GRAIL, Inc.

Previous wording

You should read the following discussion of our results of operations and financial condition together with our accompanying unaudited condensed consolidated financial statements and the notes thereto included under Item 1. “Financial Statements”. This discussion contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry and our business and financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in the section entitled “Risk Factors” in Par II, Item 1A of this Form 10-Q and the section titled “Cautionary Statement Concerning Forward-Looking Statements” of this Quarterly Report on Form 10-Q.

Current wording

You should read the following discussion of our results of operations and financial condition together with our accompanying unaudited condensed consolidated financial statements and the notes thereto included under Item 1. “Financial Statements”. This discussion contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry and our business and financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors” in Part II, Item 1A of this Form 10-Q and in Part I, Item 1A of our Form 10-K and the section entitled “Cautionary Statement Concerning Forward-Looking Statements” of this Form 10-Q.

Previous wording

We are an innovative commercial-stage healthcare company focused on saving lives and shifting the paradigm in early cancer detection. We believe screening individuals for many types of cancer with a single test represents a significant opportunity to reduce the global burden of cancer. Our Galleri test is a commercially available screening test for early detection of multiple types of cancer, which we termed multi-cancer early detection (“MCED”). We believe Galleri is clinically validated based on the results of its clinical studies completed to date, including the results of its foundational case-control Circulating Cell-free Genome Atlas (“CCGA”) study and interventional PATHFINDER study which together enrolled more than 21,000 participants. In these studies, Galleri demonstrated an ability to detect a shared cancer signal across more than 50 types of cancer, accurately predict the specific organ or tissue type where the cancer signal originated, and yield high positive predictive values and low false positive rates, all from a simple blood draw. See “Business—Our Products: Galleri and Beyond” and “—Our Clinical Studies” sections of our final Information Statement filed with our Registration Statement on Form 10, as amended (the “Form 10”), as filed with the SEC. Galleri results can help guide next steps for diagnosis of cancer by healthcare providers in required follow-up diagnostic testing. Galleri is not a diagnostic test and has not been approved or cleared by the U.S. Food and Drug Administration. We launched Galleri in the United States in mid-2021. We have sold more than 250,000 commercial tests which have detected some of the most aggressive cancers in early stages including, among others, endometrial, esophageal, gastrointestinal stromal, head and neck, liver, pancreatic, and rectal cancers.

Current wording

We are an innovative commercial-stage healthcare company focused on saving lives and shifting the paradigm in early cancer detection. We believe screening individuals for many types of cancer with a single test represents a significant opportunity to reduce the global burden of cancer. Our Galleri test is a commercially available screening test for early detection of multiple types of cancer, which we termed multi-cancer early detection (“MCED”). We believe Galleri is clinically validated based on the results of its clinical studies completed to date, including the results of its foundational case-control Circulating Cell-free Genome Atlas (“CCGA”) study and interventional PATHFINDER study which together enrolled more than 21,000 participants. In these studies, Galleri demonstrated an ability to detect a shared cancer signal across more than 50 types of cancer, accurately predict the specific organ or tissue type where the cancer signal originated, and yield high positive predictive values and low false positive rates, all from a simple blood draw. Galleri results can help guide next steps for diagnosis of cancer by healthcare providers in required follow-up diagnostic testing. We launched Galleri in the United States in mid-2021. We have sold more than 325,000 commercial tests to-date, including more than

Previous wording

Since our inception, we have incurred net losses each year. We incurred net losses of$125.7 million and $891.4 million for the three months ended September 30, 2024 and October 1, 2023, respectively and$1.9 billion and $1.3 billion for the nine months ended September 30, 2024 and October 1, 2023, respectively (see “Basis of Presentation” below for a description of applicable fiscal periods). Adjusted EBITDA was $(108.2) million and $(126.1) million for the three months ended September 30, 2024 and October 1, 2023, respectively and $(399.5) million and $(400.4) million for the nine months ended September 30, 2024 and October 1, 2023, respectively. Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation of Adjusted EBITDA to the most directly comparable U.S. generally accepted accounting principle (“GAAP”) financial measure, information about why we consider Adjusted EBITDA useful and a discussion of the material risks and limitations of these measures, please see “Non-GAAP Financial Measures” below. Substantially all of our net losses resulted from the application of pushdown accounting, including goodwill and intangible asset impairment, amortization of intangible assets, as well as our research and development programs, general and administrative (“G&A”) expenses associated with our operations and sales and marketing costs associated with commercializing our products. Additionally, due to the application of pushdown accounting, our balance sheet included goodwill and includes intangible assets recognized by Illumina in connection with their acquisition of us that may be subject to additional impairment over time. We expect to continue to incur operating losses over at least the next several years as we continue to invest in research and development and commercialization of existing products.

Current wording

Since our inception, we have incurred net losses each year. We incurred net losses of $106.2 million and $218.9 million for the three months ended March 31, 2025 and March 31, 2024, respectively (see “Basis of Presentation” below for a description of applicable fiscal periods). Adjusted EBITDA was$(98.7) million and$(152.0) million for the three months ended March 31, 2025 and March 31, 2024, respectively. Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation of Adjusted EBITDA to the most directly comparable U.S. generally accepted accounting principle (“GAAP”) financial measure, information about why we consider Adjusted EBITDA useful and a discussion of the material risks and limitations of these measures, please see “Non-GAAP Financial Measures” below. Substantially all of our net losses resulted from the application of pushdown accounting, including goodwill and intangible assets impairment, amortization of intangible assets, as well as our research and development programs, general and administrative (“G&A”) costs associated with our operations and sales and marketing costs associated with commercializing our products. Additionally, due to the application of pushdown accounting, our balance sheet includes intangible assets recognized by Illumina in connection with their acquisition of us that may be subject to additional impairment over time. We expect to continue to incur operating losses over at least the next several years as we continue to invest in research and development and commercialization of existing products.

