Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion of our results of operations and financial condition together with our accompanying consolidated financial statements and the notes thereto included under Item 8. “Financial Statements”. This discussion contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry and our business and financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in the section entitled “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K and the section titled “Cautionary Statement Concerning Forward-Looking Statements” of this Annual Report on Form 10-K. Our fiscal year end is December 31. References to 2025, 2024, and 2023 referto the fiscalyears ended December 31, 2025, December 31, 2024, and December 31, 2023. This section of this report generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. A detailed discussion comparing our results of operations for 2024 and 2023 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K, for the year ended December 31, 2024.
GRAIL, LLC, previously named SDG Ops, LLC, was formed in the state of Delaware as a wholly owned subsidiary of Illumina, Inc. (“Illumina”). SDG Ops, LLC, along with SDG Ops, Inc., a Delaware corporation and wholly owned subsidiary of Illumina, were formed for the purpose of completing a merger transaction between GRAIL, Inc., and Illumina (the “Acquisition”) in order to carry on the business of GRAIL, Inc. and its subsidiaries.
On September 20, 2020, GRAIL, Inc., Illumina and its subsidiaries, SDG Ops, LLC, and SDG Ops, Inc., entered into an agreement and plan of merger (the “Merger Agreement”). On August 18, 2021 (the “Closing Date”), Illumina completed its acquisition of GRAIL, Inc. According to the terms and conditions of the Merger Agreement, SDG Ops, Inc. and GRAIL, Inc. merged, with GRAIL, Inc. surviving and became a wholly owned subsidiary of Illumina (the “First Merger”). Immediately following the First Merger and as part of the same overall transaction, GRAIL, Inc., as the surviving corporation, merged with SDG Ops, LLC (the “Second Merger”). According to the terms and conditions of the Merger Agreement, SDG Ops, LLC became the surviving company and was renamed GRAIL, LLC.
On June 24, 2024, Illumina completed the previously announced spin-off of GRAIL (the “Spin-Off”) through a distribution of approximately 85.5% of our outstanding common stock to the holders of record of Illumina’s common stock as of the close of business on June 13, 2024 (the “Distribution”). As a result of this Distribution, GRAIL became an independent public entity.
Unless the context otherwise requires, references to "GRAIL," “we,” “us,” and the "Company" refer to (i) GRAIL, LLC and its consolidated subsidiaries prior to the Spin-Off as a carve-out business of Illumina and (ii) GRAIL, Inc. and its subsidiaries following the Spin-Off.
Overview
Our Business
We are an innovative commercial-stage healthcare company focused on shifting the paradigm in early cancer detection at population scale. We believe screening individuals for many types of cancer with a single test represents a significant opportunity to reduce the global burden of cancer. Our multi-cancer early detection test (“Galleri”) can screen for many types of cancer, accurately predicting the specific organ or tissue type where the cancer signal originated (the “Cancer Signal of Origin”, or “CSO”), with high positive predictive values (“PPV”) and low false positive rates, all from a simple blood draw. Galleri has detected some of the most aggressive cancers in early stages including, among others, endometrial, esophageal, gastrointestinal, head and neck, liver, pancreatic, and rectal cancers. We have conducted what we believe is the largest clinical program in genomic medicine to date with data from over 385,000 participants that we believe demonstrate the clinical validation and clinical utility of Galleri in its intended use population. We have deep operational experience with over 800,000 tests processed
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across this clinical program and from our commercial experience, including through partnerships with leading healthcare systems, employers, digital health platforms, payors, and life insurance providers.
Recently we announced results from two of our large clinical trials, PATHFINDER 2 and NHS-Galleri Trial, and included certain results from those studies in our pre-market approval application (“PMA”) to the Food and Drug Administration (“FDA”), the last module of which we submitted in January 2026. Performance and safety data focused on the first approximately 25,000 participants of our approximately 35,000 participant PATHFINDER 2 study were presented at the European Society for Medical Oncology (“ESMO”) in October 2025 (the “PATHFINDER 2 Initial Results”) and demonstrated that adding Galleri to recommended (breast, cervical, colorectal and lung) screenings led to a cancer detection rate more than seven-fold increase in the number of cancers found within a year, and an approximately three-fold increase when prostate screening was included. Results from the full approximately 35,000 participants in the PATHFINDER 2 study were generally consistent with the results presented at ESMO. We also announced topline results from our three year, randomized control NHS-Galleri Trial which demonstrated a substantial reduction in stage 4 cancer diagnoses, increased stage 1 and 2 detection of deadly cancers, and four-fold higher cancer detection rate when compared to recommended screenings alone, although the primary endpoint of statistically significant combined stage 3 and 4 reduction was not observed. However, there was a favorable trend toward fewer combined stage 3 and 4 cancers in a pre-specified group of 12 deadly cancers in the intervention arm after the prevalent screening round. The PATHFINDER 2 Initial Results and the performance and safety metrics from the first year (prevalent screening round) of our NHS-Galleri Trial (“NHS-Galleri Prevalent Screening Round Results”) were included in our PMA submission, along with results of a bridging study.
We designed Galleri to detect cancer early, when it is more amenable to curative treatment, and we launched Galleri in the United States in mid-2021. Galleri works by detecting DNA fragments shed into the bloodstream by tumor cells and analyzing specific methylation patterns that can be used to both identify a general cancer signal and localize that signal to a specific organ or tissue type. We have sold approximately 475,000 commercial Galleri tests through December 31, 2025, including more than 185,000 in 2025, which have detected some of the most aggressive cancers in early stages including, among others, endometrial, esophageal, gastrointestinal, head and neck, liver, pancreatic, and rectal cancers.
As an early pioneer of MCED testing, we have established strong relationships within the cancer and primary care community, including through partnerships with academic and community medical centers, key opinion leaders, and governmental policy and advocacy partners. We have shared evidence supporting our MCED testing at renowned medical conferences, such as the American Association of Cancer Research (“AACR”), American Society of Clinical Oncology (“ASCO”), ESMO, and American Academy of Family Physicians (“AAFP”). We have also published results from our studies in leading scientific and medical journals, including The Lancet, Nature, Nature Medicine, Cancer Cell, and The Lancet Oncology.
Since our inception, we have incurred net losses each year. Our net losses were $408.4 million, $2.0 billion and $1.5 billion for 2025, 2024 and 2023. Adjusted EBITDA was $(320.6) million, $(483.5) million and $(523.9) million for 2025, 2024 and 2023. Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation of Adjusted EBITDA to the most directly comparable U.S. generally accepted accounting principle (“GAAP”) financial measure, information about why we consider Adjusted EBITDA useful and a discussion of the material risks and limitations of these measures, please see “Non-GAAP Financial Measures” below. Substantially all of our net losses resulted from the application of pushdown accounting, including goodwill and intangible assets impairments, amortization of intangible assets, as well as our research and development programs, general and administrative (“G&A”) costs associated with our operations, and sales and marketing costs associated with commercializing our products. Additionally, due to the application of pushdown accounting, our balance sheet includes intangible assets recognized by Illumina in connection with their acquisition of us that may be subject to additional impairment over time. We expect to continue to incur operating losses over at least the next several years as we continue to invest in research and development and commercialization of existing products.
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$325 million Private Investment of Public Equity (the “PIPE”)
On October 18, 2025, we entered into a securities purchase agreement (the "Purchase Agreement") with certain investors for the private placement of (i) 2,640,970 shares of GRAIL's common stock at a price of $70.05 per share and (ii) pre-funded warrants to purchase an aggregate of 1,998,573 shares of GRAIL’s common stock (the "Pre-Funded Warrants") at a purchase price of $70.049 per Pre-Funded Warrant, which represents the per share price for the common stock less the $0.001 exercise price. The PIPE closed on October 21, 2025, at which time we received aggregate net proceeds of $311.3 million, after deducting issuance costs of $13.7 million.
In addition, in connection with the Purchase Agreement, we entered into a Registration Rights Agreement with all of the investors (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, we filed a registration statement on Form S-3 with the SEC on November 13, 2025 for purposes of registering the resale of the shares and the shares of common stock issuable upon exercise of the Pre-Funded Warrants purchased in the private placement.
ATM Program
On November 14, 2025, we entered into an equity distribution agreement (“Equity Distribution Agreement”), with certain sales agents, establishing an At the Market Equity Distribution Program, under which we may offer and sell shares of our common stock, having an aggregate offering price of $300.0 million or up to 6,900,000 of common stock shares (the “ATM Program”).
During the year ended December 31, 2025, we issued 1,169,218 shares of our common stock pursuant to the ATM Program and we received aggregate net proceeds of $107.5 million, after deducting issuance costs of $3.2 million. As of December 31, 2025, $189.3 million worth of shares of common stock remained available for sale pursuant to the ATM Program.
Strategic Collaboration with Samsung and $110 million Equity Investment
In October 2025, we announced a strategic collaboration with Samsung C&T Corporation (“Samsung C&T”), Samsung Electronics Singapore Pte. Ltd. (together with Samsung C&T, the “Samsung Investors”) and Samsung Electronics Co., Ltd. (“Samsung Electronics”). As part of this strategic collaboration, we and Samsung C&T intend to work as exclusive partners to commercialize Galleri in Korea and, potentially, other key Asian markets, including Japan and Singapore. In addition, we and Samsung Electronics intend to explore potential additional strategic and operational collaborations, such as supporting longitudinal genomic-lifestyle clinical research and the integration of Samsung Electronics’ health data platform with our technologies and data.
In connection with this strategic collaboration, we entered into a stock purchase agreement (the “Samsung Stock Purchase Agreement”), with the Samsung Investors and Samsung Electronics, providing for the issuance and sale by us to the Samsung Investors in a private placement of 1,570,308 shares of our common stock, at a purchase price of $70.05 per share, upon the terms and conditions set forth in the Samsung Stock Purchase Agreement, for aggregate gross proceeds of approximately $110.0 million (the “Samsung Investment”). The Samsung Investment is subject to the satisfaction of certain closing conditions set forth in the Samsung Stock Purchase Agreement, including, but not limited to the satisfaction of certain regulatory approvals or clearances, including with respect to the Committee on Foreign Investment in the United States.
We intend to use the net proceeds from all our equity offerings to fund our commercial activities and reimbursement efforts, as well as for working capital and other general corporate purposes.
Separation from Illumina
On June 21, 2024, Illumina completed the previously announced spin-off of GRAIL (the “Spin-Off”). The Spin-Off was completed through a distribution of approximately 85.5% of our outstanding common stock to the holders of record of Illumina’s common stock as of the close of business on June 13, 2024 (the “Distribution”), which resulted in the issuance of 31,049,148 shares of common stock. As a result of this Distribution, GRAIL became an independent public entity. GRAIL’s common stock is listed under the ticker symbol “GRAL” on the Nasdaq Stock Exchange.
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We entered into or adopted agreements that provide a framework for the relationship between us and Illumina in connection with the Spin-Off. Refer to Note 1 — Organization And Description Of Business in Item 8 in this Annual Report on Form 10K.
On June 21, 2024, in connection with the Spin-Off, we received a cash contribution of $932.3 million from Illumina. In connection with the Spin-Off, we incurred $22.2 million of legal and professional fees in the year ended December 31, 2024 related to the 2021 acquisition of GRAIL by Illumina, and corresponding antitrust litigation, including compliance with the hold separate arrangements imposed by the European Commission, and divestiture of GRAIL from Illumina through the Spin-Off. See “Non-GAAP Financial Measures — Adjusted EBITDA” for further details. In addition, from 2021 to 2024, we spent $143.8 million on legal and professional service fees related to the antitrust litigation and compliance with the hold separate order and transaction costs related to Illumina’s acquisition of GRAIL and the Spin-Off.
As of December 31, 2025, Illumina held 2,502,126 shares of common stock representing a less than 10% stake in the Company. On February 17, 2026, Illumina filed a Schedule 13G reporting beneficial ownership of 1,302,126 shares of our common stock.
Restructuring Plan
On August 9, 2024, following a portfolio review, our Board of Directors (the “Board”) approved a restructuring plan (“Restructuring Plan”) designed to reprioritize our resources to focus on our core MCED business and reduce overall spend as we progressed towards completion of registrational studies and PMA submission to the FDA for Galleri.
As a result, we streamlined our commercial sales forces to focus on productive customers and high priority opportunities, while maintaining sales force coverage for the majority of our current Galleri volume and active prescribers. We also streamlined the investment in enterprise business, including our employer and life insurance businesses. These changes involved simplifying management layers and commercial roles without sales responsibilities, along with reductions in medical affairs teams involved with U.S. Galleri provider engagement.
We also substantially decreased investment and planned investment in research and development activities related to our product programs beyond Galleri, including our diagnostic aid for cancer (“DAC”) and minimal residual disease programs. In addition, we made reductions in general and administrative expenses to reflect the focus on the MCED opportunity. We plan to continue to invest in our biopharmaceutical partnerships and work with our partners to leverage our proprietary methylation technology in precision oncology applications.
The decision was based on cost-reduction initiatives intended to reduce our ongoing operating expenses and maximize shareholder value.
The Restructuring Plan included a reduction in our existing headcount and planned 2024 hires of approximately 30%, inclusive of 350 then full-time employees, or approximately 25% of the workforce in place as of June 30, 2024.
