EXACT SCIENCES CORP, 10-Q filed on 10/27/2020
Quarterly Report
v3.20.2
Cover Page - shares
9 Months Ended
Sep. 30, 2020
Oct. 26, 2020
Cover [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Sep. 30, 2020  
Entity File Number 001-35092  
Entity Registrant Name EXACT SCIENCES CORPORATION  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 02-0478229  
Entity Address, Address Line One 5505 Endeavor Lane  
Entity Address, City or Town Madison  
Entity Address, State or Province WI  
Entity Address, Postal Zip Code 53719  
City Area Code 608  
Local Phone Number 535-8815  
Title of 12(b) Security Common Stock, $0.01 par value per share  
Trading Symbol EXAS  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q3  
Entity Central Index Key 0001124140  
Amendment Flag false  
Entity Common Stock, Shares Outstanding   150,424,035
v3.20.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Current Assets:    
Cash and cash equivalents $ 806,678 $ 177,254
Marketable securities 476,324 146,401
Accounts receivable, net 206,606 130,667
Inventory 80,427 61,724
Prepaid expenses and other current assets 36,592 40,913
Total current assets 1,606,627 556,959
Long-term Assets:    
Property, plant and equipment, net 456,455 455,325
Operating lease right-of-use assets 129,837 126,444
Goodwill 1,237,672 1,203,197
Intangible assets, net 871,660 1,143,550
Other long-term assets, net 52,119 20,293
Total assets 4,354,370 3,505,768
Current Liabilities:    
Accounts payable 26,061 25,973
Accrued liabilities 182,945 193,329
Operating lease liabilities, current portion 10,746 7,891
Debt, current portion 1,319 834
Other current liabilities 31,761 8,467
Total current liabilities 252,832 236,494
Long-term Liabilities:    
Convertible notes, net 1,554,967 803,605
Long-term debt, less current portion 22,643 24,032
Other long-term liabilities 62,821 34,911
Operating lease liabilities, less current portion 124,007 118,665
Total liabilities 2,017,270 1,217,707
Commitments and contingencies
Stockholders’ Equity:    
Preferred stock, $0.01 par value Authorized—5,000,000 shares issued and outstanding—no shares at September 30, 2020 and December 31, 2019 0 0
Common stock, $0.01 par value Authorized—400,000,000 shares issued and outstanding—150,373,486 and 147,625,696 shares at September 30, 2020 and December 31, 2019 1,505 1,477
Additional paid-in capital 3,865,990 3,406,440
Accumulated other comprehensive income (loss) 1,084 (100)
Accumulated deficit (1,531,479) (1,119,756)
Total stockholders’ equity 2,337,100 2,288,061
Total liabilities and stockholders’ equity $ 4,354,370 $ 3,505,768
v3.20.2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Sep. 30, 2020
Dec. 31, 2019
Statement of Financial Position [Abstract]    
Preferred stock, par value (in dollars per share) $ 0.01 $ 0.01
Preferred stock, Authorized shares (in shares) 5,000,000 5,000,000
Preferred stock, Issued shares (in shares) 0 0
Preferred stock, outstanding shares (in shares) 0 0
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, authorized shares (in shares) 400,000,000 400,000,000
Common stock, Issued shares (in shares) 150,373,486 147,625,696
Common stock, outstanding shares (in shares) 150,373,486 147,625,696
v3.20.2
Condensed Consolidated Statements of Operations - USD ($)
shares in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Income Statement [Abstract]        
Revenue $ 408,363,000 $ 218,805,000 $ 1,025,052,000 $ 580,718,000
Operating expenses        
Cost of sales (exclusive of amortization of acquired intangible assets) 95,061,000 52,335,000 254,559,000 146,301,000
Research and development 31,471,000 34,714,000 107,653,000 96,471,000
Sales and marketing 136,481,000 86,196,000 423,092,000 265,325,000
General and administrative 115,589,000 80,538,000 336,265,000 208,067,000
Amortization of acquired intangible assets 23,430,000 748,000 70,199,000 2,256,000
Intangible asset impairment charge 209,666,000 0 209,666,000 0
Total operating expenses 611,698,000 254,531,000 1,401,434,000 718,420,000
Other operating income 0 0 23,665,000 0
Loss from operations (203,335,000) (35,726,000) (352,717,000) (137,702,000)
Other income (expense)        
Investment income, net 2,523,000 9,093,000 5,532,000 23,417,000
Interest expense (23,582,000) (13,209,000) (71,647,000) (47,911,000)
Total other income (expense) (21,059,000) (4,116,000) (66,115,000) (24,494,000)
Net loss before tax (224,394,000) (39,842,000) (418,832,000) (162,196,000)
Income tax benefit (expense) 4,510,000 (683,000) 7,109,000 230,000
Net loss $ (219,884,000) $ (40,525,000) $ (411,723,000) $ (161,966,000)
Net loss per share - basic and diluted (in usd per share) $ (1.46) $ (0.31) $ (2.76) $ (1.26)
Weighted average common shares outstanding - basic and diluted (in shares) 150,155 129,567 149,346 128,344
v3.20.2
Condensed Consolidated Statements of Comprehensive Loss - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Statement of Comprehensive Income [Abstract]        
Net loss $ (219,884) $ (40,525) $ (411,723) $ (161,966)
Other comprehensive loss, before tax:        
Unrealized gain on available-for-sale investments (405) (2,697) 1,159 1,431
Foreign currency adjustment 0 0 25 0
Comprehensive loss, before tax (220,289) (43,222) (410,539) (160,535)
Income tax expense related to items of other comprehensive loss 0 643 0 (341)
Comprehensive loss, net of tax $ (220,289) $ (42,579) $ (410,539) $ (160,876)
v3.20.2
Condensed Consolidated Statements of Stockholders Equity - USD ($)
$ in Thousands
Total
Common Stock
Additional Paid-In Capital
Other Comprehensive Income (Loss)
Accumulated Deficit​
Beginning Balance at Dec. 31, 2018 $ 680,941 $ 1,232 $ 1,716,894 $ (1,422) $ (1,035,763)
Balance (in shares) at Dec. 31, 2018   123,192,540      
Increase (Decrease) in Stockholders' Equity          
Equity component of convertible notes, net of tax and issuance costs 268,390   268,390    
Shares issued to settle convertible notes (in shares)   2,158,991      
Shares issued to settle convertible notes 182,435 $ 22 182,413    
Settlement of convertible notes, net of tax (300,768)   (300,768)    
Exercise of common stock options 3,650 $ 2 3,648    
Exercise of common stock options (in shares)   235,278      
Issuance of common stock to fund the Company's 401(k) match 7,409 $ 1 7,408    
Issuance of common stock to fund the Company's 401(k) match (in shares)   86,532      
Compensation expense related to issuance of stock options and restricted stock awards 16,166 $ 35 16,131    
Compensation expense related to issuance of stock options and restricted stock awards (in shares)   3,410,481      
Net loss (82,939)       (82,939)
Accumulated other comprehensive income 1,656     1,656  
Ending Balance at Mar. 31, 2019 776,940 $ 1,292 1,894,116 234 (1,118,702)
Balance (in shares) at Mar. 31, 2019   129,083,822      
Beginning Balance at Dec. 31, 2018 $ 680,941 $ 1,232 1,716,894 (1,422) (1,035,763)
Balance (in shares) at Dec. 31, 2018   123,192,540      
Increase (Decrease) in Stockholders' Equity          
Shares issued to settle convertible notes (in shares) 2,159,017        
Issuance of common stock for business combinations $ 0        
Net loss (161,966)        
Ending Balance at Sep. 30, 2019 748,284 $ 1,299 1,945,046 (332) (1,197,729)
Balance (in shares) at Sep. 30, 2019   129,817,885      
Beginning Balance at Mar. 31, 2019 776,940 $ 1,292 1,894,116 234 (1,118,702)
Balance (in shares) at Mar. 31, 2019   129,083,822      
Increase (Decrease) in Stockholders' Equity          
Equity component of convertible notes, net of tax and issuance costs (22)   (22)    
Exercise of common stock options 1,348 $ 1 1,347    
Exercise of common stock options (in shares)   78,793      
Compensation expense related to issuance of stock options and restricted stock awards 20,143 $ 1 20,142    
Compensation expense related to issuance of stock options and restricted stock awards (in shares)   104,845      
Purchase of employee stock purchase plan shares 4,137 $ 1 4,136    
Purchase of employee stock purchase plan shares (in shares)   93,588      
Net loss (38,502)       (38,502)
Accumulated other comprehensive income 1,488     1,488  
Ending Balance at Jun. 30, 2019 765,532 $ 1,295 1,919,719 1,722 (1,157,204)
Balance (in shares) at Jun. 30, 2019   129,361,048      
Increase (Decrease) in Stockholders' Equity          
Settlement of convertible notes, net of tax $ 1   1    
Settlement of convertible notes (in shares) 26        
Exercise of common stock options $ 1,391 $ 2 1,389    
Exercise of common stock options (in shares)   178,628      
Compensation expense related to issuance of stock options and restricted stock awards 24,348 $ 2 24,346    