Previous wording

On June 21, 2024, in connection with the Spin-Off, we received a cash contribution of $932.3 million from Illumina. In connection with the Spin-Off, we incurred $22.2 million of legal and professional fees in the nine month period ended September 30, 2024 related to the 2021 acquisition of GRAIL by Illumina, and corresponding antitrust litigation, including compliance with the hold separate arrangements imposed by the European Commission, and divestiture of GRAIL from Illumina through the Spin-Off. See “Non-GAAP Financial Measures — Adjusted EBITDA” details. In addition, from 2021 to 2023, we spent $121.7 million on legal and professional service fees related to the antitrust litigation and compliance with the hold separate order and transaction costs related to Illumina’s acquisition of GRAIL and the Spin-Off.

Current wording

On June 21, 2024, in connection with the Spin-Off, we received a cash contribution of $932.3 million from Illumina. In connection with the Spin-Off, we incurred $6.3 million of legal and professional fees in the three month period ended March 31, 2024 related to the 2021 acquisition of GRAIL by Illumina, and corresponding antitrust litigation, including compliance with the hold separate arrangements imposed by the European Commission, and divestiture of GRAIL from Illumina through the Spin-Off. See “Non-GAAP Financial Measures — Adjusted EBITDA” for further details. In addition, from 2021 to 2024, we spent $143.8 million on legal and professional service fees related to the antitrust litigation and compliance with the hold separate order and transaction costs related to Illumina’s acquisition of GRAIL and the Spin-Off.

Previous wording

As a result, we took action in the period ended September 30, 2024 to streamline our commercial sales forces and focus their field-based activities on the current customers expected to be more productive and high priority opportunities. We maintained sales force coverage for the majority of our current Galleri volume and active prescribers. As part of this approach, we also streamlined our current and planned investment in our enterprise business, which included our employer and life insurance businesses. Reductions in the commercial organization included management layers and commercial roles without sales responsibilities. In addition to reductions in the commercial organization, we made reductions in medical affairs teams involved with U.S. Galleri provider engagement.

Current wording

As a result, we have taken actions to streamline our commercial sales forces and focus their field-based activities on the current customers expected to be more productive and high priority opportunities. We maintained sales force coverage for the majority of our current Galleri volume and active prescribers. As part of this approach, we also streamlined our current and planned investment in our enterprise business, which included our employer and life insurance businesses. Reductions in the commercial organization included management layers and commercial roles without sales responsibilities. In addition to reductions in the commercial organization, we made reductions in medical affairs teams involved with U.S. Galleri provider engagement.

Previous wording

The Restructuring Plan is expected to be substantially completed in the fourth quarter of 2024, and we expect to incur approximately $19.0 million to $23.0 million of total charges through the fourth quarter of 2024, consisting primarily of employee severance, benefits, payroll taxes, and other associated costs. We expect the headcount reductions to enable future cost savings of approximately $120 million on an annual basis, with approximately $27 million in savings, net of severance and benefits, in 2024. We estimate that the Restructuring Plan extends our anticipated cash runway from the second half of 2026 into 2028. For thethree and nine months ended September 30, 2024, we incurred restructuring charges of$19.0 million.

Current wording

The Restructuring Plan was substantially completed in the fourth quarter of 2024, and we incurred $18.3 million of total charges through the fourth quarter of 2024, consisting primarily of employee severance, benefits, payroll taxes, and other associated costs. For thethree months ended March 31, 2025, we incurred an immaterial amount of restructuring charges.

Previous wording

The accompanying unaudited condensed consolidated financial statements have been prepared on a stand-alone basis using the consolidated financial statements and accounting records of Illumina prior to the Spin-Off. Since the Spin-Off, we present our financial statements on a consolidated basis as a standalone publicly traded company. These unaudited condensed consolidated financial statements reflect our consolidated historical financial position, results of operations and cash flows as historically managed, in accordance with GAAP. The unaudited condensed consolidated financial statements may not be indicative of our future performance and do not necessarily reflect what the financial position, results of operations and cash flows would have been, and may not include all expenses that would have been incurred, had GRAIL been operated as an independent, publicly traded company during the periods presented prior to the Spin-Off. Certain situations require management to make estimates based on judgments and assumptions, which may affect the reported amounts of assets and respective disclosures at the date of the financial statements. Management’s judgments and assumptions may also affect the reported amounts of net sales and expenses during the reporting periods. Actual results could differ from these management estimates.

Current wording

The accompanying unaudited condensed consolidated financial statements have been prepared on a standalone basis using the consolidated financial statements and accounting records of Illumina prior to the Spin-Off, and the accounting records of GRAIL, Inc. subsequent to the Spin-Off. These unaudited condensed consolidated financial statements reflect our consolidated historical financial position, results of operations and cash flows as historically managed, in accordance with GAAP. The unaudited condensed consolidated financial statements may not be indicative of our future performance and do not necessarily reflect what the financial position, results of operations and cash flows would have been, and may not include all expenses that would have been incurred, had GRAIL been operated as an independent, publicly traded company during the periods presented prior to the Spin-Off. Certain situations require management to make estimates based on judgments and assumptions, which may affect the reported amounts of assets and respective disclosures at the date of the financial statements. Management’s judgments and assumptions may also affect the reported amounts of net sales and expenses during the reporting periods. Actual results could differ from these management estimates.

Previous wording

While GRAIL was a subsidiary of Illumina, GRAIL’s fiscal year was the 52 or 53 weeks ending the Sunday closest to December 31, with quarters of 13 or 14 weeks ending the Sunday closest to March 31, June 30, September 30, and December 31. References to Q3 2024 and Q3 2023 refer to the three months ended September 30, 2024 and October 1, 2023, respectively, which were both 13 weeks. Upon the closing of the Spin-Off, GRAIL adopted a fiscal year end of December 31.

Current wording

While GRAIL was a subsidiary of Illumina, GRAIL’s fiscal year was the 52 or 53 weeks ending the Sunday closest to December 31, with quarters of 13 or 14 weeks ending the Sunday closest to March 31, June 30, September 30, and December 31. The three months ended March 31, 2025 and March 31, 2024, respectively, were both 13 weeks. Upon the closing of the Spin-Off, GRAIL adopted a fiscal year end of December 31.

