EXACT SCIENCES CORP, 10-K filed on 2/21/2019
Annual Report
v3.10.0.1
Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2018
Feb. 20, 2019
Jun. 29, 2018
Document and Entity Information      
Entity Registrant Name EXACT SCIENCES CORP    
Entity Central Index Key 0001124140    
Document Type 10-K    
Document Period End Date Dec. 31, 2018    
Amendment Flag false    
Current Fiscal Year End Date --12-31    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Filer Category Large Accelerated Filer    
Entity Public Float     $ 7,176,273,883
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Ex Transition Period false    
Entity Shell Company false    
Entity Common Stock, Shares Outstanding   125,760,907  
Document Fiscal Year Focus 2018    
Document Fiscal Period Focus FY    
v3.10.0.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Current Assets:    
Cash and cash equivalents $ 160,430 $ 77,491
Marketable securities 963,752 347,224
Accounts receivable, net 44,239 26,419
Inventory, net 39,148 26,027
Prepaid expenses and other current assets 20,498 10,055
Total current assets 1,228,067 487,216
Long-term Assets:    
Property, plant and equipment, net 245,259 79,986
Goodwill and intangibles, net 46,281 24,205
Other long-term assets, net 4,415 7,153
Total assets 1,524,022 598,560
Current Liabilities:    
Accounts payable 28,141 16,135
Accrued liabilities 100,644 49,126
Accrued interest 4,593  
Debt, current portion 8 182
Other short-term liabilities 3,204 2,681
Total current liabilities 136,590 68,124
Convertible notes, net 664,749  
Long-term debt, less current portion 24,073 4,269
Other long-term liabilities 9,475 5,749
Lease incentive obligation, less current portion 8,194  
Total liabilities 843,081 78,142
Commitments and contingencies
Stockholders' Equity:    
Preferred stock, $0.01 par value Authorized—5,000,000 shares issued and outstanding—no shares at December 31, 2018 and December 31, 2017
Common stock, $0.01 par value Authorized—200,000,000 shares issued and outstanding—123,192,540 and 120,497,426 shares at December 31, 2018 and December 31, 2017 1,232 1,205
Additional paid-in capital 1,716,894 1,380,577
Accumulated other comprehensive loss (1,422) (750)
Accumulated deficit (1,035,763) (860,614)
Total stockholders' equity 680,941 520,418
Total liabilities and stockholders’ equity $ 1,524,022 $ 598,560
v3.10.0.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Dec. 31, 2018
Dec. 31, 2017
Consolidated Balance Sheets    
Preferred stock, par value (in dollars per share) $ 0.01 $ 0.01
Preferred stock, Authorized shares 5,000,000 5,000,000
Preferred stock, Issued shares 0 0
Preferred stock, outstanding shares 0 0
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, Authorized shares 200,000,000 200,000,000
Common stock, Issued shares 123,192,540 120,497,426
Common stock, outstanding shares 123,192,540 120,497,426
v3.10.0.1
Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Consolidated Statements of Operations      
Revenue $ 454,462 $ 265,989 $ 99,376
Cost of sales 117,982 79,196 45,195
Gross margin 336,480 186,793 54,181
Operating expenses:      
Research and development 68,210 42,139 33,473
General and administrative 178,293 109,040 76,898
Sales and marketing 249,448 153,924 112,826
Total operating expenses 495,951 305,103 223,197
Loss from operations (159,471) (118,310) (169,016)
Other income (expense)      
Investment income 21,203 3,932 2,018
Interest expense (36,789) (206) (213)
Total other income (expense) (15,586) 3,726 1,805
Net loss before tax (175,057) (114,584) (167,211)
Income tax benefit (expense) (92) 187  
Net loss $ (175,149) $ (114,397) $ (167,211)
Net loss per share-basic and diluted (in dollars per share) $ (1.43) $ (0.99) $ (1.63)
Weighted average common shares outstanding-basic and diluted (in shares) 122,207 115,684 102,335
v3.10.0.1
