EXACT SCIENCES CORP, 10-Q filed on 4/26/2018
Quarterly Report
v3.8.0.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2018
Apr. 25, 2018
Document and Entity Information    
Entity Registrant Name EXACT SCIENCES CORP  
Entity Central Index Key 0001124140  
Document Type 10-Q  
Document Period End Date Mar. 31, 2018  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Filer Category Large Accelerated Filer  
Entity Common Stock, Shares Outstanding   121,898,280
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q1  
v3.8.0.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Current Assets:    
Cash and cash equivalents $ 148,695 $ 77,491
Marketable securities 893,474 347,224
Accounts receivable, net 34,575 26,419
Inventory, net 32,380 26,027
Prepaid expenses and other current assets 12,867 10,055
Total current assets 1,121,991 487,216
Long-term Assets:    
Property, plant and equipment, net 103,448 79,986
Intangibles, net 21,558 22,160
Other long-term assets, net 9,919 9,198
Total assets 1,256,916 598,560
Current Liabilities:    
Accounts payable 12,274 16,135
Accrued liabilities 56,716 49,126
Accrued interest 1,407  
Debt, current portion 183 182
Other short-term liabilities 2,750 2,681
Total current liabilities 73,330 68,124
Convertible notes, net 486,688  
Long-term debt 4,237 4,269
Other long-term liabilities 5,643 5,749
Total liabilities 569,898 78,142
Commitments and contingencies
Stockholders' Equity:    
Preferred stock, $0.01 par value Authorized—5,000,000 shares issued and outstanding—no shares at March 31, 2018 and December 31, 2017
Common stock, $0.01 par value Authorized—200,000,000 shares issued and outstanding—121,866,759 and 120,497,426 shares at March 31, 2018 and December 31, 2017 1,219 1,205
Additional paid-in capital 1,588,173 1,380,577
Accumulated other comprehensive loss (2,336) (750)
Accumulated deficit (900,038) (860,614)
Total stockholders' equity 687,018 520,418
Total liabilities and stockholders’ equity $ 1,256,916 $ 598,560
v3.8.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2018
Dec. 31, 2017
Condensed 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 121,866,759 120,497,426
Common stock, outstanding shares 121,866,759 120,497,426
v3.8.0.1
Condensed Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Condensed Consolidated Statements of Operations    
Laboratory service revenue $ 90,296 $ 48,363
Cost of sales 22,914 16,981
Gross margin 67,382 31,382
Operating expenses:    
Research and development 14,935 8,002
General and administrative 35,567 20,070
Sales and marketing 53,408 38,801
Total operating expenses 103,910 66,873
Loss from operations (36,528) (35,491)
Other income (expense)    
Investment income 3,673 595
Interest expense (6,510) (50)
Total other income (expense) (2,837) 545
Net loss before tax (39,365) (34,946)
Income tax expense (59)  
Net loss $ (39,424) $ (34,946)
Net loss per share-basic and diluted (in dollars per share) $ (0.33) $ (0.32)
Weighted average common shares outstanding-basic and diluted (in shares) 121,016 110,582
v3.8.0.1
Condensed Consolidated Statements of Comprehensive Loss - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Condensed Consolidated Statements of Comprehensive Loss    
Net loss $ (39,424) $ (34,946)
Other comprehensive loss, net of tax:    
Unrealized loss on available-for-sale investments (1,606) (5)
Foreign currency translation gain (loss) 20 (8)
Comprehensive loss $ (41,010) $ (34,959)
v3.8.0.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Cash flows from operating activities:    
Net loss $ (39,424) $ (34,946)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization of fixed assets 4,281 3,247
Loss on disposal of property and equipment 98 20
Stock-based compensation 12,463 6,129
Amortization of debt discount 4,651  
Amortization of debt issuance costs 402  
Amortization of other liabilities (533) (377)
Amortization of deferred financing costs 23 14
Amortization of premium on short-term investments (515) 37
Amortization of intangible assets 612 50
Changes in assets and liabilities, net effects of acquisition:    
Accrued interest 1,407  
Accounts receivable, net (8,156) (7,688)
Inventory, net (6,353) (1,026)
Prepaid expenses and other current assets (2,812) (329)
Accounts payable (3,861) 181
Accrued liabilities (623) 1,204
Other short-term liabilities (29) (154)
Lease incentive obligation (153)  
Net cash used in operating activities (38,522) (33,638)
Cash flows from investing activities:    
Purchases of marketable securities (628,502) (30,563)
Maturities of marketable securities 81,161 57,236
Purchases of property and equipment (15,328) (2,745)
Internally developed software (62)  
Net cash (used in) provided by investing activities (562,731) 23,928
Cash flows from financing activities:    
Proceeds from issuance of convertible notes, net 671,091  
Proceeds from exercise of common stock options 1,391 47
Payments on mortgage payable (45) (44)
Net cash provided by financing activities 672,437 3
Effects of exchange rate changes on cash and cash equivalents 20 (8)
Net increase (decrease) in cash and cash equivalents 71,204 (9,715)
Cash and cash equivalents, beginning of period 77,491 48,921
Cash and cash equivalents, end of period 148,695 39,206
Supplemental disclosure of non-cash investing and financing activities:    
Property and equipment acquired but not paid 12,513 775
Unrealized gain (loss) on available-for-sale investments (1,606) (5)
Issuance of 86,828 and 158,717 shares of common stock to fund the Company’s 401(k) matching contribution for 2017 and 2016, respectively 4,300 3,008
Interest paid $ 48 $ 50
v3.8.0.1
Condensed Consolidated Statements of Cash Flows (Parenthetical) - shares
shares in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Condensed Consolidated Statements of Cash Flows    
Issuance of shares of common stock to fund the Company's 401(k) matching contribution 86,828 158,717
v3.8.0.1
ORGANIZATION AND BASIS OF PRESENTATION
3 Months Ended
Mar. 31, 2018
ORGANIZATION AND BASIS OF PRESENTATION  
ORGANIZATION AND BASIS OF PRESENTATION

(1) ORGANIZATION AND BASIS OF PRESENTATION

 

Organization

 

Exact Sciences Corporation (“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 tests for other types of cancer, with the goal of becoming a leader in cancer diagnostics.

 

Basis of Presentation

 

The accompanying condensed consolidated financial statements, which include the accounts of Exact Sciences Corporation and those of its wholly owned subsidiaries, Exact Sciences Laboratories, LLC, Exact Sciences Finance Corporation, CG Growth, LLC, Exact Sciences Development Company, LLC, Sampleminded, Inc., Exact Sciences Europe LTD, Beijing Exact Sciences Medical Technology Company Limited, and variable interest entities are unaudited and have been prepared on a basis substantially consistent with the Company’s audited financial statements and notes as of and for the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K (the “2017 Form 10-K”). These condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and follow the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. In the opinion of management, all adjustments (consisting only of adjustments of a normal and recurring nature) considered necessary for a fair presentation of the results of operations have been included. The results of the Company’s operations for any interim period are not necessarily indicative of the results of the Company’s operations for any other interim period or for a full fiscal year. The statements should be read in conjunction with the audited financial statements and related notes included in the 2017 Form 10-K.  Management has evaluated subsequent events for disclosure or recognition in the accompanying financial statements up to the filing of this report.

v3.8.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Mar. 31, 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries, Exact Sciences Laboratories, LLC, Exact Sciences Finance Corporation, CG Growth, LLC, Exact Sciences Development Company, LLC, Sampleminded, LLC, Exact Sciences Europe LTD, Beijing Exact Sciences Medical Technology Company Limited, and variable interest entities. 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 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 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. 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 loss. 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 March 31, 2018 and December 31, 2017, the Company’s investments 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. There were no realized losses for the three months ended March 31, 2018 and 2017. Realized gains were $30,000 and $4,000 for the three months ended March 31, 2018 and 2017, respectively.

