0001384101-21-000082 | 10-Q | XBRL Viewer

Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Lease Payments Under Non-cancelable Operating Leases

Future minimum lease payments under non-cancelable operating leases as of March 31, 2021 are as follows (in thousands of dollars):


Year Ending December 31,	Amounts
Remainder of 2021	$	2,760
2022	3,770
2023	3,880
2024	3,991
2025	4,103
Thereafter	1,661
Total future minimum lease payments	20,165
Less: amount representing interest	3,251
Present value of future lease payments	16,914
Less: short-term lease liabilities	2,878
Long-term lease liabilities	$	14,036

Stockholders' Equity (Details) - shares	Mar. 31, 2021	Dec. 31, 2020
Common Stock
Total number of shares reserved for issuance (in shares)	11,339,969	9,500,287
Shares of common stock subject to outstanding options
Common Stock
Options issued and outstanding (in shares)	4,965,510	4,867,303
Shares available for issuance (in shares)	4,851,806	3,061,589
Employee stock purchase plan
Common Stock
Shares available for issuance (in shares)	1,522,653	1,571,395

Business Combination (Tables)

3 Months Ended

Mar. 31, 2021

Business Combinations [Abstract]

Schedule of Purchase Price and Nonrecurring Post-compensation Expense

The following table summarizes the purchase price and nonrecurring post-compensation expense recorded as a part of the acquisition (in thousands):


	Purchase Price		Nonrecurring Post-Combination Compensation Expense
Upfront cash consideration	$	550,515	$	270
Liabilities incurred	44,179		24,809
Total	$	594,694	$	25,079

Schedule of Fair Values of Assets Acquired and Liabilities Assumed

The following table summarizes the fair values of

assets acquired and liabilities assumed through the Company's acquisition of Decipher Biosciences at the date of acquisition (in thousands):


Cash and cash equivalents	$	19,782
Accounts receivable	5,765
Supplies inventory	1,641
Prepaids and other current assets	778
Property and equipment, net	1,737
Operating lease assets	7,601
Finite-lived intangible assets	94,000
Indefinite-lived intangible assets	7,300
Restricted cash	146
Other assets	829
Total identifiable assets acquired	139,579
Accounts payable	(2,351)
Accrued liabilities	(4,322)
Operating lease obligations (current)	(1,241)
Operating lease obligations, net of current portion	(4,540)
Deferred tax liability	(4,544)
Net identifiable assets acquired	122,581
Goodwill	472,113
Total purchase price	$	594,694

Schedule of Supplemental Pro Forma Information

The following unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved as if the acquisition had taken place as of January 1, 2020 (in thousands):


	Three Months Ended March 31,
	2021		2020
Total revenues	$	48,680	$	38,997
Net Income (loss)	$	1,680	$	(59,913)

Fair Value Measurements - Additional Information (Details) - USD ($) $ in Thousands	Dec. 03, 2019	Mar. 31, 2021	Dec. 31, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short term contingent considerations		$ 5,986	$ 0
Long term contingent considerations		1,800	7,594
Headquarters and laboratory facilities, South San Francisco, San Diego, and Austin
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Security deposit		749	603
NanoString
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash paid in acquisition	$ 40,000
Additional cash to be paid	10,000
Acquisition-related contingent consideration, net of current portion	6,100	7,800	7,600
Short term contingent considerations		6,000
Long term contingent considerations		1,800
NanoString \| Common Stock
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Value of shares issued in acquisition	$ 10,000
Money Market Funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents		$ 319,200	$ 346,800

Organization, Description of Business and Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet as of March 31, 2021 the condensed consolidated statements of operations and

comprehensive loss for the three months ended March 31, 2021 and 2020, the condensed consolidated statements of stockholders' equity for the three months ended March 31, 2021 and 2020, and the condensed consolidated statements of cash flows for the three months ended March 31, 2021 and 2020 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of its financial position, operating results, stockholders' equity and cash flows for the periods presented. The condensed consolidated balance sheet at December 31, 2020 has been derived from audited financial statements. The results for the three months ended March 31, 2021 are not necessarily indicative of the results expected for the full year or any other period. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company operates in one segment.

The accompanying interim period condensed consolidated financial statements and related financial 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, 2020.

Use of Estimates

The preparation of unaudited interim financial statements in conformity with 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. Items subject to such estimates include: revenue recognition; write-down of supplies; the useful lives of property and equipment; the recoverability of long-lived assets; the incremental borrowing rate for leases; accounting for acquisitions; the estimation of the fair value of intangible assets and contingent consideration; variable interest entity assessment; impairment of equity investment, at cost; stock options; income tax uncertainties, including a valuation allowance for deferred tax assets; reserve on accounts receivable and contingencies. 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. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenue and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and assumptions.

Issuance of Common Stock in a Public Offering

On February 9, 2021, the Company issued and sold 8,547,297 shares of common stock in a registered public offering, including 1,114,864 shares issued and sold upon the underwriters’ exercise in full of their option to purchase additional shares, at a price to the public of $74.00 per share. The Company's net proceeds from the offering were approximately $593.8 million, after deducting underwriting discounts and commissions and offering expenses of $38.7 million.

Cash and Cash Equivalents

The Company considers demand deposits in a bank, money market funds and highly liquid investments with an original maturity of 90 days or less to be cash equivalents.

Concentrations of Credit Risk and Other Risks and Uncertainties

The worldwide spread of coronavirus, or COVID-19, has created significant uncertainty in the global economy. There have been no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of COVID-19 and the extent to which COVID-19 impacts the Company’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict. If the financial markets or the overall economy are impacted for an extended period, the Company’s liquidity, revenues, supplies, goodwill and intangibles may be adversely affected. The Company considers the effects of COVID-19 pandemic in developing our estimates.

The majority of the Company’s cash and cash equivalents are deposited with one major financial institution in the United States. Deposits in this institution may exceed the amount of insurance provided on such deposits. The Company has not experienced any losses on its deposits of cash and cash equivalents.

Several of the components of the Company’s sample collection kits and test reagents, and the nCounter system and related diagnostic kits are obtained from single-source suppliers. If these single-source suppliers fail to satisfy the Company’s requirements on a timely basis, it could suffer delays in being able to deliver its diagnostic solutions, a possible loss of revenue, or incur higher costs, any of which could adversely affect its operating results.

The Company is also subject to credit risk from its accounts receivable related to its sales. Credit risk for accounts receivable from testing revenue is incorporated in testing revenue accrual rates as the Company assesses historical collection rates and current developments to determine accrual rates and amounts the Company will ultimately collect. The Company generally does not perform evaluations of customers’ financial condition for testing revenue and generally does not require collateral. The Company assesses credit risk and the amount of accounts receivable the Company will ultimately collect for product, biopharmaceutical and collaboration revenue based on collection history, current developments and credit worthiness of the customer. The estimate of credit losses is not material at March 31, 2021.

Through March 31, 2021, most of the Company’s revenue has been derived from the sale of Afirma. To date, Afirma has been delivered primarily to physicians in the United States. The Company’s third-party payers and other customers in excess of 10% of total revenue and their related revenue as a percentage of total revenue were as follows:


	Three Months Ended March 31,
		2021		2020
Medicare		27	%	25	%
UnitedHealthcare		11	%	11	%
		38	%	36	%

The Company’s third-party payers and other customers in excess of 10% of accounts receivable and their related accounts receivable balance as a percentage of total accounts receivable were as follows at the following dates:


	March 31, 2021		December 31, 2020
Medicare	21	%	13	%
UnitedHealthcare	10	%	12	%

Restricted Cash

The Company had deposits of $749,000 and $603,000 included in long-term assets as of March 31, 2021 and December 31, 2020, restricted from withdrawal and held by banks in the form of collateral for irrevocable standby letters of credit held as security for the Company's leases.

Revenue Recognition and Cost of Revenue

Revenue Recognition

Testing Revenue

The Company recognizes testing revenue in accordance with the provisions of ASC 606, Revenue from Contracts with Customers, or ASC 606. Most of the Company’s revenue is generated from the provision of testing services. These services are completed upon the delivery of test results to the prescribing physician, at which time the Company bills for the services. The Company recognizes revenue related to billings based on estimates of the amount that will ultimately be realized. In determining the amount to accrue for a delivered test, the Company considers factors such as payment history, payer coverage, whether there is a reimbursement contract between the payer and the Company, payment as a percentage of agreed upon rate (if applicable), amount paid per test and any current developments or changes that could impact reimbursement. These estimates require significant judgment by management. Actual results could differ from those estimates and assumptions.

