Annual Report (10-k)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________

FORM 10-K

____________________

(Mark One)


x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014


o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-29101

____________________

SEQUENOM, INC.

(Exact name of registrant as specified in its charter)

____________________



DELAWARE	77-0365889
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)



3595 John Hopkins Court San Diego, California	92121
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (858) 202-9000

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

Common Stock, $0.001 par value

(Title of class)

The NASDAQ Stock Market, LLC

(Name of Each Exchange on Which Registered)

Securities registered pursuant to Section 12(g) of the Act: None

____________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	o	Accelerated filer	x

Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company filer	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing sale price of the Common Stock on June 30, 2014 as reported on The NASDAQ Global Select Market, was approximately $446.6 million. Shares of Common Stock held by each executive officer and director and by each person who owns 10% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of March 3, 2015, there were 117,970,000 shares of the registrant's Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates by reference information from the registrant's definitive proxy statement to be filed with the Securities and Exchange Commission (the Commission) in connection with the solicitation of proxies for the registrant's annual meeting of stockholders to be held on June 17, 2015. Such definitive proxy statement will be filed with the Commission no later than 120 days after December 31, 2014.

Table of Contents

SEQUENOM, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2014

INDEX



		Page No.
PART I
ITEM 1.	BUSINESS	4
ITEM 1A.	RISK FACTORS	16
ITEM 1B.	UNRESOLVED STAFF COMMENTS	36
ITEM 2.	PROPERTIES	36
ITEM 3.	LEGAL PROCEEDINGS	36
ITEM 4.	MINE SAFETY DISCLOSURES	38
PART II
ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	39
ITEM 6.	SELECTED FINANCIAL DATA	40
ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	42
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	51
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	51
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	51
ITEM 9A.	CONTROLS AND PROCEDURES	52
ITEM 9B.	OTHER INFORMATION	54
PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	55
ITEM 11.	EXECUTIVE COMPENSATION	55
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGMENT AND RELATED STOCKHOLDER MATTERS	55
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	55
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	55
PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	56

PART I


Item 1.	Business

All statements in this report that are not historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act. These forward-looking statements can generally be identified as such because the context of the statement will include words such as “may,” “will,” “intend,” “plans,” “believes,” “anticipates,” “expects,” “estimates,” “predicts,” “potential,” “continue,” “opportunity,” “goals,” or “should,” the negative of these words or words of similar import. Similarly, statements that describe our future plans, strategies, intentions, expectations, objectives, goals, or prospects are also forward-looking statements. These forward-looking statements are or will be, as applicable, based largely on our expectations and projections about future events and future trends affecting our business, and so are or will be, as applicable, subject to risks and uncertainties including but not limited to the risk factors discussed in this report, that could cause actual results to differ materially from those anticipated in the forward-looking statements. We caution investors that there can be no assurance that actual results or business conditions will not differ materially from those projected or suggested in such forward-looking statements. Our views and the events, conditions and circumstances on which these future forward-looking statements are based, may change. All forward-looking statements are qualified in their entirety by this cautionary statement and we undertake no obligation to revise or update any such statements to reflect events or circumstances after the date hereof.

SEQUENOM®, Sequenom Center for Molecular Medicine®, MaterniT21®, MaterniT21® PLUS and SensiGene® are registered trademarks and RetnaGene™, VisibiliT™, Heredi-T™ and Nextview™ are trademarks of Sequenom, Inc. This report may also refer to trade names and trademarks of other organizations.

Sequenom, Inc. was incorporated in 1994 under the laws of the State of Delaware. As used in this report, the words “we,” “us,” “our,” the “Company,” and “Sequenom” refer to Sequenom, Inc. and its wholly-owned subsidiaries on a consolidated basis, unless explicitly noted otherwise.

Overview

We are a life sciences company committed to enabling healthier lives through the development of innovative products and services. We serve patients and physicians by providing early patient management information. We offer our services in the U.S. and globally through licensing and commercial partnerships with international emphasis in countries in the European and Asia-Pacific regions.

We conduct our business primarily as a CAP (College of American Pathologists) accredited and CLIA (Clinical Laboratory Improvements Amendment of 1988, as amended) certified molecular diagnostics clinical laboratory located in San Diego, California, Raleigh-Durham, North Carolina and Grand Rapids, Michigan. Patient clinical samples are received by one of our laboratory locations where molecular diagnostic tests are performed and reports are relayed to prescribing physicians. Our testing focus is principally in prenatal health that includes molecular based laboratory developed tests, referred to as LDTs or tests, branded under the names MaterniT21 PLUS, HerediT, Nextview, SensiGene, and VisibiliT.

Strategic Direction

Our mission is to enable healthier lives as the premier provider of innovative genetic information with an exceptional customer experience. Our strategy is focused on expanding our menu of molecular diagnostic testing services for women’s healthcare, with an emphasis on noninvasive prenatal testing, or NIPT, for specific fetal chromosomal abnormalities, and utilizing our expertise in next generation sequencing and circulating cell-free DNA to develop LDT's for use in oncology.

Sequenom was the first to clinically validate NIPT in the U.S. and MaterniT21 PLUS was the first NIPT offered to physicians in the U.S. clinical market. We continue to be a leader in the NIPT market with the expansion of the MaterniT21 PLUS test to include 17 medically relevant conditions, including nine types of whole chromosome fetal aneuploidies and seven fetal microdeletions.

In parallel, we continue to expand and defend our broad NIPT patent portfolio. In October 2014, we purchased from Isis Innovation Ltd., or Isis, the technology transfer company of the University of Oxford, its intellectual property portfolio of globally issued patents for NIPT in the United States, Europe, Japan, Hong Kong, Canada and Australia. In December 2014, we entered into a settlement and patent pool agreement with Illumina, Inc., or Illumina. Pursuant to the patent pool agreement, a patent pool was established which is global in nature and combines the NIPT patents controlled by Illumina and us, including over 425 patents and patent applications. As part of the settlement, we now share in test fees paid by licensees from around the world to the patent pool. At the date of the agreement, there were 21 licensees to the patent pool, including Illumina’s affiliate, Verinata Health, Inc. or Verinata, and Sequenom Laboratories. We expect that the number of licensees using the patent pool will grow as the demand for NIPT increases. Additional information on the settlement agreement and the patent pool agreement can be found later in this Item 1 of this Annual Report under the heading “The Illumina Agreements.”

We sold the Sequenom Bioscience business unit in May 2014 to enable us to focus on improving our core laboratory operations, entering new clinical areas, and strengthening our cash position. The Bioscience business unit developed, manufactured, marketed, sold and serviced mass spectrometry analytical instruments and related instruments, software, reagents and consumables for use in the field of mass spectrometry.

We expanded the features of the MaterniT21 PLUS test to include additional content and we developed a lower cost NIPT risk score test, which can be used in the average risk pregnancy population. We focused on improving our overall profitability in 2014 by lowering our cash used in operations by $60.0 million from 2013 to net cash provided by operating activities of $28.1 million in 2014. We ended the year with $94 million in cash, cash equivalents and marketable securities.

In 2015, we plan to further develop and introduce new testing services to the prenatal health market. In addition we will look to develop an oncology testing service leveraging our research and technology expertise. Overall our plans for 2015 are to continue to research, develop and commercialize tests for prenatally-relevant genetic disorders and diseases, women's health-related disorders and diseases, and oncology.

We identify key goals each year to help provide insight to management’s plans. These management goals are not guidance but are based on our internal projects and programs as we enter the year. Our top three goals for 2015 are to:


•	achieve cash flow from operations which is no less than negative $15 million, up to positive $15 million;


•	introduce three new laboratory developed tests; and


•	develop an oncology research-use-only laboratory-developed test utilizing next generation sequencing of circulating cell-free DNA in blood (also known as liquid biopsy) for clinical studies.

We look to accomplish these goals by:


•	expanding adoption of, demand for, and reimbursement for our LDTs in domestic and international markets;


•	expanding our LDT offerings through in-house development, technology in-licensing, out-licensing, and/or partnering and acquisitions;


•	obtaining our share of test fees under the patent pool agreement entered into with Illumina, which provides a mechanism to receive payment for noninvasive prenatal testing performed under technology licensed from the patent pool;


•	utilizing the capacity of our CAP-accredited and CLIA-certified laboratories to fulfill expected increases in demand for Sequenom Laboratories’ LDT offerings; and


•	leveraging our scientific knowledge and expertise in sequencing circulating DNA in blood to develop tests serving the oncology market.

The above goals for 2015 and our intentions for accomplishing them, are, or contain, forward looking statements and our ability to achieve these goals and execute our intentions and plans are subject to risks and uncertainties including but not limited to those set forth under Item 1A in this Annual Report.

Operations

In 2014, we conducted our business through two operating segments, Sequenom Laboratories, our molecular based LDT business and Sequenom Bioscience. On May 30, 2014 we completed the sale of our Bioscience business to BioSciences Acquisition Company (“BioSciences”) which purchased substantially all of the assets used in what the Company previously reported as its Bioscience business segment. With this divestiture, we now operate in a single business segment, which generates diagnostic services revenue.



	Years ended December 31,
	2014		2013		2012
Diagnostic services revenue	$	151,569	$	119,556	$	46,457

The revenue growth is due to the rapid market adoption of the MaterniT21 PLUS test. Revenue is generated primarily from customers located within the United States. The international percentage of revenue increased to 15% in 2014 from 10% and 5% in 2013 and 2012, respectively.

We recognize revenue on a cash basis, until we can reliably estimate the amount that would be ultimately collected for each of our LDTs. Revenue from client-billed arrangements where the price is fixed and determinable is recorded on an accrual basis. In the second quarter of 2014, we began to recognize revenue on an accrual basis for certain third-party payors where we have sufficient history of collection to demonstrate our ability to estimate the amount of revenue. During 2014, 30.1% of revenue was recorded on an accrual basis compared to 9.1% in 2013 and 4.5% in 2012.

Diagnostic Services

Diagnostic services are provided through our wholly-owned subsidiary, Sequenom Laboratories. Sequenom Laboratories develops and validates its tests for use in, and solely by, Sequenom Laboratories, as a testing service to physicians.

Sequenom Laboratories is primarily focused on expanding the commercial use of, and reimbursement for its prenatal LDTs, namely the MaterniT21 PLUS test, the HerediT CF test, the SensiGene RhD test, and the VisibiliT test, and developing and offering a comprehensive menu of tests to address a broader prenatal continuum of care. The MaterniT21 PLUS and SensiGene RhD tests use our foundational, noninvasive, circulating cell-free fetal, or ccff, nucleic acid-based assay technology. This technology uses a maternal blood sample in order to provide reliable information about the presence or absence of fetal genetic material in early pregnancy. The following is a summary of Sequenom Laboratories’ test offerings in the prenatal market:

MaterniT21 PLUS LDT: Sequenom Laboratories developed, validated and exclusively performs this NIPT to detect fetal chromosomal abnormalities by determining the relative amount of chromosomal material present in circulating cell-free DNA in a maternal blood sample. The test is intended and offered for use in pregnant women at increased risk for fetal chromosomal abnormalities, including abnormalities associated with trisomies 21 (associated with Down syndrome), 18 (associated with Edwards syndrome), and 13 (associated with Pauau syndrome). It also includes the detection of the presence of the Y chromosome, and if observed, chromosomal abnormalities associated with chromosomes 16, 22, sex chromosomes X and Y, and select chromosomal microdeletions including 22q (associated with DiGeorge syndrome), 15q (associated with Angelman/ Prader-Willi syndromes), 11q (associated with Jacobsen syndrome), 8q (associated with Langer-Giedion syndrome), 5p (associated with Cri-d-chat syndrome), 4p (associated with Wolf-Hirschhorn syndrome) and 1p36 deletion syndrome. Patient samples are collected via blood draw and submitted to Sequenom Laboratories for testing and test results are reported back to the ordering clinician. We also expanded our international commercial footprint for this test in Europe and Asia through licensing and commercial collaborations.

HerediT CF LDT: Part of the prenatal menu, Sequenom Laboratories developed, validated and exclusively performs this carrier screen test to help identify individuals who may have an increased risk of having certain cystic fibrosis, or CF, genetic mutations. This test has been expanded to include screening for a broad set of phenotypically relevant genetic mutations selected from the leading Johns Hopkins CFTR2 database. Patient samples are collected via buccal (cheek) swab or blood draw and submitted to Sequenom Laboratories for testing and test results are reported back to the ordering clinician.

SensiGene RhD LDT: part of the prenatal menu, Sequenom Laboratories developed, validated and exclusively performs this NIPT to determine the presence or absence of fetal Rhesus D factor, or RhD by direct detection of the fetal RhD genotype in RhD negative mothers from a maternal blood sample. RhD incompatibility in pregnancy occurs when the mother is negative for the RhD factor and the fetus is positive. Untreated, this protein incompatibility may cause the mother to produce antibodies that destroy and eliminate the fetus’s red blood cells and could potentially lead to RhD disease in the fetus. Patient samples are collected via blood draw and submitted to Sequenom Laboratories for testing and test results are reported back to the ordering clinician.

VisibiliT LDT: a NIPT to detect fetal chromosomal abnormalities by determining the relative amount of chromosomal material present in circulating cell-free DNA in a maternal blood sample. Patient samples are collected via blood draw and submitted to Sequenom Laboratories for testing and test results are reported back to the ordering clinician. This is a risk score test for the detection of increased representation of chromosomes 21 and 18 with a greater accuracy than standard serum screening. The risk score complements current medical and genetic counseling practices for average risk for fetal chromosomal abnormalities. This test was introduced in international markets in the fourth quarter of 2014 and has been launched in the United States market in the first quarter of 2015.

Test Send-out Agreements: To provide a broad spectrum of testing services to physicians, we started leveraging our marketing and commercial organization and entered into laboratory send-out agreements with external laboratories. Through these test send-out agreements, Sequenom Laboratories offers an advanced microarray test, branded under the NextView trade name, which is performed exclusively by CombiMatrix Corporation, a clinical laboratory that developed and validated the test. The test uses fetal samples obtained by amniocentesis or chorionic villus sampling and can be ordered by a physician independently from our MaterniT21 PLUS test or ordered as a confirmatory test in the event of a positive MaterniT21 PLUS test result. Sequenom Laboratories also has test send-out agreements to provide additional carrier screening tests for Ashkenazi Jewish disorders, spinal muscular atrophy and fragile X syndrome, which are offered along with our HerediT CF carrier screening test and are also marketed under the HerediT brand. These additional LDTs were developed, validated, and are performed by either The Mount Sinai Genetic Testing Laboratory (MGTL) or Quest Laboratories.

In the eye care field, Sequenom Laboratories developed, validated and exclusively performs the RetnaGene AMD test to predict the risk of a patient with “dry” or early stage age-related macular degeneration, or AMD, progressing to “wet” or

advanced choroidal neovascular disease within 2, 5, and 10 years. Patient samples are collected by eye care professionals via buccal (cheek) swab and submitted to Sequenom Laboratories for testing and test results are reported back to the ordering clinician. In early 2014, in order to expand test access to healthcare professionals and their patients, Sequenom Laboratories entered into a collaboration agreement with Nicox Inc., or Nicox. Under the agreement, Sequenom Laboratories granted Nicox the exclusive rights to promote the RetnaGene AMD test to eye care practitioners, subject to Sequenom Laboratories’ option to co-exclusively promote and offer the test to specialized retinal disease physician practices in the United States, Canada, Puerto Rico and Mexico. Sequenom Laboratories performs the testing at its Michigan laboratory location, at an agreed price to Nicox. However, tests volumes are not significant for this test because it is generally not covered by insurance. In November, 2014, Valeant Pharmaceuticals International, Inc. acquired Nicox and assumed the rights and obligations of Nicox under the agreement with us.

Molecular Diagnostics Market

The molecular diagnostics testing market in the United States represents one of the fastest growing areas of the $51.7 billion clinical laboratory industry in the United States. Within the clinical laboratory industry, the molecular diagnostics market segment is currently estimated to be $4 billion, growing at a rate of approximately 17% per year.

The total available markets for our currently marketed molecular diagnostics tests are estimated as follows:

•

MaterniT21 PLUS LDT: The MaterniT21 PLUS test is currently indicated for use in pregnant women at increased risk for fetal chromosomal abnormalities. There are approximately 4 million annual births in the United States, based on 2010 data. We estimate the increased risk market segment for NIPT to be more than 750,000 patients per year. This segment is defined by factors including advanced maternal age at time of delivery, personal or family history and/or abnormal results from other clinical tests, such as serum screening or ultrasonography. The American Congress of Obstetrics and Gynecology, or ACOG, and the Society for Maternal-Fetal Medicine, or SMFM, issued a joint Committee Opinion (#545) supporting the use of noninvasive prenatal testing, the technology used in the MaterniT21 PLUS test, for pregnant women at increased risk of carrying a fetus with aneuploidy. We believe this guideline will continue to increase market adoption for NIPT for aneuploidy detection. Following the issuance of this guideline in late 2012, many third-party payors adopted positive coverage policies for reimbursement of NIPT for high-risk pregnancies.


•	HerediT CF LDT: CF carrier screening is the largest volume prenatal carrier screen test performed in the United States. CF testing is recommended by ACOG and the American College of Medical Genetics. A number of laboratories offer a CF test. Approximately 1.1 million CF screening tests are performed annually in the United States, based on 2010 data.


•	SensiGene RhD LDT: Each year in the United States there are approximately 600,000 Rhesus D negative women who are pregnant and could benefit from assessments of the RhD genotype status of their fetuses.


•	VisibiliT LDT: There are annually approximately 4 million births in the United States and over 200 million births worldwide that could potentially utilize this test.

Sequenom Laboratories Commercial Operations

Domestic

Our LDT's are performed at our San Diego, California, Raleigh-Durham, North Carolina and Grand Rapids, Michigan laboratory locations. The MaterniT21 PLUS test utilizes massively parallel sequencing to detect fetal DNA for analysis of the relative amount of chromosomal material. We believe that we currently have sufficient capacity to process all of our tests and the ability to accommodate increased test demand for the foreseeable future. We have invested substantially in our information technology infrastructure to enhance the ability to track samples and provide electronic ordering and reporting and have put in place sample collection and transportation logistics that can be scaled as demand for our molecular diagnostic testing services increases. Similarly, we have automated data analysis, storage and process quality control and security. We use statistical methods to optimize and monitor test performance and to analyze data from our development studies and tests.

We believe that our first to market position, focus on customer service, operational infrastructure and clinical expertise has provided us with a commercial advantage over our competitors, particularly for our MaterniT21 PLUS test. Patient blood specimens for the MaterniT21 PLUS test are collected by a health care professional and sent to our Laboratories where the samples are accessioned in the laboratory and prepared for further analysis and sequencing. Results are reported to the ordering clinician, typically within 5 business days or less from receipt of the sample in our laboratory. The clinical validation study for the test reported a 99.1% sensitivity rate in the detection of trisomy 21, and an approximate 1% non-reportable (“no call”) rate, where the test was unable to determine a result. We believe that this non-reportable rate is the lowest in the industry to date, and combined with the test's high accuracy and our prompt turn-around time represents a significant competitive advantage.

Our commercial infrastructure, including our sales force, managed care group, and physician support network, is critical to our future success. We have built strong domestic sales, marketing and reimbursement teams who interact directly with maternal fetal medicine specialists, obstetricians, genetic counselors and payors. Because prenatal diagnostics is a concentrated specialty, we believe that a focused marketing organization and specialized sales force, with regional and local experience, all supported by the quality of science behind our tests, is necessary in order to effectively serve the physician community.

Our plans are to continue our efforts to increase penetration within the obstetrics market for prenatal tests. Our managed care department works to contract with third-party payors and networks. Our customer service call center and billing support network handle benefits investigation for patients who were prescribed our tests by their health care provider. We provide physician education through our website, material provided to local advocacy groups, local and national media campaigns and educational materials and seminars provided to maternal fetal medicine specialists, genetic counselors and obstetricians.

International

We have established agreements in numerous countries with providers who collect and send us patient samples. We report the results to the ordering health care providers and bill the provider for the contracted amount. We continue to create new collaborations for this test send out service and expect that units from our current partners will grow. In 2014 one test send out provider in Japan converted to a licensee so future revenue will be in the form of test fee income rather that diagnostic services. We also have licensed our NIPT and sequencing technologies and associated intellectual property rights to companies to perform prenatal diagnostic tests in Japan, Germany, France and certain other German and French speaking countries, for which we receive a royalty. We experienced international growth in MaterniT21 PLUS test demand, and royalty income from our licensed partners in 2014. Under the Pooled Patents Agreement with Illumina, we will remit test fees from our existing licensees into the patent pool, and will receive our share of the test fees on a quarterly basis.

Sequenom Laboratories Revenue

Revenue for our LDTs comes from several sources, including commercial third-party payors, such as health insurance companies and health maintenance organizations, government payors, such as Medicare and Medicaid in the United States, patient self-pay and, in some cases, from hospitals or referring laboratories who then bill third-party payors for testing, or client bill arrangements.

Reimbursement for our LDTs from third-party payors is essential to our commercial success. As of December 31, 2014, we have agreements with insurance companies, including certain national payors, and networks covering approximately 162 million commercial lives. We also perform testing services as an out-of-network laboratory with other third-party payors. As a laboratory, we submit claims for services performed to third-party payors and pursue reimbursement on behalf of each patient. Our efforts on behalf of these patients take a substantial amount of time, and bills may not be paid for many months, if at all. Furthermore, if a third-party payor denies coverage after final appeal, collection may be substantially limited or may not occur at all. We offer a patient financial assistance program to assist patients with the cost of testing, depending upon their ability to pay.

We are continuing our efforts to enter into agreements to become an in-network laboratory provider with additional payors. This should ultimately provide more timely and predictable payments and allow us to accrue revenue once we have developed sufficient collection experience to estimate the amount of revenue, which we expect to collect pursuant to the contractual agreements. We expect to continue the cash basis of accounting for most of our diagnostics revenue for the foreseeable future due to payment variations as an out-of-network provider. We began to transition to the accrual basis of accounting on a payor by payor basis in 2014 and may transition additional payors as we develop additional payment experience. However, this process may take an extended period of time.

2013 brought substantial change to the American Medical Association's Current Procedural Terminology, or CPT, coding structure for molecular diagnostics. This was most evident with government payors, specifically Medicaid. In mid-2013 it became apparent that most states still did not have appropriate procedural codes incorporated into their payment system for reimbursement for molecular tests, and we initiated efforts to reduce the volume of Medicaid tests from those states. In 2014, we have made progress and have 15 states providing reimbursement for our tests. Our efforts with other states continue.

We have focused substantial resources on obtaining reimbursement coverage for Sequenom Laboratories' LDTs, particularly the MaterniT21 PLUS test. We increased our efforts to put reimbursement pathways in place with each state, and worked with the American Medical Association to get a specific CPT code for the MaterniT21 PLUS procedure. A specific CPT code for next generation sequencing tests such as MaterniT21 PLUS has been issued and is effective as of January 1, 2015. We believe the key factors driving adoption of and reimbursement for our LDTs include the ongoing commercial efforts, continued publication of peer-reviewed articles on studies we sponsored, conducted or collaborated on that support the use and reimbursement of the tests, clinical presentations at major symposia, and the inclusion of noninvasive prenatal diagnostic testing for fetal aneuploidy in clinical practice guidelines.

The Illumina Agreements

On December 2, 2014, we entered into a Pooled Patents Agreement (the “Pooled Patents Agreement”) with Illumina, pursuant to which the parties pooled their intellectual property directed to NIPT. Under the Pooled Patents Agreement, Illumina has exclusive worldwide rights to utilize the pooled intellectual property to develop and sell in-vitro diagnostic kits, or IVD for NIPT and to license to third-party laboratories wishing to develop and sell their own laboratory-developed NIPT tests under the collection of pooled patents. We maintain a non-exclusive right to sublicense the intellectual property rights we acquired from Isis to third-party laboratories for their own developed NIPT tests. In addition, Illumina and we each have rights to utilize all pooled patents to develop and sell its and our own respective laboratory-developed NIPT tests. Also as part of the Pooled Patents Agreement, Illumina gained access to samples and applicable study protocols from our clinical studies for high and average risk pregnancies, as registered with clinicaltrials.gov. Illumina has made an aggregate $50 million upfront payment to us as part of the overall agreement, including $6 million received by us in January 2015. Illumina will also pay royalties to us for sales of IVD kits for NIPT. Both parties and their sublicensees will pay a per-test fee into the pool for laboratory-developed NIPT tests, which will be shared between Illumina and us. Illumina has minimum yearly payment thresholds to us under the pool through 2020, covering both IVD royalties and our share of the collected test fees. The Pooled Patents Agreement shall remain in effect until the date of expiration of the last to expire pooled patent. Neither party may terminate the Pooled Patents Agreement except by mutual written agreement of the parties.

Concurrently with the execution of the Pooled Patents Agreement, we, Illumina, the Sequenom Center for Molecular Medicine, LLC, and Verinata entered into a Settlement Agreement (the “Settlement Agreement ”), pursuant to which the parties settled certain claims and released the other parties from certain liability. The parties have dismissed the U.S. District Court litigation where Verinata has asserted infringement of U.S. Patent Nos. 7,888,017, 8,008,018 and 8,195,415, or the 415 Patent against us. We will not appeal the decision of the U.S. Patent Trial and Appeal Board, or USPTAB, on the inter partes review of the ‘415 Patent. The U.S. Federal Circuit appeal from the U.S. District Court litigation where we asserted infringement of U.S. Patent No. 6,258,540 or the '540 Patent, against Ariosa Diagnostics, Inc., Natera, Inc. and DNA Diagnostics Center, Inc. will continue. However, the U.S. Federal Circuit appeal from the U.S. District Court litigation where we asserted infringement of the ‘540 Patent against Verinata was remanded to the District Court, the District Court vacated its earlier judgment that the ‘540 Patent was invalid, and all claims involving us, Verinata and the ‘540 Patent were dismissed. Each party to the Settlement Agreement released the other parties and their affiliates, licensors, licensees, developers and certain purchasers from all claims for the exploitation, on or before December 2, 2014 (the effective date of the Settlement Agreement), of NIPT products and services, as well as any other claims based on acts relating to the subject matter of the dismissed disputes or that could have been brought in response thereto. None of the parties made any admission of liability in entering into these arrangements. No party will challenge the pooled patents subject to the Pooled Patents Agreement.

In connection with entering into the Pooled Patents Agreement, we also concurrently entered into an Amended and Restated Sale and Supply Agreement with Illumina (the “Supply Agreement ”), pursuant to which we and our affiliates will purchase various products from Illumina, which we will be able to use for NIPT as well as for other clinical and research uses. The Supply Agreement amends, restates and replaces our prior Sale and Supply Agreement with Illumina dated July 8, 2011, as amended. Subject to certain conditions and limitations, including an annual purchase minimum, under the Supply Agreement we, and our affiliates will receive pricing no less favorable than that offered by Illumina to similar customers in the United States. The Supply Agreement has a term of five years; provided, however, that it may be earlier terminated in certain limited circumstances.

In accordance with the Pooled Patents Agreement, we entered into an agreement (the "CUHK Agreement") with the Chinese University of Hong Kong, or CUHK, pursuant to which certain license agreements between CUHK and us, dated September 16, 2008, and May 3, 2011 (collectively, the “CUHK License Agreements”), were amended and assigned to Illumina for inclusion in the patent pool subject to the Pooled Patents Agreement. Illumina will be responsible for paying all royalties to CUHK for the test fee pool and IVD royalties under the CUHK License Agreements. Illumina has granted us a sublicense under each CUHK License Agreement to exploit laboratory-developed NIPT tests in accordance with the Pooled Patents Agreement. In consideration, we paid CUHK a one-time $6.15 million upfront payment and we will pay additional royalties of varying percentages through 2019. The CUHK Agreement will remain in effect until the expiration of the CUHK License Agreements.

Isis Innovation Asset Purchase

In September 2014 we purchased patents (including U.S. Patent No. 6,258,540 and its foreign equivalents) from Isis resulting in total net asset of $10.6 million. These patents are directed to the detection of paternally inherited fetal nucleic acids in circulating cell-free fetal, or ccff, nucleic acids for diagnostic testing of serum and plasma samples obtained from pregnant women. Pursuant to the agreement with Isis, we may be required to pay additional downstream payments contingent on revenue exceeding certain thresholds. Previously, we had the exclusive rights for Isis global intellectual property for noninvasive prenatal genetic diagnostic testing on paternally inherited fetal nucleic acids derived from maternal plasma or serum. These patents became a part of the patent pool as a result of the Pooled Patents Agreement with Illumina.

Suppliers

We purchase products and materials used in our tests from a number of suppliers. For certain products and materials we rely on a limited number of suppliers or a single supplier. For example Illumina is the sole supplier of sequencers and certain consumables for our MaterniT21 PLUS test and those products, as well as other components and materials used in our products supplied by other suppliers, have lead times of several months. Therefore, for certain critical components, we utilize mitigation strategies such as, maintaining an inventory of safety stock on our own premises in an effort to minimize the impact of an unforeseen disruption in supply from our suppliers. The supply of sequencers and consumables from Illumina is provided under our Supply Agreement with Illumina as described above under the heading “The Illumina Agreements.”

Customer Concentration

We consider the ordering physicians and client laboratories to be our customers, and we have no single customer who accounted for over 10% of our revenue. However, hundreds of third-party payors have reimbursed us for one or more of our tests. At a third-party payor level one single payor represented more than 10% of total revenue, accounting for $17.4 million, or 11% of revenue in 2014 and $25.0 million or 21% of revenue in 2013. Another payor accounted for $12.6 million or 11% of revenue in 2013.

Seasonality

Prenatal testing rates are the lowest in the late summer months based on government monthly birthrate data which shows that the number of tests in the third quarter may vary by 3% to 5% compared to other periods. Our business is also subject to fluctuations in volume throughout the year as a result of physician practices being closed for holidays or vacations by physicians and patients which tends to negatively affect our volumes more during the late summer months and during the end of year holidays compared to other times of the year. Our reimbursed rates and cash collections are also subject to seasonality. Patient deductibles generally reset at the beginning of each year which means that patients early in the year are responsible for a greater portion of the cost of our tests, and we have lower collection rates from individuals than from third-party payors. For those payors on accrual accounting, we lower our estimated revenue in the first quarter to reflect the lower percentage expected from the third party payors. We record the patient portion when the payment is received. The effects of these seasonal fluctuations in prior periods may have been obscured by the growth of our business.

Intellectual Property

We rely on a combination of patent, copyright, trademark and trade secret laws, as well as confidentiality provisions in our contracts to support our proprietary technologies and products.

We have an ongoing program of patent development and acquisition strategy, including in-licensing, designed to facilitate our research and development and commercialization of current and future products and services. Our patent portfolio, including in-licensed patent rights, totals more than 335 issued or allowed patents and more than 425 pending patent applications in the United States and other major industrial nations throughout the world. Our issued patents expire at various times between 2018 and 2034.

Our prenatal diagnostic patent portfolio includes exclusive and non-exclusive rights to numerous owned and in-licensed issued patents and pending patent applications. These patents and patent applications cover methods of detecting and analyzing fetally-derived nucleic acids in maternal serum, plasma, and other samples, DNA sequencing-based methods of detecting fetal aneuploidy, methods of analyzing the methylation status of fetal nucleic acids to differentiate it from maternal nucleic acids, and various DNA and RNA markers which may be useful in detecting and diagnosing various fetal disorders, such as Down syndrome or other maternal disorders, such as preeclampsia.

Our prenatal diagnostic patent portfolio includes U.S. Patent Nos. 6,258,540, 6,927,028, and 6,664,056, and foreign equivalents. As described above, we purchased U.S. Patent No. 6,258,540, entitled “Noninvasive Prenatal Diagnosis” and its foreign equivalents from Isis and expires in 2018. This patent is the subject of legal proceeding as described in Item 3 of this Report. We in-licensed U.S. Patent Nos. 6,927,028 and 6,664,056 and their foreign equivalents and those patents relate to methods of differentiating DNA between individuals based on methylation differences and methods for determining the sex of a human fetus using messenger RNA. The ‘028 and ‘056 Patents and their foreign equivalents expire in 2021 and 2022. Our prenatal diagnostic patent portfolio also includes issued patent EP2183693 B1, entitled “Diagnosing Fetal Chromosomal Aneuploidy Using Genomic Sequencing.” This patent claims novel methods for detecting fetal aneuploidy using massively parallel sequencing and was the first patent filing made in the EPO directed to such novel methods. Pending patent applications covering the use of cell-free fetal nucleic acids from biological samples for prenatal diagnostic testing by massively parallel sequencing, include pending U.S. patent application no. 12/614,350 (publication no. US2010/0112590) entitled “Diagnosing Fetal Chromosomal Aneuploidy Using Genomic Sequencing With Enrichment” and pending U.S. patent application nos. 13/070,266 (publication no. US2012/0003637), 13/070,275 (publication no. US2011/0318734), 13/417,119 (publication no. US2012/0208708), and 12/178,181 (publication no. US2009/0029377), each entitled “Diagnosing Fetal Chromosomal Aneuploidy Using Massively Parallel Genomic Sequencing," and pending foreign equivalents. All patents and patent

applications discussed in this paragraph became a part of the patent pool as a result of the Pooled Patents Agreement with Illumina as described above under the heading “The Illumina Agreements” and some are involved in legal proceedings as described in Item 3 of this Annual Report.

Our success depends to a significant degree upon our ability to continue to develop proprietary products and technologies, to identify and validate useful genetic markers and to thoroughly understand their associations with disease, and to in-license desirable or necessary intellectual property as appropriate. We intend to continue to file patent applications as we develop new products and methods for nucleic acid analysis and as we develop diagnostic and molecular medicine related technology and products. Patents provide some degree of protection for our intellectual property. However, the assertion of patent protection involves complex legal and factual determinations and is therefore uncertain. The laws governing patentability and the scope of patent coverage continue to evolve, particularly in the areas of genetics, molecular biology, and prenatal and molecular diagnostics that are of interest to us. For example, In 2013, the U.S. Supreme Court decided the case Association for Molecular Pathology v. Myriad Genetics, 133 S. Ct. 2107 (2013) (No. 12-398), a case that held that, “A naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated, but cDNA is patent eligible because it is not naturally occurring.” This Supreme Court decision, and other Supreme Court and lower Federal Court decisions interpreting and/or limiting the scope of patentable subject matter under 35 U.S.C. § 101, as well as the new examination guidelines from the U.S. Patent and Trademark Office issued in 2014 (i.e., the 2014 Interim Guidance on Patent Subject Matter Eligibility (Interim Eligibility Guidance) for USPTO personnel to use when determining subject matter eligibility under 35 U.S.C. 101 in view of recent decisions by the U.S. Supreme Court), have made it more difficult for patentees to obtain and/or maintain patent claims in the United States that are directed to biotechnology-related subject matter, as claims to that subject matter are often perceived to recite or involve Laws of Nature/Natural Principles, Natural Phenomena, and/or Natural Products. There can be no assurance that patents will issue from any of our patent applications. The scope of any of our issued patents may not be sufficiently broad to offer meaningful protection.

Competition

We face competition from various companies developing and commercializing diagnostic assays, and from various companies researching and developing prenatal diagnostic technology.

In the molecular diagnostics business, including the noninvasive prenatal diagnostic market, some of our LDTs are based on detection of ccff nucleic acid in maternal plasma. Our competition arises from other parties using the same or similar methods as well as alternative methods of noninvasive prenatal diagnostics such as fetal cell purification from maternal blood and trophoblast purification from cervical swabs, fetal cell approaches, and other sequencing approaches. Principle competitors and potential competitors include Ariosa Diagnostics as part of Roche, Inc., Beijing Genomics Institute, Celula Inc., Laboratory Corporation of America Holdings, Inc., Natera, Perkin Elmer, Inc., Quest Laboratories, Verinata as part of Illumina and others. To the extent our competitors are licensed to utilize the pooled intellectual property in the Pooled Patents Agreement, we would receive royalty revenue.

Research and Development

We believe that investment in research and development is essential to establishing a long-term competitive position as a provider of diagnostic testing services.

During 2014, we conducted most of our research and development activities at our facilities in San Diego, California. Our research and development capabilities are augmented by advisory and collaborative relationships with others.

Our research and development initiatives during 2014 were primarily focused on our continuing development, automation and cost optimization of Sequenom Laboratories' MaterniT21 PLUS test for fetal aneuploidies and other genetic abnormalities, the expansion of our test prenatal test menu with enhanced content beyond fully trisomies as well as the development and introduction of VisibiliT. Our research and development expenses for the years ended December 31, 2014, 2013 and 2012, were $25.0 million, $38.7 million, and $40.2 million, respectively.

Our ongoing research and development activities are distributed between sustaining projects for existing products, cost-improvement projects, projects focused on new products in the prenatal care continuum as well as projects to develop oncology as a new market for the Company.

Government Regulation

Regulation by governmental authorities in the United States and other countries will be a significant factor in the development, testing, production and marketing of IVD tests, including tests that may be developed by us or our corporate partners, collaborators or licensees. An IVD test developed by us or our collaborators may require regulatory approval by governmental agencies prior to commercialization. Tests that we develop in the diagnostic markets, depending on their intended

use, may be regulated as medical devices by the FDA and regulatory agencies or bodies of other countries. In the United States, an IVD test may require either approval through the Premarket Approval process, or PMA, or Premarket 510(k) notification process from the FDA prior to marketing in the United States. The 510(k) notification process usually takes from three to six months from submission to clearance, but can take significantly longer. The PMA approval process is much more costly, lengthy, and uncertain and generally takes from nine to eighteen months from submission to approval, but can take significantly longer. The receipt and timing of regulatory clearances or approvals for the marketing of such IVD tests may have a significant effect on our future revenue. Various federal and state regulations also govern or influence the manufacturing, safety, labeling, storage, registration, listing, record keeping, adverse event reporting, import, export and marketing of IVD tests.

As mentioned above, our strategy focuses on capitalizing on our potential in molecular diagnostics markets with various diagnostic tests. Our approach involves the development and launch of LDTs as a testing service to physicians. We are responsible for the development, performance validation, and commercialization of the testing service. Such LDTs, which are performed exclusively by us using processes developed by us, are under the purview of the Centers for Medicare & Medicaid Services, or CMS, under CLIA and state agencies that provide oversight of all laboratory testing (except research) performed on human specimens in the United States to ensure the accuracy and reliability of laboratory testing. To date, the FDA has exercised its enforcement discretion to not regulate LDTs, as LDTs are developed and used by a single laboratory and not sold to other laboratories or health care professionals. On July 31, 2014 the FDA notified the U.S. Congress of its intent to issue draft guidance on regulation of LDTs based on risk to patients rather than whether they were made by a conventional manufacturer or a single laboratory. This draft guidance includes pre-market review for higher-risk LDTs, like those used to guide treatment decisions, including companion diagnostics that have entered the market as LDTs. The final regulation would be phased in over many years. On September 30, 2014, the FDA posted on its website draft guidance on regulation of LDTs, maintaining a ‘risk-based’ approach outlined in its notice to U.S. Congress on July 31, 2014. The published draft guidance is identical to the congressional notification. On October 3, 2014, the FDA published notices in the Federal Register formally announcing the release of the draft guidance and the beginning of a 120-day public comment period, with final guidance potentially issued in the March-April 2015 timeframe.

Hazardous Materials

Our research and development activities involve the controlled use of hazardous materials and chemicals; however, the concentration and volumes of these chemicals are limited. We are subject to federal, state and local laws and regulations governing the use, storage, handling and disposal of such materials and chemicals, as well as certain waste products.

Clinical Laboratory Improvement Amendments of 1988 and State Regulation

We and any other CLIA-certified laboratories that we may collaborate with are subject to CLIA regulations, which regulate all clinical laboratories that perform testing (except research) on human specimens by requiring that they be certified by the federal government and comply with various operational, personnel, facilities administration, quality and proficiency requirements intended to ensure that their clinical laboratory testing services are accurate, reliable and timely. Standards for testing under CLIA are based on the level of complexity of the tests performed by the laboratory. Laboratories performing high complexity testing are required to meet more stringent requirements than laboratories performing less complex tests. We hold a CLIA certification to perform high complexity testing. CLIA compliance and certification is a prerequisite to be eligible to bill for services provided to governmental health care program beneficiaries. Sanctions for failure to comply with CLIA requirements include suspension, revocation or limitation of a laboratory's CLIA certificate, which is necessary to conduct business, cancellation or suspension of the laboratory's ability to receive Medicare and/or Medicaid reimbursement, as well as significant fines and/or criminal penalties. The loss or suspension of a CLIA certification, imposition of a fine or other penalties, or future changes in the CLIA law or regulations (or interpretation of the law or regulations) could have a material adverse effect on our business.

CLIA-certified laboratories must undergo on-site surveys at least every two years, which may be conducted by the federal CLIA program or by a private CMS approved accrediting agency, such as CAP, among others, and may be subject to additional random inspection. We are also subject to regulation of laboratory operations under state clinical laboratory laws. State clinical laboratory laws may require that laboratories and/or laboratory personnel meet certain qualifications, specify certain quality controls and/or require maintenance of certain records. Certain states, such as California, Florida, Maryland, New York, Pennsylvania, and Rhode Island, each require that we obtain and maintain licenses to test specimens from patients residing in those states and additional states may require similar licenses in the future. CLIA does not preempt state laws that have established laboratory quality standards that are at least as stringent as federal law, which currently includes Washington and New York State. Sequenom Laboratories is a permitted laboratory in New York State for several of its LDTs. Potential sanctions for violation of state statutes and regulations include significant fines and the suspension or loss of various licenses, certificates and authorizations.

Coverage and Reimbursement of Clinical Laboratory Services

Coverage and reimbursement of our tests by government and private payors is essential to our commercial success. Clinical laboratory testing services, when covered by government payors, such as Medicare and Medicaid in the United States, are paid under various methodologies, including prospective payment systems and fee schedules. Under Medicare in the United States, payment is generally made under the Clinical Laboratory Fee Schedule ("CLFS") with amounts assigned to specific procedure billing codes. In recent years, federal legislation has mandated cuts to the clinical laboratory fee schedule, and levels of reimbursement may continue to decrease in the future, which may harm the demand for and reimbursement available for our tests, which in turn, could harm pricing and sales. In addition, CMS implemented a new set of CPT codes applicable to molecular diagnostics tests in 2013 without a fee schedule, and these coding changes negatively affected our test pricing and reimbursement. Further, CMS implemented a new CPT code specific for MaterniT21 PLUS procedure, which became effective January 2015. The fee schedule, once determined, may negatively affect our test pricing and reimbursement. The payment amounts under the Medicare CLFS are important not only for our reimbursement under Medicare, but also because the schedule often establishes the payment amounts set by other third party payors. For example, state Medicaid programs are prohibited from paying more than the Medicare fee schedule limit for clinical laboratory services furnished to Medicaid recipients. As a result, in light of reductions in the CLFS, certain third party payors may also reduce reimbursement amounts.

The U.S. government and other governments have shown significant interest in pursuing health care reform and reducing health care costs. Any government-adopted reform measures could cause significant pressure on the pricing of health care products and services, including our MaterniT21 PLUS test and our other LDTs, in the United States and internationally, as well as the amount of reimbursement available from governmental agencies or other third-party payors.

Privacy and Security of Health Information

The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and final omnibus rules, were issued by HHS to protect the privacy and security of protected health information used or disclosed by health care providers, such as us. HIPAA also regulates standardization of data content, codes and formats used in health care transactions and standardization of identifiers for health plans and providers. Penalties for violations of HIPAA regulations include civil and criminal penalties. In addition to federal privacy regulations, there are a number of state and international laws governing confidentiality of health information that are applicable to our operations.

We developed policies and procedures to comply with these regulations by the respective compliance enforcement dates and continually review and update these policies and procedures. The requirements under these regulations may change periodically and could have an effect on our business operations if compliance becomes substantially more costly than under current requirements.

Health Care Fraud and Abuse

The federal Anti-Kickback Statute makes it a felony for a provider or supplier, including a laboratory, to knowingly and willfully offer, pay, solicit or receive remuneration, directly or indirectly, in order to induce business that is reimbursable under any federal health care program. A violation of the federal Anti-Kickback Statute may result in imprisonment for up to five years and/or criminal fines of up to $25,000, civil assessments and fines up to $50,000, and exclusion from participation in Medicare, Medicaid and other federal health care programs.

Actions which violate the federal Anti-Kickback Statute or similar laws may also involve liability under the Federal False Claims Act, which prohibits knowingly presenting or causing to be presented a false, fictitious or fraudulent claim for payment to the U.S. Government. Although the federal Anti-Kickback Statute applies only to federal health care programs, a number of states have passed statutes substantially similar to the federal Anti-Kickback Statute pursuant to which similar types of prohibitions are made applicable to all other health plans and third-party payors.

Federal and state law enforcement authorities scrutinize arrangements between health care providers and potential referral sources to ensure that the arrangements are not designed as a mechanism to induce patient care referrals and opportunities. The law enforcement authorities, the courts and Congress have also demonstrated a willingness to look behind the formalities of a transaction to determine the underlying purpose of payments between health care providers and actual or potential referral sources. Generally, courts have taken a broad interpretation of the scope of the federal Anti-Kickback Statute, holding that the statute may be violated if merely one purpose of a payment arrangement is to induce future referrals.

In December 1994, the HHS Office of Inspector General, or OIG, issued a Special Fraud Alert on arrangements for the provision of clinical laboratory services. The Fraud Alert set forth a number of practices allegedly engaged in by some clinical laboratories and health care providers that raise issues under the federal fraud and abuse laws, including the federal Anti-Kickback Statute. The OIG emphasized in the Special Fraud Alert that when one purpose of such arrangements is to induce referrals of program-reimbursed laboratory testing, both the clinical laboratory and the health care provider (e.g., physician)

may be liable under the federal Anti-Kickback Statute, and may be subject to criminal prosecution and exclusion from participation in the Medicare and Medicaid programs.

Recognizing that the federal Anti-Kickback Statute is broad and may technically prohibit many innocuous or beneficial arrangements within the health care industry, HHS issued a series of regulatory “safe harbors.” These safe harbor regulations set forth certain provisions which, if all of their requirements are met, will assure health care providers and other parties that they may not be prosecuted under the federal Anti-Kickback Statute. Although full compliance with these provisions ensures against prosecution under the federal Anti-Kickback Statute, the failure of a transaction or arrangement to fit within a specific safe harbor does not necessarily mean that the transaction or arrangement is illegal or that prosecution under the federal Anti-Kickback Statute will be pursued.

While we believe that we are in compliance with the federal Anti-Kickback Statute, there can be no assurance that our relationships with physicians, hospitals and other customers will not be subject to scrutiny or will survive regulatory challenge under such laws. If imposed for any reason, sanctions under the federal Anti-Kickback Statute could have a negative effect on our business.

In addition to the requirements that are discussed above, there are several other health care fraud and abuse laws that could have an impact on our business. The federal False Claims Act prohibits a person from knowingly submitting or causing to be submitted false claims or making a false record or statement in order to secure payment by the federal government. Violation of the federal False Claims Act may result in fines of up to three times the actual damages sustained by the government, plus mandatory civil penalties of between $5,500 and $11,000 for each separate false claim, imprisonment or both, and possible exclusion from Medicare or Medicaid.

We are subject to a federal law directed at “self-referrals,” commonly known as the Stark Law, which prohibits, with certain exceptions, payments made by a physician to a laboratory in exchange for the provision of clinical laboratory services, presenting or causing to be presented claims to Medicare and Medicaid for laboratory tests referred by physicians who personally, or through a family member, have an investment interest in, or a compensation arrangement with, the clinical laboratory performing the tests. A person who engages in a scheme to circumvent the Stark Law's referral prohibition may be fined up to $100,000 for each such arrangement or scheme. In addition, any person who presents or causes to be presented a claim to the Medicare or Medicaid programs in violation of the Stark Law is subject to civil monetary penalties of up to $15,000 per claim submission, an assessment of up to three times the amount claimed, and possible exclusion from participation in federal governmental payor programs. Claims submitted in violation of the Stark Law may not be paid by Medicare or Medicaid, and any person collecting any amounts with respect to any such prohibited bill is obligated to refund such amounts. Many states, including California, also have anti-“self-referral” and other laws that are not limited to Medicare and Medicaid referrals.

Further, in addition to the privacy and security regulations stated above, HIPAA created two federal crimes: health care fraud and false statements relating to health care matters. The health care fraud statute prohibits knowingly and willfully executing a scheme to defraud any health care benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from government sponsored programs. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for health care benefits, items or services. A violation of this statute is a felony and may result in fines or imprisonment.

Finally, federal law prohibits any entity from offering or transferring to a Medicare or Medicaid beneficiary any remuneration that the entity knows or should know is likely to influence the beneficiary's selection of a particular provider, practitioner or supplier of Medicare or Medicaid payable items or services, including waivers of copayments and deductible amounts (or any part thereof) and transfers of items or services for free or for other than fair market value. Entities found in violation may be liable for civil monetary penalties of up to $10,000 for each wrongful act. Although we believe that our sales and marketing practices are in material compliance with all applicable federal and state laws and regulations, relevant regulatory authorities may disagree, and violation of these laws or our exclusion from such programs as Medicaid and other governmental programs as a result of a violation of such laws could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Employees

As of February 10, 2015, we employed 448 persons, of whom 38 hold Ph.D. or M.D. degrees and 52 hold other advanced degrees. Our success will depend in large part upon our ability to attract and retain employees. We face competition in this regard from other companies, research and academic institutions, government entities, and other organizations.

Executive Officers

Our executive officers, their positions with us, and their ages as of February 10, 2015 are as follows:



Name	Age	Position
William Welch	53	Chief Executive Officer and Director
Carolyn D. Beaver	57	Chief Financial Officer
Jeffrey D. Linton	51	Senior Vice President, General Counsel, and Secretary
Dirk van den Boom, Ph.D.	44	Chief Scientific and Strategy Officer
Robin Weiner	59	Senior Vice President, Corporate Governance and Regulatory Affairs

William Welch, M.B.A. Mr. Welch has served as our Chief Executive Officer since June 2014. Previously, he served as our President and Chief Operating Officer since December 2012 and served as our Senior Vice President, Diagnostics, from January 2011 to December 2012. Prior to Sequenom, Mr. Welch was a consultant to molecular diagnostic companies in the personalized medicine sector. From August 2005 to September 2009, Mr. Welch was Senior Vice President and Chief Commercial Officer at Monogram Biosciences, or Monogram, a bioscience laboratory services company. Prior to Monogram, Mr. Welch held commercial management positions at La Jolla Pharmaceuticals and Dade Behring MicroScan. Mr. Welch entered the healthcare field with Abbott Laboratories where he held progressive management positions, including General Manager. Mr. Welch received his M.B.A from Harvard University and a B.S. with honors in chemical engineering from the University of California, Berkeley.

Carolyn D. Beaver, CPA. Ms. Beaver has served as our Chief Financial Officer since June 2014. Previously she served as our Vice President and Chief Accounting Officer since June 2012. Ms. Beaver was previously Corporate Vice President and Controller of Beckman Coulter, Inc., a biomedical laboratory instrument and test company, from August 2005 until June 2012, and was named Chief Accounting Officer in October 2005 until July 2011, following the acquisition of Beckman Coulter, Inc. by Danaher Corporation. She served as interim Chief Financial Officer from July 2006 through October 2006. Ms. Beaver was a director of Commerce National Bank, Newport Beach, California, chair of its audit committee and a member of its asset/liability committee from 2005 until the bank was acquired in 2013. Ms. Beaver was an audit partner with KPMG LLP from 1987 to 2002. Ms. Beaver received a B.S. in Business Administration, magna cum laude, from California State Polytechnic University, Pomona, California.

Jeffrey D. Linton, J.D. Mr. Linton has served as our Senior Vice President, General Counsel and Secretary since September 2014. Before joining Sequenom, Mr. Linton was Senior Vice President and General Counsel at Beckman Coulter, Inc. from July 2011 to September 2014. Prior to that, he was Vice President, Deputy General Counsel from September 2008 to July 2011. Before joining Beckman Coulter, Mr. Linton was President of the research products and services division of Serologicals Corporation, a company that developed, manufactured and sold life science research products and technologies, diagnostic kits and drug discovery services. Before that role, he served as Vice President, Corporate Business Development and General Counsel at Serologicals from October 2000 to April 2003. He has held various other positions in law, government and public affairs and human resources. Mr. Linton earned a B.A., magna cum laude from Butler University and a J.D., cum laude from the University of Notre Dame Law School.

Dirk van den Boom, Ph.D. Dr. van den Boom has served as the Chief Scientific and Strategy Officer since June 2014. Previously he served as our Chief Scientific Officer from January 2014 to June 2014, Executive Vice President, Research and Development and Chief Technology Officer from December 2012 to January 2014. Senior Vice President of Research and Development from August 2010 to January 2012 and Vice President, Research and Development from October 2009 to August 2010. Dr. van den Boom joined Sequenom in 1998 in the company's Hamburg offices, subsequently serving in various management roles within our research and development department. Dr. van den Boom has co-authored more than 50 scientific articles and is inventor on 48 patents/patent applications. Dr. van den Boom received his Ph.D. in Biochemistry/Molecular Biology from the University of Hamburg where he focused on various aspects of nucleic acid analysis with mass spectrometry.

Robin Weiner, M.B.A. Ms. Weiner has served as our Senior Vice President, Corporate Governance and Regulatory Affairs since October 2010. Prior to joining us, Ms. Weiner was an independent regulatory consultant to biotechnology companies, focusing on regulatory strategy, product submissions and quality management systems. From 2004 to 2007, Ms. Weiner served as Vice President Regulatory and Government affairs at Biosite Incorporated, a medical device company, and was responsible for leading Biosite's worldwide product approvals and regulatory compliance activities. Before that role, she served as Vice President, Clinical and Regulatory Affairs at Quidel Corporation. She has held various other positions in clinical, regulatory and quality assurance. Ms. Weiner received her M.B.A. from National University and a B.A. from the University of California, San Diego.

Available Information

We file our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports, and other information with the U.S. Securities and Exchange Commission, or the SEC. We will supply a copy of any document we file with the SEC, without charge. To request a copy, please contact Investor Relations, Sequenom, Inc., 3595 John Hopkins Court, San Diego, CA, 92121, USA. The public may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street NE, Washington, D.C. 20549, or by calling the SEC at 1-800-SEC-0330, or by accessing the SEC's website at www.sec.gov, where the SEC maintains reports, proxy and information statements and other information regarding us and other issuers that file electronically with the SEC. In addition, as soon as reasonably practicable after such materials are filed with or furnished to the SEC, we make copies available to the public free of charge through our website at www.sequenom.com. We also regularly post on our corporate website copies of our press releases as well as additional information about us. Interested persons can subscribe on our website to email alerts that are sent automatically when we issue press releases, when we file our reports with the SEC, or when certain other information becomes available.


Item 1A.	Risk Factors

Before deciding to invest in our company or deciding to maintain or increase your investment, you should carefully consider the risks described below, in addition to the other information contained in this report and in our other filings with the SEC. The risks and uncertainties described below and in our other filings are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business. If any of these known or unknown risks or uncertainties actually occurs, our business, financial condition and results of operations could be seriously harmed. In that event, the market price for our common stock could decline and you may lose your investment.

We may not be able to continue to generate significant revenue from any of the tests we have commercialized including the MaterniT21 PLUS test or any test that we may develop in the future.

Our business is substantially dependent on our ability to develop and launch and obtain reimbursement for our diagnostic tests, including the MaterniT21 PLUS test. We have committed significant research and development resources for the development and validation of tests and we have likewise invested significant research and development resources for its potential future diagnostic products. There is no guarantee that we will successfully maintain our current revenues or generate additional revenues or significant revenues from any of our testing services, including the MaterniT21 PLUS test, or any other testing services that we plan to launch in the future. We have launched testing services for prenatal fetal chromosomal abnormalities, CF carrier screening, noninvasive prenatal Rhesus D genotyping, and risk assessment of a patient with “dry” or early stage AMD progressing to “wet” or advanced choroidal neovascular disease within 2, 5, and 10 years. The MaterniT21 PLUS test, which was originally launched in October 2011, detects fetal chromosomal abnormalities. The VisibiliT test, launched in 2014 is a risk score assay for the detection of increased representation of chromosomes 21 and 18. If we, or our partners, are not able to continue to successfully market or sell noninvasive prenatal diagnostic tests or successfully market or sell other tests we may develop for any reason, including the failure to obtain significant reimbursement from payors, or failure to obtain or maintain any required regulatory approvals, we will not generate or maintain significant revenues from the sale of such tests or testing services. A number of factors could impact our ability to continue to sell noninvasive prenatal diagnostic tests or other tests we have developed or may develop in the future or generate significant revenues from the sale of such tests or testing services, including the following:

•

the availability of alternative and competing tests or products, such as those using targeted sequencing based or single nucleotide polymorphism (SNP) based approaches for NIPT to detect fetal chromosomal aneuploidies, or other approaches that may have a lower cost of goods and/or be less expensive to perform compared to the MaterniT21 PLUS test or our other tests, and which in turn may result in lower prices offered by competitors;


•	technological innovations or other advances in medicine that cause our technologies to be less competitive;


•	pricing pressures, lower prices offered by competitors, or changes in third-party payor, government payor or private insurer reimbursement policies including potential delays or refusals to pay and uncertainty related to changes in CPT codes and uncertainty regarding payor adoption of and reimbursement rates for new gene sequencing related CPT codes that took effect in January 2015;


•	payors and/or patients may not pay for services;


•	payors may seek to reduce the use of our services by ordering physicians;

•

our ability to establish and maintain sufficient intellectual property rights in our products, including our ability to overturn the U.S. District Court for the Northern District of California’s order ruling our ‘540 Patent to be invalid, and our ability to ultimately enforce the ‘540 Patent in the future against competitors and obtain injunctive relief and/or monetary damages from competitors;


•	parties infringing our intellectual property rights or operating outside our intellectual property rights;


•	the ability to implement and maintain controls and risk management measures as appropriate;


•	reliance on Sequenom Laboratories, which is subject to routine governmental oversight and inspections for continued operation pursuant to CLIA to process tests ordered by physicians;

•

our ability to establish and maintain adequate infrastructure to support the continued commercialization of the MaterniT21 PLUS test and other testing services, including establishing adequate laboratory space, information technology infrastructure, sample collection and tracking systems including the laboratory information management system, or LIMS, electronic ordering and reporting systems and other infrastructure and hiring adequate laboratory and other personnel;


•	compliance with federal, state and foreign regulations governing laboratory testing on human specimens;


•	the marketing and sale of research use only or other tests;


•	the accuracy rates of such tests, including rates of false negatives and/or false positives;


•	concerns regarding the safety and effectiveness or clinical validity of noninvasive prenatal or other tests;


•	changes in the regulatory environment affecting health care and health care providers, including changes in laws regulating laboratory testing and any laws regulating prenatal testing;


•	the extent and success of our sales and marketing efforts and ability to drive continued adoption of our testing services, including the MaterniT21 PLUS test and the VisibiliT test;


•	the extent to which payors and health care providers may limit or deny the addition of new laboratory-developed test service providers to their programs;


•	general changes or developments in the market for women's and/or prenatal health diagnostics, or diagnostics in general;


•	ethical and legal issues concerning the appropriate use of the information resulting from noninvasive prenatal diagnostic tests or other tests;


•	the refusal by women to undergo such tests for moral, religious or other reasons, or based on perceptions about the safety or reliability of such tests;


•	our ability to provide effective customer support; and


•	our ability to license and protect our patented technologies and our other technologies.

We may not be able to collect all or any of the estimated range of $31 million to $34 million of amounts outstanding for tests completed which have not been recognized as revenue upon delivery of the test results.

Our business is substantially dependent on our ability to obtain reimbursement for our LDTs, including the MaterniT21 PLUS test. Collections for services performed have been volatile, and we expect collections to continue to fluctuate depending upon the results of our efforts to collect payment from third party payors. As of December 31, 2014, amounts outstanding for tests completed, net of estimated write-downs and adjustments, which were not recognized as revenue upon delivery of the test result because our accrual revenue recognition criteria were not met and the amounts had not been collected, range from approximately $31 million to $34 million, depending upon the ultimate reimbursement received for these outstanding claims. A number of factors could impact our ability to collect payment on these outstanding claims and impact the amount and timing of any payments, and we cannot provide any assurance as to when, if ever, and to what extent these amounts may be collected. If we are unsuccessful in collecting such outstanding amounts, it will adversely affect our financial position.

Claims by other companies that we infringe their intellectual property rights could adversely affect our business.

From time to time, companies have asserted, and may again assert, patent, copyright or other intellectual proprietary rights against our tests or tests using our technologies, and/or against our customers (licensees and commercial partners). These claims have resulted and may in the future result in lawsuits being brought against us and/or our customers, and could negatively affect demand for our tests, particularly the MaterniT21 PLUS test, and our ability to maintain existing, or enter into new, agreements with customers. We may not prevail in any lawsuits alleging patent infringement given the complex technical issues and inherent uncertainties in intellectual property litigation. If any of our tests, technologies or activities, in particular our tests (including the MaterniT21 PLUS test) from which we derive and expect to continue to derive almost all of our revenues, were found to infringe on another company's intellectual property rights, we could be subject to an injunction that would force the removal of such test from the market or we could be required to redesign such test, which could be costly. We could also be ordered to pay damages or other compensation, including punitive damages and attorneys' fees to such other company. A negative outcome in any such litigation could also severely disrupt the use of our technologies by our customers and licensees or their customers, which in turn could harm our relationships with our customers, our market share and our revenues. Even if we are ultimately successful in defending any intellectual property litigation, such litigation is expensive and time consuming to address, will divert our management's attention from our business and may harm our reputation.

Our ability to compete in the market may decline if we lose some of our intellectual property rights, if patent rights that we rely on are invalidated, or if we are unable to obtain other intellectual property rights.

Our success will depend on our ability to obtain, protect, and maintain the validity of patents on our technology, to protect our trade secrets, and to maintain our rights to licensed intellectual property or technologies. Such patent rights include U.S. Patent No. 6,258,540 pr the 540 Patent, currently ruled invalid by the U.S. District Court for the Northern District of California and appealed to the U.S. Court of Appeals for the Federal Circuit, and foreign equivalents, which we have purchased from Isis for noninvasive prenatal diagnostics and noninvasive prenatal gender determination testing. Such patent rights also include U.S. patents and patent applications, and their foreign equivalents, which we have rights to under the Pooled Patents Agreement with Illumina. Such patent rights also include U.S. and foreign patents and patent applications in-licensed from the Chinese University of Hong Kong, or CUHK, or in-licensed from other third-party entities.

Our patent applications or those of our licensors may not result in the issuance of patents in the U.S. or other countries. Our patents or those of our licensors may not afford meaningful protection for our technology and products. While we do not believe that the District Court’s order ruling that the ‘540 Patent is invalid will impact the competitive landscape (as we have been competing in the marketplace without the benefit of the patent being recognized by competitors), if we are unable to overturn that ruling, it will impact our potential ability in the future to obtain injunctive relief against competitors and/or money damages from competitors. Others may challenge our patents or those of our licensors by proceedings such as interference, oppositions, inter partes review, and reexaminations or in litigation seeking to establish the invalidity of our patents. In the event that one or more of our patents are challenged, the USPTO or a court may invalidate the patent(s) or determine that the patent(s) is not enforceable, which could harm our competitive position. If one or more of our patents are invalidated or found to be unenforceable, or if the scope of the claims in any of these patents is limited by the USPTO or a court decision, we could lose certain market exclusivity afforded by patents owned or in-licensed by us and potential competitors could more easily bring tests or products to the market that directly compete with our own, including the MaterniT21 PLUS test. Such adverse decisions may negatively impact our revenues. See Item 3 of this Report for a discussion of legal proceedings affecting our patents and patent applications.

Competitors may develop products or tests similar to ours that do not conflict with our patents or patent rights. Others may develop products, technologies or methods, including noninvasive prenatal tests or other diagnostic tests in violation of our patents or those of our licensors, or by operating around our patents or license agreements, which could reduce or remove our noninvasive prenatal and other diagnostic commercialization opportunities. To protect or enforce our patent rights, we have initiated interference and inter partes review proceedings, and we may initiate oppositions, reexaminations, or litigation against others. However, these activities are expensive, take significant time and divert management's attention from other business concerns. We may not prevail in these activities. If we are not successful in these activities, the prevailing party may obtain superior rights to our claimed inventions and technology, which could adversely affect our ability to successfully market and commercialize any of our tests that are dependent upon such technologies, including the MaterniT21 PLUS test. The patent position of biotechnology companies generally is highly uncertain and involves complex legal and factual questions that are often the subject of litigation. In 2013, the U.S. Supreme Court decided the case Association for Molecular Pathology v. Myriad Genetics, 133 S. Ct. 2107 (2013) (No. 12-398), a case that held that, “A naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated, but cDNA is patent eligible because it is not naturally occurring.” This Supreme Court decision, and other Supreme Court and lower Federal Court decisions interpreting and/or limiting the scope of patentable subject matter under 35 U.S.C. § 101, as well as the new examination guidelines from the U.S. Patent and Trademark Office issued in 2014 (i.e., the 2014 Interim Guidance on Patent Subject Matter Eligibility (Interim Eligibility Guidance) for USPTO personnel to use when determining subject matter eligibility under 35 U.S.C. 101 in view of recent decisions by the U.S. Supreme Court), have made it more difficult for patentees to obtain and/or maintain patent claims in the United States that are directed to biotechnology-related subject matter, as claims to that subject matter are often perceived to recite or involve Laws of Nature/Natural Principles, Natural Phenomena, and/or Natural Products. No consistent policy has emerged from the USPTO, the offices of foreign countries or the courts regarding the breadth of claims allowed or the degree of protection afforded under biotechnology patents. There is a substantial backlog of biotechnology patent applications at the USPTO and of the equivalent offices around the world and the approval or rejection of patent applications may take several years.

If we breach any of the terms of our license or supply agreements, or these agreements are otherwise terminated or modified, the termination or modification of such agreements could result in our loss of access to critical components and could delay or suspend our commercialization efforts, and we may compete with our suppliers which may adversely affect our business.

We have sourced or licensed components of our technology from other parties. Our failure to maintain continued supply of such components, particularly in the case of sole suppliers, or the right to use these components would seriously harm our business, financial condition, and results of operations. In the event of any adverse developments with these vendors, Sequenom Laboratories’ testing services may be interrupted, which would have an adverse impact on our business. Changes to

or termination of our agreements or inability to renew our agreements with these parties or enter into new agreements with other suppliers could result in the loss of access to these aspects of our technology or other intellectual property rights or technologies that we may acquire from time to time and could impair, delay, or suspend our commercialization efforts, including efforts to market and commercialize the MaterniT21 PLUS test. While we negotiate for agreement periods or notice of termination periods that provide us reasonable periods of time to secure alternative supplies, and require that such agreements may not be terminated without advance notice arbitrarily or without good reason, such as uncured breach or insolvency, these negotiations are often unsuccessful or such provisions may not provide us with adequate time to secure alternative supplies, provide us with access to alternative technologies on commercially acceptable terms, or otherwise provide us with adequate protection.

For example, Illumina, is the sole supplier of sequencers and certain consumables for Sequenom Laboratories' MaterniT21 PLUS test. The supply of sequencers and consumables to Sequenom Laboratories is provided under the Supply Agreement, pursuant to which we and our affiliates will purchase various products from Illumina, which we and they will be able to use for NIPT as well as for other clinical and research uses. The Supply Agreement has a term of five years. Upon the expiration of the Supply Agreement, we face risk and uncertainty regarding our ability to renew the supply agreement or to enter into a new supply agreement with Illumina, if at all, and on financial terms that are acceptable to us. Our failure to maintain continued supply of such sequencers and consumables would seriously harm our business, financial condition, and results of operations.

We depend on third-party products and services and limited sources of supply to develop and perform its tests.

We rely on outside vendors to supply certain products, components and materials used in our test services. Illumina is the sole supplier of sequencers and certain consumables for the MaterniT21 PLUS and the VisibiliT test and those products have lead times of several months. Among other risks, using a platform provided by another party presents potential manufacturing supply and reliability, quality compliance, and intellectual property infringement risks. For example, we have no control over the manufacture of the Illumina sequencers and consumables that we are using for the MaterniT21 PLUS and the VisibiliT test, including whether such sequencers and consumables will meet their quality control requirements to ensure quality and reliability for the sequencers and consumables, and can give no assurance that we will be able to obtain a reliable supply of the sequencers and consumables that we need for our tests. In the event that demand for our tests declines or does not meet our forecasts, we could have excess inventory or increased expenses or our margins could decrease which could have an adverse impact on our financial condition and business.

Many other products, components and materials, including blood collection tubes for the MaterniT21 PLUS and the VisibiliT test and components of the MassARRAY System that is currently used for the CF carrier screen, fetal Rhesus D genotyping test and RetnaGene AMD test, are obtained from a single supplier or a limited group of suppliers and some also have lead-times of several months.

These suppliers may be subject to regulation by the FDA and would therefore need to comply with federal regulations related to the manufacture and distribution of regulated products. Because we cannot ensure the actual production or manufacture of such critical equipment and materials, or the ability of our suppliers to comply with applicable legal and regulatory requirements, we may be subject to significant delays caused by interruption in production or manufacturing.

In the event of any adverse developments with these suppliers or vendors, our test supply may be interrupted and obtaining substitute components could be difficult or require us to re-design our tests which would have an adverse impact on our business.

Certain of our LDTs, including the MaterniT21 PLUS test, may not be eligible for reimbursement by payors or may become ineligible for reimbursement, or reimbursement may be significantly delayed, due to changes in CPT codes, or otherwise, which may limit the demand for these tests by physicians and their patients.

Certain of our current LDTs, or future tests which we intend to launch as a testing service, may not be deemed medically necessary or may otherwise not be subject to reimbursement by payors, which could affect demand for such tests by physicians.

CMS, a federal agency within the Department of Health and Human Services (HHS), establishes reimbursement payment levels and coverage rules for Medicare. State Medicaid plans and third-party payors establish rates and coverage rules independently. As a result, the coverage determination process is often a time-consuming and costly process that requires us to provide scientific and clinical validity for the use of our tests to each payor separately, with no assurance that approval will be obtained. If CMS or other third-party payors decide not to cover our tests, place significant restrictions on the use of our tests, or offer inadequate payment amounts, our ability to generate revenues from our tests could be limited.

Even a payor that covers our tests may reduce utilization or stop or lower reimbursement at any time, which could reduce our revenues. We are currently considered a “non-contracting provider” by many third-party payors because we have not entered into a specific contract to provide our specialized testing services to their insured patients at specified rates of reimbursement. Without such contracts, we may not be able to obtain reimbursement for our tests at acceptable rates, which

could also reduce our revenues. In cases where we have contracts in place, some payors continue to challenge the medical necessity of certain of our tests or have other objections that result in delay or non-payment to us.

Reimbursement for diagnostic tests furnished to Medicare beneficiaries generally is made based on a fee schedule set by CMS using a statutory formula. In recent years, payments under these fee schedules have decreased and may decrease more. In addition, Medicare fee schedules are impacted by the billing codes selected for reporting services, and changes to certain laboratory billing codes for diagnostic tests are being considered which may affect payment levels. We cannot predict whether or when additional third-party payors will cover our tests or offer adequate reimbursement to make them commercially attractive or whether existing payors will reduce utilization or stop or lower reimbursement. Clinicians or patients may decide not to order our tests if third-party reimbursement is inadequate, especially if ordering the test could result in financial liability for the patient, and reduced or discontinued purchases of our products would cause our revenues to decline.