Compensation expense related to issuance of stock options and restricted stock awards (in shares)   278,180      
Purchase of employee stock purchase plan shares 0        
Purchase of employee stock purchase plan shares (in shares)   3      
Issuance costs (409)        
Net loss (40,525)       (40,525)
Accumulated other comprehensive income (2,054)     (2,054)  
Ending Balance at Sep. 30, 2019 748,284 $ 1,299 1,945,046 (332) (1,197,729)
Balance (in shares) at Sep. 30, 2019   129,817,885      
Beginning Balance at Dec. 31, 2019 $ 2,288,061 $ 1,477 3,406,440 (100) (1,119,756)
Balance (in shares) at Dec. 31, 2019 147,625,696 147,625,696      
Increase (Decrease) in Stockholders' Equity          
Equity component of convertible notes, net of tax and issuance costs $ 346,641   346,641    
Settlement of convertible notes, net of tax (64,199)   (64,199)    
Exercise of common stock options 4,300 $ 2 4,298    
Exercise of common stock options (in shares)   160,286      
Issuance of common stock to fund the Company's 401(k) match 12,007 $ 1 12,006    
Issuance of common stock to fund the Company's 401(k) match (in shares)   136,559      
Compensation expense related to issuance of stock options and restricted stock awards 29,560 $ 11 29,549    
Compensation expense related to issuance of stock options and restricted stock awards (in shares)   1,141,376      
Issuance of common stock for business combinations 28,597 $ 4 28,593    
Issuance of common stock for business combinations (in shares)   382,947      
Net loss (105,697)       (105,697)
Accumulated other comprehensive income (1,617)     (1,617)  
Ending Balance at Mar. 31, 2020 2,537,653 $ 1,495 3,763,328 (1,717) (1,225,453)
Balance (in shares) at Mar. 31, 2020   149,446,864      
Beginning Balance at Dec. 31, 2019 $ 2,288,061 $ 1,477 3,406,440 (100) (1,119,756)
Balance (in shares) at Dec. 31, 2019 147,625,696 147,625,696      
Increase (Decrease) in Stockholders' Equity          
Issuance of common stock for business combinations $ 28,847        
Issuance of common stock for business combinations (in shares) 386,293        
Net loss $ (411,723)        
Ending Balance at Sep. 30, 2020 $ 2,337,100 $ 1,505 3,865,990 1,084 (1,531,479)
Balance (in shares) at Sep. 30, 2020 150,373,486 150,373,486      
Beginning Balance at Mar. 31, 2020 $ 2,537,653 $ 1,495 3,763,328 (1,717) (1,225,453)
Balance (in shares) at Mar. 31, 2020   149,446,864      
Increase (Decrease) in Stockholders' Equity          
Exercise of common stock options 6,638 $ 2 6,636    
Exercise of common stock options (in shares)   208,434      
Compensation expense related to issuance of stock options and restricted stock awards 40,039 $ 2 40,037    
Compensation expense related to issuance of stock options and restricted stock awards (in shares)   157,579      
Purchase of employee stock purchase plan shares 9,799 $ 2 9,797    
Purchase of employee stock purchase plan shares (in shares)   167,921      
Net loss (86,142)       (86,142)
Accumulated other comprehensive income 3,206     3,206  
Ending Balance at Jun. 30, 2020 2,511,193 $ 1,501 3,819,798 1,489 (1,311,595)
Balance (in shares) at Jun. 30, 2020   149,980,798      
Increase (Decrease) in Stockholders' Equity          
Exercise of common stock options 4,470 $ 1 4,469    
Exercise of common stock options (in shares)   140,145      
Compensation expense related to issuance of stock options and restricted stock awards 41,476 $ 2 41,474    
Compensation expense related to issuance of stock options and restricted stock awards (in shares)   249,197      
Issuance of common stock for business combinations 250 $ 1 249    
Issuance of common stock for business combinations (in shares)   3,346      
Net loss (219,884)       (219,884)
Accumulated other comprehensive income (405)     (405)  
Ending Balance at Sep. 30, 2020 $ 2,337,100 $ 1,505 $ 3,865,990 $ 1,084 $ (1,531,479)
Balance (in shares) at Sep. 30, 2020 150,373,486 150,373,486      
v3.20.2
Condensed Consolidated Statements of Stockholders Equity (Parenthetical) - $ / shares
Sep. 30, 2020
Jun. 30, 2020
Mar. 31, 2020
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Statement of Financial Position [Abstract]                
Common stock, par value (in dollars per share) $ 0.01 $ 0.01 $ 0.01 $ 0.01 $ 0.01 $ 0.01 $ 0.01 $ 0.01
v3.20.2
Condensed Consolidated Statements of Cash Flows - USD ($)
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Cash flows from operating activities:    
Net loss $ (411,723,000) $ (161,966,000)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 53,345,000 21,920,000
Loss on disposal of property, plant and equipment 930,000 880,000
Unrealized gain on equity investments (1,183,000) 0
Deferred tax benefit (7,976,000) (341,000)
Stock-based compensation 111,075,000 60,657,000
Loss on settlement of convertible notes 7,954,000 10,558,000
Amortization of convertible note debt discount and issuance costs 55,222,000 30,778,000
Amortization of deferred financing costs and other liabilities (3,614,000) (2,421,000)
Amortization of premium on short-term investments 1,040,000 (6,229,000)
Amortization of acquired intangible assets 70,199,000 2,256,000
Intangible asset impairment charge 209,666,000 0
Non-cash lease expense 11,041,000 2,681,000
Changes in assets and liabilities:    
Accounts receivable, net (73,642,000) (36,871,000)
Inventory, net (18,472,000) (14,525,000)
Operating lease liabilities (6,135,000) (2,628,000)
Accounts payable and accrued liabilities (7,608,000) 16,279,000
Other assets and liabilities 34,959,000 (7,382,000)
Net cash provided by (used in) operating activities 25,078,000 (86,354,000)
Cash flows from investing activities:    
Purchases of marketable securities (890,012,000) (604,129,000)
Maturities and sales of marketable securities 559,907,000 1,449,330,000
Purchases of property, plant and equipment (47,782,000) (130,970,000)
Business combination, net of cash acquired (6,658,000) 0
Investments in privately held companies (10,610,000) 0
Other investing activities (244,000) (530,000)
Net cash provided by (used in) investing activities (395,399,000) 713,701,000
Cash flows from financing activities:    
Proceeds from issuance of convertible notes, net 1,125,547,000 729,477,000
Proceeds from exercise of common stock options 15,408,000 6,389,000
Proceeds in connection with the Company’s employee stock purchase plan 9,799,000 4,137,000
Payments on settlement of convertible notes (150,054,000) (493,356,000)
Other financing activities (938,000) (90,000)
Net cash provided by financing activities 999,762,000 246,557,000
Net increase in cash, cash equivalents and restricted cash 629,441,000 873,904,000
Cash and cash equivalents, beginning of period 177,528,000 160,430,000
Cash and cash equivalents, end of period 806,969,000 1,034,334,000
Supplemental disclosure of non-cash investing and financing activities:    
Property, plant and equipment acquired but not paid 7,209,000 16,933,000
Unrealized gain on available-for-sale investments, before tax 1,159,000 1,431,000
Issuance of 136,559 and 86,535 shares of common stock to fund the Company’s 401(k) matching contribution for 2019 and 2018, respectively 12,007,000 7,409,000
Issuance of 2,159,017 shares of common stock upon settlement of convertible notes 0 182,435,000
Retirement of equity component of convertible notes settled (64,199,000) (300,768,000)
Issuance of common stock for business combinations 28,847,000 0
Supplemental disclosure of cash flow information:    
Interest paid $ 9,239,000 $ 4,944,000
v3.20.2
Condensed Consolidated Statements of Cash Flows (Parenthetical) - shares
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Statement of Cash Flows [Abstract]    
Issuance of shares of common stock to fund the Company's 401(k) matching contribution (in shares) 136,559 86,535
Issuance of common stock upon convertible notes settlement (in shares)   2,159,017
Issuance of common stock for business combinations (in shares) 386,293  
v3.20.2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
9 Months Ended
Sep. 30, 2020
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Exact Sciences Corporation (together with its subsidiaries, “Exact,” or the “Company”) was incorporated in February 1995. Exact is a leading global cancer diagnostics company. It has developed some of the most impactful brands in cancer screening and diagnostics, including Cologuard® and Oncotype DX®. Exact is currently working on the development of additional tests for other types of cancer, with the goal of bringing new innovative cancer tests to patients throughout the world.
Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements, which include the accounts of Exact Sciences Corporation and those of its wholly owned subsidiaries and variable interest entities, are unaudited and have been prepared on a basis substantially consistent with the Company’s audited financial statements and notes as of and for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K (the “2019 Form 10-K”). All intercompany transactions and balances have been eliminated upon consolidation. These condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and follow the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments (consisting only of adjustments of a normal and recurring nature) considered necessary for a fair statement of its financial position, operating results and cash flows for the periods presented. The condensed consolidated balance sheet at December 31, 2019 has been derived from audited financial statements, but does not contain all of the footnote disclosures from the 2019 Form 10-K. The results of the Company’s operations for any interim period are not necessarily indicative of the results of the Company’s operations for any other interim period or for a full fiscal year. The statements should be read in conjunction with the audited financial statements and related notes included in the 2019 Form 10-K.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting policies are those that affect the Company’s financial statements materially and involve difficult, subjective or complex judgments by management, and actual results could differ from those estimates. These estimates include revenue recognition, valuation of convertible notes, valuation of intangible assets and goodwill, and accounting for income taxes among others. The Company’s critical accounting policies and estimates are explained further in the notes to the condensed consolidated financial statements in this Quarterly Report and the 2019 Form 10-K.

The spread of the coronavirus (“COVID-19”) has affected many segments of the global economy, including the cancer screening and diagnostics industry. The COVID-19 outbreak, which the World Health Organization has classified as a pandemic, has prompted governments and regulatory bodies throughout the world to enact broad precautionary measures, including “stay-at-home” orders, restrictions on the performance of “non-essential” services, public gatherings and travel. Health systems, including key markets where the Company operates, have been, or may be, overwhelmed with high volumes of patients suffering from COVID-19. Even in areas where “stay-at-home” restrictions have been lifted and the number of cases of COVID-19 has declined, many individuals remain cautious about resuming activities such as preventive-care medical visits. Medical practices continue to be cautious about allowing individuals, such as sales representatives, into their offices. Many individuals continue to work from home rather from an office setting. The Company cannot forecast when the COVID-19 pandemic will end or the extent to which practices that have emerged during the pandemic will continue once it subsides.
The extent to which COVID-19 impacts the Company’s business and financial results will depend on numerous evolving factors including, but not limited to: the magnitude and duration of COVID-19, the extent to which it will impact worldwide macroeconomic conditions including interest rates, employment rates and health insurance coverage, the speed of the anticipated recovery, access to capital markets, and governmental and business reactions to the pandemic. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of September 30, 2020 and through the date of the filing of this Quarterly Report on Form 10-Q. The accounting matters assessed included, but were not limited to, the Company’s allowance for doubtful accounts and credit losses, equity investments, software, and the carrying value of the goodwill and other long-lived assets. The Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in additional material impacts to the Company’s consolidated financial statements in future reporting periods.

Despite the Company’s efforts, the ultimate impact of COVID-19 depends on factors beyond the Company’s knowledge or control, including the duration and severity of the outbreak, as well as third-party actions taken to contain its spread and mitigate its public health effects. As a result, the Company is unable to estimate the extent to which COVID-19 will negatively impact its financial results or liquidity.

Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)
In April 2020, the Company received $23.7 million from the United States Department of Health and Human Services (“HHS”) as a distribution from the Public Health and Social Services Emergency Fund provided for in the CARES Act. The fund payments are grants, not loans, and HHS will not require repayment provided the funds are utilized to offset expenses incurred to address COVID-19 or to replace lost revenues. The Company accepted the terms and conditions of the grant in May 2020 and recognized the entire $23.7 million during the nine months ended September 30, 2020, due to lost revenue attributable to COVID-19, which is reflected in other operating income in the condensed consolidated statement of operations. The Company cannot predict the extent to which it might receive any additional funds to be paid out under the Provider Relief Fund, and to what extent the financial impact of receiving such funds might offset the broad implications of the COVID-19 pandemic, which include increases in the Company’s costs and lost revenues.

Cash and Cash Equivalents
The Company considers cash on hand, demand deposits in bank, money market funds, and all highly liquid investments with an original maturity of 90 days or less to be cash and cash equivalents.
Marketable Securities
Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date. Debt securities carried at amortized cost are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Debt securities not classified as held-to-maturity are classified as available-for-sale. Available-for-sale securities are carried at fair value. The unrealized gains and losses, net of tax, on the Company’s debt securities are reported in other comprehensive income. Marketable equity securities are measured at fair value and the unrealized gains and losses, net of tax, are recognized in other income (expense) in the condensed consolidated statements of operations. The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity computed under the straight-line method. Such amortization is included in investment income, net. Realized gains and losses and declines in value as a result of credit losses on available-for-sale securities are included in the condensed consolidated statements of operations as investment income, net. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in the condensed consolidated statements of operations as investment income, net.
The Company’s investment policy limits investments to certain types of instruments issued by institutions with investment grade credit ratings and places restrictions on maturities and concentration by type and issuer. Investments in which the Company has the ability and intent, if necessary, to liquidate, in order to support its current operations (including those with a contractual term greater than one year from the date of purchase), are classified as current.

The Company periodically evaluates its available-for-sale debt securities in unrealized loss positions to determine whether any impairment is a result of a credit loss or other factors. This evaluation includes, but is not limited to, significant quantitative and qualitative assessments and estimates regarding credit ratings, significance of a security’s loss position, adverse conditions specifically related to the security, and the payment structure of the security.

Allowance for Doubtful Accounts
The Company estimates an allowance for doubtful accounts against accounts receivable using historical collection trends, aging of accounts, current and future implications surrounding the ability to collect such as economic conditions, and regulatory changes. The allowance for doubtful accounts is evaluated on a regular basis and adjusted when trends, significant events or other substantive evidence indicate that expected collections will be less than applicable accrual rates. At September 30, 2020 and December 31, 2019, the allowance for doubtful accounts recorded was not material to the Company’s condensed consolidated balance sheets. For the three and nine months ended September 30, 2020 and 2019, there was an immaterial amount of bad debt expense written off against the allowance and charged to operating expense.
Inventory
Inventory is stated at the lower of cost or net realizable value. The Company determines the cost of inventory using the first-in, first out method (“FIFO”). The Company estimates the recoverability of inventory by reference to internal estimates of future demands and product life cycles, including expiration. The Company periodically analyzes its inventory levels to identify inventory that may expire prior to expected sale, no longer meet quality specifications, or has a cost basis in excess of its estimated realizable value and records a charge to cost of sales for such inventory as appropriate.
Direct and indirect manufacturing costs incurred during process validation with probable future economic benefit are capitalized. Validation costs incurred for other research and development activities, which are not permitted to be sold, have been expensed to research and development in the Company’s condensed consolidated statements of operations.
Inventory consisted of the following:
(In thousands)September 30,
2020
December 31,
2019
Raw materials$33,842 $24,958 
Semi-finished and finished goods46,585 36,766 
Total inventory$80,427 $61,724 
Property, Plant and Equipment
​Property, plant and equipment are stated at cost and depreciated using the straight-line method over the assets’ estimated useful lives. Land is stated at cost and does not depreciate. Additions and improvements are capitalized, including direct and indirect costs incurred to validate equipment and bring it to working conditions. Revalidation costs, including maintenance and repairs are expensed when incurred.
Software Development Costs
Costs related to internal use software, including hosting arrangements, are incurred in three stages: the preliminary project stage, the application development stage, and the post-implementation stage. Costs incurred during the preliminary project and post-implementation stages are expensed as incurred. Costs incurred during the application development stage that meet the criteria for capitalization are capitalized and amortized, when the software is ready for its intended use, using the straight-line basis over the estimated useful life of the software, or the duration of the hosting agreement.
Investments in Privately Held Companies
The Company determines whether its investments in privately held companies are debt or equity based on their characteristics, in accordance with the applicable accounting guidance for such investments. The Company also evaluates the investee to determine if the entity is a variable interest entity (“VIE”) and, if so, whether the Company is the primary beneficiary of the VIE, in order to determine whether consolidation of the VIE is required. If consolidation is not required and the Company does not have voting control of the entity, the investment is evaluated to determine if the equity method of accounting should be applied. The equity method applies to investments in common stock or in substance common stock where the Company exercises significant influence over the investee.
Investments in privately held companies determined to be equity securities are accounted for as non-marketable securities. The Company adjusts the carrying value of its non-marketable equity securities for changes from observable transactions for identical or similar investments of the same issuer, less impairment. All gains and losses on non-marketable equity securities, realized and unrealized, are recognized in investment income, net in the condensed consolidated statements of operations.