During 2021, the Company changed its revenue estimates due to actual and anticipated cash collections for tests delivered in prior quarters and recognized additional revenue of $0.2 million for the three months ended March 31, 2021. These

adjustments resulted in decreases in the Company's loss from operations of $0.2 million and no change in basic and diluted net loss per share for the three months ended March 31, 2021. The change in testing revenue estimates for the three months ended March 31, 2020 was less than $0.1 million.

Product Revenue

Product revenue from instruments and diagnostic kits is recognized generally upon shipment or when the instrument is ready for use by the end customer, which is when title of the product has been transferred to the customer. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. Performance obligations are considered satisfied once the Company has transferred control of a product to the customer, meaning the customer has the ability to use and obtain the benefit of the product. The Company recognizes product revenue for satisfied performance obligations only when there are no uncertainties regarding payment terms or transfer of control. Shipping and handling costs incurred for product shipments are included in product revenue. Revenues are presented net of the taxes that are collected from customers and remitted to governmental authorities. There was no revenue from instrument sales for three months ended March 31, 2021 or 2020.

Biopharmaceutical and Collaboration Revenue

From time to time, the Company enters into arrangements for research and development and/or commercialization services. Such arrangements may require the Company to deliver various rights, services and/or samples, including intellectual property rights/licenses, research and development services, and/or commercialization services. The underlying terms of these arrangements generally provide for consideration to the Company in the form of nonrefundable upfront license fees, development and commercial performance milestone payments, royalty payments, and/or profit sharing. Net sales of data or other services to customers are recognized in accordance with ASC 606 and are classified under biopharmaceutical revenue. Certain milestone payments fall under the scope of ASC Topic 808, Collaborative Arrangements, or ASC 808, and are classified under collaboration revenue. Payments received that are not sales or services to a customer or collaboration revenue are recorded as offsets against research and development expense in the Company's consolidated statements of operations and comprehensive loss.

In arrangements involving more than one performance obligation, each required performance obligation is evaluated to determine whether it qualifies as a distinct performance obligation based on whether (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available and (ii) the good or service is separately identifiable from other promises in the contract. The consideration under the arrangement is then allocated to each separate distinct performance obligation based on its respective relative stand-alone selling price. The estimated selling price of each deliverable reflects the Company's best estimate of what the selling price would be if the deliverable was regularly sold by the Company on a stand-alone basis or using an adjusted market assessment approach if selling price on a stand-alone basis is not available.

The consideration allocated to each distinct performance obligation is recognized as revenue when control of the related goods is transferred or services are performed. Consideration associated with at-risk substantive performance milestones is recognized as revenue when it is probable that a significant reversal of the cumulative revenue recognized will not occur. Should there be royalties, the Company utilizes the sales and usage-based royalty exception in arrangements that resulted from the license of intellectual property, recognizing revenues generated from royalties or profit sharing as the underlying sales occur.

As part of the accounting for these arrangements, the Company must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation which determines how the transaction price is allocated among the performance obligations. Generally, the estimation of the stand-alone selling price may include such estimates as independent evidence of market price, forecasted revenues or costs, development timelines, discount rates, and probabilities of technical and regulatory success. The Company evaluates each performance obligation to determine if they can be satisfied at a point in time or over time, and it measures the services delivered to the collaborative partner which are periodically reviewed based on the progress of the related program. The effect of any change made to an estimated input

component and, therefore revenue or expense recognized, would be recorded as a change in estimate. In addition, variable consideration must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.

Up-front Fees: If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from the transaction price allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time.

Milestone Payments: At the inception of each arrangement that includes milestone payments (variable consideration), the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s or the collaborative partner’s control, such as non-operational developmental and regulatory approvals, are generally not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of milestones that are within its or the collaborative partner’s control, such as operational developmental milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenues and earnings in the period of adjustment. Revisions to the Company’s estimate of the transaction price may also result in negative collaboration revenues and earnings in the period of adjustment.

Diagnostic Development Agreement with Johnson & Johnson

The Company has entered into contracts with the Lung Cancer Initiative at Johnson & Johnson to cooperate on the development of clinical data, to provide data generated by the Company and to license the right to use data under the Company's intellectual property rights. Under the terms of the agreements, the Company will provide data in exchange for up to $18.0 million in payments from Johnson & Johnson. The Company is also entitled to additional payments of up to $13.0 million, conditioned upon the achievement of certain milestones.

The agreements are considered to be within the scope of ASC 808 with respect to the milestone payments, as the parties are active participants and exposed to the risks and rewards of the collaborative activity. The delivery of data under the collaborative arrangement, which the Company believes is a distinct service for which Johnson & Johnson meets the definition of a customer is within the scope of ASC 606. Using the concepts of ASC 606, the Company has identified the delivery of data as its only performance obligation. The grant of the license is not distinct from other performance obligations as the customer receives benefit only when other performance obligations are met. The Company further determined that the transaction prices under the arrangements are the $18.0 million in payments which was allocated to the obligation to deliver data. The $13.0 million in future potential payments is considered variable consideration because the Company determined that the potential payments are contingent upon regulatory and commercialization milestones that are uncertain to occur and, as such, were not included in the transaction price, and will be recognized accordingly as each potential payment becomes probable.

For the three months ended March 31, 2021 and March 31, 2020, the Company recognized $0.2 million and $0.3 million, respectively, of revenue under this contract. Accounts receivable from JJSI was $0.1 million at March 31, 2021 and zero at December 31, 2020. There was $1.1 million and $1.0 million of deferred revenue related to this agreement at March 31, 2021 and December 31, 2020, respectively.

Other Collaboration and Service Agreements

The Company has entered into agreements with biopharmaceutical companies and other diagnostic companies to provide them with data, development services and the right to develop tests on the nCounter Analysis System. For three months ended March 31, 2021 and 2020 the Company recognized biopharmaceutical revenue of $0.4 million and $0.4 million, respectively, for development services. There was $0.1 million and zero of deferred revenue related to these agreements at March 31, 2021 and December 31, 2020, respectively. Accounts receivable from these contracts totaled $0.5 million at March 31, 2021 and $0.4 million at December 31, 2020.

Cost of Testing Revenue

The components of our cost of testing services are laboratory expenses, sample collection expenses, compensation expense, license fees and royalties, depreciation and amortization, other expenses such as equipment and laboratory supplies, and allocations of facility and information technology expenses. Costs associated with performing tests are expensed as the test is processed regardless of whether and when revenue is recognized with respect to that test.

Cost of Product Revenue

Cost of product revenue consists primarily of costs of purchasing instruments and diagnostic kits from third-party contract manufacturers, installation, service and packaging and delivery costs. In addition, cost of product includes royalty costs for licensed technologies included in the Company’s products and labor expenses. Cost of product revenue for instruments and diagnostic kits is recognized in the period the related revenue is recognized. Shipping and handling costs incurred for product shipments are included in cost of product in the condensed consolidated statements of operations and comprehensive loss.

Cost of Biopharmaceutical Revenue

Cost of biopharmaceutical revenue consists of costs of performing activities under arrangements that require the Company to perform research and development services on behalf of a customer pursuant to a biopharmaceutical service agreement.

Recent Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update, or ASU, 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. This ASU removes the following exceptions: (1) exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items; (2) exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; (3) exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and (4) exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments in this ASU also improve consistency and simplify other areas of Topic 740 by clarifying and amending existing guidance. The revised guidance will be applied prospectively and became effective for the Company beginning January 1, 2021 and the adoption of ASU 2019-12 did not have a material impact on our condensed consolidated financial statements.

- Definition

Disclosure of accounting policy for revenue from contract with customer.

+ References

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-Name Accounting Standards Codification
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130563-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/exampleRef
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-Name Accounting Standards Codification
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-Paragraph 4
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-Publisher FASB
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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-Topic 606
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
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-Section 50
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+ Details

Business Combination - Fair Values of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Business Acquisition [Line Items]
Goodwill	$ 474,838	$ 2,725
Decipher Biosciences
Business Acquisition [Line Items]
Cash and cash equivalents	19,782
Accounts receivable	5,765
Supplies inventory	1,641
Prepaids and other current assets	778
Property and equipment, net	1,737
Operating lease assets	7,601
Finite-lived intangible assets	94,000
Indefinite-lived intangible assets	7,300
Restricted cash	146
Other assets	829
Total identifiable assets acquired	139,579
Accounts payable	(2,351)
Accrued liabilities	(4,322)
Operating lease obligations (current)	(1,241)
Operating lease obligations, net of current portion	(4,540)
Deferred tax liability	(4,544)
Net identifiable assets acquired	122,581
Goodwill	472,113
Total purchase price	$ 594,694

Debt

3 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Debt

Loan and Security Agreement

On November 3, 2017, the Company entered into a loan and security agreement, or Loan and Security Agreement, with Silicon Valley Bank. The Loan and Security Agreement allows the Company to borrow up to $35.0 million, with a $25.0 million advance term loan, or Term Loan Advance, and a revolving line of credit of up to $10.0 million, or Revolving Line of Credit. The Term Loan Advance was advanced upon the closing of the Loan and Security Agreement and was used to pay the outstanding balance of the Company’s existing long-term debt, which was canceled at that date. The Company had not drawn on the Revolving Line of Credit as of March 31, 2021. Borrowings under the Loan and Security Agreement mature on October 1, 2022. Amounts may be borrowed and repaid under the Revolving Line of Credit up until the earliest of full repayment or maturity of the Loan and Security Agreement, termination of the Loan and Security Agreement, or October 1, 2022.