Consolidated Statements of Comprehensive Loss - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Consolidated Statements of Comprehensive Loss      
Net loss $ (175,149) $ (114,397) $ (167,211)
Other comprehensive loss, net of tax:      
Unrealized gain (loss) on available-for-sale investments (708) (475) 230
Foreign currency translation gain (loss) 36 143 (215)
Comprehensive loss $ (175,821) $ (114,729) $ (167,196)
v3.10.0.1
Consolidated Statements of Stockholders’ Equity - USD ($)
$ in Thousands
Common Stock
Additional Paid In Capital
Accumulated Other Comprehensive Income (Loss)
Accumulated Deficit
Total
Balance at Dec. 31, 2015 $ 967 $ 904,932 $ (433) $ (578,610) $ 326,856
Balance (in shares) at Dec. 31, 2015 96,674,786        
Increase (Decrease) in Stockholders' Equity          
Issuance of common stock, net of issuance costs of $7.4 and $7.3 million for 2017, and 2016, respectively $ 98 144,144     144,242
Issuance of common stock, net of issuance costs (in shares) 9,775,000        
Exercise of common stock options $ 23 3,388     3,411
Exercise of common stock options (in shares) 2,254,384        
Issuance of common stock to fund the Company's 401(k) match $ 3 2,148     2,151
Issuance of common stock to fund the Company's 401(k) match (in shares) 341,507        
Compensation expense related to issuance of stock options and restricted stock awards $ 8 23,724     23,732
Compensation expense related to issuance of stock options and restricted stock awards (in shares) 833,627        
Purchase of employee stock purchase plan shares $ 3 2,096     2,099
Purchase of employee stock purchase plan shares (in shares) 356,823        
Net loss       (167,211) (167,211)
Accumulated other comprehensive income (loss)     15   15
Balance at Dec. 31, 2016 $ 1,102 1,080,432 (418) (745,821) 335,295
Balance (in shares) at Dec. 31, 2016 110,236,127        
Increase (Decrease) in Stockholders' Equity          
Issuance of common stock, net of issuance costs of $7.4 and $7.3 million for 2017, and 2016, respectively $ 74 253,314     253,388
Issuance of common stock, net of issuance costs (in shares) 7,450,000        
Exercise of common stock options $ 11 5,092     5,103
Exercise of common stock options (in shares) 1,067,047        
Issuance of common stock to fund the Company's 401(k) match $ 2 3,006     3,008
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 $ 12 35,500     35,512
Compensation expense related to issuance of stock options and restricted stock awards (in shares) 1,162,112        
Purchase of employee stock purchase plan shares $ 4 2,837     2,841
Purchase of employee stock purchase plan shares (in shares) 423,423        
Net loss       (114,397) (114,397)
Accumulated other comprehensive income (loss)     (332)   (332)
Balance at Dec. 31, 2017 $ 1,205 1,380,577 (750) (860,614) $ 520,418
Balance (in shares) at Dec. 31, 2017 120,497,426       120,497,426
Increase (Decrease) in Stockholders' Equity          
Cumulative-effect adjustment - ASU 2016-09 adoption | ASU 2016-09   396   (396)  
Equity component of convertible debt, net of issuance costs   260,246     $ 260,246
Exercise of common stock options $ 10 6,626     6,636
Exercise of common stock options (in shares) 1,033,012        
Issuance of common stock to fund the Company's 401(k) match $ 1 4,302     4,303
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 $ 13 60,251     60,264
Compensation expense related to issuance of stock options and restricted stock awards (in shares) 1,228,611        
Purchase of employee stock purchase plan shares $ 3 4,892     4,895
Purchase of employee stock purchase plan shares (in shares) 346,609        
Net loss       (175,149) (175,149)
Accumulated other comprehensive income (loss)     (672)   (672)
Balance at Dec. 31, 2018 $ 1,232 $ 1,716,894 $ (1,422) $ (1,035,763) $ 680,941