Previous wording

Illumina’s acquisition of GRAIL on August 18, 2021 (“the Acquisition”) represented a change of control with respect to GRAIL. Given GRAIL, Inc. merged with SDG Ops, Inc., which then merged with SDG Ops LLC, authoritative guidance (ASC 805-50-30) required pushdown accounting to be applied for the Second Merger amongst entities under common control. As a result of the application of pushdown accounting, the separately issued financial statements of GRAIL reflect Illumina’s basis in the assets and liabilities of GRAIL which were remeasured to fair value as of the closing date of Illumina’s acquisition of GRAIL (“Closing Date”). Intangible assets included developed technology, in-process research and development, and trade names, as well as goodwill. There were also various other purchase price adjustment entries made in connection with the Acquisition that impacted the GRAIL standalone financial statements. We have explained these fluctuations within the section titled “—Results of Operations” below.

Current wording

Illumina’s acquisition of GRAIL on August 18, 2021 (“the Acquisition”) represented a change of control with respect to GRAIL. Given GRAIL, Inc. merged with SDG Ops, Inc., which then merged with SDG Ops LLC, authoritative guidance (ASC 805-50-30) required pushdown accounting to be applied for the Second Merger amongst entities under common control. As a result of the application of pushdown accounting, the separately issued financial statements of GRAIL reflect Illumina’s basis in the assets and liabilities of GRAIL which were remeasured to fair value as of the Closing Date. Intangible assets included developed technology, in-process research and development, and trade names, as well as goodwill.

Previous wording

We expect to incur additional costs as a separate public company. These additional costs are primarily related to certain supporting functions that may differ from and be higher than the costs historically incurred or allocated to us.

Current wording

We have incurred and expect to incur additional costs as a separate public company. These additional costs are primarily related to certain supporting functions that may differ from and be higher than the costs historically incurred or allocated to us.

Previous wording

In addition, we have entered into a supply and commercialization agreement with Illumina. Under the terms of the agreement, regardless of whether our products incorporate any Illumina technology, we have agreed to pay to Illumina a high single-digit royalty, subject to certain reductions, in perpetuity on net sales generated by our products or revenues otherwise generated or received by us, subject to certain exceptions, in the field of oncology. Per the terms of the Separation and Distribution Agreement with Illumina, the royalty arrangement is suspended until the earlier of December 24, 2026 or any earlier GRAIL Change of Control, at which time the high-single digit royalty will become payable.

Current wording

In addition, we have entered into a supply and commercialization agreement with Illumina. Under the terms of the agreement, regardless of whether our products incorporate any Illumina technology, we have agreed to pay to Illumina a high single-digit royalty, subject to certain reductions, in perpetuity on net sales generated by our products or revenues otherwise generated or received by us, subject to certain exceptions, in the field of oncology. Per the terms of the Separation and Distribution Agreement with Illumina, the royalty arrangement is suspended until the earlier of December 24, 2026 or any earlier GRAIL Change of Control (as defined in that agreement), at which time the high single-digit royalty will become payable.

Previous wording

•FDA and other regulatory approval and reimbursement. Our performance will be impacted by the extent to which we can secure reimbursement and coverage for Galleri. Prior to broader coverage and reimbursement in the United States, we will continue our work with clinics and health systems to accelerate utilization, and with self-insured employers and health insurers to offer and cover Galleri. Galleri is currently available as a laboratory developed test (“LDT”) in the United States and we have established private reimbursement from a number of self-insured employers and health plans, but do not currently have broader coverage and reimbursement by government healthcare programs, such as Medicare. While Galleri has not been approved or cleared by the FDA, FDA approval is currently not required to market our test in the United States. We plan to pursue FDA approval to support broad access for Galleri in the United States. We plan to complete a PMA submission with the FDA in the first half of 2026. The timing of this submission is subject to various risks and other factors, including the completion of clinical studies and our ongoing discussions with the FDA. Obtaining PMA approval can take several years from the time an application is submitted, if at all. Moreover, the FDA requirements that will govern MCED tests, as well as the breadth and nature of data we must provide the FDA to support the proposed intended use, may be subject to change, and as such it is difficult to predict what information we will need to submit to obtain approval of a PMA from the FDA for a proposed intended use. We continue to work with the FDA regarding the data we must provide the FDA to support our PMA submission for the proposed intended use. We believe that FDA approval, if obtained, could unlock large commercial payors in the United States and we are supporting proposed legislation in the United States to enable coverage of FDA-approved MCED tests by Medicare. If we obtain FDA approval, we expect to pursue inclusion of Galleri in the USPSTF’s guideline recommendation, although such inclusion is not certain even with FDA approval. We believe such inclusion would further increase adoption and market acceptance of our tests. Over time, to the extent Galleri becomes more accessible in the United States, we may opt to reduce pricing in order to access a broader population base and accelerate adoption. In the United Kingdom, we are working with NHS England to complete our NHS-Galleri Trial. The NHS will evaluate the final results from the NHS-Galleri Trial, which are expected to be available in 2026, before determining whether to implement the Galleri test in the NHS. We believe our work with the NHS and data generated from our NHS-Galleri Trial could facilitate adoption in other single-payor systems around the world and support evidence of clinical utility worldwide.