 

We periodically review our 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, our intent not to sell the security, and whether it is more likely than not that we will have to sell the security before recovery of its cost basis. For the three months ended March 31, 2018, no investments were identified with other-than-temporary declines in value.

 

Available-for-sale securities at March 31, 2018 consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 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

 

$

346,193

 

 

 3

 

 

(1,073)

 

$

345,123

 

Asset backed securities

 

 

254,390

 

 

 —

 

 

(843)

 

 

253,547

 

U.S. government agency securities

 

 

194,307

 

 

 —

 

 

(283)

 

 

194,024

 

Commercial paper

 

 

52,015

 

 

 —

 

 

(21)

 

 

51,994

 

Certificates of deposit

 

 

48,864

 

 

 1

 

 

(79)

 

 

48,786

 

Total available-for-sale securities

 

$

895,769

 

$

 4

 

$

(2,299)

 

$

893,474

 

 

Available-for-sale securities at December 31, 2017 consisted 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 amounts recognized in accumulated other comprehensive income (loss) (“AOCI”) for the three months ended March 31, 2018 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Cumulative

 

Unrealized

 

Other

 

 

 

Translation

 

Gain (Loss)

 

Comprehensive

 

(In thousands)

    

Adjustment

    

on Securities

    

Income (Loss)

 

Balance at December 31, 2017

 

$

(61)

 

$

(689)

 

$

(750)

 

Other comprehensive loss before reclassifications

 

 

20

 

 

(1,630)

 

 

(1,610)

 

Amounts reclassified from accumulated other comprehensive loss

 

 

 —

 

 

24

 

 

24

 

Net current period change in accumulated other comprehensive loss

 

 

20

 

 

(1,606)

 

 

(1,586)

 

Balance at March 31, 2018

 

$

(41)

 

$

(2,295)

 

$

(2,336)

 

 

The amounts recognized in AOCI for the three months ended March 31, 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Cumulative

 

Unrealized

 

Other

 

 

 

Translation

 

Gain (Loss)

 

Comprehensive

 

(In thousands)

    

Adjustment

    

on Securities

    

Income (Loss)

 

Balance at December 31, 2016

 

$

(204)

 

$

(214)

 

$

(418)

 

Other comprehensive loss before reclassifications

 

 

(8)

 

 

(3)

 

 

(11)

 

Amounts reclassified from accumulated other comprehensive loss

 

 

 —

 

 

(2)

 

 

(2)

 

Net current period change in accumulated other comprehensive loss

 

 

(8)

 

 

(5)

 

 

(13)

 

Balance at March 31, 2017

 

$

(212)

 

$

(219)

 

$

(431)

 

 

Amounts reclassified from AOCI for the three months ended March 31, 2018 and 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Affected Line Item in the

 

Three Months Ended March 31,

 

Details about AOCI Components (In thousands)

 

Statement of Operations

 

2018

 

2017

 

Change in value of available-for-sale investments

 

 

 

 

 

 

 

 

 

Sales and maturities of available-for-sale investments

 

Investment income

 

$

24

 

$

(2)

 

Total reclassifications

 

 

 

$

24

 

$

(2)

 

 

Property and Equipment

 

Property and equipment are stated at cost and depreciated using the straight-line method over the assets’ estimated useful lives. Maintenance and repairs are expensed when incurred; additions and improvements are capitalized. Property and equipment consisted of the following as of March 31, 2018 and December 31, 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

March 31,

 

December 31,

 

(In thousands)

 

Useful Life

 

2018

 

2017

    

Property, plant and equipment

 

 

 

 

 

 

 

 

 

 

Land

 

 

(1)

 

$

4,466

 

$

4,466

 

Leasehold and building improvements

 

 

(2)

 

 

17,452

 

 

17,629

 

Land improvements

 

 

15 years

 

 

1,419

 

 

1,419

 

Buildings

 

 

30 years

 

 

7,928

 

 

7,928

 

Computer equipment and computer software

 

 

3 years

 

 

32,716

 

 

30,148

 

Laboratory equipment

 

 

3 - 5 years

 

 

26,234

 

 

23,296

 

Furniture and fixtures

 

 

3 years

 

 

4,554

 

 

4,531

 

Assets under construction

 

 

(3)

 

 

50,922

 

 

28,655

 

Property, plant and equipment, at cost

 

 

 

 

 

145,691

 

 

118,072

 

Accumulated depreciation

 

 

 

 

 

(42,243)

 

 

(38,086)

 

Property, plant and equipment, net

 

 

 

 

$

103,448

 

$

79,986

 


(1)

Not depreciated.

(2)

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

(3)

Not depreciated until placed into service.

 

At March 31, 2018, the Company had $50.9 million of assets under construction which consisted of $16.3 million related to laboratory equipment, $32.9 million related to leasehold and building improvements, and $1.7 million related to computer equipment and computer software projects. Depreciation will begin on these assets once they are placed into service. The Company expects to incur an additional $16.0 million to complete the laboratory equipment, $239.2 million to complete the building projects, and $1.6 million to complete the computer equipment and computer software projects. These projects are expected to be completed in 2018 and 2019. 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 periods ended March 31, 2018 and December 31, 2017.

 

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

 

Intangible Assets

 

Intangible assets consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

(In thousands)

    

2018

    

2017

 

Intangible assets:

 

 

 

 

 

 

 

Finite-lived intangible assets

 

$

23,660

 

$

23,660

 

Less: Accumulated amortization

 

 

(2,102)

 

 

(1,500)

 

Net carrying value

 

$

21,558

 

$

22,160

 

 

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 March 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

Net Balance at

 

Average

 

 

 

March 31,

 

Remaining

 

(In thousands)

    

2018

    

Life (Years)

 

Licensed intellectual property and patents

 

$

20,675

 

 

10.2

 

Developed technology

 

 

883

 

 

7.3

 

Total

 

$

21,558

 

 

 

 

 

The table below represents estimated future amortization expense associated with the Company’s finite-lived intangible assets as of March 31, 2018:

 

 

 

 

 

 

(In thousands)

    

 

    

 

2018

 

$

1,805

 

2019

 

 

2,407

 

2020

 

 

2,407

 

2021

 

 

2,373

 

2022

 

 

2,370

 

Thereafter

 

 

10,196

 

 

 

$

21,558

 

 

The Company reviews long-lived assets and certain 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 three months ended March 31, 2018 and 2017.

 

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 to be 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 three months ended March 31, 2018 and 2017 should be expensed and not capitalized as the future economic benefit to be derived from the transactions cannot be determined.

 

Direct and indirect manufacturing costs incurred during the process validation and for other research and development activities, which are not permitted to be sold, have been expensed to research and development.

 

Under a technology license and royalty agreement entered into with MDxHealth (“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 other long-term 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 MDx License Agreement was made as part of the Royalty Buy-Out agreement outlined below.

 

Effective April 25, 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 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 MDx License Agreement.

 

As of March 31, 2018, and December 31, 2017, an intangible asset of $8.7 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 in the Company’s condensed consolidated balance sheets.  Amortization expense was $0.3 million and $50,000 for the three months ended March 31, 2018 and March 31, 2017, respectively. 

 

On December 15, 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 ability to meet these events 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 in line 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 three months ended March 31, 2018, the Company recorded amortization expense of $40,000. At March 31, 2018 and December 31, 2017, the net balance of $12.0 million and $12.2 million, respectively, is reported in net intangible assets in the Company’s condensed consolidated balance sheets.

