Pacific Biosciences of California (PACB) 2020年年度報告「NASDAQ」.pdf

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1、2020 Annual Report?UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549Form 10-K(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For the fiscal year ended December 31,2020Or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THESECURITIES EX

2、CHANGE ACT OF 1934For the transition period fromtoCommission File Number 001-34899Pacific Biosciences of California,Inc.(Exact name of registrant as specified in its charter)Delaware16-1590339(State or other jurisdiction ofincorporation or organization)(I.R.S.EmployerIdentification No.)1305 OBrien D

3、riveMenlo Park,CA 9402594025(Address of principal executive offices)(Zip Code)(Registrants telephone number,including area code)(650)521-8000Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock,par value$0

4、.001 per sharePACBThe NASDAQ Stock Market LLCSecurities registered pursuant to Section 12(g)of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No Indicate by check mark if the registrant is not required to file rep

5、orts pursuant to Section 13 or Section 15(d)of theAct.Yes No Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the SecuritiesExchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was requir

6、ed to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuantto Rule 405 of Regulation S-T(232.405 of this chapter)during

7、 the preceding 12 months(or for such shorter period that the registrant wasrequired to submit and post such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reportingcompany or an emerging growth company.S

8、ee the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company”and“emerging growth company”in Rule 12b-2 of the Exchange Act.(Check one):Large accelerated filer Accelerated filerNon-accelerated filerSmaller reporting company Emerging growth company If an emerging growt

9、h company,indicate by check mark if the registrant has elected not to use the extended transition period forcomplying 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 has filed a report on and a

10、ttestation to its managements assessment of the effectiveness ofits internal control over financial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered publicaccounting firm that prepared or issued its audit report.Yes No Indicate by check mark whether the regis

11、trant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No Aggregate market value of registrants common stock held by non-affiliates of the registrant on June 30,2020,based upon the closingprice of Common Stock on such date as reported by NASDAQ Global Select Market,was approximat

12、ely$498,891,052.Shares of votingstock held by each officer and director have been excluded in that such persons may be deemed to be affiliates.This assumption regardingaffiliate status is not necessarily a conclusive determination for other purposes.Number of shares outstanding of the issuers common

13、 stock as of January 31,2021:193,102,689DOCUMENTS INCORPORATED BY REFERENCE:Portions of the registrants definitive Proxy Statement relating to its 2021 Annual Meeting of Stockholders to be held on June 16,2021are incorporated by reference into Part III of this Annual Report on Form 10-K where indica

14、ted.Such Proxy Statement will be filed with theU.S.Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.THIS PAGE INTENTIONALLY LEFT BLANKPacific Biosciences of California,Inc.Annual Report on Form 10-KPagePART IItem 1.Business1Item 1A.Risk

15、 Factors13Item 1B.Unresolved Staff Comments46Item 2.Properties46Item 3.Legal Proceedings46Item 4.Mine Safety Disclosures46PART IIItem 5.Market for Registrants Common Equity,Related Stockholder Matters and IssuerPurchases of Equity Securities47Item 6.Selected Financial Data49Item 7.Managements Discus

16、sion and Analysis of Financial Condition and Results ofOperations50Item 7A.Quantitative and Qualitative Disclosures about Market Risk60Item 8.Financial Statements and Supplementary Data62Item 9.Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure98Item 9A.Controls and

17、Procedures98Item 9B.Other Information99PART IIIItem 10.Directors,Executive Officers and Corporate Governance99Item 11.Executive Compensation99Item 12.Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters99Item 13.Certain Relationships and Related Transactions,

18、and Director Independence99Item 14.Principal Accountant Fees and Services99PART IVItem 15.Exhibits,Financial Statement Schedules99Item 16.Form 10-K Summary102Signatures103SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSDiscussions under the captions“Business,”“Risk Factors”and“Managements Discussio

19、n and Analysis ofFinancial Condition and Results of Operations”contain or may contain forward-looking statements that are basedon the beliefs and assumptions of the management of Pacific Biosciences of California,Inc.(the“Company,”“we,”“us,”or“our”)and on information currently available to our manag

20、ement.The statements contained in thisAnnual Report on Form 10-K that are not purely historical are forward-looking statements within the meaning ofSection 27A of the Securities Act of 1933,as amended,and Section 21E of the Securities Exchange Act of 1934,as amended(the“Exchange Act”),and include,bu

21、t are not limited to,the attributes and sequencing advantagesof SMRTtechnology,our current and future products,market opportunities,strategic and commercial plans,including strategy for our business and related financing,expectations regarding the conversion of backlog torevenue and the pricing and

22、gross margin for products,manufacturing plans including developing and scaling ofmanufacturing and delivery of our products,research and development plans,product development including,among other things,statements relating to future uses,quality or performance of,or benefits of using,products ortec

23、hnologies,updates or improvements of our products,intentions regarding seeking regulatory approval for ourproducts,competition,expectations regarding unrecognized income tax benefits,expectations regarding theimpact of an increase in market rates on the value of our investment portfolio,the sufficie

24、ncy of cash,cashequivalents and investments to fund projected operating requirements,the effects of recent accountingpronouncements on our financial statements and other future events.Such statements may be signified by termssuch as“anticipates,”“believes,”“could,”“estimates,”“expects,”“intends,”“ma

25、y,”“plans,”“potential,”“predicts,”“projects,”“seeks,”“should,”“target,”“will,”“would”or similar expressions and the negatives ofthose terms.Forward-looking statements involve known and unknown risks,uncertainties and other factors thatmay cause our actual results,performance or achievements to be ma

26、terially different from any future results,performance or achievements expressed or implied by the forward-looking statements.Factors that could causeor contribute to such differences include,but are not limited to,those discussed under the heading“Risk Factors”in this report and in other documents

27、we file with the Securities and Exchange Commission(“SEC”).Given theserisks and uncertainties,you should not place undue reliance on forward-looking statements.Also,forward-looking statements represent managements beliefs and assumptions as of the date of this report.Except asrequired by law,we assu

28、me no obligation to update forward-looking statements publicly,or to update the reasonsactual results could differ materially from those anticipated in these forward-looking statements,even if newinformation becomes available in the future.ITEM 1.BUSINESSOverviewWe develop solutions that allow scien

29、tists to fundamentally transform how data from living systems areacquired,processed,and interpreted.Our products provide the most accurate and complete views of the geneticcode of all living things,empowering scientists to improve the human condition from curing diseases,tofeeding a hungry world,to

30、conserving our planets ecosystems.Based on our novel Single Molecule,Real-Time(SMRT)sequencing technology,our products enable:denovo genome assembly to finish genomes in order to more fully identify,annotate and decipher genomicstructures;full-length transcript analysis to improve annotations in ref

31、erence genomes,characterize alternativelyspliced isoforms in important gene families,and find novel genes;targeted sequencing to more comprehensivelycharacterize genetic variations;and real-time kinetic information for epigenome characterization.Our technologyprovides highly accurate,long reads,othe

32、rwise referred to as HiFi reads,with uniform coverage and the ability tosimultaneously detect epigenetic changes.PacBiosequencing systems,including associated consumables andsoftware,provide a simple and fast end-to-end workflow for SMRT sequencing.Our current products include our Sequel II and Sequ

33、el IIe instruments,which when used together with ourSMRT Cell 8M,are capable of sequencing up to approximately eight million DNA molecules simultaneously,and our previous generation Sequel instrument,which when used together with our SMRT Cell 1M,are capableof sequencing up to approximately one mill

34、ion DNA molecules simultaneously.Our customers and our scientific collaborators have published over 8000 peer-reviewed articles in journalsincluding Nature,Science,Cell,PNAS and The New England Journal of Medicine highlighting the power andapplications of SMRT sequencing in projects such as finishin

35、g genomes,structural variation discovery,isoformtranscriptome characterization,rare mutation discovery and the identification of chemical modifications of DNArelated to virulence and pathogenicity.Our research and development efforts are focused on developing newproducts and further improving our ex

36、isting products including continuing chemistry and sample preparationimprovements to increase throughput and expand our supported applications.Pacific Biosciences of California,Inc.,formerly Nanofluidics,Inc.,was incorporated in the State ofDelaware in 2000.Our executive offices are located at 1305

37、OBrien Drive,Menlo Park,California 94025,andour telephone number is(650)521-8000.The Underlying ScienceGenetic inheritance in living systems is conveyed through a naturally occurring information storage systemknown as deoxyribonucleic acid,or DNA.DNA stores information in linear chains of the chemic

38、al basesadenine,cytosine,guanine and thymine,represented by the symbols A,C,G and T respectively.In humans,the human genome is comprised of approximately three billion DNA base-pairs,which,aredivided into 23 chromosomes ranging in size from 50 million to 250 million bases.Within these chromosomesare

39、 approximately 23,000 smaller regions,called genes,which contain the blueprints for protein production.Theproteins synthesized from these blueprints essentially underlie the operation of all biological systems.The first few whole-genome sequencing studies of disease have shown that rare mutations pl

40、ay a criticalrole in human disease,which has contributed to the burgeoning field of genomics.Since then,recent discoverieshave highlighted additional complexities in the building blocks of DNA and ribonucleic acid,or RNA,includingthe presence of modified bases,the discovery of new modified bases,and

41、 the processing of RNA,molecules aftersuch molecules are transcribed from the genome,thereby affecting the synthesis of proteins.Recent advances in our understanding of biological complexity have highlighted the need for advancedtools,such as our SequelSystem,Sequel II System,and Sequel IIe System,t

42、o study DNA,RNA,and proteins.1Incremental technological advances in nucleic acid sequencing have provided novel insights into the structureand function of the genome.With our technology,we hope to help scientists to one day fully characterizegenomes in both humans and other living organisms.Evolutio