The Restructuring Plan was substantially completed in the fourth quarter of 2024, and we incurred $18.3 million of total charges through the fourth quarter of 2024, consisting primarily of employee severance, benefits, payroll taxes, and other associated costs. For the year ended December 31, 2025, we incurred an immaterial amount of restructuring charges.
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Basis of Presentation
The accompanying consolidated financial statements have been prepared on a standalone basis using the consolidated financial statements and accounting records of Illumina prior to the Spin-Off, and the accounting records of GRAIL, Inc. subsequent to the Spin-Off. These consolidated financial statements reflect our consolidated historical financial position, results of operations and cash flows as historically managed, in accordance with GAAP. The consolidated financial statements may not be indicative of our future performance and do not necessarily reflect what the financial position, results of operations and cash flows would have been, and may not include all expenses that would have been incurred, had GRAIL been operated as an independent, publicly traded company during the periods presented prior to the Spin-Off. Certain situations require management to make estimates based on judgments and assumptions, which may affect the reported amounts of assets and respective disclosures at the date of the financial statements. Management’s judgments and assumptions may also affect the reported amounts of net sales and expenses during the reporting periods. Actual results could differ from these management estimates.
Illumina’s acquisition of GRAIL on August 18, 2021 represented a change of control with respect to GRAIL. Given GRAIL, Inc. merged with SDG Ops, Inc., which then merged with SDG Ops LLC, authoritative guidance (ASC 805-50-30) required pushdown accounting to be applied for the Second Merger amongst entities under common control. As a result of the application of pushdown accounting, the separately issued financial statements of GRAIL reflect Illumina’s basis in the assets and liabilities of GRAIL which were remeasured to fair value as of the Closing Date. Intangible assets included developed technology, in-process research and development, and trade names, as well as goodwill.
We have incurred and expect to incur additional costs as a separate public company, and particularly as we transition to a large accelerated filer as of December 31, 2026 and are subject to enhanced reporting and internal control requirements under the Sarbanes-Oxley Act of 2002. These additional costs are primarily related to certain supporting functions that may differ from and be higher than the costs historically incurred or allocated to us.
The additional costs we expect to incur as a separate public company are summarized as follows:
•Accounting and audit related costs, professional services, and new systems and software to support the accounting, financial reporting, and audits as a standalone public company;
•Professional service costs, for additional support to enhance our capabilities in areas such as investor relations, accounting, financial reporting, treasury, risk management, and equity administration, among others; and
•Corporate governance costs, including but not limited to board of directors compensation and expenses, insurance, legal and other professional services fees, annual report and proxy statement costs, SEC filing fees, transfer agent fees, and stock exchange listing fees.
In addition, we have entered into a supply and commercialization agreement with Illumina (the “Illumina Supply Agreement”). Under the terms of the Illumina Supply Agreement, regardless of whether our products incorporate any Illumina technology, we will be obligated to pay Illumina a 9% royalty, subject to certain reductions and floors, in perpetuity on net sales generated by our products or revenues otherwise generated or received by us, subject to certain exceptions, in the field of oncology. The royalty is subject to anti-stacking provisions that allow royalty payments we make to other third parties to be deducted from the 9% royalty rate, to a floor of 7%. We expect that the third party royalty payments we will make in the foreseeable future will result in a 7% royalty rate. After we have cumulatively paid Illumina royalties totaling $1 billion, the royalty rate will be reduced to 5%, without further adjustment. Pursuant to the fourth amendment to the Illumina Supply Agreement, the perpetual royalty payment obligation to Illumina is suspended until December 24, 2026 or any earlier change of control of GRAIL, at which time royalty payments to Illumina will resume, without retroactive effect. Any royalty payments that we would have made under the Illumina Supply Agreement during the suspension period are deemed to have been paid for purposes of the cumulative $1 billion in royalty payments required to reduce the royalty rate to 5%.
Certain factors could impact the nature and amount of these separate public company costs, including the finalization of our staffing and infrastructure needs.
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Key Factors Affecting Performance
We believe there are several important factors that have impacted and that we expect will impact our operating performance and results of operations, including:
•FDA and other regulatory approval and reimbursement. Our performance will be impacted by the extent to which we can secure reimbursement and coverage for Galleri. Prior to broader coverage and reimbursement in the United States, we will continue our work with clinics and health systems to accelerate utilization, and with self-insured employers and health insurers to offer and cover Galleri. Galleri is currently available as a laboratory developed test (“LDT”) in the United States and we have established coverage and reimbursement from a number of self-insured employers and health plans, including coverage from TRICARE, but we do not currently have broader coverage and reimbursement by Medicare or large commercial insurers. While Galleri has not been approved or cleared by the FDA, FDA approval is currently not required to market our test in the United States. We are pursuing FDA approval to help support broad access for Galleri in the United States and we submitted a PMA for Galleri to the FDA in January 2026. Obtaining PMA approval can take several months or years from the time an application is submitted, if at all. Moreover, the regulatory requirements surrounding the pathway to PMA for laboratory tests has in the recent past, and may in the future, be subject to change. We believe that FDA approval, if obtained, could unlock coverage from large commercial payors in the United States. In February 2026, a new law created a coverage benefit category to enable coverage of FDA-approved MCED tests by Medicare, with authority for CMS to initiate coverage as early as January 1, 2029 for the aged 50-65 Medicare population and expanding one age-year at a time annually. If we obtain FDA approval, we expect to pursue coverage through this new law and, subsequently, inclusion of Galleri in the USPSTF’s guideline recommendation, although such inclusion may take years and is not certain even with FDA approval. Should USPSTF recommend Galleri with an A or B recommendation, CMS would then have the authority to expand coverage beyond what is covered under the MCED benefit category. We believe FDA approval and, to a greater extent, inclusion in USPSTF guideline recommendations would further increase adoption and market acceptance of our tests. Over time, we have and may continue to opt to provide rebates or discounts to certain customers, or reduce pricing in order to access a broader population base and accelerate adoption. In the United Kingdom, NHS England (which is being merged with the Department of Health and Social Care) (the “NHS”) will evaluate the final results from the NHS-Galleri Trial before determining whether to implement the Galleri test in the NHS. Under our agreement with the NHS, these results have met certain success criteria and missed others. As a result, we and NHS England will convene meetings of our joint steering committee to discuss how best to proceed with deployment to the UK population, if at all, considering deployment approaches and which population groups would most benefit. We believe the decision will include considerations such as NHS budget, political priorities, cost-effectiveness and implementation constraints in addition to an evaluation of the final results. We also believe our work with the NHS and the data generated from our NHS-Galleri Trial could help facilitate adoption in other single-payor systems around the world and support evidence of clinical utility worldwide. Although the primary endpoint of statistically significant combined stage 3 and 4 reduction was not observed in the NHS-Galleri Trial, we believe other results from the trial could be compelling to these systems.
•International expansion. A component of our long-term growth strategy is to expand our commercial reach internationally. We have expanded our research internationally into the United Kingdom through our partnership with NHS England in the NHS-Galleri Trial, and we expect to launch Galleri in the United Kingdom, following any positive NHS evaluation of the final results from the NHS-Galleri Trial. We continue to evaluate international expansion opportunities and we have begun expansion in select additional geographies through distributors, including Israel and Canada, and proposed expansion in South Korea through our partnership with Samsung. We expect to continue selectively engaging with international opportunities over time. Our ability to expand into new regions and jurisdictions, drive commercial sales and growth within those regions and jurisdictions and navigate economic, political, regulatory, and other risks, including geopolitical conflict, associated with international operations will be an important driver of our performance.
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•Continued development of, and competition within, the market for MCED testing. Multi-cancer early detection is a novel technology and the market for MCED tests is evolving. We continue to drive MCED as a solution to one of healthcare’s most important challenges. Our performance depends on the extent to which key stakeholders, including current and potential commercial partners, payors and health systems, regulators, policy makers, academic and community medical centers, and key opinion leaders and advocates, understand and support MCED testing as an effective solution for cancer screening. We make significant efforts to educate these key stakeholders regarding the benefits of MCED and the clinical and economic value of our products, which we believe will continue to drive awareness of MCED and expand the commercial opportunity for our products. Additionally, new MCED products from new market entrants launched commercially in the second half of 2025. We believe that the addition of new market entrants will help develop the market for MCED testing. However, these competitors will also be targeting similar markets as us and may compete with us for customers on characteristics of their tests, such as test performance, ease of use and cost. These companies may also present clinical or other information, such as test performance information, that differs from our own presentation of similar information. Our ability to differentiate Galleri from other MCED products and any such presented data will be a key factor in our success. We believe we are differentiated by our extensive and robust datasets generated from our clinical studies, our rigorous and objective approach to test development and research, our multidisciplinary capabilities leveraging the power of next-generation sequencing and advanced and trained machine learning algorithms and data science, our robust intellectual property portfolio, and our investment in our facilities and operational workflows. However, certain new market entrants may have greater financial resources, quicker reimbursement timelines, larger sales forces, more successful marketing campaigns, more experience in screening or international commercialization, lower prices or other advantages. Our ability to succeed will depend on our market success. See Item 1A. “Risk Factors”.
•Demand for our products and customer mix. A key factor to our future success is and will be our ability to increase demand for, and sales of, Galleri from new and existing customers. Our commercial strategy is focused on innovative value-oriented partnerships and targets primary care physicians, health systems, employers, digital health platforms, payors, and life insurance providers. As Galleri is not currently broadly reimbursed, our ability to drive demand from these customers is directly linked to our ability to demonstrate the clinical and economic value of our test through clinical validation and real-world experience. As of December 31, 2025, we have entered into commercial partnerships, including with leading healthcare systems, digital health platforms, employers, payors, and life insurance providers, and have established a network of over 17,000 prescribers across the United States in a pre-reimbursement setting. We believe this commercial network represents a significant opportunity to drive further demand for Galleri. The mix of customers from which we generate revenue from period to period has an impact on our revenue and gross margin. Galleritestpricingis generally based on our list price, with discounts in certain channels, or, for certain customers, such as larger, higher-volume customers or international distributors, negotiated contractual rates. For certain customers, we also offer rebates. Revenue generated from customers with negotiated contractual rates, or with rebates or discounts, is generally lower margin as compared to revenue generated based on list pricing. We expect the number or magnitude of these rates, discounts and rebates to reduce our average selling price (“ASP”) over time. In addition, we have entered into a number of biopharmaceutical research partnerships for our research-use-only (“RUO”) offering under our precision oncology portfolio. Large customers, such as healthcare systems, employers, and biopharmaceutical partners, generally begin using our products by initiating pilots involving a limited number of tests. We believe that our ability to convert these initial pilots into long-term customer relationships has the potential to drive substantial long-term revenue. Termination of these pilots or clinical trials can have a significant impact on our revenue and results of operations. For example, in late 2025, one of our pharmaceutical partners terminated its phase 3 trial due to low enrollment, for which our methylation technology was used as a potential companion diagnostic for enrolling participants. We also expect to increase demand from new customers through our efforts to further develop the market for MCED testing.
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•Investment in clinical studies and innovation to support our strategy and growth. A significant aspect of our business is our investment in research and development and the ongoing evidence generation supporting the clinical performance and utility of Galleri. In particular, we have invested heavily in clinical studies and designed and executed what we believe is the largest clinical program in genomic medicine to date. These studies include: NHS-Galleri, PATHFINDER, PATHFINDER 2, CCGA, REACH/Galleri-Medicare, REFLECTION, STRIVE, SUMMIT, and SYMPLIFY. We have established and maintained a leading voice in conversations regarding the early detection of multiple cancer types in the peer-reviewed literature. We have published data from these studies in high-profile journals and have presented such data at renowned medical conferences. We believe these studies are critical to driving adoption of our tests, as well as favorable coverage decisions, and expect to continue investment in data generation. In addition, we have invested heavily in the development of our methylation platform and extensive technological infrastructure. We expect our research and development expenses to decrease over the next three years as, in conjunction with our portfolio review, we determined to decrease investment in product programs beyond Galleri. Additionally, we expect to see a relative decrease in research and development expenses as we complete key milestones, such as the progress of most of our large clinical trials into the data follow-up phase and substantial completion of development of enhanced versions of our Galleri test, including the version that we use in commercial channels and the updated version that was submitted with our PMA. We will continue to prioritize key objectives for Galleri, including generating and reporting clinical utility evidence to support broad adoption of Galleri and progressing our PMA towards potential approval.
•Leverage our operational infrastructure. We have made significant investments to build a scalable infrastructure capable of meeting significant demand of up to one million tests per year while satisfying applicable certification and licensing requirements and accreditation standards. Our Durham, North Carolina facility is CAP-accredited and CLIA-certified. In addition, we engineered custom technology infrastructure and cloud-based tools to enable scalable data collection and analysis capabilities. With this foundational infrastructure in place, we have been able to generate scale efficiencies as the volume of tests sold has increased. As demand for our products increases, we expect to further leverage the scale efficiencies of our infrastructure and platform technology, which we believe will positively impact margins over time. In late 2024, we began using an updated version of Galleri in commercial channels. This version incorporates a highly-automated industrial scale platform and is intended to enable us to scale more efficiently with future demand. In connection with implementation of this new version of Galleri, we have experienced and may continue to experience increased turnaround times, re-processing costs and sample failures. We continually monitor and evaluate laboratory operations and performance in an effort to achieve our intended sample processing metrics and costs; however from time to time, processing issues may arise that could impact our operations. In the future, it is possible that we may invest significant amounts in infrastructure to support new products or existing products in new markets.
