicable, based upon the controlling law of the Governing State:
Colorado: If Employee is a resident of Colorado then for so long as Employee is a resident of Colorado, the Company Confidential Information
restrictions in Section 2.B of this Agreement do not prohibit disclosure of information that arises from the worker’s general training, knowledge,
skill, or experience, whether gained on the job or otherwise, information that is readily ascertainable to the public, or information that a worker
otherwise has a right to disclose as legally protected conduct. Nothing in this Agreement or Company policy limits or prevents a worker from
disclosing information about workplace health and safety practices or hazards. Further, in addition to the other forms of Protected Conduct,
nothing in the Agreement shall be construed to prohibit Employee from disclosing information about unlawful acts in the workplace, such as
harassment or discrimination or any other conduct that Employee has reason to believe is unlawful.
District of Columbia: If Employee performs a majority of their work in the District of Columbia or is based in District in Columbia and does not
perform the majority of their work in any other jurisdiction, then the Agreement will be modified as follows: nothing in this Agreement or any
Company policy restricts Employee from having additional employment or contract work in addition to their employment with the Company so
long as the employment or work would not result in Employee’s disclosure or use of Company Confidential Information and does not violate
Employee’s duty of loyalty or create a conflict of interest.
Georgia: If Employee is a resident of Georgia, then for so long as Employee is a resident of Georgia, the definition of Company Confidential
Information will be understood to exclude information voluntarily disclosed to the public by the Company (excluding unauthorized disclosures by
Employee or others), information that is the result of independent development by others, and information that is otherwise available in the public
domain through lawful means. Nothing in this Agreement, including the definition of Company Confidential Information, limits or alters the
definition of what constitutes a trade secret under any federal or state law designed to protect trade secrets.
Washington: If Employee is a resident of Washington, then for so long as Employee is a resident of Washington, in addition to the other forms of
Protected Conduct, nothing in the Agreement prohibits disclosure or discussion of conduct Employee reasonably believes to be illegal
discrimination, illegal harassment, illegal retaliation, a wage-and-hour violation, or sexual assault, or conduct that is recognized as against a
clear mandate of public policy in the state of Washington.
(At-Will Employment, Confidential Information, and Invention Assignment Agreement - 9 of 9)
6230 Stoneridge Mall Road
Pleasanton, CA 94588-3260
925 401 7300
Exhibit 10.17
MUTUAL ARBITRATION AGREEMENT
This Mutual Arbitration Agreement (“Agreement”) is between the employee (“Employee”) and 10x Genomics, Inc. and its subsidiaries and
affiliates (“10x” or the “Company”) (collectively, the “Parties”). The Federal Arbitration Act (9 U.S.C. § 1 et seq.) (“FAA”) applies to and governs
this Agreement. All disputes covered by this Agreement will be decided by a single arbitrator through final and binding arbitration and not by
way of court or jury trial.
1.
CLAIMS COVERED BY THIS AGREEMENT
This Agreement is intended to be as broad as legally permissible, and, unless expressly excluded in Section 2 below, applies to all claims or
controversies, past, present, or future, that otherwise would be resolved in a court of law or before a forum other than arbitration, including,
without limitation, disputes arising out of or related to Employee’s application and selection for employment, employment, or other relationship
with the Company, and/or the termination of employment with the Company by either party. Except as it otherwise provides, this Agreement
applies to any dispute that 10x may have against Employee or that Employee may have against 10x, and/or any of its past, present, or future:
•
officers, directors, shareholders, employees, members, agents,
•
parents, subsidiaries, affiliates, and DBAs,
•
customers, clients, vendors, temporary workers, and independent contractors,
•
benefit plans or the plans’ sponsors, fiduciaries, administrators, affiliates, or agents, or
•
successors or assigns,
each and all of which may enforce this Agreement as a direct or third-party beneficiary.
