Document
false--12-31Q1202000015762800.00000010.000000135000000035000000094261414945090119426141494509011P12YP12YP6YP6YP8YP1Y 0001576280 2020-01-01 2020-03-31 0001576280 2020-04-30 0001576280 2019-12-31 0001576280 2020-03-31 0001576280 us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2020-03-31 0001576280 us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2019-12-31 0001576280 2019-01-01 2019-03-31 0001576280 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001576280 us-gaap:CommonStockMember 2020-01-01 2020-03-31 0001576280 gh:RedeemableNoncontrollingInterestMember 2020-01-01 2020-03-31 0001576280 us-gaap:CommonStockMember 2019-12-31 0001576280 us-gaap:RetainedEarningsMember 2019-12-31 0001576280 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-03-31 0001576280 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31 0001576280 us-gaap:CommonStockMember 2020-03-31 0001576280 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0001576280 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001576280 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0001576280 us-gaap:RetainedEarningsMember 2020-03-31 0001576280 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0001576280 gh:RedeemableNoncontrollingInterestMember 2019-12-31 0001576280 gh:RedeemableNoncontrollingInterestMember 2020-03-31 0001576280 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0001576280 us-gaap:CommonStockMember 2019-01-01 2019-03-31 0001576280 us-gaap:RetainedEarningsMember 2019-01-01 2019-03-31 0001576280 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0001576280 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0001576280 2018-12-31 0001576280 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0001576280 us-gaap:AccountingStandardsUpdate201409Member us-gaap:RetainedEarningsMember 2019-01-01 0001576280 2019-03-31 0001576280 gh:RedeemableNoncontrollingInterestMember 2019-03-31 0001576280 us-gaap:AccountingStandardsUpdate201807Member us-gaap:AdditionalPaidInCapitalMember 2019-01-01 0001576280 us-gaap:AccountingStandardsUpdate201409Member 2019-01-01 0001576280 us-gaap:CommonStockMember 2018-12-31 0001576280 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001576280 us-gaap:RetainedEarningsMember 2019-03-31 0001576280 us-gaap:AccountingStandardsUpdate201807Member us-gaap:RetainedEarningsMember 2019-01-01 0001576280 us-gaap:CommonStockMember 2019-03-31 0001576280 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-03-31 0001576280 us-gaap:RetainedEarningsMember 2018-12-31 0001576280 gh:RedeemableNoncontrollingInterestMember 2018-12-31 0001576280 gh:RedeemableNoncontrollingInterestMember 2019-01-01 2019-03-31 0001576280 gh:GuardantHealthAMEAIncMember 2018-04-30 0001576280 us-gaap:OtherAssetsMember 2020-03-31 0001576280 us-gaap:OtherAssetsMember 2019-12-31 0001576280 us-gaap:CollaborativeArrangementMember 2019-12-31 0001576280 us-gaap:CollaborativeArrangementMember 2020-03-31 0001576280 gh:CustomerBMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2020-01-01 2020-03-31 0001576280 gh:CustomerAMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2020-01-01 2020-03-31 0001576280 gh:CustomerCMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2019-01-01 2019-12-31 0001576280 gh:CustomerAMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2020-01-01 2020-03-31 0001576280 gh:CustomerAMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2019-01-01 2019-03-31 0001576280 gh:CustomerAMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2019-01-01 2019-12-31 0001576280 srt:MinimumMember 2020-01-01 2020-03-31 0001576280 srt:MaximumMember 2020-01-01 2020-03-31 0001576280 gh:GuardantHealthAMEAIncMember 2018-05-01 2018-05-31 0001576280 gh:SoftBankMember gh:GuardantHealthAMEAIncMember 2018-05-01 2018-05-31 0001576280 gh:GuardantHealthAMEAIncMember 2018-05-31 0001576280 gh:SoftBankMember gh:GuardantHealthAMEAIncMember 2018-05-31 0001576280 us-gaap:MachineryAndEquipmentMember 2019-12-31 0001576280 us-gaap:ComputerEquipmentMember 2020-03-31 0001576280 us-gaap:FurnitureAndFixturesMember 2020-03-31 0001576280 us-gaap:MachineryAndEquipmentMember 2020-03-31 0001576280 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2019-12-31 0001576280 us-gaap:ConstructionInProgressMember 2019-12-31 0001576280 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2020-03-31 0001576280 us-gaap:FurnitureAndFixturesMember 2019-12-31 0001576280 us-gaap:LeaseholdImprovementsMember 2019-12-31 0001576280 us-gaap:ConstructionInProgressMember 2020-03-31 0001576280 us-gaap:LeaseholdImprovementsMember 2020-03-31 0001576280 us-gaap:ComputerEquipmentMember 2019-12-31 0001576280 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2020-03-31 0001576280 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001576280 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember gh:ContingentConsiderationMember 2020-01-01 2020-03-31 0001576280 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember gh:RedeemableNoncontrollingInterestMember 2018-12-31 0001576280 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember gh:ContingentConsiderationMember 2019-01-01 2019-03-31 0001576280 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember gh:RedeemableNoncontrollingInterestMember 2019-01-01 2019-03-31 0001576280 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember gh:RedeemableNoncontrollingInterestMember 2019-12-31 0001576280 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember gh:RedeemableNoncontrollingInterestMember 2019-03-31 0001576280 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember gh:ContingentConsiderationMember 2019-12-31 0001576280 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember gh:RedeemableNoncontrollingInterestMember 2020-03-31 0001576280 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember gh:ContingentConsiderationMember 2019-03-31 0001576280 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember gh:RedeemableNoncontrollingInterestMember 2020-01-01 2020-03-31 0001576280 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember gh:ContingentConsiderationMember 2020-03-31 0001576280 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember gh:ContingentConsiderationMember 2018-12-31 0001576280 us-gaap:USGovernmentDebtSecuritiesMember 2019-12-31 0001576280 us-gaap:CorporateDebtSecuritiesMember 2019-12-31 0001576280 us-gaap:MoneyMarketFundsMember 2019-12-31 0001576280 us-gaap:USGovernmentDebtSecuritiesMember 2020-03-31 0001576280 us-gaap:CorporateDebtSecuritiesMember 2020-03-31 0001576280 us-gaap:MoneyMarketFundsMember 2020-03-31 0001576280 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001576280 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentDebtSecuritiesMember 2019-12-31 0001576280 us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001576280 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001576280 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001576280 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentDebtSecuritiesMember 2019-12-31 0001576280 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001576280 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2019-12-31 0001576280 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentDebtSecuritiesMember 2019-12-31 0001576280 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001576280 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2019-12-31 0001576280 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentDebtSecuritiesMember 2019-12-31 0001576280 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2019-12-31 0001576280 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2019-12-31 0001576280 us-gaap:MoneyMarketFundsMember us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001576280 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentDebtSecuritiesMember 2020-03-31 0001576280 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2020-03-31 0001576280 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2020-03-31 0001576280 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentDebtSecuritiesMember 2020-03-31 0001576280 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2020-03-31 0001576280 us-gaap:FairValueMeasurementsRecurringMember 2020-03-31 0001576280 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2020-03-31 0001576280 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2020-03-31 0001576280 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2020-03-31 0001576280 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentDebtSecuritiesMember 2020-03-31 0001576280 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2020-03-31 0001576280 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentDebtSecuritiesMember 2020-03-31 0001576280 us-gaap:MoneyMarketFundsMember us-gaap:FairValueMeasurementsRecurringMember 2020-03-31 0001576280 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2020-03-31 0001576280 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2020-03-31 0001576280 us-gaap:LicensingAgreementsMember 2019-12-31 0001576280 us-gaap:LicensingAgreementsMember 2019-01-01 2019-12-31 0001576280 us-gaap:NoncompeteAgreementsMember 2019-12-31 0001576280 us-gaap:InProcessResearchAndDevelopmentMember 2019-12-31 0001576280 us-gaap:NoncompeteAgreementsMember 2019-01-01 2019-12-31 0001576280 us-gaap:LicensingAgreementsMember 2020-03-31 0001576280 us-gaap:NoncompeteAgreementsMember 2020-03-31 0001576280 us-gaap:NoncompeteAgreementsMember 2020-01-01 2020-03-31 0001576280 us-gaap:InProcessResearchAndDevelopmentMember 2020-03-31 0001576280 us-gaap:LicensingAgreementsMember 2020-01-01 2020-03-31 0001576280 gh:BellweatherBioInc.Member gh:CovenantsNotToCompeteMember 2019-04-01 2019-04-30 0001576280 gh:BellweatherBioInc.Member gh:CommercializationMilestonesMember 2019-04-30 0001576280 gh:BellweatherBioInc.Member 2019-04-01 2019-04-30 0001576280 gh:BellweatherBioInc.Member gh:CovenantsNotToCompeteMember 2019-04-30 0001576280 gh:BellweatherBioInc.Member gh:EarnOutConsiderationMember 2019-04-30 0001576280 gh:BellweatherBioInc.Member 2019-04-30 0001576280 gh:BellweatherBioInc.Member us-gaap:InProcessResearchAndDevelopmentMember 2019-04-30 0001576280 gh:BellweatherBioInc.Member us-gaap:LicensingAgreementsMember 2019-04-30 0001576280 gh:BellweatherBioInc.Member us-gaap:LicensingAgreementsMember 2019-04-01 2019-04-30 0001576280 gh:KeyGenePatentLicenseAcquisitionMember 2020-03-31 0001576280 gh:KeyGenePatentLicenseAcquisitionMember gh:PatentandCovenantRightsMember 2020-03-31 0001576280 gh:KeyGenePatentLicenseAcquisitionMember 2020-03-01 2020-03-31 0001576280 srt:MinimumMember gh:PatentandCovenantRightsMember 2020-01-01 2020-03-31 0001576280 srt:MaximumMember gh:PatentandCovenantRightsMember 2020-01-01 2020-03-31 0001576280 srt:MaximumMember 2020-03-31 0001576280 srt:MinimumMember 2020-03-31 0001576280 gh:PersonalGenomeDiagnosticsInc.vs.GuardantHealthInc.SubsequentFilingMember 2018-07-01 2018-07-31 0001576280 2018-08-01 2018-12-31 0001576280 gh:PersonalGenomeDiagnosticsInc.vs.GuardantHealthInc.Member 2018-03-01 2018-03-31 0001576280 gh:PersonalGenomeDiagnosticsInc.vs.GuardantHealthInc.Member 2018-07-01 2018-07-31 0001576280 gh:PersonalGenomeDiagnosticsInc.andFoundationMedicineIncvs.GuardantHealthInc.SubsequentFilingMember 2017-11-01 2017-11-30 0001576280 2017-11-01 2017-11-30 0001576280 gh:A2018IncentiveAwardPlanMember 2019-12-31 0001576280 us-gaap:EmployeeStockOptionMember 2019-12-31 0001576280 gh:A2018IncentiveAwardPlanMember 2020-03-31 0001576280 us-gaap:EmployeeStockMember 2019-12-31 0001576280 us-gaap:EmployeeStockOptionMember 2020-03-31 0001576280 us-gaap:EmployeeStockMember 2020-03-31 0001576280 us-gaap:RestrictedStockUnitsRSUMember 2020-03-31 0001576280 us-gaap:RestrictedStockUnitsRSUMember 2019-12-31 0001576280 us-gaap:SellingAndMarketingExpenseMember 2020-01-01 2020-03-31 0001576280 us-gaap:ResearchAndDevelopmentExpenseMember 2020-01-01 2020-03-31 0001576280 us-gaap:GeneralAndAdministrativeExpenseMember 2019-01-01 2019-03-31 0001576280 gh:PrecisionOncologyTestingMember 2019-01-01 2019-03-31 0001576280 us-gaap:ResearchAndDevelopmentExpenseMember 2019-01-01 2019-03-31 0001576280 us-gaap:GeneralAndAdministrativeExpenseMember 2020-01-01 2020-03-31 0001576280 gh:PrecisionOncologyTestingMember 2020-01-01 2020-03-31 0001576280 us-gaap:SellingAndMarketingExpenseMember 2019-01-01 2019-03-31 0001576280 us-gaap:EmployeeStockMember 2019-01-01 2019-03-31 0001576280 us-gaap:EmployeeStockMember 2018-09-30 0001576280 gh:NonemployeeStockOptionMember 2020-03-31 0001576280 gh:NonemployeeStockOptionMember 2019-12-31 0001576280 us-gaap:EmployeeStockOptionMember 2020-01-01 2020-03-31 0001576280 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-03-31 0001576280 us-gaap:EmployeeStockMember 2020-01-01 2020-03-31 0001576280 gh:NonemployeeStockOptionMember 2020-01-01 2020-03-31 0001576280 gh:NonemployeeStockOptionMember 2018-01-01 2018-12-31 0001576280 us-gaap:RestrictedStockUnitsRSUMember 2020-01-01 2020-03-31 0001576280 us-gaap:EmployeeStockMember 2020-01-01 0001576280 us-gaap:RestrictedStockMember 2020-01-01 2020-03-31 0001576280 2019-01-01 2019-12-31 0001576280 us-gaap:RestrictedStockUnitsRSUMember 2020-01-01 2020-03-31 0001576280 us-gaap:RestrictedStockUnitsRSUMember 2019-01-01 2019-03-31 0001576280 us-gaap:EmployeeStockMember 2020-01-01 2020-03-31 0001576280 us-gaap:TreasuryStockCommonMember 2019-01-01 2019-03-31 0001576280 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-03-31 0001576280 us-gaap:EmployeeStockMember 2019-01-01 2019-03-31 0001576280 us-gaap:EmployeeStockOptionMember 2020-01-01 2020-03-31 0001576280 us-gaap:TreasuryStockCommonMember 2020-01-01 2020-03-31 0001576280 country:US 2020-01-01 2020-03-31 0001576280 us-gaap:NonUsMember 2019-01-01 2019-03-31 0001576280 country:US 2019-01-01 2019-03-31 0001576280 us-gaap:NonUsMember 2020-01-01 2020-03-31 0001576280 country:DE us-gaap:GeographicConcentrationRiskMember 2019-01-01 2019-03-31 xbrli:pure gh:patent xbrli:shares iso4217:USD xbrli:shares gh:petition gh:company iso4217:USD
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_____________________
FORM 10-Q
_____________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                        to                        
Commission File Number: 001-38683
_____________________
GUARDANT HEALTH, INC.
(Exact Name of Registrant as Specified in its Charter)
_____________________
Delaware
 