Seasonal fluctuations and underlying business trends have also affected, and are likely to continue to affect, our business. We may experience this seasonality, in particular in the third quarter due to primary care physician and patient summer vacation periods, with relatively lower volume in the first and third quarters, and relatively higher volume in the second and fourth quarters. These seasonal trends have caused, and will likely continue to cause, fluctuations in our quarterly results, including fluctuations in sequential revenue growth rates.
While each of these areas presents significant opportunities for us, they also pose significant risks and challenges that we must address. See Item 1A. “Risk Factors” for more information.
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Components of Results of Operations
Screening Revenue
We currently derive screening revenue through the sale of Galleri primarily within the United States and primarily through primary care physicians, health systems, employers, digital health platforms, payors, and life insurance providers. Galleri is not currently broadly reimbursed. Galleri test pricing is generally based on our list price, with discounts in certain channels, or, for certain customers, such as larger, higher-volume customers or international distributors, negotiated contractual rates. For certain customers, we also offer rebates. We expect the number or magnitude of these rates, discounts and rebates to reduce our ASP over time. We identify each sale of our test to our customer as a single performance obligation; therefore, revenue is recognized at the point of time when the test result report is delivered. For self-pay patients, we have concluded that an implied contract exists, however the transaction price for the implied contract represents variable consideration as there are situations in which we do not expect to collect the full invoiced amounts from self-pay patients due to price concessions. We utilize the expected value approach to estimate the transaction price and apply a constraint for such variable consideration, on a portfolio basis. We monitor the estimated amounts to be collected at each reporting period based on actual cash collections in order to assess whether a revision to the estimate is required.
Development Services Revenue
We also derive revenue through our development services, which consist of research services we provide to biopharmaceutical and clinical customers including support of ongoing clinical studies, pilot testing, research, and therapy development. We evaluate the terms and conditions included within our development services contracts with biopharmaceutical customers to ensure appropriate revenue recognition, including whether services are considered distinct performance obligations that should be accounted for separately versus together. Revenue from pilot and research services performed is recognized as performance obligations are achieved. We recognize revenue from development service agreements related to regulatory filings to support clinical study and companion diagnostic device development and regulatory submissions for the developed product(s) using an input method based on costs incurred to measure its progress toward the completion and satisfaction of the performance obligations.
Cost of Screening Revenue (Exclusive of Amortization of Intangible Assets) and Cost of Development Services Revenue
Cost of revenue represents expenses that are incurred to produce and sell our products and services. For screening revenue, these costs consist of materials, labor including salaries and wages, bonus, benefits and stock-based compensation, blood collection kits and shipping, phlebotomy, royalties, electronic medical records, equipment depreciation, and allocations of overhead expenses such as facilities and information technology costs. For development services, these costs consist of materials and patient sample acquisition, labor including salaries and wages, bonus, benefits and stock-based compensation, royalties, equipment depreciation, and allocations of overhead expenses such as facilities and information technology costs. As demand for our products increases, we expect to further leverage the scale efficiencies of our infrastructure and platform technology, which we believe will positively impact margins over time. These margin improvements from scale efficiencies will at least be partially offset when we commence recognition of royalties owing under the terms of the Illumina Supply Agreement on December 24, 2026.
Cost of Revenue—Amortization of Intangible Assets
As a result of the application of pushdown accounting, intangible assets recognized in our standalone financial statements relate to our own technology, and consist of developed technologies and in-process research and development that were measured at fair value upon the Acquisition. Our developed technology includes intangible assets related to Galleri, designed as a cancer screening test for asymptomatic individuals over 50 years of age, as well as our DAC product that is being designed to accelerate diagnostic resolution for patients for whom there is a clinical suspicion of cancer. As part of our Restructuring Plan, we have reduced investment in the development of products beyond Galleri, including DAC. The cost of identifiable intangible assets with finite lives, such as developed technology assets, are amortized on a straight-line basis over the assets’ respective estimated useful lives of 18 years.
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Research and Development
Research and development expenses include costs incurred to develop our technology (prior to establishing technological feasibility), collect clinical samples, and conduct clinical studies to develop and support our products. These costs consist of personnel costs, including salaries, benefits, and stock-based compensation expense associated with our research and development personnel, costs associated with setting up and conducting clinical studies at domestic and international sites, laboratory supplies, consulting costs, depreciation, and allocated overhead including facilities and information technology expenses, which we do not allocate by product. We expense both internal and external research and development costs in the periods in which they are incurred. Nonrefundable advance payments for goods and services that will be used or rendered in future research and development activities are deferred and recognized as expenses in the period in which the related goods are delivered or services are performed. We expect our research and development expenses to decrease over the next three years as, in conjunction with our portfolio review, we determined to decrease investment in product programs beyond Galleri. Additionally, some of our large clinical studies and development of our automated platform have substantially concluded.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel costs, including salaries, benefits and stock- based compensation expense, consulting costs, allocated overhead including facilities and information technology expenses, and travel associated with our commercial organization. Also included are costs associated with advertising programs that consist of brand and product awareness activities and trade events and conferences. Sales and marketing expense also includes amortization of the trade name intangible asset that was recognized upon the Acquisition, which has been recorded in our financial statements as a result of the application of pushdown accounting. The cost of identifiable intangible assets with finite lives, such as trade names, are amortized on a straight-line basis over the assets’ respective estimated useful lives of 9 years. We expect our sales and marketing expenses to increase following the release of positive study results as we invest in initiatives to drive awareness and demand generation of Galleri and to continue to decrease as a percentage of revenue over the next three years and long term.
General and Administrative
G&A expenses consist of personnel expenses, including salaries, benefits and stock-based compensation expenses, for executive, finance and accounting, legal, human resources, business development, corporate communications, portfolio management, medical affairs, and management information systems personnel. Also included are professional fees, legal costs, including patent and trademark-related expenses and educational activities. The related party amount in the prior year periods represents allocated stock administration expenses from Illumina. We have incurred and will incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, director and officer insurance premiums, investor relations activities, and other expenses related to administrative and professional services. We expect our G&A expenses to increase as we continue to invest in corporate infrastructure to support public company operations and the commercialization of Galleri and to continue to decrease as a percentage of revenue over the next three years and long term.
Goodwill and Intangible Assets Impairments
Upon the Acquisition, excess consideration over the aggregate fair value of tangible and intangible assets, net of liabilities assumed, was recognized by Illumina as goodwill. As a result of the application of pushdown accounting, the separately issued financial statements of GRAIL reflected the goodwill recorded by Illumina upon the Acquisition.
We evaluate goodwill and intangible assets for impairment annually or more frequently if an event occurs or circumstances change in the interim that would more likely than not reduce the fair value of the asset below its carrying amount. Refer to Note 2 — Summary Of Significant Accounting Policies—Goodwill and Intangible Assets in Item 8 in this Annual Report on Form 10K for more information.
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Interest Income
Interest income consists primarily of interest income earned on our cash, cash equivalents, and short-term marketable securities.
Other Income (Expense), Net
Other income (expense), net primarily consists of foreign currency gains and losses as a result of our intercompany agreements.
Benefit from Income Taxes
Income taxes are accounted for under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the future tax consequences of events that have been included in the consolidated financial statements. Deferred tax assets are recognized for deductible temporary differences and tax credit carryforwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portions or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
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Results of Operations
Comparisons of 2025 to 2024
The following table summarizes our results of operations for 2025 and 2024:
Year Ended Change
Revenue:
Costs and operating expenses:
Cost of revenue — amortization of intangible assets 133,889 133,889 — — %
Other income:
Revenue
Year Ended Change
Screening Revenue
The increase in screening revenue of $30.0 million or 28% was primarily driven bya 36% increase in Galleri sales volume, partially offset by a 6% decrease in ASP. Galleri sales volume increased in 2025 as a result of the continued ramp in our commercial activity following the release of positive study results, implementation of new pricing strategies, enhanced ordering pathways via new integrations, expansion of our partnerships with digital health platforms, and increased enrollment in our REACH/Galleri-Medicare clinical study.
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Development Services Revenue
The decrease in development services revenue of $8.4 million or 49% was primarily driven by a $7.0 million decrease in revenue from pilots with biopharmaceutical partners and a $1.4 million decrease in revenue from research services and other services revenue.
Cost of Screening Revenue (Exclusive of Amortization of Intangible Assets)
Year Ended Change
The increase in cost of screening revenue (exclusive of amortization of intangible assets) of $10.0 million or 16% was primarily driven by a 36% increase in Galleri sales volume, partially offset by a reduction in variable costs of Galleri testing performed on our automated platform.
Cost of screening revenue (exclusive of amortization of intangible assets) as a percent of revenue decreased in 2025 mainly due to the reduction in variable costs of Galleri testing performed on our automated platform, partially offset by a 6% decrease in ASP and higher sample reprocessing costs.
Cost of Development Services Revenue
Year Ended Change
The decrease in cost of development services revenue of $3.8 million or 60% was primarily due to a decrease in pilots with biopharmaceutical partners and a decrease in the number of research samples processed.
Research and Development
Research and development expenses for 2025 and 2024 were as follows:
Year Ended Change
The decrease in the research and development expenses of $126.6 million or 39% was primarily attributable to:
A decrease in compensation expenses of $60.3 million primarily due to a $37.4 million decrease in salaries and wages, a $14.7 million decrease in stock-based compensation expense and a $7.7 million decrease in severance and benefits, primarily due to the workforce reductions related to the Restructuring Plan implemented in 2024.
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A decrease in laboratory supplies and research collaborations of $28.5 million primarily driven by the substantial completion of the development and validation of our automated platform, the completion of enrollment in the PATHFINDER 2 study and the completion of final study visits in the NHS-Galleri Trial in 2024.
A decrease in clinical studies of $15.9 million primarily due to a $20.3 million decrease in PATHFINDER 2 study and NHS-Galleri trial expenses, partially offset by a $6.2 million increase due to increased enrollment in the REACH/Galleri-Medicare study.
A decrease in allocated expenses of $11.2 million primarily related to ongoing cost reduction efforts, which resulted in lower software, IT, and facilities expenses being allocated to the research and development function, as well as reduced headcount.
A decrease in other expenses of $8.7 million primarily due to a $3.9 million decrease in contractors and temporary labor, a $1.8 million decrease in professional services, and a $1.8 million decrease in cloud computing expenses due to cost optimization efforts.
Sales and Marketing
Year Ended Change
The decrease in sales and marketing expenses of $37.3 million or 24% was primarily attributable to a decrease in compensation expenses of $26.1 million, primarily due to a $17.4 million decrease in salaries and wages, a $4.8 million decrease in severance and benefits, and a $4.4 million decrease in stock-based compensation expense, primarily due to workforce reductions related to the Restructuring Plan implemented in 2024. Professional services and marketing expenses decreased by $9.6 million due to cost optimization efforts. Other expenses decreased by $1.6 million mainly driven by decreases in the use of contractors and temporary labor as well as reductions in allocated expenses due to cost optimization efforts.
General and Administrative
Year Ended Change
The decrease in general and administrative expenses of $54.8 million or 26% was primarily attributable to decreases in legal and professional services expenses and compensation related expenses. Legal and professional services expenses decreased $28.6 million primarily due to no longer incurring legal and professional service fees related to compliance with the European Commission hold separate order and transaction costs related to our Spin-Off, completed on June 24, 2024. Compensation expenses decreased by $21.6 million primarily due to a $9.0 million decrease in stock-based compensation expense, an $8.4 million decrease in salaries and wages, and a $5.9 million decrease in severance and benefits primarily due to the reduction in workforce related to the Restructuring Plan implemented in 2024, partially offset by a $1.6 million increase in variable compensation. Costs associated with the use of contractors and temporary labor decreased by $7.3 million due to cost optimization efforts. Other general and administrative costs increased by $2.7 million primarily due to higher allocated expenses due to changes in headcount.
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Goodwill and Intangible Assets Impairment
Year Ended Change
Goodwill and intangible impairment decreased $1.4 billion or 98% due to a goodwill impairment charge of $888.9 million and an IPR&D impairment charge of $532.0 million recognized during 2024, partially offset by an IPR&D impairment charge of $28.0 million recognized in 2025.
Interest Income
Year Ended Change
The increase in interest income of $1.9 million or 7% was primarily driven byan increasein interest earned on our money market funds and short-term marketable securities primarily due to an increase in the average balance on hand.
Other Expense, net
Year Ended Change
The decrease in other income (expense), net of $1.1 million was primarily a result of the fluctuation of foreign currency exchange rates.
Benefit from Income Taxes
Year Ended Change
The decrease in benefit from income taxes of $9.2 million or 7% was primarily due to an increase in effective tax rate for the year ended December 31, 2025 when compared to the effective tax rate for the year ended December 31, 2024.
Non-GAAP Financial Measures
In addition to our results provided throughout this Annual Report on Form 10-K that are determined in accordance with GAAP, this Annual Report on Form 10-K also includes the following non-GAAP financial measures for 2025, 2024, and 2023, which information should be read in conjunction with our audited Consolidated Financial Statements and the related notes and accompanying notes included elsewhere in this Annual Report on Form 10-K:
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Adjusted Gross Profit
Adjusted Gross Profit is a key performance measure that our management uses to assess our operational performance, as it represents the results of revenues and direct costs, which are key components of our operations. We believe that this non-GAAP financial measure is useful to investors and other interested parties in analyzing our financial performance because it reflects the gross profitability of our operations, and excludes the costs associated with our sales and marketing, product development, general and administrative activities, depreciation and amortization, and the impact of our financing methods and income taxes.