Balance (in shares) at Dec. 31, 2018 123,192,540       123,192,540
v3.10.0.1
Consolidated Statements of Stockholders’ Equity (Parenthetical) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Consolidated Statements of Stockholders’ Equity    
Issuance of common stock, issuance costs $ 7.4 $ 7.3
v3.10.0.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Cash flows from operating activities:      
Net loss $ (175,149) $ (114,397) $ (167,211)
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and amortization of property and equipment 20,482 14,500 11,309
Loss on disposal of property and equipment 353 954 151
Loss on preferred stock investment 765    
Deferred tax benefit   (115)  
Stock-based compensation 60,264 35,512 23,732
Amortization of debt discount 26,291    
Amortization of debt issuance costs 2,273    
Amortization of other liabilities (2,500) (1,674) (1,013)
Amortization of deferred financing costs 106 54 52
Amortization of premium on short-term investments (3,901) 65 463
Amortization of intangible assets 2,602 1,055 200
Proceeds from refundable tax credits     800
Changes in assets and liabilities, net of effects of acquisition:      
Accrued interest 4,593    
Accounts receivable, net (17,292) (17,529) (3,593)
Inventory, net (12,729) (19,194) (156)
Prepaid expenses and other current assets (9,076) (995) 761
Accounts payable 11,332 15,383 (2,598)
Accrued liabilities 21,744 15,154 7,349
Other short-term liabilities 172 119  
Lease incentive obligation 345 (616) (312)
Net cash used in operating activities (69,325) (71,724) (130,066)
Cash flows from investing activities:      
Purchases of marketable securities (1,192,506) (357,051) (189,989)
Maturities of marketable securities 579,171 271,466 193,321
Purchases of property and equipment (150,093) (48,480) (14,851)
Business acquisition, net of cash acquired (17,908) (2,980)  
Investment in privately-held company   (3,000)  
Purchases of intangible assets   (20,690)  
Internally developed software (578) (70)  
Net cash used in investing activities (781,914) (160,805) (11,519)
Cash flows from financing activities:      
Proceeds from issuance of convertible notes, net 896,430    
Proceeds from financing obligation 6,762    
Proceeds from exercise of common stock options 6,636 5,103 3,411
Proceeds from sale of common stock, net of issuance costs   253,388 144,242
Proceeds in connection with the Company's employee stock purchase plan 4,895 2,841 2,099
Payments of deferred financing costs (24) (202)  
Proceeds from construction loan 24,260    
Payments on mortgage payable (4,678) (174) (166)
Payments on capital lease (139)    
Net cash provided by financing activities 934,142 260,956 149,586
Effects of exchange rate changes on cash and cash equivalents 36 143 (215)
Net increase in cash and cash equivalents 82,939 28,570 7,786
Cash and cash equivalents, beginning of period 77,491 48,921 41,135
Cash and cash equivalents, end of period 160,430 77,491 48,921
Supplemental disclosure of non-cash investing and financing activities:      
Property and equipment acquired but not paid 33,452 8,818 655
Property acquired under build-to-suit lease 2,092    
Unrealized loss on available-for-sale investments (708) (475) 230
Issuance of 86,882, 158,717 and 341,507 shares of common stock to fund the Company’s 401(k) matching contribution for 2017, 2016 and 2015, respectively 4,303 3,008 2,151
Business acquisition contingent consideration liability 3,060    
Interest paid $ 4,638 $ 201 $ 209
v3.10.0.1
Consolidated Statements of Cash Flows (Parenthetical) - shares
shares in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Consolidated Statements of Cash Flows      
Issuance of shares of common stock to fund the Company's 401(k) matching contribution 86,882 158,717 341,507
v3.10.0.1
ORGANIZATION
12 Months Ended
Dec. 31, 2018
ORGANIZATION  
ORGANIZATION