Unless expressly excluded in Section 2 below, this Agreement applies, without limitation, to claims based upon or related to discrimination,
harassment, retaliation, defamation (including post-employment defamation or retaliation), whistleblowing, breach of a contract or covenant,
fraud, negligence, breach of fiduciary duty, trade secrets, unfair competition, wages, minimum wage and overtime or other compensation or any
monies claimed to be owed, meal breaks and rest periods, seating, privacy, termination, tort claims, common law claims, equitable claims, and
claims arising under the Defend Trade Secrets Act, Fair Credit Reporting Act, Civil Rights Act of 1964, Americans With Disabilities Act, Age
Discrimination in Employment Act, Pregnancy Discrimination Act, Pregnant Workers Fairness Act, Family Medical Leave Act, Fair Labor
Standards Act, Equal Pay Act, Employee Retirement Income Security Act of 1974 (“ERISA”), Affordable Care Act, Genetic Information Non-
Discrimination Act, Uniformed Services Employment and Reemployment Rights Act, Worker Adjustment and Retraining Notification Act, Older
Workers Benefits Protection Act of 1990, Occupational Safety and Health Act, Consolidated Omnibus Budget Reconciliation Act of 1985, False
Claims Act, state statutes or regulations addressing the same or similar subject matters, and any claims for violation of any federal, state, or local
law, statute, regulation, or ordinance.
The Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the validity,
scope, applicability, enforceability, or waiver of this Agreement including, but not limited to any claim that all or any part of this Agreement is void
or voidable. However, the preceding sentence does not apply to any claims under the Ending Forced Arbitration of Sexual Assault and Sexual
Harassment Act, and it does not apply to the Class Action Waiver or California Private Attorneys General Act (“PAGA”) Individual Action
Requirement, as defined below. Notwithstanding any other clause or language in this Agreement and/or any rules or procedures that might
otherwise apply because of this Agreement (including without limitation the JAMS Employment Arbitration Rules and Procedures (“JAMS Rules”)
discussed below) or any amendments and/or modifications to those rules, any disputes concerning the Ending Forced Arbitration of Sexual
Assault and Sexual Harassment Act and/or any claim that all or any part of the Class Action Waiver or California PAGA Individual Action
Requirement is unenforceable, inapplicable, unconscionable, or void or voidable, will be determined only by a court of competent jurisdiction and
not by an arbitrator.
2.
CLAIMS NOT COVERED BY THIS AGREEMENT AND LIMITATIONS ON HOW IT APPLIES
The following claims are not covered under this Agreement: (i) claims for workers’ compensation benefits, state disability insurance benefits, and
unemployment insurance benefits; however, this Agreement applies to discrimination or retaliation claims based upon seeking such benefits; (ii)
claims for benefits under employee benefit plans covered by ERISA, which may be maintained only in court; (iii) ERISA claims arising under 29
U.S.C. § 1132(a)(2) other than claims which seek recovery of relief only for the Employee, which may only be maintained in court; (iv) ERISA
claims brought under 29 U.S.C. § 1132(a)(3) which seek relief other than relief for Employee individually, which may only be
(1 of 6)
maintained in court; (v) disputes that an applicable federal statute expressly states cannot be arbitrated or subject to a pre-dispute arbitration
agreement; (vi) claims that may not be subject to predispute arbitration agreement as provided by the Sarbanes Oxley Act, 18 U.S.C. § 1514A;
(vii) claims against a contractor that may not be the subject of a mandatory arbitration agreement as provided by the Department of Defense
(“DoD”) Appropriations Act of 2010, and its implementing regulations, or any successor DoD appropriations act addressing the arbitrability of
claims; and (viii) disputes that may not be subject to a pre-dispute arbitration agreement under the Ending Forced Arbitration of Sexual Assault
and Sexual Harassment Act (at the election of Employee). If any of the above claims not covered under this Agreement are combined with
claims that are covered under this Agreement, to the maximum extent permitted under applicable law, the covered claims will be arbitrated and
continue to be covered under this Agreement.
Nothing in this Agreement prevents Employee from making a report to or filing a claim or charge with a governmental agency, including without
limitation, the Equal Employment Opportunity Commission, U.S. Department of Labor, Securities and Exchange Commission, National Labor
Relations Board, Occupational Safety and Health Administration, or law enforcement agencies, and nothing in this Agreement prevents the
investigation by a government agency of any report, claim, or charge otherwise covered by this Agreement. This Agreement also does not
prevent federal administrative agencies from adjudicating claims and awarding remedies, even if the claims would otherwise be covered by this
Agreement. Nothing in this Agreement prevents or excuses Employee from exhausting administrative remedies by filing any charges or
complaints required by any governmental agency (including without limitation the Equal Employment Opportunity Commission and/or similar
state or local agencies) before bringing a claim in arbitration. The Company will not retaliate against Employee for filing a claim with an
administrative agency or for exercising rights under the National Labor Relations Act. This Agreement also does not prevent or prohibit
Employee in any way from reporting, communicating about, or disclosing claims for discrimination, harassment, retaliation, or sexual abuse.
