EXACT SCIENCES CORP, 10-K filed on 2/21/2020
Annual Report
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Cover Page - USD ($)
12 Months Ended
Dec. 31, 2019
Feb. 20, 2020
Jun. 28, 2019
Cover page.      
Document Type 10-K    
Document Annual Report true    
Document Period End Date Dec. 31, 2019    
Document Transition Report false    
Entity File Number 001-35092    
Entity Registrant Name EXACT SCIENCES CORPORATION    
Entity Central Index Key 0001124140    
Entity Incorporation, State or Country Code DE    
Entity Address, Address Line One 441 Charmany Drive    
Entity Address, City or Town Madison    
Entity Address, State or Province WI    
Entity Tax Identification Number 02-0478229    
Entity Address, Postal Zip Code 53719    
City Area Code 608    
Local Phone Number 284‑5700    
Title of 12(b) Security Common Stock, $0.01 Par Value    
Trading Symbol EXAS    
Security Exchange Name NASDAQ    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Amendment Flag false    
Entity Filer Category Large Accelerated Filer    
Current Fiscal Year End Date --12-31    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Public Float     $ 15,069,783,760
Entity Common Stock, Shares Outstanding   147,967,507  
Documents Incorporated by Reference The registrant intends to file a definitive proxy statement pursuant to Regulation 14A within 120 days after the end of the fiscal year ended December 31, 2019. Portions of such proxy statement are incorporated by reference into Part III of this Form 10‑K.    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
v3.19.3.a.u2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Current Assets:    
Cash and cash equivalents $ 177,254 $ 160,430
Marketable securities 146,401 963,752
Accounts receivable, net 130,667 45,329
Inventory, net 61,724 39,148
Prepaid expenses and other current assets 40,913 19,408
Total current assets 556,959 1,228,067
Long-term Assets:    
Property, plant and equipment, net 455,325 245,259
Operating lease right-of-use assets 126,444  
Goodwill 1,203,197 17,279
Intangibles, net 1,143,550 29,002
Other long-term assets, net 20,293 4,415
Total assets 3,505,768 1,524,022
Current Liabilities:    
Accounts payable 25,973 28,141
Accrued liabilities 193,329 100,644
Operating lease liabilities, current portion 7,891  
Debt, current portion 834 8
Other current liabilities 8,467 7,376
Total current liabilities 236,494 136,169
Convertible notes, net 803,605 664,749
Long-term debt, less current portion 24,032 24,494
Other long-term liabilities 34,911 17,669
Operating lease liabilities, less current portion 118,665  
Total liabilities 1,217,707 843,081
Commitments and contingencies
Stockholders’ Equity:    
Preferred stock, $0.01 par value Authorized—5,000,000 shares issued and outstanding—no shares at December 31, 2019 and December 31, 2018 0 0
Common stock, $0.01 par value Authorized—200,000,000 shares issued and outstanding—147,625,696 and 123,192,540 shares at December 31, 2019 and December 31, 2018 1,477 1,232
Additional paid-in capital 3,406,440 1,716,894
Accumulated other comprehensive loss (100) (1,422)
Accumulated deficit (1,119,756) (1,035,763)
Total stockholders’ equity 2,288,061 680,941
Total liabilities and stockholders’ equity $ 3,505,768 $ 1,524,022
v3.19.3.a.u2
Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Income Statement [Abstract]      
Revenue $ 876,293 $ 454,462 $ 265,989
Operating expenses:      
Cost of sales (exclusive of amortization of acquired intangibles) 216,717 116,644 78,305
Research and development 139,694 67,285 42,099
Sales and marketing 385,176 249,448 153,924
General and administrative 352,453 178,016 108,988
Amortization of acquired intangibles 16,035 2,540 983
Total operating expenses 1,110,075 613,933 384,299
Loss from operations (233,782) (159,471) (118,310)
Other income (expense)      
Investment income 26,530 21,203 3,932
Interest expense (61,599) (36,789) (206)
Total other income (expense) (35,069) (15,586) 3,726
Net loss before tax (268,851) (175,057) (114,584)
Income tax benefit (expense) 184,858 (92) 187
Net loss $ (83,993) $ (175,149) $ (114,397)
Net loss per share-basic and diluted (in dollars per share) $ (0.64) $ (1.43) $ (0.99)
Weighted average common shares outstanding-basic and diluted (in shares) 131,257 122,207 115,684
v3.19.3.a.u2
Consolidated Statements of Comprehensive Loss - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Statement of Comprehensive Income [Abstract]      
Net Income (Loss) Attributable to Parent $ (83,993) $ (175,149) $ (114,397)
Other comprehensive loss, net of tax:      
Foreign currency translation gain 0 36 143
Unrealized gain (loss) on available-for-sale investments 1,322 (708) (475)
Comprehensive loss $ (82,671) $ (175,821) $ (114,729)
v3.19.3.a.u2
Consolidated Statements of Stockholders’ Equity - USD ($)
$ in Thousands
Total
Common Stock
Additional Paid In Capital
Accumulated Other Comprehensive Income (Loss)
Accumulated Deficit
Beginning balance at Dec. 31, 2016 $ 335,295 $ 1,102 $ 1,080,432 $ (418) $ (745,821)
