INVITAE CORP, 10-Q filed on 5/15/2015
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2015
Apr. 30, 2015
Document and Entity Information
 
 
Entity Registrant Name
Invitae Corp 
 
Entity Central Index Key
0001501134 
 
Document Type
10-Q 
 
Document Period End Date
Mar. 31, 2015 
 
Amendment Flag
false 
 
Current Fiscal Year End Date
--12-31 
 
Entity Current Reporting Status
Yes 
 
Entity Filer Category
Non-accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
31,819,289 
Document Fiscal Year Focus
2015 
 
Document Fiscal Period Focus
Q1 
 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
Current assets
 
 
Cash and cash equivalents
$ 68,264 
$ 107,027 
Prepaid expenses and other current assets
3,889 
2,616 
Marketable securities
116,069 
 
Total current assets
188,222 
109,643 
Property and equipment, net
18,180 
15,672 
Restricted cash
150 
150 
Marketable securities, noncurrent
10,181 
 
Other assets
1,482 
3,313 
Total assets
218,215 
128,778 
Current liabilities
 
 
Accounts payable
1,123 
2,862 
Accrued liabilities
7,102 
3,237 
Capital lease obligation, current portion
1,428 
1,524 
Total current liabilities
9,653 
7,623 
Capital lease obligation, net of current portion
1,780 
2,011 
Other long-term liabilities
412 
401 
Liabilities related to early exercise of stock options
11 
14 
Total liabilities
11,856 
10,049 
Commitments and contingencies (Note 5)
   
   
Convertible preferred stock, $0.0001 par value; 0 and 141,131,524 shares authorized, 0 and 141,131,524 shares issued and outstanding as of March 31, 2015 and December 31, 2014, respectively
 
202,305 
Stockholders' deficit:
 
 
Preferred stock, $0.0001 par value; 20,000,000 and 0 shares authorized, no shares issued and outstanding as of March 31, 2015 and December 31, 2014
   
   
Common stock, $0.0001 par value; 400,000,000 and 160,131,524 shares authorized, 31,803,345 and 944,581 shares issued and outstanding as of March 31, 2015 and December 31, 2014, respectively
 
Accumulated other comprehensive loss
(26)
 
Additional paid-in capital
310,199 
1,604 
Accumulated deficit
(103,817)
(85,180)
Total Stockholders' equity (deficit)
206,359 
(83,576)
Total liabilities, preferred stock, and stockholders' equity (deficit)
$ 218,215 
$ 128,778 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
Mar. 31, 2015
Dec. 31, 2014
Condensed Consolidated Balance Sheets
 
 
Convertible preferred stock, par value (in dollars per share)
$ 0.0001 
$ 0.0001 
Convertible preferred stock, shares authorized
141,131,524 
Convertible preferred stock, shares issued
141,131,524 
Convertible preferred stock, shares outstanding
141,131,524 
Preferred stock, par value (in dollars per share)
$ 0.0001 
$ 0.0001 
Preferred stock, authorized shares
20,000,000 
Preferred stock, issued shares
Preferred stock, outstanding shares
Common stock, par value (in dollars per share)
$ 0.0001 
$ 0.0001 
Common stock, shares authorized
400,000,000 
160,131,524 
Common stock, shares issued
31,803,345 
944,581 
Common stock, shares outstanding
31,803,345 
944,581 
Condensed Consolidated Statements of Operations (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Condensed Consolidated Statements of Operations
 
 
Revenue
$ 1,229 
$ 118 
Costs and operating expenses:
 
 
Cost of revenue
3,199 
611 
Research and development
8,455 
4,965 
Selling and marketing
4,740 
1,666 
General and administrative
3,440 
1,895 
Total costs and operating expenses
19,834 
9,137 
Loss from operations
(18,605)
(9,019)
Interest and other income (expense), net
(4)
Interest expense
(28)
(17)
Net loss
$ (18,637)
$ (9,033)
Net loss per share basic and diluted
$ (1.09)
$ (12.06)
Shares used in computing net loss per share, basic and diluted
17,063,463 
749,048 
Condensed Consolidated Statements of Comprehensive Loss (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Condensed Consolidated Statements of Comprehensive Loss
 
 
Net loss
$ (18,637)
$ (9,033)
Other comprehensive loss
 
 
Unrealized loss on available-for-sale marketable securities, net of tax
(26)
 
Comprehensive loss
$ (18,663)
$ (9,033)
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Cash flows from operating activities
 
 
Net loss
$ (18,637)
$ (9,033)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
Depreciation and amortization
1,017 
471 
Stock-based compensation
538 
132 
Amortization of premium on marketable securities
65 
 
Loss on disposal of assets
15 
 
Changes in operating assets and liabilities
 
 
Prepaid expenses and other current assets
(1,273)
(229)
Other assets
380 
(191)
Accounts payable
(1,775)
326 
Accrued expenses and other liabilities
1,487 
327 
Net cash used in operating activities
(18,183)
(8,197)
Cash flows from investing activities
 
 
Purchase of marketable securities
(130,841)
 
Proceeds from maturities of marketable securities
4,500 
 
Purchases of property and equipment
(1,116)
(867)
Net cash used in investing activities
(127,457)
(867)
Cash flows from financing activities
 
 
Proceeds from issuance of common stock upon initial public offering, net of issuance costs
107,147 
 
Proceeds from exercise of stock options
57 
19 
Capital lease principal payment
(327)
(185)
Net cash provided by (used in) financing activities
106,877 
(166)
Net decrease in cash and cash equivalents
(38,763)
(9,230)
Cash and cash equivalents at beginning of period
107,027 
43,070 
Cash and cash equivalents at end of period
68,264 
33,840 
Supplemental cash flow information
 
 
Interest paid
27 
16 
Supplemental cash flow information of non-cash investing and financing activities:
 
 
Conversion of convertible preferred stock to common stock
202,305 
 
Purchases of property and equipment in accounts payable and accrued liabilities
$ 2,424 
$ 49 
Organization and description of business
Organization and description of business

 

1. Organization and description of business

 

Invitae Corporation (the “Company”) was incorporated in the state of Delaware on January 13, 2010, as Locus Development, Inc. and changed its name to Invitae Corporation in 2012. The Company utilizes an integrated portfolio of laboratory processes, software tools and informatics capabilities to process DNA-containing samples, analyze information about patient-specific genetic variation and generate test reports for physicians and their patients. The Company has two laboratories: one in San Francisco, California and a second in Santiago, Chile. The Company’s current product is an assay of 221 genes that can be used for multiple indications. The test includes multiple genes associated with hereditary cancer, neurological disorders, cardiovascular disorders and other hereditary conditions. The Company operates in one segment.

 

Reverse stock split

 

In January 2015, the Company’s board of directors approved an amendment to the Company’s amended and restated certificate of incorporation to effect a reverse split of the Company’s issued and outstanding common stock at a 1-for-6 ratio, which was effected on February 9, 2015. The par value and authorized shares of common stock and convertible preferred stock were not adjusted as a result of the reverse split. All issued and outstanding common stock, options to purchase common stock and per share amounts contained in the financial statements have been retroactively adjusted to reflect the reverse stock split for all periods presented. The financial statements have also been retroactively adjusted to reflect a proportional adjustment to the conversion ratio for each series of preferred stock that will be effected in connection with the reverse stock split.

