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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

HELICOS BIOSCIENCES CORPORATION
(Exact name of registrant as specified in its charter)

         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 ý

         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 ý

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

         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). Yes o    No o

         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. ý

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

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

         The aggregate market value of the registrant's Common Stock held beneficially or of record by stockholders who are not affiliates of the registrant, based upon the closing price of the Common Stock on June 30, 2009, as reported by the NASDAQ Global Market, was approximately $7,736,729. For the purposes hereof, "affiliates" include all executive officers and directors of the registrant.

         As of March 31, 2010, the Company had 79,456,334 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

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HELICOS BIOSCIENCES CORPORATION (a development stage company)
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009
TABLE OF CONTENTS

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PART I

ITEM 1.    BUSINESS

OVERVIEW

        Helicos BioSciences Corporation is a life sciences company which has developed proprietary technology focused on the research, drug discovery and clinical diagnostics markets. Our proprietary True Single Molecule Sequencing (tSMS)™ technology enables rapid analysis of large quantities of genetic material by directly sequencing single molecules of DNA or single DNA copies of RNA (cDNA) and our newest approach of direct sequencing of RNA. Our tSMS approach differs from current methods of sequencing DNA or RNA because it analyzes individual molecules of DNA directly instead of analyzing a large number of copies of the molecule produced through complex sample preparation techniques. Our tSMS technology eliminates the need for costly, labor-intensive and time-consuming sample preparation techniques, such as amplification or cloning, which are required by other methods to produce a sufficient quantity of genetic material for analysis.

        Our Helicos® Genetic Analysis Platform is designed to obtain sequencing information by repetitively performing a cycle of biochemical reactions on individual DNA or RNA molecules and imaging the results after each cycle. The platform consists of an instrument called the HeliScope™ Single Molecule Sequencer, an image analysis computer tower called the HeliScope™ Analysis Engine, associated reagents, which are chemicals used in the sequencing process, and disposable supplies. The information generated from using our tSMS products may lead to improved drug therapies, personalized medical treatments and more accurate diagnostics for cancer and other diseases.

        In the first quarter of 2010, we began a process of considering alternatives to our existing long-term strategic focus, including a repositioning of the company in the genetic analysis markets. We believe that an adjustment to our existing strategy would better position us to take advantage of the unique capabilities of our proprietary platform and to address the growing competition in the genetic research marketplace. Although we made progress during 2009 in the genetic research market as demonstrated by our growing installed base and the number of peer reviewed publications referencing our single molecule sequencing technology, we believe that Helicos must consider a number of alternatives to improving shareholder value and, as a result, have embarked upon this process with a view toward repositioning Helicos' highly differentiated single molecule sequencing solution. In this regard, we have continued our relationship with Thomas Weisel Partners LLC (TWP), a nationally recognized investment bank, to assist us with our evaluation and execution of strategic alternatives and long term financing strategy. We have also engaged a variety of consultants in the genomic research, services and diagnostics industries to evaluate available alternatives.

        In particular, we believe that Helicos' technology is well suited for applications in molecular diagnostics. We believe that diagnostics applications may benefit from the specific features for which the Helicos System is uniquely suited, including the platform's quantitative accuracy, the use of small sample quantities in simple preparation methods, and high throughput, as well as lack of biases typically seen with sample amplification.

        We anticipate the repositioning evaluation process will take at least several months. There can be no assurance, however, that we will be successful in re-focusing our long-term strategy or that any transaction we undertake to implement a change in strategy will ultimately be completed or, if one is undertaken, there can be no assurance regarding its terms, timing or sources of funding. During this time, we will focus our limited resources on satisfying current customer needs and stabilizing system performance, which has varied at some customer and placement sites. In addition, new initiatives will be prioritized to those that reduce operational risk and conserve resources while we consider our strategic alternatives and direction.

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BACKGROUND ON DNA STRUCTURE AND FUNCTION

        The genetic program that controls a living cell is encoded in its DNA. The diagram below shows the typical double-helix structure of DNA. The two strands are made of subunits called nucleotides, each of which contains a phosphate, a sugar and a side-chain called a base. The phosphates and sugars form the backbone of the polymer, and the bases face each other. The letters A, G, T and C represent the four types of nucleotide bases: adenine, guanine, thymine and cytosine.

        The human genome includes approximately 30,000 genes. Genes are segments of DNA that contain the information needed for a cell to make proteins. Each gene has one or more parts called exons including coding regions that specify the sequence of amino acids for that protein. Genes also contain regulatory elements that determine when, where and how much protein is made. While it is currently understood that approximately 97% of the human genome does not code for proteins, recent research suggests that this non-coding DNA also contains important regulatory elements which plays an important role in controlling when and how much genes are expressed. In addition, new knowledge reveals a wealth of information in the transcribed regions of the genome that do not make up protein coding genes but yet these non-coding RNAs are becoming increasingly important in the study of biology.

        The process of making proteins using the information in DNA involves a process called gene expression. To express a gene, enzymes called RNA polymerases transcribe the coding region into molecules of messenger RNA, or mRNA. The mRNA moves from the nucleus into the cytoplasm, where the cell's protein synthesis machinery translates the genetic sequence information and assembles a chain of amino acids into a protein.

GENETIC ANALYSIS INDUSTRY OVERVIEW

        Genomic information has become a critical tool to understanding the mechanics of life, the environmental effect on biological systems, diagnosis of disease and treatment of disease. Life science tools that analyze genomic material have provided tremendous insights into the complexity and variability of the genome and have changed the methods and strategies by which scientists conduct their research. Genomic information enables the possibility and promise of personalized medicine and should

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bring forth a new era in patient knowledge whereby individuals now can have access to their own genetic information to make informed decisions concerning the prevention and treatment of disease.

        Since the development of genetic engineering techniques in the 1970s, the analysis of genetic material has become a mainstay of biological research. The first automated DNA sequencer was invented in 1986, based on technology developed by Frederick Sanger and his colleagues in 1975, which is commonly referred to as Sanger sequencing. Subsequent versions of commercial DNA sequencers have increased the speed of DNA sequencing by 3,000 fold, making possible the Human Genome Project. In 1996 the first commercial microarray was introduced and enabled a new era of RNA analysis by measuring gene expression across many genes in a single experiment. Subsequent versions of the commercial microarrays including DNA and RNA have significantly increased the amount of information per run and provided selected single nucleotide polymorphisms, or SNPs of the whole human genome on a single chip, enabled large scale genome-wide SNP association studies and have been commercialized for several diagnostic applications. Since 2007 there has been significant replacement of both of these existing genetic analysis technologies with 1^st and 2^nd Next Generation Sequencers (NGS). Today, manufacturers of systems, supplies and reagents for performing genetic analysis, which includes DNA sequencing, genotyping, and gene expression analysis, serve a worldwide market of approximately $5 billion, according to Strategic Directions International with an estimate that DNA sequencing serves approximately $1 billion of this demand for genetic analysis. The remainder of this market is addressed by other genetic analysis methods, such as gene expression analysis and genotyping. Recent studies have demonstrated the complexity and variability of the human genome. This new information will necessitate larger scale studies, and require new methods and strategies that combine different application and data analysis techniques across these larger studies. Since 2007 the market has migrated away from Sanger methods of DNA and RNA sequencing and microarray based technologies because of their inherent technology limitations in throughput, cost and complexity of sample preparation. It is estimated that approximately 30% of the Sanger sequencing systems have been replaced by 1^st and 2^nd NGS systems.

        To explore the next frontier of biomedical research, scientists must design comprehensive experiments on a larger scale than previously thought possible. Current methods of genetic analysis include DNA sequencing, gene expression analysis, genotyping and epigenetics. Until the advent of NGS technologies, researchers were required to use several different platform types each with its own unique sample preparation and data analysis formats. DNA and RNA sequencing provide the most comprehensive genome-wide information without any prior knowledge of the sequence or sequence variation; however, the limitations of Sanger sequencing technologies restrict their use in large-scale studies and as a replacement for multiple technologies. Whole genome scale projects were generally out of the reach of the individual user and were in the exclusive domain of large multi-instrument sequencing centers because of the inherent limitations of low throughput, high cost and complexity of use.

        In response to these limitations, next generation sequencing technologies are seeking to improve the speed and reduce the per base cost of sequencing. However, these technologies continue to be limited by their sensitivity to the need for amplification or cloning to obtain enough DNA or RNA from a sample for their instruments to adequately read the sequence. As with Sanger-based sequencing technologies, this requirement for amplification or cloning adds to the cost and complexity of these sequencing methods, limits the scalability of sample preparation and may limit the accuracy of the data they produce. Moreover, many 1^st and 2^nd NGS technologies appear to possess biases and are hampered by their lack of quantitative accuracy which may limit their applicability to the broader genetic analysis space.

        In the past, the prohibitive cost of high-volume sequencing at the genome scale has caused scientists to use other genetic analysis technologies to examine discrete aspects of gene structure or function. For example, researchers use gene expression analysis to compare amounts of mRNA made

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from different genes, and genotyping to examine specific gene segments known to contain sequence variations, called single nucleotide polymorphisms, or SNPs. Technologies available for gene expression analysis and genotyping include:

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chip- or bead-based microarrays, in which collections of short DNA molecules are attached to the surface of a glass chip or to beads and used to determine the identity and abundance of particular DNA or RNA molecules in a sample; and



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real-time PCR, also called RT-PCR, which is the method of biochemically copying or amplifying the DNA in a sample through a process called PCR in which the identity and quantity of amplified DNA from the sample is measured as the analysis is performed.

        While these other genetic analysis technologies address the cost limitations of DNA and RNA sequencing, they generally provide only limited information and suffer from a range of technical limitations, the most important of which is the high cost of replacement as new sequence information is added and products are updated. NGS technologies that enable a broad range of applications with a relatively similar sample preparation methodology and data analysis format would greatly enable the ability to perform both broad and deep studies of important biological samples. NGS technologies that do not require significant investments in up front automation and infrastructure would also allow large scale studies to be performed in mid to small sized laboratories as well as diagnostic laboratories by allowing continuous use of the same capital equipment for each of the different genetic analysis applications.

        The scope and pace of much important research, and the routine application of genomic information in clinical medicine, remain limited by the cost and throughput of the currently available genomic analysis systems. Efforts to overcome this barrier are endorsed by the National Institutes of Health, whose National Human Genome Research Institute established the "Revolutionary Genome Sequencing Technologies—The $1,000 Genome," grant program to fund researchers' efforts to develop technology to enable the complete sequencing of an individual human genome at a cost of approximately $1,000. This goal is measured by the cost of the consumables used in the sequencing of the human genome and without regard to the cost of the sequencing instrument. In September 2006, we received a $2 million grant under this program to foster our technology development on the path to the $1,000 genome. In September 2009, we were awarded a $2.9 million grant as part of the Sequencing Technology Development Program representing NHGRI's Signature Project for the American Recovery and Reinvestment Act. This project was specifically designed to support large-scale, high impact research projects that are expected to accelerate critical scientific breakthroughs and enable growth and investment in biomedical research. In addition, in April 2010, we were awarded a $1.5 million grant from the National Institutes of Health in support of our project titled "True Direct Single Molecule RNA Sequencing."

        Scientists have long realized that many of the disadvantages of ensemble based sequencing could be addressed through the direct sequencing of single molecules. This ability to directly measure individual sequences would reduce the cost and complexity of large scale experiments while increasing sensitivity. The simplicity of the sample preparation and detection would also provide the capability to combine multiple application techniques in order to get the most comprehensive view of each sample. For nearly 20 years, researchers have attempted without success to develop such a single molecule sequencing technology. Past efforts fell short largely due to complexity or technological hurdles in signal detection, surface materials, biochemistry, enzymology, bioinformatics, automation or engineering. In 2003, one of our co-founders, Stephen R. Quake, DPhil, demonstrated, we believe for the first time, that sequence information could be obtained from single molecules of DNA. We have replicated and improved upon Professor Quake's approach to develop our True Single Molecule Sequencing (tSMS)^TM technology. (Harris T et al. Single Molecule DNA Sequencing of a Viral Genome. Science. Vol. 320, no. 5872, pp. 106-109. 2008.)

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HELICOS TECHNOLOGY

        Our True Single Molecule Sequencing (tSMS)^TM technology is a powerful approach that directly measures single molecules. This novel approach allows our system to directly analyze billions of individual sequences in parallel and avoids the need for complex sample preparation techniques, amplification or cloning required by other methods. Our products utilizing our tSMS technology benefit from simple, scalable sample preparation techniques and automated high-throughput sequencing processes that enable sequencing with speed and provide unprecedented sensitivity and quantitative accuracy. This technology provides scientists and clinicians with extensive capabilities for basic and translational research, for pharmaceutical research and development, and for the development and clinical application of genomic diagnostics.

        Our Helicos® Genetic Analysis System is designed to provide the following benefits:

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Enhanced throughput.  Scientists measure the throughput of a DNA sequencing technology based on the number of bases analyzed per unit of time. By the end of 2009, the HeliScope^TM Single Molecule Sequencer had achieved throughput rates of approximately 180 million analyzable bases per hour, depending on the application. In addition, we have designed the imaging capability of the HeliScope Sequencer to accommodate a maximum throughput approaching one billion bases per hour. To achieve this additional increase in throughput, we would need to improve the efficiency and accuracy of the system's sequencing chemistry, increase the density of strands of DNA that bind to the surface of the flow cell in which the sequencing reactions take place and make corresponding enhancements to the image processing software.



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Simplicity.  Because the sample preparation process for genome sequencing using our HeliScope Sequencer involves only small quantities of reagents and a few simple steps, we believe that it will be less costly, less time-consuming, less error prone, and require lower amounts of starting material (without amplification) than the sample preparation processes used in current NGS technologies.



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Scalability.  The sample preparation process is highly scalable because it does not require the need for the costly automation of complex sample preparation techniques, amplification or cloning required by existing NGS methods and thus makes genomic scale studies possible in small to mid-sized research organizations.