Either party may apply to a court of competent jurisdiction for temporary or preliminary injunctive relief (“Provisional Relief”) in connection with an
arbitrable controversy, but only upon the ground that the award to which that party may be entitled may be rendered ineffectual without such
relief or is necessary to secure performance of an agreement designed to prevent irreparable harm, subject to any final determination or award
on injunctive relief which shall be resolved through arbitration. The court to which the application is made is authorized to consider the merits of
the arbitrable controversy for the limited purposes of evaluating the elements of probable success and possibility of irreparable injury to the
extent required and applicable for the issuance of Provisional Relief under controlling law. All determinations of final relief, however, will be
decided in arbitration, and pursuing Provisional Relief shall not waive rights under this Agreement.
3.
ARBITRATION PROCEDURES
The Parties agree to mutually select the neutral Arbitrator. If the Parties cannot mutually select an Arbitrator through informal communications,
the Parties will each submit a list of five proposed arbitrators to the other side for consideration and the Parties will try to choose an arbitrator
from these lists. The Arbitrator selected by the Parties must make disclosures to the Parties about any circumstance likely to give rise to
justifiable doubt as to the arbitrator’s impartiality or independence, including any bias or any financial or personal interest in the result of the
arbitration or any past or present relationship with the Parties or their representatives, and such obligation will remain in effect throughout the
arbitration.
If the Parties still cannot mutually agree to an Arbitrator, the arbitration will be held under the auspices of JAMS, and except as provided in this
Agreement, will be under the then current JAMS Rules (which are available at www.jamsadr.com/rules-employment-arbitration/ or by using a
service such as Google to search for “JAMS Employment Arbitration Rules and Procedures”). However, if there is a conflict between the JAMS
Rules and this Agreement, this Agreement shall govern. Unless the Parties jointly agree otherwise, the Arbitrator must be a retired state or
federal judge from any jurisdiction. In the event, however, either party asserts a claim or claims that include a covered ERISA claim, the Parties
agree the Arbitrator must be a retired federal judge from any jurisdiction. Unless the Parties jointly agree otherwise, the arbitration will take place
in or near the city and in the state where Employee is employed or was last employed by 10x.
If the Parties cannot mutually agree to an Arbitrator using the methods described in the first paragraph of this section, the Arbitrator will be
selected as follows: JAMS will give each party a list of eleven potential arbitrators (who are subject to the qualifications in the preceding
paragraph) drawn from its panel of arbitrators. Each party will have ten calendar days to strike all names on the list it deems unacceptable. If
only one common name remains on the lists of the Parties, that individual will be designated as the Arbitrator. If more than one common name
remains on the lists of the Parties, the Parties will strike names alternately from the list of common names by telephone conference administered
by JAMS, with the party to strike first to be determined by a coin toss conducted by JAMS, until only one name remains. If no common name
remains on the lists of the Parties, JAMS will furnish a new list of eleven
(Mutual Arbitration Agreement - 2 of 5)
arbitrators from which the Parties will strike alternately by telephone conference administered by JAMS, with the party to strike first to be
determined by a coin toss conducted by JAMS, until only one name remains. That person will be designated as the Arbitrator. If the individual
selected cannot serve, JAMS will issue another new list of eleven arbitrators and repeat the alternate striking selection process. If JAMS will not
administer the arbitration or is unwilling to administer the arbitration consistent with this Agreement, either party may apply to a court of
competent jurisdiction with authority over the location where the arbitration will be conducted to appoint a neutral Arbitrator, who shall act under
this Agreement with the same force and effect as if they had been specifically named herein.