(1) ORGANIZATION

Exact Sciences Corporation (together with its subsidiaries, “Exact,” or the “Company”) was incorporated in February 1995. Exact is a molecular diagnostics company currently focused on the early detection and prevention of some of the deadliest forms of cancer. The Company has developed an accurate, non-invasive, patient friendly screening test called Cologuard for the early detection of colorectal cancer and pre-cancer, and is currently working on the development of additional tests for other types of cancer, with the goal of becoming a leader in cancer screening and diagnostics. 

v3.10.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
12 Months Ended
Dec. 31, 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.  All significant intercompany transactions and balances have been eliminated in consolidation.

References to “Exact”, “we”, “us”, “our”, or the “Company” refer to Exact Sciences Corporation and its wholly owned subsidiaries.

Use of Estimates

The preparation of 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. The Company had no restricted cash at December 31, 2018 and 2017.

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. Marketable equity securities and debt securities not classified as held‑to‑maturity are classified as available‑for‑sale. Available‑for‑sale securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in other comprehensive income. 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.

At December 31, 2018 and 2017, the Company’s marketable securities were comprised of fixed income investments, and all were deemed available‑for‑sale. The objectives of the Company’s investment strategy are to provide liquidity and safety of principal while striving to achieve the highest rate of return consistent with these two objectives. 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. All of the Company’s investments are considered current. Realized gains were $0.4 million, $23,000, and $24,000, net of insignificant realized losses, for the years ended December 31, 2018, 2017, and 2016, respectively and are included in investment income.

The Company periodically reviews 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. For the year ended December 31, 2018, no investments were identified with other-than-temporary declines in value.

Available‑for‑sale securities at December 31, 2018 consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

    

 

 

    

Gains in Accumulated

    

Losses in Accumulated

    

 

 

 

 

 

 

 

Other Comprehensive

 

Other Comprehensive

 

Estimated Fair

(In thousands)

 

Amortized Cost

 

Income (Loss)

 

Income (Loss)

 

Value

Corporate bonds

 

$

392,973

 

$

33

 

$

(719)

 

$

392,287

Asset backed securities

 

 

277,537

 

 

30

 

 

(568)

 

 

276,999

U.S. government agency securities

 

 

250,606

 

 

43

 

 

(178)

 

 

250,471

Commercial paper

 

 

12,158

 

 

 —

 

 

(7)

 

 

12,151

Certificates of deposit

 

 

31,875

 

 

 —

 

 

(31)

 

 

31,844

Total available-for-sale securities

 

$

965,149

 

$

106

 

$

(1,503)

 

$

963,752

 

Available‑for‑sale securities at December 31, 2017 consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2017

 

    

 

 

    

Gains in Accumulated

    

Losses in Accumulated

    

 

 

 

 

 

 

 

Other Comprehensive

 

Other Comprehensive

 

Estimated Fair

(In thousands)

 

Amortized Cost

 

Income (Loss)

 

Income (Loss)

 

Value

Corporate bonds

 

$

181,639

 

$

10

 

$

(344)

 

$

181,305

Asset backed securities

 

 

94,700

 

 

 —

 

 

(185)

 

 

94,515

U.S. government agency securities

 

 

54,974

 

 

 —

 

 

(162)

 

 

54,812

Commercial paper

 

 

9,953

 

 

 —

 

 

(7)

 

 

9,946

Certificates of deposit

 

 

6,647

 

 

 1

 

 

(2)

 

 

6,646

Total available-for-sale securities

 

$

347,913

 

$

11

 

$

(700)

 

$

347,224

 

Changes in Accumulated Other Comprehensive Income (Loss)

The amount recognized in accumulated other comprehensive income (loss) (“AOCI”) for the years ended December 31, 2018, 2017 and 2016 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

Cumulative

 

Unrealized

 

Other

 

 

Translation

 

Gain (Loss)

 

Comprehensive

(In thousands)

    

Adjustment

    

on Securities

    

Income (Loss)

Balance at January 1, 2016

 

$

11

 

$

(444)

 

$

(433)

Other comprehensive income (loss) before reclassifications

 

 

(215)

 

 

117

 

 

(98)

Amounts reclassified from accumulated other comprehensive loss

 

 

 —

 

 

113

 

 

113

Net current period change in accumulated other comprehensive income (loss)

 

 

(215)

 

 

230

 

 

15

Balance at December 31, 2016

 

$

(204)

 

$

(214)

 

$

(418)

Other comprehensive income (loss) before reclassifications

 

 

143

 

 

(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 reclassifications

 

 

36

 

 

(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)

 

Amounts reclassified from accumulated other comprehensive loss for the years ended December 31, 2018, 2017 and 2016 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Affected Line Item in the

 