        We believe that our Helicos System can be used as a universal method of genetic analysis potentially replacing existing methods of gene expression analysis and genotyping. Based on its anticipated performance, we believe that the Helicos System is capable of performing applications of gene expression analysis at a comparable cost per sample, and in the case of high volume analyses, at lower cost, in comparison with current technologies. Moreover, we believe that performing expression analysis using the tSMS approach provides a more unbiased and accurate measurement of expression. In addition, as we consider our repositioning strategy, we believe that Helicos' technology is uniquely suited for applications in molecular diagnostics. In particular, we believe that our platform's quantitative accuracy, the use of small sample quantities in simple preparation methods, and high throughput, as well as lack of biases typically seen with sample amplification, can be specially useful in the field of molecular diagnostics.

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Our True Single Molecule Sequencing (tSMS)^tm Technology

        Our True Single Molecule Sequencing (tSMS)^tm technology enables the simultaneous sequencing of large numbers of strands of single DNA molecules. The first step of our single molecule sequencing approach is to cut, or shear, a sample of DNA or RNA into relatively small fragments. The double helix of each fragment is then separated into its two complementary strands. Each strand is used as a template for synthesis of a new complementary strand. This is accomplished through a series of biochemical reactions in which each of the four bases are successively introduced. If the introduced base is complementary to the next base in the template, it will be added to the new strand. Each of the added bases is tagged with a fluorescent dye, which is illuminated, imaged and then removed. The sequence of each new DNA or RNA strand is determined by collating the images of the illuminated bases from each cycle of highly specific incorporation and imaging. The raw sequencing data is then analyzed by computer algorithms. In 2009, our scientists authored or co-authored five scientific manuscripts based on our tSMS technology in several peer-reviewed journals.

        The series of figures below outlines an example of how our tSMS technology operates to sequence single molecules from genomic DNA. The actual process our HeliScope^tm Single Molecule Sequencer will utilize to sequence DNA molecules will depend on the application. In September of 2009 we published the first demonstration of the direct sequencing of RNA molecules which enables additional potentially significant areas of research.

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The Helicos® Genetic Analysis Platform

        The Helicos® Genetic Analysis Platform consists of the following components:

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Helicos® Genetic Analysis System—The instrument component of the Helicos Genetic Analysis Platform which consists of three major components:



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The HeliScope™ Single Molecule Sequencer which performs the True Single Molecule Sequencing (tSMS)™ chemistry and directly analyzes images of single molecules, producing accurate sequences of billions of templates at a time. The HeliScope Sequencer consists of a high-speed mechanical stage and a laser illumination subsystem, an image acquisition subsystem, a fluid handling subsystem and computer subsystems that control and analyze the

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sequencing reactions. To operate the instrument, a user loads a prepared sample of DNA, complementary DNA (cDNA) or RNA onto our flow cell using the HeliScope^TM Sample Loader, places the flow cell on the mechanical stage and inserts our consumable reagent pack into the fluid handling system. From that point onward, all sequencing reactions are conducted automatically by the instrument. After each base is added, the mechanical stage moves the flow cells under a microscope lens. Four lasers illuminate the fluorescent tags of the bases, and a camera images the flow cells through the microscope lens.

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HeliScope™ Analysis Engine provides computing power for near real-time image analysis and on-board data storage. The on-board data storage is appropriately sized to support two complete runs, enabling flexibility of operation and maximizing uptime. The Analysis Engine operates downstream from the HeliScope™ Sequencer in the data pipeline. It consists of the System Server, Object Finders, and an uninterruptible power supply (UPS). Components are mounted in a single enclosure for locating convenience and installation ease. Data communication between the HeliScope Sequencer and Analysis Engine is accomplished across Gigabit Ethernet (GigE) lines, providing high reliability and allowing for considerable physical distance between components.



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HeliScope™ Sample Loader facilitates and speeds the loading of samples into the Helicos® flow cells. It provides 25 discreet loading ports to ensure proper separation of samples and ease of loading.



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Helicos® True Single Molecule Sequencing (tSMS)™ Reagent Kits.  Reagent kits for sequencing which consist of proprietary formulations of a DNA polymerase enzyme, our proprietary fluorescently tagged bases, our proprietary imaging reagent, a proprietary formulation of a cleavage reagent and our proprietary application specific flow cells that have a proprietary surface coating with the chemical and optical properties needed for single molecule sequencing.

        Consumable reagents.    The biochemical sequencing reactions that occur in the HeliScope Sequencer involve the use of a proprietary formulation of a DNA polymerase enzyme, proprietary fluorescently tagged bases and proprietary imaging reagents. We have developed proprietary nucleotide triphosphates, called Virtual Terminator^TM Nucleotides, that allow us to add only one base at a time to each DNA strand. Our proprietary imaging reagents improve the stability of our fluorescent tags and increase their brightness. Our cleavage reagents are used to remove the fluorescent tags from the Virtual Terminators nucleotides.

        Disposable supplies.    The HeliScope^TM Single Molecule Sequencer is designed to perform sequencing reactions inside one or two glass flow cells. When two flow cells are used, the system alternates between the flow cells, performing sequencing reactions in one flow cell while recording images from the other. Each flow cell has an active area of about 16 square centimeters and contains 25 separate channels. Our flow cells are designed to allow researchers to sequence separate samples in each channel, which will enable the simultaneous sequencing of at least 50 different DNA, cDNA or RNA samples. The initial version of our flow cell is designed to permit binding of DNA strands at an average density of approximately 100 million strands of DNA per square centimeter, equaling an average of approximately 2.8 billion strands of DNA for both flow cells. In the first quarter of 2010, we announced the availability of a series of new reagent kits and run configurations that allow customers to choose the use of 1 or 2 flow cells and between 1 and 50 channels, adjust the number of strands of DNA imaged, and select run times between 2.5 and 8 days.

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APPLICATIONS

        The Helicos® Genetic Analysis System provides new opportunities for large scale genomic studies which encompass many areas of research, development and diagnostic use The areas where we believe Helicos' technology offers significant opportunities include:

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Studying the Human Genome.  The ENCODE studies published in 2007 and 2008 provided new insights into the complexity of the human genome. These initial studies published in 2007, which examined only 1% of the genome architecture revealed a much more dynamic and complex genome state at every level including organization, sequence, expression and regulation. New approaches which allow a window into the genome allowing unbiased interrogation are clearly required to fully understand the genome. During 2008, we saw the emergence of next generation sequencing technology applied to a fuller understanding of the genome with particular emphasis focused on the transcriptome. Through deep resequencing of the transcriptome, we are gaining new insights in the truly remarkable resilience of the genome and the variety of coding and non-coding RNAs playing intimate roles in gene regulation. During 2008 and 2009 several publications of complete human genome sequences have demonstrated levels of human genome variation far exceeding initial expectations. During 2009, full genome sequencing focused on decoding tumor genomes and uncovering rare Mendelian mutations for rare disease causing gene variants. In 2009, Dr. Steven Quake, Helicos SAB Chair and company founder also published the first single molecule sequencing of a human genome. The pace of technology advancements to drive costs of sequencing down has continued in earnest. The Helicos System provides an important platform for the depth and breadth of genomic studies required to fully unlock the secrets of the genome and the role of genome variation in health and disease.



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Disease association studies.  2007 and 2008 represented landmark years in the search for genes involved in common disease. As we have known, common diseases and conditions involve complex genetic factors and environmental interactions to produce the visible measurements or features of disease. In 2007, large scale genetic association studies including the Wellcome Trust Case Control Consortium and the Genetic Association Information Network (GAIN) identified, using high-throughput genotyping technologies, multiple genes and gene regions associated with diseases such as coronary artery disease, Type I and Type II diabetes, obesity, Crohn's Disease, rheumatoid arthritis, and bipolar disorder. In 2008, additional publications on a broad survey of diseases continued in earnest. Yet what we now have learned is that common variants associated with these diseases only begin to scratch the surface of the underlying individual variation contributing to these associations. By sequencing the genomes or selected genes from many individuals with a given condition, it may be possible to identify the causative mutations underlying the disease. Ongoing efforts are focused on the subsequent sequencing of the genomic regions associated with these common diseases to attempt the search for further genomic factors accounting for disease contributions. This research may lead to breakthroughs in disease diagnosis, prevention and treatment.



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Molecular diagnostics.  Patients who present with the same disease symptoms often have different prognoses and responses to drugs based on their underlying genetic differences. We believe that delivering patient-specific genetic and genomic information at a reasonable cost represents a multi-billion dollar potential market waiting to be fully realized. Commercial markets for molecular diagnostics include gene- or expression-based diagnostic kits and services, targeted gene resequencing for companion diagnostic products offer the opportunity for selecting and monitoring particular therapies, as well as patient screening for early disease detection and disease monitoring. Creating more effective and targeted molecular diagnostics and screening tests requires a better understanding of genes, regulatory factors and other disease- or drug-related factors. We believe that our platform's quantitative accuracy, the use of small sample quantities in simple preparation methods, and high throughput, as well as lack of biases

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typically seen with sample amplification, can be particularly useful in the field of molecular diagnostics.

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Cancer research.  Cancer genetics involves understanding the effects of the inherited genome as well as the tumor genome including acquired mutations and other genetic alterations. Diagnosing and treating cancer therefore requires a more comprehensive understanding of the individual patient tumor genome to better-predict responses to drug therapy. We believe the availability of low-cost genomic analysis including quantitative Digital Gene Expression, RNA Sequencing and microRNA profiling on small samples, circulating tumor cells, tumor cell biopsies or formalin-fixed paraffin embedded tissue specimens to characterize acquired changes of the genome that contribute to cancer would enable improved diagnosis and treatment of cancer.



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Pharmaceutical research and development.  Genomics touches every phase of the drug discovery and development process to varying degrees. This includes early target discovery, through candidate selection, clinical trial design and interpretation and ultimately into the marketplace with diagnostics linking genomic information with therapeutic intervention. In early discovery, single molecule sequencing could enable high-throughput screening in a cost-effective manner using large scale gene expression analysis, allowing the study of disease and target pathways to better identify promising drug leads. As lead matter is refined into preclinical candidates, expression profiling may allow a better understanding of compound toxicity and allow those candidates with minimal toxicity profiles to proceed to the clinic. The broad application of genomics in the later phase of drug development has been hampered by the lack of high throughput, cost effective methods to link patient variation with genomic information. In clinical development, our technology could potentially be used to generate individual gene profiles that can provide valuable information on likely response to therapy, both efficacy and adverse events, and provide insight into genomic biomarkers that may provide signatures for patient screening and individualization of therapy.



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Infectious disease.  All viruses, bacteria and fungi contain DNA or RNA. The detection and sequencing of DNA or RNA from pathogens at the single molecule level would provide medically and environmentally useful information for the diagnosis, treatment and monitoring of infections and to predict potential drug resistance. Such sequencing would not require the growth or purification of organisms that can be difficult to culture or work with.



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Autoimmune conditions.  Autoimmune conditions, such as multiple sclerosis, Type I diabetes and lupus, have important genetic components which can be reflected at both the DNA and RNA level. Monitoring the underlying genetic background of patients as well as monitoring RNA expression changes associated with these diseases and corresponding treatment may enable better patient management.



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Agriculture.  Agricultural research has increasingly turned to genomics for the discovery, development and design of genetically superior animals and crops. The agribusiness industry has been a large consumer of genetic technologies—particularly microarrays—to identify relevant genetic variations across varieties or populations which will be especially useful in species not well studied in the past. Our sequencing technology may provide a more powerful, direct and cost-effective approach to gene expression analysis and population studies for this industry.

        As we consider a repositioning of the Company in the genetic analysis markets, we are evaluating the areas where we believe Helicos' technology offers significant opportunity and, in particular, we believe that Helicos' technology is uniquely suited for applications in molecular diagnostics.

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RESEARCH AND DEVELOPMENT

        The wide variety of technical disciplines required for the development of a commercial single molecule sequencing system is represented within our research and development organization, which includes the following functional groups: methods development, organic synthesis, engineering, sequencing development and scientific informatics. Our research and development staff includes PhD scientists and PhD engineers.

        We have rapidly advanced the development of our True Single Molecule Sequencing (tSMS)™ technology since we began operations in 2003. In 2004, we began to produce sequence data from single molecules of DNA and in 2005, we sequenced genomic DNA from a small virus called M13 using our tSMS technology. Also in 2005, we began to design the Helicos® Genetic Analysis System. In 2006, we received a $2 million grant from the National Human Genome Research Institute and completed the design of the critical components of the Helicos System. In 2007, we substantially finished the assembly of five commercial grade Helicos Systems and began shipping our Helicos Systems to initial customers in 2008. Our initial shipment to our first customer, Expression Analysis, Inc. ("EA"), was made on March 5, 2008. This system was an early version and did not consistently achieve our commercial specification levels at EA and, as a result, on January 27, 2009, we agreed to have EA return the Helicos System that was installed at EA. Following EA's return of this system, our commercial relationship with EA was suspended. EA did not make any payments for this Helicos System that was ultimately returned.

        Our systems are subject to extensive verification and validation testing with reagents and flow cells produced by our operations group in order to validate the performance that will be achieved by the customer. Our engineers play a key role in developing robust manufacturing and installation processes and identifying key areas for improving system reliability and system cost. Also in 2008, we introduced a second generation Virtual Terminator™ Nucleotides with improved performance and shelf-life and introduced a second generation image analysis software with improved performance. During 2009, we continued to invest in research and development activities to further improve the performance of our Helicos System beyond its initial performance characteristics, albeit at a reduced pace given our limited resources and as a result of our December 2008 decision to implement a 30% reduction in our workforce and take other measures to reduce our operating costs.

        With additional investments in research and development activities, we believe that a further reduction of DNA sequencing cost per base of approximately 100 fold may be achieved without requiring major modifications to the HeliScope™ Single Molecule Sequencer. The pace of these research and development activities is expected to be limited during 2010, however, as a result of our limited resources. We describe below some of the ways in which we have improved the performance of the tSMS technology for use in the HeliScope Sequencer and ways in which performance can be improved on an ongoing basis.

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Improved flow cell surface stability.  By optimizing the surface coating of the flow cell and the reagents used in the HeliScope Sequencer, we have increased the stability of DNA attachment to the flow cell surface. We believe that further increases in stability would increase the number of strands that remain present at the end of a run and thus the amount of sequence data produced.