45-4139254
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
505 Penobscot Dr.
Redwood City, California, 94063
Registrant’s telephone number, including area code: (855) 698-8887
_______________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated filer
 
 
 
 
Non-accelerated filer
 (Do not check if a smaller reporting company)
Smaller reporting company
 
 
 
 
Emerging growth company
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

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




Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.00001
GH
The Nasdaq Global Select Market

As of April 30, 2020, the registrant had 94,579,349 shares of common stock, $0.00001 par value per share, outstanding.
 




GUARDANT HEALTH, INC.
FORM 10-Q
TABLE OF CONTENTS
 
 
 
 
Page
Unaudited Condensed Consolidated Financial Statements
 
Condensed Consolidated Balance Sheets
 
Condensed Consolidated Statements of Operations
 
Condensed Consolidated Statements of Comprehensive Loss
 
Condensed Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders’ Equity
 
Condensed Consolidated Statements of Cash Flows
 
Notes to the Unaudited Condensed Consolidated Financial Statements
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Controls and Procedures
 
 
 
 
 
 
 
 
 

FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including the section titled “Managements Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results that are based on our current expectations, estimates, forecasts and projections as well as the current beliefs and assumptions of our management, including about our business, our financial condition, our results of operations, our cash flows, and the industry and environment in which we operate. Statements that include words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “would,” “could,” “should,” “intend” and “expect,” variations of these words, and similar expressions, are intended to identify forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in Part I, Item 1A,“Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2019, in Part II, Item 1A, “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, and in other reports we file with the U.S. Securities and Exchange Commission, or the SEC. While forward-looking statements are based on the reasonable expectations of our management at the time that they are made, you should not rely on them. We undertake no obligation to revise or update publicly any forward-looking statements for any reason, whether as a result of new information, future events or otherwise, except as may be required by law.