Year Ended December 31,

Details about AOCI Components (In thousands)

 

Statements of Operations

 

2018

 

2017

 

2016

Change in value of available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

Sales and maturities of available-for-sale investments

 

Investment income

 

$

317

 

$

55

 

$

113

Total reclassifications

 

 

 

$

317

 

$

55

 

$

113

 

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, 2018 and 2017 there was no allowance for doubtful accounts recorded. For the years ended December 31, 2018, 2017 and 2016, 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 market value (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 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. In addition, the Company’s products are subject to strict quality control and monitoring which the Company performs throughout the manufacturing process. If certain batches or units of product no longer meet quality specifications or become obsolete due to expiration, the Company records a charge to cost of sales to write down such unmarketable inventory to its estimated realizable value.

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:

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

(In thousands)

    

2018

    

2017

Raw materials

 

$

12,761

 

$

10,344

Semi-finished and finished goods

 

 

26,387

 

 

15,683

Total inventory

 

$

39,148

 

$

26,027

Property, Plant and Equipment

Property 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:

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

December 31,

 

December 31,

(In thousands)

 

Useful Life

 

2018

 

2017

Property, plant and equipment

 

 

 

 

 

 

 

 

 

Land

 

 

(1)

 

$

4,466

 

$

4,466

Leasehold and building improvements

 

 

(2)

 

 

38,895

 

 

17,629

Land improvements

 

 

15 years

 

 

1,530

 

 

1,419

Buildings

 

 

30 years

 

 

7,928

 

 

7,928

Computer equipment and computer software

 

 

3 years

 

 

36,969

 

 

30,148

Laboratory equipment

 

 

3 - 10 years

 

 

37,518

 

 

23,296

Furniture and fixtures

 

 

3 years

 

 

8,353

 

 

4,531

Assets under construction

 

 

(3)

 

 

167,462

 

 

28,655

Property, plant and equipment, at cost

 

 

 

 

 

303,121

 

 

118,072

Accumulated depreciation

 

 

 

 

 

(57,862)

 

 

(38,086)

Property, plant and equipment, net

 

 

 

 

$

245,259

 

$

79,986

 

(1)

Not depreciated.

(2)

Lesser of remaining lease term, building life, or useful life.

(3)

Not depreciated until placed into service.

Depreciation expense for the years ended December 31, 2018, 2017, and 2016 was $20.5 million, $14.5 million, and $11.3 million, respectively.

At December 31, 2018, the Company had $167.5 million of assets under construction which consisted of $130.8 million related to building and leasehold improvements, $5.2 million of capitalized costs related to software projects, and $31.5 million of costs related to laboratory equipment under construction. Depreciation will begin on these assets once they are placed into service. The Company expects to incur an additional $184.9 million to complete the building projects and leasehold improvements, $7.5 million of costs to complete the computer software projects, $7.2 million to complete the laboratory equipment, and minimal costs to complete the computer equipment. These projects are expected to be completed in 2019 and 2020. The Company assesses its long-lived assets, consisting primarily of property and equipment, for impairment when material events and changes in circumstances indicate that the carrying value may not be recoverable. There were no impairment losses for the years ended December 31, 2018, 2017 or 2016. 

Software Capitalization Policy

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.

Patent Costs, Intangible Assets and Goodwill

Goodwill and intangible assets consisted of the following:

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

(In thousands)

    

2018

    

2017

Finite-lived intangible assets

 

 

 

 

 

 

Finite-lived intangible assets

 

$

33,058

 

$

23,726

Less: Accumulated amortization

 

 

(4,107)

 

 

(1,500)

Finite-lived intangible assets, net

 

 

28,951

 

 

22,226

Internally developed technology in process

 

 

51

 

 

 —

Total finite-lived intangible assets, net

 

 

29,002

 

 

22,226

Goodwill

 

 

17,279

 

 

1,979

Goodwill and intangible assets, net

 

$

46,281

 

$

24,205

 

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, 2018:

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

Net Balance at

 

Average

 

 

December 31,

 

Remaining

(In thousands)

    

2018

    

Life (Years)

Trade name

 

$

689

 

 

14.8

Customer relationships

 

 

2,666

 

 

14.8

Patents

 

 

18,979

 

 

9.6

Acquired developed technology

 

 

6,086

 

 

13.8

Internally developed technology

 

 

531

 

 

2.7

Total

 

$

28,951

 

 

 

 

As of December 31, 2018, 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)

    

 

    

2019

 

$

3,193

2020

 

 

3,193

2021

 

 

3,092

2022

 

 

2,956

2023

 

 

2,953

Thereafter

 

 

13,564

 

 

$

28,951

 

The Company reviews long-lived assets, including property and equipment and identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be 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, 2018, 2017, and 2016.

