UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022 OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File: Number 001-35980

NANOSTRING TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-0094687
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

530 Fairview Avenue North

Seattle, Washington 98109

(Address of principal executive offices)

(206) 378-6266

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	NSTG	The Nasdaq Stock Market LLC
		(The NASDAQ Global Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	ý	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act).   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ý

As of November 1, 2022 there were 46,646,806 shares of registrant’s common stock outstanding.

NANOSTRING TECHNOLOGIES, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED September 30, 2022

TABLE OF CONTENTS

		PAGE
PART I - FINANCIAL INFORMATION
ITEM 1:	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets at September 30, 2022 and December 31, 2021	3
	Condensed Consolidated Statements of Operations — Three and nine months ended September 30, 2022 and 2021	4
	Condensed Consolidated Statements of Comprehensive Loss — Three and nine months ended September 30, 2022 and 2021	5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity — Three and nine months ended September 30, 2022 and 2021	6
	Condensed Consolidated Statements of Cash Flows — Nine months ended September 30, 2022 and 2021	8
	Notes to Condensed Consolidated Financial Statements	9
ITEM 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
ITEM 3:	Quantitative and Qualitative Disclosures about Market Risk	25
ITEM 4:	Controls and Procedures	26
PART II - OTHER INFORMATION
ITEM 1:	Legal Proceedings	27
ITEM 1A:	Risk Factors	28
ITEM 6:	Exhibits	51
SIGNATURES		52

1

Risk Factor Summary

Our business is subject to numerous risks and uncertainties, including those highlighted in the section of this report titled “Risk Factors.” The following is a summary of the principal risks we face:

•We have incurred losses since we were formed and expect to incur losses in the future. We cannot be certain that we will achieve or sustain profitability.

•Our financial results may vary significantly from quarter to quarter which may adversely affect our stock price.

•If we do not achieve, sustain or successfully manage our anticipated growth, our business and growth prospects will be harmed.

•Our future success is dependent upon our ability to expand our customer base and introduce new applications and products.

•New market opportunities may not develop as quickly as we expect, limiting our ability to successfully market and sell our products.

•We face risks related to health epidemics and other outbreaks, such as COVID-19, which could significantly disrupt our operations and could have a material adverse impact on us.

•Our business depends on levels of research and development spending by academic and governmental research institutions and biopharmaceutical companies, a reduction in which could limit demand for our products and adversely affect our business and operating results.

•Our sales cycle is lengthy and variable, which makes it difficult for us to forecast revenue and other operating results.

•Our reliance on distributors for sales of our products outside of the United States could limit or prevent us from selling our products and impact our revenue.

•Our future capital needs are uncertain and we may need to raise additional funds in the future.

•We may not be able to develop new products, enhance the capabilities of our systems to keep pace with rapidly changing technology and customer requirements or successfully manage the transition to new product offerings, any of which could have a material adverse effect on our business and operating results.

•We are dependent on third-party manufacturers and single source suppliers for some of the components and materials used in our products, and the loss of any of these suppliers, or difficulties or delays in securing these components or materials, could harm our business.

•We may experience manufacturing problems or delays that could limit our growth or adversely affect our operating results.

•We expect to generate a substantial portion of our product and service revenue internationally and are subject to various risks relating to our international activities, which could adversely affect our operating results.

•Undetected errors or defects in our products could harm our reputation, decrease market acceptance of our products or expose us to product liability claims.

•If we experience a significant disruption in our information technology systems or breaches of data security, our business could be adversely affected.

•New product development involves a lengthy and complex process, and we may be unable to commercialize on a timely basis, or at all, any of the products we develop.

•The life sciences research market is highly competitive. If we fail to compete effectively, our business and operating results will suffer.

•We are subject to ongoing and extensive regulatory requirements, and our failure to comply with these requirements could substantially harm our business.

•Healthcare policy changes, including legislation reforming the United States healthcare system, may have a material adverse effect on our financial condition and results of operations.

•If we are unable to protect our intellectual property effectively, our business would be harmed.

•Involvement in lawsuits to protect or enforce our patents and proprietary rights, to determine the scope, coverage and validity of others’ proprietary rights, or to defend against third-party claims of intellectual property infringement, could be time-intensive and costly and may adversely impact our business or stock price.

•The price of our common stock may be volatile, and you could lose all or part of your investment.

•Macroeconomic conditions, inflationary pressures, the political climate and the ongoing impact of the COVID-19 pandemic could adversely affect our operating results and growth prospects.

•Complying with the laws and regulations affecting public companies increases our costs and the demands on management and could harm our operating results.

2

PART 1. FINANCIAL INFORMATION 

Item 1.    Condensed Consolidated Financial Statements

NanoString Technologies, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value)

	September 30, 2022		December 31, 2021
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	117,069	$	107,068
Short-term investments	113,384		241,821
Accounts receivable, net	27,273		40,130
Inventory, net	45,761		31,486
Prepaid expenses and other	15,221		7,115
Total current assets	318,708		427,620
Property and equipment, net	40,374		27,043
Operating lease right-of-use assets	18,586		19,226
Other assets	5,932		5,592
Total assets	$	383,600	$	479,481
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	16,829	$	14,283
Accrued liabilities	4,898		6,765
Accrued compensation and other employee benefits	14,733		17,466
Customer deposits	1,071		1,278
Deferred revenue, current portion	8,026		7,474
Operating lease liabilities, current portion	5,382		4,889
Total current liabilities	50,939		52,155
Deferred revenue, net of current portion	3,757		3,527
Long-term debt, net	226,250		225,144
Operating lease liabilities, net of current portion	19,726		21,693
Total liabilities	300,672		302,519
Commitment and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 15,000 shares authorized; none issued	—		—
Common stock, $0.0001 par value, 150,000 shares authorized; 46,635 and 45,729 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	5		5
Additional paid-in capital	849,406		827,028
Accumulated other comprehensive loss	(1,301)		(318)
Accumulated deficit	(765,182)		(649,753)
Total stockholders’ equity	82,928		176,962
Total liabilities and stockholders’ equity	$	383,600	$	479,481

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

NanoString Technologies, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue:
Product	$	24,605	$	32,523	$	78,561	$	90,028
Service	4,861		4,401		13,744		11,922
Total product and service revenue	29,466		36,924		92,305		101,950
Collaboration	75		226		535		680
Total revenue	29,541		37,150		92,840		102,630
Costs and expenses:
Cost of product revenue	10,159		13,286		33,592		37,090
Cost of service revenue	3,564		3,868		10,761		11,168
Total cost of product and service revenue	13,723		17,154		44,353		48,258
Research and development	16,992		19,117		51,755		51,342
Selling, general and administrative	33,767		30,253		106,234		83,907
Total costs and expenses	64,482		66,524		202,342		183,507
Loss from operations	(34,941)		(29,374)		(109,502)		(80,877)
Other income (expense):
Interest income	774		153		1,331		502
Interest expense	(1,887)		(1,876)		(5,650)		(5,614)
Other income (expense), net	(579)		(223)		(1,286)		79
Total other expense, net	(1,692)		(1,946)		(5,605)		(5,033)
Net loss before provision for income tax	(36,633)		(31,320)		(115,107)		(85,910)
Provision for income tax	(57)		59		(322)		(83)
Net loss	$	(36,690)	$	(31,261)	$	(115,429)	$	(85,993)
Net loss per share — basic and diluted	$	(0.79)	$	(0.69)	$	(2.49)	$	(1.90)
Weighted average shares used in computing basic and diluted net loss per share	46,529		45,558		46,320		45,170

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

NanoString Technologies, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net loss	$	(36,690)	$	(31,261)	$	(115,429)	$	(85,993)
Other comprehensive loss:
Change in unrealized gain (loss) on available-for-sale debt securities	149		38		(983)		(107)
Comprehensive loss	$	(36,541)	$	(31,223)	$	(116,412)	$	(86,100)

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

NanoString Technologies, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(in thousands)

(Unaudited)

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at January 1, 2021	44,441	$	4	$	848,891	$	83	$	(542,030)	$	306,948
Cumulative effect of a change in accounting policy(1)	—	—		(58,543)		—		7,531		(51,012)
Common stock issued for stock options and restricted stock units	726	1		2,249		—		—		2,250
Common stock issued for employee stock purchase plan	38	—		1,192		—		—		1,192
Tax withholdings related to net share settlements of restricted stock units	—	—		(2,585)		—		—		(2,585)
Stock-based compensation	—	—		7,385		—		—		7,385
Net loss	—	—		—		—		(27,712)		(27,712)
Other comprehensive loss	—	—		—		(74)		—		(74)
Balance at March 31, 2021	45,205	$	5	$	798,589	$	9	$	(562,211)	$	236,392
Common stock issued for stock options and restricted stock units	297	—		2,255		—		—		2,255
Stock-based compensation	—	—		8,171		—		—		8,171
Net loss	—	—		—		—		(27,020)		(27,020)
Other Comprehensive loss	—	—		—		(71)		—		(71)
Balance at June 30, 2021	45,502	$	5	$	809,015	$	(62)	$	(589,231)	$	219,727
Common stock issued for stock options and restricted stock units	111	—		1,043		—		—		1,043
Common stock issued for employee stock purchase plan	26	—		1,236		—		—		1,236
Stock-based compensation	—	—		8,336		—		—		8,336
Net loss	—	—		—		—		(31,261)		(31,261)
Other comprehensive income	—	—		—		38		—		38
Balance at September 30, 2021	45,639	$	5	$	819,630	$	(24)	$	(620,492)	$	199,119
(1) Effective January 1, 2021, the Company adopted Accounting Standard Update No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40). See Note 2. Basis of Presentation and Summary of Significant Accounting Policies and Note 9. Long-term Debt, Net for more information.

6

NanoString Technologies, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(in thousands)

(Unaudited)

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at January 1, 2022	45,729	$	5	$	827,028	$	(318)	$	(649,753)	$	176,962
Common stock issued for stock options and restricted stock units	624	—		1,035		—		—		1,035
Common stock issued for employee stock purchase plan	49	—		1,502		—		—		1,502
Tax withholdings related to net share settlements of restricted stock units	—	—		(1,505)		—		—		(1,505)
Stock-based compensation	—	—		7,785		—		—		7,785
Net loss	—	—		—		—		(39,500)		(39,500)
Other comprehensive loss	—	—		—		(974)		—		(974)
Balance at March 31, 2022	46,402	$	5	$	835,845	$	(1,292)	$	(689,253)	$	145,305
Common stock issued for stock options and restricted stock units	76	—		264		—		—		264
Stock-based compensation	—	—		6,493		—		—		6,493
Net loss	—	—		—		—		(39,239)		(39,239)
Other comprehensive loss	—	—		—		(158)		—		(158)
Balance at June 30, 2022	46,478	$	5	$	842,602	$	(1,450)	$	(728,492)	$	112,665
Common stock issued for stock options and restricted stock units	56	—		117		—		—		117
Common stock issued for employee stock purchase plan	101	—		1,168		—		—		1,168
Stock-based compensation	—	—		5,519		—		—		5,519
Net loss	—	—		—		—		(36,690)		(36,690)
Other comprehensive income	—	—		—		149		—		149
Balance at September 30, 2022	46,635	$	5	$	849,406	$	(1,301)	$	(765,182)	$	82,928

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

NanoString Technologies, Inc.

Condensed Consolidated Statements of Cash Flows (in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2022		2021
Operating activities
Net loss	$	(115,429)	$	(85,993)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	19,644		23,689
Depreciation and amortization	5,151		4,347
Amortization of deferred financing costs	1,105		1,069
Amortization of premium (accretion of discount) on short-term investments, net	1,481		(2,436)
Non-cash operating lease cost	3,012		2,553
Allowance for inventory obsolescence and accounts receivable credit loss	2,318		2,258
Changes in operating assets and liabilities:
Accounts receivable	11,698		(4,739)
Inventory	(16,109)		(10,348)
Prepaid expenses and other assets	(8,057)		(8,265)
Accounts payable	2,793		6,975
Accrued liabilities	(3,016)		(1,161)
Accrued compensation and other employee benefits	(2,348)		958
Customer deposits	(207)		(304)
Deferred revenue and other liabilities	1,040		1,540
Operating lease liabilities	(3,601)		(3,173)
Net cash used in operating activities	(100,525)		(73,030)
Investing activities
Purchases of property and equipment	(11,497)		(4,704)
Purchase of internal-use software assets	(5,343)		(651)
Purchase of intellectual property	(750)		—
Proceeds from sale of short-term investments	7,700		4,000
Proceeds from maturity of short-term investments	167,774		24,764
Purchases of short-term investments	(49,500)		(260,239)
Net cash provided by (used in) investing activities	108,384		(236,830)
Financing activities
Tax withholdings related to net share settlements of restricted stock units	(1,504)		(2,585)
Proceeds from issuance of common stock for employee stock purchase plan	2,669		2,427
Proceeds from exercise of stock options	1,417		5,547
Repayment of finance lease obligations	(257)		(170)
Net cash provided by financing activities	2,325		5,219
Effect of exchange rate changes on cash and cash equivalents	(183)		(40)
Net increase (decrease) in cash and cash equivalents	10,001		(304,681)
Cash and cash equivalents
Beginning of period	107,068		411,848
End of period	$	117,069	$	107,167
Supplemental disclosures
Operating lease right-of-use assets obtained in exchange for lease obligations	$	2,126	$	—
Finance lease right-of-use assets obtained in exchange for lease obligations	—		448

The accompanying notes are an integral part of these condensed consolidated financial statements.

8

NanoString Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited) 

1. Description of the Business

NanoString Technologies, Inc. (the “Company”) was incorporated in the state of Delaware on June 20, 2003. The Company’s headquarters is located in Seattle, Washington. NanoString develops, manufactures and markets technologies that unlock scientifically valuable and clinically actionable information from minute amounts of biological material, primarily for life science researchers in the fields of genomics and proteomics. The Company’s mission is to provide a portfolio of solutions that allow our customers to map the universe of biology, enabling scientific exploration that may lead to new therapies that can improve the human condition. The Company’s proprietary chemistries enable the direct detection, identification, and quantification of individual target molecules in biological samples by attaching unique molecular reporters to each target molecule of interest. The Company currently markets and sells two platforms based on its proprietary technologies, its nCounter Analysis System, and its GeoMx Digital Spatial Profiler, or GeoMx DSP. The Company has one additional product platform under development, its CosMx Spatial Molecular Imager, or CosMx SMI, that is expected to become commercially available by the end of 2022. The Company’s platforms are comprised of instruments and related consumables and services. The Company is also developing the AtoMx Spatial Informatics Platform, or AtoMx SIP, a cloud-based informatics portal for use with GeoMx DSP and CosMx SMI that is expected to become commercially available by the end of 2022. The Company sells its platforms primarily to academic, government, biopharmaceutical, and clinical laboratory customers.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements reflect the accounts of the Company and its wholly-owned subsidiaries. The unaudited condensed consolidated balance sheet at December 31, 2021 has been derived from the audited consolidated financial statements at that date but does not include all information and disclosures required by generally accepted accounting principles in the United States of America (“U.S. GAAP”) for annual financial statements. These unaudited condensed consolidated financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and U.S. GAAP for unaudited condensed consolidated financial information. Accordingly, they do not include all information and footnotes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the Company’s financial position and results of its operations as of and for the periods presented.

Unless indicated otherwise, all amounts presented in financial tables are presented in thousands, except for per share and par value amounts.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Given the global economic climate and additional or unforeseen effects from the COVID-19 pandemic, certain estimates are becoming more challenging, and actual results could differ materially from those estimates. The results of the Company’s operations for the three and nine month periods ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year or for any other period.

Revenue Recognition

The Company recognizes revenue when control of the promised goods or services is transferred to its customers, in an amount that reflects the consideration expected to be received in exchange for those products and services. 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 or service to the customer, meaning the customer has the ability to use and obtain the benefit of the product or service. The Company recognizes revenue for satisfied performance obligations only when there are no uncertainties regarding payment terms or transfer of control.

9

The Company generates the majority of its revenue from sales of its proprietary GeoMx DSP and nCounter Analysis systems, and related consumables. Services consist of instrument service contracts for maintenance, repair and other support related to customer owned instruments, and also certain service fees for assay processing and data analysis and reporting.

Leases

The Company determines if an arrangement is a lease at inception of a contract. The Company’s leasing portfolio is comprised of operating leases primarily for general office, manufacturing, and research and development purposes, and financing leases for equipment. Operating and financing lease liabilities and the corresponding right-of-use assets are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Operating lease right-of-use assets are reduced by lease incentives included in the agreement. As the existing leases do not contain an implicit interest rate, the Company estimates its incremental borrowing rate based on information available at commencement date in determining the present value of future payments. The Company includes options to extend the lease in the lease liability and right-of-use asset when it is reasonably certain that the option will be exercised. Operating lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Finance lease assets are amortized within operating expenses on a straight-line basis over the shorter of the estimated useful lives of the assets or, in the instance where title does not transfer at the end of the lease term, the lease term. The interest component of a finance lease is included in interest expense and recognized using the effective interest method over the lease term. For our short-term leases, we recognize lease payments as an expense on a straight-line basis over the lease term.

Capitalized Internal Use Software Costs

The Company capitalizes certain development costs incurred in connection with software development for internal use software platforms. Costs incurred in the preliminary stages of development are expensed as incurred. Once software has reached the development stage, internal and external costs, if direct, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Capitalized internal use software development costs are included in property and equipment and are amortized on a straight-line basis over the estimated useful life and are included in depreciation and amortization within operating expenses in our consolidated statements of operations. Capitalized internal use software development costs were $10.2 million and $4.0 million as of September 30, 2022 and December 31, 2021, respectively.

Capitalized costs associated with the implementation of hosted third-party cloud computing arrangements are recorded as part of current and long-term other assets. Implementation costs are amortized on a straight-line basis over the term of the related hosting arrangement and included within the consolidated statements of operations based on the functional use of the software. Unamortized capitalized software implementation costs were $2.7 million and $3.2 million as of September 30, 2022 and December 31, 2021, respectively. Maintenance and training costs are expensed as incurred.

3. Revenue from Contracts with Customers

The Company operates as a single reportable segment. The Company has one sales force that sells the Company’s nCounter Analysis systems, its GeoMx DSP system, its CosMx SMI system, and the consumables and services related to these platforms.

Disaggregated Revenues

The following table of total revenue is based on the geographic location of end users or distributors who purchase products and services, and of our collaborators. For sales to distributors, their geographic location may be different from the geographic location of the ultimate end customer. For collaboration agreements, revenues are derived from partners located primarily in the United States. Americas consists of the United States, Canada, Mexico, and South America; and Asia Pacific includes Japan, China, South Korea, Singapore, Malaysia, India, and Australia.