Beginning balance (in shares) at Dec. 31, 2016   110,236,127      
Increase (Decrease) in Stockholders' Equity          
Settlement of equity component of convertible notes 0        
Issuance of common stock, net of issuance costs 253,388 $ 74 253,314    
Issuance of common stock, net of issuance costs (in shares)   7,450,000      
Exercise of common stock options $ 5,103 $ 11 5,092    
Exercise of common stock options (in shares) 1,067,120 1,067,047      
Issuance of common stock to fund the Company's 401(k) match $ 3,008 $ 2 3,006    
Issuance of common stock to fund the Company's 401(k) match (in shares)   158,717      
Compensation expense related to issuance of stock options and restricted stock awards 35,512 $ 12 35,500    
Compensation expense related to issuance of stock options and restricted stock awards (in shares)   1,162,112      
Purchase of employee stock purchase plan shares 2,841 $ 4 2,837    
Purchase of employee stock purchase plan shares (in shares)   423,423      
Issuance of common stock to fund business combinations 0        
Issuance of common stock, issuance costs (7,400)        
Net Income (Loss) Attributable to Parent (114,397)       (114,397)
Accumulated other comprehensive income (loss) (332)     (332)  
Ending balance at Dec. 31, 2017 520,418 $ 1,205 1,380,577 (750) (860,614)
Ending balance (in shares) at Dec. 31, 2017   120,497,426      
Increase (Decrease) in Stockholders' Equity          
Cumulative-effect adjustment - ASU 2016-09 adoption | ASU 2016-09     396   (396)
Settlement of equity component of convertible notes 0        
Equity component of convertible debt, net of issuance costs 260,246   260,246    
Exercise of common stock options $ 6,636 $ 10 6,626    
Exercise of common stock options (in shares) 1,033,012 1,033,012      
Issuance of common stock to fund the Company's 401(k) match $ 4,303 $ 1 4,302    
Issuance of common stock to fund the Company's 401(k) match (in shares)   86,882      
Compensation expense related to issuance of stock options and restricted stock awards 60,264 $ 13 60,251    
Compensation expense related to issuance of stock options and restricted stock awards (in shares)   1,228,611      
Purchase of employee stock purchase plan shares 4,895 $ 3 4,892    
Purchase of employee stock purchase plan shares (in shares)   346,609      
Issuance of common stock to fund business combinations 0        
Net Income (Loss) Attributable to Parent (175,149)       (175,149)
Accumulated other comprehensive income (loss) (672)     (672)  
Ending balance at Dec. 31, 2018 $ 680,941 $ 1,232 1,716,894 (1,422) (1,035,763)
Ending balance (in shares) at Dec. 31, 2018 123,192,540 123,192,540      
Increase (Decrease) in Stockholders' Equity          
Settlement of convertible notes $ (300,768)   (300,768)    
Settlement of equity component of convertible notes (300,768)        
Shares issued to settle convertible notes $ 182,477 $ 22 182,455    
Shares issued to settle convertible notes (in shares) 2,159,716 2,159,716      
Equity component of convertible debt, net of issuance costs $ 268,368   268,368    
Exercise of common stock options $ 8,787 $ 6 8,781    
Exercise of common stock options (in shares) 641,925 641,925      
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 108,483 $ 43 108,440    
Compensation expense related to issuance of stock options and restricted stock awards (in shares)   4,322,366      
Purchase of employee stock purchase plan shares 8,396 $ 2 8,394    
Purchase of employee stock purchase plan shares (in shares)   176,458      
Issuance of common stock to fund business combinations $ 1,407,080 $ 171 1,406,909    
Issuance of common stock to fund business combinations (in shares) 17,046,159 17,046,159      
Issuance of common stock, issuance costs $ (441)   (441)    
Net Income (Loss) Attributable to Parent (83,993)       (83,993)
Accumulated other comprehensive income (loss) 1,322     1,322  
Ending balance at Dec. 31, 2019 $ 2,288,061 $ 1,477 $ 3,406,440 $ (100) $ (1,119,756)
Ending balance (in shares) at Dec. 31, 2019 147,625,696 147,625,696      
v3.19.3.a.u2
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Cash flows from operating activities:      
Net loss $ (83,993) $ (175,149) $ (114,397)
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and other amortization 34,212 20,544 14,572
Loss on disposal of property, plant and equipment 1,394 353 954
Realized gain on sale of marketable securities (3,355) (385) (23)
Unrealized net loss on revaluation of equity securities 207 0 0
Loss on preferred stock investment 0 765 0
Deferred tax benefit (185,109) 0 (115)
Stock-based compensation 108,483 60,264 35,512
Loss on settlement of convertible notes 10,558 0 0
Amortization of convertible note debt discount and issuance costs 42,256 28,564 0
Amortization of liabilities (4,467) (2,394) (1,620)
Amortization of premium on short-term investments (3,102) (3,516) 88
Amortization of acquired intangibles 16,035 2,540 983
Non-cash lease expense 5,427 0 0