43、n of SequencingIn order to understand the limitations of current nucleic acid sequencing technologies,it is important tounderstand the sequencing process.This process consists of three phases:sample preparation,physicalsequencing,and analysis.In the sample preparation phase,the target genome is brok

44、en into multiple smallfragments and,depending on the amount of sample DNA available,these fragments may be copied multipletimes through a process known as amplification,using a variety of molecular methods.In the physicalsequencing phase,the individual bases in each fragment are identified in order,

45、creating individual reads.Thenumber of individual bases identified contiguously is defined as read length.In the analysis phase,bioinformaticssoftware is used to align overlapping reads,which allows the original genome to be assembled into contiguoussequence.The longer the read length,the easier it

46、is to accurately assemble the genome.Sanger SequencingThe first automated sequencing methodology,often referred to as“Sanger sequencing,”was developed byFrederick Sanger in 1977.With this technology,during sample preparation,scientists first make different sizedfragments of DNA each starting from th

47、e same location.Each fragment ends with a particular base that is labeledwith one of four fluorescent dyes corresponding to that particular base.Then all of the fragments are distributedin order of their length by driving them through a gel.Information regarding the last base is used to determine th

48、eoriginal sequence.Under standard conditions,this method results in a read length that is approximately 700 baseson average,but may be extended to 1,000 bases.These are relatively long read lengths compared with manynext-generation sequencing methods.However,Sanger sequencing is limited by the small

49、 amounts of data thatcan be processed per unit of time,referred to as throughput.Short-read SequencingSeveral commercial DNA sequencing tools emerged in 2005 in response to the low throughput of Sangersequencing.Now commonly referred to as“short-read sequencing”,these methods achieve much higherthro

50、ughput by sequencing a large number of DNA molecules in parallel,but with the tradeoff of shorter readlengths.In most short-read sequencing methodologies,tens of thousands of identical strands are anchored to a givenlocation to be read in a process consisting of successive flushing and scanning oper

51、ations.The“flush and scan”sequencing process involves sequentially flushing in reagents,such as labeled nucleotides,incorporatingnucleotides into the DNA strands,stopping the incorporation reaction,washing out the excess reagent,scanningto identify the incorporated base and finally treating that bas

52、e so that the strand is ready for the next“flush andscan”cycle.This cycle is repeated until the reaction is no longer viable.Due to the large number of flushing,scanning and washing cycles required,the time to result for short-readsequencing methods can be longer,sometimes taking days.This repetitiv

53、e process also limits the average readlength produced by most of these systems under standard sequencing conditions to approximately 35 to 600bases.The short-read sequencing technologies require a large number of DNA molecules during the sequencingprocess.To generate enough DNA molecules,a copying m

54、ethod called PCR amplification is required during thesample preparation phase.This amplification process can introduce errors known as amplification bias.Theeffect of this bias is that resulting copies are not uniformly representative of the original template DNA.In caseswhere the original template

55、DNA contains regions of relatively high G-C content or relatively high A-T content,the PCR amplification process tends to under-represent these regions.As a result,these regions,which maycontain entire genes,can be completely missed.2In summary,while short-read sequencing methods can offer very high

56、 throughput and low cost peridentified base,their disadvantages can include limited read length,variation in sequence coverage with regard torepresentation bias and accuracy,dependence on amplification,long time to result,and/or a need for manysamples to justify machine operation.The PacBio Solution

57、 Single Molecule,Real-Time TechnologyWe have developed our SMRT technology,which enables single molecule,real-time detection of nucleicacid sequences,to address many of the limitations of previous sequencing technologies.By providing long readlengths,elimination of the dependence on amplification du

58、ring sample preparation(which can result inamplification bias),very high consensus accuracy,and the ability to detect DNA base modifications,PacBiossystems can provide more comprehensive and higher quality information of DNA and RNA sequence as well asepigenetic regulation and DNA damage.Pacific Bio

59、sciencesSMRT TechnologySMRT technology enables the observation of DNA synthesis as it occurs in real time by harnessing thenatural process of DNA replication,which in nature is a highly efficient and accurate process actuated by DNApolymerases,enzymes measuring approximately 15 nanometers(nm)in diam

60、eter.DNA polymerases attachthemselves to a strand of DNA to be replicated,examines the individual base at the point it is attached,and thendetermines which of four building blocks,or nucleotides,is required to complement that individual base.Afterdetermining which nucleotide is required,the polymera

61、ses incorporate that nucleotide into the growing strandbeing produced.After incorporation,the enzyme advances to the next base to be replicated and the process isrepeated.To overcome the challenges inherent in real-time observation of the natural activity of the DNA polymerase,we offer and support f

62、our key innovations:The SMRT CellPhospholinked nucleotidesThe Sequel,Sequel II,or Sequel IIe instrumentsCircular Consensus Sequencing or“HiFi Reads”The SMRT CellOne of the fundamental challenges with observing a single DNA polymerase molecule working in real timeis the ability to detect the incorpor

63、ation of a single nucleotide,taken from a large pool of potential nucleotides,during DNA synthesis.To resolve this problem,we utilize our nanoscale innovation,the zero-mode waveguide,or ZMW.The ZMWs in our SMRT Cells consist of holes in an opaque layer,measuring only tens of nanometers indiameter fo

64、rming nanoscale wells.The small size of the ZMW causes the intensity of visible laser light,whichhas a wavelength of approximately 600nm,to decay exponentially in the ZMW.Therefore,laser light shined intothe ZMW from below is blocked from reaching the sequencing solution above the ZMW,providing sele

65、ctiveillumination of only the bottom portion of the nanoscale well.DNA polymerases are anchored to the bottom ofthe glass surface of the nanoscale wells using proprietary techniques.Nucleotides,each type labeled with adifferent colored fluorophore,are then flooded above an array of ZMWs at the requi

66、red concentration.When thelabeled nucleotides diffuse into the bottom portion of the nanoscale wells,which contain the anchored DNApolymerases,their fluorescence can be monitored.When the correct nucleotide is detected by the polymerase,itis incorporated into the growing DNA strand in a process that

67、 takes milliseconds in contrast to simple diffusionwhich takes microseconds.This difference in time results in higher signal intensity for incorporated versus3unincorporated nucleotides,which creates a high signal-to-noise ratio.Thus,the ZMW provides the ability todetect a single incorporation event

68、 against the background of fluorescently labeled nucleotides at biologicallyrelevant concentrations.Our DNA sequencing is performed on proprietary SMRT Cells,each having an array ofZMWs.The SMRT Cells for the Sequel System each contain approximately one million ZMWs and the SMRTCells for the Sequel

69、II or IIe System contain approximately eight million ZMWs.Each ZMW is capable ofcontaining a DNA polymerase molecule bound to a single DNA template.Currently,our immobilization processrandomly distributes polymerases into ZMWs across the SMRT Cell,typically resulting in approximatelyone-third to two

70、-thirds of the ZMWs having a single template.Phospholinked NucleotidesOur proprietary phospholinked nucleotides have a fluorescent dye attached to the phosphate chain of thenucleotide rather than to the base.As a natural step in the synthesis process,the phosphate chain is cleaved whenthe nucleotide

71、 is incorporated into the DNA strand.Thus,upon incorporation of a phospholinked nucleotide,theDNA polymerase naturally frees the dye molecule from the nucleotide when it cleaves the phosphate chain.Uponcleaving,the label quickly diffuses away,leaving a natural piece of DNA without evidence of labeli

72、ng.The Sequel,Sequel II and Sequel IIe InstrumentsThe Sequel,Sequel II and Sequel IIe instruments conduct,monitor,and analyze single moleculebiochemical reactions in real time.The instruments use extremely sensitive imaging systems to collect the lightpulses emitted by fluorescent reagents allowing

73、the observation of biological processes.Computer algorithms areused to translate the information that is captured by the optics system.Using the recorded information,lightpulses are converted into either an A,C,G or T base call with associated quality metrics.Once sequencing isstarted,the real-time

74、data is delivered to the systems primary analysis pipeline,which outputs base identity andquality values,or QVs.HiFi ReadsWe enable our customers to achieve very high accuracy on long,individual DNA fragments using ourCircular Consensus Sequencing method,whereby the same DNA fragment is repetitively

75、 read to overcomerandom errors that can occur on each pass.This proprietary method of producing what we call“HiFi reads”differentiates PacBio sequencing from other long-read technologies.Users who generate HiFi reads with PacBiosystems can sequence single molecule DNA fragments up to 25,000 base pai

76、rs in length with an averageaccuracy of 99.9%.SMRT Sequencing AdvantagesSequencing based on our SMRT technology offers the following key benefits:Longer read lengthsSMRT technology has been demonstrated to produce read lengths that are significantly longer thanthose of previous sequencing technologi

77、es.With reads of tens of kilobases in length,users canassemble complete genomes and sequence full-length transcripts.Long read lengths are an importantfactor in enabling a comprehensive view of the genome,as they can reveal multiple types of geneticvariation such as structural variants.High accuracy

78、Users of SMRT technology can achieve very high accuracy due to the attributes of SMRT sequencing,including accurate mapping of long reads,lack of reliance on amplification during sample preparation(which can result in amplification bias),and lower systematic bias.In addition,using PacBiosproprietary

79、 Circular Consensus Sequencing method,our customers can generate HiFi reads on singlemolecule DNA fragments up to 25,000 base pairs in length with an average accuracy of 99.9%.Thisaccuracy provides the information users need to confidently call and detect all types of variants.4More uniformity and l

80、ess systematic errorThe sample preparation step for SMRT sequencing is compatible with but does not requireamplification;when amplification is not used during sample preparation,the reads are not subject toamplification bias.Importantly,this allows for uniform identification of all bases present in

81、a DNAsample and uniform sequence coverage.As a result,SMRT sequencing can detect and identify regionsand entire genes that may be missed by short-read sequencing technologies.In addition,SMRTsequencing can achieve high accuracy when sequencing through complex and highly repetitive regions,whereas ot