10

The following table provides information about disaggregated revenue by major product line and primary geographic market (in thousands):

	Three Months Ended September 30, 2022								Nine Months Ended September 30, 2022
	Americas		Europe and Middle East		Asia Pacific		Total		Americas		Europe and Middle East		Asia Pacific		Total
Product revenue:
Instruments	$	4,835	$	2,171	$	1,017	$	8,023	$	16,343	$	6,132	$	4,189	$	26,664
Consumables	12,044		3,687		851		16,582		37,017		11,778		3,102		51,897
Total product revenue	16,879		5,858		1,868		24,605		53,360		17,910		7,291		78,561
Service revenue	3,362		1,259		240		4,861		9,589		3,486		669		13,744
Total product and service revenue	20,241		7,117		2,108		29,466		62,949		21,396		7,960		92,305
Collaboration revenue	75		—		—		75		535		—		—		535
Total revenues	$	20,316	$	7,117	$	2,108	$	29,541	$	63,484	$	21,396	$	7,960	$	92,840

	Three Months Ended September 30, 2021								Nine Months Ended September 30, 2021
	Americas		Europe and Middle East		Asia Pacific		Total		Americas		Europe and Middle East		Asia Pacific		Total
Product revenue:
Instruments	$	8,514	$	3,827	$	2,154	$	14,495	$	21,650	$	10,230	$	6,176	$	38,056
Consumables	13,120		3,682		1,226		18,028		36,928		11,538		3,506		51,972
Total product revenue	21,634		7,509		3,380		32,523		58,578		21,768		9,682		90,028
Service revenue	2,957		1,149		295		4,401		8,138		3,010		774		11,922
Total product and service revenue	24,591		8,658		3,675		36,924		66,716		24,778		10,456		101,950
Collaboration revenue	226		—		—		226		680		—		—		680
Total revenues	$	24,817	$	8,658	$	3,675	$	37,150	$	67,396	$	24,778	$	10,456	$	102,630

Total revenue in the United States was $19.0 million, $23.9 million, $60.9 million and $65.0 million for the three and nine month periods ended September 30, 2022 and 2021, respectively. The Company’s assets are primarily located in the United States and therefore are not allocated to any specific geographic region.

Contract balances and remaining performance obligations

Contract liabilities are comprised of the current and long-term portions of deferred revenue of $11.4 million and $10.3 million as of September 30, 2022 and December 31, 2021, respectively, and customer deposits of $1.1 million and $1.3 million as of September 30, 2022 and December 31, 2021, respectively, included within the condensed consolidated balance sheets. Total contract liabilities increased by $0.8 million as of September 30, 2022 as a result of additional deferred revenue of $9.6 million associated primarily with new or extended service contracts partially offset by the recognition of previously deferred revenue and customer deposits of $8.8 million for the completion of certain performance obligations during the period. The Company recorded contract assets of $1.0 million and $0.7 million as of September 30, 2022 and December 31, 2021, related to revenues recognized, but not yet invoiced to customers. The Company’s contractual payment terms for its contracts with customers approximates 45 days on average.

As of September 30, 2022, unsatisfied or partially unsatisfied performance obligations related to undelivered products and service contracts were $12.5 million and are expected to be completed over the term of the related contract or as products are delivered.

4. Net Loss Per Share

Net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding. Convertible notes, outstanding options to purchase common stock, restricted stock units and common stock warrants have not been included in the calculation of diluted net loss per share because to do so would be anti-dilutive. Accordingly, the numerator and the denominator used in computing both basic and diluted net loss per share for each period are the same.

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The following shares were excluded from the computation of basic and diluted net loss per share for the periods presented (in thousands):

	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Options to purchase common stock	1,788	2,138	1,866	2,349
Restricted stock units	2,218	1,318	1,777	1,356
Common stock warrants	471	471	471	471

5. Concentration of Risks

Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash and cash equivalents, short-term investments, and accounts receivable. Cash is invested in accordance with the Company’s investment policy, which includes guidelines intended to minimize and diversify credit risk. Most of the Company’s investments are not federally insured. The Company has credit risk related to the collectability of its accounts receivable. The Company performs initial and ongoing evaluations of its customers’ credit history or financial position and generally extends credit on account without collateral. Additionally, the Company evaluates collectability risk over the life of its receivables in order to establish an appropriate reserve for certain receivables that may become uncollectible in future periods. The Company has not experienced significant credit losses to date. During the three and nine months ended September 30, 2022 and 2021, the Company had no customers that individually represented more than 10% of total revenue. The Company had no customers that represented more than 10% of total accounts receivable as of September 30, 2022 or December 31, 2021.

The Company is also subject to supply chain risks related to the outsourcing of the manufacturing and production of its instruments to sole suppliers. Although there are a limited number of manufacturers for instruments of this type, the Company believes that other suppliers could provide similar products on comparable terms. Similarly, the Company sources certain raw materials used in the manufacture of consumables from sole suppliers. The impact of the COVID-19 global pandemic has not had a significant impact on the Company’s ability to source raw materials or its instruments to date. However, a change in or loss of suppliers could cause a delay in manufacturing and a possible loss of sales, which would adversely affect operating results. Should COVID-19 (or a variant thereof) continue to impact the global economy at the same or heightened levels during future periods, or if certain geographies where the Company’s key suppliers or manufacturing facilities are located are more severely impacted than others, this could negatively impact the Company’s ability to manufacture new products, fulfill customer orders, and collect from customers, which could adversely affect future operating results.

6. Short-term Investments

Short-term investments consisted of available-for-sale and equity securities as follows (in thousands):

Type of securities as of September 30, 2022	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Corporate debt securities	$	80,363	$	—	$	(841)	$	79,522
Government-related debt securities	31,039		—		(423)		30,616
Asset-backed securities	3,283		—		(37)		3,246
Total available-for-sale debt securities	$	114,685	$	—	$	(1,301)	$	113,384

Type of securities as of December 31, 2021	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Corporate debt securities	$	177,375	$	3	$	(195)	$	177,183
Government-related debt securities	33,134		2		(97)		33,039
Asset-backed securities	31,631		—		(32)		31,599
Total available-for-sale debt securities	$	242,140	$	5	$	(324)	$	241,821

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The fair values of available-for-sale debt securities by contractual maturity were as follows (in thousands):

	September 30, 2022		December 31, 2021
Maturing in one year or less	$	110,138	$	174,534
Maturing in one to three years	3,246		67,287
Total available-for-sale debt securities	$	113,384	$	241,821

The Company has both the intent and ability to sell its available-for-sale debt securities maturing greater than one year within 12 months from the balance sheet date and, accordingly, has classified these securities as current in the condensed consolidated balance sheets.

The following table summarizes investments that have been in a continuous unrealized loss position as of September 30, 2022 (in thousands).

	Less than 12 months				12 months or greater				Total
	Fair Value		Gross unrealized losses		Fair Value		Gross unrealized losses		Fair Value		Gross unrealized losses
Corporate debt securities	$	44,749	$	(521)	$	14,825	$	(320)	$	59,574	$	(841)
Government-related debt securities	22,636		(391)		7,981		(32)		30,617		(423)
Asset Backed Securities	3,246		(37)		—		—		3,246		(37)
Total	$	70,631	$	(949)	$	22,806	$	(352)	$	93,437	$	(1,301)

The Company invests in securities that are rated investment grade or better. The unrealized losses on available-for-sale debt securities as of September 30, 2022 were caused primarily by interest rate increases.

The Company reviews the individual securities in its portfolio for impairment when events indicate the fair value of the investments may be below the carrying value. The Company reviews the individual securities in its portfolio for indications that unrealized losses are credit related and require an allowance to be recorded at the present value of the future expected cash flows. The Company determined unrealized losses were not for credit losses and therefore did not record an allowance related to its available-for-sale debt investments for the three and nine month periods ended September 30, 2022. The Company did not record any impairment charges related to its available-for-sale debt investments for the three and nine month periods ended September 30, 2022.

7. Fair Value Measurements

The Company establishes the fair value of its assets and liabilities using the price that would be received to sell an asset or paid to transfer a financial liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy is used to measure fair value. The three levels of the fair value hierarchy are as follows:

•Level 1 — Quoted prices in active markets for identical assets and liabilities.

•Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

•Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The recorded amounts of certain financial instruments, including cash, accounts receivable, prepaid expenses and other, accounts payable and accrued liabilities, approximate fair value due to their relatively short-term maturities. The recorded amount of the Company’s long-term debt can be determined based on the estimated or actual bid prices of the Convertible Senior Notes in an over-the-counter market, which are classified as a Level 2 financial instrument.

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The Company’s investments by level within the fair value hierarchy were as follows (in thousands):

	Fair value measurement using:
Type of securities as of September 30, 2022	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market fund	$	109,209	$	—	$	—	$	109,209
Short-term investments:
Corporate debt securities	—		79,522		—		79,522
Government-related debt securities	—		30,616		—		30,616
Asset-backed securities	—		3,246		—		3,246
Total	$	109,209	$	113,384	$	—	$	222,593
	Fair value measurement using:
Type of securities as of December 31, 2021	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market fund	$	98,247	$	—	$	—	$	98,247
Short-term investments:
Corporate debt securities	—		177,183		—		177,183
Government-related debt securities	—		33,039		—		33,039
Asset-backed securities	—		31,599		—		31,599
Total	$	98,247	$	241,821	$	—	$	340,068

In March 2020, the Company issued $230.0 million of Convertible Notes as described in more detail in Note 9. Long-term Debt, Net. As of September 30, 2022, the fair value of the Convertible Notes was $194.9 million.

8. Inventory

Inventory, net of related allowances, consisted of the following as of the date indicated (in thousands):

	September 30, 2022		December 31, 2021
Raw materials	$	7,507	$	5,135
Work in process	15,140		9,916
Finished goods	23,114		16,435
Total inventory, net	$	45,761	$	31,486

9. Long-term Debt, Net

In March 2020, the Company issued $230.0 million in aggregate principal amount of its Convertible Notes in a private offering. The Convertible Notes are governed by an indenture dated March 9, 2020 between the Company and U.S. Bank, National Association, as trustee. The Company received net proceeds from the offering of $222.6 million.

The Convertible Notes bear interest at a rate of 2.625% per year, payable semi-annually in arrears on March 1st and September 1st. The Convertible Notes may bear additional interest under specified circumstances relating to the Company’s failure to comply with its reporting obligations under, or if the Convertible Notes are not freely tradeable as required by, the indenture governing the Convertible Notes. Upon conversion, the Convertible Notes will be convertible into cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election.

The Convertible Notes are general unsecured senior obligations and will mature on March 1, 2025, unless earlier repurchased, redeemed or converted, subject to satisfaction of certain conditions and during the periods described below. The initial conversion rate for the Convertible Notes is 20.9161 shares of common stock, par value $0.0001 per share, per $1,000 principal amount of Convertible Notes (which is equivalent to an initial conversion price of approximately $47.81 per share). The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that may occur prior to the maturity date or if the Company issues a notice of redemption, the Company will increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such corporate event or in connection with such redemption, as the case may be, in certain circumstances.

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The Company incurred approximately $7.4 million of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees directly associated with the issuance. The debt issuance costs are amortized to interest expense using the effective interest method over five years, the contractual term of the Convertible Notes, with an effective interest rate of 3.3%.

The Company monitors the provision of the Convertible Notes that allow for certain conversion rights at each quarterly reporting date in order to determine whether the Convertible Notes are convertible or subject to an event triggering potential redemption during the prescribed measurement periods. As of the date of this report, none of the outstanding convertible notes had been redeemed by the Company. Based on the closing price of our common stock of $12.77 on the last trading day of the quarter, the if-converted values of the Convertible Notes did not exceed the remaining principal balance as of September 30, 2022.

All future principal payments related to the Convertible Notes are due in March 2025. The outstanding balances of the Company’s Convertible Notes and previously outstanding term loan consisted of the following (in thousands):

	September 30, 2022		December 31, 2021
Outstanding principal of Convertible Note	$	230,000	$	230,000
Less: unamortized issuance costs	(3,750)		(4,856)
Long-term debt, net	$	226,250	$	225,144

The following table sets forth total interest expense recognized related to the Convertible Notes (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Contractual interest expense	$	1,509	$	1,509	$	4,528	$	4,528
Amortization of issuance costs	373		361		1,105		1,069
Total interest expense	$	1,882	$	1,870	$	5,633	$	5,597

10. Commitments and Contingencies

Litigation

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

10x Genomics

On May 6, 2021, 10x Genomics, Inc. and Prognosys Biosciences, Inc. (“Prognosys”) filed a complaint, on May 19, 2021, an amended complaint, and on May 4, 2022, a second amended complaint, against the Company in the U.S. District Court for the District of Delaware. The amended complaint alleges that certain of the Company’s products, services and components, including those sold by the Company for use in connection with its GeoMx DSP system (the “Identified GeoMx Products”), infringe seven patents owned by Prognosys: (a) U.S. Patent No. 10,472,669,“Spatially encoded biological assays,” (b) U.S. Patent No. 10,961,566,“Spatially encoded biological assays,” (c) U.S. Patent No. 10,983,113,“Spatially encoded biological assays,” (d) U.S. Patent No. 10,996,219,“Spatially encoded biological assays,” (e) U.S. Patent No. 11,001,878, “Spatially encoded biological assays,” (f) U.S. Patent No. 11,008,607, “Spatially encoded biological assays,” and (g) U.S. Patent No. 11,293,917, “Systems for analyzing target biological molecules via sample imaging and delivery of probes to substrate wells” (the “Asserted Prognosys Patents”). The amended complaint seeks, among other relief, injunctive relief and unspecified damages (including treble damages and attorneys’ fees) in relation to the Company’s making, using, selling, offering to sell, exporting and/or importing in the United States the Identified GeoMx Products, as well as the alleged infringement by others of the Asserted Prognosys Patents through their use of the Identified GeoMx Products. The Company has evaluated the plaintiffs’ claims and does not believe that its activities infringe any patent rights held by the plaintiffs. On November 17, 2021, the Court granted the Company’s motion to dismiss the plaintiffs’ claims of pre-suit indirect infringement and willful infringement with leave to amend the complaint. Discovery is in progress. A trial is scheduled for August 2023. The Company intends to vigorously defend itself in this ongoing litigation. The Company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision in this case.

On February 28, 2022, 10x Genomics, Inc. and President and Fellows of Harvard College (“Harvard”) filed a complaint, and on May 12, 2022, an amended complaint, against the Company in the U.S. District Court for the District of Delaware. The complaint alleges that certain of the Company’s products, services and components, including those sold by the Company for use in connection with its CosMx SMI system (the “Identified CosMx Products”), infringe five patents owned by

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Harvard: (a) U.S. Patent No. 10,227,639, “Compositions and Methods for Analyte Detection,” (b) U.S. Patent No. 11,021,737, “Compositions and Methods for Analyte Detection,” (c) U.S. Patent No. 11,293,051, “Compositions and Methods for Analyte Detection”, (d) U.S. Patent No. 11,293,052, “Compositions and Methods for Analyte Detection,” and (e) U.S. Patent No. 11,293,054, “Compositions and Methods for Analyte Detection” (the “Asserted Harvard Patents”). The complaint seeks, among other relief, injunctive relief and unspecified damages (including attorneys’ fees) in relation to the Company’s making, using, selling, offering to sell, exporting and/or importing in the United States the Identified CosMx Products. The Company has evaluated the plaintiffs’ claims and does not believe that its activities infringe any patent rights held by the plaintiffs. On August 16, 2022, the Company filed an amended answer to the complaint with counterclaims alleging that 10x Genomics’ Visium Spatial Gene Expression system and related products and services infringe the Company’s U.S. Patent No. 11,377,689, “Chemical Compositions and Uses Thereof.” The Company seeks, among other relief, injunctive relief and unspecified damages (including attorneys’ fees) in relation to 10x Genomics’ making, using, selling, offering to sell, exporting and/or importing in the United States the Visium system and related products and services. A trial is scheduled for June 2024. The Company intends to vigorously defend itself in this ongoing litigation. The Company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision in this case.

In May 2022, the Company was notified of a complaint, dated March 4, 2022, naming the Company and its wholly-owned subsidiary, NanoString Technologies Germany GmbH, which 10x Genomics, Inc. filed in the Munich Regional Court I in Germany, alleging that certain of the Company's products and services, including those for use in connection with the Company’s CosMx SMI system, infringe European Patent No. 2794928B1 (“EP 2794928B1”), which is owned by Harvard. The Company has evaluated the claims and does not believe that its activities infringe any patent rights held by the plaintiff. A hearing is scheduled for March 2023 in this proceeding. On July 29, 2022, the Company, through its German subsidiary, filed a nullity action with the German Federal Patent Court in Munich requesting a judgment that EP 2794928B1, as in effect for Germany, be declared invalid and be revoked in its entirety. The Company believes a preliminary opinion in the nullity proceeding will be issued prior to the March 2023 hearing in the infringement proceeding. The Company intends to vigorously defend itself in this litigation. The Company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision in this case.

On October 20, 2022, the Company filed suit against 10x Genomics, Inc. in the U.S. District Court for the District of Delaware alleging that 10x Genomics’ Visium Spatial Gene Expression system and related products and services infringe the Company's U.S. Patent No. 11,473,142, “Chemical Compositions and Uses Thereof.” The Company seeks, among other relief, injunctive relief and unspecified damages (including attorneys’ fees) in relation to 10x Genomics’ making, using, selling, offering to sell, exporting and/or importing in the United States the Visium system and related products and services.

Contingencies

Other than the pending litigations with 10x Genomics and its co-plaintiffs, the Company is not engaged in any material legal proceedings. The Company is involved in other legal proceedings from time to time arising in the normal course of business. Additionally, the Company operates in various states and local jurisdictions for which sales, occupation, or franchise taxes may be payable to certain taxing authorities. Management believes that the outcome of these proceedings and any amounts that may become payable to certain taxing authorities will not have a material impact on the Company’s financial condition, results of operations, or liquidity.

11. Subsequent Event

In November 2022, we announced a reduction in force that is expected to result in the termination of approximately 10% of our global workforce and the Company currently estimates it will incur between approximately $3.0 million and $4.0 million of costs, consisting primarily of cash severance costs, which the Company expects to recognize in the fourth quarter of 2022. We expect to substantially complete the reduction in force by December 31, 2022.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Special Note Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available. This section should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this report. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

Forward-looking statements can be identified by words such as “believe,” “anticipate,” “could,” “continue,” “depends,” “expect,” “expand,” “forecast,” “intend,” “predict,” “plan,” “rely,” “should,” “will,” “may,” “seek,” or the negative of these terms and other similar expressions, although not all forward-looking statements contain these words. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. These forward-looking statements may include, but are not limited to:

•our expectations regarding our future operating results and capital needs, including our expectations regarding instrument, consumable and total revenue, operating expenses, sufficiency of cash on hand and operating and net loss;

•our ability to successfully commercialize our CosMx Spatial Molecular Imager platform and develop and commercialize our AtoMx SIP;

•our expectations regarding the expected cost savings and related benefits from our reduction in workforce initiated in November 2022;

•our ability to sustain the sales of our nCounter and GeoMx DSP platforms;

•our expectations regarding the success, costs and timing of implementation of our business model, strategic plans and future product development plans;

•our ability to secure and sustain certain strategic relationships, including with patent holders of our technologies, manufacturers and distributors of our products, and collaboration partners;

•our intellectual property position and the risk or results of litigation alleging that our products infringe upon the intellectual property rights of third parties;

•our ability to attract and retain key scientific or management personnel;

•our expectations regarding the impact of the COVID-19 global pandemic as it relates to our ongoing operations, including our customer order activity levels and key supplier requirements;

•the regulatory regime and our ability to secure and maintain regulatory clearance or approval or reimbursement for the clinical use of our products, domestically and internationally;

•our expectations that our existing cash, cash equivalents, and short-term investments will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months;

•our expectations regarding the competitive position, market size and growth potential for our business; and

•our ability to sustain and manage growth, including our ability to expand our customer base, develop new products, enter new markets, and hire and retain key personnel.

All forward-looking statements are based on information available to us on the date of this Quarterly Report on Form 10-Q and we will not update any of the forward-looking statements after the date of this Quarterly Report on Form 10-Q, except as required by law. Our actual results could differ materially from those discussed in this Quarterly Report on Form 10-Q. The forward-looking statements contained in this Quarterly Report on Form 10-Q, and other written and oral forward-looking statements made by us from time to time, are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements, and you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. Factors that might cause such a difference include, but are not limited to, those discussed in the following discussion and within Part II, Item 1A — “Risk Factors,” and elsewhere in this report. Our Risk Factors are not guarantees that no such conditions exist as of the date of this report and should not be interpreted as an affirmative statement that such risks or conditions have not materialized, in whole or in part. In this report, “we,” “our,” “us,” “NanoString,” and “the Company” refer to NanoString Technologies, Inc. and its subsidiaries.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and although

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we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted a thorough inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.