The Term Loan Advance bears interest at a variable rate equal to (i) the thirty-day U.S. London Interbank Offer Rate, or LIBOR, plus (ii) 4.20%, with a minimum rate of 5.43% per annum. Principal amounts outstanding under the Revolving Line of Credit bear interest at a variable rate equal to (i) LIBOR plus (ii) 3.50%, with a minimum rate of 4.70% per annum.

The Company may prepay the outstanding principal amount under the Term Loan Advance plus accrued and unpaid interest and, if the Term Loan Advance is repaid in full, a prepayment premium of $250,000. In 2019 and 2020, the Company prepaid $24.9 million and $0.1 million, respectively, of the principal amount of the Term Loan Advance. These prepayments did not trigger any prepayment premium because they were partial, not full, repayments of the principal amount.

In addition, a final payment on the Term Loan Advance in the amount of $1.2 million is due upon the earlier of the maturity date of the Term Loan Advance or its payment in full. The Loan and Security Agreement contains customary representations, warranties, and events of default, as well as affirmative and negative covenants. As of March 31, 2021, the Company was in compliance with the loan covenants. The Company’s obligations under the Loan and Security Agreement are secured by substantially all of its assets (excluding intellectual property), subject to certain customary exceptions.

The debt obligation for borrowings made under the Loan and Security Agreement was as follows (in thousands of dollars):


	March 31, 2021		December 31, 2020
Debt principal	$	—	$	—
End-of-term debt obligation	863		810
Total debt obligation	$	863	$	810

As of March 31, 2021, the principal balance outstanding was one dollar. Future principal and end-of-term debt obligation payments under the Loan and Security Agreement are $1.2 million and due in 2022. As of March 31, 2021 and December 31, 2020, the accrued interest payable under the Loan and Security Agreement was immaterial.

The end-of-term debt obligation accretes over the term of the Loan and Security Agreement until maturity and is included in interest expense in the Company's condensed consolidated statements of operations and comprehensive loss.

Balance Sheet Components - Schedule of Goodwill (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($)
Goodwill [Roll Forward]
Goodwill at beginning of period	$ 2,725
Goodwill Acquired - Decipher Biosciences	472,113
Goodwill at end of period	$ 474,838

Business Combination

3 Months Ended

Mar. 31, 2021

Business Combinations [Abstract]

Business Combination

Decipher Biosciences

On March 12, 2021, the Company acquired 100% of the equity interests of Decipher Biosciences, a privately-held company developing diagnostic tests in urologic cancers, for approximately $594.7 million, comprised of approximately $550.5 million in the form of upfront cash consideration and the remainder in cash payable post-acquisition of which $43.8 million was paid prior to March 31, 2021. The Company incurred approximately $10.0 million of transaction costs related to the acquisition of Decipher Biosciences which were recorded as general and administrative expense during the three months ending March 31, 2021.

In connection with the acquisition, certain of Decipher Biosciences' equity awards that were outstanding and unvested prior to the acquisition became fully vested per the terms of the merger agreement. The acceleration of vesting required the Company to allocate the fair value of the historical Decipher Biosciences’ employee stock awards attributable to pre-combination service to the purchase price and the remaining amount was considered the Company's nonrecurring post-combination expense. In March 2021, the Company recognized nonrecurring post-combination expense related to the acceleration and cash settlement of unvested historical Decipher Biosciences’ employee stock awards of $25.1 million, all of which was recorded as general and administrative expense during the quarter ended March 31, 2021.

The Company included the financial results of Decipher Biosciences in its consolidated financial statements from the acquisition date, which contributed $3.8 million and $0.8 million of revenue and net income, respectively, during the three months ended March 31, 2021.

The following table summarizes the purchase price and nonrecurring post-compensation expense recorded as a part of the acquisition (in thousands):


	Purchase Price		Nonrecurring Post-Combination Compensation Expense
Upfront cash consideration	$	550,515	$	270
Liabilities incurred	44,179		24,809
Total	$	594,694	$	25,079

Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. While the Company believes that its estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill. The following table summarizes the fair values of

assets acquired and liabilities assumed through the Company's acquisition of Decipher Biosciences at the date of acquisition (in thousands):


Cash and cash equivalents	$	19,782
Accounts receivable	5,765
Supplies inventory	1,641
Prepaids and other current assets	778
Property and equipment, net	1,737
Operating lease assets	7,601
Finite-lived intangible assets	94,000
Indefinite-lived intangible assets	7,300
Restricted cash	146
Other assets	829
Total identifiable assets acquired	139,579
Accounts payable	(2,351)
Accrued liabilities	(4,322)
Operating lease obligations (current)	(1,241)
Operating lease obligations, net of current portion	(4,540)
Deferred tax liability	(4,544)
Net identifiable assets acquired	122,581
Goodwill	472,113
Total purchase price	$	594,694

Based on the guidance provided in ASC 805, the Company accounted for the acquisition of Decipher Biosciences as a business combination in which the Company determined that Decipher Biosciences was a business which combines inputs and processes to create outputs, and substantially all of the fair value of gross assets acquired was not concentrated in a single identifiable asset or group of similar identifiable assets.

The Company's purchase price allocation for the acquisition is preliminary and subject to revision as additional information about the fair value of the assets and liabilities becomes available. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions and may be subject to change as additional information is received. Primary areas that are not yet finalized are related to accounts receivable, an operating lease intangible asset, and goodwill. Additional information that existed as of the closing date but not known at the time of this filing may become known to the Company during the remainder of the measurement period, a period not to exceed 12 months from the closing date.

The intangible assets acquired are two in-process research and development, or IPR&D, assets (Metastatic Hormone Sensitive Cancer and Castrate Resistant Cancer), developed technology, and trade names. Additionally, the Company identified certain off-market leases and an intangible asset of $1.8 million is included in operating lease assets which will be amortized over the remaining lease term.

The estimated fair value of the IPR&D is determined using the multi-period excess earnings method which calculates the present value of the estimated revenues and net cash flows derived from the IPR&D once the technologies are developed. The IPR&D is not amortized until it becomes commercially viable and placed in service. At the time when the intangible assets are placed in service the Company will determine a useful life.

The fair value of the finite-lived intangible assets was estimated as follows: (i) the developed technology of $90.0 million was based on a multi-period excess earnings method, and (ii) the trade names of $4.0 million was based on the relief from royalty method. The estimated useful life for the developed technology is 10 years, and the estimated useful life for the trade names is five years. The amortization expense related to finite-lived intangible assets is recorded within the intangible asset amortization financial statement line item.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The acquisition resulted in the recognition of $472.1 million of goodwill which the Company believes consists primarily of expanded market and product opportunities, including new areas of genomic testing, as well as the potential expansion of the Company's product offerings in international markets. Furthermore, the acquisition of Decipher Biosciences gives the Company a presence in seven of the ten most common cancers impacting patients in the United States, which in turn enhances the Company’s overall prominence in the genomic testing arena. Goodwill created as a result of the acquisition is not deductible for tax purposes. The acquisition advances the Company's objective to improve the lives of patients through innovations in genomic technology tailored for diagnostic, prognostic, and treatment decisions related to urologic cancers.

We recorded an income tax benefit primarily due to net deferred tax liabilities assumed in connection with the acquisition, which provided a future source of income to support the realization of our deferred tax assets and resulted in a release of $3.5 million in the Company's valuation allowance.

Supplemental Pro Forma Information (unaudited)

The unaudited pro forma financial information in the table below summarizes the combined results of operations for Veracyte and Decipher as though the companies had been combined as of January 1, 2020. The pro forma amounts have been adjusted for:

•day 1 expense related to the accelerated vesting of unvested legacy Decipher equity awards,

•transaction expenses incurred by Decipher and us,

•lease expense resulting from the fair value adjustments to the operating lease obligation and operating lease asset,

•amortization expense resulting from the acquired intangible assets,

•the elimination of historical interest expense incurred by Decipher on its debt and debt-like items, and

•income tax benefits resulting from the deferred tax liabilities acquired.