82、her sequencing methods are unable to resolve such regions,which can often result in pooraccuracy.Ability to observe and capture kinetic informationThe ability to observe the activity of a DNA polymerase in real time enables the PacBio RS II,Sequel,and Sequel II Systems to collect,measure and assess

83、the dynamics and timing of nucleotides beingadded to a growing DNA strand,referred to as kinetics.It is well established in the scientificcommunity that chemical modification of DNA such as the addition of a methyl group,known asmethylation,can alter the biological activity of the affected nucleotid

84、e.The Sequel and Sequel IISystems detect changes in kinetics automatically by capturing and recording changes in the duration of,and time period between,each of the fluorescent pulses during a typical sequencing analysis.Integratedsoftware can then translate these kinetic signatures into uniquely ch

85、aracterized modified bases such as6-mA,4-mC and 5-mC.Other sequencing systems,which rely on a sample preparation amplificationstep or are limited by signal resolution,are unable to directly measure this type of kinetic data.FlexibilityOur sequencing systems have the ability to scale the throughput a

86、nd cost of sequencing across a rangeof small to large projects.They can be used with a variety of sample types and can output a range ofDNA lengths.Our ProductsWe entered the market with our first commercial product,the PacBio RS System,during the second quarterof 2011 and launched the higher perfor

87、mance PacBio RS II System during the second quarter of 2013.InSeptember 2015,we announced the Sequel System,which is based on the same underlying SMRT technology asthe PacBio RS II System,but the Sequel System can achieve up to approximately seven times the throughputusing the SMRT Cell 1M chip.In A

88、pril 2019,we introduced the Sequel II System,which can achieveapproximately eight times the throughput of the Sequel System,utilizing our new SMRT Cell 8M chip.Coupledwith chemistry and software improvements for the Sequel II System released during the fourth quarter of 2019,customers commonly gener

89、ate up to 15 times as much throughput on Sequel II Systems,compared with thethroughput generated on Sequel systems.Our sequencing systems provide access to a wide range of applicationsand are designed for expandable improvements to performance capability and new application capabilitiesthrough chemi

90、stry and software enhancements without necessitating changes to instrument hardware.In October2020,we launched the Sequel IIe System,which has increased computational capacity,and is designed to enablecustomers to generate PacBio HiFi reads more efficiently.PacBios SystemsThe PacBio RS II,Sequel,Seq

91、uel II and Sequel IIe Systems conduct,monitor,and analyze biochemicalsequencing reactions.PacBio systems are integrated units that include high performance optics,automated liquidhandling,a touchscreen control interface and computational hardware and software.Each instruments highperformance optics

92、monitor the ZMWs in a SMRT Cell in real time.The automated liquid handling systemperforms reagent mixing and prepares SMRT Cells.Each instruments touchscreen control interface is the usersprimary control center to design and monitor experiments.The computational hardware and software in each5instrum

93、ent is responsible for processing the sequencing data produced by the SMRT Cells.The PacBio Systemshave been designed to allow for performance improvements to be easily integrated into the systems.We nolonger manufacture the PacBio RS II instrument.ConsumablesCustomers must purchase proprietary cons

94、umable products to run their PacBio Systems.Our consumableproducts include our proprietary SMRT Cells and reagent kits.One SMRT Cell is consumed per sequencingreaction,and scientists can choose the number of SMRT Cells they use per experiment.SMRT Cells areindividually and hermetically sealed,then p

95、ackaged together into a streamlined four-pack tray.We offer several reagent kits,each designed to address a specific step in the workflow.A templatepreparation kit is used to convert DNA into SMRTbelldouble-stranded DNA library formats and includestypical molecular biology reagents,such as ligase,bu

96、ffers and exonucleases.Our binding kits include ourmodified DNA polymerase,and are used to bind SMRTbell libraries to the polymerase in preparation forsequencing.Our sequencing kits contain reagents required for on-instrument,real-time sequencing,including thephospholinked nucleotides.Product Enhanc

97、ementsSince the introduction of our products in 2011,we have continued to significantly enhance the performanceof PacBio sequencing systems through a combination of sample preparation protocol enhancements,softwarereleases,and new sequencing reagent chemistries.By providing an increasing number of l

98、onger reads perinstrument run,the new chemistries have enabled users to assemble more genomes to a high quality.We havecontinually improved our software to expand the number of supported applications such as large genomeassembly,structural variant analysis,variant detection,sequencing of transcript

99、isoforms produced from genes,metagenomics,and phasing of haplotypes in large amplicons.Market for Our ProductsOur customers use our products for sequencing genomes and transcriptomes across a wide range oforganisms.Initially,customers in research,government and commercial markets used PacBio Systems

100、 togenerate more complete assemblies of small and medium size genomes,such as bacteria and fungi,and forsequencing targeted regions of larger genomes such as humans and plants.As throughput and read lengths haveincreased,the complexity and size of genomes being resolved with SMRT sequencing have gro

101、wn.Scientistsnow use SMRT sequencing to generate genome assemblies of numerous plant,human and other animal genes,including characterization of transcriptomes through full-length isoform sequencing,and phase complex genomicregions like full-length human leukocyte antigen,or HLA,genes.With continued

102、performance improvements ofour products,we anticipate increasing both mindshare and market share within research,government andcommercial markets such as human biomedical research,plant and animal sciences,microbiology&infectiousdisease,and immunogenomics.There are a number of emerging markets for s

103、equencing-based tests,including molecular diagnostics,whichrepresent significant potential opportunities for our products.The development of these markets is subject tovariability driven by ongoing changes in the competitive landscape,evolving regulatory requirements,government funding of research a

104、nd development activities,and macroeconomic conditions.Introductions ofnew technologies and products,while positive to the overall development of these markets,may result in greatercompetition for the limited financial resources available.As we continue to expand into these emerging markets,the deve

105、lopment of our business will be impacted by the variability of the factors affecting the growth of thesemarkets.6Marketing,Sales,Service and SupportWe market our products through a direct sales force in North America and parts of Europe and throughdistribution partners in Asia,certain other parts of

106、 Europe,the Middle East and Africa,and Latin America.Oursales strategy involves the use of a combination of sales personnel and field application scientists.The role of oursales personnel is to educate customers on the advantages of SMRT technology and the applications that ourtechnology makes possi

107、ble.The role of our field application scientists is to provide on-site training and scientifictechnical support to prospective and existing customers and to encourage customer utilization of our SMRTsequencing technology.Our field application scientists are technical experts,often with advanced degr

108、ees,andgenerally have extensive experience in academic research and core sequencing lab experience.Service for our instruments is performed by field service engineers.These field service engineers are trainedby experienced personnel to test,trouble-shoot,and service instruments installed at customer

109、 sites.In addition,we maintain an applications lab team in Menlo Park,California composed of scientific expertswho can transfer knowledge from the research and development team to the field application scientists.Theapplications lab team also runs foundational scientific collaborations and proof of

110、principle studies,which helpdemonstrate the value of our product offering to prospective customers.Our business is subject to seasonal trends.See“Risk Factors Seasonality may cause fluctuations in ourrevenue and results of operations”for additional information.CustomersOur customers include research

111、 institutions,commercial laboratories,genome centers,clinical,governmentand academic institutions,genomics service providers,pharmaceutical companies and agricultural companies.Ingeneral,our customers will isolate,prepare and analyze genetic samples using PacBio sequencing systems intheir own resear

112、ch labs,or they will send their genetic samples to third party service providers who in turn willsequence the samples with PacBio systems and provide the sequence data back to the customer for furtheranalysis.For example,customers in academic research institutions may have bacteria,animal,or human D

113、NAsamples isolated from various sources while agricultural biology companies may have DNA samples isolatedfrom different strains of rice,corn or other crops.For the years ended December 31,2020,2019 and 2018,onecustomer,Gene Company Limited,our primary distributor for China and Hong Kong,accounted f

114、orapproximately 14%,17%and 26%of our total revenue,respectively.We believe that the majority of our current customers are early adopters of sequencing technology.Byfocusing our efforts on high-value applications,and developing whole product solutions around theseapplications,we seek to drive the ado

115、ption of our products across a broader customer base and into numerouslarge-scale projects.In general,the broader adoption of new technologies by mainstream customers can take anumber of years.We currently sell our products to a number of customers outside the United States,including customers inoth

116、er areas of North America,Europe,Middle East,Africa,Asia Pacific and South America.Revenue fromcustomers outside the United States totaled$43.1 million,or 55%of our total revenue during fiscal 2020,compared to$48.1 million,or 53%of our total revenue during fiscal 2019 and$44.7 million,or 57%of our t

117、otalrevenue during fiscal 2018.BacklogAs of December 31,2020,our instrument backlog was approximately$10.1 million,compared to$6.6 million as of December 31,2019.We define backlog as purchase orders or signed contracts from ourcustomers which we believe are firm and for which we have not yet recogni

118、zed revenue.We expect to convertthis backlog to revenue during 2021;however,our ability to do so is subject to customers who may seek tocancel or delay their orders even if we are prepared to fulfill them.7ManufacturingOur principal manufacturing activities are performed at our headquarters in Menlo

119、 Park,California.Wecurrently perform some of the manufacturing and all of the final integration of our instruments in-house,whileoutsourcing most sub-assemblies to third-party manufacturers.With respect to the manufacture of SMRT Cells,we subcontract wafer fabrication and processing to semiconductor

120、 processing facilities,but conduct criticalsurface treatment processes internally.We also subcontract the packaging of SMRT Cells,and bring them backin-house for final testing.In addition,we manufacture critical reagents in-house,including our phospholinkednucleotides and our DNA polymerase.We purch

121、ase both custom and off-the-shelf components from a large number of suppliers and subject themto significant quality specifications.We periodically conduct quality audits of most critical suppliers and haveestablished a supplier certification program.Some of the components required in our products a