We calculate Adjusted Gross Profit as gross loss (as defined below) adjusted to exclude amortization of intangible assets and stock-based compensation allocated to cost of revenue. Adjusted Gross Profit should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income or loss from operations, net earnings or loss and other GAAP measures of income (loss) or profitability. The following table presents a reconciliation of gross loss, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted Gross Profit.
Year Ended
(1) Gross loss is calculated as total revenue less cost of revenue (exclusive of amortization of intangible assets), cost of development services revenue, and cost of revenue — amortization of intangible assets.
Adjusted EBITDA
Adjusted EBITDA is a key performance measure that our management uses to assess our financial performance and is also used for internal planning and forecasting purposes. We believe that this non-GAAP financial measure is useful to investors and other interested parties in analyzing our financial performance because it provides a comparable overview of our operations across historical periods. In addition, we believe that providing Adjusted EBITDA, together with a reconciliation of net loss to Adjusted EBITDA, helps investors make comparisons between our company and other companies that may have different capital structures, different tax rates, different operational and ownership histories, and/or different forms of employee compensation.
Adjusted EBITDA is used by our management team as an additional measure of our performance for purposes of business decision-making, including managing expenditures. Period-to-period comparisons of Adjusted EBITDA help our management identify additional trends in our financial results that may not be shown solely by period-to-period comparisons of net income (loss) or income (loss) from operations. Our management recognizes that Adjusted EBITDA has inherent limitations because of the excluded items, and may not be directly comparable to similarly titled metrics used by other companies.
We calculate Adjusted EBITDA as net loss adjusted to exclude amortization of intangible assets, stock-based compensation, depreciation, goodwill and intangible assets impairment, restructuring, interest income, benefit from income tax expense, and legal and professional services costs related to the Acquisition and corresponding antitrust litigation, including compliance with the hold separate arrangements imposed by the European Commission, and our divestment from Illumina. We believe that the items subject to these further adjustments are not indicative of our ongoing operations due to their nature, especially considering the impact of certain items as a result of the Acquisition.
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Adjusted EBITDA should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income or loss from operations, net earnings or loss and other U.S. GAAP measures of income (loss). Additionally, it is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as interest and tax payments. Further, our definition of Adjusted EBITDA may differ from similarly titled measures used by other companies and therefore may not be comparable among companies. The following table presents a reconciliation of net loss, the most directly comparable financial measure calculated in accordance with U.S. GAAP, to Adjusted EBITDA on a consolidated basis.
Year Ended
Adjusted to exclude the following:
(1) Represents amortization of intangible assets, including developed technology and trade names.
(2) Represents all stock-based compensation recognized on our standalone financial statements for the periods presented.
(3) Reflects impairment of goodwill and intangible assets recognized as a result of the Acquisition.
(4) Represents employee severance, benefits, payroll taxes, and other costs associated with the Restructuring Plan.
(5) Represents legal and professional services costs associated with the Acquisition and corresponding antitrust litigation, including compliance with the hold separate arrangements imposed by the European Commission, and legal and professional services costs associated with the divestiture.
Pursuant to the fourth amendment to the Illumina Supply Agreement, our perpetual royalty payment obligation to Illumina is suspended until December 24, 2026 or any earlier change of control, at which time royalty payments to Illumina will resume without retroactive effect. In future periods, when we are obliged to make royalty payments under the Illumina Supply Agreement, our gross loss, adjusted gross profit, net loss and Adjusted EBITDA will be impacted.
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Liquidity and Capital Resources
Sources of Liquidity
From inception through the closing date of Illumina’s acquisition of GRAIL, we had funded our operations primarily through the sale and issuance of redeemable convertible preferred stock and receipt of continuation payments from Illumina. Post- Acquisition until completion of the Spin-Off, we received funding on a quarterly basis directly from Illumina. While we generate revenue from screening and development services, these revenues have not been sufficient to fund all operations. On June 21, 2024, in connection with the Spin-Off, we received a cash contribution of $932.3 million from Illumina.
In October 2025, we completed the PIPE and received aggregate net proceeds of $311.3 million, after deducting issuance costs of $13.7 million.
During 2025, we issued 1,169,218 shares of our common stock under the ATM program at the prevailing market prices for aggregate net proceeds of $107.5 million, after deducting issuance costs of $3.2 million. As of December 31, 2025, $189.3 million worth of shares of common stock remained available for sale pursuant to the ATM program.
As of December 31, 2025, our cash and cash equivalents totaled $249.7 million and our short-term marketable securities totaled $654.7 million.
In October 2025, we signed the Samsung Stock Purchase Agreement providing for the purchase by the Samsung Investors of 1,570,308 shares for aggregated net proceeds of $110.0 million, excluding any issuance costs. The Samsung Investment has not closed, and remains subject to the satisfaction of certain closing conditions set forth in the Samsung Stock Purchase Agreement, including, but not limited to the satisfaction of certain regulatory approvals or clearances, including with respect to the Committee on Foreign Investment in the United States.
We intend to use the net proceeds from these transactions to fund our commercial activities and reimbursement efforts, as well as for working capital and other general corporate purposes.
Future Funding Requirements
We began generating revenue in mid-2021, but we have continued to incur significant losses and negative cash flows from operations. Subsequent to the Acquisition, we have incurred net losses of $10.2 billion which includes cumulative charges of $7.0 billion for impairment of goodwill and intangible assets. We expect to continue to incur operating losses over at least the next several years as we continue to invest in research and development and seek to achieve broad reimbursement of our current commercialized products. We believe that our existing cash, cash equivalents and short-term marketable securities will be sufficient to meet our working capital and capital expenditure needs into 2030, as of the date of this Annual Report on Form 10-K. However, we anticipate that we will need to raise additional financing in the future to fund our operations. Our future capital requirements will depend on many factors, including the timing and extent of spending to support commercialization and pipeline product development, market acceptance of our products prior to broad reimbursement, and the timing of broad reimbursement. We are subject to typical risks associated with an early-stage commercial company and are developing the market for multi-cancer early detection. We may encounter complications with executing our business plans that may cause unforeseen expenses and adversely affect our business.
We may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies, and intellectual property rights. We may be required to seek additional capital through equity or debt financing. In the event that additional financing is required, we may not be able to raise it on terms acceptable to us or at all. If we raise additional funds through the issuance of additional debt or equity securities, it could result in dilution to our existing stockholders, increased fixed payment obligations, and the existence of securities with rights that may be senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that would restrict our operations. We are also restricted in our ability to raise money through certain transactions or with certain parties pursuant to the terms of the Tax Matters Agreement we entered into with
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Illumina on June 24, 2024 in connection with the Spin-Off. We may also choose to raise funds through collaborations and licensing arrangements, in which case we may relinquish significant rights or grant licenses on terms that are not favorable to us. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would be adversely affected.
The following table summarizes our cash flows for the periods presented:
Year Ended Change
Generally, our net cash provided by financing activities is used to fund our day to day operating activities. First quarter operating cash requirements are generally higher due to payment in the first quarter of our annual bonuses accrued during the prior year. During 2025 and 2024, cash paid for annual bonuses accrued during the prior year was $24.2 million and $25.9 million. As of December 31, 2025, $22.8 million is accrued related to annual bonuses that will be paid in the first quarter of 2026.
Net Cash Used by Operating Activities
The decrease in net cash used by operating activities was primarily driven by an improvement in the net loss, adjusted for non-cash changes of $241.5 million and positive working capital changes of $36.7 million, primarily due to an increase in revenue collections, a decrease in operating expenses primarily driven by a reduction in workforce related to the Restructuring Plan, a decrease in clinical studies driven by completion of enrollment in our PATHFINDER 2 study and completion of final study visits in our NHS-Galleri Trial and a decrease in purchases of laboratory supplies driven by the completion of the development and validation of our automated platform at the end of 2024 and lower clinical studies sample processing. In addition, prior to the Spin-Off, our stock based compensation was settled in cash and subsequent to the Spin-Off settled in shares.
Net Cash Used by Investing Activities
The decrease in net cash used by investing activities was primarily related to proceeds from maturities of marketable securities, net of purchases of marketable securities.
Net Cash Provided by Financing Activities
The decrease in net cash provided by financing activities was primarily related to the funding received from Illumina in 2024 prior to the Spin-off of $1.2 billion, partially offset by net proceeds from equity offerings of $418.8 million.
Off-Balance Sheet Arrangements
In accordance with our lease agreements, we provided standby letters of credit totaling $7.0 million in lieu of a security deposit. These letters of credit remain effective through March 1, 2028 and January 28, 2038.
Except for the letters of credit mentioned above, we did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements.
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Material Cash Requirements
Our material cash requirements include the following contractual and other obligations as of December 31, 2025:
Leases
We act as lessee in our lease agreements, which include operating leases for our corporate office, laboratory space and laboratory and office equipment. As of December 31, 2025, we had minimum operating lease payments of $70.8 million, of which $13.6 million is payable in 2026. These minimum lease payments exclude future lease payments associated with our Sunnyvale, California lease of $61.7 million. The Sunnyvale, California lease will commence on October 1, 2026 and we expect the lease commencement date for accounting purposes to be in the first half of 2026. Refer to Note 9 — Leases in item 8 in this Annual Report on Form 10K for more details on the Sunnyvale, California lease.
Purchase Commitments
Contractual obligations represent future cash commitments and liabilities under agreements with third parties and exclude purchase orders for goods and services that are cancellable. Our non-cancelable purchase orders represent authorizations to purchase rather than binding agreements. The Company’s contractual commitment amounts are associated with agreements that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum services to be used; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. The purchase commitments primarily relate to contractual commitments for future use of web services and laboratory supplies in the normal course of business. As of December 31, 2025, we had non-cancelable purchase obligations of $52.8 million, with $25.0 million payable within twelve months of December 31, 2025.
Minimum Royalties
Minimum royalty payments are associated with licensing agreements related to research efforts. Minimum annual royalty payments do not include royalties that would be payable on net sales of Galleri or any future products, pursuant to existing agreements and licenses with Illumina, The Chinese University of Hong Kong, and other third parties in excess of minimum annual royalty payments. As of December 31, 2025, we had minimum royalty commitments of $5.7 million, with $1.0 million payable within twelve months of December 31, 2025.
Critical Accounting Estimates
This discussion and analysis of our financial condition and results of operations is based on our audited Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these audited Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the audited Consolidated Financial Statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our audited Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
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Screening Revenue
Screening revenue includes cancer screening testing services provided to patients. Patients obtain tests via their healthcare systems, employers, digital health providers, payors, concierge medicine practices, or life insurance providers, or they can order the test via telemedicine (collectively referred to as our direct customers). The test price is generally based on our list price, with discounts in certain channels, or, for certain customers, such as larger, higher-volume customers or international distributors, negotiated contractual rates. For each specimen received, testing services are performed and test results are electronically delivered to the ordering physician. We identify each sale of our test to a customer as a single performance obligation; therefore, revenue is recognized at the point of time when the test result report is delivered.
For self-pay patients, we have concluded that an implied contract exists, however the transaction price for the implied contract represents variable consideration as there are situations in which we do not expect to collect the full invoiced amounts from self-pay patients due to price concessions. We utilize the expected value approach to estimate the transaction price and apply a constraint for such variable consideration, on a portfolio basis. We monitor the estimated amounts to be collected at each reporting period and assess whether a revision to the estimate is required based on the actual cash collections. Both the estimate and any subsequent revisions are subject to uncertainty and require significant judgment in the estimation and application of the constraint for such variable consideration. We analyze our actual cash collections over the expected collection period and compare it with the estimated variable consideration for each portfolio. The difference is then recognized as an adjustment to revenue when we do not believe there is a probable revenue reversal.
Accrued Clinical Studies and Research and Development Expenses
We accrue for estimated costs of research and development activities conducted by third-party service providers, including those conducting clinical studies. We record the estimated costs of research and development activities based upon the estimated amount of services provided and include these costs in accrued liabilities in our consolidated balance sheets and within research and development expenses in our consolidated statements of operations. These costs are a significant component of our research and development expenses. We accrue for these costs based on factors such as estimates of the work completed and in accordance with agreements established with our third-party service providers. We make judgments and estimates in determining the accrued liabilities balance in each reporting period.
Goodwill and Indefinite-Lived Intangible Assets Impairment
Goodwill represented the costs in excess of the fair value of net assets of GRAIL acquired by Illumina in August 2021. Indefinite-lived intangible assets consisted of GRAIL’s in-process research and development (“IPR&D”) and were measured by Illumina at fair value as of the Closing Date.
We test goodwill and indefinite-lived intangible assets for impairment annually or more frequently whenever events or changes in circumstances indicate that goodwill and indefinite-lived intangible assets may be impaired. Goodwill and indefinite-lived intangible assets are considered to be impaired when the carrying value of a reporting unit or asset exceeds its fair value. GRAIL currently has only one reporting unit; and therefore, we measure the carrying value against the fair value of the Company.
We use qualitative factors to determine whether goodwill and indefinite-lived intangible assets are more likely than not impaired and whether a quantitative test for impairment is considered necessary. If we conclude from the qualitative assessment that goodwill and indefinite-lived intangible assets are more likely than not impaired, we are required to perform a quantitative assessment to determine the amount of impairment.