Overview

We develop, manufacture and market technologies that unlock scientifically valuable and clinically actionable information from minute amounts of biological material, primarily for life science researchers in the fields of genomics and proteomics. Our mission is to provide a portfolio of solutions that allow our customers to map the universe of biology, enabling scientific exploration that may lead to new therapies that can improve the human condition.

Our technologies include proprietary chemistries that enable the labeling and counting of single molecules. Our product platforms are used for scientific discovery and clinical research applications, often in connection with pharmaceutical product development and human clinical trials of potential new therapies. Our proprietary chemistries may reduce the number of steps required to conduct certain types of scientific experiments and allow for multiple experiments to be conducted at once. Our product platforms are also able to extract information from multiple types of biological samples, including those that are often challenging to work with using other scientific methods or platforms. As a result, we are able to develop tools that are easier for researchers to use and that may generate faster and more consistent scientific results.

We currently offer two commercially available product platforms, our nCounter Analysis System, or nCounter, and our GeoMx Digital Spatial Profiler, or GeoMx DSP. We have one additional product platform under development, our CosMx Spatial Molecular Imager, or CosMx SMI, that is expected to commence commercial shipments by the end of 2022. The Company is also developing the AtoMx Spatial Informatics Platform, or AtoMx SIP, a cloud-based informatics portal for use with GeoMx DSP and CosMx SMI that is expected to become commercially available by the end of 2022.

All NanoString product platforms include instruments, related consumables, software and services, have the versatility to detect both RNA and protein expression and are able to generate reliable and reproduceable data in a variety of biological sample types, including formalin fixed paraffin embedded, or FFPE sample types. Our product platforms allow our customers to progress their research in areas such as oncology, immunology and neurology. We market and sell our product platforms to researchers in academic, government and biopharmaceutical laboratories for research use, both through our direct sales force and through selected distributors in certain markets.

Our nCounter platform, which was commercially launched in 2008, is used to conduct what is known as bulk gene expression analysis, whereby biological samples are first reduced, and then gene expression, specifically quantities of selected RNA or proteins, are measured at their average levels throughout the totality of the sample. nCounter can be used to analyze the activity of up to 800 genes in a single experiment. As of September 30, 2022, we had an installed base of approximately 1,105 nCounter systems, which our customers have used to publish more than 6,100 peer-reviewed scientific papers.

GeoMx DSP, which was commercially launched in 2019, is a pioneering product platform in the emerging field of spatial biology. While nCounter and other common gene expression analysis technologies use bulk analysis approaches, GeoMx DSP is used to analyze selected regions of an intact biological sample without the need to reduce or destroy the sample, enabling researchers to see how gene expression might vary across those regions. After a researcher selects regions of interest, GeoMx DSP arranges the biological information extracted from these regions to be subsequently quantified and analyzed, or “read out,” by a platform such as nCounter, whereby researchers can obtain information on up to 96 biological targets per selected region of interest, or by a next generation sequencer, or NGS, system, such as systems manufactured by Illumina, Inc., whereby researchers can obtain information on up to 18,000 biological targets, or the whole possible universe of potential RNA targets, per selected region of interest. As of September 30, 2022, we had an installed base of approximately 330 GeoMx DSP systems, which our customers have used to publish approximately 160 peer-reviewed scientific papers.

We have discovered other novel applications that utilize our core technologies. CosMx SMI, which is expected to become commercially available by the end of 2022, is a new product platform under development in the field of spatial biology. CosMx SMI is being developed to complement GeoMx DSP. While GeoMx DSP offers researchers the ability to profile gene expression activity in a selected region of interest that may contain multiple cells or cell types, CosMx SMI is designed to enable multiplexed spatial profiling of RNA and protein targets at a single and sub-cellular resolution level. While GeoMx allows for more rapid, higher throughput analysis of gene expression activity in selected regions of interest, CosMx is designed to allow researchers to “drill down” into a specific single cell or sub-cellular area in a region of interest to gather more information as desired or required. At the time of first commercial shipments, CosMx SMI is expected to enable the analysis of up to 1,000 RNA targets and up to 64 protein targets, at a single or sub-cellular level of resolution within morphologically intact tissue samples.

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Given the large amounts of biological data that can be generated by our spatial biology platforms, we are developing the AtoMx SIP, as a companion technology for our CosMx SMI and GeoMx DSP. The AtoMx SIP is a cloud-based informatics portal under development and is expected to provide an integrated information storage and data analysis, or compute, platform ecosystem, with workflows that enable researchers to manage, analyze and share data from our spatial biology platforms.

To support the commercialization of GeoMx DSP and the expected commercial launch of CosMx SMI and AtoMx SIP, we provide selected customers in-house sample testing services whereby customers send biological samples to our Seattle facilities to be analyzed using our product platforms and selected consumables under our technology access program, or TAP. Upon completion of each project, the raw data and analysis report is provided to the customer. As of September 30, 2022, we have conducted over 980 TAP projects for approximately 440 customers.

We derive a substantial majority of our revenue from the sale of our products, which currently consist of our GeoMx DSP and nCounter instruments and related proprietary consumables and service. Our instruments are designed to work only with our consumable products. Accordingly, as the installed base of instruments grows, we expect recurring revenue from consumable sales to become an increasingly important driver of our operating results. Our consumables include our standardized GeoMx DSP and nCounter panel products, nCounter custom codeset products that contain a specific set of targets for scientific analysis as requested by a customer, and the nCounter-based Prosigna breast cancer assay which is manufactured for our partner Veracyte Inc, or Veracyte. We also derive revenue from processing fees related to proof-of-principle studies, including from our TAP program for both our GeoMx DSP and CosMx SMI. For nCounter, GeoMx DSP, and in future periods, for our CosMx SMI, we offer extended service contracts and generate service revenue.

Our product and service revenue decreased $9.6 million to $92.3 million for the nine months ended September 30, 2022, compared to $102.0 million for the first nine months of 2021. Our total revenue was $92.8 million for the nine months ended September 30, 2022, compared to $102.6 million for the first nine months of 2021.

We use third-party contract manufacturers to produce our instruments and certain raw materials for our consumables. We build our consumables, including our panels, custom code sets and reagent packages, at our greater Seattle, Washington area facilities.

We focus a substantial portion of our resources on developing new technologies, products, and solutions. Research and development expense totaled $51.8 million and $51.3 million for the nine months ended September 30, 2022 and 2021, respectively. We intend to continue to make significant investments in research and development to support our existing instrument platforms and related consumable offerings, as well as research and development of new technologies.

We have never been profitable and had net losses of $115.4 million and $86.0 million for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, our accumulated deficit was $765.2 million.

Recent Developments

Reduction in Force

On November 7, 2022, we announced a reduction in force that is expected to result in the termination of approximately 10% of our global workforce. We took this step, together with other cost reduction steps, to decrease our operating expenses and create a more streamlined organization to support our business objectives, including sustaining our most critical spatial biology investments while conserving our cash resources. We expect to substantially complete the reduction in force by December 31, 2022.

Results of Operations

Revenue

Our product revenue currently consists of sales of GeoMx DSP and nCounter, including instruments and related consumables and service. Service revenue consists of fees associated with service contracts and conducting various forms of data analysis studies, such as providing services under our Technology Access Programs, or TAP, and programs in which we offer customers early access to technologies under development for which we generate data and perform analysis services on their behalf. Our customer base is primarily comprised of academic institutions, government laboratories, biopharmaceutical companies and clinical laboratories.

The following table reflects total revenue by geography based on the geographic location of our customers, distributors, and collaborators. For sales to distributors, their geographic location may be different from the geographic locations of the ultimate end customer.

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	Three Months Ended September 30,										Nine Months Ended September 30,
	2022				2021				% Change		2022				2021				% Change
	(Dollars in thousands)
Americas	$	20,316	69	%	$	24,817	67	%	(18)	%	$	63,484	68	%	$	67,396	66	%	(6)	%
Europe & Middle East	7,117		24	%	8,658		23	%	(18)	%	21,396		23	%	24,778		24	%	(14)	%
Asia Pacific	2,108		7	%	3,675		10	%	(43)	%	7,960		9	%	10,456		10	%	(24)	%
Total revenue	$	29,541	100	%	$	37,150	100	%	(20)	%	$	92,840	100	%	$	102,630	100	%	(10)	%

The following table reflects the breakdown of our revenue into the primary components of product, service and collaboration.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		% Change		2022		2021		% Change
	(Dollars in thousands)
Product revenue:
Instruments	$	8,023	$	14,495	(45)	%	$	26,664	$	38,056	(30)	%
Consumables	16,582		18,028		(8)	%	51,897		51,972		—	%
Total product revenue	24,605		32,523		(24)	%	78,561		90,028		(13)	%
Service revenue	4,861		4,401		10	%	13,744		11,922		15	%
Total product and service revenue	29,466		36,924		(20)	%	92,305		101,950		(9)	%
Collaboration revenue	75		226		(67)	%	535		680		(21)	%
Total revenue	$	29,541	$	37,150	(20)	%	$	92,840	$	102,630	(10)	%

Instrument revenue during the three and nine month periods ended September 30, 2022 decreased as compared to the same periods in 2021, primarily as a result of fewer shipments of our GeoMx DSP systems. We believe the lower number of GeoMx systems shipped was due primarily to spatial biology market development trends that impacted our mix of system orders. The primary trends include a lower rate of converting GeoMx DSP system opportunities in our sales funnel as compared to opportunities associated with our new CosMx SMI system, which has impacted current period instrument revenue recognized as we have not yet commenced shipment of CosMx systems to customers, and a realignment of our commercial team early in the year that led to lower than typical instrument sale close rates as compared to previous quarterly periods.

Consumables revenue currently includes sales of consumables for GeoMx DSP and nCounter, and sales of Prosigna in vitro diagnostic kits to our partner Veracyte. Consumables revenue decreased for the three month period ended September 30, 2022 as compared to the same period in 2021, and was flat for the nine month period ended September 30, 2022 as compared to the same period in 2021. The decrease in consumables revenue for the three month period ended September 30, 2022 was due primarily to lower nCounter consumables sales, and lower growth of GeoMx consumables sales, as a result of customer life cycle factors, and other global market factors including levels of clinical trial activity, decreased activity of smaller biotechnology firms and lower sales in China due to the impact of COVID-19 lockdowns in the region. The lower sales of nCounter consumables during the three and nine month periods were impacted by our aging installed base, with fewer new nCounter customers added to our installed base in more recent periods, as well as global market factors. While lower nCounter consumables sales were partially offset by an increase in GeoMx consumables sales during the periods, GeoMx consumables sales growth was lower in the current period due to the relatively large number of newly installed systems in 2022 that have not yet reached the utilization levels of GeoMx systems that were installed in previous years, and due to global market factors.

Service revenue increased for the three and nine month periods ended September 30, 2022 as compared to the same periods of 2021, due primarily to growth in our instrument installed bases and the corresponding service contract revenue realized as compared to the same periods of 2021, as well as increased revenue generated from our TAP program for both GeoMx DSP and CosMx SMI as compared to the same periods of 2021.

During 2020, 2021 and to a lesser extent during 2022, the COVID-19 pandemic impacted our ability to solicit and fulfill customer orders, and record related product and service revenue. While all revenue categories were impacted due to lab closures and lower customer activity, nCounter-related consumables revenue were impacted most substantively. A resurgence of COVID-19 or a variant thereof could recur at any time, with a resulting impact on our business. As in the past, we would expect our revenue to be negatively impacted overall, and our consumables revenue to be more severely impacted as consumables revenue more closely correlates with day-to-day customer research activity. However, we cannot predict with any certainty the extent to which any resurgence in COVID-19 or a variant thereof would impact our business, and it is possible that

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the effects of such a resurgence would have different or more severe impacts on our business than we have experienced in the past.

With consideration to these potential negative impacts on our business related to COVID-19, we expect our product and service revenue may increase in future periods, primarily as a result of the expected commercial launch of our CosMx SMI platform.

Cost of Product and Service Revenue; Gross Profit; and Gross Margin

Cost of product and service revenue consists primarily of costs incurred in the production process including costs of purchasing instruments from third-party contract manufacturers, consumable component materials and assembly labor and overhead, installation, warranty, service and packaging, and delivery costs. In addition, cost of product and service revenue includes royalty costs for licensed technologies included in our products, provisions for slow-moving and obsolete inventory, and stock-based compensation expense. We provide a one-year warranty for both GeoMx DSP and nCounter and establish a reserve for warranty repairs based on historical warranty repair costs incurred.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		% Change		2022		2021		% Change
	(Dollars in thousands)
Cost of product and service revenue	$	13,723	$	17,154	(20)	%	$	44,353	$	48,258	(8)	%
Product and service gross profit	15,743		19,770		(20)	%	47,952		53,692		(11)	%
Product and service gross margin	53%		54%				52%		53%

For the three and nine month periods ended September 30, 2022, cost of product and service revenue decreased as compared to the same periods of 2021, due primarily to a lower volume of instruments sold, as well as a lower volume of nCounter consumable sales as compared to the same periods in the prior year. The lower costs associated with decreased volume of instruments and consumables sold during 2022 were partially offset by increased investments made to support growth of our consumable manufacturing capabilities and our TAP service for GeoMx DSP and CosMx SMI and increased costs associated with providing service for our growing installed base of systems.

Our gross margins on product and service revenue for the three and nine month periods ended September 30, 2022 decreased modestly as compared to the same periods of 2021. The decline in gross margins for the periods was due in part to lower margins on certain of our GeoMx DSP and nCounter instruments as a result of a greater number of bundled selling arrangements which include multiple products from our portfolio, including consumables and service contracts and for which the bundled arrangements typically have higher associated discounts across the products sold. In addition, we have experienced increased costs associated with sourcing certain materials and shipping products to our customers resulting from inflation and other factors impacting the cost of shipping and handling. These impacts were partially offset by a favorable mix of consumables revenue relative to our total product and service revenue, as revenue from our consumables generally have higher gross margins compared to our instrument platforms.

We expect our cost of product and service revenue will increase in future periods with the anticipated growth in sales of our spatial biology platforms. We also expect to continue to make investments in our operations to support the growth of our business, and that may improve our manufacturing efficiency and reduce production costs. We expect these investments and potential cost increases may be partially offset by certain reductions in employee and other operating costs related to our November 2022 reorganization and restructuring initiatives.

We expect our gross margin on product and service revenue may fluctuate in future periods. Variability will depend in part on the level of our consumables revenue, for which we typically record higher gross margins and operate the manufacturing process directly, as compared to our instrument sales or service revenue, for which we typically record lower gross margins. Our gross margins may also vary depending on potential expenses we may incur for regulatory compliance, quality assurance or activities and investments related to the expansion of our manufacturing capacity or improvements in our manufacturing efficiency. In addition, as business activity has recovered through the pandemic, the cost and global availability of certain raw materials and other supplies have been impacted. While to date our operations, supply chain or costs have not been materially impacted, our gross margins could be affected in the future by changes in the cost or availability of certain raw materials or supplies. Notwithstanding the foregoing, we expect our gross margins may increase in the longer term as consumable sales become a larger percentage of our total revenue.

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Research and Development Expense

Research and development expenses consist primarily of salaries and benefits, occupancy, laboratory supplies, engineering services, consulting fees, costs associated with licensing molecular diagnostics rights, and certain expenses related to research activities with customers and collaborators for which we have undertaken joint research projects. We have made substantial investments in research and development since our inception. Our research and development efforts have focused primarily on the tasks required to enhance our technologies and to support development and commercialization of new and existing products and applications.

Given the size of our research and development staff and the number of active projects at any given time, we believe it is most effective to manage our research and development activities on a departmental basis. Accordingly, other than for collaborations and certain major technology development programs, we have neither required employees to report their time by project nor allocated our research and development costs to individual projects. Research and development expense by functional area was as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		%  Change		2022		2021		%  Change
	(Dollars in thousands)
Research and discovery	$	4,109	$	11,971	(66)	%	$	14,053	$	29,994	(53)	%
Manufacturing, support and service	2,449		1,761		39	%	7,563		5,503		37	%
Product and process engineering	8,240		2,180		278	%	23,043		6,452		257	%
Regulatory and medical affairs	194		395		(51)	%	877		1,077		(19)	%
Facilities and overhead	2,000		2,810		(29)	%	6,219		8,316		(25)	%
Total research and development expense	$	16,992	$	19,117	(11)	%	$	51,755	$	51,342	1	%

Research and development expenses for the three month period ended September 30, 2022 decreased as compared to the same period in 2021, due primarily to lower professional fees and higher capitalized costs for internally developed software and technology related to the development of our AtoMx SIP, as well as lower facility related costs. These decreases were partially offset by higher personnel related costs to support product development activities for our spatial biology platforms. For the nine month period ended September 30, 2022, research and development expenses were approximately flat as compared to the same period in 2021 due primarily to higher personnel-related and lab costs, offset by the impact of capitalizing certain personnel and consulting costs related to AtoMx SIP and lower facility related costs.

We continue to invest in product development activities associated with our spatial biology platforms and our AtoMx SIP. We expect research and development expense to increase modestly in future periods, reflecting the impact of increasing investments in our spatial biology and other future projects and technologies, offset by certain reductions in employee and other expenses related to our November 2022 reorganization and restructuring initiatives.

Selling, General and Administrative Expense

Selling, general and administrative expense consists primarily of costs for our sales and marketing, finance, human resources, information technology, business development, legal, and general management functions, as well as professional fees for legal, insurance, consulting, and accounting services.

Selling, general, and administrative expense was as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		% Change		2022		2021		% Change
	(Dollars in thousands)
Selling, general and administrative expense	$	33,767	$	30,253	12	%	$	106,234	$	83,907	27	%

The increase in selling, general, and administrative expense for the three and nine month periods ended September 30, 2022 as compared to the same periods in 2021 is due primarily to increased investments made to expand our commercial sales team to support our spatial biology related commercial initiatives, as well as increases in advertising, travel and trade show related activities. Additionally, we have made increased investments in information technology systems and software supporting our commercial team, operations, and finance functions, and we have incurred increased professional fees related to the investments in those systems. We have also incurred increased costs in 2022 related to ongoing legal proceedings. These increases have been partially offset by lower stock-based compensation costs.

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We expect selling, general and administrative expenses may increase in future periods as the number of sales, technical support, marketing, and administrative personnel grows to support the expected growth of our spatial biology business, with growth in those expenses offset by certain reductions in employee and other expenses related to our November 2022 reorganization and restructuring initiatives.

Other Income (Expense)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		% Change		2022		2021		% Change
	(Dollars in thousands)
Interest income	$	774	$	153	406	%	$	1,331	$	502	165	%
Interest expense	(1,887)		(1,876)		1	%	(5,650)		(5,614)		1	%
Other income (expense), net	(579)		(223)		160	%	(1,286)		79		(1,728)	%
Total other expense, net	$	(1,692)	$	(1,946)	(13)	%	$	(5,605)	$	(5,033)	11	%

Other income and expense items are comprised primarily of interest income earned on our cash equivalents and short term investments and interest paid on our outstanding convertible debt. Our total other income (expense), net for the three month period ended September 30, 2022 decreased as compared with the same period in the prior year, due primarily to increased interest income associated with higher yields on our short term investments, partially offset by increased losses on the remeasurement of foreign currency transactions into the Company’s functional currency of U.S. dollars, as a result of currency fluctuations in the Euro and British pound sterling against the U.S. dollars in the current year periods. In addition, the nine month period ended September 30, 2021 includes the favorable impact resulting from a recovery of certain sales and use taxes which did not recur to the same extent during the current period.