The Arbitrator may award any remedy to which a party is entitled under applicable law, but remedies will be limited to those that would be
available to a party in their individual capacity for the claims presented to the Arbitrator. Unless otherwise agreed in writing by the Parties, the
Arbitrator shall apply the substantive federal, state, or local law applicable to the claims asserted. The Federal Rules of Evidence shall apply to
the proceeding. Either party may file dispositive motions, including without limitation a motion to dismiss and/or a motion for summary judgment,
and the Arbitrator will apply the legal standards governing such motions under the Federal Rules of Civil Procedure. A party may make an offer
of judgment in a manner consistent with, and within the time limitations, consequences, and effects provided in Rule 68 of the Federal Rules of
Civil Procedure. Unless post-arbitration briefing is agreed to by both Parties or required by applicable law as determined by the Arbitrator, the
Parties will not submit post-arbitration briefs and will instead engage in closing arguments at the end of any arbitration hearing.
The Parties agree that the Arbitrator shall issue an award by written opinion, which includes the factual and legal basis for the award, within thirty
days from the date the arbitration hearing concludes or the post-hearing briefs (if any) are received, whichever is later. Judgment on the award
issued by the Arbitrator may be entered in any court of competent jurisdiction. The Parties agree, however, that any arbitration award shall have
no preclusive effect as to issues or claims in any other dispute or arbitration proceeding between any other employee and the Company.
4.
CLASS AND COLLECTIVE ACTION WAIVERS
The Company and Employee agree to bring any claim on an individual basis only. Accordingly, EMPLOYEE AND THE COMPANY WAIVE ANY
RIGHT FOR ANY DISPUTE TO BE BROUGHT, HEARD, DECIDED, OR ARBITRATED AS A CLASS AND/OR COLLECTIVE ACTION AND THE
ARBITRATOR WILL HAVE NO AUTHORITY TO HEAR OR PRESIDE OVER ANY CLASS OR COLLECTION ACTION (“Class Action Waiver”).
Additionally, no arbitration proceeding under this Agreement may be consolidated or joined in any way with an arbitration proceeding involving
one or more different employees.
The Class Action Waiver shall be severable from this Agreement if there is a final judicial determination that the Class Action Waiver is invalid,
unenforceable, unconscionable, void, or voidable. In that case, the class and/or collective action must be litigated in a civil court of competent
jurisdiction—not in arbitration—but any portion of the Class Action Waiver that is enforceable shall be enforced in arbitration.
5.
CALIFORNIA PAGA INDIVIDUAL ACTION REQUIREMENT
The Parties agree to arbitrate California PAGA claims on an individual basis only. Therefore, any claim by Employee under PAGA to recover for
unpaid wages, civil penalties, or other individual relief must be arbitrated under this Agreement. The Parties also agree and stipulate that any
non-individual PAGA claims shall be stayed in the trial court, pending a final determination and written decision by the Arbitrator in arbitration with
respect to Employee’s alleged status as an “aggrieved employee,” and Employee and 10x agree that the Arbitrator, and not the court, will make
this determination. The Arbitrator is without authority to preside over any PAGA claim by Employee on behalf of any other person or joined by or
consolidated with another person’s or entity’s PAGA claim. This California PAGA Individual Action Requirement clause will be severable from this
Agreement if there is a final judicial determination that it is invalid, unenforceable, unconscionable, void, or voidable. In that case, the PAGA
action must be litigated in a civil court of competent jurisdiction—not in arbitration—but any portion of the California PAGA Individual Action
Requirement that is enforceable shall be enforced in arbitration.
6.
NOTICE OF ARBITRATION DEMAND, COOLING OFF PERIOD, AND INFORMAL SETTLEMENT CONFERENCE
The Company and Employee agree that the party initiating the claim must make a written demand for arbitration of the claim to the other party
no later than the expiration of the statute of limitations that the applicable law allows for the claim. The demand for arbitration shall identify the
claims asserted, the facts upon which such claims are based, and the relief or remedy sought. The demand for arbitration must be signed by the
party making the demand for arbitration (i.e., the Employee personally or an authorized representative of 10x, as applicable). Written demand for
arbitration to 10x must be sent to the attention of 10x’s Chief Legal Officer, currently at 6230 Stoneridge Mall Road, Pleasanton, CA
(Mutual Arbitration Agreement - 3 of 5)
94588-3260. Employee will be given notice of any demand for arbitration by 10x at the last home address contained in 10x’s records (or to
Employee’s counsel, if applicable). The Arbitrator will resolve all disputes regarding the propriety of the demand for arbitration and apply the
statute of limitations that would have applied if the claim(s) had been brought in court.