Investments in privately held companies determined to be debt securities are accounted for as available-for-sale or held-to-maturity securities, in accordance with the applicable accounting guidance for such investments.​
Derivative Financial Instruments
The Company hedges a portion of its foreign currency exposures related to outstanding monetary assets and liabilities using foreign currency forward contracts. The foreign currency forward contracts are included in prepaid expenses and other current assets or in accrued liabilities in the condensed consolidated balance sheets, depending on the contracts’ net position. These contracts are not designated as hedges, and as a result, changes in their fair value are recorded in other income (expense) in the condensed consolidated statements of operations. There were no gains or losses recorded for the three and nine months ended September 30, 2020 and 2019. As of September 30, 2020 and December 31, 2019, the Company had open foreign currency forward contracts with notional amounts of $18.2 million and $17.9 million, respectively. The Company's foreign exchange derivative instruments are classified as Level 2 within the fair value hierarchy as they are valued using inputs that are observable in the market or can be derived principally from or corroborated by observable market data. The fair value of the foreign currency forward contracts was zero at September 30, 2020 and December 31, 2019.
Intangible Assets
Purchased intangible assets are recorded at fair value. The Company uses a discounted cash flow model to value intangible assets. The discounted cash flow model requires assumptions about the timing and amount of future net cash flows, risk, the cost of capital, terminal values and market participants.
Patent costs are capitalized as incurred, only if the Company determines that there is some probable future economic benefit derived from the transaction. A capitalized patent is amortized over its estimated useful life, beginning when such patent is approved. Capitalized patent costs are expensed upon disapproval, upon a decision by the Company to no longer pursue the patent or when the related intellectual property is either sold or deemed to be no longer of value to the Company. The Company determined that all patent costs incurred during the three and nine months ended September 30, 2020 and 2019 should be expensed and not capitalized as the future economic benefit derived from the patent costs incurred cannot be determined.​
Acquired In-process Research and Development (IPR&D)
Acquired IPR&D represents the fair value assigned to research and development assets that have not reached technological feasibility. The value assigned to acquired IPR&D is determined by estimating the costs to develop the acquired technology into commercially viable products, estimating the resulting revenues from the projects and discounting the net cash flows to present value. The revenues and cost projections used to value acquired IPR&D are, as applicable, reduced based on the probability of success. IPR&D projects acquired in a business combination that are not complete are capitalized and accounted for as indefinite-lived intangible assets until completion or abandonment of the related R&D efforts. Upon successful completion of the project, the capitalized amount is amortized over its estimated useful life. If a project is abandoned, all remaining capitalized amounts are written off immediately. There are often major risks and uncertainties associated with IPR&D projects as we are required to obtain regulatory approvals in order to be able to market the resulting products. Such approvals require completing clinical trials that demonstrate the products effectiveness. Consequently, the eventual realized value of the IPR&D project may vary from its fair value at the date of acquisition, and IPR&D impairment charges may occur in future periods.
Capitalized IPR&D projects are tested for impairment annually and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company considers various factors for potential impairment, including the current legal and regulatory environment, current and future strategic initiatives and the competitive landscape. Adverse clinical trial results, significant delays in obtaining marketing approval, the inability to bring a product to market and the introduction or advancement of competitors' products could result in partial or full impairment of the related intangible assets.
Goodwill​
The Company evaluates goodwill for possible impairment in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350 on an annual basis during the fourth quarter, or more frequently if events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Qualitative factors considered in this assessment include industry and market conditions, overall financial performance, and other relevant events and factors affecting the Company's business. Based on the qualitative assessment, if it is determined that the fair value of goodwill is more likely than not to be less than its carrying amount, the fair value of a reporting unit will be calculated and compared with its carrying amount and an impairment charge will be recognized for the amount that the carrying value exceeds the fair value.
Impairment of Long-Lived Assets
The Company evaluates the fair value of long-lived assets, which include property, plant and equipment, finite-lived intangible assets, and investments in privately held companies, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Refer to Note 5 for discussion of the impairment charges recorded during the nine months ended September 30, 2020.
Fair Value Measurements
The FASB has issued authoritative guidance that requires fair value to be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under that standard, fair value measurements are separately disclosed by level within the fair value hierarchy. The fair value hierarchy establishes and prioritizes the inputs used to measure fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are inputs that reflect the assumptions that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Convertible Notes
The Company accounts for convertible notes that may be settled in cash or equity upon conversion by separating the liability and equity components of the instruments in a manner that reflects the Company’s nonconvertible debt borrowing rate. The Company determines the carrying amount of the liability component of the convertible notes by using assumptions that market participants would use in pricing a debt instrument, including market interest rates, credit standing, yield curves and volatilities. Determining the fair value of the debt component requires the use of accounting estimates and assumptions. These estimates and assumptions are judgmental in nature and could have a significant impact on the determination of the debt component, and the associated non-cash interest expense.
Leases
The Company acts as lessee in its lease agreements, which include operating leases for corporate offices, laboratory space, warehouse space, vehicles and certain laboratory and office equipment, and finance leases for certain equipment and vehicles.
The Company determines whether an arrangement is, or contains, a lease at inception. At the beginning of fiscal year 2019, the company adopted ASC Topic 842. The Company records the present value of lease payments as right-of-use (“ROU”) assets and lease liabilities on the condensed consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments based on the present value of lease payments over the lease term. Classification of lease liabilities as either current or non-current is based on the expected timing of payments due under the Company’s obligations.
As most of the Company’s leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term and at an amount equal to the lease payments in a similar economic environment. In order to determine the appropriate incremental borrowing rates, the Company has used a number of factors including the credit rating, and the lease term. Certain vehicle leases include variable lease payments that depend on an index or rate. Those lease payments are initially measured using the index or rate at the lease commencement date.
The ROU asset also consists of any lease incentives received. The lease terms used to calculate the ROU asset and related lease liability include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. “Reasonably certain” is assessed internally based on economic, industry, company, strategic and contractual factors. The leases have remaining lease terms of 1 year to 15 years, some of which include options to extend the lease for up to 10 years, and some of which include options to terminate the lease within 1 year. Operating lease expense and amortization of finance lease ROU assets are recognized on a straight-line basis over the lease term as an operating expense. Finance lease interest expense is recorded as interest expense on the Company’s condensed consolidated statements of operations.
The Company accounts for leases acquired in business combinations by measuring the lease liability at the present value of the remaining lease payments as if the acquired lease were a new lease for the Company. This measurement includes recognition of a lease intangible for any below-market terms present in the leases acquired. The below-market lease intangible is included in the ROU asset on the condensed consolidated balance sheets and are amortized over the remaining lease term. The Company has not acquired any leases with above-market terms.
The Company has taken advantage of certain practical expedients offered to registrants at adoption of ASC 842. The Company does not apply the recognition requirements of ASC 842 to short-term leases. Instead, those lease payments are recognized in profit or loss on a straight-line basis over the lease term. Further, as a practical expedient, all lease contracts are accounted for as one single lease component, as opposed to separating lease and non-lease components to allocate the consideration within a single lease contract.
Net Loss Per Share​
Basic net loss per common share was determined by dividing net loss applicable to common stockholders by the weighted average common shares outstanding during the period. Basic and diluted net loss per share is the same because all outstanding common stock equivalents have been excluded, as they are anti-dilutive as a result of the Company’s losses.
The following potentially issuable common shares were not included in the computation of diluted net loss per share because they would have an anti-dilutive effect due to net losses for each period:
September 30,
(In thousands)20202019
Shares issuable in connection with acquisitions157 — 
Shares issuable upon exercise of stock options2,429 2,199 
Shares issuable upon the release of restricted stock awards4,654 3,902 
Shares issuable upon conversion of convertible notes20,309 12,197 
27,549 18,298 
Accounting for Stock-Based Compensation
The Company requires all share-based payments to employees, including grants of employee stock options, restricted stock, restricted stock units and shares purchased under an employee stock purchase plan (if certain parameters are not met), to be recognized in the financial statements based on their grant date fair values. Forfeitures of any share-based awards are recognized as they occur. ​
Revenue Recognition​
Revenues are recognized when the satisfaction of the performance obligation occurs, in an amount that reflects the consideration the Company expects to collect in exchange for those services. To determine revenue recognition for the arrangements that the Company determines are within the scope of FASB ASC Topic 606, Revenue from Contracts with Customers, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. See Note 2 for further discussion.
Foreign Currency Transactions
Prior to 2019, the Company’s international subsidiaries’ functional currency was the local currency and assets and liabilities were translated into U.S. dollars at the period-end exchange rate or historical rates, as appropriate. Condensed consolidated statements of operations were translated at average exchange rates for the period, and the cumulative translation adjustments resulting from changes in exchange rates were included in the Company’s condensed consolidated balance sheet as a component of additional paid-in capital. In 2019 and 2020, the Company’s international subsidiaries use the U.S. dollar as the functional currency, resulting in the Company not being subject to gains and losses from foreign currency translation of the subsidiary financial statements. The Company recognizes gains and losses from foreign currency transactions in the condensed consolidated statements of operations. Net foreign currency transaction gains or losses were not material to the condensed consolidated statements of operations for the periods presented.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation in the condensed consolidated financial statements and accompanying notes to the condensed consolidated financial statements including the amortization of acquired intangible assets, which is now presented as a separate line item on the Company's condensed consolidated statements of operations and was previously included in cost of sales, research and development, and general and administrative expenses. Due to these reclassifications, the Company is no longer presenting gross margin on the Company's condensed consolidated statements of operations.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The updated guidance requires companies to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets, including trade receivables. The updates also require available-for-sale debt security credit losses to be recognized as allowances rather than a reduction in amortized cost. The guidance was adopted by the Company on January 1, 2020. The requirements of the ASU did not result in the recognition of a material allowance for current expected credit losses, as the Company’s analysis of collectability looks at historical experience as well as current and future implications surrounding the ability to collect. Adoption of the updated guidance did not have a material impact on the Company’s condensed consolidated financial statements.
