Grail Inc.
03/12/2026 | Press release | Distributed by Public on 03/12/2026 14:41
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
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 2023refer to the fiscal years 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 2024and 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 ourapproximately 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 soldapproximately475,000 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, 2024and 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 1,570,308shares of our common stock, at a purchase price of $70.05per 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. 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. 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 Assetsin 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 2025and 2024:
| Year Ended | Change | ||||||||||||||||||||||
| (in thousands) | December 31, 2025 | December 31, 2024 | $ | % | |||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Screening revenue | $ | 138,601 | $ | 108,627 | $ | 29,974 | 28 | % | |||||||||||||||
| Development services revenue | 8,571 | 16,968 | (8,397) | (49 | %) | ||||||||||||||||||
| Total revenue | 147,172 | 125,595 | 21,577 | 17 | % | ||||||||||||||||||
| Costs and operating expenses: | |||||||||||||||||||||||
| Cost of screening revenue (exclusive of amortization of intangible assets) | 73,251 | 63,284 | 9,967 | 16 | % | ||||||||||||||||||
| Cost of development services revenue | 2,605 | 6,444 | (3,839) | (60 | %) | ||||||||||||||||||
|
Cost of revenue - amortization of intangible assets
|
133,889 | 133,889 | - | - | % | ||||||||||||||||||
| Research and development | 195,794 | 322,380 | (126,586) | (39 | %) | ||||||||||||||||||
| Sales and marketing | 116,693 | 153,958 | (37,265) | (24 | %) | ||||||||||||||||||
|
General and administrative
|
159,103 | 213,862 | (54,759) | (26 | %) | ||||||||||||||||||
|
Goodwill and intangible assets impairment
|
28,000 | 1,420,936 | (1,392,936) | (98 | %) | ||||||||||||||||||
| Total costs and operating expenses | 709,335 | 2,314,753 | (1,605,418) | (69 | %) | ||||||||||||||||||
|
Loss from operations
|
(562,163) | (2,189,158) | 1,626,995 | 74 | % | ||||||||||||||||||
| Other income: | |||||||||||||||||||||||
| Interest income | 28,652 | 26,733 | 1,919 | 7 | % | ||||||||||||||||||
| Other income (expense), net | (993) | 64 | (1,057) | (1652 | %) | ||||||||||||||||||
| Total other income, net | 27,659 | 26,797 | 862 | 3 | % | ||||||||||||||||||
| Loss before income taxes | (534,504) | (2,162,361) | 1,627,857 | 75 | % | ||||||||||||||||||
| Benefit from income taxes | 126,153 | 135,356 | (9,203) | (7 | %) | ||||||||||||||||||
| Net loss | $ | (408,351) | $ | (2,027,005) | $ | 1,618,654 | 80 | % | |||||||||||||||
| Cost of screening revenue (exclusive of amortization of intangible assets) as a percentage of screening revenue | 53 | % | 58 | % | (5) | % | |||||||||||||||||
Revenue
| Year Ended | Change | ||||||||||||||||||||||
| (in thousands) |
December 31, 2025 |
December 31, 2024 |
$ | % | |||||||||||||||||||
| Screening revenue | $ | 138,601 | $ | 108,627 | $ | 29,974 | 28 | % | |||||||||||||||
| Development services revenue | 8,571 | 16,968 | (8,397) | (49 | %) | ||||||||||||||||||
| Total revenue | $ | 147,172 | $ | 125,595 | $ | 21,577 | 17 | % | |||||||||||||||
Screening Revenue
The increasein screening revenue of $30.0 millionor 28% was primarily driven by a 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 decreasein development services revenue of $8.4 millionor 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 | ||||||||||||||||||||||
| (in thousands) |
December 31, 2025 |
December 31, 2024 |
$ | % | |||||||||||||||||||
| Cost of screening revenue (exclusive of amortization of intangible assets) | $ | 73,251 | $ | 63,284 | $ | 9,967 | 16 | % | |||||||||||||||
The increasein cost of screening revenue (exclusive of amortization of intangible assets) of $10.0 million or 16% was primarily driven bya 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 | ||||||||||||||||||||||
| (in thousands) |
December 31, 2025 |
December 31, 2024 |
$ | % | |||||||||||||||||||
| Cost of development services revenue | $ | 2,605 | $ | 6,444 | $ | (3,839) | (60 | %) | |||||||||||||||
The decreasein 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 2025and 2024were as follows:
| Year Ended | Change | ||||||||||||||||||||||
| (in thousands) |
December 31, 2025 |
December 31, 2024 |
$ | % | |||||||||||||||||||
| Compensation expenses | $ | 102,580 | $ | 162,914 | $ | (60,334) | (37 | %) | |||||||||||||||
| Laboratory supplies and research collaborations | 12,802 | 41,341 | (28,539) | (69 | %) | ||||||||||||||||||
| Clinical studies | 28,012 | 43,890 | (15,878) | (36 | %) | ||||||||||||||||||
| Allocated Expenses | 24,206 | 35,436 | (11,230) | (32 | %) | ||||||||||||||||||
| Depreciation expenses | 10,347 | 12,237 | (1,890) | (15 | %) | ||||||||||||||||||
| Other expenses | 17,847 | 26,562 | (8,715) | (33 | %) | ||||||||||||||||||
| Total research and development | $ | 195,794 | $ | 322,380 | $ | (126,586) | (39 | %) | |||||||||||||||
The decreasein the research and developmentexpenses of $126.6 millionor 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 | ||||||||||||||||||||||
| (in thousands) |
December 31, 2025 |
December 31, 2024 |
$ | % | |||||||||||||||||||
| Sales and marketing | $ | 116,693 | $ | 153,958 | $ | (37,265) | (24 | %) | |||||||||||||||
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 | ||||||||||||||||||||||
| (in thousands) |
December 31, 2025 |
December 31, 2024 |
$ | % | |||||||||||||||||||
| General and administrative | $ | 159,103 | $ | 213,862 | $ | (54,759) | (26 | %) | |||||||||||||||
The decreasein general and administrative expenses of $54.8 millionor 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 | ||||||||||||||||||||||
| (in thousands) |
December 31, 2025 |
December 31, 2024 |
$ | % | |||||||||||||||||||
| Goodwill and intangible assets impairment | $ | 28,000 | $ | 1,420,936 | $ | (1,392,936) | (98 | %) | |||||||||||||||
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 | ||||||||||||||||||||||
| (in thousands) |
December 31, 2025 |
December 31, 2024 |
$ | % | |||||||||||||||||||
| Interest income | $ | 28,652 | $ | 26,733 | $ | 1,919 | 7 | % | |||||||||||||||
The increasein interest income of $1.9 millionor 7% was primarily driven by an increase in interest earned on our money market funds and short-term marketable securities primarily due to an increase in the average balance on hand.