122、re currently eithersole sourced or single sourced.If the capabilities of our suppliers and component manufacturers are limited orstopped,due to disasters,quality,regulatory,or other reasons,it could negatively impact our ability tomanufacture our products.Research and DevelopmentOur SMRT technology

123、requires the blending of a number of unique disciplines,namely nanofabrication,physics,photonics,optics,molecular biology,engineering,signal processing,high performance computing,andbioinformatics.Our research and development team is a blend of these disciplines creating a single,cross-functional/op

124、erating unit.We have also established productive working relationships with technology industryleaders,as well as leading academic centers,to augment and complement our internal research and developmentefforts.We plan to continue our investment in research and development to enhance the performance

125、and expandthe application of our current products,and introduce additional products based on our SMRT technology.Ourgoals include further improvements in sequencing read length and mappable data per SMRT Cell,chemistry andsoftware enhancements,and enhancements in sample preparation and bioinformatic

126、s tools that take advantage ofthe capabilities of our products.In addition,our engineering teams will continue their focus on increasinginstrument component and system reliability,reducing costs,and implementing additional system flexibility andversatility through the enhancement of existing product

127、s and development of new products.Intellectual PropertyDeveloping and maintaining a strong intellectual property position is an important element of our business.We have sought,and will continue to seek,patent protection for our SMRT technology,for improvements to ourSMRT technology,as well as for a

128、ny of our other technologies where we believe such protection will beadvantageous.Our current patent portfolio,including patents exclusively licensed to us,is directed to various technologies,including SMRT nucleic acid sequencing and other methods for analyzing biological samples,ZMW arrays,surface

129、 treatments,phospholinked nucleotides and other reagents for use in nucleic acid sequencing,opticalcomponents and systems,processes for identifying nucleotides within nucleic acid sequences and processes foranalysis and comparison of nucleic acid sequence data.Some of the patents and applications th

130、at we own,as wellas some of the patents and applications that we have licensed from other parties,are subject to U.S.governmentmarch-in rights,whereby the U.S.government may disregard our exclusive patent rights on its own behalf or onbehalf of third parties by imposing licenses in certain circumsta

131、nces,such as if we fail to achieve practicalapplication of the U.S.government funded technology,because action is necessary to alleviate health or safetyneeds,to meet requirements of federal regulations,or to give preference to U.S.industry.In addition,U.S.government funded inventions must be report

132、ed to the government and U.S.government funding must bedisclosed in any resulting patent applications.As of December 31,2020,we own or hold exclusive licenses to 332 issued U.S.patents,64 pending U.S.patent applications,220 granted foreign patents and 63 pending foreign patent applications,including

133、 foreign8counterparts of U.S.patent and patent applications.The full term of the issued U.S.patents will expire between2021 and 2038.We also have non-exclusive patent licenses with various third parties to supplement our ownlarge and robust patent portfolio.Of our exclusively licensed patent applica

134、tions,6 issued U.S.patents are licensed to us by the CornellResearch Foundation,which manages technology transfers on behalf of Cornell University.Other Sequencing SolutionsThere are a significant number of companies offering nucleic acid sequencing equipment or consumables.These include,but are not

135、 limited to,Illumina,Inc.(“Illumina”),BGI Genomics,Thermo Fisher Scientific Inc.(“Thermo”),Oxford Nanopore Technologies Ltd.(“ONT Ltd.”),Roche,and Qiagen N.V.(“Qiagen”).Many ofthese companies currently have greater financial,technical,research and/or other resources than we do.They alsohave larger a

136、nd more established manufacturing capabilities and marketing,sales and support functions.Weexpect the competition to intensify within the overall nucleic acid sequencing market as there are also severalcompanies developing new sequencing technologies,products and/or services.Increased competition ma

137、y resultin pricing pressures,which could harm our sales,profitability or share of supply.In order for us to maintain and increase our sales,we will need to demonstrate that our products deliversuperior performance and value as a result of our key differentiators,including single molecule,real-timere

138、solution,the combination of very high consensus accuracy and long read lengths with the ability to detect real-time kinetic information,fast time to result and flexibility,as well as the breadth and depth of current and futureproducts and applications.Government RegulationOur products are not curren

139、tly subject to U.S.Food and Drug Administration(FDA)clearance or approvalsince they are not intended or labeled for use in the diagnosis,prevention,or treatment of any disease,and arelabeled and promoted as“For Research Use Only”(RUO)products.However,in the future,certain of ourproducts or related a

140、pplications,such as those that may be developed for clinical uses,could be subject to FDAregulation,or the FDAs regulatory jurisdiction could be expanded to include our products.As we expand product lines to potentially address clinical applications including the diagnosis of disease,regulation by g

141、overnmental authorities in the United States and other countries may become an increasinglysignificant factor in development,testing,production,and marketing.In the future,products that we develop inthe molecular diagnostic markets,depending on their intended use,may be regulated as medical devices

142、or invitro diagnostic products(IVDs)by the FDA and comparable agencies in other countries.Obtaining the requisiteregulatory approvals can be expensive and may involve considerable delay.Some countries have regulatoryreview processes that are substantially longer than U.S.processes.Failure to obtain

143、regulatory approval in atimely manner and meet all of the local requirements including language and specific safety standards in anyforeign country in which we plan to market our products could prevent us from marketing products in suchcountries or subject us to sanctions and fines.Changes to the cu

144、rrent regulatory framework,including theimposition of additional or new regulations,could arise at any time during the development or marketing of ourproducts.If our products that are labeled as RUO are or could be used for the diagnosis of disease,the regulatoryrequirements related to marketing,sel

145、ling,and supporting such products could be uncertain.This is true even ifsuch use by our customers occurs without our consent.If the FDA or other regulatory authorities assert that anyof our RUO products are subject to regulatory clearance or approval,our business,financial condition,or resultsof op

146、erations could be adversely affected.Certain of our products are currently available through laboratories that are certified under the ClinicalLaboratory Improvements Amendments(CLIA)of 1988.These products are commonly called“laboratory9developed tests”(LDTs).For a number of years,the FDA has exerci

147、sed its regulatory enforcement discretion notto regulate LDTs as medical devices if created and used within a single laboratory.However,the FDA iscontinually reexamining this regulatory approach and changes to the agencys handling of LDTs could impactour business in ways that we cannot predict at th

148、is time.We cannot predict the nature or extent of the FDAsfinal guidance or regulation of LDTs,in general,or with respect to our or our customersLDTs,in particular.Certification of CLIA laboratories includes standards in the areas of personnel qualifications,administration,and participation in profi

149、ciency testing,patient test management,and quality control procedures.CLIA also mandates that,for high complexity labs such as ours,to operate as a lab,we must have anaccreditation by an organization recognized by CLIA such as the College of American Pathologists(CAP),which we have obtained and must

150、 maintain.If we were to lose our CLIA certification or CAP accreditation,ourbusiness,financial condition,or results of operations could be adversely affected.In addition,state laboratorylicensing and inspection requirements may also apply to our products,which,in some cases,are more stringentthan CL

151、IA requirements.We are committed to the protection of our employees and the environment.Our operations require the useof hazardous materials that subject us to various federal,state,and local environmental and safety laws andregulations.We believe that we are in material compliance with current appl

152、icable laws and regulations.However,we could be held liable for damages and fines should contamination of the environment or individualexposures to hazardous substances occur.In addition,we cannot predict how changes in these laws andregulations,or the development of new laws and regulations,will af

153、fect our business operations or the cost ofcompliance.Additionally,we must comply with complex foreign and U.S.laws and regulations,such as the U.S.ForeignCorrupt Practices Act,the U.K.Bribery Act,and other local laws prohibiting corrupt payments to governmentalofficials,anti-competition regulations

154、 and sanctions imposed by the U.S.Office of Foreign Assets Control andother similar laws and regulations.Violations of these laws and regulations could result in fines and penalties,criminal sanctions,restrictions on our business conduct and on our ability to offer our products in one or morecountri

155、es,and could also materially affect our brand,our ability to attract and retain employees,our internationaloperations,our business and our operating results.Although we have implemented policies and proceduresdesigned to ensure compliance with these laws and regulations,there can be no assurance tha

156、t our employees,contractors,or agents will not violate our policies.As we continue to expand our business into multiple international markets,our success will depend,in largepart,on our ability to anticipate and effectively manage these and other risks associated with our internationaloperations.Any

157、 of these risks could harm our international operations and negatively impact our sales,adverselyaffecting our business,results of operations,financial condition and growth prospects.Human CapitalAs of December 31,2020,we had 412 full-time employees.Of these employees,158 were in research anddevelop

158、ment,94 were in operations and service,101 were in marketing,sales and customer support,and 59 werein general and administration.With the exception of our field-based sales,marketing and service teams,themajority of our employees are based out of our headquarters in Menlo Park,California.None of our

159、 employeesare represented by labor unions or are covered by a collective bargaining agreement with respect to theiremployment.We have not experienced any work stoppages,and we consider our relationship with our employeesto be good.Talent Acquisition and RetentionWe recognize that our employees large

160、ly contribute to our success.To this end,we support business growthby seeking to attract and retain best-in-class talent.Our talent acquisition team uses internal and external10resources to recruit highly skilled candidates globally.In 2020,we have been successful in hiring key positionsthroughout t

161、he organization that will help advance the companys growth.This includes an appointment of a newChief Executive Officer,Chief Financial Officer,Chief Operating Officer,and Chief Commercial Officer.Wecontinue to attract and retain superior talent as measured by our minimal turnover rate and high empl

162、oyee servicetenure.Total RewardsOur total rewards philosophy has been to create investment in our workforce by offering competitivecompensation and benefits package.We provide employees with compensation packages that include base salary,annual incentive bonuses,and long-term equity awards.We also o