   

As a result of the Sampleminded acquisition, the Company recorded an intangible asset of $1.0 million, which was comprised of developed technology acquired 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 developed technology acquired, three years for customer relationships, and five years for non-compete agreements. For the three months ended March 31, 2018, the Company recorded amortization expense of $36,000. At March 31, 2018 and December 31, 2017 the net balance of $0.9 million and $0.9 million, respectively, is reported in intangible assets in the Company’s condensed consolidated balance sheet. 

 

Goodwill 

During the third quarter of 2017, the Company recognized goodwill of $2.0 million from the acquisition of Sampleminded, Inc., which was completed during the period. Goodwill is recorded as part of other long-term assets on the condensed consolidated balance sheets. The Company will evaluate goodwill impairment on an annual basis, or more frequently should an event or change in circumstance occur that indicate the carrying amount is in excess of the fair value. There were no impairment losses for the three months ended March 31, 2018.

 

Investment in Privately-Held Company 

On November 30, 2017, the Company made a 10 percent investment in a supplier. The investment does not constitute a variable interest entity, as the Company does not have control over the supplier’s business.  Additionally, as the ownership percentage is below 20 percent, the equity method is not being used to account for the investment. The supplier is privately-held, and there are no quoted prices or observable pricing inputs available. Therefore, the Company has accounted for this investment at cost, less any impairments, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment. The investment will be evaluated annually for impairment and adjusted to fair value whenever there is an observable price change in the identical or alike investment. There was no impairment recorded during the three months ended March 31, 2018. The total cash paid related to the investment was $3.0 million, which agrees to the carrying value as of March 31, 2018 and is included in the other long-term assets on the Company’s condensed consolidated balance sheets. There were no adjustments to the carrying value, upward or downward, for the three months ended March 31, 2018.

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 are the same because all outstanding common stock equivalents have been excluded, as they are anti-dilutive due to 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:

 

 

 

 

 

 

 

 

 

 

March 31,

 

(In thousands)

    

2018

    

2017

    

Shares issuable upon exercise of stock options

 

3,284

 

3,613

 

Shares issuable upon the release of restricted stock awards

 

6,315

 

5,553

 

Shares issuable upon conversion of convertible notes

 

9,148

 

 —

 

 

 

18,747

 

9,166

 

 

Revenue Recognition

 

The Company’s laboratory service revenues are generated by performing diagnostic 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 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 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 diagnostic 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, regardless of 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.  Our 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, does not disclose the value of unsatisfied performance obligations.

 

Transaction price

 

The transaction price is the amount of consideration to which 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 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 $8.5 million for the three months ended March 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 on 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 to the single performance obligation contained in a 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 three months ended March 31, 2018 and 2017:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

(In thousands)

    

2018

    

2017

 

Medicare Parts B & C

 

$

52,475

 

$

31,812

 

Commercial

 

 

34,834

 

 

15,136

 

Other

 

 

2,987

 

 

1,415

 

Total

 

$

90,296

 

$

48,363

 

 

Contract Balances

 

The timing of revenue recognition, billings and cash collections results in billed accounts receivable and deferred revenue on the condensed consolidated balance sheets.  Generally, billing occurs subsequent to 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 included in other short-term liabilities on our condensed consolidated balance sheets and was $0.2 million and $0.2 million as of March 31, 2018 and December 31, 2017, respectively.

 

Revenue recognized for the three-months ended March 31, 2018 and 2017, that was included in the deferred revenue balance at the beginning of each period was $56,000 and $0, 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.  

 

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. 

 

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 net realizable value, and records a charge to cost of sales for such inventory, as appropriate. In addition, the materials used in performing Cologuard tests 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 net 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. 

 

Inventory consists of the following:

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

(In thousands)

    

2018

    

2017

 

Raw materials

 

$

10,935

 

$

10,344

 

Semi-finished and finished goods

 

 

21,445

 

 

15,683

 

Total inventory

 

$

32,380

 

$

26,027

 

 

Foreign Currency Translation

 

For the Company’s international subsidiaries, the local currency is the functional currency. Assets and liabilities of these subsidiaries are translated into United States dollars at the period-end exchange rate or historical rates, as appropriate. Condensed consolidated statements of operations are translated at average exchange rates for the period. The cumulative translation adjustments resulting from changes in exchange rates are included in the condensed consolidated balance sheet as a component of accumulated other comprehensive loss in total Exact Sciences Corporation’s stockholders’ equity. Transaction gains and losses are included in the condensed consolidated statement of operations.

 

Reclassifications

 

Certain prior period amounts have been reclassified to conform to the current period presentation in the condensed consolidated financial statements and accompanying notes to the condensed consolidated financial statements.

v3.8.0.1
MAYO LICENSE AGREEMENT
3 Months Ended
Mar. 31, 2018
MAYO LICENSE AGREEMENT  
MAYO LICENSE AGREEMENT

(3) MAYO LICENSE AGREEMENT

 

Overview

 

As more fully described in the 2017 Form 10-K, in June 2009 the Company entered into a patent license agreement with MAYO Foundation for Medical Education and Research (“MAYO”). The Company’s license agreement with MAYO was amended and restated in February 2015 and further amended in January 2016 and October 2017. Under the license agreement, MAYO granted the Company an exclusive, worldwide license to certain MAYO patents and patent applications, as well as a non-exclusive, worldwide license with regard to certain MAYO know-how. As expanded by the January 2016 amendment to the license agreement, the scope of the license includes any screening, surveillance or diagnostic tests or tools for use in connection with any type of cancers, pre-cancers, diseases or conditions.

 

Pursuant to the Company’s agreement with MAYO, the Company is required to pay MAYO a low-single-digit royalty on the Company’s net sales of products using the licensed MAYO intellectual property, with minimum annual royalty fees of $25,000 each year through 2033, the year the last patent expires. The January 2016 amendment to the MAYO license agreement established various low-single-digit royalty rates on net sales of current and future products and clarified how net sales will be calculated.  The October 2017 amendment further modified royalty rates.  As part of these amendments, the royalty rate on the Company’s net sales of Cologuard increased and, if in the future, improvements are made to the Cologuard product, the royalty rate may further increase, but would remain a low-single-digit percentage of net sales.

 

In addition to royalties, the Company is required to pay MAYO cash of $0.2 million, $0.8 million and $2.0 million upon each product using the licensed MAYO intellectual property reaching $5.0 million, $20.0 million and $50.0 million in cumulative net sales, respectively.

 

As part of the February 2015 amendment and restatement of the license agreement, the Company agreed to pay MAYO an additional $5.0 million, payable in five annual installments, through 2019. The Company paid MAYO the annual installment of $1.0 million in the first quarter of each of 2015, 2016 and 2018. The Company paid MAYO the 2017 installment in December 2016. The Company records the $1.0 million installments to prepaid expenses and other current assets and amortizes each installment over a twelve-month period commencing on February 1 of each year. For the three months ended March 31, 2018 and 2017 the Company has recorded $0.3 million and $0.3 million in amortization of the installments, respectively.

 

In addition, the Company is paying MAYO for research and development efforts. As part of the Company’s research collaboration with MAYO, the Company incurred charges of $1.3 million for the months ended March 31, 2018. The Company made payments of $1.8 million for the three months ended March 31, 2018. The Company recorded an estimated liability of $1.3 million for research and development efforts as of March 31, 2018. The Company incurred charges of $1.1 million for the three months ended March 31, 2017. The Company made payments of $1.4 million for the three months ended March 31, 2017. The Company recorded an estimated liability of $0.6 million for research and development efforts as of March 31, 2017.

