10-Q: Personalis Q3 Revenue Drops 44% Amid Natera Exit, Clinical Growth

Personalis, Inc. reported a significant 44% year-over-year revenue decline in Q3 2025, primarily driven by reduced Natera volumes and population sequencing, despite strong growth in clinical diagnostic tests and strategic partnership expansions.

Summary

• Net loss for the three months ended September 30, 2025, was $(21.652) million, compared to $(39.089) million for the same period in 2024.
• Net loss for the nine months ended September 30, 2025, was $(57.458) million, compared to $(64.859) million for the same period in 2024.
• Total revenue for Q3 2025 was $14.495 million, a 44% decrease from $25.709 million in Q3 2024.
• Total revenue for the nine months ended September 30, 2025, was $52.303 million, a 23% decrease from $67.814 million in 2024.
• Clinical diagnostic revenue increased by 42% in Q3 2025 and 99% for the nine months ended September 30, 2025.
• The company delivered 4,388 clinical tests in Q3 2025, representing a 26% sequential increase and 364% year-over-year growth.
• A third dossier for Medicare coverage for lung cancer was submitted, with the company confident its evidence will meet coverage standards.
• Positive new data from AstraZeneca's Phase 3 NeoADAURA and LAURA trials for lung cancer were presented, indicating NeXT Personal's effectiveness in predicting patient outcomes and detecting MRD.
• The CATE clinical trial was launched in collaboration with Yale Cancer Center to demonstrate the utility of NeXT Personal in guiding treatment decisions for HR+/HER2breast cancer.
• Cash and cash equivalents, and short-term investments totaled $150.515 million as of September 30, 2025, down from $185.009 million as of December 31, 2024.
• Net cash used in operating activities increased to $(52.700) million for the nine months ended September 30, 2025, from $(37.354) million in 2024.
• The company does not expect a long-term commercial relationship with Natera beyond 2025.
• A new annual task order from the VA Million Veteran Program (MVP) for up to $13.5 million became effective on September 30, 2025.
• The Tempus agreement was expanded to include colorectal cancer and its term was extended through November 25, 2029.
• An amendment to the Tempus standstill agreement allows Tempus to acquire shares in open market purchases, provided beneficial ownership does not exceed 19.99%.

Sentiment

Score: 4

Explanation: While there is strong growth in clinical diagnostics and strategic partnerships, the significant overall revenue decline, increased cash burn from operations, and the impending loss of a major customer (Natera) create substantial headwinds. The company continues to operate at a loss and expects to do so for the foreseeable future, indicating ongoing financial challenges despite some positive developments.

Positives

• Clinical diagnostic revenue showed strong growth, increasing 42% in Q3 2025 and 99% for the nine months ended September 30, 2025.
• Clinical test volume significantly increased, with 4,388 tests delivered in Q3 2025, marking a 26% sequential rise and 364% year-over-year growth.
• Submitted a third dossier for Medicare coverage for lung cancer, indicating progress in reimbursement efforts.
• Presented positive new data from AstraZeneca's Phase 3 NeoADAURA and LAURA trials, highlighting NeXT Personal's efficacy as a predictor of patient outcomes and a sensitive MRD measure in lung cancer.
• Launched the CATE clinical trial with Yale Cancer Center to demonstrate NeXT Personal's utility in breast cancer treatment decisions.
• Expanded the collaboration with Tempus to include colorectal cancer as a covered indication and extended the agreement term through November 25, 2029.
• Received a new annual task order from the VA Million Veteran Program (MVP) for up to $13.5 million, effective September 30, 2025.
• Net loss decreased to $(21.652) million in Q3 2025 from $(39.089) million in Q3 2024, primarily due to the absence of a noncash loss related to Tempus Warrants remeasurement.
• Interest income increased by 21% in Q3 2025 and 44% for the nine months ended September 30, 2025, driven by higher average investment balances.