We continue to maintain a cash preservation investment strategy and, as a result, held the majority of our cash and cash equivalents in money market or other short duration fixed income positions for which yields have historically been very low. While we are beginning to see improvement in interest rates available for investments resulting from the Federal Reserve responding to increasing inflation and other macroeconomic factors, we at this time do not expect to see material increases in our interest income.

Liquidity and Capital Resources

	September 30, 2022		December 31, 2021		Change
	(In thousands)
Cash and cash equivalents	$	117,069	$	107,068	$	10,001
Short-term investments	113,384		241,821		(128,437)
Total cash and cash equivalents and short-term investments	$	230,453	$	348,889	$	(118,436)

	Nine Months Ended September 30,
	2022		2021		Change
	(In thousands)
Cash used in operating activities	$	(100,525)	$	(73,030)	$	(27,495)
Cash provided by (used in) investing activities	108,384		(236,830)		345,214
Cash provided by (used in) financing activities	2,325		5,219		(2,894)
Effect of foreign exchange on cash and cash equivalents	(183)		(40)		(143)
Net increase (decrease) in cash and cash equivalents	$	10,001	$	(304,681)	$	314,682

Changes in Cash Flow

Operating Activities

For the nine months ended September 30, 2022, net cash used in operating activities consisted of our net loss of $115.4 million and net increases in our operating assets and liabilities of $17.8 million, partially offset by approximately $32.7 million of net non-cash income and expense items, such as stock-based compensation, depreciation and amortization, increased provisions for inventory obsolescence and bad debts and amortization of right-of-use assets.

For the nine months ended September 30, 2021, net cash used in operating activities consisted of our net loss of $86.0 million and net increases in our operating assets and liabilities of $18.5 million, partially offset by $31.5 million of net non-cash

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income and expense items, such as stock-based compensation, depreciation and amortization, increased provisions for inventory obsolescence and bad debts and amortization of our right-of-use assets.

Investing Activities

Our most significant investing activities for the nine months ended September 30, 2022 and 2021, respectively, were related to the purchase, maturity and sale of short-term investments. Because we manage our cash usage with respect to our total cash, cash equivalents and short-term investments, we do not consider cash flows related to management of our short-term investments to be important to an understanding of our liquidity and capital resources.

For the nine months ended September 30, 2022 and 2021, we purchased property and equipment totaling $11.5 million and $4.7 million, respectively, which we believe will be required to support the growth and expansion of our operations. In addition, for the nine months ended September 30, 2022 and 2021, we have invested $5.3 million and $0.7 million, respectively, related to the development of software and technology to support data storage and analysis across our spatial biology platforms.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2022 and 2021 consisted primarily of $4.1 million and $8.0 million, respectively, of net proceeds from the exercise of stock options and other equity awards and our Employee Stock Purchase Plan. These proceeds were partially offset by tax withholdings related to the net settlement of restricted stock units of $1.5 million and $2.6 million for the nine months ended September 30, 2022 and 2021, respectively.

Short-term Investments

Our cash, cash equivalents, and investments are held in a variety of non-interest bearing bank accounts and interest-bearing instruments subject to investment guidelines allowing for holdings in U.S. government and agency securities, corporate securities, taxable municipal bonds, commercial paper and money market accounts. Our investment portfolio is structured to provide for investment maturities and access to cash to fund our anticipated working capital needs. However, if our liquidity needs should be accelerated for any reason in the near term, or investments do not pay at maturity, we may be required to sell investment securities in our portfolio prior to their scheduled maturities, which may result in a loss.

Financial Condition

Since inception, we have financed our operations primarily through the sale of equity securities, borrowings under term loan agreements and convertible notes, licensing of intellectual property and, to a lesser extent, sales of certain assets. As of September 30, 2022, we had cash, cash equivalents and short-term investments of $230.5 million, compared to $348.9 million as of December 31, 2021.

We believe our existing cash, cash equivalents and short-term investments, and cash generated from operations will be sufficient to meet these material cash requirements and fund our operating requirements for the next 12 months and beyond, including working capital requirements, capital expenditures and other operational investments.

Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Any future funding requirements will depend on many factors, including: market acceptance and the level of sales of our existing products and new products; the effect of competing technological and market developments; any continued impact of sales execution issues and the timing of any recovery therefrom; the nature and timing of any additional research, product development or other partnerships or collaborations we may establish; the cost and timing of establishing additional sales, marketing, and distribution capabilities; the cost of our research and development activities; the impact of, and anticipated cost savings resulting from, our November 2022 reorganization and restructuring initiatives; any new developments relating to the COVID-19 or related pandemic and the impact on our customer and operational activity; the cost and timing of regulatory clearances or approvals; and the extent to which we acquire or invest in businesses, products and technologies, although we currently have no commitments or agreements relating to any of these types of transactions. We may require additional funds in the future and we may not be able to obtain such funds on acceptable terms, or at all. If we raise additional funds by issuing equity or equity-linked securities, our stockholders may experience dilution. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt or additional equity financing we raise may contain terms that are not favorable to us or our stockholders. If we raise additional funds through partnership, collaboration or licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, or grant licenses on terms that are not favorable to us. If we are unable to raise adequate funds we may have to liquidate some or all of our assets; delay, reduce the scope or eliminate some or all of our research and development programs, launch activities, or commercialization of our products; license to third parties the rights to commercialize products or technologies that we would otherwise seek to commercialize; or reduce marketing, customer support, or other resources devoted to our products; or cease operations.

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Material Cash Requirements

Our principal uses of cash are funding our operations, capital expenditures, working capital requirements and satisfaction of any outstanding obligations under our debt agreements. Over the past several years, our product and service revenue has increased from year to year and, as a result, our cash flows from customer collections have increased. Our operating expenses have also increased as we have invested in our sales and marketing activities and in research and development of new product platforms and technologies that we believe have the potential to drive the long-term growth of our business.

Our material cash requirements for the remainder of fiscal 2022 include non-cancelable purchase commitments for long-lead time inventory, research and development items, software development for internal-use projects and property and equipment and lease payments for office, laboratory and manufacturing spaces. We expect capital expenditures to increase in fiscal year 2022 as compared to fiscal 2021, due primarily to planned investments in manufacturing capacity, and in software development for internal-use projects. As of September 30, 2022, we had future long-term interest payment obligations of $14.6 million, of which $6.0 million is payable within 12 months, and total operating and financing lease obligations of $31.1 million, of which $3.5 million is payable within 12 months. See Note 9. Long-term Debt of the Notes to the Consolidated Financial Statements of this report. In addition, our purchase commitments as of September 30, 2022 are $43.5 million, of which $41.2 million is payable within 12 months.

Our material cash requirements may increase in the future as we invest in research and development related to existing or new product platforms, as well as in manufacturing capacity, sales and marketing and administrative activities. These requirements may be offset by the impact on our cash requirements from certain reductions in employee and other expenses related to our November 2022 reorganization and restructuring initiatives. We cannot be certain our revenue will grow sufficiently to offset any operating expense increases. As a result, we may need to raise additional funds to support our operations, and such funding may not be available to us on acceptable terms, or at all. If we are unable to raise additional funds when needed, our operations and ability to execute our business strategy could be adversely affected.

Critical Accounting Policies and Significant Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities, revenue and expenses at the date of the financial statements. Generally, we base our estimates on historical experience and on various other assumptions in accordance with GAAP that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.

Critical accounting policies and significant estimates are those that we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies and estimates include those related to: 

•revenue recognition;

•stock-based compensation;

•inventory valuation;

•fair value measurements; and

•income taxes.

For additional information, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 1, 2022 and Note 2 of the Notes to the Condensed Consolidated Financial Statements under Item 1 of this report.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements, see Note 2 of the Notes to the Condensed Consolidated Financial Statements under Item 1 of this report.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk.

We are exposed to various market risks, including changes in commodity prices and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices. Prices for our products are largely denominated in U.S. dollars and, as a result, we do not face significant risk with respect to foreign currency exchange rates.

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Interest Rate Risk

Generally, our exposure to market risk has been primarily limited to interest income sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because the majority of our investments are in short-term debt securities. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. To minimize risk, we maintain our portfolio of cash, cash equivalents and short-term investments in a variety of interest-bearing instruments, which have included U.S. government and agency securities, high-grade U.S. corporate bonds, asset-backed securities, and money market funds. Declines in interest rates, however, would reduce future investment income. A 10% decline in interest rates, occurring on October 1, 2022 and sustained throughout the period ended September 30, 2023, would not be material.

Our Convertible Notes are based on a fixed rate; accordingly, we do not have economic interest rate exposure on the Convertible Notes. However, changes in interest rates could impact the fair market value of the Convertible Notes. Generally, the fair market value of the fixed interest rate of the Convertible Notes will increase as interest rates fall and decrease as interest rates rise. In addition, the fair market value of the Convertible Notes fluctuates when the market price of our common stock fluctuates. As of September 30, 2022, the fair market value of the Convertible Notes was $194.9 million and was determined based on the estimated or actual bid prices of the Convertible Notes in an over-the-counter market.

Foreign Currency Exchange Risk

As we continue to expand internationally our results of operations and cash flows will become increasingly subject to fluctuations due to changes in foreign currency exchange rates. Historically, a majority of our revenue has been denominated in U.S. dollars, although we sell our products and services directly in certain markets outside of the United States denominated in local currency, principally the Euro. Our expenses are generally denominated in the currencies in which our operations are located, which is primarily in the United States. The effect of a 10% adverse change in exchange rates on foreign denominated cash, receivables and payables would not have been material for the periods presented. As our operations in countries outside of the United States grow, our results of operations and cash flows are and will be subject to potentially greater fluctuations due to foreign currency exchange rate fluctuations, including the impact of the COVID-19 pandemic. To date, we have not entered into any material foreign currency hedging contracts although we may do so in the future.

Inflation Risk

While we have experienced increased operating costs in recent periods, which we believe are due in part to the recent growth in inflation, we do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could adversely affect our business, financial condition and results of operations.

Item 4.    Controls and Procedures.

(a) Evaluation of disclosure controls and procedures. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) prior to the filing of this quarterly report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that as of the end of the period covered by this quarterly report, our disclosure controls and procedures were, in design and operation, effective.

(b) Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting during the quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent limitation on the effectiveness of internal control over financial reporting.

The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgement in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.    Legal Proceedings.

On May 6, 2021, 10x Genomics, Inc. and Prognosys Biosciences, Inc. (“Prognosys”) filed a complaint, on May 19, 2021, an amended complaint, and on May 4, 2022, a second amended complaint, against us in the U.S. District Court for the District of Delaware. The amended complaint alleges that certain of our products, services and components, including those sold by us for use in connection with our GeoMx DSP system (the “Identified GeoMx Products”), infringe seven patents owned by Prognosys: (a) U.S. Patent No. 10,472,669, “Spatially encoded biological assays”, (b) U.S. Patent No. 10,961,566, “Spatially encoded biological assays,”(c) U.S. Patent No. 10,983,113,“Spatially encoded biological assays,” (d) U.S. Patent No. 10,996,219, “Spatially encoded biological assays,” (e) U.S. Patent No. 11,001,878, “Spatially encoded biological assays,” (f) U.S. Patent No. 11,008,607, “Spatially encoded biological assays,” and (g) U.S. Patent No. 11,293,917, “Systems for analyzing target biological molecules via sample imaging and delivery of probes to substrate well” (the “Asserted Prognosys Patents”). The amended complaint seeks, among other relief, injunctive relief and unspecified damages (including treble damages and attorneys’ fees) in relation to our making, using, selling, offering to sell, exporting and/or importing in the United States the Identified GeoMx Products, as well as the alleged infringement by others of the Asserted Prognosys Patents through their use of the Identified GeoMx Products. We have evaluated the plaintiffs’ claims and do not believe that our activities infringe any patent rights held by the plaintiffs. On November 17, 2021, the Court granted our motion to dismiss the plaintiffs’ claims of pre-suit indirect infringement and willful infringement with leave to amend the complaint. Discovery is in progress. A trial is scheduled for August 2023. We intend to continue to vigorously defend ourselves in this ongoing litigation.

On February 28, 2022, 10x Genomics, Inc. and President and Fellows of Harvard College (“Harvard”) filed a complaint, and on May 12, 2022, an amended complaint, against us in the U.S. District Court for the District of Delaware. The complaint alleges that certain of our products, services and components, including those sold by us for use in connection with our CosMx SMI system (the “Identified CosMx Products”), infringe five patents owned by Harvard: (a) U.S. Patent No. 10,227,639, “Compositions and Methods for Analyte Detection,” (b) U.S. Patent No. 11,021,737, “Compositions and Methods for Analyte Detection,” (c) U.S. Patent No. 11,293,051, “Compositions and Methods for Analyte Detection”, (d) U.S. Patent No. 11,293,052, “Compositions and Methods for Analyte Detection,” and (e) U.S. Patent No. 11,293,054, “Compositions and Methods for Analyte Detection” (the “Asserted Harvard Patents”). The complaint seeks, among other relief, injunctive relief and unspecified damages (including attorneys’ fees) in relation to our making, using, selling, offering to sell, exporting and/or importing in the United States the Identified CosMx Products. We have evaluated the plaintiffs’ claims and do not believe that our activities infringe any patent rights held by the plaintiffs. On August 16, 2022, we filed an amended answer in the case with counterclaims alleging that 10x Genomics’ Visium Spatial Gene Expression system and related products and services infringe our U.S. Patent No. 11,377,689, “Chemical Compositions and Uses Thereof.” We seek, among other relief, injunctive relief and unspecified damages (including attorneys’ fees) in relation to 10x Genomics’ making, using, selling, offering to sell, exporting and/or importing in the United States the Visium system and related products and services. A trial is scheduled for June 2024. We intend to continue to vigorously defend ourselves in this ongoing litigation.

In May 2022, we were notified of a complaint, dated March 4, 2022, naming us and our wholly-owned subsidiary, NanoString Technologies Germany GmbH, which 10x Genomics, Inc. filed in the Munich Regional Court I in Germany, alleging that certain of our products and services, including those for use in connection with our CosMx SMI system, infringe European Patent No. 2794928B1 (“EP 2794928B1”), which is owned by Harvard. We have evaluated the claims and do not believe that our activities infringe any patent rights held by the plaintiff. A hearing is scheduled for March 2023 in this proceeding. On July 29, 2022, we, through our German subsidiary, filed a nullity action with the German Federal Patent Court in Munich requesting a judgment that EP 2794928B1, as in effect for Germany, be declared invalid and be revoked in its entirety. We believe a preliminary opinion in the nullity proceeding will be issued prior to the March 2023 hearing in the infringement proceeding. We intend to vigorously defend ourselves in this litigation.

On October 20, 2022, we filed suit against 10x Genomics, Inc. in the U.S. District Court for the District of Delaware alleging that 10x Genomics’ Visium Spatial Gene Expression system and related products and services infringe our U.S. Patent No. 11,473,142, “Chemical Compositions and Uses Thereof.” We seek, among other relief, injunctive relief and unspecified damages (including attorneys’ fees) in relation to 10x Genomics’ making, using, selling, offering to sell, exporting and/or importing in the United States the Visium system and related products and services.

Other than the pending litigations with 10x Genomics and its co-plaintiffs, we are not engaged in any material legal proceedings. From time to time, we may become involved in litigation relating to claims arising from the ordinary course of business. Other than the pending litigations with 10x Genomics and its co-plaintiffs, we believe that there are no claims or actions pending against us currently, the ultimate disposition of which would have a material adverse effect on our consolidated results of operations, financial condition or cash flows.

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Item 1A.    Risk Factors

You should carefully consider the following risk factors, in addition to the other information contained in this report, including the sections of this report captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes. If any of the events described in the following risk factors and the risks described elsewhere in this report occurs, our business, operating results and financial condition could be seriously harmed. Our risk factors are not guarantees that no such conditions exist as of the date of this report and should not be interpreted as an affirmative statement that such risks or conditions have not materialized, in whole or in part. This report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this report.

Risks Related to Our Business and Strategy

We have incurred losses since we were formed and expect to incur losses in the future. We cannot be certain that we will achieve or sustain profitability.

We have incurred losses since we were formed and expect to incur losses in the future. We incurred net losses of $115.4 million and $86.0 million for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, we had an accumulated deficit of $765.2 million. We expect that our losses will continue for at least the next several years as we will be required to invest significant additional funds toward ongoing development and commercialization of our technology. We also expect that our operating expenses may continue to increase as we grow our business, and there can be no assurance that our revenue and gross profit will increase sufficiently such that our net losses decline, or we attain profitability, in the future. Our ability to achieve or sustain profitability is based on numerous factors, many of which are beyond our control, including the market acceptance of our products, future product development and our market penetration and margins. In addition, inflationary pressure, rising interest rates, potential economic recession and other deteriorating factors in the macroeconomic environment could adversely impact our financial results. Our operating costs have increased, and may continue to increase, due to the recent growth in inflation. We may not fully offset these cost increases by raising prices for our products and services, which could result in downward pressure on our margins. Further, our customers may choose to reduce their business with us if we increase our pricing. In November 2022, we announced certain reorganization and restructuring initiatives, under which we intend to reduce certain employee-related expenses and other operating expenses. While we expect our operating costs will be reduced in future periods as a result of these actions, we may not fully realize all of the anticipated cost savings. As a result of these and other factors, we may never be able to generate sufficient revenue to achieve or sustain profitability.

Our financial results may vary significantly from quarter to quarter which may adversely affect our stock price.

Investors should consider our business and prospects in light of the risks and difficulties we expect to encounter in the uncertain and rapidly evolving markets in which we compete. Because these markets are evolving, predicting their future growth and size is difficult. We expect that our visibility into future sales of our products, including volumes, prices and product mix between instruments and consumables will continue to be limited and could result in unexpected fluctuations in our quarterly and annual operating results.

Numerous other factors, many of which are outside our control, may cause or contribute to significant fluctuations in our quarterly and annual operating results, including the ongoing impact on our business operations and financial results of the COVID-19 pandemic, rising interest rates, potential economic recession and other deteriorating factors in the macroeconomic environment. These fluctuations may make financial planning and forecasting difficult. For example, in the first and third quarters of 2022, product and service revenue did not meet expectations which adversely affected our stock price. In addition, these fluctuations may result in unanticipated changes in our available cash, which could negatively affect our business and prospects. Factors that may contribute to fluctuations in our operating results include many of the risks described in this section. Also, one or more of such factors may cause our revenue or operating expenses in one period to be disproportionately higher or lower relative to the others. Furthermore, our instruments involve a significant capital commitment by our customers and accordingly involve a lengthy sales cycle. We may expend significant effort in attempting to make a particular sale, which may be deferred by the customer or never occur. Accordingly, comparing our operating results on a period-to-period basis may not be meaningful, and investors should not rely on our past results as an indication of our future performance. If such fluctuations occur or if our operating results deviate from our expectations or the expectations of securities analysts, our stock price may be adversely affected.

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If we do not achieve, sustain or successfully manage our anticipated growth, our business and growth prospects will be harmed.