Patent costs, which have historically consisted of related legal fees, 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 year ended December 31, 2018, 2017 and 2016 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 goodwill and 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 ten-year useful life of the licensed intellectual property through 2024, and such amortization is reported in cost of sales. 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 cost of sales. The $6.6 million of liabilities relieved were related to historical milestones and accrued royalties under the License Agreement. 

As of December 31, 2018 and 2017, an intangible asset of $7.7 million and $9.0 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. Amortization expense for the years ended December 31, 2018, 2017, and 2016 was $1.3 million, $1.0 million, and $0.2 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. In connection with the Armune Purchase Agreement, Armune terminated a license agreement pursuant to which it licensed certain patent rights and know-how from the Regents of the University of Michigan (“University of Michigan”), and the Company entered into a license agreement with the University of Michigan with respect to such patent rights and know-how, as well as certain additional intellectual property rights. Pursuant to the Company’s agreement with the University of Michigan, it is required to pay the University of Michigan a low single-digit royalty on its net sales of products using the licensed intellectual property.

 

The Company accounted for the transaction as an asset acquisition under GAAP. The asset is comprised of a portfolio of biomarkers, related technology and know-how, which is a group of complementary assets concentrated in a single identifiable asset. 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. The Company capitalized these costs as there is a reasonable expectation that the assets acquired will be used in an alternative manner in the future, that is not contingent on future development subsequent to acquisition, and the Company anticipates there to be economic benefit from these alternative uses.  For the years ended December 31, 2018 and 2017, the Company recorded amortization expense of $0.9 million and $40,000, respectively. At December 31, 2018 and 2017, the net balances of $11.3 million and $12.2 million, respectively are reported in net goodwill and intangible assets in the Company’s consolidated balance sheet.

 

As a result of the Sampleminded, Inc. (“Sampleminded”) acquisition discussed in Note 14, the Company recorded an intangible asset of $1.0 million which was comprised of acquired developed technology of $0.9 million, customer relationships of $0.1 million, and non-compete agreements of $32,000. The intangible assets acquired are being amortized over the remaining useful life which was determined to be eight years for acquired developed technology, three years for customer relationships, and five years for non-compete agreements. For the years ended December 31, 2018 and 2017, the Company recorded amortization expense of $0.1 million and $52,000, respectively, and the net balances of $0.8 million and $0.9 million, respectively, are reported in net goodwill and intangible assets in the Company’s consolidated balance sheet. 

As a result of the Biomatrica Acquisition discussed in Note 14, 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 fifteen years for the acquired developed technology, fifteen years for the customer relationships, and fifteen years for the trade names. For the year ended December 31, 2018, the Company recorded amortization expense of $0.1 million and the net balance of $8.7 million is reported in net goodwill and intangible assets in the Company’s consolidated balance sheet.

In 2017, the Company recognized goodwill of $2.0 million from the acquisition of Sampleminded, Inc. During the fourth quarter of 2018, the Company recognized goodwill of $15.3 million from the acquisition of Biomatrica, Inc. Goodwill is reported in net goodwill and intangible assets in the Company’s consolidated balance sheet. The Company will evaluate goodwill impairment on an annual basis or more frequently should an event or change in circumstance occur that indicates that the carrying amount is in excess of the fair value. There were no impairment losses for the years ended December 31, 2018, 2017, and 2016. Refer to Note 14 for further discussion of the goodwill recorded.