Negatives

• Total revenue decreased by $11.2 million (44%) in Q3 2025 compared to Q3 2024, and by $15.511 million (23%) for the nine months ended September 30, 2025, compared to the same period in 2024.
• Revenue from Natera is expected to decline by $4.6 million in Q3 2025, and the company does not anticipate a long-term commercial relationship with Natera beyond 2025.
• Population sequencing revenue decreased significantly by $4.2 million (95%) in Q3 2025.
• Pharma tests and services revenue decreased by $2.5 million in Q3 2025, mainly due to fewer clinical trial samples processed for Moderna and lower selling prices.
• Net cash used in operating activities increased to $(52.700) million for the nine months ended September 30, 2025, from $(37.354) million in 2024, driven by working capital needs and lower revenue with reduced gross margin.
• Cash and cash equivalents, and short-term investments decreased to $150.515 million as of September 30, 2025, from $185.009 million as of December 31, 2024.
• Working capital decreased to $138.246 million as of September 30, 2025, from $171.889 million as of December 31, 2024.
• Cost of revenue decreased at a slower rate than the corresponding revenue decrease in Q3 2025, primarily due to lower fixed overhead absorption and increased clinical diagnostic test costs where reimbursement rates were less than production costs.
• The company reversed previously recognized stock-based compensation expense for performance-based RSUs as the achievement of the operational target was no longer considered probable.
• The company has a history of losses and expects to incur significant losses for the foreseeable future, with an accumulated deficit of $607.4 million as of September 30, 2025.