In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments –Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The updated guidance provides clarity regarding measurement of securities without readily determinable fair values. The guidance was adopted on January 1, 2020 and did not have a material impact on the Company's condensed consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles –Goodwill and Other –Internal-Use Software (Subtopic 350-40). The update provided guidance for evaluating the accounting for fees paid by a customer in a cloud computing arrangement that is a service contract. The guidance was adopted on a prospective basis, beginning on January 1, 2020 and it did not have a material impact on the Company's condensed consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820); Disclosure Framework -Changes to the Disclosure Requirements for Fair Value Measurement. The guidance provided an update to the disclosure requirements for fair value measurements under the scope of ASC 820. The updates were adopted on January 1, 2020 and did not have a material impact on the Company’s condensed consolidated financial statements.
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808). The update provided additional guidance regarding the interaction between Topic 808 on Collaborative Arrangements and Topic 606 on Revenue Recognition. The guidance was adopted on January 1, 2020 and did not have a material impact on the Company's condensed consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The update simplifies the accounting for income taxes through removing exceptions related to certain intraperiod allocations and deferred tax liabilities; clarifying guidance primarily related to evaluating the step-up tax basis for goodwill in a business combination; and reflecting enacted changes in tax laws or rates in the annual effective tax rate. The amended guidance is effective for interim and annual periods in 2021, however early adoption is permitted. The guidance was early adopted on January 1, 2020 and did not have a material impact on the Company’s condensed consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The updated guidance provides optional expedients for applying the requirements of certain topics in the codification for contracts that are modified because of reference rate reform. In addition to the optional expedients, the update includes a general principle that permits an entity to consider contract modifications due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. The updated guidance is effective for all entities as of March 12, 2020 and through December 31, 2022. The Company adopted the guidance upon issuance on March 12, 2020. There was no impact on the Company's condensed consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In August 2020, The Financial Accounting Standards Board issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). This update simplifies the accounting for convertible debt instruments by removing the beneficial conversion and cash conversion separation models for convertible instruments. Under the update, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives or that do not result in substantial premiums accounted for as paid-in capital. The update also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the computation of diluted EPS. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
v3.20.2
REVENUE
9 Months Ended
Sep. 30, 2020
Revenue from Contract with Customer [Abstract]  
REVENUE REVENUE ​The Company’s revenue is primarily generated by its laboratory testing services utilizing its Cologuard, Oncotype DX, and COVID-19 tests. The services are completed upon release of a patient’s test result to the ordering healthcare provider.
The core principle of ASC 606 is that the Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to collect in exchange for those goods or services. The Company recognizes revenues from its products in accordance with that core principle, and key aspects considered by the Company include the following:
Contracts​
The Company’s customer is primarily the patient, but the Company does not enter into a formal reimbursement contract with a patient. The Company establishes a contract with a patient in accordance with other customary business practices which is the point in time an order is received from a provider and a patient specimen has been returned to the laboratory for testing. Payment terms are a function of a patient’s existing insurance benefits, including the impact of coverage decisions with Center for Medicare & Medicaid Services (“CMS”) and applicable reimbursement contracts established between the Company and payers. However, when an order is received for a patient with no active insurance or insurance that does not cover the Company’s testing services, the Company requires payment from the patient prior to the commencement of the Company’s performance obligations. The Company’s consideration can be deemed variable or fixed depending on the structure of specific payer contracts, and the Company considers collection of such consideration to be probable to the extent that it is unconstrained.
Under the Company’s Laboratory Service Agreements (“LSA”) and Laboratory Reference Agreements (“LRA”) the Company contracts with a direct bill payer who is the customer for an agreed upon amount of laboratory testing services for a specified amount of time at a fixed reimbursement rate, and certain of the Company’s LSAs obligate the customer to pay for testing services prior to result.
Performance obligations
A performance obligation is a promise in a contract to transfer a distinct good or service (or a bundle of goods or services) to the customer. The Company’s contracts have a single performance obligation, which is satisfied upon rendering of services, which culminates in the release of a patient’s test result to the ordering healthcare provider. Or, in the context of some of the Company’s LSAs, the satisfaction of the performance obligation occurs when a specimen sample is not returned to the laboratory for processing before the end of the allotted testing window. The Company elects the practical expedient related to the disclosure of unsatisfied performance obligations, as the duration of time between providing testing supplies, the receipt of a specimen sample, and the release of a test result to the ordering healthcare provider is far less than one year.
Transaction price
The transaction price is the amount of consideration that the Company expects to collect in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration expected to be collected from a contract with a customer may include fixed amounts, variable amounts, or both.
Fixed consideration is derived from the Company’s LSA, LRA, and direct bill payer contracts that exist between the Company and the direct bill payers who assume the downstream patient billing. The contracted reimbursement rate is deemed to be fixed as the Company expects to fully collect all amounts billed under these relationships. Variable consideration is primarily derived from third party and patient billing and can result due to several factors such as the amount of contractual adjustments, any patient co-payments, deductibles or patient adherence incentives, the existence of secondary payers, and claim denials.
The Company estimates the amount of variable consideration using the expected value method, which represents the sum of probability-weighted amounts in a range of possible consideration amounts. When estimating the amount of variable consideration, the Company considers several factors, such as historical collections experience, patient insurance eligibility and payer reimbursement contracts.
The Company limits the amount of variable consideration included in the transaction price to the unconstrained portion of such consideration. In other words, the Company recognizes revenue up to the amount of variable
consideration that is not subject to a significant reversal until additional information is obtained or the uncertainty associated with the additional payments or refunds is subsequently resolved. Differences between original estimates and subsequent revisions, including final settlements, represent changes in the estimate of variable consideration and are included in the period in which such revisions are made. Revenue recognized from changes in transaction prices was $0.5 million and $1.2 million for the three months ended September 30, 2020 and 2019, respectively. Revenue recognized from changes in transaction prices was $9.1 million and $4.6 million for the nine months ended September 30, 2020 and 2019, respectively.
The Company monitors its estimates of transaction price to depict conditions that exist at each reporting date. If the Company subsequently determines that it will collect more or less consideration than it originally estimated for a contract with a patient, it will account for the change as an increase or decrease in the estimate of the transaction price (i.e., an upward or downward revenue adjustment) in the period identified.
When the Company does not have significant historical experience or that experience has limited predictive value, the constraint over estimates of variable consideration may result in no revenue being recognized upon release of the performance obligations associated with the Company’s tests, with recognition, generally occurring at the date of cash receipt.
Allocate transaction price
The transaction price is allocated entirely to the performance obligation contained within the contract with a customer.
Point in time recognition
The Company’s single performance obligation is satisfied at a point in time. That point in time is defined as the date the Company releases a result to the ordering healthcare provider, or, in the context of some of the Company’s LSAs, that point in time could be the date the allotted testing window ends if a specimen sample is not returned to the laboratory for processing. The point in time in which revenue is recognized by the Company signifies fulfillment of the performance obligation to the patient or direct bill payer.
Disaggregation of Revenue
The following table presents the Company’s revenues disaggregated by revenue source:
Three Months Ended September 30,Nine Months Ended September 30,
(In thousands)2020201920202019
Screening
Medicare Parts B & C$98,847 $108,617 $256,589 $295,103 
Commercial106,002 99,352 280,451 261,521 
Other9,774 10,836 28,367 24,094 
Total Screening214,623 218,805 565,407 580,718 
Precision Oncology
Medicare Parts B & C$33,945 $— $114,973 $— 
Commercial37,402 — 137,212 — 
International16,243 — 56,227 — 
Other3,989 — 14,493 — 
Total Precision Oncology91,579 — 322,905 — 
COVID-19 Testing$102,161 $— $136,740 $— 
Total$408,363 $218,805 $1,025,052 $580,718 
Screening revenue primarily includes laboratory service revenue from Cologuard while Precision Oncology revenue primarily includes laboratory service revenue from global Oncotype DX products.