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Increased sequencing reaction efficiency and accuracy.  In the course of developing our proprietary sequencing process and reagents, we have significantly increased the efficiency with which new bases are added to a growing DNA strand and the accuracy with which they are detected. We believe that further increases in efficiency and accuracy at each step of the sequencing process would continue to increase the number of DNA strands that are useful for genetic analysis.

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Increased density of DNA strands.  We have successfully developed the flow cells in our HeliScope Sequencer to permit binding of DNA strands at an average density of approximately 100 million strands per square centimeter. We believe that additional development work in the area of surface chemistry would increase the number of DNA strands that can be anchored to the surface of the flow cells up to 400 million per square centimeter.



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Enhanced speed of image processing subsystem.  We have developed high speed image processing that enables analysis of the images produced by the HeliScope Sequencer. We believe that enhancements to the speed of the image processing subsystem would enable reduction in the server hardware included as a part of the cost of a Helicos System.



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Reduced instrument cost.  We believe that efforts to evaluate new camera and laser technology would give us the opportunity to both reduce the material cost of the instrument and increase sequencing performance.

        We believe that each of the above improvements, if successful, would increase the throughput of the HeliScope Sequencer and reduce the cost per base of sequencing. We believe that other improvements, such as reducing reagent consumption, reducing image acquisition time, and enhancing the performance of the system's mechanical components, with the goal of further increasing throughput and reducing cost, are feasible depending on our ability to make additional levels of investment in research and development activities. As we reevaluate our long-term strategy, we may elect to pursue some or none of these potential performance enhancements depending on the availability of resources and the importance of such enhancements to our long-term strategy.

        In 2009 we continued our forward thinking research activities in genomic and measurement sciences. Our Applications, Methods and Collaborations group emerged as a result of the intimate relationship between genomic sciences, applications and methods. This group spends a significant amount of time supporting customers, prospective customers and collaborators who now can benefit from our expertise in sample preparation and novel methods for the application of single molecule sequencing to address important questions in biology. These efforts have resulted in the publication of several studies which highlight the versatility and breadth of scientific studies which are enabled on our platform. We have continued our work with world class leaders in the field of genomics including members of the ENCODE consortium, genome sequencing centers and academic research institutions. Our applications research areas include:

•

Transcriptome analyses:  Digital gene expression and RNA Sequencing provides a hypothesis free, global, and quantitative analysis of the transcriptome. Our research focuses on developing the single molecule sequencing method to allow the quantitative measurement of virtually all genes in a sample by counting the number of individual mRNA molecules produced from each gene. This allows one to examine all the genes present in a cell or tissue in a hypothesis independent manner with no bias toward the genes believed to be expressed. We believe the end result is a highly sensitive and quantitative measurement which will allow not only for the detection of highly expressed transcripts but also for the detection of very rare transcripts represented by only a few molecules of RNA per cell.



•

Direct RNA Sequencing:  The traditional approaches to transcriptome analyses have been typically dependent on the creation of a cDNA intermediate, an indirect measurement of the RNA in the cell. As such, we embarked on a program to develop the methodology required for the direct sequencing of RNA. While still in the research phase during 2009, our research program definitively demonstrated the direct sequencing of RNA without cDNA-intermediate and published this work in the prestigious journal Nature in October, 2009. In the first quarter of 2010, we have implemented direct RNA sequencing on the Helicos System and began an early access program to provide key scientific leaders with data to demonstrate the unique attributes of the technology.

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•

Chromatin Immunoprecipitation sequencing (ChIP Seq) studies:  In 2009 we worked with world leaders in the epigenomics field to develop the methodology required for ChIP Seq studies. Benefiting from the simplicity of single molecule sequencing, the Helicos ChIP Seq method provides rapid DNA sample preparation combined with the ability to work with small DNA sample quantities to reveal an unbiased, genome-wide and quantitative view of protein-DNA interactions and chromatin structure. During 2009, we published our work on ChIP Seq with scientists at the Broad Institute, Inc. and Massachusetts General Hospital demonstrating these principles.



•

miRNA measurements:  microRNA (miRNA) represent important regulators of gene expression and are becoming increasingly important in disease studies, especially cancer. Helicos is using single molecule sequencing to investigate the ability to quantitatively measure miRNAs from human samples as well as identify novel miRNAs which have been missed because of previous requirements for amplification and limited depth of coverage. In these studies we demonstrate the unique attributes of single molecule sequencing for accurate miRNA quantitation as compared to quantitation obtained using amplification based methods.



•

Candidate region sequencing:  Currently the cost of sequencing an entire human genome remains too high to enable routine whole genome sequencing. New methods are currently under development to allow a simplified, highly multiplexed candidate region capture method to facilitate large-scale studies of genomic regions of interest. Our technology enables sample barcoding which allows multiplexed sequencing of up to 15 samples per HeliScope Sequencer channel, resulting in the analysis of up to 750 samples per sequencing run.



•

Paired reads:  A paired read methodology is desirable for comprehensive whole genome sequencing. Our paired-read development efforts are focused on reading two portions of a DNA molecule using a defined gap size between sequence reads to accurately recapitulate the structural context of the genome to be sequenced. Optimizing the gap sizes for our paired read strategy to allow both short gaps (250-500 base pairs) and longer gaps (1 to 10 kb) remains our focus. Proof of principle was demonstrated on the HeliScope^TM Single Molecule Sequencer for both transcriptome and genome analyses.

        Depending on the outcome of our repositioning strategy in the genetic analysis markets and strategic direction, we may decide to continue our applications research in some or all of the aforementioned areas or focus on new areas that would benefit from the unique capabilities of our proprietary platform.

        In the years ended December 31, 2007, 2008, and 2009 we incurred $24.8 million, $24.6 million and $18.3 million respectively, of research and development expenses.

PRODUCT DEMONSTRATION ARRANGEMENTS

        Our strategy in the research markets has been to establish the Helicos® Genetic Analysis Platform as the platform of choice for analyzing diverse genomic information and to expand the applications of our technology. Accordingly, we entered into product demonstration arrangements with outside parties which were designed to enhance our commercial prospects by demonstrating through publication our technology as a viable platform for analyzing large quantities of genetic information and to expand the potential applications for our technology. These product demonstration arrangements include the transfer of genetic samples from third parties for us to process and analyze using our internal Helicos Systems.

        Our product demonstration arrangements also included the outright placement of Helicos Systems at reference sites for scientific and commercial evaluation. In 2009, we had placed Helicos Systems at the following reference sites for evaluation: Dana Farber Cancer Institute (Dana Farber), Massachusetts

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General Hospital Cancer Center (MGH) and Ontario Institute for Cancer Research (OICR). These reference sites may have the opportunity to purchase their system outright or return the system to us. Entering the second quarter of 2010, the Dana Farber and MGH placements remained ongoing, however, OICR returned its system at the end of the first quarter 2010.

        As we consider our repositioning strategy in the genetic analysis markets and strategic direction, we may decide to continue to engage in these types of joint activities with third parties or focus on new relationships with third parties in areas such as molecular diagnostics or others that we believe would benefit from the unique capabilities of our proprietary platform. In any case, these arrangements and any future similar arrangements are not guaranteed to generate any revenue from system sales and are not expected to generate new material intellectual property or new technology for our business.

MANUFACTURING AND RAW MATERIALS

        We have manufactured our products using a combination of outsourced components and subassemblies. In addition to our in-house production capability, we have utilized subcontractors for parts of the manufacturing process where we have determined it is in our best interest to do so. As a result of our efforts to reposition the Company in the genetic analysis markets, we do not plan to allocate substantial resources to increasing our manufacturing process capability or capacity.

MARKETING, SALES, SERVICE AND SUPPORT

        As a result of our limited resources, we have operated, and expect during 2010 to continue to operate, with a limited number of sales, marketing and service personnel while we develop our strategy to reposition the Company in the genetic analysis markets.

OUR SCIENTIFIC ADVISORY BOARD

        We have established a scientific advisory board consisting of individuals whom we have selected for their particular expertise in the fields of genomics, physics, molecular biology, chemistry and engineering. We anticipate that our scientific advisory board members will consult with us on matters relating to:

•

our research and development efforts;



•

opportunities for strategic collaborations;



•

new technologies relevant to our research and development efforts;



•

scientific and technical issues relevant to our business; and



•

our sales and marketing strategy.

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        All of our advisors are employed by organizations other than us and may have commitments to or consulting or advisory agreements with other entities that may limit their availability to us. Our scientific advisory board currently consists of the following members:

COMPETITION IN THE GENETIC ANALYSIS MARKET

        Competition among entities developing or commercializing instruments, research tools or services for genetic analysis is intense. A number of companies offer DNA sequencing equipment or consumables, including Life Technologies, Inc., Beckman Coulter, Inc., the Life Sciences Division of GE Healthcare, Illumina, Inc., Complete Genomics, Inc. and Roche Applied Science. Furthermore, a number of other companies and academic groups are in the process of developing novel techniques for DNA sequencing. These companies include, among others, Ion Torrent, Genizon BioSciences, Intelligent Bio-Systems, Lucigen, Microchip Biotechnologies, Pacific Biosciences, Shimadzu Biotech, ZS Genetics, Oxford Nanopore, NabSys and IBM. For RNA analysis and/or genotyping there are a number of companies that offer equipment and supplies including Affymetrix, Inc., Agilent Technologies, Applera Corporation, Bio-Rad Laboratories, Luminex and Nanostring. Three companies provide a wide range of products that span both DNA and RNA analysis—Life Technologies, Inc., Affymetrix, Inc. and Illumina, Inc. However, the solutions that are provided are separate applications that require different sample preparation techniques, consumables, analysis software and instrumentation with limited correlation between platforms.

        Many of these companies have substantially greater capital resources, research and product development capabilities and greater financial, scientific, manufacturing, marketing, and distribution experience and resources, including human resources, than we do. These companies may develop or commercialize genetic analysis technologies before us or that are more effective than those we are

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developing, and may obtain patent protection or other intellectual property rights that could limit our rights to offer genetic analysis products or services

        As we consider the repositioning of the Company in the genetic analysis markets, we will need to continue to assess our ability to successfully compete against existing and future technologies. Moreover, we will need to demonstrate that the price and performance of our technologies and platform applied to our target markets are competitive with those of competing technologies.

INTELLECTUAL PROPERTY

        Developing and maintaining a strong intellectual property position is an important element of our business strategy. Our patent portfolio relating to our proprietary technology is comprised, on a worldwide basis, of various patents and pending patent applications, which, in either case, we own directly or for which we are the exclusive or semi-exclusive licensee. A number of these patents and patent applications are foreign counterparts of U.S. patents or patent applications. Among other things, our patent estate includes patents and/or patent applications having claims directed to:

•

the overall True Single Molecule Sequencing (tSMS)^tm method;



•

certain components of the Helicos® Genetic Analysis Platform, including our laser illumination subassembly, our flow cells and various methods for using our HeliScope Sequencer;



•

methods for focusing our lasers and imaging our flow cell surfaces, and our use of combinations of laser optical paths;



•

our Virtual Terminator^TM Nucleotides and other nucleotides;



•

various aspects of our sample preparation processes;



•

algorithms for analysis of our data; and



•

reagent formulations for imaging and for sequencing.

        Within broad technological categories, our patent portfolio can be broken down as follows: most of our issued (81%) and pending (60%) patents are directed to sequencing by synthesis, primarily at the single molecule level; the smallest portion of the patent portfolio (3% of issued patents and 3% of pending applications) involves bioinformatics and data processing; the remainder of the portfolio is roughly evenly split among sample preparation (6% of issued patents and 12% of pending applications), instrumentation (10% of issued patents and 11% of pending applications), and commercial applications (14% of pending patent applications). The last-mentioned of these groups—commercial applications—encompasses wide areas of scientific and commercial interest including direct RNA sequencing, single-cell analysis, high-throughput screening, digital gene expression, and candidate region re-sequencing.

        Our patents generally have terms of 20 years from their respective non-provisional priority filing dates. The first non-provisional patent applications prosecuted by Helicos were filed in 2004 and thus our issued patents are not scheduled to expire until 2024 or later. We have filed terminal disclaimers in certain later-filed patents, which means that such later-filed patents are scheduled to expire earlier than the twentieth anniversary of their respective non-provisional priority filing dates, although not earlier than 2024 with respect to patent applications prosecuted by Helicos. We have also in-licensed patents and patent applications. All of the material patents and patent applications to which we have licensed rights are scheduled to expire in 2017 or later.

        Patent law relating to the scope of claims in the technology field in which we operate is still evolving. The degree to which we will be able to protect our technology with patents, therefore, is uncertain. Others may independently develop similar or alternative technologies, duplicate any of our technologies and, if patents are licensed or issued to us, design around the patented technologies

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licensed to or developed by us. In addition, we could incur substantial costs in litigation if we are required to defend ourselves in patent suits brought by third parties or if we initiate such suits.

        We regard as proprietary any technology that we or our exclusive licensors have developed or discovered, including technologies disclosed in our patent estate, and that was not previously in the public domain. Aspects of our technology that we consider proprietary may be placed into the public domain by us or by our licensors, either through publication or as a result of the patent process. We may choose for strategic business reasons to make some of our proprietary technology publicly available whether or not it is protected by any patent or patent application.

        With respect to proprietary know-how that is not patentable and for processes for which patents are difficult to obtain or enforce, we may rely on trade secret protection and/or confidentiality agreements to protect our interests. While we require all employees, consultants, collaborators, customers and licensees to enter into confidentiality agreements, we cannot be certain that proprietary information will not be disclosed or that others will not independently develop substantially equivalent proprietary information.

        In addition to our patents, patent applications, confidential know-how, and potential trade secrets, we license technology that we consider to be material to our business.