Levels of reimbursement may continue to decrease in the future, and future legislation, regulation or reimbursement policies of third-party payors may harm the demand for and reimbursement available for our products, which in turn, could harm pricing and sales. The payment amounts under the Medicare clinical laboratory fee schedule are important not only for our reimbursement under Medicare, but also because the schedule often establishes the payment amounts set by other third-party payors. For example, state Medicaid programs are prohibited from paying more than the Medicare fee schedule limit for clinical laboratory services furnished to Medicaid recipients. As a result, in light of reductions in the clinical laboratory fee schedule, certain third-party payors may also reduce reimbursement amounts.

In the U.S. the AMA generally assigns specific billing codes for laboratory tests under a coding system known as Current Procedure Terminology, or CPT, codes, which are necessary for us, and our customers, to bill and receive reimbursement for our diagnostic tests. Once the CPT code is established, CMS in turn establishes payment levels and coverage rules under Medicare, and private payors establish rates and coverage rules independently. We cannot guarantee that any of our tests are or will be covered by the CPT codes that we believe may be applied to them or that any of our tests or other products will be approved for coverage or reimbursement by Medicare, Medicaid or any third-party payor. Our tests and the CPT codes we use may not qualify for Medicaid reimbursement in any or all of the 50 states.

In addition, payors have initiated efforts to develop a more specific set of billing codes for laboratory tests so that the particular laboratory test is more precisely identified. CMS has established a new molecular diagnostic code for next generation sequencing tests specific for fetal aneuploidy, code 81420, was implemented on January 1, 2015. We cannot guarantee that this new code will help facilitate the reimbursement process or reduce the time required for third-party payors to process claims. When CMS recommends new codes typically the gap fill process is used in establishing a new code rate; however we cannot guarantee that such process will be used. These coding changes and lack of a CMS fee schedule have negatively affected and may continue to negatively affect our product pricing and the amount of and timing of payor reimbursement. We cannot guarantee that the issuance of the new code will improve our product pricing or the amount of and timing of payor reimbursement.

Under the Pooled Patents Agreement, if Illumina is not able to license additional laboratories, collect test fees or develop in-vitro diagnostic kits for NIPT, our revenues, net earnings, cash flow and profitability could be negatively affected.

Under the Pooled Patents Agreement, Illumina has exclusive worldwide rights to license the pooled patent rights to third-party laboratories to develop and sell their own laboratory-developed NIPT tests. We, Illumina and our respective licensees will pay a per-test fee into the pool for laboratory-developed NIPT tests, which will be shared between Illumina and us. We cannot guarantee that Illumina will be successful in licensing the pooled intellectual property to additional third-party laboratories and generating additional test fees. Also, we have no control over how many laboratory-developed NIPT tests Illumina will sell or over Illumina’s collection of test fees from its licensees. To the extent Illumina is unsuccessful in selling its own laboratory-developed NIPT tests, obtaining additional third-party licensees under the pooled patent rights and/or collecting a test fee from such licensees, our revenues, net income, cash flow and profitability could be negatively affected.

In addition, under the Pooled Patents Agreement, Illumina has exclusive worldwide rights under the pooled patent rights to develop and sell in-vitro diagnostic kits for NIPT and to license others to do so. Illumina will pay royalties to us for sales of in-vitro diagnostic kits for NIPT by Illumina and such licensees. We have no control over when, if ever, Illumina will develop and sell in-vitro diagnostic kits for NIPT or license others to do so. If Illumina and its licensees fail to develop and sell in-vitro diagnostic kits for NIPT, we will not collect any royalties from Illumina which could negatively affect our revenues, net income, cash flow and profitability.

Under the Pooled Patents Agreement, if Illumina fails to effectively control prosecution, maintenance and enforcement of the pooled patent rights, the value of the pooled patent rights may be diminished and/or we may need to incur significant unexpected legal costs which may adversely impact our financial condition.

Under the Pooled Patents Agreement, Illumina will control prosecution, maintenance and enforcement of the pooled patent rights, and we will be responsible for paying a portion of the costs thereof. We have no control over these costs. We will continue to control, at our sole cost, the prosecution, maintenance and enforcement of the patents we purchased from Isis including the ‘540 patent. If Illumina fails to prosecute, maintain and/or enforce any of the pooled patent rights, the scope and value of the pooled patent rights may be diminished, and the revenues that we receive from our share of the test fees may be reduced. We have the right to assume control of the enforcement of certain of the pooled patent rights if Illumina fails to do so. If we do assume control of enforcement of any of the pooled patent rights, we cannot guarantee that we will be successful in our efforts and the scope and value of the pooled patent rights may be diminished. In addition, our assumption of such control of enforcement of any of the pooled patent rights will cause us to incur significant unexpected legal costs which may adversely impact our financial condition.

The minimum payments we expect to receive under the Pooled Patents Agreement may be reduced which could negatively impact our cash flow and profitability.

Under the Pooled Patents Agreement, we are entitled to receive certain minimum annual payments from Illumina. In certain circumstances, the amount of these minimum payments may be reduced. These circumstances include a reduction in the average amount of the test fees collected, Illumina’s enforcement of the pooled patents and the impairment or diminution in value of the pooled patent rights. We have no control over these circumstances and, should such circumstances occur, it could have a negative impact on our cash flow and profitability.

Our failure to establish enrollment in and obtain favorable payment policies from state Medicaid programs could result in a substantial portion of our services being unreimbursed and adversely affect our results of operations and financial condition.

We have established enrollment in many state Medicaid programs. However, even though we are enrolled in many state Medicaid programs, we are not receiving reimbursement or are receiving lower than expected reimbursement in most of those states. In mid-2013 it became apparent that most states still did not have appropriate procedure codes incorporated into their payment system for reimbursement for molecular tests, and we initiated efforts to reduce the volume of Medicaid tests from those states. At the same time, we increased our efforts to put reimbursement pathways in place with each state, and work with the AMA to get a specific CPT code for the MaterniT21 PLUS test. CMS has established a new molecular diagnostic code for next generation sequencing tests specific for fetal aneuploidy, code 81420, which was implemented on January 1, 2015, however it is not exclusive to the MaterniT21 PLUS test. In those states where we are not enrolled in the Medicaid system, we do not receive reimbursement for our tests. If we are unable to receive reimbursement, or adequate reimbursements under state Medicaid programs, our opportunity for future revenues would be reduced, which would adversely affect our results of operations and financial condition.

Billing complexities associated with obtaining payment or reimbursement for our tests may negatively affect our revenues, cash flow and profitability. We may incur additional financial risk related to collections and reimbursement in connection with the commercialization of our molecular diagnostic tests.

Billing for clinical laboratory testing services is complex. We generally bills third-party payors for our testing services and pursues case-by-case reimbursement where policies are not in place for a particular test. We may also face an increased risk in our collection efforts, including potential write-offs of doubtful accounts and long collection cycles for accounts receivable related to our testing service, which could adversely affect our business, results of operations and financial condition. We began internal billing operations on May 1, 2013. Among the factors complicating our billing of third-party payors are:


•	disputes among payors as to which party is responsible for payment;


•	disparity in coverage among various payors;


•	disparity in information and billing requirements among payors; and


•	incorrect or missing billing information, which is required to be provided by the prescribing physician.

These billing complexities, and the related uncertainty in obtaining payment for our tests, could negatively affect our revenues, cash flow and profitability.

Our failure to comply with governmental payor regulations could result in our being excluded from participation in Medicare, Medicaid or other governmental payor programs, which would decrease our revenues and adversely affect our results of operations and financial condition.

The Medicare program is administered by CMS, which, like the states that administer their respective state Medicaid programs, imposes extensive and detailed requirements on diagnostic services providers, including, but not limited to, rules that govern how we structure our relationships with physicians, how and when we submit reimbursement claims and how we provide our specialized diagnostic services. Our failure to comply with applicable Medicare, Medicaid and other governmental payor rules could result in our inability to participate in a governmental payor program, our returning funds already paid to us,

civil monetary penalties, criminal penalties and/or limitations on the operational function of our laboratory. If we were unable to receive reimbursement under a governmental payor program, a substantial portion of our revenues would be lost, which would adversely affect our results of operations and financial condition.

Continued evolution of the U.S. health care reform law could adversely affect our business, profitability and stock price and prevent the commercial success of the MaterniT21 PLUS test.

In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, or PPACA. At this time, it remains unclear whether there will be any further changes made to PPACA, whether in part or in its entirety.

The PPACA includes expansions of health care fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance. As discussed below, enforcement of any of these laws against our company could harm our business.

It is unclear whether and to what extent, if at all, other anticipated developments resulting from health care reform, such as an increase in the number of people with health insurance and an increased focus on preventive medicine, may provide us additional revenue. Extending coverage to a large population could substantially change the structure of the health insurance system and the methodology for reimbursing medical services, drugs and devices. These structural changes could entail modifications to the existing system of third-party payors and government programs, such as Medicare and Medicaid, the creation of additional government-sponsored health care insurance sources, or some combination of both, as well as other changes. Restructuring the coverage of medical care in the U.S. could impact the reimbursement for diagnostic tests like ours, including the MaterniT21 PLUS test. If reimbursement for our diagnostic tests is substantially less than we or our clinical laboratory customers expect, or rebate obligations associated with them are substantially increased, our business could be materially and adversely impacted.

Any health care reform measures adopted by the U.S. government and other governments could cause significant pressure on the pricing of health care products and services, including the MaterniT21 PLUS test, in the U.S. and internationally, as well as the amount of reimbursement available from governmental agencies or other third-party payors. The continuing efforts of the U.S. and foreign governments, insurance companies, managed care organizations and other payors to contain or reduce health care costs may compromise our ability to set prices at commercially attractive levels for our tests, including the MaterniT21 PLUS test, and other diagnostic tests that we may develop. Changes in health care policy, such as the creation of broad limits for diagnostic products, could substantially diminish the sale of or inhibit the utilization of future diagnostic tests, increase costs, divert management's attention and adversely affect our ability to generate revenues and achieve profitability.

New laws, regulations and judicial decisions, or new interpretations of existing laws, regulations and decisions, relating to health care availability, methods of delivery or payment for diagnostic products and services, or sales, marketing or pricing, may also limit our potential revenues, and we may need to revise our research and development or commercialization programs. The pricing and reimbursement environment may change in the future and become more challenging for a number of reasons, including policies advanced by the U.S. government, new health care legislation or fiscal challenges faced by government health administration authorities. Specifically, in both the U.S. and some foreign jurisdictions, there have been a number of legislative and regulatory proposals and initiatives to change the health care system in ways that could affect our and Sequenom Laboratories' ability to sell our diagnostic tests, including the MaterniT21 PLUS test, profitably. Some of these proposed and implemented reforms could result in reduced utilization or reimbursement rates for our diagnostic products.

If our laboratory facilities are damaged, our business would be seriously harmed.

We operate laboratory facilities in San Diego, California, Grand Rapids, Michigan, and Raleigh-Durham, North Carolina. Damage to our facilities due to war, fire, natural disaster, earthquake, power loss, communications failure, terrorism, unauthorized entry, or other events could prevent us from conducting our business for an indefinite period, could result in a loss of important data or cause us to cease development and processing of our test services. We cannot be certain that our limited insurance to protect against business interruption would be adequate or would continue to be available to us on commercially reasonable terms, or at all.

We must comply with stringent CLIA requirements to operate, and have limited capacity and infrastructure. Our ability to successfully develop and commercialize tests and to generate revenues will depend on our ability to successfully operate our CLIA-certified laboratory, establish and maintain necessary capacity, and maintain required regulatory licensures.

Sequenom Laboratories, a CLIA-certified and CAP-accredited laboratory, has developed, validated and commercialized five laboratory-developed tests to date. For future tests, if we are unable to successfully develop and validate any new tests that we intend to commercialize we may not be able to successfully commercialize such tests on the anticipated timelines or at all. Although we have invested substantially in our infrastructure, and believe that we have sufficient infrastructure and capacity for near-term demand, it is possible that we may not have adequate infrastructure and capacity in place to meet longer term future demand for our currently launched testing services or for the demand of future tests that we develop. Our ability to successfully

develop and validate tests will depend on our ability to successfully operate and maintain required regulatory licensure and we cannot provide assurances that we will have sufficient resources to continue our operations and maintain our licenses. We currently perform the MaterniT21 PLUS test in our San Diego, California, and Raleigh-Durham, North Carolina, facilities. We face risk in relying upon two laboratory locations to meet demand for, perform, and generate revenues from the MaterniT21 PLUS test. Reliance upon two facilities presents risk to our operations in the event that one or both facilities' capacity is exceeded, or one or both facilities experiences production problems or delays.

CLIA requirements are designed to ensure the quality and reliability of clinical laboratories by mandating specific standards in the areas of personnel qualifications, administration and participation in proficiency testing, patient test management, quality control, quality assurance and inspections. Potential sanctions for failure to comply with CLIA requirements may be suspension, revocation or limitation of a laboratory's CLIA certificate, which is necessary to conduct business, as well as significant fines and/or criminal penalties. Laboratories must undergo on-site surveys at least every two years, which may be conducted by the Federal CLIA program or by a private CMS approved accrediting agency, such as CAP, among others. Sequenom Laboratories is also subject to regulation of laboratory operations under state clinical laboratory laws as will be any new CLIA-certified laboratory that we establish or acquire. State clinical laboratory laws may require that laboratories and/or laboratory personnel meet certain qualifications, specify certain quality controls or require maintenance of certain records. Certain states, such as California, Florida, Maryland, New York, Pennsylvania and Rhode Island, require that laboratories obtain licenses to test specimens from patients residing in those states and additional states may require similar licenses in the future. If we are unable to obtain and maintain licenses from states where required, it will not be able to process any samples from patients located in those states. Only Washington and New York States are exempt under CLIA, as these states have established laboratory quality standards at least as stringent as the CLIA requirement's. Potential sanctions for violation of these statutes and regulations include significant fines and the suspension or loss of various licenses, certificates and authorizations, which could adversely affect our business and results of operations.

If we fail to maintain compliance with the CLIA requirements, CMS or state agencies could require us to cease our testing services, including the MaterniT21 PLUS test. Even if it were possible for us to bring our laboratory back into compliance after failure to comply with such requirements, we could incur significant expenses and potentially lose revenues in doing so.

Failure to establish, and perform to, appropriate quality standards to assure that the highest level of quality is observed in the performance of our testing services could adversely affect the results of our operations and adversely impact our reputation.

The provision of clinical testing services, including the MaterniT21 PLUS test, and related services, and the marketing of those services involve certain inherent risks. The services that we provide and markets are intended to provide information for health care providers in providing patient care. Therefore, users of such services may have a greater sensitivity to errors than the users of services that are intended for other purposes, such as research.

Performance defects, incomplete process controls, unexpected failure modes, unanticipated use of Sequenom Laboratories' services, or inadequate disclosure of information (including associated risks or limitations) relating to the use of the services can lead to injury or other adverse events, including laboratory operation disruptions, delays, or incorrect clinical testing results. These events could lead to safety alerts relating to our services (either voluntary or required by governmental authorities) and could result, in certain cases, in the removal of services from the market. Any removal of services could result in significant costs as well as negative publicity that could reduce demand for our test services. Personal injuries relating to the use of our services can also result in product liability claims being brought against us.

Our operating results may fluctuate significantly.

Our revenues and results of operations may fluctuate significantly, depending on a variety of factors, including the following:


•	our success in developing, marketing, and selling, and changes in demand for our diagnostic testing services, including the MaterniT21 PLUS test, and the level of reimbursement and collection obtained for these tests;


•	the pricing of our diagnostic testing services, and the timing and pricing of new diagnostic testing service offerings, and those of our competitors;


•	our ability to manage costs and expenses and effectively implement our business strategy;


•	our ability, if necessary, to raise additional capital;


•	the amount of royalties that we are required to pay to third parties in connection with the sale of certain of our testing services;


•	our success in collecting payments from third-party payors, customers, and collaborative partners, variations in the timing of these payments and the recognition of these payments as revenues;


•	our success in responding to customer complaints effectively and managing relationships with our customers;


•	our ability to identify and develop in a cost-efficient manner new services, such as noninvasive prenatal and other diagnostic technologies, our ability to improve current services to increase demand for such services and the success of such products and improvements;


•	our ability to establish and maintain sufficient intellectual property rights including our ability to overturn the U.S. District Court for the Northern District of California’s order ruling the ‘540 Patent to be invalid, and our ability to ultimately enforce the 540 Patent in the future against competitors and obtain injunctive relief and/or monetary damages from competitors;


•	the potential need to acquire licenses to new technology, including genetic markers that may be useful in diagnostic applications, or to use our technology in new markets, which could require us to pay unanticipated license fees and royalties in connection with licenses we may need to acquire;


•	our research and development progress, including our ability to develop and validate improved or new tests, , particularly in our expanded field of oncology, and how rapidly we are able to achieve technical milestones;


•	the cost, quality and availability of the hardware platforms and consumables, including reagents and related components and technologies, used by us to perform our tests;


•	material developments in our customer and supplier relationships, including our ability to successfully transition to new technologies and/or alternative suppliers; and


•	the amount of any legal expenses, settlement payments, fines or damages arising from patent litigation or any future litigation.

The absence of or delay in reimbursement for our testing services and generating revenues has had, and will continue to have, a significant adverse effect on our operating results from period to period and will result in increased operating losses unless and until such reimbursement is established, at sufficient levels to cover our costs. Our internationally derived revenues and operating results are also difficult to predict because they depend upon the activities of our licensees in numerous countries.

We believe that period-to-period comparisons of our financial results will not necessarily be meaningful. You should not rely on these comparisons as an indication of our future performance. If our operating results in any future period fall below the expectations of securities analysts and investors, our stock price may decline.

Our increased leverage as a result of our issuance of the 5.00% Convertible Senior Notes due 2017 may harm our financial condition and results of operations.

Our total consolidated long-term debt and obligations as of December 31, 2014, which includes the 5.00% Convertible Senior Notes due 2017, or Convertible Senior Notes, was $139.7 million and represented approximately 129% of our total capitalization as of that date.

Our level of indebtedness could have important consequences on our future operations, including:


•	making it more difficult for us to meet our payment and other obligations under the Convertible Senior Notes and our other outstanding debt;


•	resulting in an event of default if we fail to comply with the financial and other restrictive covenants contained in our debt agreements, which could result in all of our indebtedness becoming immediately due and payable;


•	reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes;


•	limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industries in which we operate and the general economy;


•	placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged and that, therefore, may be able to take advantage of opportunities that our debt levels or leverage prevent us from exploiting; and


•	limiting our ability to obtain additional financing.

Each of these factors may have a material and adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations under the Convertible Senior Notes and our other indebtedness.

We may not be able to generate enough cash flow from our operations to service our indebtedness.

We have a significant amount of indebtedness. In September 2012, we completed the sale of $130.0 million of our Convertible Senior Notes. Our ability to make payments on, and to refinance, our indebtedness, including the Convertible Senior Notes, and to fund planned commercialization efforts, research and development efforts, working capital and other general corporate purposes depends on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors, some of which are beyond our control. Historically, our business has generated losses and we may never become profitable. If we are unable to generate the necessary cash flow, we may be required to adopt one or more alternatives, such as selling assets, refinancing or restructuring indebtedness or

obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. If we raise additional debt, it will increase our interest expense, our leverage and our operating and financial costs. In addition, the terms of the indenture governing the Convertible Senior Notes restricts our ability to incur additional debt, and the agreements governing our other existing or future indebtedness may restrict us from adopting any of these alternatives. We may not be able to execute any of these actions on commercially reasonable terms or at all.

The Convertible Senior Notes also include a provision whereby upon a “fundamental change”, which is defined in the indenture related to the Convertible Senior Notes, holders of the Convertible Senior Notes may require us to repurchase, for cash, all or a portion of their Convertible Senior Notes. We may not have sufficient funds to pay the interest or repurchase price when due. In addition, the terms of any borrowing agreements which we may enter into from time to time may require early repayment of borrowings under circumstances similar to those constituting a “fundamental change”. These agreements may also make our repurchase of Convertible Senior Notes an event of default under the agreements.

If we fail to make any required payments under our indebtedness, or otherwise breach the terms of our indebtedness, including the Convertible Senior Notes, all or a substantial portion of our indebtedness could be subject to acceleration. In such a situation, it is unlikely we would be able to repay the accelerated debt, which would have a material adverse impact on our business, results of operations and financial condition.

If we fail to generate enough cash flow from our operations or otherwise obtain the capital necessary to fund our operations, our financial results, financial condition and our ability to continue as a going concern will be adversely affected and we will have to cease or reduce further commercialization efforts or delay or terminate some or all of our diagnostic testing services or other product development programs.

We expect to continue to incur losses and may have to raise additional cash to fund our planned operations.

Our cash, cash equivalents, and current marketable securities were $93.9 million as of December 31, 2014. Based on our current plans, we believe our cash, cash equivalents and current marketable securities and collections from our commercialized testing services and income from the Pooled Patents Agreement will be sufficient to fund our operating expenses and capital requirements through the next twelve months. We are continuing to expand our operations following commercialization of the MaterniT21 PLUS test and our research and development activities related to improvements to current tests and expansion of our test menu, particularly in our expanded field of oncology, may require raising additional funds. In addition, there can be no assurances that these commercialization or research and development activities will be successful. We cannot be certain that our efforts to obtain reimbursement for our tests will be successful. Our current sales and marketing operations may not be sufficient to maintain or increase the level of market awareness and sales required for us to retain significant commercial success for the MaterniT21 PLUS test. If we are not able to successfully implement our marketing, sales commercialization, and reimbursement strategies, we may not be able to expand geographically, increase sales of the MaterniT21 PLUS test or successfully commercialize any future tests or products that we may develop and therefore may not be able to generate revenues sufficient to fund operations. If we are not able to generate revenues sufficient to fund operations, we may need to raise additional funds through financing or other means. The actual amount of funds that we will need and the timing of any such investment will be determined by many factors, some of which are beyond our control.

We may need to raise additional funds in the future to support expanding commercialization of the MaterniT21 PLUS test and continued development and commercialization of our proprietary technology, particularly in our expanded field of oncology. We may need to sell equity or debt securities to raise significant additional funds. However, it may be difficult for us to raise additional capital through the sale of equity or debt securities.

The amount of additional funds we may need depends on many factors, including:


•	the degree to which our costs and expenses exceed our revenues;


•	our success selling, marketing and generating revenues from the MaterniT21 PLUS test and the level of reimbursement and collections from third-party payors;


•	our success in selling, marketing and generating revenues from our testing services for CF carrier screening, fetal Rhesus D genotyping, and AMD, and the level of reimbursement and collections from third-party payors for these and future tests;


•	the level of our selling, general, and administrative expenses;


•	our obligation to pay royalties to third parties in connection with the sale of our tests;


•	our success and the extent of our investment in the research, development and commercialization of diagnostic technology, including molecular diagnostics, noninvasive prenatal diagnostic technology, oncology and the acquisition and/or licensing of third-party intellectual property rights;


•	our success in obtaining sufficient quantities and quality of patient samples;


•	our success in obtaining regulatory clearance or approval, if applicable, to market any of our testing services in various countries, including the U.S.;


•	our success in validating additional laboratory-developed tests and the levels of clinical performance achieved;


•	our success either alone or in collaboration with our partners in launching and selling additional diagnostic testing services, particularly in our expanded field of oncology;


•	the extent to which we enter into, maintain, and derive revenues from licensing agreements, including agreements to out-license our noninvasive prenatal analysis technology, research and other collaborations, joint ventures and other business arrangements;


•	the level of our legal expenses and any damages or settlement payments arising from ongoing or new patent related litigation;


•	the amount of any legal expenses, settlement payments, fines or damages arising from any future litigation or demand and the extent to which any of the foregoing is not covered by insurance;


•	the dilution from any issuance of securities, whether in connection with future capital-raising or merger or acquisition transactions, the settlement of litigation, or otherwise;


•	the extent to which we acquire, and our success in integrating, technologies or companies;


•	compliance with corporate governance and regulatory developments or initiatives;


•	regulatory changes by the FDA, CMS and other worldwide regulatory authorities; and


•	technological developments in our markets.

Additional financing may not be available in amounts or on terms satisfactory to us or at all. General market conditions, the market price of our common stock, our financial condition, uncertainty about the successful commercialization and development of diagnostic tests, particularly in our expanded field of oncology, regulatory developments, the uncertainty regarding the results of ongoing litigation matters, the status and scope of our patent rights or other factors may not support capital raising transactions. In addition, our ability to raise additional capital may depend upon obtaining stockholder approval. There can be no assurance that we will be able to obtain stockholder approval if it is necessary. If we are unable to obtain sufficient additional funds on a timely basis or on terms favorable to us, we may be required to cease or reduce further commercialization of our testing services, to cease or reduce certain research and development projects, to sell, license or otherwise dispose of some or all of our technology or assets, to merge all or a portion of our business with another entity or we may not be able to continue as a going concern. If we raise additional funds by selling shares of our capital stock (or otherwise issue shares of our capital stock or rights to acquire share of our capital stock), the ownership interest of our current stockholders will be diluted.

The development of new, more cost-effective tests that can be performed by our customers or by patients, or the internalization of testing by hospitals or physicians, could negatively impact our testing volume and revenues.

Advances in technology may lead to the development of more cost-effective tests that can be performed outside of a commercial clinical laboratory such as point-of-care tests that can be performed by physicians in their offices, esoteric tests that can be performed by hospitals in their own laboratories or home testing that can be performed by patients in their homes. Although CLIA compliance makes it cost prohibitive for many physicians to operate clinical laboratories in their offices, manufacturers of laboratory equipment and test kits could seek to increase their sales by marketing point-of-care test equipment to physicians. Diagnostic tests cleared or approved by the FDA for home use are automatically deemed to be exempt under CLIA and may also be performed in physician office laboratories with minimal regulatory oversight under CLIA. Test kit manufacturers could seek to increase sales to both physicians and patients of test kits cleared or approved by the FDA for point-of-care testing or home use. Development of such technology and its use by our customers could reduce the demand for Sequenom Laboratories' testing services and negatively impact our revenues. Our future success will depend on our ability to keep pace with the evolving needs of our customers on a timely and cost-effective basis and to pursue new market opportunities that develop as a result of technological and scientific advances.

Quarterly revenues may be difficult to predict.

We may be unable to accurately predict quarterly revenues relating to the MaterniT21 PLUS test and our other tests due to relatively recent changes in billing codes and adoption and implementation of billing codes by payors and uncertainties related to the PPACA. If our quarterly or year-end revenues fall below the expectations of securities analysts and investors, our stock price may decline.

Uncertainty regarding the development of new tests, including our plans to develop tests in the field of oncology, could materially adversely affect our business, financial condition, and results of operations.

We are continuing to focus research and development efforts on tests, in addition to improvements and additions to current tests, including the MaterniT21 PLUS test. We will look to develop an oncology testing service based on our research and technology capabilities to be used initially for research and potential future clinical studies. Our plans for 2015 are to continue

to research, develop and commercialize tests for prenatal genetic disorders and diseases, women's health-related disorders and diseases, and for oncology. The launch of any other test will require the completion of certain clinical development and commercialization activities, and may include the efforts of collaborative partners on which we sometimes rely, and the expenditure of additional cash resources. We can give no assurance that we will be able to successfully complete the clinical development of any other test or diagnostic test or that we will be able to establish or maintain the collaborative relationships (if any collaborators are involved) that are essential to our clinical development and commercialization efforts. We have limited experience in the field of oncology and we cannot guarantee that our research and development activities will be successful in developing any marketable oncology testing service. We also can give no assurance that we will be able to reduce our expenditures sufficiently or otherwise mitigate the risks associated with our business to raise enough capital to complete clinical development or commercialization activities. Clinical development requires large numbers of patient specimens and we may not be able to use prior collected specimens or collect a sufficient number of appropriate specimens in a timely manner in the future to complete clinical development for any planned test. Patient specimens for clinical development for noninvasive prenatal tests may be unavailable or available only in limited quantities due to an increased number of competitive parties seeking such specimens. Also, as noninvasive testing increases in demand and invasive testing (such as amniocentesis) potentially declines over time, less patient specimens for clinical development become available that include confirmatory data from an invasive procedure such as amniocentesis. Failure to possess or to collect a sufficient number of appropriate specimens in a timely manner could prevent or significantly delay our ability to research, develop, complete clinical development and validation, obtain FDA clearance or approval as may be necessary, or launch any of our planned tests. Any failure to complete on-going clinical studies for our planned tests could have material adverse effects on our business, operating results or financial condition.

We may not successfully obtain, or maintain, regulatory approval of any noninvasive prenatal or other product which we or our licensing or collaborative partners develop.

Products we or our collaborators develop in the noninvasive prenatal diagnostic or other markets depending on their intended use, may be regulated as medical devices by the FDA and other worldwide regulatory authorities. In the U.S., our tests may require either a Premarket 510(k) Notification or a Premarket Approval Application to be submitted to the U.S. FDA prior to marketing in interstate commerce. The Premarket 510(k) Notification process usually takes from three to nine months from submission to clearance, but can take significantly longer. The PMA approval process is much more costly, lengthy, uncertain and generally takes from nine to eighteen months or longer from submission to approval. In addition, commercialization of any diagnostic or other product that we or our licensees or collaborators develop would depend upon successful completion of non-clinical (bench) testing and clinical studies. Non-clinical bench testing and clinical studies can be long, expensive, and uncertain processes and we do not know whether we, our licensees, or any of our collaborators, would be permitted or able to undertake clinical studies of any potential products. It may take us or our licensees or collaborators many years to complete any such testing, and failure could occur at any stage. Results from preliminary studies do not necessarily predict final results, and acceptable results in early studies may not be repeated in later studies. A number of companies in the diagnostics industry, including biotechnology companies, have suffered significant setbacks in clinical studies, even after promising results in earlier studies. Delays or rejections of potential products may be encountered based on changes in regulatory policy for product approval during the period of product development and regulatory agency review. If our projects reach clinical studies, we or our licensees or collaborators could decide to discontinue development of any or all of these projects at any time for commercial, scientific, or other reasons.

The FDA currently regulates IVD devices under the authority of Section 201(h) of the Federal Food, Drug, and Cosmetic Act. To date, the FDA has exercised its regulatory enforcement discretion to not regulate LDTs as a medical device and exempted from regulation LDTs created and used within a single laboratory. However, at a July 2010 FDA public meeting on oversight of tests, the FDA stated that it was reconsidering its enforcement discretion policy. The FDA commented that regulation of LDTs may be warranted because of the growth in the volume and complexity of testing services utilizing LDTs. On July 31, 2014 the FDA notified the U.S. Congress of its intent to issue draft guidance on regulation of LDTs based on risk to patients rather than whether they were made by a conventional manufacturer or a single laboratory. This draft guidance includes pre-market review for higher-risk LDTs, like those used to guide treatment decisions, including companion diagnostics that have entered the market as LDTs. In addition, under the draft guidance, the FDA would continue to exercise enforcement discretion for LDTs used solely for forensic purposes and LDTs used in CLIA-certified high complexity histocompatibaility labs for transplantation, among others. The final regulation would be phased in over many years. On September 30, 2014, the FDA posted on its website draft guidance on regulation of LDTs, maintaining a ‘risk-based’ approach outlined in its notice to U.S. Congress on July 31, 2014. The published draft guidance is identical to the congressional notification. On October 3, 2014, the FDA published notices in the Federal Register formally announcing the release of the draft guidance and the beginning of a 120-day public comment period, with final guidance potentially issued in the March-April 2015 timeframes. Our revenues from testing services utilizing LDTs comprise almost 100% of our total revenues.

In addition to the potential regulation of LDTs by FDA as mentioned above, certification of the laboratory is required under CLIA to ensure the accuracy and reliability of all laboratory testing, except research, on human specimens through a quality assurance program, which includes standards in the areas of personnel qualifications, administration and participation in proficiency testing, patient test management and quality control procedures. In addition, state laboratory licensing and inspection requirements may also apply.

We cannot predict the extent of the FDA's final guidance on regulation of LDTs in general or with respect to our LDTs in particular. If we are unable to comply with the FDA's final guidance on regulation of LDTs, we may have to cease our testing services which could have a material adverse effect on our business, results of operations, financial condition and cash flows. Additionally, if we are unable to successfully launch any additional LDTs or if we are otherwise required to obtain FDA premarket clearance or approval prior to commercializing any of our products or are not able to comply with any other regulatory requirements that the FDA may impose on LDTs, our ability to generate revenues from providing such products may be delayed and we may never be able to generate significant revenues from providing diagnostic products.

The results of preclinical and clinical studies are not necessarily predictive of future results, and our current diagnostic tests and product candidates may not have favorable results in later studies.

We intend to publish results of certain of our studies, and have published studies of our tests, and there can be no assurance that such results when published will be viewed favorably by clinicians, patients or investors. In addition, our scientific collaborators and other third parties may also publish results relating to their own studies. There can be no assurance that the results of their studies when published will be viewed favorably. If such results are not viewed favorably after publication, it could have a negative impact on the perception of our technology and its tests.

Performance achieved in published studies may not be repeated in later studies that may be required to obtain either FDA premarket clearance or approval. Limited results from earlier-stage verification studies may not predict results from studies in larger numbers of subjects drawn from more diverse populations over a longer period of time. Unfavorable results from ongoing preclinical and clinical studies could result in delays, modifications or abandonment of ongoing or future clinical studies, or abandonment of a product development program or may delay, limit or prevent regulatory approvals or commercialization.

We and our licensees and collaborators may not be successful in developing or commercializing diagnostic products or tests, including noninvasive prenatal diagnostic products or tests, or other products or tests using technologies, services, or discoveries.

Development of products or tests by us, our licensees, or our collaborators are subject to risks of failure inherent in the development and commercial viability of any such product or test, such as demand for such product or test. These risks further include the possibility that such product or test would:


•	be found to be ineffective, unreliable, inadequate or otherwise fail to receive regulatory clearance or approval or be subject to new or additional regulatory requirements;


•	be difficult or impossible to manufacture or perform on a commercial scale;


•	be uneconomical to market or otherwise not be effectively marketed;


•	fail to be successfully commercialized if adequate reimbursement from government health administration authorities, private health insurers, and other organizations for the costs of such product is unavailable;


•	be impossible to commercialize because such product or test infringes on the proprietary rights of others or competes with products marketed by others that are superior;


•	fail to be commercialized prior to the successful marketing of similar products or tests by competitors; or


•	be subject to competitive price erosion that makes it uneconomical to market effectively.

If a licensee discovers or develops diagnostic or other products or tests or we or a collaborator, discover or develop diagnostic or other products or tests using our technology, products, services, or discoveries, we may rely on that licensee or collaborator, referred to as partner, for product or test development, regulatory approval, manufacturing, and marketing of those products or tests before we can realize revenues and some or all of the milestone payments, royalties, or other payments we may be entitled to under the terms of the licensing or collaboration agreement. If we or our partners fail to develop successful products or tests, we will not earn the revenues contemplated and we could lose license rights to intellectual property that are required to commercialize such products or tests. Our agreements may allow our partners significant discretion in electing whether to pursue any of these activities. We cannot control the amount and timing of resources our partners may devote to our programs or potential products or tests. As a result, we cannot be certain that our partners will choose to develop or commercialize any products or tests or will be successful in doing so. In addition, if a partner is involved in a business combination, such as a merger or acquisition, or changes its business focus, its performance under its agreement with us may suffer and, as a result, we may not generate any revenues or only limited revenues from the royalty, milestone, and similar payment provisions contained in our agreement with that partner.

We may not be able to form and maintain the collaborative relationships or the rights to third-party intellectual property and technologies that our business strategy requires and such relationships may lead to disputes over technology rights or product revenue, royalties, or other payments.

We form research collaborations and licensing arrangements with collaborators to operate our business successfully. To succeed, we will have to maintain our existing relationships and establish additional collaborations and licensing arrangements. Our current strategy includes pursuing partnering opportunities with companies interested in or involved in the development of pharmaceutical and diagnostic products and tests. Our strategy also includes obtaining ownership of, or licenses to third-party intellectual property rights and technologies to potentially expand our product and testing portfolio and generate additional sources of revenue. Disputes may arise in connection with these collaborations and licensing arrangements, which may result in liability to us or may result in the loss of acquired technology that may adversely affect our business.

We cannot be sure that we will be able to establish any additional research collaborations, licensing arrangements, or other partnerships necessary to develop and commercialize products or that we can do so on terms favorable to us. If we are unable to establish these collaborations or licensing arrangements, we may not be able to successfully generate any milestone, royalty, or other revenues from sales of these products or applications. If our collaborations or licensing arrangements are not successful or we are not able to manage multiple collaborations successfully, our programs will suffer and we may never generate any revenues or only generate limited revenues from sales of products based on licensed rights or technologies or under these collaborative or licensing arrangements. If we increase the number of collaborations or licensing agreements, it will become more difficult to manage the various relationships successfully and the potential for conflicts among the collaborators and licensees or licensors will increase. Conflicts with our collaborators, licensees or licensors, or other factors may lead to disputes over technology or intellectual property rights or product revenue, royalties, or other payments, which may adversely affect our business, including our ability to generate revenues from the MaterniT21 PLUS test.

In addition, our government grants provide the government certain license rights to inventions resulting from funded work. Our business could be harmed if the government exercises those rights.

The agreements and rights we rely upon to protect the intellectual property underlying our tests and technology may not be adequate, which could enable others to use our technology and reduce our ability to compete with them.

We require our employees, consultants, advisors, and collaborators to execute confidentiality agreements and in certain cases, assignment or license agreements. We cannot guarantee that these agreements will provide us with adequate intellectual property ownership or protection against improper or unauthorized use or disclosure of confidential information or inventions. In some situations, these agreements may conflict with or be subject to the rights of others with whom our employees, consultants, advisors, or collaborators have prior employment or consulting relationships. In some situations these types of agreements or relationships are subject to foreign law, which provides us with less favorable rights or treatment than under U.S. law. Others may gain access to our inventions, trade secrets or independently develop substantially equivalent proprietary materials, products, information, and techniques.

Our business and industry are subject to complex and costly regulation and if government regulations are interpreted or enforced in a manner adverse to us, we may be subject to enforcement actions, penalties, exclusion, and other material limitations on our operations.

We are subject to various federal, state and local laws targeting fraud and abuse in the health care industry, including anti-kickback and false claims laws. The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal health care program, such as Medicare or Medicaid. The definition of “remuneration” has been broadly interpreted to include anything of value, including, for example, gifts, discounts, the furnishing of free supplies, equipment or services, credit arrangements, payments of cash and waivers of payment. Several courts have interpreted the statute's intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the statute has been violated. The PPACA, among other things, amends the intent requirement of the federal Anti-Kickback Statute and certain criminal health care fraud statutes to provide that a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. In addition, the PPACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act or the civil monetary penalties statute, which imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.

The Anti-Kickback Statute is broad and prohibits many arrangements and practices that are lawful in businesses outside of the health care industry. Recognizing that the Anti-Kickback Statute is broad and may technically prohibit many innocuous or beneficial arrangements, Congress authorized the HHS Office of Inspector General, or OIG, to issue a series of regulations,

known as “safe harbors.” These safe harbors set forth requirements that, if met in their entirety, will assure health care providers and other parties that they most likely will not be prosecuted under the Anti-Kickback Statute. The failure of a transaction or arrangement to fit precisely within one or more safe harbors does not necessarily mean that it is illegal, or that prosecution will be pursued. However, conduct and business arrangements that do not fully satisfy each applicable safe harbor may result in increased scrutiny by government enforcement authorities, such as the OIG. Penalties for violations of the federal Anti-Kickback Statute include criminal penalties and civil sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other healthcare programs. Many states have adopted laws similar to the Anti-Kickback Statute. Some of these state prohibitions apply to referral of patients for health care items or services reimbursed by any payor, not only the Medicare and Medicaid programs, and do not contain identical safe harbors. Government officials have brought cases against numerous companies and certain sales and marketing personnel for allegedly offering unlawful inducements to potential or existing customers in an attempt to procure their business.

In addition to the Anti-Kickback Statute, we are also subject to the physician self-referral laws, commonly referred to as the Stark law, which generally prohibits physicians from referring Medicare patients to providers of “designated health services,” including clinical laboratories, with whom the physician or the physician's immediate family member has an ownership interest or compensation arrangement, unless an applicable exception applies. The Stark law is a strict liability statute, meaning that a violation may occur regardless of the parties' intent. Moreover, many states have adopted or are considering adopting similar laws, some of which extend beyond the scope of the Stark law to prohibit the payment or receipt of remuneration for the prohibited referral of patients for designated health care services and physician self-referrals, regardless of the source of the payment for the patient's care. Penalties for violations of the Stark law include denial of payment, refund of payment, imposition of up to $15,000 in civil monetary penalties for each claim submitted in violation of the law, up to $100,000 in civil monetary penalties for each “arrangement or scheme” that violates the law, a civil monetary penalty of three times the amount claimed, and exclusion from participation in the Medicare program and/or other government health programs. If it is determined that certain of our practices or operations violate the Stark law or similar statutes, the imposition of any such penalties could harm our business.

Another development affecting the health care industry is the increased use of the federal civil False Claims Act and, in particular, actions brought pursuant to the False Claims Act's “whistleblower” or “qui tam” provisions. The False Claims Act imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal health care program. The qui tam provisions of the False Claims Act allow a private individual to bring actions on behalf of the federal government alleging that the defendant has submitted a false claim to the federal government, and to share in any monetary recovery. In recent years, the number of suits brought by private individuals has increased dramatically. In addition, various states have enacted false claim laws analogous to the False Claims Act. Many of these state laws apply where a claim is submitted to any third-party payor and not merely a federal health care program. When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties of $5,500 to $11,000 for each separate false claim. There are many potential bases for liability under the False Claims Act. Liability arises, primarily, when an entity knowingly submits, or causes another to submit, a false claim for reimbursement to the federal government. The False Claims Act has been used to assert liability on the basis of, among other things, inadequate care, kickbacks and other improper referrals, improper use of Medicare numbers when detailing the provider of services, and allegations as to misrepresentations with respect to the services rendered. Our activities relating to the sale and marketing of our products may be subject to scrutiny under these laws. Also, the Health Insurance Portability and Accountability Act of 1996, or HIPAA, created several new federal crimes, including health care fraud and false statements relating to health care matters. The health care fraud statute prohibits knowingly and willfully executing a scheme to defraud any health care benefit program, including private third-party payors. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for health care benefits, items or services. We are unable to predict whether we would be subject to actions under the False Claims Act or a similar state law, or under the federal crimes created by HIPAA, or the impact of such actions. However, the costs of defending such claims, as well as any sanctions imposed, could significantly adversely affect our financial performance.

Federal law prohibits any entity from offering or transferring to a Medicare or Medicaid beneficiary any remuneration that the entity knows or should know is likely to influence the beneficiary's selection of a particular provider, practitioner or supplier of Medicare or Medicaid payable items or services, including waivers of copayments and deductible amounts (or any part thereof) and transfers of items or services for free or for other than fair market value. Entities found in violation may be liable for civil monetary penalties of up to $10,000 for each wrongful act. Although we believe that our sales and marketing practices are in material compliance with all applicable federal and state laws and regulations, relevant regulatory authorities may disagree, and violation of these laws or our exclusion from such programs as Medicaid and other governmental programs as a result of a violation of such laws could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Ethical, privacy, or other concerns about the use of genetic information could reduce demand for our products and services.

Genetic testing has raised ethical issues regarding privacy and the appropriate uses of the resulting information. For these reasons, governmental authorities may limit or otherwise regulate the use of genetic testing, including the MaterniT21 PLUS test, or prohibit testing for genetic predisposition to certain conditions, particularly for those that have no known cure. Such concerns may lead individuals to refuse to use genetics tests even if permitted and may lead to negative public relations. Any of these scenarios could reduce the potential markets for our products and services, which would seriously harm our business, financial condition, and results of operations.

If the validity of an informed consent from a subject was to be challenged, we could be forced to stop using some of our resources, which would hinder our diagnostic product development efforts.

We have measures in place to ensure that all clinical data and genetic and other biological samples that we receive from our clinical collaborators have been collected from subjects who have provided appropriate informed consent for the data and samples provided for purposes which extend to include commercial diagnostic product and test development activities. We have measures in place to ensure that data and samples that have been collected by our clinical collaborators are provided to us on a subject de-identified manner. We also have measures in place to ensure that the subjects from whom our data and samples are collected do not retain or have conferred on them any proprietary or commercial rights to the data or any discoveries derived from them. Our clinical collaborators are based in a number of different countries, and, to a large extent, we rely upon our clinical collaborators for appropriate compliance with the subject's informed consent provided and with local law and international regulation. That our data and samples come from and are collected by entities based in different countries results in complex legal questions regarding the adequacy of informed consent and the status of genetic material under a large number of different legal systems. The subject's informed consent obtained in any particular country could be challenged in the future, and those informed consents could prove invalid, unlawful or otherwise inadequate for our purposes. Any findings against us, or our clinical collaborators, could deny us access to or force us to stop using some of our clinical samples, which would hinder our diagnostic product and test development efforts. We could become involved in legal challenges, which could consume our management and financial resources.

If we cannot obtain licenses to patented genetic markers and genes relevant to our diagnostic areas of interest, we could be prevented from obtaining significant revenues or becoming profitable.

The USPTO has issued patents claiming single SNP and gene discoveries and their related associations and functions. The law is evolving and the validity of those types of patents has been and continues to be unclear. If certain SNPs and genes are patented, the validity of such patents is unclear and it is uncertain whether we may need to obtain rights to those SNPs and genes to develop, use, and sell related assays and other types of products or services utilizing such SNPs and genes. Required licenses may not be available on commercially acceptable terms. If we were to fail to obtain licenses to certain patented SNPs and genes claimed under valid patents, we might never achieve significant revenues from our diagnostic product development.

We may not be able to successfully adapt or maintain our products for commercial applications.

A number of potential applications of our technology and potential products and tests, including diagnostic applications for noninvasive prenatal and other molecular testing, may require significant enhancements in our core technology or the in-licensing of intellectual property rights or technologies. In connection with developing new products and applications, we may not effectively deploy our research and development efforts in a cost-efficient manner or otherwise in a manner that leads to the successful commercialization and scale-up of such products and applications. If we are not successful enhancing our technology or the in-licensing of technology our products or tests may not achieve or maintain a significant level of market acceptance, and our business, financial condition and results of operations could be seriously harmed.

We may not be able to successfully compete in the diagnostic industry.

The diagnostic industry is highly competitive. We expect to compete with a broad range of companies in the U.S. and other countries that are engaged in the development and production of products, tests, applications, services, and strategies to develop and commercialize diagnostic, noninvasive prenatal diagnostic, oncology and other products and tests for customers in the molecular medicine fields as well as diagnostic service laboratories and customers in other markets. They include:


•	biotechnology, diagnostic, and other life science companies;


•	academic and scientific institutions;


•	governmental agencies; and


•	public and private research organizations.

Some of our competitors and/or potential competitors have greater financial, technical, research, marketing, sales, distribution, operations, service, and other resources than we do. Our competitors may offer broader product lines and services

and have greater name recognition than we do. Several companies are currently offering, making, or developing products and tests that compete with our tests. Our competitors may develop or market technologies, tests or products that are more effective or commercially attractive than our current or future tests or products that may render our technologies or products or tests obsolete or that have superior intellectual property rights. We have limited experience in the field of oncology and we cannot guarantee that our research and development activities will be successful in developing any marketable oncology testing service.

If we do not effectively manage our business as it grows and evolves, it could affect our internal operations as well as our ability to pursue opportunities and expand our business.

As our development and commercialization plans and strategies develop, we expect to expand our employee base for managerial, operational, sales, marketing, financial and other resources. Future growth would impose significant added responsibilities on members of management, including the need to identify, recruit, maintain, motivate and integrate additional employees. Also, our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure and may impact our ability to maintain effective internal controls for financial reporting. In addition, evolution in our business, particularly our transition to developing and commercializing molecular diagnostic tests, has placed and may continue to place a significant strain on our personnel, facilities, management systems, information technology infrastructure, disclosure controls, internal controls and resources. If we fail to effectively manage the evolution of our business and the transition to also being a provider of diagnostic products and tests, or fail to take other necessary action to maintain close coordination among our various departments, our ability to execute on our business plan, maintain our credibility, pursue business opportunities, maintain and expand our business, and sell our products and tests in new markets may be adversely affected.

We may not successfully complete the sale, or acquisition of, or merger, or joint venture with businesses that we desire to acquire, merge, or partner with.

We may acquire additional businesses or technologies, merge or form joint ventures with other businesses, or enter into other strategic transactions. Managing and completing future acquisitions, mergers, joint ventures, sales, or other strategic transactions entails numerous operational and financial risks, including:


•	the inability to retain key employees of any acquired or merged businesses or hire enough qualified personnel to staff any new or expanded operations;


•	the impairment of relationships with key customers of acquired or merged businesses due to changes in management and ownership of the acquired or merged businesses;


•	the inability to sublease on financially acceptable terms excess leased space or terminate lease obligations of acquired or merged businesses that are not necessary or useful for the operation of our business;


•	the exposure to federal, state, local and foreign tax liabilities in connection with any acquisition or merger or the integration of any acquired or merged businesses;


•	the exposure to unknown liabilities or disputes with the former stakeholders or management or employees of acquired or merged businesses;


•	higher than expected acquisition or merger and integration expenses that would cause our quarterly and annual operating results to fluctuate;


•	increased amortization expenses if an acquisition or merger results in significant intangible assets;


•	combining the operations and personnel of acquired businesses with our own, which would be difficult and costly;


•	disputes over rights to acquired or accessed technologies or with licensors or licensees of those technologies; and


•	integrating or completing the development and application of any acquired or accessed technologies, which would disrupt our business and divert management's time and attention.

We may also attempt to acquire businesses or technologies, merge businesses or form joint ventures, or attempt to enter into strategic transactions that we are unable to complete. If we are unable to complete such transactions, we may expend substantial resources and ultimately not successfully complete the transaction. Such transactions may also distract management and result in other adverse effects on our business and operations. These transactions may also involve the issuance of shares of our capital stock, which may result in dilution to our stockholders.

We may potentially compete with our customers or licensees, which may adversely affect our business.

We have entered into diagnostic test services agreements and license agreements, for the MaterniT21 PLUS test, substantially similar tests, and other test services. Some of these contractual partners send patient samples to Sequenom Laboratories for test services and other partners perform the testing in their own laboratory or plan to do so in the future. In addition, we expect more third-party laboratories will license the pooled intellectual property created as a result of the Pooled Patents Agreement. Although there are many potential business opportunities, our customers and licensees may seek diagnostic

testing service business from clients or potential clients that we already have as clients or have chosen to pursue. In such cases we will likely compete against our customers or licensees. Competition from our customers or licensees may adversely affect our business or our ability to successfully commercialize our diagnostic testing services.

If we cannot attract and retain highly-skilled personnel, our growth might not proceed as rapidly as we intend and our business may be adversely affected.

The success of our business will depend on our ability to identify, attract, hire, train, retain, maintain, and motivate highly skilled personnel, particularly sales, scientific, medical, laboratory, CLIA laboratory, and technical personnel, for our future success. Competition for highly skilled personnel is intense, in particular for licensed laboratory technicians in the state of California, and we might not succeed in attracting and retaining these employees. If we cannot attract and retain the personnel we require, we would not be able to expand our business as rapidly as we intend. When we seek to hire personnel to fill open positions, we may be unable to hire qualified replacements for the positions that we need to fill, and there may be significant costs associated with the recruiting, hiring and retention of officers and employees for the open positions. The market price of our common stock has decreased over time, which has reduced the retention value of many of our prior equity awards made to our employees and officers. If we lose key employees, officers, scientists, physician collaborators or if our management team is not able to effectively manage us through these events, our business, financial condition, and results of operations may be adversely affected. We do not carry “key person” insurance covering any of our officers or other employees.

Our success is dependent on the performance of our executive officers and key employees, and any accident or disability suffered by an executive officer or key employee could adversely impact our business.

Our business and operations are substantially dependent on the performance of our executive officers and key employees. If an executive officer is incapacitated or disabled by accident, sickness or otherwise so as to render such individual mentally or physically incapable of performing the services and duties required to be performed by such individual, it may adversely impact our results of operations and financial condition.

We incur significant costs as a result of operating as a public company and our management expects to continue to devote substantial time to public company compliance programs.

As a public company, we incur significant legal, accounting and other expenses due to our compliance with regulations and disclosure obligations applicable to us, including compliance with the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as rules implemented by the SEC and The NASDAQ Stock Market. The SEC and other regulators have continued to adopt new rules and regulations and make additional changes to existing regulations that require our compliance. In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that have required the SEC to adopt additional rules and regulations in these areas. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact (in ways we cannot currently anticipate) the manner in which we operate our business. Our management and other personnel devote a substantial amount of time to these compliance programs and monitoring of public company reporting obligations and, as a result of the new corporate governance and executive compensation related rules, regulations and guidelines prompted by the Dodd-Frank Act and further regulations and disclosure obligations expected in the future, we will likely need to devote additional time and costs to comply with such compliance programs and rules. These rules and regulations will continue to cause us to incur significant legal and financial compliance costs and will make some activities more time-consuming and costly.

We are subject to risks associated with our foreign business activities.

We expect that a portion of our sales will continue to be made outside the U.S. Revenues from our international licensees increased during the year ended December 31, 2014. A successful international effort will require us to develop relationships with international customers and collaborators, including licensees and distributors. We may not be able to identify, attract, retain, or maintain suitable international customers or collaborators. Expansion into international markets may require us to hire additional personnel to develop relationships with foreign customers and collaborators, licensees or distributors and maintain good relations with our foreign customers and collaborators, licensees or distributors. International business activities include many of the same risks to our business that affect our domestic operations, but also involve a number of risks not typically present in domestic operations, including:


•	currency fluctuation risks;


•	changes in regulatory requirements;


•	licenses, tariffs, and other trade barriers;


•	political and economic instability and possible country-based boycotts;


•	potentially adverse tax consequences;


•	compliance with the Foreign Corrupt Practices Act and other countries’ anti-corruption laws;


•	the burden of complying with a wide variety of complex foreign laws and treaties; and


•	different rules, regulations, and policies governing intellectual property protection and enforcement.

Our international business is subject to additional laws and regulations that could result in increased operational costs and risk. For example, the European Union, or EU, is currently in the midst of reviewing updates to the EU Privacy Directive that would result in additional requirements and costs if passed, such as the appointment of a dedicated privacy officer and increased civil and criminal penalties in the event of any loss or unauthorized disclosure of private information related to any resident of the EU.

We must be in compliance with state and federal security and privacy regulations, which may increase our operational costs.

The privacy and security regulations under HIPAA establish comprehensive federal standards with respect to the uses and disclosures of protected heath information, or PHI, by health plans and health care providers, in addition to setting standards to protect the confidentiality, integrity and availability of electronic PHI. The regulations establish a complex regulatory framework on a variety of subjects, including, without limitation:


•	the circumstances under which uses and disclosures of PHI are permitted or required without a specific authorization by the patient, including but not limited to treatment purposes, to obtain payments for services and health care operations activities;


•	a patient's rights to access, amend and receive an accounting of certain disclosures of PHI;


•	the content of notices of privacy practices for PHI; and


•	administrative, technical and physical safeguards required of entities that use or receive PHI electronically.

The Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, which became effective on February 17, 2010, makes HIPAA's privacy and security standards directly applicable to “business associates”-independent contractors or agents of covered entities that have access to protected health information in connection with providing a service on behalf of a covered entity. We are a covered entity and also a business associate of our covered entity customers. Among other things, HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney's fees and costs associated with pursuing federal civil actions.

As we expand our business we must continue to implement policies and procedures related to compliance with the HIPAA privacy and security regulations, as required by law, which may increase our operational costs. Furthermore, the privacy and security regulations provide for significant fines and other penalties for wrongful use or disclosure of PHI, including potential civil and criminal fines and penalties. We have evaluated the security of our computer networks and determined that appropriate measures are in place to safeguard PHI contained on such networks. However, no security system is invulnerable to breach, and unauthorized persons may in the future be able to exploit weaknesses in the security systems of our computer networks and gain access to such PHI. Additionally, we share PHI with third-party contractors who are contractually obligated to safeguard and maintain the confidentiality of PHI. Unauthorized persons may be able to gain access to PHI stored in such third-party contractors' computer networks. Any wrongful use or disclosure of PHI by us or our third-party contractors, including disclosure due to data theft or unauthorized access to our or our third-party contractors' computer networks, could subject us to fines or penalties that could adversely affect our business and results of operations. Although the HIPAA statute and regulations do not expressly provide for a private right of damages, we also could incur damages under state laws to private parties for the wrongful use or disclosure of confidential health information or other private personal information by us or our third-party contractors.

In addition, different states and foreign nations, such as the EU, also impose certain requirements on the collection of all types of personal information. For example, the European Union Privacy Directive requires that we adhere to certain “safe harbor” requirements with respect to any personal information of a European resident or customer while various states in the U.S. have implemented equally restrictive requirements, such as 201 CMR 17.00, which requires that any company that obtains personal information of any resident of the Commonwealth of Massachusetts implement and maintain a security program that adequately protects such information from unauthorized use or disclosure. As a business that operates both internationally and across all fifty states, any wrongful use or disclosure of personally identifiable information, even if it does not constitute PHI, by us or our third-party contractors, including disclosure due to data theft or unauthorized access to our or our third-party contractors' computer networks, could subject us to fines or penalties that could adversely affect our business and results of operations, including the cost of providing credit monitoring and identity theft prevention services to affected consumers and loss of EU Safe harbor certification.

Security threats to our IT infrastructure and/or our physical buildings could expose us to liability, and damage our reputation and business.

It is essential to our business strategy that our technology and network infrastructure and our physical buildings remain secure and are perceived by our customers and corporate partners to be secure. Despite security measures, however, any network infrastructure may be vulnerable to cyber-attacks by hackers and other security threats. As a leader in the field of molecular diagnostic testing and genetics analysis, we may face cyber-attacks that attempt to penetrate our network security, including our data centers, to sabotage or otherwise disable our research, products and services, misappropriate our or our customers' and partners' proprietary information, which may include personally identifiable information, or cause interruptions of our internal systems and services. Despite security measures, we also cannot guarantee security of our physical buildings. If successful, physical building penetration or any cyber-attacks could negatively affect our reputation, damage our network infrastructure and our ability to deploy our products and services, and harm our relationship with customers and partners that are affected, and expose us to financial liability. We maintain cyber security risk insurance coverage, however any uncovered claim or a claim in excess of our insurance coverage would have to be paid out of our cash reserves, which could have a detrimental effect on our financial condition. It is difficult to determine whether we have sufficient insurance coverage to cover potential claims. Also, we may not be able to procure or maintain insurance policies with desirable levels of coverage on commercially acceptable terms, or at all. We can provide no assurance that we will be able to avoid significant claims, which could hurt our reputation and our financial condition.

We may not have adequate insurance if we become subject to product liability or other claims.

Our business exposes us to potential product liability and other types of claims and our exposure will increase as we and Sequenom Laboratories and our partners and collaborators expand commercialization of our tests including the MaterniT21 PLUS test. We have product and general liability insurance that covers us against specific product liability and other claims up to an annual aggregate limit of $30.0 million and $2.0 million, respectively. Any claim in excess of our insurance coverage would have to be paid out of our cash reserves, which would have a detrimental effect on our financial condition. It is difficult to determine whether we have obtained sufficient insurance to cover potential claims. Also, we cannot assure you that we can or will maintain our insurance policies on commercially acceptable terms, or at all. We can provide no assurance that we will be able to avoid significant product liability claims, which could hurt our reputation and our financial condition.

Responding to claims relating to improper handling, storage or disposal of hazardous chemicals, and radioactive and biological materials that we use could be time consuming and costly.

We use controlled hazardous and radioactive materials in the conduct of our business, as well as biological materials that have the potential to transmit disease. The risk of accidental contamination or injury from these materials cannot be completely eliminated. If an accident with these substances occurs, we could be liable for any damages that result, which could seriously harm our business. Additionally, an accident could damage our research and manufacturing facilities and operations, resulting in delays and increased costs. Such damage and any expense resulting from delays, disruptions, or any claims may not be covered by our insurance policies.

Hostile takeover bids and unsolicited offers could adversely impact our value and cause the trading price of our common stock to fall.

The current economic environment may encourage potential acquirers to make unsolicited and under-priced offers to acquire our business. If we are the target of a hostile takeover bid or unsolicited offer that undervalues our company, such hostile takeover bid or unsolicited offer may adversely impact public perception of the value of our company, which could cause the trading price of our common stock to fall. In addition, such hostile takeover bids or unsolicited offers may distract management and result in other adverse effects on our business and operations.

Our stock price has been and may continue to be volatile, and your investment could suffer a decline in value.

The trading price of our common stock has been volatile and could be subject to wide fluctuations in price in response to various factors, many of which are beyond our control, including but not limited to:


•	our ability to generate cash flow and continue as a going concern;


•	actual or anticipated variations in quarterly and annual operating results;


•	announcements regarding technological innovations, intellectual property rights, the outcome of patent litigation, research and development progress or setbacks, or product launches by us or our competitors;


•	our success in entering into, and the success in performing under, licensing and product and test development and commercialization agreements with others;


•	the success of validation studies for tests under development and our ability to continue to publish study results in peer-reviewed journals;


•	our success in and the expenses associated with researching, developing, commercializing, and obtaining reimbursement for diagnostic products and tests, alone or in collaboration with our partners and obtaining any required regulatory approval for those products and tests;


•	the status of litigation against us; and


•	securities analysts' earnings projections or recommendations, third-party research recommendations, or general market conditions.

The stock market in general, The NASDAQ Global Select Market, and the market for life sciences companies in particular, have experienced extreme price and volume fluctuations that may have been unrelated or disproportionate to the operating performance of the listed companies. These price fluctuations may be rapid and severe and may leave investors little time to react. Broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance, and may expose us to potential securities class-action litigation.

We have in the past identified material weaknesses in our internal control over financial reporting which could, if not effectively remediated, result in additional material misstatements in our financial statements.

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. As disclosed in Item 9A of our 2012 Annual Report on Form 10-K, management identified material weaknesses in our internal control over financial reporting. A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As a result of these material weaknesses in conjunction with the 2012 Annual Report, our management concluded at that time that our internal control over financial reporting was not effective based on criteria set forth by the Committee of Sponsoring Organization of the Treadway Commission in Internal Control-An Integrated Framework. In 2013, we implemented a remediation plan designed to address these material weaknesses. If our remedial measures are insufficient to address the material weaknesses, or if additional material weaknesses or significant deficiencies in our internal control are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results, which could lead to substantial additional costs for accounting and legal fees.


Item 1B.	UNRESOLVED STAFF COMMENTS

None.

Item 2. PROPERTIES

We are headquartered in San Diego, California and have laboratory locations in San Diego, California, Grand Rapids, Michigan, and Raleigh-Durham, North Carolina. Collectively, we lease or sublease approximately 193,000 square feet under leases that expire at various dates through September 2025, each of which contains laboratory, office, R&D or storage facilities.

The San Diego site is our company headquarters and houses our selling, general and administrative offices, and research and development facilities. The San Diego site consists of three buildings. One of the buildings, which was added in early 2013, is vacant. The lease expires in July 2015 and is currently marketed by us for sublease. We sublease through January 1, 2016, a portion of another San Diego building from the company that purchased our Bioscience segment in 2014.

Locations in Grand Rapids, Michigan, Raleigh-Durham, North Carolina, and San Diego, California, house our CLIA-certified, CAP-accredited molecular diagnostics laboratory and selling, general and administrative offices. We believe our facilities are adequate for our current needs.

Item 3. LEGAL PROCEEDINGS

Patent Litigation

In December 2011, we were named as a defendant in a complaint filed by plaintiff Aria Diagnostics, Inc., in the U.S. District Court for the Northern District of California, case no. 3:11-cv-06391-SI. Since the complaint was filed, Aria changed its name to Ariosa Diagnostics, Inc., or Ariosa. In the complaint, the plaintiff seeks a judicial declaration that no activities related to the plaintiff's noninvasive, prenatal test using cell-free DNA circulating in the blood of a pregnant woman do or will infringe any claim of U.S Patent No. 6,258,540 entitled Noninvasive Prenatal Diagnosis, or the '540 Patent, which was exclusively in-licensed from Isis prior to September 30, 2014, when we purchased the patent from Isis. In March 2012, we filed an answer to the complaint and asserted counterclaims that Ariosa is infringing the '540 Patent and seeking unspecified damages and injunctive relief. Our counterclaims name Isis as a nominal counter-defendant for purposes of subject matter jurisdiction only. With the purchase of the '540 Patent, we will seek to dismiss Isis from the lawsuit as soon as practicable. In

March 2012, Ariosa responded to our answer and counterclaims and asserted affirmative defenses including invalidity of the '540 Patent under U.S. patent laws. In March 2012, we filed a motion against Ariosa for preliminary injunctive relief. On July 5, 2012, the Court denied our motion for preliminary injunctive relief and on July 16, 2012, we filed a Notice of Appeal to the U.S. Court of Appeals for the Federal Circuit (CAFC) from the order denying the preliminary injunction motion. On August 9, 2013, the CAFC vacated and remanded the District Court’s decision, ruling that the District Court incorrectly interpreted the claims of the ‘540 Patent and improperly balanced factors regarding issuance of a preliminary injunction. On August 16, 2013, Ariosa filed a motion for summary judgment in favor of Ariosa on our counterclaim for patent infringement on the ground that the claims of the ‘540 Patent are invalid because they are not drawn to patent-eligible subject matter under the patent code, Title 35 U.S.C. § 101. On October 16, 2013, the District Court issued its order on the interpretation of the claims of the patent. On October 30, 2013, the District Court issued its order granting Ariosa’s motion for summary judgment, finding that the’540 Patent is invalid under Title 35 U.S.C. §101. The Company disagrees with the Order and has appealed the decision to the U.S. Court of Appeals for the Federal Circuit. We intend to vigorously defend against the judicial declarations sought by Ariosa in its complaint and intend to vigorously pursue our claims against Ariosa for damages and injunctive relief. However, the Company cannot predict the outcome of this matter.

In addition, Ariosa has sought to invalidate the ‘540 Patent through a petition for inter parties review ("IPR") (Case IPR2012-00022 (MPT)) under 35 U.S.C. section 312 and 37 C.F.R. section 42.108, before the Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (USPTO). Trial of the IPR was held before the PTAB on January 24, 2014. The PTAB issued a Decision in the IPR on September 2, 2014, invalidating some claims but upholding the validity of other claims. Both we and Ariosa have requested reconsideration of the PTAB decision.

In January 2012, we were named as a defendant in a complaint filed by plaintiff Natera, a Delaware corporation, in the U.S. District Court for the Northern District of California, case no. 3:12-cv-00132-SI. In the complaint, the plaintiff seeks a judicial declaration that (i) activities related to the plaintiff's noninvasive, prenatal paternity test do not directly or indirectly infringe any claim of the '540 Patent, and (ii) one or more claims of the '540 Patent are invalid for failure to comply with the requirements of the patent laws of the U.S. In April 2012, we filed an answer to the complaint and asserted counterclaims that Natera and DNA Diagnostics Center, Inc., or DDC, are infringing the '540 Patent based on their activities relating to noninvasive prenatal paternity testing and noninvasive prenatal aneuploidy testing and seeking unspecified damages and injunctive relief. Our counterclaims named Isis as a nominal counter-defendant for purposes of subject matter jurisdiction only and we seek to dismiss Isis as soon as practicable now that we have purchased the '540 patent from Isis. On October 16, 2013 the District Court issued its order on the interpretation of the patent claims. Many of the ‘540 Patent claims asserted against Natera are the same claims that were invalidated by the same District Court on October 30, 2013 in the litigation involving Ariosa, set forth above, and we and Natera stipulated to final judgment on the '540 patent claims in this case and have appealed the patent invalidity determination to the U.S. Court of Appeals for the Federal Circuit, which has consolidated the Ariosa, Natera, and Verinata case appeals. We intend to vigorously defend against the judicial declarations sought by Natera in its complaint and intend to vigorously pursue our claims against Natera for damages and injunctive relief. However, we cannot predict the outcome of this matter.

In February 2012, we and Sequenom Center for Molecular Medicine, LLC, were named as defendants in a complaint filed by plaintiffs Verinata Health, Inc., or Verinata, and The Board of Trustees of the Leland Stanford Junior University, or Stanford, in the U.S. District Court for the Northern District of California, case no. 3:12-cv-00865-SI. Verinata was acquired by Illumina, Inc. in 2013. In the complaint (i) Verinata seeks a judicial declaration that activities related to its noninvasive prenatal test using cell-free DNA circulating in the blood of a pregnant woman do not directly or indirectly infringe any claim of the '540 Patent, which at the time was exclusively in-licensed from Isis but has since been purchased from Isis, (ii) Verinata seeks a judicial declaration that each claim of the '540 Patent is invalid for failure to comply with the requirements of the patent laws of the U.S., and (iii) Verinata and Stanford allege that we and Sequenom Center for Molecular Medicine, by performing our noninvasive prenatal MaterniT21 test, have and continue to directly infringe U.S. Patent No. 8,008,018, or the '018 Patent, entitled Determination of Fetal Aneuploidies by Massively Parallel DNA Sequencing and U.S. Patent No. 7,888,017, or the '017 Patent, entitled Noninvasive Fetal Genetic Screening by Digital Analysis, each of which have been exclusively licensed to Verinata by Stanford and seek unspecified damages. In March 2012, we filed an answer to the complaint and asserted counterclaims that Verinata is infringing the '540 Patent and seeking unspecified damages and injunctive relief. Our counterclaims name Isis as a nominal counter-defendant for purposes of subject matter jurisdiction only. In June 2012, plaintiffs Verinata and Stanford amended their complaint and allege that we and Sequenom Center for Molecular Medicine, by performing its noninvasive prenatal MaterniT21 PLUS test, have and continue to directly infringe U.S. Patent No. 8,195,415, or the '415 Patent, entitled Noninvasive Diagnosis of Fetal Aneuploidy by Sequencing, which has been exclusively licensed to Verinata by Stanford and seek unspecified damages. In July 2012, we filed an answer to the complaint.

On October 16, 2013, the District Court issued its order on the interpretation of the ‘540 Patent, ‘018 Patent, ‘017 Patent, and ‘415 Patent claims. Many of the ‘540 Patent claims asserted against Verinata are the same claims that were invalidated by the same District Court on October 30, 2013 in the litigation involving Ariosa, set forth above, and we and Verinata stipulated to final judgment on the ‘540 patent claims in this case and have appealed the patent invalidity determination to the U.S. Court

of Appeals for the Federal Circuit. The District Court set trial beginning February 23, 2015 on the ‘018, ‘017, and ‘415 Patents. On December 2, 2014, Sequenom and Verinata reached a settlement that resolved litigation between them involving the ‘540 Patent, ‘018 Patent, ‘017 Patent, and ‘415 Patent, and all litigation between Sequenom and Verinata related to these patents is now dismissed. As part of that settlement, rights to the ‘540 Patent, ‘018 Patent, ‘017 Patent, and ‘415 Patent, along with other U.S. and foreign patents and pending applications, are now pooled under the Pooled Patents Agreement between Illumina (who acquired Verinata) and us. We and Verinata are now licensees to the patent rights that are pooled under the Pooled Patents Agreement.