We have experienced significant revenue growth in recent periods and we may not achieve similar growth rates in the future. Investors should not rely on our operating results for any prior periods as an indication of our future operating performance. If we are unable to maintain adequate revenue growth, our financial results could suffer and our stock price could decline. Furthermore, growth will place significant strains on our management and our operational and financial systems and processes. For example, the recent commercialization of our GeoMx DSP platform and future commercial launch of our CosMx SMI platform are key elements of our growth strategy and will require us to hire and retain additional sales and marketing personnel and resources. If we do not successfully generate demand for GeoMx DSP, CosMx SMI or other new product offerings, or manage our anticipated expenses accordingly, our operating results will be harmed.

Additionally, we implemented a Company-wide reduction in workforce starting in November 2022 to help achieve a more cost-efficient organization, which we believe will enhance our ability to execute on our key priorities. We anticipate that the reduction in workforce will impact at least 10% of our employees; however, we are still assessing the full scope and scale of this plan and the reductions may ultimately be more or less than we currently anticipate, and may yield unintended consequences and costs such as the loss of institutional knowledge and expertise, attrition beyond our intended reduction in force, lowered morale among our remaining employees, and the risk that we may not achieve the anticipated benefits of such cost-saving measures, all of which may have an adverse effect on our results of operations or financial condition.

Our future success is dependent upon our ability to expand our customer base and introduce new applications and products.

Our current customer base is primarily composed of academic and government research laboratories, biopharmaceutical companies and clinical laboratories (including physician-owned laboratories) that perform analyses using our nCounter Analysis Systems. Our success will depend, in part, upon our ability to increase our market penetration among all of these customers and to expand our market by developing and marketing new research applications and new instruments. We expect that increasing the installed base of our nCounter Analysis Systems and GeoMx DSP systems will drive demand for our relatively high margin consumable products. If we are not able to successfully increase our installed base of nCounter Analysis Systems or GeoMx DSP systems, sales of our consumable products and our margins may not meet expectations.

We also develop and introduce new products, such as our GeoMx DSP system, which was commercially launched in 2019, and the expected commercial launch of our CosMx SMI platform by the end of 2022. We anticipate that scaling and training our sales force to attract new customers will require substantial time and expense. Any failure to expand our existing customer base through the launch of our GeoMx DSP system and the expected launch of our CosMx SMI platform or other new applications and products would adversely affect our operating results.

The life sciences research market is highly competitive. If we fail to compete effectively, our business and operating results will suffer.

We face significant competition in the life sciences research market. We currently compete with both established and early stage life sciences research companies that design, manufacture and market instruments and consumables for gene expression analysis, single-cell analysis, polymerase chain reaction, or PCR, digital PCR, other nucleic acid detection and additional applications. These companies use well-established laboratory techniques such as microarrays or quantitative PCR as well as newer technologies such as next generation sequencing, including RNA-sequencing. We believe our principal competitors in the life sciences research market are Agilent Technologies, Akoya Biosciences, Bio-Rad, Bio-Techne, Fluidigm, Illumina, Qiagen, Thermo Fisher Scientific, Vizgen and 10x Genomics. In addition, there are a number of new market entrants in the process of developing novel technologies for the life sciences market, including those that may compete with GeoMx DSP.

Many of our current competitors are large publicly traded companies, or are divisions of large publicly-traded companies, and may enjoy a number of competitive advantages over us, including:

•greater name and brand recognition, financial and human resources;

•broader product lines;

•larger sales forces and more established distributor networks;

•substantial intellectual property portfolios;

•larger and more established customer bases and relationships; and

•better established, larger scale, and lower cost manufacturing capabilities.

We believe that the principal competitive factors in all of our target markets include:

•cost of capital equipment;

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•cost of consumables and supplies;

•reputation among customers;

•innovation in product offerings;

•flexibility and ease-of-use;

•accuracy and reproducibility of results; and

•compatibility with existing laboratory processes, tools and methods.

We cannot assure investors that our products will compete favorably or that we will be successful in the face of increasing competition from new products and technologies introduced by our existing competitors or new companies entering our markets. In addition, we cannot assure investors that our competitors do not have or will not develop products or technologies that currently or in the future will enable them to produce competitive products with greater capabilities or at lower costs than ours. Any failure to compete effectively could materially and adversely affect our business, financial condition and operating results.

New product development involves a lengthy and complex process, and we may be unable to commercialize on a timely basis, or at all, any of the products we develop.

Few research and development projects result in successful commercial products. At any point, we may abandon development of a product candidate, which would adversely impact potential revenue and our expenses. In addition, any delay in product development would provide others with additional time to commercialize competing products before we do, which in turn may adversely affect our growth prospects and operating results. For example, our inability to successfully develop the CosMx SMI platform would negatively impact our prospects for future revenue growth.

New market opportunities may not develop as quickly as we expect, limiting our ability to successfully market and sell our products.

The markets for our products are new and evolving. Accordingly, we expect the application of our technologies to emerging opportunities will take several years to develop and mature and we cannot be certain that these market opportunities will develop as we expect. For example, in 2019, we commercially launched our GeoMx DSP system, in 2021 we launched new assays to analyze GeoMx DSP data on next generation sequencing systems, and by the end of 2022 we expect to make our newest product platform, CosMx SMI, available to customers.

In 2019 we also launched our GeoMx DSP system and related consumables. GeoMx DSP targets spatial genomics, a novel market opportunity and research application for which existing research experience and applications are limited. Prior to the launch of GeoMx DSP, we had not previously targeted this market and, as a result, we have limited marketing and selling experience. Even if we successfully develop these products, our limited marketing and selling experience targeting these new markets and customers may hinder the successful commercialization of these products.

In addition, we expect to commercially launch our new CosMx SMI platform by the end of 2022. The CosMx SMI is designed to combine the spatial profiling of a large number of biological targets with high-resolution imaging. The CosMx SMI is expected to enable the analysis of up to 1,000 biological targets directly from single cells within morphologically intact tissue samples, as compared to GeoMx DSP, which typically offers such profiling across regions containing multiple cells. Even if we successfully develop and launch our CosMx SMI platform, we cannot be certain that the market opportunity for the instrument and any related consumables will develop as we expect.

The future growth of the market for these new products depends on many factors beyond our control, including recognition and acceptance of our applications by the scientific community and the growth, prevalence and costs of competing methods. For example, the COVID-19 pandemic disrupted our operations and the operations of the customers we service in our targeted markets, which impacted our growth and our ability to serve these markets. Our customers may be further affected by rising interest rates, inflation, potential economic recession and other deteriorating factors in the macroeconomic environment. If the markets for our new products do not develop as we expect, our business may be adversely affected. If we are not able to successfully market and sell our products or to achieve the revenue or margins we expect, our operating results may be harmed.

We face risks related to health epidemics and other outbreaks, such as COVID-19, which could significantly disrupt our operations and could have a material adverse impact on us.

Our business could be adversely impacted by the effects of health epidemics and other outbreaks. For example:

•the temporary closure of our manufacturing facilities and/or those used in our supply chain processes;

•restrictions on the export or shipment of our products;

•unavailability of components and materials used in our products;

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•significant cutback of ocean container delivery;

•business closures in impacted areas;

•reduced demand, research grants, and business activities of our customers due to the impact of COVID-19;

•limitations in employee resources, including because of stay-at-home orders, sickness of employees or their families or the desire of employees to avoid contact with large groups of people; and

•restrictions on our employees’ and other service providers’ ability to travel, to meet with customers and install and train customers on our systems.

The extent to which COVID-19, including any variants that have emerged or may emerge in the future, or any other health epidemic impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of a particular virus and its variants and the actions to contain it or treat its impact, among others. We cannot at this time quantify or forecast the business impact of COVID-19, and there can be no assurance that the COVID-19 pandemic will not have a material and adverse effect on our business, operating results and financial condition. In addition, the COVID-19 pandemic increases the likelihood and potential severity of other risks described in the “Risk Factors” section. Although national, state and local governments have introduced relief measures intended to alleviate the impact of COVID-19-related disruptions, we may not qualify for or benefit from such measures.

Our business depends on levels of research and development spending by academic and governmental research institutions and biopharmaceutical companies, a reduction in which could limit demand for our products and adversely affect our business and operating results.

In the near term, we expect that a large portion of our revenue will be derived from sales of our nCounter Analysis Systems and GeoMx DSP systems, as well as related consumables, to academic and government research laboratories and biopharmaceutical companies worldwide for research and development applications. The demand for our products will depend in part upon the research and development budgets of these customers, which are impacted by factors beyond our control, such as:

•changes in government programs (such as the National Institutes of Health) that provide funding to research institutions and companies;

•macroeconomic conditions, the political climate and the ongoing impact of the COVID-19 pandemic;

•changes in the regulatory environment;

•differences in budgetary cycles;

•competitor product offerings or pricing;

•inflationary pressures, rising interest rates, potential economic recession and other deteriorating factors in the macroeconomic environment;

•market-driven pressures to consolidate operations and reduce costs; and

•market acceptance of relatively new technologies, such as our GeoMx DSP instrument.

In addition, academic, governmental and other research institutions that fund research and development activities may be subject to stringent budgetary constraints that could result in spending reductions, reduced allocations or budget cutbacks, which could jeopardize the ability of these customers to purchase our products. Our operating results may fluctuate substantially due to reductions and delays in research and development expenditures by these customers, including delays caused by these customers’ reducing activities in response to the COVID-19 pandemic. Any decrease in our customers’ budgets or expenditures, or in the size, scope or frequency of capital or operating expenditures, could materially and adversely affect our business, operating results and financial condition.

Our sales cycle is lengthy and variable, which makes it difficult for us to forecast revenue and other operating results.

Our instruments require a significant investment and, accordingly, our sales process involves numerous interactions with multiple individuals within an organization, and often includes in-depth analysis by potential customers of our products, performance of proof-of-principle studies, preparation of extensive documentation and a lengthy review process. As a result of these factors, the significant capital investment required in purchasing our instruments and the budget cycles of our customers, the time from initial contact with a customer to our receipt of a purchase order can vary significantly, and may be up to 12 months or longer. Given the length and uncertainty of our sales cycle we have in the past experienced, and likely will in the future experience, fluctuations in our instrument sales will occur on a period-to-period basis. These factors also make it difficult to forecast revenue on a quarterly basis. For example, in the first and third quarters of 2022, our actual revenues were lower than our forecasts for reasons we did not predict, including uneven sales execution and the impact of changes made to re-align our expanded commercial team early in 2022. In addition, any failure to meet customer expectations could result in customers choosing to continue to use their existing systems or to purchase systems other than ours.

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Our reliance on distributors for sales of our products outside of the United States could limit or prevent us from selling our products and impact our revenue.

We have established distribution agreements for our instruments and related consumable products in many countries where we do not sell directly. We intend to continue to grow our business internationally, and to do so we must attract additional distributors and retain existing distributors to maximize the commercial opportunity for our products. There is no guarantee that we will be successful in attracting or retaining desirable sales and distribution partners or that we will be able to enter into such arrangements on favorable terms. Distributors may not commit the necessary resources to market and sell our products to the level of our expectations or may choose to favor marketing the products of our competitors. If current or future distributors do not perform adequately, or we are unable to enter into effective arrangements with distributors in particular geographic areas, we may not realize long-term international revenue growth.

Our future capital needs are uncertain and we may need to raise additional funds in the future.

We believe that our existing cash and cash equivalents and short-term investments will be sufficient to meet our anticipated cash requirements for at least the next 12 months. However, we may need or choose to raise substantial additional capital to:

•expand the commercialization of our products;

•fund our operations; and

•further our research and development.

Our future funding requirements will depend on many factors, including:

•market acceptance of our products;

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

•the cost of our research and development activities;

•the cost and timing of regulatory clearances or approvals;

•our ability to successfully implement the reduction in workforce announced in November 2022 and achieve the anticipated cost reductions;

•the effect of competing technological and market developments; and

•the extent to which we engage in strategic transactions, such as the acquisition of, investment in or disposal of businesses, assets, products and technologies, including inbound or outbound licensing arrangements.

We cannot assure you that we will be able to obtain additional funds on acceptable terms, or at all. If we raise additional funds by issuing equity or equity-linked securities, or convertible debt, our stockholders may experience dilution. For example, in March 2020, we sold $230.0 million aggregate principal amount of our 2.625% Convertible Senior Notes due 2025, or the notes, in a private placement to qualified institutional buyers for net proceeds of $222.6 million and in October 2020, we sold an aggregate of 5,750,000 shares of common stock in an underwritten public offering for net proceeds of $215.8 million. Future debt financing, if available, may involve additional covenants restricting our operations or our ability to incur additional debt. Any debt or additional equity financing that we raise may contain terms that are not favorable to us or our stockholders. If we raise additional funds through strategic transactions with third parties, such as collaborations, asset sales and licensing arrangements, it may be necessary to relinquish some rights to our technologies or our products, or grant licenses on terms that are not favorable to us. We have in the past pursued these types of transactions, such as the License and Asset Purchase Agreement, or LAPA, with Veracyte, Inc., or Veracyte, which we completed in December 2019, and may in the future pursue similar transactions or other strategic transactions, on our own or with other advisors, that may impact our business and prospects and the value of our common stock. If we do not have, or are not able to obtain, sufficient funds, we may have to delay development or commercialization of our products or license to third parties the rights to commercialize products or technologies that we would otherwise seek to commercialize. We also may have to reduce marketing, customer support or other resources devoted to our products or cease operations, and we may not successfully implement the reduction in workforce announced in November 2022 and achieve the anticipated cost reductions. Any of these factors could harm our operating results.

We may not be able to develop new products, enhance the capabilities of our systems to keep pace with rapidly changing technology and customer requirements or successfully manage the transition to new product offerings, any of which could have a material adverse effect on our business and operating results.

Our success depends on our ability to develop new products and applications for our technology in existing and new markets, while improving the performance and cost-effectiveness of our systems. New technologies, techniques or products could emerge that might offer better combinations of price and performance than our current or future products and systems.

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Existing markets for our products, including gene expression analysis, gene fusions and copy number variation, as well as new markets, such as protein expression and gene mutations, and potential markets for our research product candidates, are characterized by rapid technological change and innovation. Competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. We anticipate that we will face increased competition in the future as existing companies and competitors develop new or improved products and as new companies enter the market with new technologies. It is critical to our success that we anticipate changes in technology and customer requirements and successfully introduce new, enhanced and competitive technologies to meet our customers’ and prospective customers’ needs on a timely and cost-effective basis. If we do not successfully innovate and introduce new technology into our product lines, our business and operating results will be adversely impacted.

The development and manufacture of new products typically requires new scientific discoveries or advancements and complex technology and engineering, including the design of sophisticated software. Such developments may involve external suppliers and service providers, making the management of development projects complex and subject to risks and uncertainties regarding timing, timely delivery of required components, software or services and satisfactory technical performance of such components, software or assembled products. If we do not achieve the required technical specifications or successfully manage new product development processes, or if development work and manufacturing is not performed according to schedule, then such new technologies or products may be adversely impacted and our business and operating results may be harmed. Any delays in bringing new products to market may lead our customers to purchase our competitors’ products or cancel outstanding purchase orders.

Additionally, we must carefully manage the introduction of new products. If customers believe that such products will offer enhanced features or be sold for a more attractive price, they may delay purchases until such products are available. If customers conclude that such new products offer better value as compared to our existing products, we may suffer from reduced sales of our existing products and our overall revenue may decline. We may also have excess or obsolete inventory of older products as we transition to new products and our experience in managing product transitions is limited. If we do not effectively manage the transitions to new product offerings, our revenue, results of operations and business will be adversely affected.

We are dependent on third-party manufacturers and single source suppliers for some of the components and materials used in our products, and the loss of any of these suppliers, or difficulties or delays in securing these components or materials, could harm our business.

We rely on third-party manufacturers and single source suppliers for some of the components and materials used in our instruments, such as Precision System Science, Co., Ltd of Chiba, Japan, to build our nCounter Prep Station; Korvis LLC of Corvallis, Oregon, to build our nCounter Digital Analyzer and GeoMx DSP; and D&K Engineering, Inc. of San Diego, California, to build our CosMx SMI. Since our contracts with instrument suppliers do not commit them to carry inventory or make available any particular quantities, they may give other customers’ needs higher priority than ours, and we may not be able to obtain adequate supplies in a timely manner or on commercially reasonable terms. We also rely on sole suppliers for various components we use to manufacture our consumable products. We periodically forecast our needs for such components and enter into standard purchase orders with them. If we were to lose such suppliers, or if the products provided by such suppliers or third-party manufacturers are unable to meet our performance specifications, there can be no assurance that we will be able to identify or enter into agreements with alternative suppliers or manufacturers on a timely basis on acceptable terms, if at all. In addition, if as a result of global economic or political instability, such as the ongoing geopolitical tensions related to Russia’s actions in Ukraine, disease outbreaks, such as the COVID-19 pandemic, rising interest rates, potential economic recession and other deteriorating factors in the macroeconomic environment, or other factors impacting the global supply chain, our suppliers or third-party manufacturers experience shortages or delays for materials sourced or manufactured in the affected countries, their ability to supply us with instruments or product components may be affected. For example, in late 2022, we expect to make our newest product platform, CosMx SMI, available to customers. Delays or shortages in the global supply chain for certain components of the CosMx instrument may require that we source certain components from alternative suppliers that may be less experienced making components at the volumes that we may require, which may increase our costs or lead to delays in shipping instruments to our customers. From time to time, certain components of our systems and reagents reach the end of their life cycles or are obsoleted by our suppliers, and we have to procure alternative sources for these end-of-life products. If we should encounter delays or difficulties in securing the quality and quantity of materials we require for our products, our supply chain would be interrupted which would adversely affect sales. If any of these events occur, our business and operating results could be harmed.

We may experience manufacturing problems or delays that could limit our growth or adversely affect our operating results.

Our consumable products are manufactured at our facilities located in the greater Seattle, Washington area using complex processes, sophisticated equipment and strict adherence to specifications and quality systems procedures. Any unforeseen manufacturing problems, such as contamination of our facilities, equipment malfunction, quality issues with

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components and materials sourced from third-party suppliers, failure to strictly follow procedures or meet specifications, or reduced or blocked access to our facilities as a result of the ongoing COVID-19 pandemic, could result in delays or shortfalls in production or require us to voluntarily recall our consumable products. Identifying and resolving the cause of any such manufacturing or supplier issues could require substantial time and resources. If we are unable to keep up with demand for our products by successfully manufacturing and shipping our products in a timely manner, our revenue could be impaired, market acceptance for our products could be adversely affected and our customers might instead purchase our competitors’ products or cancel outstanding purchase orders.

In addition, the introduction of new products may require the development of new manufacturing processes and procedures as well as new suppliers. For example, our GeoMx DSP systems require that we establish supply relationships with antibody providers. While all of our CodeSets are produced using the same basic processes, significant variations may be required to meet new product specifications. Developing new processes and negotiating supply agreements can be very time consuming, and any unexpected difficulty in doing so could delay the introduction of a product.

If our greater Seattle area facilities become unavailable or inoperable, we will be unable to continue our research and development, manufacturing our consumables or processing sales orders, and our business will be harmed.

We manufacture our consumable products in our facilities located in the greater Seattle, Washington area, which are the center for research and development, order processing, receipt of our instruments manufactured by third-party contract manufacturers and shipping products to customers. Our facilities and the equipment we use to manufacture our consumable products would be costly, and would require substantial lead time, to repair or replace. The Seattle area is situated near active earthquake fault lines. These facilities may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes and power outages, which may render it difficult or impossible for us to produce our products for some period of time. The inability to manufacture consumables or to ship products to customers for even a short period of time may result in the loss of customers or harm our reputation, and we may be unable to regain those customers in the future. Although we possess insurance for damage to our property and the disruption of our business, this insurance, and in particular earthquake insurance, which is limited, may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, if at all.

We expect to generate a substantial portion of our product and service revenue internationally and are subject to various risks relating to our international activities, which could adversely affect our operating results.