Current wording

•FDA and other regulatory approval and reimbursement. Our performance will be impacted by the extent to which we can secure reimbursement and coverage for Galleri. Prior to broader coverage and reimbursement in the United States, we will continue our work with clinics and health systems to accelerate utilization, and with self-insured employers and health insurers to offer and cover Galleri. Galleri is currently available as a laboratory developed test (“LDT”) in the United States and we have established private reimbursement from a number of self-insured employers and health plans, including coverage from TRICARE, but we do not currently have broader coverage and reimbursement by Medicare or large commercial insurers. While Galleri has not been approved or cleared by the FDA, FDA approval is currently not required to market our test in the United States. We plan to pursue FDA approval to help support broad access for Galleri in the United States. We plan to complete a PMA submission with the FDA in the first half of 2026. The timing of this submission is subject to various risks and other factors, including the completion of clinical studies and our ongoing discussions with the FDA. Obtaining PMA approval can take several years from the time an application is submitted, if at all. Moreover, the FDA requirements that will govern MCED tests, as well as the breadth and nature of data we must provide the FDA to support the proposed intended use, may be subject to change, and as such it is difficult to predict what information we will need to submit to obtain approval of a PMA from the FDA for a proposed intended use or at all. Moreover, the regulatory requirements surrounding the pathway to PMA for LDTs like Galleri may be subject to change, including through a recent court decision that has successfully challenged the FDA’s authority to implement medical device requirements with respect to LDTs. We continue to interact with the FDA regarding the data we must provide the FDA to support our PMA submission for the proposed intended use. We believe that FDA approval, if obtained, could unlock large commercial payors in the United States and we are supporting proposed legislation in the United States to enable coverage of FDA-approved MCED tests by Medicare. If we obtain FDA approval, we expect to pursue inclusion of Galleri in the USPSTF’s guideline recommendation, although such inclusion is not certain even with FDA approval. We believe such inclusion would further increase adoption and market acceptance of our tests. Over time, to the extent Galleri becomes more accessible in the United States, we may opt to reduce pricing in order to access a broader population base and accelerate adoption. In the United Kingdom, we are working with NHS England to complete our NHS-Galleri Trial. The NHS will evaluate the final results from the NHS-Galleri Trial, which are expected to be available in 2026, before determining whether to implement the Galleri test in t…

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Previous wording

•International expansion. A component of our long-term growth strategy is to expand our commercial reach internationally. We have expanded internationally into the United Kingdom through our partnership with NHS England, and we expect to launch Galleri in the United Kingdom subject to the results of our NHS-Galleri Trial. We continue to evaluate international expansion opportunities and expect to expand into additional select geographies over time, including through distributors.

Current wording

•International expansion. A component of our long-term growth strategy is to expand our commercial reach internationally. We have expanded our research internationally into the United Kingdom through our partnership with NHS England in the NHS-Galleri Trial, and we expect to launch Galleri in the United Kingdom, subject to the results of our NHS-Galleri Trial. We continue to evaluate international expansion opportunities and we have begun expansion in select additional geographies through distributors. We expect to continue selectively engaging with international opportunities over time.

Previous wording

•Continued development of the market for MCED testing. Multi-cancer early detection is a relatively novel technology and the market for MCED tests is evolving. We coined the term “multi-cancer early detection” and continue to drive MCED as a solution to one of healthcare’s most important challenges. Our performance depends on the extent to which key stakeholders, including current and potential commercial partners, payors and health systems, regulators, policy makers, academic and community medical centers, and key opinion leaders and advocates, understand and support MCED testing as an effective solution for cancer screening. We make significant efforts to educate these key stakeholders regarding the benefits of MCED and the clinical and economic value of our products, which we believe will continue to drive awareness of MCED and expand the commercial opportunity for our products.

Current wording

•Continued development of the market for MCED testing. Multi-cancer early detection is a relatively novel technology and the market for MCED tests is evolving. We continue to drive MCED as a solution to one of healthcare’s most important challenges. Our performance depends on the extent to which key stakeholders, including current and potential commercial partners, payors and health systems, regulators, policy makers, academic and community medical centers, and key opinion leaders and advocates, understand and support MCED testing as an effective solution for cancer screening. We make significant efforts to educate these key stakeholders regarding the benefits of MCED and the clinical and economic value of our products, which we believe will continue to drive awareness of MCED and expand the commercial opportunity for our products.

Previous wording

•Demand for our products and customer mix. A key factor to our future success is and will be our ability to increase demand for, and sales of, Galleri from new and existing customers. Our commercial strategy is focused on innovative value-oriented partnerships and targets health systems, employers, payors, and life insurance providers. As Galleri is not currently broadly reimbursed, our ability to drive demand from these customers is directly linked to our ability to demonstrate the clinical and economic value of our test through clinical validation and real-world experience. As of September 30, 2024, we have entered into commercial partnerships, including with leading healthcare systems, employers, payors, and life insurance providers, and have established a network of over 12,000 prescribers across the United States in a pre-reimbursement setting. We believe this commercial network represents a significant opportunity to drive further demand for Galleri. The mix of customers from which we generate revenue from period to period has an impact on our revenue and gross margin. Galleri test pricing is generally based on our list price or, for certain customers, such as larger, higher-volume customers, negotiated contractual rates. For certain customers, we also offer rebates or discounts from time to time. Revenue generated from customers with negotiated contractual rates, or with rebates or discounts, is generally lower margin as compared to revenue generated based on list pricing. In addition, we have entered into a number of biopharmaceutical research partnerships for our research-use-only (“RUO”) offering under our precision oncology portfolio. Large customers, such as healthcare systems, employers, and biopharmaceutical partners, generally begin using our products by initiating pilots involving a limited number of tests. We believe that our ability to convert these initial pilots into long-term customer relationships has the potential to drive substantial long-term revenue. We also expect to increase demand from new customers through our efforts to further develop the market for MCED testing.

Current wording

•Demand for our products and customer mix. A key factor to our future success is and will be our ability to increase demand for, and sales of, Galleri from new and existing customers. Our commercial strategy is focused on innovative value-oriented partnerships and targets health systems, employers, payors, and life insurance providers. As Galleri is not currently broadly reimbursed, our ability to drive demand from these customers is directly linked to our ability to demonstrate the clinical and economic value of our test through clinical validation and real-world experience. As of March 31, 2025, we have entered into commercial partnerships, including with leading healthcare systems, employers, payors, and life insurance providers, and have established a network of over 14,000 prescribers across the United States in a pre-reimbursement setting. We believe this commercial network represents a significant opportunity to drive further demand for Galleri. The mix of customers from which we generate revenue from period to period has an impact on our revenue and gross margin. Galleri test pricing is generally based on our list price or, for certain customers, such as larger, higher-volume customers, negotiated contractual rates. For certain customers, we also offer rebates or discounts from time to time. Revenue generated from customers with negotiated contractual rates, or with rebates or discounts, is generally lower margin as compared to revenue generated based on list pricing. We expect the number or magnitude of these rates, discounts and rebates to reduce our average selling price over time. In addition, we have entered into a number of biopharmaceutical research partnerships for our research-use-only (“RUO”) offering under our precision oncology portfolio. Large customers, such as healthcare systems, employers, and biopharmaceutical partners, generally begin using our products by initiating pilots involving a limited number of tests. We believe that our ability to convert these initial pilots into long-term customer relationships has the potential to drive substantial long-term revenue. We also expect to increase demand from new customers through our efforts to further develop the market for MCED testing.