On March 12, 2013 the U.S. Patent and Trademark Office, or USPTO, declared a patent interference (Patent Interference No. 105,920 (DK)) between Verinata's '018 Patent, which Verinata had asserted against us in the litigation, and our then in-licensed (from CUHK) pending patent application no. 13/070,275 (publication no. US2011/0318734 entitled “Diagnosing Fetal Chromosomal Aneuploidy Using Massively Parallel Genomic Sequencing”). Two related patent interferences (Patent Interference Nos. 105,923 and 105,924 (DK)) were declared by the USPTO between patent applications related to the patent and application in the ‘920 Interference. On April 7, 2014, the USPTO concluded the interferences, ruling that Verinata’s ‘018 Patent and related patent application lacked sufficient disclosure to meet the written description requirement for the patent claims, and entered judgment canceling all four of the ‘018 patent claims in the interference and the involved claims of the related patent application. Verinata has appealed the USPTO’s decision to the U.S. District Court for the Northern District of California. The District Court had set trial to beginning February 23, 2015 on the appeal from the ‘920, ‘923 and ‘924 interferences but has now stayed all proceedings indefinitely. On December 2, 2014, the involved patents and applications were added to the patent pool. We are not a party to the District Court proceedings.

On May 3, 2013, the USPTO declared a patent interference (Patent Interference No. 105,922 (DK)) between Verinata's '415 Patent, which Verinata has asserted against us in the litigation, and our then in-licensed (from CUHK) pending patent application no. 13/070,266 (publication no. US2012/0003637 entitled “Diagnosing Fetal Chromosomal Aneuploidy Using Massively Parallel Genomic Sequencing”). On April 7, 2014, the USPTO ruled that the pending patent application no. 13/070,266 has sufficient disclosure to meet the written description requirement for the patent claims and ordered the interference to proceed to the priority phase to determine which inventors were the first to invent the subject matter of the interference and entitled to a patent on that subject matter. We also separately challenged the validity of Verinata’s ‘415 Patent in an inter partes review proceeding before the USPTO (Case IPR 013-00390). The USPTO recently issued a decision in the ‘922 Interference and the ‘415 Patent IPR upholding the validity of the ‘415 patent. Pursuant to the terms of our settlement with Verinata, we will not appeal these decisions.

On September 29, 2014 and October 1, 2014 two unknown third parties initiated Opposition Proceedings against European Patent EP2183693 B1, entitled “Diagnosing Fetal Chromosomal Aneuploidy Using Genomic Sequencing,” in the European Patent Office. This patent was previously in-licensed by us from CUHK but has since been added to the patent pool under the Pooled Patents Agreement. We have rights to this patent under the patent pool but we no longer control efforts to defend this patent in the Opposition Proceedings.

In addition, from time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business, including claims related to our products, tests, and services, including our LDT services. These other matters are, in the opinion of management, immaterial with respect to our consolidated financial position, liquidity, or results of operations.

Claim estimates that are probable and can be reasonably estimated are reflected as liabilities. Because of the uncertainties related to our pending litigation, investigations, inquiries or claims, management is currently unable to predict the ultimate outcome of any litigation, investigation, inquiry or claim, determine whether a liability has been incurred, or make an estimate regarding the possible loss or range of loss that could result from an unfavorable outcome. It is reasonably possible that some of the matters, which are pending or may be asserted, could be decided unfavorably to us. An adverse ruling or outcome in any lawsuit involving us could materially affect our business, liquidity, consolidated financial position or results of operations ability to sell one or more of our products or could result in additional competition. In view of the unpredictable nature of such matters, we cannot provide any assurances regarding the outcome of any litigation, investigation, inquiry or claim to which we are a party or the impact on us of an adverse ruling of such matters.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Table of Contents

PART II


Item 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is traded on The NASDAQ Global Select Market under the symbol “SQNM.” The following tables set forth the high and low sales prices for the Company's common stock as reported on The NASDAQ Global Select Market for the periods indicated.



	High		Low
Year ended December 31, 2014:
Fourth Quarter	$	4.19	$	2.74
Third Quarter	$	4.17	$	2.92
Second Quarter	$	3.98	$	2.36
First Quarter	$	2.80	$	2.02
Year ended December 31, 2013:
Fourth Quarter	$	2.89	$	1.65
Third Quarter	$	4.90	$	2.58
Second Quarter	$	4.56	$	3.42
First Quarter	$	5.36	$	3.95

Holders

There were approximately 255 holders of record of our common stock as of March 3, 2015.

Dividends

We have never paid cash dividends and do not anticipate any being paid in the foreseeable future. The indentures for our 5.00% Convertible Senior Notes due 2017, which notes are convertible into cash and in certain circumstances, shares of our common stock, require us to increase the conversion rate applicable to the notes if we pay any cash dividends.

Securities Authorized for Issuance Under Equity Compensation Plans

A description of our equity compensation plans is set forth in "Note. 8 Stock Compensation Plans" to the consolidated financial statements included elsewhere in this Annual Report.

Performance Graph*

The following graph compares the cumulative total stockholder return on our common stock between December 31, 2009 and December 31, 2014 with the cumulative total return of (i) the NASDAQ Biotechnology Index (ii) the NASDAQ Composite Index and (iii) NASDAQ Global Select Index, over the same period.

* This section is not “soliciting material”, is not deemed “filed” with the SEC and is not to be incorporated by reference in any of our filing under the Securities Act of 1933 or the Securities Exchange Act of 1934 whether made before or after the date hereof without regard to any general incorporation language in any such filing.

Item 6. SELECTED FINANCIAL DATA

The following table presents our selected historical condensed consolidated financial data. The consolidated statements of operations data for each of the three fiscal years ended December 31, 2014, 2013 and 2012 and the consolidated balance sheet data as of December 31, 2014 and 2013 are derived from our audited consolidated financial statements included elsewhere in this Annual Report.

The consolidated statements of operation data for the fiscal year ended December 31, 2011 and 2010 and the consolidated balance sheet data as of December 31, 2012, 2011 and 2010 are derived from unaudited financial statements that are not included in this Form 10-K.

The selected historical consolidated balance sheet and operating data presented below should be read in conjunction with the consolidated financial statements and the notes to such statements and “Management's Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report. Historical results are not necessarily indicative of the results to be expected in the future.



	Years ended December 31,
(in thousands, except per share data)	2014			2013			2012			2011			2010
Consolidated Statements of Operations Data:
Diagnostic services revenue, net	$	151,569		$	119,556		$	46,457		$	8,319		$	2,554
Cost of diagnostic services revenue	83,475			87,302			47,283			10,031			3,965
Gross margin	$	68,094		$	32,254		$	(826	)	$	(1,712	)	$	(1,411	)
Restructuring costs⁽¹⁾	$	1,907		$	5,753		$	—		$	—		$	—
Litigation settlement, net⁽²⁾	$	—		$	—		$	—		$	—		$	55,384
Gain on pooled patents agreement⁽³⁾	$	22,850		$	—		$	—		$	—		$	—
Loss from continuing operations	$	(14,364	)	$	(109,567	)	$	(117,291	)	$	(79,815	)	$	(125,502	)
Earnings from discontinued operations⁽⁴⁾	$	15,376		$	2,161		$	262		$	5,681		$	4,658
Net earnings (loss)	$	1,012		$	(107,406	)	$	(117,029	)	$	(74,134	)	$	(120,844	)
Net earnings (loss) per share, basic and diluted	$	0.01		$	(0.93	)	$	(1.03	)	$	(0.75	)	$	(1.69	)
	As of December 31,
	2014			2013			2012			2011			2010
Consolidated Balance Sheet Data:
Cash, cash equivalents, and marketable securities	$	93,897		$	71,257		$	175,942		$	84,216		$	136,884
Working capital	65,687			51,893			141,194			132,088			127,096
Total assets	161,071			128,920			232,903			174,279			159,269
Total long-term obligations, net of current portion⁽⁵⁾	135,602			139,642			147,041			14,375			3,561
Total stockholders' (deficit) equity⁽⁶⁾	(31,164		)	(46,503		)	48,007			91,388			143,694

___________________________________________

(1)

Restructuring costs during the year ended December 31, 2014 were $1.9 million based on management's reassessment of the liability related to our vacated facility. Restructuring costs during the year ended December 31, 2013 represent $2.4 million in facility exit costs, $1.7 million of impairment expense for tenant improvements associated with the vacated facility, $0.7 million of impairment expense for intangible assets and prepaid royalties related to our RetnaGene AMD LDT licensed technology, and $1.0 million in employee termination costs.


(2)	Litigation settlement expense, net, during the year ended December 31, 2010 of $55.4 million represents $0.3 million paid in cash and the issuance of 7.0 million shares of our common stock with an aggregate fair value of $55.1 million in settlement of consolidated class action securities lawsuits and payment of related plaintiffs' attorneys' fees.


(3)	In December 2014, we entered into a Pooled Patents Agreement with Illumina, to pool our intellectual property for noninvasive prenatal testing. Of the aggregate $50 million consideration we recognized $22.9 million as a gain in the 4th quarter of 2014.


(4)	In May 2014, we sold our Biosciences business, which had been under review for strategic alternatives. As a result of this sale our Bioscience segment has been excluded from continuing operations and reported as discontinued operations.


(5)	In September 2012, we issued $130.0 million aggregate principal amount of 5.00% Convertible Senior Notes due 2017 and received net proceeds of $124.7 million.

(6)

In January 2012, we completed an underwritten public offering of 14.95 million shares of our common stock for $4.15 per share, resulting in net proceeds of $58.2 million. During the year ended December 31, 2010 we completed an underwritten public offering and a private placement of 16.1 million and 12.4 million shares of our common stock for $6.00 per share and $4.15 per share, respectively, resulting in net proceeds of $90.6 million and $47.8 million, respectively.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide the reader of the Company’s financial statements with a narrative from the perspective of management on the Company’s financial condition, results of operations, liquidity and certain other factors that may affect future results. The MD&A should be read in conjunction with our consolidated financial statements and accompanying notes to such statements included elsewhere in this report. This discussion and analysis may contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, such as those set forth under the heading “Risk Factors,” and elsewhere in this Annual Report.

All references to 2014, 2013 and 2012 refer to our calendar years ended December 31.

Company Overview

We are a life sciences company committed to enabling healthier lives through the development of innovative products and services. We serve patients and physicians by providing early patient management information. We offer our services in the U.S. and globally with international emphasis in countries in the European and Asia-Pacific regions. We conduct our business in one operating segment, Sequenom Laboratories.

Sequenom Laboratories provides molecular based laboratory developed tests, with a focus principally on prenatal care. Sequenom Laboratories is a CAP (College of American Pathologists) accredited and CLIA (Clinical Laboratory Improvements Amendment of 1988, as amended) certified molecular diagnostics laboratory that develops, validates and exclusively offers tests branded under the names MaterniT21® PLUS, HerediT™, SensiGene® and VisibiliT™. These genetic tests, offered as a testing service to physicians for the benefit of their patients, provide early patient management information for obstetricians, geneticists, and maternal fetal medicine specialists.

On May 30, 2014, we completed the sale of our Bioscience business to BioSciences Acquisition Company which purchased substantially all of the assets used in what we previously reported as our Bioscience business segment. With this divestiture, we now operate in a single business segment.

As a result of the Bioscience segment sale, we have retrospectively revised the consolidated statements of operations for the years ended December 31, 2013 and 2012, the consolidated statements of cash flows for the years ended December 31, 2013 and 2012, and the consolidated balance sheet as of December 31, 2013, to reflect the financial results from the Bioscience business segment, and the related assets and liabilities, as discontinued operations.

Our strategic focus for 2015 will be to achieve cash flow from operations which is no less than negative $15 million, up to positive $15 million and to expand our portfolio of products by introducing three new laboratory developed tests. We also plan on entering new markets by launching an early access program with a research-use-only test for clinical studies in oncology. Our ability to achieve these objectives is dependent on a number of factors, including the risks as summarized under the heading Risk Factors in Item 1A of this Annual Report. With the recent Pooled Patents Agreement entered into with Illumina, we expect to receive test fees from the patent pool. We continue to focus on obtaining profitable test volume through increased market penetration, payor contracts, cash collections and growing revenue for a sustainable, profitable business model while investing in research and development programs to develop additional or enhanced products and tests.

2014 Overview


•	Total revenue during 2014 increased $32.0 million, or 27%, to $151.6 million when compared to $119.6 million during 2013.


•	Net loss from continuing operations decreased $95.2 million, or 87%, to $14.4 million when compared to $109.6 million loss in 2013.


•	Total accessions for all tests during 2014 increased 12,000, or 6%, to 197,500 when compared to 185,500 during 2013.


•	Net cash used in operating activities was $28.1 million for the year ended December 31, 2014, compared to $88.1 million in the prior year.


•	As of December 31, 2014, we had available cash and cash equivalents and current marketable securities totaling $93.9 million and working capital of $65.7 million.


•	In May 2014, we sold our Biosciences business for a cash sale price of $31.0 million, plus a $2.0 million, milestone

payment. As a result of this sale our Bioscience segment has been excluded from continuing operations and reported as discontinued operations.


•	In September 2014, we purchased the noninvasive prenatal testing intellectual property from Isis for $10.6 million.


•	In December 2014, we entered into a Pooled Patents Agreement with Illumina, to pool our intellectual property for noninvasive prenatal testing. Illumina made an aggregate $50 million upfront payment to us as part of the overall agreement.

Revenue

Our revenue and accessions for the years ended December 31, 2014, 2013 and 2012 were as follows:



							Year Over Year Increase
	Years ended December 31,						2014 from 2013			2013 from 2012
(dollars in thousands)	2014		2013		2012		Change		% Change	Change		% Change
Diagnostic services	$	151,569	$	119,556	$	46,457	$	32,013	27%	$	73,099	157%

Total accessions (for all Sequenom Laboratories tests)	197,500		185,500		92,000		12,000		6%	93,500		102%

Diagnostic Services

Each test performed relates to a patient specimen collected by a health care professional, and received by the laboratory. Such specimen encounter is commonly referred to as an “accession” in the laboratory sector. Although accessions are not billed until the test is complete and results are reported to the ordering physician, we believe that the number of accessions received is useful to understand the volume of our business. These tests are typically completed within five or fewer business days from the date of accession. Revenue for diagnostic services performed in our laboratory are generated primarily from customers located within the United States. Our international customers collect and ship patient specimens to the laboratory, and we process the specimens in our laboratory in the United States. We also have royalty agreements with domestic and international customers to whom we have licensed our technology in certain countries.

Diagnostic services revenue is derived from providing testing services for our tests and is primarily recognized on a cash basis as payments are received. We account for revenue on a cash basis until we have a history of collections from a third-party payor and we are able to demonstrate that we can make a reasonable estimate of collectible amounts before moving to the accrual method of revenue recognition for such payor and test. In the second quarter of 2014, we adopted accrual accounting for select payors. For the payors recorded on an accrual basis in 2014, we recognized revenue of $19.6 million, and of that revenue we collected $17.8 million as of December 31, 2014.

For the years ended December 31, 2014 and 2013 we recognized $23.4 million and $11.6 million, respectively, on an accrual basis for royalties and test service revenue generated from our domestic and international customers (client bill) for those agreements under which we are able to make a reasonable estimate of collectible amounts.

The $32.0 million, or 27%, and the $73.1 million, or 157%, increases in diagnostic services revenue during 2014 and 2013, respectively, are primarily attributable to the increase in the number of accessions, an increased percentage of accessions on which we ultimately collect, a decrease in the average number of days to collect a receivable and collections for accessions billed in prior periods.

Our revenue is impacted by the number and type of tests billed, the number of tests which are reimbursed by third-party payors and patients, and the rate paid per test. The number of tests billed has increased consistent with the increase in the number of accessions. The average rate received per MaterniT21 PLUS test reimbursed declined by about 17% in 2014 to approximately $1,000 per test primarily as a result of competition and obtaining payment from additional payors including certain state Medicaid programs. While the amount per reimbursed test decreased, the number of tests we were reimbursed for increased and the average days between billing and collections also decreased.

The following is a summary of accessions and diagnostic services revenue for the quarters in 2014 and 2013:



	2014								2013
(collections in millions, accessions in thousands)	Q4		Q3		Q2		Q1		Q4		Q3		Q2		Q1
Accessions by quarter	50.9		46.6		50.1		49.9		46.0		48.3		46.7		44.5
Revenue recorded on accrual basis	$	16.1	$	11.6	$	10.6	$	4.7	$	4.1	$	3.8	$	2.9	$	0.8
Cash basis revenue for services performed in the quarter	4.6		6.2		8.5		11.2		12.1		11.2		9.1		9.4
Revenue for services performed in prior quarters	16.1		20.1		20.7		21.2		16.5		18.3		12.5		18.9
Diagnostic services revenue	$	36.8	$	37.9	$	39.8	$	37.1	$	32.7	$	33.3	$	24.5	$	29.1

Collections for services in prior periods have been volatile, and we expect collections to continue to fluctuate depending upon the results of our efforts to collect payment from third party payors and patients for prior period claims. Our reimbursed rates and cash collections are also subject to seasonality. Patient deductibles generally reset at the beginning of each year which means that patients early in the year are responsible for a greater portion of the cost of our tests, and we have lower collection rates from individuals than from third-party payors. For those payors on accrual accounting, we lower our estimated revenue in the first quarter to reflect the lower percentage expected from the third party payors.

Collections recorded as revenue on the cash basis during the annual period of 2014 and 2013, for services performed in a prior year totaled $37.9 million and $26.4 million, respectively. As of December 31, 2014, amounts outstanding for tests delivered, net of estimated write-downs and adjustments, which were not recognized as revenue upon delivery of the test result because our accrual revenue recognition criteria were not met and the amounts had not been collected, range from approximately $31 million to $34 million, depending upon the ultimate reimbursement received for outstanding claims. We cannot provide any assurance as to when, if ever, and to what extent these amounts will be collected.

One single payor represented more than 10% of total revenue in 2014, accounting for $17.4 million, or 11% of revenue. In 2013 there were two payors which accounted for $25.0 million or 21% and $12.6 million or 11% of revenue, respectively.

The increases in the number of accessions during 2014 and 2013 of 6% and 102%, respectively, are primarily attributable to the market adoption domestically and internationally of the MaterniT21 PLUS test. Client bill revenue which is primarily international customers accounted for $23.4 million and $11.6 million of diagnostic services revenue during 2014 and 2013, respectively.

We believe that our diagnostic services revenue will continue to be affected by our current revenue recognition policy of generally recognizing revenue upon cash collection, the overall acceptance and demand for our new and existing commercial products and services, the adoption rates of our existing LDTs and any future LDTs we may develop, and payment patterns of third-party payors and patients. We also believe that our diagnostic service revenue will be affected as other companies license our technologies and other patent rights through the patent pool with Illumina, for which we will receive a test fee. We continue to pursue collection for our tests with third-party payors, including Medicare and Medicaid, where appropriate. Diagnostic services revenue collected from Medicaid payors during 2014 and 2013 were $9.8 million and $3.0 million, or 6% and 3%, respectively.

Cost of Revenue and Gross Margins

Our costs of revenue and gross margins were as follows:



				Year Over Year Increase (Decrease)
	Years ended December 31,			2014 from 2013				2013 from 2012
(dollars in thousands)	2014	2013	2012	$ Change			% Change	$ Change		% Change
Cost of diagnostic services revenue	$83,475	$87,302	$47,283	$	(3,827	)	(4)%	$	40,019	85%
Gross margin	$68,094	$32,254	$(826)	$	35,840		111%	$	33,080	4,005%
Gross margin as a percentage of revenue	45%	27%	(2)%

Diagnostic Services

Cost of diagnostic services revenue represents the cost of materials, direct labor, equipment, outside laboratory costs, royalties and infrastructure expenses associated with accessioning patient specimens (including quality control analyses and shipping charges to transport patient specimens), and license fees. Infrastructure expenses include allocated facility occupancy

and information technology costs. Costs associated with performing tests are recorded as tests are processed. Costs recorded for patient specimen processing represent the cost of all the tests processed during the period regardless of whether revenue is recognized with respect to that test. Royalties for licensed technology calculated as a percentage of revenue is recorded as license fees in cost of revenue at the time revenue are recognized or in accordance with other contractual obligations. While license fees are generally calculated as a percentage of revenue, the percentage increase in license fees does not correlate exactly to the percentage increase in revenue because certain agreements contain provisions for fixed annual payments and other agreements have tiered rates and payments that may be capped at annual minimum or maximum amounts. License fees represent a significant component of our cost of revenue and are expected to remain so for the foreseeable future. License fees as a percentage of cost of diagnostic services revenue were 15%, 14% and 15% during 2014, 2013 and 2012, respectively.

The decrease in cost of diagnostic services revenue during 2014 when compared to 2013, is primarily attributable to improved cost of materials and labor which is offset by higher test volumes. In 2014 the company initiated various initiatives to lower laboratory operational costs related to materials labor and overhead. The increase in cost of diagnostic services revenue during 2013 when compared to the same period in 2012, is primarily attributable to increased labor, royalties associated with increased test volumes, and increased costs for the additional laboratory location in North Carolina, which became operational in 2013.

Gross margin as a percentage of diagnostic services revenue is also affected by our current revenue recognition policy of generally recognizing revenue upon cash collection, which may result in costs being incurred in one period that relate to revenue recognized in a later period. The increase in gross margin in 2014 and 2013 when compared to a negative gross margin during 2012, is primarily attributable to the increased revenue, improved utilization of fixed overhead from an increased number of accessions completed, collections for accessions performed in a prior year and cost cutting initiatives.

We expect that gross margin for our diagnostic services will continue to fluctuate and be affected by the adoption rate of our LDT's, our revenue recognition policy, the levels of reimbursement, and payor and other contracts we may enter into for our tests. We also expect that our margins will be affected by the per test license fee we will pay for tests we perform under the Pooled Patents Agreement.

We continue to look at ways to reduce our costs per test but expect the overall cost of revenue to fluctuate with test volume. We have the ability to expand capacity within our laboratory, including our location in Raleigh-Durham, North Carolina.

Operating Expenses

Our operating expenses were as follows:



							Year Over Year Increase (Decrease)
	Years ended December 31,						2014 from 2013				2013 from 2012
(dollars in thousands)	2014		2013		2012		$ Change			% Change	$ Change			% Change
Selling and marketing	$	30,826	$	37,588	$	33,795	$	(6,762	)	(18)%	$	3,793		11%
Research and development	$	25,005	$	38,735	$	40,242	$	(13,730	)	(35)%	$	(1,507	)	(4)%
General and administrative	$	46,910	$	52,545	$	39,782	$	(5,635	)	(11)%	$	12,763		32%
Restructuring costs	$	1,907	$	5,753	$	—	$	(3,846	)	(67)%	$	5,753		—%
Total	$	104,648	$	134,621	$	113,819	$	(29,973	)	(22)%	$	20,802		18%

Selling and Marketing Expenses

Selling and marketing expenses consists primarily of compensation and related departmental expenses for sales and marketing, customer support, and business development personnel.

The $6.8 million, or 18%, decrease in selling and marketing expenses during 2014, when compared to 2013, is primarily due to the cost saving efforts that we put in place at the end of 2013, which lowered costs of personnel and related costs by $3.8 million, marketing cost by $1.1 million and travel costs by $1.6 million.

The $3.8 million, or 11%, increase in selling and marketing expenses during 2013, when compared to 2012, is primarily due to the expansion of our Sequenom Laboratories sales force, including the costs of labor, travel and commissions.

We expect our selling and marketing expenses to fluctuate in future periods as new products are introduced.

Research and Development Expenses

Research and development expenses consists primarily of compensation and related personnel expenses, product development costs, quality and regulatory costs, and expenses relating to licensing costs and work performed under research and development contracts.

The $13.7 million, or 35%, decrease in research and development expenses during 2014, when compared to 2013, is primarily due to $5.2 million from the completion of the Raleigh-Durham, North Carolina laboratory location which incurred development cost prior to the location becoming operational in 2013, a $4.6 million decrease from a reduction in headcount and related costs, $2.5 million in lower clinical samples collected and lower project and sponsored research and development of $1.0 million and $0.6 million, respectively.

The $1.5 million, or 4%, decrease in research and development expenses during 2013, when compared to 2012, is primarily due to $1.2 million in lower supplies and overhead, which were attributed to the completion and validation of the Raleigh-Durham, North Carolina laboratory location during 2013, and decreases in discretionary and share-based compensation expenses of $0.7 million and $0.1 million, respectively.

We expect our research and development expenses to fluctuate in future periods as we continue to invest in our product pipeline and other molecular diagnostic areas.

General and Administrative Expenses

General and administrative expenses consist primarily of compensation and related departmental expenses for executive, legal, accounting, finance, non-allocated information technology and human resource personnel and outside professional fees.

The $5.6 million, or 11%, decrease in general and administrative expenses during 2014, when compared to 2013, is primarily related to litigation costs of $20.1 million in 2013 which declined to $13.1 million in 2014, a decrease of $7.0 million, partially offset by increased bonus expenses of $1.2 million and an increase in the cost of billing operations of $0.5 million.

The $12.8 million, or 32%, increase in general and administrative expenses during 2013, when compared to 2012, is primarily related to increased legal costs of $9.1 million, associated primarily with patent litigation, increased billing costs of $2.4 million due to our growth in diagnostic services collections and increased headcount to support our operations resulting in higher labor and related costs of $1.6 million.

We expect general and administrative expenses to decrease in future periods as we realize lower patent related litigation cost and obtain efficiencies from our cost cutting initiatives.

Restructuring Costs

As part of a 2013 cost reduction effort, we recorded $2.4 million in facility exit costs, $1.7 million of impairment expense for tenant improvements associated with the vacated facility, $0.7 million of impairment expense for intangible assets and prepaid royalties related to our RetnaGene AMD LDT licensed technology, and $1.0 million in employee termination costs during 2013.

In 2014 we recorded $1.9 million of additional restructuring expense related to the vacated San Diego facility as we no longer expect that we can sublease this facility.

Gain on Pooled Patents Agreement

The gain recognized on the Pooled Patents Agreement relates to two elements which were delivered to Illumina in 2014, $21.0 million for the transfer of IVD technology and $1.85 million for the settlement of claims and disputes. In 2015, we expect to recognize the remaining $21.0 million of deferred gain upon completion of delivery of the samples and related study protocols.

Other Income and Expense, and Income Tax



										Year Over Year Increase (Decrease)
	Years ended December 31,									2014 from 2013			2013 from 2012
(dollars in thousands)	2014			2013			2012			$ Change			$ Change
Interest expense, net	$	(8,129	)	$	(8,443	)	$	(3,318	)	(314		)	$	5,125
Other (expense) income, net	$	(207	)	$	(110	)	$	(12	)	$	97		$	(98	)
Income tax benefit	$	7,676		$	1,353		$	684		$	6,323		$	(669	)

Interest expense, net

The decrease of $0.3 million in interest expense during 2014 is attributable to the reduction in the outstanding balances on our term loan.

The increase in interest expense during 2013 is attributable to the issuance of our 5.00% Convertible Senior Notes due 2017, or Convertible Senior Notes, in September 2012 and higher outstanding balances on our term loan.

Income tax benefit

As a result of the gain from the sale of discontinued operations of $24.3 million in 2014, we recorded an income tax expense from discontinued operations of $8.3 million. We also recognized a corresponding tax benefit in continuing operations in 2014. This benefit is a result of the required accounting for discontinued operations which requires a separate tax presentation for discontinued and continuing operations.

Discontinued Operations

On May 30, 2014, we completed the sale of our Bioscience business to BioSciences Acquisition Company (“BioSciences”) who purchased substantially all of the assets used in, and assumed the liabilities of, the business previously reported as the Bioscience business segment.

The sale, with a cash price of $31.0 million plus a $2.0 million milestone payment realized provides us with additional working capital. As part of the sale, we were required to deposit in escrow $1.5 million to secure our indemnification obligations and any working capital adjustment to the purchase price. The escrow funds are restricted but we expect to receive access to these funds within one year.

As part of the sale, we entered into several agreements with BioSciences. A supply agreement is effective for three years under which we may purchase consumables and systems for our laboratory business. We expect to purchase an immaterial amount of such products under the supply agreement in the next twelve months. Also, we agreed to provide certain administrative services to BioSciences from the time of the sale until December 31, 2014. All leases associated with the Bioscience business segment were assumed by BioSciences, however, we sublease back a portion of a building in San Diego for office space where some of our administrative employees are located. The associated rent expense is immaterial.

As a result of the Bioscience segment sale our consolidated statements of operations, cash flows and the consolidated balance sheets have been retrospectively revised to reflect the financial results from the Bioscience business segment as discontinued operations.

Liquidity and Capital Resources

We have a history of losses from operations and have an accumulated deficit. Our capital requirements to sustain operations, including Sequenom Laboratories' billed but unpaid tests, research and development projects, and litigation have been and will continue to be significant. As of December 31, 2014 and 2013, we had working capital of $65.7 million and $51.9 million, respectively. These amounts do not include our unrecorded accounts receivable (due to our cash basis accounting for certain diagnostic services provided), which are discussed below.

We consider the material drivers of our cash flow to be testing volumes and collections of billed tests for our diagnostic testing services, our share of test fees and royalties from the Pooled Patents Agreement, working capital, inventory management, and operating expenses. Our principal sources of liquidity are our cash, cash equivalents, and marketable securities, collections for our accounts receivable, collections from our commercialized tests and services and collections of test fees from the Pooled Patents Agreement. We have also financed our operating and capital requirements during the last three years with proceeds from the sale of our Bioscience segment, funds received from the Pooled Patents Agreement with Illumina in 2014, issuance of our Convertible Senior Notes and the public offering of our common stock during 2012.

We have expanded the operations of our laboratories following commercialization of the MaterniT21 PLUS test, including research and development activities related to improvements to current tests and expansion of our diagnostic testing menu.

As of December 31, 2014, amounts outstanding for tests delivered, net of estimated write-downs and adjustments, which were not recognized as revenue upon delivery of the test result because our accrual revenue recognition criteria were not met and the amounts had not been collected, range from approximately $31 million to $34 million, depending upon the ultimate reimbursement received for outstanding claims. We cannot provide any assurance as to when, if ever, and to what extent these amounts will be collected.

As of December 31, 2014, cash, cash equivalents, and current marketable securities totaled $93.9 million, compared to $71.3 million at December 31, 2013. The $22.6 million increase is due primarily to the proceeds from the sale of our Bioscience segment, and funds received from the Pooled Patents Agreement with Illumina. We had purchases of equipment

and leasehold improvements of $2.2 million, and repayment on our term loan of $7.5 million. Our cash equivalents and current marketable securities are held in a variety of securities that include U.S. government treasuries, certificates of deposits, and money market funds that have ratings of AA or better, or are fully guaranteed by the U.S. government, and mutual funds.

We expect that our cash, cash equivalents and current marketable securities are sufficient to provide for our operating needs through at least the end of 2015.

Operating Activities

Cash used in operations during 2014 was $28.1 million, compared to cash used of $88.1 million during 2013. The improvement was from higher revenue and lower operating costs.

Investing Activities

Net cash provided in investing activities was $32.9 million during 2014, compared to net cash provided by investing activities of $30.0 million during 2013. Investing cash inflows in 2014, included $29.3 million cash received from the sale of our Bioscience business segment and a net $36.0 million received in connection with the Pooled Patents Agreement. Offsetting these items were net purchases of marketable securities of $20.9 million, $9.3 million used for the purchase of the Isis intangible asset and $2.2 million used for the purchase of property, equipment and leasehold improvements.

Financing Activities

Net cash used by financing activities during 2014, was $5.7 million, compared to cash used of $6.1 million during 2013. Financing activities during 2014 include payments on debt obligations of $7.5 million, partially offset by $1.8 million in cash proceeds from the exercise of stock options and employee contributions under our employee stock purchase plan.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2014 (in thousands):



Contractual obligations	Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years
Long-term obligations⁽¹⁾	$	139,771	$	4,168	$	130,667	$	797	$	4,139
Research and development collaboration and licensing agreements⁽²⁾	12,661		2,238		2,126		1,646		6,651
Operating leases	31,521		4,066		5,060		5,335		17,060
Total contractual obligations	$	183,953	$	10,472	$	137,853	$	7,778	$	27,850

(1)

Long-term obligations include our Convertible Senior Notes, which are convertible at any time prior to the third trading day immediately preceding their maturity date in October 2017, at the option of the holders, into shares of our common stock at specified conversion rates, our bank loans due May 2015, and our financing obligation for building and improvements recorded in connection with our Raleigh-Durham, North Carolina, location.


(2)	Future minimum guaranteed payment obligations for royalties, milestone payments, and research funding obligations under all such agreements. The expected timing of payments included in the table above is estimated based on current information. Timing of payment and actual amounts paid may differ depending on the timing of receipt of services and/or achievement of milestones.

Off-Balance Sheet Arrangements

We have no significant contractual obligations not fully recorded on our consolidated balance sheets or fully disclosed in the notes to our consolidated financial statements.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect amounts reported in the accompanying consolidated financial statements and related notes. In preparing our financial statements we make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management considers relevant. Because future events and their effects cannot be determined with certainty, actual results could differ materially from our assumptions and estimates. Our Senior Management has reviewed these critical accounting policies and related disclosures with the Audit Committee of our Board of Directors.

We believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

Our revenue is generated primarily from diagnostic services from providing laboratory-developed tests, or LDTs, primarily for the detection of specific fetal abnormalities or other genetic conditions as well as other amounts earned for royalties and license agreements.

We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured. We assess whether the fee is fixed or determinable based on the nature of the fee charged for the services delivered, whether there are existing contractual arrangements, and historical payment patterns. When recording revenue we evaluate collectability and consider whether we have sufficient history to reliably estimate a payor's individual payment patterns. Revenue is deferred for fees received before they are earned. Royalty revenue is generally recorded on an accrual basis when earned.

Diagnostic services revenue is recognized upon cash collection until we can reliably estimate the amount that would be ultimately collected for our LDTs and the above criteria have been met, subsequent to such time we recognize revenue on an accrual basis. We generally bill third-party payors upon generation and delivery of a test result to the ordering physician following completion of a test. As such, we take assignment of benefits and risk of collection with the third-party payor. Patients have out-of-pocket costs for amounts not covered by their insurance carrier and we bill the patient directly for these amounts in the form of co-pays and deductibles in accordance with their insurance carrier and health plans. Some payors may not cover our test as ordered by the physician under their reimbursement policies. Consequently, we pursue reimbursement on a case-by-case basis. From time to time, we receive requests for refunds of payments made by third-party payors. Upon becoming aware of a refund request, we establish an accrued liability for tests covered by the refund request until we determine the amounts upon which a refund is due. Accrued refunds were $0.4 million and $1.7 million at December 31, 2014 and 2013, respectively.

We enter into license arrangements that may involve multiple elements and we evaluate the agreements to determine whether each deliverable represents a separate unit of accounting. A deliverable constitutes a separate unit of accounting when it has stand-alone value to the customer. Items are considered to have stand-alone value when they are sold separately by any vendor or when the customer could resell the item on a stand-alone basis. Consideration is allocated at the inception of the contract to all deliverables based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence (VSOE) of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence exists we use our best estimate of the selling price for the deliverable; such amounts are recognized as revenue when each unit is delivered.

If the delivered element does not have stand-alone value without one of the undelivered elements in the arrangement, we combine such elements and account for them as a single unit of accounting. Such amounts are recognized as revenue when the last deliverable of the combined units is delivered.

Development, License or Patent Agreements

We may from time to time enter into development, license or patent agreements with collaborative partners under which one or multiple deliverables are exchanged. We apply the accounting guidance in ASC 605-25 for multiple element arrangements to determine the separate units of account and basis for allocating consideration received or paid in these transactions. The value of deliverables under the arrangements are often derived using discounted cash flow analysis and may also require third-party valuation experts. Establishing fair value based on discounted cash flow models or third-party valuation experts involves management’s judgment and considers multiple factors, including market conditions and company-specific factors, including those factors contemplated in negotiating the agreements as well as internally developed assumptions related to market opportunity, estimated sales and costs, probability of success, and the time needed to commercialize a product candidate pursuant to the license. In validating assumptions used in determining fair value, we consider whether changes in key

assumptions used will have a significant effect on the allocation of the arrangement consideration between the multiple deliverables.

Recently Adopted Accounting Pronouncements

In June 2014, the Financial Accounting Standards Board, or FASB, issued an accounting standards update that requires a performance target that affects vesting of a share-based payment award and that could be achieved after the requisite service period to be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized over the required service period, if it is probable that the performance target will be achieved. This guidance will be effective for fiscal years beginning after December 15, 2015, which will be the Company's fiscal year 2016, with early adoption permitted. We do not expect the adoption of the guidance will have a material impact on the Company's consolidated financial statements.

In May 2014, the FASB issued an accounting standards update that creates a single source of revenue guidance for companies in all industries. The new standard provides guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers, unless the contracts are within the scope of other accounting standards. It also provides a model for the measurement and recognition of gains and losses on the sale of certain nonfinancial assets. This guidance must be adopted using either a full retrospective approach for all periods presented or a modified retrospective approach and will be effective for fiscal years beginning after December 15, 2016, which will be the Company's fiscal year 2017. We have not yet evaluated the potential impact of adopting the guidance on the Company's consolidated financial statements.

In April 2014, the FASB issued an accounting standards update that raises the threshold for disposals to qualify as discontinued operations and allows companies to have significant continuing involvement with and continuing cash flows from or to the discontinued operation. It also requires additional disclosures for discontinued operations and new disclosures for individually material disposal transactions that do not meet the definition of a discontinued operation. This guidance will be effective for fiscal years beginning after December 15, 2014, which will be the Company's fiscal year 2015, with early adoption permitted. The Company elected to use the non-amended guidance to evaluate the reported discontinued operations (see footnote 4) and will adopt the new guidance after its effective date.


Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive from our investments without significantly increasing risk. Some of the securities that we invest in may have market risk. This means that a change in prevailing interest rates may cause the fair value of the principal amount of the investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing rate and interest rates later rise, the fair value of the principal amount of our investment will probably decline. To minimize this risk our current investment policy requires us to maintain our portfolio of cash equivalents and marketable securities in a variety of securities that are represented by issuances from the U.S. government, repurchase agreements collateralized by U.S. government securities that have ratings of AA, or are fully guaranteed by the U.S. government. Our investment policy also includes a minimum quality rating for all new investments and the overall amount that may be invested with a single security. If an investment we hold falls below this level, we research the reasons for the fall and determine if we should continue to hold the investment in order to minimize our exposure to market risk of the investment.

The appropriate classification of marketable securities is determined at the time of purchase and reevaluated as of each balance sheet date. Based on this determination, as of December 31, 2014 and 2013, all of our investments in marketable securities were classified as available-for-sale and were reported at fair value. We measure fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is determined based on observable market quotes or valuation models using assessments of counterparty credit worthiness, credit default risk or underlying security and overall capital market liquidity. Declines in fair value that are considered other-than-temporary are charged to operations and those that are considered temporary are reported as a component of accumulated other comprehensive income (loss) in stockholders' equity. We use the specific identification method of determining the cost basis in computing realized and unrealized gains and losses on the sale of our available-for-sale securities.

At December 31, 2014, we had $93.9 million in cash, cash equivalents, and marketable securities, all of which are reported at their fair value. Changes in market interest rates would not be expected to have a material impact on the fair value of these assets at December 31, 2014, as the assets consisted of highly liquid securities with short-term maturities.

Foreign currency rate fluctuations

Transactions with our customers and vendors are primarily in USD. Foreign currencies to which we are exposed did not have a material impact on our business or operating results during the periods presented.

Interest Rate Sensitivity

Our investment portfolio is exposed to market risk from changes in interest rates. This risk is mitigated as we have maintained a relatively short average maturity for our investment portfolio. If a 100 basis point change in interest rates were to occur in 2015, our interest income would change by less than $1.0 million in relation to amounts we would expect to earn, based on our cash, cash equivalents, and short-term investments as of December 31, 2014.

Changes in interest rates may impact our interest expense. We have a $130.0 million convertible senior notes (“the Notes”) which bears interest at 5% and matures on October 1, 2017. After the Notes mature or if we would refinance the Notes, an incremental change in the borrowing rate of 100 basis points would increase our interest expense by approximately $1.3 million based on the $130.0 million balance as of December 31, 2014.

Inflation

We do not believe that inflation has had a material adverse impact on our business or operating results during the periods presented.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplemental data required by this item are set forth at the pages indicated in Part IV, Item 15(a)(1) of this annual report.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

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Item 9A.	CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer, or CEO, and our Chief Financial Officer, or CFO, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our management, including our CEO and CFO, has concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of the end of such period.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our system of internal control over financial reporting is designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of our consolidated financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with the authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material adverse effect on our financial statements.

Our management, under the supervision of our CEO and CFO, assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making this assessment, we used the framework included in Internal Control - Integrated Framework (1992), or the 1992 Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. Based on our evaluation under the 1992 Framework, our management concluded that, as of December 31, 2014, our internal control over financial reporting was effective.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2014 has been audited by Ernst & Young LLP an independent registered public accounting firm, as stated in their report appears below under this Item 9A and expresses an unqualified opinion on the effectiveness of our internal control over financial reporting.

On May 14, 2013, COSO issued an updated version of its Internal Control - Integrated Framework, or the 2013 Framework which officially superseded the 1992 Framework on December 15, 2014. Originally issued in 1992, the framework helps organizations design, implement and evaluate the effectiveness of internal control concepts and simplify their use and application. We are currently in the process of performing an analysis to evaluate what changes to our control environment, if any, would be needed to successfully implement the 2013 Framework. Until such time as our transition to the 2013 Framework is complete, we will continue to use the 1992 Framework in connection with our assessment of internal control.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2014 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our CEO and our CFO, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Sequenom, Inc.

We have audited Sequenom, Inc.'s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). Sequenom, Inc.'s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Sequenom, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Sequenom, Inc. as of December 31, 2014 and 2013, and the related consolidated statements of operations and comprehensive income (loss), stockholders’ (deficit) equity, and cash flows for each of the three years in the period ended December 31, 2014 of Sequenom, Inc. and our report dated March 9, 2015 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

San Diego, California

March 9, 2015

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Item 9B.	OTHER INFORMATION

None.

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PART III

Certain information required by Part III is omitted from this report because we will file with the Securities and Exchange Commission a definitive proxy statement within 120 days after the end of our fiscal year for our annual meeting of stockholder (Proxy Statement), and the information included in the Proxy Statement is incorporated herein by reference.

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is incorporated by reference to our Proxy Statement under the heading “Election of Directors.” Information regarding executive officers is set forth in Item 1 of Part I of this report and is incorporated herein by reference.

We have adopted a code of business conduct and ethics for directors, officers (including our principal executive, financial and accounting officers) and all employees, which we refer to as our Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics is available on our website at http://www.sequenom.com. Stockholders may request a free copy of our Code of Business Conduct and Ethics from:

Sequenom, Inc.

Attention: Investor Relations

3595 John Hopkins Court

San Diego, CA 92121-1331

(858) 202-9000

If we make any substantive amendments to the code of business conduct and ethics or grant any waiver from a provision of the code to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website. We will promptly disclose on our website (i) the nature of any amendment to the policy that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and (ii) the nature of any waiver, including an implicit waiver, from a provision of the policy that is granted to one of these specified individuals, the name of such person who is granted the waiver and the date of the waiver.

Section 16(a) Beneficial Ownership Reporting Compliance

Item 405 of Regulation S-K calls for disclosure of any known late filing or failure by an insider to file a report required by Section 16 of the Exchange Act. This disclosure is incorporated by reference from the information in the section entitled “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement.

Item 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference from the information in the sections entitled “Executive Compensation” and “Election of Directors” in the Proxy Statement.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated herein by reference from the information in the sections entitled “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance under Equity Compensation Plans” in the Proxy Statement.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated herein by reference from the information in the sections entitled “Certain Transactions” and “Independence of the Board of Directors” in the Proxy Statement.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item is incorporated herein by reference from the information in the section entitled “Principal Accounting Fees and Services” and “Pre-Approval Policies and Procedures” in the Proxy Statement.

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PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


(a)(1)	Financial Statements

The financial statements required by this item are submitted in a separate section beginning on page F-1 of this annual report.


(a)(2)	Financial Statement Schedules

The other financial statement schedules have been omitted because they are either not required, not applicable, or the information is otherwise included.


(a)(3)	Exhibits

The exhibits listed below are required by Item 601 of Regulation S-K. Each management contract or compensatory plan or arrangement required to be filed as an exhibit to this report has been identified.



Exhibit Number		Description of Document

2.1²⁴		Stock and Asset Purchase Agreement dated May 30, 2014 between the Registrant and BioSciences Acquisition Company.

3.1⁽¹⁾		Restated Certificate of Incorporation of the Registrant.

3.2⁽²⁾		Restated Bylaws of Registrant, as amended.

3.3⁽³⁾		Registrant's Certificate of Designation of Series A Junior Participating Preferred Stock.

4.1⁽¹⁾		Specimen common stock certificate.

4.2⁽³⁾		Rights Agreement dated as of March 3, 2009, between the Registrant and American Stock Transfer and Trust Company, LLC.

4.3⁽³⁾		Form of Right Certificate.

4.4⁽¹⁹⁾		Warrant dated May 3, 2011, issued to the Chinese University of Hong Kong Foundation Limited.

4.5⁽²¹⁾		Indenture dated as of September 17, 2012 by and between the Registrant and Wells Fargo Bank, National Association, as trustee.

4.6		Form of 5.00% Convertible Senior Notes due 2017 (included in Exhibit 4.5).

10.1⁽¹⁾		Form of Indemnification Agreement between the Registrant and each of its officers and directors.

10.2^(5)#		1999 Stock Incentive Plan, as amended.

10.3^(4)#		1999 Stock Incentive Plan Form of Notice of Grant of Stock Option.

10.4^(4)#		1999 Stock Incentive Plan Form of Stock Option Agreement.

10.5^(6)#		1999 Employee Stock Purchase Plan, as amended.

10.6^(7)#		2006 Equity Incentive Plan, as amended.

10.7^(1)#		2006 Equity Incentive Plan Form of Stock Option Grant Notice.

10.8^(1)#		2006 Equity Incentive Plan Form of Stock Option Agreement.

10.9^(8)#		2006 Equity Incentive Plan Form of Notice of Exercise.

10.10^(9)#		2006 Equity Incentive Plan Form of Restricted Stock Unit Award Grant Notice.

10.11^(9)#		2006 Equity Incentive Plan Form of Restricted Stock Unit Award Agreement.

10.13⁽¹⁰⁾		Building Lease Agreement, dated March 29, 2000, between the Registrant and TPSC IV LLC.

10.14⁽¹¹⁾		Form of Stock Issuance Agreement under 1999 Stock Incentive Plan.



10.15⁽¹²⁾		Amendment Number One to Lease dated March 29, 2000, by and between the Registrant and TPSC IV LLC dated September 9, 2005.

10.16⁽¹²⁾		Common Stock Warrant, dated September 9, 2005, issued to Kwacker, Ltd.

10.19^(13)#		Form of Restricted Stock Bonus Grant Notice under 2006 Equity Incentive Plan.

10.20^(13)#		Form of Restricted Stock Bonus Agreement under 2006 Equity Incentive Plan.

10.23^(23)#		Non-Employee Director Compensation Policy.

10.24^(14)#		Amended and Restated Change in Control Severance Benefit Plan.

10.26^(15)#		Agreement dated March 13, 2010 by and between the Registrant and Harry F. Hixson, Jr., Ph.D.

10.27^(15)#		Letter agreement dated October 21, 2010 by and between the Registrant and Paul V. Maier.

10.28⁽¹⁶⁾		Stipulation of Settlement in In re Sequenom, Inc. Derivative Litigation.

10.29⁽¹⁷⁾		Registration Rights Agreement, dated May 12, 2010, by and among the Registrant and the other parties named therein.

10.30^(18)#		New-Hire Equity Incentive Plan.

10.31⁽¹⁹⁾		Loan Agreement dated May 31, 2011, between the Registrant, Sequenom Center for Molecular Medicine, LLC, and Silicon Valley Bank.

10.32⁽²⁰⁾		Second Amendment to Loan Agreement dated September 10, 2012, between the Registrant, Sequenom Center for Molecular Medicine, LLC, and Silicon Valley Bank.

10.33⁽¹⁹⁾		First Amendment to Loan Agreement dated June 20, 2011, between the Registrant, Sequenom Center for Molecular Medicine, LLC, and Silicon Valley Bank.

10.34⁽²³⁾		Employment Agreement dated January 29, 2014 between the Registrant and William Welch.

10.35⁽²³⁾		Employment Agreement dated January 29, 2014 between the Registrant and Dirk van den Boom.

10.36⁽²⁴⁾*		License Agreement dated May 30, 2014 between the Registrant and BioSciences Acquisition Company.

10.37⁽²⁴⁾*		Supply Agreement dated May 30, 2014 between the Registrant and BioSciences Acquisition Company.

10.38⁽²⁴⁾*		Agreement for Services dated June 13, 2014 between the Registrant and Quest Diagnostics, Inc.

10.39⁽²⁴⁾		First Amendment to Agreement for Services dated July 15, 2014 between the Registrant and Quest Diagnostics, Inc.

10.40⁽²⁴⁾*		License Agreement dated June 13, 2014 between the Registrant and Quest Diagnostics, Inc.

10.41⁽²⁵⁾*		Patent Purchase Agreement dated September 30, 2014 between the Registrant and Isis Innovation Limited.

10.42⁽²⁵⁾		Second Amendment to Lease dated as of September 25, 2014 by and between Registrant and TPSC IV LLC, a Delaware limited liability company.

10.43*		Pooled Patents Agreement dated December 2, 2014 between the Registrant and Illumina, Inc.

10.44*		Settlement Agreement dated December 2, 2014 among the Registrant, Illumina, Inc. and Sequenom Center for Medicine, LLC,

10.45*		Amended and Restated Sale and Supply Agreement dated December 2, 2014 between the Registrant and Illumina, Inc.

10.46*		Agreement dated December 2, 2014 between the Registrant and The Chinese University of Hong Kong

21.1		Subsidiaries of the Registrant.

23.1		Consent of Independent Registered Public Accounting Firm.

31.1		Certification of Principal Executive Officer pursuant to Rule13a-14(a) and Rule 15d-14(a) of the Securities and Exchange Act, as amended.




31.2		Certification of Principal Financial Officer pursuant to Rule13a-14(a) and Rule 15d-14(a) of the Securities and Exchange Act, as amended.

32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document.

101.SCH		XBRL Taxonomy Extension Schema Document.

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Database.


#	Management contract or compensatory plan.


*	Certain confidential portions of this Exhibit have been omitted pursuant to a request for confidential treatment. Omitted portions have been filed separately with the Securities and Exchange Commission.


(1)	Incorporated by reference to the Registrant's Current Report on Form 8-K (No. 000-29101) filed June 6, 2006.


(2)	Incorporated by reference to the Registrant's Current Report on Form 8-K (No. 000-29101) filed January 15, 2010.


(3)	Incorporated by reference to the Registrant's Current Report on Form 8-K (No. 000-29101) filed March 4, 2009.


(4)	Incorporated by reference to the Registrant's Registration Statement on Form S-1 (No. 333-91665), as amended.


(5)	Incorporated by reference to the Registrant's Annual Report on Form 10-K (No. 000-29101) for the year ended December 31, 2006.


(6)	Incorporated by reference to the Registrant's Current Report on Form 8-K (No. 000-29101) filed February 1, 2010.


(7)	Incorporated by reference to the Registrant's Definitive Proxy Statement on Schedule 14A filed April 29, 2010.


(8)	Incorporated by reference to the Registrant's Current Report on Form 8-K (No. 000-29101) filed June 6, 2006.


(9)	Incorporated by reference to the Registrant's Registration Statement on Form S-8 (No. 333-152230) filed July 10, 2008.


(10)	Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q (No. 000-29101) for the quarter ended March 31, 2000.


(11)	Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q (No. 000-29101) for the quarter ended September 30, 2004.


(12)	Incorporated by reference to the Registrant's Current Report on Form 8-K (No. 000-29101) filed September 14, 2005.


(13)	Incorporated by reference to the Registrant's Current Report on Form 8-K (No. 000-29101) filed January 24, 2007.


(14)	Incorporated by reference to the Registrant's Annual Report on Form 10-K (No. 000-29101) for the year ended December 31, 2008.


(15)	Incorporated by reference to the Registrant's Annual Report on Form 10-K (No. 000-29101) for the year ended December 31, 2009.


(16)	Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q (No. 000-29101) for the quarter ended March 31, 2010.


(17)	Incorporated by reference to the Registrant's Current Report on Form 8-K (No. 000-29101) filed May 13, 2010.


(18)	Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q (No. 000-29101) for the quarter ended March 31, 2011.


(19)	Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q (No. 000-29101) for the quarter ended June 30, 2011.


(20)	Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q (No. 000-29101) for the quarter ended September 30, 2012.


(21)	Incorporated by reference to the Registrant's Current Report on Form 8-K (No. 000-29101) filed September 17, 2012.


(22)	Incorporated by reference to the Registrant's Annual Report on Form 10-K (No. 000-29101) for the year ended December 31, 2013.


(23)	Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q (No. 000-29101) for the quarter ended March 31, 2014.


(24)	Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q (No. 000-29101) for the quarter ended June 30, 2014.


(25)	Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q (No. 000-29101) for the quarter ended September 30, 2014.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 9, 2015



SEQUENOM, INC.

By:	/s/ William J. Welch
	William J. Welch Chief Executive Officer

By:	/S/ CAROLYN D. BEAVER
	Carolyn D. Beaver Chief Financial Officer

POWER OF ATTORNEY

Know all men by these presents, that each person whose signature appears below constitutes and appoints William J. Welch and Carolyn D. Beaver, and each of them, as his attorneys-in-fact and agents, each with power of substitution in any and all capacities, to sign any amendments to this annual report on Form 10-K, and to file the same with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that the attorney-in-fact or his substitute or substitutes may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.



Signature	Title	Date

/S/ William J. Welch	Chief Executive Officer (Principal Executive Officer)	March 9, 2015
William J. Welch

/S/ CAROLYN D. BEAVER	Chief Financial Officer (Principal Financial Officer)	March 9, 2015
Carolyn D. Beaver

/S/ Harry F. Hixson, Jr., Ph.D.	Director, Chairman of the Board of Directors	March 6, 2015
Harry F. Hixson, Jr., Ph.D.

/S/ KENNETH F. BUECHLER, PH.D.	Director	March 6, 2015
Kenneth F. Buechler, Ph.D.

/S/ JOHN A. FAZIO	Director	March 6, 2015
John A. Fazio

/S/ MYLA LAI-GOLDMAN, M.D.	Director	March 6, 2015
Myla Lai-Goldman, M.D.

/S/ RICHARD A. LERNER, M.D.	Director	March 6, 2015
Richard A. Lerner, M.D.

	Director	March 6, 2015
Ronald M. Lindsay, Ph.D.

/S/ DAVID PENDARVIS	Director	March 6, 2015
David Pendarvis

/S/ CHARLES SLACIK	Director	March 6, 2015
Charles Slacik

SEQUENOM, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



	Page

The following documents are filed as part of this report: (a) Financial Statements:
Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets as of December 31, 2014 and 2013	F-3

Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2014, 2013, and 2012	F-4

Consolidated Statements of Stockholders' (Deficit) Equity for the years ended December 31, 2014, 2013, and 2012	F-5

Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013, and 2012	F-6

Notes to Consolidated Financial Statements	F-7

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Sequenom, Inc.

We have audited the accompanying consolidated balance sheets of Sequenom, Inc. as of December 31, 2014 and 2013, and the related consolidated statements of operations and comprehensive income (loss), stockholders' (deficit) equity, and cash flows for each of the three years in the period ended December 31, 2014. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sequenom, Inc. at December 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Sequenom, Inc.'s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated March 9, 2015 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

San Diego, California

March 9, 2015

F-2

SEQUENOM, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value information)



	December 31, 2014			December 31, 2013
Assets
Current assets:
Cash and cash equivalents	$	63,309		$	61,589
Marketable securities, available-for-sale	30,588			9,668
Accounts receivable, net	9,131			2,552
Inventories	6,516			11,598
Other current assets and prepaid expenses	12,112			2,653
Current assets of discontinued operations	—			13,474
Total current assets	121,656			101,534
Property, equipment and leasehold improvements, net	15,348			24,378
Goodwill	10,007			10,007
Intangible assets, net	11,247			2,382
Other assets	2,813			4,093
Noncurrent assets of discontinued operations	—			2,308
Total assets	$	161,071		$	144,702

Liabilities and stockholders' deficit
Current liabilities:
Accounts payable	$	6,089		$	9,086
Accrued expenses	22,155			25,256
Long-term debt and obligations, current portion	4,144			7,643
Other current liabilities	2,581			1,449
Deferred gain on pooled patents agreement	21,000			—
Current liabilities of discontinued operations	—			6,207
Total current liabilities	55,969			49,641
Long-term debt and obligations, less current portion	5,602			9,642
Convertible senior notes	130,000			130,000
Other long-term liabilities	664			976
Long-term liabilities of discontinued operations	—			946
Total liabilities	192,235			191,205
Commitments and contingencies
Stockholders' deficit:
Convertible preferred stock, par value $0.001; 5,000 shares authorized, no shares issued or outstanding at December 31, 2014 and 2013	—			—
Common stock, par value $0.001; 185,000 shares authorized, 117,434 and 115,796 shares issued and outstanding at December 31, 2014 and 2013, respectively	117			116
Additional paid-in capital	981,929			967,015
Accumulated other comprehensive income	87			148
Accumulated deficit	(1,013,297		)	(1,014,309		)
Cumulative translation adjustment of discontinued operations	—			527
Total stockholders' deficit	(31,164		)	(46,503		)
Total liabilities and stockholders' deficit	$	161,071		$	144,702

See accompanying notes to consolidated financial statements.

F-3

SEQUENOM, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share information)



	Years ended December 31,
	2014			2013			2012
Statements of Operations
Diagnostic services revenue, net	$	151,569		$	119,556		$	46,457
Cost of diagnostic services revenue	83,475			87,302			47,283
Gross margin	68,094			32,254			(826		)
Operating expenses:
Selling and marketing	30,826			37,588			33,795
Research and development	25,005			38,735			40,242
General and administrative	46,910			52,545			39,782
Restructuring costs	1,907			5,753			—
Total operating expenses	104,648			134,621			113,819
Gain on pooled patents agreement	22,850			—			—
Operating loss	(13,704		)	(102,367		)	(114,645		)
Interest expense	(8,184		)	(8,589		)	(3,417		)
Interest income	55			146			99
Other expense, net	(207		)	(110		)	(12		)
Loss from continuing operations before income taxes	(22,040		)	(110,920		)	(117,975		)
Income tax benefit	7,676			1,353			684
Loss from continuing operations	(14,364		)	(109,567		)	(117,291		)
Discontinued operations:
Earnings from discontinued operations, net of tax	15,376			2,161			262
Net earnings (loss)	$	1,012		$	(107,406	)	$	(117,029	)
Net earnings (loss) per common share, basic and diluted
Continuing operations	$	(0.12	)	$	(0.95	)	$	(1.03	)
Discontinued operations	$	0.13		$	0.02		$	—
Net earnings (loss) per common share, basic and diluted	$	0.01		$	(0.93	)	$	(1.03	)
Weighted average number of shares outstanding, basic and diluted	116,729			115,378			113,646

Statements of Comprehensive Income (Loss)
Net earnings (loss)	$	1,012		$	(107,406	)	$	(117,029	)
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities, net of taxes	(26		)	51			(24		)
Foreign currency translation adjustment	63			201			261
Write-off of permanent investment in subsidiary upon dissolution	—			—			1,011
Write-off of foreign translation gain included in earnings from discontinued operations	(625		)	—			—
Total other comprehensive income (loss)	(588		)	252			1,248
Comprehensive income (loss)	$	424		$	(107,154	)	$	(115,781	)

See accompanying notes to consolidated financial statements.

F-4

Table of Contents

SEQUENOM, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY

(In thousands)



	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)				Accumulated Deficit				Total Stockholders' (Deficit) Equity
	Shares		Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)				Accumulated Deficit				Total Stockholders' (Deficit) Equity
Balance at December 31, 2011	99,349		$	99	$	881,779		$	(825	)		$	(789,874	)		$	91,179
Total comprehensive loss	—		—		—			1,248				(117,029		)		(115,781		)
Share-based compensation	—		—		13,324			—				—				13,324
Shares issued or vested under employee stock plans	488		1		1,123			—				—				1,124
Issuance of common stock, net of issuance costs	14,950		15		58,146			—				—				58,161
Balance at December 31, 2012	114,787		115		954,372			423				(906,903		)		48,007
Total comprehensive loss	—		—		—			252				(107,406		)		(107,154		)
Share-based compensation	—		—		11,171			—				—				11,171
Shares issued or vested under employee stock plans	1,121		1		1,927			—				—				1,928
Repurchase of shares in satisfaction of tax withholding obligations in connection with the vesting of restricted units	(112	)	—		(455		)	—				—				(455		)
Balance at December 31, 2013	115,796		116		967,015			675				(1,014,309		)		(46,503		)
Total comprehensive income (loss)	—		—		—			(588	)		1,012				424
Share-based compensation	—		—		13,081			—				—				13,081
Shares issued or vested under employee stock plans	1,853		1		2,541			—				—				2,542
Repurchase of shares in satisfaction of tax withholding obligations in connection with the vesting of restricted units	(215	)	—		(708		)	—				—				(708		)
Balance at December 31, 2014	117,434		$	117	$	981,929		$	87			$	(1,013,297	)		$	(31,164	)

See accompanying notes to consolidated financial statements.

F-5

Table of Contents

SEQUENOM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



	Years ended December 31,
	2014			2013			2012
Operating activities:
Net earnings (loss)	$	1,012		$	(107,406	)	$	(117,029	)
Adjustments to reconcile net earnings (loss) to net cash used in operating activities:
Gain on pooled patents agreement related to sale of license	(21,000		)	—			—
Gain on sale of discontinued operations	(24,291		)	—			—
(Earnings) loss from discontinued operations, net of tax	583			(2,161		)	(262		)
Depreciation and amortization	12,232			14,174			10,469
Share-based compensation	11,519			9,527			10,790
Noncash restructuring costs	1,907			2,358			—
Other non cash items	387			1,111			2,241
Changes in operating assets and liabilities:
Accounts receivable	(6,579		)	(1,747		)	(805		)
Inventories	5,082			(6,636		)	(1,925		)
Prepaid expenses and other assets	(1,675		)	(151		)	1,292
Accounts payable and accrued expenses	(5,681		)	2,099			12,399
Other liabilities	(1,582		)	737			29
Net cash used in operating activities	(28,086		)	(88,095		)	(82,801		)
Investing activities:
Purchases of property, equipment and leasehold improvements	(2,236		)	(12,071		)	(12,918		)
Purchases of marketable securities	(45,128		)	(52,826		)	(57,739		)
Maturities of marketable securities	24,203			95,393			60,928
Payment for the purchase of intangible assets	(9,250		)	—			—
Net cash received from sale of segment	29,291			—			—
Proceeds from pooled patents agreement	42,150			—			—
Distribution from pooled patents agreement	(6,150		)	—			—
Net cash paid for other assets	—			(483		)	(1,891		)
Net cash provided by (used in) investing activities	32,880			30,013			(11,620		)
Financing activities:
Payments on long-term obligations	(7,541		)	(7,574		)	(2,631		)
Borrowings on term loan and capital lease obligations	—			—			5,390
Proceeds from issuance of convertible debt, net of issuance costs	—			—			124,728
Proceeds from stock offering, net of issuance costs	—			—			58,161
Proceeds from common stock issued under employee stock plans	1,833			1,473			1,123
Net cash provided by (used in) financing activities	(5,708		)	(6,101		)	186,771
Discontinued operations:
Net cash provided by operating activities of discontinued operations	2,816			2,456			4,785
Net cash used in investing activities of discontinued operations	(164		)	(643		)	(2,310		)
Net cash provided by discontinued operations	2,652			1,813			2,475
Effect of exchange rate changes on cash and cash equivalents	(18		)	157			51
Net increase (decrease) in cash and cash equivalents	1,720			(62,213		)	94,876
Cash and cash equivalents at beginning of year	61,589			123,802			28,926
Cash and cash equivalents at end of year	$	63,309		$	61,589		$	123,802

Supplemental disclosure of cash flow information:
Cash paid for interest	$	7,129		$	7,386		$	724
Supplemental non-cash items:
Plant and equipment acquired with financing and capital lease obligations	$	—		$	—		$	2,250

See accompanying notes to consolidated financial statements.

F-6

Table of Contents

SEQUENOM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

Note 1. The Company and Its Significant Accounting Policies

The Company

Sequenom Inc., and its wholly owned subsidiary Sequenom Center for Molecular Medicine LLC, doing business as Sequenom Laboratories (collectively "the Company"), is a life sciences company committed to enabling healthier lives through the development of innovative products and services. We serve physicians by providing early patient management information. The Company develops and commercializes innovative molecular diagnostics testing services that serve women's health and oncology markets.

Basis of Presentation and Consolidation

The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles, or GAAP, and include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Discontinued Operations

On May 30, 2014, the Company sold its Bioscience business segment. As a result of this sale, the Company's Bioscience segment has been excluded from continuing operations for all periods herein and reported as discontinued operations. For additional information on the divestiture of the Company's Bioscience segment, see Note 4 Discontinued Operations.

Segment Information

Prior to the divestiture, the Company derived revenue from two business segments: Sequenom Laboratories and Sequenom Bioscience. Therefore, with the reported divestiture the Company operates in a single business segment and all prior period information herein has been recast to conform to this presentation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires that management make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Examples of the Company’s significant accounting estimates that may involve a higher degree of judgment and complexity than others include revenue recognition and the estimates required in accrual accounting. Actual results could differ materially from those estimates and assumptions.

Revenue Recognition

The Company generates revenue primarily from diagnostic services from providing laboratory-developed tests, or LDTs, primarily for the detection of specific fetal abnormalities or other genetic conditions, as well as other amounts earned for royalties and license agreements.

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured. The Company assesses whether the fee is fixed or determinable based on the nature of the fee charged for the services delivered, whether there are existing contractual arrangements, and historical payment patterns. In determining when to record revenue, the Company evaluates collectability and considers whether there is sufficient history to reliably estimate a payor's individual payment patterns. Revenue is deferred for fees received before earned. Royalty revenue is generally recorded on an accrual basis when earned.

Diagnostic services revenue is recognized upon cash collection until we can reliably estimate the amount that would be ultimately collected for the test and the above criteria have been met, at which time revenue is recognized on an accrual basis. The Company generally bills third-party payors upon generation and delivery of a test result to the ordering physician following completion of a test. As such, the Company takes assignment of benefits and risk of collection with the third-party payor. Patients have out-of-pocket costs for amounts not covered by their insurance carrier and the Company bills the patient directly for these amounts in the form of co-pays and deductibles in accordance with their insurance carrier and health plans. Some payors may not cover the test as ordered by the physician under their reimbursement policies. Consequently, the Company pursues reimbursement on a case-by-case basis.

From time to time, the Company receives requests for refunds of payments, generally due to overpayments made by third party-payors. Upon becoming aware of a refund request, the Company establishes an accrued liability for tests covered by the

F-7

refund request until such time as the Company determines whether or not a refund is due. Accrued refunds were $0.4 million and $1.7 million at December 31, 2014 and 2013, respectively.

License arrangements may involve multiple elements and the Company evaluates the agreements to determine whether each deliverable represents a separate unit of accounting. A deliverable constitutes a separate unit of accounting when it has stand-alone value to the customer. Items are considered to have stand-alone value when they are sold separately by any vendor or when the customer could resell the item on a stand-alone basis. Consideration is allocated at the inception of the contract to all deliverables based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence (VSOE) of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence exists, the Company uses its best estimate of the selling price for the deliverable. Such amounts are recognized as revenue when each unit is delivered.

If the delivered element does not have stand-alone value without one of the undelivered elements in the arrangement, the elements are combined and accounted for as a single unit of accounting. Such amounts are recognized as revenue when the last deliverable of the combined units is delivered.

Cost of Revenue

Cost of revenue includes the cost of materials, direct labor (including laboratory and service personnel), equipment and infrastructure expenses associated with processing blood and other samples, quality control analyses, shipping charges to transport samples, and license fees. Infrastructure expenses include allocated facility occupancy and information technology costs. Costs associated with performing testing services are recorded as tests are processed. Costs recorded for sample processing and shipping charges represent the cost of all the tests processed during the period regardless of whether revenue is recognized with respect to that test. Royalties for licensed technology calculated on a per test basis or as a percentage of product revenue and fixed annual payments relating to the launch and commercialization of LDTs are recorded as license fees in cost of revenue at the time product revenue is recognized or in accordance with other contractual obligations.

Research and Development Expenses

Research and development expenses are comprised of costs incurred to develop technology and carry out clinical studies and include salaries and benefits, reagents and supplies used in research and development laboratory work, infrastructure expenses, including allocated facility occupancy and information technology costs, contract services, and other outside costs. Research and development costs are expensed as incurred.

Costs for collaboration and clinical study agreements with collaborators are recorded as research and development expenses. Accruals are recorded for estimated study costs comprised of work performed by collaborators under contract terms. Advance payments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized and recognized as expense as the goods are delivered or the related services are performed.

Collaboration, Development and Licensing Agreement Expenses

The Company has collaborative agreements with life sciences partners that provide rights to develop, produce, and market products using certain know-how, technology and patent rights maintained by these partners. Terms of the various collaboration agreements may require milestone payments upon the achievement of certain product research and development objectives and payment of royalties on future sales, if any, of commercial products resulting from the collaboration.

Concentration of Risks

Financial instruments, which potentially are a concentration of credit risk, consist primarily of cash, cash equivalents, marketable securities, and accounts receivable. The exposure to credit loss is limited by placing cash, cash equivalents and marketable securities with US financial institutions. Additionally, the Company has established guidelines regarding diversification of investments and their maturities, which are designed to maintain principal and maximize liquidity. Credit risk with respect to accounts receivable is limited due to the Company's large and diverse customer base.

In 2014 one payor represented $17.4 million, or 11% of revenue. In 2013 two payors represented $25.0 million and $12.6 million or 21% and 11% of revenue, respectively. In 2012 two payors represented $6.7 million and $6.0 million or 15% and 13% of revenue, respectively.

The Company requires raw materials and devices of appropriate quality, reliability and to meet applicable regulatory requirements that currently are available from a limited number of sources and in certain cases a single source of supply. Consequently, in the event that supplies are delayed or interrupted for any reason, it could impair the ability to develop and produce services, which could have a material adverse effect on the business, financial condition and results of operations.

F-8

Fair Value Measurements

Financial instruments consist principally of cash, cash equivalents, short-term marketable securities, accounts receivable, accounts payable, accrued expenses, long term debt and the Company's 5.00% Convertible Senior Notes due 2017, or Convertible Senior Notes.