Our product and service revenue generated from sales to customers located outside of North America was approximately 32% and 35% for the nine months ended September 30, 2022 and 2021, respectively. We believe that a significant percentage of our future revenue will come from international sources as we expand our overseas operations and develop opportunities in additional areas. Engaging in international business involves a number of difficulties and risks, including:

•required compliance with existing and changing foreign regulatory requirements and laws;

•required compliance with anti-bribery laws, such as the U.S. Foreign Corrupt Practices Act and U.K. Bribery Act, privacy and data protection requirements, labor laws and anti-competition regulations;

•export or import restrictions;

•various reimbursement and insurance regimes;

•laws and business practices favoring local companies;

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

•political and economic instability, such as the ongoing geopolitical tensions related to Russia’s actions in Ukraine, resulting sanctions imposed by the U.S. and other countries, and retaliatory actions taken by Russia in response to such sanctions;

•global health pandemics, such as the ongoing COVID-19 pandemic;

•potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements and other trade barriers;

•difficulties and costs of staffing and managing foreign operations; and

•difficulties protecting or procuring intellectual property rights.

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As we expand internationally, our results of operations and cash flows will become increasingly subject to fluctuations due to changes in foreign currency exchange rates. Historically, most of our revenue has been denominated in U.S. dollars, although we have sold our products and services in local currency outside of the United States, principally the Euro. Our expenses are generally denominated in the currencies of the countries in which our operations are located, which is primarily in the United States. As our operations in countries outside of the United States grow, our results of operations and cash flows will increasingly be subject to fluctuations due to changes in foreign currency exchange rates, which could harm our business in the future. For example, if the value of the U.S. dollar increases relative to foreign currencies, our product and service revenue could be adversely affected as we convert revenue from local currencies to U.S. dollars. Similarly, a strong U.S. dollar relative to the local currencies of our international customers can potentially reduce demand for our products, which may compound the adverse effect of foreign exchange translation on our revenue. If we dedicate significant resources to our international operations and are unable to manage these risks effectively, our business, operating results and prospects will suffer.

We could be subject to additional income tax liabilities.

We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in evaluating our worldwide provision for income taxes. During the ordinary course of business, there are many transactions for which the ultimate tax determination is uncertain. For example, our effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in foreign currency exchange rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations. We are subject to audit in various jurisdictions, and such jurisdictions may assess additional income tax against us. Although we believe our tax estimates are reasonable and we have established any required reserves in respect of such estimates in accordance with Generally Accepted Accounting Principles, the final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on our operating results or cash flows in the period or periods for which that determination is made.

Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition or results of operations.

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could affect the tax treatment of our domestic and foreign earnings. Any new taxes could adversely affect our domestic and international business operations, and our business and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, the legislation commonly known as the Tax Cuts & Jobs Act, or the TCJA, which was signed into law on December 22, 2017, as modified by the Coronavirus Aid, Relief, and Economic Security Act of 2020, or CARES Act, significantly revised the Internal Revenue Code of 1986, as amended, or the Code. The TCJA, among other things, contains significant changes to corporate taxation, including a reduction of the federal statutory rates from a top marginal rate of 35% to a flat rate of 21%, the transition of U.S. international taxation from a worldwide tax system to a territorial system, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, and modifying or repealing many business deductions and credits. We have accounted for such changes in accordance with our understanding of the TCJA, as modified by the CARES Act, and guidance available as of the date of this filing as described in more detail in our financial statements. Further, the Inflation Reduction Act of 2022, or the IRA, will become effective beginning in fiscal year 2024. We do not currently expect that the IRA will have a material impact on our income tax liability. We will continue to monitor and assess the impact of the federal legislation on our business and the extent to which various states conform to the federal tax law. Any further changes in tax laws or regulations that are applied adversely to us or our customers could have a material adverse effect on our business, cash flow, financial condition or results of operations.

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Our ability to use net operating losses to offset future taxable income may be subject to certain limitations.

As of December 31, 2021, we had federal net operating loss carryforwards, or NOLs, to offset future taxable income of approximately $554.0 million. The federal NOLs generated during and after fiscal 2018 totaling $320.1 million are carried forward indefinitely, while all others, if not utilized, will expire in various years beginning in 2025. A lack of future taxable income would adversely affect our ability to utilize these NOLs. In addition, under Section 382 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its NOLs to offset future taxable income. We may have already experienced one or more ownership changes. Depending on the timing of any future utilization of our carryforwards, we may be limited as to the amount that can be utilized each year as a result of such previous ownership changes. However, we do not believe such limitations will cause our NOLs and tax credit carryforwards to expire unutilized. In addition, future changes in our stock ownership as well as other changes that may be outside of our control, could result in additional ownership changes under Section 382 of the Code. Our NOLs may also be impaired under similar provisions of state law or limited pursuant to provisions of the TCJA amendments to the Code, as modified by the CARES Act. We have recorded a full valuation allowance related to our NOLs and other deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.

Provisions of debt instruments we may enter into may restrict our ability to pursue our business strategies.

From time to time, we have used debt financing to provide capital for our business. Debt instruments we may enter into in the future may require us to comply with various covenants that limit our ability to, among other things:

•dispose of assets;

•complete mergers or acquisitions;

•incur indebtedness;

•encumber assets;

•pay dividends or make other distributions to holders of our capital stock;

•make specified investments;

•engage in any new line of business; and

•engage in certain transactions with our affiliates.

These restrictions could inhibit our ability to pursue our business strategies and may also impose certain financial covenants that require us to achieve certain revenue targets and/or maintain certain minimum cash balances. If we default under any such debt instruments, the lenders could terminate commitments to lend and cause all amounts outstanding with respect to such debt to be due and payable immediately, which in turn could result in cross defaults under other debt instruments. Our assets and cash flow may not be sufficient to fully repay borrowings under all of our then outstanding debt instruments if some or all of these instruments are accelerated upon a default. If we are unable to repay, refinance or restructure indebtedness when payment is due, the lenders could also proceed against any collateral granted to them to secure such indebtedness or force us into bankruptcy or liquidation.

Acquisitions or joint ventures could disrupt our business, cause dilution to our stockholders and otherwise harm our business.

We may acquire other businesses, products or technologies as well as pursue strategic alliances, joint ventures, technology licenses or investments in complementary businesses. We have not made any acquisitions to date, and our ability to do so successfully is unproven. Any of these transactions could be material to our financial condition and operating results and expose us to many risks, including:

•disruption in our relationships with customers, distributors or suppliers as a result of such a transaction;

•unanticipated liabilities related to acquired companies;

•difficulties integrating acquired personnel, technologies and operations into our existing business;

•diversion of management time and focus from operating our business;

•increases in our expenses and reductions in our cash available for operations and other uses; and

•possible write-offs or impairment charges relating to acquired businesses.

Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries.

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Also, the anticipated benefit of any strategic transaction may not materialize. Future acquisitions could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses or write-offs of goodwill, any of which could harm our financial condition. We cannot predict the number, timing or size of future joint ventures or acquisitions, or the effect that any such transactions might have on our operating results.

We may fail to achieve the expected cost savings and related benefits from our reduction in workforce initiated in November 2022.

In November 2022, we announced a plan to reduce our workforce to enable us to help achieve a more cost-efficient organization. The target of the reduction in workforce is to reduce employee headcount by at least 10% by the end of 2022. The full scope, scale and impact of the reduction in workforce is not yet known.

We may fail to effectively execute on, or achieve the stated goals of, the reduction in workforce. Our plans may also change as we continue to refocus on our key priorities. These actions may take more time than we currently estimate and we may not be able to achieve the cost-efficiencies sought. In addition, the reduction in workforce may negatively impact employee moral for those who are not directly impacted, which may increase employee attrition and hurt future recruiting efforts, hindering our ability to achieve our key priorities. Any failure to achieve the expected benefits from the reduction in workforce could adversely affect our stock price, financial condition and ability to achieve our key priorities, as well as lead to stockholder complaints and litigation.

If we are unable to recruit, train and retain key personnel, we may not achieve our goals.

Our future success depends on our ability to recruit, train, retain and motivate key personnel, including our senior management, research and development, manufacturing and sales and marketing personnel. Competition for qualified personnel is intense, particularly in the Seattle, Washington area. Our growth depends, in particular, on attracting, retaining and motivating highly-trained sales personnel with the necessary scientific background and ability to understand our systems at a technical level to effectively identify and sell to potential new customers. We do not maintain fixed term employment contracts or key man life insurance with any of our employees. Because of the complex and technical nature of our products and the dynamic market in which we compete, any failure to attract, train, retain and motivate qualified personnel could materially harm our operating results and growth prospects. Further, the reduction in workforce announced in November 2022 may negatively impact our ability to recruit key personnel and make retention of our current personnel both more important and challenging.

Undetected errors or defects in our products could harm our reputation, decrease market acceptance of our products or expose us to product liability claims.

Our products have in the past and may in the future contain undetected errors or defects when first introduced or as new versions are released. Disruptions or other performance problems with our products may damage our customers’ businesses, harm our reputation and result in reduced revenues. If that occurs, we may also incur significant costs, the attention of our key personnel could be diverted, or other significant customer relations problems may arise. We may also be subject to warranty and liability claims for damages related to errors or defects in our products. A material liability claim or other occurrence that harms our reputation or decreases market acceptance of our products could adversely impact our business and operating results.

The sale and use of products or services based on our technologies, or activities related to our research, could lead to the filing of product liability claims if someone were to allege that one of our products contained a design or manufacturing defect which resulted in the failure to adequately perform the analysis for which it was designed. A product liability claim could result in substantial damages and be costly and time consuming to defend, either of which could materially harm our business or financial condition. We cannot assure investors that our product liability insurance would adequately protect our assets from the financial impact of defending a product liability claim. Any product liability claim brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing insurance coverage in the future.

We face risks related to handling of hazardous materials and other regulations governing environmental safety.

Our operations are subject to complex and stringent environmental, health, safety and other governmental laws and regulations that both public officials and private individuals may seek to enforce. Our activities that are subject to these regulations include, among other things, our use of hazardous materials in manufacturing and in our products, and the generation, transportation and storage of waste. We could discover that we, an acquired business or our suppliers are not in material compliance with these regulations. Existing laws and regulations may also be revised or reinterpreted, or new laws and regulations may become applicable to us, whether retroactively or prospectively, that may have a negative effect on our business and results of operations. It is also impossible to eliminate completely the risk of accidental environmental contamination or injury to individuals. In such an event, we could be liable for any damages that result, which could adversely

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affect our business.

If we experience a significant disruption in our information technology systems or breaches of data security, our business could be adversely affected.

We rely on information technology systems to keep financial records, manage our manufacturing operations, fulfill customer orders, capture laboratory data, maintain corporate records, communicate with staff and external parties and operate other critical functions. Our information technology systems, and those of our vendors, are potentially vulnerable to disruption due to breakdown, malicious intrusion and computer viruses, ransomware or other malicious code, or other disruptive events including but not limited to natural disaster. We are increasingly dependent upon our and our vendors’ technology systems to operate our business and our ability to effectively manage our business depends on the security, reliability and adequacy of our technology systems and data, which includes use of cloud technologies, including Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS). If we were to experience a prolonged system disruption in our information technology systems or those of certain of our vendors, it could negatively impact our ability to serve our customers, which could adversely impact our business. Although we maintain offsite back-ups of our data, if operations at our facilities were disrupted, it may cause a material disruption in our business if we are not capable of restoring function on an acceptable timeframe. In addition, our information technology systems, and those of our vendors, are potentially vulnerable to data security breaches and other security incidents — whether by employees or others — which may expose sensitive data to unauthorized persons. Such data security breaches and incidents, whether resulting from hacking, social engineering, phishing, or other causes could lead to the loss of confidential information, financial assets, trade secrets or other intellectual property, or could lead to unauthorized access to or use, modification, unavailability, disclosure, loss or acquisition of, or the public exposure of, personal information (including sensitive personal information) of our employees, customers and others, or confidential information of ourselves or of third parties that we maintain, any of which could have a material adverse effect on our business, reputation, financial condition and results of operations. In addition, any such access, disclosure or other loss of information could result in legal claims, investigations or proceedings by governmental entities or private parties, adverse publicity and harm to our reputation, loss of business, and liability under laws or regulations, including privacy and data protection laws and regulations and the EU General Data Protection Regulation, or GDPR, and other laws and regulations, the breach of which could result in significant penalties and other liabilities. In addition, these breaches and incidents and other inappropriate access can be difficult to detect, and any delay in identifying them and responding to or otherwise remediating them may lead to increased harm of the type described above. We expect to continue to expend significant resources to protect against security breaches and incidents, and could be required to expend significant amounts to remediate and otherwise respond to security breaches and incidents, including in connection with making notifications to customers or other persons or implementing additional security measures. With the increase in personnel working remotely during the COVID-19 pandemic, we and our vendors are at increased risk for security breaches and incidents. We are taking steps in an effort to monitor and enhance the security of our technology systems and data; however, the unprecedented scale of remote work may require additional personnel and resources, which nevertheless cannot be guaranteed to fully safeguard our technology systems or data or other data or information that we maintain or that otherwise is processed in our business. Additionally, geopolitical tensions related to Russia’s actions in Ukraine may increase cybersecurity risks.

Although we maintain insurance that may cover certain liabilities in connection with a security breach or other security incident, we cannot be certain our insurance coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on commercially reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, results of operations and reputation.

Significant United Kingdom or European developments stemming from the United Kingdom’s withdrawal from the European Union could have a material adverse effect on us.

In June 2020, the United Kingdom officially left the European Union. The full effect of Brexit remains uncertain, but Brexit creates economic and legal uncertainty in the region and could adversely affect the tax, currency, operational, legal and regulatory regimes to which our business is subject. Complying with changes in regulations in the United Kingdom in addition to European Union regulations has increased and may continue to increase our costs of compliance and result in greater legal risks. There are many ways in which our business could be affected, some of which include additional volatility in global financial markets, new or modified trade agreements or data transfer agreements between the United Kingdom and other countries, including the United States, and the possible imposition of trade or other regulatory and immigration barriers in the United Kingdom. In addition, the Europe-wide market authorization framework for our products and access to European Union research funding by research scientists based in the United Kingdom may also change and may also result in a slowdown in spending on research tools like our systems. Furthermore, we currently operate in Europe through a subsidiary based in the

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United Kingdom, which provides us with certain operational, tax and other benefits, as well as through other subsidiaries in Europe. The United Kingdom’s withdrawal from the European Union could adversely affect our ability to realize those benefits and we may incur costs and suffer disruptions in our European operations as a result. These possible negative impacts, and others resulting from the United Kingdom’s withdrawal from the European Union, may adversely affect our operating results and growth prospects.

We intend to seek strategic collaborations and partnerships and other transactions, which may result in the use of a significant amount of our management resources or significant costs, and we may not be able to fully realize the potential benefit of such transactions.

We intend to seek strategic collaborations, partnerships and other transactions to support the continued growth of our company. However, there is no assurance that we will be successful in doing so. Accordingly, we may be engaged in evaluating potential transactions including, without limitation, strategic partnerships, divestitures of existing businesses or assets, a merger or consolidation with a third party that results in a change in control, a sale or transfer of all or a significant portion of our assets or a purchase by a third party of our securities that may result in a minority or control investment by such third party. From time to time, we may engage in discussions that may result in one or more transactions. Although there would be uncertainty that any of these discussions would result in definitive agreements or the completion of any transaction, we may devote a significant amount of our management resources to such a transaction, which could negatively impact our operations. In addition, we may incur significant costs in connection with seeking strategic transactions regardless of whether the transaction is completed. In the event that we consummate a strategic collaboration, partnership or other transaction in the future, we cannot assure you that we would fully realize the potential benefit of such a transaction or that the market would not have an adverse reaction to any such transaction. The failure to fully realize the potential benefit of such a transaction, adverse market reaction to any such transaction and any other issues we may encounter in connection with the consummation of any such transaction could adversely affect our future financial results or negatively impact the value of stockholders’ investment in us.

For example, in December 2019, we entered into a LAPA with Veracyte, pursuant to which we granted to Veracyte an exclusive worldwide license to our nCounter FLEX Analysis System, or the FLEX System, for in vitro diagnostic use and for the development and commercialization of in vitro diagnostic tests, including in vitro diagnostic devices, or IVDs, or laboratory developed tests, or LDTs, for use on the FLEX System and sold to Veracyte certain assets, including our rights with respect to the Prosigna Breast Cancer Prognostic Gene Signature Assay, the LymphMark Lymphoma Subtyping Test and the assay software modules that operate together with the FLEX System. For additional information regarding our transaction with Veracyte please see Part I, Item 1. “Business — License Agreement — Veracyte, Inc.” of our Annual Report on Form 10-K for the year ended December 31, 2021. We cannot be certain that we will realize all of the anticipated benefits from our transaction with Veracyte and the disposition of certain of our assets pursuant to the LAPA may yet have an unforeseen detrimental impact on our business. Furthermore, transactions such as our agreement with Veracyte can be disruptive to our retained operations, divert management’s attention from day-to-day operations and potentially increase employee attrition.

Risks Related to Government Regulation

Our “Research Use Only” products for the research, life sciences market could become subject to more stringent regulatory requirements as medical devices by the FDA or other regulatory agencies in the future which could increase our costs and delay our commercialization efforts, thereby materially and adversely affecting our business and results of operations.

In the United States, most of our products are currently labeled and sold for Research Use Only, or RUO, and not for the diagnosis or treatment of disease, and are sold to pharmaceutical and biotechnology companies, academic and government institutions and research laboratories. Because such RUO products are not intended for diagnostic or clinical use, and the products do not include clinical or diagnostic claims or provide directions for use as diagnostic products, they are not subject to regulation by the Food and Drug Administration, or FDA, as medical devices. In particular, while the FDA regulations require that RUO products be appropriately labeled, “For Research Use Only. Not for Use in Diagnostic Procedures,” the regulations do not subject such products to the FDA’s pre- and post-market controls for medical devices. Pursuant to the FDA guidance on RUO products, a company may not make clinical or diagnostic claims about an RUO product or provide clinical directions or clinical support services to customers for RUO products, or engage in distribution or sales practices that are not consistent with the RUO labeling. If the FDA were to modify its approach to regulating RUO products, compliance with additional or changes in regulations could reduce our revenue or increase our costs and adversely affect our business, prospects, results of operations or financial condition.

Even where our products are labeled, promoted, and intended as RUO, the FDA or comparable agencies of other countries, depending on the totality of circumstances, could disagree with our conclusion that our products are intended for research use only or deem our sales, marketing and promotional efforts as being inconsistent with research use only products. For example, our customers may independently elect to use our RUO products for clinical or diagnostic purposes, which could

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subject our products to government regulation, and the regulatory clearance or approval and maintenance process for such products may be uncertain, expensive, and time-consuming. This uncertainty exists even if such use by our customers occurs without our consent. If the FDA determines that our sales or distribution practices are not consistent with the RUO labeling, the FDA could consider our products to be misbranded and/or adulterated under the Federal Food, Drug, and Cosmetic Act and take adverse administrative or enforcement actions against us, such as recall and warning letter, among others, any of which could materially harm our business. In the event that the FDA requires marketing authorization of our RUO products in the future, there can be no assurance that the FDA will ultimately grant any clearance or approval requested by us in a timely manner, or at all.