 

Initial public offering

 

In February 2015, the Company completed an initial public offering (“IPO”) of its common stock. In connection with its IPO, the Company sold 7,302,500 shares of common stock at $16.00 per share for aggregate net proceeds of $105.7 million after underwriting discounts and commissions and offering expenses payable by the Company. This includes the exercise in full by the underwriters of their option to purchase up to 952,500 additional shares of common stock at the same price to cover over-allotments. Upon the closing of the IPO, all shares of convertible preferred stock then outstanding converted into 23,521,889 shares of common stock.

 

Upon the effectiveness of the Amended and Restated Certificate of Incorporation of the Company on February 12, 2015, the number of shares of capital stock the Company is authorized to issue was increased to 420,000,000 shares, of which 400,000,000 shares are common stock and 20,000,000 shares are preferred stock. Both the common stock and preferred stock have a par value of $0.0001 per share. There are no shares of preferred stock outstanding at March 31, 2015.

 

Basis of presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. general accepted accounting principles (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The results for the three months ended March 31, 2015 are not necessarily indicative of the results expected for the full fiscal year or any other periods.

Summary of significant accounting policies
Summary of significant accounting policies

 

2. Summary of significant accounting policies

 

Principles of consolidation

 

The Company’s unaudited condensed consolidated financial statements have been prepared in conformity with U.S. GAAP.  The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

 

Use of estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company believes judgment is involved in determining revenue recognition; the recoverability of long-lived assets; the fair value of the Company’s common stock; stock-based compensation expense; and income tax uncertainties. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ materially from those estimates and assumptions.

 

Customer concentration

 

Significant customers are those which represent 10% or more of the Company’s total revenue for each period presented in the condensed consolidated statements of operations. For each significant customer, revenue as a percentage of total revenue was follows:

 

 

 

Three Months Ended
March 31,

 

Customers

 

2015

 

2014

 

Customer A

 

14 

%

20 

%

Customer B

 

*

 

12 

%

Customer C

 

 

11 

%

 

*Less than 10% of total revenue

 

Cash equivalents

 

The Company considers all highly liquid marketable securities with original maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market funds and U.S government agency securities.

 

Marketable securities

 

All marketable securities, have been classified as “available-for-sale” and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities. Management determines the appropriate classification of its marketable securities in debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. Short-term marketable securities have maturities less than 365 days as of the balance sheet date. Long-term marketable securities have maturities greater than 365 days as of the balance sheet date. Unrealized gains and losses are excluded from earnings and are reported as a component of comprehensive income (loss). Realized gains and losses and declines in fair value judged to be other than temporary, if any, on available-for-sale securities are included in other income (expense), net. The cost of securities sold is based on the specific-identification method. Interest on marketable securities is included in interest income.

 

Restricted cash

 

Restricted cash consists of money market funds that serves as collateral for a credit card agreement at one of the Company’s financial institutions.

 

Internal-use software

 

The Company capitalizes third-party costs incurred in the application development stage to design and implement the software used in its tests and Invitae Family History Tool mobile application. Costs incurred in the application development stage of the software and mobile application are capitalized and will be amortized over an estimated useful life of three years on a straight line basis.

 

During the three months ended March 31, 2015 and 2014, the Company capitalized $750,000 and $150,000, respectively, of software development costs.

 

Deferred offering costs

 

Deferred offering costs, which primarily consist of direct incremental legal, accounting and printer fees relating to the IPO, were initially capitalized. The deferred offering costs were subsequently offset against IPO proceeds upon the closing of the offering in February 2015. As of December 31, 2014, the Company capitalized $1.9 million of deferred offering costs in other assets on the consolidated balance sheets.

 

Fair value of financial instruments

 

The Company’s financial instruments consist principally of cash and cash equivalents, marketable securities, and accounts payable. The carrying amounts of certain of these financial instruments, including cash and cash equivalents, and accounts payable, approximate fair value due to their short maturities.

 

See Note 4, “Fair value measurements” for further information on the fair value of the Company’s financial instruments.

 

Revenue recognition

 

Revenue is generated from the sale of tests that provide analysis and associated interpretation of the sequencing of parts of the genome. Revenue associated with subsequent re-requisition services was de minimis for all periods presented.

 

Revenue is recognized when persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured. The criterion for whether the fee is fixed or determinable and whether collectability is reasonably assured are based on management’s judgments. When evaluating collectability, in situations where contracted reimbursement coverage does not exist, the Company considers whether the Company has sufficient history to reliably estimate a payor’s individual payment patterns. The Company reviews the number of tests paid against the number of tests billed and the payor’s outstanding balance for unpaid tests to determine whether payments are being made at a consistently high percentage of tests billed and at appropriate amounts given the amount billed. The Company has not been able to demonstrate a predictable pattern of collectability, and therefore recognizes revenue when payment is received.

 

Cost of revenue

 

Cost of revenue reflects the aggregate costs incurred in delivering the genetic testing results to physicians and includes expenses for personnel costs including stock-based compensation, materials and supplies, equipment and infrastructure expenses associated with testing and allocated overhead including rent, equipment depreciation and utilities. Costs associated with performing the Company’s test are recorded as the test is processed regardless of whether and when revenue is recognized with respect to that test.

 

Foreign currency transactions

 

The Company uses the U.S. dollar as its functional currency for its subsidiary in Chile. Foreign currency assets and liabilities are remeasured into U.S. dollars using the end of period exchange rates except for nonmonetary assets and liabilities, which are remeasured using historical exchange rates. Expenses are remeasured using an average exchange rate for the respective period. No revenue has been recorded in Chile for the periods presented. Gains or losses from foreign currency transactions are included in interest income and other income (expense), net, in the condensed consolidated statements of operations. Foreign currency transaction gains and losses have not been significant to the condensed consolidated financial statements for all periods presented.

 

Net loss per common share

 

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per common share in the periods presented is the same as basic net loss per common share, since the effects of potentially dilutive securities are antidilutive. Common shares subject to repurchase are excluded from the weighted-average shares. At March 31, 2015 and 2014, 17,907 and 48,439 shares subject to repurchase, respectively, are excluded from basic net loss per share calculation.

 

Recent accounting pronouncements

 

On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard will become effective for the Company on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

 

In August 2014, the FASB issued ASU No. 2014-15 (Subtopic 205- 40), Presentation of Financial Statements—Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), which provides guidance about management’s responsibility to evaluate whether there is substantial doubt about the Company’s ability to continue as a going concern and to provide related footnote disclosure. ASU 2014-15 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early application is permitted. The adoption of this standard is not expected to have an impact on the Company’s consolidated financial statements.

Balance sheet components
Balance sheet components

 

3. Balance sheet components

 

Cash equivalents and marketable securities

 

The following is a summary of cash equivalents and marketable securities (in thousands).