We are required to use judgment when applying the goodwill and indefinite-lived intangible assets impairment test. Changes in these estimates could materially affect our assessment of the fair value and goodwill and indefinite-lived intangible assets impairment. Significant estimates used in our impairment test include the determination of the weighted average cost of capital, revenue growth rates, long-term growth rates, and forecasted profitability of our business.
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The estimates and assumptions used in our assessment of indefinite-lived intangible assets represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value.
We fully impaired goodwill as of December 31, 2024, resulting in no remaining carrying value. In addition, we fully impaired our IPR&D assets during 2025, resulting in no remaining carrying value.
Income Taxes
Our provision for income taxes, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect our best assessment of estimated future taxes to be paid. Judgments and estimates based on interpretations of existing tax laws or regulations in the United States and foreign jurisdictions where we are subject to income tax are required in determining our provision for income taxes. Changes in tax laws, regulations, or statutory tax rates (including the implementation of global minimum tax rates in certain jurisdictions), and estimates of our future taxable income could impact the deferred tax assets and liabilities provided for in the consolidated financial statements and would require an adjustment to the provision for income taxes.
Deferred tax assets are regularly assessed to determine the likelihood they will be recovered from future taxable income. A valuation allowance is established when we believe it is more likely than not the future realization of all or some of a deferred tax asset will not be achieved. In evaluating our ability to recover deferred tax assets within the jurisdiction which they arise, we consider all available positive and negative evidence.
We recognize the impact of a tax position in our consolidated financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. Due to the complexity of some of the uncertainties, the ultimate resolution may result in payments that are materially different from our current estimate of the tax liability. These differences, as well as any interest and penalties, will be reflected in the provision for income taxes in the period in which they are determined.
JOBS Act
We are an emerging growth company under the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, we may delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have nonetheless irrevocably elected not to avail ourselves of this exemption and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.
We will remain an emerging growth company (“EGC”) until the earliest to occur of the following: (i) the last day of the fiscal year in which our total annual gross revenues first meet or exceed at least $1.235 billion (as adjusted for inflation), (ii) the date on which we have, during the prior three-year period, issued more than $1.0 billion in non-convertible debt, (iii) the last day of the fiscal year in which we (a) have an aggregate worldwide market value of common stock held by non-affiliates of $700 million or more (measured at the end of each fiscal year) as of the last business day of our most recently completed second fiscal quarter and (b) have been a reporting company under the Exchange Act for at least one year (and have filed at least one annual report under the Exchange Act and are not smaller reporting company), or (iv) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act. We expect to cease to be an EGC effective December 31, 2026.
Recent Accounting Pronouncements
See Note 2 — Summary Of Significant Accounting Policiesin Item 8. Financial Statements of this Annual Report on Form 10-K for details of recent accounting pronouncements.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Sensitivity
We are exposed to market risk related to changes in interest rates related primarily to our cash, cash equivalents and marketable securities. We had cash and cash equivalents of $249.7 million as of December 31, 2025, which consisted primarily of bank deposits, money market funds and U.S. government treasury bills with an original maturity of three months or less. As of December 31, 2025, we had short-term marketable securities of $654.7 million. Our marketable securities are held in U.S. government treasury bills. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of the interest rates in the United States. The primary objective of our investment activities is to preserve capital to fund our operations. We do not enter into investments for trading or speculative purposes.
Our investments are subject to interest rate risk and could fall in value if market interest rates increase. Due to the short-term duration of our investment portfolio and the low-risk profile of our investments, a hypothetical 10% relative change in interest rates during any of the periods presented would not have had a material impact on our Consolidated Financial Statements.
Foreign Currency Sensitivity
The majority of our transactions occur in U.S. dollars. However, we do have certain transactions that are denominated in currencies other than the U.S. dollar, primarily the British pound, and we therefore are subject to foreign exchange risk. The fluctuation in the value of the U.S. dollar against the foreign currencies affects the reported amounts of expenses, assets, and liabilities associated with certain activities. We do not currently engage in any hedging activity to reduce our potential exposure to currency fluctuations, although we may choose to do so in the future. A hypothetical 10% change in foreign exchange rates during any of the periods presented would not have had a material impact on our Consolidated Financial Statements.
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Item 8. Financial Statements and Supplementary Data
INDEXTO CONSOLIDATEDFINANCIALSTATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 152
Audited Consolidated Financial Statements
Consolidated Balance Sheets 153
Consolidated Statements of Operations 154
Consolidated Statements of Comprehensive Loss 155
Consolidated Statements of Stockholders’/ Member’s Equity 156
Consolidated Statements of Cash Flows 157
Notes to Consolidated Financial Statements 158
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directorsof GRAIL,Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of GRAIL, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive loss, stockholders’/member’s equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
BasisforOpinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/Ernst & Young LLP
WehaveservedastheCompany’sauditorsince2023.
San Mateo, California
March 12, 2026
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CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
As of December 31,
Assets
Current assets:
Prepaid expenses and other current assets(3) 15,107 17,447
Liabilities and stockholders’ equity
Current liabilities:
Operating lease liabilities, current portion 11,715 13,260
Operating lease liabilities, net of current portion 43,148 54,881
Other non-current liabilities 2,752 2,236
Commitments and contingencies (Note 10)
Stockholders’ equity:
Accumulated other comprehensive income 2,655 1,451
(1)Includes related party accounts receivable, net of nil and $65, respectively.
(2)Includes related party supplies of nil and $3,130, respectively.
(3)Includes related party prepaid expenses and other current assets of nil and $77, respectively.
(4)Includes related party property and equipment, net of nil and $2,227, respectively.
(5)Includes related party accrued liabilities of nil and $104, respectively.
See accompanying notes to consolidatedfinancialstatements.
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CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
Year Ended
Revenue
Costs and operating expenses
Other income
Other income (expense), net (993) 64 (208)
Net loss per share — Basic and Diluted $ (11.11) $ (63.54) $ (47.21)
(1)Includes related party screening revenue of $208, $460 and $652, respectively.
(2)Includes related party cost of screening revenue of $4,617, $13,091 and $8,532, respectively.
(3)Includes related party cost of development services revenue of $275, $637 and $238, respectively.
(4)Includes related party research and development expenses of $3,306, $18,843 and $19,508, respectively.
(5)Includes related party general and administrative expenses of nil, $104 and $206, respectively.
See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTSOF COMPREHENSIVELOSS
(Amounts in thousands)
Year Ended
Other comprehensive income:
Net unrealized gain on marketable securities, net of tax 110 266 —
Foreign currency translation adjustment 1,094 119 172
See accompanying notes to consolidatedfinancialstatements.
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CONSOLIDATED STATEMENTSOFSTOCKHOLDERS’/ MEMBER’S EQUITY
(Amounts in thousands, except share data)
Common Stock
Stock-based compensation expense — — 1,773 — — — 1,773
Other comprehensive income — — — — 172 — 172
Other comprehensive income — — — — 385 — 385
Vesting of restricted stock units 2,844,261 3 — (3) — — —
Stock-based compensation expense — — — 58,283 — — 58,283
Other comprehensive income — — — — 1,204 — 1,204
Vesting of restricted stock units 2,491,212 2 — (2) — — —
*See Note 1 — Organization And Description Of Business for more information on the Spin-Off.
See accompanying notes to consolidatedfinancialstatements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year Ended
Cash flows from operating activities
Adjustments to reconcile net loss to net cash used by operating activities:
Amortization of discount on marketable securities (21,217) (3,167) —
Credit loss expense 332 — —
Changes in operating assets and liabilities:
Operating lease right-of-use assets and liabilities, net 1,025 1,747 6,712
Cash flows from investing activities
Proceeds from maturities of marketable securities 1,224,200 — —
Cash flows from financing activities
Issuance of common stock under ESPP 4,525 — —
Represented by:
Supplemental cash flow information:
Operating cash flows from operating leases, net $ (17,174) $ (19,272) $ (18,733)
(1)Includes changes in related party accounts receivable of $(65), $15 and $133, respectively.
(2)Includes changes in related party supplies of $(3,130), $2,725 and $(871), respectively.
(3)Includes changes in related party prepaid and other current assets of $(77), $(36) and $27, respectively.
(4)Includes changes in related party accounts payable of nil, $(168) and $(2,965), respectively.
(5)Includes changes in related party accrued liabilities of $104, $9 and $91, respectively.
(6)Includes related party purchases of property and equipment of $(591), nil and $(2,644), respectively.
See accompanying notes to Consolidated financial statements.
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NOTES TO CONSOLIDATEDFINANCIALSTATEMENTS
NOTE 1.ORGANIZATION AND DESCRIPTION OF BUSINESS
GRAIL, Inc. (“GRAIL” or the “Company”),headquarteredin Menlo Park, California, is an innovativecommercial-stagehealthcarecompany focusedonshiftingtheparadigmofearlycancerdetection.The Company’s Galleribloodtest is a commercially available screening test for early detection of multiple types of cancer. GRAIL’s common stock is listed under the ticker symbol “GRAL” on the Nasdaq Stock Exchange.
GRAIL was previously acquired by Illumina, Inc. (”Illumina”) in August 2021 (the “Acquisition”), at which point it became a 100% owned subsidiary of Illumina, and held separate as a part of binding hold separate commitments implemented pursuant to orders issued by the European Commission. GRAIL separated from Illumina on June 24, 2024, as described below. GRAIL was a limitedliabilitycompany(“LLC”) from August 19, 2021 to June 21, 2024 when it was converted into a corporation (the “Conversion”) in anticipation of such separation.
Separation from Illumina
On June 24, 2024, (the “Distribution Date”), Illumina completed the previously announced spin-off of GRAIL (the “Spin-Off”). The Spin-Off was completed through a distribution of 85.5% of the Company’s outstanding common stock to the holders of record of Illumina’s common stock as of the close of business on June 13, 2024 (the “Distribution”), which resulted in the distribution of 31.0 million shares of common stock. As a result of the Distribution, the Company became an independent public entity. Illumina’s ownership of GRAIL reduced to 4,502,126 shares of common stock representing 14.5% ownership of the Company after the Spin-Off. Unless the context otherwise requires, references to the Company or GRAIL, refer to (i) GRAIL, LLC prior to the Conversion and (ii) GRAIL, Inc. and its subsidiaries following the Conversion.
In connection with the Spin-Off, the Company entered into or adopted agreements that provide a framework for the relationship between the Company and Illumina, including, but not limited to the following:
•Separation and Distribution Agreement — governed the terms and conditions of the Spin-Off and sets forth aspects of the Company’s and Illumina’s relationship following the Spin-Off. See Note 11 — Legal And Regulatory Proceedings for more information regarding the contingencies related to this agreement.
•Tax Matters Agreement — governs the respective rights, responsibilities and obligations of Illumina and the Company after the Spin-Off with respect to all tax matters and includes restrictions to preserve the tax-free status of the Distribution. See Note 14 — Taxes and Note 11 — Legal And Regulatory Proceedings regarding income taxes and the contingencies related to this agreement.
•Employee Matters Agreement — addresses employment, compensation, and benefits matters, including the allocation and treatment of assets and liabilities relating to employees and compensation and benefits plans and programs in which GRAIL employees participate, as well as the treatment of cash-based incentive awards in connection with the Spin-Off. See Note 8 — Stock-Based Compensation for further details regarding treatment of equity awards.
•Stockholder and Registration Rights Agreement — governs the respective rights, responsibilities and obligations of Illumina and the Company after the Spin-Off with respect to Illumina’s continuing ownership of GRAIL common stock.
•Supply and Commercialization Agreement Amendment — amends the Company’s supply and commercialization agreement with Illumina, which governs the ongoing supply and commercial relationship, including licensing, royalty payments and intellectual property between GRAIL and Illumina. See Note 16 — Related Party Transactions for more information regarding the royalty arrangements with Illumina.
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NOTES TO CONSOLIDATEDFINANCIALSTATEMENTS
Illumina provided the Company with disposal funding (the “Disposal Funding”) in the amount of $932.3 million in accordance with the Separation and Distribution Agreement, which was subject to a clawback feature that lapsed on September 24, 2025. See Note 11 — Legal And Regulatory Proceedings — Contingencies for details.
Our Abilityto Continue as a Going Concern
The accompanyingconsolidatedfinancialstatementshave been preparedon a going concern basis, which contemplatestherealizationofassetsandthesatisfactionofliabilitiesinthenormalcourseofbusiness.The realizationofassetsandthesatisfactionofliabilitiesinthenormalcourseofbusinessaredependenton,among otherthings,theCompany’sabilitytomanageits netlossandtobecomeprofitableandoperateprofitably,to managethe Company’snegativecashflowsfromoperationsandtogeneratepositivecashflowsfromoperations,andthe Company’s abilitytoobtainfinancingtosupportworkingcapitalrequirements. The Company had $249.7 millionof cash and cash equivalents and $654.7 million of short-term marketable securities as of December 31, 2025.
The Companybelievesthatitsexistingcashandcashequivalents and short-term marketable securities willbesufficienttomeetitsworkingcapitalandcapitalexpenditureneedsforatleastthenext12 months,asofthedatetheseconsolidatedfinancialstatementswerefiled.
NOTE 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basisof Presentationand Principlesof Consolidation
After the Spin-Off, the Company became a standalone publicly-traded company, and the Company’s financial statements are presented on a consolidated basis.