Previous wording

•Investment in clinical studies and innovation to support our strategy and growth. A significant aspect of our business is our investment in research and development and the ongoing evidence generation supporting the clinical performance and utility of Galleri. In particular, we have invested heavily in clinical studies and designed and executed what we believe is the largest clinical program in genomic medicine to date. These studies include: NHS-Galleri, CCGA, SUMMIT, STRIVE, SYMPLIFY, PATHFINDER, PATHFINDER 2, REFLECTION and REACH/Galleri-Medicare. We have established and maintained a leading voice in conversations regarding the early detection of multiple cancer types in the peer-reviewed literature. We have published data from these studies in high-profile journals and have presented such data at renowned medical conferences. We believe these studies are critical to driving adoption of our tests, as well as favorable coverage decisions, and expect to continue investment in data generation. In addition, we have invested heavily in the development of our methylation platform and extensive technological infrastructure. We expect our research and development expenses to decrease over the next three years as, in conjunction with our portfolio review, we determined to decrease investment in product programs beyond Galleri. Additionally, some of our large clinical trials are moving into follow-up phase and the development of our automated platform is expected to substantially conclude next year. We will continue to prioritize key objectives for Galleri, including completion of our registrational studies and our premarket approval application.

Current wording

•Investment in clinical studies and innovation to support our strategy and growth. A significant aspect of our business is our investment in research and development and the ongoing evidence generation supporting the clinical performance and utility of Galleri. In particular, we have invested heavily in clinical studies and designed and executed what we believe is the largest clinical program in genomic medicine to date. These studies include: CCGA, NHS-Galleri, PATHFINDER, PATHFINDER 2, REACH/Galleri-Medicare, REFLECTION, STRIVE, SUMMIT, and SYMPLIFY. We have established and maintained a leading voice in conversations regarding the early detection of multiple cancer types in the peer-reviewed literature. We have published data from these studies in high-profile journals and have presented such data at renowned medical conferences. We believe these studies are critical to driving adoption of our tests, as well as favorable coverage decisions, and expect to continue investment in data generation. In addition, we have invested heavily in the development of our methylation platform and extensive technological infrastructure. We expect our research and development expenses to decrease over the next three years as, in conjunction with our portfolio review, we determined to decrease investment in product programs beyond Galleri. Additionally, some of our large clinical trials are moving into follow-up phase and the development of our automated platform is expected to substantially conclude in 2025. We will continue to prioritize key objectives for Galleri, including completion of our registrational studies and our premarket approval application.

Previous wording

•Leverage our operational infrastructure. We have made significant investments to build a scalable infrastructure capable of meeting significant demand while satisfying applicable certification requirements. Our facilities are able to process a substantial number of tests annually and are CAP-accredited and CLIA-certified. In addition, we engineered custom technology infrastructure and cloud-based tools to enable scalable data collection and analysis capabilities. With this foundational infrastructure in place, we have been able to generate scale efficiencies as the volume of tests sold has increased. As demand for our products increases, we expect to further leverage the scale efficiencies of our infrastructure and platform technology, which we believe will positively impact margins over time. In the future, it is possible that we may invest significant amounts in infrastructure to support new products or existing products in new markets.

Current wording

•Leverage our operational infrastructure. We have made significant investments to build a scalable infrastructure capable of meeting significant demand of up to one million tests per year while satisfying applicable certification requirements. Our Durham, North Carolina facility is CAP-accredited and CLIA-certified. In addition, we engineered custom technology infrastructure and cloud-based tools to enable scalable data collection and analysis capabilities. With this foundational infrastructure in place, we have been able to generate scale efficiencies as the volume of tests sold has increased. As demand for our products increases, we expect to further leverage the scale efficiencies of our infrastructure and platform technology, which we believe will positively impact margins over time. In the future, it is possible that we may invest significant amounts in infrastructure to support new products or existing products in new markets.

Previous wording

While each of these areas presents significant opportunities for us, they also pose significant risks and challenges that we must address. See the “Risk Factors” section of this Quarterly Report on Form 10-Q for more information. Seasonal fluctuations, underlying business trends have also affected, and are likely to continue to affect, our business. We may experience this seasonality, in particular in the third quarter due to primary care physician and patient summer vacation period. These seasonal trends have caused, and will likely continue to cause, fluctuations in our quarterly results, including fluctuations in sequential revenue growth rates.

Current wording

While each of these areas presents significant opportunities for us, they also pose significant risks and challenges that we must address. See the “Risk Factors” section of our 2024 Form 10-K for the year ended December 31, 2024 (filed on March 5, 2025) and the “Risk Factors” section of this Form 10-Q, alongside other information set forth in this Form 10-Q and in other documents that we file with the SEC, for more information. Seasonal fluctuations, underlying business trends have also affected, and are likely to continue to affect, our business. We may experience this seasonality, in particular in the third quarter due to primary care physician and patient summer vacation period, with relatively lower volume in the first and third quarters, and relatively higher volume in the second and fourth quarters. These seasonal trends have caused, and will likely continue to cause, fluctuations in our quarterly results, including fluctuations in sequential revenue growth rates.

Previous wording

We currently derive screening revenue through the sale of Galleri within the United States and primarily through primary care physicians, health systems, employers, payors, and life insurance providers. Galleri is not currently broadly reimbursed. The test price is based on the negotiated contractual rate with our contracted customers, otherwise our standard list price applies. We identify each sale of our test to our customer as a single performance obligation; therefore, revenue is recognized at the point of time when the test result report is delivered. For self-pay patients, we have concluded that an implied contract exists, however the transaction price for the implied contract represents variable consideration as there are situations in which we do not expect to collect the full invoiced amounts from self-pay patients due to price concessions. We utilize the expected value approach to estimate the transaction price and apply a constraint for such variable consideration, on a portfolio basis. We monitor the estimated amounts to be collected at each reporting period based on actual cash collections in order to assess whether a revision to the estimate is required.