 

 

 

March 31, 2015

 

 

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Estimated
Fair
Value

 

Money market funds

 

$

24,430

 

$

 

$

 

$

24,430

 

U.S. treasury notes 

 

2,033

 

 

 

2,033

 

U.S. government agency securities

 

163,376

 

1

 

(27

)

163,350

 

 

 

$

189,839

 

$

1

 

$

(27

)

$

189,813

 

Reported as:

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

$

63,413

 

Restricted cash

 

 

 

 

 

 

 

150

 

Marketable securities

 

 

 

 

 

 

 

116,069

 

Marketable securities, non-current

 

 

 

 

 

 

 

10,181

 

Total cash equivalents, restricted cash and marketable securities

 

 

 

 

 

 

 

$

189,813

 

 

 

 

December 31, 2014

 

 

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Estimated
Fair
Value

 

Money market funds

 

$

15,167 

 

$

 

$

 

$

15,167 

 

 

 

$

15,167 

 

$

 

$

 

$

15,167 

 

Reported as:

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

$

15,017 

 

Restricted cash

 

 

 

 

 

 

 

150 

 

Total cash equivalents and restricted cash

 

 

 

 

 

 

 

$

15,167 

 

 

At March 31, 2015, the remaining contractual maturities of available-for-sale securities were less than 1.5 years. For the three months ended March 31, 2015, there were no realized gains or losses on the available-for-sale securities. There were no available-for-sale marketable securities held by the Company at December 31, 2014.

 

Property and equipment, net

 

Property and equipment consisted of the following (in thousands):

 

 

 

March 31,
2015

 

December 31,
2014

 

Leasehold improvements

 

$

2,123

 

$

1,914

 

Laboratory equipment

 

8,196

 

6,528

 

Equipment under capital lease

 

6,585

 

3,735

 

Computer equipment

 

1,349

 

1,156

 

Internal-use software

 

1,551

 

800

 

Software

 

45

 

31

 

Furniture and fixtures

 

158

 

158

 

Automobiles

 

20

 

 

Construction-in-progress

 

2,617

 

4,853

 

Total property and equipment, gross

 

22,644

 

19,175

 

Accumulated depreciation and amortization

 

(4,464

)

(3,503

)

Total property and equipment, net

 

$

18,180

 

$

15,672

 

 

Included in the construction-in-progress balance as of December 31, 2014 was $2.9 million of capital lease equipment that had not been placed in service. This capital lease equipment was placed in service as of March 31, 2015.

 

Accrued liabilities

 

Accrued liabilities consisted of the following (in thousands):

 

 

 

March 31,
2015

 

December 31,
2014

 

Accrued compensation and related expenses

 

$

1,929 

 

$

1,439 

 

Accrued costs of equipment

 

2,313 

 

 

Accrued professional services

 

909 

 

1,030 

 

Accrued costs for construction-in-progress

 

75 

 

32 

 

Other

 

1,876 

 

736 

 

Total accrued liabilities

 

$

7,102 

 

$

3,237 

 

 

Fair value measurements
Fair value measurements

 

4. Fair value measurements

 

Financial assets and liabilities are recorded at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The authoritative guidance establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity.

 

The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

 

Level 1—Observable inputs such as quoted prices (unadjusted) for identical instruments in active markets.

 

Level 2—Observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or model-derived valuations whose significant inputs are observable.

 

Level 3—Unobservable inputs that reflect the reporting entity’s own assumptions.

 

The following tables set forth the fair value of the Company’s consolidated financial instruments that were measured at fair value on a recurring basis as of March 31, 2015 and December 31, 2014 (in thousands):

 

 

 

March 31, 2015

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Financial assets:

 

 

 

 

 

 

 

 

 

Money market funds

 

$

24,430 

 

$

 

$

 

$

24,430 

 

U.S. treasury notes

 

2,033 

 

 

 

2,033 

 

U.S. government agency securities

 

 

163,350 

 

 

163,350 

 

Total financial assets

 

$

26,463 

 

$

163,350 

 

$

 

$

189,813 

 

 

 

 

December 31, 2014

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Financial assets:

 

 

 

 

 

 

 

 

 

Money market funds

 

$

15,167 

 

$

 

$

 

$

15,167 

 

Total financial assets

 

$

15,167 

 

$

 

$

 

$

15,167 

 

 

The Company’s debt securities of U.S. government agency entities are classified as Level 2 as they are valued 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.

 

There were no transfers between Level 1 and Level 2 during the periods presented.

 

Commitments and contingencies
Commitments and contingencies

 

5. Commitments and contingencies

 

New Leases

 

In March 2015, the Company leased additional space in San Francisco and Oakland, California. The leases expire in April and June 2017, respectively, and aggregate future minimum lease payments for these facilities are approximately $2.4 million.

 

Contingencies

 

On November 25, 2013, the University of Utah Research Foundation, the Trustees of the University of Pennsylvania, HSC Research and Development Limited Partnership, Endorecherche, Inc. and Myriad Genetics, Inc. (collectively, the Myriad Plaintiffs) filed a complaint in the District of Utah (the Utah Action), alleging that certain of the Company’s genetic testing services infringe certain claims of various U.S. Patents (collectively, the Myriad Patents). On November 26, 2013, the Company filed a complaint for declaratory judgment in the Northern District of California (the California Action), asserting that the Myriad Patents are invalid and the Company does not infringe them, and the Myriad Plaintiffs counterclaimed alleging that the Company infringes the Myriad Patents. Although the Utah Action was dismissed, on February 19, 2014, the Judicial Panel on Multidistrict Litigation granted the Myriad Plaintiffs’ motion to consolidate for pre-trial proceedings all actions concerning the Myriad Patents (the MDL Proceedings), with the MDL Proceedings taking place in the District of Utah. On January 23, 2015, the Myriad Plaintiffs stipulated to the dismissal with prejudice of all of their claims and granted the Company a covenant not to sue for all of the patents they had asserted against the Company. On January 26, 2015, the court issued an order dismissing the California Action with prejudice, thereby ending the litigation.

 

The Company may become party to various other claims and complaints arising in the ordinary course of business. Management does not believe that any ultimate liability resulting from any of these claims will have a material adverse effect on its results of operations, financial condition, or liquidity. However, management cannot give any assurance regarding the ultimate outcome of these claims, and their resolution could be material to operating results for any particular period, depending upon the level of income for the period.

Stock incentive plans
Stock incentive plans

 

6. Stock incentive plans

 

Stock incentive plans

 

In 2010, the Company adopted the 2010 Incentive Plan (the “2010 Plan”). The 2010 Plan provides for the granting of stock-based awards to employees, directors, and consultants under terms and provisions established by the Board of Directors. Under the terms of the 2010 Plan, options may be granted at an exercise price not less than fair market value. For employees holding more than 10% of the voting rights of all classes of stock, the exercise prices for incentive and nonstatutory stock options must be at least 110% of fair market of the common stock on the grant date, as determined by the Board of Directors. The terms of options granted under the 2010 Plan may not exceed ten years.

 

In January 2015, the Company adopted the 2015 Stock Incentive Plan, or the 2015 Plan, which became effective upon the closing of the IPO. The 2015 Plan had 4,370,452 shares of common stock reserved for future issuance at the time of its effectiveness, which included 120,452 shares under the 2010 Plan which were transferred to the 2015 Plan upon effectiveness of the 2015 Plan. The 2015 Plan provides for automatic annual increases in shares available for grant, beginning on January 1, 2016 through January 1, 2025. In addition, shares subject to awards under the 2010 Plan that are forfeited or terminated will be added to the 2015 Plan. The 2015 Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, stock units, stock appreciation rights and other forms of equity compensation, all of which may be granted to employees, including officers, non-employee directors and consultants. Additionally, the 2015 Plan provides for the grant of cash-based awards.