	Three Months Ended March 31,
	2021		2020
Total revenues	$	48,680	$	38,997
Net Income (loss)	$	1,680	$	(59,913)

Related Party Transactions

Members of Veracyte's board of directors, Dr. Tina S. Nova, Ph.D. and Dr. Robert S. Epstein, M.D., M.S., served on the board of directors of Decipher Biosciences prior to the acquisition of Decipher Biosciences, with Dr. Nova additionally serving as President and Chief Executive Officer of Decipher Biosciences. Pursuant to Veracyte's related party transactions policy, Dr. Nova and Dr. Epstein recused themselves from all discussions of its board of directors related to the acquisition, and the acquisition was approved by each of the non-interested members of the board of directors. In connection with the acquisition, certain Decipher Biosciences equity awards held by Dr. Nova and Dr. Epstein were fully-accelerated and certain incentive bonus payments were made to Dr. Nova pursuant to a management incentive plan established by the Decipher Biosciences board of directors, resulting in payments of approximately $26.5 million and $1.4 million to each of them, respectively. Dr. Nova resigned from Veracyte’s board of directors and now serves as Veracyte's General Manager, Thyroid and Urologic Cancers. Dr. Epstein continues to serve on Veracyte’s board of directors.

Balance Sheet Components - Schedule of Future Amortization Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Balance Sheet Related Disclosures [Abstract]
Intangible asset amortization	$ 1,801	$ 1,275
2021 remainder of year	11,129
2022	14,837
2023	14,837
2024	14,797
2025	14,351
Thereafter	82,172
Total	$ 152,123		$ 59,924

Business Combination - Schedule of Purchase Price and Nonrecurring Expenses (Details) - Decipher Biosciences - USD ($) $ in Thousands		1 Months Ended	3 Months Ended
	Mar. 12, 2021	Mar. 31, 2021	Mar. 31, 2021
Statement [Line Items]
Upfront cash consideration		$ 43,800	$ 550,515
Liabilities incurred			44,179
Total	$ 594,700		594,694
Acquisition-related Costs
Statement [Line Items]
Upfront cash consideration			270
Liabilities incurred			24,809
Total			$ 25,079

Organization, Description of Business and Summary of Significant Accounting Policies - Schedule of Third-party Payers And Other Customers (Details) - Customer concentration risk	3 Months Ended		12 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Revenue
Accounts, Notes, Loans and Financing Receivable [Line Items]
Concentration risk	38.00%	36.00%
Revenue \| Medicare
Accounts, Notes, Loans and Financing Receivable [Line Items]
Concentration risk	27.00%	25.00%
Revenue \| UnitedHealthcare
Accounts, Notes, Loans and Financing Receivable [Line Items]
Concentration risk	11.00%	11.00%
Accounts receivable \| Medicare
Accounts, Notes, Loans and Financing Receivable [Line Items]
Concentration risk	21.00%		13.00%
Accounts receivable \| UnitedHealthcare
Accounts, Notes, Loans and Financing Receivable [Line Items]
Concentration risk	10.00%		12.00%

Balance Sheet Components

3 Months Ended

Mar. 31, 2021

Balance Sheet Related Disclosures [Abstract]

Balance Sheet Components

Goodwill

The changes in the carrying amounts of goodwill were as follows (in thousands of dollars):


	Amounts
Balance as of December 31, 2020	$	2,725
Goodwill Acquired - Decipher Biosciences	472,113
Balance as of March 31, 2021	$	474,838

Intangible Assets, Net

Intangible assets include finite-lived product technology, customer relationships, licenses and trade names and indefinite-lived in-process research and development. Intangible assets consisted of the following (in thousands of dollars):


	March 31, 2021						December 31, 2020						Weighted Average Amortization Period (Years)
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Percepta product technology	$	16,000	$	(6,400)	$	9,600	$	16,000	$	(6,133)	$	9,867	15
Prosigna product technology	4,120		(366)		3,754		4,120		(298)		3,822		15
Prosigna customer relationships	2,430		(648)		1,782		2,430		(526)		1,904		5
nCounter Dx license	46,880		(4,167)		42,713		46,880		(3,386)		43,494		15
LymphMark product technology	990		(189)		801		990		(153)		837		7
Decipher product technology	90,000		(484)		89,516		—		—		—		10
Decipher trade names	4,000		(43)		3,957		—		—		—		5
Total finite-lived intangibles	164,420		(12,297)		152,123		70,420		(10,496)		59,924		11.6
In-process research and development	7,300		—		7,300		—		—		—
Total intangible assets	$	171,720	$	(12,297)	$	159,423	$	70,420	$	(10,496)	$	59,924

Amortization of the finite-lived intangible assets is recognized on a straight-line basis. Amortization expense of $1.8 million and $1.3 million was recognized for the three months ended March 31, 2021 and 2020, respectively.

The estimated future aggregate amortization expense as of March 31, 2021 is as follows (in thousands of dollars):


Year Ending December 31,	Amounts
2021 remainder of year	$	11,129
2022	14,837
2023	14,837
2024	14,797
2025	14,351
Thereafter	82,172
Total	$	152,123

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands of dollars):


	March 31, 2021		December 31, 2020
Accrued compensation expenses	$	10,214	$	9,201
Accrued other	6,040		2,504
Total accrued liabilities	$	16,254	$	11,705

Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurement Inputs and Valuation Techniques

As of March 31, 2021 and December 31, 2020, the Company calculated the estimated fair value of the milestones using the following significant unobservable inputs:


	Value or Range (Weighted-Average)
Unobservable input	March 31, 2021	December 31, 2020
Discount rate	6.2	6.9
Probability of achievement	70% - 100% (86%)	70% - 100% (86%)

Fair Value Measurements - Fair Value Measurement Input (Details)	Mar. 31, 2021	Dec. 31, 2020
Discount rate
Measurement input	6.2	6.9
Probability of achievement \| Minimum
Measurement input	0.70	0.70
Probability of achievement \| Maximum
Measurement input	1	1
Probability of achievement \| Weighted Average
Measurement input	0.86	0.86

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 324,062	$ 349,364
Accounts receivable	27,877	18,461
Supplies	6,308	4,657
Prepaid expenses and other current assets	3,845	3,197
Total current assets	362,092	375,679
Property and equipment, net	10,562	8,990
Right-of-use assets - operating lease	15,186	7,843
Intangible assets, net	159,423	59,924
Goodwill	474,838	2,725
Restricted cash	749	603
Other assets	2,286	1,399
Total assets	1,025,136	457,163
Current liabilities:
Accounts payable	7,137	3,116
Accrued liabilities	16,254	11,705
Current portion of deferred revenue	454	371
Current portion of acquisition related contingent consideration	5,986	0
Current portion of operating lease liability	2,878	1,589
Total current liabilities	32,709	16,781
Long-term debt	863	810
Deferred revenue, net of current portion	747	829
Deferred tax liability	750	0
Acquisition-related contingent consideration, net of current portion	1,800	7,594
Operating lease liability, net of current portion	14,036	9,917
Total liabilities	50,905	35,931
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized, 0 shares issued and outstanding as of March 31, 2021 and December 31, 2020	0	0
Common stock, $0.001 par value; 125,000,000 shares authorized, 67,236,162 and 58,200,526 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	67	58
Additional paid-in capital	1,297,626	702,768
Accumulated deficit	(323,462)	(281,594)
Total stockholders’ equity	974,231	421,232
Total liabilities and stockholders’ equity	$ 1,025,136	$ 457,163

Commitments and Contingencies - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Operating Leases
Weighted average discount rate	6.70%
Facilities rent expense	$ 600	$ 500
Cash paid for amounts in lease liability	$ 600	$ 600
Headquarters and laboratory facilities, South San Francisco, San Diego, and Austin
Operating Leases
Weighted average remaining lease term	5 years 2 months 12 days
Security deposit	$ 749		$ 603
Decipher Biosciences
Operating Leases
Operating lease assets	7,601
Decipher Biosciences \| Off-Market Favorable Lease
Operating Leases
Operating lease assets	$ 1,800