Changes in assets and liabilities, net of effects of acquisition:      
Accounts receivable, net (27,938) (17,292) (17,529)
Inventory, net (19,041) (12,729) (19,194)
Operating lease liabilities (4,114) 0 0
Accounts payable and accrued liabilities 3,469 33,076 30,537
Other assets and liabilities (5,932) (3,966) (1,492)
Net cash used in operating activities (115,010) (69,325) (71,724)
Cash flows from investing activities:      
Purchases of marketable securities (634,117) (1,192,506) (357,051)
Maturities of marketable securities 1,660,559 579,171 271,466
Purchases of property, plant and equipment (171,802) (150,093) (48,480)
Business combination, net of cash acquired (973,861) (17,908) (2,980)
Purchases of intangible assets 0 0 (20,690)
Other investing activities (1,852) (578) (3,070)
Net cash used in investing activities (121,073) (781,914) (160,805)
Cash flows from financing activities:      
Proceeds from issuance of convertible notes, net 729,477 896,430 0
Proceeds from financing obligation, net payments on mortgage payable 0 2,084 (174)
Proceeds from exercise of common stock options 8,787 6,636 5,103
Proceeds from sale of common stock, net of issuance costs 0 0 253,388
Proceeds in connection with the Company's employee stock purchase plan 8,396 4,895 2,841
Payments on settlement of convertible notes (493,356) 0 0
Proceeds from construction loan, net deferred financing costs 319 24,236 (202)
Other financing activities (442) (139) 0
Net cash provided by financing activities 253,181 934,142 260,956
Effects of exchange rate changes on cash and cash equivalents 0 36 143
Net increase in cash, cash equivalents and restricted cash 17,098 82,939 28,570
Cash, cash equivalents and restricted cash at the beginning of period 160,430 77,491 48,921
Cash, cash equivalents and restricted cash at the end of period 177,528 160,430 77,491
Supplemental disclosure of non-cash investing and financing activities:      
Property, plant and equipment acquired but not paid 10,265 33,452 8,818
Property acquired under build-to-suit lease 0 2,092 0
Unrealized loss on available-for-sale investments 1,322 (708) (475)
Issuance of 86,532, 86,882, and 158,717 shares of common stock to fund the Company’s 401(k) matching contribution for 2018, 2017, and 2016, respectively 7,409 4,303 3,008
Issuance of 2,159,716 shares of common stock upon settlement of convertible notes (182,477) 0 0
Retirement of equity component of convertible notes settled (300,768) 0 0
Issuance of common stock to fund business combinations (1,407,080) 0 0
Business acquisition contingent consideration liability 0 3,060 0
Supplemental disclosure of cash flow information:      
Interest paid $ 9,301 $ 4,638 $ 201
v3.19.3.a.u2
Consolidated Balance Sheets (Parenthetical) - $ / shares
Dec. 31, 2019
Dec. 31, 2018
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) 200,000,000 200,000,000
Common stock, issued shares (in shares) 147,625,696 123,192,540
Common stock, outstanding shares (in shares) 147,625,696 123,192,540
v3.19.3.a.u2
Consolidated Statements of Stockholders’ Equity (Parenthetical) - USD ($)
$ in Thousands
1 Months Ended 12 Months Ended
Nov. 30, 2019
Dec. 31, 2019
Dec. 31, 2017
Statement of Stockholders' Equity [Abstract]      
Issuance of common stock, issuance costs $ 400 $ 441 $ 7,400
v3.19.3.a.u2
Consolidated Statements of Cash Flows (Parenthetical) - shares
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Statement of Cash Flows [Abstract]      
Issuance of shares of common stock to fund the Company's 401(k) matching contribution (in shares) 86,532 86,882 158,717
Shares issued to settle convertible notes (in shares) 2,159,716    
Issuance of common stock to fund business combinations (in shares) 17,046,159    
v3.19.3.a.u2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
12 Months Ended
Dec. 31, 2019
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.
On November 8, 2019, Exact completed a combination (the “Combination”) with Genomic Health, Inc. (“Genomic Health”), under which the Company acquired Genomic Health, which is a leading provider of genomic based diagnostic tests to help to optimize cancer care.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company’s wholly-owned subsidiaries and variable interest entities. See Note 12 for the discussion of financing arrangements involving certain entities that are variable interest entities that are included in the Company’s consolidated financial statements. The functional currency for the Company's wholly-owned subsidiaries incorporated outside the United States (“U.S.”) is the U.S. dollar. All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States (“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. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers cash on hand, demand deposits in a 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 consolidated statement 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. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in investment income. 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 investment income.