 

v3.8.0.1
STOCK-BASED COMPENSATION
3 Months Ended
Mar. 31, 2018
STOCK-BASED COMPENSATION  
STOCK-BASED COMPENSATION

(4) STOCK-BASED COMPENSATION

 

Stock-Based Compensation Plans

 

The Company maintains the 2010 Omnibus Long-Term Incentive Plan (As Amended and Restated Effective July 27, 2017), the 2010 Employee Stock Purchase Plan, the 2015 Inducement Award Plan, the 2016 Inducement Award Plan and the 2000 Stock Option and Incentive Plan (collectively, the “Stock Plans”).

 

Stock-Based Compensation Expense

 

The Company records stock-based compensation expense in connection with the amortization of restricted stock and restricted stock unit awards, stock purchase rights granted under the Company’s employee stock purchase plan and stock options granted to employees, non-employee consultants and non-employee directors. The Company recorded $12.5 million in stock-based compensation expense during the three months ended March 31, 2018. The Company recorded $6.1 million in stock-based compensation expense during the three months ended March 31, 2017.

 

Determining Fair Value

 

Valuation and Recognition – The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The fair value of each market measure-based award is estimated on the date of grant using a Monte Carlo simulation pricing model. The fair value of service-based awards for each restricted stock unit award is determined on the date of grant using the closing stock price on that day. The estimated fair value of these awards is recognized to expense using the straight-line method over the vesting period. The Black-Scholes and Monte Carlo pricing models utilize the following assumptions:

 

Expected Term – Expected life of an option award is the average length of time over which the Company expects employees will exercise their options, which is based on historical experience with similar grants. Expected life of a market measure-based award is based on the applicable performance period.

 

Expected Volatility - Expected volatility is based on the Company’s historical stock volatility data over the expected term of the awards.

 

Risk-Free Interest Rate - The Company bases the risk-free interest rate used in the Black-Scholes and Monte Carlo valuation models on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent expected term.

 

Forfeitures – Beginning in 2017, the Company adopted Accounting Standards Update (“ASU”) No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“Update 2016-09”). With the adoption of Update 2016-09, forfeiture estimates are no longer required, and the effects of actual forfeitures are recorded at the time they occur. The impact on the condensed consolidated balance sheet as of March 31, 2017 was a cumulative-effect adjustment of $0.4 million, increasing opening accumulated deficit and additional paid-in capital.

 

The fair value of each option and market measure-based award is based on the assumptions in the following table:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

 

    

2018

    

2017

    

    

Option Plan Shares

 

 

 

 

 

 

Risk-free interest rates

 

 2.79%

 

2.13%

 

 

Expected term (in years)

 

6.44

 

6.59

 

 

Expected volatility

 

61.8%

 

62.9%

 

 

Dividend yield

 

0%

 

0%

 

 

Weighted average fair value per share of options granted during the period

 

$26.84

 

$13.20

 

 

 

 

 

Stock Option and Restricted Stock Activity

 

A summary of stock option activity under the Stock Plans during the three months ended March 31, 2018 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

    

Weighted

    

 

 

 

 

 

 

 

Weighted

 

Average

 

 

 

 

 

 

 

 

Average

 

Remaining

 

Aggregate

 

 

 

 

 

Exercise

 

Contractual

 

Intrinsic

 

Options

 

Shares

 

Price

 

Term (Years)

 

Value(1)

 

(Aggregate intrinsic value in thousands)

 

 

 

 

 

 

 

 

 

 

 

Outstanding, January 1, 2018

 

3,360,461

 

$

11.89

 

6.4

 

 

 

 

Granted

 

343,566

 

 

44.37

 

 

 

 

 

 

Exercised

 

(420,129)

 

 

3.31

 

 

 

 

 

 

Forfeited

 

 —

 

 

 —

 

 

 

 

 

 

Outstanding, March 31, 2018

 

3,283,898

 

$

16.39

 

7.0

 

$

80,098

 

Exercisable, March 31, 2018

 

1,757,384

 

$

10.80

 

5.4

 

$

51,901

 

 


(1)

The aggregate intrinsic value of options outstanding, exercisable and vested and expected to vest is calculated as the difference between the exercise price of the underlying options and the market price of the Company’s common stock for options that had exercise prices that were lower than the $40.33 market price of the Company’s common stock at March 31, 2018.  The total intrinsic value of options exercised during the three months ended March 31, 2018 and 2017 was $19.1 million and $0.2 million, respectively.

 

As of March 31, 2018, there was $137.6 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under all Stock Plans.  Total unrecognized compensation cost will be adjusted for future forfeitures.  The Company expects to recognize that cost over a weighted average period of 3.2 years.

 

A summary of restricted stock and restricted stock unit activity under the Stock Plans during the three months ended March 31, 2018 is as follows:

 

 

 

 

 

 

 

 

    

 

    

Weighted

 

 

 

Restricted

 

Average Grant

 

 

 

Shares

 

Date Fair Value

 

Outstanding, January 1, 2018

 

6,148,778

 

$

15.76

 

Granted

 

1,079,223

 

 

45.16

 

Released

 

(880,022)

 

 

17.67

 

Forfeited

 

(33,307)

 

 

26.37

 

Outstanding, March 31, 2018

 

6,314,672

 

$

20.36

 

 

v3.8.0.1
FAIR VALUE MEASUREMENTS
3 Months Ended
Mar. 31, 2018
FAIR VALUE MEASUREMENTS  
FAIR VALUE MEASUREMENTS

(5) FAIR VALUE MEASUREMENTS

 

The Financial Accounting Standards Board has issued authoritative guidance which requires that fair value should 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 the 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 and mutual funds 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 change from period to period.  The estimated fair value of the Company’s long-term debt based on a market approach was approximately $4.4 million and $4.5 million as of March 31, 2018 and December 31, 2017, respectively, and represent Level 2 measurements.  When determining the estimated fair value of the Company’s long-term debt, the Company used market-based risk measurements, such as credit risk.

 

The following table presents the Company’s fair value measurements as of March 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 March 31, 2018 Using:

 

 

    

 

 

    

Quoted Prices

    

Significant

    

 

 

 

 

 

 

 

 

in Active

 

Other

 

Significant

 

 

 

 

 

 

Markets for

 

Observable

 

Unobservable

 

 

 

Fair Value at

 

Identical Assets

 

Inputs

 

Inputs

 

(In thousands)

 

March 31, 2018

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and money market

 

$

101,103

 

$

101,103

 

$

 —

 

$

 —

 

Certificates of deposit

 

 

25,198

 

 

 —

 

 

25,198

 

 

 —

 

Commercial paper

 

 

11,998

 

 

 —

 

 

11,998

 

 

 —

 

U.S. government agency securities

 

 

8,398

 

 

 —

 

 

8,398

 

 

 —

 

Corporate bonds

 

 

1,998

 

 

 —

 

 

1,998

 

 

 —

 

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

345,123

 

 

 —

 

 

345,123

 

 

 —

 

Asset backed securities

 

 

253,547

 

 

 —

 

 

253,547

 

 

 —

 

U.S. government agency securities

 

 

194,024

 

 

 —

 

 

194,024

 

 

 —

 

Commercial paper

 

 

51,994

 

 

 —

 

 

51,994

 

 

 —

 

Certificates of deposit

 

 

48,786

 

 

 —

 

 

48,786

 

 

 —

 

Total

 

$

1,042,169

 

$

101,103

 

$

941,066

 

$

 —

 

 

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 as of March 31, 2018 and December 31, 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 gross unrealized losses and fair values of our investments in an unrealized loss position as of March 31, 2018, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 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

 

$

328,935

 

$

(1,073)

 

$

 —

 

$

 —

 

$

328,935

 

$

(1,073)

 

Asset backed securities

 

 