Business Combination - Narrative (Details) - USD ($) $ in Thousands		1 Months Ended		3 Months Ended
	Mar. 12, 2021	Mar. 31, 2021	Mar. 31, 2021	Mar. 31, 2021	Dec. 31, 2020
Business Acquisition [Line Items]
Useful life of finite-lived intangible assets				11 years 7 months 6 days
Goodwill		$ 474,838	$ 474,838	$ 474,838	$ 2,725
Release of valuation allowance				$ 3,500
Decipher product technology
Business Acquisition [Line Items]
Useful life of finite-lived intangible assets				10 years
Decipher trade names
Business Acquisition [Line Items]
Useful life of finite-lived intangible assets				5 years
Decipher Biosciences
Business Acquisition [Line Items]
Equity interest acquired	100.00%
Cash paid in acquisition	$ 594,700			$ 594,694
Considerations to be paid in acquisition		550,500
Upfront cash considerations paid in acquisition		43,800		550,515
Transaction costs			10,000
Revenues associated with acquisition				3,800
Net income associated with acquisition				800
Operating lease assets		7,601	7,601	7,601
Fair value of finite-lived intangible assets		94,000	94,000	94,000
Goodwill		472,113	472,113	472,113
Decipher Biosciences \| Dr. Tina S. Nova, Ph.D.
Business Acquisition [Line Items]
Payments to board of directors members			26,500
Decipher Biosciences \| Dr. Robert S. Epstein, M.D., M.S.
Business Acquisition [Line Items]
Payments to board of directors members			1,400
Decipher Biosciences \| Decipher product technology
Business Acquisition [Line Items]
Fair value of finite-lived intangible assets		90,000	90,000	$ 90,000
Useful life of finite-lived intangible assets				10 years
Decipher Biosciences \| Decipher trade names
Business Acquisition [Line Items]
Fair value of finite-lived intangible assets		4,000	4,000	$ 4,000
Useful life of finite-lived intangible assets				5 years
Decipher Biosciences \| Off-Market Favorable Lease
Business Acquisition [Line Items]
Operating lease assets		$ 1,800	$ 1,800	$ 1,800
Decipher Biosciences \| Acquisition-related Costs
Business Acquisition [Line Items]
Cash paid in acquisition				25,079
Upfront cash considerations paid in acquisition				$ 270

Balance Sheet Components (Tables)

3 Months Ended

Mar. 31, 2021

Balance Sheet Related Disclosures [Abstract]

Schedule of Goodwill

The changes in the carrying amounts of goodwill were as follows (in thousands of dollars):


	Amounts
Balance as of December 31, 2020	$	2,725
Goodwill Acquired - Decipher Biosciences	472,113
Balance as of March 31, 2021	$	474,838

Schedule of Intangible Assets

Intangible assets consisted of the following (in thousands of dollars):


	March 31, 2021						December 31, 2020						Weighted Average Amortization Period (Years)
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Percepta product technology	$	16,000	$	(6,400)	$	9,600	$	16,000	$	(6,133)	$	9,867	15
Prosigna product technology	4,120		(366)		3,754		4,120		(298)		3,822		15
Prosigna customer relationships	2,430		(648)		1,782		2,430		(526)		1,904		5
nCounter Dx license	46,880		(4,167)		42,713		46,880		(3,386)		43,494		15
LymphMark product technology	990		(189)		801		990		(153)		837		7
Decipher product technology	90,000		(484)		89,516		—		—		—		10
Decipher trade names	4,000		(43)		3,957		—		—		—		5
Total finite-lived intangibles	164,420		(12,297)		152,123		70,420		(10,496)		59,924		11.6
In-process research and development	7,300		—		7,300		—		—		—
Total intangible assets	$	171,720	$	(12,297)	$	159,423	$	70,420	$	(10,496)	$	59,924

Schedule of Estimated Future Aggregate Amortization Expense

The estimated future aggregate amortization expense as of March 31, 2021 is as follows (in thousands of dollars):


Year Ending December 31,	Amounts
2021 remainder of year	$	11,129
2022	14,837
2023	14,837
2024	14,797
2025	14,351
Thereafter	82,172
Total	$	152,123

Schedule of Accrued Liabilities

Accrued liabilities consisted of the following (in thousands of dollars):


	March 31, 2021		December 31, 2020
Accrued compensation expenses	$	10,214	$	9,201
Accrued other	6,040		2,504
Total accrued liabilities	$	16,254	$	11,705

Condensed Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit
Shares outstanding at beginning of period (in shares) at Dec. 31, 2019		49,625
Stockholders' equity at beginning of period at Dec. 31, 2019	$ 239,455	$ 50	$ 486,090	$ (246,685)
Issuance of common stock on exercise of stock options and vesting of restricted stock units (in shares)		314
Issuance of common stock on exercise of stock options and vesting of restricted stock units	981		981
Issuance of common stock under employee stock purchase plan (ESPP) (in shares)		61
Issuance of common stock under employee stock purchase plan (ESPP)	1,101		1,101
Tax portion of vested restricted stock units	(2,304)		(2,304)
Stock-based compensation expense (employee)	2,551		2,551
Stock-based compensation expense (ESPP)	354		354
Net loss and comprehensive loss	(11,716)			(11,716)
Shares outstanding at end of period (in shares) at Mar. 31, 2020		50,000
Stockholders' equity at end of period at Mar. 31, 2020	230,422	$ 50	488,773	(258,401)
Shares outstanding at beginning of period (in shares) at Dec. 31, 2020		58,201
Stockholders' equity at beginning of period at Dec. 31, 2020	421,232	$ 58	702,768	(281,594)
Sale of common stock in a public offering, net of offering costs (in shares)		8,547
Sale of common stock in a public offering, net of offering costs of $38,677	593,821	$ 9	593,812
Issuance of common stock on exercise of stock options and vesting of restricted stock units (in shares)		439
Issuance of common stock on exercise of stock options and vesting of restricted stock units	2,806		2,806
Issuance of common stock under employee stock purchase plan (ESPP) (in shares)		49
Issuance of common stock under employee stock purchase plan (ESPP)	1,159		1,159
Tax portion of vested restricted stock units	(6,774)		(6,774)
Stock-based compensation expense (employee)	3,657		3,657
Stock-based compensation expense (non-employee)	16		16
Stock-based compensation expense (ESPP)	182		182
Net loss and comprehensive loss	(41,868)			(41,868)
Shares outstanding at end of period (in shares) at Mar. 31, 2021		67,236
Stockholders' equity at end of period at Mar. 31, 2021	$ 974,231	$ 67	$ 1,297,626	$ (323,462)

Debt - Schedule of Loan and Security Agreement (Details) - Line of credit - Silicon Valley Bank - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Debt principal	$ 0	$ 0
End-of-term debt obligation	863	810
Total debt obligation	$ 863	$ 810

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Preferred stock, par value (in USD per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in USD per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	125,000,000	125,000,000
Common stock, shares issued (in shares)	67,236,162	58,200,526
Common stock, shares outstanding (in shares)	67,236,162	58,200,526

Cover Page - shares	3 Months Ended
Cover Page - shares	Mar. 31, 2021	May 07, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2021
Document Transition Report	false
Entity File Number	001-36156
Entity Registrant Name	VERACYTE, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-5455398
Entity Address, Address Line One	6000 Shoreline Court
Entity Address, Address Line Two	Suite 300
Entity Address, City or Town	South San Francisco
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94080
City Area Code	(650)
Local Phone Number	243-6300
Title of 12(b) Security	Common Stock, par value, $0.001 per share
Trading Symbol	VCYT
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		67,248,259
Entity Central Index Key	0001384101
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2021

Commitments and Contingencies

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Operating Leases

The Company leases office and laboratory facilities in South San Francisco and San Diego, California and Austin Texas under various non-cancelable lease agreements. The lease terms extend to January 2029 and contain extension of lease term and expansion options. The leases have a weighted average remaining lease term of 5.2 years as of March 31, 2021. The Company had deposits of $749,000 and 603,000 included in long-term assets as of March 31, 2021 and December 31, 2020, respectively, restricted from withdrawal and held by banks in the form of collateral for irrevocable standby letters of credit held as security for the leases.

The Company determined its operating lease liabilities using payments through their current expiration dates and a weighted average discount rate of 6.7% based on the rate that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments in a similar economic environment. Operating lease liabilities along with the associated right-of-use assets are disclosed in the accompanying condensed consolidated balance sheets. After the adoption of ASC 842, Leases, the Company classified its deferred rent for tenant improvements with its operating lease right-of-use assets on the consolidated balance sheets. In connection with the acquisition of Decipher Biosciences, the Company identified certain off-market rate leases and has preliminarily estimated an intangible asset of $1.8 million which is included in operating lease assets and will be amortized over the remaining lease term. See Note 4 for more information on the acquisition of Decipher Biosciences.

Future minimum lease payments under non-cancelable operating leases as of March 31, 2021 are as follows (in thousands of dollars):


Year Ending December 31,	Amounts
Remainder of 2021	$	2,760
2022	3,770
2023	3,880
2024	3,991
2025	4,103
Thereafter	1,661
Total future minimum lease payments	20,165
Less: amount representing interest	3,251
Present value of future lease payments	16,914
Less: short-term lease liabilities	2,878
Long-term lease liabilities	$	14,036

The Company recognizes operating lease expense on a straight-line basis over the non-cancelable lease period. Operating lease expense was $0.6 million and $0.5 million for the three months ended March 31, 2021 and 2020, respectively. Cash paid for amounts included in the measurement of lease liabilities was $0.6 million for each of the three months ended March 31, 2021 and 2020.