        Roche License Agreement.    In June 2004, we entered into a license agreement with Roche Diagnostics (the "Roche License Agreement") which granted us a worldwide, semi-exclusive royalty-bearing license, with the right to grant sublicenses under a patent relating to sequencing methods. In connection with the Roche License Agreement, we paid an upfront fee of 175,000 Euros and committed to pay an annual license fee ranging from 10,000 to 40,000 Euros. There are no milestone payments potentially payable by us under the Roche License Agreement in addition to those described above. We have an option to convert the license to non-exclusive beginning in 2008, in which case the annual license fees would be reduced to 10,000 Euros beginning in 2008. We have the right to terminate the Roche License Agreement at any time for convenience upon 90 days prior written notice to Roche Diagnostics. We both have the right to terminate the Roche License Agreement upon breach by the other party, subject to notice and an opportunity to cure. The Roche License Agreement also terminates upon the occurrence of specified bankruptcy events. As part of the Roche License Agreement, we agreed to pay single digit royalties based on a percentage of defined net sales. We also agreed to pay half of our income amounts that we receive based on sublicenses that we grant to third parties. Our royalty obligation, if any, extends until the expiration of the last-to-expire of the licensed patents. Through December 31, 2009, no royalty payments have been made. All license fee amounts paid to date have been expensed to research and development expense as technological feasibility had not established and the technology had no alternative future use. The total expense recognized under the Roche License Agreement for the years ended December 31, 2007, 2008 and 2009, and the period from May 9, 2003 (date of inception) through December 31, 2009 was $39,000, $62,000, $54,000 and $421,000, respectively.

        AZTE License Agreement.    In March 2005, we entered into a license agreement with Arizona Technology Enterprises (the "AZTE License Agreement") that granted us a worldwide, exclusive, irrevocable, royalty-bearing license, with the right to grant sublicenses, under specified patents and patent applications exclusively licensed by AZTE from Arizona State University and the University of Alberta. In connection with the AZTE License Agreement, we paid an upfront fee of $350,000, committed to an annual license fee of $50,000, which has increased to $100,000 upon the successful issuance of a U.S. patent, committed to pay a three-year maintenance fee of $50,000, payable in equal annual installments beginning in March 2006, and issued 88,888 shares of restricted common stock, which vest in two equal installments upon the achievement of separate milestones. There are no milestone payments potentially payable by us under the AZTE License Agreement in addition to those described above. We are obligated to use reasonable commercial efforts to develop, manufacture and.

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In addition, if we fail to to use commercially-reasonable efforts to develop, manufacture and sell licensed products, the AZTE License Agreement converts from exclusive to non-exclusive. The AZTE License Agreement will remain in force until terminated. We have the right to terminate the AZTE License agreement at any time for convenience upon 60 days prior written notice to Arizona Technology Enterprises. We both have the right to terminate the agreement upon breach by the other party, subject to notice and an opportunity to cure. The AZTE License Agreement also terminates upon the occurrence of specified bankruptcy events.

        As part of the AZTE License Agreement, we agreed to pay a single digit percentage royalty based on defined net sales. We also agreed to pay a mid-teens percentage of specified sublicense income amounts that are received based on sublicenses granted to third parties which increases to 30 percent after we receive an aggregate of $50,000 of such amounts. Our royalty obligation, if any, extends until the expiration of the last-to-expire of the licensed patents. Through December 31, 2009, no royalty payments have been made. All license fee amounts paid to date have been expensed to research and development expense as technological feasibility had not been established and the technology had no alternative future use. In May 2006, in accordance with the license agreement, due to the successful issuance of a U.S. patent, the committed annual license fee increased from $50,000 to $100,000 and 44,444 shares of the restricted common stock vested. The vesting of 44,444 shares of restricted common stock resulted in a charge to research and development expense of $127,000 based on the fair value of our common stock at the time the milestone was achieved. The remaining 44,444 shares of restricted common stock vested immediately upon the successful issuance of a second U.S. patent on January 12, 2010. The total expense recognized under the AZTE License Agreement for the years ended December 31, 2007, 2008 and 2009, and the period from May 9, 2003 (date of inception) through December 31, 2009 was $117,000, $103,000, $141,000 and $990,000, respectively.

        Caltech License Agreement.    In November 2003, we entered into a license agreement with California Institute of Technology (the "Caltech License Agreement") that granted us a worldwide, exclusive, royalty-bearing license, with the right to grant sublicenses, under specified patents and patent applications, and a worldwide, non-exclusive royalty bearing license, with the right to grant sublicenses, under specified technology outside the scope of the licensed patents. In connection with the Caltech License Agreement, we issued 46,514 shares of common stock, and recorded a charge of $20,000. In addition, we pay an annual license fee of $10,000 per year. The license fee payments are creditable against single digit royalties calculated upon sales of products covered by patents licensed under the agreement. We are also obligated to pay California Institute of Technology a single digit percentage of specified license and sublicense income, a single digit percentage of proceeds from sales of specified intellectual property and a single digit percentage of service revenue amounts that we receive based on licenses and sublicenses that we grant, sales of intellectual property and services that we provide to third parties. The royalty obligation with respect to any licensed product extends until the later of the expiration of the last-to-expire of the licensed patents covering the licensed product and three years after the first commercial sale of the licensed product in any country for non-patented technology covered under the agreement. Through December 31, 2009, no royalty payments have been made. In March 2007, we amended the Caltech License Agreement to provide rights under an additional patent application under the terms of the existing license in exchange for a one-time payment of $50,000 to the California Institute of Technology. There are no milestone payments potentially payable by us under the Caltech License Agreement in addition to those described above. All license fee amounts paid to date and the value of the common stock issued have been expensed to research and development expense as technological feasibility had not been established and the technology had no alternative future use. The total expense recognized under the Caltech License Agreement for the years ended December 31, 2007, 2008 and 2009, and the period from May 9, 2003 (date of inception) through December 31, 2009 was $60,000, $10,000, $10,000 and $123,000, respectively.

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        PerkinElmer License Agreement.    In April 2007, we entered into an agreement with PerkinElmer LAS, Inc. ("PerkinElmer"), in which PerkinElmer granted us a worldwide, non-exclusive, non-transferable, non-sublicensable, royalty bearing license under specified patents. Our license from PerkinElmer grants us rights under certain patents to produce and commercialize certain of the reagents used in some applications on the Helicos System, which contain chemicals purchased from PerkinElmer. In exchange for rights licensed from PerkinElmer, we are obligated to pay PerkinElmer a single digit percentage of our net revenue from the sale of reagents that contain chemicals covered by the patents licensed under the PerkinElmer agreement. There are no milestone payments potentially payable by us under this agreement with PerkinElmer. We have the right to terminate the agreement at any time upon 90 days written notice to PerkinElmer. Each party has the right to terminate the agreement upon breach by the other party subject to notice and an opportunity to cure. The agreement also terminates upon the occurrence of specified bankruptcy events. PerkinElmer has the sole right under the agreement to enforce the licensed patents. There has been no expense recorded for this agreement for any period from May 9, 2003 (inception) through December 31, 2009.

        See Note 7 to the Consolidated Financial Statements contained in this Form 10-K for additional information on license agreements.

CORPORATE INFORMATION

        We were incorporated in Delaware in May 2003. In 2003, one of our co-founders, Professor Stephen R. Quake, who was then at the California Institute of Technology, demonstrated, we believe for the first time, that sequence information could be obtained from a single strand of DNA. Shortly thereafter, Noubar Afeyan, Chief Executive Officer of Flagship Ventures, and Stanley Lapidus, then a Venture Partner at Flagship Ventures, met with Professor Quake and agreed to found a company to develop and commercialize technology based on Professor Quake's single molecule approach. Combining the experience of Professor Quake in single molecule methods, Dr. Afeyan in the sequencing technology and life sciences businesses, and Mr. Lapidus in diagnostics and entrepreneurship, we focused exclusively on the technical and commercial development of technology based on Professor Quake's approach. Professor Eric Lander, Director of the Broad Institute of MIT and Harvard, and a leader in the DNA sequencing field, provided helpful guidance and advice during our founding stages.

EMPLOYEES

        We had 80 full time employees at December 31, 2009. We have never had a work stoppage and none of our employees are covered by collective bargaining agreements. We believe our employee relations are good. Our success depends in large part on our ability to attract and retain skilled and experienced employees.

AVAILABLE INFORMATION

        Our annual reports on Form 10-K, quarterly reports on Form 10-Q, definitive proxy statements on Form 14A, current reports on Form 8-K, and any amendments to those reports are made available free of charge on our website, www.helicosbio.com, as soon as reasonably practicable after such reports are electronically filed with or furnished to the Securities and Exchange Commission ("SEC"). Statements of changes in beneficial ownership of our securities on Form 4 by our executive officers and directors are made available on our website by the end of the business day following the submission to the SEC of such filings. In addition, the SEC's website, www.sec.gov, contains reports, proxy statements, and other information regarding reports that we file electronically with the SEC.

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Item 1A.    RISK FACTORS

        The following important factors could cause our actual business, prospects, financial results or financial condition to differ materially from those contained in forward-looking statements made in this Annual Report on Form 10-K or elsewhere by management from time to time.

RISKS RELATED TO OUR BUSINESS

We are exploring various alternatives to the Company's existing long-term strategic focus. If we are unsuccessful in pursuing any of these new business initiatives, our business, financial condition, results of operations and prospects will be materially adversely affected and we may have to cease operations.

        We are reevaluating our long-term strategic focus and considering various alternatives to reposition our business, by exploring various opportunities including the use of our technology for diagnostic applications in the genetic analysis market. It will take us at least several months to pursue any of these opportunities. While any of these new business opportunities will rely upon the capabilities of our proprietary Helicos® Genetic Analysis Platform, the business model, including the revenue and expense models and the potential marketing and distribution channels, for these opportunities may be materially different than that which we have engaged in before. We are unable to give any assurance we will be commercially successful in any opportunity we pursue. Our failure to be commercially successful in any such new business opportunity would materially adversely impact our business, financial condition, results of operations and prospects and could ultimately require that we cease operations.

        Any successful shift in our strategic focus will likely require significant organizational changes. We will need to attract, train and retain qualified sales, marketing and service personnel, engineers, scientists and other technical and management personnel with appropriate expertise for our new strategic focus. These areas of expertise may be different than the skills of our existing employees. Given the potential uncertainty about our strategic focus and long term roles within our organization, morale may be lowered, key employees may be distracted and our business may experience a loss of continuity while we reevaluate our long-term strategic focus. Our inability retain existing personnel during this period of uncertainty or our inability to attract new personnel that fit within a new strategic focus once it is identified, would prevent our exploiting fully any new business alternative and thereby cause a material adverse effect on our business, financial condition, results of operations and prospects.

Before the end of the second half of 2010, we will need to raise additional funding, which may not be available on favorable terms, if at all, or without dilution to our stockholders. If we do not raise the necessary funds, we will need to reduce expenses or terminate some or all aspects of our operations, which would materially adversely affect our business prospects.

        We will need to raise additional capital before the end of the second half of 2010 in order to sustain our business and to exploit any new business opportunities. The amount of additional capital we will need to raise depends on many factors, including:

•

the success of our efforts in considering alternatives to the Company's existing long-term strategic focus, including a repositioning of the company in the genetic analysis markets;



•

the rate of progress and cost of our commercialization activities;



•

the success of our research and development efforts;



•

the expenses we incur in marketing and selling our products or services;



•

the revenue generated by future sales of our products or services;



•

the timeliness of payments from our customers;



•

the emergence of competing or complementary technological developments;

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•

the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;



•

the terms and timing of any collaborative, licensing or other arrangements that we may establish; and



•

the acquisition of businesses, products and technologies, although we currently have no commitments or agreements relating to any of these types of transactions.

        The instability of the worldwide financial markets has materially and adversely impacted the availability of financing to a wide variety of companies, particularly early-stage companies such as Helicos. We do not know whether the additional capital which we will require will be available when and as needed, on favorable terms if at all, or that our actual cash requirements will not be greater than anticipated. We may seek additional capital through a combination of private and public equity offerings, debt financings and collaboration, strategic and licensing arrangements. To the extent we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring additional debt or making capital expenditures or that require early repayment, even with penalties, in connection with a change of control. If we raise additional funds through collaboration, strategic alliance and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or products, or grant licenses on terms that are not favorable to us. We may not be able to complete any such capital raising transactions on acceptable terms, or at all. If adequate additional funds are not available to us when required, we will be required to reduce expenses or terminate some or all aspects of our operations, which would materially adversely affect our business prospects.

The audit report contained in this Annual Report on Form 10-K contains an explanatory paragraph to the effect that there is substantial doubt about our ability to continue as a going concern.

        This "going concern" statement may discourage some third parties from contracting with us and some investors from purchasing our stock or providing alternative capital financing. The resulting failure to establish, or loss of existing, favorable commercial relationships or to satisfy our capital requirements could adversely affect our business, financial condition, results of operations and prospects.

        Unless we raise additional funds, either through public or private sales of equity, from borrowings or from strategic partners, we will need to significantly reduce our workforce and our operating expenses. If we do not take these actions, we will not have sufficient funds to continue operations. Even if we take these actions, they may be insufficient, particularly if our costs are higher than projected or unforeseen expenses arise. At the same time, significantly reducing our workforce or operating expenses may adversely affect our business and prospects. See "Liquidity and Capital Resources" in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and note 1 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

We may not be able to meet our debt service obligations, or may otherwise default, under our loan and security agreement, which would materially adversely affect our business, financial condition, results of operations and prospects.

        Our loan and security agreement imposes restrictions and obligations on us with which we may not be able to comply. If we fail to comply with such restrictions, our lenders may declare us in default. Also, we have debt service obligations under our loan and security agreement. We may be unable to generate sufficient cash flow from operations to service this debt. Failure to service our debt could result in an event of default. The occurrence of an event of default could lead to acceleration such debt

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or any instruments evidencing indebtedness that contain cross-acceleration or cross-default provisions. In such event, we may be required to sell assets, to refinance, or to obtain additional financing. Such refinancing may not be possible and additional financing may not be available on commercially acceptable terms or at all. The borrowings under the loan agreement are collateralized by essentially all of our assets and include account control agreements for each of the Company's cash and investment accounts. These account control agreements permit the lender to control our cash and investment accounts in the event of a default.

We have a history of operating losses, expect to continue to incur substantial losses, and might never achieve or maintain profitability.