The carrying amounts of financial instruments such as cash equivalents, accounts receivable, accounts payable and accrued expenses approximate the related fair values due to the short-term maturities of these instruments. Marketable securities consist of available-for-sale securities that are reported at fair value.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Accounting guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Includes other inputs that are directly or indirectly observable in the marketplace.

Level 3—Unobservable inputs that are supported by little or no market activities, therefore requiring an entity to develop its own assumptions.

The Company determines the value of cash equivalents and marketable securities using quoted market prices or alternative pricing sources and models utilizing observable market inputs and, as such, classifies cash equivalents and marketable securities within Level 1 or Level 2.

Cash, Cash Equivalents, and Marketable Securities

Cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less at the time of purchase.

Investments with an original maturity of more than three months at the time of purchase are considered marketable securities. All marketable securities have been classified by management as available-for-sale. The available-for-sale securities are carried at fair value, with unrealized gains and losses, determined on a specific identification basis, reported as a component of other comprehensive income (loss) in stockholders' deficit until realized.

A decline in the market value of any marketable security below cost that is determined to be other-than-temporary will result in a revaluation of its carrying amount to fair value. The impairment would be included in other income or expense in the consolidated statements of operations and a new cost basis for the security would be established. There were no such declines in market value of any marketable security in the periods presented.

Accounts Receivable

Diagnostic services revenue is recorded on an accrual basis for payors and tests that meet the revenue recognition criteria for accrual basis and for client bill arrangements, which are primarily labs and international customers, upon delivery of test results to ordering physicians where a contractual agreement exits and for which collectability is reasonably assured.

The Company considers receivables past due based on payment terms and reserves specific receivables if collectability is no longer reasonably assured. The Company evaluates such reserves on a regular basis and adjusts its reserves as needed. Once a receivable is deemed to be uncollectible, such balance is charged against the reserve.

Inventories

Inventories are valued at the lower of cost (first-in, first-out) or market value (net realizable value). Provisions for slow moving, excess and obsolete inventories are estimated based on future demands and product life cycles, including expiration.

Property, Equipment and Leasehold Improvements

Property consists of a leased building that did not meet the sale-leaseback criteria upon completion of the construction of the building and is recorded at its fair value at the date of the lease, less depreciation. The building is being depreciated over a period of 15 years equal to the term of the related lease and extensions.

Equipment is stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets (generally 3 to 5 years).

Leasehold improvements are stated at cost and amortized using the straight-line method over the estimated useful life of the improvement or the remaining term of the lease, whichever is shorter. The maximum estimated useful life of any leasehold improvement is generally 15 years from the completion of the improvement. Maintenance and repairs are charged to operations

F-9

as incurred. When assets are sold, or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operating expense.

Financing Lease

For accounting purposes only, the Company is deemed to be the owner of the leased building in Raleigh-Durham, North Carolina, laboratory site as the terms of that facility lease agreement required extensive involvement in the construction of the building. Accordingly, assets were recorded representing the fair value of the building based on the assessed value and the total costs of the improvements, including the costs paid by the lessor (the legal owner of the building), with an associated long-term obligation. Upon completion of construction of the building, the sale-leaseback criteria was not met for de-recognition of the building assets and obligation. Therefore the lease is accounted for as a long-term financing obligation. The Company reports rent expense only on the land portion of the property but not for the building which is owned by the Company for accounting purposes. Rather, building rental payments under the lease are recognized as a reduction of the financing obligation and interest expense.

Operating Leases

The Company leases office, laboratory and research and development facilities, and equipment under various non-cancellable operating lease agreements. Facility leases generally provide for periodic rent increases, and many contain escalation clauses and renewal options. Certain leases require the Company to pay property taxes and routine maintenance. Facility leases have terms that expire at various dates through September 2025.

In cases where the lessor grants leasehold improvement allowances rent expense is reduced by the allowances paid as those amounts are capitalized as improvements which are recognized as deferred rent that is amortized over the shorter of the lease term or the expected useful life of the improvements. During the year ended December 31, 2012, $2.8 million was capitalized from lessor paid leasehold improvements. During the year ended December 31, 2014 and 2013 no leasehold improvements were paid by a lessor.

Rent expense for operating leases is recognized on a straight-line basis. Rent expense of $5.2 million, $5.8 million, and $4.9 million was recognized for all operating leases during the years ended December 31, 2014, 2013 and 2012, respectively. Current and noncurrent deferred rent totaled $1.2 million and $0.1 million, respectively, at December 31, 2014, and $1.4 million and $0.7 million, respectively, at December 31, 2013.

Intangible Assets

Intangible assets that have finite useful lives consist of purchased patent rights and licenses. These intangible assets are being amortized over the expected economic use of the assets.

Goodwill

Goodwill represents the excess purchase price of net tangible and identifiable intangible assets acquired in business combinations over their estimated fair value. The allocation of purchase price for acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values. Goodwill is deemed to have an indefinite life and, therefore, is not amortized.

Goodwill is tested for impairment at the reporting unit level during the fourth quarter each fiscal year, or more frequently if indicators of impairment are present. If goodwill is considered to be impaired, the impairment recognized is equal to the amount by which the carrying value of the reporting units goodwill exceeds the implied fair value of that goodwill.

Valuation of Long-Lived and Intangible Assets

The Company periodically re-evaluates the original assumptions and rationale utilized in the establishment of the carrying value and estimated lives of long-lived assets and finite-lived intangible assets. Long-lived assets and finite-lived intangibles are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an asset is considered to be impaired, the impairment recognized is equal to the amount by which the carrying value of the asset exceeds its fair value.

Share-Based Compensation

The Company measures and recognizes compensation expense for all share-based payments made to employees, directors, and consultants based on estimated fair value, net of estimated forfeitures. These share-based awards include stock options, restricted stock and restricted stock units, and stock purchase rights under the Company's employee stock purchase plan. The fair value of stock options granted and stock purchase rights is estimated using the Black-Scholes-Merton ("BSM"), option-pricing model and for market-based grants the Monte Carlo simulation model is used. These models require the use of

F-10

estimates such as stock price volatility and expected option lives, as well as expected option forfeiture rates, to value employee share-based compensation at the date of grant or modification. The fair value of restricted stock awards and restricted stock units is based on the market price of the Company's common stock on the date of grant.

Share-based compensation cost is recognized on a straight-line basis over the requisite service period of the award or, in the case of market-based awards, on an accelerated basis, over the greater of the vesting period or derived service period. Share-based compensation expense is recognized only for those awards that are ultimately expected to vest for awards with only a service condition. For stock option modifications, the Company compares the fair value of the original award immediately before and after the modification. For Type I modifications, or probable-to-probable vesting conditions, the incremental fair value of fully vested awards is recognized as expense on the date of the modification, with the incremental fair value of unvested awards recognized ratably over the new service period. Forfeitures are estimated at the time of grant and revised if necessary, in subsequent periods, if actual forfeitures differ from those estimates. Changes in forfeiture estimates impact compensation cost in the period in which the change in estimate occurs.

Due to a net loss carryforward position, no tax benefits for share-based compensation have been recognized in the consolidated statements of cash flows. The Company has not recognized, and does not expect to recognize in the near future, any tax benefit related to share-based compensation cost as a result of the full valuation allowance of the Company's net deferred tax assets and net operating loss carryforwards.

The fair value of options granted to non-employees is estimated at the measurement date using the BSM pricing model and remeasured at each reporting date to fair value, with changes in fair value recognized as expense in the statement of operations and comprehensive income (loss).

Restructuring Costs

During the year ended December 31, 2013, the Company announced and executed a restructuring plan to exit its marketing of RetnaGene AMD LDT, reduce the Company’s workforce and not to move into a leased facility. The Company measured and accrued the liabilities associated with employee separation costs at fair value as of the date the plan was announced and terminations were communicated to employees, which primarily consisted of severance pay and other separation costs such as outplacement services and benefits.

The fair value measurement of restructuring related liabilities requires certain assumptions and estimates to be made by the Company, such as the retention period of certain employees, the timing and amount of sublease income on the property, and the operating costs to be paid until lease termination. The Company’s policy is to use its best estimates based on facts and circumstances available at the time of measurement, review the assumptions and estimates periodically, and adjust the liabilities when necessary.

Income Taxes

As a result of a gain of $24.3 million from the sale of the discontinued operations in 2014, we recorded income tax expense from discontinued operations of $8.3 million. We also recognized a corresponding tax benefit in continuing operations in 2014. This benefit is a result of the required accounting for discontinued operations which requires a separate tax presentation for discontinued and continuing operations.

Our provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for the expected future tax benefit to be derived from tax loss and credit carryforwards. Deferred tax assets and liabilities are determined using the enacted tax rates in effect for the years in which those tax assets are expected to be realized. A valuation allowance is established when it is more likely than not the future realization of all or some of the deferred tax assets will not be achieved. The evaluation of the need for a valuation allowance is performed on a jurisdiction by jurisdiction basis, and includes a review of all available positive and negative evidence. When we establish or reduce the valuation allowance against deferred tax assets, our provision for income taxes will increase or decrease, respectively, in the period such determination is made. As of December 31, 2014 and 2013, we maintained valuation allowances against U.S. and foreign deferred tax assets that we concluded had not met the “more likely than not” threshold. Changes in the valuation allowance when they are recognized in the provision for income taxes may result in a change in the estimated annual effective tax rate.

We recognize excess tax benefits associated with share-based compensation to stockholders' equity only when realized. When assessing whether excess tax benefits relating to share-based compensation have been realized, we follow the with-and-without approach, excluding any indirect effects of the excess tax deductions. Under this approach, excess tax benefits related to share-based compensation are not deemed to be realized until after the utilization of all other tax benefits available to us.

F-11

We recognize the impact of a tax position in our financial statements only if we believe that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. Any interest and penalties related to uncertain tax positions will be reflected in income tax expense.

Accumulated Other Comprehensive Income (Loss)

Comprehensive loss and its components encompasses all changes in equity other than those with stockholders, and includes net loss, unrealized gains and losses on available-for-sale marketable securities and foreign currency translation adjustments.

Functional Currency

The U.S. dollar is the functional currency of the Company’s international operations. The Company remeasures its foreign subsidiaries’ monetary assets and liabilities to the U.S. dollar and records the net gains or losses resulting from remeasurement in other expense, net in the consolidated statements of operations.

Net Earnings (Loss) Per Share

Basic and diluted net loss per common share for the periods presented is computed by dividing net loss by the weighted-average number of common shares outstanding during the respective periods, without consideration of common stock equivalents. Common stock equivalents, determined on a weighted-average, that could potentially reduce net earnings per common share in the future that were not included in the determination of diluted earnings (loss) per common share as their effects were antidilutive are as follows (in thousands):



	Years ended December 31,
	2014	2013	2012
Shares underlying Convertible Senior Notes	28,088	28,088	8,014
Options to purchase common stock	13,108	13,789	11,131
Restricted stock units not yet vested and released	2,038	1,654	825
Restricted stock awards issued, but unvested	34	17	9
Options to purchase shares under the Employee Stock Purchase Plan	158	172	114
Warrants to purchase common stock	250	250	250
Total	43,676	43,970	20,343

The control number for determining whether to present potential dilutive common shares in the diluted EPS computation is income from continuing operations. As a result, if there is a loss from continuing operations, diluted EPS would be computed in the same manner as basic EPS is computed, even if we report net earnings after including discontinued operations.

Recently Adopted Accounting Pronouncements

In June 2014, the Financial Accounting Standards Board, or FASB, issued an accounting standards update that requires a performance target that affects vesting of a share-based payment award and that could be achieved after the requisite service period to be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized over the required service period, if it is probable that the performance target will be achieved. This guidance will be effective for fiscal years beginning after December 15, 2015, which will be the Company's fiscal year 2016, with early adoption permitted. The Company does not expect the adoption of the guidance will have a material impact on the Company's consolidated financial statements.

In May 2014, the FASB issued an accounting standards update that creates a single source of revenue guidance for companies in all industries. The new standard provides guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers, unless the contracts are within the scope of other accounting standards. It also provides a model for the measurement and recognition of gains and losses on the sale of certain nonfinancial assets. This guidance must be adopted using either a full retrospective approach for all periods presented or a modified retrospective approach and will be effective for fiscal years beginning after December 15, 2016, which will be the Company's fiscal year 2017. The Company has not yet evaluated the potential impact of adopting the guidance on the Company's consolidated financial statements.

F-12

permitted. The Company elected to use the non-amended guidance to evaluate the reported discontinued operations (see footnote 4) and will adopt the new guidance after its effective date.

Note 2. Supplementary Financial Information

Marketable Securities, available-for-sale (in thousands):



	As of December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. treasury securities	$	30,049	$	—	$	(29	)	$	30,020
Certificates of deposit	48		—		—			48
Mutual funds	277		243		—			520
Total marketable securities	$	30,374	$	243	$	(29	)	$	30,588



	As of December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. treasury securities	$	4,999	$	—	$	—		$	4,999
Certificates of deposit	4,163		—		(2		)	4,161
Mutual funds	250		258		—			508
Total marketable securities	$	9,412	$	258	$	(2	)	$	9,668

As of December 31, 2014, gross unrealized losses on marketable securities were insignificant. There were no impairments considered other-than-temporary for the years presented, as the Company has the intent and ability to hold the securities until maturity or a recovery of the cost basis or recovery of fair value. As of December 31, 2014, all marketable securities were due within one year.

Inventories (in thousands):



	As of December 31,
	2014		2013
Raw materials	$	6,165	$	10,613
Work in process	351		985
Total	$	6,516	$	11,598

Other Current Assets and Prepaid Expenses (in thousands):



	As of December 31,
	2014		2013
Pooled patents agreement receivable	$	6,000	$	—
Other	6,112		2,653
Total	$	12,112	$	2,653

F-13

Property, Equipment and Leasehold Improvements (in thousands):



	As of December 31,
	2014			2013
Building and improvements	$	8,673		$	8,673
Laboratory equipment	34,026			37,101
Leasehold improvements	6,351			6,156
Office furniture and equipment	16,709			16,956
	65,759			68,886
Less accumulated depreciation and amortization	(50,411		)	(44,508		)
Total	$	15,348		$	24,378

Depreciation expense for the years ended December 31, 2014, 2013 and 2012 was $11.5 million, $13.6 million, and $9.9 million, respectively. Depreciation of assets under capital leases is included in depreciation expense.

Accrued Expenses (in thousands):



	As of December 31,
	2014		2013
Accrued royalties, licenses, and collaboration payments	$	7,223	$	11,119
Accrued compensation and related taxes	7,606		4,520
Accrued professional fees and consulting	1,872		4,324
Other	5,454		5,293
Total	$	22,155	$	25,256

Note 3. Significant Acquisitions and Other Transactions

Acquisition of Patent Rights

On September 30, 2014, the Company entered into a patent purchase agreement (Patent Purchase Agreement) with Isis Innovation Limited (“Isis”). The acquired patents and patent applications from Isis relate to noninvasive prenatal testing for use in the United States, Canada, Japan, Australia, Hong Kong and Europe. The Company received an irrevocable, perpetual, fully-paid, exclusive license (with the right to sublicense) to certain know-how and intellectual property related to noninvasive prenatal testing, subject to certain reserved rights retained by Isis. The purchase is an asset acquisition and the accounting guidance requires assets acquired to be measured at the cost of the consideration paid or the fair value of the asset acquired, whichever measure is more reliable. The Company previously held an exclusive license to the patents and patent applications under the Exclusive License of Technology Agreement, dated October 14, 2005, between Isis and the Company, as amended (the “Exclusive License Agreement”). Under the Patent Purchase Agreement the Exclusive License Agreement was terminated as of September 30, 2014.

In consideration for the exclusive rights to the license, the Company made an up-front payment of $9.25 million to Isis and agreed to waive $2.1 million in legal fees owed to the Company by Isis. Additionally, Isis agreed to waive $1.4 million of royalties owed by the Company to Isis, under the Exclusive License Agreement. Including the remaining intangible asset value of $0.65 million from the Exclusive License Agreement, the acquired patent value was $10.6 million. The purchased patent rights will be amortized on a straight-line basis over their expected useful life, which was determined to be 3.5 years or through March 2018. Under the agreement the Company may also be required to make future payments to Isis based on meeting or exceeding certain revenue targets.

As of December 31, 2014 the carrying amount of the Company's intangible assets was $13.9 million less accumulated amortization of $2.7 million. Future estimated amortization of intangible assets at December 31, 2014 is as follows (in thousands):

F-14



2015	$	3,160
2016	3,160
2017	3,160
2018	898
2019	144
Thereafter	725
Total	$	11,247

Pooled Patents Agreement

On December 2, 2014, the Company entered into a Pooled Patents Agreement (the “Pooled Patents Agreement”) with Illumina, Inc. (“Illumina”), pursuant to which the parties pooled their intellectual property directed to noninvasive prenatal testing (“NIPT”). Under the Pooled Patents Agreement, Illumina has exclusive worldwide rights to utilize the pooled intellectual property to develop and sell in-vitro diagnostic (IVD) kits for NIPT and to license to third-party laboratories wanting to develop and sell their own laboratory-developed NIPT tests under the collection of pooled patents. The Company maintained a non-exclusive right to sublicense the intellectual property rights it acquired from Isis to third-party laboratories for its own developed NIPT tests. In addition, the Company and Illumina each have rights to utilize all pooled patents to develop and sell their own respective laboratory-developed NIPT tests. Additionally, as part of the Pooled Patents Agreement, Illumina gained access to samples and applicable study protocols from the Company’s clinical studies for high and low risk pregnancies.

In consideration, Illumina made an aggregate $50.0 million upfront payment to the Company as part of the agreement, of which $6.0 million was received in January 2015. Illumina will also pay royalties to the Company for sales of IVD kits for NIPT. The Company, Illumina and their sublicensees will each pay a per-test fee into a pool for laboratory-developed NIPT tests depending on the annualized volumes of tests, which will be shared between the Company and Illumina. Illumina has agreed to make minimum yearly payments to the Company under the pool covering both IVD royalties and Sequenom’s share of the collected test fees through 2020. The Pooled Patents Agreement will remain in effect until the date of expiration of the last to expire pooled patent on, which may be extended if patent applications in the pool are approved. Neither party may terminate the Pooled Patents Agreement except by mutual written agreement of the parties.

In accordance with the Pooled Patents Agreement, Sequenom and the Chinese University of Hong Kong (“CUHK”) entered into an agreement (the “CUHK Agreement”), pursuant to which certain license agreements by and between Sequenom and CUHK, were amended and assigned to Illumina for inclusion in the patent pool, subject to the Pooled Patents Agreement. Illumina is responsible for paying all royalties to CUHK under the CUHK License Agreements, and granted the Company a sublicense under each agreement to exploit laboratory-developed NIPT tests in accordance with the Pooled Patents Agreement. In consideration, the Company paid CUHK a one-time $6.15 million upfront payment and will pay additional royalties of varying percentages through 2019. The CUHK Agreement shall remain in effect until the expiration of the CUHK License Agreements. Each of the CUHK License Agreements expires concurrently with the last-to-expire patent that is a subject of the agreement or on the 20th anniversary of the commencement date of the agreement, whichever is later.

Concurrently with the execution of the Pooled Patents Agreement, Sequenom, Illumina, the Sequenom Center for Molecular Medicine, LLC (“SCMM ” a subsidiary of Sequenom Inc.), and Verinata Health, Inc., a subsidiary of Illumina (“Verinata ”) entered into a Settlement Agreement (the “Settlement Agreement ”), pursuant to which the parties settled certain claims and released the other parties from potential liability. Each party to the Settlement Agreement released the other parties and their affiliates, licensors, licensees, developers and certain purchasers from all claims for the exploitation, on or before the December 2, 2014 effective date of the Settlement Agreement, of NIPT products and services, as well as any other claims based on acts relating to the subject matter of the dismissed disputes or that could have been brought in response thereto. None of the parties made any admission of liability in entering into these arrangements.

In connection with entering into the Pooled Patents Agreement, the Company also entered into an Amended and Restated Sale and Supply Agreement with Illumina (the “Supply Agreement”), pursuant to which Sequenom and its affiliates will purchase various products from Illumina for use in NIPT as well as for other clinical and research uses. The Supply Agreement amends, restates and replaces Sequenom’s prior Sale and Supply Agreement with Illumina. Subject to certain conditions and limitations, including an annual purchase minimum, under the Supply Agreement Sequenom and its affiliates will receive pricing no less favorable than that offered by Illumina to similar customers in the United States. The Supply Agreement has a term of five years; provided, however, that it may be earlier terminated (i) in the event that either party breaches a material provision and fails to cure such breach within thirty days after receiving written notice of the breach, or (ii) by written notice if the other party becomes the subject of a voluntary or involuntary petition in bankruptcy or any proceeding relating to insolvency, receivership, liquidation or composition for the benefit of creditors that is not dismissed within 60 days.

F-15

The Company determined that the Pooled Patents Agreement, the Settlement Agreement, the Supply Agreement and the CUHK Agreement were all part of a single transaction with multiple elements as the various agreements were contemporaneously negotiated, contingent upon one another and negotiated with the same counterparties. As the agreements were considered to be part of one transaction with multiple elements, the Company followed the accounting guidance in ASC 605-25 to determine the separate units of account and the basis for allocating the consideration received. The Company evaluated all elements of the agreements and identified the following deliverables that had value; (1) the physical samples and applicable study protocols, (2) transfer of IVD technology (3) settlement of claims and disputes between the Company and Illumina and (4) the $6.15 million upfront payment made to CUHK. The Company allocated consideration to the physical samples and transfer of IVD technology based on its best estimate of selling price for each of the deliverables, which were derived from Company models as well as through the use of a third-party valuation expert. The Company determined the value to be allocated to the settlement of claims and disputes based on the residual value method due to the complex nature of the litigation and the inability to make a reliable estimate of value for this component. Consideration allocated to each element was $21.0 million for each of (i) the physical samples and (ii) the transfer of IVD technology and $1.85 million for the settlement of claims and disputes. The $6.15 million payment made by the Company to CUHK was reflected as a reduction of the proceeds received from Illumina as this was primarily for the amendment of certain license agreements by and between Sequenom and CUHK, and the assignment of those agreements to Illumina for inclusion in the patent pool, and resulted in net consideration to be allocated by the Company of $43.85 million.

Effective December 2, 2014, the Company transferred to Illumina the IVD technology and settled all claims and disputes with Illumina set forth in the Settlement Agreement. As such, the Company satisfied two deliverables in the arrangement and recognized $22.85 million as a gain on the Pooled Patents Agreement in the consolidated statement of operations and comprehensive income (loss) during the fourth quarter of 2014. The Company will recognize a gain of $21.0 million once the remaining applicable study protocols associated with the physical samples are delivered to Illumina, which is expected to occur during the first half of 2015.

Note 4. Discontinued Operations

The results of operations from discontinued operations presented below include certain allocations that management believes fairly reflect the utilization of services provided to the Bioscience business segment. The allocations do not include amounts related to general corporate administrative expenses or interest expense. Therefore, the results of operations from the Bioscience business segment do not necessarily reflect what the results of operations would have been had the business operated as a stand-alone entity.



	Period ended May 30,			Years ended December 31,
	2014			2013			2012
Discontinued Operations (in thousands)
Revenue:
Bioscience product sales and services	$	12,470		$	42,870		$	43,240
Cost of revenue:
Cost of bioscience product sales and services	4,235			15,436			15,025
Gross margin	8,235			27,434			28,215
Operating expenses:
Selling and marketing	6,237			13,772			14,792
Research and development	2,248			7,797			10,283
General and administrative	643			1,621			1,308
Restructuring costs	19			284			—
Total operating expenses	9,147			23,474			26,383
Earnings (loss) from discontinued operations	(912		)	3,960			1,832
Other income (expense), net	81			(145		)	(1,155		)
Earnings (loss) from discontinued operations before income taxes	(831		)	3,815			677
Income tax benefit (expense)	248			(1,654		)	(415		)
Gain on sale of discontinued operations, net of tax	15,959			—			—
Earnings from discontinued operations	$	15,376		$	2,161		$	262

The gain on the sale of the Bioscience business segment, net of $8.3 million of related tax expense was $16.0 million, with an aggregate cash sale price of $31.8 million, plus a $2.0 million, milestone payment, less net book value of $6.2 million,

F-16

adjustments for working capital of $0.8 million, and transaction costs of approximately $2.5 million, which consist primarily of investment banking and legal fees.

The following table summarizes the assets and liabilities of discontinued operations as of December 31, 2013 related to the Bioscience business segment (in thousands):



	December 31, 2013
Assets
Current assets:
Accounts receivable, net	$	7,696
Inventories	5,370
Other current assets and prepaid expenses	408
Total current assets	13,474
Property, equipment and leasehold improvements, net	2,175
Other assets	133
Total noncurrent assets	2,308
Total assets of discontinued operations	$	15,782

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	868
Accrued expenses	2,878
Other current liabilities	2,461
Total current liabilities of discontinued operations	6,207
Other long-term liabilities	946
Cumulative translation adjustment	527
Total liabilities and equity of discontinued operations	$	7,680

In connection with the sale of the Bioscience segment, the Company also entered into other agreements designed to facilitate the orderly transfer of business operations to BioSciences. One agreement is a three year Supply Agreement with BioSciences where the Company may purchase consumables and systems for the laboratory business and for the first twelve months of the agreement has preferred pricing. Purchases made by the Company of consumables and systems for the years ended December 31, 2014, 2013 and 2012, were $0.7 million, $0.9 million and $0.6 million, respectively, these sales have been eliminated from discontinued operations reported revenue because the transaction was intra-entity.

Note 5. Research and Development and Collaboration and Licensing Agreements

The Company has entered into various collaborative agreements that provide rights to develop, produce and market products using certain know-how, technology and patent rights maintained by the Company's collaborative partners. Terms of the various collaboration agreements may require us to make milestone payments upon the achievement of certain product research and development objectives and pay royalties on future sales, if any, of commercial products resulting from the collaboration. Certain of the licensing agreements require guaranteed minimum royalty payments. Terms of the licensing agreements generally range from the remaining life of the patent up to 17 years and, in some cases, may be subject to earlier termination by either party upon specified circumstances.

F-17

Total expense incurred under all research and development collaboration and licensing agreements for royalties, milestone payments, and research funding obligations, including amortization, during the years ended December 31, 2014, 2013 and 2012 was $13.6 million, $12.0 million and $5.5 million, respectively.

Future minimum guaranteed payment obligations for royalties, milestone payments, and research funding obligations under all such agreements at December 31, 2014 are as follows (in thousands):



2015	$	2,238
2016	1,063
2017	1,063
2018	823
2019	823
Thereafter	6,651
Total	$	12,661

Note 6. Long-Term Obligations (in thousands, except percentages):



	As of December 31,
	2014			2013
5.00% Convertible Senior Notes due October 2017, interest payable semi-annually in April and October	$	130,000		$	130,000
Bank Loans due May 2015, principal and interest payable monthly, weighted-average effective interest rates of 5.5% and 5.5%, net of unamortized discounts of $8 and $109 at December 31, 2014 and 2013, respectively	3,722			10,894
Obligation for building and improvements, effective interest rate of 4.9%, expiring October 2026	5,868			6,116
Capital lease liabilities, expiring January 2016, net of unamortized discounts of $17 and $57 at December 31, 2014 and 2013, respectively	156			275
Total long-term obligations	139,746			147,285
Less current portion	(4,144		)	(7,643		)
Non-current portion	$	135,602		$	139,642

Future maturities of long-term obligations at December 31, 2014 are as follows (in thousands):



2015	$	4,168
2016	323
2017	130,344
2018	380
2019	417
Thereafter	4,139
Total gross maturities	139,771
Less unamortized discounts for imputed interest	(25		)
Total long-term obligations	$	139,746

Convertible Senior Notes

On September 17, 2012, the Company issued $130.0 million aggregate principal amount of Convertible Senior Notes ("the Notes") in a private offering to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended. The Notes bear interest at a fixed rate of 5.00% per year, payable semiannually in arrears on April 1 and October 1 of each year. The Notes mature on October 1, 2017, unless earlier converted, redeemed, or repurchased. The Notes are convertible at any time prior to the third trading day immediately preceding the maturity date, at the option of the holders, into shares of common stock.

The net proceeds received were $124.7 million after deducting underwriting discounts and commissions and other offering costs of $5.3 million. The debt issuance costs are recorded in other assets and are amortized to interest expense, using the effective interest method, over the five-year term of the Notes. At December 31, 2014 and 2013, unamortized deferred debt issuance costs totaled $3.1 million and $4.1 million, respectively.

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The Notes are initially convertible into a total of 28.1 million shares of common stock, which is equal to an initial conversion rate of 216.0644 shares of common stock per $1,000 principal amount of the Notes (equivalent to an initial conversion price of approximately $4.63 per share of common stock), and will be subject to adjustment upon the occurrence of certain events. The maximum conversion rate is 275.4821 shares of common stock per $1,000 principal amount of the Notes, which would result in a maximum issuance of 35.8 million shares of common stock if all holders converted at the maximum conversion rate. In addition, under certain circumstances the Company, in connection with a make-whole fundamental change (as defined in the indenture governing the Notes), may be required to increase the conversion rate for holders of the Notes and as of December 31, 2014, no change to the conversion rate has occurred on the Notes.

The Company may not redeem the Notes prior to October 1, 2015. On or after October 1, 2015, the Company may redeem for cash all, but not less than all, of the Notes if the last reported sale price of the common stock equals or exceeds 140% of the applicable conversion price for at least 20 trading days during the 30 consecutive trading day period ending on the trading day immediately prior to the date on which the notice of the redemption is delivered. The redemption price will equal 100% of the principal amount of the Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date. In addition, if the Notes are called for redemption, a make-whole fundamental change will be deemed to occur. As a result, in certain circumstances, this would increase the conversion rate for holders who convert their Notes after a notice of redemption is delivered and on or prior to the close of business on the third business day immediately preceding the relevant redemption date. Upon a fundamental change, subject to certain exceptions, the holders may require that the Company repurchase some or all of their Notes for cash at a repurchase price equal to 100% of the principal amount of the Notes being repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

On September 17, 2012, the Company entered into an indenture with Wells Fargo Bank, National Association, as trustee, relating to the Notes. The Notes are senior, unsecured obligations and rank equal in right of payment with existing and future senior, unsecured indebtedness, and will be senior in right of payment to any future indebtedness that is expressly subordinated to the Notes. The Notes will be effectively subordinated to existing and future secured indebtedness to the extent of the assets securing such indebtedness and will be structurally subordinated to all indebtedness and other liabilities and commitments of subsidiaries, including trade payables and any guarantees that they may provide with respect to any existing or future indebtedness.

Bank Loans

In May 2011, the Company entered into a Loan and Security Agreement, or the Loan Agreement, with Silicon Valley Bank, or SVB, that allowed for term loans of up to $20.0 million to be borrowed through August 31, 2012, revolving cash borrowings of up to $10.0 million, as well as letters of credit all under a secured credit facility. All borrowings under the Loan Agreement are secured by substantially all of the Company's assets, except for intellectual property, and are subject to certain other exceptions. The Loan Agreement includes limitations on the ability, among other things, to incur debt, to grant liens, to make certain investments, to make certain restricted payments such as dividend payments, and to dispose of assets, as well as requirements to meet a number of affirmative and negative covenants.

The Company borrowed under the term loans $5.0 million and $15.0 million during the years ended December 31, 2012 and 2011, respectively. Under the Loan Agreement, the term loans bear interest at the rate fixed on the date of funding equal to the U.S. treasury rate plus 3.25% per annum. The term loan borrowings are being repaid in 33 equal installments of principal, plus accrued interest which commenced on September 1, 2012. The term loans requires a final payment of 3.5% of all advances made under the term loans, in addition to principal repayments, at the loan maturity date, which is May 1, 2015, which is being amortized as interest expense over the term of the loan. The Company has the option to prepay the outstanding balance of the term loans in full, subject to the final payment.

At December 31, 2014, the Company was in compliance with all covenants under the Loan Agreement. These include a minimum liquidity covenant requiring the Company to maintain with SVB unrestricted cash and marketable securities plus available amounts equal to or greater than the sum of all indebtedness owed to SVB plus operating liquidity.

Obligation for Building and Improvements

In November 2011, the Company entered into a lease agreement for a building in Raleigh-Durham, North Carolina, that is accounted for as a financing lease. The term of the lease and the obligation was initially 15 years through October 2026, including two 5-year extensions of the lease. Rent payments under the lease are allocated primarily between interest expense and reduction to the long-term obligation. In the event the lease is terminated prior to the end of the 15-year period, any gain representing the amount by which the balance of the obligation exceeds the net book value of the related building and improvements would be recognized.

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Note 7. Commitments and Contingencies

Patent Litigation

In December 2011, the Company was named as a defendant in a complaint filed by plaintiff Aria Diagnostics, Inc., in the U.S. District Court for the Northern District of California. Since the complaint was filed, Aria changed its name to Ariosa Diagnostics, Inc., or Ariosa. In the complaint, the plaintiff seeks a judicial declaration that no activities related to the plaintiff's noninvasive, prenatal test using cell-free DNA circulating in the blood of a pregnant woman do or will infringe any claim of U.S Patent No. 6,258,540 entitled Noninvasive Prenatal Diagnosis, or the '540 Patent, which was exclusively in-licensed from Isis prior to September 30, 2014 when the Company purchased the patent from Isis. In March 2012, the Company filed an answer to the complaint and asserted counterclaims that Ariosa is infringing the '540 Patent and seeking unspecified damages and injunctive relief. The Company's counterclaims name Isis as a nominal counter-defendant for purposes of subject matter jurisdiction only. With the purchase of the '540 Patent, the Company will seek to dismiss Isis from the lawsuit as soon as practicable. In March 2012, Ariosa responded to the Company's answer and counterclaims and asserted affirmative defenses including invalidity of the '540 Patent under U.S. patent laws. In March 2012, the Company filed a motion against Ariosa for preliminary injunctive relief. On July 5, 2012, the Court denied the Company's motion for preliminary injunctive relief and on July 16, 2012 the Company filed a Notice of Appeal to the U.S. Court of Appeals for the Federal Circuit (CAFC) from the order denying the preliminary injunction motion. On August 9, 2013, the CAFC vacated and remanded the District Court’s decision, ruling that the District Court incorrectly interpreted the claims of the ‘540 patent and improperly balanced factors regarding issuance of a preliminary injunction. On August 16, 2013, Ariosa filed a motion for summary judgment in favor of Ariosa on the Company's counterclaim for patent infringement on the ground that the claims of the ‘540 Patent are invalid because they are not drawn to patent-eligible subject matter under the patent code. On October 16, 2013 the District Court issued its order on the interpretation of the claims of the patent. On October 30, 2013 the District Court issued its order granting Ariosa’s motion for summary judgment, finding that the’540 Patent is invalid. The Company disagrees with the Order and has appealed the decision to the U.S. Court of Appeals for the Federal Circuit. The Company intends to vigorously defend against the judicial declarations sought by Ariosa in its complaint and intends to vigorously pursue the Company's claims against Ariosa for damages and injunctive relief. However, the Company cannot predict the outcome of this matter.

In addition, Ariosa has sought to invalidate the ‘540 Patent through a petition for inter parties review ("IPR") before the Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (USPTO). Trial of the IPR was held before the PTAB on January 24, 2014. The PTAB issued a Decision in the IPR on September 2, 2014 invalidating some claims but upholding the validity of other claims. Both the Company and Ariosa have requested reconsideration of the PTAB decision.

In January 2012, the Company was named as a defendant in a complaint filed by plaintiff Natera, a Delaware corporation, in the U.S. District Court for the Northern District of California. In the complaint, the plaintiff seeks a judicial declaration that (i) activities related to the plaintiff's noninvasive, prenatal paternity test do not directly or indirectly infringe any claim of the '540 Patent, and (ii) one or more claims of the '540 Patent are invalid for failure to comply with the requirements of the patent laws of the U.S. In April 2012, the Company filed an answer to the complaint and asserted counterclaims that Natera and DNA Diagnostics Center, Inc., or DDC, are infringing the '540 Patent based on their activities relating to noninvasive prenatal paternity testing and noninvasive prenatal aneuploidy testing and seeking unspecified damages and injunctive relief. The Company's counterclaims named Isis as a nominal counter-defendant for purposes of subject matter jurisdiction only and the Company seeks to dismiss Isis as soon as practicable now that the Company has purchased the '540 patent from Isis. On October 16, 2013 the District Court issued its order on the interpretation of the patent claims. Many of the ‘540 Patent claims asserted against Natera are the same claims that were invalidated by the same District Court on October 30, 2013 in the litigation involving Ariosa, set forth above, and the Company and Natera stipulated to final judgment on the '540 patent claims in this case and have appealed the patent invalidity determination to the U.S. Court of Appeals for the Federal Circuit, which has consolidated the Ariosa, Natera, and Verinata case appeals. The Company intends to vigorously defend against the judicial declarations sought by Natera in its complaint and intend to vigorously pursue our claims against Natera for damages and injunctive relief. However, the Company cannot predict the outcome of this matter.

In February 2012, the Company was named as defendants in a complaint filed by plaintiffs Verinata Health, Inc., or Verinata, and The Board of Trustees of the Leland Stanford Junior University, or Stanford, in the U.S. District Court for the Northern District of California. Verinata was acquired by Illumina, Inc. in 2013. In the complaint (i) Verinata seeks a judicial declaration that activities related to its noninvasive prenatal test using cell-free DNA circulating in the blood of a pregnant woman do not directly or indirectly infringe any claim of the '540 Patent, which at the time was exclusively in-licensed from Isis but has since been purchased from Isis, (ii) Verinata seeks a judicial declaration that each claim of the '540 Patent is invalid for failure to comply with the requirements of the patent laws of the U.S., and (iii) Verinata and Stanford allege that the Company, by performing its noninvasive prenatal MaterniT21 test, has and continues to directly infringe U.S. Patents which have been exclusively licensed to Verinata by Stanford and seek unspecified damages. In March 2012, the Company filed an answer to the complaint and asserted counterclaims that Verinata is infringing the '540 Patent and seeking unspecified damages

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and injunctive relief. The Company's counterclaims name Isis as a nominal counter-defendant for purposes of subject matter jurisdiction only. In June 2012, plaintiffs Verinata and Stanford amended their complaint and allege that the Company, by performing its noninvasive prenatal MaterniT21 PLUS test, have and continue to directly infringe on a Patent which has been exclusively licensed to Verinata by Stanford and seek unspecified damages. In July 2012, the Company filed an answer to the complaint.

On October 16, 2013, the District Court issued its order on the interpretation. Many of the ‘540 Patent claims asserted against Verinata are the same claims that were invalidated by the same District Court on October 30, 2013 in the litigation involving Ariosa, set forth above, and the Company and Verinata stipulated to final judgment on the ‘540 patent claims in this case and have appealed the patent invalidity determination to the U.S. Court of Appeals for the Federal Circuit. The District Court set trial beginning February 23, 2015. On December 2, 2014, the Company and Verinata reached a settlement that resolved litigation between them, and all litigation between the Company and Verinata related to these patents is now dismissed. As part of that settlement the patents and pending applications, are now pooled under a Pooled Patents Agreement between the Company and Illumina (who acquired Verinata). The Company and Verinata are now licensees to the patent rights that are pooled under the Pooled Patents Agreement.

On March 12, 2013, the U.S. Patent and Trademark Office, or USPTO, declared a patent interference between Verinata's patent, which Verinata had asserted against us in the litigation, and the Company's then in-licensed (from CUHK) pending a patent application. Two related patent interferences were declared by the USPTO between patent applications related to the patent and application. On April 7, 2014, the USPTO concluded the interferences, ruling that Verinata’s lacked sufficient disclosure to meet the written description requirement for the patent claims, and entered judgment canceling all four of the patent claims in the interference and the involved claims of the related patent application. Verinata has appealed the USPTO’s decision to the U.S. District Court for the Northern District of California. The District Court has set trial beginning February 23, 2015 on the appeal. On December 2, 2014, the involved patents and applications were added to the patent pool. The Company is not a party to the District Court proceedings.

On May 3, 2013, the USPTO declared a patent interference between Verinata's Patent, which Verinata has asserted against us in the litigation, and the Company's then in-licensed (from CUHK) pending patent application. On April 7, 2014, the USPTO ruled that the pending patent application has sufficient disclosure to meet the written description requirement for the patent claims and ordered the interference to proceed to the priority phase to determine which inventors were the first to invent the subject matter of the interference and entitled to a patent on that subject matter. The Company also separately challenged the validity of Verinata’s Patent in an inter partes review proceeding before the USPTO. The USPTO recently issued a decision in the Interference and the patent IPR upholding the validity of the patent. Pursuant to the terms of its settlement with Verinata, the Company will not appeal these decisions.

On September 29, 2014, and October 1, 2014 two unknown third parties initiated Opposition Proceedings against a European Patent. This patent was previously in-licensed by the Company from CUHK but has since been added to the patent pool under the Pooled Patents Agreement. The Company has rights to this patent under the patent pool but no longer controls efforts to defend this patent in the Opposition Proceedings.

In addition, from time to time, the Company may be involved in litigation relating to claims arising out of the Company's operations in the normal course of business, including claims related to the Company's products, tests, and services, including LDT services. These other matters are, in the opinion of management, immaterial with respect to the Company's consolidated financial position, liquidity, or results of operations.

Claim estimates that are probable and can be reasonably estimated are reflected as liabilities. Because of the uncertainties related to the Company's pending litigation, investigations, inquiries or claims, management is currently unable to predict the ultimate outcome of any litigation, investigation, inquiry or claim, determine whether a liability has been incurred, or make an estimate regarding the possible loss or range of loss that could result from an unfavorable outcome. It is reasonably possible that some of the matters, which are pending or may be asserted, could be decided unfavorably to us. An adverse ruling or outcome in any lawsuit involving us could materially affect the Company's business, liquidity, consolidated financial position or results of operations ability to sell one or more of the Company's products or could result in additional competition. In view of the unpredictable nature of such matters, the Company cannot provide any assurances regarding the outcome of any litigation, investigation, inquiry or claim to which the Company is a party or the impact on us of an adverse ruling of such matters.

Operating Leases

F-21

Future minimum annual obligations under all non-cancellable operating lease commitments, including the facility leases, at December 31, 2014 are as follows (in thousands):



2015	$	4,066
2016	2,499
2017	2,561
2018	2,631
2019	2,704
Thereafter	17,060
Total	$	31,521

Note 8. Preferred and Common Stock

Preferred Shares

The Board of Directors has the authority to designate up to 5.0 million shares of preferred stock in one or more series and to define the terms of each series of preferred stock, including dividend, conversion, voting, redemption and liquidation rights and preferences. As of December 31, 2014 no preferred stock has been issued or is outstanding.

Stock Purchase Rights Agreement

The Company has a Rights Agreement to protect stockholders' interest in the event of a proposed takeover of the Company. Each outstanding share of common stock has attached to it one preferred share purchase right, or Right, which entitles the registered holder to purchase one one-hundredth of a share of Series A Preferred Stock at a price of $120.00 subject to adjustment. The rights are exercisable only if a person, entity or group acquires, or announces their intention to acquire beneficial ownership of 15% or more of outstanding common stock, or Acquiring Person. Upon exercise, holders, other than the Acquiring Person, will have the right to receive shares of common stock or Series A Preferred Shares, cash, debt, stock or a combination thereof having a market value of two times the exercise price of the Right. The Rights expire on March 20, 2019.

Common Shares

As of December 31, 2014, the Company has authorized 185.0 million shares of common stock, of which 16.4 million shares are available for future issuance.

Common shares reserved for future issuance upon the exercise, issuance or conversion of the respective equity instruments at December 31, 2014 are as follows (in thousands):



Stock options:
Issued and outstanding	11,116
Available for future grant	8,611
Issued and outstanding restricted stock units	1,674
Available for issuance under the ESPP	1,388
Warrants outstanding	250
Convertible Senior Notes	28,088
Total	51,127

On January 25, 2012, the Company closed an underwritten public offering of 15.0 million shares of common stock at $4.15 per share, resulting in gross proceeds of $62.0 million. After deducting $3.8 million in underwriting discounts and commissions and other offering costs, net proceeds were $58.2 million.

Note 9. Stock Compensation Plans

Equity Incentive Plans

The 2006 Equity Incentive Plan, or the 2006 Plan, as approved by stockholders, provides for the granting of stock options, restricted stock, restricted stock units, stock appreciation rights, and performance awards to employees, directors and consultants.

F-22

As of December 31, 2014, under the 2006 Plan, up to an aggregate of 20.9 million shares of common stock may be issued, of which 12.5 million shares are reserved for issuance upon exercise of granted and outstanding options and vesting of restricted stock units, and 8.4 million shares are available for future grants.

The New-Hire Equity Incentive Plan, or the New-Hire Plan, which was approved by the Board of Directors in 2010, provides for the granting of stock options to eligible persons entering into employment with the Company and are not available to current or former employees or directors unless there has been a bona fide period of non-employment. As of December 31, 2014, under the New-Hire Plan, up to an aggregate of 550,000 shares of common stock may be issued, of which 311,000 shares are reserved for issuance upon exercise of granted and outstanding options, and 239,000 shares are available for future stock option grants.

Stock options generally vest over a four-year period and have a maximum term of ten years from the date of grant, subject to earlier cancellation prior to vesting upon cessation of service to the Company. A summary of activity related to stock option awards is as follows:



	Shares Subject to Options (in thousands)		Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2012	12,488		$	6.17
Granted	3,151		$	3.54
Exercised	(111	)	$	2.90
Forfeitures and cancellations	(2,485	)	$	5.68
Outstanding at December 31, 2013	13,043		$	5.66
Granted	4,716		$	3.45
Exercised	(483	)	$	2.71
Forfeitures and cancellations	(6,160	)	$	5.77
Outstanding at December 31, 2014	11,116		$	4.96	6.6	$	3,161
Options exercisable at December 31, 2014	7,619		$	5.62	5.8	$	1,277
Options vested or expected to vest at December 31, 2014	10,412		$	5.08	6.5	$	2,698

The aggregate intrinsic value of stock options exercised during the years ended December 31, 2014, 2013 and 2012 was $0.5 million, $0.1 million, and $0.0 million, respectively. Cash received from stock option exercises during the years ended December 31, 2014, 2013 and 2012 was $1.3 million, $0.3 million, and $0.1 million, respectively.

Restricted stock awards generally vest over a four-year period and have a maximum term of ten years from the date of grant, subject to earlier cancellation or forfeiture prior to vesting upon cessation of service to the Company. The following table summarizes activity related to restricted stock awards and restricted stock units:



	Number of Shares (in thousands)		Weighted-Average Grant Date Fair Value
Outstanding at December 31, 2012	905		$	4.34
Grants and awards	1,822		$	3.32
Vested and released	(370	)	$	4.13
Forfeitures and cancellations	(224	)	$	3.87
Outstanding at December 31, 2013	2,133		$	3.47
Grants and awards	1,373		$	2.55
Vested and released	(724	)	$	3.13
Forfeitures and cancellations	(1,108	)	$	3.31
Outstanding at December 31, 2014	1,674		$	2.99

The total fair value of restricted stock awards and restricted stock units that vested during the years ended December 31, 2014, 2013 and 2012 was $2.3 million, $1.5 million, and $0.6 million, respectively. As permitted under the 2006 Plan, 215,000 shares were repurchased for an aggregate value of $0.7 million during the year ended December 31, 2014 to satisfy tax withholding obligations for employees in connection with the vesting of restricted stock units.

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Employee Stock Purchase Plan

The 1999 Employee Stock Purchase Plans, or the ESPP, permits eligible employees to purchase shares of common stock at a discount through payroll deductions, with six-month offerings beginning on the first business day in February and August each calendar year. Under the terms of the ESPP, employees can elect to have up to 15% of their annual compensation, up to a maximum of $25,000 per year, withheld to purchase shares of common stock and limited to no more than 10,000 shares per individual per offering period. The price at which common stock is purchased under the ESPP is equal to 85% of the fair market value of the common stock on the first or last day of the offering period, whichever is lower.

During the years ended December 31, 2014, 2013 and 2012, a total of 0.6 million shares, 0.6 million shares, and 0.4 million shares, respectively, were purchased by and distributed to employees at an average price of $1.90, $2.49, and $2.91 per share, respectively. The total intrinsic value of purchase rights exercised during the periods presented was $0.6 million, $0.7 million, and $0.2 million, respectively.

As of December 31, 2014, 1.4 million shares of common stock were reserved for future issuance under the ESPP.

Market Condition Grants

The fair value of stock options awarded that include market-based performance conditions is estimated on the date of grant using a Monte Carlo simulation model, based on the market price of the underlying common stock, expected performance measurement period, expected stock price volatility and expected risk-free interest rate. There have been two market condition grants, both grants were made in 2014 with an exercise price of $3.07. The first grant was for 75,500 shares with a market performance goal of a 25% premium to the exercise price of the option for 30 consecutive days. The grant date fair value was determined to be $2.45 per share. The second grant was for 200,000 shares with a market performance goal of a closing stock price of $5.00 per share for 30 consecutive days. The grant date fair value was determined to be $2.42 per share. The two market condition grants are recognized over the vesting period which is 4 years.

The grant date value is based on the following assumptions:



Market condition option grants
Risk-free interest rate	2.6		%
Volatility	89.0		%
Dividend yield	—		%
Expected life (years)	8.0
Weighted-average grant date fair value	$	2.43

Share-based Compensation Expense

Following are the weighted-average underlying assumptions used to determine the fair value of stock option award grants and for stock purchase rights under the ESPP:



	Years ended December 31,
Stock option grants	2014			2013			2012
Risk-free interest rate	1.16		%	0.96		%	1.64		%
Volatility	54.3		%	73.0		%	94.5		%
Dividend yield	—		%	—		%	—		%
Expected life (years)	4.1			5.3			7.4
Weighted-average grant date fair value	$	1.67		$	2.58		$	3.61



	Years ended December 31,
ESPP stock purchase rights	2014			2013			2012
Risk-free interest rate	0.79		%	0.09		%	0.14		%
Volatility	67.2		%	68.9		%	68.2		%
Dividend yield	—		%	—		%	—		%
Expected life (years)	0.5			0.5			0.5
Weighted-average grant date fair value	$	0.91		$	1.17		$	1.13

The determination of fair value is affected by the stock price as well as assumptions regarding a number of complex and subjective variables that require judgment. The computation of the expected option life assumption is based on a weighted-

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average calculation combining the average historical exercise activity and assumptions regarding the estimated life of all unexercised, outstanding stock options. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of employee stock options. The expected volatility is based on the historical volatility of the Company's stock. No dividends on common stock have been paid since the Company's inception and, the Company does not anticipate paying dividends on common stock in the foreseeable future.

We amortize the fair value of share-based compensation on a straight-line basis over the requisite service periods of the awards for awards with only a service condition. Awards that contain a performance condition are amortized on an accelerated basis.

Modifications

In 2014 share-based compensation related grants were modified for executives retiring from employment with the Company, but continuing to serve the Company in a consultant role or as a member of the Company’s Board following their retirement. In connection with their retirement and return to service as a consultant or non-employee director, the Company’s board of directors approved an amendment to each stock option held by the executives extending the term in which the stock options may be exercised. These modifications resulted in an aggregate incremental compensation cost of $1.5 million, of that amount $1.2 million was attributable to vested awards and expensed immediately.

Total share-based compensation expense for all stock awards recognized in the consolidated statements of operations and comprehensive income (loss) is as follows (in thousands):



	Years ended December 31,
	2014		2013		2012
Total	$	11,519	$	9,527	$	10,790

As of December 31, 2014, there was $7.0 million of unamortized compensation cost related to unvested stock option awards, which is expected to be recognized over a remaining weighted-average vesting period of 2.2 years. As of December 31, 2014, there was $3.1 million of unamortized compensation cost related to unvested restricted stock awards which is expected to be recognized over a remaining weighted-average vesting period of 2.5 years.

Warrants

In connection with an amendment to the corporate headquarters lease in 2005, a warrant was issued to purchase 50,000 shares of the Company's common stock with an exercise price of $2.64 per share to the lessor. The warrant, which remains outstanding at December 31, 2014, was immediately exercisable and expires in October 2015. The fair value of the warrant, calculated using the Black-Scholes option pricing model, was recorded as prepaid rent and is being amortized as rent expense over the remaining life of the lease.

In connection with a license agreement to The Chinese University of Hong Kong Foundation Limited (an affiliate of CUHK), we issued a warrant to purchase up to 200,000 shares of common stock at a price of $7.00 per share, the closing price of common stock on May 3, 2011. The warrant, which expires in May 2018 and remains outstanding at December 31, 2014, was immediately exercisable, in whole or in part, but not for less than 20,000 shares and in increments of 20,000 shares. The fair value of the warrant of $1.2 million was recognized as research and development expense during the year ended December 31, 2011.

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Note 10. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables summarize the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis (in thousands):



	Fair Value Measurements at Reporting Date Using:
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
As of December 31, 2014
Cash equivalents:
Money market funds	$	50,359	$	50,359	$	—
Total cash equivalents	50,359		50,359		—
Marketable securities:
U.S. treasury securities	30,020		30,020		—
Certificates of deposit	48		—		48
Mutual funds	520		520		—
Total marketable securities	30,588		30,540		48
Total	$	80,947	$	80,899	$	48



	Fair Value Measurements at Reporting Date Using:
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
As of December 31, 2013
Cash equivalents:
Money market funds	$	41,260	$	41,260	$	—
Total cash equivalents	41,260		41,260		—
Marketable securities:
U.S. treasury securities	4,999		4,999		—
Certificates of deposit	4,161		—		4,161
Mutual funds	508		508		—
Total marketable securities	9,668		5,507		4,161
Total	$	50,928	$	46,767	$	4,161

There were no transfers in or out of Level 1, Level 2, or Level 3 investments during the years ended December 31, 2014 and 2013.

For fair values determined by Level 1 inputs, which utilize quoted prices in active markets for identical assets, the level of judgment required to estimate fair value is relatively low. The value of investments in money market funds, U.S. treasury securities and mutual funds was determined using Level 1 inputs. Fair values determined by Level 2 inputs, which utilize data points that are observable such as quoted prices, interest rates and yield curves and fair values determined by Level 3 inputs, which utilize unobservable data points supported by little or no market activities, require the exercise of judgment and use of estimates, that if changed, could significantly affect the Company's financial position and results of operations. Investments in certificates of deposit are valued using Level 2 inputs.

Level 2 securities are initially valued at the transaction price and subsequently valued and reported utilizing fair values provided by investment managers who estimate the fair value using inputs other than quoted prices that are observable either directly or indirectly, such as quotes from multiple third-party pricing vendors, fund or trust companies and quoted prices for securities with similar maturity and rating features along with additional procedures performed to corroborate the fair value of securities, including the comparison of fair values provided by investment managers to those obtained from other reliable sources.

F-26

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain non-financial assets and liabilities are measured at fair value on a nonrecurring basis in accordance with authoritative guidance. These include items such as non-financial assets and liabilities initially measured at fair value in a business combination and non-financial long-lived asset groups measured at fair value for an impairment assessment. In general, non-financial assets including goodwill, intangible assets, and property and equipment are measured at fair value when there is an indication of impairment and are recorded at fair value only when any impairment is recognized.

Facility Exit Liabilities. In connection with the restructuring in August 2013, as further described in Note 11 Restructuring Costs, and the exit of an operating lease on a facility in San Diego, which expires in July 2015, the fair values of the remaining lease liability and remaining tenant improvement liabilities was determined as of the cease-use date. The fair value of the remaining tenant improvement liabilities was determined using the aggregate of the remaining committed purchase orders for construction of the improvements (Level 1 inputs). The fair value of the remaining lease liability was determined as the present value of the remaining payments due under the lease and ancillary costs, reduced by estimated sublease rental income that could be reasonably obtained from the property, discounted using a credit-adjusted risk-free interest rate of 5.9% (Level 3 inputs). The estimated future payments were, net of estimated future sublease payments, based on current rental rates available in the local real estate market, and an evaluation of the ability to sublease the facility which was estimated to be in April 2014. The fair values were recorded as liabilities at the cease-use date with a corresponding expense recognized in restructuring costs in the consolidated statement of operations.

In 2014 management reassessed the remaining liabilities in connection with the facility exit and based on the shortened period where the facility could be subleased and consideration of other new information an additional $1.9 million of restructuring expense was recorded related to the vacated facility. The restructuring cost was for the entire lease obligation and costs to maintain the facility through the lease expiration.

As of December 31, 2014, the fair value of the remaining lease liability on the vacated facility was measured using the remaining lease liability. As of December 31, 2013, the fair value of the remaining lease liability on the vacated facility was measured using estimated net cash flows, discounted using a credit-adjusted risk-free rate, which are considered Level 3 inputs. The following table summarizes assets and liabilities measured at fair value on a nonrecurring basis during the year ended December 31, 2013 and the respective input levels based on the fair value hierarchy contained in fair value measurements and disclosures accounting guidance and the effect of the measurements on the statement of operations (in thousands):



	Fair Value Measurements at
	December 31, 2013
	using:
			Quoted Prices in
			Active Markets		Significant		Losses for the
			for Identical		Unobservable		Year Ended
Description	Fair Value		Liabilities (Level 1)		Inputs (Level 3)		December 31, 2013
Facility exit liabilities	$	1,281	$	18	$	1,263	$	2,438
Leasehold improvements	—		—		—		1,708
Other assets	—		—		—		650

Leasehold Improvements. In connection with the restructuring in August 2013, the carrying values of the leasehold improvement assets associated with the vacated leased facility were no longer recoverable, and an asset impairment charge was recorded during the year ended December 31, 2013, which is reported in restructuring costs in the consolidated statement of operations. As of December 31, 2014, all liabilities for the leasehold improvement have been paid.

Other Assets. In connection with the restructuring in August 2013 and the reduction in estimate of future cash flows to be generated by the RetnaGene AMD LDT product line, discussed in Note 11 Restructuring Costs, the carrying values of the RetnaGene AMD LDT licensed technology and prepaid minimum royalty balance were no longer recoverable, and, as a result, recognized asset impairment charges were recognized during the year ended December 31, 2013, which is reported in restructuring costs in the consolidated statement of operations.

F-27

Fair Value of Other Financial Instruments

The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts payable and accrued expenses, approximate fair value due to their short-term nature. Based on current borrowing rates currently available in the market for bank loans with similar terms, management believes that the fair values of its bank loans approximates their respective carrying values (Level 1).

The carrying amounts and fair values of Convertible Senior Notes are as follows (in thousands):



	December 31, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Convertible senior notes	$	130,000	$	134,227	$	130,000	$	113,100

At December 31, 2014, the fair value of Convertible Senior Notes was based on quoted market prices of similar instruments (Level 1).

Note 11. Restructuring Costs

As part of an overall cost reduction effort, in August 2013, the Company communicated to employees a plan to reduce the workforce. The restructuring resulted in the release of 57 employees, a reduction in estimated future cash flows to be generated by the RetnaGene AMD LDT, which resulted in an asset impairment of licensed technology, and the decision to exit a leased facility in San Diego, which is available for sublease until the lease expires in July 2015.

In connection with the restructuring, the Company recorded $2.4 million in facility exit costs, $1.7 million of impairment expense for tenant improvements associated with the vacated facility, $0.7 million of impairment expense for intangible assets and prepaid royalties related to the RetnaGene AMD LDT licensed technology, and $1.0 million in employee termination costs during the year ended December 31, 2013.

In 2014, based on the shortened period where the facility could be subleased and consideration of other new information management reassessed the remaining liabilities in connection with the restructuring and recorded an additional $1.9 million of restructuring expense related to the vacated facility. The restructuring cost is for the lease obligation and costs to operate the facility through the lease expiration.

The following table summarizes the restructuring activity during the year ended December 31, 2014 and related liabilities as of December 31, 2014 (in thousands):



	Facility Exit Costs			Employee Termination Costs			Total
Restructuring costs at December 31, 2013	$	1,281		$	106		$	1,387
Cash payments	(2,022		)	(77		)	(2,099		)
Change in prior estimate	1,936			(29		)	1,907
Balance as of December 31, 2014	$	1,195		$	—		$	1,195

The remaining liabilities at December 31, 2014, of $1.2 million are payable within the next twelve months through the remainder of the lease for the facility vacated, which expires in July 2015.

F-28

Table of Contents

Note 12. Income Taxes

The reconciliation of income tax computed at the federal statutory tax rate to the benefit for income taxes from continuing operations is as follows (in thousands):



	Years ended December 31,
	2014			2013			2012
Tax at statutory rate	$	(7,713	)	$	(38,821	)	$	(41,291	)
State taxes, net of federal benefit	(375		)	(6,399		)	(4,868		)
Change in valuation allowance	(640		)	216,586			668
Federal and state net operating losses, (addition) removal of limitations	(2,882		)	(173,288		)	42,121
Share-based compensation	4,366			2,761			2,597
Credits and other	(432		)	(2,192		)	89
Income tax benefit	$	(7,676	)	$	(1,353	)	$	(684	)

Income tax benefit from continuing operations consists of the following (in thousands):



	Years ended December 31,
	2014			2013			2012
Current:
Federal	$	(7,713	)	$	(1,491	)	$	(629	)
State	(279		)	(200		)	2
Foreign	69			(79		)	21
Total current tax benefit provision	(7,923		)	(1,770		)	(606		)
Deferred:
Federal	203			335			(71		)
State	44			82			(7		)
Total deferred tax provision (benefit)	247			417			(78		)
Income tax benefit	$	(7,676	)	$	(1,353	)	$	(684	)

In addition, current income tax expense of $8.1 million, $1.7 million and $0.4 million from discontinued operations was recorded for the years ended December 31, 2014, 2013 and 2012, respectively.

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax assets and liabilities are shown below. A full valuation allowance has been recorded, as realization of such assets is uncertain (in thousands):



	As of December 31,
	2014			2013
Deferred tax assets:
Net operating loss carryforwards	$	189,140		$	195,634
Capitalized research expenses and credits	21,555			21,874
Depreciation	3,169			2,870
Stock options	8,745			9,033
Accruals and reserves	4,400			6,248
Deferred revenue and other, net	8,797			815
Total deferred tax assets	235,806			236,474
Valuation allowance	(235,773		)	(236,413		)
Deferred tax assets	33			61
Deferred tax liabilities	(616		)	(399		)
Net deferred tax liabilities	$	(583	)	$	(338	)

F-29

Table of Contents

At December 31, 2014, federal and state tax net operating loss carryforwards totaled approximately $483.1 million and $436.0 million, respectively. The federal tax loss carryforwards will begin to expire in 2019, unless previously utilized. The state tax loss carryforwards began to expire in 2010.

At December 31, 2014, federal and California research and development tax credit carryforwards totaled approximately, $8.9 million and $17.3 million respectively. The federal research and development tax credit carryforwards will begin to expire in 2027 unless previously utilized. The California research and development credit will carryforward indefinitely.

Pursuant to Internal Revenue Code, or IRC, Sections 382 and 383, annual use of net operating loss and research and development credit carryforwards may be limited in the event of a cumulative change in ownership of more than 50% within a three-year period. During the year ended December 31, 2013, the Company completed an analysis under IRC Sections 382 and 383 from June 7, 2006 through December 31, 2012, and determined that several ownership changes occurred during this period with the last one occurring in December 2010. However, these ownership changes did not result in the forfeiture of any net operating losses or research and development credits. As a result, as of December 31, 2013, the reinstated deferred tax assets for federal and state net operating losses totaled $507.5 million and $449.8 million, respectively, and federal and California research and development credits of $8.5 million and $16.2 million, respectively, generated through December 31, 2013. In addition, a corresponding increase to the valuation allowance was recorded as of December 31, 2014. Upon reinstatement of these operating losses and research and development credits, the Company recorded $5.5 million of related unrecognized tax benefits. The Company is in the process of completing the Section 382 analysis through December 31, 2014 and the Company does not believe that they have experienced any additional ownership changes.

The Company's income tax return recognizes the impact of an uncertain income tax position at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained.

Following is a tabular reconciliation of unrecognized tax benefit activity for the three years ended December 31, 2014 (excluding interest and penalties) (in thousands):



Beginning balance, January 1, 2012	$	2,533
Reduction due to tax provision that reversed in the current year	(2,533		)
Ending balance, December 31, 2012	—
Additions based on tax positions related to the current year	997
Additions based on tax positions related to prior years	4,522
Ending balance, December 31, 2013	5,519
Additions based on tax positions related to the current year	1,748
Additions based on tax positions related to prior years	(22		)
Ending balance, December 31, 2014	$	7,245

The Company recognizes interest and/or penalties related to income tax matters in income tax expense. The Company had no accruals for interest or penalties in the consolidated balance sheets at December 31, 2014 and 2013, and has not recognized any interest or penalties in the statements of operations for the years ended December 31, 2014, 2013 or 2012.

The unrecognized tax benefits as of December 31, 2014, if recognized, would not impact income tax expense or effective tax rate as long as deferred tax assets remain subject to a full valuation allowance.

The Company is subject to taxation in the United States, foreign and various state jurisdictions. The tax years for 1996 and forward are subject to examination by federal and California tax authorities due to the carryforward of unutilized net operating losses and research and development credits. The Company does not expect any changes to unrecognized tax benefits over the next twelve months.

F-30

Table of Contents

Note 13. Quarterly Financial Data (unaudited)



	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total Year
	(In thousands, except share and per share information)
2014
Total revenue	$	37,061		$	39,782		$	37,937		$	36,789		$	151,569
Gross margin	$	14,291		$	17,372		$	16,937		$	19,494		$	68,094
Earnings (loss) from continuing operations	$	(16,669	)	$	(8,364	)	$	(6,078	)	$	16,747		$	(14,364	)
Earnings from discontinued operations	$	995		$	12,817		$	—		$	1,564		$	15,376
Net earnings (loss) (1)	$	(15,674	)	$	4,453		$	(6,078	)	$	18,311		$	1,012
Net earnings (loss) per common share, basic	$	(0.13	)	$	0.04		$	(0.05	)	$	0.16		$	0.01
Net earnings (loss) per common share, diluted	$	(0.13	)	$	0.04		$	(0.05	)	$	0.14		$	0.01
Weighted average number of shares outstanding, basic	116,134			116,454			117,067			117,377			116,729
Weighted average number of shares outstanding, diluted	116,134			116,454			117,067			146,228			116,729

2013
Total revenue	$	29,083		$	24,526		$	33,268		$	32,679		$	119,556
Gross margin	$	8,004		$	3,892		$	10,026		$	10,332		$	32,254
Loss from continuing operations	$	(28,982	)	$	(31,519	)	$	(29,344	)	$	(19,722	)	$	(109,567	)
Earnings (loss) from discontinued operations	$	(378	)	$	496		$	1,196		$	847		$	2,161
Net loss (2)	$	(29,360	)	$	(31,023	)	$	(28,148	)	$	(18,875	)	$	(107,406	)
Net loss per common share, basic and diluted	$	(0.26	)	$	(0.27	)	$	(0.24	)	$	(0.16	)	$	(0.93	)
Weighted average number of shares outstanding, basic and diluted	115,040			115,174			115,592			115,743			115,378

_____________________________________________

(1) Net earnings during the fourth quarter of 2014 includes a $22.9 million gain from the Pooled Patents Agreement. That gain was offset by a $1.2 million tax expense due to a reduction in a tax benefit estimated in the prior quarter. The first and second quarter of 2014 include restructuring costs of $0.9 million and $1.0 million, respectively.

(2) Net loss during the third quarter of 2013 includes $5.7 million in restructuring costs and impairment charges.

F-31

***Text Omitted and Filed Separately with

the Securities and Exchange Commission.

Confidential Treatment Requested Under

17 C.F.R. Sections 200.80(b)(4) and 230.406.

POOLED PATENTS AGREEMENT

This Pooled Patents Agreement (the “Agreement”) is made and entered as of 11:59 P.M. Pacific Time on December 2, 2014 (such date and time the “Effective Date”) by and among:

Illumina Inc., a Delaware corporation, having a place of business at 5200 Illumina Way, San Diego, CA 92122 (“Illumina”), and

Sequenom, Inc., a Delaware corporation, having a place of business at 3595 John Hopkins Court, San Diego CA 92121 (“Sequenom”),

W I T N E S S E T H:

WHEREAS, the Parties and others have entered into the Settlement Agreement dated as of the Effective Date (the “Settlement Agreement”) pursuant to which the Parties and others finally settled and resolved certain disputes on the terms and conditions thereof;

WHEREAS, both of the Parties desire to continue their current businesses related to the sale of services in the NIPT LDT Field;

WHEREAS, the Parties desire to pool together certain patent rights which each Party or its Affiliates owns or in-licenses in the Licensed NIPT Field, as Pooled Patents, and to offer them to third parties as a package license in an effort to help facilitate the broader exploitation in the marketplace of the technology claimed by the Pooled Patents;

WHEREAS, the Parties have agreed upon a price schedule for such licenses in the NIPT LDT Field, and upon mechanisms for adjusting such prices in response to changes in market conditions;

WHEREAS, the Parties desire for Illumina to have the exclusive right to Exploit the Pooled Patents in the NIPT IVD Field and have agreed on royalties that shall be payable by Illumina to Sequenom upon sale of NIPT IVD Products in the NIPT IVD Field;

WHEREAS, the Parties desire that the Pooled Patents be prosecuted, enforced, and licensed or sublicensed by Illumina or its Affiliates as set forth in this Agreement, and have set forth or referenced in this Agreement certain assignments, licenses, rights and obligations in that regard;

WHEREAS, the Parties have agreed upon one-time and recurring payments to be made between and among them in recognition of the rights and obligations each is receiving and incurring under this Agreement and the Ancillary Agreements; and

NOW THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, the Parties, intending to be legally bound, agree as follows:

ARTICLE I

DEFINITIONS AND INTERPRETATION

1.1 Definitions. Unless otherwise specifically provided herein, the following Capitalized terms shall have the following meanings:

“Agreement” has the meaning set forth in the preamble.

“Ancillary Agreement” means any agreement that is executed and delivered pursuant to the terms of this Agreement, including any agreement the execution and delivery of which is a condition precedent to the effectiveness of this Agreement, including as stated in Sections 2.4, 2.5, 2.6 and 2.7.

“Annual Report” has the meaning set forth in Section 3.4(c)(i).

“Authorized Lab” has the meaning set forth in Section 2.8(b).

“Business Day” means all days other than Saturdays, Sundays or a national or local holiday recognized in the United States or Hong Kong.

“Change of Control” means, with respect to a Person: (a) a transaction or series of related transactions that results in the sale or other disposition of all or substantially all of such Person’s assets; or (b) a merger or consolidation in which such Person is not the surviving corporation or in which, if such Person is the surviving corporation, the shareholders of such Person immediately prior to the consummation of such merger or consolidation do not, immediately after consummation of such merger or consolidation, possess, directly or indirectly through one or more intermediaries, a majority of the voting power of all of the surviving entity’s outstanding stock and other securities and the power to elect a majority of the members of such Person’s board of directors; or (c) a transaction or series of related transactions (which may include a tender offer for such Person’s stock or the issuance, sale or exchange of stock of such Person) if the shareholders of such Person immediately prior to the initial such transaction do not, immediately after consummation of such transaction or any of such related transactions, own, directly or indirectly through one or more intermediaries, stock or other securities of the entity that possess a majority of the voting power of all of such Person’s outstanding stock and other securities and the power to elect a majority of the members of such Person’s board of directors.