Prior to the Spin-Off, the accompanying consolidated financial statements represented the historical operations of the standalone GRAIL legal entity and included purchase accounting adjustments and certain tax adjustments as if the Company filed a separate income tax return and was not included in Illumina’s consolidated return for the period of time the Company was owned by Illumina. All revenues and costs as well as assets and liabilities directly associated with the business activity of the Company were included in the consolidated financial statements. Certain assets and liabilities were reflected at fair value under the new basis of accounting established at the closing of the Acquisition. Managementconsideredtheneedtoallocateanysharedcostsincurredbytheparent,Illumina,tothe accompanyingconsolidatedfinancialstatements. However, since theEuropeanCommissionhad adopted an order requiringIlluminaand GRAILto be held and operatedas distinctand separateentities, nomaterialallocationswererequired.
The financial statements for all periods presented, including the historical results of the Company prior to the Spin-Off, are referred to as “Consolidated Financial Statements” and have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and include the accountsof the Companyand its wholly owned subsidiaries.All intercompanybalanceshave been eliminatedin consolidation. The Company’s significant accounting policies are summarized below.
Use of Estimates
The preparationof the consolidatedfinancialstatementsin accordancewith U.S. GAAPrequires managementto makeestimatesand assumptionsthataffecttheamountsof assetsand liabilities,disclosureof contingentassetsand liabilities,and the reportedamountsof revenuesand expenses in the consolidatedfinancial statementsand accompanyingnotes.The Company basesitsestimateson historicalexperienceand othermarket- specificorotherrelevantassumptionsthatitbelievestobereasonableunderthecircumstances.On anongoing basis,managementevaluatesitsestimates,including,butnotlimitedto,thoserelatedtoestimationofvariable consideration,standalonesellingpriceincludedincontractswithmultiple performanceobligations,measureofprogresstowardthecompletionandsatisfactionofperformanceobligations, accruedclinicalstudiesand researchand developmentexpenses,stock-basedcompensationexpense, measurementofliability-
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NOTES TO CONSOLIDATEDFINANCIALSTATEMENTS
classifiedawards,valuation of intangibleassets,usefullivesofintangible assetsandpropertyandequipment,determinationofincrementalborrowingrateforoperatingleases, contingencies,andtheprovisionforincometaxes, amongothers.Theseestimatesgenerallyinvolvecomplex issuesandrequirejudgments,involvetheanalysisofhistoricalresultsandpredictionoffuturetrends,canrequire extendedperiodsoftimetoresolveandaresubjecttochangefromperiodtoperiod.Actualresultscoulddiffer fromthoseestimates,and such differencescouldbe materialto theconsolidatedfinancialstatements.
Concentrationof CreditRisk
Financial Instruments
The Company is subject to credit risk from its portfolio of cash, cash equivalents and short-term marketable securities held at three accredited financial institutions. As of December 31, 2025, the Company had $249.7 million of cash and cash equivalents, and short-term marketable securities of $654.7 million. The Company limits its exposure to credit losses by investing in money market funds and United States (“U.S.”) government treasury securities through U.S. banks with high credit ratings. The Company’s cash consists of deposits held with banks that may at times exceed federally insured limits, however, its exposure to credit risk in the event of default by the financial institution is limited to the extent of amounts recorded on the consolidated balance sheets. The Company performs evaluations of the relative credit standing of these financial institutions to limit the amount of credit exposure. The Company has not experienced any losses in such accounts.
The Company has policy limits for the amount it can invest in any one type of security, except for securities issued or guaranteed by the U.S. government. The goals of the Company’s investment policy, in order of priority, are as follows: minimize risk of the invested capital (including credit risk, interest rate risk and concentration risk), provide liquidity in a timely manner to accommodate operational and capital needs, and subject to the foregoing, seek to generate a reasonable return based on market conditions given these risk and liquidity guidelines.As of December 31, 2025, the Company had no off-balance sheetconcentrationsofcreditrisk. Under its investment policy, the Company limits amounts invested in such securities by credit rating, maturity, investment type and issuer, as a result, the Company is not exposed to any significant concentrations of credit risk from these financial instruments.
Customers
TheCompanyissubjecttocreditriskrelatedtoitsaccountsreceivable.Accountsreceivableprimarilyarise fromtestingservices performed inthe U.S. andareprimarilywithbiopharmaceuticalcompanies,healthcareorganizations,employers, digital health platforms, conciergemedicinepractices,lifeinsurancecompanies, Centers for Medicare & Medicaid Services,and individuals.The Company doesnotrequirecollateral.Accountsreceivablearerecordednetoftheallowanceforcreditlosses.
Significant customers are those that represent more than ten percent of total revenue or accounts receivable, net balances for the periods and as of each consolidated balance sheet date presented, respectively.
For the year ended December 31, 2025, no single customer accounted for 10% or more of the Company’s revenue. For the years ended December 31, 2024, and December 31, 2023, one customer accounted for 11% and 14% of the Company’s revenue.
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NOTES TO CONSOLIDATEDFINANCIALSTATEMENTS
As of December 31, 2025, no single customer accounted for 10% or more of the Company’s account receivable, net. As ofDecember 31, 2024 one customer accounted for 32% of the Company’s account receivable, net.
Suppliers
The Company is subject to a concentration risk for equipment, supplies and reagents that are available from a limited number of sources. The Company sources certain laboratory equipment, supplies and reagents used to perform testing services and research and development from single vendors. Historically, the Company has not experienced significant issues sourcing equipment and supplies needed to perform testing services.
Cash and Cash Equivalents
Cash and cash equivalentsconsist of cash on deposit with banks denominatedin U.S. Dollars and British Pounds, money market funds, and all highly liquid investments with an original maturity of three months or less.
RestrictedCash
Restrictedcashiscomprisedofcashthatisrestrictedastowithdrawaloruserelatedtolettersofcreditfor theCompany’soperatingleaseagreements.
Short-term marketable securities
The Company classifies its investments as available-for-sale, which consist of high-grade U.S. government treasury bills and are reported at fair value. Management determines the appropriate classification of investments at the time of purchase and re-evaluates such designation as of each balance sheet date. Marketable securities that mature within twelve months from the balance sheet date are classified as short-term marketable securities and those with maturities over twelve months from the balance sheet date are classified as long-term marketable securities. Unrealized holding gains and losses are reflected as a separate component of shareholders’ equity in accumulated other comprehensive gain (loss) until realized. Realized gains and losses on the sale of these securities are recognized in net income or loss.
The Company regularly evaluates its investment portfolio under the available-for-sale debt securities impairment model guidance for indications of possible impairment from credit losses or other factors. For available-for-sale debt securities in an unrealized loss position, the Company evaluates whether a current expected credit loss exists based on available information relevant to the credit rating of the security, current economic conditions and reasonable and supportable forecasts. The Company’s investment portfolio is composed of low-risk, investment grade securities and thus the Company has not recorded an expected credit loss for its investment portfolio.
FairValueofFinancialInstruments
Thefairvalueoffinancialassetsandliabilitiesisdeterminedusingthefairvaluehierarchyestablishedin Accounting Standards CodificationTopic 820, Fair Value Measurement(“ASC 820”). ASC820 identifiesfairvalueastheexchangeprice,orexitprice,representingtheamountthatwouldbereceivedtosellan assetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipants.Thehierarchydescribes threelevelsofinputsthatmaybeusedtomeasurefairvalue,asfollows:
Level1—Observableinputs,suchasquotedpricesinactivemarketsforidenticalassetsandliabilities.
Level2—ObservableinputsotherthanLevel1thatareobservable,eitherdirectlyorindirectly,suchas quotedpricesforsimilarassetsorliabilities,quotedpricesinmarketsthatarenotactive,orotherinputsthatare observableorcanbecorroboratedbyobservablemarketdataforsubstantiallythefulltermoftheassetsor liabilities.
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NOTES TO CONSOLIDATEDFINANCIALSTATEMENTS
Level3—Unobservableinputsthataresupportedbylittleornomarketactivityandthataresignificantto thefairvalueoftheassetsorliabilities.
Afinancialinstrument’slevelwithinthefairvaluehierarchyisbasedonthelowestlevelofanyinputthatis significantto thefairvaluemeasurement.
The carryingamountsforfinancialinstrumentssuchasaccountsreceivable,net,prepaidexpensesand othercurrentassets,accountspayable, and accruedliabilitiesapproximatefairvaluedue totheirshort-termnature.
AccountsReceivable,Net
Accountsreceivablerepresentunconditionalrightsto considerationfromcustomers.Accountsreceivable areevaluatedregularlyforcollectabilityandpotentialcreditlosses.Allowanceforcreditlossesisestimated basedon management’sassessmentof historicalcollectiontrendsand thefinancialconditionsof customers, among other factors. These reserves are re-evaluated on a regular basis and adjusted, as needed. Once a receivable is deemed to be uncollectible, the receivable balance is charged against the reserve.As of December 31, 2025, and December 31, 2024, the Company had $3.6 million and $3.8 million of allowance for credit losses.
Supplies
Suppliesconsistsofmaterialsandreagentsconsumedintheperformanceoftestingservices.TheCompany periodicallyanalyzessupplylevelsandexpirationdates,andwritesdown supplythathasbecomeobsoleteorthat hasacostbasisinexcessofexpectedsalesrequirementsascostofrevenue.TheCompanyrecordsanallowance forexcessorobsoletesuppliesusinganestimatebasedonhistoricaltrends, usage forecastsandevaluationofnear-term expirations.
Propertyand Equipment,Net
Propertyandequipment,netisstatedatcostlessaccumulateddepreciationandamortization.Depreciationis calculatedusingthestraight-linemethodovertheestimatedusefullivesoftheassets.Leaseholdimprovements areamortizedusingthestraight-linemethodovertheshorteroftheleasetermortheusefullifeofthe improvements.Repairexpensesandmaintenancecostsareexpensedasincurred.Whenanitemissoldor disposedof,thecostandrelatedaccumulateddepreciationoramortizationiseliminatedandtheresultinggainor loss,ifany,isrecordedintheconsolidatedstatementsofoperations.
Theestimatedusefullivesofthemajorclassesofpropertyandequipmentaregenerallyasfollows:
Useful Life (in Years)
Laboratory equipment 3 to 5
Computer hardware 3
Computer software 3
Furniture and fixtures 5
Leasehold improvements Lease Term
Leases
Leasesareclassifiedas operatingor financingatleaseinceptionand, as necessary,atmodification.Leased assets represent the Company’s right to use an underlying asset for the lease term and lease liabilitiesrepresent itsobligationtomakeleasepaymentsarisingfromthelease.
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NOTES TO CONSOLIDATEDFINANCIALSTATEMENTS
Operatingleasesareincludedinoperatingleaseright-of-use(“ROU”) assetsand operatingleaseliabilities intheconsolidatedbalancesheets.OperatingleaseROUassetsandliabilitiesarerecognizedatthelease commencementdatebasedonthepresentvalueofleasepaymentsovertheleaseterm.Whenreadily determinable,theCompanyusestherateimplicitintheleasetodiscountleasepayments;however,whentherate isnotreadilydeterminable,theCompanyusestheincrementalborrowingratebasedontheinformationavailable atthecommencementdate.Theincrementalborrowingrateistherateofinterestthatacompanywouldhaveto pay to borrow an amount equal to the lease paymentson a collateralizedbasis over a similartermand in a similar economicenvironment. The operatingleaseROUassetalsoincludesanyinitialdirectcosts,leasepaymentsmadepriortolease commencement,andleaseincentivesreceived.Variableleasepaymentsareexpensedasincurredandarenot includedwithintheROUassetandleaseliabilitycalculation.Variableleasepaymentsprimarilyinclude reimbursementsofcostsincurredbylessorsforcommonareamaintenanceandutilities.
Foreachlease,thedeterminedleasetermisbasedonanoncancellableperiod,includinganyrent-free periodsprovidedbythelessor,andmayincludeoptionstoextendorterminatetheleasewhenitisreasonably certainthattheCompanywillexercisethatoption.Leasecostforleasepaymentsisrecognizedonastraight-line basisovertheleaseterm.Certainleaseagreementscontainleaseandnon-leasecomponents.The Company accountsfornon-leasecomponentsaspartoftheleasecomponenttowhichtheyrelate.
TheCompanydoesnotrecognizeROUassetsandleaseliabilitiesforshort-termleases,whichhavealease term of twelve months or less and do not include an option to purchase the underlying asset that the Company is reasonablycertainto exercise.
Goodwill and IntangibleAssets
IntangibleassetsidentifiedintheAcquisitionincludeGRAILtradenames,developedtechnology,and GRAILin-processresearchanddevelopment(“IPR&D”)andweremeasuredatfairvalueasoftheclosing date of Illumina’s acquisition of GRAIL (“ClosingDate”). Goodwillrepresentedtheexcessofpurchasepricepaidoverfairvalueofthenetidentifiableassetsacquired.
TheCompany’stradenames,GRAILandGalleri,havebrandrecognitioninthemarketrelatedtothe servicesGRAILprovidescustomersand the researchand developmentactivitiesGRAILperforms.GRAIL’s developedtechnologyincludesintangibleassetsrelatedtoGalleri, itsmulti-cancerearlydetectiontestthatwas launchedasalaboratory-developedtest(“LDT”)in2021,aswellasadiagnosticaidforcancertest. The developedtechnologyunderpinsbothGalleri, designedasa cancerscreeningtestforasymptomatic individuals over 50 years of age, and a diagnostic aid for cancer test for patients for whom there is a clinical suspicion of cancer. The cost of identifiable intangible assets with finite lives, such as trade names and developed technology assets, are amortized on a straight-line basis over the assets’ respective estimated useful lives of 9 years and 18 years,respectively.