Other Expense, net
| Year Ended | Change | ||||||||||||||||||||||
| (in thousands) |
December 31, 2025 |
December 31, 2024 |
$ | % | |||||||||||||||||||
| Other income (expense), net | $ | (993) | $ | 64 | $ | (1,057) | (1652 | %) | |||||||||||||||
The decrease in other income (expense), net of $1.1 millionwasprimarily a result of the fluctuation of foreign currency exchange rates.
Benefit from Income Taxes
| Year Ended | Change | ||||||||||||||||||||||
| (in thousands) |
December 31, 2025 |
December 31, 2024 |
$ | % | |||||||||||||||||||
| Benefit from income taxes | $ | 126,153 | $ | 135,356 | $ | (9,203) | (7 | %) | |||||||||||||||
The decrease in benefit from income taxes of $9.2 million or 7% was primarily due toan 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 | |||||||||||||||||
| (in thousands) |
December 31, 2025 |
December 31, 2024 |
December 31, 2023 |
||||||||||||||
|
Gross loss (1)
|
$ | (62,573) | $ | (78,022) | $ | (95,611) | |||||||||||
| Amortization of intangible assets | 133,889 | 133,889 | 133,889 | ||||||||||||||
| Stock-based compensation | 2,262 | 1,954 | 1,970 | ||||||||||||||
| Adjusted Gross Profit | $ | 73,578 | $ | 57,821 | $ | 40,248 | |||||||||||
(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 | |||||||||||||||||
| (in thousands) |
December 31, 2025 |
December 31, 2024 |
December 31, 2023 |
||||||||||||||
| Net loss | $ | (408,351) | $ | (2,027,005) | $ | (1,465,685) | |||||||||||
| Adjusted to exclude the following: | |||||||||||||||||
|
Amortization of intangible assets (1)
|
138,334 | 138,333 | 138,333 | ||||||||||||||
|
Stock-based compensation (2)
|
58,283 | 86,084 | 97,235 | ||||||||||||||
| Depreciation | 18,010 | 19,723 | 20,364 | ||||||||||||||
|
Goodwill and intangible assets impairment (3)
|
28,000 | 1,420,936 | 718,466 | ||||||||||||||
|
Restructuring (4)
|
(34) | 18,313 | - | ||||||||||||||
| Interest income | (28,652) | (26,733) | (7,954) | ||||||||||||||
| Benefit from income tax expense | (126,153) | (135,356) | (41,951) | ||||||||||||||
|
Illumina/GRAIL merger & divestiture legal and professional services costs (5)
|
- | 22,158 | 17,320 | ||||||||||||||
| Adjusted EBITDA | $ | (320,563) | $ | (483,547) | $ | (523,872) | |||||||||||
(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 1,570,308shares 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 billionwhich 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 | ||||||||||||||||||||||
| (in thousands) |
December 31, 2025 |
December 31, 2024 |
$ | % | |||||||||||||||||||
| Net cash used by operating activities | $ | (299,007) | $ | (577,156) | $ | 278,149 | (48) | % | |||||||||||||||
| Net cash used by investing activities | (85,049) | (551,011) | 465,962 | (85) | % | ||||||||||||||||||
| Net cash provided by financing activities | 423,321 | 1,244,300 | (820,979) | (66) | % | ||||||||||||||||||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (147) | (62) | (85) | 137 | % | ||||||||||||||||||
|
Net increase in cash, cash equivalents, and restricted cash
|
$ | 39,118 | $ | 116,071 | $ | (76,953) | (66) | % | |||||||||||||||
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 millionand 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 millionin 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 millionis 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 Policies in Item 8. Financial Statements of this Annual Report on Form 10-K fordetails of recent accounting pronouncements.
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