 

Options granted generally vest over a period of four years. Typically, the vesting schedule for options granted to newly hired employees provides that 1/4 of the grant vests upon the first anniversary of the employee’s date of hire, with the remainder of the shares vesting monthly thereafter at a rate of 1/48 of the total shares subject to the option. All other options typically vest in equal monthly installments over the four-year vesting schedule.

 

2015 employee stock purchase plan

 

In January 2015, the Company adopted the 2015 Employee Stock Purchase Plan (the “ESPP”), which became effective upon the closing of the IPO. A total of 325,000 shares of common stock are reserved for issuance under the ESPP. Eligible employees may purchase common stock at 85% of the lesser of the fair market value of common stock on the purchase date or last trading day preceding the offering date. The ESPP provides for automatic annual increases in shares available for grant, beginning on January 1, 2016 through January 1, 2025. The Company has not determined the date on which the initial purchase period will commence under the ESPP.

 

Summary of option activity

 

Activity under the 2010 Plan and the 2015 Plan is set forth below (in thousands, except share and per share amounts and years):

 

 

 

Shares
available
for grant

 

Stock
options
outstanding

 

Weighted-
average
exercise
price

 

Weighted-average
remaining
contractual life
(years)

 

Aggregate
intrinsic
value

 

Balances at December 31, 2014

 

276,805

 

1,923,332

 

$

4.37

 

8.90

 

$

15,946

 

Additional shares reserved

 

4,370,452

 

 

 

 

 

 

 

Granted

 

(144,070

)

144,070

 

$

13.98

 

 

 

 

 

Cancelled

 

41,613

 

(41,613

)

$

5.41

 

 

 

 

 

Exercised

 

 

(28,379

)

$

1.99

 

 

 

 

 

Balances at March 31, 2015

 

4,544,800

 

1,997,410

 

$

5.07

 

8.74

 

$

23,341

 

Options exercisable at March 31, 2015

 

 

 

546,810

 

$

2.01

 

7.94

 

$

8,063

 

Options vested and expected to vest at March 31, 2015

 

 

 

1,947,699

 

$

5.03

 

8.73

 

$

22,852

 

 

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock for stock options that were in-the-money.

 

The weighted-average fair value of options to purchase common stock granted was $10.78 and $2.89 per share in the three months ended March 31, 2015 and 2014, respectively.

 

The fair value of options to purchase common stock vested was $484,000 and $62,000 in the three months ended March 31, 2015 and 2014, respectively.

 

The intrinsic value of options to purchase common stock exercised was $364,000 and $88,000 in the three months ended March 31, 2015 and 2014, respectively.

 

Early exercise of stock options

 

The 2010 Plan allows for the granting of options that may be exercised before the options have vested. Shares issued as a result of early exercise that have not vested are subject to repurchase by the Company upon termination of the purchaser’s employment or services, at the price paid by the purchaser, and are not deemed to be issued for accounting purposes until those related shares vest. The amounts received in exchange for these shares have been recorded as a liability on the accompanying balance sheets and will be reclassified into common stock and additional paid-in-capital as the shares vest. The Company’s right to repurchase these shares generally lapses 1/4 after a one-year cliff then at a monthly rate of 1/48 thereafter.

 

At March 31, 2015 and December 31, 2014, there were 17,907 and 23,903 shares of common stock outstanding, respectively, subject to the Company’s right of repurchase at prices ranging from $0.30 to $1.26 per share. At March 31, 2015 and December 31, 2014, the Company recorded $11,000 and $14,000, respectively, as liabilities associated with shares issued with repurchase rights.

 

Stock-based compensation

 

The fair value of share-based payments for option granted to employees and directors was estimated on the date of grant using the Black-Scholes option- pricing valuation model based on the following assumptions:

 

 

 

Three Months Ended
March 31,

 

 

 

2015

 

2014

 

Expected term (in years)

 

6.03 

 

6.03 

 

Expected volatility

 

83.8 

%

86.6 

%

Risk-free interest rate

 

1.28 

%

1.75 - 1.91%

 

Dividend yield

 

 

 

 

Stock-based compensation related to stock options granted to non- employees is recognized as the stock options are earned. The fair value of the stock options granted is calculated at each reporting date using the Black- Scholes option pricing model with the following assumptions: expected life is equal to the remaining contractual term of the award as of the measurement date ranging from 8.00 years to 9.12 years as of March 31, 2015, and 9.00 years to 9.35 years as of March 31, 2014, respectively; risk free rate is based on the U.S. Treasury Constant Maturity rate with a term similar to the expected life of the option at the measurement date; expected dividend yield of 0%; and volatility of 83.8% as of March 31, 2015, and 86.63% as of March 31, 2014, respectively.

 

The following table summarizes stock-based compensation expense related to stock options for the three months ended March 31, 2015 and 2014 included in the condensed consolidated statements of operations as follows (in thousands):

 

 

 

Three Months Ended
March 31,

 

 

 

2015

 

2014

 

Cost of revenue

 

$

76 

 

$

 

Research and development

 

213 

 

62 

 

Selling and marketing

 

124 

 

19 

 

General and administrative

 

125 

 

45 

 

Total stock-based compensation expense

 

$

538 

 

$

132 

 

 

As of March 31, 2015, unrecognized compensation expense related to unvested options, net of estimated forfeitures, was $6.2 million, which the Company expects to recognize on a straight-line basis over a weighted- average period of 3.3 years.

 

Net loss per common share
Net loss per common share

 

7. Net loss per common share

 

The following table presents the calculation of basic and diluted net loss per share for the three months ended March 31, 2015 and 2014 (in thousands, except share and per share amounts):

 

 

 

Three Months Ended
March 31,

 

 

 

2015

 

2014

 

Net loss

 

$

(18,637

)

$

(9,033

)

Shares used in computing net loss per share, basic and diluted

 

17,063,463

 

749,048

 

Net loss per share, basic and diluted

 

$

(1.09

)

$

(12.06

)

 

The following outstanding common stock equivalents have been excluded from diluted net loss per share for the three months ended March 31, 2015 and 2014 because their inclusion would be anti-dilutive:

 

 

 

Three Months Ended
March 31,

 

 

 

2015

 

2014

 

Shares of common stock subject to outstanding options

 

1,997,410 

 

1,615,581 

 

Shares of common stock subject to conversion from convertible preferred stock

 

 

13,521,900 

 

Shares of common stock subject to unvested early exercise of outstanding options subject to repurchase

 

17,907 

 

48,439 

 

Total common stock equivalents

 

2,015,317 

 

15,185,920 

 

 

Geographic information
Geographic information

 

8. Geographic information

 

Revenue by country is determined based on the billing address of the customer. The following presents revenue by country for the three months ended March 31, 2015 and 2014 (in thousands):

 

 

 

Three Months Ended
March 31,

 

 

 

2015

 

2014

 

United States

 

$

974 

 

$

97 

 

Canada

 

125 

 

13 

 

Rest of world

 

130 

 

 

Total revenue

 

$

1,229 

 

$

118 

 

 

Long-lived assets, net, by location are summarized as follows (in thousands):

 

 

 

March 31,
2015

 

December 31,
2014

 

United States

 

$

16,451 

 

$

13,858 

 

Chile

 

1,729 

 

1,814 

 

Total long-lived assets, net

 

$

18,180 

 

$

15,672 

 

 

Summary of significant accounting policies (Policies)

 

Principles of consolidation

 

The Company’s unaudited condensed consolidated financial statements have been prepared in conformity with U.S. GAAP.  The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

 

Use of estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company believes judgment is involved in determining revenue recognition; the recoverability of long-lived assets; the fair value of the Company’s common stock; stock-based compensation expense; and income tax uncertainties. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ materially from those estimates and assumptions.