        We are a development-stage company with limited operating history. We have incurred significant losses in each fiscal year since our inception, including net losses attributable to common stockholders of $45.7 million and $28.0 million in the years ended December 31, 2008 and 2009, respectively. As of December 31, 2009, we had an accumulated deficit of $167.7 million. These losses have resulted principally from costs incurred in our research and development programs and from our selling, general and administrative expenses. In the year ended December 31, 2009, we used cash in operating activities of $15.5 million and used cash in investing activities totaling $22,000. As of December 31, 2009 and March 31, 2010, we had $15.9 million and $11.3 million, respectively, in cash and cash equivalents.

        We will need to generate significant revenue to achieve profitability. As we exited 2009, we have received cumulative sales orders for ten Helicos® Genetic Analysis Systems. In addition, as of March 31, 2010, we have one system installed at the Broad Institute, Inc. on a no cost basis, and have three systems at leading academic institutions for scientific and commercial evaluation. We have recognized revenue from two of these initial shipments. Because our products are subject to various customer evaluation periods with acceptance criteria, we expect the customer evaluation period and our ability to have any recognizable revenue from additional sales, if any, to extend beyond the fiscal quarters in which the products are shipped. In addition, there is no guarantee that any institutions which have received a system for scientific and commercial evaluation will ultimately decide to purchase the system or other products from us, particularly as we reevaluate our long-term strategic focus. Moreover, we expect our losses to continue for a considerable period of time as we reevaluate our long-term strategic focus and consider various alternatives to reposition our business, by exploring various opportunities including the use of our technology for diagnostic applications in the genetic analysis market. These losses, among other things, have had and will continue to have an adverse effect on our working capital, total assets and stockholders' equity. Because of the numerous risks and uncertainties associated with our long-term strategic focus, we are unable to predict when we will become profitable, and we may never become profitable. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. If we are unable to achieve and then maintain profitability, the market value of our common stock will decline.

Although we have shipped a limited number of Helicos® Genetic Analysis Systems to our initial customers during 2008 and 2009, we are exploring various alternatives to our existing long-term strategic focus and, ultimately, may decide not to invest in the manufacturing process necessary to build and test multiple Helicos® Genetic Analysis Systems on a full commercial basis, in which event our business may be materially harmed.

        We are reevaluating our long-term strategic focus and considering various alternatives to reposition our business, including by exploring various opportunities in the genetic analysis markets. It will take us at least several months to pursue any of these opportunities. While any of these new business opportunities will rely upon the capabilities of our proprietary Helicos® Genetic Analysis Platform, the business model, including the revenue and expense models and the potential marketing and distribution channels, for these opportunities may be materially different than that which we have engaged in before. We are unable to give any assurance we will be commercially successful in any opportunity we

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pursue. If we ultimately decide to sustain our commercial activities involving multiple shipments of the Helicos Systems, however, we would need to take other steps to scale the manufacturing process of the system, including improvements to our manufacturing yields and cycle times, manufacturing documentation and quality assurance and quality control procedures. We also would need to scale our manufacturing process of the proprietary reagents and disposable supplies that are part of the system. In conjunction with our decision to reevaluate our long-term strategic focus, if we are unable to successfully complete these tasks or if we decide not to pursue these tasks, we may not be able to ship multiple Helicos Systems on a full production scale which would materially harm our business. In addition, although we believe that we have already incurred the substantial majority of the costs related to the development of the initial version of our Helicos System, if we experience unanticipated problems with our initial system placements, these costs could substantially increase, which would materially harm our business.

If our technology fails to achieve and sustain sufficient market acceptance, we will not generate expected revenue.

        Our success depends, in part, on our ability to develop products and applications that displace current technology, as well as expand the market for genetic analysis to include new applications that are not practical with current genetic sequencing technology. To accomplish this, we must develop and successfully commercialize our Helicos® Genetic Analysis System, proprietary technology and other applications for use in a variety of life science markets. As we reevaluate our long-term strategic focus and consider various alternatives to reposition our business, by exploring various opportunities including the use of our technology for diagnostic applications in the genetic analysis market, we may not have adequate resources available to develop products that displace current technologies and expand the market with the introduction of new applications. We cannot guarantee that the design of the Helicos System and any applications that we may develop, will be satisfactory to potential customers in the markets we seek to reach or whether they will beneficial to us as we consider various alternatives to our long-term strategy.

We have limited resources in selling and marketing and, as a result, may be unable to successfully commercialize our Helicos® Genetic Analysis System.

        We have a small sales and marketing team. Our ability to achieve profitability depends on attracting customers for our Helicos System and taking full advantage of the capabilities of our proprietary technology for business opportunities that may be materially different than that which we have engaged in before. Although members of our sales and marketing team have considerable industry experience and have engaged in marketing activities for our Helicos System, in the future we must expand our sales, marketing, distribution and customer support capabilities with the appropriate technical expertise to effectively pursue existing or future business opportunities. To successfully perform sales, marketing, distribution and customer support functions ourselves, we will face a number of risks, including:

•

our ability to successfully reevaluate our long-term strategic focus and consider various alternatives to reposition our business;



•

the ability of our remaining limited sales and marketing team to achieve our near term goals following our December 2008 workforce reduction;



•

our ability to attract, retain and manage the specialized sales, marketing and service force necessary to commercialize and gain market acceptance for our technology;



•

the time and cost of establishing a specialized sales, marketing and service force for a particular application, which might not be justifiable by the revenues generated by our technology; and



•

the ability of our remaining limited sales and marketing team to achieve our near term goals.

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        We may seek to enlist one or more third parties to assist with sales, distribution and customer support globally or in certain regions of the world. There is no guarantee, if we do seek to enter into such arrangements, that we will be successful in attracting desirable sales and distribution partners, or that we will be able to enter into such arrangements on favorable terms. If our sales and marketing efforts, or those of any third-party sales and distribution partners, are not successful, our technologies and products may not gain market acceptance, which could materially impact our business operations.

If we are unable to timely establish manufacturing capacity by ourselves or with partners, commercialization of our products would be delayed, which would result in lost revenues and harm our business.

        To commercialize our Helicos® Genetic Analysis System, we need to either build internal manufacturing capacity or contract with one or more manufacturing partners, or both. We currently manufacture our products using a combination of internal manufacturing resources and outsourced components subassemblies and subsystems. Although we began to manufacture our instruments, reagents and disposable supplies on a commercial scale during 2008, we have limited the expansion of these capabilities following our December 2008 decision to reduce our operating expenses and conserve cash. We may limit the expansion of these capabilities even further depending on the outcome of our reevaluation of our long-term strategic focus. We may encounter difficulties in manufacturing our products and, due to the complexity of our technology and our manufacturing process, we cannot be sure we fully understand all of the factors that affect our manufacturing processes or product performance. There is no assurance that we will be able to continue to build manufacturing capacity internally or find one or more suitable manufacturing partners, or both, to meet the volume and quality requirements necessary to be successful in the market. Manufacturing and product quality issues may arise as we increase production rates of our Helicos System and associated proprietary reagents and disposable supplies. If our products do not consistently meet our customers' performance expectations, we may be unable to generate sufficient revenues to become profitable. Any delay in establishing or inability to expand our manufacturing capacity could diminish our ability to develop or sell our products, which could result in lost revenue and seriously harm our business, financial condition and results of operations.

Future product sales or utilization of our proprietary platform and technology in current or new business opportunities will depend, in part, on research and development spending levels of academic, clinical and governmental research institutions and pharmaceutical, biotechnology and agriculture companies, and any reduction in such spending levels could limit our ability to sell our products.

        Our success will depend upon the demand for and use of our products and our proprietary platform and technology in current or new business opportunities. Accordingly, the spending policies of our customers will have a significant effect on the demand for our technology. These policies are based on a wide variety of factors, including the resources available to make purchases, the spending priorities among various types of equipment, policies regarding spending during recessionary periods and changes in the political climate. In addition, especially given recent weakness in the global economy and changing market conditions, our target customers may be subject to stringent budgetary constraints that could result in spending reductions, reduced allocations or budget cutbacks, which could jeopardize the ability of these customers to purchase our Helicos System or other products based on our proprietary platform and technology. Our operating results may fluctuate substantially due to reductions and delays in expenditures by these customers. These reductions and delays may result from factors that are not within our control, such as:

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changes in economic conditions;



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changes in government programs that provide funding to research institutions and companies;



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changes in the regulatory environment affecting life sciences companies and life sciences research;

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•

market-driven pressures on companies to consolidate and reduce costs; and



•

other factors affecting research and development spending.

        Any decrease in our customers' budgets or expenditures or in the size, scope or frequency of capital or operating expenditures as a result of the foregoing or other factors could materially adversely affect our operations or financial condition.

If the suppliers we rely on fail to supply the materials we use in the manufacturing of our products, we would be unable to satisfy product demand, which would negatively affect our business.

        Some components used in the manufacturing of our Helicos® Genetic Analysis System and certain raw materials used in the manufacturing of our reagents and disposable supplies are available from only a few suppliers. We acquire some of these components and raw materials on a purchase-order basis, which means that the supplier is not required to supply us with specified quantities of these components or raw materials over a certain period of time or to set aside part of its inventory for our anticipated requirements. If supplies from these vendors were delayed or interrupted for any reason, we may not be able to manufacture and sell our Helicos System and associated reagents and disposable supplies in a timely fashion or in sufficient quantities or under acceptable terms. Additionally, for certain of these components and raw materials, we currently purchase from sole-source suppliers and have not yet arranged for alternative suppliers. It might be difficult to find alternative suppliers in a timely manner and on terms acceptable to us. Consequently, if we do not forecast properly, or if our suppliers are unable or unwilling to supply us in sufficient quantities or on commercially acceptable terms, we might not have access to sufficient quantities of these materials on a timely basis and might not be able to satisfy product demand. Additionally, if there is concern among potential and existing suppliers about our financial viability, these suppliers may be hesitant to supply components and raw materials under acceptable terms, if at all. Moreover, if any of these components and raw materials becomes unavailable in the marketplace, we will be forced to further develop our technologies to incorporate alternate components or raw materials.

Our inability to continually enhance or maintain our product performance, including any improvements to the Helicos® Genetic Analysis System, to keep pace with rapidly changing technology and customer requirements, would adversely affect our ability to compete effectively.

        The success of any products or applications utilizing our True Single Molecule Sequencing (tSMS)™ technology will depend on our ability to continue to maintain and increase the performance and decrease the price of sequencing using this technology. New technologies, techniques or products could emerge which might allow the analysis of genomic information with similar or better price-performance than our Helicos Genetic Analysis System and could exert pricing pressures on or take market share from our products. It is critical to our success for us to continually monitor, stabilize and correct any variability in system performance that may emerge from time to time with current and future systems. Moreover, it is critical to our success for us to anticipate changes in technology and customer requirements and to successfully introduce new, enhanced and competitive technology to meet our customers' and prospective customers' needs on a timely basis. While we have planned substantial improvements to the Helicos System, including enhancing the performance of the system's reagents and disposable supplies and image processing subsystem and reducing the consumption of reagents, we may not be able to successfully implement these improvements or decide not to implement these improvements as a result of our reevaluation of our long-term strategic focus. Even if we successfully implement some or all of these planned improvements, we could incur substantial development costs. We may not have adequate resources available to develop new technologies or be able to successfully introduce enhancements to our system. There can be no guarantee that we will be able to maintain technological advantages over emerging technologies in the future, and we will need to respond to technological innovation in a rapidly changing industry. If we fail to maintain system performance stability, keep pace with emerging technologies, our system will become uncompetitive,

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our market share will decline and our business, revenue, financial condition and operating results could suffer materially.

We operate in a highly competitive industry and if we are not able to compete effectively, our business and operating results will likely be harmed.

        Some of our current competitors, as well as many of our potential competitors, have greater name recognition, more substantial intellectual property portfolios, longer operating histories, significantly greater resources to invest in new technologies and more substantial experience in new product development, regulatory expertise, manufacturing capabilities and the distribution channels to deliver products to customers than we do. For example, companies such as Affymetrix, Inc., Agilent Technologies, Life Technologies Corporation, the Life Sciences Division of GE Healthcare, Illumina, Inc., and Roche Applied Science have products for genetic analysis which compete with our products in certain segments of the market. Pharmaceutical and biotechnology companies have significant needs for genomic information and may also choose to develop or acquire competing technologies to meet these needs. In addition, a number of other companies and academic groups are in the process of developing novel techniques for genetic analysis, many of which have also received grants from the National Human Genome Research Institute, a branch of the National Institutes of Health, for the development of technologies that can achieve substantially lower costs, referred to as a "$100,000 genome" or a "$1,000 genome." These competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. Further, in light of these advantages, even if our technology is more effective than the product or service offerings of our competitors, current or potential customers might accept competitive products and services in lieu of purchasing our technology. We may not be able to compete effectively against these organizations. Increased competition is likely to result in pricing pressures, which could harm our sales, profitability or market share. Our failure to compete effectively could materially adversely affect our business, financial condition or results of operations.

        In addition, as we reevaluate our long-term strategic focus, to the extent that we commercialize any products utilizing our tSMS technology for use in future life science applications, such as clinical diagnostic or protein analysis applications, we will face additional competition. In the event that we develop new technology and products that compete with existing technology and products of well established companies, the marketplace might not adopt our technology and products.

Inability to expand our commercial and research and development capabilities would harm our business.

        Our December 2008 decision to reduce the Company's operating costs that included, among other strategies, a reduction in the Company's workforce by 30%, will continue to limit our ability to expand our capabilities to successfully pursue our commercialization strategy for our Helicos® Genetic Analysis System and proprietary technology as well as our research and development efforts and our efforts to reposition our business. We may not have adequate resources to pursue various business opportunities, enhance our manufacturing capabilities and operations, information technology infrastructure, and financial and accounting systems and controls. We also must attract, train and retain qualified sales, marketing and service personnel, engineers, scientists and other technical personnel and management personnel but may not have adequate resources to do so in the future. Our inability to expand our capabilities, particularly as we reevaluate our long-term strategic focus, retain existing personnel, attract new personnel and grow our business would have a material adverse effect on our business, operating results or financial condition. Future growth would require significant capital expenditures and may divert financial resources from other projects, such as the development of new products, applications or enhancements. If our management is unable to effectively manage our limited resources, our revenue could grow more slowly than expected and we may not be able to achieve our research and development and commercialization goals.