163、ffer comprehensive employee benefits,whichvary by country and region,such as life,disability,and health insurance,health savings and flexible spendingaccounts,paid time off,paid parental leave,Employee Stock Purchase Program,and a 401(k)plan.It is ourexpressed intent to be an employer of choice in o

164、ur industry by providing market-competitive compensation andbenefits package.Health,Safety,and WellnessThe health,safety,and wellness of our employees is a priority in which we have always invested and willcontinue to do so.We provide our employees and their families with access to a variety of inno

165、vative,flexible,and convenient health and wellness programs.Program benefits are intended to provide protection and security,so employees can have peace of mind concerning events that may require time away from work or that mayimpact their financial well-being.These programs are highlighted regularl

166、y in our monthly human resourcesnewsletters.These investments and the prioritization of employee health,safety,and wellness took on particularsignificance in 2020 in light of COVID-19.To protect and support our essential team members,we haveimplemented health and safety measures that included maximi

167、zing personal workspaces,changing shiftschedules,providing personal protective equipment(PPE),instituting mandatory screening before accessingbuildings and performing asymptomatic COVID-19 testing regularly for employees who work on site.We havealso supported access to testing by holding on-site tes

168、ting clinics available to employees and their familymembers.In response to local stay-at-home orders and in alignment with CDC recommendations,we havelimited our manufacturing and commercial operations based in Menlo Park,California.To aid in containing thespread of COVID-19,we have implemented remo

169、te-work options and are limiting employee travel.We aremonitoring this rapidly evolving situation and will continue to seek programs to educate and assist employeeswhenever possible.Diversity,Equity,and InclusionWe believe a diverse workforce is critical to our success.Our mission is to value differ

170、ences in races,ethnicities,religions,nationalities,genders,ages,sexual orientations,as well as education,skill sets andexperience.In 2020,we implemented a global training program on diversity awareness to help employeesunderstand,recognize,respond,and prevent bias at all levels of our organization.T

171、his is the first of our multi-pronged approach in building an inclusive culture.We are focused on inclusive hiring practices,fair andequitable treatment,organizational flexibility,and training and resources.Training and DevelopmentWe believe in encouraging employees in becoming lifelong learners by

172、providing ongoing learning andleadership training opportunities.We provide a scaled learning platform of on-demand and virtual classroomlearning focused on personal and professional development.While we strive to provide real-time recognition ofemployee performance,we have a formal annual review pro

173、cess not only to determine pay and equityadjustments tied to individual contributions,but to identify areas where training and development may beneeded.11Available InformationOur website is located at .The information posted on or that can be accessed through ourwebsite is not incorporated by refere

174、nce into this Annual Report on Form 10-K,and the inclusion of our websiteaddress is an inactive textual reference only.Our Annual Report on Form 10-K,Quarterly Reports on Form10-Q,Current Reports on Form 10-K and amendments to reports filed or furnished pursuant to Sections 13(a)and 15(d)of the Secu

175、rities Exchange Act of 1934,as amended,are available free of charge through the“Investors”section of our website as soon as reasonably practicable after we electronically file such materialwith,or furnish it to,the SEC.The SEC also maintains a website that contains our SEC filings.The address ofthe

176、site is www.sec.gov.Additionally,we use our website as a channel of distribution for important company information.Importantinformation,including press releases,analyst presentations and financial information regarding us,as well ascorporate governance information,is routinely posted and accessible

177、on the“Investor Relations”section of thewebsite,which is accessible by clicking on the tab labeled“About UsInvestors”on our website home page.Inaddition,important information is routinely posted and accessible on the blog section of our website,which isaccessible through our website at well as our T

178、witter account(pacbio).Information onor that can be accessed through our website or our Twitter account is not incorporated by reference into thisAnnual Report on Form 10-K,and the inclusion of our website address is an inactive textual reference only.12ITEM 1A.RISK FACTORSYou should consider carefu

179、lly the risks and uncertainties described below,together with all of the otherinformation in our public filings with the Securities and Exchange Commission,which could materially affect ourbusiness,financial condition,results of operations and prospects.The risks described below are not the onlyrisk

180、s facing us.Risks and uncertainties not currently known to us or that we currently deem to be immaterial alsomay materially affect our business,financial condition,results of operations and prospects.In addition,theimpact of COVID-19 and any worsening of the economic environment may exacerbate the r

181、isks described below,any of which could have a material impact on us.This situation is changing rapidly and additional impacts mayarise that we are not aware of currently.Summary Risk FactorsThe following is a summary of the principal risks that could adversely affect our business,operations andfina

182、ncial results.Such risks are discussed more fully below and include,but are not limited to,risks related to:The potential adverse impact of health epidemics,including the recent coronavirus outbreak;Our ability to successfully market,commercialize,and sell current and future products and relatedmain

183、tenance services;Our ability to achieve profitability for our business;Our ability to successfully research,develop and timely manufacture our current and future products;Management of new product introductions and transitions,resultant costs,and ability of new productsto generate promised performan

184、ce;Recent significant changes to our leadership team and resultant disruptions to our business;Retention,recruitment,and training of senior management,key personnel,scientists and engineers;Our ability to further penetrate nucleic acid sequencing applications,as well as grow product demand;Our relia

185、nce on outsourcing to other companies for manufacturing certain components andsub-assemblies,some of which are sole sourced;Our ability to consistently manufacture our instruments and consumable kits to meet customersspecifications,quantity,cost,or performance requirements;The high amount of competi

186、tion we face in our industry;Our ability to attract customers and increase sales of current and future products;Reliance on a limited number of customers for a significant portion of our revenues,includingacademic,research and government institutions;The complexity of our products giving rise to def

187、ects or errors;Our unpredictable and lengthy sales cycle;Securing and maintaining patent or other intellectual property protection for our products and relatedimprovements;Current and future legal proceedings filed against us claiming intellectual property infringement;Governmental regulations that

188、burden operations or narrow the market for our products;Evolving ethical,legal,privacy,social,and regulatory concerns regarding genetic testing;Volatility of the price of our common stock;andOur stock price falling as a result of future offerings or sales.13Risks Related to Our BusinessOur business

189、may be adversely affected by health epidemics,including the recent coronavirus outbreak.Our business could be adversely impacted by the effects of COVID-19 or other epidemics or pandemics.Asa result of COVID-19,our 2020 financial results were impacted negatively as our customers in multiple regionsa

190、round the world suspended their normal operations in efforts to curb the spread of the COVID-19 pandemic.However,a significant number of our customer sites that had shut down due to COVID-19 have re-opened.Inaddition,a significant number of customers have delayed purchases of capital due to the nega

191、tive impact of thepandemic on their businesses.This dynamic continues to negatively impact the recognition of revenue related tothe sale of our Sequel and Sequel II/IIe instruments and the associated consumables and software.The negativeimpacts of COVID-19 on our customers will likely continue to ad

192、versely impact our revenues during the firsthalf of 2021.The inability to receive or accept shipment of orders for our products on a timely basis,or at all,thedelay or possible cancellation of orders for our products or related maintenance and support services,and thereduced utilization of our produ

193、cts has negatively affected and may negatively affect in the future our operationsand revenues.In response to local stay-at-home orders and in alignment with CDC recommendations,we havelimited our manufacturing and commercial operations based in Menlo Park,California.We will,however,continue to prov

194、ide consumables and support to scientists at government,academic,and commercial labs thatremain open.To aid in containing the spread of COVID-19,we have implemented remote-work options and arelimiting employee travel.We are monitoring this rapidly evolving situation.Our manufacturing partners and su

195、ppliers could also be disrupted by conditions related to COVID-19 orother epidemics or pandemics,possibly resulting in disruption to the production of our products.If ourmanufacturing partners or suppliers are unable or fail to fulfill their obligations to us for any reason,we may notbe able to manu

196、facture our products and satisfy customer demand or our obligations under sales agreements in atimely manner,and our business could be harmed as a result.At this point in time,there is significant uncertaintyrelating to the potential effect of COVID-19 on our business.Infections may resurge or becom

197、e more widespreadand the limitation on our ability to travel and timely sell and distribute our products,as well as any closures orsupply disruptions,may be extended for longer periods of time,which could have a negative impact on ourbusiness,financial condition and operating results.Even after the

198、COVID-19 pandemic has subsided,we may continue to experience an adverse impact to ourbusiness as a result of its global economic impact,including any recession that has occurred or may occur in thefuture.Specifically,difficult macroeconomic conditions,such as decreases in discretionary capital expen

199、diturespending,increased and prolonged unemployment or a decline in consumer confidence as a result of theCOVID-19 pandemic,as well as limited or significantly reduced points of access of our products,could have acontinuing adverse effect on the demand for some of our products and,consequently,relat

200、ed maintenance andsupport services.The degree of impact of COVID-19 on our business will depend on several factors,such as theduration and the extent of the pandemic,as well as actions taken by governments,businesses and consumers inresponse to the pandemic,all of which continue to evolve and remain

201、 uncertain at this time.We have limited commercial sales to date and the commercialization and sales of our current or futureproducts may be unsuccessful or less successful than anticipated.Our first commercial product launched in 2011 and we have had limited sales to date.As such,we havelimited his

202、torical financial data upon which to base our projected revenue and planned operating expenses orupon which to evaluate our company and our commercial prospects.Furthermore,in September 2015,welaunched the PacBio SequelSystem,and concurrently began phasing out production of PacBio RS IIinstruments,a

203、nd,in April 2019 we announced the commercial launch of the Sequel II System.In October 2020,we launched the Sequel IIe System,which has increased computational capacity,and is designed to enablecustomers to generate PacBio HiFi reads more efficiently.Based on our limited experience in developing and

204、marketing our existing products and launching new products,we may not be able to effectively:manage the timeliness of our new product introductions and the rate at which sales of our new productsmay cannibalize sales of our older products;14drive adoption of our current and future products,including