Contingencies

From time to time, the Company may be involved in legal proceedings arising in the ordinary course of business. The Company assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in its condensed consolidated financial statements. An estimated loss contingency is accrued in the financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company believes there is no legal proceeding pending that could have, either individually or in the aggregate, a material adverse effect on the Company’s condensed consolidated financial statements.

Balance Sheet Components - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 164,420	$ 70,420
Accumulated Amortization	(12,297)	(10,496)
Total	$ 152,123	59,924
Weighted Average Amortization Period (Years)	11 years 7 months 6 days
Indefinite-lived intangible assets	$ 7,300
Total intangible assets	171,720	70,420
Intangible assets, net	159,423	59,924
Percepta product technology
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	16,000	16,000
Accumulated Amortization	(6,400)	(6,133)
Total	$ 9,600	9,867
Weighted Average Amortization Period (Years)	15 years
Prosigna product technology
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 4,120	4,120
Accumulated Amortization	(366)	(298)
Total	$ 3,754	3,822
Weighted Average Amortization Period (Years)	15 years
Prosigna customer relationships
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 2,430	2,430
Accumulated Amortization	(648)	(526)
Total	$ 1,782	1,904
Weighted Average Amortization Period (Years)	5 years
nCounter Dx license
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 46,880	46,880
Accumulated Amortization	(4,167)	(3,386)
Total	$ 42,713	43,494
Weighted Average Amortization Period (Years)	15 years
LymphMark product technology
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 990	990
Accumulated Amortization	(189)	(153)
Total	$ 801	837
Weighted Average Amortization Period (Years)	7 years
Decipher product technology
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 90,000	0
Accumulated Amortization	(484)	0
Total	$ 89,516	0
Weighted Average Amortization Period (Years)	10 years
Decipher trade names
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 4,000	0
Accumulated Amortization	(43)	0
Total	$ 3,957	$ 0
Weighted Average Amortization Period (Years)	5 years

Income Taxes	3 Months Ended
Income Taxes	Mar. 31, 2021
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes The Company recorded an income tax benefit of $3.8 million for the three months ended March 31, 2021 and no income tax provision or benefit for the three months ended March 31, 2020. The income tax benefit for 2021 was primarily impacted by a discrete tax adjustment related to the release of certain valuation allowances on the Company's deferred tax assets upon recording of the deferred tax liabilities for the acquisition of Decipher Biosciences while 2020 had a full valuation allowance on all net deferred tax assets. On March 27, 2020 and on December 27, 2020, respectively, the Coronavirus Aid, Relief, and Economic Security Act and the Consolidated Appropriations Act were enacted in response to the COVID-19 pandemic. The Company does not expect the provisions of such legislation to have a significant impact on the effective tax rate, the results of operations or the financial position of the Company.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

Organization, Description of Business and Summary of Significant Accounting Policies - Narrative (Details) $ / shares in Units, $ in Thousands			3 Months Ended
	Feb. 09, 2021 USD ($) $ / shares shares	Dec. 28, 2018 USD ($)	Mar. 31, 2021 USD ($) segment	Mar. 31, 2020 USD ($)	Dec. 31, 2020 USD ($)
Class of Stock [Line Items]
Number of operating segments \| segment			1
Number of shares issued in transaction (in shares) \| shares	8,547,297
Proceeds from issuance of common stock	$ 593,800
Payments of stock issuance costs	$ 38,700
Long term deposit			$ 749		$ 603
Revenue			36,703	$ 31,122
Income (loss) from operations			(45,415)	(12,200)
Current portion of deferred revenue			454		371
Accounts receivable			27,877		18,461
Biopharmaceutical Company \| Collaborative Arrangement
Class of Stock [Line Items]
Current portion of deferred revenue			100		0
Accounts receivable			500		400
ASU 2014-09
Class of Stock [Line Items]
Income (loss) from operations			200
Service \| Biopharmaceutical Company \| Collaborative Arrangement
Class of Stock [Line Items]
Contract with customer, revenue recognized			400	400
Testing
Class of Stock [Line Items]
Revenue			33,078	26,991
Testing \| ASU 2014-09
Class of Stock [Line Items]
Revenue			200	100
Johnson and Johnson Services, Inc. \| Collaborative Arrangement
Class of Stock [Line Items]
Collaborative agreement contingent receivable amount		$ 13,000
Contract with customer, revenue recognized			200	$ 300
Accounts receivable, before allowance for credit loss			100		0
Current portion of deferred revenue			$ 1,100		$ 1,000
Johnson and Johnson Services, Inc. \| Provision of Data \| Collaborative Arrangement
Class of Stock [Line Items]
Contract agreement receivable for services		$ 18,000
Common Stock
Class of Stock [Line Items]
Shares issued, price per share (in USD per share) \| $ / shares	$ 74.00
Over-Allotment Option
Class of Stock [Line Items]
Number of shares issued in transaction (in shares) \| shares	1,114,864

Net Loss Per Common Share (Tables)

3 Months Ended

Mar. 31, 2021

Earnings Per Share [Abstract]

Schedule of Outstanding Common Stock Equivalents Excluded From Diluted Net Loss Per Common Share

The following outstanding common stock equivalents have been excluded from diluted net loss per common share because their inclusion would be anti-dilutive:


	Three Months Ended March 31,
		2021	2020
Shares of common stock subject to outstanding options		3,944,887	4,760,128
Employee stock purchase plan		15,720	19,857
Restricted stock units		886,584	936,524
Total common stock equivalents		4,847,191	5,716,509

Stockholders' Equity (Tables)

3 Months Ended

Mar. 31, 2021

Equity [Abstract]

Schedule of reserved shares of common stock for issuance

The Company had reserved shares of common stock for issuance as follows:


	March 31, 2021	December 31, 2020
Stock options and restricted stock units issued and outstanding	4,965,510	4,867,303
Stock options and restricted stock units available for grant under stock option plans	4,851,806	3,061,589
Common stock available for the Employee Stock Purchase Plan	1,522,653	1,571,395
Total	11,339,969	9,500,287

Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Revenue:
Total Revenue	$ 36,703	$ 31,122
Operating expenses:
Research and development	5,336	4,407
Selling and marketing	16,296	17,584
General and administrative	46,282	7,813
Intangible asset amortization	1,801	1,275
Total operating expenses	82,118	43,322
Loss from operations	(45,415)	(12,200)
Interest expense	(53)	(55)
Other (loss) income, net	(195)	539
Loss before income tax benefit	(45,663)	(11,716)
Income tax benefit	(3,795)	0
Comprehensive loss	(41,868)	(11,716)
Net loss and comprehensive loss	$ (41,868)	$ (11,716)
Net loss per common share, basic and diluted (in USD per share)	$ (0.66)	$ (0.24)
Shares used to compute net loss per common share, basic and diluted (in shares)	63,331,702	49,792,631
Testing
Revenue:
Total Revenue	$ 33,078	$ 26,991
Operating expenses:
Cost of revenue	10,832	10,568
Product
Revenue:
Total Revenue	3,059	3,409
Operating expenses:
Cost of revenue	1,490	1,559
Biopharmaceutical
Revenue:
Total Revenue	566	722
Operating expenses:
Cost of revenue	$ 81	$ 116

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Operating activities
Net loss	$ (41,868)	$ (11,716)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,550	1,972
Stock-based compensation	3,855	2,905
Benefit from income taxes	(3,795)	0
Interest on end-of-term debt obligation	53	54
Write-down of excess supplies	0	1,088
Noncash lease expense	258	232
Revaluation of acquisition-related contingent consideration	192	(484)
Effect of foreign currency on operations	82	0
Changes in operating assets and liabilities:
Accounts receivable	(3,748)	238
Supplies	(10)	(376)
Prepaid expenses and other current assets	132	(818)
Other assets	(58)	135
Operating lease liability	(373)	(331)
Accounts payable	1,931	5,450
Accrued liabilities and deferred revenue	238	(3,650)
Net cash used in operating activities	(40,561)	(5,301)
Investing activities
Acquisition of business, net of cash acquired	(574,411)	0
Purchases of property and equipment	(1,196)	(665)
Net cash used in investing activities	(575,607)	(665)
Financing activities
Proceeds from the issuance of common stock in a public offering, net of issuance costs	593,821	0
Payment of taxes on vested restricted stock units	(6,774)	(2,304)
Proceeds from the exercise of common stock options and employee stock purchases	3,965	2,085
Net cash provided by (used in) financing activities	591,012	(219)
Net decrease in cash, cash equivalents and restricted cash	(25,156)	(6,185)
Cash, cash equivalents and restricted cash at beginning of period	349,967	159,920
Cash, cash equivalents and restricted cash at end of period	324,811	153,735
Supplementary cash flow information:
Purchases of property and equipment included in accounts payable and accrued liability	357	113
Interest paid on debt	0	1
Cash and cash equivalents	324,062
Restricted cash	749
Total cash, cash equivalents and restricted cash	$ 324,811	$ 153,735