The change in the carrying amount of goodwill for the years ended December 31, 2018 and 2017 is as follows:

 

 

 

 

(In thousands)

 

 

 

Balance, December 31, 2016

 

$

 —

Sampleminded acquisition

 

 

1,979

Balance, December 31, 2017

 

 

1,979

Biomatrica acquisition

 

 

15,300

Balance, December 31, 2018

 

$

17,279

 

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)

    

2018

    

2017

    

2016

Shares issuable upon exercise of stock options

 

2,532

 

3,360

 

3,505

Shares issuable upon the release of restricted stock awards

 

6,246

 

6,149

 

5,601

Shares issuable upon conversion of convertible notes

 

12,044

 

 —

 

 —

 

 

20,822

 

9,509

 

9,106

 

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 fair values.

Revenue Recognition

The Company’s revenue is primarily generated by screening services using its Cologuard test, and the service is completed upon delivery of a patient’s test result to the ordering physician.  The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), which it adopted on January 1, 2018, using the modified retrospective method, which it 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 revenue from its Cologuard test 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, including national coverage determination for Cologuard, 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 physician and the return of a sample by the patient.

·

The Company is obligated to perform its laboratory services upon receipt 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 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 the Company shipping a collection kit to the patient.

·

Once the Company delivers a patient’s test result to the ordering physician, the contract with a patient has commercial substance, as the Company is legally able to collect payment and bill an insurer and/or patient, 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 delivery of a patient’s Cologuard test result to the ordering physician. The duration of time between sample receipt and delivery of a valid test result to the ordering physician is typically less than two weeks. Accordingly, the Company elects the practical expedient and therefore, the Company does not disclose the value of unsatisfied performance obligations.

 

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, though the variability is not explicitly stated in any contract. Rather, the implied variability is due to several factors, such as the amount of contractual adjustments, any patient co-payments, deductibles or patient compliance 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 $15.0 million for the year ended December 31, 2018.

 

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 delivery of a patient’s Cologuard test result to the ordering physician, with recognition, generally occurring at the date of cash receipt. Since the first quarter of 2017, the Company has determined that its historical experience has sufficient predictive value, such that there are no longer any contracts for which no revenue is recognized upon delivery of a Cologuard test result to an ordering physician. Of the revenue recognized in the twelve months ended December 31, 2017, approximately $4.3 million relates to the one-time impact of certain payers meeting the Company’s revenue recognition criteria for accrual-basis revenue recognition beginning with the period ended March 31, 2017. Approximately $1.0 million of this one-time impact relates to tests completed in the prior year and for which the Company’s accrual revenue recognition criteria were not met until 2017.

 

Allocate transaction price

 

The entire 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 delivered to the patient’s ordering physician. The Company considers this date to be the time at which the patient obtains control of the promised Cologuard test service.  

 

Disaggregation of Revenue

 

The following table presents our revenues disaggregated by revenue source for the years ended December 31, 2018, 2017 and 2016, respectively:

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

(In thousands)

    

2018

    

2017

    

2016

Medicare Parts B & C

 

$

254,431

 

$

172,255

 

$

81,976

Commercial

 

 

184,538

 

 

84,842

 

 

16,017

Other

 

 

15,493

 

 

8,892

 

 

1,383

Total

 

$

454,462

 

$

265,989

 

$

99,376

 

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 delivery of a patient’s test result to the ordering physician, resulting in an account receivable. However, the Company sometimes receives advance payment from a patient, particularly a self-pay patient, before a Cologuard test result is completed, resulting in deferred revenue. The deferred revenue balance is relieved upon delivery of the applicable patient’s test result to the ordering physician. Changes in accounts receivable and deferred revenue were not materially impacted by any other factors.

 

Deferred revenue balances are reported in other short-term liabilities in the Company’s consolidated balance sheets and were $0.5 million and $0.2 million as of December 31, 2018 and 2017, respectively.

 

Revenue recognized for the years ended December 31, 2018 and 2017, which was included in the deferred revenue balance at the beginning of each period was $0.1 million and $44,000, 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 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. compliance 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 $93.7 million, $58.0 million, and $38.1 million of media advertising during the years ended December 31, 2018, 2017, and 2016, respectively.

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.