Each of the terms the “Company,” “we,” “our,” “us” and similar terms used herein refer collectively to Guardant Health, Inc., a Delaware corporation, and its consolidated subsidiaries, unless otherwise stated. 




PART I—FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
Guardant Health, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(in thousands, except share and per share data)
 
March 31, 2020
 
December 31, 2019
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
152,239

 
$
143,228

Short-term marketable securities
367,853

 
379,574

Accounts receivable, net
48,015

 
47,986

Inventory
25,148

 
15,181

Prepaid expenses and other current assets
14,137

 
11,389

Total current assets
607,392

 
597,358

Long-term marketable securities
238,206

 
268,783

Property and equipment, net
46,685

 
43,668

Right-of-use assets
30,132

 
29,140

Intangible assets, net
17,681

 
8,524

Goodwill
3,290

 
3,290

Capitalized license fees
60

 
6,890

Other assets
4,721

 
4,882

Total Assets(1)
$
948,167

 
$
962,535

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
24,378

 
$
16,197

Accrued compensation
22,935

 
18,557

Accrued expenses
23,073

 
25,703

Deferred revenue
11,936

 
12,277

Total current liabilities
82,322

 
72,734

Long-term operating lease liabilities
33,773

 
33,256

Obligation related to royalty

 
6,880

Other long-term liabilities
1,459

 
1,672

Total Liabilities(1)
117,554

 
114,542

Redeemable noncontrolling interest
45,500

 
49,600

Stockholders’ equity:
 
 
 
Common stock, par value of $0.00001 per share; 350,000,000 shares authorized as of March 31, 2020 and December 31, 2019; 94,509,011 and 94,261,414 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively
1

 
1

Additional paid-in capital
1,157,945

 
1,150,090

Accumulated other comprehensive income
7,705

 
1,111

Accumulated deficit
(380,538
)
 
(352,809
)
Total Stockholders’ Equity
785,113

 
798,393

Total Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity
$
948,167

 
$
962,535





(1) As of March 31, 2020 and December 31, 2019, includes $42.0 million and $45.1 million of assets, respectively, that can be used only to settle obligations of the consolidated variable interest entity (“VIE”) and VIE’s subsidiaries, and $4.6 million and $5.7 million of liabilities of the consolidated VIE and VIE’s subsidiaries, respectively, for which their creditors do not have recourse to the general credit of the Company. See Note 3, Investment in Joint Venture.
The accompanying notes are an integral part of these condensed consolidated financial statements.

5


Guardant Health, Inc.
Condensed Consolidated Statements of Operations (unaudited)
(in thousands, except per share data)
 
 
Three Months Ended
March 31,
 
 
2020
 
2019
 
 
 
 
 
Revenue:
 
 
 
 
Precision oncology testing
 
$
60,246

 
$
28,837

Development services
 
7,264

 
7,818

Total revenue
 
67,510

 
36,655

Costs and operating expenses:
 
 
 
 
Cost of precision oncology testing
 
18,191

 
11,023

Cost of development services
 
2,315

 
2,512

Research and development expense
 
37,016

 
16,316

Sales and marketing expense
 
25,115

 
17,807

General and administrative expense
 
19,785

 
12,661

Total costs and operating expenses
 
102,422

 
60,319

Loss from operations
 
(34,912
)
 
(23,664
)
Interest income
 
3,318

 
2,485

Interest expense
 
(12
)
 
(293
)
Other (expense) income, net
 
(209
)
 
147

Loss before provision for income taxes
 
(31,815
)
 
(21,325
)
Provision for income taxes
 
14

 
26

Net loss
 
(31,829
)
 
(21,351
)
Adjustment of redeemable noncontrolling interest
 
4,100

 
(4,700
)
Net loss attributable to Guardant Health, Inc. common stockholders
 
$
(27,729
)
 
$
(26,051
)
Net loss per share attributable to Guardant Health, Inc. common stockholders, basic and diluted
 
$
(0.29
)
 
$
(0.30
)
Weighted-average shares used in computing net loss per share attributable to Guardant Health, Inc. common stockholders, basic and diluted
 
94,382

 
85,935

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

6


Guardant Health, Inc.
Condensed Consolidated Statements of Comprehensive Loss (unaudited)
(in thousands)
 
 
Three Months Ended
March 31,
 
 
2020
 
2019
 
 
 
 
 
Net loss
 
$
(31,829
)
 
$
(21,351
)
Other comprehensive income, net of tax impact:
 
 
 
 
Unrealized gain on available-for-sale securities
 
6,571

 
485

Foreign currency translation adjustments
 
23

 
(69
)
Other comprehensive income
 
6,594

 
416

Comprehensive loss
 
$
(25,235
)
 
$
(20,935
)
Comprehensive gain (loss) attributable to redeemable noncontrolling interest
 
4,100

 
(4,700
)
Comprehensive loss attributable to Guardant Health, Inc.
 
$
(21,135
)
 
$
(25,635
)
The accompanying notes are an integral part of these condensed consolidated financial statements.

7


Guardant Health, Inc.

Condensed Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders’ Equity (unaudited)
(in thousands, except share data)
 
Redeemable Noncontrolling Interest

 
Common Stock 
 
 
Additional
Paid-in
Capital

 
Accumulated
Other
Comprehensive Loss

 
 
Accumulated
Deficit

 
Total Stockholders’ Equity

 
 
Shares

 
Amount

 
Balance as of December 31, 2019
$
49,600

 
94,261,414

 
$
1

 
$
1,150,090

 
$
1,111

 
$
(352,809
)
 
$
798,393

Issuance of common stock upon exercise of stock options

 
242,003

 

 
1,504

 

 

 
1,504

Vesting of restricted stock units

 
5,594

 

 

 

 

 

Vesting of common stock exercised early

 

 

 
13

 

 

 
13

Stock-based compensation

 

 

 
6,338

 

 

 
6,338

Adjustment of redeemable noncontrolling interest
(4,100
)
 

 

 

 

 
4,100

 
4,100

Other comprehensive gain, net of tax impact

 

 

 

 
6,594

 

 
6,594

Net loss

 

 

 

 

 
(31,829
)
 
(31,829
)
Balance as of March 31, 2020
$
45,500

 
94,509,011

 
$
1

 
$
1,157,945

 
$
7,705

 
$
(380,538
)
 
$
785,113

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Redeemable Noncontrolling Interest

 
Common Stock 
 
 
Additional
Paid-in
Capital

 
Accumulated
Other
Comprehensive Loss

 
 
Accumulated
Deficit

 
Total Stockholders’ Equity

 
 
Shares

 
Amount

 
Balance as of December 31, 2018
$
41,800

 
85,832,454

 
$
1

 
$
764,033

 
$
(83
)
 
$
(280,799
)
 
$
483,152

Cumulative effect adjustment for Topic 606 adoption

 

 

 

 

 
4,907

 
4,907

Cumulative effect adjustment for ASU 2018-07 adoption

 

 

 
1,266

 

 
(1,266
)
 

Issuance of common stock upon exercise of stock options

 
146,318

 

 
538

 

 

 
538

Vesting of common stock exercised early

 

 

 
56

 

 

 
56

Common stock issued under employee stock purchase plan

 
119,702

 

 
1,933

 

 

 
1,933

Stock-based compensation

 

 

 
3,183

 

 

 
3,183

Adjustment of redeemable noncontrolling interest
4,700

 

 

 

 

 
(4,700
)
 
(4,700
)
Other comprehensive gain, net of tax impact

 

 

 

 
416

 

 
416

Net loss

 

 

 

 

 
(21,351
)
 