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. Realized gains were $3.4 million, $0.4 million, and $23,000, net of insignificant realized losses, for the years ended December 31, 2019, 2018, and 2017, respectively and are included in investment income in the Company's consolidated statements of operations.
The Company periodically evaluates investments in unrealized loss positions for other-than-temporary impairments. This evaluation includes, but is not limited to, significant quantitative and qualitative assessments and estimates regarding credit ratings, collateralized support, the length of time and significance of a security’s loss position, the Company’s intent not to sell the security, and whether it is more likely than not that the Company will have to sell the security before recovery of its cost basis. As of December 31, 2019 and 2018, no investments were identified with other-than-temporary declines in value.
The following table sets forth the Company’s cash, cash equivalents, restricted cash, and marketable securities at December 31, 2019 and 2018:

(In thousands)December 31, 2019December 31, 2018
Cash, cash equivalents, and restricted cash
Cash and money market$146,932  $75,375  
Cash equivalents30,322  85,055  
Restricted cash (1)274  —  
Total cash, cash equivalents and restricted cash177,528  160,430  
Marketable securities
Available-for-sale debt securities144,685  963,752  
Equity securities1,716  —  
Total marketable securities146,401  963,752  
Total cash and cash equivalents, restricted cash and marketable securities$323,929  $1,124,182  
(1) Restricted cash is included in other long-term assets on the consolidated balance sheets. The Company had no restricted cash at December 31, 2018 or December 31, 2017.
Available-for-sale debt securities at December 31, 2019 consisted of the following:

December 31, 2019
(In thousands)Amortized CostGains in Accumulated
Other Comprehensive
Income (Loss) (1)
Losses in Accumulated
Other Comprehensive
Income (Loss) (1)
Estimated Fair
Value
Cash equivalents
U.S. government agency securities$30,320  $ $—  $30,322  
Total cash equivalents30,320   —  30,322  
Marketable securities
Corporate bonds4,017  —  (14) 4,003  
U.S. government agency securities140,745  10  (73) 140,682  
Total marketable securities144,762  10  (87) 144,685  
Total available-for-sale debt securities$175,082  $12  $(87) $175,007  

(1) Gains and losses in accumulated other comprehensive income (loss) are reported net of tax.
Available-for-sale debt securities at December 31, 2018 consisted of the following:
December 31, 2018
(In thousands)Amortized CostGains in Accumulated
Other Comprehensive
Income (Loss) (1)
Losses in Accumulated
Other Comprehensive
Income (Loss) (1)
Estimated Fair
Value
Cash equivalents
U.S. government agency securities$49,982  $ $—  $49,985  
Commercial paper24,072  —  (2) 24,070  
Certificates of deposit11,000  —  —  11,000  
Total cash equivalents85,054   (2) 85,055  
Marketable securities
Corporate bonds392,973  33  (719) 392,287  
Asset backed securities277,538  30  (569) 276,999  
U.S. government agency securities250,606  43  (178) 250,471  
Commercial paper12,158  —  (7) 12,151  
Certificates of deposit31,875  —  (31) 31,844  
Total marketable securities965,150  106  (1,504) 963,752  
Total available-for-sale debt securities$1,050,204  $109  $(1,506) $1,048,807  

(1) Gains and losses in accumulated other comprehensive income (loss) are reported net of tax.
Changes in Accumulated Other Comprehensive Income (Loss)
The amount recognized in accumulated other comprehensive income (loss) (“AOCI”) for the years ended December 31, 2019, 2018 and 2017 were as follows:
(In thousands)Cumulative
Translation
Adjustment
Unrealized
Gain (Loss)
on Securities
Accumulated
Other
Comprehensive
Income (Loss)
Balance at January 1, 2017$(204) $(214) $(418) 
Other comprehensive income (loss) before reclassifications143  (530) (387) 
Amounts reclassified from accumulated other comprehensive loss—  55  55  
Net current period change in accumulated other comprehensive income (loss)143  (475) (332) 
Balance at December 31, 2017$(61) $(689) $(750) 
Other comprehensive income (loss) before reclassifications36  (1,025) (989) 
Amounts reclassified from accumulated other comprehensive loss—  317  317  
Net current period change in accumulated other comprehensive income (loss)36  (708) (672) 
Balance at December 31, 2018$(25) $(1,397) $(1,422) 
Other comprehensive income (loss) before reclassifications—  681  681  
Amounts reclassified from accumulated other comprehensive loss—  641  641  
Net current period change in accumulated other comprehensive income (loss)—  1,322  1,322  
Balance at December 31, 2019$(25) $(75) $(100) 
Amounts reclassified from accumulated other comprehensive loss for the years ended December 31, 2019, 2018 and 2017 were as follows:
Year Ended December 31,
Details about AOCI Components (In thousands)Affected Line Item in the
Statements of Operations
201920182017
Change in value of available-for-sale investments
Sales and maturities of available-for-sale investmentsInvestment income$641  $317  $55  
Total reclassifications$641  $317  $55  
Allowance for Doubtful Accounts
The Company estimates an allowance for doubtful accounts against accounts receivable based on estimates of expected collections consistent with historical cash collection experience. 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 December 31, 2019 and 2018 there was no allowance for doubtful accounts recorded. For the years ended December 31, 2019, 2018 and 2017, there was no 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 meets 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 and for other research and development activities, which are not permitted to be sold, have been expensed to research and development in the Company’s consolidated statements of operations.