Debt - Loan and Security Agreement (Details) - Silicon Valley Bank - USD ($)		12 Months Ended
	Nov. 03, 2017	Dec. 31, 2020	Dec. 31, 2019	Mar. 31, 2021
Line of credit
Line of Credit Facility [Line Items]
Line of credit facility, maximum borrowing capacity	$ 35,000,000.0
Periodic payment terms, balloon payment to be paid				$ 1,200,000
Long-term debt balance outstanding		$ 810,000		863,000
Line of credit \| Secured Debt
Line of Credit Facility [Line Items]
Line of credit facility, maximum borrowing capacity	25,000,000.0
Periodic payment terms, balloon payment to be paid	1,200,000
Line of credit \| Revolving Credit Facility
Line of Credit Facility [Line Items]
Line of credit facility, maximum borrowing capacity	$ 10,000,000.0
Repayments of long-term debt		$ 100,000	$ 24,900,000
Term Loan Advance
Line of Credit Facility [Line Items]
Long-term debt balance outstanding				$ 1
London Interbank Offered Rate (LIBOR) \| Line of credit \| Secured Debt
Line of Credit Facility [Line Items]
Basis spread on variable rate	4.20%
London Interbank Offered Rate (LIBOR) \| Line of credit \| Revolving Credit Facility
Line of Credit Facility [Line Items]
Basis spread on variable rate	3.50%
Minimum \| London Interbank Offered Rate (LIBOR) \| Line of credit \| Secured Debt
Line of Credit Facility [Line Items]
Interest rate, stated percentage	5.43%
Minimum \| London Interbank Offered Rate (LIBOR) \| Line of credit \| Revolving Credit Facility
Line of Credit Facility [Line Items]
Interest rate, stated percentage	4.70%
Debt prepayment tranche three \| London Interbank Offered Rate (LIBOR) \| Line of credit \| Revolving Credit Facility
Line of Credit Facility [Line Items]
Prepayment premium	$ 250,000

Fair Value Measurements

3 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

The Company records its financial assets and liabilities at fair value. The carrying amounts of certain financial instruments of the Company, including cash and cash equivalents, prepaid expenses and other current assets, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities. The accounting guidance for fair value

provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. 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 accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

•Level I: Inputs which include quoted prices in active markets for identical assets and liabilities;

•Level II: Inputs other than Level I that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices 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 assets or liabilities; and

•Level III: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The fair value of the Company’s financial assets includes money market funds and deposits for leases of the Company's facilities. Money market funds, included in cash and cash equivalents in the accompanying condensed consolidated balance sheets, were $319.2 million and $346.8 million as of March 31, 2021 and December 31, 2020, respectively, and are Level I assets as described above. The deposits for the leases, included in restricted cash in the accompanying condensed consolidated balance sheets, was $749,000 and $603,000 as of March 31, 2021 and December 31, 2020, respectively, and is a Level I asset as described above.

On December 3, 2019, the Company acquired from NanoString the exclusive global diagnostics license to the nCounter Analysis System, the Prosigna breast cancer prognostic gene signature assay, and the LymphMark lymphoma subtyping assay. Pursuant to the terms of the agreement, Veracyte paid NanoString $40.0 million in cash and $10.0 million in Veracyte common stock, and may pay up to an additional $10.0 million in cash, contingent upon the commercial launch of Veracyte diagnostic tests for use on the platform. This contingency was valued at $6.1 million as of the acquisition date and is remeasured to fair value at each reporting date until the contingent consideration is settled. As of March 31, 2021 and December 31, 2020, this contingency was remeasured to $7.8 million and $7.6 million, respectively, with the corresponding changes included in general and administrative expense in the Company's condensed consolidated statements of operations and comprehensive loss. The fair value of the contingent consideration includes inputs that are not observable in the market and thus represent a Level III financial liability. The estimation of the fair value of the contingent consideration is based on the present value of the expected payments calculated by assessing the likelihood of when the related milestones would be achieved, discounted using the Company's estimated borrowing rate. These estimates form the basis for making judgments about the carrying value of the contingent consideration that are not readily apparent from other sources. Changes to the forecasts for the achievement of the milestones and the estimates of the borrowing rate can significantly affect the estimated fair value of the contingent consideration. As of March 31, 2021, the achievement of two of the milestones is forecasted to occur within the next 12 months. As a result, $6.0 million of the contingent consideration is included in short term liabilities and $1.8 million is included in long term liabilities in the condensed consolidated balance sheets. As of March 31, 2021 and December 31, 2020, the Company calculated the estimated fair value of the milestones using the following significant unobservable inputs:


	Value or Range (Weighted-Average)
Unobservable input	March 31, 2021	December 31, 2020
Discount rate	6.2	6.9
Probability of achievement	70% - 100% (86%)	70% - 100% (86%)

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Organization, Description of Business and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Description of Business and Summary of Significant Accounting Policies

Veracyte, Inc., or Veracyte, or the Company, is a global genomic diagnostics company that improves patient care by answering important clinical questions to inform diagnosis and treatment decisions throughout the patient journey. The company’s growing menu of tests leverage advances in genomic science and machine learning technology to change care for patients, enabling them to avoid risky, costly procedures and accelerate time to more appropriate treatment. In addition to making its genomic tests available in the United States through its central laboratories, the company believes its exclusive access to the nCounter Analysis System, a best-in-class diagnostics platform, positions the company to deliver its tests to patients worldwide through laboratories and hospitals that can perform them locally. With its acquisition of Decipher Biosciences, Inc. in March 2021, the company now has a presence in seven of the ten most common cancers impacting patients in the United States.

Veracyte was incorporated in the state of Delaware on August 15, 2006 as Calderome, Inc. Calderome operated as an incubator until early 2008. On March 4, 2008, the Company changed its name to Veracyte, Inc. The Company’s operations are based in South San Francisco, California and Austin, Texas. On March 12, 2021, the Company acquired Decipher Biosciences, Inc., or Decipher Biosciences, with operations based in San Diego, California.

Veracyte utilizes a foundational approach for all of its genomic tests, or classifiers, which begins with determining what clinical questions need to be answered in order to change what happens next for the patient. The Company then deploys rigorous science and technology to develop and validate its tests, and then collects extensive clinical utility data to demonstrate the tests’ ability to change care as intended. This approach has enabled the Company to obtain Medicare reimbursement for its genomic classifiers in each of its indications. The Company positions its tests to integrate seamlessly into the way physicians currently evaluate patients in order to facilitate adoption.

Veracyte develops its genomic tests using advanced scientific methods, such as RNA whole-transcriptome analysis and machine learning, and then optimizes the assays and classifiers for the platform on which the test will be performed. Historically, the Company has utilized RNA whole-transcriptome analysis to perform its tests in its Clinical Laboratory Improvement Amendments of 1988, or CLIA, certified laboratories in South San Francisco and San Diego. With Veracyte’s exclusive global access to the nCounter Analysis System, the Company is positioned to deliver its tests to patients worldwide through laboratories and hospitals that can perform the tests locally.

Veracyte currently offers genomic tests in lung cancer; breast cancer; prostate cancer; thyroid cancer; interstitial lung diseases, or ILD, including idiopathic pulmonary fibrosis, or IPF; and bladder cancer. Additionally, the Company’s LymphMark lymphoma subtyping test and renal cancer test are in development.

Lung Cancer - Percepta Genomic Sequencing Classifier. The Percepta classifier improves lung cancer diagnosis when diagnostic bronchoscopy results are inconclusive. This second-generation test was developed using the Company's RNA whole-transcriptome sequencing and machine learning platform and was commercially introduced in June 2019. The Percepta classifier identifies patients with lung nodules who are at low risk of cancer and may avoid further, invasive procedures as well as patients at high risk of cancer so they may obtain faster diagnosis and treatment. The test is built upon foundational "field of injury" science - through which genomic changes associated with lung cancer in current and former smokers can be identified with a simple brushing of a patient's airway - without the need to sample the often hard-to-reach nodule directly.