(21,351
)
Balance as of March 31, 2019
$
46,500

 
86,098,474

 
$
1

 
$
771,009

 
$
333

 
$
(303,209
)
 
$
468,134

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

8


Guardant Health, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)
 
Three Months Ended March 31,
 
2020
 
2019
 
 
 
 
OPERATING ACTIVITIES:
 
Net loss
$
(31,829
)
 
$
(21,351
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
3,304

 
2,354

Amortization of right-of-use assets
1,496

 
802

Charge of in-process research and development costs with no alternative future use
8,500

 

Unrealized translation gains (loss) on obligation related to royalty

 
(144
)
Re-valuation of contingent consideration
(190
)
 

Non-cash stock-based compensation
6,338

 
3,182

Amortization of premium (discount) on marketable securities
580

 
(553
)
Others
56

 

Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
(179
)
 
11,608

Inventory
(9,967
)
 
(1,120
)
Prepaid expenses and other current assets
(2,598
)
 
(947
)
Other assets
161

 
(833
)
Accounts payable
9,491

 
(2,610
)
Accrued compensation
4,378

 
1,697

Accrued expenses
(660
)
 
2,308

Operating lease liabilities
(1,858
)
 
329

Deferred revenue
(341
)
 
975

Other liabilities
36

 

Net cash used in operating activities
(13,282
)
 
(4,303
)
 
 
 
 
INVESTING ACTIVITIES:
 
 
 
Purchases of marketable securities
(55,760
)
 
(45,966
)
Maturity of marketable securities
104,048

 
64,000

Purchases of property and equipment
(9,598
)
 
(2,705
)
Purchase of intangible assets
(17,886
)
 

Net cash provided by investing activities
20,804

 
15,329

 
 
 
 
FINANCING ACTIVITIES:
 
 
 
Payments made on royalty obligations

 
(73
)
Payments made on capital lease obligations
(38
)
 
(21
)
Proceeds from issuance of common stock upon exercise of stock options
1,504

 
538

Proceeds from issuances of common stock under employee stock purchase plan

 
1,933

Payment of offering costs related to initial public offering and follow-on offering

 
(89
)
Net cash provided by financing activities
1,466

 
2,288

Net effect of foreign exchange rate changes on cash and cash equivalents
23

 
(69
)
Net increase in cash and cash equivalents
9,011

 
13,245


9


Cash and cash equivalents—Beginning of period
143,228

 
140,544

Cash and cash equivalents—End of period
$
152,239

 
$
153,789

Supplemental Disclosures of Cash Flow Information:
 
 
 
Operating lease liabilities arising from obtaining right-of-use assets
$
1,957

 
$

Supplemental Disclosures of Noncash Investing and Financing Activities:
 
 
 
Purchases of property and equipment included in accounts payable and accrued expenses
$
1,365

 
$
490

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

10


 Guardant Health, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
1.
Description of Business
Guardant Health, Inc. (the “Company”) is a leading precision oncology company focused on helping conquer cancer globally through use of its proprietary blood tests, vast data sets and advanced analytics. The key to conquering cancer is unprecedented access to its molecular information throughout all stages of the disease, which the Company enables by a routine blood draw, or liquid biopsy. The Guardant Health Oncology Platform is designed to leverage the Company’s capabilities in technology, clinical development, regulatory, reimbursement and commercial adoption to improve patient clinical outcomes, lower healthcare costs and accelerate biopharmaceutical drug development. In pursuit of its goal to manage cancer across all stages of the disease, the Company has launched its Guardant360 and GuardantOMNI liquid biopsy-based tests for advanced stage cancer patients, and is developing tests from its LUNAR program which aims to address the needs of early stage cancer patients with neoadjuvant and adjuvant treatment selection, cancer survivors with surveillance, and asymptomatic individuals eligible for cancer screening and individuals at a higher risk for developing cancer with early detection.
The Company was incorporated in Delaware in December 2011 and is headquartered in Redwood City, California. In May 2018, the Company formed and capitalized Guardant Health AMEA, Inc. (the “Joint Venture”) in the United States with an entity affiliated with SoftBank. Under the terms of the joint venture agreement, the Company held a 50% ownership interest in the Joint Venture. As of March 31, 2020, the Joint Venture has subsidiaries in Singapore and Japan (see Note 3, Investment in Joint Venture) and the Company has a subsidiary in Switzerland, which was incorporated in 2019.
2.
Summary of Significant Accounting Policies
Basis of Presentation
The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated financial statements include the accounts of Guardant Health, Inc. and its consolidated Joint Venture. Other stockholders’ interests in the Joint Venture are shown in the condensed consolidated financial statements as redeemable noncontrolling interest. All significant intercompany balances and transactions have been eliminated in consolidation.
The Company believes that its existing cash and cash equivalents and marketable securities as of March 31, 2020 will be sufficient to allow the Company to fund its current operating plan through at least a period of one year after the date the accompanying condensed consolidated financial statements are issued. As the Company continues to incur losses, its transition to profitability is dependent upon a level of revenues adequate to support the Company’s cost structure. If the Company’s transition to profitability is not consistent with its current operating plan, the Company may have to seek additional capital.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the periods presented. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Estimates are used in several areas including, but not limited to, estimation of variable consideration, standalone selling price allocation included in contracts with multiple performance obligations, the fair value of assets acquired and liabilities assumed for business combinations, goodwill and identifiable intangible assets, stock-based compensation, contingencies, certain inputs into the provision for (benefit from) income taxes, including related reserves, valuation of redeemable noncontrolling interest, among others. These estimates generally involve complex issues and require judgments, involve the analysis of historical results and prediction of future trends, can require extended periods of time to resolve and are subject to change from period to period. Actual results may differ materially from management’s estimates. The extent to which the COVID-19 pandemic will ultimately impact the Company’s business, results of operations, financial conditions, or cash flows is highly uncertain and difficult to predict because it will depend on many factors that are outside the Company’s control, such as the duration, scope and severity of the pandemic, steps required or mandated by governments to mitigate the impact of the pandemic, and whether COVID-19 can be effectively prevented, detected, contained and treated, particularly in the markets where the Company operates.


11


Unaudited Interim Condensed Financial Statements
The accompanying condensed consolidated balance sheet as of March 31, 2020, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2020 and 2019, the condensed consolidated statements of redeemable noncontrolling interest and stockholders’ equity for the three months ended March 31, 2020 and 2019 and cash flows for the three months ended March 31, 2020 and 2019, and the related interim condensed consolidated disclosures are unaudited. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities Act of 1933, as amended (the “Securities Act”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring accruals that the Company believes are necessary to fairly state the financial position and the results of the Company’s operations and cash flows for interim periods in accordance with GAAP. Interim-period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period.
The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
Foreign Currency Translation
The functional currency of the subsidiaries of the consolidated Joint Venture is the local currency. The assets and liabilities of the subsidiaries are translated into U.S. dollars at exchange rates in effect at each balance sheet date, with the resulting translation adjustments recorded to a separate component of accumulated other comprehensive loss within stockholders’ equity. Income and expense accounts are translated at average exchange rates during the period. Foreign currency transaction gains and losses resulting from transactions denominated in a currency other than the functional currency are recognized in the condensed consolidated statements of operations. For the three months ended March 31, 2020 and 2019, foreign currency translation adjustment was immaterial.
Concentration of Risk
The Company is subject to credit risk from its portfolio of cash equivalents held at one commercial bank and investments in marketable securities. The Company limits its exposure to credit losses by investing in money market funds through a U.S. bank with high credit ratings. The Company’s cash may consist 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 condensed 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 also invests in investment‑grade debt instruments and 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: safety and preservation of principal and diversification of risk; liquidity of investments sufficient to meet cash flow requirements; and a competitive after‑tax rate of return. 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.
The Company is also subject to credit risk from its accounts receivable. The majority of the Company’s accounts receivable arises from the provision of precision oncology services in the United States and are primarily with biopharmaceutical companies with high credit ratings. The Company has not experienced any material losses related to receivables from individual customers, or groups of customers. The Company does not require collateral. Accounts receivable are recorded at the invoiced amount and do not bear interest.
A significant customer is a biopharmaceutical customer or a clinical testing payer that represents 10% or more of the Company’s total revenue or accounts receivable balance. Revenue attributable to each significant customer, including its affiliated entities, as a percentage of the Company’s total revenue, for the respective period, and accounts receivable balance attributable to each significant customers, including its affiliated entities, as a percentage of the Company’s total accounts receivable balance, at the respective condensed consolidated balance sheet date, are as follows:

12


 
 
Revenue
 
Accounts Receivable, Net
 
 
Three Months Ended March 31,
 
March 31, 2020
 
December 31, 2019
 
 
2020
 
2019
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited)
 
(unaudited)
 
 
Customer A
 
20
%
 
24
%
 
38
%
 
40
%
Customer B
 
20
%
 
*

 
*

 
*

Customer C
 
*

 
*

 
*

 
10
%
*
less than 10%
Accounts Receivable, Net
Accounts receivable represent valid claims against biopharmaceutical companies, research institutes and international distributors. The Company evaluates the collectability of its accounts receivable based on historical collection trends, the financial condition of payment partners, and external market factors and provides for an allowance for potential credit losses based on management’s best estimate of the amount of probable credit losses. As of March 31, 2020, the Company recorded $150,000 as allowance for credit losses. As of December 31, 2019, the Company had no allowance for credit losses.
Asset Acquisition
If an acquisition of an asset or group of assets does not meet the definition of a business, the transaction is accounted for as an asset acquisition rather than a business combination. An asset acquisition does not result in the recognition of goodwill and transaction costs are capitalized as part of the cost of the asset or group of assets acquired. The total consideration is allocated to the various intangible assets acquired on a relative fair value basis. Transaction costs associated with the asset acquisition are capitalized. Cash paid in connection of purchase of in-process research and development technology in an asset acquisition is presented within the investing section of the condensed consolidated statement of cash flows.
Goodwill and Intangible Assets, net
Intangible assets related to in-process research and development costs (“IPR&D”) are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts. If and when development is complete, the associated assets would be deemed finite-lived and would then be amortized based on their respective estimated useful lives at that point in time. Prior to completion of the research and development efforts, the assets are considered indefinite-lived. During this period, the assets will not be amortized but will be tested for impairment on an annual basis and between annual tests if we become aware of any events occurring or changes in circumstances that would indicate a reduction in the fair value of the IPR&D projects below their respective carrying amounts.
Goodwill represents the excess of the purchase price over the fair value of net identifiable assets and liabilities. Goodwill and IPR&D are not amortized but are tested for impairment at least annually during the fourth fiscal quarter, or if circumstances indicate their value may no longer be recoverable. The Company continues to operate in one segment, which is considered to be the sole reporting unit and, therefore, goodwill was tested for impairment at the enterprise level. As of March 31, 2020, there has been no impairment of goodwill.
Intangible assets are carried at cost, net of accumulated amortization. The Company does not have intangible assets with indefinite useful lives other than goodwill and the acquired IPR&D. Amortization is recorded on a straight-line basis over the intangible asset's useful life, which is approximately 6-12 years.

13


Leases
The Company determines if an arrangement contains a lease at inception. Operating lease right-of-use (“ROU”) assets and operating leases liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. ROU assets also include any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the lease liabilities, as the Company's leases generally do not provide an implicit rate. Lease terms may include options to extend or terminate when the Company is reasonably certain the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term. The Company also has lease arrangements with lease and non-lease components. The Company elected the practical expedient not to separate non-lease components from lease components for the Company’s facility leases. The Company also elected to apply the short-term lease measurement and recognition exemption in which ROU assets and lease liabilities are not recognized for leases with terms of 12 months or less.
Revenue Recognition
The Company derives revenue from the provision of precision oncology testing services provided to its ordering physicians and biopharmaceutical customers, as well as from biopharmaceutical research and development services provided to its biopharmaceutical customers. Precision oncology services include genomic profiling and the delivery of other genomic information derived from the Company’s platform. Development services include companion diagnostic development, information solutions and laboratory services. The Company currently receives payments from third-party commercial and governmental payers, certain hospitals and oncology centers and individual patients, as well as biopharmaceutical companies and research institutes.
Revenues are recognized when control of services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. ASC 606 provides for a five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation.
Precision oncology testing
The Company recognizes revenue from the sale of its precision oncology tests for clinical customers, including certain hospitals, cancer centers, other institutions and patients, at the time results of the test are reported to physicians. Most precision oncology tests requested by clinical customers are sold without a written agreement; however, the Company determines an implied contract exists with its clinical customers. The Company identifies each sale of its liquid biopsy test to clinical customer as a single performance obligation. With the exception of certain limited contracted arrangements with insurance carriers and other institutions where the transaction price is fixed, a stated contract price does not exist and the transaction price for each implied contract with clinical customers represents variable consideration. The Company estimates the variable consideration under the portfolio approach and considers the historical reimbursement data from third-party commercial and governmental payers and patients, as well as known or anticipated reimbursement trends not reflected in the historical data. The Company monitors the estimated amount to be collected in the portfolio at each reporting period based on actual cash collections in order to assess whether a revision to the estimate is required. Both the estimate and any subsequent revision contain uncertainty and require the use of judgment in the estimation of the variable consideration and application of the constraint for such variable consideration. The Company analyzes its actual cash collections over the expected reimbursement period and compares it with the estimated variable consideration for each portfolio and any difference is recognized as an adjustment to estimated revenue after the expected reimbursement period, subject to assessment of the risk of future revenue reversal. Revenue from sales of precision oncology tests to biopharmaceutical customers are based on a negotiated price per test or on the basis of an agreement to provide certain testing volume over a defined period. The Company identifies its promise to transfer a series of distinct liquid biopsy tests to biopharmaceutical customers as a single performance obligation. Precision oncology tests to biopharmaceutical customers are generally billed at a fixed price for each test performed. For agreements involving testing volume to be satisfied over a defined period, revenue is recognized over time based on the number of tests performed as the performance obligation is satisfied over time. Results of the Company’s precision oncology services are delivered electronically, and as such there are no shipping or handling fees incurred by the Company or billed to customers.
Development services
The Company performs development services for its biopharmaceutical customers utilizing its precision oncology information platform. Development services typically represent a single performance obligation as the Company performs a significant integration service, such as analytical validation and regulatory submissions. The individual