The Parties mutually agree that after a party initiates the claim by making a written demand for arbitration there will be a thirty-day “Cooling Off
Period.” During the Cooling Off Period, the Parties may attempt to resolve the claim. The Parties may also mutually agree to extend the Cooling
Off Period. During the Cooling Off Period, either party may request an informal meeting to discuss a potential informal resolution of the dispute,
without the need to go forward in an arbitration (“Informal Settlement Conference”). If timely requested, the Informal Settlement Conference will
take place at a mutually agreeable time by telephone or videoconference. Employee and a 10x representative must both personally participate;
any counsel representing Employee or 10x also may participate. The requirement of personal participation in an Informal Settlement Conference
may be waived only if both Employee and an authorized representative of 10x agree in writing. The Cooling Off Period and Informal Settlement
Conference are to allow the Parties to attempt resolution. At the end of the Cooling Off Period or if an Informal Settlement Conference is timely
requested, thirty days after completion of the Informal Settlement Conference, and unless the Parties have resolved the claim, the Parties will
begin the Arbitrator selection process as described above in Section 3. Unless otherwise prohibited by applicable law, an Arbitrator and/or any
arbitration sponsoring organization is without authority to accept or administer any arbitration demand, or assess or demand fees for the
arbitration, unless and until the Parties have complied with the demand for arbitration process and the Cooling Off Period, as well as the Informal
Settlement Conference, if requested by either party. In addition, if arbitration is commenced without submitting a complete demand for
arbitration, during the Cooling Off Period, or without participating in a timely requested Informal Settlement Conference, the Parties agree that a
court shall have the authority to enjoin the arbitration or the assessment of any arbitrator or arbitration administrator fees in connection with such
an arbitration.
7.
DISCOVERY AND SUBPOENAS
Each party may take the deposition of three individual fact witnesses and any expert witness designated by another party. Each party also may
propound twenty-five requests for production of documents and ten interrogatory requests (including sub-parts) to the other party. And, each
party shall have the right to subpoena witnesses and documents for discovery or the arbitration hearing, including testimony and documents
relevant to the case from third parties, in accordance with any applicable state or federal law. Additional discovery may be conducted by mutual
stipulation, and the Arbitrator will have exclusive authority to entertain requests for additional discovery, and to grant or deny such requests,
based on the Arbitrator’s determination whether additional discovery is warranted by the circumstances of a particular case.
8.
ARBITRATION FEES AND COSTS
The Company (and/or Company’s customers, clients, or vendors, if applicable) will pay all costs and expenses unique to arbitration, including
without limitation the Arbitrator’s fees, except for the filing fee (if any) as required by the mutually selected Arbitrator or JAMS Rules (if the Parties
do not mutually select the Arbitrator), but Employee will not be responsible for any portion of those fees in excess of the filing or initial
appearance fees applicable to court actions in the jurisdiction where the arbitration will be conducted. The Company (and/or customers, clients,
or vendors, if applicable) shall pay any remaining portion of the initial fee. Each party will pay for its own costs and attorneys’ fees, if any, except
that the Arbitrator may award reasonable fees to the prevailing party as permitted by law. The Arbitrator will resolve any disputes regarding costs
or fees associated with arbitration.
9.
CONSTRUCTION AND ENFORCEMENT OF THIS AGREEMENT
Employee has the right to consult with counsel of Employee’s choice concerning this Agreement and to be represented by counsel at any stage
during the arbitration process. This is the complete agreement of the Parties about arbitration of covered disputes. Any contractual disclaimers
10x has in any Employee Handbooks, other agreements, or policies do not apply to this Agreement. The mutual obligations of the Parties to
arbitrate provide consideration for this Agreement. This Agreement will survive the termination of Employee’s employment and the expiration of
any benefit, and it will also continue to apply notwithstanding any change in Employee’s duties, responsibilities, position, or title, and/or if
Employee is separated and rehired by 10x. This Agreement does not alter the “at-will” status of Employee’s employment.