252,105

 

 

(841)

 

 

1,442

 

 

(2)

 

 

253,547

 

 

(843)

 

U.S. government agency securities

 

 

169,071

 

 

(237)

 

 

24,953

 

 

(46)

 

 

194,024

 

 

(283)

 

Commercial paper

 

 

51,425

 

 

(21)

 

 

 —

 

 

 —

 

 

51,425

 

 

(21)

 

Certificates of deposit

 

 

41,551

 

 

(79)

 

 

 —

 

 

 —

 

 

41,551

 

 

(79)

 

Total

 

$

843,087

 

$

(2,251)

 

$

26,395

 

$

(48)

 

$

869,482

 

$

(2,299)

 

 

The following summarizes contractual underlying maturities of the Company’s available-for-sale investments in debt securities at March 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due one year or less

 

Due after one year through four years

(In thousands)

    

 

Cost

    

 

Fair Value

 

 

Cost

    

 

Fair Value

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

224,976

 

$

224,287

 

$

121,217

 

$

120,836

U.S. government agency securities

 

 

174,495

 

 

174,218

 

 

19,812

 

 

19,806

Commercial paper

 

 

52,015

 

 

51,994

 

 

 —

 

 

 —

Certificates of deposit

 

 

46,888

 

 

46,820

 

 

1,976

 

 

1,966

Asset backed securities

 

 

30,844

 

 

30,753

 

 

223,546

 

 

222,794

Total

 

$

529,218

 

$

528,072

 

$

366,551

 

$

365,402

 

v3.8.0.1
NEW MARKET TAX CREDIT
3 Months Ended
Mar. 31, 2018
NEW MARKET TAX CREDIT  
NEW MARKET TAX CREDIT

(6) NEW MARKET TAX CREDIT

As more fully described in the 2017 Form 10-K, during the fourth quarter of 2014, the Company received approximately $2.4 million in net proceeds from financing agreements related to working capital and capital improvements at one of its Madison, Wisconsin facilities.  This financing arrangement was structured with an unrelated third party financial institution, an investment fund, and its majority owned community development entity in connection with the Company’s participation in transactions qualified under the federal New Markets Tax Credit (“NMTC”) program, pursuant to Section 45D of the Internal Revenue Code of 1986, as amended. The $2.4 million was recorded in Other Long-Term Liabilities on the condensed consolidated balance sheets. The benefit of this net $2.4 million contribution will be recognized as a decrease in expenses, included in cost of sales, as the Company amortizes the contribution liability over the seven-year compliance period as it is being earned through the Company’s on-going compliance with the conditions of the NMTC program. The Company has recorded $0.1 million as a decrease of expenses for the three months ended March 31, 2018. At March 31, 2018, the remaining balance of $1.3 million is included in Other Long-Term Liabilities. The Company recorded $0.1 million as a decrease of expenses for the three months ended March 31, 2017. At March 31, 2017, the remaining balance of $1.6 million was included in Other Long-Term Liabilities. The Company incurred approximately $0.2 million of debt issuance costs related to the above transactions, which are recorded as a direct deduction from the liability. The debt issuance costs are being amortized over the life of the agreements.

v3.8.0.1
LONG-TERM DEBT
3 Months Ended
Mar. 31, 2018
LONG TERM DEBT  
LONG-TERM DEBT

(7) LONG-TERM DEBT

 

Building Purchase Mortgage

 

During June 2015, the Company entered into a $5.1 million credit agreement with an unrelated third-party financial institution to finance the purchase of a facility located in Madison, Wisconsin. The credit agreement is collateralized by the acquired building.

 

Borrowings under the credit agreement bear interest at 4.15%. The Company made interest-only payments on the outstanding principal balance for the period between July 12, 2015 and September 12, 2015. Beginning on October 12, 2015 and continuing through May 12, 2019, the Company is required to make monthly principal and interest payments of $31,000. The final principal and interest payment due on the maturity date of June 12, 2019 is $4.4 million.

 

Additionally, the Company has recorded $73,000 in mortgage issuance costs, which are recorded as a direct deduction from the mortgage liability. The issuance costs are being amortized through June 12, 2019. The Company has recorded $4,000 in amortization of mortgage issuance costs for each of the three months ended March 31, 2018 and 2017.

 

Revolving Loan Agreement

 

During December 2017, the Company entered into a revolving loan agreement with MB Financial Bank, N.A. (“MB Bank”). The revolving loan agreement provides the Company with a 24-month secured revolving credit facility of up to $15.0 million. The credit facility is collateralized by the Company’s accounts receivable and inventory. The credit facility is available for general working capital purposes and all other lawful corporate purposes; provided that the Company may not use the credit facility to purchase or carry margin stock.

   

Borrowings under the revolving loan agreement accrue interest at one of the following per annum rates, as elected by the Company (i) the sum of the 1-month LIBOR rate plus 2.00 percent, (ii) the sum of the 3-month LIBOR rate plus 2.00 percent, or (iii) the MB Bank Reference Rate minus 0.5 percent. Loans under the credit facility may be prepaid at any time without penalty. The maturity date of the loan under the revolving credit agreement is December 10, 2019.

   

The Company has agreed to various financial covenants including minimum liquidity and minimum tangible net worth.  At March 31, 2018, the Company is in compliance with all covenants.

   

As of March 31, 2018, the Company has not drawn any funds from the revolving credit agreement, and no amounts are outstanding under the loan agreement.

 

Construction Loan Agreement

 

During December 2017, the Company entered into a loan agreement with MB Bank, which provides the Company with a non-revolving construction loan of $25.6 million. The Company expects to use the loan proceeds to finance the construction of an additional clinical laboratory and related facilities in Madison, Wisconsin. The non-revolving construction loan is collateralized by the additional clinical laboratory and related facilities.

   

Pursuant to the construction loan agreement, funds drawn will bear interest at a rate equal to the sum of the 1-month LIBOR rate plus 2.25 percent. Regular monthly payments are interest-only for the first 24 months, with further payments based on a 20-year amortization schedule. Amounts borrowed pursuant to this loan agreement may be prepaid at any time without penalty. The maturity date of this loan agreement is December 10, 2022.

   

MB Bank, on behalf of the Company, previously issued an Irrevocable Standby Letter of Credit in the amount of $0.6 million in favor of the City of Madison, Wisconsin, which is deemed to have been issued pursuant to the construction loan agreement (the “City Letter of Credit”). The amount of the City Letter of Credit will reduce, dollar for dollar, the amount available for borrowing under the construction loan agreement.

 

As a condition to MB Bank’s initial advance of loan proceeds under the loan agreement, the Company is required to first invest at least $16.4 million of its own cash into the construction project. The Company expects to fulfill its required initial investment and draw on the $25.6 million during 2018, however, the Company is not able to estimate the future principal and interest payments, as they depend on the timing of the initial draw. As of March 31, 2018, the Company has invested $2.3 million into the construction project, and has not drawn any funds from the non-revolving construction loan.

   

Additionally, the Company has recorded deferred financing costs of $0.2 million. These deferred financing costs are recorded as a reduction to long-term debt in the condensed consolidated balance sheets.

   

The Company has agreed to various financial covenants including minimum liquidity and minimum tangible net worth. As of March 31, 2018, the Company is in compliance with all covenants.