14


promises are not separately identifiable from other promises in the contracts and, therefore, are not distinct. However, under certain contracts, a biopharmaceutical customer may engage the Company for multiple distinct development services which are both capable of being distinct and separately identifiable from other promises in the contracts and, therefore, distinct performance obligations.
The Company collaborates with pharmaceutical companies in the development of new drugs. As part of these collaborations, the Company provides services related to regulatory filings with the FDA to support companion diagnostic device submissions for the Company’s liquid biopsy panels. Under these collaborations, the Company generates revenue from achievement of milestones, as well as provision of on-going support. For development services performed, the Company is compensated through a combination of an upfront fee and performance-based, non-refundable regulatory and other developmental milestone payments. The transaction price of the Company's development services contracts typically represents variable consideration. Application of the constraint for variable consideration to milestone payments is an area that requires significant judgment. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be managed to achieve the respective milestone and the level of effort and investment required to achieve the respective milestone. In making this assessment, the Company considers its historical experience with similar milestones, the degree of complexity and uncertainty associated with each milestone, and whether achievement of the milestone is dependent on parties other than the Company. The constraint for variable consideration is applied such that it is probable a significant reversal of revenue will not occur when the uncertainty associated with the contingency is resolved. Application of the constraint for variable consideration is updated at each reporting period as a revision to the estimated transaction price.
The Company recognizes development services revenue over the period in which biopharmaceutical research and development services are provided. Specifically, the Company recognizes revenue using an input method to measure progress, utilizing costs incurred to-date relative to total expected costs as its measure of progress. The Company assesses the changes to the total expected cost estimates as well as any incremental fees negotiated resulting from changes to the scope of the original contract in determining the revenue recognition at each reporting period. For development of new products or services under these arrangements, costs incurred before technological feasibility is reached are included as research and development expenses in the Company’s condensed consolidated statements of operations, while costs incurred thereafter are recorded as cost of development services.
Contracts with multiple performance obligations
Contracts with biopharmaceutical customers may include multiple distinct performance obligations, such as provision of precision oncology testing, biopharmaceutical research and development services, and clinical trial enrollment assistance, among others. The Company evaluates the terms and conditions included within its 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. The Company first identifies material promises, in contrast to immaterial promises or administrative tasks, under the contract, and then evaluates whether these promises are both capable of being distinct and distinct within the context of the contract. In assessing whether a promised service is capable of being distinct, the Company considers whether the customer could benefit from the service either on its own or together with other resources that are readily available to the customer, including factors such as the research, development, and commercialization capabilities of a third party as well as the availability of the associated expertise in the general marketplace. In assessing whether a promised service is distinct within the context of the contract, the Company considers whether it provides a significant integration of the services, whether the services significantly modify or customize one another, or whether the services are highly interdependent or interrelated.
For contracts with multiple performance obligations, the transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The Company determines standalone selling price by considering the historical selling price of these performance obligations in similar transactions as well as other factors, including, but not limited to, the price that customers in the market would be willing to pay, competitive pricing of other vendors, industry publications and current pricing practices, and expected costs of satisfying each performance obligation plus appropriate margin.
Contract assets
Contract assets consists primarily of: i) precision oncology testing revenues to clinical customers that are recognized upon delivery of the test results prior to cash collection; and ii) development services revenues to biopharmaceutical customers that are recognized upon the achievement of performance-based milestones but prior to the establishment of billing rights. Contract assets are relieved when the Company receives payments from clinical customers, or when it invoices the biopharmaceutical customers when milestones are achieved, thereby reclassifying the balances from contract assets to accounts receivable. Contract assets are presented under accounts receivable, net and other assets on

15


the Company’s condensed consolidated balance sheets. As of March 31, 2020, the Company had contract assets of $9.1 million of which $150,000 was recorded in other assets. As of December 31, 2019, the Company had contract assets of $6.2 million of which $1.0 million was recorded in other assets.
Deferred revenue
Deferred revenue, which is a contract liability, consists primarily of payments received in advance of revenue recognition from contracts with customers. For example, development services contracts with biopharmaceutical customers often contain upfront payments which results in the recording of deferred revenue to the extent cash is received prior to the Company's performance of the related services. Contract liabilities are relieved as the Company performs its obligations under the contract and revenue is consequently recognized. As of March 31, 2020 and December 31, 2019, the deferred revenue balance was $11.9 million and $12.3 million, respectively, which included $5.5 million and $4.8 million, respectively, related to collaboration development efforts with pharmaceutical companies to be recognized as the Company performs research and development services in the future periods. Revenue recognized in the three months ended March 31, 2020 that was included in the deferred revenue balance as of December 31, 2019 was $4.0 million, which primarily represented revenue from provision of development services under the collaboration agreement with biopharmaceutical company. 
Transaction price allocated to the remaining performance obligations
Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and non-cancelable amounts that will be invoiced and recognized as revenues in future periods. The Company expects to recognize substantially all of the remaining transaction price in the next 12 months.

Costs of Precision Oncology Testing
Cost of precision oncology testing generally consists of cost of materials, direct labor including bonus, benefit and stock-based compensation, equipment and infrastructure expenses associated with processing liquid biopsy test samples (including sample accessioning, library preparation, sequencing, quality control analyses and shipping charges to transport blood samples), freight, curation of test results for physicians and license fees due to third parties. Infrastructure expenses include depreciation of laboratory equipment, rent costs, amortization of leasehold improvements and information technology costs. Costs associated with performing the Company’s tests are recorded as the tests are performed regardless of whether revenue was recognized with respect to that test. Royalties for licensed technology calculated as a percentage of revenues generated using the associated technology are recorded as expense at the time the related revenues are recognized. One-time royalty payments related to signing of license agreements or other milestones, such as issuance of new patents, are amortized to expense over the expected useful life of the applicable patent rights.
Cost of Development Services
Cost of development service includes costs incurred for the performance of development services requested by the Company’s customers. For development of new products, costs incurred before technological feasibility has been achieved are reported as research and development expenses, while costs incurred thereafter are reported as cost of development services.
Research and Development Expenses
Research and development expenses are comprised of costs incurred to develop technology and include compensation and benefits, reagents and supplies used in research and development laboratory work, infrastructure expenses, including allocated facility occupancy and information technology costs, contract services and other outside costs.
Stock‑Based Compensation
Stock‑based compensation related to stock options granted to the Company’s employees, directors and nonemployees is measured at the grant date based on the fair value of the award. The fair value is recognized as expense over the requisite service period, which is generally the vesting period of the respective awards. Compensation expense for stock options with performance metrics is calculated based upon expected achievement of the metrics specified in the grant.
Starting January 1, 2019, upon adoption of Accounting Standards Update (“ASU”) 2018-07, Compensation - Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting, the fair value of stock options issued to nonemployee consultants is determined as of the grant date, and compensation expense is being recognized over the period that the related services are rendered.

16


The Company uses the Black‑Scholes option‑pricing model to estimate the fair value of its stock options and stock purchase rights under its 2018 Employee Stock Purchase Plan. The Black-Scholes option-pricing model requires assumptions to be made related to expected term of an award, expected volatility, risk-free rate and expected dividend yield. Starting January 1, 2017, forfeitures are accounted for as they occur.
The Company accounts for restricted stock units issued to employees based on the grant date fair value which is determined based on the closing market price of the common stock on the date of grant. The expense is recognized in the Company’s condensed consolidated statement of operations on a straight-line basis over the requisite vesting period.
Net Loss Per Share Attributable to Common Stockholders
The Company calculates basic net loss per share attributable to common stockholders by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. The diluted net loss per share attributable to common stockholders is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period determined using the treasury stock method. For purposes of this calculation, stock options, restricted stock units, shares issuable pursuant to the employee stock purchase plan, shares subject to repurchase from early exercised options and contingently issuable shares are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is anti-dilutive.
Accounting Pronouncements Adopted
Financial Instruments
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), in order to improve financial reporting of expected credit losses on financial instruments and other commitments to extend credit. ASU 2016-13 requires that an entity measure and recognize expected credit losses for financial assets held at amortized cost and replaces the incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to certain available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities.  These changes result in earlier recognition of credit losses. The Company adopted ASU 2016-13 using the modified retrospective approach as of January 1, 2020. The cumulative effect upon adoption was not material to the Company’s condensed consolidated financial statements. The Company will continue to monitor the developments pertaining to the recent coronavirus (COVID-19) pandemic and its impact on expected credit losses.

Goodwill
In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment which eliminates Step 2 from the goodwill impairment test and instead requires entities to perform its annual or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The Company adopted this new standard on January 1, 2020. The adoption of this standard did not have a significant impact to the Company’s condensed consolidated financial statements.
Fair Value Measurements
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements in ASC 820, Fair Value Measurement, as part of its disclosure framework project. The Company adopted this new guidance on January 1, 2020. The adoption of this standard did not have a significant impact on the Company’s condensed consolidated financial statements.
Cloud Computing Arrangements
In August 2018, the FASB issued ASU 2018-15—Intangibles-Goodwill and Other-Internal—Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC Topic 350, Intangibles—Goodwill and Other, to determine which implementation costs to capitalize as assets or expense as incurred. The Company adopted this new standard on January 1, 2020 on a prospective basis. The adoption of this standard did not have a significant impact on the Company’s condensed consolidated financial statements.
Collaborative Arrangements

17


In November 2018, the FASB issued ASU 2018-18 -Collaborative Arrangements (ASC 808) to clarify that certain transactions between participants in a collaborative arrangement should be accounted for under Revenue from contracts with customers (Topic ASC 606) when the counterparty is a customer. The Company adopted this new standard on January 1, 2020. The adoption of this standard did not have a significant impact to the Company’s condensed consolidated financial statements.
Income Taxes
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.  The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.  The Company early adopted this new standard on January 1, 2020.The adoption of this standard did not have a significant impact to the Company’s condensed consolidated financial statements. Under prior GAAP, the Company historically allocated income tax benefit to continuing operations and an offsetting income tax expense to other comprehensive income under the applicable exception to ASC Topic 740.  The new standard eliminates this exception and the Company will now determine the tax effect of pre-tax income or loss from continuing operations without regard to the tax effect of other items.  The Company applied the new intraperiod tax allocation guidance prospectively in the period of adoption.