 

Customer concentration

 

Significant customers are those which represent 10% or more of the Company’s total revenue for each period presented in the condensed consolidated statements of operations. For each significant customer, revenue as a percentage of total revenue was follows:

 

 

 

Three Months Ended
March 31,

 

Customers

 

2015

 

2014

 

Customer A

 

14 

%

20 

%

Customer B

 

*

 

12 

%

Customer C

 

 

11 

%

 

*Less than 10% of total revenue

 

Cash equivalents

 

The Company considers all highly liquid marketable securities with original maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market funds and U.S government agency securities.

 

Marketable securities

 

All marketable securities, have been classified as “available-for-sale” and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities. Management determines the appropriate classification of its marketable securities in debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. Short-term marketable securities have maturities less than 365 days as of the balance sheet date. Long-term marketable securities have maturities greater than 365 days as of the balance sheet date. Unrealized gains and losses are excluded from earnings and are reported as a component of comprehensive income (loss). Realized gains and losses and declines in fair value judged to be other than temporary, if any, on available-for-sale securities are included in other income (expense), net. The cost of securities sold is based on the specific-identification method. Interest on marketable securities is included in interest income.

 

Restricted cash

 

Restricted cash consists of money market funds that serves as collateral for a credit card agreement at one of the Company’s financial institutions.

 

Internal-use software

 

The Company capitalizes third-party costs incurred in the application development stage to design and implement the software used in its tests and Invitae Family History Tool mobile application. Costs incurred in the application development stage of the software and mobile application are capitalized and will be amortized over an estimated useful life of three years on a straight line basis.

 

During the three months ended March 31, 2015 and 2014, the Company capitalized $750,000 and $150,000, respectively, of software development costs.

 

Deferred offering costs

 

Deferred offering costs, which primarily consist of direct incremental legal, accounting and printer fees relating to the IPO, were initially capitalized. The deferred offering costs were subsequently offset against IPO proceeds upon the closing of the offering in February 2015. As of December 31, 2014, the Company capitalized $1.9 million of deferred offering costs in other assets on the consolidated balance sheets.

 

Fair value of financial instruments

 

The Company’s financial instruments consist principally of cash and cash equivalents, marketable securities, and accounts payable. The carrying amounts of certain of these financial instruments, including cash and cash equivalents, and accounts payable, approximate fair value due to their short maturities.

 

See Note 4, “Fair value measurements” for further information on the fair value of the Company’s financial instruments.

 

Revenue recognition

 

Revenue is generated from the sale of tests that provide analysis and associated interpretation of the sequencing of parts of the genome. Revenue associated with subsequent re-requisition services was de minimis for all periods presented.

 

Revenue is recognized when persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured. The criterion for whether the fee is fixed or determinable and whether collectability is reasonably assured are based on management’s judgments. When evaluating collectability, in situations where contracted reimbursement coverage does not exist, the Company considers whether the Company has sufficient history to reliably estimate a payor’s individual payment patterns. The Company reviews the number of tests paid against the number of tests billed and the payor’s outstanding balance for unpaid tests to determine whether payments are being made at a consistently high percentage of tests billed and at appropriate amounts given the amount billed. The Company has not been able to demonstrate a predictable pattern of collectability, and therefore recognizes revenue when payment is received.

Cost of revenue

 

Cost of revenue reflects the aggregate costs incurred in delivering the genetic testing results to physicians and includes expenses for personnel costs including stock-based compensation, materials and supplies, equipment and infrastructure expenses associated with testing and allocated overhead including rent, equipment depreciation and utilities. Costs associated with performing the Company’s test are recorded as the test is processed regardless of whether and when revenue is recognized with respect to that test.

 

Foreign currency transactions

 

The Company uses the U.S. dollar as its functional currency for its subsidiary in Chile. Foreign currency assets and liabilities are remeasured into U.S. dollars using the end of period exchange rates except for nonmonetary assets and liabilities, which are remeasured using historical exchange rates. Expenses are remeasured using an average exchange rate for the respective period. No revenue has been recorded in Chile for the periods presented. Gains or losses from foreign currency transactions are included in interest income and other income (expense), net, in the condensed consolidated statements of operations. Foreign currency transaction gains and losses have not been significant to the condensed consolidated financial statements for all periods presented.

 

Net loss per common share

 

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per common share in the periods presented is the same as basic net loss per common share, since the effects of potentially dilutive securities are antidilutive. Common shares subject to repurchase are excluded from the weighted-average shares. At March 31, 2015 and 2014, 17,907 and 48,439 shares subject to repurchase, respectively, are excluded from basic net loss per share calculation.

 

Recent accounting pronouncements

 

On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard will become effective for the Company on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

 

In August 2014, the FASB issued ASU No. 2014-15 (Subtopic 205- 40), Presentation of Financial Statements—Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), which provides guidance about management’s responsibility to evaluate whether there is substantial doubt about the Company’s ability to continue as a going concern and to provide related footnote disclosure. ASU 2014-15 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early application is permitted. The adoption of this standard is not expected to have an impact on the Company’s consolidated financial statements.

Summary of significant accounting policies (Tables)
Schedule significant customer, revenue as a percentage

 

 

 

Three Months Ended
March 31,

 

Customers

 

2015

 

2014

 

Customer A

 

14 

%

20 

%

Customer B

 

*

 

12 

%

Customer C

 

 

11 

%

 

Balance sheet components (Tables)

 

The following is a summary of cash equivalents and marketable securities (in thousands).

 

 

 

March 31, 2015

 

 

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Estimated
Fair
Value

 

Money market funds

 

$

24,430

 

$

 

$

 

$

24,430

 

U.S. treasury notes 

 

2,033

 

 

 

2,033

 

U.S. government agency securities

 

163,376

 

1

 

(27

)

163,350

 

 

 

$

189,839

 

$

1

 

$

(27

)

$

189,813

 

Reported as:

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

$

63,413

 

Restricted cash

 

 

 

 

 

 

 

150

 

Marketable securities

 

 

 

 

 

 

 

116,069

 

Marketable securities, non-current

 

 

 

 

 

 

 

10,181

 

Total cash equivalents, restricted cash and marketable securities

 

 

 

 

 

 

 

$

189,813

 

 

 

 

December 31, 2014

 

 

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Estimated
Fair
Value

 

Money market funds

 

$

15,167 

 

$

 

$

 

$

15,167 

 

 

 

$

15,167 

 

$

 

$

 

$

15,167 

 

Reported as:

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

$

15,017 

 

Restricted cash

 

 

 

 

 

 

 

150 

 