Where Employee is employed or was last employed in California, the Parties agree that, if the FAA does not apply to a particular dispute or to
one or both Parties, the California Arbitration Act will apply. Where Employee is employed or was last employed in a jurisdiction outside of
California, the Parties agree that (i) if the FAA does not apply to a particular dispute or to one or both Parties, the Delaware Uniform Arbitration
Act (“DUAA”) will apply and they
(Mutual Arbitration Agreement - 4 of 5)
acknowledge that 10x Genomics, Inc. is a Delaware corporation; provided that, (ii) if neither the FAA or DUAA apply, the Parties stipulate and
agree that the arbitration law of the jurisdiction where the arbitration will take place will apply.
Unless this Agreement is not entered into or is deemed void, unenforceable, or invalid in its entirety, the Parties expressly agree that this
Agreement supersedes and takes priority over any arbitration agreement or provision in any At-Will Employment, Confidential Information,
Invention Assignment, and Arbitration Agreement or similar agreement (“Confidentiality Agreement”) between the Parties. In all other respects,
the Confidentiality Agreement will remain in full effect and will operate according to the terms thereof. The Parties expressly agree that any
disputes arising out of or related to any Confidentiality Agreement between Employee and the Company will be resolved in accordance with this
Agreement, including without limitation, the provision in Section 2 above that allows either party to seek Provisional Relief in a court of
competent jurisdiction in connection with an arbitrable controversy. Furthermore, claims for Provisional Relief under the Confidentiality
Agreement may be pursued in the venue and forum provided for in the Confidentiality Agreement with respect to such provisional, non-final
relief.
If any provision of this Agreement is adjudged to be invalid, unenforceable, unconscionable, void, or voidable, in whole or in part (other than the
Class Action Waiver and California PAGA Individual Action Requirement, which are governed by the specific severability provisions set forth
above), such adjudication will not affect the validity of the remainder of the Agreement. All remaining provisions will remain in full force and effect.
AGREED BY THE PARTIES
10X GENOMICS, INC.:
[COMPANY REPRESENTATIVE NAME]
EMPLOYEE:
I have carefully read and understand this Agreement. By signing below using an electronic signature, I am agreeing to this
Agreement’s terms and to arbitrate claims covered by this Agreement. Additionally, I authorize the use of an electronic signature to
show my acceptance and assent to this Agreement, and I understand and acknowledge that an electronic signature is as valid and has
the same legal effect as an ink signature.
[EMPLOYEE NAME] DATE
(Mutual Arbitration Agreement - 5 of 5)
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-233720, 333-253667, 333-
262863, 333-269837, and 333-277120) pertaining to the 10x Genomics, Inc. 2019 Omnibus Incentive Plan and the 10x
Genomics, Inc. 2019 Employee Stock Purchase Plan of our reports dated February 12, 2025, with respect to the
consolidated financial statements of 10x Genomics, Inc. and the effectiveness of internal control over financial reporting of
10x Genomics, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2024.
/s/ Ernst & Young LLP
San Jose, California
February 12, 2025
Exhibit 31.1
CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Serge Saxonov, certify that:
1.
I have reviewed this Annual Report on Form 10-K of 10x Genomics, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth
fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: February 12, 2025
By:
/s/ Serge Saxonov
Serge Saxonov
Chief Executive Officer and Director
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Adam S. Taich, certify that:
1.
I have reviewed this Annual Report on Form 10-K of 10x Genomics, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth
fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: February 12, 2025
By:
/s/ Adam S. Taich
Adam S. Taich
Chief Financial Officer
(Principal Financial and Accounting Officer)
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Serge Saxonov, the Chief Executive Officer of
10x Genomics, Inc. (the “Company”), hereby certify, that, to my knowledge:
1.
The Annual Report on Form 10-K for the period ended December 31, 2024 (the “Report”) of the Company fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 12, 2025
By:
/s/ Serge Saxonov
Serge Saxonov
Chief Executive Officer and Director
(Principal Executive Officer)
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Adam S. Taich, the Chief Financial Officer of
10x Genomics, Inc. (the “Company”), hereby certify, that, to my knowledge:
1.
The Annual Report on Form 10-K for the period ended December 31, 2024 (the “Report”) of the Company fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 12, 2025
By:
/s/ Adam S. Taich
Adam S. Taich
Chief Financial Officer
(Principal Financial and Accounting Officer)