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We expect that our sales cycle will be lengthy and unpredictable, which will make it difficult for us to forecast revenue and increase the magnitude of quarterly fluctuations in our operating results.

        Potential customers for our Helicos® Genetic Analysis System typically commit significant resources to evaluate genetic analysis technologies. The complexity of our product will require us to spend substantial time and effort to assist potential customers in evaluating our Helicos System and in benchmarking it against available technologies. Because our Helicos System requires a significant investment of time and cost by our customers, we must target those senior managers within the customer's organization who are able to make these decisions on behalf of such organizations. We may face difficulty identifying and establishing contact with such decision makers. Even after initial acceptance, the negotiation and documentation processes can be lengthy. Additionally, our customers may have stricter limitations on spending given the current economic climate. We expect our sales cycle to typically range between six and twelve months, but it may be longer. Any delay in completing sales in a particular quarter could cause our operating results to fall below expectations. In addition, until we have completed our reevaluation of our long-term strategic focus and have determined any repositioning of our business, additional sales of our products may be further delayed or diminished.

Our customers may purchase replacements for the reagents and disposable supplies that are a part of our Helicos® Genetic Analysis System from third parties or discover a method that allows them to use less than the expected amounts of such products, which would materially and adversely affect our revenues.

        The success of our business depends, in part, on the recurring sales of the proprietary reagents and disposable supplies for our system. Because we have only recently begun commercialization of our Helicos® Genetic Analysis System, we do not have the experience to predict the percentage of our revenues that we will derive from sales of proprietary reagents and disposable supplies. Our customers or competitors could potentially produce reagents and disposable supplies that are compatible with our Helicos System at a lower cost, which could exert pricing pressures on, or take market share from, our reagents and disposable supplies. Similarly, our customers or competitors may discover a method of utilizing smaller quantities of our proprietary reagents and disposable supplies while achieving satisfactory results, which could reduce the amount of reagents and supplies we are able to sell. In either case, there could be a material adverse effect on our revenues and harm to our business, financial condition and results of operations.

If we are unable to recruit and retain key executives and scientists, we may be unable to achieve our goals.

        We are substantially dependent on the performance of our senior management and key scientific and technical personnel. We do not maintain employment contracts with any of our employees. In 2008 we implemented a workforce reduction that was designed to reduce our operating costs, conserve cash and direct our resources to continue advancing towards the Company's near term goals. Depending on our circumstances, we may need to implement additional workforce reductions in the future. The loss of the services of any member of our senior management or our scientific or technical staff may significantly delay or prevent the development of our products and other business objectives by diverting management's attention to transition matters and identification of suitable replacements, if any, and could have a material adverse effect on our business, operating results and financial condition.

        In addition, our product development and marketing efforts could be delayed or curtailed if we are unable to hire, train and retain highly skilled employees and scientific advisors, particularly our management team, senior scientists and engineers and sales, marketing and service personnel. To expand our research, product development and sales efforts we need additional people skilled in areas such as bioinformatics, manufacturing, sales, marketing, and potentially in key applications uses such as diagnostics, and technical support. Because of the complex and technical nature of our Helicos System

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and the dynamic market in which we compete, any failure to attract and retain a sufficient number of qualified employees could materially harm our ability to develop and commercialize our technology. Competition for these people is intense. Further, our inability to hire, train and retain sales, marketing and service personnel could have a material adverse affect on our ability to generate sales or successfully commercialize our technology. Each of our executive officers and other key employees could terminate his or her relationship with us at any time. These persons' expertise would be difficult to replace and could have a material adverse effect on our ability to achieve our business goals. There can be no assurance that we will have the financial resources or otherwise be successful in hiring or retaining qualified personnel and our failure to do so could have a material adverse effect on our business, financial condition and results of operations.

Ethical, legal and social concerns surrounding the use of genetic information could reduce demand for our technology.

        One of the potential uses for our product is genetic testing for predisposition to certain conditions. Genetic testing has raised ethical, legal and social issues regarding privacy and the appropriate uses of the resulting information. Governmental authorities could, for social or other purposes, call for limits on or regulation of the use of genetic testing or prohibit testing for genetic predisposition to certain conditions, particularly for those that have no known cure. Similarly, such concerns may lead individuals to refuse to use genetics tests even if permissible. These and other ethical, legal and social concerns about genetic testing may limit market acceptance of our technology for certain applications or reduce the potential markets for our technology, either of which could have a material adverse effect on our business, financial condition and results of operations.

Our products could in the future be subject to regulation by the U.S. Food and Drug Administration or other regulatory agencies, which could increase our costs and delay our commercialization efforts, thereby materially and adversely affecting our business and results of operations.

        Our products are not currently subject to U.S. Food and Drug Administration ("FDA") clearance or approval if they are not used for the diagnosis or treatment of disease. However, in the future, certain of our products or related applications could be subject to FDA regulation; the FDA's regulatory jurisdiction could be expanded to include our products, or both. Even where a product is exempted from FDA clearance or approval, the FDA may impose restrictions as to the types of customers to which we can market and sell our products. Such regulation and restrictions may materially and adversely affect our business, financial condition and results of operations.

        Laws and regulations are also in effect in many countries that could affect our products. The number and scope of these requirements are increasing. We may not be able to obtain regulatory approvals in such countries or may incur significant costs in obtaining or maintaining our foreign regulatory approvals. In addition, the export by us of certain of our products which have not yet been cleared for domestic commercial distribution may be subject to FDA or other export restrictions.

Our products could have unknown defects or errors, which may give rise to claims against us or divert application of our resources from other purposes.

        Any product utilizing our True Single Molecule Sequencing (tSMS)™ technology will be complex and may develop or contain undetected defects or errors. We cannot assure that a material performance problem will not arise. Despite testing, defects or errors may arise in our system, which could result in a failure to achieve market acceptance or expansion, diversion of development resources, injury to our reputation and increased service and maintenance costs. Defects or errors in our products might also discourage customers from purchasing our system. The costs incurred in correcting any defects or errors may be substantial and could adversely affect our operating margins. In addition, such defects or errors could lead to the filing of product liability claims, which could be costly

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and time-consuming to defend and result in substantial damages. Though we have obtained product liability insurance, our coverage levels and future product liability insurance that we procure may not protect our assets from the financial impact of a product liability claim. Moreover, we may not be able to obtain adequate insurance coverage on acceptable terms. Any insurance that we do obtain will be subject to deductibles and coverage limits. A product liability claim could have a serious adverse effect on our business, financial condition and results of operations.

We have incurred, and will continue to incur significant increased costs as a result of operating as a public company, and our management is and will continue to be required to devote substantial time to new compliance initiatives.

        The Sarbanes-Oxley Act of 2002 and rules subsequently implemented by the Securities and Exchange Commission and the NASDAQ Stock Market, Inc. have imposed various requirements on public companies, including requiring changes in corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly.

        In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404(a) of the Sarbanes-Oxley Act. However, our testing may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. Our compliance with Section 404 will require that we incur substantial accounting expense and expend significant management time on compliance-related issues. We currently do not have an internal audit group and we will evaluate the need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the NASDAQ Stock Market, Inc., the Securities and Exchange Commission or other regulatory authorities, which would require additional financial and management resources.

We use hazardous chemicals and biological materials in our business. Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly.

        Our research and development processes involve the controlled use of hazardous materials, including chemicals and biological materials. Our operations produce hazardous waste products. We cannot eliminate the risk of accidental contamination or discharge and any resultant injury from these materials. We may be sued for any injury or contamination that results from our use or the use by third parties of these materials. We do not currently maintain separate environmental liability coverage. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of hazardous materials. Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may impair our research, development and production efforts.

Because we are subject to existing and potential additional governmental regulation, we may become subject to burdens on our operations, and the markets for our products may be narrowed.

        We are subject, both directly and indirectly, to the adverse impact of existing and potential future government regulation of our operations and markets. For example, export of our instruments is subject to strict regulatory control in a number of jurisdictions. The failure to satisfy export control criteria or

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obtain necessary clearances could delay or prevent shipment of products, which could adversely affect our revenues and profitability. Moreover, the life sciences industry, which is the market for our technology, has historically been heavily regulated. There are, for example, laws in several jurisdictions restricting research in genetic engineering, which can operate to narrow our markets. Given the evolving nature of this industry, legislative bodies or regulatory authorities may adopt additional regulation that adversely affects our market opportunities. Additionally, if ethical and other concerns surrounding the use of genetic information, diagnostics or therapies become widespread, we may have less demand for our products. Our business is also directly affected by a wide variety of government regulations applicable to business enterprises generally and to companies operating in the life science industry in particular. Failure to comply with these regulations or obtain or maintain necessary permits and licenses could result in a variety of fines or other censures or an interruption in our business operations which may have a negative impact on our ability to generate revenues and could increase the cost of operating our business.

If we make acquisitions in the future, we may encounter a range of problems that could harm our business.

        We may acquire technologies, products or companies that we feel could accelerate our ability to compete in our core markets. Acquisitions involve numerous risks, including:

•

difficulties in integrating operations, technologies, accounting and personnel;



•

difficulties in supporting and transitioning customers of our acquired companies;



•

diversion of financial and management resources from existing operations;



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risks of entering new markets;



•

potential loss of key employees; and



•

inability to generate sufficient revenue to offset acquisition costs.

        Acquisitions also frequently result in the recording of goodwill and other intangible assets which are subject to potential impairments in the future that could harm our financial results. In addition, if we finance acquisitions by issuing convertible debt or equity securities, our existing stockholders may be diluted, which could affect the market price of our stock. As a result, if we fail to properly evaluate acquisitions or investments, we may not achieve the anticipated benefits of any such acquisitions, and we may incur costs in excess of what we anticipate.

RISKS RELATED TO OUR INTELLECTUAL PROPERTY

Our failure to establish a strong intellectual property position and enforce our intellectual property rights against others would enable competitors to develop similar or alternative technologies.

        Our success depends in part on our ability to obtain and maintain intellectual property protection for our products, processes and technologies. Our policy is to seek to protect our intellectual property by, among other methods, filing U.S. patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business.

        Our patent portfolio relating to our proprietary technology is comprised of issued patents and pending patent applications which, in either case, we own directly or for which we are the exclusive or semi-exclusive licensee. Some of these patents and patent applications are foreign counterparts of U.S. patents or patent applications. We may not be able to maintain and enforce existing patents or obtain further patents for our products, processes and technologies. Even if we are able to maintain our existing patents or obtain further patents, these patents may not provide us with substantial protection or be commercially beneficial. The issuance of a patent is not conclusive as to its validity or

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enforceability, nor does it provide the patent holder with freedom to operate unimpeded by the patent rights of others. Patent law relating to the scope of claims in the technology fields in which we operate is still evolving and the extent of future protection is highly uncertain, so there can be no assurance that the patent rights that we have or may obtain will be valuable. Others have filed patent applications that are similar in scope to ours, and in the future are likely to file patent applications that are similar or identical in scope to ours or those of our licensors. We cannot predict whether any of our competitors' pending patent applications will result in the issuance of valid patents. Moreover, we cannot assure investors that any such patent applications will not have priority or dominate over our patents or patent applications. The invalidation of key patents owned by or licensed to us or non-approval of pending patent applications could increase competition, and materially adversely affect our business, financial condition and results of operations. Furthermore, there can be no assurance that others will not independently develop similar or alternative technologies, duplicate any of our technologies, or, if patents are issued to us, design around the patented technologies developed by us.

We may be involved in lawsuits and administrative proceedings to protect or enforce our patents and proprietary rights and to determine the scope and validity of others' proprietary rights, which could result in substantial costs and diversion of resources and which, if unsuccessful, could harm our competitive position and our results of operations.

        Litigation and administrative proceedings may be necessary to enforce our patent and proprietary rights and/or to determine the scope and validity of others' proprietary rights. Litigation on these matters has been prevalent in our industry and we expect that this will continue. To determine the priority of inventions, we may have to initiate and participate in interference proceedings declared by the U.S. Patent and Trademark Office that could result in substantial costs in legal fees and could substantially affect the scope of our patent protection. Also, our intellectual property may be subject to significant administrative and litigation proceedings such as invalidity, opposition, reexamination, or reissue proceedings against our patents. The outcome of any litigation or administrative proceeding might not be favorable to us, and, in that case, we might be required to develop alternative technological approaches that we may not be able to complete successfully or require licenses from others that we may not be able to obtain. Even if such licenses are obtainable, they may not be available at a reasonable cost. We may also be held liable for money damages to third parties and could be enjoined from manufacturing or selling our products or technologies. In addition, if we resort to legal proceedings to enforce our intellectual property rights or to determine the validity and scope of the intellectual property or other proprietary rights of others, the proceedings could be burdensome and expensive, even if we were to prevail. These types of administrative proceedings and any litigation that may be necessary in the future could result in our patent protection being significantly modified or reduced, and could result in substantial costs and diversion of resources and could have a material adverse effect on our business, operating results or financial condition. In August 2006, we filed an opposition against EP 1 105 529 B1 in the European Patent Office, with respect to which we received a preliminary non-binding opinion upholding the patent. In October 2008, EP 1 105 529 B1 was maintained in amended form and in January 2009 we filed a notice of appeal of the European Patent Office's decision. The patent owner filed a response brief on October 19, 2009, and the Company filed a reply brief on March 19, 2010.

We depend upon our ability to license technologies, and the failure to license or otherwise acquire necessary technologies could harm our ability to commercialize our products or defend our intellectual property position.

        We hold various licenses to use certain technologies that we consider to be material to our business. Each of these licenses imposes a range of obligations on us and may be terminated if we breach the terms of any of the respective agreements. We may also be required to enter into additional licenses with third parties for other technologies that we consider to be necessary for our business. If

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we are unable to maintain our existing licenses or obtain additional technologies on acceptable terms, we could be required to develop alternative technologies, either alone or with others, in order to avoid infringing the intellectual property to which we no longer hold a license. This could require our product to be re-configured which could negatively impact its availability for commercial sale and increase our development costs. Failure to license or otherwise acquire necessary technologies would harm our ability to commercialize our products, which could materially adversely affect our business, financial condition and results of operations. In addition, any licenses we obtain from federally-funded institutions are subject to the march-in rights of the U.S. government.