Breast Cancer - Prosigna Breast Cancer Prognostic Gene Signature Assay. The Prosigna test, acquired in December 2019 through the Company's strategic transaction with NanoString Technologies, Inc., or NanoString, uses advanced genomic technology to inform next steps for patients with early-stage breast cancer, based on the genomic make-up of their disease. The test uses a set of 50 genes known as the PAM50 gene signature and can provide a breast cancer patient and physician with a prognostic score that indicates the probability of cancer recurrence over ten years. Physicians use Prosigna to help guide therapeutic decisions so that patients receive a therapeutic intervention, such as chemotherapy, only if clinically warranted. Patient test results outside of the United States include intrinsic breast cancer subtypes to complement the risk-of-recurrence score.

Prostate Cancer – Decipher Prostate Biopsy and RP Genomic Classifiers. The Decipher Prostate cancer tests, developed through RNA whole-transcriptome analysis, predict a patient’s risk of progressing to metastatic disease, which helps physicians determine an appropriate treatment plan for patients. The Decipher Prostate Biopsy test is used with patients following a cancer diagnosis to inform whether the patient is a candidate for active surveillance, if they need monotherapy, or if they may benefit from multi-modality or intensified therapy, and the Decipher Prostate RP test is used following surgery to guide decision-making regarding treatment timing following radical prostatectomy and whether patients undergoing salvage radiotherapy may benefit from the addition of hormone therapy.

Thyroid Cancer - Afirma Genomic Sequencing Classifier and Xpression Atlas. The Company's Afirma offerings comprise the Afirma GSC and Xpression Atlas, which help guide next steps for patients with potentially cancerous thyroid nodules. The offerings are intended to provide physicians with clinically actionable results from a single fine needle aspiration, or FNA biopsy. The Afirma GSC was developed with RNA whole-transcriptome sequencing and machine learning, and is used to identify patients with benign thyroid nodules among those with indeterminate cytopathology results in order to rule out unnecessary thyroid surgery.

The Afirma Xpression Atlas complements the Afirma GSC by providing genomic alteration content from the same FNA samples used in Afirma GSC testing to help physicians decide with greater confidence on the surgical or therapeutic pathway for their patients. The Company commercially launched the Afirma Xpression Atlas in 2018 and in April 2020 introduced an expanded version of the test, which includes significantly more genomic content.

ILD/IPF - Envisia Genomic Classifier. The Envisia classifier improves diagnosis of ILDs, including IPF, without the need for surgery. The test identifies the genomic pattern of usual interstitial pneumonia, or UIP, a hallmark of IPF, with high accuracy on patient samples that are obtained through transbronchial biopsy, a nonsurgical procedure that is commonly used in lung evaluation.

Bladder Cancer – Decipher Bladder Genomic Classifier. The Decipher Bladder test helps determine which patients with muscle-invasive bladder cancer may benefit from neoadjuvant chemotherapy prior to radical cystectomy. Veracyte believes its test will be the only genomic subtyping tool available to physicians in the United States treating patients with locally advanced bladder cancer. The Company plans to expand commercialization of the Decipher Bladder test upon receiving final Medicare coverage for the test, which is expected in mid-2021.

The Company performs its genomic tests for thyroid cancer, lung cancer and IPF in its CLIA-certified laboratory in South San Francisco, California and its genomic tests for prostate and bladder cancer in its College of American Pathologists, or CAP, accredited and CLIA-certified laboratory in San Diego, California. In December 2019, the Company acquired from NanoString, Inc. the exclusive global diagnostics license to the nCounter Analysis System and the Prosigna breast cancer prognostic gene signature assay, which is commercially available, along with the LymphMark lymphoma subtyping assay, which is in development. Both tests are designed for use on the nCounter Analysis System. The Prosigna test kits and associated products are sold to laboratories and hospitals in global markets including the United States.

Veracyte’s whole-transcriptome approach, including RNA sequencing, also provides multiple opportunities for partnerships with biopharmaceutical and diagnostic testing companies. In developing its products, the Company has built or gained access to unique biorepositories, proprietary technology and bioinformatics that it believes are important to the development of new targeted therapies, determining clinical trial eligibility and guiding treatment selection. Additionally, the Company believes that the nCounter Analysis System provides an attractive distributed platform for other diagnostic companies seeking to make their genomic tests available to global markets.

Basis of Presentation

Use of Estimates

Issuance of Common Stock in a Public Offering

Cash and Cash Equivalents

The Company considers demand deposits in a bank, money market funds and highly liquid investments with an original maturity of 90 days or less to be cash equivalents.

Concentrations of Credit Risk and Other Risks and Uncertainties


	Three Months Ended March 31,
		2021		2020
Medicare		27	%	25	%
UnitedHealthcare		11	%	11	%
		38	%	36	%


	March 31, 2021		December 31, 2020
Medicare	21	%	13	%
UnitedHealthcare	10	%	12	%

Restricted Cash

Revenue Recognition

Testing Revenue

Product Revenue

Biopharmaceutical and Collaboration Revenue

Diagnostic Development Agreement with Johnson & Johnson

Other Collaboration and Service Agreements

Cost of Testing Revenue

Cost of Product Revenue

Cost of Biopharmaceutical Revenue

Recent Accounting Pronouncements

Stockholders' Equity

3 Months Ended

Mar. 31, 2021

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Common Stock

The Company had reserved shares of common stock for issuance as follows:


	March 31, 2021	December 31, 2020
Stock options and restricted stock units issued and outstanding	4,965,510	4,867,303
Stock options and restricted stock units available for grant under stock option plans	4,851,806	3,061,589
Common stock available for the Employee Stock Purchase Plan	1,522,653	1,571,395
Total	11,339,969	9,500,287

Net Loss Per Common Share

3 Months Ended

Mar. 31, 2021

Earnings Per Share [Abstract]

Net Loss Per Common Share

Basic net loss per common share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method. The following outstanding common stock equivalents have been excluded from diluted net loss per common share because their inclusion would be anti-dilutive:


	Three Months Ended March 31,
		2021	2020
Shares of common stock subject to outstanding options		3,944,887	4,760,128
Employee stock purchase plan		15,720	19,857
Restricted stock units		886,584	936,524
Total common stock equivalents		4,847,191	5,716,509

Commitments and Contingencies (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Future minimum lease payments under non-cancelable operating leases
Remainder of 2021	$ 2,760
2022	3,770
2023	3,880
2024	3,991
2025	4,103
Thereafter	1,661
Total future minimum lease payments	20,165
Less: amount representing interest	3,251
Present value of future lease payments	16,914
Less: short-term lease liabilities	2,878	$ 1,589
Long-term lease liabilities	$ 14,036	$ 9,917

Condensed Consolidated Statements of Stockholders' Equity (Parenthetical) $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($)
Statement of Stockholders' Equity [Abstract]
Issuance costs	$ 38,677

Net Loss Per Common Share (Details) - shares	3 Months Ended
Net Loss Per Common Share (Details) - shares	Mar. 31, 2021	Mar. 31, 2020
Outstanding shares of common stock equivalents that have been excluded from diluted net loss per common share
Shares of common stock subject to outstanding options (in shares)	4,847,191	5,716,509
Shares of common stock subject to outstanding options
Outstanding shares of common stock equivalents that have been excluded from diluted net loss per common share
Shares of common stock subject to outstanding options (in shares)	3,944,887	4,760,128
Employee stock purchase plan
Outstanding shares of common stock equivalents that have been excluded from diluted net loss per common share
Shares of common stock subject to outstanding options (in shares)	15,720	19,857
Restricted stock units
Outstanding shares of common stock equivalents that have been excluded from diluted net loss per common share
Shares of common stock subject to outstanding options (in shares)	886,584	936,524

Debt (Tables)

3 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Schedule of net debt obligations

The debt obligation for borrowings made under the Loan and Security Agreement was as follows (in thousands of dollars):


	March 31, 2021		December 31, 2020
Debt principal	$	—	$	—
End-of-term debt obligation	863		810
Total debt obligation	$	863	$	810

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Mar. 31, 2020
Income Tax Disclosure [Abstract]
Income tax benefit	$ (3,795)	$ 0

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

Organization , Description of Business and Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of the Company's Third-party Payers

The Company’s third-party payers and other customers in excess of 10% of total revenue and their related revenue as a percentage of total revenue were as follows:


	Three Months Ended March 31,
		2021		2020
Medicare		27	%	25	%
UnitedHealthcare		11	%	11	%
		38	%	36	%


	March 31, 2021		December 31, 2020
Medicare	21	%	13	%
UnitedHealthcare	10	%	12	%

Balance Sheet Components - Schedule of Accrued Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Balance Sheet Related Disclosures [Abstract]
Accrued compensation expenses	$ 10,214	$ 9,201
Accrued other	6,040	2,504
Total accrued liabilities	$ 16,254	$ 11,705

Business Combination - Supplemental Pro Forma Information (Details) - Decipher Biosciences - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items]
Total revenues	$ 48,680	$ 38,997
Net Income (loss)	$ 1,680	$ (59,913)