3.
Investment in Joint Venture
Variable Interest Entity (“VIE”)
In May 2018, the Company and SoftBank formed and capitalized Guardant Health AMEA, Inc. (the “Joint Venture”) for the sale, marketing and distribution of the Company’s tests in all areas worldwide, outside of North America, Central America, South America, the United Kingdom, all other member states of the European Union as of May 9, 2017, Iceland, Norway, Switzerland and Turkey. The Company expects to rely on the Joint Venture to accelerate commercialization of its products in Asia, the Middle East and Africa, with an initial focus on Japan.
Under the terms of the joint venture agreement, the Company paid $9.0 million for 40,000 shares of common stock, or 50% ownership interest, of the Joint Venture, and the affiliate of SoftBank contributed $41.0 million for 40,000 shares of common stock, or the other 50% ownership interest, of the Joint Venture. Neither party has the obligation to provide additional financial support to the Joint Venture. The Joint Venture is deemed to be a variable interest entity (“VIE”) and the Company has been identified as the VIE’s primary beneficiary. As the primary beneficiary, the Company has consolidated the financial position, results of operations and cash flows of the Joint Venture in its financial statements and all intercompany balances have been eliminated in consolidation.
As of March 31, 2020 and December 31, 2019, the Joint Venture had total assets of approximately $42.0 million and $45.1 million, respectively, which were primarily comprised of cash, property and equipment, right-of-use assets and security deposits. Although the Company consolidates the Joint Venture, the legal structure of the Joint Venture limits the recourse that its creditors will have over the Company’s general credit or assets.  Similarly, the assets held in the Joint Venture can be used only to settle obligations of the Joint Venture. As of March 31, 2020 and December 31, 2019, the Company has not provided financial or other support to the Joint Venture that was not previously contracted or required.
Put-call arrangements
The joint venture agreement includes a put-call arrangement with respect to the shares of the Joint Venture held by SoftBank and its affiliates. Under certain specified circumstances and on terms specified in the joint venture agreement, including timely written notice, SoftBank has the right to cause the Company to purchase all shares of the Joint Venture held by SoftBank and its affiliates (the “put right”), and the Company has a right to purchase all such shares (the “call right”).
Each of the Company and SoftBank may exercise its respective put-call rights for the Company to purchase all shares of the Joint Venture held by SoftBank in the event of (i) certain material disagreements relating to the Joint Venture or its business that may seriously affect the ability of the Joint Venture to perform its obligations under the joint venture agreement or may otherwise seriously impair the ability of the Joint Venture to conduct its business in an effective matter, other than one relating to the Joint Venture’s business plan or to factual matters that may be capable of expert determination; (ii) the effectiveness of the Company’s initial public offering, a change in control of the Company, the seventh anniversary of the formation of the Joint Venture, or each subsequent anniversary of each of the foregoing events; or (iii) a material breach of the joint venture agreement by the other party that goes unremedied within 20 business days. Unless the shares of the Joint Venture are publicly traded and listed on a nationally recognized stock exchange, the purchase price per share of the Joint Venture in these situations will be determined by a third-party valuation firm

18


on the assumption that the sale is on an arm’s-length basis on the date of the put or call notice. The third-party valuation firm may evaluate a range of factors and employ assumptions that are subjective in nature, which could result in the fair value of SoftBank’s interests in the Joint Venture being determined to be materially different from what has been recorded in the Company’s condensed consolidated financial statements.
In the event the Company exercises its call right, the fair value of the Joint Venture will be deemed to be no less than an amount that yields a 20% internal rate of return on each tranche of capital invested by SoftBank and its affiliates in the Joint Venture, taking into account all proceeds received by SoftBank and its affiliates arising from their shares through such date.
In the event SoftBank exercises its put right and the fair value of the Joint Venture is determined to be greater than 40% of the fair value of the Company, the Company will only be required to purchase the number of shares of the Joint Venture held by SoftBank and its affiliates having an aggregate value equal to the product of 40% of the Company's fair value and the pro rata portion of the outstanding shares of the Joint Venture held by SoftBank and its affiliates.
The Company may pay the purchase price for the shares of the Joint Venture in cash, in shares of its capital stock (which may be a non-voting security with senior preferences to all other classes of its equity or, if its common stock is publicly traded on a national exchange, its common stock), or in a combination thereof. In the event the Company exercises the call right, SoftBank will choose the form of consideration. In the event SoftBank exercises the put right, the Company will choose the form of consideration.
The noncontrolling interest held by SoftBank contains embedded put-call redemption features that are not solely within the Company’s control and has been classified outside of permanent equity in the consolidated balance sheets. The put-call feature embedded in the redeemable noncontrolling interest do not currently require bifurcation as it does not meet the definition of a derivative and is considered to be clearly and closely related to the redeemable noncontrolling interest. The noncontrolling interest is considered probable of becoming redeemable as SoftBank has the option to exercise its put right to sell its equity ownership in the Joint Venture to the Company on or after the seventh anniversary of the formation of the Joint Venture, on each subsequent anniversary of the Company’s initial public offering (the “IPO”) and under certain other circumstances. The Company elected to recognize the change in redemption value immediately as they occur as if the put-call redemption feature were exercisable at the end of the reporting period. The carrying value of the redeemable noncontrolling interest is first adjusted for the earnings or losses attributable to the redeemable noncontrolling interest based on the percentage of the economic or ownership interest retained in the consolidated VIE by the noncontrolling parties, and then adjusted to equal to its redemption amount, or the fair value of the noncontrolling interest held by SoftBank, as if the redemption were to occur at the end of the reporting date.
4.
Condensed Consolidated Balance Sheet Components
Property and Equipment, Net
Property and equipment, net consist of the following:
 
March 31, 2020
 
December 31, 2019
 
(unaudited)
 
 
 
(in thousands)
Machinery and equipment
$
32,603

 
$
29,119

Computer hardware
7,108

 
6,296

Leasehold improvements
22,233

 
21,031

Furniture and fixtures
2,601

 
1,962

Computer software
930

 
829

Construction in progress
5,939

 
6,354

Property and equipment, gross
$
71,414

 
$
65,591

Less: accumulated depreciation and amortization
(24,729
)
 
(21,923
)
Property and equipment, net
$
46,685

 
$
43,668


Depreciation and amortization expense related to property and equipment was $3.0 million and $2.1 million for the three months ended March 31, 2020 and 2019, respectively.