We may be the subject of costly and time-consuming lawsuits brought by third parties for alleged infringement of their proprietary rights, which could limit our ability to use certain technologies in the future, force us to redesign or discontinue our products, or pay royalties to continue to sell our products.

        Our success depends, in part, on us neither infringing patents or other proprietary rights of third parties nor breaching any licenses to which we are a party. We may be the subject of legal claims by third-parties that we infringe their patents or otherwise violate their intellectual property rights. In addition, the technology that we license from third parties for use in our Helicos System could become subject to similar infringement claims. Infringement claims asserted against us or our licensors may have a material adverse effect on our business, results of operations or financial condition. Any claims, either with or without merit, could be time-consuming and expensive to defend, and could divert our management's attention away from the execution of our business plan. Moreover, any settlement or adverse judgment resulting from the claim could require us to pay substantial amounts of money or obtain a license to continue to use the technology that is the subject of the claim, or otherwise restrict or prohibit our use of the technology. There can be no assurance that we would be able to obtain a license on commercially reasonable terms, if at all, from third parties asserting an infringement claim; that we would be able to develop alternative technology on a timely basis, if at all; or that we would be able to obtain a license to use a suitable alternative technology to permit us to continue offering, and our customers to continue using, our affected products. Accordingly, an adverse determination could prevent us from offering our instruments, reagents or disposable supplies to others. In addition, we may be required to indemnify our customers for third-party intellectual property infringement claims, which would increase the cost to us of an adverse ruling for such a claim. We believe that there may be significant litigation in the industry regarding patent and other intellectual property rights. If we become involved in such litigation, it could consume a substantial portion of our managerial and financial resources.

        Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, during the course of this kind of litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.

The measures that we use to protect the security of our intellectual property and other proprietary rights may not be adequate, which could result in the loss of legal protection for, and thereby diminish the value of, such intellectual property and other rights.

        Our success depends in part on our ability to protect our intellectual property and other proprietary rights. In addition to patent protection, we also rely upon a combination of trademark, trade secret, copyright and unfair competition laws, as well as license agreements and other contractual provisions, to protect our intellectual property and other proprietary rights. In addition, we attempt to protect our intellectual property and proprietary information by requiring our employees, consultants

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and certain academic collaborators to enter into confidentiality and assignment of inventions agreements. There can be no assurance, however, that such measures will provide adequate protection for our patents, copyrights, trade secrets or other proprietary information. In addition, there can be no assurance that trade secrets and other proprietary information will not be disclosed, that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to or disclose our trade secrets and other proprietary information. To the extent that our intellectual property and other proprietary rights are not adequately protected, third parties might gain access to our proprietary information, develop and market genetic analysis systems similar to our tSMS technology, or use trademarks similar to ours, each of which could materially harm our business. Existing U.S. federal and state intellectual property laws offer only limited protection. Moreover, the laws of other countries in which we may market our technology may afford little or no effective protection of our intellectual property. The failure to adequately protect our intellectual property and other proprietary rights could materially harm our business.

RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK

Our directors and management will exercise significant control over our company, which will limit your ability to influence corporate matters.

        Certain of our directors and executive officers and their affiliates collectively control a majority of our outstanding common stock as of December 31, 2009. As a result, these stockholders, if they act together, will be able to influence our management and affairs and all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control of our company and might negatively affect the market price of our common stock.

The market price of our common stock may be volatile, which could result in substantial losses for our stockholders and subject us to securities class action litigation.

        Market prices of technology and healthcare companies have been particularly volatile. Some of the factors that may cause the market price of our common stock to fluctuate include:

•

investors' perception of our ability to successfully reevaluate our long-term strategic focus and reposition our business;



•

fluctuations in our quarterly operating results or the operating results of companies perceived to be similar to us;



•

changes in estimates of our financial results or recommendations by securities analysts;



•

failure of our technology to achieve or maintain market acceptance or commercial success;



•

changes in market valuations of similar companies;



•

success of competitive products and services;



•

changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;



•

announcements by us or our competitors of significant products, contracts, acquisitions or strategic alliances;



•

regulatory developments in the United States, foreign countries or both;



•

litigation involving our company, our general industry or both;



•

additions or departures of key personnel;

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•

investors' general perception of us; and



•

changes in general economic, industry and market conditions.

        In addition, if the market for biotechnology and life sciences stocks or the stock market in general experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to class action lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

If equity research analysts do not publish research reports about our business or if they issue unfavorable commentary or downgrade our common stock, the price of our common stock could decline.

        The trading market for our common stock may rely in part on the research and reports that equity research analysts publish about us and our business. We do not control the opinions of these analysts. The price of our stock could decline if one or more equity analysts downgrade our stock or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business.

A significant portion of our total outstanding shares may be sold into the public market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.

        A majority of the shares of our common stock outstanding as of December 31, 2009 may be offered and sold by selling stockholders pursuant to effective registration statements on Forms S-3 declared effective by the SEC. In addition, up to 28,344,589 additional shares of our common stock may be offered and sold pursuant to effective registration statements by selling stockholders upon exercise of warrants. In addition, a majority of the other outstanding shares of our common stock and other warrants are eligible for resale by the holders of those shares pursuant to other effective registration statements or in exempt private transactions.

        If our existing stockholders sell substantial amounts of our common stock in the public market, the market price of our common stock could decrease significantly. The perception in the public market that our stockholders might sell shares of common stock could also depress the market price of our common stock. A decline in the price of shares of our common stock might impede our ability to raise capital through the issuance of additional shares of our common stock or other equity securities, and may cause you to lose part or all of your investment in our shares of common stock.

        We have registered the issuance of all shares of common stock that we have issued and may issue under our employee option plans. Having registered the issuance of these shares, they can be freely sold in the public market upon issuance. In addition, as of December 31, 2009, there were 277,777 shares of common stock reserved for future issuance as charitable contribution to the Broad Institute, Inc. that will become eligible for sale in the public market to the extent permitted by Rule 144 under the Securities Act of 1933, as amended.

        Due to these factors, sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.

Provisions in our certificate of incorporation and by-laws or Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.

        Provisions of our certificate of incorporation and by-laws and Delaware law may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable,

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including transactions in which you might otherwise receive a premium for your shares of our common stock. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. These provisions include:

•

a staggered board of directors;



•

limitations on the removal of directors;



•

advance notice requirements for stockholder proposals and nominations;



•

the inability of stockholders to act by written consent or to call special meetings; and



•

the ability of our board of directors to make, alter or repeal our by-laws.

        The affirmative vote of the holders of at least 75% of our shares of capital stock entitled to vote is necessary to amend or repeal the above provisions of our certificate of incorporation. In addition, our board of directors has the ability to designate the terms of and issue new series of preferred stock without stockholder approval. Also, absent approval of our board of directors, our by-laws may only be amended or repealed by the affirmative vote of the holders of at least 75% of our shares of capital stock entitled to vote. Accordingly, given that our executive officers, directors and their affiliates collectively own a majority of our outstanding common stock, certain of these persons acting together will have the ability to block any such amendment.

        In addition, Section 203 of the Delaware General Corporation Law prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

        The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

We do not currently intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

        We have never declared or paid any cash dividends on our common stock and do not currently intend to do so for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon any future appreciation in its value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.

Our common stock may be delisted from The NASDAQ Global Market, which could negatively impact the price of our common stock and our ability to access the capital markets.

        Our common stock is listed on The NASDAQ Global Market. On April 14, 2010, the Company received a letter from The NASDAQ Stock Market LLC ("NASDAQ") advising that for the previous 30 consecutive business days, the bid price of the Company's common stock had closed below the minimum $1.00 per share requirement for continued inclusion on The NASDAQ Global Market. If we fail to comply with this minimum bid price requirement or any other listing standards applicable to issuers listed on The NASDAQ Global Market, our common stock may be delisted from The NASDAQ Global Market. The delisting of our common stock would significantly affect the ability of investors to trade our securities and would significantly negatively affect the value and liquidity of our common stock. In addition, the delisting of our common stock could materially adversely affect our ability to

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raise capital on terms acceptable to us or at all. Delisting from The NASDAQ Global Market could also have other negative results, including the potential loss of confidence by suppliers and employees, the loss of institutional investor interest and fewer business development opportunities.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

        Not applicable.

ITEM 2.    PROPERTIES

        Our principal U.S. facilities that we lease consist of a global headquarters, research and development facility and manufacturing plant in Cambridge, Massachusetts, comprising 46,317 square feet. The lease for our Cambridge facility expired on March 31, 2010. As a result of our process of considering alternatives to the Company's existing long-term strategic focus, we are currently evaluating our facility requirements which we expect will be clarified during the second quarter of 2010 as we determine our long-term business strategy. In the interim, we are working with our landlord in order to avoid any disruption to our occupancy of our facilities.

        For additional information regarding obligations under operating leases see Note 7 to the Consolidated Financial Statements contained in this Form 10-K.

ITEM 3.    LEGAL PROCEEDINGS

        We are not party to any material pending or threatened litigation.

ITEM 4.    Reserved.

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PART II

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

Market Information

        Our common stock has traded publicly under the symbol "HLCS" since our initial public offering in May 2007 on the NASDAQ Global Market. The following table sets forth the range of quarterly high and low sales prices for our common stock.

Holders

        As of March 31, 2010, there were approximately 112 holders of record of our common stock, one of which is Cede & Co., a nominee for Depository Trust Company ("DTC"). All of the shares of common stock held by brokerage firms, banks and other financial institutions as nominees for beneficial owners are deposited into participant accounts at DTC and therefore are considered to be held of record by Cede & Co. as one shareholder.

Dividends

        We have never declared or paid any cash dividends on our capital stock and do not expect to pay any cash dividends for the foreseeable future. We intend to use future earnings, if any, in the operation and expansion of our business. Any future determination relating to our dividend policy will be made at the discretion of our board of directors, based on our financial condition, results of operations, contractual restrictions, capital requirements, business properties, restrictions imposed by applicable law and other factors our board of directors may deem relevant.

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Issuer Purchases of Equity Securities

        During 2009, we purchased 67,993 restricted shares from employees to cover withholding taxes due from the employees at the time the shares vested. The following table provides information about these purchases of restricted shares for the year ended December 31, 2009:

        Upon the termination of employees during the year ended December 31, 2009, 39,422 unvested restricted shares were forfeited. The following table provides information about our forfeited restricted shares for the year ended December 31, 2009:

Use of Proceeds from Initial Public Offering of Common Stock

        On May 24, 2007, we completed our initial public offering of 5,400,000 shares of our common stock at a price to the public of $9.00 per share for an aggregate offering price of $48.6 million. We received aggregate net proceeds of approximately $43.9 million, after deducting underwriting discounts and commissions of $2.9 million, and $1.8 million of additional expenses, including legal, accounting and printing costs and various other fees associated with the registration and listing of our common stock. None of the underwriting discounts and commissions or offering expenses were incurred or paid,

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directly or indirectly, to directors or officers of ours or their associates or to persons owning 10% or more of our common stock or to any affiliates of ours. The offer and sale of all of the shares in the initial public offering were registered under the Securities Act of 1933, as amended, pursuant to a registration statement on Form S-1 (File No. 333-140973), which was declared effective by the Securities and Exchange Commission on May 24, 2007. UBS Investment Bank, JP Morgan, Leerink Swann & Company, and Pacific Growth Equities, LLC were the underwriters of the initial public offering. The offering commenced on May 24, 2007 and did not terminate until after the sale of all of the securities registered in the registration statement.

        On June 27, 2007, we sold an additional 397,000 shares of our common stock at $9.00 per share pursuant to the over-allotment option granted to the underwriters of our initial public offering. The net proceeds after deducting underwriters' discounts and commission related to the offering were $3.3 million. UBS Securities, J.P. Morgan Securities, Inc., Leerink Swann & Co., Inc. and Pacific Growth Equities, LLC acted as representatives of the underwriters.

        Of the $52.2 million of gross proceeds we received in our initial public offering, including the exercise of the over-allotment options, through December 31, 2008, we have spent approximately $3.2 million on underwriting discounts and commissions and approximately $1.8 million for payment of expenses related to our initial public offering. Additionally, we have spent $16.6 million on pre-production research and development expenses and $10.9 million on inventory. None of these expenses were incurred or paid, directly or indirectly, to directors or officers of ours or their associates or to persons owning 10% or more of our common stock or to any affiliates of ours.

        The proceeds remaining after paying the costs noted above are invested in interest bearing bank accounts. During early 2009, we used the remaining proceeds from our initial public offering for general corporate purposes which include ongoing research and development activities, funding the additional recruitment of our specialized sales, marketing and services force and marketing initiatives and funding manufacturing expenses associated with the commercial version of our Helicos System. Our management has broad discretion as to the use of the net proceeds.

Recent Sales of Unregistered Securities

        In September 2009, we entered into a securities purchase agreement with certain investors pursuant to which we (i) sold to certain existing investors a total of 1,030,028 units, each unit consisting of (a) one share of common stock and (b) one warrant to purchase 0.662 shares of common stock at an exercise price equal to $2.61 per share (105% of the closing bid price of the common stock on September 15, 2009), at a purchase price equal to $2.57 per unit, and (ii) sold to certain new investors a total of 3,281,252 units, each unit consisting of (a) one share of common stock and (b) one warrant to purchase 0.50 shares of common stock at an exercise price equal to $2.61 per share, at a purchase price equal to $2.24 per unit (together, the "September 2009 Offering") for gross proceeds of $10.0 million. We paid $646,000 in placement agent fees and offering expenses and expect to use the remaining net proceeds of $9.4 million for general corporate purposes, which include ongoing research and development activities, funding marketing initiatives and funding manufacturing expenses associated with the commercial version of our Helicos System. The warrants have a five and a half year term and become exercisable on or after the six month anniversary following the closing of the transaction. The closing of the transaction occurred on September 18, 2009. The September 2009 Offering was consummated in reliance on the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act").