 

v3.8.0.1
WISCONSIN ECONOMIC DEVELOPMENT TAX CREDITS
3 Months Ended
Mar. 31, 2018
WISCONSIN ECONOMIC DEVELOPMENT TAX CREDITS.  
WISCONSIN ECONOMIC DEVELOPMENT TAX CREDITS

(8) WISCONSIN ECONOMIC DEVELOPMENT TAX CREDITS

During the first quarter of 2015, the Company entered into an agreement with the Wisconsin Economic Development Corporation (“WEDC”) to earn $9.0 million in refundable tax credits if the Company expends $26.3 million in capital investments and establishes and maintains 758 full-time positions in the state of Wisconsin over a seven-year period.  The tax credits earned are first applied against the tax liability otherwise due, and if there is no such liability present, the claim for tax credits will be reimbursed in cash to the Company.  The maximum amount of the refundable tax credit to be earned for each year is fixed, and the Company earns the credits by meeting certain capital investment and job creation thresholds over the seven-year period. Should the Company earn and receive the job creation tax credits but not maintain those full-time positions through the end of the agreement, the Company may be required to pay those credits back to the WEDC. 

 

The Company records the earned tax credits as job creation and capital investments occur. The amount of tax credits earned is recorded as a liability and amortized as a reduction of operating expenses over the expected period of benefit. The tax credits earned from capital investment are recognized as an offset to depreciation expense over the expected life of the acquired capital assets. The tax credits earned related to job creation are recognized as an offset to operational expenses over the life of the agreement, as the Company is required to maintain the minimum level of full-time positions through the seven-year period.

 

As of March 31, 2018, the Company has earned $7.8 million of tax credits and has received payment of $2.4 million from the WEDC. The unpaid portion is $5.4 million, of which $1.9 million is reported in prepaid expenses and other current assets and $3.5 million is reported in other long-term assets, reflecting when collection of the refundable tax credits is expected to occur. As of March 31, 2018, the Company also has recorded a $1.9 million liability in other short-term liabilities and a $3.2 million liability in other long-term liabilities, reflecting when the expected benefit of the tax credit amortization will reduce future operating expenses.

 

During the three months ended March 31, 2018, the Company amortized $0.4 million of the tax credits earned as a reduction of operating expenses. During the three months ended March 31, 2017, the Company amortized $0.3 million of the tax credits earned as a reduction of operating expenses.

 

v3.8.0.1
CONVERTIBLE NOTES
3 Months Ended
Mar. 31, 2018
CONVERTIBLE NOTES.  
CONVERTIBLE NOTES

(9) CONVERTIBLE NOTES

On January 17, 2018, the Company issued and sold $690.0 million in aggregate principal amount of 1.0% Convertible Notes (“Notes”) with a maturity date of January 15, 2025 (the “Maturity Date”). The Notes accrue interest at a fixed rate of 1.0% per year, payable semi-annually in arrears on January 15 and July 15 of each year, beginning on July 15, 2018. The net proceeds from the issuance of the Notes were approximately $671.1 million, after deducting underwriting discounts and commissions and the offering expenses payable by the Company.

 

Prior to July 15, 2024, the Notes are convertible only upon the occurrence of certain events and during certain periods, as set forth in the indenture governing the Notes (the “Indenture”), and thereafter, until the close of business on the second scheduled trading day immediately preceding the Maturity Date. The Notes will be convertible into cash, shares of the Company’s common stock (plus, if applicable, cash in lieu of any fractional share), or a combination of cash and shares of the Company’s common stock, at the Company’s election. On or after July 15, 2024, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time.

 

It is the Company’s intent and policy to settle all conversions through combination settlement. The initial conversion rate for the Notes is 13.2569 shares of common stock per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $75.43 per share of the Company’s common stock. The conversion rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest. In addition, holders of the Notes who convert their Notes in connection with a “make-whole fundamental change” (as defined in the Indenture), will, under certain circumstances, be entitled to an increase in the conversion rate.

 

If the Company undergoes a “fundamental change” (as defined in the Indenture), holders of the Notes may require the Company to repurchase for cash all or part of their Notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest.

 

The Notes are the Company’s senior unsecured obligations and (i) rank senior in right of payment to all of its future indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to all of the Company’s future liabilities that are not so subordinated, unsecured indebtedness; (ii) are effectively junior to all of our existing and future secured indebtedness and other secured obligations, to the extent of the value of the assets securing that indebtedness and other secured obligations; and (iii) are structurally subordinated to all indebtedness and other liabilities of the Company’s subsidiaries.

 

While the Notes are currently classified on the Company’s condensed consolidated balance sheets at March 31, 2018 as long-term, the future convertibility and resulting balance sheet classification of this liability will be monitored at each quarterly reporting date and will be analyzed dependent upon market prices of the Company’s common stock during the prescribed measurement periods. In the event that the holders of the Notes have the election to convert the Notes at any time during the prescribed measurement period, the Notes would then be considered a current obligation and classified as such.

 

Under current accounting guidance, an entity must separately account for the liability and equity components of convertible debt instruments (such as the Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The liability component of the instrument was valued in a manner that reflects the market interest rate for a similar nonconvertible instrument at the date of issuance. The initial carrying value of the liability component of $495.1 million was calculated using a 6.0% assumed borrowing rate. The equity component of $194.9 million, representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the Notes and is recorded in additional paid-in capital on the condensed consolidated balance sheet at the issuance date. That equity component is treated as a discount on the liability component of the Notes, which is amortized over the seven-year term of the Notes using the effective interest rate method. The equity component is not re-measured as long as it continues to meet the conditions for equity classification.

 

The Company allocated the total transaction costs of approximately $18.8 million related to the issuance of the Notes to the liability and equity components of the Notes based on their relative values, with $13.1 million being allocated to the discount on the Notes. Transaction costs attributable to the liability component are amortized to interest expense over the seven-year term of the Notes, and transaction costs attributable to the equity component are netted with the equity component in stockholders’ equity.

 

The Notes do not contain any financial or operating covenants or any restrictions on the payment of dividends, the issuance of other indebtedness or the issuance or repurchase of securities by the Company.

 

Debt, net of discounts and deferred financing costs at March 31, 2018, consisted of the following:

 

 

 

 

 

 

(In thousands)

    

 

    

 

Principal

 

$

690,000

 

Debt discount, net

 

 

(190,206)

 

Deferred financing costs

 

 

(13,106)

 

Net carrying amount

 

$

486,688

 

 

v3.8.0.1
RELATED PARTY TRANSACTIONS
3 Months Ended
Mar. 31, 2018
RELATED PARTY TRANSACTION  
RELATED PARTY TRANSACTION

(10) RELATED PARTY TRANSACTION

In May 2017, the Company entered into a professional services agreement for recruiting and related services with a firm whose principal is a non-employee director. In accordance with the agreement, the Company is expected to make cash payments totaling up to an aggregate of $0.4 million under the agreement during 2017 and 2018. The Company incurred charges of $50,000 for the three months ended March 31, 2018. The Company made payments of $50,000 for the three months ended March 31, 2018 and no payments were made for the three months ended March 31, 2017.

 

In November 2017, the Company made a 10 percent investment in a supplier, as further described in Note 2. The Company incurred $58,000 and $0 in purchases from the supplier for the three months ended March 31, 2018 and 2017, respectively.

 

v3.8.0.1
RECENT ACCOUNTING PRONOUNCEMENTS
3 Months Ended
Mar. 31, 2018
RECENT ACCOUNTING PRONOUNCEMENTS.  
RECENT ACCOUNTING PRONOUNCEMENTS

(11) RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The Company adopted this guidance on January 1, 2018. See Note 2 for additional discussion.