Current wording

We currently derive screening revenue through the sale of Galleri primarily within the United States and primarily through primary care physicians, health systems, employers, payors, and life insurance providers. Galleri is not currently broadly reimbursed. The test price is based on the negotiated contractual rate with our contracted customers, otherwise our standard list price applies. We identify each sale of our test to our customer as a single performance obligation; therefore, revenue is recognized at the point of time when the test result report is delivered. For self-pay patients, we have concluded that an implied contract exists, however the transaction price for the implied contract represents variable consideration as there are situations in which we do not expect to collect the full invoiced amounts from self-pay patients due to price concessions. We utilize the expected value approach to estimate the transaction price and apply a constraint for such variable consideration, on a portfolio basis. We monitor the estimated amounts to be collected at each reporting period based on actual cash collections in order to assess whether a revision to the estimate is required.

Previous wording

We also derive revenue through our development services, which consist of services we provide to biopharmaceutical and clinical customers including support of clinical studies, pilot testing, research, and therapy development. We evaluate the terms and conditions included within our development services contracts with biopharmaceutical customers to ensure appropriate revenue recognition, including whether services are considered distinct performance obligations that should be accounted for separately versus together. Revenue from pilot and research services performed is recognized as performance obligations are achieved. We recognize revenue from development service agreements to support clinical study and companion diagnostic device development and regulatory submissions for the developed product(s) using an input method based on costs incurred to measure progress toward the completion and satisfaction of performance obligations.

Current wording

We also derive revenue through our development services, which consist of research services we provide to biopharmaceutical and clinical customers including support of ongoing clinical studies, pilot testing, research, and therapy development. We evaluate the terms and conditions included within our development services contracts with biopharmaceutical customers to ensure appropriate revenue recognition, including whether services are considered distinct performance obligations that should be accounted for separately versus together. Revenue from pilot and research services performed is recognized as performance obligations are achieved. We recognize revenue from development service agreements related to regulatory filings to support clinical study and companion diagnostic device development and regulatory submissions for the developed product(s) using an input method based on costs incurred to measure its progress toward the completion and satisfaction of the performance obligations.

Previous wording

Cost of Screening Revenue (Exclusive of Amortization of Intangible Assets), Cost of Development Services Revenue, Cost of Screening Revenue — Related Parties, and Cost of Development Services Revenue — Related Parties

Current wording

Cost of Screening Revenue (Exclusive of Amortization of Intangible Assets) and Cost of Development Services Revenue

Previous wording

Cost of revenue represents expenses that are incurred to produce and sell our products and services. For screening revenue, these costs consist of direct materials, direct labor including salaries and wages, bonus, benefits and stock-based compensation, shipping, royalties, and allocations of overhead and equipment depreciation. For development services, these costs consist of direct materials and patient sample acquisition, direct labor including salaries and wages, bonus, benefits and stock-based compensation, royalties, and allocations of overhead and equipment depreciation. Cost of screening revenue — related parties and cost of development services revenue — related parties represent the costs of supplies purchased from related parties used in the generation of revenue from all customers.

Current wording

Cost of revenue represents expenses that are incurred to produce and sell our products and services. For screening revenue, these costs consist of materials, labor including salaries and wages, bonus, benefits and stock-based compensation, blood collection kits and shipping, phlebotomy, royalties, electronic medical records, equipment depreciation, and allocations of overhead expenses such as facilities and information technology costs. For development services, these costs consist of materials and patient sample acquisition, labor including salaries and wages, bonus, benefits and stock-based compensation, royalties, equipment depreciation, and allocations of overhead expenses such as facilities and information technology costs.

Previous wording

Research and development expenses include costs incurred to develop our technology (prior to establishing technological feasibility), collect clinical samples, and conduct clinical studies to develop and support our products. These costs consist of personnel costs, including salaries, benefits, and stock-based compensation expense associated with our research and development personnel, costs associated with setting up and conducting clinical studies at domestic and international sites, laboratory supplies, consulting costs, depreciation, and allocated overhead including facilities and information technology expenses, which we do not allocate by product. We expense both internal and external research and development costs in the periods in which they are incurred. Research and development — related parties expenses include only those costs incurred with related parties as further discussed in Note 6 — Related Party Transactions in Item 1. Financial Statements of this Quarterly Report on Form 10-Q. Nonrefundable advance payments for goods and services that will be used or rendered in future research and development activities are deferred and recognized as expense in the period in which the related goods are delivered or services are performed. We expect our research and development expenses to decrease over the next three years as, in conjunction with our portfolio review, we determined to decrease investment in product programs beyond Galleri. Additionally, some of our large clinical studies and development of our automated platform are expected to conclude in this period.

Current wording

Research and development expenses include costs incurred to develop our technology (prior to establishing technological feasibility), collect clinical samples, and conduct clinical studies to develop and support our products. These costs consist of personnel costs, including salaries, benefits, and stock-based compensation expense associated with our research and development personnel, costs associated with setting up and conducting clinical studies at domestic and international sites, laboratory supplies, consulting costs, depreciation, and allocated overhead including facilities and information technology expenses, which we do not allocate by product. We expense both internal and external research and development costs in the periods in which they are incurred. Nonrefundable advance payments for goods and services that will be used or rendered in future research and development activities are deferred and recognized as expense in the period in which the related goods are delivered or services are performed. We expect our research and development expenses to decrease over the next three years as, in conjunction with our portfolio review, we determined to decrease investment in product programs beyond Galleri. Additionally, some of our large clinical studies and development of our automated platform are expected to substantially conclude in this period.

Previous wording

Sales and marketing expenses consist primarily of personnel costs, including salaries, benefits and stock- based compensation expense, consulting costs, allocated overhead including facilities and information technology expenses, and travel associated with our commercial organization. Also included are costs associated with advertising programs that consist of brand and product awareness activities and trade events and conferences. Sales and marketing expenses also includes amortization of the trade name intangible assets that was recognized upon the Acquisition, which has been recorded in our financial statements as a result of the application of pushdown accounting. The cost of identifiable intangible assets with finite lives, such as trade names, are amortized on a straight-line basis over the assets’ respective estimated useful lives of 9 years. We expect our sales and marketing expenses to decrease immediately following implementation of the Restructuring Plan and to continue to decrease as a percentage of revenue over the next three years and long term.