        In connection with the September 2009 Offering, we entered into a registration rights agreement (the "September 2009 Registration Rights Agreement") with each of the investors. The September 2009 Registration Rights Agreement provides that we will file a "resale" registration statement covering all of the shares of common stock and the shares of common stock issuable upon exercise of the warrants, up to the maximum number of shares able to be registered pursuant to applicable SEC regulations,

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within 15 days of the closing of the September 2009 Offering. We currently maintain an effective registration statement relating to these shares (File No. 333- 162240). Under the terms of the September 2009 Registration Rights Agreement, we are obligated to maintain the effectiveness of the "resale" registration statement until all securities therein are sold or are otherwise can be sold pursuant to Rule 144, without any restrictions. A cash penalty at the rate of 2% per month will be triggered for any filing or effectiveness failures or 1% in the event of suspensions of prospectus delivery or if, at any time after six months following the closing of the September 2009 Offering, we cease to be current in our periodic reports with the SEC. The aggregate penalty accrued with respect to each investor may not exceed 12% of the original purchase price paid by that investor.

        In December 2009, we entered into an Underwriting Agreement (the "Underwriting Agreement") with Thomas Weisel Partners LLC (the "Underwriter"), pursuant to which we agreed to sell to the Underwriter 6,400,000 shares of common stock and warrants to purchase up to 4,160,000 shares of Common Stock sold in units, at a price of $1.00 per unit. Each unit consists of one share of common stock and a warrant (each a "Warrant") to buy 0.65 of a share of common stock. The Warrants will be exercisable for a period of five years, beginning six months after issuance, at an exercise price of $1.4385 per share. We received approximately $6.4 million in gross proceeds from the offering ("December 2009 Offering"). We paid $0.7 million in underwriting discounts, commissions and offering expenses and expect to use the remaining net proceeds of $5.7 million for general corporate purposes, which include ongoing research and development activities, funding marketing initiatives and funding manufacturing expenses associated with the commercial version of our Helicos System. The closing of the transaction occurred on December 21, 2009.

ITEM 6.    SELECTED FINANCIAL DATA

        Smaller reporting companies are not required to provide disclosure pursuant to this Item.

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

        The following "Management's Discussion and Analysis of Financial Condition and Results of Operations", as well as disclosures included elsewhere in this Form 10-K, include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. This Act provides a safe harbor for forward-looking statements to encourage companies to provide prospective information about themselves so long as they identify these statements as forward-looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. All statements other than statements of historical fact we make in this Form 10-K are forward-looking. In particular, the statements herein regarding future sales and operating results; our ability to raise capital or finance our operations; Company and industry growth and trends; growth of the markets in which we participate; international events; product performance; the generation, protection and acquisition of intellectual property, and litigation related to such intellectual property; new product introductions; development of new products, technologies and markets; the acquisition of or investment in other entities; the construction of new or refurbishment of existing facilities by us; and statements preceded by, followed by or that include the words "intends", "estimates", "plans", "believes", "expects", "anticipates", "should", "could" or similar expressions, are forward-looking statements. Forward-looking statements reflect our current expectations and are inherently uncertain. Our actual results may differ significantly from our expectations. We assume no obligation to update this forward-looking information. The section entitled "Risk Factors" describes some, but not all, of the factors that could cause these differences.

        The following discussion and analysis should be read in conjunction with our historical financial statements and the notes to those financial statements which are included in Item 8 of Part II of this Form 10-K.

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BUSINESS OVERVIEW

        Helicos BioSciences Corporation is a life sciences company which has developed proprietary technology focused on the research, drug discovery and clinical diagnostics markets. Our proprietary True Single Molecule Sequencing (tSMS)™ technology enables rapid analysis of large quantities of genetic material by directly sequencing single molecules of DNA or single DNA copies of RNA (cDNA) and our newest approach of direct sequencing of RNA. Our tSMS approach differs from current methods of sequencing DNA or RNA because it analyzes individual molecules of DNA directly instead of analyzing a large number of copies of the molecule produced through complex sample preparation techniques. Our tSMS technology eliminates the need for costly, labor-intensive and time-consuming sample preparation techniques, such as amplification or cloning, which are required by other methods to produce a sufficient quantity of genetic material for analysis.

        Our Helicos® Genetic Analysis Platform is designed to obtain sequencing information by repetitively performing a cycle of biochemical reactions on individual DNA or RNA molecules and imaging the results after each cycle. The platform consists of an instrument called the HeliScope™ Single Molecule Sequencer, an image analysis computer tower called the HeliScope™ Analysis Engine, associated reagents, which are chemicals used in the sequencing process, and disposable supplies. The information generated from using our tSMS products may lead to improved drug therapies, personalized medical treatments and more accurate diagnostics for cancer and other diseases.

        In the first quarter of 2010, we began a process of considering alternatives to our existing long-term strategic focus, including a repositioning of the Company in the genetic analysis markets. We believe that an adjustment to our existing strategy would better position us to take advantage of the unique capabilities of our proprietary platform and to address the growing competition in the genetic research marketplace. Although we made progress during 2009 in the genetic research market as demonstrated by our growing installed base and the number of peer reviewed publications referencing our single molecule sequencing technology, we believe that we must consider a number of alternatives to improving shareholder value and, as a result, have embarked upon this process with a view toward repositioning our highly differentiated single molecule sequencing solution. In this regard, we have continued our relationship with Thomas Weisel Partners LLC (TWP), a nationally recognized investment bank, to assist us with our evaluation and execution of strategic alternatives and long term financing strategy. We have also engaged a variety of consultants in the genomic research, services and diagnostics industries to evaluate available alternatives.

        In particular, we believe that our technology is uniquely suited for applications in molecular diagnostics. We believe that diagnostics applications may benefit from the specific features for which the Helicos System is uniquely suited, including the platform's quantitative accuracy, the use of small sample quantities in simple preparation methods, and high throughput, as well as lack of biases typically seen with sample amplification.

        We anticipate the repositioning evaluation process will take at least several months. There can be no assurance, however, that we will be successful in re-focusing our long-term strategy or that any transaction we undertake to implement a change in strategy will ultimately be completed or, if one is undertaken, there can be no assurance regarding its terms, timing or sources of funding. During this time, we will focus our limited resources on satisfying current customer needs and stabilizing system performance, which has varied at some customer and placement sites. In addition, new initiatives will be prioritized to those that reduce operational risk and conserve resources while the company considers its strategic alternatives and direction.

        For the year ended December 31, 2009, we have received cumulative sales orders for ten Helicos Systems. In addition, we have one system installed at the Broad Institute, Inc. on a no cost basis, and have three systems at leading academic institutions for scientific and commercial evaluation. During

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2009, we have recognized revenue on two of the ten sales orders. We have shipped five units that have not met our revenue recognition requirements.

        We believe that we have incurred the substantial majority of the costs related to the development of the initial version of our Helicos System. Any future shipments, as well as shipments that have occurred but have not yet generated revenue, of the Helicos Systems will be subject to various customer evaluation periods with acceptance criteria, and we expect the customer evaluation period to extend beyond the fiscal quarters in which commercial units are shipped. Future revenues from sales of our instruments, proprietary reagents and disposable supplies will depend on individual customer agreements, timing of the installation and turnover to customer, customers' use of the system and our ability to maintain our proprietary position on the reagents and disposable supplies. Because we have limited experience in the commercialization of our Helicos System and are reevaluating our long-term strategic focus, we cannot predict the percentage of our revenues that we will derive from sales of proprietary reagents and disposable supplies.

        In September 2009, we raised approximately $9.4 million, after deducting placement agent fees and offering expenses, through the issuance of 4,311,280 shares of common stock and warrants to acquire up to 2,322,509 shares of common stock for an exercise price of $2.61 per share. In December 2009, we raised approximately $5.7 million, after deducting placement agent fees and offering expenses, through the issuance of 6,400,000 shares of common stock and warrants to acquire up to 4,160,000 shares of common stock for an exercise price of $1.44 per share.

        Since inception, we have incurred losses and have not generated positive cash flows from operations. We expect our losses to continue for a considerable period of time as we reevaluate our long-term strategic focus and consider various alternatives to reposition our business, by exploring various opportunities including the use of our technology for diagnostic applications in the genetic analysis market. These losses, among other things, have had and will continue to have an adverse effect on our working capital, total assets and stockholders' equity. As of December 31, 2009 and March 31, 2010, we had $15.9 million and $11.3 million, respectively, in cash and cash equivalents. We will, before the end of the second half of 2010, require significant additional capital to fund our operations. Since our present capital resources are not sufficient to fund our planned operations for a twelve month period as of the date of this Annual Report on Form 10-K, our current financial resources raise substantial doubt about our ability to continue as a going concern. A result of our failure to raise capital as and when needed would have a material negative impact on our financial condition and would have a material adverse impact on the viability of our company to continue as a going concern.

        We were incorporated in Delaware in May 2003 under the name RareEvent Medical Corporation, renamed Newco LS6, Inc. in September 2003 and ultimately renamed Helicos BioSciences Corporation in November 2003. Our activities to date have consisted primarily of conducting research and development. Accordingly, we are considered to be in the development stage at December 31, 2009, as defined by the Financial Accounting Standards Board ("FASB"). Our fiscal year ends on December 31, and we operate as one reportable segment. Our corporate offices are located at One Kendall Square, Building 700, Cambridge, Massachusetts 02139.

FINANCIAL OVERVIEW

Product revenue

        Product revenue for the year ended December 31, 2009 consists of $1.8 million of revenue recognized from the sale of two instrument systems for which all acceptance criteria were satisfied during the period and $0.5 million of revenue recognized from the sale of proprietary reagents to customers for the year ended December 31, 2009.

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Grant revenue

        In September 2006, we were awarded a grant from the National Human Genome Research Institute ("NHGRI"), a branch of the National Institutes of Health ("NIH"), pursuant to which we are eligible to receive reimbursement of our research expenses of up to $2.0 million through August 2009. We recognized revenue during the years ended December 31, 2008 and 2009 of $772,000 and $454,000, respectively, in connection with this award. We have fully expended all available funds under the grant as of December 31, 2009.

        In September 2009, we were awarded another grant from the NHGRI, pursuant to which we are eligible to receive reimbursement of our research expenses of up to $2.9 million through August 2011. The two year grant is part of the Sequencing Technology Development Program representing NHGRI's Signature Project for the American Recovery and Reinvestment Act's effort to jumpstart the economy and create or save millions of jobs. This project, a part of NIH's "Grand Opportunities" program, is designed to support large-scale, high impact research projects that are expected to accelerate critical scientific breakthroughs and enable growth and investment in biomedical research and development. During the year ended December 31, 2009 we recognized $247,000 in revenue, in connection with this award.

Cost of product revenue

        Cost of product revenue for the years ended December 31, 2008 and 2009 were $10,000 and $1.2 million, respectively. Cost of product revenue is related to the sale of instruments and proprietary reagents.

Research and development expenses

        Research and development expenses consist of costs associated with scientific research activities, and engineering development efforts. Such costs primarily include salaries, benefits and stock-based compensation; lab and engineering supplies; investment in equipment; consulting fees; and facility related costs, including rent and depreciation. During the years ended December 31, 2008 and 2009, research and development expenses included $4.2 million and $1.9 million, respectively of labor and overhead costs associated with the under-utilization of the manufacturing facility.

        Substantially all research and development expenses since our inception have been in connection with the launch of the initial version of the Helicos® Genetic Analysis System and we believe that we have incurred the substantial majority of the development costs associated with the commercial launch of the first generation of the Helicos System through December 2007. However, additional costs were incurred during 2008 and 2009 to both maintain and enhance the initial version of the Helicos System in addition to development of new and different genetic analysis assays which will extend the capability of the initial version.

        Research and development expenses for the years ended December 31, 2008 and 2009 were $24.6 million and $18.3 million, respectively. During December 2008, we implemented a 30% reduction in our workforce and took other measures to reduce our future operating costs (the "Reduction in Force Plan"). From 2008 to 2009, expenses decreased in connection with the Reduction in Force Plan implemented in December 2008, as we focused more of our efforts on manufacturing activities and spent less time and resources on research and development activities.

        In addition to our ongoing research and development efforts, we have incurred start-up manufacturing costs related to the assembly, testing and performance validation of the Helicos System. These costs were accounted for as research and development expenses in our pre-commercialization phase as we prepared to ship the first Helicos System, which occurred on March 5, 2008. We reached

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technological feasibility of the Helicos System in December 2007 and, as a result, we began to record the cost of the Helicos System in inventory.

        We believe that the Helicos System can potentially access a wide range of genetic analysis tests useful to the basic, pharmaceutical, and biomedical research and diagnostic markets. In addition, we have envisioned a series of performance enhancements to the chemistries and consumables used on the initial Helicos System which potentially serve to greatly enhance the sequencing throughput. Each of these research and development projects is dependent upon achieving technical objectives, which are inherently uncertain. As a result of these uncertainties, we are unable to predict to what extent we will receive cash inflows from the sale of future tests or from the future enhanced throughput. Our inability to complete these new research and development projects in a timely manner would significantly increase our capital requirements and would adversely impact our liquidity.

Selling, general and administrative expenses

        Selling, general and administrative expenses consist principally of salaries, benefits and stock-based compensation, consulting and professional fees, including patent related costs, general corporate costs and facility costs not otherwise included in research and development expenses or cost of product revenue.

        Selling, general and administrative expenses for the years ended December 31, 2008 and 2009 were $20.1 million and $12.5 million, respectively. The decrease is due to the Reduction in Force Plan implemented in December 2008, as well as a significant reduction in costs associated with ERP system enhancements, public company expenses, investor relations programs, and outside consultant costs related to Sarbanes-Oxley compliance.

Restructuring

        In December 2008, we implemented a Reduction in Force Plan that resulted in the reduction of approximately 30% of our workforce. The Reduction in Force Plan was designed to reduce our operating costs and direct our resources to continue advancing towards our near term goals. Employees directly affected by the Reduction in Force Plan were provided with severance payments and outplacement assistance.

        We incurred restructuring charges relating to one-time termination benefits of approximately $433,000 in the fourth quarter of 2008. These charges represent employee severance and termination costs which were paid out during the fourth quarter of 2008 and the first quarter of 2009.

        A summary of restructuring activity at December 31, 2009 is as follows:

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