205、 the Sequel II/IIe Systems;attract and retain customers for our products;provide appropriate levels of customer training and support for our products;implement an effective marketing strategy to promote awareness of our products;develop and implement an effective sales and distribution strategy for

206、our current and future products;develop,manufacture and commercialize new products or achieve an acceptable return on ourmanufacturing or research and development efforts and expenses;comply with regulatory requirements applicable to our products;anticipate and adapt to changes in our market;accommo

207、date customer expectations and demands with respect to our products,increase productadoption by our existing customers or develop new customer relationships;grow our share by marketing and selling our products for new and additional applications;maintain and develop strategic relationships with vend

208、ors,manufacturers and other industry partners toacquire necessary materials for the production of,and to develop,manufacture and commercialize,ourexisting or future products;adapt or scale our manufacturing activities to meet performance specifications and potential demand ata reasonable cost;avoid

209、infringement and misappropriation of third-party intellectual property;obtain and maintain any necessary licenses to third-party intellectual property on commerciallyreasonable terms;obtain valid and enforceable patents that give us a competitive advantage or enforce existing patents;protect our pro

210、prietary technology;andattract,retain and motivate qualified personnel.The risks noted above,especially with respect to the marketing,sales,and commercialization of ourproducts,may be heightened by the impact of the COVID-19.In addition,a high percentage of our expenses isand will continue to be fix

211、ed.Accordingly,if we do not generate revenue as and when anticipated,we couldsuffer a material adverse effect on our business,financial conditions,results of operations and prospects.We have incurred losses to date,and we expect to continue to incur significant losses as we develop ourbusiness and m

212、ay never achieve profitability.Except for the quarters ended September 30,2015(as a result of a one-time gain on lease amendments),March 31,2020(as a result of the recognition of a gain relating to the Continuation Advances),andDecember 31,2020(as a result of recognition of gain relating to the Reve

213、rse Termination Fee),and the yearended December 31,2020(as a result of recognition of gain relating to the Reverse Termination Fee and gainrelating to the Continuation Advances),we have incurred net losses since inception and we cannot be certain if orwhen we will produce sufficient revenue from our

214、 operations to support our costs.While we achievedprofitability for the quarter ended March 31,2020,this result was largely due to income recognition of theContinuation Advances.Even if profitability is achieved in the future,we may not be able to sustain profitabilityon a consistent basis.Excluding

215、 the recognition in October 2020 of gain relating to the Reverse Termination Feeand the recognition in the first quarter of 2020 of gain relating to the Continuation Advances,we expect tocontinue to incur substantial losses and negative cash flow from operations for the foreseeable future.15Our net

216、losses since inception and our expectation of incurring substantial losses and negative cash flow forthe foreseeable future could:make it more difficult for us to satisfy our obligations;increase our vulnerability to general adverse economic and industry conditions;limit our ability to fund future w

217、orking capital,capital expenditures,research and development andother business opportunities;increase the volatility of the price of our common stock;limit our flexibility to react to changes in our business and the industry in which we operate;place us at a disadvantage to other companies that offe

218、r nucleic acid sequencing equipment orconsumables;andlimit our ability to borrow additional funds.Any or all of the foregoing may have a material adverse effect on our business,operations,financial condition,and prospects.We are not cash flow positive and may not have sufficient cash to fund our lon

219、g term planned operations.Our operations have consumed substantial amounts of cash since inception,and we expect to continue toincur substantial losses and negative cash flow from operations for the foreseeable future.We believe that ourgrowth will depend,in part,on our ability to fund our commercia

220、lization efforts and our efforts to develop newproducts,including any improvements to the SMRT Cell 8M and Sequel II/IIe Systems.Our existing resourcesmay require us to delay,or even not allow us to conduct any or all of these activities that we believe would bebeneficial for our future growth.We ma

221、y need to raise additional funds through public or private debt or equityfinancing or alternative financing arrangements,which may include collaborations or licensing arrangements.Ifwe are unable to raise funds on favorable terms,or at all,we may have to reduce our cash burn rate and may notbe able

222、to support our commercialization efforts and launching of new products,operations or to increase ormaintain the level of our research and development activities.Additional funds may not be available on terms acceptable to us or at all.We have incurred and may furtherincur additional debt,including t

223、he debt recently incurred through issuance of$900.0 million in aggregateprincipal amount of 1.50%Convertible Senior Notes due 2028.We may not have sufficient cash to makerequired payments under the terms of this debt,and,should this occur,debt holders have rights senior to commonstockholders to make

224、 claims on our assets.We may not be able to issue equity securities due to unacceptableterms and conditions to us in the capital markets.To the extent that we intend to raise additional funds throughthe sale of our common stock,downward fluctuations in our stock price could adversely affect such fun

225、draisingefforts.Furthermore,equity financings normally involve shares sold at a discount to the current market price,andfundraising through sales of additional shares of common stock or other equity securities will have a dilutiveeffect on our existing investors.The shares may also be sold at a time

226、 when the market price for our commonstock is low because we are in need of the funds,which will further dilute existing holders more than if themarket price for our common stock was higher.If we are unable to generate sufficient cash flows or to raise adequate funds to finance our forecastedexpendi

227、tures,we may have to make significant changes to our operations,including delaying or reducing thescope of,or eliminating some or all of,our development programs.We also may have to reduce sales,marketing,engineering,customer support or other resources devoted to our existing or new products,or we m

228、ay need tocease operations.Any of these actions could materially impede our ability to achieve our business objectives andcould materially harm our operating results.If our cash,cash equivalents and investments are insufficient to fundour projected operating requirements and we are unable to raise c

229、apital,it could have a material adverse effect onour business,financial condition and results of operations and prospects.16If we are unable to successfully develop and timely manufacture our current and future products,includingwith respect to the Sequel System,the SMRT Cell 8M and Sequel II/IIe Sy

230、stems and related products,ourbusiness may be adversely affected.In light of the highly complex technologies involved in our products,there can be no assurance that we willbe able to manufacture and commercialize our current and future products on a timely basis or continueproviding adequate support

231、 for our existing products.The commercial success of our products,including theSequel and Sequel II/IIe Systems,depends on a number of factors,including performance and reliability of thesystem,our anticipating and effectively addressing customer preferences and demands,the success of our salesand m

232、arketing efforts,effective forecasting and management of product demand,purchase commitments andinventory levels,effective management of manufacturing and supply costs,and the quality of our products,including consumables such as SMRT Cells and reagents.Should we face delays in or discover unexpecte

233、ddefects during the further development or manufacturing process of instruments or consumables related to ourproducts,including with respect to the SMRT Cell 8M,reagents and Sequel II/IIe Systems,and including anydelays or defects in software development or product functionality,the timing and succe

234、ss ofthe continued rollout and scaling of our products may be significantly impacted,which may materially andnegatively impact our revenue and gross margin.The ability of our customers to successfully utilize our productswill also depend on our ability to deliver high quality SMRT Cells and reagents

235、,including with respect to theSMRT Cell 8M.We have designed SMRT Cells and other consumables specifically for the Sequel System,andmay need to develop in the future,other customized SMRT Cells and consumables for our future products,including the SMRT Cell 8M for the Sequel II/IIe Systems.Our produc

236、tion of the SMRT Cells for the SequelSystem has been and may in the future be below desired levels,and we have experienced and may experience inthe future manufacturing delays,product or quality defects,SMRT Cell variability,and other issues.Forexample,the recent COVID19 outbreak has impacted and co

237、uld result in more pronounced impacts to ourmanufacturing and our ability to supply products.The performance of our consumables is critical to ourcustomerssuccessful utilization of our products,and any defects or performance issues with our consumableswould adversely affect our business.All of the f

238、oregoing could materially negatively impact our ability to sellour products or result in other material adverse effects on our business,operations,financial condition,operationsand prospects.The development of our products is complex and costly.Problems in the design or quality of our productsmay ha

239、ve a material and adverse effect on our brand,business,financial condition,and operating results,andcould result in us losing our certifications from the International Organization for Standardization(“ISO”).If wewere to lose ISO certification,then our customers might choose not to purchase products

240、 from us and this couldadversely impact our ability to develop products approved for clinical uses.Unanticipated problems with ourproducts could divert substantial resources,which may impair our ability to support our new and existingproducts,and could substantially increase our costs.If we encounte

241、r development challenges or discover errorsin our products late in our development cycle,we may be forced to delay product shipments or the scaling ofmanufacturing or supply.In particular,if the continued rollout of our current and future products,including withrespect to the SMRT Cell 8M and Sequel

242、 II/IIe Systems,is delayed or is not successful or less successful thananticipated,then we may not be able to achieve an acceptable return,if any,on our substantial research anddevelopment efforts,and our business may be materially and adversely affected.The expenses or lossesassociated with delayed

243、 or unsuccessful product development or lack of market acceptance of our existing andnew products,including the SMRT Cell 8M and Sequel II/IIe Systems,could materially and adversely affect ourbusiness,operations,financial condition,and prospects.Our research and development efforts may not result in

244、 the benefits that we anticipate,and our failure tosuccessfully market,sell,and commercialize our current and future products could have a material adverseeffect on our business,financial condition and results of operations.We have dedicated significant resources to developing our current products,i

245、ncluding sequencing systemsand consumables based on our proprietary SMRT sequencing technology and our Sequel and Sequel II/IIe17Systems.We are also engaged in substantial and complex research and development efforts,which,if successful,may result in the introduction of new products in the future,in

246、cluding with respect to the SMRT Cell 8M and theSequel II/IIe Systems.Our research and development efforts are complex and require us to incur substantialexpenses.We may not be able to develop,manufacture and commercialize new products,obtain regulatoryapproval if necessary,or achieve an acceptable

247、return,if any,on our research and development efforts andexpenses or joint research and development efforts with partners.Our joint research and development effortswith partners require significant management attention and operational resources.If we are unable tosuccessfully manage such joint resea