 

In January 2016, the Financial Accounting Standards Board issued ASU No. 2016-01, “Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“Update 2016-01”).  Update 2016-01 modifies how entities measure equity investments and present changes in the fair value of financial liabilities. Under the new guidance, entities will have to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. A practicality exception will apply to those equity investments that do not have readily determinable fair value and do not qualify for the practical expedient to estimate fair value under ASC 820, “Fair Value Measurements,” and as such these investments may be measured at cost. Update 2016-01 will be effective for the Company’s fiscal year beginning January 1, 2018, and subsequent interim periods. Update 2016-01 was further amended in February 2018 by ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, (“Update 2018-03”). Update 2018-03 clarifies certain aspects of the guidance issued in Update 2016-01. Public business entities with fiscal years beginning between December 15, 2017 and June 15, 2018, are not required to adopt these amendments until the interim period beginning after June 15, 2018. Early adoption is allowed as long as Update 2016-01 has been adopted. The Company adopted Update 2016-01 on January 1, 2018.  The Company is currently evaluating the effects that the adoption of Update 2018-03 will have on the Company’s condensed consolidated financial statements. The Company does not anticipate that the new guidance will impact the Company’s condensed consolidated financial statements as the Company has already adopted Update 2016-01.

 

In February 2016, the Financial Accounting Standards Board issued ASU No. 2016-02, Leases (Topic 842), (“Update 2016-02”) which requires recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP.   The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company expects to adopt the guidance in 2019. The Company is currently evaluating the effects that the adoption of Update 2016-02 will have on the Company’s condensed consolidated financial statements; however, as the Company has several leases, assets and liabilities are expected to increase upon adoption for right-of-use assets and lease liabilities.

 

In August 2016, the Financial Accounting Standards Board issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, (“Update 2016-15”). Current GAAP either is unclear or does not include specific guidance on the eight cash flow classification issues included in the amendments in Update 2016-15. The amendments are an improvement to GAAP because they provide guidance for each of the eight issues, thereby reducing the current and potential future diversity in practice.  The Company adopted this guidance January 1, 2018, and it did not have an impact on the Company’s condensed consolidated financial statements.

 

In October 2016, the Financial Accounting Standards Board issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, (“Update 2016-16”). This amendment improves the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. The Company adopted this guidance on January 1, 2018, and it did not have an impact on the Company’s condensed consolidated financial statements.

 

In November 2016, the Financial Accounting Standards Board issued ASU No. 2016-18, Statement of Cash Flows; Restricted Cash, (“Update 2016-18”). Update 2016-18 provides guidance on the classification of restricted cash in the statement of cash flows. The Company adopted this guidance on January 1, 2018, and it did not have an impact on the Company’s condensed consolidated financial statements, as the Company does not have restricted cash.

 

In May 2017, the Financial Accounting Standards Board issued ASU No. 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting, (“Update 2017-09”). Update 2017-09 provides guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. The Company adopted this guidance on January 1, 2018, and it did not have an impact on the Company’s condensed consolidated financial statements.

v3.8.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
3 Months Ended
Mar. 31, 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
Principles of Consolidation

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries, Exact Sciences Laboratories, LLC, Exact Sciences Finance Corporation, CG Growth, LLC, Exact Sciences Development Company, LLC, Sampleminded, LLC, Exact Sciences Europe LTD, Beijing Exact Sciences Medical Technology Company Limited, and variable interest entities. 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

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers cash on hand, demand deposits in bank, money market funds, and all highly liquid investments with an original maturity of 90 days or less to be cash and cash equivalents.

 

Marketable Securities

 

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 loss. 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 March 31, 2018 and December 31, 2017, the Company’s investments 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. There were no realized losses for the three months ended March 31, 2018 and 2017. Realized gains were $30,000 and $4,000 for the three months ended March 31, 2018 and 2017, respectively.

 

We periodically review our 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, our intent not to sell the security, and whether it is more likely than not that we will have to sell the security before recovery of its cost basis. For the three months ended March 31, 2018, no investments were identified with other-than-temporary declines in value.

 

Available-for-sale securities at March 31, 2018 consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 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

 

$

346,193

 

 

 3

 

 

(1,073)

 

$

345,123

 

Asset backed securities

 

 

254,390

 

 

 —

 

 

(843)

 

 

253,547

 

U.S. government agency securities

 

 

194,307

 

 

 —

 

 

(283)

 

 

194,024

 

Commercial paper

 

 

52,015

 

 

 —

 

 

(21)

 

 

51,994

 

Certificates of deposit

 

 

48,864

 

 

 1

 

 

(79)

 

 

48,786

 

Total available-for-sale securities

 

$

895,769

 

$

 4

 

$

(2,299)

 

$

893,474

 

 

Available-for-sale securities at December 31, 2017 consisted 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)

Changes in Accumulated Other Comprehensive Income (Loss)

The amounts recognized in accumulated other comprehensive income (loss) (“AOCI”) for the three months ended March 31, 2018 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Cumulative

 

Unrealized

 

Other

 

 

 

Translation

 

Gain (Loss)

 

Comprehensive

 

(In thousands)

    

Adjustment

    

on Securities

    

Income (Loss)

 

Balance at December 31, 2017

 

$

(61)

 

$

(689)

 

$

(750)

 

Other comprehensive loss before reclassifications

 

 

20

 

 

(1,630)

 

 

(1,610)

 

Amounts reclassified from accumulated other comprehensive loss

 

 

 —

 

 

24

 

 

24

 

Net current period change in accumulated other comprehensive loss

 

 

20

 

 

(1,606)

 

 

(1,586)

 

Balance at March 31, 2018

 

$

(41)

 

$

(2,295)

 

$

(2,336)

 

 

The amounts recognized in AOCI for the three months ended March 31, 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Cumulative

 

Unrealized

 

Other

 

 

 

Translation

 

Gain (Loss)

 

Comprehensive

 

(In thousands)

    

Adjustment

    

on Securities

    

Income (Loss)

 

Balance at December 31, 2016

 

$

(204)

 

$

(214)

 

$

(418)

 

Other comprehensive loss before reclassifications

 

 

(8)

 

 

(3)

 

 

(11)

 

Amounts reclassified from accumulated other comprehensive loss

 

 

 —

 

 

(2)

 

 

(2)

 

Net current period change in accumulated other comprehensive loss

 

 

(8)

 

 

(5)

 

 

(13)

 

Balance at March 31, 2017

 

$

(212)

 

$

(219)

 

$

(431)

 

 

Amounts reclassified from AOCI for the three months ended March 31, 2018 and 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Affected Line Item in the

 

Three Months Ended March 31,

 

Details about AOCI Components (In thousands)

 

Statement of Operations

 

2018

 

2017

 

Change in value of available-for-sale investments

 

 

 

 

 

 

 

 

 

Sales and maturities of available-for-sale investments

 

Investment income

 

$

24

 

$

(2)

 

Total reclassifications

 

 

 

$

24

 

$

(2)

 

 

Property and Equipment

Property and Equipment

 

Property and equipment are stated at cost and depreciated using the straight-line method over the assets’ estimated useful lives. Maintenance and repairs are expensed when incurred; additions and improvements are capitalized. Property and equipment consisted of the following as of March 31, 2018 and December 31, 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

March 31,

 

December 31,

 

(In thousands)

 

Useful Life

 

2018

 

2017

    

Property, plant and equipment

 

 

 

 

 

 

 

 

 

 

Land

 

 

(1)

 

$

4,466

 

$

4,466

 

Leasehold and building improvements

 

 

(2)

 

 

17,452

 

 

17,629

 

Land improvements

 

 

15 years

 

 

1,419

 

 

1,419

 

Buildings

 

 

30 years

 

 

7,928

 

 

7,928

 

Computer equipment and computer software

 

 

3 years

 

 

32,716

 

 

30,148

 

Laboratory equipment

 

 

3 - 5 years

 

 

26,234

 

 

23,296

 

Furniture and fixtures

 

 

3 years

 

 

4,554

 

 

4,531

 

Assets under construction

 

 

(3)

 

 

50,922

 

 

28,655

 

Property, plant and equipment, at cost

 

 

 

 

 

145,691

 

 

118,072

 

Accumulated depreciation

 

 

 

 

 

(42,243)

 

 

(38,086)

 

Property, plant and equipment, net

 

 

 

 

$

103,448

 

$

79,986

 


(1)

Not depreciated.