Total cash equivalents and restricted cash

 

 

 

 

 

 

 

$

15,167 

 

 

 

Property and equipment consisted of the following (in thousands):

 

 

 

March 31,
2015

 

December 31,
2014

 

Leasehold improvements

 

$

2,123

 

$

1,914

 

Laboratory equipment

 

8,196

 

6,528

 

Equipment under capital lease

 

6,585

 

3,735

 

Computer equipment

 

1,349

 

1,156

 

Internal-use software

 

1,551

 

800

 

Software

 

45

 

31

 

Furniture and fixtures

 

158

 

158

 

Automobiles

 

20

 

 

Construction-in-progress

 

2,617

 

4,853

 

Total property and equipment, gross

 

22,644

 

19,175

 

Accumulated depreciation and amortization

 

(4,464

)

(3,503

)

Total property and equipment, net

 

$

18,180

 

$

15,672

 

 

 

Accrued liabilities consisted of the following (in thousands):

 

 

 

March 31,
2015

 

December 31,
2014

 

Accrued compensation and related expenses

 

$

1,929 

 

$

1,439 

 

Accrued costs of equipment

 

2,313 

 

 

Accrued professional services

 

909 

 

1,030 

 

Accrued costs for construction-in-progress

 

75 

 

32 

 

Other

 

1,876 

 

736 

 

Total accrued liabilities

 

$

7,102 

 

$

3,237 

 

 

Fair value measurements (Tables)
Financial instruments at fair value on a recurring basis

 

The following tables set forth the fair value of the Company’s consolidated financial instruments that were measured at fair value on a recurring basis as of March 31, 2015 and December 31, 2014 (in thousands):

 

 

 

March 31, 2015

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Financial assets:

 

 

 

 

 

 

 

 

 

Money market funds

 

$

24,430 

 

$

 

$

 

$

24,430 

 

U.S. treasury notes

 

2,033 

 

 

 

2,033 

 

U.S. government agency securities

 

 

163,350 

 

 

163,350 

 

Total financial assets

 

$

26,463 

 

$

163,350 

 

$

 

$

189,813 

 

 

 

 

December 31, 2014

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Financial assets:

 

 

 

 

 

 

 

 

 

Money market funds

 

$

15,167 

 

$

 

$

 

$

15,167 

 

Total financial assets

 

$

15,167 

 

$

 

$

 

$

15,167 

 

 

Stock incentive plans (Tables)

 

Activity under the 2010 Plan and the 2015 Plan is set forth below (in thousands, except share and per share amounts and years):

 

 

 

Shares
available
for grant

 

Stock
options
outstanding

 

Weighted-
average
exercise
price

 

Weighted-average
remaining
contractual life
(years)

 

Aggregate
intrinsic
value

 

Balances at December 31, 2014

 

276,805

 

1,923,332

 

$

4.37

 

8.90

 

$

15,946

 

Additional shares reserved

 

4,370,452

 

 

 

 

 

 

 

Granted

 

(144,070

)

144,070

 

$

13.98

 

 

 

 

 

Cancelled

 

41,613

 

(41,613

)

$

5.41

 

 

 

 

 

Exercised

 

 

(28,379

)

$

1.99

 

 

 

 

 

Balances at March 31, 2015

 

4,544,800

 

1,997,410

 

$

5.07

 

8.74

 

$

23,341

 

Options exercisable at March 31, 2015

 

 

 

546,810

 

$

2.01

 

7.94

 

$

8,063

 

Options vested and expected to vest at March 31, 2015

 

 

 

1,947,699

 

$

5.03

 

8.73

 

$

22,852

 

 

 

 

 

Three Months Ended
March 31,

 

 

 

2015

 

2014

 

Expected term (in years)

 

6.03 

 

6.03 

 

Expected volatility

 

83.8 

%

86.6 

%

Risk-free interest rate

 

1.28 

%

1.75 - 1.91%

 

Dividend yield

 

 

 

 

 

The following table summarizes stock-based compensation expense related to stock options for the three months ended March 31, 2015 and 2014 included in the condensed consolidated statements of operations as follows (in thousands):

 

 

 

Three Months Ended
March 31,

 

 

 

2015

 

2014

 

Cost of revenue

 

$

76 

 

$

 

Research and development

 

213 

 

62 

 

Selling and marketing

 

124 

 

19 

 

General and administrative

 

125 

 

45 

 

Total stock-based compensation expense

 

$

538 

 

$

132 

 

 

Net loss per common share (Tables)

 

The following table presents the calculation of basic and diluted net loss per share for the three months ended March 31, 2015 and 2014 (in thousands, except share and per share amounts):

 

 

 

Three Months Ended
March 31,

 

 

 

2015

 

2014

 

Net loss

 

$

(18,637

)

$

(9,033

)

Shares used in computing net loss per share, basic and diluted

 

17,063,463

 

749,048

 

Net loss per share, basic and diluted

 

$

(1.09

)

$

(12.06

)

 

 

 

 

Three Months Ended
March 31,

 

 

 

2015

 

2014

 

Shares of common stock subject to outstanding options

 

1,997,410 

 

1,615,581 

 

Shares of common stock subject to conversion from convertible preferred stock

 

 

13,521,900 

 

Shares of common stock subject to unvested early exercise of outstanding options subject to repurchase

 

17,907 

 

48,439 

 

Total common stock equivalents

 

2,015,317 

 

15,185,920 

 

 

Geographic information (Tables)

 

Revenue by country is determined based on the billing address of the customer. The following presents revenue by country for the three months ended March 31, 2015 and 2014 (in thousands):

 

 

 

Three Months Ended
March 31,

 

 

 

2015

 

2014

 

United States

 

$

974 

 

$

97 

 

Canada

 

125 

 

13 

 

Rest of world

 

130 

 

 

Total revenue

 

$

1,229 

 

$

118 

 

 

 

 

Long-lived assets, net, by location are summarized as follows (in thousands):

 

 

 

March 31,
2015

 

December 31,
2014

 

United States

 

$

16,451 

 

$

13,858 

 

Chile

 

1,729 

 

1,814 

 

Total long-lived assets, net

 

$

18,180 

 

$

15,672 

 

 

Organization and description of business (Details) (USD $)
In Millions, except Share data, unless otherwise specified
0 Months Ended 3 Months Ended 1 Months Ended
Feb. 12, 2015
Mar. 31, 2015
segment
item
Dec. 31, 2014
Feb. 12, 2015
IPO
Jan. 31, 2015
Common Stock
Feb. 28, 2015
Common Stock
IPO
Feb. 12, 2015
Common Stock
IPO
Feb. 12, 2015
Preferred Stock
IPO
Feb. 28, 2015
Maximum
Common Stock
IPO
Mar. 31, 2015
California
item
Mar. 31, 2015
CHILE
item
Number of laboratories
 
 
 
 
 
 
 
 
Number of operating segments
 
 
 
 
 
 
 
 
 
 
Reverse Stock Split, conversion ratio
 
 
 
 
0.1667 
 
 
 
 
 
 
Number of common stock shares issued
 
31,803,345 
944,581 
 
 
7,302,500 
 
 
 
 
 
Sale price on common stock (in dollars per share)
 
 
 
 
 
$ 16.00 
 
 
 
 
 