Risks

• The company has a history of losses and expects to incur significant losses for the foreseeable future, potentially unable to achieve or sustain profitability.
• Inability to increase sales of current services, successfully develop and commercialize other services/products, or gain sufficient market acceptance/reimbursement could prevent profitability.
• Substantial customer concentration, with a limited number of customers (Moderna, VA MVP, Natera) accounting for a significant portion of revenue and accounts receivable, poses a risk if these relationships change.
• The company does not expect a long-term commercial relationship with Natera beyond 2025, which will significantly impact revenue concentration.
• Building the clinical laboratory business is subject to reimbursement challenges, and the company may not establish medical necessity or adequate reimbursement rates for its tests.
• The partner-centric strategy with key relationships (Tempus, Myriad, Moderna, Merck) may not be successful or agreements may terminate, adversely impacting business.
• Reliance on a limited number of suppliers, or in some cases, a sole supplier (e.g., Illumina for sequencers), for laboratory instruments and materials creates supply chain risks.
• International trade policies, including tariffs, sanctions, and trade barriers, may adversely affect the business, financial condition, results of operations, and prospects.
• The company operates from a single facility; if it becomes damaged or inoperable, or if the company is required to vacate it, the ability to sell and provide services and pursue R&D efforts may be jeopardized.
• Inability to develop services and products to keep pace with rapid advances in technology, medicine, and science, or delays in such developments, could harm operating results and competitive position.
• Personalized cancer therapies represent new therapeutic approaches that could result in heightened regulatory scrutiny, delays in clinical development, or delays/inability to achieve regulatory approval, commercialization, or payor coverage.
• The loss of key members of the executive management team or the inability to hire, retain, or motivate highly skilled personnel could adversely affect the business.
• Inability to manage future growth effectively could make it difficult to execute the business strategy.
• Potential acquisitions of businesses or assets, formation of joint ventures, or investments in other companies/technologies could harm operating results, dilute stockholders' ownership, or cause debt/significant expense.
• Tests may be subject to regulatory action if they do not appropriately comply with statutory and regulatory requirements enforced by the FDA, or equivalent foreign regulatory authorities and/or CLIA requirements.
• Complying with numerous statutes and regulations pertaining to the business is an expensive and time-consuming process, and any failure to comply could result in substantial penalties.
• Information technology systems, or those of third-party vendors, contractors, or consultants, may fail or suffer security breaches, loss or leakage of data, and other disruptions.
• Failure or perceived failure to comply with existing or future laws, regulations, contracts, self-regulatory schemes, standards, and other obligations related to data privacy and security could harm the business.
• Employees may engage in misconduct or other improper activities, such as noncompliance with regulatory standards and requirements, which could cause significant liability and harm reputation.
• Changes in health care policy (e.g., ACA, IRA 2022, OBBBA, PAMA) could increase costs, decrease revenue, and impact sales of and reimbursement for tests.
• Competitors could take legal action against the company for statements made, requiring significant time and money, and potentially limiting marketing ability.
• Litigation or other proceedings or claims of intellectual property infringement, misappropriation, breach of license terms, or other violations may require significant time and money and could prevent the sale of tests.
• Inability to license rights to use necessary technologies on reasonable terms may prevent commercialization of new services and products.
• If the company is not able to obtain, maintain, and enforce patent protection for its products, services, or technologies, competitors could develop and commercialize similar or identical offerings.
• Inability to protect the confidentiality of trade secrets and know-how would harm the business.
• Use of open source software could subject proprietary software to general release, adversely affect the ability to sell products and services, and lead to litigation.
• If trademarks and trade names are not adequately protected, the company may not be able to build name recognition in its markets of interest.
• Inability to raise additional capital on acceptable terms in the future may limit the ability to continue to operate and expand operations.
• The market price of common stock may be volatile or decline steeply/suddenly regardless of operating performance, potentially leading to loss of investment.
• Quarterly results may fluctuate significantly, which could adversely impact the common stock's value.
• Insiders or holders of greater than five percent of outstanding common stock may exercise significant control over the company and influence corporate matters.
• Future sales of shares by existing stockholders, or the perception of such sales, could cause the stock price to decline.
• The company does not currently intend to pay dividends on common stock, so return on investment depends on stock appreciation.
• If securities or industry analysts do not publish research or publish inaccurate/unfavorable research, the stock price and trading volume could decline.
• Delaware law and provisions in the amended and restated certificate of incorporation and bylaws could make a merger, tender offer, or proxy contest difficult, depressing the trading price of common stock.
• The amended and restated certificate of incorporation has an exclusive forum provision, which could limit stockholders' ability to obtain a favorable judicial forum for disputes.
• Disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
• Unstable market, economic, and geo-political conditions (e.g., inflation, conflicts, bank failures) may have serious adverse consequences on business, financial condition, and stock price.
• Adverse developments affecting the financial services industry could adversely affect current and projected business operations and financial condition.
• The company maintains cash at financial institutions, often in balances that exceed federally insured limits, posing a risk in case of bank failure.
• Environmental, social, and corporate governance (ESG) matters or reporting of such matters could negatively impact the business.

Future Outlook

The company expects to incur significant losses for the foreseeable future and anticipates higher gross margins over the long-term as growing revenue leads to economies of scale. Research and development, as well as selling, general and administrative expenses, are projected to increase to support the growth of clinical diagnostic offerings. The company does not expect a long-term commercial relationship with Natera beyond 2025. Management believes current cash, cash equivalents, and short-term investments, combined with anticipated cash flow from operations, are sufficient to fund near-term capital and operating needs for at least the next 12 months. Capital expenditures are expected to be approximately $7.0 million in 2025 and between $13.0 million to $14.0 million in each of 2026 and 2027, with increased spending on raw materials and laboratory supplies in 2025 to support planned clinical test volume increases ahead of Medicare reimbursement.

