Full Press Release Details
GRAIL AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS
| Page | ||||
| AUDITED CONSOLIDATED FINANCIAL STATEMENTS: | ||||
| Report of Independent Registered Public Accounting Firm | 2 | |||
| Consolidated Balance Sheets | 3 | |||
| Consolidated Statements of Operations | 4 | |||
| Consolidated Statements of Comprehensive Loss | 5 | |||
| Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders Deficit | 6 | |||
| Consolidated Statements of Cash Flows | 7 | |||
| Notes to Consolidated Financial Statements | 8 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of GRAIL, Inc.
Financial Statements
We have audited the accompanying consolidated balance sheets of GRAIL, Inc. and its subsidiaries (the Company ) as of
December 31, 2019 and 2018, and the related consolidated statements of operations, of comprehensive loss, of redeemable convertible preferred stock and stockholders deficit and of cash flows for the years then ended, including the related
notes (collectively referred to as the consolidated financial statements ). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019
and 2018, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Change in Accounting Principle
As discussed in Note 2 to the
financial statements, the Company changed the manner in which it accounts for leases in 2019.
These consolidated financial statements are the responsibility of the Company s management. Our responsibility is to express an opinion on the Company s
consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of
these consolidated financial statements in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation
of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
San Jose, California
We have served as the Company s auditor since 2017.
CONSOLIDATED BALANCE SHEETS
except share and per share data)
| As of December 31, | ||||||||
| 2018 | 2019 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 95,094 | $ | 143,189 | ||||
| Short-term marketable securities | 546,256 | 401,155 | ||||||
| Prepaid expenses and other current assets | 6,539 | 12,585 | ||||||
| Prepaid expenses and other current assets related party | 1,342 | 584 | ||||||
| Total current assets | 649,231 | 557,513 | ||||||
| Property and equipment, net | 29,604 | 23,078 | ||||||
| Property and equipment, net related parties | 3,435 | 1,347 | ||||||
| Operating lease right-of-use assets | 35,036 | |||||||
| Long-term marketable securities | 13,933 | |||||||
| Restricted cash | 1,630 | 1,228 | ||||||
| Other non-current assets | 2,945 | 3,384 | ||||||
| Total assets | $ | 686,845 | $ | 635,519 | ||||
| Liabilities, redeemable convertible preferred stock, and stockholders deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 12,390 | $ | 5,880 | ||||
| Accounts payable related parties | 361 | 207 | ||||||
| Accrued liabilities | 36,961 | 31,584 | ||||||
| Accrued liabilities related parties | 21,209 | |||||||
| Liability for early exercise of unvested stock options, current portion | 1,451 | 1,855 | ||||||
| Operating lease liabilities | 4,604 | |||||||
| Other current liabilities | 1,785 | 800 | ||||||
| Total current liabilities | 74,157 | 44,930 | ||||||
| Finance lease payable, net of current portion | 800 | |||||||
| Deferred rent, net of current portion | 6,909 | |||||||
| Operating lease liabilities, net of current portion | 36,638 | |||||||
| Liability for early exercise of unvested stock options, net of current portion | 2,251 | 349 | ||||||
| Other non-current liabilities | 2,356 | 3,075 | ||||||
| Total liabilities | 86,473 | 84,992 | ||||||
| Commitments and contingencies (Note 7) | ||||||||
| Redeemable convertible preferred stock: | ||||||||
| Series A redeemable convertible preferred stock, $0.001 par value, 85,000,000 shares authorized as of December 31, 2018 and 2019; 85,000,000 shares issued and outstanding as of December 31, 2018 and 2019; aggregate liquidation preference of $85,000 as of December 31, 2018 and 2019 | 68,263 | 68,263 | ||||||
| Series B redeemable convertible preferred stock, $0.001 par value, 309,256,591 shares authorized as of December 31, 2018 and 2019; 309,256,591 shares issued and outstanding as of December 31, 2018 and 2019; aggregate liquidation preference of $1,239,655 as of December 31, 2018 and 2019 | 1,235,404 | 1,235,404 | ||||||
| Series C redeemable convertible preferred stock, $0.001 par value, 63,144,601 shares and 63,144,600 shares authorized as of December 31, 2018 and 2019, respectively; 63,144,600 shares issued and outstanding as of December 31, 2018 and 2019; aggregate liquidation preference of $300,000 as of December 31, 2018 and 2019 | 299,557 | 299,557 | ||||||