Current wording

Sales and marketing expenses consist primarily of personnel costs, including salaries, benefits and stock- based compensation expense, consulting costs, allocated overhead including facilities and information technology expenses, and travel associated with our commercial organization. Also included are costs associated with advertising programs that consist of brand and product awareness activities and trade events and conferences. Sales and marketing expense also includes amortization of the trade name intangible asset that was recognized upon the Acquisition, which has been recorded in our financial statements as a result of the application of pushdown accounting. The cost of identifiable intangible assets with finite lives, such as trade names, are amortized on a straight-line basis over the assets’ respective estimated useful lives of 9 years. We expect our sales and marketing expenses to decrease in the near term as a result of the implementation of the Restructuring Plan, and then to remain flat-to-increasing and continue to decrease as a percentage of revenue over the next three years and long term.

Previous wording

G&A expenses consist of personnel expenses, including salaries, benefits and stock-based compensation expense, for executive, finance and accounting, legal, human resources, business development, corporate communications, medical affairs and management information systems personnel. Also included are professional fees, legal costs, including patent and trademark-related expenses and educational activities. The related party amount represents allocated stock administration expenses from Illumina. We have incurred and will incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, director and officer insurance premiums, investor relations activities, and other expenses related to administrative and professional services. We expect our G&A expensesto decrease following implementation of the Restructuring Plan and to decrease as a percentage of revenue over the next three years and long term.

Current wording

G&A expenses consist of personnel expenses, including salaries, benefits and stock-based compensation expense, for executive, finance and accounting, legal, human resources, business development, corporate communications, medical affairs and management information systems personnel. Also included are professional fees, legal costs, including patent and trademark-related expenses and educational activities. The related party amount in the prior year period represents allocated stock administration expenses from Illumina. We have incurred and will incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, director and officer insurance premiums, investor relations activities, and other expenses related to administrative and professional services. We expect our G&A expensesto decrease in the near term following implementation of the Restructuring Plan in the third and fourth quarter 2024, and then to remain flat-to-increasing and continue to decrease as a percentage of revenue over the next three years and long term.

Previous wording

We evaluate goodwill impairment annually or more frequently if an event occurs or circumstances change in the interim that would more likely than not reduce the fair value of the asset below its carrying amount. See Note 2 — Summary of Significant Accounting Policies — Goodwill and Intangible Assets to our Consolidated Financial Statements filed with our Form 10. See Note 3 — Goodwill and Intangible Assets in Item 1. Financial Statements of this Quarterly Report on Form 10-Q for more information.

Current wording

We evaluate goodwill impairment annually or more frequently if an event occurs or circumstances change in the interim that would more likely than not reduce the fair value of the asset below its carrying amount. See Note 2 — Summary of Significant Accounting Policies — Goodwill and Intangible Assets to our Consolidated Financial Statements filed with our 2024 Form 10-K (filed on March 5, 2025).

Previous wording

Interest income consists primarily of interest income earned on our cash and cash equivalents.

Current wording

Interest income consists primarily of interest income earned on our cash, cash equivalents, and short-term marketable securities.

Previous wording

Upon closing of the Acquisition, as a wholly owned subsidiary of Illumina, we were no longer subject to U.S. income tax for the successor periods on a standalone basis and U.S. income tax was combined into Illumina’s consolidated income tax return as a subsidiary of Illumina. However, for financial statement purposes, we have elected to compute our income tax provision, including current and deferred taxes, as if we filed a separate income tax return and were not included in Illumina’s consolidated return for the period GRAIL was owned by Illumina. Including the provision for income taxes in our standalone financials is more representative of our financial position as a standalone company.

Current wording

Upon closing of the Acquisition, as a wholly owned subsidiary of Illumina, we were no longer subject to U.S. income tax on a standalone basis and U.S. income tax was combined into Illumina’s consolidated income tax return as a subsidiary of Illumina. However, for financial statement purposes, we have elected to compute our income tax provision, including current and deferred taxes, as if we filed a separate income tax return and were not included in Illumina’s consolidated return for the period GRAIL was owned by Illumina. Including the provision for income taxes in our standalone financials is more representative of our financial position as a standalone company. As such, the income tax provisions and related deferred tax assets and liabilities reflected in our financial statements for the period ending March 31, 2024 has been estimated as if we were a separate taxpayer.

Previous wording

Under this method, various tax attributes, such as net operating losses and tax credits, are also presented on a separate return basis. For income tax purposes, since we were not a separate taxpayer and merely a subsidiary of Illumina, these tax attributes, including net operating losses and tax credits, are the property of Illumina and have either already been utilized by Illumina in its consolidated or combined income tax returns or will be utilized by Illumina in its returns in the future. Accordingly, such tax attributes will not be available to us as a standalone entity on our income tax returns in the future; therefore, in connection with the Spin-off, we recorded an entry to additional paid in capital in order to remove the tax-effected deferred tax assets, net of any valuation allowance, for the tax attributes that remained the property of Illumina.

Current wording

Under this method, various tax attributes, such as net operating losses and tax credits, are also presented on a separate return basis. For income tax purposes, since we were not a separate taxpayer and merely a subsidiary of Illumina, these tax attributes, including net operating losses and tax credits, are the property of Illumina and have either already been utilized by Illumina in its consolidated or combined income tax returns or will be utilized by Illumina in its returns in the future. Accordingly, such tax attributes will not be available to us as a standalone entity on our income tax returns in the future; therefore, in connection with the Spin-off, we recorded an entry to additional paid in capital in order to remove the tax-effected deferred tax assets, net of any valuation allowance, for the tax attributes that remained the property of Illumina. Beginning in 2024 after the Spin-off, as a

Previous wording

Comparisons of the Three and Nine Months Ended September 30, 2024 and October 1, 2023

Current wording

Comparisons of the Three Months Ended March 31, 2025 and March 31, 2024

Previous wording

The following table summarizes our results of operations for the three and nine months ended September 30, 2024 and October 1, 2023.