Inventory consisted of the following:
(In thousands)December 31,
2019
December 31,
2018
Raw materials$24,958  $12,761  
Semi-finished and finished goods36,766  26,387  
Total inventory$61,724  $39,148  
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. Maintenance and repairs are expensed when incurred; additions and improvements are capitalized. The estimated useful lives of property and equipment are as follows:
(In thousands)Estimated
Useful Life
December 31,
2019
December 31,
2018
Property, plant and equipment
Landn/a  $4,466  $4,466  
Leasehold and building improvements(1) 80,352  38,895  
Land improvements15 years1,766  1,530  
Buildings30 years112,815  7,928  
Computer equipment and computer software3 years65,323  36,969  
Laboratory equipment3 - 10 years104,008  37,518  
Furniture and fixtures3 years14,539  8,353  
Assets under constructionn/a  149,687  167,462  
Property, plant and equipment, at cost532,956  303,121  
Accumulated depreciation(77,631) (57,862) 
Property, plant and equipment, net$455,325  $245,259  
(1)Lesser of remaining lease term, building life, or estimated useful life.
Depreciation expense for the years ended December 31, 2019, 2018, and 2017 was $33.9 million, $20.5 million, and $14.5 million, respectively.
At December 31, 2019, the Company had $149.7 million of assets under construction which consisted of $126.2 million related to building and leasehold improvements, $18.9 million of costs related to laboratory equipment under construction, $3.9 million of capitalized costs related to software projects, and $0.7 million of furniture and fixtures. Depreciation will begin on these assets once they are placed into service. The Company expects to incur an additional $111.0 million to complete the building projects and leasehold improvements, $3.7 million to complete the laboratory equipment, $2.2 million of costs to complete the computer software projects, and minimal costs to complete the furniture and fixtures. These projects are expected to be completed in 2020 and 2021.
Software Development Costs
Software development costs related to internal use software are incurred in three stages of development: 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, which is generally 3 years.
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 owns less than 50.1% of the voting interest 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.
Prior to January 1, 2018, if the equity method did not apply, investments in privately held companies determined to be equity securities were accounted for using the cost method. As discussed below, on January 1, 2018, the Company adopted ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which changed the way it accounts for 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 other income (expense), net in the 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, included in prepaid expenses and other current assets or in accrued liabilities, depending on the contracts’ net position, the Company uses to hedge the exposure are not designated as hedges, and as a result, changes in their fair value are recorded in other income (expense). As of December 31, 2019, the Company had open foreign currency forward contracts with notional amounts of $17.9 million. 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 $0 at December 31, 2019. As of December 31, 2018, the Company had no open foreign currency forward contracts.
Intangible Assets
Intangible assets consisted of the following:
(In thousands)December 31,
2019
December 31,
2018
Intangible assets
Finite-lived intangible assets$963,690  $33,058  
Less: Accumulated amortization(20,411) (4,107) 
Finite-lived intangible assets, net943,279  28,951  
In-process research and development200,000  —  
Internally developed technology in process271  51  
Intangible assets, net$1,143,550  $29,002  
Finite-Lived Intangible Assets
The following table summarizes the net-book-value and estimated remaining life of the Company’s finite-lived intangible assets as of December 31, 2019:
(In thousands)
Net Balance at December 31, 2019Weighted
Average
Remaining
Life (Years)
Trade name$99,739  15.9
Customer relationships2,476  13.8
Patents16,715  8.8
Supply agreements29,429  7.5
Acquired developed technology794,027  9.9
Internally developed technology893  2.5
Total$943,279  
As of December 31, 2019, 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$93,610  
202193,508  
202293,302  
202393,159  
202492,825  
Thereafter476,875  
$943,279  
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. Other than the transactions discussed below, the Company determined that all patent costs incurred during the years ended December 31, 2019, 2018 and 2017 should be expensed and not capitalized as the future economic benefit derived from the transactions cannot be determined.
Under a technology license and royalty agreement entered into with MDx Health (“MDx”), dated July 26, 2010 (as subsequently amended, the “MDx License Agreement”), the Company was required to pay MDx milestone-based royalties on sales of products or services covered by the licensed intellectual property. Once the achievement of a milestone occurred or was considered probable, an intangible asset and corresponding liability was reported in intangible assets and accrued liabilities, respectively. The liability was relieved once the milestone was achieved and payment made. The intangible asset is being amortized over the estimated 10-year useful life of the licensed intellectual property through 2024, and such amortization is reported in amortization of acquired intangibles. Payment for all remaining milestones under the License Agreement was made as part of the Royalty Buy-Out agreement outlined below.