In addition, we sell dual-use instruments with software that has both FDA-cleared functions, and research functions for which the FDA approval or clearance is not required. Dual-use instruments are subject to FDA regulation since they are intended, at least in part, for use by customers performing clinical diagnostic testing. In November 2014, the FDA issued a guidance document that described the FDA’s approach to regulating molecular diagnostic instruments that combine both approved/cleared device functions and research functions for which approval/clearance is not required. There is a risk that the requirements for dual-use instruments could change causing additional costs and delays for development of these products. For example, there could be enforcement action if the FDA determines that approval or clearance was required for those functions for which the FDA approval or clearance has not been obtained, or the instruments are being promoted for off-label use. There is also a risk that the FDA could broaden its current regulatory enforcement of dual-use instruments through additional FDA oversight of such products or impose additional requirements upon such products. In July 2017, FDA adopted a new regulation exempting certain clinical multiplex test systems, like the ones used with the Prosigna assay that we supply to Veracyte, from premarket notification requirements, although such instruments are still required to comply with the special controls applicable to Class II medical devices. However, these new regulations will not impact the FDA clearance requirements for our nCounter Dx Analysis System intended for use with specific assays or panels for clinical or diagnostic purposes, such as Prosigna, each of which will require separate premarket notification or premarket approval.

Our nCounter reagents may be used by clinical laboratories to create Laboratory-Developed Tests (LDTs), which could, in the future, be the subject of additional FDA regulation as medical devices, which could materially and adversely affect our business and results of operations.

Our nCounter reagents allow users to design and validate their own customized assays using standard sets of barcodes provided by us with the laboratories’ choice of oligonucleotide probes. These reagents may be used by laboratories in conjunction with analyte-specific reagents and general purpose reagents to create diagnostic tests or test systems validated within the accredited testing laboratory.

A clinical laboratory can use our custom-manufactured reagents to create what is called a Laboratory Developed Test, or LDT. LDTs, according to the FDA, are in vitro diagnostic tests that are developed, validated and performed by a single laboratory and include genetic tests. Historically, the FDA has generally exercised “enforcement discretion” for most LDTs, meaning that the FDA has not required LDTs to comply with medical device requirements. However, the FDA has sought to regulate certain types of LDTs, such as pharmacogenetic tests and cancer screening tests, and had taken enforcement action against companies marketing such tests without premarket authorization. In October 2014, the FDA issued two draft guidance documents proposing a comprehensive risk-based regulatory framework for all LDTs. Although the FDA announced in 2016 these draft guidance documents would not be finalized, the FDA could in the future seek to regulate LDTs more broadly and could take enforcement action against new LDTs, the FDA could alter its position or question a particular LDT that a laboratory is providing.

In August 2020, the Department of Health and Human Services, or HHS, announced rescission of guidances and other informal issuances of FDA regarding premarket review of LDT absent notice-and-comment rulemaking, stating that, absent notice-and-comment rulemaking, those seeking approval or clearance of, or an emergency use authorization, for an LDT may nonetheless voluntarily submit a premarket approval application, premarket notification or an EUA request, respectively, but are not required to do so. In November 2021, HHS under the Biden administration issued a statement that withdrew the August 2020 policy announcement stating that HHS does not have a policy on LDTs that is separate from FDA's longstanding approach.

Legislative and administrative proposals to amend the FDA's oversight of LDTs have been introduced in recent years, including the Verifying Accurate Leading-edge IVCT Development Act of 2021 (VALID Act). More recently, Congress passed the FDA user fee reauthorization legislation without substantive FDA policy riders, including the VALID Act, but Congress may revisit the policy riders and enact other FDA programmatic reforms in the future. It is unclear how future legislation by federal and state governments and FDA regulation will impact the industry, including our business and that of our customers. Any restrictions on LDTs, IVDs, or RUO products by the FDA, HHS, Congress, or state regulatory authorities could decrease the demand for our products. Additionally, compliance with additional regulatory burdens could be time consuming and costly for us and our partners and customers. The adoption of the new restrictions on RUOs, whether by the FDA or Congress, could

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adversely affect demand for our specialized reagents and instruments. Further, we could be required to obtain premarket clearance or approval before we can continue to sell our products to certain customers.

For medical devices that we develop and commercialize, we are subject to ongoing and extensive regulatory requirements, and our failure to comply with these requirements could substantially harm our business.

Certain of our products are regulated as in vitro diagnostic medical devices, including the nCounter FLEX Analysis System. Accordingly, we and certain of our contract manufacturers are subject to ongoing International Organization for Standardization, or ISO, obligations as well as regulation by the FDA, state regulatory authorities, and other comparable national and local health authorities. These may include routine inspections of our manufacturing facilities and our records by Notified Bodies, the FDA, and other health authorities, to assess compliance with requirements such as ISO 13485 and the FDA’s Quality System Regulations, or QSR, 21 C.F.R. Part 820, which include extensive requirements for quality assurance and control as well as manufacturing and change control procedures, among others. We are also subject to other FDA regulations, such as requirements pertaining to the registration of our manufacturing facilities and the listing of our devices with the FDA; continued medical device reporting, for example, reporting of adverse events and malfunctions; reporting certain corrections and removals; and labeling and promotional requirements. Other agencies may also issue guidelines and regulations that could impact the development, labeling, marketing, and distribution of our products, among other activities. The final form of the European In Vitro Diagnostic Regulation (IVDR), which will replace Europe’s In Vitro Diagnostic Directive (IVDD), became effective on May 26, 2022. On May 25, 2017 the European Union adopted the IVD Regulation, which increases the regulatory requirements applicable to in vitro diagnostics in the EU and required the re-classification and approval, registration, or clearance of CE-marked IVD products, including our nCounter FLEX system, which became effective May 26, 2022. 

We may also be subject to additional FDA or global regulatory authority post-marketing obligations or requirements by the FDA or other regulatory authorities to change our current product classifications which would impose additional regulatory obligations on us and our contractors. If we or our contractors or suppliers are not able to maintain regulatory compliance, we may not be permitted to market our medical device products and/or may be subject to enforcement by EU Competent Authorities and the FDA and other global regulatory authorities such as through the issuance of warning letters, fines, injunctions, and civil penalties; recall or seizure of products; operating restrictions; and criminal prosecution. In addition, we may be subject to similar regulatory regimes of other foreign jurisdictions as we continue to commercialize our products in new markets outside of the United States and Europe. Any adverse action by Notified Body, EU Competent Authority, the FDA or other global regulatory authority could significantly increase our expenses, expose us to greater liability, limit our revenue and profitability and cause reputational harm.

We are also required to comply with an increasing number of environmental compliance regulations, including those focused upon the restriction of certain hazardous substances in our products. We have compliance programs designed to meet the requirements of environmental compliance regulations, but our failure to comply with such current or future regulations could result in the imposition of substantial fines, suspension of production, alteration of our manufacturing processes or cessation of operations that could have a material adverse effect on our business, results of operations and financial condition.

We may be subject, directly or indirectly, to healthcare fraud and abuse laws and other laws applicable to our marketing and promotional practices. If we or our agents and contractors are unable to comply, or have not complied, with such laws, we could face substantial penalties.

Various laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Our operations are directly, or indirectly through our agents, contractors, or customers, subject to various fraud and abuse laws, including, without limitation, the federal and state anti-kickback statutes and state, federal and foreign marketing compliance laws. Any misconduct could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by our employees, agents, representatives, or independent contractors that we may work with, and the precautions we take to detect and prevent misconduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other adverse actions or lawsuits stemming from a failure to comply with applicable laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions, exclusion from participation in government healthcare programs, or the curtailment or restructuring of our operations. These laws may impact, among other things, our proposed sales and marketing and education programs and require us to implement additional internal systems for tracking certain marketing expenditures and reporting them to government authorities. In addition, we may be subject to laws and regulations relating to privacy and data protection by both the federal government and the states in which we conduct our business as well as by foreign governments and entities. The laws that may affect our ability to operate include, but are not limited to:

•the federal Anti-kickback Statute and state equivalents;

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•the federal physician self-referral prohibition, commonly known as the Stark Law, and state equivalents;

•the federal Health Insurance Portability and Accountability Act of 1996, as amended, commonly known as HIPAA;

•the Medicare civil money penalty laws and exclusion requirements;

•the federal False Claims Act and state equivalents;

•the Physician Payments Sunshine Act;

•state, federal and foreign marketing expenditure disclosure laws;

•state privacy laws, such as the California Consumer Privacy Act, and California Privacy Rights Act;

•the Foreign Corrupt Practices Act, which applies to our international activities; and

•the European Union’s General Data Protection Regulation.

Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the U.S. We have undertaken certain efforts to conform transfers of personal data from the European Economic Area, or EEA, to the U.S. and other jurisdictions based on our understanding of current regulatory obligations and the guidance of data protection authorities, including standard contractual clauses approved by the European Commission, or the SCCs, and the EU-U.S. and Swiss-U.S. Privacy Shield programs administered by the U.S. Department of Commerce. Despite this, we may be unsuccessful in maintaining conforming means of transferring personal data from the EEA, Switzerland, and United Kingdom, in particular as a result of continued legal and legislative activity within those regions. The EU-U.S.-and Swiss-U.S. Privacy Shield frameworks and the SCCs have been subject to legal challenge, and on July 16, 2020, the Court of Justice of the European Union, or CJEU, issued a decision invalidating the EU-U.S. Privacy Shield and imposing additional requirements in connection with the use of the SCCs. The Swiss-U.S. Privacy Shield also has been declared invalid. The European Commission issued new SCCs in June 2021 that account for the CJEU’s decision and other developments, which need to be put in place for new contracts involving the transfer of personal data from the EEA to a third country as of September 27, 2021, and by December 27, 2022, replace previous SCCs included in existing contracts concluded before September 27, 2021. Additionally, the United Kingdom’s Information Commissioner’s Office issued new standard contractual clauses to support personal data transfers out of the United Kingdom on February 2, 2022 that became effective March 21, 2022 and are required to be used for new contractual arrangements as of September 21, 2022, and must replace prior standard contractual clauses as of March 21, 2024. We are assessing these developments and their impact on our data transfer mechanisms. We may, in addition to other impacts, experience additional costs associated with increased compliance burdens, and we and our customers face the potential for regulators in the EEA, Switzerland, and United Kingdom to apply different standards to the transfer of personal data from those regions to the U.S., and to block, or require ad hoc verification of measures taken with respect to, certain data flows from those regions to the U.S. We also may be required to engage in new contract negotiations with third parties that aid in processing data on our behalf. We may find it necessary or desirable to make further changes to our handling of personal data of residents of those regions. The regulatory environment applicable to the handling of the personal data of EEA, Switzerland, and United Kingdom residents, and our actions taken in response, may cause us to assume additional liabilities or incur additional costs and could result in our business, operating results and financial condition being harmed. Additionally, we and our customers may face a risk of enforcement actions by data protection authorities in those regions relating to personal data transfers. Any such enforcement actions could result in substantial costs and diversion of resources, distract management and technical personnel and negatively affect our business, operating results and financial condition.

The exit of the United Kingdom from the EU, also known as Brexit, has created uncertainty with regard to data protection in the United Kingdom. The United Kingdom maintains the Data Protection Act of 2018 and the UK GDPR, which collectively implement and complement the GDPR and provide for penalties for noncompliance of up to the greater of £17.5 million, or four percent, of worldwide revenues. On June 28, 2021, the European Commission announced a decision of “adequacy” concluding that the United Kingdom ensures an equivalent level of data protection to the GDPR, which provides some relief regarding the legality of continued personal data flows from the EEA to the United Kingdom. Such adequacy decision must, however, be renewed after four years and may be modified or revoked in the interim. We cannot fully predict how the Data Protection Act, the UK GDPR and other United Kingdom data protection laws or regulations may develop in the medium to longer term, nor the effects of divergent laws and guidance regarding how data transfers to and from the United Kingdom will be regulated.

More generally, the laws, rules and regulations relating to privacy or data protection to which we may be subject, or that otherwise apply to our business, are constantly evolving, and we expect that there will continue to be new proposed laws, regulations and industry standards concerning these matters in the United States, the EU and other jurisdictions. If our operations are found to be in violation of any of the laws or regulations described above or others that apply to us, or to which we become subject in the future, we may be subject to claims, complaints, investigations, enforcement actions, and penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations, any of which could

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adversely affect our ability to operate our business and our results of operations.

Healthcare policy changes, including legislation reforming the United States healthcare system, may have a material adverse effect on our financial condition and results of operations.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively, the ACA, enacted in March 2010, made changes that significantly impact the pharmaceutical and medical device industries and clinical laboratories. For example, the Budget Control Act of 2011 contained automatic spending cuts to the federal budget known as sequestration. As a result of sequestration, Medicare payments are reduced by 2% per year through 2031, with the exception of a temporary suspension implemented under various COVID 19 relief legislation from May 1, 2020 through March 31, 2022, unless additional congressional action is taken. Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester. These or any future proposed or mandated reductions in payments and may indirectly reduce demand for our products.

Other significant measures contained in the ACA include coordination and promotion of research on comparative clinical effectiveness of different technologies and procedures, initiatives to revise Medicare payment methodologies, such as bundling of payments across the continuum of care by providers and physicians, and initiatives to promote quality indicators in payment methodologies. The ACA also included significant new fraud and abuse measures, including required disclosures of financial arrangements with physician customers, lower thresholds for violations and increased potential penalties for such violations.

Since its enactment, certain provisions of the ACA have been subject to judicial and Congressional challenges. In June 2021, the United States Supreme Court held that Texas and other challengers had no legal standing to challenge the ACA, dismissing the case without specifically ruling on the constitutionality of the ACA, which remains in effect in its current form. We cannot predict the impact of these decisions, future litigation, as well as future healthcare initiatives, legislation, regulation, and other efforts implemented at the federal or state level or in countries outside of the United States in which we may do business, will have on us, our partners or customers, or our industry in general. Changes in the United States healthcare industry may increase our compliance burden, expose us to greater liability, result in decreased profits to us, and adversely affect our business, financial condition and results of operations.

Risks Related to Intellectual Property

If we are unable to protect our intellectual property effectively, our business would be harmed.

We rely on patent protection as well as trademark, copyright, trade secret and other intellectual property rights protection and contractual restrictions to protect our proprietary technologies, all of which provide limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. As of September 30, 2022, we owned or licensed approximately 35 issued U.S. patents and approximately 23 pending U.S. patent applications, including provisional and non-provisional filings and 6 pre-nationalization PCT applications. We also owned or licensed approximately 313 pending and granted counterpart applications worldwide, including 117 country-specific validations of 17 European patents. We continue to file new patent applications to protect the full range of our technologies. If we fail to protect our intellectual property, third parties may be able to compete more effectively against us and we may incur substantial litigation costs in our attempts to recover or restrict use of our intellectual property.

Our success depends in part on obtaining patent protection for our products and processes, preserving trade secrets, patents, copyrights and trademarks, operating without infringing the proprietary rights of third parties, and acquiring licenses for technology or products. We cannot assure investors that any of our currently pending or future patent applications will result in issued patents, and we cannot predict how long it will take for such patents to be issued. As the patent and prior art landscape for translational research products grows more crowded and becomes more complex we may find it more difficult to obtain patent protection for our products including those related to digital spatial profiling, spatial molecular imaging and sequencing. Our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from practicing our technologies or from developing competing products and may therefore fail to provide us with any competitive advantage. Additionally, we cannot assure investors that our currently pending or future patent applications have or will be filed in all of our potential markets. Further, we cannot assure investors that other parties will not challenge any patents issued to us or that courts or regulatory agencies will hold our patents to be valid or enforceable. We cannot guarantee investors that we will be successful in defending challenges made against our patents and patent applications. Any successful third-party challenge to our patents could result in the unenforceability or invalidity of such patents and could deprive us of the ability to prevent others from using the technologies claimed in such issued patents.

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The patent positions of life sciences companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in such companies’ patents has emerged to date inside or outside the United States. Furthermore, in the biotechnology field, courts frequently render opinions that may affect the patentability of certain inventions or discoveries, including opinions that may affect the patentability of methods for analyzing or comparing biological macromolecules including nucleic acids, such as DNA and RNA, and proteins.

In particular, the patent positions of companies engaged in development and commercialization of genomic diagnostic tests, like Prosigna, are particularly uncertain. Various United States courts, including the U.S. Supreme Court, have rendered decisions that impact the scope of patentability of certain inventions or discoveries relating to genomic diagnostics. Specifically, these decisions stand for the proposition that patent claims that recite laws of nature (for example, the relationships between gene expression levels and the likelihood of risk of recurrence of cancer) are not themselves patentable unless those patent claims have “sufficient” additional features which provide practical assurance that the processes are genuinely inventive applications of those laws rather than patent drafting efforts designed to monopolize the law of nature itself. What constitutes a “sufficient” additional feature is uncertain. Furthermore, in view of these decisions, in December 2014 the U.S. Patent and Trademark Office, or USPTO, published revised guidelines for patent examiners to apply when examining process claims for patent eligibility. This guidance was updated by the USPTO in July 2015 and additional illustrative examples provided in May 2016. The USPTO provided additional guidance on examination procedures pertaining to subject matter eligibility in April 2018, June 2018, January 2019 and October 2019. The guidance indicates that claims directed to a law of nature, a natural phenomenon, or an abstract idea that do not meet the eligibility requirements should be rejected as non-statutory, patent ineligible subject matter; however, method of treatment claims that practically apply natural relationships should be considered patent eligible. We cannot assure investors that our patent portfolio will not be negatively impacted by the current uncertain state of the law, new court rulings or changes in guidance or procedures issued by the USPTO. From time to time, the U.S. Supreme Court, other federal courts, the U.S. Congress or the USPTO may change the standards of patentability and validity of patents within the genomic diagnostic space, and any such changes could have a negative impact on our business.

The laws of some non-U.S. countries do not protect intellectual property rights to the same extent as the laws of the United States, and many companies have encountered significant problems in protecting and defending such rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biotechnology, which could make it difficult for us to stop the infringement of our patents. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business; the foreign court may find that our enforced patent is invalid or unenforceable.

Changes in either the patent laws or in interpretations of patent laws in the United States or other countries may diminish the value of our intellectual property. We cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents. For example:

•We might not have been the first to make the inventions covered by each of our pending patent applications.

•We might not have been the first to file patent applications for these inventions.

•Others may independently develop similar or alternative products and technologies or duplicate any of our products and technologies.

•It is possible that our pending patent applications will not result in issued patents, and even if they issue as patents, they may not provide a basis for commercially viable products, may not provide us with any competitive advantages, or may be challenged and invalidated by third parties.

•We may not develop additional proprietary products and technologies that are patentable.

•The patents of others may have an adverse effect on our business.

•We apply for patents covering our products and technologies and uses thereof, as we deem appropriate. However, we may fail to apply for patents on important products and technologies in a timely fashion or at all.

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In addition to pursuing patents on our technology, we take steps to protect our intellectual property and proprietary technology by entering into confidentiality agreements and intellectual property assignment agreements with our employees, consultants, corporate partners and, when needed, our advisors. Similarly, where permitted by applicable law, we enter into non-compete agreements with certain of our employees. Such agreements may not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements, and we may not be able to prevent such unauthorized disclosure. Monitoring unauthorized disclosure is difficult, and we do not know whether the steps we have taken to prevent such disclosure are, or will be, adequate. If we were to enforce a claim that a third party had illegally obtained and was using our trade secrets, it would be expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets.

In addition, competitors could purchase our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual property rights, design around our protected technology or develop their own competitive technologies that fall outside of our intellectual property rights. In addition, competitors may develop their own versions of our technology in countries where we did not apply for patents, where our patents have not issued or where our intellectual property rights are not recognized and compete with us in those countries and markets. If our intellectual property is not adequately protected so as to protect our market against competitors’ products and methods, our competitive position could be adversely affected, as could our business.