“Claims” means, collectively, all losses, liabilities, damages, costs and expenses of any type or nature whatsoever, and all claims, demands, suits, actions, causes of action or other proceedings of any type or nature whatsoever relating thereto.

“Combined Product” means a bundle of products consisting of at least one NIPT IVD Product and any other product (including any Illumina Product) that is not itself an NIPT IVD Product where the bundle is sold or transferred for a single price in a territory in any royalty reporting period, where such NIPT IVD Product and other product are also sold and priced separately in such territory in such royalty reporting period.

“Confidential Information” means all information that (a) is provided by one Party to the other Party pursuant to this Agreement, and (b) if disclosed in writing or other tangible medium is marked or identified as confidential at the time of disclosure to the recipient or, if disclosed other than in writing, is acknowledged at the time of disclosure to be confidential and is documented as confidential by written notice to the recipient within thirty (30) days after disclosure. Notwithstanding the foregoing, all reports, payments made and notices provided under this Agreement shall be Confidential Information of the providing Party, and all information subject to audits hereunder shall be Confidential Information of the audited Party, in each case whether or not so marked or identified, and subject to the exclusions (i) through (iv) immediately below. Notwithstanding the foregoing, Confidential Information of a Party shall not include that portion of such information that, and only to the extent that, the recipient can establish by satisfactory evidence: (i) was known to the recipient without an obligation of confidentiality to disclosing Party or any other Person before receipt thereof from the disclosing Party, (ii) is disclosed to the recipient free of confidentiality obligations by a Third Party who has the right to make such disclosure, (iii) is or becomes part of the public domain through no fault of the recipient, or (iv) was independently developed by Persons on behalf of recipient without use of the information disclosed by the disclosing Party.

“CUHK Licenses” means, collectively, the CUHK Licenses (2008/2011) and CUHK Licenses 2014.

“CUHK Licenses (2008/2011)” means (a) that license agreement between the Chinese University of Hong Kong (“CUHK”) and Sequenom, No TS094849 titled License Agreement, effective as of September 16, 2008, (b) that license agreement between CUHK and Sequenom, No TS116378 titled License Agreement, effective as of May 3, 2011 and (c) that license agreement between CUHK and Sequenom, No TS116379 titled License Agreement, effective as of May 3, 2011, as each of (a), (b) and (c) is amended as of the Effective Date and transferred by Sequenom to Illumina by assignment and novation as of the Effective Date.

“CUHK Licenses (2014)” means (a) that license agreement between CUHK and Illumina, No TS148570 titled License Agreement, effective as of the Effective Date, pursuant to which CUHK grants to Illumina certain licenses and other rights related to the inventions and other technology described in CUHK’s University Docket No. 10/MED/401/ITF, and (b) that license agreement between CUHK and Illumina, No TS148571 titled License Agreement, effective as of the Effective Date, pursuant to which CUHK grants to Illumina certain licenses and other rights related to the inventions and other technology described in CUHK’s University Docket No. 11/MED/403.

“CUHK Patent” means any Patent licensed to Illumina or Sequenom under a CUHK License.

“Current Illumina Product” means, collectively:

(a)any NIPT LDT Test that is first commercially performed by an Illumina Party as of or before the Effective Date;

(b)any Illumina Product first commercially sold by an Illumina Party as of or before the Effective Date solely to the extent such Product was used by any Person on or prior to the Effective Date for NIPT, and any line extension or natural evolution of such Illumina Product, provided that such line extension or natural evolution is first commercially sold by an Illumina Party and used for NIPT prior to the fifth (5^th) anniversary of the Effective Date and solely to the extent such Illumina Product is used by any Person for NIPT as set forth in subsections (a), (c), (d) and (e) herein;

(c)any NIPT LDT Test that is a line extension or natural evolution of any NIPT LDT Test set forth in the foregoing clause (a), provided that such line extension or natural evolution is first commercially performed by an Illumina Party prior to the fifth (5^th) anniversary of the Effective Date;

(d)any NIPT LDT Test:

(i)which is first commercially performed by an Illumina Party prior to the fifth (5th) anniversary of the Effective Date;

(ii)for which a Test Fee is paid in accordance with this Agreement; and

(iii)which is developed and performed solely and exclusively by or on behalf of Illumina or its Affiliates as its own product, and is sold


(A)	under brand names of Illumina or its Affiliates or

(B)under a private label for a Third Party sales agent, distributor or other reseller, provided that an NIPT LDT Test shall be excluded from this clause (d) if such NIPT LDT Test is performed in collaboration with a Third Party sales agent, distributor or other reseller; and

(e)any NIPT IVD Product:

(i) which is first commercially sold by an Illumina Party prior to the fifth (5^th) anniversary of the Effective Date;

(ii) for which a Royalty is paid in accordance with this Agreement; and

(iii) which is developed and made solely and exclusively by or on behalf of Illumina or its Affiliates as its own product, and is sold


(A)	under brand names of Illumina or its Affiliates; or

(B) under a private label for a Third Party sales agent, distributor or other reseller, provided that an NIPT IVD Product shall be excluded from this clause (e) if such NIPT IVD Product is developed or manufactured for or in collaboration with a Third Party sales agent, distributor or other reseller in accordance with the product design of, such Third Party, including by an Illumina Party acting as a foundry, contract developer or manufacturer, or original equipment or device manufacturer.

For the avoidance of doubt,

(x) porting an NIPT LDT Test from one sequencing instrument to a different sequencing instrument for performance thereon is a natural evolution or line extension of that NIPT LDT Test;

(y) nothing in this Agreement prohibits Illumina from using a foundry, contract developer or manufacturer to develop and/or manufacture on its behalf any NIPT IVD Product; and

(z) NIPT IVD Product that is covered by the elements of clauses (e)(i), (ii) and (iii) herein is not excluded from Current Illumina Product solely by as a result of being developed on its behalf, made on its behalf or distributed or re-sold by a Third Party.

“Current Sequenom Product” means, collectively, (a) any NIPT LDT Test that is first commercially performed by a Sequenom Party as of or before the Effective Date; (b) any NIPT LDT Test that is a line extension or natural evolution of any NIPT LDT Test set forth in the foregoing clause (a), provided that such line extension or natural evolution is first commercially performed by a Sequenom Party prior to the fifth (5^th) anniversary of the Effective Date; and (c) any NIPT LDT Test (i) which is first commercially performed by a Sequenom Party prior to the fifth (5^th) anniversary of the Effective Date, (ii) for which a Test Fee is paid in accordance with this Agreement, and (iii) which is developed and performed solely and exclusively by or on behalf of Sequenom or its Affiliates as its own product and sold (A) under brand names of Sequenom or its Affiliates or (B) under a private label for a Third Party sales agent, distributor or other reseller, provided that an NIPT LDT Test shall be excluded from this clause (c) if such NIPT LDT Test is performed in collaboration with a Third Party sales agent, distributor or other reseller. For the avoidance of doubt, porting an NIPT LDT Test from one sequencing instrument to a different sequencing instrument for performance thereon is a natural evolution or line extension of that NIPT LDT Test.

“Existing Illumina License” has the meaning set forth in Section 2.11(a).

“Existing Illumina Licensee” has the meaning set forth in Section 2.11(a).

“Existing Illumina Litigant” has the meaning set forth in Section 2.8(e).

“Existing Sequenom License” has the meaning set forth in Section 2.10(a).

“Existing Sequenom Licensee” has the meaning set forth in Section 2.10(a).

“Existing Sequenom Litigant” has the meaning set forth in Section 2.8(d).

“Expire” and grammatical variations “expired” or “expiration” (with corresponding meaning for “unexpired”) in relation to a Patent shall include abandonment, failure to maintain, or a holding of invalidity or unenforceability by a final decision of a court or a governmental agency of competent jurisdiction (including without limitation any patent office of competent jurisdiction), from which no further appeal is possible, in addition to the ordinary expiration of a patent term of an issued patent.

“Exploit” means (a) with respect to NIPT LDT Tests, Current Sequenom Products and those Current Illumina Products that are NIPT LDT Tests, to research, develop, offer for sale, have offered for sale, sell, have sold, market, have marketed and perform, and (b) with respect to NIPT IVD Products and all Current Illumina Products not addressed in clause (a), to research, develop, make, have made, use, have used, sell, have sold, offer to sell and have offered to sell, import and have imported, market and have marketed, perform and all other acts that, but for a license, would infringe a Patent in the country in which the act occurred.

“Granting Illumina Affiliate” has the meaning set forth in Section 2.2(c).

“Granting Sequenom Affiliate” has the meaning set forth in Section 2.3(c).

“Gross Test Fees” has the meaning set forth in Section 3.2(d).

“HDFN Product” has the meaning set forth in Section 2.16.

“Illumina Customer” means any Person that purchases Illumina Products.

“Illumina Customer License” has the meaning set forth in Section 2.8(a).

“Illumina In-Licensed Patents” means all Patents in-licensed by Illumina or its Affiliates under, and as set forth in, the Stanford License, […***…] and, on and after the Effective Date, the CUHK Licenses. The Illumina In-Licensed Patents as of the Effective Date are set forth on Annex II, provided that on and after the Effective Date, the Patents set forth on Annex IV (in-licensed by Sequenom from CUHK) shall be deemed added to Annex II, and Annex IV shall be deemed to no longer include any Patents.

“Illumina Owned Patents” means, collectively, (a) those United States and foreign patents and patent applications, including provisional applications, owned by Illumina or its Affiliates set forth on Annex I, (b) all divisional, continuation, continuation-in-part, and substitute applications of any of the patents or patent applications set forth in the foregoing clause (a), (c) all patents that have issued or in the future issue from any of the patent applications set forth in the foregoing clauses (a) and (b), including utility model and design patents and certificates of invention, (d) all extensions, supplemental protection certificates, registrations, confirmations, reissues, reexaminations, inter partes reviews, post-grant reviews, restorations and renewals of or to any of the foregoing described patents and (e) any equivalents of any of the foregoing in clauses (a), (b), (c) and (d) in any jurisdiction.

“Illumina Patents” means, collectively, the Illumina In-Licensed Patents and Illumina Owned Patents.

“Illumina Parties” means, collectively, Illumina and its Affiliates.

“Illumina Products” refers to any and all consumables, reagents, instruments, software and accessories commercialized by or on behalf of Illumina or its Affiliates.

“Illumina Technology Partner” has the meaning set forth in Section 2.12(a).

“Isis License” means that license agreement between Isis Innovation Limited (“Isis”) and Sequenom, titled Exclusive License of Technology, effective as of October 14, 2005, and as amended on October 19, 2006 (1st amendment), November 5, 2007 (2nd amendment), November 3, 2009 (3rd amendment), November 29, 2012 (4th amendment), the letter amendment dated 26 October 2012, as further amended prior to the Effective Date, and which was terminated on or before the Effective Date.

“Isis Patents” means the Patents originally owned by Isis and licensed by Isis to Sequenom under the Isis License, and that were sold, assigned and transferred to Sequenom before the Effective Date. The Isis Patents are set forth on Annex III.

“Lapidus Patents” means the Patents on Annex V.

“Law” means, individually and collectively, any and all laws, ordinances, orders, rules, rulings, directives and regulations of any kind whatsoever of any governmental or regulatory authority within the applicable jurisdiction.

“Licensed NIPT Field” means, collectively, the NIPT IVD Field and NIPT LDT Field.

[…^***…].

“Net IVD Sales” means the gross sales price of any NIPT IVD Product invoiced by Illumina or its Affiliates, a Person that is sublicensee described in Section 3.3(c) or its Affiliates, for the first (and not any subsequent) arms-length sale of that NIPT IVD Product to any non-Affiliate Person and any use, transfer or sale set forth in (i), (ii) or (iii) hereinbelow, less, to the extent reasonable in the in vitro diagnostic industry and actually paid, applied or accrued, (a) credits, allowances, discounts and rebates to, and chargebacks from the account of, such Person for spoiled, damaged, outdated and returned product; (b) freight and insurance costs incurred in transporting such product to such Persons; (c) cash, quantity and trade discounts, rebates and other price reductions for such product given to such Persons under price reduction programs that are consistent with price reductions given for in vitro diagnostic products; (d) sales, use, value-added and other direct taxes, incurred on the sale of such product to such

customers; and (e) customs duties, surcharges and other governmental charges incurred in exporting or importing such product to such customers. To the extent any NIPT IVD Product in any calendar quarter is (i) used by Illumina or its Affiliates or a Person that is a sublicensee described in Section 3.3(c) or its Affiliates (excluding NIPT IVD Products purchased from Illumina or its Affiliates in an arms-length sale, for which gross sales price is included in Net IVD Sales) in conjunction with a fee-for-service arrangement, or (ii) is transferred to a customer in the course of a reagent rental sales structure, or (iii) is sold in other than an arm’s length sale (including as part of a reagent rental program, operating or capital lease or comparable sales arrangement), the gross sales price of the NIPT IVD Product for purposes of calculating Net IVD Sales shall be the weighted average gross invoiced sales price of the applicable NIPT IVD Product for sales of such NIPT IVD Product to Persons purchasing comparable volumes of such NIPT IVD Product in an arm’s length sale in the applicable territory during such calendar quarter.

In the event an NIPT IVD Product is sold, transferred or bundled as part of a Combined Product, the gross invoiced sales price of such Combined Product shall be multiplied by the fraction A / (A+B) to determine the gross invoiced sales price of such NIPT IVD Product for purposes of calculating the Net Sales of such NIPT IVD Product, where A equals the weighted average gross invoiced sales price of such NIPT IVD Product sold separately, and B equals the weighted average gross invoiced sales price of such other product comprising such Combined Product sold separately, in each case sold to Persons purchasing comparable volumes of such NIPT IVD Product and/or other product in the applicable territory during the applicable royalty reporting period.

In the event an NIPT IVD Product is sold, transferred or bundled as part of a reagent rental program, operating or capital lease or comparable sales arrangement, then the gross invoiced sales price of such NIPT IVD Product shall equal the weighted average gross invoiced sales price of such NIPT IVD Product sold separately (other than as part of a reagent rental program, operating or capital lease or comparable sales arrangement) to Persons purchasing comparable volumes of such NIPT IVD Product in the applicable territory during the applicable royalty reporting period.

In the event of an NIPT IVD Product that is not a single use consumable and, instead, is intended for repeated use (e.g., software), the gross invoiced sales price of that NIPT IVD Product shall be (x) the actual gross invoiced sales price of that NIPT IVD Product at the time of sale and (y) any additional sales price that is based on usage, subscription, or other recurring occurrences, both (x) and (y) subject to applicable deductions permitted herein. Each of the sales prices described in clause (x) and (y) constitutes Net IVD Sales for the calendar quarter in which such sales price is invoiced or payable, subject to applicable deductions permitted herein.

Notwithstanding anything in this Agreement to the contrary, in the case of NIPT IVD Product that is software, Illumina has sole discretion to transfer such NIPT IVD Product by license instead of sale, provided that all amounts payable to Illumina, its Affiliates, or a Person that is a sublicensee described in Section 3.3(c) or its Affiliates, in exchange for such transfer shall, for the purpose of the immediately preceding paragraph, be considered as the sales price set forth in (x) and (y). For the avoidance of doubt, separately invoiced services regarding

installation, training, maintenance and similar activities that a software seller/licensor provides to a software purchaser/licensee shall not be included in Net IVD Sales.

“Net LDT Sales” has the meaning […^***…].

“New Illumina Licensee” has the meaning set forth in Section 2.8(a).

“New Sequenom Licensee” has the meaning set forth in Section 2.9(b).

“NIPT” means in vitro cell-free nucleic acid-based non-invasive prenatal testing (including, without limitation, testing by massively parallel sequencing or digital PCR) of a biological sample (including but not limited to plasma, serum, whole blood, and urine) obtained from a pregnant woman, excluding oncology testing.

“NIPT IVD Field” means the field of conducting or performance of NIPT (in whole or in part) by use of an NIPT IVD Product.

“NIPT IVD Product” means a distributable in vitro diagnostic device that has either (a) received applicable Regulatory Approval for sale and use to conduct or perform (in whole or in part) NIPT or (b) is otherwise particularly labeled and marketed for use to conduct or perform NIPT (in whole or in part,) excluding from (a) and (b) general purpose products and components labeled for research use only. For the purposes of this Agreement, an item is distributable if it is distributed on tangible medium or if accessed remotely (e.g., available in the cloud).

“NIPT LDT Field” means the field of conducting or performance of NIPT by use of an NIPT LDT Test, in a clinical laboratory, excluding the NIPT IVD Field.

“NIPT LDT Test” means a non-distributable in vitro test (including a Site-specific IVD) performed in a clinical laboratory to conduct or perform NIPT, excluding all NIPT IVD Products, but in all cases (other than Site-specific IVD tests), whether or not the test requires Regulatory Approval for sale or use before or after the Effective Date. As of the Effective Date, NIPT LDT Tests include, without limitation, the verifi® test that is performed by Illumina and its Affiliates and the MaterniT21® test and VisibiliT™ test that is performed by Sequenom and its Affiliates.

“Nominal Amount” has the meaning set forth in Section 3.4(c)(ii).

“Other Platform License” has the meaning set forth in Section (a).

“One-Time Payment” has the meaning set forth in Section 3.1.

“Party” means Illumina or Sequenom and “Parties” means Illumina and Sequenom.

in the foregoing clause (a), (c) all patents that have issued or in the future issue from any of the patent applications set forth in the foregoing clauses (a) and (b), including utility model and design patents and certificates of invention, and (d) all extensions, supplemental protection certificates, registrations, confirmations, reissues, reexaminations, inter partes reviews, post-grant reviews, restorations and renewals of or to any of the foregoing described patents and any foreign equivalents of any of the foregoing.

“Patent Royalty Term” means, on a country-by-country and product-by-product basis with respect to a particular NIPT IVD Product in the NIPT IVD Field, the time period beginning on the Effective Date and ending upon the date of expiration of the last to Expire Pooled Patent having at least one Valid Issued Claim covering the applicable NIPT IVD Product or its use in the NIPT IVD Field.

“Person” means any individual, corporation, partnership, firm, company, joint venture, association (including trust association), joint-stock company, limited liability company, trust, unincorporated organization, governmental body, organization or other entity.

“Pooled Patents” means the Illumina Patents and the Sequenom Patents.

“Protective Action” has the meaning as set forth in Section 5.1(b).

“Regulatory Approval” means any governmental approvals, licenses, registrations, clearances or authorizations necessary for the marketing, sale, or use of an in vitro diagnostic device; provided that, (a) in the United States, as of the Effective Date Regulatory Approval is only that sought from the Federal Food and Drug Administration, (b) in the European Union, as of the Effective Date Regulatory Approval is only that sought through compliance with the In Vitro Diagnostic Medical Devices Directive (which on the Effective Date is Directive 98/79/EC) and (c) in jurisdictions not requiring any governmental approvals, licenses, registrations, clearances or authorizations for the marketing, sale, or use of an in vitro diagnostic device, Regulatory Approval shall be deemed to have been provided for a particular in vitro diagnostic device upon the first commercial sale or marketing of that in vitro diagnostic device if that in vitro diagnostic device would require Regulatory Approval in the United States if marketed in the United States.

“Royalty” and “Royalties” have the meaning set forth in Section 3.3(d).

“Sample Agreement” means the Sample Transfer Agreement made and entered into as of the Effective Date, between the Parties.

“Sequenom In-Licensed Patents” means all Patents in-licensed by Sequenom or its Affiliates immediately prior to the Effective Date under, and as set forth in, the CUHK Licenses (2008/2011). The Sequenom In-Licensed Patents immediately prior to the Effective Date are set forth on Annex IV, provided that on and after the Effective Date, the Patents set forth on Annex IV shall be deemed added to Annex II, and Annex IV shall be deemed to no longer include any Patents.

“Sequenom Owned Patents” means, collectively, (a) those United States and foreign patents and patent applications and provisional applications owned by Sequenom or its

Affiliates set forth on Annex III and (solely if and to the extent Sequenom owns and has the right to grant licenses under the Lapidus Patents) the Lapidus Patents on Annex V, (b) all divisional, continuation, continuation-in-part, and substitute applications of any of the patents or patent applications set forth in the foregoing clauses (a), (c) all patents that have issued or in the future issue from any of the patent applications set forth in the foregoing clauses (a) and (b), including utility model and design patents and certificates of invention, (d) all extensions, supplemental protection certificates, registrations, confirmations, reissues, reexaminations, inter partes reviews, post-grant reviews, restorations and renewals of or to any of the foregoing described patents, and (e) any equivalents of any of the foregoing in clauses (a), (b), (c) and (d) in any jurisdiction.

“Sequenom Parties” means, collectively, Sequenom and its Affiliates.

“Sequenom Patents” means, collectively, the Sequenom In-Licensed Patents, Sequenom Owned Patents and Isis Patents.

“Sequencing Platform Manufacturer” means a Person, other than Illumina or its Affiliates, (a) that has raised at least $[…^***…] in financing transaction(s) and is engaged as a primary business in the business of […***…], collectively, “Sequencing Platform Products”), or (b) the annual aggregated revenue of such Person and its Affiliates for the most recent full calendar year is greater than $[…***…] and […***…].

“Sequenom Technology Partner” has the meaning set forth in Section 2.12(a).

“Site-specific IVD” means a non-distributable in vitro diagnostic test that received Regulatory Approval for sale or use, which Regulatory Approval in the United States is pursuant to 21 CFR 814 or 21 CFR 807 Subpart E.

“Stanford License” means that license agreement between Verinata and the Trustees of Leland Stanford Junior University (“Stanford”), titled the Second Amended and Restated Co-Exclusive Agreement, effective on September 14, 2012, as amended as of the Effective Date.

“Stanford Sublicense Agreement” means the sublicense agreement from Illumina Parties to Sequenom Parties (excluding Affiliates that are Sequencing Platform Manufacturers) under the Stanford License, effective on the Effective Date.

“Technology Agreement” has the meaning as set forth in Section 2.12(a).

“Term” has the meaning as set forth in Section 4.1.

“Test Fee” has the meaning as set forth in Section 3.2(a).

“Test Fee and Royalty Report” has the meaning set forth in Section 3.4(a).

“Third Party” means any Person that is not a Party to this Agreement and is not an Affiliate of a Party to this Agreement.

“United States” means the United States of America and its territories and possessions.

“University Licenses” means the CUHK Licenses, Stanford License, […^***…].

“University Licensors” means CUHK, Stanford, […***…].

“Valid Claim” means (a) any claim of an issued and unexpired Pooled Patent that has not been held unenforceable, unpatentable, or invalid by a final decision of a court or a governmental agency of competent jurisdiction (including without limitation any patent office of competent jurisdiction), from which no further appeal is possible (“Valid Issued Claim”), and (b) solely in the case of Pooled Patents other than Illumina Owned Patents, Isis Patents and Sequenom Owned Patents, any claim of a pending patent application that is a Pooled Patent, excluding such claims that have been abandoned and such claims for which no further prosecution is possible in order to seek allowance and issuance of such claim (“Valid Pending Claim”).

“Verinata” means Verinata Health, Inc.

1.2 Interpretation. Except where expressly stated otherwise in this Agreement, the following rules of interpretation apply to this Agreement:

(a) all references to a particular section or schedule or annex shall be a reference to that section or schedule or annex in or to this Agreement as it may be amended from time to time pursuant to this Agreement;

(b) the headings are inserted for convenience only and shall be ignored in construing this Agreement;

(c) words importing the masculine gender shall include the feminine and vice versa and words in the singular include the plural and vice versa;

(d) any phrase introduced by the terms “including”, “include”, “in particular” or any similar expression shall be construed as illustrative and shall not limit the sense of the words preceding or following those terms;

(e) reference to any statute or regulation includes any modification or re-enactment of that statute or regulation;

(f) all references to a “license,” “licensed” or “licensing” include the grant or receipt of either a direct license from the owner of the rights licensed, a sublicense from a Party or Affiliate of rights licensed or sublicensed to such Party or Affiliate, or both, in each case as applicable to the particular rights being licensed and so referred to;

(g) all references in this Agreement to “Illumina Patent” or “Illumina Patents” or to “Sequenom Patent” or “Sequenom Patents” is a reference to the defined terms, and is not a reference to all Patents of Illumina or all Patents of Sequenom;

(h) all references in this Agreement to “Schedule 1” or the “Test Fee Schedule” is a reference to Schedule 1 as it may be amended from time to time in accordance with this Agreement; and

(i) all references in this Agreement to NIPT LDT Tests in the NIPT LDT Field are understood to mean NIPT LDT Tests performed in the NIPT LDT Field, and all references in this Agreement to NIPT IVD Products in the NIPT IVD Field are understood to mean NIPT IVD Products in, for, or for use in the NIPT IVD Field.

ARTICLE II

RIGHTS OF SEQUENOM AND ILLUMINA UNDER POOLED PATENTS

2.1 Rights Under Pooled Patents Generally. This Section 2.1 is not intended to, and does not, convey any license rights under any Pooled Patent. In the event of any conflict between the language in this Section 2.1 and the provisions of any Ancillary Agreement granting a license under any Pooled Patent, or the licenses granted pursuant to Sections 2.2 (License to Sequenom Under Illumina Owned Patents) and 2.3 (Licenses to Illumina Under Sequenom Owned Patents and Isis Patents) of this Agreement, the applicable provisions in the Ancillary Agreement, Section 2.2, or Section 2.3 shall control.

(a) Illumina Rights. Pursuant and subject to this Agreement (including the license grants in Sections 2.2 and 2.3), and the Ancillary Agreements, and the rights retained by Sequenom (and by Isis and its Affiliates as described in Schedule 7.1(b)) under the Sequenom Patents, the Illumina Parties will have:

(i) the exclusive (even as to the Sequenom Parties), worldwide, sublicensable right under the Pooled Patents to Exploit NIPT IVD Products in the NIPT IVD Field,

(ii) the exclusive, worldwide, sublicensable right under the Pooled Patents (excluding the Isis Patents) to Exploit NIPT LDT Tests in the NIPT LDT Field, subject to the non-exclusive rights granted to, or reserved by, the Sequenom Parties, and

(iii) the nonexclusive, worldwide, sublicensable right under the Isis Patents to Exploit NIPT LDT Tests in the NIPT LDT Field.

Notwithstanding the foregoing, for the avoidance of doubt:

(1) each of Sections 2.1(a)(i), 2.1(a)(ii) and 2.1(a)(iii) is subject to any and all applicable terms in the CUHK Licenses, including without limitation any territory restrictions and rights reserved by CUHK thereunder,

(2) each of Sections 2.1(a)(i), 2.1(a)(ii) and 2.1(a)(iii) is subject to Section 2.8 (Conditions for Illumina Grant of Licenses Under Pooled Patents), and

(3) Section 2.1(a)(ii) is subject to rights granted under Existing Sequenom Licenses.

(b) Sequenom Rights. Pursuant and subject to this Agreement (including the license grants in Sections 2.2 and 2.3, the exclusive rights of Illumina in Section 1.1(a)), the Ancillary Agreements, and the rights retained by the Sequenom Parties under the Isis Patents:

(i) neither Sequenom nor any of its Affiliates will have any rights under the Pooled Patents (including under the Isis Patents) to Exploit NIPT IVD Products anywhere in the world,

(ii) the Sequenom Parties will have a non-exclusive, worldwide, non-sublicensable right under the Pooled Patents to Exploit NIPT LDT Tests in the NIPT LDT Field, except that, with respect to the Isis Patents, the Sequenom Parties will have the right to grant sublicenses to Persons […^***…] and thereby authorize, only under the Isis Patents, each such sublicensee to Exploit NIPT LDT Tests in the NIPT LDT Field in that sublicensee’s, or as applicable its Affiliates’, clinical laboratory,

(iii) the Sequenom Parties will retain the rights under the Isis Patents, subject to the rights granted to Illumina Parties under the Isis Patents (exclusive to Exploit NIPT IVD Products in the NIPT IVD Field, and nonexclusive to Exploit NIPT LDT Tests in the NIPT LDT Field).

Notwithstanding the foregoing, for the avoidance of doubt, (A) Sequenom acknowledges and agrees that the Sequenom Parties do not have any rights under Pooled Patents with respect to Exploiting NIPT IVD Products, and (B) each of Sections 2.1(b)(ii) and 2.1(b)(iii) is subject to:

(1) rights granted under Existing Sequenom Licenses, and

(2) any and all applicable terms in the University Licenses, including without limitation any field limitations, any territory restrictions and rights reserved by the applicable University Licensor thereunder or Isis.

2.2 License to Sequenom Under Illumina Owned Patents.

(a) On the terms and conditions of this Agreement, Illumina, on behalf of itself and its Affiliates, hereby grants to Sequenom and its Affiliates […^***…] a non-exclusive, irrevocable and perpetual (subject to Section 2.2(b)), non-transferable and non-assignable (except as permitted under Section 9.1) worldwide non-sublicensable Test Fee -bearing license under the Illumina Owned Patents to Exploit NIPT LDT Tests in the NIPT LDT Field.

(b) The license rights set forth in Section 2.2(a) granted to any Affiliate of Sequenom shall automatically terminate with respect to such Person when it ceases to be an Affiliate of Sequenom. Persons (other than […^***…]) that become

Affiliates of Sequenom after the Effective Date shall be licensed under the license rights set forth in Section 2.2(a) only for those licensed acts that occur on and after the date it becomes an Affiliate.

(c) Illumina agrees on behalf of itself, its Affiliates, and their respective successors and assigns that, to the extent any Illumina Affiliate (a “Granting Illumina Affiliate”) is the owner (including joint owner) or in-licensee of any Pooled Patents for which Sequenom Parties have been granted rights hereunder (including under Ancillary Agreements), or the Granting Illumina Affiliate has granted rights hereunder (including under Ancillary Agreements) to any Sequenom Party, such rights granted to Sequenom Parties (i) shall not terminate following the date, if any, that such Granting Illumina Affiliate ceases to be an Affiliate of Illumina and that such rights shall continue after such date, with such rights under Illumina Owned Patents continuing to be perpetual and irrevocable on and after such date, subject to Section 2.2(b) and (ii) to the extent the Sequenom Parties received rights only from a Granting Illumina Affiliate under Pooled Patents and not from Illumina or another Affiliate that is not a Granting Illumina Affiliate, such rights shall become a direct license from Illumina under Illumina Owned Patents or, if applicable, a direct license from the applicable University Licensor under, and pursuant to the terms of, the applicable Illumina In-Licensed Patents.

2.3 License to Illumina Under Sequenom Owned Patents and Isis Patents.

(a) On the terms and conditions of this Agreement, Sequenom, on behalf of itself and its Affiliates, hereby grants to Illumina and its Affiliates an exclusive, irrevocable and perpetual (subject to Section 2.3(b)), non-transferable and non-assignable (except as permitted under Section 9.1), worldwide license, with the exclusive right to grant sublicenses, under the Sequenom Owned Patents and Isis Patents, to Exploit NIPT LDT Tests in the NIPT LDT Field and to Exploit NIPT IVD Products in the NIPT IVD Field, provided that the license is Royalty-bearing with respect to NIPT IVD Products and the license is Test Fee-bearing with respect to NIPT LDT Tests. The foregoing license grant in the NIPT LDT Field is subject to (i) any and all Existing Sequenom Licenses, and (ii) the reservation of the non-exclusive right, on behalf of Sequenom and its Affiliates, to Exploit NIPT LDT Tests in the NIPT LDT Field and to grant sublicenses under the Isis Patents to Persons that are not Sequencing Platform Manufacturers for each such sublicensee to Exploit NIPT LDT Tests in the NIPT LDT Field in its, or as applicable its Affiliates’, clinical laboratories.

(b) The license rights set forth in Section 2.3(a) granted to any Affiliate of Illumina shall automatically terminate with respect to such Person when it ceases to be an Affiliate of Illumina. Persons that become Affiliates of Illumina after the Effective Date shall be licensed under the license rights set forth in Section 2.3(a) only for those licensed acts that occur on and after the date it becomes an Affiliate.

(c) Sequenom agrees on behalf of itself, its Affiliates, and their respective successors and assigns that, to the extent any such Sequenom Affiliate (a “Granting Sequenom Affiliate”) is the owner (including joint owner) or in-licensee of any Pooled Patents for which Illumina Parties have been granted rights hereunder (including under Ancillary Agreements), or has granted rights hereunder (including under Ancillary Agreements) to any Illumina Party, such rights granted to Illumina Parties (i) shall not terminate following the date, if any, that such

Granting Sequenom Affiliate ceases to be an Affiliate of Sequenom and that such rights shall continue to be perpetual and irrevocable on and after such date, subject to Section 2.3(b) and (ii) to the extent the Illumina Parties received rights only from a Granting Sequenom Affiliate under Pooled Patents and not from Sequenom or another Affiliate that is not a Granting Sequenom Affiliate, such rights shall become a direct license from Sequenom under Sequenom Patents.

2.4 Amendments, Assignments, Licenses and Sublicenses Under CUHK Licenses. The effectiveness of this Agreement is subject to the satisfaction in full, or the waiver by the Parties, of the due execution and delivery of the Settlement Agreement and the agreements required to be duly executed and delivered pursuant to the terms of ARTICLE V thereof, of the satisfaction of the conditions precedent set forth therein, and of the following additional conditions precedent:

(a) The due execution and delivery by Sequenom and CUHK, and acknowledgement by Illumina, of the amendments to each of the CUHK Licenses (2008/2011) and the satisfaction of the conditions precedent set forth therein.

(b) The due execution and delivery by Sequenom, Illumina, and CUHK, of the assignment and novation from Sequenom to Illumina of each of the CUHK Licenses (2008/2011) and the satisfaction of the conditions precedent set forth therein.

(c) The due execution and delivery by Sequenom and Illumina of the sublicenses from Illumina to Sequenom Parties (excluding Affiliates that are Sequencing Platform Manufacturers) under each of the CUHK Licenses (2008/2011) and the satisfaction of the conditions precedent set forth therein.

(d) The due execution and delivery by Illumina and CUHK of each of the CUHK Licenses (2014), and the satisfaction of the conditions precedent set forth therein.

(e) The due execution and delivery by Sequenom and Illumina of the sublicenses from Illumina to Sequenom Parties (excluding Affiliates that are Sequencing Platform Manufacturers) under each of the CUHK Licenses (2014), and the satisfaction of the conditions precedent set forth therein.

2.5 Sublicense Under Stanford License. The effectiveness of this Agreement is subject to the satisfaction in full, or the waiver by the Parties, of the due execution and delivery by Sequenom and Illumina of the Stanford Sublicense Agreement.

2.6 Sublicense Under […^***…]. The effectiveness of this Agreement is subject to the satisfaction in full, or the waiver by the Parties, of the due execution and delivery by Sequenom and Illumina of the sublicense from Illumina Parties to Sequenom Parties (excluding Affiliates that are Sequencing Platform Manufacturers) under the […^***…].

2.7 Isis Patents. The effectiveness of this Agreement is subject to the due execution and delivery by Sequenom and Isis of a valid and binding agreement pursuant to which Sequenom purchases from Isis all right title and interest in and to the Isis Patents and receives full legal and beneficial title thereto, subject to the rights described in Schedule 7.1(b), and the

satisfaction of any and all conditions precedent set forth therein. Sequenom represents and warrants that the Isis Patents were sold, assigned and transferred to Sequenom, and the provisions of this Section 2.7 have been satisfied in full, before the Effective Date.

2.8 Conditions for Illumina to Grant Licenses Under Pooled Patents.

(a) Test Fee; Conveyance of Customer License to Illumina Customers. Subject to the terms and conditions of this Agreement (including Section 1.1(a) (Non-Illumina Platforms) and Section 2.9(a)(i) (Sequenom Granting Licenses Under Isis Patents), and rights expressly retained by Sequenom to grant sublicenses to Persons to Exploit NIPT LDT Tests in the NIPT LDT Field in such Person’s, or as applicable its Affiliates’, clinical laboratory under the Isis Patents), the Illumina Parties have the exclusive right to grant licenses to perform NIPT LDT Tests in the NIPT LDT Field to any Person under any and all the Pooled Patents, provided the license obligates the Person to pay a Test Fee on terms consistent with Section 3.2 of this Agreement (each a “New Illumina Licensee”). Subject to the immediately preceding sentence, including obligations regarding Test Fees, the Illumina Parties may grant licenses under Pooled Patents to Illumina Customers who purchase Illumina Products, which licenses authorize the Illumina Customer, with each unit of consumable Illumina Product purchased, to Exploit, including a subset of the rights constituting Exploitation, NIPT LDT Tests in the NIPT LDT Field using Illumina Products (each such license an “Illumina Customer License”).

(b) […^***…].

(c) Conveyance of License for NIPT IVD Product. With each NIPT IVD Product that is covered by a Valid Claim of a Pooled Patent that is sold by Illumina and its Affiliates, Illumina and its Affiliates shall include a label license under Pooled Patents authorizing use of that unit of NIPT IVD Product for the labeled intended use in the NIPT IVD Field under the applicable Pooled Patents.

(d) Third Parties in Litigation with Sequenom. A Third Party in litigation over a Pooled Patent with Sequenom or a Sequenom Affiliate as of the Effective Date is an “Existing Sequenom Litigant.” Sequenom has identified Existing Sequenom Litigants, and the Pooled Patents subject to each such litigation as of the Effective Date, on Schedule 2.8(d), which Schedule 2.8(d) shall be amended by notice from Sequenom in the event that a litigant settles or is dismissed or is otherwise dropped from the applicable litigation, and may be amended by mutual agreement of the Parties in writing from time to time. […^***…].

(e) Third Parties in Litigation with Illumina. A Third Party in litigation over any Pooled Patent with Illumina or an Illumina Affiliate as of the Effective Date is an “Existing Illumina Litigant.” […^***…]

[…^***…]. Illumina shall provide Sequenom with a written accounting of any such amounts collected in settlement or as an award or reimbursements, and the allocations pursuant to the terms of this Section 2.8(e). […^***…].

(f) Non-Illumina Platforms.

(i) Subject to the terms and conditions of this Agreement, including the right of Sequenom Parties to grant sublicenses under Isis Patents only to a Person to Exploit NIPT LDT Tests in the NIPT LDT Field in that Person’s, or as applicable its Affiliates’, clinical laboratory, Illumina has the exclusive right to grant licenses to or to authorize any Person under the Pooled Patents to Exploit NIPT LDT Tests in the NIPT LDT Field or Exploit NIPT IVD Products in the NIPT IVD Field on any manufacturers’ platform, including non-Illumina platforms, subject to Sequenom’s prior written consent to the overall economic terms for any such license that expressly permits such Exploitation in the Licensed NIPT Field on a non-Illumina platform under terms that are less favorable to Sequenom set forth in this Agreement (“Other Platform License”), which consent shall not be unreasonably withheld, delayed or conditioned. As between Sequenom and Illumina, Illumina shall have the right to retain all types of economic consideration (whether one-time payments, royalties, continuing payments or other payment types) paid by all Persons under an Other Platform License described in the preceding sentence until such time as Illumina has received under this sentence the aggregate amount of […^***…]. Thereafter, with respect to consideration received under Other Platform Licenses (A) consideration received for Exploitation of NIPT LDT Tests under Pooled Patents will be treated as Test Fees and shared between the Parties in accordance with Section 3.2(d), (B) consideration received for all sales of NIPT IVD Products under Pooled Patents will be treated under, and Illumina shall pay Royalties to Sequenom in accordance with, Section 3.3(c), and (C) all other types of economic consideration that are not within (A) or (B), (whether one-time payments, continuing payments or other payment types) paid by a Person under any such Other Platform License shall be shared between Illumina and Sequenom in the same proportion as for the Test Fees in accordance with Section 3.2(d)(i).

(ii) In the event that Sequenom undergoes a Change of Control […^***…] (including as part of an assignment of this Agreement in a bankruptcy or other financial restructuring of Sequenom), the provisions of this Section 1.1(a) shall apply with respect to how rights under the Pooled Patents to Exploit NIPT LDT Tests in the NIPT LDT Field or Exploit NIPT IVD Products on non-Illumina platforms may be made available to such Person, provided that in such event […^***…]

[…^***…].

2.9 Conditions for Sequenom Grant of Licenses under Isis Patents.

(a) Right to License Only Under Isis Patents; No Right to License for NIPT IVD Products.

(i) Without limiting the foregoing in Section 2.9(a)(i), Sequenom and its Affiliates may not, and shall not, grant licenses under the Pooled Patents, including the Isis Patents, to Exploit any NIPT IVD Product.

(b) Test Fees. […^***…], Sequenom agrees that any license granted by a Sequenom Party to a Person after the Effective Date that authorizes performance in the NIPT LDT Field under any Isis Patent(s) (“New Sequenom Licensee”), will include an obligation for that Person to pay a Test Fee on terms (including amounts) consistent with Section 3.2 of this Agreement and Sequenom will share Test Fees and other consideration received for such sublicenses in accordance with Section 3.2.

(c) Settlement with Existing Sequenom Litigants. No term in this Agreement, or any Ancillary Agreement prohibits Sequenom from settling any litigation with an Existing Sequenom Litigant, and Sequenom shall be entitled as part of any such settlement to grant rights to an Existing Sequenom Litigant under rights Sequenom retains under any Isis Patent, provided that Sequenom shall use commercially reasonable efforts to negotiate and enter into an agreement with such Existing Sequenom Litigant obligating such Existing Sequenom Litigant to pay a Test Fee in at least the amount set forth in Schedule 1 for rights under any Isis Patent or group of Isis Patents that authorizes the Existing Sequenom Litigant to perform NIPT LDT Tests in NIPT LDT Field in its, or its Affiliates’, clinical laboratory. […^***…]

[…^***…]. Sequenom shall provide Illumina with a written accounting of any such amounts collected in settlement or as an award or reimbursements, and the allocations pursuant to the terms of this Section 2.9(c). Nothing in this Section 2.9(c) alters Illumina’s exclusive rights regarding NIPT IVD Product.

2.10 Existing Sequenom Licensees.

(a) Sequenom and its Affiliates are parties to written agreements with Third Parties, entered into prior to the Effective Date and remaining effective as of the Effective Date, under which such Third Party (“Existing Sequenom Licensee”) is expressly authorized or licensed by Sequenom or its Affiliate to Exploit an NIPT LDT Test under one or more Sequenom Patents in the NIPT LDT Field (“Existing Sequenom License”). The Existing Sequenom Licensees and Existing Sequenom Licenses are set forth on Schedule 2.10(a), which indicates which Existing Sequenom Licensees are Sequenom Technology Partners and other information.

(b) As set forth in and on the terms and conditions of this Agreement, Sequenom shall be responsible for collecting, and shall use commercially reasonable efforts to collect, Test Fees for Licensed NIPT LDT Tests performed by Existing Sequenom Licensees under a grant of any rights under any Pooled Patents on and after the Effective Date. […^***…]. All Test Fees paid by Existing Sequenom Licensees on and after the Effective Date are subject to sharing between Illumina and Sequenom in accordance with Section 3.2(d).

(c) For avoidance of doubt, no rights are granted under this Agreement to Existing Sequenom Licensees or Existing Illumina Licensees, however this Agreement shall not result in such existing licensees losing the rights under Sequenom Patents or under Illumina Patents that each was granted or received from Sequenom Party or an Illumina Party, respectively, prior to the Effective Date.

(i) […^***…].

[…^***…].

(ii) […^***…].

(iii) Notwithstanding the foregoing, if an Existing Sequenom Licensee is obligated as of the Effective Date under a written Agreement, to which it is a party with a Sequenom Party and was granted a right under Sequenom Patents (prior to assignment of CUHK License (2008/2011)) to perform a Licensed NIPT LDT Test in the NIPT LDT Field, in exchange for payment of Test Fees, in an amount that is $[…^***…] or higher (based on currency exchange rates in effect on the Effective Date), for performance of such Licensed NIPT LDT Tests in its, or as applicable its Affiliates’, clinical laboratory, then the provisions of clause (i) of this Section 2.10(c) shall apply to that Existing Sequenom Licensee.

2.11 Existing Illumina Licensees.

(a) Illumina or its Affiliates are parties to written agreements with Third Parties, entered into prior to the Effective Date and remaining effective as of the Effective Date, under which such Third Party (“Existing Illumina Licensee”) is expressly authorized or licensed by an Illumina Party to Exploit NIPT LDT Test under one or more Pooled Patent in the NIPT LDT Field (“Existing Illumina License”). The Existing Illumina Licensees and Existing Illumina Licenses are set forth on Schedule 2.11(a), which indicates which Existing Illumina Licensees are Illumina Technology Partners and other information. Existing Illumina Licenses include licenses or rights granted pursuant to supply agreements in effect on the Effective Date.

(b) On the terms and conditions of this Agreement, Illumina shall be responsible for collecting, and shall use commercially reasonable efforts to collect, Test Fees for Licensed NIPT LDT Tests performed in NIPT LDT Field by Existing Illumina Licensees

under a grant of any rights under any Pooled Patents on and after the Effective Date. For the avoidance of doubt, and as set forth in Section 3.2, the amount of Test Fees paid by Existing Illumina Licensees on an per test or annual basis may be less or more than the amounts, or at a less or more expensive price tier of annual Test Fees, on Schedule 1. All Test Fees paid by Existing Illumina Licensees on and after the Effective Date are subject to sharing between Illumina and Sequenom in accordance with Section 3.2(d).

2.12 Transfers of NIPT Technology and Know How.

(a) Subject to Section 2.12(b) Illumina and Sequenom and their respective Affiliates each may enter into and perform under Technology Agreements with Third Parties as set forth in this Section 2.12. “Technology Agreement” means a written agreement under which (i) a Third Party receives from an Illumina Party certain know how and transfer of technology, and is authorized under Illumina Patents (for Technology Agreements entered into prior to Effective Date) or Pooled Patents (for Technology Agreements entered into on and after Effective Date) to use same to perform an NIPT LDT Test in NIPT LDT Field that is the same or substantially similar to the Illumina verifi® test or another Licensed NIPT LDT Test covered by Pooled Patents, or (ii) a Third Party receives from Sequenom or its Affiliates certain know how and transfer of technology, and is authorized under Sequenom Patents (for Technology Agreements entered into prior to the Effective Date) or Isis Patents (for Technology Agreements entered into on and after Effective Date) to use same to perform an NIPT LDT Test in NIPT LDT Field that is the same or substantially similar to the Sequenom MaterniT21® test or another Licensed NIPT LDT Tests covered by Pooled Patents. A Third Party who enters into a Technology Agreement with an Illumina Party is an “Illumina Technology Partner,” and a Third Party who enters into a Technology Agreement with Sequenom or an Affiliate is a “Sequenom Technology Partner.” The Illumina Technology Partners and Sequenom Technology Partners as of the Effective Date are identified on Schedules 2.11(a) and 2.10(a), respectively. This Agreement shall be amended by the Parties on a quarterly basis or otherwise upon notification by one Party to the other, to revise Schedules 2.11(a) and 2.10(a) to identify any new Third Party that becomes an Illumina Technology Partner or a Sequenom Technology Partner after the Effective Date and to identify which Existing Illumina Licenses and Existing Sequenom Licenses (including those with existing Technology Partners) are terminated or expired.

(b) Illumina shall obligate Illumina Technology Partners and Sequenom shall obligate Sequenom Technology Partners to pay a Test Fee on terms consistent with Section 3.2 of this Agreement. […^***…].

(c) Illumina represents that all Illumina Technology Partners under a Technology Agreement in effect as of the Effective Date have received rights under one or more Illumina Patents (prior to assignment and novation of the CUHK Licenses (2008/2011)) and, therefore, are Existing Illumina Licensees and, except as set forth on Schedule 7.1(c)(ix), are subject to payment of Test Fees on terms consistent with Section 3.2 of this Agreement.

(d) Sequenom represents that all Sequenom Technology Partners under a Technology Agreement in effect as of the Effective Date have received rights under one or more Sequenom Patents (prior to assignment and novation of the CUHK Licenses (2008/2011)) and, therefore, are Existing Sequenom Licensees and are subject to payment of Test Fees on terms consistent with Section 3.2 of this Agreement.

2.13 Non-Assertion Covenants.

(a) Sequenom, on behalf of itself and its Affiliates and their respective predecessors, successors and assigns (each a “Sequenom Covenant Party”), hereby covenants not to directly (e.g., by itself) or indirectly (e.g., through a “strawman”, other involvement for or with a Third Party, or otherwise) (i) sue (or purport to sue) in any forum, (ii) assign to any Third Party any right to sue in any forum, nor (iii) in any way support or encourage any Third Party in suing in any forum, any Illumina Protected Party (as defined below) for infringement of any Patent that (x) is owned or controlled by Sequenom or any of its Affiliates as of or after the Effective Date and (y) has its earliest priority date as of or before the Effective Date, in each case excluding (1) the Pooled Patents, (2) in the event of the Change of Control of Sequenom, all Patents of the Third Party acquirer, successor or survivor in such Change of Control, and its Affiliates, immediately prior to such Change of Control, and (3) in the event of the Change of Control of either Sequenom or Illumina, all Patents first owned or controlled by Sequenom or any of its Affiliates immediately after such Change of Control, wherein such suit for infringement of any such Patent alleges that the Exploitation of any Current Illumina Product by Illumina or its Affiliates and, solely to the extent any of the following Persons are expressly authorized to Exploit any Current Illumina Product and are acting within the scope of such express authorization (including paying Test Fees if a (sub)licensee or if otherwise so required to make payment as a condition of authorization): manufacturers, distributors, resellers, (sub)licensees and customers (each of the Illumina Parties and the foregoing Persons an “Illumina Protected Party”), infringes, or induces or contributes to the infringement of, any such Patent. With respect to subclause (3) herein, applications (and patents that issue therefrom) that are continuations, divisionals, continuation-in-parts, or substitute applications claiming earliest priority from a Patent that was subject to the covenant in this Section 2.13(a) prior to the date of the Change of Control, are deemed to be Patents first owned or controlled by Sequenom or any of its Affiliates before the date of that Change of Control. Notwithstanding the foregoing or anything in this Agreement, the covenant in this Section 2.13(a) shall not apply to the extent any Illumina Protected Party infringes (directly or indirectly) a Patent claim that covers general platform technology of a Sequencing Platform Manufacturer that is an Affiliate of Sequenom solely to the extent claiming multi-purpose (i.e., useful in multiple fields of use) consumables, reagents, instruments (or components of instruments), software or accessories. This non-assertion covenant shall be a covenant that transfers with, and burdens, any sale, license, assign, or other disposition, transfer or grant of rights under the applicable Patent including with respect to the disposition of any rights in any license agreement pertaining thereto. Each Sequenom Covenant Party shall impose the foregoing non-assertion covenant on any Third Party to which such Sequenom Covenant Party may sell, license, assign or otherwise dispose of, transfer or grant any rights to or under the applicable Patent, but only to the extent such rights sold,

licensed, assigned or otherwise disposed of, transferred or granted give the Third Party the right to enforce such Patent against an Illumina Protected Party.

(b) Illumina, on behalf of itself, its Affiliates and their respective predecessors, successors and assigns (each an “Illumina Covenant Party”), hereby covenants not to directly (e.g., by itself) or indirectly (e.g., through a “strawman”, other involvement for or with a Third Party, or otherwise) (i) sue (or purport to sue) in any forum, (ii) assign to any Third Party any right to sue in any forum, nor (iii) in any way support or encourage any Third Party in suing in any forum any Sequenom Protected Party (as defined below) for infringement of any Patent that is (x) is owned or controlled by Illumina or any of its Affiliates as of or after the Effective Date and (y) has its earliest priority date as of or before the Effective Date, in each case excluding (1) the Pooled Patents, (2) in the event of the Change of Control of Illumina, all Patents of the Third Party acquirer, successor or survivor in such Change of Control, and its Affiliates, immediately prior to such Change of Control, and (3) in the event of the Change of Control of either Sequenom or Illumina, all Patents first owned or controlled by Illumina or any of its Affiliates immediately after such Change of Control, wherein such suit for infringement of any such Patent alleges that the Exploitation of any Current Sequenom Product by any Sequenom Party and, solely to the extent any of the following Persons are expressly authorized to Exploit any Current Sequenom Product and are acting within the scope of such express authorization (including payment of Test Fees if a (sub)licensee or if otherwise so required to make payment as a condition of authorization): distributors, resellers, (sub)licensees and customers (each of the Sequenom Parties and the foregoing Persons, a “Sequenom Protected Party”), infringes, or induces or contributes to the infringement of, any such Patent. With respect to subclause (3) herein, applications (and patents that issue therefrom) that are continuations, divisionals, continuation-in-parts, or substitute applications claiming earliest priority from a Patent that was subject to the covenant in this Section 2.13(b) prior to the date of the Change of Control, are deemed to be Patents first owned or controlled by Illumina or any of its Affiliates before the date of that Change of Control. Notwithstanding the foregoing or anything in this Agreement, the covenant in this Section 2.13(b) shall not apply to the extent any Sequenom Protected Party infringes (directly or indirectly) a Patent claim that covers general platform technology of an Illumina Party solely to the extent claiming multi-purpose (i.e., useful in multiple fields of use) consumables, reagents, instruments (or components of instruments), software or accessories. This non-assertion covenant shall be a covenant that transfers with and burdens any sale, license assign, or other disposition, transfer or grant of rights under the applicable Patent, including with respect to the disposition of any rights in any license agreement pertaining thereto. Each Illumina Covenant Party shall impose the foregoing non-assertion covenant on any Third Party to which such Illumina Covenant Party may sell, license, assign or otherwise dispose of, transfer or grant any rights to or under the applicable Patent, but only to the extent such rights sold, licensed, assigned or otherwise disposed of, transferred or granted give the Third Party the right to enforce such Patent against a Sequenom Protected Party.

(c) Each Sequenom Covenant Party hereby covenants not to directly (e.g., by itself) or indirectly (e.g., through a “strawman”, other involvement for or with a Third Party, or otherwise) (i) sue (or purport to sue) in any forum, (ii) assign to any Third Party any right to

sue in any forum, nor (iii) in any way support or encourage any Third Party in suing in any forum alleging that the Exploitation of any Current Illumina Product by any Illumina Party infringes any Pooled Patent. Nothing in this Section 2.13(c) alters any obligation to pay Test Fees and/or Royalties in accordance with the terms of this Agreement.

(d) Each Illumina Covenant Party hereby covenants not to directly (e.g., by itself) or indirectly (e.g., through a “strawman”, other involvement for or with a Third Party, or otherwise) (i) sue (or purport to sue) in any forum, (ii) assign to any Third Party any right to sue in any forum, nor (iii) in any way support or encourage any Third Party in suing in any forum alleging that the Exploitation of any Current Sequenom Product by any Sequenom Party infringes any Pooled Patent. Nothing in this Section 2.13(d) alters any obligation to pay Test Fees and Royalties in accordance with the terms of this Agreement.

2.14 […^***…] Patents. Sequenom, on behalf of itself and its Affiliates, agrees […^***…], it shall not undertake to expand the scope of the claims of the Patents as such claims exist as of the Effective Date.

2.15 […^***…] Patents. Illumina, on behalf of itself and its Affiliates, represents and warrants […^***…].

2.16 HDFN Products. Notwithstanding anything to the contrary in this Agreement, solely with respect to NIPT LDT Tests in each case that are solely directed to fetal blood antigen testing associated with hemolytic disease of the fetus and newborn (“HDFN Products”), each Party shall be permitted to Exploit such HDFN Product in the NIPT LDT Field and, if such Exploitation of an HDFN Product is covered by a Valid Claim of an Isis Patent, but not covered by a Valid Claim of any other Pooled Patent, then such Party shall have no obligation under this Agreement to collect or share a Test Fee or other consideration with the other Party.

2.17 Additional Rights.

(a) The Patents set forth on Schedule 2.17(a) are exclusively licensed by Sequenom from CUHK and are not Pooled Patents. Upon Illumina’s request, Sequenom will negotiate in good faith commercially reasonable terms under which Sequenom would grant Illumina a sublicense under the Patents on Schedule 2.17(a).

(b) The Patents set forth on Schedule 2.17(b) are solely owned by Sequenom and are not Pooled Patents. In the event Sequenom licenses any of the Patents on Schedule 2.17(b) to any Third Party (other than in settlement of litigation), then upon Illumina’s request, Sequenom will negotiate in good faith with Illumina a license under the Patents on Schedule 2.17(b) […^***…].

ARTICLE III

CONSIDERATION

3.1 One-Time Payment. A one-time, non-refundable payment of fifty million dollars (US$50,000,000) shall be payable by Illumina, in three installments, in recognition of the settlement of the disputes, grants of exclusivity and other rights granted to Illumina as set forth in this Agreement and the Ancillary Agreements (the “One-Time Payment”). Within one (1) Business Day after the Effective Date, Illumina shall pay to Sequenom forty four million dollars (US$44,000,000) of the One-Time Payment. Within five (5) Business Days after the […^***…], Illumina shall pay to Sequenom two million dollars (US$2,000,000). Within five (5) Business Days after the […^***…], Illumina shall pay to Sequenom four million dollars (US$4,000,000). In the event […^***…], Illumina shall have the right to credit one million dollars (US$1,000,000) of the One-Time Payment against any and all amounts owed by Illumina to Sequenom under this Agreement until the full one million dollars (US$1,000,000) has been credited. In the event […^***…], Illumina shall have the right to credit two million dollars (US$2,000,000) of the One-Time Payment against any and all amounts owed by Illumina to Sequenom under this Agreement until the full two million dollars (US$2,000,000) has been credited. Notwithstanding anything to the contrary in this Agreement, nothing in this Agreement is intended by the Parties to, and nothing in this Agreement shall, […^***…].

3.2 Test Fees for Performance of Licensed NIPT LDT Test.

(a) Selected Definitions. For purposes of this Agreement:

(i) A “Licensed NIPT LDT Test” means an NIPT LDT Test the performance of which is covered by a Valid Claim of a Pooled Patent, wherein the Person performing the NIPT LDT Test received the right, license or other authorization to Exploit that NIPT LDT Test under that Pooled Patent, subject to Section 3.2(b).

(ii) An “Authorized Lab” means any Person that receives the right, license or other authorization pursuant to the terms and conditions of this Agreement to Exploit a Licensed NIPT LDT Test under at least one Pooled Patent. Without limitation, each of the following is an Authorized Lab to the extent of its rights under the Pooled Patent(s) under which it received right, license or other authorization: (A) each Sequenom Party, (B) Sequenom Technology Partners, (C) Existing Sequenom Licensees (which includes Sequenom Technology Partners existing on Effective Date), (D) Illumina Parties, (E) Illumina Technology Partners, (F) Existing Illumina Licensees (which includes Illumina Technology Partners existing on Effective Date), (G) any and all Illumina Customers who receive an Illumina Customer License with purchase of Illumina Products, (H) any New Sequenom Licensee, and (I) any New Illumina Licensee. For the avoidance of doubt, an Authorized Lab may be described by more than one

category of (A) through (I). An Authorized Lab shall be an Authorized Lab only for so long as it has a right, license or other authorization to Exploit Licensed NIPT LDT Tests under one or more Pooled Patents pursuant to the terms and conditions of this Agreement.

(iii) A “Test Fee” means the per test amount that is payable by an Authorized Lab when a Licensed NIPT LDT Test is performed by such Authorized Lab as a fee-for-service or reimbursable offering (whether or not Authorized Lab is paid or reimbursed for the test), such amount set in accordance with Section 3.2(c) and payable and/or creditable in accordance with Section 3.2(b).

(b) Payment and Collection of Test Fees. Illumina or Sequenom, as applicable, shall obligate, pursuant to written agreements therewith (or this Agreement with respect to Sequenom Parties and Illumina Parties), every Authorized Lab to pay a Test Fee for any and all (subject to Section 1.1(a)(i)) Licensed NIPT LDT Tests performed by such Authorized Lab as follows:

(i) Sequenom shall be responsible for all Test Fees that are payable under this Agreement for any and all Licensed NIPT LDT Tests performed by Sequenom Parties (Authorized Labs A), and Illumina shall be responsible for all Test Fees that are payable under this Agreement for any and all Licensed NIPT LDT Tests performed by Illumina Parties (Authorized Labs D).

(ii) Illumina shall use commercially reasonable efforts to collect Test Fees that are payable by Illumina Technology Partners, Existing Illumina Licensees, and Illumina Customers who receive an Illumina Customer License (Authorized Labs – E, F, G), and any other Authorized Lab (I) that receives the applicable right, license or authorization from an Illumina Party, for any and all Licensed NIPT LDT Tests performed by such Persons.

(iii) Sequenom shall use commercially reasonable efforts to collect Test Fees that are payable by its Sequenom Technology Partners, Existing Sequenom Licensees, and any New Sequenom Licensees (Authorized Labs – B, C and H) for any and all Licensed NIPT LDT Tests performed by such Persons.

(iv) In the event there is an Authorized Lab that is not in a category addressed in this Section 3.2(b), Illumina and Sequenom shall mutually agree on which of them shall be responsible for using commercially reasonable efforts to collect Tests Fees payable by such an Authorized Lab.

(v) Each Party shall and shall cause its Affiliates to forego any conduct the intent of which is to prevent the collection or sharing of Test Fees or other consideration between the Parties in accordance with the terms of this Agreement.

(vi) Any consideration received by an Illumina Party or a Sequenom Party from any Person for a license under a Pooled Patent to Exploit an NIPT LDT Test in the NIPT LDT Field, that is not in the form of Test Fees, shall be shared between Illumina and Sequenom in accordance with Section 3.2(d).

(vii) To the extent any Illumina Party or Sequenom Party entered into prior to the Effective Date any agreement that obligates an Authorized Lab to pay a Test Fee for performance of an NIPT LDT Test that is covered by a Valid Issued Claim or any pending claim of a Pooled Patent (including pending claims of the Illumina Owned Patents, Sequenom Owned Patents and Isis Patents), and such Authorized Lab pays such Test Fee, then such NIPT LDT Test shall be deemed to be a Licensed NIPT LDT Test and all such Test Fees collected under such agreements shall be shared between the Parties in accordance with this Agreement.

(i) Except as expressly stated otherwise in this Agreement (including in Section 1.1(a)(i) (Exceptions to Amount of Test Fee), Section 2.8(e) (Third Parties in Litigation with Illumina), Section 1.1(a) (Non-Illumina Platforms) and Section 2.9(c) (Settlement with Existing Sequenom Litigants)), each Illumina Party or Sequenom Party shall enter into written agreements with Persons it grants rights, licenses, or authorizations as an Authorized Labs such that the Authorized Lab is obligated to pay Test Fees on a quarterly basis, and Sequenom Parties and Illumina Parties shall be obligated to pay Test Fees on a quarterly basis. (A) Except as stated below with respect to Licensed NIPT LDT Test for which the Test Fee is equal to […^***…]. With respect to Licensed LDT Tests performed by an Authorized Lab during the first calendar year of its agreement under which it received the right to perform Licensed NIPT LDT Tests, the Test Fee amount that the Authorized Lab shall pay for Licensed NIPT LDT Tests performed during the first calendar year of that agreement shall be no lower than the amount of Test Fee on Schedule 1, Section 3 that corresponds to the good faith estimate of the volume that Authorized Lab will achieve at the end of that first calendar year. For agreements entered into within six months before the end of a calendar year, the first annual calculation of the Test Fee amount payable by the Authorized Lab will be for the period ending on December 31 of the first full calendar year of that agreement. The quarterly Test Fees for an Authorized Lab shall be in amounts that result in at least the product of (1) the number of Licensed NIPT LDT Tests performed by that Authorized Lab in that quarter with (2) the Test Fee amount in effect for that Authorized Lab in that quarter, plus an amount equal to the product of the annual number of Licensed NIPT LDT Tests in (1) that are subject to the additional $[…^***…] fee as set forth on Schedule 1 multiplied by $[…^***…]. (B) With respect to each Licensed NIPT LDT Test for which the Test Fee is equal to […^***…]. For the avoidance of doubt, notwithstanding the minimum amounts payable in accordance with the first sentence of this Section 3.2(c), the full amount of all Test Fees collected by Illumina and Sequenom from Authorized Labs shall be shared between the Parties as set forth in Section 3.2(d) (Sharing of Test Fee Amounts.)

(ii) Exceptions to Amount of Test Fee.

(1) Illumina Licensees. Illumina shall use commercially reasonable efforts to collect a Test Fee from Existing Illumina Licensees (including Illumina Technology Partners in existence as of the Effective Date) and New Illumina Licensees in the amounts governed by the terms of the applicable Existing Illumina License (including an applicable Technology Agreement) as modified by this Section 3.2(c)(ii). […^***…]. Notwithstanding anything to the contrary in this Agreement, any and all amounts for Test Fees received by Illumina from an Existing Illumina Licensee or New Illumina Licensee, including amounts in excess of the Test Fee that would otherwise be due under this Agreement, shall be subject to sharing with Sequenom in the same manner and amount as set forth in Section 3.2(d) (Sharing of Test Fees).

(2) Existing Sequenom Licensees. Sequenom shall use commercially reasonable efforts to collect a Test Fee from Existing Sequenom Licensees (including Sequenom Technology Partners in existence as of the Effective Date) and New Sequenom Licensees in the amounts governed by the terms of the applicable Existing Sequenom License (including an applicable Technology Agreement) as modified by this Section 1.1(a)(i). If an Existing Sequenom Licensee is obligated under an Existing Sequenom License to pay a per test fee upon performance of a NIPT LDT Test that is less than the amount that Sequenom would otherwise be obligated to charge under the provisions of Sections 3.2(c)(i), then Sequenom shall not be under any obligation to raise the Test Fee amounts payable by that Existing Sequenom Licensee from the amount set forth in that Existing Sequenom License and the Test Fees amounts collected by Sequenom on such basis shall be shared with Illumina in accordance with this Agreement. […^****…]. Notwithstanding anything to the contrary in this Agreement, any and all amounts for Test Fees (and their equivalents) received by Sequenom from an Existing Sequenom Licensee or New Sequenom Licensee, including amounts in excess of the Test Fee due under this Agreement shall be subject to sharing with Illumina in the same manner and amount as set forth in Section 3.2(d) (Sharing of Test Fees).

(3) With respect to Existing Sequenom Licensees and New Sequenom Licensees that are Authorized Labs, which have received less than full rights under all Pooled Patents to perform NIPT LDT Tests in the NIPT LDT Field, in the event an Illumina Party enters into a later agreement with such Authorized Lab to extend the rights under the Pooled Patents granted to such Authorized Lab under which such Authorized Lab is authorized to perform Licensed NIPT LDT Tests, Illumina shall be entitled to offer such extended rights at Test Fee amounts lower than those set forth in Schedule 1 in order to facilitate the later agreement with such Authorized Lab in view of the Test Fee amounts already owed pursuant the earlier agreement. In any such case, Illumina shall not require such Authorized Lab or any existing Illumina Licensee to pay an additional amount of Test Fees (for the total rights received from Sequenom and from Illumina) that would result in the aggregate amount of Test Fees paid by that Authorized Lab to be in excess of the Test Fees set forth in Schedule 1.

(4) Research and Development. The Test Fee is […^***…] for a Licensed NIPT LDT Test (A) that is performed by an Authorized Lab for internal research or development in the NIPT LDT Field, and (B) for which the Authorized Lab did not receive compensation on a per test basis (individually or as a lot of tests) for such Licensed NIPT LDT Test, and (C) the results of such Licensed NIPT LDT Test were not reported back to a subject or her physician or used for commercial purposes.

(iv) […^***…].

(1) Adjustment to Test Fee Schedule. Illumina shall have the right to adjust the Test Fee Schedule […^***…] on a market segment (including geographic or product segment) basis to reflect such market changes, upon written notice to and consent of Sequenom. Upon receipt of such notice […^***…], Sequenom shall consider in good faith whether or not to consent, such consent not to be unreasonably withheld, delayed or conditioned. As promptly as practicable, […^***…], Sequenom shall notify Illumina of its decision to consent or to withhold consent and its reasons therefor. If Sequenom has not responded in writing within the specified time, then it shall be deemed to have consented and Illumina may proceed with such reduced Test Fee structure for that market segment. In the event of a dispute between the Parties regarding adjustment of amounts in this clause (1), the procedures set forth on Schedule 2 shall govern the resolution of such Dispute.

(2) […^***…] Test Fees for Potential Future Authorized Labs. Each Party shall have the right to request that Test Fees be adjusted […^***…] for a particular Person that is a potential future Authorized Lab, upon notice to and consent from the other Party. Upon receipt of such notice requesting a reduced Test Fee structure for a particular Person (other than the Parties or their respective Affiliates), the other Party shall consider in good faith whether or not to consent, such

consent not to be unreasonably withheld, delayed or conditioned, on a case by case basis, to charging […^***…] to such Person if such […^***…] is reasonably necessary or useful to promote adoption of Licensed NIPT LDT Tests in that Person’s clinical laboratory […^***…]. As promptly as practicable, but in no event later than […^***…] after receiving such notice, the other Party shall notify the requesting Party of its decision to consent or to withhold consent and its reasons therefor. If the other Party has not responded in writing within the specified time, then the other Party shall be deemed to have consented and the requesting Party may proceed with such […^***…] for that Authorized Lab. […^***…].

(3) In the event the Test Fee Schedule is adjusted […^***…] pursuant to the procedure in clause (1) in this Section 3.2(c)(iii), then Schedule 1 automatically shall be amended to reflect such […^***…] adjustment for the applicable market segment, and thereafter shall be applicable to Test Fees payable by the Illumina Parties, Sequenom Parties and new Authorized Labs authorized after the adjustment date and, pursuant to each Party’s rights to adjust Test Fees as set forth in Section 1.1(a)(i), payable by the Parties’ then-existing licensees.

(d) Sharing of Test Fees.

(i) Sharing of Test Fees Between Illumina and Sequenom. The aggregate Test Fees collected by Illumina and Sequenom in a particular calendar quarter from Authorized Labs, including the Test Fees payable by Sequenom Parties and Illumina Parties as Authorized Labs (in amounts prior to any allocation of Test Fees between Illumina and Sequenom or deductions or credits), are the “Gross Test Fees” Illumina and Sequenom will share Gross Test Fees as follows:

(1) For Licensed NIPT LDT Tests performed by Authorized Labs anywhere in the world, excluding […^***…], Illumina shall be entitled […^***…] of the Gross Test Fees collected and Sequenom shall be entitled to […^***…] of the Gross Test Fees collected, subject to Section 3.2(d)(ii).

(2) For Licensed NIPT LDT Tests performed by Authorized Labs in […^***…], Illumina shall be entitled to […^***…] of the Gross Test Fees collected and Sequenom shall be entitled to […^***…] of the Test Fees collected, subject to Section 3.2(d)(ii).

(ii) Illumina shall be responsible for any amounts owed to its third party licensors (including University Licensors), and Sequenom shall be responsible for any amounts owed to its third party licensors or Isis, provided that, Illumina may credit or […^***…] of all of Illumina’s payments to CUHK pursuant to the CUHK Licenses (including all amounts paid or payable to CUHK after termination or expiration of such CUHK Licenses, pursuant to the terms of any such CUHK License), based on performance of NIPT LDT Tests by Authorized Labs (including royalties, milestone payments, and any recurring payments to the extent related to performance of NIPT LDT Tests, and minimum guarantees, bonus payments, any payments to make up for shortfalls in payments not made by sub-licensee or a sublicensee of

a sublicensee, but excluding Patent Costs, the sharing of which is addressed in Section 5.2) against the amounts owing to Sequenom based on the sharing of Gross Fees hereunder. Subject to Section 3.5 (Minimum Payments), payments by one Party to the other Party necessary to effectuate the sharing of Gross Test Fees set forth in this Section 3.2(d) shall be made in accordance with Section 3.4 (Payments and Reports).