Effective April 2017, the Company and MDx entered into a royalty buy-out agreement (“Royalty Buy-Out Agreement”), which terminated the MDx License Agreement. Pursuant to the Royalty Buy-Out Agreement, the Company paid MDx a one-time fee of $8.0 million in exchange for an assignment of certain patents covered by the MDx License Agreement and the elimination of all ongoing royalties and other payments by the Company to MDx under the MDx License Agreement. Also included in the Royalty Buy-Out Agreement is a mutual release of liabilities, which includes all amounts previously accrued under the MDx License Agreement. Concurrently with entering into the Royalty Buy-Out Agreement, the Company entered into a patent purchase agreement (“Patent Purchase Agreement”) with MDx under which it paid MDx an additional $7.0 million in exchange for the assignment of certain other patent rights that were not covered by the MDx License Agreement. The total $15.0 million paid by the Company pursuant to the Royalty Buy-Out Agreement and Patent Purchase Agreement, net of liabilities relieved of $6.6 million, was recorded as an intangible asset and is being amortized over the estimated remaining useful life of the licensed intellectual property through 2024, and such amortization is reported in amortization of acquired intangibles on the consolidated statements of operations. The $6.6 million of liabilities relieved were related to historical milestones and accrued royalties under the License Agreement.
As of December 31, 2019 and 2018, an intangible asset of $6.4 million and $7.7 million, respectively, related to historical milestone payments made under the MDx License Agreement and intangible assets acquired as part of the Royalty Buy-Out Agreement and Patent Purchase Agreement is reported in intangible assets, net. Amortization expense for the years ended December 31, 2019, 2018, and 2017 was $1.3 million, $1.3 million, and $1 million, respectively.
In December 2017, the Company entered into an asset purchase agreement (the “Armune Purchase Agreement”) with Armune BioScience, Inc. (“Armune”), pursuant to which the Company acquired intellectual property and certain other assets underlying Armune’s APIFINY®, APIFINY® PRO and APIFINY® ACTIVE SURVEILLANCE prostate cancer diagnostic tests. The portfolio of Armune assets the Company acquired is expected to complement its product pipeline. The total consideration was comprised of an up-front cash payment of $12.0 million and $17.5 million in contingent payment obligations that will become payable upon the Company’s achievement of development and commercial milestones using the acquired intellectual property. The satisfaction of these milestones is subject to many risks and is therefore uncertain.  The Company will not record the contingent consideration until it is probable that the milestones will be met.  There is no other
consideration due to Armune beyond the milestone payments and the Company is not subject to future royalty obligations should a product be developed and commercialized. The transaction costs directly related to the asset acquisition were added to the asset in accordance with GAAP. As such, the collective asset value from the acquisition resulted in an intangible asset of $12.2 million.  The intellectual property asset, which includes related transaction costs, is being amortized on a straight-line basis over the period the Company expects to be benefited, which is consistent with the legal life of the patents acquired. For the years ended December 31, 2019, 2018, and 2017 the Company recorded amortization expense of $0.9 million, $0.9 million, and $40,000, respectively, which is included in amortization of acquired intangibles on the consolidated statements of operations. At December 31, 2019 and 2018, the net balances of $10.4 million and $11.3 million, respectively are reported in intangible assets, net in the Company’s consolidated balance sheets.
As a result of the Biomatrica Acquisition discussed in Note 13, the Company recorded an intangible asset of $8.8 million which was comprised of acquired developed technology of $5.4 million, customer relationships of $2.7 million, and trade names of $0.7 million. The intangible assets acquired are being amortized over the remaining useful life which was determined to be 15 years for the acquired developed technology, customer relationships, and trade names. For the years ended December 31, 2019 and 2018, the Company recorded amortization expense of $0.6 million and $0.1 million, respectively, which is included in amortization of acquired intangibles on the consolidated statements of operations. At December 31, 2019 and 2018 the net balances of $8.1 million and $8.7 million, respectively, are reported in net intangible assets in the Company’s consolidated balance sheets.
As a result of the combination with Genomic Health discussed in Note 13, the Company recorded intangible assets of $1.1 billion which was comprised of acquired developed technology of $800.0 million, in-process research and development of $200.0 million, trade names of $100.0 million, and supply agreement of $30.0 million. The intangible assets acquired are being amortized over the remaining useful life which was determined to be 10 years for the acquired developed technology, 16 years for the trade names, and 7.6 years for the supply agreement. For the year ended December 31, 2019, the Company recorded amortization expense of $13.0 million, which is included in amortization of acquired intangibles on the consolidated statement of operations, and the net balance of $1.1 billion is reported in net intangible assets in the Company’s consolidated balance sheet.
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 costs 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 reuqire 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 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
In 2017, the Company recognized goodwill of $2.0 million from the acquisition of Sampleminded, Inc. In 2018, the Company recognized goodwill of $15.3 million from the acquisition of Biomatrica, Inc. In November 2019, the Company recognized goodwill of $1.2 billion from the combination with Genomic Health. Refer to Note 13 for further discussion of the goodwill recorded.