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable and deferred revenue on the condensed consolidated balance sheets. Generally, billing occurs subsequent to the release of a patient’s test result to the ordering healthcare provider, resulting in an account receivable. However, the Company sometimes receives advance payment from a patient or a direct bill payer before a test result is completed, resulting in deferred revenue. The deferred revenue recorded is recognized as revenue at the point in time results are released to the patient’s healthcare provider. Or, in the context of some of the Company’s LSAs, the satisfaction of the performance obligation occurs when a specimen sample is not returned to the laboratory for processing before the end of the allotted testing window.
Deferred revenue balances are reported in other current liabilities in the Company’s condensed consolidated balance sheets and were $22.4 million and $0.6 million as of September 30, 2020 and December 31, 2019, respectively. As of September 30, 2020, $21.8 million of the Company’s deferred revenue balance is a result of the billing terms pursuant to the existing COVID-19 LSAs with customers.
Revenue recognized for the three months ended September 30, 2020 and 2019, which was included in the deferred revenue balance at the beginning of each period was $5,000 and $0.2 million, respectively. Revenue recognized for the nine months ended September 30, 2020 and 2019, which was included in the deferred revenue balance at the beginning of each period was $0.2 million and $0.5 million, respectively.
Practical Expedients
The Company does not adjust the transaction price for the effects of a significant financing component, as at contract inception, the Company expects the collection cycle to be one year or less.
The Company expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses in the Company’s condensed consolidated statements of operations.
The Company incurs certain other costs that are incurred regardless of whether a contract is obtained. Such costs are primarily related to legal services and patient communications (e.g. adherence reminder letters). These costs are expensed as incurred and recorded within general and administrative expenses in the Company’s condensed consolidated statements of operations.
v3.20.2
MARKETABLE SECURITIES
9 Months Ended
Sep. 30, 2020
Cash and Cash Equivalents [Abstract]  
MARKETABLE SECURITIES MARKETABLE SECURITIES
The following table sets forth the Company’s cash, cash equivalents, restricted cash, and marketable securities at September 30, 2020 and December 31, 2019:
(In thousands)September 30, 2020December 31, 2019
Cash, cash equivalents, and restricted cash
Cash and money market$456,701 $146,932 
Cash equivalents349,977 30,322 
Restricted cash (1)291 274 
Total cash, cash equivalents, and restricted cash806,969 177,528 
Marketable securities
Available-for-sale debt securities474,906 144,685 
Equity securities1,418 1,716 
Total marketable securities476,324 146,401 
Total cash and cash equivalents, restricted cash and marketable securities$1,283,293 $323,929 
______________
(1)Restricted cash is included in other long-term assets on the condensed consolidated balance sheets. There was no restricted cash at September 30, 2019.
Available-for-sale debt securities at September 30, 2020 consisted of the following:
(In thousands)Amortized CostGains in Accumulated
Other Comprehensive
Income (Loss)
Losses in Accumulated
Other Comprehensive
Income (Loss)
Estimated Fair
Value
Cash equivalents
U.S. government agency securities$349,975 $$— $349,977 
Total cash equivalents349,975 — 349,977 
Marketable securities
Corporate bonds191,651 970 — 192,621 
U.S. government agency securities257,102 60 — 257,162 
Certificates of deposit10,000 — 10,001 
Asset backed securities15,071 51 — 15,122 
Total marketable securities473,824 1,082 — 474,906 
Total available-for-sale securities$823,799 $1,084 $— $824,883 
Available-for-sale debt securities at December 31, 2019 consisted of the following:
(In thousands)Amortized CostGains in Accumulated
Other Comprehensive
Income (Loss)
Losses in Accumulated
Other Comprehensive
Income (Loss)
Estimated Fair Value
Cash equivalents
U.S. government agency securities$30,320 $$— $30,322 
Total cash equivalents30,320 — 30,322 
Marketable securities
U.S. government agency securities140,745 10 (73)140,682 
Corporate bonds4,017 — (14)4,003 
Total marketable securities144,762 10 (87)144,685 
Total available-for-sale securities$175,082 $12 $(87)$175,007 

The following table summarizes contractual underlying maturities of the Company’s available-for-sale debt securities at September 30, 2020:​
Due one year or lessDue after one year through four years
(In thousands)CostFair ValueCostFair Value
Cash equivalents
U.S. government agency securities$349,975 $349,977 $ $ 
Total cash equivalents349,975 349,977   
Marketable securities
U.S. government agency securities249,943 249,949 7,159 7,213 
Corporate bonds148,903 149,409 42,748 43,212 
Certificates of deposit10,000 10,001 — — 
Asset backed securities— — 15,071 15,122 
Total marketable securities408,846 409,359 64,978 65,547 
Total$758,821 $759,336 $64,978 $65,547 
The following table summarizes the gross unrealized losses and fair values of available-for-sale debt securities in an unrealized loss position as of September 30, 2020, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:
Less than one yearOne year or greaterTotal
(In thousands)Fair ValueGross Unrealized LossFair ValueGross Unrealized LossFair ValueGross Unrealized Loss (1)
Cash equivalents
U.S. government agency securities$49,996 $— $— $— $49,996 $— 
Total cash equivalents49,996 — — — 49,996 — 
Marketable securities
U.S. government agency securities24,994 — — — 24,994 — 
Total marketable securities24,994 — — — 24,994 — 
Total available-for-sale securities$74,990 $— $— $— $74,990 $— 
______________
(1)Available-for-sale debt securities in an unrealized loss position are insignificant as of September 30, 2020.
The Company evaluates investments, including investments in privately-held companies, that are in an unrealized loss position for impairment as a result of credit loss. It was determined that no credit losses exist as of September 30, 2020 and December 31, 2019 because the change in market value for those securities in an unrealized loss position has resulted from fluctuating interest rates rather than a deterioration of the credit worthiness of the issuers. The Company recorded a realized gain on available-for-sale debt securities of $1,000 and $3.1 million for the three months ended September 30, 2020 and 2019, respectively, net of insignificant realized losses. The Company recorded a realized gain on available-for-sale debt securities of $0.1 million and $3.3 million for the nine months ended September 30, 2020 and 2019, respectively, net of insignificant realized losses.

The Company recorded a gain of $33,000 and a loss of $0.3 million from its equity securities for the three and nine months ended September 30, 2020 as compared to no gain or loss for the three and nine months ended September 30, 2019.

The gains and losses recorded are included in investment income, net in the Company’s condensed consolidated statements of operations.
v3.20.2
PROPERTY, PLANT, AND EQUIPMENT
9 Months Ended
Sep. 30, 2020
Property, Plant and Equipment [Abstract]  
PROPERTY, PLANT, AND EQUIPMENT PROPERTY, PLANT AND EQUIPMENT
The estimated useful lives of property, plant and equipment are as follows:
(In thousands)Estimated
Useful Life
September 30,
2020
December 31,
2019
Property, plant and equipment
Landn/a$4,466 $4,466 
Leasehold and building improvements(1)113,153 80,352 
Land improvements15 years3,222 1,766 
Buildings
30 - 40 years
200,141 112,815 
Computer equipment and computer software3 years78,350 65,323 
Laboratory equipment
3 - 10 years
136,462 104,008 
Furniture and fixtures
3 - 10 years
23,950 14,539 
Assets under constructionn/a26,472 149,687 
Property, plant and equipment, at cost586,216 532,956 
Accumulated depreciation(129,761)(77,631)
Property, plant and equipment, net$456,455 $455,325 
______________
(1)Lesser of remaining lease term, building life, or estimated useful life.
Depreciation expense for the three months ended September 30, 2020 and 2019 was $19.5 million and $8.4 million, respectively. Depreciation expense for the nine months ended September 30, 2020 and 2019 was $52.9 million and $21.8 million, respectively.