(iii) If any University License, pursuant to which any Illumina In-Licensed Patents are licensed to Illumina, is terminated and Sequenom and its Affiliates obtain a direct license from the applicable University Licensor under such Illumina In-Licensed Patents, thereafter (1) Sequenom shall be responsible for the payment of all amounts owing to such University Licensor for sales by Sequenom and its Affiliates under such Illumina In-Licensed Patents, (2) Sequenom shall continue to be responsible for all payment obligations to Illumina set forth in this Agreement, including payment of Test Fees, and (3) Sequenom shall have the right to credit against Illumina’s portion of shared consideration under this Agreement all such amounts owing to such University Licensor (other than CUHK) for sales by Sequenom and its Affiliates under such Illumina In-Licensed Patents up to the amounts that Illumina would have paid to University Licensor if it had remained the direct licensee.

3.3 Royalties on NIPT IVD Products.

(a) For any country, in which there is, at the time of sale of the applicable NIPT IVD Product, a Valid Issued Claim in such country covering that NIPT IVD Product, Illumina shall pay Sequenom a royalty of […^***…] of Net IVD Sales of such NIPT IVD Product sold by Illumina and its Affiliates during the Patent Royalty Term in the NIPT IVD Field in such country. Notwithstanding the foregoing […^***…] shall be due under this Agreement for sales of instruments, hardware or sale or sale/license of general or multi-purpose software.

(b) For any country, other than […^***…], (i) in which there is not, at the time of sale of the applicable NIPT IVD Product, a Valid Issued Claim in that country covering that NIPT IVD Product, and (ii) if that NIPT IVD Product had been sold in another country at the same time, the sale or use thereof in such other country would be covered by a Valid Issued Claim in such other country, then in the case of (i) and (ii) Illumina shall pay Sequenom a royalty of […^***…] of Net IVD Sales of such NIPT IVD Product sold by Illumina and its Affiliates in the NIPT IVD Field during the period beginning on the Effective Date and ending on the […^***…] anniversary thereof. Notwithstanding the foregoing […^***…] shall be due under this Agreement for sales of instruments, hardware or sale/license of general or multi-purpose software.

(c) Illumina shall share with Sequenom any royalties received by Illumina or an Illumina Affiliate from a sublicensee (and its Affiliates), that is licensed under Pooled Patents to Exploit an NIPT IVD Product in the NIPT IVD Field, for sale of NIPT IVD Products in the NIPT IVD Field under such license to Pooled Patents, in the proportion set forth in Section 3.2(d). Illumina agrees that any sublicense granted to any Person under Pooled Patents to Exploit an NIPT IVD Product in the NIPT IVD Field will be for a royalty that is no less than […^***…]% of Net IVD Sales of NIPT IVD Products sold by such sublicensee (and its Affiliates) in the NIPT IVD Field. For the avoidance of doubt, for the purpose of this

Section 3.3(c), a Person that purchases NIPT IVD Product is not a sublicensee under Pooled Patents. Notwithstanding the foregoing no Royalty shall be due under this Agreement for sales of instruments, hardware or sale/license of general or multi-purpose software.

(d) “Royalty” and “Royalties” means the amount payable to Sequenom pursuant to Sections 3.3(a), 3.3(b), 3.3(c) and 3.3(g). Notwithstanding anything to the contrary in this Agreement, (i) except as stated in part (iii) herein, a Royalty shall be calculated and due under this Agreement with respect to any and all NIPT IVD Products in the NIPT IVD Field sold, and subject to, and solely with respect to, the terms of Section 3.3(g), NIPT Components sold and used with NIPT IVD Product(s) to perform (in whole) NIPT, (ii) in the event any Person (including Illumina Parties, Sequenom Parties or any other Authorized Lab) purchases any NIPT IVD Product from or on behalf of an Illumina Party or a sublicensee as permitted hereunder, (except as stated in part (iii) herein) including to perform an NIPT LDT Test in the NIPT LDT Field and a Royalty is payable in accordance with Section 3.3(a)-(c) or 3.3(g) for such sale of the NIPT IVD Product, then no Test Fee shall be payable under this Agreement for the performance of such NIPT LDT Test, (iii) in the event of sale of an NIPT IVD Product in the NIPT IVD Field wherein the purchaser is expressly authorized by Illumina Party or sublicensee as permitted hereunder to use such product to perform NIPT for tests not included in the product label or protocols for use (e.g., for genetic conditions not included in label), then no Royalty shall be payable in accordance with Section 3.3(a)- (c) or 3.3(g) for such sale of the NIPT IVD Product, however a Test Fee shall be payable under this Agreement for the performance of such NIPT (whether the NIPT is deemed to be performed in the NIPT IVD Field or the NIPT LDT Field) and (iv) except as set forth in clauses (x) and (y) of the fourth paragraph of the definition of Net IVD Sales, under no circumstances shall more than one Royalty be payable for the same unit of NIPT IVD Product or NIPT Component sold.

(e) With respect to Net IVD Sales for NIPT IVD Products, Illumina shall be responsible for any amounts owed to its third party licensors (including University Licensors), and Sequenom shall be responsible for any amounts owed to its third party licensors, provided that, Illumina may credit or offset the full amount of all of Illumina’s payments to CUHK pursuant to the CUHK Licenses (including all amounts paid or payable to CUHK after termination or expiration of such CUHK Licenses, pursuant to the terms of any such CUHK License), based on sales of NIPT IVD Product (by Illumina Parties or sublicensees and their Affiliates) (including royalties, milestone payments, and any recurring payments to the extent related to sale of NIPT IVD Product, and minimum guarantees, bonus payments, any payments to make up for shortfalls in payments not made by sub-licensee or a sublicensee of a sublicensee, but excluding Patent Costs, the sharing of which is addressed in Section 5.2) against the Royalties owing to Sequenom on Net IVD Sales.

(f) Subject to Section 3.5, payments by one Party to the other Party necessary to effectuate the Royalties provisions set forth in this Section 3.3 shall be made in accordance with Section 3.4 (d).

(g) To the extent Illumina, its Affiliates, or sublicensees described in Section 3.3(c),

(i) sells an NIPT IVD Product in the NIPT IVD Field for conduct or performance (in part, but not in whole) of NIPT,

(A) for which a Royalty is payable pursuant to Section 3.3(a), (b) or (c) upon such sale, and

(B) which sale (alone or together with NIPT Component(s)) conveys to the purchaser particular rights to conduct or perform (in whole) NIPT in accordance with product labeling or protocols of use without risk of infringing any Pooled Patent (e.g., convey through patent exhaustion, license, or covenant), and

(ii) sells together (whether under a single purchase order or under separate purchase orders) with such NIPT IVD Product other product(s) (whether NIPT IVD Product(s) or a non-NIPT IVD Product(s)) that is not an instrument, hardware, or general or multi-purpose software (such software being sold or licensed), but that is a required component, with NIPT IVD Product(s), to conduct or perform (in whole) NIPT, and (A) if each such other product(s) is the same or substantially the same as a product that, at the time of sale, is a component of an NIPT IVD Product of the seller that has received Regulatory Approval in the United States for conducting or performing (in whole) NIPT, or (B) in the event there is not such an NIPT IVD Product in (A), would be a component of an NIPT IVD Product of the seller for which an application for Regulatory Approval in the United States would be required for sale of such NIPT IVD Product for conducting or performing (in whole) NIPT (each such product an “NIPT Component”), then

(iii) Illumina shall pay Sequenom

(A) a Royalty upon sale of such NIPT IVD Product sold, payable in accordance with Section 3.3(a), (b) or (c), as required,

(B) a Royalty on each NIPT Component sold, payable (1) only during the time period stated in the applicable clause (a), (b) or (c) of Section 3.3, (2) as a percentage of net sales of each such NIPT Component calculated in the same manner as set forth for calculation of Net IVD Sales (for the purpose of this Section 3.3(g)(iii)(B), each instance of NIPT IVD Product in “Net IVD Sales” is replaced with NIPT Component) and (3) in the percentage stated in such applicable clause (a), (b) or (c) of Section 3.3, as required, and

(C) Notwithstanding the foregoing or anything contrary in this Agreement, Illumina is not obligated to pay a Royalty on any NIPT Component that is used by an Authorized Lab to perform a Licensed NIPT LDT Test for which a Test Fee is owed to an Illumina Party or a Sequenom Party.

3.4 Payment and Reports.

(a) Not later than forty five (45) calendar days after the last day of each calendar quarter, Sequenom and Illumina each shall provide the other with a written Test Fee and Royalty Report (each a “Test Fee and Royalty Report”), detailing separately for Japan and the rest of the world other than Japan (i) the names of all Third Party Authorized Labs for which that Party is obligated to collect Test Fees, (ii) the degree of compliance by each such

Third Party Authorized Lab with its payment obligations under the applicable agreement therewith, (iii) the aggregate number of Licensed NIPT LDT Tests performed by all such Authorized Labs, including by Sequenom Parties and Illumina Parties, during that period, including the number of Licensed NIPT LDT Tests that are subject to the additional $[…^***…] added to the Test Fee and that are subject to a Test Fee in an amount equal to percentage of Net LDT Sales, (iv) the aggregate amount of Test Fees collected by such Party during that period, including for its own Licensed NIPT LDT Test and those of its applicable Affiliates, (v) the amount of the Test Fees collected by the reporting Party that is owed to the other Party during that period based on the sharing obligations set forth in Section 3.2(d) (Sharing of Test Fees), (vi) in the case of Illumina, the aggregate Net IVD Sales and the Royalties owed to Sequenom based on the Net IVD Sales, and the corresponding net sales and Royalties owed to Sequenom based on sales of NIPT Components as provided for in Section 3.3(g)(iii)(B) above, (vii) all other consideration received by such Party during that period that is subject to sharing hereunder and the amount thereof owing to the other Party hereunder, (viii) in the case of Illumina, all amounts paid by Illumina to CUHK during such period pursuant to the CUHK Licenses (including all amounts paid or payable to CUHK after termination of such CUHK Licenses, pursuant to the terms of any such CUHK License), including as set forth in this Agreement in Section 3.2(d)(ii) and 3.3(e), (ix) a reasonably detailed report on any anomalous activity during the period, such as a Third Party’s licensee’s refusal to pay an owed amount or any other material exception to the expected performance by such Authorized Lab in relation to this Agreement, (x) the aggregate Net LDT Sales, and the number of tests upon which Net LDT Sales is based, by such Party or its Affiliates or (sub)licensees under any Pooled Patent, as applicable, (xi) the Patent Cost incurred by that Party, (xii) in the case of Illumina, all amounts creditable in accordance with Section 3.1, and (xiii) based on the foregoing (i) through (xii), the net amount owed to the other Party for that period before taking into consideration the other Party’s Test Fee and Royalty Report for the same period. Each Party shall provide its quarterly Test Fee and Royalty Report in a Microsoft excel-compatible spreadsheet (electronic and hard copy), or in another mutually acceptable spreadsheet format. In the event that a University Licensor of Illumina under any Pooled Patent requires in its University License additional reporting relating to sales of NIPT LDT Tests, which reporting is not set forth in this Agreement, upon Illumina’s request therefor, Sequenom shall include in its Test Fee and Royalty Report such additional reporting.

(b) Not later than sixty (60) calendar days after the last day of each calendar quarter, or thirty (30) days after a Party receives the applicable Test Fee and Royalty Report from the other Party for such calendar quarter, whichever is later, (i) each Party shall reconcile the amount subject to sharing hereunder that is owed to the other Party under the Test Fee and Royalty Reports provided for such calendar quarter, after application of all offsets and credits permitted under this Agreement, including under Sections 3.1, 3.2(d)(ii), 3.3(e) and 3.4(b) and Patent Costs, and (ii)(A) if such reconciliation shows that Illumina owes to Sequenom a net aggregate amount of consideration subject to sharing hereunder for such calendar quarter, then Illumina shall pay such net aggregate amount to Sequenom, and (B) if such reconciliation shows that Sequenom owes to Illumina a net aggregate amount of consideration subject to sharing hereunder or subject to reimbursement hereunder for such calendar quarter, then Sequenom shall pay such net aggregate amount to Illumina. Making or accepting a payment made under this Section 3.4(b) shall not constitute an admission by a Party or conclusive evidence of the correctness of any amount so paid or accepted.

(i) Not later than ninety (90) calendar days after the last day of each calendar year, or forty five (45) days after a Party receives from the other Party the Test Fee and Royalty Report for the last calendar quarter of such calendar year, whichever is later, each Party shall provide the other with an annual report (the “Annual Report”) in reasonable detail showing for the previous calendar year all categories of information set forth in parts (i) through (xii) of the quarterly Test Fee and Royalty Report, and in each case, any difference between the information reported on the Annual Report and the information reported in the quarterly Test Fee and Royalty Reports. The Annual Report provided by Sequenom shall also report the number of NIPT LDT Tests in the NIPT LDT Field (A) performed during that calendar year period using Illumina equipment and consumables and (B) performed during that period using non-Illumina equipment and consumables, and any adjustments to those number permitted in accordance with Section 3.5(b) (Adjustment Due to Third Party Platforms and Products). Each Party shall provide its Annual Report in a Microsoft excel spreadsheet (electronic and hard copy), or in another mutually acceptable spreadsheet format.

(ii) The Parties shall each calculate and also include such calculation in such Annual Report the sum of (A) payments received by Sequenom from Illumina for shared Test Fees and other shared consideration, (B) Royalties received by Sequenom from Illumina for Net IVD Sales, (C) the amounts retained by Sequenom for Test Fees and other shared consideration in relation to Licensed NIPT LDT Tests, and, in the case of Illumina, (D) the amounts paid by Illumina to CUHK pursuant to the CUHK Licenses and deducted by Illumina from payments to Sequenom as specifically permitted under this Agreement and (E) for 2015, any amounts that Illumina credited in accordance with Section 3.1, in each case during the previous calendar year (such sum, the “Nominal Amount”). For the avoidance of doubt, the Nominal Amount for a calendar year shall not include any amount of shared consideration that was retained or received by Sequenom or Illumina, as applicable, in that year pursuant to Section 5.1(c), to the extent such amount was in a prior year actually credited against a Minimum Payment, as permitted pursuant to Section 3.5(b)(ii) (Credit Due to Illumina Enforcing Pooled Patents).

(iii) The Parties shall each calculate and also include in such Annual Report any adjustments to the Minimum Payment pursuant to Section 3.5(b). If, for any calendar year, there is any amount paid by Illumina to CUHK pursuant to the CUHK Licenses (except for the Patent Costs, which are addressed in ARTICLE V) that has not been credited or reimbursed by Sequenom, then Sequenom shall pay to Illumina along with the payment otherwise due for the first calendar quarter of the following calendar year, that amount of un-credited or not reimbursed payments made by Illumina to CUHK as set forth in Illumina’s annual report.

(iv) If, for any calendar year starting with 2015 and ending with 2020, the Nominal Amount for that calendar year is less than the Minimum Payment amount for the applicable year set forth in Section 3.5(a) as that Minimum Payment is adjusted pursuant to Section 3.5(b), then Illumina shall pay to Sequenom along with the payment otherwise due for the first calendar quarter of the following calendar year, the difference between such Minimum Payment and such Nominal Amount.

(d) To the extent that, with respect to any calendar year for which a Minimum Payment is set forth in Section 3.5(a), the aggregate amount that Sequenom retains and receives of shared revenues hereunder is in excess of the applicable Minimum Payment for such calendar year, then the excess amount over such Minimum Payment for such calendar year shall be credited against the amount (if any) owing by Illumina to Sequenom under Section 3.5 for the immediately following calendar year in excess of the aggregate amount that Sequenom retains and receives of shared revenues hereunder for such immediately following calendar year; provided, however, that the operation of this Section 3.4(d), together with any adjustment under Section 3.5(b) that is subject to a floor, shall not reduce the amount of the Minimum Payment below the amount of such floor therefor set forth in the first paragraph of Section 3.5(b).

(e) All calculations and payments under this Section shall be made subject to Section 3.6 (Foreign Exchange).

3.5 Minimum Payments.

(a) Unadjusted Minimum Payments. Beginning in calendar year 2015 and continuing through calendar year 2020, the unadjusted minimum aggregate annual amounts payable to Sequenom including all amounts expressly stated to be payable under this Agreement, other than the One-Time Payment (each, a “Minimum Payment”), shall be:

(i) for calendar year 2015, […^***…];

(ii) for calendar year 2016 […^***…];

(iii) for calendar year 2017, […^***…];

(iv) for calendar year 2018, […^***…];

(v) for calendar year 2019, […^***…]; and

(vi) for calendar year 2020, […^***…].

(b) Adjustments and Credits to the Minimum Payment Obligations. To the extent that any of the events or circumstances set forth in this Section 3.5(b) arises in any year after 2016, the Minimum Payment for the applicable year shall be adjusted downward as set forth below, provided that any such reduction shall not bring the Minimum Payment owed for such year below a floor of (1) in 2017 calendar year, […^***…] dollars (US$[…^***…], (2) in calendar year 2018, […^***…] dollars (US$[…^***…], and (3) in calendar year 2019, […^***…] dollars (US$[…^***…] (with no floor applicable to calendar year 2020), except as expressly stated otherwise.

(i) Adjustment Due to Average Test Fee Collected. The Minimum Payments set forth in Section 3.5(a) are based on an average annual Test Fee collected by Illumina and Sequenom in the amount of $[…^***…] per NIPT Test. If the average Test Fee collected for a calendar year is lower than $[…^***…] per NIPT Test by […^***…]% or more, then the Minimum Payment

for the calendar year shall be adjusted downward by multiplying the then current Minimum Payment amount by the quotient of the average Test Fee actually collected and subject to sharing between Illumina and Sequenom during that calendar year divided by […^***…].

(ii) Credit Due to Illumina Enforcing Pooled Patents. To the extent an Illumina Party is suing in good faith any Person (other than an Existing Illumina Litigant) for patent infringement under any Pooled Patent, and is diligently prosecuting such suit:

(A) […^***…] shall be used to calculate the annual amount of Test Fees that would have been collected by such Illumina Party, […^***…] Sequenom as if such sales were made by such Illumina Party, in each case if those sales had been licensed under the Pooled Patents and amounts had been paid in accordance with this Agreement;

(B) the applicable amounts that would have been paid hereunder to Sequenom, […^***…], shall be calculated; and

(C) […^***…] of the applicable amounts calculated under clause (B) above shall be credited against the minimum amounts set forth in Section 3.5(a) for such year, subject to Section 3.4(c)(ii).

(iii) Credit Due to Test Fees Not Paid by Sequenom. In the event that Sequenom fails to pay any Test Fee owing under this Agreement based on Licensed NIPT LDT Tests performed by a Sequenom Party, then the full amount of such unpaid debt (i.e., not just the share due to Sequenom) shall be credited against the Annual Minimum in the same year. The provisions of Section 3.5(b) to establish a floor for adjustments shall not be applicable to this Section 3.5(b)(iii).

(iv) Adjustment Due to Third Party Platforms and Products. If in any calendar quarter a Sequenom Party employs non-Illumina equipment and consumables (excluding library prep) for more than […^***…]% of its laboratory services for NIPT, when Illumina equipment and consumables are otherwise available to Sequenom Party on non-discriminatory economic terms consistent with the intent of this Agreement and any applicable Ancillary Agreements, then the annual Minimum Payment amounts set forth in Section 3.5(a) will be reduced by […^***…]% for the calendar year during which such calendar quarter occurs and the immediately following calendar year. The provisions of Section 3.5(b) to establish a floor for adjustments shall not be applicable to this Section 3.5(b)(iv).

(v) Adjustment Due to Impairment of Pooled Patents. If one or more key Patents within the Patent Pool are held invalid so as to be or otherwise become unenforceable in a country, then the Parties shall engage in good faith renegotiation of the Minimum Payment amounts set forth in Section 3.5(a) with the intention of reducing those minimum amounts commensurate with the impact of such an event in such country on the

market. Notwithstanding the foregoing, the provisions of this Section 3.5(b)(v) shall not be applicable if one or more key Patents within the Patent Pool are held invalid so as to be or otherwise become unenforceable in a country as a result of a challenge by an Illumina Party pursuant to Section 4.2.2(e) of the Settlement Agreement and the Illumina Party controlled, participated in, or assisted (other than being named as a nominal party or a real party in interest, or paying or reimbursing costs, or taking an action that it is required to take under a University License as set forth in Schedule 3.5(b)(v)) in such challenge The provisions of Section 3.5(b) to establish a floor for adjustments shall not be applicable to this Section 3.5(b)(v).

(vi) Adjustment Due to Decreased Value of Pooled Patents in Market. If after the Effective Date either Party or its Affiliates, or any Third Party, sells a competitive NIPT LDT Test or NIPT IVD Product in a country that does not infringe any of the Pooled Patents in such country, and all such competitive NIPT LDT Tests and NIPT IVD Products achieve in aggregate a market share for the applicable products or services of at least […^***…], then the Parties shall engage in good faith renegotiation of the Minimum Payment amounts set forth in Section 3.5(a) with the intention of reducing those minimum amounts commensurate with the impact of such an event in such country on the market.

3.6 Foreign Exchange. For the purpose of calculating all amounts received hereunder subject to sharing with the other Party hereunder, where the consideration is received in a currency other than U.S. Dollars, conversion from such foreign currency to U.S. Dollars will be calculated and reported for each date in a calendar month based on the rate of exchange quoted by OANDA.com on last calendar day of the applicable month, with respect to the currency in which such consideration is received for each day during the applicable calendar quarter.

3.7 Records. Sequenom and Illumina each will keep, and will require all other Authorized Labs to keep, for […^***…] years from the date of each payment of Test Fees or Royalties, or the date of receipt of any other amount that is subject to sharing between the Parties under this Agreement, records in sufficient detail to allow the determination of the accuracy and completeness of reports submitted hereunder with respect to any payment hereunder. Further, Sequenom and Illumina will obtain from the Authorized Labs with which they or their applicable Affiliates are in contract, the right for the contracting Party to audit the records of such Authorized Labs of a scope at least as beneficial to the auditing party as set forth herein. Sequenom and Illumina each will have the right for a period of […^***…] years after receiving any report or statement with respect to amounts due and payable hereunder to appoint an independent certified public accountant reasonably acceptable to the other Party, and which auditor shall receive the same consideration for performing the audit regardless of outcome, to inspect the relevant records of the other Party to the extent necessary to verify the accuracy and completeness of such report or statement. The auditor shall have the right to report to the auditing party whether the Test Fees, Royalties and Test Fee Reports and Annual Reports were accurate and complete, and if they are not, then the nature and amount of the inaccuracy or incompleteness, and no further information. The audited Party will make its records and the relevant records of its Affiliates available (including any applicable reports received from Authorized NIPT Labs) for inspection by such independent certified public accountant during regular business hours on Business Days at such place or places where such records are customarily kept, upon reasonable prior notice (of at least thirty (30) days) from the auditing

party, to verify the accuracy and completeness of the reports and payments. Such inspection right will not be exercised more than once in any calendar year and no period may be audited by a Party more than once. The auditing Party will bear all costs and expenses associated with an audit conducted pursuant to this Section 3.7, provided, however, that if the designated auditor discovers an underpayment of […^***…]% or more for the audited period between the amount of payments made under this Agreement and the amount of payments actually owed under this Agreement, then the audited Party will bear all reasonable costs and expenses associated with such audit. Any amount of underpayment shall be made, with interest calculated in accordance with Section 3.9, within ten (10) Business Days after a final audit report. The auditing Party agrees to hold in confidence all information learned in the course of any audit or inspection, in accordance with the terms and conditions set forth in ARTICLE VI. Neither Party will have any obligation under this Agreement to maintain records pertaining to such reports or payments beyond such three-year period. The University Licensors’ of the Pooled Patents shall have the audit rights stated in their respective University Licenses. In the event the written agreement between an Illumina Party or a Sequenom Party and its Existing Illumina Licensee or Existing Sequenom Licensee, respectively, does not include audit rights of at least the scope of this Section 3.7, then Illumina or Sequenom, as applicable, shall use commercially reasonable efforts to seek such audit rights from the existing licensee and execute an amendment to that agreement that contains audits rights of at least the scope of this Section 3.7.

3.8 Taxes.

(a) All payments under this Agreement will be made without deduction or withholding for taxes except to the extent that any such deduction or withholding is required by Law in effect at the time of payment.

(b) Any tax required to be withheld on amounts payable under this Agreement will promptly be paid by payor on behalf of the payee to the appropriate governmental authority, and the payor will furnish the payee with proof of payment of such tax. Any such tax required to be withheld will be an expense of and borne by the payee.

(c) Illumina and Sequenom will cooperate with respect to all documentation required by any taxing authority or reasonably requested by Illumina or Sequenom to attempt to minimize or eliminate the rate of applicable withholding taxes.

3.9 Interest on Late Payments. For any payment due hereunder that is not made when due, in addition to paying the amount of such payment, the Party making such payment shall pay an additional amount as interest on such late amount calculated at a rate equal to the lower of […^***…], or the highest rate permitted by applicable Law, calculated daily from the date that such late amount was due until and including the date actually paid.

3.10 CUHK Licenses. Illumina and Sequenom acknowledge that certain of the CUHK Licenses include certain […^***…] to CUHK. Notwithstanding anything to the contrary in this Agreement or any Ancillary Agreement, any and all of Sequenom’s obligations under this Agreement to reimburse Illumina (whether by

credit, repayment, or any other means of reimbursement satisfactory to Illumina) for payments that Illumina is obligated to make to CUHK under a CUHK License shall continue for so long as Illumina is so obligated to CUHK and shall be […^***…].

ARTICLE IV

TERM

4.1 Term. Unless earlier terminated by mutual written agreement of the Parties, the term of this Agreement, including the licenses granted under this Agreement, shall be from the Effective Date until the date of Expiration of the last to Expire Pooled Patent (the “Term”). Neither Party may terminate this Agreement except by mutual written agreement of the Parties. Upon termination of the Agreement, the following terms and provisions shall survive: (a) ARTICLE I, (b) Section 5.1 (Infringement Claims Against Third Parties) shall survive for six years after Expiration of each Pooled Patent, (c) ARTICLE VI (Confidentiality) shall survive, (d) all payment obligations under the Agreement shall survive until satisfied, (e) Section 3.7 (Records) shall survive for three years after the last day of the Term, (f) Section 7.2 (No Implied Warranty), (g) ARTICLE VIII, and (h) ARTICLE IX.

4.2 Effect of Material Breach. If a Party materially breaches this Agreement and such breach is not cured within thirty (30) days after written notice thereof from the other Party, the non-breaching Party shall have a right to pursue a claim in accordance with the enforcement procedures set forth in Section 9.7.

ARTICLE V

ENFORCEMENT AND PROSECUTION OF POOLED PATENTS

5.1 Infringement Claims Against Third Parties.Notices.

(a) Notices: Sequenom will advise Illumina promptly upon its becoming aware of: (i) any unlicensed activities which it believes may be an actual or impending infringement of any Pooled Patent in the Licensed NIPT Field; (ii) any attack on or appeal of the grant of any Pooled Patent; (iii) any published application for Patent by, or the grant of a Patent to, a Person which claims the same subject matter as any Pooled Patent; or (iv) any application made for a compulsory license under any Pooled Patent.

(b) Right to Take Action. Subject to Section 5.1(f) (Secondary Enforcement Rights) and Section 5.1(d) (University Licensors) and any applicable University License, as between Sequenom and Illumina and their respective Affiliates, Illumina shall have the sole right (which it may exercise through its Affiliates at its sole discretion), at its sole expense, to enforce the Pooled Patents against Third Parties that Exploit NIPT LDT Tests in the NIPT LDT Field and against Third Parties that Exploit NIPT IVD Products in the NIPT IVD Field, except to the extent (i) such sole right is inconsistent with an applicable Ancillary Agreement or University License, (ii) that Sequenom and its Affiliates retains the enforcement rights under the Isis Patents in the NIPT LDT Field, or (iii) subject to Section 5.1(e) (Existing Litigation).

Subject to the foregoing, solely with respect to infringement of the Isis Patents in the NIPT LDT Field, Sequenom, and in all other cases, Illumina, on behalf of itself and its respective Affiliates, will have the sole right to determine whether or not to take whatever legal or other action is required in response to activities described under Section 5.1(a), including such activities of which Sequenom becomes aware and provides notice under Section 5.1(a) (“Protective Action”). If the applicable Party determines in its sole discretion that such Protective Action is warranted, then such Party or its Affiliates shall, at such Party’s expense, commence and prosecute and control such Protective Action. The other Party may be represented by counsel of its own selection at its own expense in such Protective Action to the extent it is a party of record in such Protective Action, provided that such counsel shall not in any way control such Protective Action.

(c) Recovery. Any recovery obtained as a result of such Protective Action, whether by judgment, award, decree or settlement, (i) first, will be […^***…], and (ii) then, […^***…], (A) with recovery of amounts for NIPT LDT Tests […^***…], and (B) with recovery of amounts for NIPT IVD Products […^***…]. To the extent such recovery is insufficient to reimburse the Parties’ associated reasonable costs and expenses fully, then a Party’s share of the recovery will be […^***…].

(d) University Licensors. Each Party agrees to enforce the provisions of any agreement it has with any of the University Licensors, which provisions permit such Party to solicit or compel the cooperation of, including the naming as a party to a litigation of, any such University Licensor, as may be necessary or useful to bring or maintain an action to enforce any Pooled Patent hereunder.

(e) Existing Litigation. Nothing in this ARTICLE V is intended to alter or divest rights of any Party to continue to prosecute and settle any enforcement action of any Pooled Patent against a Third Party, which Third Parties as of the Effective Date are set forth on Schedules 2.8(d) and 2.8(e), and which enforcement action had begun as of the Effective Date, or to take any appeal therefrom.

(f) Secondary Enforcement Rights. Notwithstanding anything to the contrary in this Agreement, in the event Sequenom provides notice to Illumina pursuant to Section 5.1(a) with respect to any Patent on Schedule 5.1(f), and Illumina does not within three (3) months of such written notice take Protective Action in response to such notice and thereafter diligently prosecute such Protective Action to eliminate the applicable activity described in Section 5.1(a), or if Illumina provides written notice earlier than such three (3) months that it does not intend to take Protective Action, then Sequenom shall have the same right to take action with respect to the applicable Patent as Illumina has to enforce the Pooled

Patents set forth in Section 5.1(b), provided that Sequenom takes such action within three (3) months of such notice and diligently prosecutes such action to eliminate the applicable activity described in Section 5.1(a). In the event Sequenom chooses to take Protective Action, then Illumina shall have the same rights set forth in Section 5.1(b) as Sequenom has when Illumina takes Protective Action. Any recovery obtained as a result of any such Protective Action pursued by Sequenom in accordance with this Section 5.1(f) shall be treated as set forth in Section 5.1(c), except that with respect to the division set forth in clause (ii) therein (A) recovery of amounts for NIPT LDT Tests treated as Test Fees shall be shared between the Parties with Sequenom receiving the portion that Illumina would have received if Illumina pursued the Protective Action and with Illumina receiving the portion that Sequenom would have received if Illumina pursued the Protective Action, and (B) with recovery of amounts for NIPT IVD Products being treated as royalties received and Sequenom shall pay a portion of such amount equal to the Royalties that would have been payable by Illumina to Sequenom in accordance with Section 3.3(c) if Illumina had pursued the Protective Action.

5.2 Prosecution and Maintenance of Pooled Patents.

(a) As between the Parties and subject to the applicable University Licenses and Section 5.2(e), Illumina and its Affiliates shall control the prosecution and maintenance of the Illumina Patents and the Sequenom Patents.

(b) As between the Parties, Sequenom and its Affiliates shall control at their sole cost the prosecution and maintenance of the Isis Patents.

(c) Subject to Section 5.2(b) (regarding Isis Patents), Illumina and Sequenom shall share the reasonable costs and expenses directly incurred by Illumina and Sequenom for prosecution (including responding to interferences declared and oppositions filed and post-grant proceedings) and maintenance of the Pooled Patents, other than Interference Expenses as that term is defined in each of the CUHK Licenses, including without limitation costs and expenses for litigating (in any forum or procedure, including arbitration) Patent Interference Nos. 105,920, 105,922, 105,923 and 105,924 before the United States Patent and Trademark Office, Patent Trial & Appeal Board, or for appealing or settling such interferences, (such shared costs and expenses “Patent Costs”) on a […^***…] Illumina:Sequenom basis. The Patent Costs include out-of-pocket costs and expenses and costs and expenses incurred by Illumina and Sequenom for activities that occur on and after the Effective Date for outside counsel and in-house patent attorneys and patent agents prosecuting the Pooled Patents (whether directly or through review and oversight of outside counsel), provided that such in-house expenses shall be at an hourly rate of $[…^***…] per hour (which shall increase annually by […^***…] on January 1, 2016 and on each January 1 thereafter during the Term). Payments owed shall be made or credited in accordance with Section 3.4. For the avoidance of doubt, (1) […^***…] are not creditable against the Minimum Payments, (2) […^***…] is included in Patent Costs and (3) […^***…] shall be paid by Illumina and Sequenom shall reimburse Illumina for 100% of such amounts paid. Notwithstanding the foregoing, Patent Costs shall not include any costs incurred by […^***…]

[…^***…]. Unless there was reasonable basis for delay, neither Party will be responsible for payment of costs or expenses that were incurred by the other Party and arising more than six (6) months prior to the receipt by such first Party of the invoice from such other Party. Each Party shall provide the other Party with reasonable detail regarding costs for services and shall include, at a minimum, the date services were performed, a description of each service provided, specific and accurate time for each service provided and the hourly rate for the service provider. A party shall have the right to audit the invoices in accordance with the audit process set forth in Section 3.7.

(d) Illumina will use commercially reasonable efforts to (i) prosecute (including responding to interferences declared and oppositions filed) and maintain Sequenom-Owned Patents by filing all necessary papers and paying any fees required for such purpose by the patent Laws of the particular country in which such Sequenom-Owned Patent is prosecuted and was granted, and (ii) obtain such patent extensions or restorations of patent terms as may become available from time to time in any country regarding Sequenom-Owned Patents. In the event Illumina decides not to prosecute or maintain any pending application or issued patent within Sequenom-Owned Patents, or obtain any patent extensions or restorations of patent term, Illumina will give Sequenom written notice of such decision at least sixty (60) days prior to Illumina allowing such application to go abandoned or prior to Illumina not taking a necessary step to maintain, extend or restore such patent. Sequenom will have the option of taking over the activities in (i) and (ii) with respect to such application or patent, and shall notify Illumina in writing if it chooses to assume such control of the prosecution or maintenance of any such application or patent. If Sequenom so assumes control of the prosecution or maintenance of any such application or patent, promptly after such notification, Illumina shall transfer its files with respect thereto to Sequenom, and Sequenom will use commercially reasonable efforts to prosecute (including responding to interferences declared and oppositions filed) and maintain any such application or patent to the same extent Illumina is required as set forth and pursuant to parts (i) and (ii) of this Section 5.2(d).

(e) Each Party prosecuting Pooled Patents pursuant to Sections 5.2(a)-(d) shall use commercially reasonable efforts and reasonably experienced patent professionals of its choosing (in-house or law firm) in so doing to maintain and, if reasonably possible under applicable patent Laws, to prosecute to allowance Valid Issued Claims in the Pooled Patents in the Licensed NIPT Field so maintained and prosecuted, and shall consider in good faith the interests of the other Party in so doing. […^***…]. Notwithstanding the foregoing, a Party prosecuting a Pooled Patent shall give good faith consideration to any such comments on prosecution of a Pooled Patent in the Licensed NIPT Field received by the other Party.

5.3 Cooperation. Each Party shall reasonably cooperate with the other Party in the exercise of its rights or performance of its obligations under this ARTICLE V. For any action or proceeding brought by a Party under this ARTICLE V, the other Party shall join as a party plaintiff in any such action or proceeding if necessary for standing or otherwise necessary to enable the initiating Party or its Affiliates to bring or continue such action or proceeding. Each Party shall enter into a common interest agreement if requested by the other Party in connection with performing its obligations or exercising its rights under this Article V.

ARTICLE VI

CONFIDENTIALITY

6.1 Confidentiality. During the Term and for a period of five (5) years thereafter, each Party shall maintain in confidence the Confidential Information of the other Party, shall not use or grant the use of the Confidential Information of the other Party except as expressly permitted hereby, and shall not disclose the Confidential Information of the other Party except on a need-to-know basis to such Party’s directors, officers, employees, agents and consultants, to the extent such disclosure is necessary or useful in connection with performance of such Party’s obligations or exercise of such Party’s rights under this Agreement or any of the Ancillary Agreements. To the extent that disclosure to any Person is authorized by this Agreement, prior to disclosure, a Party shall have obtained written agreement of such Person (which written agreement may be a general employee confidentiality agreement) to hold in confidence and not disclose, use or grant the use of the Confidential Information of the other Party except as expressly permitted under this Agreement. Each Party shall notify the other Party promptly upon discovery of any unauthorized use or disclosure of the other Party’s Confidential Information.

6.2 Terms of Agreement. Neither Party shall disclose any terms or conditions of this Agreement to any Third Party without the prior consent of the other Party; provided, however, that a Party may disclose the terms or conditions of this Agreement, (a) on a need-to-know basis to such Party’s directors, officers, employees and consultants, and its legal and accounting advisors, in each case, to the extent such disclosure is necessary, and (b) to a Third Party, other than a Sequencing Platform Manufacturer, in connection with (i) an equity investment in or financing of the operations of such Party, (ii) a merger, consolidation or similar transaction by such Party, or (iii) the sale of all or substantially all of the assets of such Party to which the Agreement and the Ancillary Agreement are related, provided in each case that such Third Party is bound by written confidentiality obligations respecting such disclosures in accordance with the terms of this Agreement.

6.3 Permitted Disclosures. Notwithstanding Section 6.4, if required by Law, including without limitation by the U.S. Securities and Exchange Commission or any stock exchange or Nasdaq, or by other applicable law, regulation, court or administrative order then a Party may issue a press release or other public announcement regarding this Agreement, or make a disclosure required by Law, provided that the other Party has received prior written notice of such intended press release or public announcement, or the disclosure required by Law, if practicable under the circumstances, and the other Party has been provided sufficient opportunity to object to any such disclosure or to request confidential treatment thereof , and an opportunity to seek a protective order (if applicable), or to have discussion between the Parties and their

counsel regarding the requirement, in each case to the extent reasonably practicable under the circumstances, and the Party subject to the requirement cooperates with the other Party to limit the disclosure and includes in such press release or public announcement or required disclosure only such information relating to this Agreement as is required by such Law to be publicly disclosed. In the event this Agreement or an Ancillary Agreement is required by applicable Law to be made public (e.g., SEC filing), the Parties will make reasonable attempts to diligently and in good faith work together to redact this Agreement and any applicable Ancillary Agreement to a mutually acceptable extent and in compliance with applicable Law, and in any event the Party required to make the applicable agreement public shall provide the other Party with a copy of the proposed redaction prior to public disclosure.

6.4 Publicity; Use of Names. Each Party shall obtain the prior written consent of the other Party on all press releases or other public announcements relating to this Agreement, including its existence or its terms, provided that a Party is not required to obtain prior written consent of the other Party for press releases or public disclosures that repeat information that has been previously authorized for public disclosure pursuant to terms of this Agreement. Notwithstanding anything to the contrary in this Agreement, the Parties have mutually agreed on the form of the press release attached hereto as Schedule 6.4, and any Party may disclose free from confidentiality obligations the content of such press release, provided that, except as permitted hereunder, no more than one (1) press release may be issued by any Party in relation to the transactions contemplated by this Agreement and the Ancillary Agreements unless the other Party consents in writing to any additional press release, such consent to be given or withheld in such other Party’s sole and absolute discretion. Neither Party shall use the name or trademarks of the other Party without the express prior written consent of the other Party.

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

7.1 Representations and Warranties.

(a) Except as set forth on Schedule 7.1(a), each of the Parties represents and warrants, as of the Effective Date, that:

(i) it has legal power, authority and right to enter into this Agreement;

(ii) the execution and performance by it of its obligations hereunder will not constitute a breach of, or conflict with, its organizational documents nor any other material agreement or arrangement, whether written or oral, by which it is bound;

(iii) it has full power and authority and has taken all action necessary to enter into and perform this Agreement, and that this Agreement has been duly authorized, executed and delivered by such Party;

(iv) this Agreement is a valid, binding, and legally enforceable obligation of that Party in accordance with its terms;

(v) it has the right to grant the rights granted hereunder, including the licenses and covenants not to sue granted hereunder, and undertake the obligations it assumes hereunder and that it has not previously licensed, assigned, or otherwise conveyed rights in any intellectual property, which license, assignment or other conveyance is inconsistent with the terms of, or could otherwise undermine any exclusivity set forth in, the terms of this Agreement;

(vi) each of its Existing Illumina Licensees or Existing Sequenom Licensees (as applicable) as of the Effective Date that is authorized by an Illumina Party under any Illumina Patent (excluding CUHK Patents) or by a Sequenom Party under any Sequenom Patent (prior to assignment and novation of the CUHK Licenses (2008/2011)) or Isis Patent to perform or have performed an NIPT LDT Test is obligated on a per-test basis to pay a fixed fee (or fixed fee dependent upon volume tiers) on performance of such NIPT LDT Test, which fee will be treated as a Test Fee hereunder; and

(vii) it has no knowledge or reasonable belief, without a duty to investigate, that any Person, other than Illumina, Sequenom, CUHK, Isis, Stanford, […^***…] and any of their Affiliates (a) owns any right, title or interest in a Pooled Patent, or (b) has asserted or alleged that it owns any right, title or interest in a Pooled Patent.

(b) Except as set forth on Schedule 7.1(b), Sequenom represents and warrants, as of the Effective Date, that:

(i) it is the sole and exclusive beneficial and record owner of the Sequenom Owned Patents and Isis Patents licensed to Illumina hereunder;

(ii) this Agreement is not in conflict in any material respect with, and will not result in breach of another agreement to which Sequenom or any of its Affiliates is a party;

(iii) other than as set forth in the Settlement Agreement, it is not aware of any legal action challenging the ownership, validity or enforceability of any of the Sequenom Patents or CUHK Patents;

(iv) that the Sequenom Patents (prior to assignment and novation of the CUHK Licenses (2008/2011)) include all Patents owned or in-licensed by Sequenom and its Affiliates with a right to sublicense that claim the verifi® test, MaterniT21® test, VisibiliT™ test and other methods of performing NIPT (including targeted sequencing, PCR, arrays), in each case as currently commercially performed and sold by Sequenom and Illumina, […^***…];

(v) it intends to continue prosecuting the ongoing disputes it has with Existing Sequenom Litigants in a manner that, if successful, would lead to an obligation, on each such Existing Sequenom Litigant that intends to perform on a going forward basis an NIPT LDT Test that is covered by a Valid Issued Claim under the Isis Patents, to take a license under the Isis Patents in exchange for consideration payable to Sequenom that is consistent with the Test Fee amounts set forth on Schedule 1;

(vi) other than as set forth in the Settlement Agreement, it has no reasonable basis to believe that (A) any of the Sequenom Owned Patents, Isis Patents or CUHK Patents will Expire prior to the ordinary date that would be calculated for any such Patent based on the filing and priority dates of the applications leading to such Patent and (B) it will allow any Expiration to occur for Pooled Patents under its control that is prior to the ordinary date that would be calculated for any such Patent based on the filing and priority dates of the applications leading to such Patent;

(vii) it is not a party to any agreement with any Person that would conflict with the obligations regarding Test Fees collection and sharing with Illumina hereunder or that includes a right for a Person other than a Sequenom Party to sublicense any rights under any Sequenom Patent or CUHK Patent;

(viii) it is not in material breach of any existing agreement under which it has obtained any right in any Sequenom Patent (prior to assignment and novation of the CUHK Licenses (2008/2011)), including Isis Patents;

(ix) It has not reserved any rights for any Sequenom Party, nor granted any right or license to any Person under any of the Sequenom Patents, including Isis Patents, or CUHK Patents that results in Illumina Parties receiving less than full exclusive rights under Sequenom Patents, including Isis Patents, and CUHK Patents to Exploit NIPT IVD Products in the NIPT IVD Field;

(x) It has not reserved any rights for any Sequenom Party, nor granted any right or license to any Person under any of the Sequenom Patents, including Isis Patents, or CUHK Patents to Exploit NIPT IVD Products in the NIPT IVD Field;

(xi) any agreement entered into by Sequenom or any Affiliate of Sequenom prior to the Effective Date granting rights under any Sequenom Patent (prior to assignment and novation of the CUHK Licenses (2008/2011)) includes an obligation for the grantee to pay Test Fees to Sequenom or such Affiliate that are in an amount that is materially consistent with (or higher than) the Test Fee amounts (based on currency exchange rates in effect on the Effective Date) set forth on Schedule 1 (excluding the additional $[…^***…] fee pursuant to Section 3 of Schedule 1);

(xii) no Existing Sequenom Licensee has been granted a right under any Sequenom Patent (prior to assignment and novation of the CUHK Licenses (2008/2011)) greater than a right to Exploit an NIPT LDT Test in the NIPT LDT Field;

(xiii) it and none of its Affiliates has neither granted any license to, nor entered into any agreement with, any Person that would prohibit Illumina from granting licenses to Exploit NIPT IVD Products in the NIPT IVD Field and NIPT LDT Tests in the NIPT LDT Field under the Pooled Patents anywhere in the world;

(xiv) other than an obligation to make an up-front payment, all payment obligations of Existing Sequenom Licensees (including existing Sequenom Technology Partners) to Sequenom or its Affiliates pursuant to and under an Existing Sequenom License are in

consideration of the grant of a license or right under at least one Sequenom Patent (prior to assignment and novation of the CUHK Licenses (2008/2011));

(xv) […^***…];

(xvi) […^***…];

(xvii) it owns all right, title and interest in the Isis Patents, including the sole and exclusive right to assert, bring, settle, and release claims of infringement and collect for past damages;

(xviii) other than rights granted by Sequenom or its Affiliates under Existing Sequenom Licenses, no other Person has any right under any Isis Patent;

(xix) it has the sole right to grant licenses under the Isis Patents; and

(xx) it has not granted any rights under any Sequenom Patent to an Existing Sequenom Licensee that is performing NIPT on a non-Illumina platform.

(i) Except as set forth on Schedule 7.1(c)(i), it (and/or its Affiliates) is the sole and exclusive beneficial and record owner of the Illumina Owned Patents licensed to Sequenom hereunder;

(ii) this Agreement is not in conflict in any material respect with, and will not result in breach of another agreement to which Illumina or any of its Affiliates is a party;

(iii) other than as set forth in the Settlement Agreement, it is not aware of any legal action challenging the ownership, validity or enforceability of any of the Illumina Patents (excluding the CUHK Patents);

(iv) the Illumina Patents (excluding the CUHK Patents) include all Patents owned or in-licensed by Illumina and its Affiliates with a right to sublicense that claim the verifi® test, MaterniT21® test, VisibiliT™ test and other methods of performing NIPT (including targeted sequencing, PCR, arrays), in each case as currently commercially performed and sold by Sequenom and Illumina, but excluding those claims of Patents solely to the extent they cover Illumina’s and its Affiliates’ general purpose consumables, reagents, instruments, accessories and software and use thereof;

(v) it intends to continue prosecuting the ongoing disputes it has with Existing Illumina Litigants in a manner that, if successful, would lead to an obligation, on each such Existing Illumina Litigant that intends to perform on a going forward basis an NIPT LDT Test that is covered by a Valid Issued Claim under the Illumina Patents (excluding the CUHK

Patents), to take a license under such Illumina Patents in exchange for consideration payable to Illumina that is consistent with the Test Fee amounts set forth on Schedule 1 (excluding the additional $[…^***…] fee pursuant to Section 3 of Schedule 1);

(vi) other than as set forth in the Settlement Agreement, it has no reasonable basis to believe that (A) any of the Illumina Owned Patents or Illumina In-Licensed Patents (excluding the CUHK Patents) will Expire prior to the ordinary date that would be calculated for any such Patent based on the filing and priority dates of the applications leading to such Patent and (B) it will allow any Expiration to occur for Pooled Patents under its control that is prior to the ordinary date that would be calculated for any such Patent based on the filing and priority dates of the applications leading to such Patent;

(vii) it is not a party to any agreement with any Person that would conflict with the obligations regarding Test Fees collection and sharing with Sequenom hereunder or that includes a right for a Person, other than the Illumina Parties or its University Licensors, to sublicense any rights under any Illumina Patent (excluding the CUHK Patents);

(viii) it is not in material breach of any existing agreement under which it has obtained any right in any Illumina Patent (excluding any CUHK Patents);

(ix) except as set forth on Schedule 7.1(c)(ix), any agreement entered into by Illumina or any Affiliate of Illumina prior to the Effective Date granting rights under any Illumina Patent (excluding the CUHK Patents) includes an obligation for the grantee to pay Test Fees to Illumina or such Affiliate that are materially consistent with (or higher than) the Test Fee amounts (based on currency exchange rates in effect on the Effective Date) set forth on Schedule 1 (excluding the additional $[…^***…]fee pursuant to Section 3 of Schedule 1);

(x) no Existing Illumina Licensee has been granted a right under any Illumina Patent (excluding the CUHK Patents) greater than a right to Exploit an NIPT LDT Test in the NIPT LDT Field;

(xi) it and none of its Affiliates has neither granted any license to, nor entered into any agreement with, any Person that would prohibit Sequenom from granting licenses to Persons for Exploiting NIPT LDT Tests in the NIPT LDT Field in such Person’s, or its Affiliates’, clinical laboratory under the Isis Patents anywhere in the world; and

(xii) Except as set forth on Schedule 7.1(c)(xiii), all payment obligations of Existing Illumina Licensees (including existing Illumina Technology Partners) to Illumina or an Illumina Affiliate pursuant to and under an Existing Illumina License are in consideration of the grant of a license or right under at least one Illumina Patent (excluding CUHK Patents).

7.2 No Implied Agreements or Warranties. Nothing contained in this Agreement will be construed as:

(a) a warranty or representation that any manufacture, importation, offer for sale, sale, lease, use, performance or other disposition of NIPT LDT Tests or NIPT IVD Product hereunder will be free from infringement of Third Party Patents;

(b) a warranty or representation of the validity of any claims of the Pooled Patents;

(c) an agreement or other obligation to bring or prosecute actions or suits for infringement of or otherwise enforce any of the Pooled Patents generally or against any particular Person or Persons;

(d) conferring any right to use in advertising, publicity, or otherwise, any trademark, trade name or names, or any contraction, abbreviation or simulation thereof, of any Party; and

(e) conferring by implication, estoppel or otherwise, upon any Party hereunder, any license or other right under any class or type of Patent or other intellectual property right, except the licenses and rights expressly granted hereunder or under the Ancillary Agreements. The Parties reserve for themselves any rights not so expressly granted to the other Party or its Affiliates hereunder or under the Ancillary Agreements.

ARTICLE VIII

INDEMNIFICATION

8.1 Indemnification.

(a) Illumina shall fully and unconditionally indemnify, defend and hold harmless Sequenom, its Affiliates, and each of their respective directors, officers, employees, agents and representatives, successors and assigns, for any Claims by a Third Party to the extent (i) arising from a breach or misrepresentation of any representation or warranty made by Illumina (on behalf of itself and its Affiliates) under this Agreement, (ii) arising from infringement or alleged infringement of any […^***…] by the Exploitation of any NIPT LDT Test in the NIPT LDT Field by Sequenom or its Affiliates that are not Sequencing Platform Manufacturers in accordance with this Agreement and with the sublicense under the […^***…] executed and delivered in accordance with Section 2.6, or (iii) arising from, resulting from or relating to the failure of Illumina to pay any and all applicable royalties owing to […^***…] for activities for which Sequenom has paid the applicable consideration in accordance with […^***…].

(b) Sequenom shall fully and unconditionally indemnify, defend and hold harmless Illumina, its Affiliates, and each of their respective directors, officers, employees, agents and representatives, successors and assigns, for any Claims (i) by a Third Party to the extent arising from (A) a breach or misrepresentation of any representation or warranty made by Sequenom (on behalf of itself and its Affiliates) under this Agreement, (B) infringement or alleged infringement of any […^***…], in each case by Illumina or its Affiliates in accordance with this Agreement, (C) any act or omission of Sequenom, or an Affiliate of Sequenom pursuant to any sublicense granted to Sequenom or an Affiliate of Sequenom under this Agreement or any Ancillary Agreement to the extent Illumina has an express indemnification obligation in respect of such Claim under an applicable

University License, in each case to the extent such obligation is expressly disclosed by Illumina to Sequenom prior to the Effective Date or exists in a CUHK License as of the Effective Date, (D) the transaction that resulted in Sequenom taking assignment and ownership of the Isis Patents, (E) any and all Pre-Novation Liability (as defined in the assignment and novation agreements referenced in Section 2.4(b) of this Agreement), (F) any act or omission of Sequenom, or its sublicensees or their sub-sublicensees under the Sequenom Sublicense (as defined in the sublicenses referenced in Section 2.4(c) and (e) of this Agreement), any Existing Sequenom Sublicense or any sub-sublicense granted under an Existing Sequenom License, including a breach of any of the foregoing sublicenses or sub-sublicenses, (G) any duties, obligations act or omission of Sequenom or an Existing Sequenom Licensee, for which Illumina and Sequenom are jointly and severally liable to CUHK under any or all of the assignment and novation agreement referenced in Section 2.4(b) (other than due to any failure by Illumina or its Affiliates to comply with the terms and conditions of such novation or assignment), or (H) or arising under, or otherwise in relation to the novation or assignment of any or all of the CUHK Licenses (2008/2011) referenced in Section 2.4(b) to Illumina (other than due to any failure by Illumina or its Affiliates to comply with the terms and conditions of such novation or assignment), or (ii) arising out of (A) a suit or other action by or on behalf of Sequenom or an Affiliate of Sequenom for infringement or alleged infringement of any […^***…] by the Exploitation of any NIPT LDT Test in the NIPT LDT Field or Exploitation of any NIPT IVD Products in the NIPT IVD Field by Illumina or its Affiliates, or (B) a Claim that would have been released under Section 4.1.1 of the Settlement Agreement if Claims for infringement of any Patents licensed by […^***…] to Sequenom as of the Effective Date had not been excluded from such release pursuant to Section 4.1.1 of the Settlement Agreement.

8.2 Procedure. The indemnified Party promptly shall notify the indemnifying Party of any Claim in respect of which the indemnified Party intends to claim such indemnification, and the indemnifying Party shall have the right to assume the defense thereof with reasonable counsel selected by the indemnifying Party. The indemnity agreement in this ARTICLE VIII shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the consent of the indemnifying Party, which consent shall not be unreasonably withheld, delayed or conditioned. The failure to deliver notice to the indemnifying Party within a reasonable time after the commencement of any such Claim, if prejudicial to its ability to defend such action, shall relieve the indemnifying Party of liability to the indemnified Person under this ARTICLE VIII to the extent of such prejudice, but the omission so to deliver notice to the indemnifying Party shall not relieve it of any liability that it may have to the indemnified Person otherwise than under this ARTICLE VIII. The indemnified Party under this ARTICLE VIII, its directors, officers, employees, agents and representatives shall reasonably cooperate with the indemnifying Party and its legal representatives in the investigation and defense of any Claim covered by this indemnification.

8.3 Limitation of Liability. Notwithstanding anything to the contrary, the maximum economic liability of a Party under Section 8.1 shall be limited to (a) […^***…] of the shared Test Fees and related revenues collected pursuant to Section 3.2(b)(vi) paid to or retained by such Party under this Agreement, plus (b)(i) in the case of Sequenom, […^***…]

[…^***…], and (ii) in the case of Illumina, […^***…].

ARTICLE IX

MISCELLANEOUS PROVISIONS

9.1 No Assignment Without Consent.

(a) No Party shall, without the prior written consent of the other Party, assign or transfer this Agreement (in whole or in part) or assign, transfer, declare a trust of or dispose of in any manner any of its rights and obligations hereunder to any Third Party, except that Illumina and Sequenom (a) may assign or transfer this Agreement (in whole or in part) to an Affiliate or (b) may assign or transfer this Agreement, only together with all the Ancillary Agreements to which it is a party, to a Third Party as part of a merger, sale of stock or shares, or sale of assets in each case relating to the entire business of either Illumina or Sequenom to which this Agreement and the Ancillary Agreements relate, as applicable, in each case without any further consent required of any other Party, subject in all cases to Section 1.1(a). Any purported assignment or transfer in violation of this Section 9.1(a) shall be null and void ab initio.

(b) Subject to the foregoing, all of the terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the respective successors and assigns of the Parties.

(c) For the avoidance of doubt, the provisions of Section 1.1(a) shall be applicable in the event of a Change of Control of Sequenom to a Sequencing Platform Manufacturer (including as part of an assignment of this Agreement in a bankruptcy or other financial restructuring of Sequenom).

9.2 Notices. All notices required or permitted to be given hereunder will be in writing and will be valid and sufficient if dispatched by internationally recognized overnight courier (such as UPS, FedEx or DHL), freight prepaid, or delivered personally with written receipt as follows:

If to Illumina:

Illumina, Inc.
5200 Illumina Way
San Diego, CA 92122
Attn: Senior Vice President, Corporate Development

With a copy to:
Illumina, Inc.
5200 Illumina Way
San Diego, CA 92122
Attn: General Counsel

If to Sequenom:

Sequenom, Inc.
3595 John Hopkins Court
San Diego CA 92121
Attn: President

With a copy to:
Sequenom, Inc.
3595 John Hopkins Court
San Diego CA 92121
Attn: General Counsel

Either Party may give written notice of a change of address and, after notice of such change has been received, any notice or request will thereafter be given to such Party as above provided at such changed address.

9.3 Counterparts. This Agreement may be executed in one or more counterparts (whether delivered by facsimile or otherwise), each of which will be considered one and the same agreement and will become effective when counterparts have been signed by each of the Parties and delivered to the other Party.

9.4 Entire Agreement. This Agreement along with the Ancillary Agreements: (i) constitutes the entire agreement and supersedes all prior agreements, negotiations, arrangements and understandings, both written and oral, between the Parties with respect to the subject matter hereof, and (ii) is not intended to confer upon any Person, other than the Parties, any rights, benefits or remedies of any nature whatsoever.

9.5 Severability. Any term or provision of this Agreement that is held to be invalid, void or unenforceable in any situation in any jurisdiction will not affect the validity or enforceability of the remaining terms and provisions hereof, or the validity or enforceability of the invalid, void or unenforceable term or provision in any other situation or in any other jurisdiction. If any term or provision of this Agreement is declared invalid, void or unenforceable, the Parties agree that the authority making such determination will have the power to and shall, subject to the discretion of such authority, reduce the scope, duration, area or applicability of the term or provision, to delete specific words or phrases, or to replace any invalid, void or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the original intention of the invalid or unenforceable term or provision.

9.6 Governing Law. This Agreement and any action related thereto shall be governed, controlled, interpreted and defined by and under the Laws of the State of California, without regard to any choice of law or conflicts of laws provisions thereof.

9.7 Enforcement.

(a) Illumina and Sequenom each agree that all disputes arising out of or relating to this Agreement (other than disputes between the Parties regarding adjustment of

Test Fee amounts in accordance with Section 3.2(c)(iii)) shall be presented in writing to the Presidents of the Parties who shall use good faith efforts to resolve such disputes. If any such dispute is not resolved by the Presidents within thirty (30) days (or such longer period as the Parties mutually agree in writing) after first presentation in writing to each of such dispute, then either Party shall be entitled to commence proceedings in the state or federal courts, as applicable, located in San Diego, California. Each Party agrees (i) that all such disputes shall be instituted exclusively in the state or federal courts in California; (ii) irrevocably to submit and consent to the exclusive jurisdiction of the foregoing courts for any action properly brought pursuant to clause (i) above; and (iii) to waive any objection they may have now or hereafter to the venue of any action brought pursuant to clause (i) above.

(b) Irreparable damage may occur if any of the provisions of this Agreement were not performed in accordance with their specific terms. Accordingly, the Parties will be entitled to seek specific performance of the terms of this Agreement, this being in addition to any other remedy to which they are entitled at Law or in equity.

(c) No failure or delay on the part of either Party in the exercise or assertion of any right under this Agreement will impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation or agreement herein, nor will any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. All rights and remedies under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

(d) Any agreement on the part of a Party to any extension, waiver, amendment, modification or supplement of this Agreement or its rights hereunder will be valid only if set forth in an instrument in writing signed on behalf of such Party.

(e) All rights and licenses granted under or pursuant to this Agreement by one Party to the other are, and will otherwise be deemed to be, for purposes of Article 365(n) of the Bankruptcy Code, licenses of rights to “intellectual property” as defined under Article 101(52) of the Bankruptcy Code. The Parties agree that either Party in its capacity as a licensee of such rights under this Agreement will retain and may fully exercise all of its rights and elections under the Bankruptcy Code.

9.8 Export Control Laws. Anything contained in this Agreement to the contrary notwithstanding, the obligations of the Parties will be subject to all Laws, present and future and including export control laws and regulations, of any government having jurisdiction over the Parties hereto, and to orders, regulations, directions or requests of any such government. Each Party will undertake to comply with and be solely responsible for complying with such Laws applicable to such Party.

9.9 Construction. Any reference to a Party will include such Party’s permitted successors and permitted assigns. If any ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the Parties, and no presumption or burden of proof will arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement. No prior draft of this Agreement will be used in the interpretation or construction of this Agreement. Headings are used for convenience only and will not in any

way affect the construction or interpretation of this Agreement. The doctrine of election of remedies will not apply in constructing or interpreting the remedies provisions of this Agreement or the equitable power of a court considering this Agreement or the transactions contemplated hereby.

9.10 No Implied Warranty. EXCEPT AS SPECIFIED IN SECTION VII (REPRESENTATIONS AND WARRANTIES), AND ANY OTHER EXPRESS REPRESENTATION OR WARRANTY IN THIS AGREEMENT, THE LICENSES GRANTED HEREUNDER ARE GRANTED WITHOUT ANY WARRANTY OF ANY KIND. EACH PARTY HEREBY DISCLAIMS ANY IMPLIED WARRANTIES OF ANY KIND INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT.

9.11 Damage Limitation. EXCEPT FOR INFRINGEMENT OF THE OTHER PARTY’S INTELLECTUAL PROPERTY RIGHTS, ANY EXPRESS OBLIGATION OF A PARTY TO INDEMNIFY, HOLD HARMLESS AND DEFEND UNDER THIS AGREEMENT, AND FOR BREACH OF THE CONFIDENTIALITY OBLIGATIONS SET FORTH IN ARTICLE VI (CONFIDENTIALITY). NEITHER PARTY WILL BE LIABLE TO THE OTHER FOR ANY INDIRECT, CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES, OR FOR LOST PROFITS OR COSTS ASSOCIATED WITH OBTAINING SUBSTITUTE PERFORMANCE HEREUNDER, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE BREACH THEREOF, REGARDLESS OF WHETHER SUCH PARTY HAD BEEN WARNED OF SUCH DAMAGES, AND REGARDLESS OF THE THEORY UPON WHICH SUCH DAMAGES ARE CLAIMED, INCLUDING, FOR BREACH OF CONTRACT, WARRANTY, TORT, NEGLIGENCE OR STRICT LIABILITY.

[signature page follows]

Illumina and Sequenom have duly executed and delivered this Pooled Patents Agreement as of the Effective Date.



Illumina Inc.	Sequenom, Inc.



By: /s/ Nicholas Naclerio____________	By: /s/ Bill Welch________________
Name: Nicholas Naclerio____________	Name: Bill Welch________________
Title: SVP Corporate Development +__ GM Enterprise Informatics	Title: CEO______________________

SEQUENOM DRAFT SEPTEMBER 8, 2014
CONFIDENTIAL DRAFT FOR DISCUSSION UNDER RULE 408

SUBJECT TO REVIEW AND APPROVAL BY ALL PARTIES AND THEIR COUNSEL

SETTLEMENT AGREEMENT

By and among

Illumina Inc.,

Sequenom, Inc.,

Sequenom Center for Molecular Medicine, LLC,

and

Verinata Health, Inc.

Dated as of December 2, 2014

SETTLEMENT AGREEMENT

THIS SETTLEMENT AGREEMENT (“Agreement”) is made and entered into as of 11:59 P.M. Pacific Time on December 2, 2014 (such date at such time the “Effective Date”), BY AND AMONG:

Illumina Inc., a Delaware corporation, having a place of business at 5200 Illumina Way, San Diego, CA 92122 (“Illumina”),

Sequenom, Inc., a Delaware corporation, having a place of business at 3595 John Hopkins Court, San Diego CA 92121 (on its own behalf, and as successor in interest to the Isis Patents (as defined below), “Sequenom”),

Sequenom Center for Molecular Medicine, LLC, having a place of business at 3595 John Hopkins Court, San Diego CA 92121 (“Sequenom LLC”), and

Verinata Health, Inc., a wholly-owned subsidiary of Illumina having a place of business at 800 Saginaw Dr., Redwood City, CA 94063 (“Verinata”) (each, a “Party” and collectively, the “Parties”).

RECITALS

WHEREAS, there is currently pending in United States District Court for the Northern District of California Verinata Health, Inc. et al. v. Sequenom, Inc. et al., 3:12-cv-00865-SI, (the “Federal Litigation”), between Verinata and Trustees of Leland Stanford Junior University (“Stanford”), on the one hand, and Sequenom, Sequenom LLC, the Chinese University of Hong Kong (“CUHK”) and Isis (as defined below), on the other hand;

WHEREAS, there is currently pending in United States Court of Appeals for the Federal Circuit Ariosa Diagnostics, Inc., et al. v. Sequenom, Inc. et al., Docket Nos. 14-1139, -1142, -1144 (the “Federal Appeal”), between Ariosa Diagnostics, Inc. (“Ariosa”), Natera, Inc. (“Natera”), Verinata, DNA Diagnostics Center, Inc. (“DNA Diagnostics”), and Stanford, on the one hand, and Sequenom, Sequenom LLC, and Isis, on the other hand;

WHEREAS, there are currently pending before the United States Patent and Trademark Office, Patent Trial & Appeal Board (“USPTAB”), or on appeal in the Federal Litigation from a decision of the USPTAB, Patent Interference Nos. 105,920, 105,922, 105,923 and 105,924 (the “Interferences”) relating to certain patents and patent applications of Stanford and CUHK;

WHEREAS, there are currently pending before the USPTAB Inter Partes Review proceeding Case No. IPR2013-00390 (the “IPR”) in response to a petition filed by Sequenom to cancel as unpatentable one or more claims of United States Patent No. 8,195,415, assigned to Stanford; and

WHEREAS, each Party desires, solely as between or among the Parties, to settle the Federal Litigation, the Federal Appeal and the IPR (the “Disputes”) to which it is a party, and all Parties mutually acknowledge and agree that the terms hereof are intended as a final settlement and compromise of disputed claims and that nothing in this Agreement shall be deemed as an admission under any of the Disputes by any Party for any purpose.

NOW THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, the Parties, intending to be legally bound, agree as follows:

1.DEFINITIONS AND INTERPRETATION


1.1	Definitions. For purposes of this Agreement, the terms defined in this Section 1 shall have the respective meanings set forth below:

1.1.1

“Affiliate” means, with respect to a Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person at any time during the period for which the determination of affiliation is being made and only for so long as that Person is so affiliated. For purposes of this definition, the term “control” means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of management policies of such Person, whether through the ownership of voting securities or by contract or otherwise.


1.1.2	“Agreement” has the meaning set forth in the preamble.


1.1.3	“Amended and Restated Sale and Supply Agreement” means the Amended and Restated Sale and Supply Agreement dated as of the Effective Date, between Illumina and Sequenom.


1.1.4	“Ancillary Agreement” means any agreement that is executed and delivered pursuant to the terms of this Agreement, including any agreement the execution and delivery of which is a condition precedent to the effectiveness of this Agreement, including as stated in Article 5 herein.


1.1.5	“Business Day” means all days other than Saturdays, Sundays or a national or local holiday recognized in the United States or Hong Kong.

1.1.6

“Challenge” means (a) to assert in any patent office, court or other competent governmental authority that any Pooled Patent or claim thereof is invalid or unenforceable, (b) to challenge the ownership, inventorship, validity, enforceability or scope of any Pooled Patent or claim thereof in any patent office, court or other competent governmental authority, (c) to seek from, request from, or otherwise take any action in or with any patent office, court or other competent governmental authority that results in the declaration, consideration, initiation or continuation of an interference or derivative proceeding, opposition, reexamination, post-grant review or inter partes review, opposition, nullity action (or their equivalents in any jurisdiction) of any Pooled Patent or any claim therein, or (d) to directly or indirectly assist or cooperate with any other Person to do any of the foregoing.


1.1.7	“Claims” means, collectively, all losses, liabilities, damages, costs and expenses of any type or nature whatsoever, and all claims, demands, suits, actions, causes of action or other proceedings of any type or nature whatsoever relating thereto.


1.1.8	“Court of Appeals” has the meaning set forth in Section 2.2.2.


1.1.9	“CUHK Licenses” means the CUHK 2008/2011 Licenses and the CUHK 2014 Licenses:

1.1.10

“CUHK 2008/2011 Licenses” means (a) that license agreement between CUHK and Sequenom, titled License Agreement, No TS094849 effective as of September 16, 2008; (b) that license agreement between CUHK and Sequenom, titled License Agreement, No TS116378 effective as of May 3, 2011; and (c) that license agreement between CUHK and Sequenom, titled License Agreement, No TS116379 effective as of May 3, 2011, as each of (a) and (b) and (c) is amended as of the Effective Date, and transferred by Sequenom to Illumina by assignment and novation as of the Effective Date.

1.1.11

“CUHK 2014 Licenses” means (a) that license agreement between CUHK and Illumina, titled License Agreement, No TS148570 effective as of the Effective Date, pursuant to which CUHK grants to Illumina certain licenses and other rights related to the inventions and other technology described in CUHK’s University Docket No. 10/MED/401/ITF and (b) that license agreement between CUHK and Illumina, titled License Agreement, No TS148571 effective as of the Effective Date pursuant to which CUHK grants to Illumina certain licenses and other rights related to the inventions and other technology described in CUHK’s University Docket No. 11/MED/403.


1.1.12	“District Court” has the meaning set forth in Section 2.1.1.


1.1.13	“Effective Date” has the meaning set forth in the preamble.


1.1.14	“Existing Illumina Litigant” has the meaning set forth in Section 4.1.2.


1.1.15	“Existing Sequenom Litigant” has the meaning set forth in Section 4.1.1.


1.1.16	“Federal Appeal” has the meaning set forth in the recitals.


1.1.17	“Federal Appeal Party” refers to Verinata, Sequenom or Sequenom LLC individually, and “Federal Appeal Parties” refers to Verinata, Sequenom, and Sequenom LLC collectively.


1.1.18	“Federal Indicative Motion” has the meaning set forth in Section 2.2.1.


1.1.19	“Federal Litigation” has the meaning set forth in the recitals.


1.1.20	“Federal Litigation Dismissal One” has the meaning set forth in Section 2.1.1.