The Company’s IPR&D includesassets relatedto GRAIL’s developmentof a minimalresidualdisease (“MRD”)test,apost-diagnostictest,thatisunderdevelopment.IPR&Disconsideredindefinite-lived andtherefore is not amortized until completed and placed into service or expensed upon abandonment of the associated research and development efforts.
Goodwill and IPR&D, which were not amortized, were reviewed for impairmentat least annually or more frequentlyif events or circumstancesindicated a potentialfor impairment.Goodwill and IPR&D were considered impairedifthecarryingvalueofthereportingunitorIPR&Dassetexceededitsrespectivefairvalue.
The Company performed itsgoodwillimpairmentanalysisatthereportingunitlevel. The Company hasonereportingunit,which alignswith its reportingstructureandavailabilityofdiscretefinancialinformation.Duringthegoodwill impairmentreview, the Company assessedqualitativefactorstodeterminewhetherit was morelikelythannotthatthefairvalue of the Company’s reportingunit waslessthanthecarryingamount,includinggoodwill. During the indefinite-lived intangible asset impairment review, the Company assessed the qualitative factors to determine whether it was more likely than not that the fair value of the indefinite-lived intangible asset was less
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NOTES TO CONSOLIDATEDFINANCIALSTATEMENTS
than the carrying amount. The qualitative factors considered included, but were not limited to, macroeconomic conditions, industry and market considerations, and the Company’s overall financial performance. Ifthecarryingamountofthereportingunit or intangible asset exceededitsfairvalue, the Company recordedanimpairmentloss basedontheexcess.
The Company fully impaired goodwill as of December 31, 2024, resulting in no remaining carrying value. In addition, the Company fully impaired its IPR&D assets as of December 31, 2025, resulting in no remaining carrying value as of that date.
ImpairmentofLong-LivedAssets
Long-livedassets,otherthangoodwillandIPR&D(asdescribedabove),areevaluatedforindicationsof possibleimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountofanasset maynotberecoverable.Recoverabilityismeasuredbycomparisonofthecarryingamountstothefuture undiscountedcashflowsattributabletotheseassets.Shouldimpairmentexist,theimpairmentwouldbemeasured astheamountbywhichthecarryingamountoftheassetsexceedsthefairvalueofthoseassets.
Segments
The Company operatesand managesits businessas one reportableoperatingsegmentwhich provides multi-cancerearlydetectiontestingandservices.The chiefoperatingdecisionmaker (“CODM”) reviewsfinancial informationonanaggregatebasisforthepurposesofevaluatingfinancialperformanceandallocatingthe companyresources.SubstantiallyalloftheCompany’slong-livedassetsarelocatedinthe U.S.
RevenueRecognition
RevenueisaccountedforinaccordancewithTopic606,whichprovidesforafive-stepmodelthatincludes identifyingthe contractwith a customer,identifyingthe performanceobligationsin the contract,determiningthe transactionprice,allocatingthetransactionpriceto theperformanceobligations,and recognizingrevenuewhen, oras,anentitysatisfiesaperformanceobligation.Revenuesarederivedfromscreeninganddevelopment services.The Company’s revenueswere primarilygeneratedin the U.S.
ScreeningRevenue
TheCompanyrecognizesscreeningrevenuefromthesaleofcancerscreeningtestingservicesforpatients. Patientsobtaintestsviahealthcaresystems,employers, digital health platforms, payors,conciergemedicinepractices,lifeinsurance providersordirectlyviatelemedicine.Patientsreceivethemulti-cancerearlydetectionkitaftertheorderisplaced andcompletetheblooddraw.ThespecimenisthensenttotheCompany’slab,thetestisprocessed,andtheresultis electronicallydeliveredtothepatients’physician.Thetestpriceis generally based on our list price, with discounts in certain channels, or, for certain customers, such as larger, higher-volume customers or international distributors, negotiated contractual rates. For certain customers, we also offer rebates.TheCompanyidentifieseach saleofitstesttoacustomerasasingleperformanceobligation;therefore,revenueisrecognizedatthepointoftime whenthetestresultreportisdelivered.Invoicesaregenerallyduewithin30daysofreceipt.
For self-paypatients,theCompanyhas concludedthatan impliedcontractexists,however thetransaction pricefortheimpliedcontractrepresentsvariableconsiderationas therearesituationsin which theCompany is notexpectedtocollectthefullinvoicedamountsfromself-paypatientsdue topriceconcessions.The Company utilizestheexpectedvalueapproachtoestimatethetransactionpriceandappliesaconstraintforsuchvariable consideration,on a portfoliobasis. The Company monitorsthe estimatedamountsto be collectedat each reportingperiodbasedonactualcashcollectionsinordertoassesswhetherarevisiontotheestimateisrequired. Both the estimateand any subsequentrevisioncontain uncertaintyand requirethe use of significantjudgmentin theestimationofthevariableconsiderationandapplicationoftheconstraintforsuchvariableconsideration.The Companyanalyzesitsactualcashcollectionsovertheexpectedcollectionperiodandcomparesitwiththe
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NOTES TO CONSOLIDATEDFINANCIALSTATEMENTS
estimatedvariableconsiderationforeachportfolioand any differenceisrecognizedas an adjustmentto estimated revenueaftertheexpectedcollectionperiod,subjecttoassessmentoftheriskoffuturerevenuereversal.
DevelopmentServicesRevenue
Developmentservicesrevenueincludesdevelopmentactivitiesperformedin partnershipwith biopharmaceuticalcompanies.The Company’stargetedmethylation-basedtechnologyenablesdevelopmentof productsandservicestooptimizetreatmentonceacancerhasbeendiagnosed.Biopharmaceuticalpartners engagetheCompanytorunpilotsandresearchstudiestoevaluateandlearnaboutthetechnology’sapplication. The Company evaluatesthetermsand conditionsincludedwithinitsdevelopmentservicescontractswith biopharmaceuticalcustomersto ensureappropriaterevenuerecognition,includingwhetherservicesare considereddistinctperformanceobligations.The Company firstidentifiesmaterialpromisesunderthecontract andthenevaluateswhetherthesepromisesarecapableofbeingdistinctwithinthecontextofthecontract.In assessingwhetherapromisedserviceiscapableofbeingdistinct,theCompanyconsiderswhetherthecustomer couldbenefitfromtheserviceeitheron itsown or togetherwith otherresourcesthatarereadilyavailableto the customer,includingfactorssuch as theresearch,development,and commercializationcapabilitiesof a thirdparty aswellastheavailabilityoftheassociatedexpertiseinthegeneralmarketplace.Forcontractswithmultiple performanceobligations,thetransactionpriceisallocatedtotheseparateperformanceobligationsonarelative standalonesellingpricebasis.The Company determinesthestandalonesellingpriceby consideringthehistorical sellingpriceoftheseperformanceobligationsinsimilartransactionsaswellasotherfactors,including,butnot limitedto,thepricethatcustomersinthemarketwouldbewillingtopay,competitivepricingofothervendors, industrypublicationsand currentpricingpractices,and expectedcostsof satisfyingeachperformanceobligation plusappropriatemargin;orbyusingtheresidualapproachifstandalonesellingpriceisnotobservable,by referencetothetotaltransactionpricelessthesumoftheobservablestandalonesellingpricesofother performanceobligationspromisedin thecontract.
BiopharmaceuticalpartnersengagetheCompanytorunpilotandresearchstudiesbysendingpatient samplesand comparingtheCompany’stestresultto theirexpectedresultforevaluationof performanceand application.The Company recognizesrevenueas performanceobligationsarecompleted.
Followingfavorableresultsfrompilotand researchstudies,biopharmaceuticalpartnersand theCompany mayenterintodevelopmentserviceagreementsrelatedto clinicaltrialand companiondiagnosticdevice developmentand regulatorysubmissionsforthedevelopedproduct(s).These agreementstypicallyhave multiple commitmentsof servicesand thereforehave longer performanceperiods. The Company uses an input method basedoncostsincurredtomeasureitsprogresstowardthecompletionandsatisfactionoftheperformance obligations.TheCompanyassessesthechangestothetotalexpectedcostestimatesaswellasanyincremental feesnegotiatedresultingfromchangestothescopeoftheoriginalcontractindeterminingtherevenuerecognized ateachreportingperiod.Invoicesaregenerallyduewithin60days.
DeferredRevenue
Deferredrevenue,whichisacontractliability,consistsprimarilyofpaymentsreceivedinadvanceof revenuerecognitionfromcontractswith customers.For example,prepaymentsreceivedfrompatientsfor screeningtestingservicesand developmentservicesand othercontractswith biopharmaceuticalcustomersoften containupfrontpaymentswhichresultsintherecordingofdeferredrevenuetotheextentcashisreceivedpriorto theCompany’sperformanceof therelateddevelopmentservices.Contractliabilitiesarerelievedas theCompany performsitsobligationsunderthecontractandrevenueisrecognized.Deferredrevenue was $1.9 million and $1.6 million as of December 31, 2025 and December 31, 2024, all of which is considered short-term and was recorded within other current liabilities on the accompanying consolidated balance sheets.
Cost of ScreeningRevenue
Costofscreeningrevenuegenerallyconsistsofcostofmaterials, labor including salaries and wages, bonus, benefits and stock-based compensation,amortizationof GRAILintangibleassets,blood collection kits and shipping, phlebotomy, royalties, electronic medical records, equipment depreciation, and allocations of overhead
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expenses such as facilities and information technology costs.Per the terms of the Separation and Distribution Agreement with Illumina, the royalty arrangement with Illumina is suspended until the earlier of December 24, 2026, or any change of control of the Company, at which time a high-single digit royalty will be payable on screening revenue.
Cost of Development ServicesRevenue
Cost of developmentservicesrevenuegenerallyconsistsof materials and patient sample acquisition, labor including salaries and wages, bonus, benefits and stock-based compensation, royalties, equipment depreciation, and allocations of overhead expenses such as facilities and information technology costs. Per the terms of the Separation and Distribution Agreement with Illumina, the royalty arrangement with Illumina is suspended until the earlier of December 24, 2026 or any change of control of the Company, at which time a high-single digit royalty will be payable on development services revenue.
Accrued ClinicalStudiesand Research and Development Expenses
Estimatesofunbilledcostsofresearchanddevelopmentactivitiesforclinicalstudiesconductedbythird- partyserviceprovidersareaccrued.Theestimatedcostsofresearchanddevelopmentactivitiesarerecorded basedupontheestimatedamountofservicesprovided.Thesecostsareincludedinaccruedliabilitiesintheconsolidatedbalancesheetsandwithinresearchanddevelopmentexpensesintheconsolidatedstatementsofoperations.Thesecostsarea significantcomponentof researchand developmentexpenses.The costsareaccruedbasedon factorssuch as estimatesof the work completedand in accordancewith agreementsestablishedwith third-partyservice providers.The judgmentsand estimatesin determiningtheaccruedliabilitiesbalanceareassessedin each reportingperiod.
Research and Development
Researchanddevelopmentexpensesincludecostsincurred todeveloptheCompany’stechnology(priortoestablishingtechnologicalfeasibility),collectclinicalsamples, andconductclinicalstudiestodevelopandsupporttheCompany’smulti-cancertests.Thesecostsconsistof personnelcosts,includingsalaries,benefits,and stock-basedcompensationexpenseassociatedwith theresearch and developmentpersonnel,laboratorysupplies,consultingcosts,costsassociatedwith settingup and conducting clinicalstudiesatdomesticand internationalsites,and allocatedoverheadexpensesincludingrent,information technology,and equipmentdepreciation.Both internaland externalresearchand developmentcosts are expensed intheperiodsinwhichtheyareincurred.Nonrefundableadvancepaymentsforgoods and servicesthat willbeusedorrenderedinfutureresearchanddevelopmentactivitiesaredeferredandrecognizedasexpensein theperiodinwhichtherelatedgoodsaredelivered,orservicesareperformed.
AdvertisingCosts
Advertisingcostsareexpensedas incurred.Advertisingcostswere $15.1 million,$17.7 million and $21.9 million for the years ended December 31, 2025, December 31, 2024, and December 31, 2023.
Stock-BasedCompensationExpense
The Company’s stock-based compensation expense includes expenses related to restricted stock units (“RSUs”), performance stock units (“PSUs”), deferred stock units (“DSUs”), performance stock options (“PSOs”), Employee Stock Purchase Plan (“ESPP”) and Cash-Based Equity Awards. Forfeitures are accounted for as incurred.
The grant date fair values of RSUs and PSUs are generally determined based on the closing market price of GRAIL’s common stock on the date of the grant and in the case of DSUs resulting from deferrals of director cash fees, based on the closing market price of GRAIL’s common stock on the date that such cash fees would have been otherwise paid. Generally, awards of RSUs are granted subject to service conditions and PSUs are granted subject to service and performance based-conditions, with vesting periods ranging between 18 and 48 months.
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Stock-based compensation expense is recognized based on the fair value of the award on a straight-line basis over the requisite service periods of the RSUs. The fair value of the PSUs begins to be recognized when it is probable that the performance-based condition will be met.