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. There were no impairment losses for the years ended December 31, 2019, 2018, and 2017.
The change in the carrying amount of goodwill for the years ended December 31, 2019 and 2018 is as follows:
(In thousands)
Balance, January 1, 2018$1,979  
Biomatrica acquisition15,300  
Balance, December 31, 201817,279  
Genomic Health acquisition1,185,918  
Balance, December 31, 2019$1,203,197  
Impairment of Long-Lived Assets
The Company evaluates the fair value of long-lived assets, which include property and equipment, 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. There were no impairment losses for the years ended December 31, 2019, 2018, and 2017.
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:
December 31,
(In thousands)201920182017
Shares issuable upon exercise of stock options2,700  2,532  3,360  
Shares issuable upon the release of restricted stock awards4,384  6,246  6,149  
Shares issuable upon conversion of convertible notes12,196  12,044  —  
19,280  20,822  9,509  
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.
Revenue Recognition
The Company’s revenue is primarily generated by its laboratory testing services utilizing its Cologuard and Oncotype DX tests. The services are completed upon delivery of a patient’s test result to the ordering healthcare provider. The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), which was adopted on January 1, 2018, using the modified retrospective method, which was elected to apply to all contracts.  Application of the modified retrospective method did not impact amounts previously reported by the Company, nor did it require a cumulative effect adjustment upon adoption, as the Company’s method of recognizing revenue under ASC 606 was analogous to the method utilized immediately prior to adoption. Accordingly, there is no need for the Company to disclose the amount by which each financial statement line item was affected as a result of applying the new standard and an explanation of significant changes. 
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 be entitled 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 the patient. However, the Company does not enter into a formal reimbursement contract with a patient, as formal reimbursement contracts are established with payers.  Accordingly, the Company establishes a contract with a patient in accordance with other customary business practices.
Approval of a contract is established via the order submitted by the patient’s healthcare provider and the receipt of a sample in the laboratory.
The Company is obligated to perform its laboratory services upon acceptance of a sample from a patient, and the patient and/or applicable payer are obligated to reimburse the Company for services rendered based on the patient’s insurance benefits.
Payment terms are a function of a patient’s existing insurance benefits, including the impact of coverage decisions with CMS and any applicable reimbursement contracts established between the Company and payers, unless the patient is a self-pay patient, whereby the Company requires payment from the patient prior to commencement of the Company's performance obligations.
Once the Company releases a patient’s test result to the ordering healthcare provider, the Company is legally able to collect payment and bill an insurer, patient and/or health system, depending on payer contract status or patient insurance benefit status.
The Company’s consideration is deemed to be variable, and the Company considers collection of such consideration to be probable to the extent that it is unconstrained.
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. The Company elects the practical expedient related to disclosure of unsatisfied performance obligations, as the duration of time between sample receipt and the release of a valid 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 from a contract with a customer may include fixed amounts, variable amounts, or both.
The consideration derived from the Company’s contracts is deemed to be variable 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 $9.9 million and $15.0 million for the years ended December 31, 2019 and 2018, 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 consideration than it originally estimated for a contract with a patient, it will account for the change as an increase in the estimate of the transaction price (i.e., an upward revenue adjustment) in the period identified.  Similarly, if the Company subsequently determines that the amount it expects to collect from a patient is less than it originally estimated, it will generally account for the change as a decrease in the estimate of the transaction price (i.e., a downward revenue adjustment), provided that such downward adjustment does not result in a significant reversal of cumulative revenue recognized.
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 patient.
Point in time recognition
The Company’s single performance obligation is satisfied at a point in time, and that point in time is defined as the date a patient’s successful test result is released to the patient’s ordering healthcare provider. The Company considers this date to be the time at which the patient obtains control of the promised test service.
Disaggregation of Revenue
The following table presents the Company's revenues disaggregated by revenue source:

December 31,
(In thousands)201920182017
Screening
Medicare Parts B & C$404,331  $254,431  $172,255  
Commercial368,006  184,538  84,842  
Other37,783  15,493  8,892  
Total Screening810,120  454,462  265,989  
Precision Oncology
Medicare Parts B & C$24,325  $—  $—  
Commercial29,976  —  —  
International11,444  —  —  
Other428  —  —  
Total Precision Oncology66,173  —  —  
Total$876,293  $454,462  $265,989  
Screening includes laboratory service revenue from Cologuard and revenue from Biomatrica products. Precision Oncology 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 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, particularly a self-pay patient, before a test result is completed, resulting in deferred revenue. The deferred revenue balance is relieved upon release of the applicable patient’s test result to the ordering healthcare provider. As of December 31, 2019 and 2018, the deferred revenue balance is not material to the Company's consolidated financial statements.
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 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 consolidated statements of operations.