At September 30, 2020, the Company had $26.5 million of assets under construction which consisted of $9.7 million in laboratory equipment, $8.4 million of building and leasehold improvements, $7.9 million in capitalized costs related to software projects, and $0.5 million related to furniture and fixtures. Depreciation will begin on these assets once they are placed into service. The Company expects to incur an additional $2.0 million to complete the laboratory equipment, $13.3 million to complete the building projects and leasehold improvements, $3.6 million to complete the software projects, and minimal costs to complete the furniture and fixtures. These projects are expected to be completed throughout 2020 and 2021.
v3.20.2
INTANGIBLE ASSETS AND GOODWILL
9 Months Ended
Sep. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
INTANGIBLE ASSETS AND GOODWILL INTANGIBLE ASSETS AND GOODWILL
Intangible Assets
The following table summarizes the net-book-value and estimated remaining life of the Company’s intangible assets as of September 30, 2020:​
(In thousands)Weighted Average
Remaining
Life (Years)
CostAccumulated AmortizationNet Balance at September 30, 2020
Finite-lived intangible assets
Trade name15.2$100,700 $(5,683)$95,017 
Customer relationships13.12,700 (359)2,341 
Patents4.010,441 (5,089)5,352 
Acquired developed technology9.2814,171 (73,022)741,149 
Supply agreements6.830,000 (3,538)26,462 
Internally developed technology2.41,883 (750)1,133 
Total finite-lived intangible assets959,895 (88,441)871,454 
Internally developed technology in processn/a206 — 206 
Total intangible assets$960,101 $(88,441)$871,660 
The following table summarizes the net-book-value and estimated remaining life of the Company’s intangible assets as of December 31, 2019:​
(In thousands)Weighted Average
Remaining
Life (Years)
CostAccumulated AmortizationNet Balance at December 31, 2019
Finite-lived intangible assets
Trade name15.9$100,700 $(961)$99,739 
Customer relationships13.62,700 (224)2,476 
Patents8.822,690 (5,974)16,716 
Acquired developed technology9.9806,371 (12,345)794,026 
Supply agreements7.530,000 (571)29,429 
Internally developed technology2.51,229 (336)893 
Total finite-lived intangible assets963,690 (20,411)943,279 
In-process research and developmentn/a200,000 — 200,000 
Internally developed technology in processn/a271 — 271 
Total intangible assets$1,163,961 $(20,411)$1,143,550 
As of September 30, 2020, the estimated future amortization expense associated with the Company’s finite-lived intangible assets for each of the five succeeding fiscal years is as follows:​
(In thousands)
2020$23,357 
202193,322 
202293,116 
202392,812 
202492,421 
Thereafter476,426 
$871,454 
The Company’s acquired intangible assets are being amortized on a straight-line basis over the estimated useful life. The amortization expense recorded from these intangible assets is reported in amortization of acquired intangible assets on the condensed consolidated statements of operations.
During the third quarter of 2020, the Company began discussions with Biocartis regarding the termination of its agreements with Biocartis related to the development of an in vitro diagnostic (“IVD”) version of the Oncotype DX Breast Recurrence Score test. As a result, and in connection with the preparation of the financial statements, the Company recorded a non-cash, pre-tax impairment loss of $200.0 million related to the in-process research and development intangible asset that was initially recorded as part of the combination with Genomic Health. The impairment is recorded in intangible asset impairment charge in the condensed consolidated statement of operations for the three and nine months ended September 30, 2020. See Note 7 for additional information on Biocartis.
During the third quarter of 2020, the Company abandoned certain research and development assets acquired through an asset purchase agreement with Armune Biosciences, Inc. in 2017. These assets were expected to complement the Company’s product pipeline and were expected to have alternative future uses at the time of acquisition; however, due to changes in strategic priorities and efforts during the third quarter of 2020, these assets are no longer expected to be utilized to advance the Company’s product pipeline. As a result, and in connection with the preparation of the financial statements, the Company wrote-off the gross cost basis of the intangible asset of $12.2 million and accumulated amortization of $2.5 million as of September 30, 2020. This write-off resulted in a non-cash, pre-tax impairment loss of $9.7 million, which is recorded in intangible asset impairment charge in the condensed consolidated statement of operations for the three and nine months ended September 30, 2020.
There were no impairment losses for the three and nine months ended September 30, 2019.
Goodwill
As a result of the acquisition of Paradigm Diagnostics, Inc. (“Paradigm”) and Viomics, Inc. (“Viomics”) in March 2020, the Company recognized goodwill of $30.4 million, which includes an immaterial post-acquisition adjustment to goodwill in the second quarter of 2020. Refer to the Company’s 2019 10-K for further discussion on goodwill recorded from previous business combinations.
The Company evaluates goodwill for possible impairment in accordance with ASC 350 on an annual basis during the fourth quarter, or more frequently if events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Qualitative factors considered in this assessment include industry and market conditions, overall financial performance, and other relevant events and factors affecting the Company's business. Based on the qualitative assessment, if it is determined that the fair value of goodwill is more likely than not to be less than its carrying amount, the fair value of a reporting unit will be calculated and compared with its carrying amount and an impairment charge will be recognized for the amount that the carrying value exceeds the fair value. Due to the impact of COVID-19 on the Company’s operations, the Company performed a qualitative assessment of goodwill to determine if an event indicating impairment was present. No such indicators were identified as of September 30, 2020. There were no impairment losses for the periods ended September 30, 2020 and September 30, 2019. During the nine months ended September 30, 2020, the Company recognized a measurement period adjustment to goodwill of $4.0 million related to an increase in Genomic Health’s pre-acquisition deferred tax liability due to finalization of certain income-tax related items.
The change in the carrying amount of goodwill for the periods ended September 30, 2020 and December 31, 2019 is as follows:
(In thousands)
Balance, January 1, 2019$17,279 
Genomic Health acquisition1,185,918 
Balance, December 31, 20191,203,197 
Paradigm & Viomics acquisition30,431 
Genomic Health acquisition adjustment4,044 
Balance, September 30, 2020$1,237,672 
v3.20.2
FAIR VALUE MEASUREMENTS
9 Months Ended
Sep. 30, 2020
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS
The three levels of the fair value hierarchy established are as follows:
Level 1    Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2    Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3    Unobservable inputs that reflect the Company’s assumptions about the assumptions that market participants would use in pricing the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available.
The following table presents the Company’s fair value measurements as of September 30, 2020 along with the level within the fair value hierarchy in which the fair value measurements in their entirety fall.
(In thousands)Fair Value at September 30,
2020
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Cash, cash equivalents, and restricted cash
Cash and money market$456,701 $456,701 $— $— 
U.S. government agency securities349,977 — 349,977 — 
Restricted cash291 291 — — 
Marketable securities
Corporate bonds192,621 — 192,621 — 
U.S. government agency securities257,162 — 257,162 — 
Certificates of deposit10,001 — 10,001 — 
Asset backed securities15,122 — 15,122 — 
Equity Securities1,418 1,418 — — 
Liabilities
Contingent consideration(2,638)— — (2,638)
Total$1,280,655 $458,410 $824,883 $(2,638)
The following table presents the Company’s fair value measurements as of December 31, 2019 along with the level within the fair value hierarchy in which the fair value measurements in their entirety fall.​
(In thousands)Fair Value at December 31,
2019
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Cash and cash equivalents
Cash and money market$146,932 $146,932 $— $— 
U.S. government agency securities30,322 — 30,322 — 
Restricted cash274 274 — — 
Marketable securities
U.S. government agency securities140,682 — 140,682 — 
Corporate bonds4,003 — 4,003 — 
Equity securities1,716 1,716 — — 
Liabilities
Contingent consideration(2,879)— — (2,879)
Total$321,050 $148,922 $175,007 $(2,879)
There have been no changes in valuation techniques or transfers between fair value measurement levels during the periods ended September 30, 2020 and December 31, 2019. The fair value of Level 2 instruments classified as cash equivalents and marketable debt securities are valued using a third-party pricing agency where the valuation is based on observable inputs including pricing for similar assets and other observable market factors. The Company’s marketable equity security investment in Biocartis is classified as a Level 1 instrument. See Note 7 for additional information on Biocartis. ​
Contingent Consideration
In connection with the Biomatrica Acquisition, a contingent earn-out liability was created to account for an additional $20.0 million in contingent consideration that could be earned based upon certain revenue milestones being met. The following table provides a roll-forward of the fair values of the contingent consideration, which includes Level 3 measurements:
(In thousands)Contingent consideration
Balance, January 1, 2020$(2,879)
Changes in fair value— 
Gains (losses) recognized in earnings— 
Payments241 
Balance, September 30, 2020$(2,638)
As of September 30, 2020, the fair value of the contingent earn-out liability is classified as a component of other long-term liabilities in the Company’s condensed consolidated balance sheet.
This fair value measurement of contingent consideration related to the Biomatrica acquisition was categorized as a Level 3 liability, as the measurement amount is based primarily on significant inputs not observable in the market. The Company evaluates the fair value of expected contingent consideration and the corresponding liability each annual reporting period using the Monte Carlo Method, which is consistent with the initial measurement of the expected Biomatrica Acquisition earn-out liability. The Company estimates projections during the earn-out period utilizing various potential pay-out scenarios. Probabilities were applied to each potential scenario and the resulting values were discounted using a rate that considers weighted average cost of capital as well as a specific risk premium associated with the riskiness of the earn-out itself, the related projections, and the overall business.
Non-Marketable Equity Investment
The Company has non-marketable equity investments which are initially recorded at the estimated fair value based on observable transactions. The Company has concluded it is not a primary beneficiary with regards to these investments and does not have the ability to exercise significant influence over the investees and thus has not consolidated the investees pursuant to the requirements of ASC 810, Consolidation. The Company will continue to assess its investments and future commitments to the investees and to the extent its relationship with the investees change and whether such change may require consolidation of the investees in future periods. The Company remeasures the fair value only when an observable transaction occurs during the period that would suggest a change in the carrying value of the investment. As of September 30, 2020 and December 31, 2019, the Company had non-marketable equity investments of $23.9 million and $11.8 million, respectively, which are classified as a component of other long-term assets in the Company’s condensed consolidated balance sheets. As of September 30, 2020, the balance primarily consists of the Company’s preferred stock investments in 18,258,838 shares of Epic Sciences and 5,025,764 shares of Thrive Earlier Detection Corp. (“Thrive”) of $10.8 million and $12.5 million, respectively. As of December 31, 2019, the balance consists of the Company’s preferred stock investments in Epic Sciences and Thrive Earlier Detection Corp. (“Thrive”) of $10.8 million and $1.0 million, respectively.