Net proceeds from issue of common stock
 
 
 
 
 
$ 105.7 
 
 
 
 
 
Number additional shares on common stock can be purchased by underwriters
 
 
 
 
 
 
 
 
952,500 
 
 
Number of common stock shares converted from preferred stock
 
 
 
 
 
23,521,889 
 
 
 
 
 
Shares authorized
420,000,000 
 
 
 
 
 
 
 
 
 
 
Common stock, shares authorized
 
400,000,000 
160,131,524 
 
 
 
400,000,000 
 
 
 
 
Preferred stock, authorized shares
 
20,000,000 
 
 
 
 
20,000,000 
 
 
 
Common stock, par value (in dollars per share)
 
$ 0.0001 
$ 0.0001 
$ 0.0001 
 
 
 
 
 
 
 
Preferred stock, par value (in dollars per share)
 
$ 0.0001 
$ 0.0001 
$ 0.0001 
 
 
 
 
 
 
 
Preferred stock, shares outstanding
 
 
 
 
 
 
 
 
 
Summary of significant accounting policies (Details)
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Customer A
 
 
Concentration risk (as a percent)
14.00% 
20.00% 
Customer B
 
 
Concentration risk (as a percent)
 
12.00% 
Customer C
 
 
Concentration risk (as a percent)
 
11.00% 
Revenue |
Customer Concentration Risk
 
 
Concentration risk (as a percent)
10.00% 
 
Summary of significant accounting policies (Details 2) (USD $)
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Dec. 31, 2014
Software development costs incurred and capitalized
$ 750,000 
$ 150,000 
 
Deferred offering costs
 
 
$ 1,900,000 
Shares subject to repurchase, excluded from basic loss per share calculation
2,015,317 
15,185,920 
 
Unvested early exercise of outstanding options subject to repurchase
 
 
 
Shares subject to repurchase, excluded from basic loss per share calculation
17,907 
48,439 
 
Balance sheet components (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Dec. 31, 2014
Investment Holdings [Line Items]
 
 
Amortized Cost
$ 189,839 
$ 15,167 
Gross Unrealized Gains
 
Gross Unrealized Losses
(27)
 
Estimated Fair Value
189,813 
15,167 
Reported as:
 
 
Cash equivalents
63,413 
15,017 
Restricted cash
150 
150 
Marketable securities
116,069 
 
Marketable securities, noncurrent
10,181 
 
Estimated Fair Value
189,813 
15,167 
Remaining contractual maturities
1 year 6 months 
 
Marketable available-for-sale securities
 
Money market funds
 
 
Investment Holdings [Line Items]
 
 
Amortized Cost
24,430 
15,167 
Estimated Fair Value
24,430 
15,167 
Reported as:
 
 
Estimated Fair Value
24,430 
15,167 
U.S. treasury notes
 
 
Investment Holdings [Line Items]
 
 
Amortized Cost
2,033 
 
Estimated Fair Value
2,033 
 
Reported as:
 
 
Estimated Fair Value
2,033 
 
US government agency securities
 
 
Investment Holdings [Line Items]
 
 
Amortized Cost
163,376 
 
Gross Unrealized Gains
 
Gross Unrealized Losses
(27)
 
Estimated Fair Value
163,350 
 
Reported as:
 
 
Estimated Fair Value
163,350 
 
Available-for-sale Securities.
 
 
Investment Holdings [Line Items]
 
 
Gross Unrealized Gains
 
Gross Unrealized Losses
$ 0 
 
Balance sheet components (Details 2) (USD $)
Mar. 31, 2015
Dec. 31, 2014
Property and equipment
 
 
Total property and equipment, gross
$ 22,644,000 
$ 19,175,000 
Accumulated depreciation and amortization
(4,464,000)
(3,503,000)
Total property and equipment, net
18,180,000 
15,672,000 
Leasehold improvements
 
 
Property and equipment
 
 
Total property and equipment, gross
2,123,000 
1,914,000 
Laboratory equipment
 
 
Property and equipment
 
 
Total property and equipment, gross
8,196,000 
6,528,000 
Equipment under capital lease
 
 
Property and equipment
 
 
Total property and equipment, gross
6,585,000 
3,735,000 
Computer equipment
 
 
Property and equipment
 
 
Total property and equipment, gross
1,349,000 
1,156,000 
Internal-use software
 
 
Property and equipment
 
 
Total property and equipment, gross
1,551,000 
800,000 
Software
 
 
Property and equipment
 
 
Total property and equipment, gross
45,000 
31,000 
Furniture and fixtures
 
 
Property and equipment
 
 
Total property and equipment, gross
158,000 
158,000 
Automobiles
 
 
Property and equipment
 
 
Total property and equipment, gross
20,000 
 
Construction-in-progress
 
 
Property and equipment
 
 
Total property and equipment, gross
2,617,000 
4,853,000 
Capital lease equipment not placed in service
 
$ 2,900,000 
Balance sheet components (Details 3) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
Accrued liabilities
 
 
Accrued compensation and related expenses
$ 1,929 
$ 1,439 
Accrued costs of equipment
2,313 
 
Accrued professional services
909 
1,030 
Accrued costs for construction-in-progress
75 
32 
Other
1,876 
736 
Total accrued liabilities
$ 7,102 
$ 3,237 
Fair value measurements (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
Total financial assets
$ 189,813 
$ 15,167 
Transfers from Level 1 to Level 2
Transfers from Level 2 to Level 1
Recurring basis
 
 
Total financial assets
189,813 
15,167 
Recurring basis |
Level 1
 
 
Total financial assets
26,463 
15,167 
Recurring basis |
Level 2
 
 
Total financial assets
163,350 
 
Money market funds |
Recurring basis
 
 
Total financial assets
24,430 
15,167 
Money market funds |
Recurring basis |
Level 1
 
 
Total financial assets
24,430 
15,167 
U.S. treasury notes
 
 
Total financial assets
2,033 
 
U.S. treasury notes |
Recurring basis
 
 
Total financial assets
2,033 
 
U.S. treasury notes |
Recurring basis |
Level 1
 
 
Total financial assets
2,033 
 
US government agency securities
 
 
Total financial assets
163,350 
 
Government sponsored entities |
Recurring basis
 
 
Total financial assets
163,350 
 
Government sponsored entities |
Recurring basis |
Level 2
 
 
Total financial assets
$ 163,350 
 
Commitments and contingencies (Details) (New Leases, USD $)
In Millions, unless otherwise specified
Mar. 31, 2015
New Leases
 
Future minimum lease payments under operating leases
 
Future minimum lease payments
$ 2.4 
Stock incentive plans (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 12 Months Ended 3 Months Ended 12 Months Ended 1 Months Ended
Mar. 31, 2015
Stock incentive plans
Jan. 31, 2015
Stock incentive plans
Dec. 31, 2010
Stock incentive plans
Minimum
Dec. 31, 2010
Stock incentive plans
Maximum
Mar. 31, 2015
Stock incentive plans
Options
Mar. 31, 2014
Stock incentive plans
Options
Dec. 31, 2014
Stock incentive plans
Options
Jan. 31, 2015
2010 Plan
Jan. 31, 2015
ESPP
Stock incentive plan
 
 
 
 
 
 
 
 
 