 

Fixed‑income securities are valued using a third-party pricing agency. The valuation is based on observable inputs including pricing for similar assets and other observable market factors. There has been no material pricing change from period to period. The estimated fair value of the Company’s long-term debt represents a Level 2 measurement. When determining the estimated fair value of the Company’s long-term debt, the Company used market-based risk measurements, such as credit risk. See Note 9 and Note 10 for further detail on the Company’s long-term debt. 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 assesses the fair value of expected contingent consideration and the corresponding liability each reporting period using the Monte Carlo Method, which is consistent with the initial measurement of the expected 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. There were no changes in the fair value assessed between the acquisition date and December 31, 2018. See Note 14 for further detail on the Biomatrica Acquisition.

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:

 

    

 

 

    

Quoted Prices

    

Significant

    

 

 

 

 

 

 

 

in Active

 

Other

 

Significant

 

 

 

 

 

Markets for

 

Observable

 

Unobservable

 

 

Fair Value at

 

Identical Assets

 

Inputs

 

Inputs

(In thousands)

 

December 31, 2018

 

(Level 1)

 

(Level 2)

 

(Level 3)

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Cash and money market

 

$

86,375

 

$

86,375

 

$

 —

 

$

 —

U.S. government agency securities

 

 

49,985

 

 

 —

 

 

49,985

 

 

 —

Commercial paper

 

 

24,070

 

 

 —

 

 

24,070

 

 

 —

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

392,287

 

 

 —

 

 

392,287

 

 

 —

Asset backed securities

 

 

276,999

 

 

 —

 

 

276,999

 

 

 —

U.S. government agency securities

 

 

250,471

 

 

 —

 

 

250,471

 

 

 —

Certificates of deposit

 

 

31,844

 

 

 —

 

 

31,844

 

 

 —

Commercial paper

 

 

12,151

 

 

 —

 

 

12,151

 

 

 —

Contingent consideration

 

 

(3,060)

 

 

 —

 

 

 —

 

 

(3,060)

Total

 

$

1,121,122

 

$

86,375

 

$

1,037,807

 

$

(3,060)

 

The following table presents the Company’s fair value measurements as of December 31, 2017 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, 2017 Using:

 

    

 

 

    

Quoted Prices

    

Significant

    

 

 

 

 

 

 

in Active

 

Other

 

Significant

 

 

 

 

 

Markets for

 

Observable

 

Unobservable

 

 

Fair Value at

 

Identical Assets

 

Inputs

 

Inputs

(In thousands)

 

December 31, 2017

 

(Level 1)

 

(Level 2)

 

(Level 3)

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Cash and money market

 

$

61,297

 

$

61,297

 

$

 —

 

$

 —

Commercial paper

 

 

10,995

 

 

 —

 

 

10,995

 

 

 —

Certificates of deposit

 

 

1,499

 

 

 —

 

 

1,499

 

 

 —

U.S. government agency securities

 

 

3,700

 

 

 —

 

 

3,700

 

 

 —

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

181,305

 

 

 —

 

 

181,305

 

 

 —

Asset backed securities

 

 

94,515

 

 

 —

 

 

94,515

 

 

 —

U.S. government agency securities

 

 

54,812

 

 

 —

 

 

54,812

 

 

 —

Commercial paper

 

 

9,946

 

 

 —

 

 

9,946

 

 

 —

Certificates of deposit

 

 

6,646

 

 

 —

 

 

6,646

 

 

 —

Total

 

$

424,715

 

$

61,297

 

$

363,418

 

$

 —

 

The Company monitors investments for other-than-temporary impairment.  It was determined that unrealized gains and losses at December 31, 2018 and 2017 are temporary in nature because the change in market value for those securities has 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 investments 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 months

 

12 months or greater

 

Total

 

(In thousands)

    

 

Fair Value

    

 

Gross Unrealized Loss

    

 

Fair Value

    

 

Gross Unrealized Loss

    

 

Fair Value

    

 

Gross Unrealized Loss

 

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

340,287

 

$

(638)

 

$

35,773

 

$

(81)

 

$

376,060

 

$

(719)

 

U.S. government agency securities