We have not yet registered certain of our trademarks in all of our potential markets. If we apply to register these trademarks, our applications may not be allowed for registration, and our registered trademarks may not be maintained or enforced. In addition, opposition or cancellation proceedings may be filed against our trademark applications and registrations, and our trademarks may not survive such proceedings. If we do not secure registrations for our trademarks, we may encounter more difficulty in enforcing them against third parties than we otherwise would.

To the extent our intellectual property, including licensed intellectual property, offers inadequate protection, or is found to be invalid or unenforceable, we would be exposed to a greater risk of direct competition. If our intellectual property does not provide adequate protection against our competitors’ products, our competitive position could be adversely affected, as could our business. Both the patent application process and the process of managing patent disputes can be time consuming and expensive.

We depend on certain technologies that are licensed to us. We do not control these technologies and any loss of our rights to them could prevent us from selling our products.

We rely on licenses in order to be able to use various proprietary technologies including our core digital molecular barcoding technology licensed from the Institute for Systems Biology and technology relating to Prosigna licensed from Veracyte. We do not own the patents that underlie these licenses. Our rights to use these technologies and employ the inventions claimed in the licensed patents are subject to the continuation of and compliance with the terms of those licenses.

We may need to license other technologies to commercialize future products. We may also need to negotiate licenses to patents and patent applications after launching any of our commercial products. Our business may suffer if the patents or patent applications are unavailable for license or if we are unable to enter into necessary licenses on acceptable terms.

In some cases, we do not control the prosecution, maintenance, or filing of the patents to which we hold licenses, or the enforcement of these patents against third parties. Some of our patents and patent applications were either acquired from another company who acquired those patents and patent applications from yet another company, or are licensed from a third party. Thus, these patents and patent applications were not written by us or our attorneys, and we did not have control over the drafting and prosecution. The former patent owners and our licensors might not have given the same attention to the drafting and prosecution of these patents and applications as we would have if we had been the owners of the patents and applications and had control over the drafting and prosecution. We cannot be certain that drafting or prosecution of the licensed patents and patent applications by the licensors has been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights.

Enforcement of our licensed patents or defense of any claims asserting the invalidity of these patents is often subject to the control or cooperation of our licensors. Certain of our licenses contain provisions that allow the licensor to terminate the license upon specific conditions. Therefore, our business may suffer if these licenses terminate, if the licensors fail to abide by the terms of the license or fail to prevent infringement by third parties or if the licensed patents or other rights are found to be invalid. Our rights under the licenses are subject to our continued compliance with the terms of the license, including the payment of royalties due under the license. Because of the complexity of our products and the patents we have licensed, determining the scope of the license and related royalty obligation can be difficult and can lead to disputes between us and the licensor. An unfavorable resolution of such a dispute could lead to an increase in the royalties payable pursuant to the license or termination of the license. If a licensor believes that we are not paying the royalties due under the license or are otherwise not in

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compliance with the terms of the license, the licensor might attempt to revoke the license. If such an attempt were successful, we might be barred from producing and selling some of our products.

In addition, certain of the patents we have licensed relate to technology that was developed with U.S. government grants. Federal regulations impose certain domestic manufacturing requirements with respect to some of our products embodying these patents. Additionally, under the Bayh-Dole Act, the U.S. government has certain rights to inventions developed with such grants.

Involvement in lawsuits to protect or enforce our patents and proprietary rights, to determine the scope, coverage and validity of others’ proprietary rights, or to defend against third-party claims of intellectual property infringement, could be time-intensive and costly and may adversely impact our business or stock price.

We have received notices of claims of infringement and misappropriation or misuse of other parties’ proprietary rights in the past and may from time to time receive additional notices. Some of these claims have led and may lead to litigation. We cannot assure investors that we will prevail in such actions, or that other actions alleging misappropriation or misuse by us of third-party trade secrets, infringement by us of third-party patents and trademarks or other rights, or the validity of our patents, trademarks or other rights, will not be asserted or prosecuted against us.

For example, on May 6, 2021, 10x Genomics, Inc. and Prognosys Biosciences, Inc. filed a complaint, on May 19, 2021, they filed an amended complaint, and on May 4, 2022, they filed a second amended complaint, against us in the U.S. District Court for the District of Delaware. Further, on February 28, 2022, 10x Genomics, Inc. and President and Fellows of Harvard College filed a complaint, and on May 12, 2022, an amended complaint, against us in the U.S District Court for the District of Delaware. In addition, on March 4, 2022, 10x Genomics, Inc. filed suit against us in the Munich Regional Court in Germany. The complaints allege infringement of certain patents described in the complaints, and seek, among other relief, injunctive relief and unspecified damages (including attorneys’ fees). We have evaluated the plaintiffs’ claims, and do not believe that our activities infringe any patent rights held by the plaintiffs, and we intend to vigorously defend ourselves. If the plaintiffs prevail in these pending litigations, we may be prohibited from selling the alleged infringing products and services in the United States, Germany, and potentially elsewhere or be ordered to pay significant damages or both, either of which would have a material and adverse impact on our business. Even if we ultimately prevail in these litigations, litigation is costly, time-consuming and will divert our management’s attention, which could also have a material and adverse impact on our business. For additional information regarding these pending litigations, please refer to the section of this report titled “Legal Proceedings.”

Litigation may also be necessary for us to protect or enforce our patent and proprietary rights, to defend against third-party claims or to determine the scope, coverage and validity of the proprietary rights of others. Litigation could result in substantial legal fees and could adversely affect the scope of our patent protection and reduce our ability to compete in the marketplace. The outcome of any litigation or other proceeding is inherently uncertain and might not be favorable to us. If we resort to legal proceedings to enforce our intellectual property rights or to determine the validity, scope and coverage of the intellectual property or other proprietary rights of others, the proceedings could be burdensome and expensive, even if we were to prevail. Any litigation that may be necessary in the future could result in substantial costs and diversion of resources and could have a material adverse effect on our business, operating results or financial condition.

Numerous significant intellectual property issues have been litigated, and will likely continue to be litigated, between existing and new participants in our existing and targeted markets. Our success depends in part on our non-infringement of the patents or proprietary rights of third parties. We develop complex products that integrate a wide range of technologies which may impact our ability to do so clear of third-party rights and therefore may need to license other technologies or challenge the scope, coverage and validity of the proprietary rights of others to commercialize future products. As we develop new technologies such as those related to digital spatial profiling, spatial molecular imaging and sequencing, for example, and move into new markets and applications for our products, incumbent participants in such markets may assert their patents and other proprietary rights against us as part of a business strategy to slow our entry into such markets, impede our successful competition and/or extract substantial license and royalty payments from us. In addition, we may be unaware of pending third-party patent applications that relate to our technology and our competitors and others may have patents or may in the future obtain patents and may claim that use of our products infringes these patents. Our competitors and others may now, and in the future, have significantly larger and more mature patent portfolios than we currently have. In addition, future litigation may involve patent holding companies or other adverse patent owners who have no relevant product revenue and against whom our own patents may provide little or no deterrence or protection. Therefore, our commercial success may depend in part on our non-infringement of the patents or proprietary rights of third parties. We are aware of a third party, Genomic Health, Inc., that has issued patents and pending patent applications in the United States, Europe and other jurisdictions that claim methods of using certain genes that are included in Prosigna, which we manufacture for Veracyte. We believe that our manufacture of Prosigna does not infringe any valid issued claim. We could incur substantial costs and divert the attention of our management and technical personnel in defending against any of these claims. Any adverse ruling or perception of an adverse ruling in

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defending ourselves against these claims could have an adverse impact on our stock price, which may be disproportionate to the actual impact of the ruling itself. Parties making claims against us may be able to obtain injunctive or other relief, which could block our ability to develop, commercialize and sell products, and could result in the award of substantial damages against us. In the event of a successful claim of infringement against us, we may be required to pay damages and obtain one or more licenses from third parties, or be prohibited from selling certain products. We may not be able to obtain these licenses at a reasonable cost, if at all. We could therefore incur substantial costs related to royalty payments for licenses obtained from third parties, which could negatively affect our gross margins. In addition, we could encounter delays in product introductions while we attempt to develop alternative methods or products to avoid infringing third-party patents or proprietary rights. Defense of any lawsuit or failure to obtain any of these licenses on favorable terms could prevent us from commercializing products, and the prohibition of sale of any of our products could materially affect our ability to grow and gain market acceptance for our products.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, during the course of this kind of litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.

In addition, our agreements with some of our suppliers, distributors, customers, collaborators and other entities with whom we do business require us to defend or indemnify these parties to the extent they become involved in infringement claims against us, including the claims described above. We could also voluntarily agree to defend or indemnify third parties in instances where we are not obligated to do so if we determine it would be important to our business relationships. If we are required or agree to defend or indemnify any of these third parties in connection with any infringement claims, we could incur significant costs and expenses that could adversely affect our business, operating results, or financial condition.

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of our employees’ former employers.

Many of our employees were previously employed at universities or other life sciences companies, including our competitors or potential competitors. Although no claims against us are currently pending, we or our employees may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. A loss of key research personnel work product could hamper or prevent our ability to commercialize certain potential products, which could severely harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

Our products contain third-party open source software components, and failure to comply with the terms of the underlying open source software licenses could restrict our ability to sell our products.

Our products contain software tools licensed by third-party authors under “open source” licenses. Use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. Some open source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the type of open source software we use. If we combine our proprietary software with open source software in a certain manner, we could, under certain open source licenses, be required to release the source code of our proprietary software to the public. This would allow our competitors to create similar products with less development effort and time and ultimately could result in a loss of product sales.

Although we monitor our use of open source software to avoid subjecting our products to conditions we do not intend, the terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our products. Moreover, we cannot assure investors that our processes for controlling our use of open source software in our products will be effective. If we are held to have breached the terms of an open source software license, we could be required to seek licenses from third parties to continue offering our products on terms that are not economically feasible, to re-engineer our products, to discontinue the sale of our products if re-engineering could not be accomplished on a timely basis, or to make generally available, in source code form, our proprietary code, any of which could adversely affect our business, operating results, and financial condition.

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We use third-party software that may be difficult to replace or cause errors or failures of our products that could lead to lost customers or harm to our reputation.

We use software licensed from third parties in our products. In the future, this software may not be available to us on commercially reasonable terms, or at all. Any loss of the right to use any of this software could result in delays in the production of our products until equivalent technology is either developed by us, or, if available, is identified, obtained and integrated, which could harm our business. In addition, any errors or defects in third-party software, or other third-party software failures, could result in errors, defects or cause our products to fail, which could harm our business and be costly to correct. Many of these providers attempt to impose limitations on their liability for such errors, defects or failures, and if enforceable, we may have additional liability to our customers or third-party providers that could harm our reputation and increase our operating costs.

We will need to maintain our relationships with third-party software providers and to obtain software from such providers that does not contain any errors or defects. Any failure to do so could adversely impact our ability to deliver reliable products to our customers and could harm our results of operations.

Risks Related to Ownership of Our Common Stock

The price of our common stock may be volatile, and you could lose all or part of your investment.

The trading price of our common stock has fluctuated and may continue to fluctuate substantially. The trading price of our common stock depends on a number of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance. These fluctuations could cause stockholders to lose all or part of their investment in our common stock. Factors that could cause fluctuations in the trading price of our common stock include the following:

•actual or anticipated quarterly variation in our results of operations or the results of our competitors;

•announcements by us or our competitors of new products, significant contracts or commercial relationships;

•developments in our pending litigations with 10x Genomics, Inc. and its co-plaintiffs;

•adverse regulatory announcements;

•issuance of new or changed securities analysts’ reports or recommendations for our stock;

•developments or disputes concerning our intellectual property or other proprietary rights;

•commencement of, or our involvement in, litigation;

•volatility and uncertainty in U.S. and international markets resulting from the spread of COVID-19 and its variants and related containment and mitigation measures, rising interest rates, potential economic recession and other deteriorating factors in the macroeconomic environment;

•market conditions in the research market;

•manufacturing disruptions;

•any future sales of our common stock or other securities;

•any change to the composition of the board of directors or key personnel, including developments relating to our reduction in workforce announced in November 2022;

•announcements by us or our competitors of significant acquisitions or divestitures, strategic partnerships, joint ventures or capital commitments;

•general economic conditions and slow or negative growth of our markets; and

•the other factors described in this “Risk Factors” section.

The stock market in general, and market prices for the securities of life sciences companies like ours in particular, have from time to time experienced volatility that often has been unrelated to the operating performance of the underlying companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our operating performance. In several recent situations where the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders were to bring a lawsuit against us, the defense and disposition of the lawsuit could be costly and divert the time and attention of our management and harm our operating results and negatively impact the trading price of our common stock.

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If securities or industry analysts do not publish research reports about our business, or if they issue an adverse opinion about our business, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of the analysts who cover us issues an adverse opinion about our company, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Future sales of our common stock in the public market could cause our stock price to fall.

Our stock price could decline as a result of sales of a large number of shares of our common stock or the perception that these sales could occur, including by our officers, directors and their respective affiliates. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

We register the offer and sale of all shares of common stock that we may issue under our equity compensation plans. In addition, in the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with a financing, acquisition, litigation settlement, employee arrangements or otherwise. For example, in March 2020 we sold $230 million aggregate principal amount of 2.625% Convertible Senior Notes due 2025 in a private placement to qualified institutional buyers for net proceeds of $222.6 million and in October 2020, we sold an aggregate of 5,750,000 shares of common stock in an underwritten public offering for net proceeds of $215.8 million. Any such future issuance could result in substantial dilution to our existing stockholders and could cause our stock price to decline.

We have broad discretion over the use of the proceeds to us from our March 2020 convertible notes offering and October 2020 underwritten public offering and may apply the proceeds to uses that do not improve our operating results or the value of your securities.

We have broad discretion over the use of proceeds to us from our March 2020 convertible notes offering and October 2020 underwritten public offering and investors will be relying solely on the judgment of our board of directors and management regarding the application of these proceeds. Our use of the proceeds may not improve our operating results or increase the value of the securities offered pursuant to the foregoing fundraising transactions.

Servicing our convertible notes may require a significant amount of cash, and we may not have sufficient cash flow or the ability to raise the funds necessary to satisfy our obligations under the notes, and our current and future indebtedness may limit our operating flexibility or otherwise affect our business.

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance any current or future indebtedness, including the notes, or to make cash payments in connection with any conversion of notes or upon any fundamental change if note holders require us to repurchase their notes for cash, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our indebtedness and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring indebtedness or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. In addition, our existing and future indebtedness could have important consequences to our stockholders and significant effects on our business. For example, it could:

•make it more difficult for us to satisfy our debt obligations, including the notes;

•increase our vulnerability to general adverse economic and industry conditions;

•require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital and other general corporate purposes;

•limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

•restrict us from exploiting business opportunities;

•place us at a competitive disadvantage compared to our competitors that have less indebtedness; or

•limit our availability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other general purposes.

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Transactions relating to our notes may dilute the ownership interest of existing stockholders, or may otherwise depress the price of our common stock.

If the notes are converted by holders, we have the ability under the indenture for the notes to deliver cash, common stock, or any combination of cash or common stock, at our election upon conversion of the notes. If we elect to deliver common stock upon conversion of the notes, it would dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, certain holders of the notes may engage in short selling to hedge their position in the notes. Anticipated future conversions of such notes into shares of our common stock could depress the price of our common stock.

Anti-takeover provisions in our charter documents and under Delaware or Washington law could make an acquisition of us difficult, limit attempts by our stockholders to replace or remove our current management and limit our stock price.

Provisions of our certificate of incorporation and bylaws may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our stock. Among other things, the certificate of incorporation and bylaws:

•permit the board of directors to issue up to 15,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate;

•provide that the authorized number of directors may be changed only by resolution of the board of directors;

•provide that all vacancies, including newly-created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;

•divide the board of directors into three classes;

•provide that a director may only be removed from the board of directors by the stockholders for cause;

•require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and may not be taken by written consent;

•provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and meet specific requirements as to the form and content of a stockholder’s notice;

•prevent cumulative voting rights (therefore allowing the holders of a plurality of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose);

•provide that special meetings of our stockholders may be called only by the chairman of the board, our chief executive officer or by the board of directors; and

•provide that stockholders are permitted to amend the bylaws only upon receiving at least two-thirds of the total votes entitled to be cast by holders of all outstanding shares then entitled to vote generally in the election of directors, voting together as a single class.

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Likewise, because our principal executive offices are located in Washington, the anti-takeover provisions of the Washington Business Corporation Act may apply to us under certain circumstances now or in the future. These provisions prohibit a “target corporation” from engaging in any of a broad range of business combinations with any stockholder constituting an “acquiring person” for a period of five years following the date on which the stockholder became an “acquiring person.”

Complying with the laws and regulations affecting public companies increases our costs and the demands on management and could harm our operating results.

As a public company, we incur and will continue to incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act and rules subsequently implemented by the SEC and The Nasdaq Global Market impose numerous requirements on public companies, including requiring changes in corporate governance practices. Also, the Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. Our management and other personnel must devote a substantial amount of time to compliance with these laws and regulations. These burdens may increase as new legislation is passed and implemented, including any new requirements that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 may impose on

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public companies. These requirements have increased and will likely continue to increase our legal, accounting, and financial compliance costs and have made and will continue to make some activities more time consuming and costly. For example, as a public company it is more difficult and more expensive for us to obtain director and officer liability insurance, and in the future we may be required to accept reduced policy limits and coverage or to incur substantial costs to maintain the same or similar coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or our board committees or as executive officers.

Rules implemented by the SEC pursuant to the Sarbanes-Oxley Act require, among other things, that we assess the effectiveness of our internal control over financial reporting annually and assess the effectiveness of our disclosure controls and procedures quarterly. In particular, Section 404 of the Sarbanes-Oxley Act, or Section 404, requires us to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on, and our independent registered public accounting firm to attest to, the effectiveness of our internal control over financial reporting. Our compliance with applicable provisions of Section 404 requires that we incur substantial accounting expense and expend significant management time on compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements. For example, management concluded that our internal controls over financial reporting were not effective as of December 31, 2019 and 2018, resulting in extensive remediation efforts during 2019 and 2020, including increased staffing and investments in additional technology and other expenses. While we have since remediated the material weakness, maintaining adequate internal control over financial reporting will continue to require significant management attention and the incurrence of additional expense.

Furthermore, investor perceptions of our company may suffer as a result of material weakness findings in our internal controls, and this could cause a decline in the market price of our stock. Irrespective of compliance with Section 404, any failure of our internal control over financial reporting could have a material adverse effect on our stated operating results and harm our reputation. If we are unable to avoid future material weaknesses, our operations, financial reporting, or financial results could be harmed and any such material weakness findings could result in an adverse opinion on our internal control over financial reporting from our independent registered public accounting firm.

Item 6.    Exhibits and Financial Statement Schedules.

(a) Exhibits.

Exhibit Number	Description	Form	File No.	Filing Date	Exhibit	Filed Herewith
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a).					X
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a).					X
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.					X
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.					X
101.INS	Inline XBRL Instance Document.					X
101.SCH	Inline XBRL Taxonomy Extension Schema Document.					X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.					X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.					X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.					X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.					X
104	Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).					X

*    The Certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of NanoString Technologies, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing.

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SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		NANOSTRING TECHNOLOGIES, INC.
Date:	November 7, 2022	By:	/s/ R. Bradley Gray
			R. Bradley Gray
			President and Chief Executive Officer
			(Principal Executive Officer)
Date:	November 7, 2022	By:	/s/ K. Thomas Bailey
			K. Thomas Bailey
			Chief Financial Officer
			(Principal Financial and Accounting Officer)

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