Advertising Costs
The Company expenses the costs of media advertising at the time the advertising takes place. The Company expensed approximately $88.7 million, $93.7 million, and $58.0 million of media advertising during the years ended December 31, 2019, 2018, and 2017, respectively, which is recorded in sales and marketing expenses on the Company's consolidated statements of operations.
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.
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 Company's available-for-sale debt securities are classified as Level 2. They 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 securities are classified as Level 1. There were no transfers between Level 1 and Level 2 categories during the year ended December 31, 2019. The fair value 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. This fair value measurement is considered a Level 3 measurement because 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. The contingent earn-out liability is classified as a component of other long-term liabilities in the Company’s consolidated balance sheets. The change in the fair value between the acquisition date and December 31, 2019 was due to an earn-out payment made during that time resulting in a decrease in the liability at December 31, 2019. See Note 13 for further detail on the Biomatrica Acquisition. Of the Company's non-marketable equity investments, $10.8 million is related to the preferred stock investment in Epic Sciences and is categorized as a Level 3 asset in the fair value hierarchy because the value is estimated using an option pricing model that considered a recent observable transaction and other unobservable inputs including volatility and long-term plan of Epic Sciences. There were no changes to the fair value based on observable transactions during the period end from the combination date to December 31, 2019 utilizing the option pricing model discussed above. See Note 6, for additional information regarding the terms of this investment.
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.
Fair Value Measurement at December 31, 2019 Using:
(In thousands)Fair value at December 31, 2019Quoted 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$146,932  $146,932  $—  $—  
U.S. government agency securities30,322  —  30,322  —  
Restricted cash274  274  —  —  
Marketable securities
Corporate bonds4,003  —  4,003  —  
U.S. government agency securities140,682  —  140,682  —  
Equity securities1,716  1,716  —  —  
Non-marketable equity investments11,821  —  —  11,821  
Contingent consideration(2,879) —  —  (2,879) 
Total$332,871  $148,922  $175,007  $8,942  
The following table presents the Company’s fair value measurements as of December 31, 2018 along with the level within the fair value hierarchy in which the fair value measurements, in their entirety, fall.
Fair Value Measurement at December 31, 2018 Using:
(In thousands)Fair Value at December 31, 2018Quoted 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$75,375  $75,375  $—  $—  
U.S. government agency securities49,985  —  49,985  —  
Commercial paper24,070  —  24,070  —  
Certificates of deposit11,000  —  11,000  
Marketable securities
Corporate bonds392,287  —  392,287  —  
Asset backed securities276,999  —  276,999  —  
U.S. government agency securities250,471  —  250,471  —  
Certificates of deposit31,844  —  31,844  —  
Commercial paper12,151  —  12,151  —  
Contingent consideration(3,060) —  —  (3,060) 
Total$1,121,122  $75,375  $1,048,807  $(3,060) 
The Company evaluates investments including investments in privately-held companies for other-than-temporary impairment. It was determined that unrealized gains and losses at December 31, 2019, 2018, and 2017 are temporary in nature because the change in market value for those securities resulted from fluctuating interest rates rather than a deterioration of the credit worthiness of the issuers. So long as the Company holds these securities to maturity, it is unlikely to experience gains or losses. In the event that the Company disposes of these securities before maturity, it is expected that realized gains or losses, if any, will be immaterial.
The following table summarizes the gross unrealized losses and fair values of available-for-sale debt securities in an unrealized loss position as of December 31, 2019, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:
December 31, 2019
Less than 12 months12 months or greaterTotal
(In thousands)Fair ValueGross Unrealized LossFair ValueGross Unrealized LossFair ValueGross Unrealized Loss
Marketable securities
Corporate bonds$4,003  $(14) $—  $—  $4,003  $(14) 
U.S. government agency securities140,682  (73) —  —  140,682  (73) 
Total$144,685  $(87) $—  $—  $144,685  $(87) 
The following table summarizes the gross unrealized losses and fair value of available-for-sale debt securities in an unrealized loss position as of December 31, 2018, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:
December 31, 2018
Less than 12 months12 months or greaterTotal
(In thousands)Fair ValueGross Unrealized LossFair ValueGross Unrealized LossFair ValueGross Unrealized Loss
Cash equivalents
Commercial paper$24,070  $(2) $—  $—  $24,070  $(2) 
Total cash equivalents24,070  (2) —  —  24,070  (2) 
Marketable Securities
Corporate bonds$340,287  $(638) $35,773  $(81) $376,060  $(719) 
Asset backed securities201,036  (178) —  —  201,036  (178) 
U.S. government agency securities243,846  (501) 18,335  (67) 262,181  (568) 
Certificates of deposit31,843  (31) —  —  31,843  (31) 
Commercial paper12,151  (7) —  —  12,151  (7) 
Total marketable securities829,163  (1,355) 54,108  (148) 883,271  (1,503) 
Total$853,233  $(1,357) $54,108  $(148) $907,341  $(1,505) 
The following table summarizes contractual underlying maturities of the Company’s available-for-sale debt securities at December 31, 2019:
December 31, 2019
Due one year or lessDue after one year through four years