Management Comments

• Delivered 4,388 clinical tests, demonstrating robust 26% sequential increase over the second quarter of 2025 and a 364% year-over-year growth fueled by increasing physician adoption of the NeXT Personal platform for cancer monitoring.
• Submitted a third dossier for Medicare coverage. The Company has three pending indications and remains confident its evidence will meet the standard for coverage.
• Presented positive new data from AstraZeneca's Phase 3 NeoADAURA trial in lung cancer. The findings show NeXT Personal is a strong predictor of patient outcomes and a more sensitive and accurate measure of MRD in the neoadjuvant setting. Data from the LAURA trial was also presented at ESMO that showed NeXT Personal could detect recurrence five months ahead of blinded expert review and NeXT Personal could be utilized for treatment response monitoring in adjuvant lung cancer.
• Launched the CATE clinical trial in collaboration with Yale Cancer Center. The study aims to demonstrate the utility of NeXT Personal in guiding treatment decisions for patients with HR+/HER2breast cancer to prevent metastatic relapse.
• We anticipate that our current cash and cash equivalents and short-term investments, together with cash provided by operating activities, are sufficient to fund our near-term capital and operating needs for at least the next 12 months.

Industry Context

The company operates in the highly competitive and rapidly evolving cancer genomics and precision oncology sector, which is characterized by continuous technological advancements and increasing focus on personalized cancer therapies. The industry faces significant regulatory scrutiny, particularly for new diagnostic tests, and is influenced by evolving healthcare policies and reimbursement challenges. Strategic partnerships, such as those with Tempus and Merck, are crucial for leveraging broader market access and funding. The impending loss of a major customer like Natera highlights the dynamic nature of collaborations and the constant need for diversification and innovation to maintain competitiveness against numerous established and emerging players in the diagnostic and genomic sequencing market.

Comparison to Industry Standards

• The company's laboratory capacity, capable of sequencing and analyzing over 350 trillion bases of DNA per week, is stated to be larger than most cancer genomics companies, indicating a competitive advantage in scale.
• NeXT Personal is presented as a strong predictor of patient outcomes and a more sensitive and accurate measure of MRD in the neoadjuvant setting, suggesting superiority over existing methods.
• Data from the LAURA trial showed NeXT Personal could detect recurrence five months ahead of blinded expert review, demonstrating a significant lead time advantage in treatment response monitoring.
• The company's tests are currently marketed as Laboratory Developed Tests (LDTs) and are not FDA-approved companion diagnostics, which places them at a competitive disadvantage in market segments requiring FDA clearance, unlike tests from competitors such as Abbott Laboratories, Inc. (anaplastic lymphoma kinase FISH test), Roche Molecular Systems, Inc. (BRAF kinase V600 mutation test), and bioMerieux (BRAF kinase V600 mutation test).

Management Changes

Corporate Governance

Legal Proceedings

• As of September 30, 2025, the company was not involved in any material legal proceedings.
• In the past, the company filed complaints against Foresight Diagnostics Inc. for infringement of certain patents related to MRD detection, which were dismissed pursuant to a settlement agreement in June 2024.
• Two of the company's patents were recently challenged and subsequently invalidated during inter partes reviews initiated by Foresight Diagnostics Inc.

Related Party Transactions

• Tempus AI, Inc. and Merck & Co., Inc. are related parties, each owning more than 10% of the company's common stock.
• The company has a Commercialization and Reference Laboratory Agreement with Tempus, under which Tempus markets the NeXT Personal Dx test in the United States, and the company compensates Tempus on a per-test basis for orders and results delivered.
• Tempus agreed to pay a $6.0 million Market Development Fee for development activities, which has been fully received as of September 30, 2025.
• The company compensates Tempus for co-promotion activities through the end of 2026.
• Tempus has access to genomic data and will pay a 10-20% revenue share if it licenses such data to a third party; no revenue share was recognized in Q3 or 9M 2025.
• In August 2024, Tempus exercised warrants to purchase 9,218,800 shares of common stock for $18.4 million in cash.
• In August 2024, the company sold 3,500,000 shares of common stock to Tempus for $17.7 million under an investment agreement.
• In July 2025, the Tempus Agreement was amended to include colorectal cancer as a covered indication and extend the term through November 25, 2029.
• In September 2025, the Tempus standstill agreement was amended to allow Tempus to acquire shares in open market purchases up to 19.99% beneficial ownership.
• Related party revenue from Tempus was $1.1 million for Q3 2025 and $3.5 million for 9M 2025.
• Related party sales and marketing expenses to Tempus were $1.2 million for Q3 2025 and $2.7 million for 9M 2025.
• Unamortized Market Development Fees from Tempus were $3.5 million (current) and $1.05 million (long-term) as of September 30, 2025.
• Accrued payable to Tempus was $1.114 million as of September 30, 2025.
• In December 2024, the company entered into an investment agreement with Merck, selling 14,044,943 shares of common stock for $50.0 million.
• The company has a Master Service Agreement with Merck (since June 2017, amended February 2024) for DNA/RNA sequencing analysis and clinical laboratory services.
• Invoiced $1.0 million from Merck in Q3 2025 and $3.3 million in 9M 2025.
• A receivable of $2.5 million from Merck was outstanding as of September 30, 2025.