248、rch and development efforts,our future results may be adversely impacted.In January 2021,we entered into a multi-year collaboration with Invitae Corporation to begin development of aproduction-scale high-throughput sequencing platform;in certain termination circumstances of this collaboration,we may

249、 be obligated to refund all or a portion of the development funds advanced by Invitae and/or we may oweInvitae a share of the revenue generated from the sale of the program products.Furthermore,we need to continueto expand our internal capabilities or seek new partnerships or collaborations,or both,

250、in order to successfullydevelop,market,sell and commercialize our products for and in the markets we seek to reach.If we are unable todo so or are delayed,then this could materially and adversely affect our business,operations,financial conditionand prospects.We must successfully manage new product

251、introductions and transitions,including with respect to the SMRTCell 8M and Sequel II/IIe Systems,we may incur significant costs during these transitions,and they may notresult in the benefits we anticipate.If our products and services fail to deliver the performance,scalability or results expected

252、by our current andfuture customers,or are not delivered on a timely basis,our reputation and credibility may suffer,our current andfuture sales and revenue may be materially harmed and our business may not succeed.For instance,if we are notable to realize the benefits we anticipate from the developm

253、ent and commercialization of the SMRT Cell 8M andSequel II/IIe Systems and also any future products that may be developed for medical and clinical uses,it couldhave a material adverse effect on our business,financial condition and results of operations.In addition,theintroduction of future products,

254、including with respect to the SMRT Cell 8M and Sequel II/IIe Systems,has andmay in the future lead to our limiting or ceasing development of further enhancements to our existing products aswe focus our resources on new products,and has resulted and could in the future result in reduced marketplaceac

255、ceptance and loss of sales of our existing products,materially adversely affecting our revenue and operatingresults.The introduction of new products has had and may in the future also have a negative impact on ourrevenue in the near-term as our current and future customers have delayed or cancelled

256、and may in the futuredelay or cancel orders of existing products in anticipation of new products and we may also be pressured todecrease prices for our existing products.Further,we have experienced,and may in the future experience,difficulty in managing or forecasting customer reactions,purchasing d

257、ecisions or transition requirements withrespect to newly launched products.We have incurred and may continue to incur significant costs in completingthese transitions,including costs of write-downs of our products,as current or future customerstransition to newproducts.If we do not successfully mana

258、ge these product transitions,including with respect to the SMRT Cell8M and Sequel II/IIe System,our business,operations,financial condition,and prospects may be materially andadversely affected.Recent significant changes to our leadership team and the resulting management transitions might harm ourf

259、uture operating results.We have recently experienced significant changes to our leadership team.Our President and ChiefExecutive Officer Christian O.Henry was appointed effective September 14,2020,succeeding Dr.MichaelHunkapiller who retired on December 31,2020.Our Chief Financial Officer Susan G.Ki

260、m was appointedeffective September 28,2020,succeeding Susan K.Barnes who retired on August 7,2020.Our Chief OperatingOfficer,Mark Van Oene,and our Chief Commercial Officer,Peter Fromen,were each appointed effectiveJanuary 8,2021.Also,our Vice President and Chief Accounting Officer Eric E.Schaefer wa

261、s appointed effectiveMay 26,2020,and our Chairman of the Board Dr.John F.Milligan was appointed effective September 14,2020.18Although we believe these leadership transitions are in the best interest of our stakeholders,these transitionsmay result in the loss of personnel with deep institutional or

262、technical knowledge.Further,the transition couldpotentially disrupt our operations and relationships with employees,suppliers,partners and customers due toadded costs,operational inefficiencies,decreased employee morale and productivity and increased turnover.Wemust successfully recruit and integrat

263、e our new leadership team members within our organization to achieve ouroperating objectives;as such,the leadership transition may temporarily affect our business performance andresults of operations while the new members of our leadership team become familiar with our business.Inaddition,our compet

264、itors may seek to use this transition and the related potential disruptions to gain acompetitive advantage over us.Furthermore,these changes increase our dependency on the other members of ourleadership team that remain with us,who are not contractually obligated to remain employed with us and mayle

265、ave at any time.Any such departure could be particularly disruptive given that we are already experiencingleadership transitions and,to the extent we experience additional management turnover,competition for topmanagement is high such that it may take some time to find a candidate that meets our req

266、uirements.Our futureoperating results depend substantially upon the continued service of our key personnel and in significant partupon our ability to attract and retain qualified management personnel.If we are unable to mitigate these or othersimilar risks,our business,results of operations and fina

267、ncial condition may be materially and adversely affected.We depend on the continuing efforts of our senior management team and other key personnel.If we losemembers of our senior management team or other key personnel or are unable to successfully retain,recruitand train qualified scientists,enginee

268、rs,sales personnel and other employees,our ability to maintain,developand commercialize our products could be harmed and we may be unable to achieve our goals.Our success depends upon the continuing services of members of our senior management team andscientific and engineering personnel.In particul

269、ar,our scientists and engineers are critical to our technologicaland product innovations and we will need to hire additional qualified personnel.Our industry,particularly in theSan Francisco Bay Area,is characterized by high demand and intense competition for talent,and the turnoverrate can be high.

270、We compete for qualified management and scientific personnel with other life sciencecompanies,academic institutions and research institutions,particularly those focusing on genomics.In addition,we will need to continue to recruit,hire and retain sales personnel to support the commercialization of ou

271、rproducts.Our employees could leave our company with little or no prior notice and would be free to work for acompetitor.In addition,changes to U.S.immigration policies,particularly to H-1B and other visa programs,could restrain the flow of technical and professional talent into the U.S.and may inhi

272、bit our ability to hirequalified personnel.If one or more of our senior executives or other key personnel were unable or unwilling tocontinue in their present positions,we may not be able to replace them easily or at all,and other seniormanagement may be required to divert attention from other aspec

273、ts of the business.In addition,we do not have“key person”life insurance policies covering any member of our management team or other key personnel.Theloss of any of these individuals or any inability to attract or retain qualified personnel,including scientists,engineers,sales personnel and others,c

274、ould prevent us from pursuing collaborations and materially andadversely affect our support of existing products,product development and introductions,business growthprospects,results of operations and financial condition.Our success is highly dependent on our ability to further penetrate nucleic ac

275、id sequencing applications aswell as on the growth and expansion of the demand for our products.If our products fail to achieve andsustain sufficient market acceptance,we will not generate expected revenue and our business may notsucceed.Although nucleic acid sequencing technology is well-establishe

276、d,our SMRT Sequencing technology isrelatively new and evolving.We cannot be sure that our current or future products will gain acceptance in themarketplace at levels sufficient to support our costs.Our success depends,in part,on our ability to expandoverall demand for nucleic acid sequencing to incl

277、ude new applications that are not practicable with other currenttechnologies and to introduce new products that capture a larger share of growing overall demand for sequencing.To accomplish this,we must successfully commercialize,and continue development of,our proprietary SMRT19Sequencing technolog

278、y for use in a variety of life science and other applications,including uses by academic,government and clinical laboratories,as well as pharmaceutical,diagnostic,biotechnology and agriculturecompanies,among others.However,we may be unsuccessful in these efforts and the sale and commercializationof

279、the SMRT Cell 8M and Sequel II/IIe Systems,and related products may not grow sufficiently to cover ourcosts.There can be no assurance that we will be successful in adding new products or securing additionalcustomers for our current and future products,including with respect to the SMRT Cell 8M and S

280、equel II/IIeSystems.Our ability to further penetrate existing applications and any new applications depends on a number offactors,including the cost,performance and perceived value associated with our products,as well as customerswillingness to adopt a different approach to nucleic acid sequencing.P

281、otential customers may have already madesignificant investments in other sequencing technologies and may be unwilling to invest in new technologies.Weare experiencing pricing pressures caused by industry competition and increased demand for lower-pricedinstruments and lower operational costs.We have

282、 limited experience commercializing and selling productsoutside of the academic and research settings,and we cannot assure that we can successfully acquire additionalcustomers.Furthermore,we cannot guarantee that our products will be satisfactory to potential customers weseek to reach or that our pr

283、oducts will perform in accordance with customer expectations.These applications are new and dynamic,and there can be no assurance that they will develop as quickly aswe anticipate,that they will reach their full potential or that they will be receptive to any of our products.As aresult,we may be req

284、uired to refocus our marketing efforts,and we may have to make changes to thespecifications of our products to enhance our ability to enter particular applications more quickly.We may alsoneed to delay full-scale commercial deployment of new products as we develop them in order to perform qualitycon

285、trol and early access user testing,including with respect to the SMRT Cell 8M and Sequel II/IIe Systems.Even if we are able to implement our technology successfully,we and/or our sales and distribution partners mayfail to achieve or sustain market acceptance of our current or future products across

286、the full range of our intendedlife science and other applications.We need to continue to expand and update our internal capabilities or tocollaborate with other partners,or both,in order to successfully expand sales of our products in the applicationsthat we seek to reach,which we may be unable to d

287、o at the scale required to support our business.If the demand for our products grows more slowly than anticipated,if we are unable to successfully scale orotherwise ensure sufficient manufacturing capacity for new products to meet demand,if we are not able tosuccessfully market and sell our products

288、,if competitors develop better or more cost-effective products,if ourproduct launches and commercialization are not successful,or if we are unable to further grow our customer baseor do not realize the growth with existing customers that we are expecting,our current and future sales andrevenue may b

289、e materially and adversely harmed and our business may not succeed.We rely on other companies for the manufacture of certain components and sub-assemblies and intend tooutsource additional sub-assemblies in the future,some of which are sole sources.We may not be able tosuccessfully scale the manufac

290、turing process necessary to build and test multiple products on a fullcommercial basis,which could materially harm our business.Our products are complex and involve a large number of unique components,many of which requireprecision in manufacturing.The nature of our products requires customized comp