Employees holding voting rights of all classes of stock (as a percent)
 
 
10.00% 
 
 
 
 
 
 
Exercise price of options on common stock (as a percent)
 
 
110.00% 
 
 
 
 
 
 
Term of options granted
 
 
 
10 years 
 
 
 
 
 
Vesting rate upon the first anniversary (as a percent)
25.00% 
 
 
 
 
 
 
 
 
Monthly vesting rate thereafter (as a percent)
2.08% 
 
 
 
 
 
 
 
 
Purchase price of common stock of the lesser of fair market value on the purchase date or the last trading day preceding the offering date (as a percent)
 
 
 
 
 
 
 
 
85.00% 
Activity under the plan
 
 
 
 
 
 
 
 
 
Shares available for grant
 
 
 
 
4,544,800 
 
276,805 
 
 
Additional shares reserved
 
4,370,452 
 
 
4,370,452 
 
 
120,452 
325,000 
Balance at the beginning of the period
 
 
 
 
1,923,332 
 
 
 
 
Granted (in shares)
 
 
 
 
144,070 
 
 
 
 
Cancelled (in shares)
 
 
 
 
(41,613)
 
 
 
 
Exercised (in shares)
 
 
 
 
(28,379)
 
 
 
 
Balance at the end of the period
 
 
 
 
1,997,410 
 
1,923,332 
 
 
Weighted-average exercise price
 
 
 
 
 
 
 
 
 
Balance at the beginning of the period (in dollars per share)
 
 
 
 
$ 4.37 
 
 
 
 
Granted (in dollars per share)
 
 
 
 
$ 13.98 
 
 
 
 
Cancelled (in dollars per share)
 
 
 
 
$ 5.41 
 
 
 
 
Exercised (in dollars per share)
 
 
 
 
$ 1.99 
 
 
 
 
Balance at the end of the period (in dollars per share)
 
 
 
 
$ 5.07 
 
$ 4.37 
 
 
Additional information
 
 
 
 
 
 
 
 
 
Weighted-average remaining contractual life
 
 
 
 
8 years 8 months 27 days 
 
8 years 10 months 24 days 
 
 
Aggregate intrinsic value
 
 
 
 
$ 23,341 
 
$ 15,946 
 
 
Exercisable, Number of shares
 
 
 
 
546,810 
 
 
 
 
Exercisable, weighted-average exercise price (in dollars per share)
 
 
 
 
$ 2.01 
 
 
 
 
Exercisable, weighted-average remaining contractual life
 
 
 
 
7 years 11 months 9 days 
 
 
 
 
Exercisable, aggregate intrinsic value
 
 
 
 
8,063 
 
 
 
 
Vested and expected to vest
 
 
 
 
 
 
 
 
 
Number of shares
 
 
 
 
1,947,699 
 
 
 
 
Weighted-average exercise price (in dollars per share)
 
 
 
 
$ 5.03 
 
 
 
 
Weighted-average remaining contractual life
 
 
 
 
8 years 8 months 23 days 
 
 
 
 
Aggregate intrinsic value
 
 
 
 
22,852 
 
 
 
 
Weighted-average grant date fair value (in dollars per share)
 
 
 
 
$ 10.78 
$ 2.89 
 
 
 
Fair value of options granted
 
 
 
 
484 
62 
 
 
 
Exercised, aggregate intrinsic value
 
 
 
 
$ 364 
$ 88 
 
 
 
Stock incentive plans (Details 2) (USD $)
3 Months Ended
Mar. 31, 2015
Dec. 31, 2014
Stock incentive plan
 
 
Liabilities associated with shares issued with repurchase rights
$ 11,000 
$ 14,000 
Options |
2010 Plan
 
 
Stock incentive plan
 
 
Repurchase of options before the end of year one (as a percent)
25.00% 
 
Monthly repurchase of options after the end of year one (as a percent)
2.08% 
 
Number of shares outstanding eligible for repurchase
17,907 
23,903 
Minimum price at which options may be repurchased (in dollars per share)
$ 0.30 
 
Maximum price at which options may be repurchased (in dollars per share)
$ 1.26 
 
Liabilities associated with shares issued with repurchase rights
$ 11,000 
$ 14,000 
Stock incentive plans (Details 3)
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Options
 
 
Assumptions used in determination of fair value of options using the Black Scholes option pricing valuation model
 
 
Expected term (in years)
6 years 11 days 
6 years 11 days 
Expected volatility
83.80% 
86.60% 
Risk-free interest rate
1.28% 
 
Non-Employee Options
 
 
Assumptions used in determination of fair value of options using the Black Scholes option pricing valuation model
 
 
Dividend yield
0.00% 
0.00% 
Expected volatility
83.80% 
86.63% 
Minimum
 
 
Assumptions used in determination of fair value of options using the Black Scholes option pricing valuation model
 
 
Risk-free interest rate
 
1.75% 
Minimum |
Options
 
 
Assumptions used in determination of fair value of options using the Black Scholes option pricing valuation model
 
 
Risk-free interest rate
 
1.91% 
Minimum |
Non-Employee Options
 
 
Assumptions used in determination of fair value of options using the Black Scholes option pricing valuation model
 
 
Expected term (in years)
8 years 
9 years 
Maximum
 
 
Assumptions used in determination of fair value of options using the Black Scholes option pricing valuation model
 
 
Risk-free interest rate
 
1.91% 
Maximum |
Non-Employee Options
 
 
Assumptions used in determination of fair value of options using the Black Scholes option pricing valuation model
 
 
Expected term (in years)
9 years 1 month 13 days 
9 years 4 months 6 days 
Stock incentive plans (Details 4) (USD $)
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Stock-based compensation
 
 
Total stock based compensation expense
$ 538,000 
$ 132,000 
Unrecognized stock based compensation
6,200,000 
 
Expected period to recognize on a straight line basis
3 years 3 months 18 days 
 
Cost of revenue.
 
 
Stock-based compensation
 
 
Total stock based compensation expense
76,000 
6,000 
Research and development
 
 
Stock-based compensation
 
 
Total stock based compensation expense
213,000 
62,000 
Selling and marketing
 
 
Stock-based compensation
 
 
Total stock based compensation expense
124,000 
19,000 
General and administrative
 
 
Stock-based compensation
 
 
Total stock based compensation expense
$ 125,000 
$ 45,000 
Net loss per common share (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Net loss per share
 
 
Net loss
$ (18,637)
$ (9,033)
Shares used in computing net loss per share, basic and diluted
17,063,463 
749,048 
Net loss per share, basic and diluted
$ (1.09)
$ (12.06)
Antidilutive shares excluded from diluted net loss per share
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
2,015,317 
15,185,920 
Options
 
 
Antidilutive shares excluded from diluted net loss per share
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
1,997,410 
1,615,581 
Conversion from preferred stock
 
 
Antidilutive shares excluded from diluted net loss per share
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
 
13,521,900 
Unvested early exercise of outstanding options subject to repurchase
 
 
Antidilutive shares excluded from diluted net loss per share
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
17,907 
48,439 
Geographic information (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Dec. 31, 2014
Geographic information
 
 
 
Revenue
$ 1,229 
$ 118 
 
Total Long-lived assets, net
18,180 
 
15,672 
UNITED STATES
 
 
 
Geographic information