Stakeholder Impact

• Shareholders face potential dilution from future equity offerings, stock price volatility, and the influence of large shareholders (Tempus, Merck).
• Employees are affected by the company's ability to attract and retain skilled personnel, and by past/future restructuring activities (reductions in workforce).
• Customers are impacted by the company's ability to increase sales, develop new products, meet quality and turnaround times, and secure reimbursement, with the loss of Natera as a major customer being a significant factor.
• Suppliers face risks related to the company's reliance on a limited number of providers, potentially leading to supply chain disruptions or price increases.
• Creditors are impacted by the company's ability to generate sufficient revenue and manage liquidity to meet its loan and other financial obligations.
• Regulatory bodies continue to scrutinize the company's compliance with various healthcare and data privacy regulations, potentially leading to enforcement actions.

Next Steps

• Continue to invest in product development and sales and marketing efforts.
• Further increase sales to existing customer groups and expand the customer base.
• Advance operational infrastructure and build regulatory credentials.
• Focus marketing efforts on large pharmaceutical companies.
• Build and publish clinical evidence-base to support products and services in key indications.
• Pursue reimbursement coverage from Medicare and other payors for clinical diagnostic offerings.
• Seek additional partnerships.
• Continuously develop new services and products and enhance existing ones to keep pace with evolving technologies.
• Expand NeXT Personal Dx capacity.
• Reserve $10.0 million of proceeds from the Merck Investment Agreement to open an ISO-certified laboratory in a mutually agreed region outside of the United States.
• Aaron Tachibana, CFO and COO, has adopted a Rule 10b5-1 trading plan to sell 269,901 shares of common stock by August 22, 2026.
• The MHRA in the U.K. will consult later in 2025 on indefinite recognition of CE-marked medical devices and new international reliance routes.

Key Dates

Recommendation

The company faces significant headwinds with a substantial 44% year-over-year revenue decline in Q3 2025, increased cash burn from operations, and the impending loss of a major customer (Natera) beyond 2025. While there are positive developments in clinical diagnostic growth (364% YoY clinical test volume increase), strategic partnerships with Tempus and Merck, and a new VA MVP order, these are currently insufficient to offset the overall financial challenges and expected continued losses. The stock is likely to remain volatile due to these mixed signals and the need for more clarity on the company's path to profitability and successful diversification of its revenue streams. The potential for future capital raises also suggests ongoing financial needs. A 'Hold' recommendation reflects the balanced view of both opportunities and substantial risks.

Keywords

Cancer genomics, Precision oncology, Personalized cancer therapies, Liquid biopsy, NeXT Personal Dx, Clinical diagnostics, Molecular residual disease (MRD), Whole genome sequencing (WGS), Pharmaceutical partnerships, Tempus AI, VA Million Veteran Program, Natera, Merck, Illumina, Biotechnology, Healthcare, SEC filing, 10-Q, Financial results, Stock market, Intellectual property, Regulatory compliance, Healthcare policy