19


Accrued Expenses
Accrued expenses consist of the following:
 
March 31, 2020
 
December 31, 2019
 
(unaudited)
 
 
 
(in thousands)
Accrued royalty obligations
$
350

 
$
1,564

Accrued legal expenses
2,951

 
1,046

Accrued tax liabilities
3,362

 
3,050

Accrued professional services
3,094

 
3,464

Accrued clinical trials and studies
2,012

 
2,029

Purchases of property and equipment included in accrued expenses
281

 
2,424

Operating lease liabilities
7,307

 
7,140

Other
3,716

 
4,986

Total accrued expenses
$
23,073

 
$
25,703


5.
Fair Value Measurements, Cash Equivalents and Marketable Securities
Financial instruments consist of cash equivalents, marketable securities, accounts receivable, net, prepaid expenses and other current assets, accounts payable and accrued expenses. Cash equivalents and marketable securities are stated at fair value. Prepaid expenses and other current assets, accounts payable and accrued expenses are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date.
Fair value is defined as the exchange price that would be received from sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The identification of market participant assumptions provides a basis for determining what inputs are to be used for pricing each asset or liability. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
A fair value hierarchy has been established which gives precedence to fair value measurements calculated using observable inputs over those using unobservable inputs. This hierarchy prioritized the inputs into three broad levels as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements were as follows:

20


 
March 31, 2020
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
 
 
 
 
 
 
 
 
 
(unaudited)
 
(in thousands)
Financial Assets:
 
 
 
 
 
 
 
Money market funds
$
35,592

 
$
35,592

 
$

 
$

Total cash equivalents
$
35,592

 
$
35,592

 
$

 
$

 
 
 
 
 
 
 
 
Corporate bonds
$
4,035

 
$

 
$
4,035

 
$

U.S. government debt securities
363,818

 

 
363,818

 

Total short-term marketable securities
$
367,853

 
$

 
$
367,853

 
$

 
 
 
 
 
 
 
 
U.S. government debt securities
$
238,206

 
$

 
$
238,206

 
$

Total long-term marketable securities
$
238,206

 
$

 
$
238,206

 
$

Total
$
641,651

 
$
35,592

 
$
606,059

 
$

 
 
 
 
 
 
 
 
Financial Liabilities:
 
 
 
 
 
 
 
Contingent consideration
$
1,175

 
$

 
$

 
$
1,175

Total
$
1,175

 
$

 
$

 
$
1,175

 
December 31, 2019
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
 
 
 
 
 
 
 
 
 
(in thousands)
Financial Assets:
 
 
 
 
 
 
 
Money market funds
$
10,734

 
$
10,734

 
$

 
$

Total cash equivalents
$
10,734

 
$
10,734

 
$

 
$

 
 
 
 
 
 
 
 
Corporate bonds
$
16,690

 
$

 
$
16,690

 
$

U.S. government debt securities
362,884
 

 
362,884
 

Total short-term marketable securities
$
379,574

 
$

 
$
379,574

 
$

 
 
 
 
 
 
 
 
U.S. government debt securities
$
268,783

 
$

 
$
268,783

 
$

Total long-term marketable securities
$
268,783

 
$

 
$
268,783

 
$

Total
$
659,091

 
$
10,734

 
$
648,357

 
$

 
 
 
 
 
 
 
 
Financial Liabilities:
 
 
 
 
 
 
 
Contingent consideration
$
1,365

 
$

 
$

 
$
1,365

Total
$
1,365

 
$

 
$

 
$
1,365


The Company measures the fair value of money market funds based on quoted prices in active markets for identical securities. Corporate bonds, U.S. government debt securities and U.S. government agency bonds are valued taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads; benchmark securities; prepayment/default projections based on historical data and other observable inputs.

21


The following table summarizes the activities for the Level 3 financial instruments for the three months ended March 31, 2020 and 2019:
 
 
Redeemable Noncontrolling Interest
 
Contingent consideration
 
 
Three Months Ended March 31,
 
Three Months Ended March 31,
 
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
 
 
 
 
 
 
(unaudited)
 
 
(in thousands)
Fair value — beginning of period
 
$
49,600

 
$
41,800

 
$
1,365

 
$

Increase (decrease) in fair value
 
(3,027
)
 
5,022

 
(190
)
 

Net loss for the period
 
(1,073
)
 
(322
)
 

 

Fair value — end of period
 
$
45,500

 
$
46,500

 
$
1,175

 
$


As of March 31, 2020 and December 31, 2019, contingent consideration liability of $1.2 million and $1.4 million, respectively, was recorded within other long-term liabilities on the condensed consolidated balance sheets.
Cash Equivalents and Marketable Securities
The following tables summarizes the Company’s cash equivalents and marketable securities’ amortized costs, gross unrealized gains, gross unrealized losses and estimated fair values by significant investment category:
 
March 31, 2020
 
Amortized Cost
 
Gross Unrealized Gain
 
Gross Unrealized Loss
 
Estimated Fair Value
 
 
 
 
 
 
 
 
 
(unaudited)
 
(in thousands)
Money market fund
$
35,592

 
$

 
$

 
$
35,592

Corporate bond
4,035

 

 

 
4,035

U.S. government debt securities
594,064

 
7,961

 

 
602,025

Total
$
633,691

 
$
7,961

 
$

 
$
641,652

 
December 31, 2019
 
Amortized Cost
 
Gross Unrealized Gain
 
Gross Unrealized Loss
 
Estimated Fair Value
 
 
 
 
 
 
 
 
 
(in thousands)
Money market fund
$
10,734

 
$

 
$

 
$
10,734

Corporate bond
16,679

 
11

 

 
16,690

U.S. government debt securities
630,283

 
1,422

 
(39
)
 
631,666

Total
$
657,696

 
$
1,433

 
$
(39
)
 
$
659,090


There have been no material realized gains or losses on marketable securities for the periods presented. None of the Company’s investments in marketable securities has been in an unrealized loss position for more than one year. The Company determined that it did have the ability and intent to hold all marketable securities that have been in a continuous loss position until maturity or recovery, thus there has been no recognition of credit losses in the three months ended March 31, 2020 and 2019, respectively. The maturities of the Company’s long-term marketable securities range from 1.0 year to 1.7 years as of March 31, 2020.

22


6.
Intangible Assets, Net and Goodwill
The following table presents details of purchased intangible assets as of March 31, 2020 and December 31, 2019:
 
 
March 31, 2020
 
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Remaining Weighted Average Useful Life
 
 
 
 
 
 
 
 
 
 
 
(unaudited)
 
 
(in thousands)
 
(in years)
Intangible assets subject to amortization:
 
 
 
 
 
 
 
 
Acquired license
 
$
11,886

 
$
(499
)
 
$
11,387

 
10.6
Non-compete agreements and other covenant rights
 
5,100

 
(406
)
 
4,694

 
5.6
Total intangible assets subject to amortization
 
16,986

 
(905
)
 
16,081

 
 
Intangible assets not subject to amortization:
 
 
 
 
 
 
 
 
IPR&D
 
1,600

 

 
1,600

 
 
Goodwill
 
3,290

 

 
3,290

 
 
Total purchased intangible assets
 
$
21,876

 
$
(905
)
 
$
20,971

 
 
 
 
December 31, 2019
 
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Remaining Weighted Average Useful Life
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
 
(in years)
Intangible assets subject to amortization:
 
 
 
 
 
 
 
 
Acquired license
 
$
5,100

 
$
(373
)
 
$
4,727

 
9.5
Non-compete agreements
 
2,500

 
(303
)
 
2,197

 
5.5
Total intangible assets subject to amortization
 
7,600

 
(676
)
 
6,924

 
 
Intangible assets not subject to amortization:
 
 
 
 
 
 
 
 
IPR&D
 
1,600

 

 
1,600

 
 
Goodwill
 
3,290

 

 
3,290

 
 
Total purchased intangible assets
 
$
12,490

 
$
(676
)
 
$
11,814

 
 

Amortization of finite-lived intangible assets was $229,000 for the three months ended March 31, 2020. No amortization of finite-lived intangible assets was recorded for the three months ended March 31, 2019.
The following table summarizes estimated future amortization expense of finite-lived intangible assets:
Year Ending December 31,
 
 
 
 
(unaudited)
 
 
(in thousands)
Remainder of 2020
 
$
1,496

2021
 
1,909

2022
 
1,909

2023
 
1,910

2024
 
1,915

2025 and thereafter
 
6,942

Total
 
$
16,081



23



7.
Acquisition
Patent License Acquisition
In January 2017, the Company entered into a license agreement with a biotechnology company, KeyGene N.V. (“KeyGene”). An arbitration was initiated between the parties in 2018. In March 2020, the Company and KeyGene entered into a settlement and patent license agreement (the “SPLA”) to resolve the dispute and to acquire an extended worldwide non-exclusive license to certain patent rights with respect to KeyGene’s Next Generation