291、onents that are currentlyavailable only from a limited number of sources,and in some cases,single sources.We have chosen to sourcecertain critical components from a single source,including suppliers for our SMRT Cells,reagents andinstruments.We cannot assure you that product supplies will not be lim

292、ited or interrupted,especially with respectto our sole source third-party manufacturing and supply collaborators,or will be of satisfactory quality orcontinue to be available at acceptable prices.In particular,any replacement of our manufacturers could requiresignificant effort and expertise because

293、 there may be a limited number of qualified replacements.For our currentand future sole source third-party manufacturing and supply collaborators,we may be unable to negotiate bindingagreements with them or find replacement manufacturers to support our development and commercial activities20at comme

294、rcially reasonable terms in the event that their services to us becomes interrupted for any reason.We donot always have arrangements in place for a redundant or second-source supply for our sole source vendors in theevent they cease to provide their products or services to us or do not timely provid

295、e sufficient quantities to us.Ifwe are required to purchase these components from alternative sources,it could take several months or longer toqualify the alternative sources.If we are unable to secure a sufficient supply of these product components on atimely basis,or if these components do not mee

296、t our expectations or specifications for quality and functionality,our operations and manufacturing will be materially and adversely affected,we could be unable to meet customerdemand and our business and results of operations may be materially and adversely affected.The operations of our third-part

297、y manufacturing partners and suppliers could be disrupted by conditionsunrelated to our business or operations or that are beyond our control,including but not limited to internationaltrade restrictions and conditions related to COVID-19 or other epidemics.If our manufacturing partners orsuppliers a

298、re unable or fail to fulfill their obligations to us for any reason,we may not be able to manufacture ourproducts and satisfy customer demand or our obligations under sales agreements in a timely manner,and ourbusiness could be harmed as a result.Our current manufacturing process is characterized by

299、 long lead timesbetween the placement of orders for and delivery of our products.If we have received insufficient components tomanufacture our products on a timely basis to meet customer demand,our sales and our gross margin may beadversely affected and our business could be materially harmed.If we

300、are unable to reduce our manufacturingcosts and establish and maintain reliable,high-volume manufacturing suppliers as we scale our operations,ourbusiness,operations,financial condition,and prospects could be materially and adversely harmed.We may be unable to consistently manufacture our instrument

301、s and consumable kits,including SMRT Cells,to the necessary specifications or in quantities necessary to meet demand at an acceptable cost or at anacceptable performance level.In order to successfully generate revenue from our products,we need to supply our customers with productsthat meet their exp

302、ectations for quality and functionality in accordance with established specifications.Ourcustomers have experienced variability in the performance of our products.We have experienced and maycontinue to experience delays,quality issues or other difficulties leading to customer dissatisfaction with ou

303、rproducts.Our production of SMRT Cells and reagents involves a long and complex manufacturing process,hasbeen and may in the future be below desired levels,and we have experienced and may experience in the futuremanufacturing delays,product defects,variability in the performance of SMRT Cells and ot

304、her products,inadequate reserves for inventory,or other issues.There is no assurance that we will be able to manufacture our products so that they consistently achieve theproduct specifications and quality that our customers expect,including any products developed for clinical uses.Problems in the d

305、esign or quality of our products,including low manufacturing yields of SMRT Cells,orsub-performing reagent lots may have a material adverse effect on our brand,business,financial condition,andoperating results,and could result in us losing our ISO certifications.If we were to lose our ISO certificat

306、ions,then our customers might choose not to purchase products from us.There is also no assurance that we will beable to increase manufacturing yields and decrease costs,or that we will be successful in forecasting customerdemand or manufacturing and supply costs,or that product supplies,including re

307、agents or integrated chips,willnot be limited or interrupted,or will be of satisfactory quality or continue to be available at acceptable prices.Furthermore,we may not be able to increase manufacturing to meet anticipated demand or may experiencedowntime in our manufacturing facilities.An inability

308、to manufacture products and components that consistentlymeet specifications,in necessary quantities and at commercially acceptable costs,will have a negative impact,and may have a material adverse effect on our business,financial condition and results of operations.21Rapidly changing technology in l

309、ife sciences and diagnostics could make our products obsolete unless wecontinue to develop,manufacture and commercialize new and improved products and pursue newopportunities.Our industry is characterized by rapid and significant technological changes,frequent new productintroductions and enhancemen

310、ts and evolving industry standards.Our future success depends on our ability tocontinually improve our products,to develop and introduce new products that address the evolving needs of ourcustomers on a timely and cost-effective basis and to pursue new opportunities.These new opportunities may beout

311、side the scope of our proven expertise or in areas where demand is unproven,and new products and servicesdeveloped by us may not gain market acceptance or may not adequately perform in order to capture market share.Our inability to develop and introduce new products and to gain market acceptance of

312、our existing and newproducts could harm our future operating results.Unanticipated difficulties or delays in replacing existingproducts with new products or in commercializing our existing or new products in sufficient quantities and ofacceptable quality to meet customer demand,including with respec

313、t to the SMRT Cell 8M and Sequel II/IIeSystems,could diminish future demand for our products and may materially and adversely harm our futureoperating results.Increased market adoption of our products by customers may depend on the availability of sample preparationand informatics tools,some of whic

314、h may be developed by third parties.Our commercial success may depend in part upon the development of sample preparation and software andinformatics tools by third parties for use with our products.We cannot guarantee that product supplies,includingreagents,will not be limited or interrupted,or will

315、 be of satisfactory quality or continue to be available atacceptable prices,or that third parties will develop tools that our current and future customers will find usefulwith our products,or that customers will adopt such third-party tools on a timely basis or at all.A lack ofcomplementary sample p

316、reparation and informatics tools,or delayed updates of such tools,may impede theadoption of our products and may materially and adversely impact our business.We operate in a highly competitive industry and if we are not able to compete effectively,our business andoperating results will likely be har

317、med.There are a significant number of companies offering nucleic acid sequencing products and/or services,including Illumina,BGI Genomics,Thermo,ONT Ltd.,Roche,and Qiagen.Many of these companies currentlyhave greater name recognition,more substantial intellectual property portfolios,longer operating

318、 histories,significantly greater financial,technical,research and/or other resources,more experience in new productdevelopment,larger and more established manufacturing capabilities and marketing,sales and support functions,and/or more established distribution channels to deliver products to custome

319、rs than we do.These companies maybe able to respond more quickly and effectively than we can to new or changing opportunities,technologies,standards or customer requirements.There are also several companies that are in the process of developing or have already developed andcommercialized new,competi

320、ng or potentially competing technologies,products and/or services,including ONTLtd.and its subsidiaries,against whom we have filed complaints for patent infringement in the U.S.DistrictCourt for the District of Delaware and,previously,with the U.S.International Trade Commission,in the HighCourt of E

321、ngland and Wales and in the District Court of Mannheim,Germany.ONT Ltd.previously filed claimsagainst us in the High Court of England and Wales and the District Court of Mannheim,Germany,also for patentinfringement,and its subsidiary,Oxford Nanopore Technologies,Inc.(“ONT Inc.”),filed counterclaims

322、againstus in the U.S.District Court for the District of Delaware seeking declaratory judgements of non-infringement,invalidity and unenforceability of the asserted patents,as well as antitrust,false advertising and unfaircompetition counterclaims that were subsequently dismissed by that court.Roche

323、is developing potentiallycompeting sequencing products.Increased competition may result in pricing pressures,which could harm oursales,profitability or market share.Our failure to further enhance our existing products and to introduce newproducts to compete effectively could materially and adversely

324、 affect our business,operations,financialcondition and prospects.22We may be unable to successfully increase sales of our current products or market and sell our futureproducts.Our ability to achieve profitability depends on our ability to attract customers for our current and futureproducts,and we

325、may be unable to effectively market or sell our products,or find appropriate partners to do so.To perform sales,marketing,distribution and customer support functions successfully,we face a number of risks,including:our ability to attract,retain and manage qualified sales,marketing and service person

326、nel necessary toexpand market acceptance for our technologies;the performance and commercial availability expectations of our existing and potential customers withrespect to new and existing products;availability of potential sales and distribution partners to sell our technologies,and our ability t

327、o attractand retain such sales and distribution partners;the time and cost of maintaining and growing a specialized sales,marketing and service force for aparticular application,which may be difficult to justify in light of the revenue generated;andour sales,marketing and service force may be unable

328、 to execute successful commercial activities.We have enlisted and may continue to enlist third parties to assist with sales,distribution and customersupport.There is no guarantee that we will be successful in attracting desirable sales and distribution partners,that we will be able to enter into arr

329、angements with such partners on terms favorable to us or that we will be ableto retain such partners on a going-forward basis.If our sales and marketing efforts,or those of any of our third-party sales and distribution partners,are not successful,or our products do not perform in accordance withcust

330、omer expectations,our technologies and products may not gain market acceptance,which could materiallyand adversely impact our business,operations,financial condition and prospects.Large purchases by a limited number of customers represent a significant portion of our revenue,and any lossor delay of

331、expected purchases has resulted,and in the future could result,in material quarter-to-quarterfluctuations of our revenue or otherwise adversely affect our results of operations.We receive a significant portion of our revenue from a limited number of customers.For example,for thefiscal year ended Dec

332、ember 31,2020,2019 and 2018,one of our customers,Gene Company Limited,accountedfor approximately 14%,17%and 26%of our total revenue,respectively.Gene Company Limited is our primarydistributor in China.Many of these customers make large purchases on a purchase-order basis rather thanpursuant to long-

333、term contracts.As a consequence of the concentrated nature of our customer base and theirpurchasing behavior,our quarterly revenue and results of operations have fluctuated,and may fluctuate in thefuture,from quarter to quarter and are difficult to forecast.For example,the cancellation of orders or accelerationor delay in anticipated product purchases or the acceptance of shipped products by our l