Current wording

The following table summarizes our results of operations for the three months ended March 31, 2025 and March 31, 2024.

Previous wording

The increase in screening revenue of $8.6 million was primarily attributable to a 57% increase in Galleri sales volume, offset by a 3% decrease in average selling price (“ASP”). The Galleri sales volume increased in 2024 as a result of the continued ramp in our commercial activity, expansion of our network of ordering providers, additional commercial partnerships and new promotional campaigns.

Current wording

The increase in screening revenue of $5.6 million was primarily attributable to a 31% increase in Galleri sales volume, offset by a 5% decrease in average selling price (“ASP”). The Galleri sales volume increased in the first three months of 2025 as a result of the continued ramp in our commercial activity and partnerships, expansion of our network of ordering providers, and new promotional campaigns.

Previous wording

The increase in cost of screening revenue (exclusive of amortization of intangible assets) and cost of screening revenue — related parties of $11.1 million was primarily attributable to an increase in test volume. Cost of screening revenue (exclusive of amortization of intangible assets) and cost of screening revenue — related parties as a percent of revenue decreased in the nine months ended September 30, 2024 primarily due to improved efficiency in Galleri testing related to increased Galleri sales volume.

Current wording

The increase in cost of screening revenue (exclusive of amortization of intangible assets) of $3.4 million was primarily attributable to an increase in test volume. Cost of screening revenue (exclusive of amortization of intangible assets) as a percent of revenue decreased in 2025 primarily due to the launch of our automated platform, however this decrease was offset by the 5% decrease in average selling price.

Previous wording

Research and development and research and development — related parties expenses for the three months ended September 30, 2024 and October 1, 2023 were as follows:

Current wording

Research and development expenses for the three months ended March 31, 2025 and March 31, 2024 were as follows:

Previous wording

The decrease in research and development expenses by $1.8 million was primarily driven by a decrease in clinical studies and research collaboration expenses of $3.1 million due to the completion of enrollment in our Pathfinder 2 study and completion of final study visits in our NHS Galleri Trial. The increase in laboratory supplies and expenses of $0.7 million was primarily driven by an increase in our reserve for excess supplies on hand as a result of our strategic decision to decrease investment in product programs beyond Galleri as part of the Restructuring Plan. The increase in compensation expenses of $0.3 million was primarily related to an increase of $9.0 million in severance and benefits related to the Restructuring Plan, offset by decreases of $3.4 million in stock-based compensation, $2.9 million in salaries and wages and $2.4 million in variable compensation expense primarily due to the reduction in workforce related to the Restructuring Plan. The increase of $0.3 million in other expenses is a result of increases in the use of contractors and temporary labor, cloud computing, and other expenses driven by higher software, IT, and facilities expenses being allocated to the research and development function, partially offset by a decrease in depreciation expenses.

Current wording

The decrease of $3.4 million in allocated expenses was primarily attributable to lower software, IT, and facilities expenses being allocated to the research and development function.

Previous wording

The increase in research and development expenses by $19.4 million was primarily attributable to the increase in laboratory supplies and expenses, other expenses, and compensation expenses. The increase in laboratory supplies and expenses of $7.7 million was primarily driven by increased sample processing to support our clinical studies as well as development and validation testing of our automated platform. The increase of $6.9 million in other expenses was primarily driven by an increase of $2.3 million in professional services expenses, an increase of $3.5 million driven by higher software, IT, and facilities expenses being allocated to the research and development function, and an increase of $1.1 million in the use of contractors and temporary labor. The increase of $6.5 million in compensation expenses was primarily related to an increase of $9.0 million in severance and benefits related to the Restructuring Plan and an increase of $1.1 million in salaries and wages primarily due to a reduction in labor allocated to development services projects, offset by decreases of $2.0 million in variable compensation expense and $1.6 million in stock-based compensation primarily due to the reduction in workforce related to the Restructuring Plan. The decrease in clinical studies and research collaboration expenses of $1.7 million was primarily due to completion of enrollment in our Pathfinder 2 study and completion of final study visits in our NHS Galleri Trial.

Current wording

The decrease in clinical studies of $9.0 million was primarily due to a decrease of $10.1 million primarily related to completion of enrollment in our PATHFINDER 2 study and completion of final study visits in our NHS-Galleri Trial, partially offset by an increase of $1.1 million due to enrollment in our REACH/Galleri-Medicare study.

Previous wording

The increase in interest income of $9.1 million was primarily driven by an increase in interest earned on our money market funds primarily due to an increase in the balance of money market funds held.

Current wording

The increase in interest income of $4.9 million was primarily driven by an increase in interest earned on our money market funds and short-term marketable securities primarily due to an increase in the balance on hand as a result of the disposal funding provided by Illumina in connection with the Spin-Off.

Previous wording

The increase in benefit from income taxes was primarily driven by the increase in pretax tax book losses for the three months ended September 30, 2024 when compared to the three months ended October 1, 2023, with consideration to the impact of the valuation allowance against pre-tax losses.

Current wording

The increase in benefit from income taxes was primarily driven by the increase in effective tax rate for the three months ended March 31, 2025 when compared to the effective tax rate for the three months ended March 31, 2024. The increase in effective tax rate for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 primarily relates to the Company’s 2024 valuation allowance impacts against pre-tax losses prior to the Spin-off.

Previous wording

In addition to our results provided throughout this Quarterly Report on Form 10-Q that are determined in accordance with GAAP, this Quarterly Report on Form 10-Q also includes the following non-GAAP financial measures for the three and nine months ended September 30, 2024 and October 1, 2023, which information should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and the related notes and accompanying notes included elsewhere in this Quarterly Report on Form 10-Q:

Current wording

In addition to our results provided throughout this Form 10-Q that are determined in accordance with GAAP, this Form 10-Q also includes the following non-GAAP financial measures for the three months ended March 31,

Previous wording

(1) Gross loss is calculated as total revenue less cost of revenue (exclusive of amortization of intangible assets), cost of revenue — related parties, and cost of revenue — amortization of intangible assets.

Current wording

(1) Gross loss is calculated as total revenue less cost of screening revenue (exclusive of amortization of intangible assets), cost of development services revenue and cost of revenue — amortization of intangible assets.