1.1.21	“Federal Litigation Party” refers to Verinata, Sequenom, Sequenom LLC individually, and “Federal Litigation Parties” refers to Verinata, Sequenom, Sequenom LLC collectively.


1.1.22	“Illumina Covered Party” has the meaning set forth in Section 4.1.1.

1.1.23

“Illumina In-Licensed Patents” means all Patents in-licensed by Illumina or its Affiliates under, and as set forth in, the Stanford License, the MGH License, excluding the Type 2 Patent Rights defined and as set forth in the MGH License and, on and after the Effective Date, the CUHK Licenses. The Illumina In-Licensed Patents as of the Effective Date are set forth on Annex II, provided that on and after the Effective Date, the Patents set forth on Annex IV (in-licensed by Sequenom from CUHK) shall be deemed added to Annex II, and Annex IV shall be deemed to no longer include any Patents.

1.1.24


1.1.25	“Illumina Patent Party” has the meaning set forth in Section 4.1.2.


1.1.26	“Illumina Patents” means, collectively, the Illumina In-Licensed Patents and Illumina Owned Patents.


1.1.27	“Illumina Sequencing Products” refers to any and all consumables, reagents, instruments, software and accessories commercialized by Illumina or its Affiliates for use in the nucleic acid sequencing workflow. For the avoidance of doubt, Illumina Sequencing Products include products for library preparation, sequencing, and analysis of sequencing data.


1.1.28	“Interferences” has the meaning set forth in the recitals.


1.1.29	“IPR” has the meaning set forth in the recitals.


1.1.30	“Isis” means Isis Innovation Limited, having a place of business at Ewert House, Ewert Place, Oxford OX2 7SG, United Kingdom.

1.1.31

“Isis License” means that license agreement between Isis and Sequenom, titled Exclusive License of Technology, effective as of October 14, 2005, and as amended on October 19, 2006 (1st amendment), November 5, 2007 (2nd amendment), November 3, 2009 (3rd amendment), November 29, 2012 (4th amendment), the letter amendment dated 26 October 2012, as further amended prior to the Effective Date, and which was terminated on or before the Effective Date.


1.1.32	“Isis Patents” means the Patents originally owned by Isis and licensed by Isis to Sequenom under the Isis License, and that were sold, assigned and transferred to Sequenom before the Effective Date. The Isis Patents are set forth on Annex III.


1.1.33	“MGH” means The General Hospital Corporation, a not-for-profit corporation doing business as Massachusetts General Hospital.


1.1.34	“NIPT” means in vitro cell-free nucleic acid-based non-invasive prenatal testing (including, without limitation, testing by massively parallel sequencing or digital PCR) of a biological sample (including but not limited to plasma, serum, whole blood, and urine) obtained from a pregnant woman, excluding oncology testing.

1.1.35

1.1.36


1.1.37	“Party” and “Parties” have the meanings set forth in the first paragraph, above.

1.1.38

“Patent” means (a) any United States or foreign issued patent or pending patent application, including provisional application, together with (b) all divisional, continuation, continuation-in-part, and substitute applications of any such patent or patent application set forth in the foregoing clause (a), (c) all patents that have issued or in the future issue from any of the patent applications set forth in the foregoing clauses (a) and (b), including utility model and design patents and certificates of invention, and (d) all extensions, supplemental protection certificates, registrations, confirmations, reissues, reexaminations, inter partes reviews, post-grant reviews, restorations and renewals of or to any of the foregoing described patents and any foreign equivalents of any of the foregoing.


1.1.39	“Person” means any individual, corporation, partnership, firm, company, joint venture, association (including trust association), joint-stock company, limited liability company, trust, unincorporated organization, governmental body, organization or other entity.


1.1.40	“Pooled Patents” means the Illumina Patents and the Sequenom Patents.


1.1.41	“Pooled Patents Agreement” means the Pooled Patents Agreement dated as of the Effective Date, between Illumina and Sequenom.

1.1.42


1.1.43	“Sample Agreement” means the Sample Transfer Agreement made and entered into as of the Effective Date, between Illumina and Sequenom.


1.1.44	“Sequenom Covered Party” has the meaning set forth in Section 4.1.2.

1.1.45

1.1.46

“Sequenom Owned Patents” means collectively, (a) those United States and foreign patents and patent applications and provisional applications owned by Sequenom or its Affiliates set forth on Annex III, and (solely if and to the extent Sequenom owns and has the right to grant licenses under the Lapidus Patents) the Lapidus Patents on Annex V, (b) all divisional, continuation, continuation-in-part, and substitute applications of any of the patents or patent applications set forth in the foregoing clause (a), (c) all patents that have issued or in the future issue from any of the patent applications set forth in the foregoing clauses (a) and (b), including utility model and design patents and certificates of invention, (d) all extensions, supplemental protection certificates, registrations, confirmations, reissues, reexaminations, inter partes reviews, post-grant reviews, restorations and renewals of or to any of the foregoing described patents, and (e) any equivalents of any of the foregoing in clauses (a), (b), (c), and (d) in any jurisdiction.


1.1.47	“Sequenom Patent Party” has the meaning set forth in Section 4.1.1.


1.1.48	“Sequenom Patents” means, collectively, the Sequenom In-Licensed Patents, Isis Patents and Sequenom Owned Patents.


1.1.49	“Site-specific IVD” means a non-distributable in vitro diagnostic test that received Regulatory Approval for sale or use, which Regulatory Approval in the United States is pursuant to 21 CFR 814 or 21 CFR 807 Subpart E.


1.1.50	“Third Party” means any Person that is not a Party to this Agreement and is not an Affiliate of a Party to this Agreement.


1.1.51	“United States” means the United States of America and its territories and possessions.


1.1.52	“USPTAB” has the meaning set forth in the recitals.


1.2	Interpretation. This Agreement (including the Recitals) shall be interpreted and construed pursuant to the following rules of interpretation and construction:


1.2.1	all references to a particular Clause or Schedule shall be a reference to that clause or schedule in or to this Agreement as it may be amended from time to time pursuant to this Agreement;


1.2.2	the headings are inserted for convenience only and shall be ignored in construing this Agreement;


1.2.3	words importing the masculine gender shall include the feminine;


1.2.4	the words “include”, “included”, “including” and “in particular” or any similar expression are to be construed as illustrative and without limitation to the generality of the preceding words;


1.2.5	reference to any statute or regulation includes any modification or re-enactment of that statute or regulation; and


1.2.6	all references in this Agreement to “Illumina Patent” or “Illumina Patents” or to “Sequenom Patent” or “Sequenom Patents” is a reference to the defined terms, and is not a reference to all Patents of Illumina or all Patents of Sequenom.

2. SETTLEMENT OF FEDERAL LITIGATION AND FEDERAL APPEAL.


2.1	The Federal Litigation Parties agree that:

2.1.7

Within three (3) Business Days after the Effective Date, the Federal Litigation Parties jointly shall execute (or cause their respective attorneys of record to execute) and file with the United States District Court for the Northern District of California (the “District Court”) a Stipulation and [Proposed] Order Dismissing Certain Claims and Counterclaims Regarding U.S. Patent Nos. 7,888,017, 8,008,018 and 8,195,415 Pursuant To Rule 41, together with the related form of order, in the form and substance as set forth in Schedule 2.1.1 attached hereto (the “Federal Litigation Dismissal One”).


2.1.8	Without limiting the foregoing, the Federal Litigation Parties shall cooperate and take such further actions as necessary to effectuate the dismissal of the Federal Litigation with prejudice on the terms and conditions set forth in Federal Litigation Dismissal One, with each Federal Litigation Party to bear its own costs and attorneys’ fees for the Federal Litigation.


2.1.9	Notwithstanding the Federal Litigation Dismissal One, there shall be no dismissal of Claims V, VI, and VII of the First Supplemental Complaint in the Federal Litigation, and any related counterclaims, directed to appeals pursuant to 35 U.S.C. §146 of the Decisions of the Patent Trial and Appeal Board in Interferences Nos. 105,920, 105,923, and 105,924.


2.2	The Federal Appeal Parties agree that:

2.2.1

Within three (3) Business Days after the Effective Date, the Federal Appeal Parties shall jointly execute (or cause their respective attorneys of record to execute) and file with the District Court a Joint Stipulated Motion For Indicative Ruling Pursuant To Rule 62.1, together with the related form of order, in the form and substance as set forth in Schedule 2.2.1 attached hereto (the “Federal Indicative Motion”).

2.2.2

Within three (3) Business Days after the District Court issues an order granting the Federal Indicative Motion, the Federal Appeal Parties shall jointly execute (or cause their respective attorneys of record to execute) and file with the United States Court of Appeals for the Federal Circuit (the “Court of Appeals”) the Joint Motion For Remand Following District Court’s Indicative Ruling Pursuant To FRAP Rule 12.1(b), together with the related form of order, in the form and substance as set forth in Schedule 2.2.2 (the “Federal Remand Motion”) to remand to the District Court all of the Federal Appeal Parties’ respective appeal claims, counterclaims and affirmative defenses with respect to the Federal Appeal Litigation, but only to the extent such appeal claims, counterclaims and affirmative defenses are between or among the Federal Appeal Parties.

2.2.3

Within three (3) Business Days after the Court of Appeals grants the Federal Remand Motion and remands the case to the District Court, and simultaneous with the filing called for in Section 2.2.4, the Federal Appeal Parties shall jointly execute (or cause their respective attorneys of record to execute) and file with the District Court the Joint Stipulated Motion For Vacatur Of Docket No. 150 Pursuant To Rule 60(b), together with the related form of order, in the form and substance as set forth in Schedule 2.2.3 (“Federal Vacatur Motion”) to vacate the District Court judgment that is Docket No. 150.

2.2.4

Within three (3) Business Days after the Court of Appeals grants the Federal Remand Motion and remands the case to the District Court, and simultaneous with the filing called for in Section 2.2.3, the Federal Appeal Parties shall jointly execute (or cause their respective attorneys of record to execute) and file with the District Court the Stipulation and [Proposed] Order Dismissing Certain Claims and Counterclaims Regarding U.S. Patent No. 6,258,540 Pursuant to Rule 41, in the form and substance as set forth in Schedule 2.2.4 (the “Federal Litigation Dismissal Two”), to dismiss with prejudice all remaining claims, counterclaims, and affirmative defenses in the Federal Litigation related to the ‘540 patent.


2.3	The Federal Appeal Parties further agree that:

2.3.1

Notwithstanding anything to the contrary herein, nothing in this Agreement or otherwise is intended to or shall dismiss or alter any claim, counterclaim or affirmative defense made by Sequenom, Sequenom LLC or Isis with respect to Ariosa Diagnostics, Inc., Natera, Inc. or DNA Diagnostics Center, Inc. with respect to the ‘540 patent or any pending or future appeal of any such claim, counterclaim or affirmative defense.

2.3.2

After the Effective Date, except as otherwise expressly set forth above or as required by law, Verinata shall not take any further action in the Federal Appeal, and without limiting the generality of the foregoing, Verinata shall not cooperate further with Ariosa Diagnostics, Inc., Natera, Inc. or DNA Diagnostics Center, Inc. with respect to oral argument, motions, supplemental briefing, litigation, strategy, or further appeals. Subject to all of the parties’ obligations set forth in Section 2.2 above, and at a time mutually agreeable to Verinata and Sequenom, Verinata shall be permitted to notify the Court of Appeals for the Federal Circuit that the Parties have settled their dispute with respect to the ‘540 patent and that Verinata will not be taking further action in the Federal Appeal. Sequenom agrees that it will not unreasonably withhold, condition or delay its consent to Verinata providing the Federal Circuit with said notification, and will allow Verinata to promptly notify the Federal Circuit that Verinata will not be participating in the appeal.


2.3.3	The Federal Appeal Parties shall take all reasonable steps to ensure that Sequenom and Sequenom LLC are able to maintain all such claims, counterclaims, and affirmative defenses set forth in Section 2.3.1 against any claim of estoppel or otherwise which would prevent a resolution of the Federal Appeal in its entirety on the merits by the Court of Appeals or Supreme Court.


2.4	The Federal Litigation Parties further agree that if the District Court does not grant the Federal Indicative Motion, or if the Court of Appeals does not grant the Federal Remand Motion, the following steps shall be taken:


2.4.1	Verinata shall allow the Federal Appeal to proceed without actively participating in compliance with Section 2.3.

2.4.2

After final disposition of the Federal Appeal including any petitions for en banc or Supreme Court review and within three (3) Business Days after the Court of Appeals has issued a final remittitur to the District Court, the Federal Appeal Parties shall jointly execute (or cause their respective attorneys of record to execute) and file with the Federal Litigation Dismissal Two to dismiss with prejudice all remaining claims, counterclaims, and affirmative defenses in the Federal Litigation related to the ‘540 patent, with each Federal Appeal Party to bear its own costs and attorneys’ fees.

2.5

The Federal Litigation Parties further agree that if, after the Effective Date but before the Federal Litigation Parties have completed the steps set forth in Sections 2.1 and 2.2, the Court of Appeals remands the Federal Litigation Parties’ dispute over the ’540 patent to the District Court, including after the final disposition of any petitions for en banc or Supreme Court review of the Federal Appeal by Sequenom, then within three (3) Business Days after the Court of Appeals has issued a final remittitur to the District Court, the Federal Appeal Parties shall jointly execute (or cause their respective attorneys of record to execute) and file with the Federal Litigation Dismissal Two to dismiss with prejudice all remaining claims, counterclaims, and affirmative defenses in the Federal Litigation related to the ‘540 patent, with each Federal Appeal Party to bear its own costs and attorneys’ fees.

2.6

As a condition precedent to the effectiveness of this Agreement, (a) Stanford shall have duly executed and delivered the acknowledgement and consent, in the form and substance set forth in Schedule X attached hereto, authorizing counsel representing both Verinata and Stanford in the Federal Litigation and Federal Appeal to duly execute, and file in the appropriate court, the various Schedules to this Agreement jointly on behalf of Stanford and Verinata, and (b) the Conditions (as defined in Schedule X) shall have been met literally and in their entirety.


2.7	Within two (2) Business Days after the Effective Date, the Federal Litigation Parties shall jointly execute (or cause their respective attorneys of record to execute) and file with the District Court a Joint Stipulation and [Proposed] Order Dismissing With Prejudice ISIS Innovation Limited as Nominal Defendant in the form and substance as set forth in Schedule 2.7 attached hereto.

3. SETTLEMENT OF THE USPTAB PROCEEDINGS


3.1	Sequenom shall take no action in the IPR, directly or indirectly, including in any appeal therefrom. Without limitation, Sequenom shall not file a notice of appeal or request for reconsideration of the final written decision in the IPR.

4. RELEASES


4.1	Releases

4.1.4

Release to Illumina Covered Parties In consideration of the releases and other provisions contained in this Agreement, Sequenom and each of the Sequenom Affiliates (including Sequenom LLC) (each a “Sequenom Patent Party” and collectively the “Sequenom Patent Parties”), on behalf of itself and its predecessors, successors and assigns, intending to be legally bound, hereby fully, finally and irrevocably releases, acquits and discharges each and every Illumina Covered Party from any and all Claims (including infringement claims) whether at law or in equity, whether or not the facts giving rise to such Claims are now known or unknown, discoverable or undiscoverable, which any such Sequenom Patent Party ever had, now have, or hereafter can, shall or may claim to have that arise, or are based on facts that arise or events that occur, prior to or on the Effective Date (but not thereafter), in each case to the extent resulting from the research, development, making, use, offer for sale, distribution, marketing, sale, export, or import on or before the Effective Date (but not thereafter) of (a) Illumina Sequencing Products to perform NIPT, (b) NIPT LDT Tests, or (c) NIPT IVD Products. The following Persons are collectively the “Illumina Covered Parties” and each is individually an “Illumina Covered Party”:


(i)	Illumina and Illumina’s Affiliates (including Verinata) and their respective predecessors;


(ii)	Licensors of Patents and technology to Illumina and Illumina Affiliates for NIPT, solely to the extent acting in such capacity (including Stanford and MGH);

(iii)

any Third Party that is a party with Illumina or an Illumina Affiliate to a written agreement under which the Third Party receives from Illumina or its Affiliates certain know how and transfer of technology, and is expressly authorized or licensed thereunder by Illumina or an Illumina Affiliate to use same to perform an NIPT LDT Test that is the same or substantially similar to the Illumina verifi® test, solely to the extent acting in such capacity;

(iv)

any Third Party that is a party with Illumina or an Illumina Affiliate to a written agreement under which the Third Party is expressly authorized or licensed by Illumina or an Illumina Affiliate to perform NIPT LDT Tests under any Illumina Patent, including any such Third Party that purchases Illumina Sequencing Products and is so authorized to use such products to perform NIPT LDT Tests under any Illumina Patent, solely to the extent acting in such capacity (as “Illumina Patent” is defined in this Agreement);


(v)	any Person that directly or indirectly orders or purchases an NIPT LDT Test performed by Illumina or an Illumina Affiliate, or performed by an authorized Third Party described in (iii) or (iv), solely to the extent acting in such capacity;


(vi)	any Person that is authorized by Illumina or an Illumina Affiliate to manufacture, sell, resell, market or distribute any Illumina Sequencing Product to perform NIPT, or expressly authorized in writing by Illumina or an Illumina Affiliate to sell or market any NIPT LDT Test performed by Illumina or an Illumina Affiliate, solely to the extent acting in such capacity; and


(vii)	any Person that assists Illumina or an Illumina Affiliate in the development of an Illumina Sequencing Product, an NIPT LDT Test, or an NIPT IVD Product, solely to the extent acting in such capacity,

provided that (a) any and all Third Parties in litigation over a Pooled Patent with Sequenom or a Sequenom Affiliate, as of the Effective Date, (each an “Existing Sequenom Litigant”) are expressly excluded from the definition of Illumina Covered Party(ies) for the purpose of this release and all such Existing Sequenom Litigants are not released, acquitted or discharged by any Sequenom Patent Party from any Claims made or that could have been made, (b) any and all Claims for infringement of any Patents licensed by Boston University to Sequenom as of the Effective Date are expressly excluded from this release and Illumina Covered Parties are not released, acquitted or discharged from any such Claims made or that could have been made, and (c) any and all Claims directed to, necessary for or relating to Interference No. 105,922 and any appeals related thereto, and appeals pursuant to 35 U.S.C. §146 of the Decisions of the Patent Trial and Appeal Board in Interferences Nos. 105,920, 105,923, and 105,924 are expressly excluded from this release and Illumina Covered Parties are not released, acquitted or discharged from any such Claims made or that could have been made.

4.1.5

Release to Sequenom Covered Parties. In consideration of the releases and other provisions contained in this Agreement, each of Illumina and Illumina Affiliates (including Verinata) (each an “Illumina Patent Party” and collectively the “Illumina Patent Parties”), on behalf of itself and its predecessors, successors and assigns, intending to be legally bound, hereby fully, finally and irrevocably releases, acquits and discharges each and every Sequenom Covered Party from any and all Claims (including infringement claims) whether at law or in equity, whether or not the facts giving rise to such Claims are now known or unknown, discoverable or undiscoverable, which any such Illumina Patent Party ever had, now have, or hereafter can, shall or may claim to have that arise, or are based on facts that arise or events that occur, prior to or on the Effective Date (but not thereafter), in each case to the extent resulting from the research, development, making, use, distribution, offer for sale, sale, export or import on or before the Effective Date (but not thereafter) of NIPT LDT Tests. The following Persons are collectively the “Sequenom Covered Parties” and each is individually a “Sequenom Covered Party”:


(i)	Sequenom and Sequenom’s Affiliates (including Sequenom LLC) and their respective predecessors;


(ii)	Licensors of Patents and technology to Sequenom and Sequenom Affiliates for NIPT, solely to the extent acting in such capacity (including CUHK);

(iii)

any Third Party that is a party with Sequenom or a Sequenom Affiliate to a written agreement under which the Third Party receives from Sequenom or its Affiliates certain know how and transfer of technology, and is expressly authorized or licensed thereunder by Sequenom or a Sequenom Affiliate to use same to perform an NIPT LDT Test that is the same or substantially similar to the Sequenom MaterniT21® test, solely to the extent acting in such capacity;


(iv)	any Third Party that is a party with Sequenom or a Sequenom Affiliate to a written agreement under which the Third Party is expressly authorized or licensed by Sequenom or a Sequenom Affiliate to perform NIPT LDT Tests under any Sequenom Patent (as “Sequenom Patent” is defined in this Agreement), solely to the extent acting in such capacity;


(v)	any Person that directly or indirectly orders or purchases an NIPT LDT Test performed by Sequenom or a Sequenom Affiliate, or performed by an authorized Third Party described in (iii) or (iv), solely to the extent acting in such capacity;


(vi)	any Person that is expressly authorized in writing by Sequenom or a Sequenom Affiliate to sell or market any NIPT LDT Test performed by Sequenom or a Sequenom Affiliate, solely to the extent acting in such capacity; and


(vii)	any Person that assists Sequenom or a Sequenom Affiliate in the development of an NIPT LDT Test, solely to the extent acting in such capacity,

provided that (a) any and all Third Parties in litigation over any Pooled Patent with Illumina or an Illumina Affiliate as of the Effective Date (each an “Existing Illumina Litigant”) and Boston University, are expressly excluded from the definition of Sequenom Covered Party(ies) for the purpose of this release and Boston University and all such Existing Illumina Litigants are not released, acquitted or discharged by any Illumina Patent Party from any Claims made or that could have been made, and (b) any and all Claims directed to, necessary for or relating to Interference No. 105,922 and any appeals related thereto, and appeals pursuant to 35 U.S.C. §146 of the Decisions of the Patent Trial and Appeal Board in Interferences Nos. 105,920, 105,923, and 105,924 are expressly excluded from this release and Sequenom Covered Parties are not released, acquitted or discharged from any such Claims made or that could have been made.

4.1.6

Additional Release by Sequenom Patent Parties to Illumina Patent Parties. In consideration of the releases and other provisions contained in this Agreement, each Sequenom Patent Party, on behalf of itself, and its predecessors, successors and assigns, intending to be legally bound, hereby fully, finally and irrevocably releases, acquits and discharges each and every Illumina Patent Party, and each of their respective predecessors, from any and all Claims (including infringement claims) whether at law or in equity, whether or not the facts giving rise to such Claims are now known or unknown, discoverable or undiscoverable, which any Sequenom Patent Party ever had, now have, or hereafter can, shall or may claim to have that arise, or are based on facts that arise or events that occur prior to or on the Effective Date (but not thereafter), in each case to the extent relating to the subject matter of the Disputes or any cross-actions that could have been brought in response thereto, in each case except with respect to the rights and obligations of the Parties under this Agreement and the Ancillary Agreements; provided, however, that any and all Claims directed to, necessary for or relating to Interference No. 105,922 and any appeals related thereto, and appeals pursuant to 35 U.S.C. §146 of the Decisions of the Patent Trial and Appeal Board in Interferences Nos. 105,920, 105,923, and 105,924 are expressly excluded from this release and Illumina Patent Parties are not released, acquitted or discharged from any such Claims made or that could have been made.

4.1.7

Additional Release by Illumina Patent Parties to Sequenom Patent Parties. In consideration of the releases and other provisions contained in this Agreement, each Illumina Patent Party, on behalf of itself, and its predecessors, successors and assigns, intending to be legally bound, hereby fully, finally and irrevocably releases, acquits and discharges each and every Sequenom Patent Party, and each of their respective predecessors, from any and all Claims (including infringement claims) whether at law or in equity, whether or not the facts giving rise to such Claims are now known or unknown, discoverable or undiscoverable, which any Illumina Patent Party ever had, now have, or hereafter can, shall or may claim to have that arise, or are based on facts that arise or events that occur prior to or on the Effective Date (but not thereafter), in each case to the extent relating to the subject matter of the Disputes or any cross-actions that could have been brought in response thereto, in each case except with respect to the rights and obligations of the Parties under this Agreement and the Ancillary Agreements; provided, however, that any and all Claims directed to, necessary for or relating to Interference No. 105,922 and any appeals related thereto, and appeals pursuant to 35 U.S.C. §146 of the Decisions of the Patent Trial and Appeal Board in Interferences Nos. 105,920, 105,923, and 105,924 are expressly excluded from this release and Sequenom Patent Parties are not released, acquitted or discharged from any such Claims made or that could have been made.

4.1.8

Unknown and Unsuspected Losses. TO THE EXTENT SECTION 1542 OF THE CIVIL CODE OF THE STATE OF CALIFORNIA, (OR ANY SUCCESSOR LAW OR OTHER SIMILAR LAW IN ANY JURISDICTION) MAY APPLY TO ANY PROVISION OF THIS AGREEMENT, EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHTS IT MAY HAVE UNDER SECTION 1542 OF THE CIVIL CODE OF THE STATE OF CALIFORNIA, (OR ANY SUCCESSOR LAW OR OTHER SIMILAR LAW IN ANY JURISDICTION), WHICH PROVIDES THAT:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”


4.2	No Patent Challenges


4.2.3	No Party shall Challenge, either directly (e.g., by itself) or indirectly (e.g., through an Affiliate, through a “strawman”, or other involvement for or with a Third Party, or otherwise), any Pooled Patent.

4.2.4

The foregoing restriction in Section 4.2.1 shall not apply to the extent any such Challenge (whether direct or indirect) (a) is made in defense of a patent infringement claim, (b) is required to comply with any applicable law, regulation, court or administrative order, or legal or administrative process (and solely to the extent necessary to comply therewith), (c) is directed to, necessary for, or related to appeals pursuant to 35 U.S.C. §146 of the Decisions of the Patent Trial and Appeal Board in Interferences Nos. 105,920, 105,923, and 105,924, (d) is directed to, necessary for or related to Interference No. 105,922 and any related appeals, or (e) is required (solely to the extent required) to comply with express terms of any license to an Illumina In-Licensed Patent (in effect as of and on the Effective Date, including the CUHK Patents).

4.2.5

Subject to the exceptions (a) – (e) stated in Section 4.2.2, each Party agrees that it shall not submit an interfering claim in a Pooled Patent to the United States Patent and Trademark Office without prior consultation between the Party or Parties that own or in-license that Pooled Patent; provided, however, that each Party shall have the right to submit an interfering claim to the United States Patent and Trademark Office without such prior consultation if necessary, for any patent application for which the America Invents Act (“AIA”) does not apply, to meet the requirements of 35 U.S.C. 135(b) as existing prior to the AIA, and the necessity was not known to the submitting Party more than one day prior to the deadline for submission. An interfering claim for purposes of this Agreement is a claim that interferes-in-fact (pursuant to 37 CFR 41.203(a)) with another claim present in a Pooled Patent. Prior to submitting such an interfering claim to the Patent Office, for which consultation between the Parties is required pursuant to this Section 4.2.3, the applicable Parties agree to consult and seek to resolve any dispute regarding the interfering claims through good faith negotiation.


4.2.6	In the event that an interference is declared in the Patent Office between or among any Patents of the Pooled Patents for which the Parties control prosecution:

4.2.6.1

Before any contested motion is proposed or filed, the applicable Parties shall make a good faith effort to resolve the proceedings by exchanging proofs and corresponding materials, and coming to agreement on the disputed issues. If the applicable Parties are unable to agree on the disputed issues within thirty (30) days of exchanging proofs, then the disputed issues shall be referred to and finally determined by arbitration in accordance with the WIPO Expedited Arbitration Rules, using an arbitrator practicing in the United States. The place of arbitration shall be San Diego, California. The language to be used in the arbitral proceedings shall be English. The dispute, controversy or claim shall be decided in accordance with the patent laws of the United States, where submission to the arbitrator by the Parties shall be limited to no more than the following: (a) an exchange of a sworn statement from each inventor named in a Patent or an application in dispute; (b) priority evidence, including any corroborating evidence and written fact testimony, including expert testimony, not to exceed ten (10) pages, regarding validity under 35 U.S.C. § 112, including sufficiency of the applicable specification with respect to claim(s)subject to the interference, but not any other expert testimony or cross-examination testimony; (c) a simultaneous exchange of briefs, not to exceed thirty (30) pages per brief, explaining the relevance of the statements and evidence, as well as stating any request(s) for relief, and (d) documents, submissions and other correspondence between a Party and the United States Patent and Trademark Office regarding the claim(s) subject to the interference, including, without limitation, any order, ruling or other determination by the United States Patent and Trademark Office.

4.2.6.2

There will be no hearing unless deemed necessary by the arbitrator for the fair and just administration of the arbitration. Should the arbitrator find in favor of the Junior party with respect to the interference Count(s), then Senior party shall promptly file with the USPTAB a request for adverse judgment in accordance with Patent Office interference rules. Should the arbitrator find in favor of the Senior party, then the Junior party shall promptly file with the USPTAB a request for adverse judgment in accordance with Patent Office interference rules. The Party filing a request for adverse judgment shall be the “Non-Prevailing Party” with respect to the Count; the other Party shall be the “Prevailing Party.”


4.2.6.3	The Parties hereby agree that the applicable Parties shall mutually request with the USPTAB an extension of the any applicable deadlines to adhere to the resolution procedure set forth above.


4.2.6.4	Prior to termination of the interference, the Prevailing Party pursuant to 37 C.F.R. §41.205 shall file the appropriate agreements with the USPTAB accompanied by a request pursuant to 37 C.F.R. §41.205(c) and (d).

4.2.6.5

The Parties agree that a decision of the arbitrator regarding the Count(s) in the Interference shall be final, and the Parties shall not file or request any form of review, reconsideration or appeal thereof. The Parties agree that this procedure for resolving interferences is intended to be compatible with the applicable Patent Office rules and procedures (as set forth in any Standing Order or other orders entered in the interference). In the event any aspect of the procedure set forth herein is not compatible with the Patent Office rules and/or procedures, the Parties agree to confer with each other in good faith in order to reach agreement on any modification of the procedure for resolving an interference necessary for compatibility with the applicable rules and procedures.


4.2.6.6	In the event that the Board disputes resolution as determined by the Parties or arbitrator, the Parties agree to seek to resolve such disputes through good faith negotiation.

5. CONDITIONS PRECEDENT.

The effectiveness of this Agreement is subject to the satisfaction in full, or the express written waiver by the Parties, of the following conditions precedent:


5.1	The due execution and delivery of the Pooled Patents Agreement and the Ancillary Agreements required to be duly executed and delivered pursuant to the terms thereof, and the satisfaction of the conditions expressly stated to be conditions precedent set forth therein;


5.2	The due execution and delivery of the Amended and Restated Sale and Supply Agreement and the Ancillary Agreements required to be duly executed and delivered pursuant to the terms thereof, and the satisfaction of the conditions expressly stated to be conditions precedent set forth therein;


5.3	The due execution and delivery of the Sample Agreement and the Ancillary Agreements required to be duly executed and delivered pursuant to the terms thereof, and the satisfaction of the conditions expressly stated to be conditions precedent set forth therein; and


5.4	The conditions precedent set forth in Section 2.6.

6. REPRESENTATIONS AND WARRANTIES.


6.1	Warranties by Each Party. Each Party hereby warrants to each of the other Parties that, as of the Effective Date:


6.1.1	it is duly organized and validly existing under the laws of its place of organization;


6.1.2	it has legal power, authority and right to enter into this Agreement and the Ancillary Agreements to which it is a party;


6.1.3	the execution and performance by it of its obligations hereunder and under the Ancillary Agreements to which it is a party will not constitute a breach of, or conflict with, its organizational documents or any other material agreement or arrangement, whether written or oral, by which it is bound;


6.1.4	it has full power and authority and has taken all action necessary to enter into and perform this Agreement and the Ancillary Agreements to which it is a party, and that this Agreement has been duly authorized, executed, and delivered by that Party;


6.1.5	that this Agreement and each Ancillary Agreement to which it is a party is a valid, binding, and legally enforceable obligation of that Party in accordance with its terms;

6.1.6

it has not previously licensed, assigned, or otherwise conveyed rights in any intellectual property, including any rights to enforce any intellectual property, which license, assignment or other conveyance is materially inconsistent with the terms of, or could otherwise undermine any exclusivity or freedom from Claims set forth in, the terms of this Agreement or any Ancillary Agreement to which it is a party;

6.1.7

except as otherwise disclosed, and memorialized in writing, by Sequenom to Illumina, or by Illumina to Sequenom, prior to or on the Effective Date, it has no knowledge or reasonable belief, without a duty to investigate, that any Person, other than Illumina, Sequenom, CUHK, Stanford, and MGH and any of their Affiliates (a) owns any right, title or interest in a Pooled Patent, or (b) has asserted or alleged that it owns any right, title or interest in a Pooled Patent.

6.2

No Implied Warranties. The warranties provided in this Section 6 are in lieu of any other warranties, express or implied, and save for the warranties in this Section 6 and in any Ancillary Agreement, nothing herein shall be construed as a warranty by any Party of any kind including any implied warranty of fitness for a specific purpose or merchantable quality, all of which are expressly and specifically excluded.

6.3

No Warranties of Intellectual Property Rights. Without limitation to Section 6.2, nothing in this Agreement shall be construed as a warranty given by any Party (a) that any Patent will issue after the Effective Date based upon any pending patent application, or (b) that any issued Patent is or will be valid and enforceable, or (c) that the manufacture, use or sale of any product or the use of any intellectual property will not infringe the Patent or proprietary rights of any Third Party.

6.4

No Further Warranties. No director, officer, employee or agent of any Party or its Affiliates is authorized to make any further warranty to any other Party that is not contained in this Agreement or in any Ancillary Agreement, and each Party acknowledges that it has not entered into this Agreement or any Ancillary Agreement in reliance on any such oral or written warranty that is not contained in this Agreement or in any Ancillary Agreement.

7. CONFIDENTIALITY

7.1

Confidentiality Obligations. Each Party undertakes that, except as expressly permitted pursuant to this Agreement or the Ancillary Agreements, it shall not, and shall ensure that its Affiliates do not, disclose or permit to be disclosed to any Person (except as expressly permitted herein), or use or permit the use for any purpose other than in performance of its obligations or exercise of its rights under this Agreement or any of the Ancillary Agreements to which it is a party, the terms or conditions of this Agreement or the Ancillary Agreements.


7.2	Permitted Disclosures. Notwithstanding the foregoing, a Party may disclose the terms or conditions of this Agreement as follows:

7.2.1

To its Affiliates, and its and its Affiliates’ respective employees, officers, directors, representatives, and agents who have a reasonable need to know such terms or conditions to perform its obligations or exercise its rights under this Agreement or any of the Ancillary Agreements to which it is a party, provided in each case that such Persons are bound by written confidentiality obligations or, in the case of professional advisers, ethical duties, respecting such disclosures in accordance with the terms of this Agreement;


7.2.2	To Stanford and CUHK;

7.2.3

To a Third Party in connection with (a) an equity investment in such Party, (b) a merger, consolidation, or similar transaction by such Party, or (c) the sale of all or substantially all of the assets of such Party to which this Agreement relates, provided in each case that such Third Party is bound by written confidentiality obligations respecting such disclosures in accordance with the terms of this Agreement;


7.2.4	To governmental authorities in order to gain or maintain approval or authorization to conduct clinical trials or to market products, but such disclosure may be only to the extent reasonably necessary to obtain such approval or authorization;

7.2.5

To the extent that a Party is required to disclose information by applicable law, regulation, rule or order of a governmental agency, a court of competent jurisdiction or any securities exchange on which securities of such Party are listed; provided, however, that such Party (a) promptly gives notice to the Party whose Confidential Information is required to be disclosed in order to allow the other Party whatever opportunity may exist to object to such disclosure or to seek confidential treatment; (b) provides to the other Party reasonable assistance to obtain confidentiality undertakings at such Party’s expense; and (c) only discloses such terms and conditions to the extent so required. In the event this Agreement or an Ancillary Agreement to which two of the Parties are parties is so required to be made public (e.g., SEC filing), the Parties will make reasonable attempts to diligently and in good faith work together to redact this Agreement and any applicable Ancillary Agreement to a mutually acceptable extent and in compliance with the requirement, and in any event the Party required to make the applicable agreement public shall provide the other Parties with a copy of the proposed redaction prior to public disclosure (provided that with respect to Ancillary Agreement, only to the extent any of the other Parties is a party to that Ancillary Agreement.)


7.3	Exclusions from Confidentiality Obligations. The obligations of confidentiality set out in this Clause 7 shall not apply to Confidential Information that is published or becomes generally available to the public other than as a result of a breach of the undertakings hereunder by a Party.

7.4

Publicity. Notwithstanding anything to the contrary in this Agreement, the Parties have mutually agreed on the form of the press release attached hereto as Schedule 7.4, and any Party may disclose free from confidentiality obligations the content of such press release. Except as otherwise required by applicable law, regulation, rule or order of a governmental agency, a court of competent jurisdiction or any securities exchange on which securities of such Party are listed, no Party shall make or cause to be made any disparaging public statement regarding the ownership, scope, validity, inventorship or enforceability of any Pooled Patent without the prior written consent of Sequenom and Illumina.

8. WAIVER

8.1

No Party shall be deemed to have waived any of its rights or remedies conferred by this Agreement unless the waiver is made in writing and signed by a duly authorized representative of that Party. In particular, no delay or failure of any Party in exercising or enforcing any of its rights or remedies conferred by this Agreement shall operate as a waiver of those rights or remedies or so as to preclude or impair the exercise or enforcement of those rights or remedies nor shall any partial exercise or enforcement of any right or remedy by any Party preclude or impair any other exercise or enforcement of that right or remedy by that Party.

9. ENTIRE AGREEMENT/AMENDMENT

9.1

Each of the Parties confirms on behalf of itself and its Affiliates that this Agreement, the Schedules attached hereto, and the Ancillary Agreements to which such Party is a party, constitute the entire agreement and understanding between and among the Parties relating to the subject matter of this Agreement, and supersede all prior oral or written understandings, arrangements, representations, negotiations or agreements (which shall cease to have any further force or effect) between or among them relating to the subject matter of this Agreement and, without prejudice to the generality of the foregoing, excludes any warranty, condition or other undertaking implied at law or by custom, usage or course of dealing.

9.2

Each Party confirms in entering into this Agreement that it has agreed not to rely on any representation (including any misrepresentation or any misstatement), warranty, collateral contract, assurance, covenant, indemnity, undertaking or commitment that is not expressly set out in this Agreement, or the agreements referred to in it to which it is a party, including the Ancillary Agreements, and Schedules attached hereto, made by or on behalf of any other Party before the date of this Agreement including during the course of negotiating this Agreement.


9.3	Nothing in this Article 9 shall limit or exclude any liability for fraud.

9.4

No variation, amendment, modification or supplement to this Agreement shall be valid unless made in writing and signed by a duly authorized representative of each Party. In making any such amendment, modification or supplement to this Agreement, the Parties shall consider the implications of any changes to definitions in this agreement that are in-common with any definitions in any Ancillary Agreement to which Illumina and Sequenom are parties and shall give due consideration to changing such definition in such Ancillary Agreements at the same time as they are changed herein, including those definitions set forth in Sections 1.1.1 (Affiliate), 1.1.23 (Illumina In-Licensed Patents), 1.1.24 (Illumina Owned Patents), 1.1.26 (Illumina Patents), 1.1.27 (Illumina Sequencing Products), 1.1.34 (NIPT), 1.1.35 (NIPT IVD Product), 1.1.36 (NIPT LDT Test), 1.1.38 (Patent), 1.1.45 (Sequenom In-Licensed Patents), 1.1.46 (Sequenom Owned Patents), 1.1.48 (Sequenom Patents), and 1.1.49 (Site-specific IVD).


9.5	Each Ancillary Agreement is a separate agreement between or among the parties set forth in each Ancillary Agreement.

10. NOTICES

10.1

Any notice to be given pursuant to this Agreement shall be in writing in the English language and shall be delivered by hand, sent by registered or recorded delivery airmail post or an express mail delivery service confirmed by registered or recorded delivery post to the address of the recipient set out in Schedule 10.1 or such other address as a Party may from time to time designate by written notice to the other Party.


10.2	Any notice given pursuant to this Article 10 shall be deemed to have been received:


10.2.1	in the case of delivery by hand, when delivered; or


10.2.2	in the case of sending by mail:


10.2.3	where mailed in the country of the addressee, on the third Business Day following the day of mailing; and


10.2.4	where mailed in any other country, on the seventh Business Day following the day of mailing; or


10.2.5	in the case of an express mail delivery services, on the date printed on the receipt of delivery.

11. ASSIGNMENT

11.1

No Party shall, without the prior written consent of the other Parties, assign or transfer this Agreement (in whole or in part) or assign, transfer, declare a trust of or dispose of in any manner any of its rights and obligations hereunder to any Third Party, except that Illumina and Sequenom (a) may assign or transfer this Agreement (in whole or in part) to an Affiliate or (b) may assign or transfer this Agreement, in each case together with all the Ancillary Agreements to which it is a party, to a Third Party as part of a merger, sale of stock or shares, or sale of assets in each case relating to the entire business of either Illumina or Sequenom to which this Agreement and the Ancillary Agreements relate, as applicable, in each case without any further consent required of any other Party. A Party assigning its rights and obligations under this Agreement shall provide written notice of such assignment to the other Parties as promptly as practicable following the effectiveness of such assignment, which notice shall include the identity of the Person to whom assignment has been made and a copy of assignment documentation evidencing that such Person has agreed to be bound by all of the terms and conditions of this Agreement upon and after such assignment. Any purported assignment or transfer in violation of this Section 11 shall be null and void ab initio.


11.2	Subject to the foregoing, all of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the Parties and their respective successors and permitted assignees.

12. THIS AGREEMENT NOT TO CONSTITUTE A PARTNERSHIP


12.1	None of the provisions of this Agreement or any Ancillary Agreement shall be deemed to:


12.1.1	constitute a partnership, joint venture, or other collaboration between any of the Parties; or


12.1.2	make or provide authority of any Party to act as the agent of any other Party for any purpose except as may be expressly set forth herein or therein.


12.2	No Party shall have any authority to bind any other Party in any way except as expressly provided in this Agreement or any document referred to in it.

13. FURTHER ASSURANCES

Each of the Parties shall at its own cost, and shall procure that each of its Affiliates that is not a Party shall at that Affiliate’s or such Party’s own cost, execute all such documents and take all such steps and do all such acts or things as may at any time be reasonably required or necessary for the purpose of implementing and giving full effect to the provisions of this Agreement and to ensure that its terms are binding on or enforceable against each of the Parties in any relevant jurisdiction.

14. COSTS AND COUNTERPARTS EXECUTION


14.1	Each Party shall bear its own legal costs, legal fees and other expenses incurred in the preparation and execution of this Agreement.

14.2

This Agreement may be entered into by the Parties in any number of counterparts and by the Parties on separate counterparts. Each counterpart shall, when executed and delivered, be regarded as an original, and all the counterparts shall together constitute one and the same instrument. This Agreement shall not take effect until each Party has executed at least one counterpart. This Agreement may be validly exchanged and delivered by email.

15. GOVERNING LAW AND DISPUTE RESOLUTION


15.1	Governing Law. This Agreement and any action related thereto shall be governed, controlled, interpreted and defined by and under the laws of the State of California, without regard to any choice of law or conflicts of law provisions thereof.


15.2	Enforcement.

15.2.1

Illumina and Sequenom each agree (a) that all disputes, litigation, proceedings or other legal actions against either Party by the other Party arising out of or relating to this Agreement shall be instituted exclusively in the state or federal courts in California; (b) irrevocably to submit and consent to the exclusive jurisdiction of the foregoing courts for any action properly brought pursuant to clause (a) above; (c) to waive any objection they may have now or hereafter to the venue of any action brought pursuant to clause (a) above; (d) that service of process may be made in any manner specified in Section 10; and (e) to waive any objection as to the sufficiency of the method of service, if service is made in any manner specified in Section 10.


15.2.2	In any action to enforce any right or remedy under this Agreement or to interpret any provision of this Agreement, each Party shall bear its own costs and expenses relating thereto, including attorneys’ fees, and shall not be entitled to recover any costs or expenses from the other Party.

15.2.3

Irreparable damage may occur if any of the provisions of this Agreement were not performed in accordance with their specific terms. Accordingly, the Parties will be entitled to seek specific performance of the terms of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity. A Party may seek an injunction or other equitable remedy on an interim basis from any court having jurisdiction thereover in order to maintain the status quo pending completion of the arbitration proceeding hereunder

15.2.4

No failure or delay on the part of either Party in the exercise or assertion of any right under this Agreement will impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation or agreement herein, nor will any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. All rights and remedies under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.


15.2.5	Any agreement on the part of a Party to any extension, waiver, amendment, modification or supplement of this Agreement or its rights hereunder will be valid only if set forth in an instrument in writing signed on behalf of such Party.

[SIGNATURE PAGE FOLLOWS.]

THE REMAINDER OF THIS PAGE INTENTIONALLY BLANK]

Each Party has duly executed and delivered this Settlement Agreement as of the Effective Date.

ILLUMINA INC. SEQUENOM, INC.

By: By:

Name: Name:

Title: Title:


VERINATA HEALTH, INC.	SEQUENOM CENTER FOR MOLECULAR MEDICINE, LLC

By: By:

Name: Name:

Title: Title:

sd-643856

***Text Omitted and Filed Separately with the Securities and Exchange Commission.Confidential Treatment Requested Under17 C.F.R. Sections 200.80(b)(4) and 230.406.

Amended and Restated Sale and Supply Agreement

This Amended and Restated Sales and Supply Agreement (“Agreement”) by and between Illumina Inc., a Delaware corporation, having a place of business at 5200 Illumina Way, San Diego, CA 92122 (“Illumina”), and Sequenom, Inc., a Delaware corporation, having a place of business at 3595 John Hopkins Court, San Diego CA, 92121 (hereinafter “Customer”), is made and entered into as of the Effective Date (as defined below).

Recitals

1. WHEREAS, effective as of July 8, 2011 (the “Original Effective Date”), Customer and Illumina entered into the Sale and Supply Agreement pursuant to which Customer received the [non-exclusive right to] use the goods sold thereunder for research and for providing a commercial service in its clinical laboratory that is licensed under CLIA (as defined below) for the detection of Fetal Chromosomal Abnormalities and Gender Testing (each as defined below) (as amended by the First Amendment to Sale and Supply Agreement effective as of September 29, 2011, the Second Amendment to Sale and Supply Agreement effective as of April 12, 2012, and the Third Amendment to Sale and Supply Agreement effective as of October 1, 2012, the “Original Agreement”);

2. WHEREAS, Illumina and Customer have entered into the Settlement Agreement, Pooled Patents Agreement and other Ancillary Agreements (each as defined below) as of the Effective Date;

3. WHEREAS, Customer is seeking to have Illumina continue to supply it with Goods (as defined below) for Approved Applications (as defined below), and Illumina is willing to supply Customer with Goods for those purposes under the terms of this Agreement;

NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, the parties hereto amend and restate the Original Agreement in its entirety, effective as of the Effective Date, and otherwise agree as follows:

Agreement


1.	Definitions.

“Affiliate” means, with respect to a Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person at any time during the period for which the determination of affiliation is being made. For purposes of this definition, the term “control” means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of management policies of such Person, whether through the ownership of voting securities or by contract or otherwise. Set forth on Schedule 1 is a list of the Affiliates of Customer as of the Effective Date, and Customer shall update Schedule 1 by written notice to Illumina promptly upon any change in its Affiliates. Subject to Section 3.b, but otherwise notwithstanding anything to the contrary in this Agreement, Affiliates of Customer shall be limited to those Affiliates listed on Schedule 1, as updated by Customer as set forth above.


b.	“Ancillary Agreement” means any agreement that is executed and delivered pursuant to the terms of the Pooled Patents Agreement or the Settlement Agreement, including any agreement the execution and delivery of which is a condition precedent to the effectiveness of the Pooled Patents Agreement or the Settlement Agreement, as applicable.


c.	“Approved Applications” means Clinical Use, NIPT Use, and Research Use.


d.	“Business Day” means all days other than Saturdays, Sundays or a national or local holiday recognized in the United States.


e.	“CLIA” means the United States Clinical Laboratory Improvement Amendments of 1988 (as amended from time to time).

Page 1 of 32


f.	“Clinical Use” means testing of human samples and specimens using nucleic acid sequencing-based Laboratory Developed Tests in a Facility for all clinical applications, including in clinical trials, specifically excluding […***…].

“Consumables” means all Goods for use with, and to be consumed through the use of Hardware and provided hereunder as specified in Exhibit A, Part 2. “TG Consumables” are Consumables that have a “TG” prefix in their part or catalog number; “Non-TG Consumables” are Consumables that do not have such “TG” prefix. All references in this Agreement to Consumables means both TG Consumables and Non-TG Consumables, unless expressly specified otherwise.


h.	“Derivative Software” means any derivative or modification of Software made by Customer as may be permitted by the relevant EULA.


i.	“Discontinued Consumables” means any TG Consumables previously offered on a general commercial basis to all Illumina customers and purchased hereunder, but that will no longer be offered to all Illumina customers.


j.	“Documentation” means user manuals, protocols or other documentation provided by Illumina under this Agreement or the Original Agreement to Customer in connection with the Goods and related to the use and maintenance of the Goods.


k.	“Effective Date” means 11:59 p.m. Pacific Time on December 2, 2014.


l.	“EULA” means the software end user license agreement for Software.


m.	“Facility” means a clinical laboratory owned, leased or operated by Customer or any of its Affiliates, located at the shipping address identified on the Purchase Order.


n.	“Fetal Chromosomal Abnormalities” means […***…].


o.	“Forecast” is as defined in Section 5.


p.	“Gender Testing” means testing for chromosome X and/or Y presence or absence.


q.	“Goods” means any and all of the Consumables, Hardware, Software, and other items provided hereunder.


r.	“Hardware” means the Instruments, accessories or peripherals, and other hardware, as specified in Exhibit A, Part 1.


s.	“Instrument” means equipment provided hereunder as specified in Exhibit A.


t.	“Intellectual Property Rights” means all patent rights, copyrights, trade secrets, know-how, trademark, service mark and trade dress rights and other intellectual property rights, current or future, under the laws of any jurisdiction, together with all applications therefore and registrations thereto.


u.	“IVD Product” means a distributable in vitro diagnostic device that has received applicable Regulatory Approval for sale and use to conduct or perform NIPT, and is labeled for such use (excluding products and components labeled for research use only).


v.	“Laboratory Developed Test” means a laboratory test (including a Site-Specific IVD) that is performed as a fee-for-service offering (whether or not Customer is paid or reimbursed for the test) in a clinical

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laboratory, which test in the United States is regulated under CLIA (or regulated as stated in Section 1ee for a Site-Specific IVD) and in any other applicable country is subject to local regulation, provided that IVD Products, and laboratory tests performed using an IVD Product, are not, and are excluded from (including exclusion of rights therefor under Section 2), Laboratory Developed Tests.


w.	“NIPT” means in vitro cell-free nucleic acid sequencing-based non-invasive prenatal testing (including, without limitation, testing by massively parallel sequencing or digital PCR) of a biological sample (including but not limited to plasma, serum, whole blood, and urine) obtained from a pregnant woman.

“NIPT Use” means NIPT testing and Gender Testing (by NIPT) on biological samples obtained from pregnant women using Laboratory Developed Tests in a Facility, and includes any such NIPT testing for fetal blood antigen associated with hemolytic disease of the fetus and newborn (“HDFN”) whether such testing is performed in combination with other tests or as a single test. NIPT Use includes, without limitation, nucleic acid sequencing-based testing for Fetal Chromosomal Abnormalities, the […***…] test (both of which are nucleic acid sequencing-based tests).


y.	“Person” means any individual, corporation, partnership, firm, company, joint venture, association (including trust association), joint-stock company, limited liability company, trust, unincorporated organization, governmental body, organization or other entity.


z.	“Pooled Patents Agreement” means that certain pooled patents agreement by and between Illumina and Customer, effective as of the Effective Date.


aa.	“Purchase Order” means the written orders for Goods submitted to Illumina by Customer pursuant to this Agreement.

bb.

cc.

“Research Use” means nucleic acid sequencing-based experimentation intended to develop or investigate scientific or medical knowledge, which includes such uses conducted in exchange for a fee and the delivery of data to a third party, but expressly excluding (a) Clinical Use, (b) NIPT Use and (c) all uses, testing or analysis that generates information that is conveyed (directly or indirectly) to a subject who provided a sample for testing and that is used to diagnose, treat, or inform healthcare decisions.


dd.	“Settlement Agreement” means that certain settlement agreement by and among Illumina, Customer and certain of their respective Affiliates, effective as of the Effective Date.


ee.	“Site-specific IVD” means a non-distributable in vitro diagnostic test that received Regulatory Approval for sale or use, which Regulatory Approval in the United States is pursuant to 21 CFR 814 or 21 CFR 807 Subpart E.

ff.

“Software” means the Software provided under this Agreement or Original Agreement, or as updates or options under future agreements, which agreements specifically refer to this Agreement or the Original Agreement, or as incorporated or embedded in Hardware or components thereof or otherwise provided under this Agreement or Original Agreement whether or not there is a separate charge therefor, including any software that meets the foregoing conditions and is provided from a third party. All references in this

Page 3 of 3

Agreement to the “purchase” or “sale” of Software shall mean the acquiring or granting, respectively, of a license to use such Software to exercise the rights pertaining to such Software that are expressly set forth herein.


gg.	“Specifications” means, with respect to a Good, the written specifications for such Good that are contained in the Documentation, and/or other written materials for such Good in effect for such Good as of the date such Good is shipped. For the avoidance of doubt, Section 12 sets forth terms for change notification for certain Goods.

Rights Conferred upon Customer. Subject to the terms and conditions of this Agreement, including the limitations in this Section 2 and Section 20 (Restrictions; Reservation of Rights), Customer’s purchase of the Goods confers upon Customer, or on its Affiliates purchasing the Goods, on a unit purchased basis a […***…] right under Illumina’s Intellectual Property Rights in the Goods, to use those Goods, solely for Approved Applications. The phrase “Illumina’s Intellectual Property Rights in the Goods” means only those Intellectual Property Rights of Illumina and its Affiliates that are applicable to the general functionality of the Goods. Notwithstanding any other agreement between or among Illumina, Customer, and their respective Affiliates, Customer acknowledges that Illumina’s Intellectual Property Rights in the Goods conferred in this Section 2 expressly excludes […***…]. By way of non-limiting examples, Illumina’s Intellectual Property Rights in the Goods conferred in this Section 2 expressly excludes any and all Intellectual Property Rights with respect to […***…]. Consistent with that and subject to paragraphs a and b of this Section 2, Customer further acknowledges that its (and its Affiliates’) use of the Goods […***…]. The Goods may be covered by one or more U.S. or foreign patents, and it is solely Customer’s responsibility to ensure it (and each of its Affiliates purchasing Goods hereunder) has all rights necessary for its intended use of the Goods (other than under Illumina’s Intellectual Property Rights in the Goods). The parties hereby acknowledge and agree that under and subject to the terms and conditions of the Pooled Patents Agreement and certain Ancillary Agreements, Illumina has granted to Customer, and certain of its Affiliates as stated in such agreements, certain license rights (and Customer has assumed, on behalf of itself and its Affiliates, certain obligations with respect thereto) to research, develop, offer for sale, have offered for sale, sell, have sold, market, have marketed and perform NIPT LDT Tests in the NIPT LDT Field under Pooled Patents, in exchange for Customer paying a Test Fee (structured as a per test fee or as a percentage of Net LDT Sales, as applicable) for Licensed NIPT LDT Tests it performs (as the terms Pooled Patents, Test Fee, NIPT LDT Tests, Net LDT Sales, Licensed NIPT LDT Test and NIPT LDT Field are defined in the Pooled Patents Agreement) on the terms and conditions of the Pooled Patents Agreement, including without limitation the terms therein regarding Customer obligations regarding Test Fees payable for performance of certain NIPT LDT Tests for HDFN.

The Intellectual Property Rights of Illumina are numerous, diverse, and rapidly changing, and Sequenom does not know with certainty the metes and bounds of every right included therein as of the Effective Date. Subject to the preceding sentence, and in reliance on Illumina’s representation and warranty below, Customer represents and warrants that, […***…]. If Customer or any of its Affiliates requires a right or license under any Intellectual Property Rights of Illumina in order for Customer or its Affiliates purchasing Goods hereunder to use the Goods as expressly permitted in this Section 2, which right or license is not granted under Illumina’s Intellectual Property Rights in the Goods under this Agreement or granted pursuant to the Pooled Patents Agreement or certain Ancillary Agreements, then any such future grant of right or license by Illumina to Customer or its Affiliates will be subject to negotiation and additional consideration. Notwithstanding the foregoing, nothing in this Agreement diminishes or waives the benefits and other rights that Customer and its Affiliate receive under the Pooled Patents Agreement,

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including, without limitation, with regard to Current Sequenom Products and the covenant not to sue set forth in Section 2.13(b) therein.


b.	The Intellectual Property Rights of Illumina are numerous, diverse, and rapidly changing, and Illumina does not know with certainty the metes and bounds of every right included therein as of the Effective Date. Subject to the preceding sentence, and in reliance on the Customer’s representation and warranty above, […*…], Illumina represents and warrants that, […*…].


3.	Applicability of Terms and Conditions; Affiliates; Pre- Purchased Instruments; Conditions Precedent.


a.	Applicability of Terms and Conditions. This Agreement shall exclusively govern the ordering, purchase and supply of the Goods between Customer and Illumina for Approved

Applications, and shall override any conflicting, amending and/or additional terms contained in any purchase orders, invoices or similar documents, which are hereby rejected and shall be null and void. Illumina’s or Customer’s failure to object to any such terms shall not constitute a waiver by Illumina or Customer, nor constitute acceptance by Illumina or Customer of such terms and conditions.

Affiliates. Affiliates of Customer set forth on Schedule 1 (as may be amended in writing in accordance with this Agreement) are permitted to purchase and use Goods hereunder; provided that, (i) such Affiliates are subject to and shall adhere to all of the terms and conditions of this Agreement that are applicable to Customer, and shall be directly liable to Illumina with respect thereto, and (ii) Customer shall remain wholly liable for the acts or omissions of such Affiliates in connection with or arising out of this Agreement, including all payment obligations with respect to purchase of Goods, to the same extent as if the acts and omissions were those of Customer under this Agreement. On behalf of each of Customer’s present and future Affiliates set forth on Schedule 1 (as may be amended), Customer hereby agrees that each such Affiliate will abide by all terms and conditions of this Agreement. Unless expressly stated otherwise in this Agreement, the Pooled Patents Agreement, Settlement Agreement or other Ancillary Agreements, reference in this Agreement to rights and obligations of Customer are equally rights and obligations of Customer and its Affiliates set forth on Schedule 1 (as may be amended), provided that only Customer may exercise its right of audit set forth in Section 14.g (Quality Audit), right to enter into amendments of this Agreement (Section 30.h), right to terminate this Agreement pursuant to Section 28, and right to request or attend product reviews or other rights pursuant to Section 30.a. Affiliates of Customer that are not set forth on Schedule 1 (as may be amended) do not have any rights under this Agreement, including no right to purchase or use Goods under the terms of this Agreement. Subject to the foregoing, Affiliates of Customer shall have whatever express rights are granted thereto in this Agreement but no other rights are implied hereunder. Customer shall have the right and standing to bring suit, action and other claims against Illumina or Illumina’s Affiliates with respect to such Customer Affiliate’s rights hereunder. No Affiliate of Customer shall have any right or standing itself to bring suit, action or other claims against Illumina or Illumina’s Affiliates with respect to this Agreement, including with respect to such Customer Affiliate’s rights hereunder, and Customer on behalf of each of its Affiliates hereby irrevocably waives any right or standing of such Affiliate to bring any such suit, claim or action against Illumina or Illumina’s Affiliates with respect to this Agreement, including with respect to such Customer Affiliate’s rights hereunder. Notwithstanding anything to the contrary in this Agreement, if Customer becomes an Affiliate of a Person that is itself a party to an Illumina supply agreement (“New Affiliate”), then:

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(i)

this Agreement shall remain in effect with respect to Customer and its Affiliates (excluding the New Affiliate and only those Persons that are subject to, or entitled to purchase and be supplied under, the New Affiliate Agreement immediately prior to the time Customer and that Person become Affiliates (“New Affiliate Date”)) and no purchases shall be made under this Agreement by, for, on behalf of or for the benefit of any other Person, including without limitation a New Affiliate,

(ii)

the Illumina supply agreement between Illumina and the New Affiliate (“New Affiliate Agreement”) shall remain in effect with respect to the New Affiliate and only those Persons that are subject to, or entitled to purchase and be supplied under, the New Affiliate Agreement immediately prior to the New Affiliate Date, and no purchases shall be made under that Agreement by, for, on behalf of or for the benefit of any other Person, including without limitation Customer,


(iii)	any amounts payable by Customer under this Agreement or by New Affiliate under a New Affiliate Agreement (including without limitation fees, royalties or invoiced amounts) shall remain payable under the terms of this Agreement or the New Affiliate Agreement, respectively,

(iv)

in the event any Affiliate of Customer (including without limitation a New Affiliate) receives any right under any or all Pooled Patents to research, develop, offer for sale, have offered for sale, sell, have sold, market, have marketed and perform NIPT LDT Tests in the NIPT LDT Field under any or all of the Pooled Patents, then that Affiliate is obligated to pay a Test Fee […***…] for Licensed NIPT LDT Tests it performs on the terms and conditions of the Pooled Patents Agreement,

(v)

upon Customer’s request, Illumina shall enter into good faith negotiations with Customer or New Affiliate for terms under which Illumina would supply Goods and other Illumina products to Customer, New Affiliate and their Affiliates under a single agreement, in place of this Agreement and the New Affiliate Agreement, such terms consistent with terms in other supply agreements between Illumina and customers that purchase the same or less quantities of the same Goods or products for the same fields of use, at the same level of exclusivity and […***…], and


(vi)	within ten (10) Business Days after the New Affiliate Date, Customer shall provide Illumina with the New Affiliate’s written agreement, signed by an authorized representative of the New Affiliate, to be bound by the terms of this Section 3.b, including parts (i)-(iv) herein. For the avoidance of doubt, and without limitation, Section 3.b is a material provision of this Agreement.

Pre-Purchased Instruments. Sections 2 (Rights Conferred upon Customer), 13 (Validation), 14 (Regulatory; Other Terms), 16 (Instrument Standards), 17 (Limitation of Liability), 18 (Limited Warranties), 20 (Restrictions; Reservation of Rights), 21 (Indemnity), 23 (Additional Instrument Service and Support), and 29 (Survival of Obligations) of this Agreement shall apply to those […***…] instruments purchased by Customer prior to Effective Date (“Pre-Purchased Instruments”). All other terms of this Agreement do not apply to the Pre-Purchased Instruments. In the event of conflict between the terms of this Agreement that apply to the Pre-Purchased Instruments and the terms under which they were sold by Illumina to Customer, the terms of this Agreement that do apply shall control and supersede.

Conditions Precedent. The effectiveness of this Agreement is subject to the satisfaction in full, or the waiver by Illumina and Customer, of the due execution and delivery of the Settlement Agreement, the Pooled Patents Agreement and the agreements required to be duly executed and delivered pursuant to the terms of those agreements, and of the satisfaction of the conditions precedent set forth therein.


4.	Shipping Terms; Title and Risk of Loss. Unless otherwise agreed upon in writing, (a) all shipments to a Facility in North Carolina are made DAP (INCOTERMS 2010) at Customer’s or its Affiliate’s address on Purchase Order, (b) all shipments to a Facility in San Diego are made Ex Works (INCOTERMS 2010) at

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Illumina’s Carroll Park Drive address set forth on Exhibit B, or upon written notice provided by Illumina, at another San Diego address, (c) all other shipments not addressed in (a) or (b) are made Ex Works (INCOTERMS 2010) at Illumina’s address on the Purchase Order, provided that Illumina will make arrangements for transport of Goods to Customer or purchasing Affiliates consistent with other arrangements for transport of Goods under this Agreement. In all cases, title (except for Software and third-party software) and risk of loss transfers to Customer when Supplied Product is made available at such address stated in the preceding sentence. All prices are […***…]. Shipping charges shall be actual costs. All prices and other amounts payable to Illumina under this Agreement are […***…]. In the event Illumina is required, by applicable law or regulation, […***…]. The latest ship date allowed for any Goods under a Purchase Order is the date that is […***…] months after the date the Purchase Order was received by Illumina.

Forecast. No later than […***…] Business Days after the beginning of each calendar month, Customer shall submit a written forecast to Illumina, detailed on a monthly basis, of the quantity of TG Consumables […***…] that Customer (and each Affiliate) expects to purchase from Illumina and have delivered during the […***…] months that immediately follow the month in which the forecast is submitted (the “Forecast”). Each Forecast shall be non-binding and shall be for planning purposes only. Customer shall make all purchases under this Agreement solely in accordance with Section 9.

Minimum Annual Purchase. In the event Customer’s aggregate calendar year purchases of Consumables under this Agreement drops below $[…***…] (such amount being net of any discounts), then Illumina will be relieved of its obligations and representations with respect to Discontinued Consumables (including Section 12), favored customer pricing as set forth in Section 15 (a)-(d) and quality audits as set forth in Section 14.g.

Illumina Technology. In the event Customer or any of its Affiliates use technology other than Illumina technology in lieu of the Goods (other than library preparation consumables or reagents) and/or in lieu of an Illumina IVD Product for more than […***…]% of the total number of nucleic acid sequencing-based (a) Laboratory Developed Tests for NIPT Use and Clinical Use and (b) tests performed using an IVD Product, performed in a year (in the aggregate (the sum of (a) plus (b)) by Customer and its Affiliates), then Illumina will be relieved of its obligations and representations with respect to Discontinued Consumables (Section 12) and with respect to all provisions of Section 15 (a)-(d), including favored customer pricing as set forth therein, to Customer, its Affiliates and Technology Partners. If Illumina is so relieved of its obligations, then Illumina would offer to supply Consumables to Customer and its Affiliates, and those Technology Partners that are parties to written supply agreements with Illumina at the time Illumina is so relieved of its obligations, for the remainder of the Term (or earlier as stated in Section 15) at then prevailing prices. For the avoidance of doubt, in the event Illumina is so relieved of its obligations under Section 12 and Section 15, then the terms of any new or renewal supply agreements that Illumina may choose to offer to Customer’s Technology Partners shall be defined by Illumina in its sole discretion. Customer shall provide Illumina with a written report by January 31 of each year during the Term to specify the […***…]. For the purpose of this Section 7, when Goods are used for nucleic acid sequencing-based Laboratory Developed Tests for NIPT Use and Clinical Use, then the Goods shall include at minimum Instruments and Consumables for cluster generation and SBS chemistry.

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8.	Price.

Goods Pricing. Subject to the Discontinued Goods pricing section below, the purchase price for Goods ordered hereunder for use by Customer or Affiliates in the United States shall be as set forth in Exhibit A, subject to pricing adjustments therein and in accordance with Section 15. In the event Customer or an Affiliate outside of the United States desires to purchase Goods under this Agreement, and use the Goods in a Facility in a country outside of the United States in which Illumina or its Affiliates is a direct seller such Goods without a distributor, then Exhibit A shall be amended to add such Goods and the applicable price for such Goods in such country, provided that, such price shall be subject to discounts that are no less favorable to Customer than the discounts offered to Customer for similar Goods when purchased in similar quantities under this Agreement, subject in all cases to applicable laws, rules and regulations regarding pricing. In the event Customer or an Affiliate outside of the United States wishes to purchase Goods under this Agreement, and use the Goods in a Facility in a country outside of the United States in which Illumina or its Affiliates is not a direct seller of such Goods and uses distributor(s) to sell and supply such Goods in such country, then Illumina shall provide written notice to the applicable distributor in such country of the pricing for such Goods offered to Customer hereunder, and subject in all cases to applicable laws, rules and regulations regarding pricing (including those pertaining to agreements between a seller and distributor regarding price at which distributor sells Goods), Illumina shall use commercially reasonable efforts to discuss with such distributor the pricing that such distributor would offer Customer to distribute such Goods to Customer or its Affiliates in that region. Notwithstanding anything to the contrary, […***…], and at such time the pricing and discounts offered to Customer, its Affiliates, and Technology Partners shall be established to be no less favorable than the pricing and discounts Illumina then offers to its customers who purchase the same or substantially the same Goods and sets of Goods, in the same or substantially the same volume, and who do not exclusively use Illumina’s library preparation products, subject to pricing adjustments in accordance with Section 7, 8 and Section 15.


b.	Discontinued Consumable Pricing. The purchase price for Discontinued Consumables, if they will be made available to Customer, will be determined at the time of discontinuation.

Purchase Orders; Lead Times; Delivery. Customer agrees to use written Purchase Orders when ordering Goods under this Agreement, and shall submit Purchase Orders not more than once per calendar month and no later than […***…] Business Days after the beginning of such calendar month. Illumina shall be deemed to have accepted a Purchase Order if it has not rejected it within […***…] Business Days of its receipt; provided that, Purchase Orders meeting the terms and conditions of this Agreement may not be rejected. Purchase Orders shall be sent to the attention of Illumina Customer Solutions or to any other person or department designated by Illumina. Purchase Orders shall reference this Agreement and state, at a minimum, the Illumina part number for Goods, quantity ordered, price, Facility, requested delivery date, which, with respect to TG Consumables shall not be less than ninety (90) days after the date of the applicable Purchase Order, provided that the Purchase Order was submitted within the first five Business Days of a calendar month, and the Illumina provided quote number (or other reference provided by Illumina), if any. If the Purchase Order for a calendar month is submitted on any day after the fifth Business Day of a calendar month, then delivery dates for TG Consumables on that Purchase Order shall be not less than ninety (90) days after the first day of the next calendar month. Delivery dates for Goods ordered hereunder will be mutually agreed upon at the time of ordering. Goods shall be considered to have been delivered on-time if they arrive no sooner than […***…] Business Days earlier and no later than […***…] Business Days later than as mutually agreed upon; provided that, all Instrument orders and all other orders will be delivered as mutually agreed. All Purchase Orders submitted and not rejected hereunder shall be binding, subject to Sections 10 and 11(b); provided, however, that any changes to Purchase Orders, including ship dates, must be approved and authorized in writing by Customer’s purchasing department and Illumina.

10.

Invoices; Payment. Illumina shall issue invoices upon shipment of Goods hereunder. Invoices shall be sent to Customer’s accounts payable department, or any other address designated by Customer. Payments shall be sent to Illumina’s accounts receivable department, or any other address designated by Illumina. All payments by Customer are due within […***…] days of the date of the invoice, provided that Customer has not disputed any amounts under the invoice by written notice to Illumina. For undisputed amounts under invoices, any

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amounts not paid when due will accrue interest at the rate of […***…] percent ([…***…]%) per month, or the maximum amount allowed by law, if lower. Notwithstanding anything to the contrary, in the event that any payment is not made with respect to an undisputed amount under an invoice within the time period specified in this Agreement, Illumina shall have the right to revoke the rights conferred and/or licenses given hereunder and suspend performance, including shipment, until all payments are made current. Customer shall pay for all costs (including reasonable attorneys’ fees) incurred by Illumina in connection with the collection of late payments. The amount of credit may be changed or credit withdrawn by Illumina at any time. Each Purchase Order is a separate, independent transaction, and Customer has no right of set-off against other purchase orders or other transactions with Illumina.

11.