The Company purchased 4.0 million shares of Series B Preferred Stock of Thrive for $10.0 million in July 2020. The Company previously held a $1.0 million investment in the Series A Preferred Stock of Thrive, which does not have a readily determinable fair value and therefore, the Company elected the measurement alternative. The rights and obligations of the Series B Preferred Stock are generally the same as the Series A Preferred Stock previously held indicating that the transactions are identical or similar investments. As a result, the Company recorded an unrealized gain of $1.5 million during the three months ended September 30, 2020 in investment income, net on the Company’s condensed consolidated statement of operations to revalue the Company’s initial investment to the value of the Series B Preferred Stock, which was the most recent observable transaction.
There have been no other observable transactions during the three and nine months ended September 30, 2020 and 2019.
Fair Value of Long-Term Debt and Convertible Notes​
The Company measures the fair value of its convertible notes and long-term debt for disclosure purposes. The following table summarizes the Company’s outstanding convertible notes and long-term debt:​
September 30, 2020December 31, 2019
(In thousands)Carrying Amount (1)Fair ValueCarrying Amount (1)Fair Value
2028 Convertible notes (2)$796,463 $1,251,085 $— $— 
2027 Convertible notes (2)506,294 881,631 483,909 843,741 
2025 Convertible notes (2)252,210 494,627 319,696 592,482 
Construction loan (3)23,962 23,962 24,866 24,866 
______________
(1)The carrying amounts presented are net of debt discounts and debt issuance costs (see Note 12 and Note 15 of the condensed consolidated financial statements for further information).​
(2)The fair values are based on observable market prices for this debt, which is traded in active markets and therefore is classified as a Level 2 fair value measurement. A portion of the 2025 convertible notes were settled in 2020 resulting in a decrease in the liability.​
(3)The carrying amount of the construction loan approximates fair value due to the short-term nature of this instrument. The construction loan is privately held with no public market for this debt and therefore is classified as a Level 3 fair value measurement. The change in the fair value was due to payments made on the loan resulting in a decrease in the liability.
v3.20.2
LICENSE AND COLLABORATION AGREEMENTS
9 Months Ended
Sep. 30, 2020
LICENSE AGREEMENTS [Abstract]  
LICENSE AND COLLABORATION AGREEMENTS LICENSE AND COLLABORATION AGREEMENTS
The Company licenses certain technologies that are, or may be, incorporated into its technology under several license agreements, as well as the rights to commercialize certain diagnostic tests through collaboration agreements. Generally, the license agreements require the Company to pay royalties based on net revenues received using the technologies and may require minimum royalty amounts or maintenance fees.
Mayo
In June 2009 the Company entered into a license agreement with Mayo Foundation for Medical Education and Research (“Mayo”). The Company’s license agreement with Mayo was most recently amended in September 2020. Under the license agreement, Mayo granted the Company an exclusive, worldwide license to certain Mayo patents and patent applications, as well as a non-exclusive, worldwide license with regard to certain Mayo know-how. The scope of the license covers any screening, surveillance or diagnostic test or tool for use in connection with any type of cancer, pre-cancer, disease or condition.
The licensed Mayo patents and patent applications contain both method and composition claims that relate to sample processing, analytical testing and data analysis associated with nucleic acid screening for cancers and other diseases. The jurisdictions covered by these patents and patent applications include the U.S., Australia, Canada, the European Union, China, Japan and Korea. Under the license agreement, the Company assumed the obligation and expense of prosecuting and maintaining the licensed Mayo patents and is obligated to make commercially reasonable efforts to bring to market products using the licensed Mayo intellectual property.
Pursuant to the Company’s agreement with Mayo, the Company is required to pay Mayo a low-single-digit royalty on the Company’s net sales of current and future products using the licensed Mayo intellectual property each year during the term of the Mayo agreement.
As part of the most recent amendment, the Company agreed to pay Mayo an additional $6.3 million, payable in five annual installments through 2024. The Company paid Mayo the first annual installment of $1.3 million in the third quarter of 2020 and will make all subsequent annual payments in the first quarter of the year beginning in January 2021.
The license agreement will remain in effect, unless earlier terminated by the parties in accordance with the agreement, until the last of the licensed patents expires in 2037 (or later, if certain licensed patent applications are issued). However, if the Company is still using the licensed Mayo know-how or certain Mayo-provided biological specimens or their derivatives on such expiration date, the term shall continue until the earlier of the date the Company stops using such know-how and materials and the date that is five years after the last licensed patent expires. The license agreement contains customary termination provisions and permits Mayo to terminate the license agreement if the Company sues Mayo or its affiliates, other than any such suit claiming an uncured material breach by Mayo of the license agreement.
In addition to granting the Company a license to the covered Mayo intellectual property, Mayo provides the Company with product development and research and development assistance pursuant to the license agreement and other collaborative arrangements. In September 2020, Mayo also agreed to make available certain personnel to provide such assistance through January 2025. In connection with this collaboration, the Company incurred charges of $0.9 million and $1.0 million for the three months ended September 30, 2020 and 2019, respectively. The Company incurred charges of $2.8 million and $3.6 million for the nine months ended September 30, 2020 and 2019, respectively. The charges incurred in connection with this collaboration are recorded in research and development expenses in the Company’s condensed consolidated statements of operations.
Epic Sciences
In June 2016, Genomic Health (now a wholly-owned subsidiary of the Company) entered into a collaboration agreement with Epic Sciences, which was superseded and replaced in March 2019 by a license agreement and laboratory services agreement with Epic Sciences, under which Genomic Health was granted exclusive distribution rights to commercialize Epic Sciences’ AR-V7 Nucleus Detect test in the United States, which is marketed as Oncotype DX AR-V7 Nucleus Detect. The Company has primary responsibility, in accordance with applicable laws and regulations, for marketing and promoting the test, order fulfillment, billing and collections of receivables, claims appeals, customer support, and providing and maintaining order management systems for the test. Epic Sciences is responsible for performing all tests, performing studies including analytic and clinical validation studies, and seeking Medicare coverage and a Medicare payment rate from the CMS for the test. The license and laboratory service agreement has a term of ten years from June 2016, unless terminated earlier under certain circumstances. The Oncotype DX AR-V7 Nucleus Detect test became commercially available in February 2018. The Company recognizes revenues for the test performed under this arrangement and Epic Sciences receives a fee per test performed that represents the fair market value for the testing services they perform.
Biocartis N.V.
In September 2017, Genomic Health entered into an exclusive license and development agreement with Biocartis, a molecular diagnostics company based in Belgium, to develop and commercialize an IVD version of the Oncotype DX Breast Recurrence Score test on the Biocartis Idylla platform. Under the terms of the license and development agreement, the Company has an exclusive, worldwide, royalty-bearing license to develop and commercialize an IVD version of the Oncotype DX Breast Recurrence Score test on the Biocartis Idylla platform, and an option to expand the collaboration to include additional tests in oncology and urology. The Company has primary responsibility for developing, validating and obtaining regulatory authorizations and registrations for IVD Oncotype DX tests to be performed on the Idylla platform. The Company is also responsible for manufacturing and commercialization activities with respect to such tests.
Pursuant to the license and development agreement, Genomic Health recorded a one-time upfront license and option fee of $3.2 million. In December 2017, Genomic Health purchased 270,000 ordinary shares of Biocartis, a public company listed on the Euronext exchange, for a total cost of $4.0 million. This investment was subject to a lock-up agreement that expired in December 2018. The investment has been recognized at fair value, which the Company estimated to be $1.4 million and $1.7 million as of September 30, 2020 and December 31, 2019, respectively, and is included in marketable securities on the Company's condensed consolidated balance sheets.
Under a November 2018 addendum to the license and development agreement, the Company exercised its option to expand the collaboration to include tests in urology and obtained a right of first refusal to add a test for the non-invasive detection of prostate cancer in a pre-biopsy setting.
Additional terms of the license and development agreement and the addendum include the Company’s obligation to pay Biocartis (i) an aggregate of €2.5 million in cash upon achievement of certain milestones, (ii) €2.0 million for the expansion of the collaboration to include additional tests in oncology, and (iii) certain royalties based primarily on the future sales volumes of the Company’s tests performed on the Idylla platform.
The Company is currently in discussions with Biocartis to terminate the agreements. The outcome of these discussions is not determinable at this time. Refer to Note 5 for further information regarding Biocartis.