The fair value of shares to be issued under the ESPP, is derived using the Black-Scholes-Merton option-pricing model at the commencement of 6-month purchase periods in May and November of each year. Stock-based compensation for the ESPP is expensed using a straight-line attribution method over the offering period. Additionally, forfeitures are accounted for as incurred.
The fair value of PSOs that continue to be subject to service conditions was determined using the Black-Scholes-Merton option-pricing model. The model assumptions include expected volatility, term, dividends, and the risk-free interest rate. The expected volatility was determined by weighting the historical and implied volatility of peer companies’ common stock. The expected term was the Company’s best estimates based on the vesting period and contractual term. Given that cash dividends were never declared or paid on the Illumina nor GRAIL common stock, the expected dividend yield is determined to be 0%. The risk-free interest rate was based upon U.S. Treasury securities with remaining terms similar to the expected term of the stock-based awards. The fair value of the PSOs begins to be recognized when it is probable that the performance-based condition will be met.
A cash-based equity incentive award (the “Cash-Based Equity Award”) program was adopted following Illumina’s acquisition of GRAIL in 2021 to provide GRAIL employees with dollar-denominated long-term incentive awards that were indexed to the value of GRAIL. In connection with the Spin-Off, in accordance with the Employee Matters Agreement, the Cash-Based Equity Awards, which were cash-settled, liability-classified awards, were modified to become RSUs that will be settled in shares of the Company’s common stock upon vesting (the “Award Modification”). Unvested PSOs that were previously held by certain GRAIL employees to purchase Illumina common stock were converted to options to purchase GRAIL common stock in connection with the Spin-Off.
Prior to the Award Modification, the Cash-Based Equity Awards were liability-classified awards because the Cash-Based Equity Awards could be (and were) settled in cash. Until April 30, 2024, GRAIL’s stand-alone value calculation was estimated by the Company based on its analysis and the input from independent valuation advisors. The value of the Cash-Based Equity Awards was recorded over the applicable vesting periods, with recognition of a corresponding liability recorded in incentive plan liabilities in the consolidated balance sheets. The Cash-Based Equity Awards were remeasured at each reporting date until settlement with changes in fair value recognized in stock-based compensation expense. On April 30, 2024, Illumina’s Compensation Committee approved an adjustment of the ordinary course payouts of the Cash-Based Equity Awards providing that the Cash-Based Equity Awards would be paid based on their nominal (face) value without adjustment based on changes in equity value. Subsequent to this adjustment to the Cash-Based Equity Awards and continuing until the Award Modification, the Cash-Based Equity Awards were expensed in accordance with their applicable vesting schedules.
There were no Cash-Based Equity Awards outstanding as of December 31, 2024. See Note 8 — Stock-Based Compensation for further details.
Deferred Offering Costs
The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After the consummation of an equity financing, these costs are recorded as a reduction of additional paid-in capital. Should the in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations.
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Pre-funded Warrants
Pre-funded warrants are classified as a component of stockholders’ equity within additional paid-in capital and are recorded at the issuance date. The pre-funded warrants are equity classified because they (i) are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, (ii) are immediately exercisable, (iii) do not embody an obligation for the Company to repurchase its shares, (iv) permit the holders to receive a fixed number of shares of common stock upon exercise, (v) are indexed to the Company’s common stock and (vi) meet the equity classification criteria. In addition, such pre-funded warrants do not provide any guarantee of value or return. The value of the pre-funded warrants is known at issuance, as their sales price approximates their fair value, and net proceeds from the sale are recorded as a component of additional paid-in capital.
DefinedContributionPlan
The Company sponsors a defined contribution plan under Section401(k) of the Internal Revenue Code (the“401(k)Plan”) pursuant to which, eligible employees can elect to contribute eligible compensation to the 401(k) Plan, subject to certain limitations. On January 1, 2023, the 401K Plan was modified to provide for a 100% employer match of employee contributions up to a maximum of three thousand dollars per employee. For the years ended December 31, 2025 and December 31, 2024, the Company contributed $2.6 million and $3.9 million to match employee contributions. The Company pays the administrative costs for the 401(k) plan.
BenefitfromIncomeTaxes
Income taxes are accounted for under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the future tax consequences of events that have been included in the consolidated financial statements. Deferred tax assets are recognized for deductible temporary differences and tax credit carryforwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portions or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
We recognize the impact of a tax position in our consolidated financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. Due to the complexity of some of the uncertainties, the ultimate resolution may result in payments that are materially different from our current estimate of the tax liability. These differences, as well as any interest and penalties, will be reflected in the provision for income taxes in the period in which they are determined.
As a standalone entity, the Company files tax returns on its own behalf, and tax balances and the effective income tax rate may differ from the amounts reported in historical periods. As of June 24, 2024 and in connection with the Spin-Off, the Company adjusted its deferred tax balances and computed its related tax provision to reflect operations as a standalone entity. During the period that Illumina held the Company, the Company’s activity generated various tax attributes recognized as deferred tax assets, due primarily to the generation of net operating losses, IRC 174 capitalized research and experimental expenditures, and research and development (“R&D”) tax credits that could not be specifically utilized by the Company as it did not generate positive taxable income and it was not a separately regarded tax paying entity from Illumina. Since the Company was not a separately regarded taxable entity from Illumina, these tax attributes were either utilized by or will be utilized by Illumina when filing its consolidated tax return. Historically, the tax attributes were only presented in the Company’s standalone financial statements to allow the users to understand the financial position of the Company as a standalone taxable entity under the Separate-Return Method. The total tax-effected value of the tax attributes, net of Financial Accounting Standards Board Interpretation No. 48 liabilities and valuation allowance that were deemed to be the property of Illumina, was $447.2 million. In connection with the Spin-off, the
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underlying $447.2 million of tax attributes were adjusted through an entry of $447.2 million to additional paid in capital.
Net Loss Per Share
The Company calculates basic net loss per share by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. The weighted-average shares number of shares of common stock outstanding as of December 31, 2025 included pre-funded warrants, as the shares underlying the warrants are issuable for little cash consideration and are immediately exercisable. Diluted net loss per share is computed based on the sum of the weighted average number of common shares and potentially dilutive common shares outstanding during the period. In loss periods, basic and diluted net loss per share are identical since the effect of potentially dilutive common shares is antidilutive and therefore excluded. Potentially dilutive common shares consist of shares issuable under equity awards. Potentially dilutive common shares from equity awards are determined using the average share price for each period under the treasury stock method. In addition, proceeds from exercise of equity awards and the average amount of unrecognized compensation expense for equity awards are assumed to be used to repurchase shares.
Restructuring Charges
Restructuring charges consist primarily of severance, benefits, payroll taxes, and other related costs. The Company records a liability for ongoing employee termination benefits when it is probable that an employee is entitled to them and the amount of the benefits can be reasonably estimated. One-time employee termination costs are recognized when management has communicated the termination plan to employees, unless future service is required, in which case the costs are recognized ratably over the future service period. All other related costs are recognized when incurred. Restructuring charges are recognized as an operating expense within the consolidated statements of operations and are classified based on each employee’s respective function.
ForeignCurrency
The functionalcurrencyof the foreignsubsidiary istheBritishPound. Adjustmentsresultingfrom translatingthe financialstatementsof the United Kingdom subsidiaryintoU.S.Dollarsarerecordedasacomponentofothercomprehensivelossintheconsolidated statementsofcomprehensiveloss.Monetaryassetsandliabilitiesdenominatedinaforeigncurrencyare translatedintoU.S.Dollarsattheexchangerateonthebalancesheetdate.Revenuesandexpensesaretranslated attheweighted-averageexchangeratesduringtheperiod.Equitytransactionsaretranslatedusinghistorical exchangerates.Gainsandlossesresultingfromtranslationofforeigncurrencymonetarytransactionsare reportedinotherincome(expense),netintheconsolidatedstatementsofoperationsandcomprehensiveloss. Gainsandlossesresultingfromforeigncurrencytransactionsthataredeemedtobeofalong-terminvestment naturearereportedasaseparatecomponentofothercomprehensiveloss.
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Reclassification
Certain amounts within the segment disclosure in the footnote to the consolidated financial statements for the respective periods ended December 31, 2024 and December 31, 2023 have been conformed to the current period presentation.
Recent Accounting Pronouncements
The Company evaluates all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (the "FASB") for consideration of their applicability. ASUs not included in the disclosures in this report were assessed and determined to be either not applicable or are not expected to have a material impact on the Company’s consolidated financial statements.
Recently Adopted Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This update improves income tax disclosure requirements, primarily through enhanced transparency and decision usefulness of disclosures. The Company adopted the standard on its effective date in 2025, on a retroactive basis, and has included the required disclosures in Note 14 — Taxes.
Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures. This update intends to improve financial reporting by requiring disclosure of additional information about specific expense categories. This guidance is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and the guidance is to be applied prospectively and may be applied retrospectively. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
In May 2025, the FASB issued No. ASU 2025-04, Compensation-Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606). This update address diversity in practice and improves the operability of accounting for share-based consideration granted to customers. The amendments clarify how to distinguish between service and performance conditions for vesting, require entities to estimate forfeitures for all share-based consideration payable to customers, and specifies that variable consideration guidance in ASC 606 does not apply when measuring such awards. This guidance is effective for fiscal years beginning after December 15, 2026, and interim reporting periods within those annual reporting periods, with early adoption permitted. The transition method may be modified retrospective or on a retrospective basis. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This update provides entities with a practical expedient related to developing reasonable and supportable forecasts as part of estimating expected credit losses, in which entities may elect to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. This guidance is effective for fiscal years beginning after December 15, 2025 and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This update removes all references to software development project stages and requires entities to start capitalizing software costs when both of the following occur: (i) management has authorized and committed to funding the software project and (ii) it is probable that the project will be completed and the software will be used to perform the function intended. This guidance is effective for fiscal years beginning after December 15, 2027 and interim
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reporting periods within those annual reporting periods. Early adoption is permitted. The transition method may be prospective, modified, or retrospective. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU No. 2025-10 (ASC Topic 832), Accounting for Government Grants Received by Business Entities. This ASU establishes the accounting and presentation for government grants received by a business entity. This guidance is effective for fiscal years beginning after December 15, 2028 and interim reporting periods within those annual reporting periods. Early adoption is permitted. This ASU provides for adoption either on a modified prospective, modified retrospective, or retrospective basis. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. This update enhances consistency in interim reporting for all entities by clarifying interim disclosure requirements and the form and content of interim financial statements in accordance with GAAP. This guidance is effective for interim reporting periods with annual reporting periods beginning after December 15, 2027. Early adoption is permitted and must be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements. This update includes a series of technical amendments intended to clarify guidance, correct unintended application issues, and improve consistency and operability across various Topics within the FASB Accounting Standards Codification. This guidance is effective for fiscal years beginning after December 15, 2026 and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact of this update on its consolidated financial statements and related disclosures.
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NOTE 3. REVENUE
The following table presents the Company’s revenue disaggregated by geographic areas based on the customers’ locations:
Year Ended
United States
International(1)
_________
(1) International region includes revenue earned from customers located outside of the United States.
The following table presents the Company’s revenue disaggregated by revenue source:
Year Ended
Screening
Development Services
_________
(1) Government screening revenue primarily consists of revenue earned as part of our REACH/Galleri-Medicare clinical study.
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NOTE 4.GOODWILL AND INTANGIBLE ASSETS
Due to the application of pushdown accounting, the Company’s consolidated balance sheet included goodwill and intangible assets recognized by Illumina in connection with Illumina’s acquisition of the Company.
Goodwill Impairment
Goodwill represented the excess of purchase price Illumina paid over the fair value of the net identifiable assets acquired upon the Acquisition of the Company.
(in thousands) Goodwill
Balance as of December 31, 2024 $ —
2023 Goodwill Impairment
In Q3 2023, Illumina concludedthesustaineddecreasein Illumina’sstockpriceand overallmarketcapitalization duringthequarterwasatriggeringeventindicatingthefairvalueofGRAILmightbelessthanitscarrying amountwhichled the Company totestgoodwillforimpairment.Theassessmentwasperformedusingacombinationofboth anincomeandamarketapproachtodeterminethefairvalueofgoodwill.Theincomeapproachutilized estimateddiscountedcashflows,whilethemarketapproachutilizedcomparablecompanyinformation.Estimates andassumptionsusedintheincomeapproachincludedprojectedcashflowsandadiscountrate.Thediscount rateselectedatthetimeofthegoodwillimpairmentassessmentwas24.0%.The Company recognizeda goodwill impairmentof $608.5as a resultof the impairment assessment,primarilyduetochangestoexpectedtimingofrevenueandahigherdiscountrateselectedforthe fairvaluecalculationofGRAIL.
2024 Goodwill Impairment
In Q2 2024, prior to the Spin-Off, the approval of the Spin-Off by Illumina’s board of directors represented a potential indicator of impairment, which also aligned with the timing of Illumina’s annual goodwill impairment test date for 2024. Theassessmentwasperformedusinga marketapproachtodeterminethefairvalueofgoodwill whichutilized the valuation ranges prepared by the divestment financial advisors engaged by Illumina in connection with the Spin-Off. The valuation ranges were determined using revenue multiples from public company peers for 2024 and 2025.The implied discount rateforthegoodwillimpairmentassessmentwas51.5%.The Company recognizeda goodwill impairmentof $888.9as a resultof the impairment assessment,primarilyduetochangesto the forecast of GRAIL’s value and the method for valuing GRAIL.