Availability of TG Consumables; Use of TG Consumables for Approved Applications. (a) TG Consumables require a 90 day lead time. (b) Customer may cancel all or part of a Purchase Order for TG Consumables provided that Illumina reserves the right to charge Customer up to […***…]% of the purchase price of the canceled TG Consumables. Subject to the preceding sentence, all Purchase Orders accepted by Illumina are non-cancelable by Customer. (c) If at any time during the Term Illumina does not have a TG Consumable version of a Non-TG Consumable generally available for purchase, whether because of inventory shortage or because Illumina has not released a TG version of that Non-TG Consumable, then if and when Illumina does have such TG Consumable version generally available for purchase, Illumina will give Customer written notice of the availability. In the event such TG Consumable version is not included in Exhibit A at the time it becomes generally available for purchase, then such TG Consumable shall automatically be added to Exhibit A of this Agreement and available for purchase by Customer at such price relative to the applicable list price that is no less favorable to Customer than the prices for other similar Goods purchased in similar quantities under this Agreement relative to the applicable list prices therefor. Notice may be by way of inclusion of the TG Consumable on a quote. The terms of Section 12 are applicable to a new release TG Consumable that is a TG version of a Non-TG Consumable in Exhibit A. (d) Customer shall use only TG Consumables on Hardware for NIPT Use and Clinical Use, provided that if a TG Consumable is not available for a particular Clinical Use or NIPT Use, then Customer shall provide written notice to Illumina of the particular Clinical Use or NIPT Use for which a TG Consumable is not available, and thereafter shall have the right to use the applicable Non-TG Consumable(s) for that particular Clinical Use or NIPT Use (i) subject to the provisions of Section 12, in the case of the new release of a TG Consumable that is a Substitute Consumable, and (ii) until Customer and Customer Affiliates have exhausted their inventory of the applicable Non-TG Consumable for that particular Clinical Use or NIPT Use, in the case of the applicable TG Consumable having come back into inventory and Illumina having provided written notice that such TG Consumable is available for the applicable Clinical use or NIPT Use. Notwithstanding the foregoing, Customer shall stop purchasing such Non-TG Consumable, and start purchasing the applicable TG Consumable, for that particular Clinical Use or NIPT Use as soon as commercially practical and reasonable after validation by Customer.

12.

Change to Specifications; Discontinued Consumables; New Versions. The parties acknowledge both that Customer will be validating its assays based upon some of the specific Goods listed in Exhibit A, and that the product lifecycle may result in eventual discontinuation or changes to the Goods. Notwithstanding anything to the contrary in this Agreement (including without limitation Section 20.c), in cases where Illumina makes a revision to the Specifications for a Good that is a TG Consumable that result in a change to the form, fit or function thereof, or a TG Consumable purchased hereunder is being discontinued/phased out or there is a new version of such TG Consumable that results in a change to form, fit or function, then Illumina shall take commercially reasonable efforts to (i) provide Customer with a minimum of […***…] months advance notice prior to such revision or discontinuation of supply of the Discontinued Consumable to Customer hereunder, and (ii) supply Customer with Goods that meet the unrevised Specifications or Discontinued Consumables, as applicable, during that […***…] month period, that have a shelf life not less than […***…] months at the time of shipment. Any product or combination of products that is intended by Illumina to replace such Good (for which the Specifications were revised) or Discontinued Consumable shall be referred to as a “Substitute Consumable.” In some instances a Substitute Consumable may differ from the Discontinued Consumable through changes in one or more components that comprised the Discontinued Consumable (“Changed Components”). In other instances the Substitute Consumable may represent a complete change from the Discontinued Consumable (“Complete Change”). With respect to Substitute Consumables, Illumina will use commercially reasonable efforts to make available to Customer as soon as practicable, but in any event within the […***…] months advance notice period referred to above, Changed Components and instructions on how to modify the protocol or other relevant

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Documentation related to the Discontinued Consumable in order to use the Changed Components, or in the case of a Complete Change, make that Substitute Consumable available for purchase by Customer as soon as practical. Illumina will provide a reasonable quantity of Changed Components or Substitute Consumables free of charge to facilitate Customer’s validation efforts in support of the change. Once a Discontinued Consumable is no longer available for purchase (either in the instance of a Complete Change or Changed Component), Illumina will give Customer written notice (which may be by way of quote) and the Substitute Consumable will automatically be added to this Agreement as a Consumable and the Discontinued Consumable will be removed. The price to Customer for a Substitute Consumable will be consistent with Customer’s discount provided in this Agreement, subject to Section 30(a). Supply and use of Substitute Consumables shall be subject to the terms and conditions of this Agreement. Any new TG Consumable intended by Illumina to replace a specific Non-TG Consumable found in Exhibit A shall be deemed to be a Substitute Consumable and must be compatible with the Hardware and Software set forth in Exhibit A; provided that, Customer has maintained any updates or upgrades to such Hardware and Software provided by Illumina to Customer. Customer acknowledges and agrees that in some cases it may not be possible or practical to continue to supply Discontinued Consumables hereunder and in such cases Illumina bears no liability to Customer for such discontinuation. In cases where it is possible and practical for Illumina to continue to supply a Discontinued Consumable, and provided that Illumina does not offer a substantially equivalent Consumable (or combination of Consumables) with a regulatory status more appropriate for Customer’s intended use as reasonably determined by Illumina, and Customer has used commercially reasonable efforts to validate such substantially equivalent Consumable (or combination of Consumables), then if Customer desires to continue to purchase the Discontinued Consumable it may do so under the following terms:

Lot Purchases for Discontinued Consumables. Subject to the terms of this Agreement, Illumina will use commercially reasonable efforts to continue to sell the Discontinued Consumable to Customer; provided that, Customer will be required to purchase such Discontinued Consumable in minimum lot sizes. Illumina shall use commercially reasonable efforts to establish a minimum lot size that is no greater than the median lot size of lot sizes produced during the prior two (2) full calendar quarters. Pricing, minimum lot sizes (subject to the immediately preceding sentence), lead times, warranty terms, support, and any other applicable terms for such Discontinued Consumable will be mutually agreed upon in writing at the time of discontinuation and, at minimum, shall be subject to the terms under this Agreement regarding Purchase Orders and supply of TG Consumables; provided that, pricing will be commensurate with pricing under this Agreement taking into consideration all factors involved with making custom lots of Discontinued Consumables.

In cases where Customer desires to begin purchasing a Substitute Consumable, it may do so under the following terms:

Substitute Consumables. Pricing, lead times, warranty terms, support, and any other applicable terms for such Substitute Consumable will be agreed upon in writing at the time of adding the Substitute Consumable to this Agreement.


13.	Validation. Customer shall, […***…] responsible for validating all Goods including Software for its particular uses, including any Substitute Consumables provided hereunder.


14.	Regulatory; Other Terms.


a.	Research Use Only. Customer acknowledges that the Goods have not been subjected to regulatory review or approved or cleared by the FDA or any other regulatory entity, or otherwise reviewed, cleared or approved under any statute, law, rule or regulation for any purpose, whether research, commercial, diagnostic or otherwise.

Notwithstanding Illumina’s consent for Customer to use the Goods in any given Approved Application, Illumina makes no claim, representation, or warranty of any kind as to the utility of the Goods for such use including, without limitation, whether the regulatory status of the Goods is appropriate for Customer’s use. Customer is solely responsible for determining the utility and fitness of the Goods for its uses. Nothing set forth in this Section 14.b shall limit Illumina’s warranties in Sections 24, 25 and 27.

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c.	Regulatory Approvals. Customer is solely responsible for obtaining any and all regulatory approvals and licensure necessary for its intended uses of the Goods.

Implementation of New Illumina Product with Appropriate Regulatory Status. In the event Illumina offers a new Consumable product (including combination of Consumables) that is substantially equivalent to Consumable(s) purchased hereunder and that has a regulatory status (e.g., IVD, GPR, etc.) […***…], then Customer shall use good faith efforts to validate such new Consumable(s) product, and if validated by Customer implement that new Consumable(s) product within […***…] months of Illumina making such new Consumable(s) product available to Customer. In the event any Goods added to this Agreement after the Effective Date has been certified, approved or cleared by a regulatory agency, including without limitation the FDA, then it may be subject to additional terms and conditions of sale, including pricing, and this Agreement will be amended as may be necessary, provided that the pricing and other terms set forth in such amendment (taken as a whole) relative to pricing and other terms (taken as a whole) in agreements between Illumina and other customers that purchase less or the same quantities of substantially the same or the same products shall be no less favorable to Customer than the pricing and other terms set forth in agreements between Illumina and such other customers. Nothing in this Section 14.d shall relieve Illumina from its obligations under Section 12 (if applicable to a new Consumable(s) product described in this Section 14.d) or its rights under Section 14.f.

Disclosures. Customer will disclose to Illumina in a timely manner any communication, oral or written, that it receives from the FDA (or its foreign counterparts) regarding the use of any Goods or the business relationship between Customer and Illumina. Illumina will disclose to Customer in a timely manner any communication, oral or written, that it receives from the FDA (or its foreign counterparts) regarding Customer’s use of any Goods or the business relationship, including any that may reasonably be considered to affect the continuity of supply of Goods to Customer, between Customer and Illumina. If either party receives any of the preceding communications, the parties will cooperate with each other to address any concerns raised by the FDA (or its foreign counterpart) therein.

Compliance with Law. Customer and Illumina each have the right to cease performance under the Agreement, including without limitation, the sale of Consumables under the Agreement, and without liability to the other (except for payment for Goods and services delivered up to that date), in the event that either party is notified by the FDA (or an agency under the Federal Health and Human Services) or any foreign equivalent that such performance is illegal or violates any law or order including, without limitation, any FFDCA law, FDA regulation, order, or similar action, or has a reasonable basis to believe that such performance is illegal or violates any law or order; provided that, the party receiving such notice or that makes such determination has first notified the other party in writing and discussed the matter. For clarity, the preceding may not be used solely as a means to merely terminate the Agreement for convenience.

Quality Audits. Once per calendar year and only after providing […***…] days prior written notice, Customer may at its sole expense audit Illumina’s quality systems applicable to the provision of Goods hereunder. If Customer chooses to conduct such quality audit, such audit shall be conducted by or on behalf of Customer by individuals qualified and appropriate to conduct such audit and shall be identified (by name, affiliates and job title) in written notice. An additional inspection may be initiated following submission of an FDA application by Customer for a Laboratory Developed Test for Clinical Use or NIPT Use for which an FDA application and additional inspection is required, in preparation for an anticipated pre-approval inspection audit by the FDA for such Laboratory Developed Test. Notwithstanding any provision of this Agreement to the contrary, all information disclosed or observed during the audit shall be the confidential information of Illumina regardless of form and may not be disclosed to any third party or used in any manner without the prior written consent of Illumina. In the case of a specific and material quality issue with a Good purchased hereunder, Illumina shall, on a case-by-case basis, work with Customer on potential additional audit(s) in connection with that specific issue and both parties will work together in good-faith to close the inquiry. Any audit(s) conducted under this

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provision must be conducted in a manner so as not to interfere with Illumina’s business operations and must take place during Illumina’s normal operating hours.

Training and Customer Audits. The parties agree that it is important to maintain the highest possible levels of quality both from Illumina’s supply side and in connection with Customer’s use of the Goods purchased hereunder. Accordingly, Customer agrees to undertake any training for the use of the Goods that Illumina may reasonably request. Customer further agrees to allow Illumina to audit Customer no more frequently than once per year in order to verify its personnel’s proficiency in the use of the Goods. The Facilities, times, and dates for such proficiency audits will be mutually agreed upon.


i.	Implementation of ISO/QSR. Illumina acknowledges that it plans to implement a quality system in compliance with the applicable ISO standard and Quality System regulations (“QSR”) for the manufacture of the Consumables purchased hereunder by the end of the Term.


j.	Illumina Manufacturing Facilities. All Goods are currently manufactured at one or more of the facilities listed in Exhibit B. Illumina may manufacture Goods at additional or different facilities in the future. Upon written request of Customer, to be submitted no more than once per calendar year, Illumina will provide any updates to Exhibit B.


k.	IVD Product. In the event Illumina develops and receives FDA clearance for an IVD Product that is based on the […***…] test, then at such time as Illumina offers that IVD Product for sale, Illumina will offer to supply Customer with that IVD Product during the Term at pricing and other terms consistent with this Agreement.

15.

Favored Customer Pricing; Customer Technology Partners. (a) Illumina represents that on the Effective Date, the pricing for nucleic acid sequencing-based Consumables offered to Customer under this Agreement is no greater than the least price being paid by any other customer in the United States that purchases less or similar quantities of substantially similar or same products and set of products, from Illumina on the Effective Date; provided that, such other customer is expressly authorized in writing by Illumina to use such products for NIPT, including, without limitation, […***…].

(b) No later than each […***…], thereafter during the Term, Illumina shall review the pricing for (1) nucleic acid sequencing-based Consumables (including Goods used for sample preparation) and (2) Goods that have been certified, approved or cleared by a regulatory agency, including without limitation the FDA, offered under this Agreement during the preceding twelve (12) month period to customers in the United States that meet the criteria in the preceding paragraph (a) of this Section 15 and whose purchases are commensurate with Customer’s total volume of business (or less). After such review, […***…]; provided that […***…], the pricing and discounts shall be established to be no less favorable than the pricing and discounts Illumina then offers to its customers who purchase the same or substantially the same Goods and sets of Goods, in the same or substantially the same volume, […***…].

(c) Customer Technology Partners. A “Technology Agreement” means a written agreement under which a third party receives from Customer or its Affiliates certain transfer of know-how and technology, and is authorized to use such know-how and technology only in its clinical laboratory located outside of the United States and only to perform their own nucleic acid sequencing-based NIPT test that at the time of such transfer is the same or substantially similar to Customer’s […***…] test. A “Customer

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Technology Partner” means any third party that is a party with Customer or any of its Affiliates to a Technology Agreement. Prior to the Effective Date, Customer entered into Technology Agreements with Customer Technology Partners, which Customer Technology Partners and the countries outside the United States in which they are authorized are set forth on Schedule 2. Customer has informed Illumina that it may enter into Technology Agreements with additional third parties after the Effective Date. Upon written request of Customer, and subject to the conditions of this Agreement and applicable local laws, rules and regulations, Illumina shall offer to supply Goods to each Customer Technology Partner for use to perform their own nucleic acid sequencing-based NIPT test that is the same or substantially similar to Customer’s […***…] test during the Term under terms, including pricing, that Illumina then offers its own technology transfer partners in the applicable country(ies) outside of the United States. The foregoing pricing terms are conditioned upon and subject to the Customer Technology Partner entering into a written supply agreement with Illumina to purchase Goods for use to perform their own nucleic acid sequencing-based NIPT test that is the same or substantially similar to Customer’s […***…] test and pay a Test Fee on terms and conditions as set forth in the Pooled Patents Agreement, and (b) that Customer Technology Partner remains in good standing under that supply agreement and the Technology Agreement.

(d) Notwithstanding anything to the contrary, (i) the pricing offered by Illumina to Customer Technology Partners in Section 15(c) will not discriminate against such Customer Technology Partners relative to Illumina’s own technology transfer partners that perform nucleic acid sequencing-based tests, and (ii) the terms of Section 15(c) shall not apply to any Person (1) that is not a Customer Technology Partner or (2) that, […***…], is or was a party to a supply agreement with Illumina.


16.	Instrument Standards. Each Instrument and Hardware provided hereunder shall comply with the normative safety and EMC general requirements for Electrical Equipment for Measurement, Control and Laboratory Use.


17.	Limitation of Liability.

TO THE EXTENT PERMITTED BY LAW, (i) IN NO EVENT SHALL CUSTOMER BE LIABLE TO ILLUMINA OR ANY OF ITS AFFILIATES FOR LOST PROFITS, DATA OR BUSINESS, OR FOR ANY INDIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, CONSEQUENTIAL, OR PUNITIVE DAMAGES OF ANY KIND ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE), AND (ii) THE TOTAL AND CUMULATIVE LIABILITY OF CUSTOMER AND ITS AFFILIATES, JOINTLY AND SEVERALLY, ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE, SHALL IN NO EVENT EXCEED THE AGGREGATE AMOUNT RECEIVED BY ILLUMINA FROM CUSTOMER AND CUSTOMER AFFILIATES DURING THE PRECEDING 12 MONTHS UNDER THIS AGREEMENT; PROVIDED, HOWEVER, THAT SUCH LIMITATION IN (i) AND (ii) SHALL NOT APPLY TO ANY INDEMNIFICATION OBLIGATIONS OF CUSTOMER UNDER SECTION 21.d, OR INTENTIONAL MISCONDUCT, OR INFRINGEMENT OF ILLUMINA INTELLECTUAL PROPERTY RIGHTS, AND SUCH LIMITATION IN (ii) SHALL NOT APPLY TO ANY PAYMENT OBLIGATIONS WITH RESPECT TO GOODS (INCLUDING PAYMENT ON INVOICES). THE LIMITATIONS SET FORTH IN THIS SECTION SHALL APPLY EVEN IF ILLUMINA OR ITS SUPPLIERS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. CUSTOMER AND CUSTOMER AFFILIATES SHALL REMAIN JOINTLY AND SEVERALLY, AND FULLY, RESPONSIBLE TO ILLUMINA FOR PAYMENT OF THE APPLICABLE PURCHASE PRICE FOR ALL GOODS PURCHASED BY CUSTOMER AND CUSTOMER AFFILIATES UNDER THIS AGREEMENT.


b.	TO THE EXTENT PERMITTED BY LAW, (i) IN NO EVENT SHALL ILLUMINA OR ITS SUPPLIERS BE LIABLE TO CUSTOMER OR ANY CUSTOMER AFFILIATE OR ANY THIRD PARTY FOR COSTS OF PROCUREMENT OF SUBSTITUTE PRODUCTS OR SERVICES, LOST PROFITS, DATA OR BUSINESS, OR FOR ANY INDIRECT, SPECIAL, INCIDENTAL,

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EXEMPLARY, CONSEQUENTIAL, OR PUNITIVE DAMAGES OF ANY KIND ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE) AND (ii) ILLUMINA’S TOTAL AND CUMULATIVE LIABILITY TO CUSTOMER OR ANY CUSTOMER AFFILIATE ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE, SHALL IN NO EVENT EXCEED THE AMOUNT RECEIVED BY ILLUMINA FROM CUSTOMER AND CUSTOMER AFFILIATES (IN THE AGGREGATE) DURING THE PRECEDING 12 MONTHS UNDER THIS AGREEMENT; PROVIDED, HOWEVER, THAT SUCH LIMITATION IN (i) AND (ii) SHALL NOT APPLY TO ANY INDEMNIFICATION OBLIGATIONS OF ILLUMINA UNDER SECTIONS 21.a AND 21.c. OR TO ANY LIABILITY ARISING FROM INTENTIONAL MISCONDUCT. THE LIMITATIONS SET FORTH IN THIS SECTION SHALL APPLY EVEN IF ILLUMINA OR ITS SUPPLIERS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.

18.

Limited Warranties. TO THE EXTENT PERMITTED BY LAW, EXCEPT FOR THE EXPRESS LIMITED WARRANTIES SET FORTH IN SECTIONS 2, 24, 25 AND 27 OF THIS AGREEMENT, ILLUMINA MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE GOODS OR ANY SERVICES PROVIDED IN CONNECTION WITH THIS AGREEMENT, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, OR ARISING FROM COURSE OF PERFORMANCE, DEALING, USAGE OR TRADE.


19.	Confidentiality.

Confidential Information. The parties acknowledge that, by virtue of the activities to be performed and the relationships created under this Agreement, each party (the “Recipient Party”) may have access to information that the other party (the “Disclosing Party”) considers to be confidential (“Confidential Information”). Confidential Information includes, but shall not be limited to, inventions, designs, formulas, algorithms, trade secrets, know-how, customer lists, cost and pricing information, business and marketing plans, and other business and financial information. Each party is under no obligation to provide or disclose Confidential Information that is not necessary in the performance of this Agreement. During the Term and or a period of […***…] years thereafter, the Recipient Party shall hold the Disclosing Party’s Confidential Information in confidence, and abide by restricted use obligations, using the degree of care that is used by the Recipient Party with respect to its own Confidential Information (but no less than reasonable care). Notwithstanding the foregoing, if information constitutes Confidential Information under both this Agreement and under any of the Pooled Patents Agreement, the Settlement Agreement, and/or any Ancillary Agreement, then each party shall be obligated to hold in confidence, and adhere to restricted use and other obligations with respect to such Confidential Information as set forth in this Agreement and the applicable other agreement(s). The Recipient Party shall only disclose the Confidential Information of the Disclosing Party on a need to know basis to its employees, directors, representatives, contractors and Affiliates under nondisclosure terms consistent with this Agreement. The Recipient Party shall not use the Disclosing Party’s Confidential Information for any purpose other than as contemplated by this Agreement. The Confidential Information at all times remains the property of the Disclosing Party. Upon the termination or expiration of this Agreement, the Recipient Party shall, upon written request of the Disclosing Party, return to the Disclosing Party or destroy the Confidential Information. Notwithstanding the foregoing, the Recipient Party may maintain one copy of the Disclosing Party’s Confidential Information to be retained by the Recipient Party’s Legal Department for archival purposes only.

Exceptions. Notwithstanding any provision contained in this Agreement, neither party shall be required to maintain in confidence any of the following information: (1) information that, at the time of disclosure to the Recipient Party, is in the public domain through no breach of this Agreement or another obligation of confidentiality owed to the Disclosing Party or its Affiliates; (2) information that, after disclosure hereunder, becomes part of the public domain by publication or otherwise, except by breach of this

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Agreement or another obligation of confidentiality owed to the Disclosing Party or its Affiliates; (3) information that was in the Recipient Party’s possession at the time of disclosure hereunder by the Disclosing Party unless subject to an obligation of confidentiality owed to the Disclosed Party or its Affiliates; (4) information that is independently developed by or for the Recipient Party; or (5) information that the Recipient Party receives from a third party where Recipient Party reasonably believes such third party was under no obligation of confidentiality to the Disclosing Party with respect to such information.

Disclosures Required by Law. The Recipient Party may disclose the Disclosing Party’s Confidential Information as required by court order, operation of law, or government regulation, provided that the Recipient Party promptly notifies the Disclosing party of the specifics of such requirement prior to the actual disclosure or promptly thereafter if prior disclosure is impractical under the circumstances, uses diligent efforts to limit the scope of such disclosure or obtain confidential treatment of the Confidential Information, and allows the Disclosing Party to participate in the process undertaken to protect the confidentiality of the Disclosing Party’s Confidential Information including, without limitation, cooperating with Disclosing Party in order to comply with the requirements of such order, law, or regulation in a manner that discloses the least amount, if any, of the Confidential Information of the Disclosing Party.

Injunctive Relief. Each party acknowledges that any use or disclosure of the other party’s Confidential Information other than in accordance with this Agreement may cause irreparable damage to the other party. Therefore, in the event of any such use or disclosure or threatened use or threatened disclosure of the Confidential Information of either party hereto, the non-breaching party shall be entitled, in addition to all other rights and remedies available at law or in equity, to injunctive relief against the breach or threatened breach of any obligations hereunder.

Disclosure of Agreement. Notwithstanding anything in this Agreement to the contrary and except to the extent that disclosure of this Agreement and/or its terms are required by Securities and Exchange Commission regulation or law (“SEC Rules”), neither party may disclose this Agreement, the terms of this Agreement, including any financial terms thereof, and the subject matter of this Agreement to any third party without the prior written consent of the other party that will not be unreasonably withheld. Notwithstanding a party’s right to disclose this Agreement, the terms of this Agreement, and its subject matter as required by SEC Rules, the disclosing party shall provide the non-disclosing party a copy of any proposed disclosure in advance in order to allow the non-disclosing party to redact any confidential or proprietary information. This Section 19.e is subject to Section 30.k.


20.	Restrictions; Reservation of Rights.

Restrictions. Customer agrees that, unless otherwise expressly authorized in writing by Illumina: (i) the Consumables are intended for single-use only, and (ii) any use of reagents other than the Consumables or reagents that Illumina has expressly authorized in writing to be used with the Goods voids all warranties and extended warranties for the Goods including, without limitation, the Hardware Warranty found in Section 24 and Consumables Warranty found in Section 27. Customer agrees that Customer shall not, nor will Customer allow any third party or Affiliate to, engage in any of the following activities without the express prior written permission of an officer of Illumina: (i) disassemble, reverse-engineer, reverse-compile, or reverse-assemble the Goods, (ii) separate, extract, or isolate components of Consumables or subject Consumables or components thereof to any analysis not authorized by Illumina, (iii) otherwise gain access to or determine the methods of operation of the Goods, (iv) lease, sell, or resell any Goods, (v) re-use Consumables, (vi) use Goods in a manner other than as described in applicable Specifications and Documentation, (vii) use third party consumables or reagents on Hardware (unless the Specifications or Documentation state otherwise). For the avoidance of doubt, Customer is not prevented under this Agreement from using third party library preparation consumables or reagents to prepare samples for sequencing on Hardware and Customer acknowledges that, pursuant to the terms of this Agreement, including Sections 7 and 8, such decision could result in […***…]. In addition to any other remedies available to Illumina, a breach of this provision shall immediately terminate the rights, license(s), or permissions given hereunder and void all warranties including, without

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limitation, the rights conferred under Section 2 and all warranties under Sections 24, 25 and 27. Customer agrees that it is not an authorized dealer, representative, reseller, or distributor of any of Illumina’s, or its Affiliates’, products or services. Customer (1) is not purchasing the Goods on behalf of a third party, (2) is not purchasing the Goods in order to resell or distribute the Goods to a third party, (3) is not purchasing the Goods in order to export the Goods outside the United States, and (4) will not export the Goods out of the United States.

Software. Customer shall not (i) reproduce, modify or create derivative works of the Software, except as expressly permitted in the relevant EULA provided to Customer, (ii) decompile, reverse engineer or otherwise attempt to gain unauthorized access to the Software source code, any Hardware or any component thereof or unbundle any embedded Software from any Hardware, (iii) use the Hardware, component thereof, or the Software for third-party training, commercial time-sharing or service bureau use, or for any purpose other than as expressly authorized in Section 2 of this Agreement, (iv) remove, alter, cover or obfuscate any copyright, trademark or other proprietary rights notices on or in the Goods, (v) cause, authorize or permit any third party to do any of the foregoing, or (vi) transfer or sublicense Software to a third-party. The Software is licensed (to Customer or its applicable Affiliates) on a personal and non-transferable basis, except as permitted in accordance with Section 30.e (Assignment).

Documentation. Subject to the terms and conditions of this Agreement, and upon specific written request by Customer, Illumina shall provide Customer with Documentation for a Good on or before shipment of such Good. Customer shall use the Documentation in accordance with the restrictions set forth therein, which may include but shall not be limited to restrictions against altering, modifying or copying the Documentation or removing the Documentation from the Customer Facility without the prior written approval of Illumina, except that Customer shall be authorized to make any necessary copies of the Documentation as required to support an application for FDA approval for a Laboratory Developed Test for Clinical Use or for NIPT Use that required FDA approval, but not for any IVD Product or any other distributable product. Any permitted copies of the Documentation shall include Illumina’s copyright and other proprietary notices. Customer shall use the Goods in accordance with and as instructed by the Documentation (including as electronically published) applicable to the Goods.


d.	Illumina Proprietary Information. Customer may use the Illumina proprietary sequences (e.g., […***…], and such other proprietary sequences as Illumina may identify from time to time), only with the Goods.


e.	Reservation of Rights. Illumina reserves all rights not expressly granted in this Agreement, and no licenses are granted by Illumina under this Agreement, whether by implication, estoppel or otherwise, except as expressly set forth herein.

Customer’s (and its Affiliates) intended use of the Goods for any Research Use, Clinical Use or NIPT Use may require that it obtain a license or other rights to third party Intellectual Property Rights (other than Intellectual Property Rights included within Illumina’s Intellectual Property Rights in Goods and other than third party Intellectual Property Rights applicable to the general functionality of the Goods) to use Goods without infringing third party Intellectual Property Rights. Between Illumina and Customer, it is Customer’s responsibility to ensure that it (and its Affiliates) has or obtains rights to all third party Intellectual Property Rights (other than Intellectual Property Rights included within Illumina’s Intellectual Property Rights in Goods and other than third party Intellectual Property Rights applicable to the general functionality of the Goods) that are required for Customer to use the Goods for any Research Use, Clinical Use or NIPT Use without infringement of such third party Intellectual Property Rights. Illumina does not represent, warrant, covenant or undertake that use of Goods will not infringe third party Intellectual Property Rights and expressly disclaims and excludes any statement or implication otherwise, to the maximum extent permitted by law.


21.	Indemnity.


a.	Infringement. Except as set forth in Section 21.b and Section 20.f, Illumina shall defend, indemnify and hold harmless Customer and its Affiliates, and each of their officers, directors and employees, against any

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third-party claim or action alleging that the Goods, when used in accordance with the terms and conditions of this Agreement infringe any valid and enforceable Intellectual Property Right, and Illumina shall pay all settlements entered into, and all final judgments and costs (including reasonable attorneys’ fees) awarded against such indemnified party in connection with any such action. If the Goods or any part thereof, become, or in Illumina’s opinion may become, the subject of an infringement claim against Illumina or Customer, Illumina shall have the right, at its option, to (i) procure for Customer the right to continue using such Goods, (ii) modify or replace such Goods with substantially equivalent noninfringing products, provided the modification or replacement is substantially equivalent to the replaced product, (iii) or, after using commercially reasonable efforts to achieve the results in clauses (i) or (ii), require the return of such Goods and terminate the rights, license and any other permissions given hereunder with respect thereto and refund to Customer the depreciated value of the Goods as shown in the financial records of Customer or price paid for such Goods, whichever is less. This Section 21.a states the entire liability of Illumina for any infringement of Intellectual Property Rights.

Exclusions. Illumina shall have no obligations to defend, indemnify or hold harmless Customer and its Affiliates, and each of their officers, directors and employees with respect to any third-party claim or action alleging that (i) the use of the Goods, outside the scope of the rights, license(s), or permissions given by Illumina to Customer for such Goods, (ii) the use of the Goods, in combination with any other products or services not supplied by Illumina, (iii) the use of the Goods to perform any assay or other process not supplied by Illumina, (iv) any Goods (or certain aspect thereof) provided hereunder in accordance with specifications or instructions furnished to Illumina by Customer (or by a third party on behalf of Customer), (v) any act regarding the Goods in a manner not expressly authorized in this Agreement, or (vi) any Derivative Software or use of Derivative Software, in each of (i), (ii), (iii), (iv), (v) or (vi) infringes any third party Intellectual Property Right (each of (i) – (vi) an (“Excluded Claim”). For the avoidance of doubt, any claim or action arising from alleged infringement of third party Intellectual Property Rights addressed in Section 20.f, for which Customer is responsible for ensuring it has or obtains rights, is an Excluded Claim under at least clause (i).


c.	Indemnification by Illumina. Illumina shall defend, indemnify and hold harmless Customer and its Affiliates, and their respective officers, directors and employees, against any third-party claim or action involving injury or death to a person or damage to tangible property and arising out of failure of the Goods to conform to their Specifications when such Goods are used for Research Use.

Indemnification by Customer. Customer shall defend, indemnify and hold harmless Illumina, its Affiliates and each of their respective officers, directors and employees, against (i) any third-party claim or action that is, relates to, or arises out of an Excluded Claim, and (ii) any third party claims, liabilities, damages, fines, penalties, causes of action, and losses of any and every kind resulting from any use of the Goods for Clinical Use or NIPT Use including any failure to use the Goods in accordance with its Documentation and any failure of Customer to obtain and maintain the applicable regulatory approvals and licensure required for Customer’s intended uses of the Goods.

Conditions. The parties’ indemnification obligation pursuant to this Section 21 is subject to the party seeking indemnification (i) notifying the other promptly in writing of such action, (ii) giving other party exclusive control and authority over the defense and settlement of such action, (iii) not admitting infringement of any Intellectual Property Right without prior written consent, (iv) not entering into any settlement or compromise of any such action without the indemnifying party’s prior written consent, and (v) providing all reasonable assistance to the other party (provided that such party reimburses the indemnified party for its reasonable out-of-pocket expenses incurred in providing such assistance); provided, that the indemnifying party may not enter into any settlement that admits fault on the part of the indemnified party and does not include a release within the scope of the claim that is the subject of the action for which the indemnified party is obligated to indemnify hereunder.


f.	Third-Party Goods. Notwithstanding anything herein to the contrary, Illumina shall have no indemnification obligations with respect to any goods or software originating from a third party and provided under this Agreement. Customer’s sole right to indemnification with respect to such third party

Page 17 of 17

goods or software shall be pursuant to the original manufacturer’s or licensor’s indemnity, if any, to Customer, to the extent provided by the original manufacturer or licensor.


22.	Shelf-life. All Non-TG Consumables shall have no less than […*…] months shelf life at the time of shipment and all TG Consumables shall have no less than […*…] months shelf life at the time of shipment.


23.	Additional Instrument Service and Support. If Customer desires additional service and support for Hardware, Customer and Illumina will execute a separate service and support agreement.

24.

Warranty for Hardware. The “Hardware Warranty Period” shall be for a period of […***…] months. In the case of Hardware that includes installation, the Hardware Warranty Period shall commence upon installation of the Hardware. For all other Hardware, the Hardware Warranty Period commences upon delivery. During the Hardware Warranty Period, the Hardware (other than Software, the warranty for which is set forth in Section 25) will conform to the Specifications (“Base Hardware Warranty”). This limited warranty extends only to Customer as original purchaser unless otherwise agreed upon in writing by Illumina. “Upgraded Components” means Illumina-provided components, modifications, upgrades, updates and/or enhancements to Hardware. Illumina warrants that Upgraded Components will conform to their Specifications for the longer of the Base Hardware Warranty or a period of […***…] days from the date the Upgraded Components are installed. Upgraded Components do not extend the Base Hardware Warranty.

The foregoing warranty shall not apply if the Hardware or any component thereof (i) has been subjected to abuse, misuse, neglect, negligence, accident, improper testing, improper installation, improper storage, improper handling or use contrary to any instructions issued by Illumina or has been used in any manner inconsistent with the rights conferred upon Customer under this Agreement, (ii) has been repaired, altered, disassembled or reassembled, or removed from the Facility by persons not expressly authorized by Illumina, (iii) has not been installed, operated, repaired and maintained in accordance with the Documentation, (iv) has failed due to an act of God, including but not limited to fire, flood, tornado, earthquake, hurricane, lightning, threat of or actual acts of terrorism or war, or (v) has been used with any third party software, hardware, or item including, without limitation, reagent which has not been previously approved in writing by Illumina. If during the Hardware Warranty Period: (x) Illumina’s authorized service or support representative is notified promptly upon discovery of any failure of the Hardware to conform to the warranty set forth in this Section, including a detailed description of such alleged failure, (y) at Illumina’s option, either access to the Hardware is provided to Illumina on-site at the Facility or such applicable component(s) are returned, transportation charges prepaid, to Illumina’s designated facility in accordance with Illumina’s then-current return procedures, and (z) Illumina’s inspections and tests determine that the Hardware or the applicable component indeed fails to conform and has not been subjected to any of the conditions set forth in this Section, then, as Customer’s sole remedy (except for any indemnification obligations of Illumina pursuant to Section 21.a and 21.c) and Illumina’s sole obligation under the foregoing warranty, Illumina will, at Illumina’s option, repair or replace without charge the Hardware or applicable component(s). Any Hardware or component that has either been repaired or replaced under this warranty shall have warranty coverage for the longer of […***…] days or the remaining warranty period. Repairs may include the replacement of parts with functionally equivalent, reconditioned or new parts. Notwithstanding anything to the contrary set forth herein, if during the Hardware Warranty Period any Hardware or component does not meet the Base Hardware Warranty for more than […***…] days, Illumina shall loan to Customer a Hardware that meets the Base Hardware Warranty until Illumina provides Customer with a repaired or replacement Hardware on the terms and conditions set forth herein.

25.

Software Warranty. The Software will substantially conform to its Specifications for the warranty period specified in the EULA provided with the Software, but in any event no longer than the […***…]; provided that Customer maintains a software release level within one major release of the most current release of the Software. Customer’s sole remedy and Illumina’s sole obligation under the foregoing warranty shall be for Illumina to use commercially reasonable efforts to correct any substantial nonconformity of the Software reported to Illumina’s authorized service or support representative by Customer during the warranty period. The foregoing warranty shall not apply to any failure to conform by the Software that is caused by (i) the use or operation of the Software in an environment other than that advised or recommended by Illumina, (ii) modifications to the Software not made or authorized by Illumina, or (iii) third party hardware or software,

Page 18 of 18

whether provided by Illumina or any third party. In addition, the foregoing warranty shall not apply to any Software which has been used with any third party hardware or software or to any Derivative Software.


26.	Third-Party Goods. Notwithstanding anything herein to the contrary, Illumina makes no warranty with respect to any third-party goods provided under this Agreement. Customer’s sole remedy with respect to such third-party goods shall be pursuant to the original manufacturer’s or licensor’s warranty, if any, to Customer, to the extent permitted by the original manufacturer or licensor.

27.

Warranty for Consumables. The Consumables, will conform to the Specifications until the later of (i) for Non-TG Consumables […***…] months from the date of shipment, and for TG Consumables, […***…] months from the date of shipment, or (ii) any expiration date or the end of the shelf-life pre-printed on such Consumable by Illumina, but in no event later than […***…] months from the date of shipment (the “Consumable Warranty Period”). This limited warranty extends only to Customer, as original purchaser unless otherwise agreed upon in writing by Illumina. The foregoing warranties shall not apply if any Consumable (a) has been subjected to abuse, misuse, neglect, negligence, accident, improper testing, improper installation, improper storage, improper handling or use contrary to any instructions issued by Illumina or has been used in any manner inconsistent with the rights conferred upon Customer under this Agreement, (b) has been repaired, altered, disassembled or reassembled, (c) has not been operated, repaired and maintained in accordance with the Documentation, (d) has failed due to an act of God, including but not limited to fire, flood, tornado, earthquake, hurricane, lightning, threat of or actual acts of terrorism or war, or (e) has been used with any third party good not provided under this or any other agreement with Illumina. If during the Consumable Warranty Period: (x) Illumina’s authorized service or support representative is notified promptly upon discovery of any failure of such Consumable to conform to the warranty set forth in this Section, including a detailed description of such alleged failure, (y) such Consumable is returned, transportation charges prepaid, to Illumina’s designated facility in accordance with Illumina’s then-current return procedures, and (z) Illumina’s inspections and tests determine that such Consumable indeed fails to conform and has not been subjected to any of the conditions set forth in this Section, then, as Customer’s sole remedy (except for any indemnification obligations of Illumina pursuant to Section 21.a and 21.c) and Illumina’s sole obligation under the foregoing warranty, Illumina will, at Illumina’s option, repair or replace without charge such Consumable. Repaired or replaced Consumables come with a warranty that is the longer of […***…] days after shipment of the repaired or replaced Consumable or any expiration date or the end of the shelf-life pre-printed on such Consumable. In no event will the warranty for repaired or replaced Consumables be later than […***…] months from the date of shipment. With respect to replaced TG Consumables, Illumina will use commercially reasonable efforts to provide replacement TG Consumables in a Customer’s scheduled shipment where single lot per shipment can be maintained.


28.	Term; Cancellation; Termination.

Term. This Agreement shall commence on the Original Effective Date and terminate five (5) years after the Effective Date, unless otherwise terminated early as provided hereunder or extended longer upon the mutual written agreement of the parties. The period from the Original Effective Date to the date the Agreement expires or is terminated is the “Term.” Upon Customer’s written request, provided at least ninety (90) days prior to expiration or termination (other than termination pursuant to a party’s right under Section 28c) of the Agreement, Illumina agrees that it will engage with Customer in good faith negotiations to identify the terms and conditions under which, if mutually agreed upon in a written amendment, Illumina would continue to supply Customer with Consumables at the same or substantially the same pricing as set forth herein for a period of time after the end of the Term.


b.	Cancellation of Orders. Except as set forth in Section 11.b and 30.g, all Purchase Orders are non-cancelable and may not be modified without the prior written consent of Illumina.


c.	Termination.


(i)	If either party breaches a material provision of this Agreement and fails to cure such breach within thirty (30) days after receiving written notice of the breach, the non-breaching party shall have the right to terminate this Agreement at any time by providing written notice to the other party. Either party may terminate this Agreement, effective immediately upon written notice, if

Page 19 of 19

the other party becomes the subject of a voluntary or involuntary petition in bankruptcy or any proceeding relating to insolvency, receivership, liquidation or composition for the benefit of creditors that is not dismissed within sixty (60) days. In the event of any bankruptcy or insolvency proceeding commenced by or against Customer, Illumina shall be entitled to cancel any order then outstanding.


(ii)	Reserved.

29.

Survival of Obligations. All provisions of this Agreement that by their nature should survive termination shall survive including without limitation Sections 1 (Definitions), 3.b (Affiliates),3c (Pre-Purchased Instruments), 10 (Invoices; Payment), 13 (Validation), 14.a-14.c, 14.e, 14.f (Regulatory; Other Terms), 17 (Limitation of Liability), 18 (Limited Warranties), 19 (Confidentiality), 20 (Restrictions; Reservation of Rights), 21 (Indemnify), 24 (Warranty for Hardware, for time period stated therein), 25 (Software Warranty, for time period stated therein), 26 (Third-Party Goods), 27 (Warranty for Consumables, for time period stated therein), 28.b (Term; Cancellation; Termination) 30.b-f, h-k (Miscellaneous), and all payment obligations incurred hereunder. All other rights and obligations of the parties under this Agreement shall cease upon termination or expiration of this Agreement.


30.	Miscellaneous.


a.	Future Products; Additional Products.

(iii)

Customer acknowledges and agrees that any future products and/or services (“Unreleased Products”) are subject to new part numbers, pricing and specifications and, in some cases, use restrictions. Customer agrees that its purchase of the Goods hereunder is not in reliance on the availability of any Unreleased Products. Customer acknowledges that Customer has no right to return any Goods except as expressly provided hereunder. Upon Customer’s written request, which shall not be made more than one time per calendar quarter, Illumina will engage in business reviews with Customer with the intent of addressing the operation of purchase and supply of Goods under this Agreement, and the potential availability of Unreleased Products that may be released for use in the Approved Applications. To facilitate such discussions, two weeks prior to any such review, Customer shall provide Illumina with an updated list of its instrument install base and associated Software (including version numbers).

(iv)

Additionally, upon written request of Customer or Illumina, the parties shall, no more than one time per calendar quarter, review the then current list of Goods on Exhibit A. The parties shall enter into a written amendment of this Agreement to add to Exhibit A, as Goods, additional Illumina products for nucleic acid sequencing-based Laboratory Developed Tests for NIPT Use and Clinical Use that the parties agree should be added based on reasonable expectations of Customer’s requirements during the 12 months period that follows the review, or that Illumina determines should be removed based on lack of purchase by Customer during the preceding 12 month period, provided that for such products that the parties agree should be added to this Agreement (1) for […***…] (but excluding […***…]) hardware and associated core sequencing consumables that Illumina makes available for sale to its customers as of the Effective Date, such products shall be offered to Customer at pricing that reflects the same discount off list price as for the Goods set forth in the then-current Exhibit A , and (2) for all Illumina products for nucleic acid sequencing-based Laboratory Developed Tests for NIPT Use and Clinical Use not in (1), such products shall be offered to Customer at pricing that the parties shall negotiate in good faith prior to adding such products to Exhibit A.

Severability; Waiver; Independent Parties. If any provision of this Agreement is held invalid or unenforceable, such provision shall be enforced to the maximum extent permissible so as to effect the intent of the parties, and the remainder of this Agreement will continue in full force and effect. The failure of either party to exercise any right granted herein or to require any performance of any term of this Agreement or the waiver by either party of any breach of this Agreement shall not prevent a subsequent exercise or enforcement of, or be deemed a waiver of any subsequent breach of, the same or any other term of this Agreement. Nothing in this Agreement shall constitute or create a joint venture,

Page 20 of 20

partnership, or any other similar arrangement between the parties. No party is authorized to act as agent for the other party hereunder except as expressly stated in this Agreement.

Export. Customer acknowledges and agrees that the Goods provided under this Agreement may be subject to restrictions and controls imposed by the United States Export Administration Act and the regulations thereunder (or the regulations and laws of another country). Customer agrees not to export or re-export the Goods, or any related technology into any country in violation of such controls or any other laws, rules or regulations of any country, state or jurisdiction.

Notices. All notices required or permitted under this Agreement shall be in writing and shall be deemed received when (a) delivered personally; (b) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid (or ten (10) days for international mail); or (c) one (1) day after deposit with a commercial express courier specifying next day delivery or, for international courier packages, two (2) days after deposit with a commercial express courier specifying 2-day delivery, with written verification of receipt. In addition, the parties shall provide the primary business contacts for this Agreement with a courtesy notice via email; provided, however, that failure to provide such courtesy copy of any notice shall not cause such notice to be defective. All notices shall be sent to the following or any other address designated by a party using the procedures set forth in this sub-section:

If to Illumina

Illumina, Inc.

5200 Illumina Way

San Diego, CA 92122

Attn: Senior Vice President, Corporate Development

With a copy to:

Illumina, Inc.

5200 Illumina Way

San Diego, CA 92122

Attn: General Counsel

If to Customer

Sequenom, Inc.

3595 John Hopkins Court

San Diego, CA 92121

Attn: President

With a copy to:

Sequenom, Inc.

3595 John Hopkins Court

San Diego, CA 92121

Attn: General Counsel

If to Customer, and is an invoice:

Sequenom, Inc.

3595 John Hopkins Court

San Diego, CA 92121

Attn: Accounts Payable

Page 21 of 21


e.	Assignment. All of the terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the respective successors and assigns of the parties. No party shall,

Page 22 of 22

without the prior written consent of the other party, assign or transfer this Agreement (in whole or in part) or assign, transfer, declare a trust of or dispose of in any manner any of its rights and obligations hereunder to any third party, except that either party (i) may assign or transfer this Agreement (in whole or in part) to an Affiliate or ii) may assign or transfer this Agreement, only together with the Pooled Patents Agreement, the Settlement Agreement, and all the Ancillary Agreements to which it is a party, to a third party as part of a merger, sale of stock or shares, or sale of assets in each case relating to the entire business of either Illumina or Customer to which this Agreement and the Pooled Patents Agreement, the Settlement Agreement, and all the Ancillary Agreements relate, as applicable, in each case without any further consent required of the other party. Subject to the foregoing and Section 3.b with respect to New Affiliate, this Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assignees. Any purported assignment or transfer in violation of this Section 30.e shall be null and void ab initio. A party to this Agreement assigning its rights and obligations under this Agreement shall provide written notice of such assignment to the other party as promptly as practicable following the effectiveness of such assignment, which notice shall include the identity of the Person to whom assignment has been made and a copy of assignment documentation evidencing that such Person has agreed to be bound by all of the terms and conditions of this Agreement upon and after such assignment.


f.	Choice of Law. This Agreement and performance by the parties hereunder shall be construed in accordance with the laws of the State of California, U.S.A., without regard to provisions on the conflicts of laws.

Force Majeure. Illumina shall not be responsible for any failure to perform or delay attributable in whole or in part to any cause beyond its reasonable control, including but not limited to acts of God, fire, flood, tornado, earthquake, hurricane, lightning, government actions, actual or threatened acts of war, terrorism, civil disturbance or insurrection, sabotage, labor shortages or disputes, failure or delay in delivery by Illumina’s suppliers or subcontractors, transportation difficulties, shortage of energy, raw materials or equipment, or Customer’s fault or negligence; provided, however, that Customer may terminate any Purchase Order for which the delivery of the Goods subject to such Purchase Order has been delayed for more than […***…] days as a result of such force majeure event. In the event of any such delay the delivery date shall be deferred for a period equal to the time lost by reason of the delay. Except with respect to its obligations to pay any amounts due under this Agreement, Customer shall not be responsible for any failure to perform or otherwise attributable in whole or in part to any cause beyond its reasonable control, including but not limited to acts of God, fire, flood, tornado, earthquake, hurricane, lightning, government actions, actual or threatened acts of war, terrorism, civil disturbance or insurrection, sabotage, labor shortages or disputes.

Entire Agreement; Amendment. This Agreement, including the Settlement Agreement, Pooled Patents Agreement and Ancillary Agreements referenced herein, represents the entire agreement between the parties regarding the subject matter hereof and supersedes all prior discussions, communications, agreements, and understandings of any kind and nature between the parties (other than as stated in the last sentence of this Section 30.h). No amendment to this Agreement or waiver of any right, condition, or breach will be effective unless in writing and signed by both parties. Illumina and Customer agree that this Agreement amends and restates the Original Agreement in its entirety, effective as of the Effective Date, however, for the avoidance of doubt, does not cancel any payment obligations accrued under the Original Agreement.

Insurance. Customer shall obtain and maintain insurance coverage as follows: (i) a policy for liability (including professional and errors & omissions) in the amount of no less than US$5,000,000 per occurrence, and (ii) separately a policy for commercial general liability insurance in the amount of no less than US$10,000,000, in the case of each of (i) and (ii) to protect the Illumina indemnitees under the indemnification provided hereunder. Illumina shall be an additional insured on Customer’s insurance policy or policies and, upon request, Illumina shall be provided appropriate certificates of insurance. Such policies shall provide a waiver of subrogation against Illumina as an additional insured and contain no cross-liability exclusion. Customer agrees that the parties intend that Customer’s insurance coverage will be primary over any other potentially applicable insurance. Customer shall ensure that any umbrella

Page 23 of 23

or excess liability coverage shall not treat the naming of Illumina as an additional insured as a coverage change that voids or terminates such coverage. Customer will not cancel or amend the policies without thirty (30) days prior written notice to Illumina. Customer shall maintain such insurance at all times during the Term and for a period of 3 years thereafter.


j.	Legal Compliance. Nothing in this Agreement is intended, or should be interpreted, to prevent either party from complying with, or to require a party to violate, any and all applicable Laws.

Publicity; Use of Names or Trademarks. Each party shall obtain the prior written consent of the other party on all press releases or other public announcements relating to this Agreement, including its existence or its terms, provided that a party is not required to obtain prior written consent of the other party for press releases or public disclosures that repeat information that has been previously publicly disclosed. Notwithstanding any of the foregoing, if required by Law, including without limitation by the U.S. Securities and Exchange Commission or any stock exchange or Nasdaq, then a party may issue a press release or other public announcement regarding this Agreement, provided that the other party has received prior written notice of such intended press release or public announcement, if practicable under the circumstances, and an opportunity to seek a protective order if practicable under the circumstances, and the party subject to the requirement cooperates with the other party to limit the disclosure and includes in such press release or public announcement only such information relating to this Agreement as is required by such Law to be publicly disclosed. The parties will make all reasonable attempts to diligently and in good faith work together to redact this Agreement to a mutually acceptable extent in the event this Agreement is required by applicable Law to be made public (e.g., SEC filing). Neither party shall use the name or trademarks of the other party without the express prior written consent of the other party.

NIPT Marketing Materials. The marketing materials or test reports of Customer, its Affiliate or Customer Technology Partners will not state or suggest that (a) Illumina or an Affiliate of Illumina provided any part of the testing service, (b) the Illumina technology used to generate the results has been approved, cleared, or otherwise approved by any regulatory body or agency (e.g., U.S. FDA) for any clinical or diagnostic use, or (c) Illumina intends that such technology be used for clinical or diagnostic purpose. Notwithstanding the foregoing, in the event Illumina launches a marketing program during the Term that promotes the identification of Illumina Goods used by Customer for NIPT Use, then the parties shall negotiate in good faith terms under which this Agreement may be amended to include the parties’ rights and obligations regarding any such marketing program.

[SIGNATURE PAGE FOLLOWS.]

THE REMAINDER OF THIS PAGE INTENTIONALLY BLANK]

Each Party has duly executed and delivered this Amended and Restated Sale and Supply Agreement as of the Effective Date.

Sequenom, Inc.: Illumina Inc.:

By: /s/ William Welch__________ By: /s/ Nick Naclerio___________

Name: William Welch Name: Nick Naclerio

Title: Chief Executive Officer Title: SVP, Corporate Development +

GM Enterprise Informatics

Date: __________________________ Date: 12-2-2014________________

Exhibit A, Part 1

Instruments

The following tables list the Hardware subject to purchase under this Agreement and the applicable price and discounts



Part Number	Description	List Price as of Effective Date of the Agreement*	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]

*Illumina has the right to change list prices in the usual course of its business, from time to time.

Instrument Purchase Price for […***…] only

The purchase prices for […***…] instruments purchased under this Agreement are given in the table below. […***…]

By way of example, […***…].



Tier	Cumulative Purchase Threshold	Part Number	Description	Price	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]	[…***…]	[…***…]

Exhibit A, Part 2

Consumables



Part Number	Description	2014 List Price*
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]

*Illumina has the right to change list prices in the usual course of its business, from time to time, however the Customer’s price for Consumables on a per sample basis, for processing samples in the same manner as processed for NIPT Use as of the Effective Date, shall not increase as a result of an increase in list price; provided that if samples are processed in a different manner than for NIPT Use as of the Effective Date, then Customer’s price for Consumables on a per sample basis shall not increase more than 3% annually.

First Quote. Illumina will provide Customer a quotation referencing this Agreement and specifying the price for each Consumable from the Effective Date through March 31, 2015 (the “First Quote”). The First Quote and pricing found therein expires on March 31, 2015 and sets forth the pricing that will be used on all Purchase Orders that are provided by Customer prior to the end of such period. The Purchase Orders placed against the First Quote must reference the First Quote and this Agreement to be valid.

Annual Quotes and Purchase Orders for Consumables. Beginning on March 31, 2015 and thereafter no later than March 31 of each calendar year of this Agreement, Illumina will issue a quotation referencing this Agreement and specifying the price for each Consumable (the “Annual Quote”). Each Annual Quote and pricing found therein expires on March 31 of the next consecutive calendar year and sets forth the pricing that will be used on all Purchase Orders that are provided by Customer prior to the end of such calendar year. The Annual Quote issued on March 31, 2015 will set forth the pricing for the period April 1, 2015 through March 31, 2016. The Purchase Orders placed against each Annual Quote must reference the Annual Quote and this Agreement to be valid. Notwithstanding the foregoing, the pricing for Consumables during the period beginning on July 8, 2016 through March 31, 2017, shall be as set forth in Section 15(b) of the Agreement.

Consumables Purchase Price

The purchase price to be used on the First Quote and on each Annual Quote is equal to the price for TG Consumables and non-TG Consumables found in this Exhibit A less the discount in the table below corresponding to Customer’s Consumable Spend. “Consumable Spend” equals the total amount Illumina has invoiced Customer for shipments of TG-

Consumables and Non-TG Consumables to Customer during the 12 calendar months that ended prior to the date the First Quote or Annual Quote is due. For the avoidance of doubt, any Non-TG Consumables used for NIPT Use and Clinical Use in accordance with Section 11(d) are subject to the Non-TG Consumables pricing, discount and Consumable Spend until such time as Customer may no longer purchase such Non-TG Consumables in accordance with Section 11(d). Non-TG Consumables that are supplied for Research Use as of the Effective Date are subject to the Non-TG Consumables pricing, discount and Consumable Spend.

[…***…]



	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]

Exhibit B

Illumina Manufacturing Facilities

The table below lists the manufacturing locations for the parts listed as of the date of execution of this Agreement. The abbreviations in the table refer to the Illumina manufacturing sites listed below, along with their mailing addresses.

1.SD Illumina Inc.

5200 Illumina Way

San Diego, CA 92122 USA

Illumina Inc.

9440 Carroll Park Dr.

San Diego, CA 92122 USA

2.SG Illumina Singapore

29 Woodlands Industrial Park E1

North Tech, Lobby 3, #02-13/18

Singapore 757716

Consumables



Part Number	Description
		SD	SG
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]
[…***…]	[…***…]	[…***…]	[…***…]

***Confidential Treatment Requested

Schedule 1

Affiliates of Customer as of Effective Date

Sequenom Center for Molecular Medicine, LLC, d/b/a Sequenom Laboratories

Sequenom Biosciences (India) Pvt. Ltd.

Schedule 2

Customer Technology Partners as of Effective Date



Customer Technology Partner	Location	Term Ends	Currently using Illumina platform?
[…***…]	France	2018	[…***…]
[…***…]	Germany	2016	[…***…]
[…***…]	Japan	2019	[…***…]
[…***…]	Japan	2019	[…***…]
[…***…]	Israel	2020	[…***…]

Page 24 of 24

***Text Omitted and Filed Separately with the Securities and Exchange Commission. Confidential Treatment Requested Under 17 C.F.R. Sections 200.80(b)(4) and 230.406.

AGREEMENT

THIS AGREEMENT (this “Agreement”) is made and entered into as of December 2, 2014 (the “Effective Date”) by and between Sequenom, Inc. (“Sequenom”) and The Chinese University of Hong Kong (“University”). Sequenom and University are each referred to herein as a “Party” and collectively as the “Parties.”

RECITALS

WHEREAS, Sequenom, Illumina, Inc. (“Illumina”) and others are parties to that certain settlement agreement dated as of December 2, 2014 (the “Settlement Agreement”) relating to, among other proceedings, the Northern District of California Verinata Health, Inc. et al. v. Sequenom, Inc. et al., 3:12-cv-00865-SI.

WHEREAS, Sequenom and University are parties to that certain (1) License Agreement dated as of September 16, 2008 (the “License Agreement (’256)”), (2) License Agreement dated as of May 3, 2011 (the “License Agreement (’336)”), and (3) License Agreement dated as of May 3, 2011 (the “License Agreement (’335)”, and together with the License Agreement (’256) and License Agreement (’336), collectively, the “Sequenom License Agreements”).

WHEREAS, University and Illumina are parties to that certain (a) License Agreement dated as of December 2, 2014, pursuant to which University grants to Illumina certain licenses and other rights related to the inventions and other technology described in University Docket No. […***…] (the “License Agreement (’401)”), and (2) License Agreement dated as of December 2, 2014, pursuant to which University grants to Illumina certain licenses and other rights related to the inventions and other technology described in University Docket No. […***…] (the “License Agreement (’403)”, and together with the License Agreement (’401), collectively, the “Illumina License Agreements”). The Sequenom License Agreements and the Illumina License Agreements, collectively, the “License Agreements”).

WHEREAS, in connection with the Settlement Agreement, University agreed to (a) certain amendments to the Sequenom License Agreements, (b) assignments by novation from Sequenom to Illumina of the Sequenom License Agreements (as amended) as of 11:59 P.M. Pacific Time on December 2, 2014, (c) grants (following such assignments by novation) by Illumina to Sequenom of sublicenses under Illumina’s rights under the Inventions subject to the License Agreements, and (d) the Illumina License Agreements (collectively, “Settlement-Related Agreements”).

NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants and other agreements set forth herein and the mutual benefits to be gained by the performance hereof, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted, the Parties hereby agree as follows:

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1.Definitions.

(a) “Licensed Product” shall mean, collectively, Licensed Product as defined in any one or more of the License Agreements.

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(b) “Non-IVD Net Sales” shall mean with respect to a Non-IVD Licensed Product sold by Sequenom or its Affiliates, the gross revenue actually received by Sequenom or its Affiliates for the sale to any third party of such Non-IVD Licensed Product.

(c) “US T 21 Test” shall mean a non-invasive, prenatal, circulating cell-free, fetal nucleic acid-based trisomy 21 test for United States sales only.

(d) Any capitalized term not defined in this Agreement shall have the meaning ascribed to such term in the respective License Agreements (as amended to date, including by the Settlement-Related Agreements).

2. Payments. In consideration for University’s agreement to the Settlement-Related Agreements, Sequenom shall pay to University:

(a) Within ten (10) days after the Effective Date, the following amounts:

(i) Six million US dollars (US$ 6,000,000);

(ii) Fifty Thousand US dollars (US $50,000) for […***…]; and

(iii) One Hundred Thousand US dollars (US $100,000) for […***…].

(b) Provided that at least one of the patent applications subject to the Pooled Patents Agreement effective as of December 2, 2014 (the “Pooled Patents Agreement”), between Illumina and Sequenom is still pending or at least one of the issued patents has not expired, an incurred royalty on Non-IVD Net Sales equal to the following (the “Non-IVD Royalty”):

(i) For such sales of Non-IVD Licensed Products by Sequenom or its Affiliates during 2015, the amount equal to […***…] percent ([…***…] %) of the Non-IVD Net Sales for such sales, up to […***…] US dollars (US$ […***…]);

(ii) For such sales of Non-IVD Licensed Products by Sequenom or its Affiliates during 2016, the amount equal to […***…] percent ([…***…] %) of the Non-IVD Net Sales for such sales, up to […***…] US dollars (US$ […***…]);

(iii) For such sales of Non-IVD Licensed Products by Sequenom or its Affiliates during 2017, the amount equal to […***…] percent ([…***…] %) of the Non-IVD Net Sales for such sales, up to […***…] US dollars (US$ […***…]);

(iv) For such sales of Non-IVD Licensed Products by Sequenom or its Affiliates during 2018, the amount equal to […***…] percent ([…***…] %) of the Non-IVD Net Sales for such sales; and

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(v) For such sales of Non-IVD Licensed Products by Sequenom or its Affiliates during 2019, the amount equal to […***…] percent ([…***…] %) of the Non-IVD Net Sales for such sales.

(c) An additional royalty on Non-IVD Net Sales in respect of each sale of US T 21 Test sold by Sequenom or its Affiliates equal to […***…] percent ([…***…]%) of Non-IVD Net Sales for such US T 21 Test (the “US T 21 Test Royalty”).

(i) The US T 21 Test Royalty shall expire upon a cumulative royalty payment attributable to this […***…]% of Non-IVD Net Sales to University, whether under the License Agreement (’335) for sales prior to the Effective Date or under this Section 2(c) for sales on or after the Effective Date, of […***…] US dollars (US $[…***…]). For the avoidance of doubt, Sequenom does not have an obligation to pay the full $[…***…], or any portion thereof, except as incurred based on such Non-IVD Net Sales during the term of the term of the License Agreement (’335) and subject to Section 2(c)(iii) below.

(ii) The US T 21 Test Royalty shall apply to sales of the US T 21 Test, regardless of whether or not the Inventions within University Docket No. […***…]335 related to the US T 21 Test. Solely for purposes of this Section 2(c), the term “Non-IVD Licensed Product” in the definition of Net Sales Value in the License Agreement (‘335) shall be replaced with the term “US T 21 Test”.

(iii) The provisions of this Section 2(c) shall survive any termination of the License Agreement (’335) by Licensee, unless such termination is due to a material breach of the License Agreement (’335) or of the Sponsored Research Agreement (No.TS116377) between University and Sequenom.

(d) During the term of the Pooled Patents Agreement, an additional royalty equal to […***…]% of any minimum payments (or the portion thereof), if any, actually paid by Illumina to Sequenom, less any amounts credited or offset by Illumina against the applicable minimum payment amounts by Illumina thereunder (the “Minimum Payment Royalty”).

(e) The royalties provided for in Section 2(b), 2(c) and 2(d) shall be paid semi-annually, and shall be in arrears ninety (90) days after the last day of June and December in each year in accordance with Section 5.

3. Commercialization Report and Accounting for and Payment of Royalties and Maintenance of Records.

(a) Sequenom shall, within 90 days after the last day of June, and December, send to University a confidential commercialization report which comprises a statement specifying royalties payable to University, which shall include the quantities of Non-IVD Licensed Product or US T 21 Test, as applicable, sold or otherwise disposed of, the sales price of Non-IVD Licensed Product or US T 21 Test, as applicable, sold or otherwise disposed of, and a calculation showing

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the royalties due. There shall be no cross-collateralization, no accounts shall be offset and no other adjustment shall be made between the Non-IVD Licensed Product or US T 21 Test, as applicable, or between territories, areas or countries of the Territory unless provided otherwise in the License Agreement (’335).

(b) Royalty payments attributable to the Non-IVD Royalty, the US T 21 Test Royalty and the Minimum Payment Royalty shall be individually itemized in statements from Sequenom to University.

(c) The first commercialization report, covering the period from the Effective Date to the 31^st of December, 2014 shall be due on 1^st of April, 2015. Each subsequent commercialization report should cover a period of six months as stipulated in Section 2(e).

(d) Sequenom shall keep during the term of this Agreement and two years thereafter, records or accounts sufficient to enable accurate calculations of royalties due to University under this Agreement. University shall be entitled to appoint an auditor not employed by the University and reasonably acceptable to Sequenom to determine the correctness of any royalty statement or royalties payable or paid hereunder. The cost of inspection by such auditor shall be borne by University unless the auditor’s report indicates that Sequenom has under-reported its sales of Non-IVD Licensed Product or US T 21 Test, as applicable by more than five (5) percent in which case Sequenom shall bear the full cost of such audit.

4. Interference Expenses. Sequenom further agrees to reimburse University for documented Interference Expenses incurred during the Term of the applicable License Agreement in the Territory; […***…]. Said reimbursements to be made to University within thirty (30) days upon presentation of invoice to Sequenom therefor.

5. Payment Terms. All payments to be paid hereunder shall be made in reference to this Agreement for purpose of identification. All payments to University are to be made payable to “The Chinese University of Hong Kong”, to be in US dollars and to be sent to the Office of Research and Knowledge Transfer Services at the above address of University or by wire transfer to the following account:

Account Name: The Chinese University of Hong Kong

Account No.: […***…]

Swift Code: […***…]

Name of Bank: […***…]

[…***…]

and shall be paid in full without any deductions, save for such tax as Sequenom is legally bound to withhold. Sequenom shall provide reasonable assistance to University, free of charge, to recover any tax so withheld.

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6. Additional Covenant. Sequenom shall not terminate the Pooled Patents Agreement without the University’s prior written consent.

7. Confidentiality. The terms of this Agreement shall be deemed confidential information under this Agreement and there shall be no public disclosure except with prior mutual agreement, unless as provided for in this Section 7. In the event that a Party is required to publicly disclose the terms of this Agreement pursuant to the rules of any securities exchange

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or the U.S. Securities and Exchange Commission, or other regulatory or governmental agency, to which any Party is subject, the Party shall, where legally permissible, give prior written notice to the other Party, redact as much confidential information as is permitted under such rules and shall agree on all such redactions with the other Party prior to disclosure, except where such agreement may be precluded by advice of legal counsel of a Party.

8. Term and Termination. This Agreement shall come into effect on the Effective Date and, unless terminated earlier in accordance with this Agreement, shall continue in force for until the expiration or earlier termination of the License Agreements.

9. Governing Law and Jurisdiction.

(a) This Agreement shall be governed by and construed in accordance with the laws of the Hong Kong SAR, excluding conflict-of-law principles that would cause the application of the laws of any other jurisdiction.

(b) Should Sequenom bring suit under or relating to this Agreement, such suit, any resulting counterclaim, and the Agreement shall be governed by and in accordance with the laws of the Hong Kong SAR and the Parties hereby agree to submit to the exclusive jurisdiction of the courts of the Hong Kong SAR, without regard to any choice of forum principles that might apply to move the forum to another jurisdiction. Should University bring suit under or relating to this Agreement, such suit and any resulting counterclaim, and this agreement shall be governed by and construed in accordance with the laws of the Hong Kong SAR and the Parties hereby agree to submit to the exclusive jurisdiction of any of the state of federal courts of California, Delaware, or the state where Sequenom is incorporated or maintains a principal place of business, to be chosen at University’s discretion, without regard to any choice of forum principle that might apply to move the forum to another jurisdiction.

10. Assignment. Sequenom shall not assign, mortgage, charge or otherwise transfer any rights and obligations under this Agreement (and any attempt to do so shall be null and void), without the prior written consent of University, provided, however, that each Party may assign its rights and obligations hereunder without such consent to an entity that acquires all or substantially all of the business or assets of the party to which this Agreement pertains, whether by merger, reorganization, acquisition, sale, or otherwise, provided that reasonable prior written notice is given to the other Party and the Assignee shall expressly in writing assume all rights and obligations of Sequenom under this Agreement. Upon such assignment, Assignee shall assume all rights and obligations under this Agreement. Sequenom shall procure the Assignee to enter into novation agreements with University and shall procure that either Sequenom or the Assignee shall bear all reasonable costs incurred by University (including legal costs and attorney charges) in connection with the novation agreements as well as the registration or giving of notice to patents administrations and other relevant third parties as necessitated by the assignment.

(The remainder of this page is intentionally left blank.)

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In witness whereof, the Parties hereto have caused this Agreement to be executed as of the date first written above by their respective duly authorized officers.

Sequenom, Inc.

By: /s/ Bill Welch____________

Name: Bill Welch_______________

Title: CEO____________________

The Chinese University of Hong Kong

By: /s/ Fanny M. Cheung_______

Name: Professor Fanny M. Cheung_

Title: Pro-Vice-Chancellor________

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Exhibit 21.1

SUBSIDIARIES OF THE REGISTRANT

Sequenom Hong Kong, Ltd Hong Kong

Sequenom Biosciences (India) Pvt. Ltd India

Sequenom Center for Molecular Medicine, LLC, Michigan, United States

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:


(1)	Registration Statement (Form S-3 Nos. 333-167061 and 333-147146) of Sequenom, Inc.,


(2)	Registration Statement (Form S-8 (Nos. 333-189520, 333-182911, 333-175513, 333-172302, 333-167831, 333-152230, 333-134906, 333-125456, 333-112322, 333-102769, 333-99629, 333-90778 and 333-67332) pertaining to the 2006 Equity Incentive Plan, 1999 Employee Stock Purchase Plan, 1999 Stock Incentive Plan, and the New-Hire Equity Incentive Plan;

of our reports dated March 9, 2015, with respect to the consolidated financial statements of Sequenom, Inc., and the effectiveness of internal control over financial reporting of Sequenom, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2014.

/s/ Ernst & Young LLP

San Diego, California

March 9, 2015

Exhibit 31.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William J. Welch, certify that:

1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2014 of Sequenom, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date: March 9, 2015	/s/ William J. Welch
	William J. Welch
	Chief Executive Officer
	(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Carolyn D. Beaver, certify that:

1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2014 of Sequenom, Inc.;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date: March 9, 2015	/s/ Carolyn D. Beaver
	Carolyn D. Beaver
	Chief Financial Officer
	(Principal Financial Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. § 1350), William J. Welch, Chief Executive Officer, of Sequenom, Inc. (the “Company”), hereby certifies that, to the best of his knowledge:

1. The Company's Annual Report on Form 10-K for the period ended December 31, 2014, to which this Certification is attached as Exhibit 32.1 (the “Annual Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act, and

2. The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission (“SEC”) or its staff upon request.

This certification accompanies the Form 10-K to which it relates, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Annual Report), irrespective of any general incorporation language contained in such filing.

IN WITNESS WHEREOF, the undersigned has set his hand hereto as of the 9th day of March, 2015.



		/s/ William J. Welch
		William J. Welch
		Chief Executive Officer
		(Principal Executive Officer)

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. § 1350), Carolyn D. Beaver, Chief Financial Officer of Sequenom, Inc. (the “Company”), hereby certifies that, to the best of her knowledge:

1. The Company's Annual Report on Form 10-K for the period ended December 31, 2014, to which this Certification is attached as Exhibit 32.2 (the “Annual Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act, and

2. The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, the undersigned has set her hand hereto as of the 9th day of March, 2015.