| Series D redeemable convertible preferred stock, $0.001 par value, no shares authorized as of December 31, 2018, 48,942,833 shares authorized as of December 31, 2019; no shares issued and outstanding as of December 31, 2018, 31,323,413 shares issued and outstanding as of December 31, 2019; aggregate liquidation preference of $0 as of December 31, 2018 and $160,000 as of December 31, 2019 | 159,836 | |||||||
| Total redeemable convertible preferred stock | 1,603,224 | 1,763,060 | ||||||
| Stockholders deficit: | ||||||||
| Common stock, $0.001 par value; 715,179,000 (Class A 685,179,000 and Class B 30,000,000) shares and 863,943,220 (Class A 833,943,220 and Class B 30,000,000) shares authorized as of December 31, 2018 and 2019, respectively; 130,361,960 (Class A 105,372,563 and Class B 24,989,397) and 134,663,097 (Class A 109,673,700 and Class B 24,989,397) shares issued and outstanding as of December 31, 2018 and 2019, respectively | 129 | 138 | ||||||
| Additional paid-in capital | 57,667 | 90,495 | ||||||
| Accumulated other comprehensive income | 128 | 2,465 | ||||||
| Accumulated deficit | (1,060,776 | ) | (1,305,631 | ) | ||||
| Total stockholders deficit | (1,002,852 | ) | (1,212,533 | ) | ||||
| Total liabilities, redeemable convertible preferred stock, and stockholders deficit | $ | 686,845 | $ | 635,519 |
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
thousands, except share and per share data)
| Year Ended December 31, | ||||||||
| 2018 | 2019 | |||||||
| Operating expenses: | ||||||||
| Research and development | $ | 190,205 | $ | 158,886 | ||||
| Research and development related parties | 32,955 | 8,202 | ||||||
| Marketing | 6,107 | 7,679 | ||||||
| General and administrative | 58,229 | 80,896 | ||||||
| Total operating expenses | 287,496 | 255,663 | ||||||
| Loss from operations | 287,496 | 255,663 | ||||||
| Interest income, net | (12,550 | ) | (12,430 | ) | ||||
| Other expense, net | 287 | 1,817 | ||||||
| Loss before provision for (benefit from) income taxes | 275,233 | 245,050 | ||||||
| Provision for (Benefit from) income taxes | 485 | (195 | ) | |||||
| Net loss | $ | 275,718 | $ | 244,855 | ||||
| Net loss attributable to Class A and Class B common stockholders | ||||||||
| Basic and diluted | $ | 275,718 | $ | 244,855 | ||||
| Net loss per share attributable to Class A and Class B common stockholders | ||||||||
| Basic and diluted | $ | (2.42 | ) | $ | (1.99 | ) | ||
| Weighted-average shares of Class A and Class B common stock used in computing net loss per share attributable to Class A and Class B common stockholders | ||||||||
| Basic and diluted | 114,138,912 | 123,188,351 |
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
| Year Ended December 31, | ||||||||
| 2018 | 2019 | |||||||
| Net loss | $ | 275,718 | $ | 244,855 | ||||
| Other comprehensive income: | ||||||||
| Net unrealized gain on marketable securities | (371 | ) | (589 | ) | ||||
| Foreign currency translation adjustment | (483 | ) | (1,748 | ) | ||||
| Comprehensive loss | $ | 274,864 | $ | 242,518 |
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS DEFICIT
(in thousands, except share data)
| Redeemable Convertible Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Series A | Preferred Series B | Preferred Series C | Preferred Series D | Class A | Class B | Additional Paid-In Capital | Accumulated Other Compre- hensive (Loss) Income | Accumulated Deficit | Total Stock- holders Deficit | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2018 | 85,000,000 | $ | 68,263 | 309,256,591 | $ | 1,235,404 | $ | $ | 100,503,548 | $ | 95 | 24,989,397 | $ | 25 | $ | 43,468 | $ | (726 | ) | $ | (785,058 | ) | $ | (742,196 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares upon exercise of options | 5,734,164 | 4 | 1,549 | 1,553 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchases of early exercised stock options | (865,149 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of early exercised stock options | 3 | 2 | 1,609 | 1,614 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series C redeemable convertible preferred stock, net of issuance costs of $443 | 63,144,600 | 299,557 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 11,041 | 11,041 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive | 854 | 854 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | (275,718 | ) | (275,718 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2018 | 85,000,000 | $ | 68,263 | 309,256,591 | $ | 1,235,404 | 63,144,600 | $ | 299,557 | $ | 105,372,563 | $ | 102 | 24,989,397 | $ | 27 | $ | 57,667 | $ | 128 | $ | (1,060,776 | ) | $ | (1,002,852 | ) | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares upon exercise of options | 5,158,613 | 5 | 3,042 | 3,047 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchases of early exercised stock options | (857,476 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of early exercised stock options | 3 | 1 | 1,395 | 1,399 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series D redeemable convertible preferred stock, net of issuance costs of $164 | 31,323,413 | 159,836 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 28,391 | 28,391 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | 2,337 | 2,337 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | (244,855 | ) | (244,855 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2019 | 85,000,000 | $ | 68,263 | 309,256,591 | $ | 1,235,404 | 63,144,600 | $ | 299,557 | 31,323,413 | $ | 159,836 | 109,673,700 | $ | 110 | 24,989,397 | $ | 28 | $ | 90,495 | $ | 2,465 | $ | (1,305,631 | ) | $ | (1,212,533 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended December 31, | ||||||||
| 2018 | 2019 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (275,718 | ) | $ | (244,855 | ) | ||
| Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||
| Depreciation and amortization | 14,080 | 10,307 | ||||||
| Stock-based compensation expense | 11,041 | 28,391 | ||||||
| Loss on disposal of property and equipment | 214 | 334 | ||||||
| Loss on foreign currency | 1,624 | |||||||
| Impairment of property and equipment and other long-term assets | 5,657 | 2,219 | ||||||
| Amortization of premium (discount) on marketable securities | (4,209 | ) | (4,530 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other assets | 1,478 | (5,553 | ) | |||||
| Prepaid expenses and other assets related party | 458 | 758 | ||||||
| Accounts payable | 3,276 | (6,393 | ) | |||||
| Accounts payable related parties | (3,614 | ) | (154 | ) | ||||
| Accrued and other liabilities | 16,868 | (4,507 | ) | |||||
| Accrued and other liabilities related parties | 21,209 | (21,209 | ) | |||||
| Operating lease right-of-use assets | 4,025 | |||||||
| Operating lease liabilities | (6,251 | ) | ||||||
| Net cash used by operating activities | (209,260 | ) | (245,794 | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchases of property and equipment | (15,812 | ) | (3,332 | ) | ||||
| Purchases of property and equipment related parties | (177 | ) | ||||||
| Proceeds from the sale of property and equipment | 476 | 82 | ||||||
| Purchases of marketable securities | (681,130 | ) | (551,519 | ) | ||||
| Proceeds from maturities of marketable securities | 603,253 | 687,806 | ||||||
| Net cash provided by (used by) investing activities | (93,390 | ) | 133,037 | |||||
| Cash flows from financing activities | ||||||||
| Proceeds from exercise of stock options | 1,553 | 3,047 | ||||||
| Proceeds from early exercise of unvested stock options | 1,300 | 195 | ||||||
| Repurchases of early exercised stock options | (282 | ) | (261 | ) | ||||
| Proceeds from issuance of Series C redeemable convertible preferred stock, net | 299,557 | |||||||
| Proceeds from issuance of Series D redeemable convertible preferred stock, net | 159,836 | |||||||
| Payment of deferred offering costs | (932 | ) | ||||||
| Repayments of borrowings from finance lease | (1,510 | ) | (1,559 | ) | ||||
| Net cash provided by financing activities. | 300,618 | 160,326 | ||||||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 483 | 124 | ||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | (1,549 | ) | 47,693 | |||||
| Cash, cash equivalents and restricted cash beginning of year | 98,273 | 96,724 | ||||||
| Cash, cash equivalents and restricted cash end of year | $ | 96,724 | $ | 144,417 | ||||
| Represented by: | ||||||||
| Cash and cash equivalents | $ | 95,094 | $ | 143,189 | ||||
| Restricted cash | 1,630 | 1,228 | ||||||
| Total | $ | 96,724 | $ | 144,417 | ||||
| Supplemental cash flow information: | ||||||||
| Cash paid for interest | $ | 164 | $ | 85 | ||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Vesting of early exercised stock options | 1,614 | 1,399 | ||||||
| Property and equipment included in accounts payable and accrued liabilities | 3,914 | 138 | ||||||
| Deferred offering costs included in accrued liabilities | 994 |
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ORGANIZATION AND DESCRIPTION OF BUSINESS
GRAIL, Inc. ( GRAIL or the Company ) was incorporated in the State of Delaware in
September 2015 and began operations as a stand-alone entity in February 2016. GRAIL is a healthcare company focused on developing technologies for early cancer detection. The Company is headquartered in Menlo Park, California.
Since inception, the Company has incurred losses from operations. The Company incurred losses from operations of $287.5 million and $255.7 million
during 2018 and 2019, respectively. The Company had an accumulated deficit of $1.3 billion as of December 31, 2019. The Company has not yet launched a commercial product and may never develop a product that will generate revenues, including in
amounts that will be sufficient to fund operations. Accordingly, the Company has been dependent on its ability to raise capital through equity issuances.
The Company had $558.3 million of cash, cash equivalents, and marketable securities at December 31, 2019. Based on the Company s business
plans, management believes that this is sufficient to meet its obligations for at least 12 months from the issuance date of these consolidated financial statements.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
of Presentation and Principles of Consolidation
The consolidated financial statements for 2018 and 2019 include the accounts of GRAIL, Inc. and
its wholly- owned subsidiaries. The consolidated financial statements are prepared in accordance with United States Generally Accepted Accounting Principles (U.S. GAAP). All intercompany balances and transactions have been eliminated on
preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the
reported amounts of expenses in the consolidated financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to accrued clinical studies and research and development expenses,
stock-based compensation expense, useful lives of intangible assets and property and equipment, determination of incremental borrowing rate for operating leases, and the provision (benefit) for income taxes. Actual results could differ from these
estimates, and such differences could be material to the consolidated financial statements.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, and
marketable securities.
Substantially all the Company s cash and cash equivalents are deposited in accounts with four accredited financial
institutions that management believes are of high-credit quality. Such deposits have and will continue to exceed federally insured limits. The Company has not experienced any losses on its cash deposits.
The Company s investment policy limits investments to certain types of securities issued by the
U.S. government and its agencies and institutions with investment-grade credit ratings and places restrictions on maturities and concentration by type and issuer. The Company is exposed to credit risk in the event of a default by the financial
institutions holding its cash, cash equivalents, and marketable securities, and by issuers of marketable securities to the extent recorded on the consolidated balance sheets. As of December 31, 2019, the Company had no off-balance sheet
concentrations of credit risk.
Risks and Uncertainties
The Company is in the research and discovery stage and may never develop a product that will generate revenues, including in amounts sufficient to fund
operations. The market for which the Company is developing products is highly competitive and rapidly changing. Difficulties or delays in the Company s clinical studies, delays in planned commercial launch of the Company s products,
potential complications with the Company s sole suppliers, complex regulatory regimes, regulatory issues and other factors could negatively impact the Company s operating results.
In December 2019, a novel strain of coronavirus (COVID-19) was first reported in Wuhan, China and has since become a global pandemic. The extent of the
impact of the coronavirus outbreak on the Company s business will depend on certain developments, including the duration and spread of the outbreak and the extent and severity of the impact on the Company s research activities at its
primary operations and the operations of its suppliers as well as any further delay on clinical trial activities, all of which are uncertain and cannot be predicted. As of the date of issuance of these consolidated financial statements, the extent
to which the coronavirus outbreak may materially impact the Company s financial condition, liquidity, or results of operations is uncertain.
The Company may need to raise additional equity or debt financing to fund future operations that may not be available at terms acceptable to the
Company, if at all. If the Company does not successfully commercialize its products in development, it will be unable to generate revenue from product sales or achieve profitability.
The Company operates and manages
its business as one reportable operating segment. The Company s chief operating decision maker reviews financial information on an aggregate basis for the purposes of evaluating financial performance and allocating the Company s resources.
95% and 100% of the Company s long-lived assets were located in the United States as of December 31, 2018 and 2019, respectively.
Value of Financial Instruments
The Company determines the fair value of financial assets and liabilities using the fair value hierarchy
established in Accounting Standards Codification (ASC) Topic 820, Fair Value Measurement (ASC 820). ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants. The hierarchy describes three levels of inputs that may be used to measure fair value, as follows:
Level 1 Observable inputs, such as quoted prices in active markets for identical assets and liabilities.
Level 2 Observable inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or
liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 Unobservable inputs that are supported by little or no market activity and that
are significant to the fair value of the assets or liabilities.
A financial instrument s level within the fair value hierarchy is based on the
lowest level of any input that is significant to the fair value measurement.
The Company has not elected the fair value option as prescribed by ASC
Topic 825, Financial Instruments, for its financial assets and liabilities that are not otherwise required to be carried at fair value. Under ASC 820, material financial assets and liabilities not carried at fair value are reported at their
The carrying amounts for financial instruments such as prepaid expenses and other current assets, prepaid expenses and other
current assets related party, accounts payable, accounts payable related parties, accrued liabilities and accrued liabilities related parties approximate fair value due to their short-term maturities.
Cash and Cash Equivalents
considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks denominated in U.S. Dollars, Hong Kong Dollars and British