(2)

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

(3)

Not depreciated until placed into service.

 

At March 31, 2018, the Company had $50.9 million of assets under construction which consisted of $16.3 million related to laboratory equipment, $32.9 million related to leasehold and building improvements, and $1.7 million related to computer equipment and computer software projects. Depreciation will begin on these assets once they are placed into service. The Company expects to incur an additional $16.0 million to complete the laboratory equipment, $239.2 million to complete the building projects, and $1.6 million to complete the computer equipment and computer software projects. These projects are expected to be completed in 2018 and 2019. 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 periods ended March 31, 2018 and December 31, 2017.

Software Capitalization Policy

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

Patent Costs, Intangible Assets and Goodwill

 

Intangible Assets

 

Intangible assets consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

(In thousands)

    

2018

    

2017

 

Intangible assets:

 

 

 

 

 

 

 

Finite-lived intangible assets

 

$

23,660

 

$

23,660

 

Less: Accumulated amortization

 

 

(2,102)

 

 

(1,500)

 

Net carrying value

 

$

21,558

 

$

22,160

 

 

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 March 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

Net Balance at

 

Average

 

 

 

March 31,

 

Remaining

 

(In thousands)

    

2018

    

Life (Years)

 

Licensed intellectual property and patents

 

$

20,675

 

 

10.2

 

Developed technology

 

 

883

 

 

7.3

 

Total

 

$

21,558

 

 

 

 

 

The table below represents estimated future amortization expense associated with the Company’s finite-lived intangible assets as of March 31, 2018:

 

 

 

 

 

 

(In thousands)

    

 

    

 

2018

 

$

1,805

 

2019

 

 

2,407

 

2020

 

 

2,407

 

2021

 

 

2,373

 

2022

 

 

2,370

 

Thereafter

 

 

10,196

 

 

 

$

21,558

 

 

The Company reviews long-lived assets and certain 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 three months ended March 31, 2018 and 2017.

 

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 to be 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 three months ended March 31, 2018 and 2017 should be expensed and not capitalized as the future economic benefit to be derived from the transactions cannot be determined.

 

Direct and indirect manufacturing costs incurred during the process validation and for other research and development activities, which are not permitted to be sold, have been expensed to research and development.

 

Under a technology license and royalty agreement entered into with MDxHealth (“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 other long-term 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 MDx License Agreement was made as part of the Royalty Buy-Out agreement outlined below.

 

Effective April 25, 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 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 MDx License Agreement.

 

As of March 31, 2018, and December 31, 2017, an intangible asset of $8.7 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 in the Company’s condensed consolidated balance sheets.  Amortization expense was $0.3 million and $50,000 for the three months ended March 31, 2018 and March 31, 2017, respectively. 

 

On December 15, 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 ability to meet these events 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 in line 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 three months ended March 31, 2018, the Company recorded amortization expense of $40,000. At March 31, 2018 and December 31, 2017, the net balance of $12.0 million and $12.2 million, respectively, is reported in net intangible assets in the Company’s condensed consolidated balance sheets.

   

As a result of the Sampleminded acquisition, the Company recorded an intangible asset of $1.0 million, which was comprised of developed technology acquired 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 developed technology acquired, three years for customer relationships, and five years for non-compete agreements. For the three months ended March 31, 2018, the Company recorded amortization expense of $36,000. At March 31, 2018 and December 31, 2017 the net balance of $0.9 million and $0.9 million, respectively, is reported in intangible assets in the Company’s condensed consolidated balance sheet. 

 

Goodwill 

During the third quarter of 2017, the Company recognized goodwill of $2.0 million from the acquisition of Sampleminded, Inc., which was completed during the period. Goodwill is recorded as part of other long-term assets on the condensed consolidated balance sheets. The Company will evaluate goodwill impairment on an annual basis, or more frequently should an event or change in circumstance occur that indicate the carrying amount is in excess of the fair value. There were no impairment losses for the three months ended March 31, 2018.

Investment in privately-held company

Investment in Privately-Held Company 

On November 30, 2017, the Company made a 10 percent investment in a supplier. The investment does not constitute a variable interest entity, as the Company does not have control over the supplier’s business.  Additionally, as the ownership percentage is below 20 percent, the equity method is not being used to account for the investment. The supplier is privately-held, and there are no quoted prices or observable pricing inputs available. Therefore, the Company has accounted for this investment at cost, less any impairments, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment. The investment will be evaluated annually for impairment and adjusted to fair value whenever there is an observable price change in the identical or alike investment. There was no impairment recorded during the three months ended March 31, 2018. The total cash paid related to the investment was $3.0 million, which agrees to the carrying value as of March 31, 2018 and is included in the other long-term assets on the Company’s condensed consolidated balance sheets. There were no adjustments to the carrying value, upward or downward, for the three months ended March 31, 2018.

Net Loss Per Share

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 are the same because all outstanding common stock equivalents have been excluded, as they are anti-dilutive due to 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:

 

 

 

 

 

 

 

 

 

 

March 31,

 

(In thousands)

    

2018

    

2017

    

Shares issuable upon exercise of stock options

 

3,284

 

3,613

 

Shares issuable upon the release of restricted stock awards

 

6,315

 

5,553

 

Shares issuable upon conversion of convertible notes

 

9,148

 

 —

 

 

 

18,747

 

9,166

 

 

Revenue Recognition

Revenue Recognition

 

The Company’s laboratory service revenues are generated by performing diagnostic 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 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 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 diagnostic 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, regardless of 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.  Our 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, does not disclose the value of unsatisfied performance obligations.

 

Transaction price

 

The transaction price is the amount of consideration to which 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 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 $8.5 million for the three months ended March 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 on 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 to the single performance obligation contained in a 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 three months ended March 31, 2018 and 2017:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

(In thousands)

    

2018

    

2017

 

Medicare Parts B & C

 

$

52,475

 

$

31,812

 

Commercial

 

 

34,834

 

 

15,136

 

Other

 

 

2,987

 

 

1,415

 

Total

 

$

90,296

 

$

48,363

 

 

Contract Balances

 

The timing of revenue recognition, billings and cash collections results in billed accounts receivable and deferred revenue on the condensed consolidated balance sheets.  Generally, billing occurs subsequent to 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 included in other short-term liabilities on our condensed consolidated balance sheets and was $0.2 million and $0.2 million as of March 31, 2018 and December 31, 2017, respectively.

 

Revenue recognized for the three-months ended March 31, 2018 and 2017, that was included in the deferred revenue balance at the beginning of each period was $56,000 and $0, 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.  

 

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.

Inventory

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 net realizable value, and records a charge to cost of sales for such inventory, as appropriate. In addition, the materials used in performing Cologuard tests 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 net 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. 

 

Inventory consists of the following:

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

(In thousands)

    

2018

    

2017

 

Raw materials

 

$

10,935

 

$

10,344

 

Semi-finished and finished goods

 

 

21,445

 

 

15,683

 

Total inventory

 

$

32,380

 

$

26,027

 

 

Foreign Currency Translation

Foreign Currency Translation

 

For the Company’s international subsidiaries, the local currency is the functional currency. Assets and liabilities of these subsidiaries are translated into United States dollars at the period-end exchange rate or historical rates, as appropriate. Condensed consolidated statements of operations are translated at average exchange rates for the period. The cumulative translation adjustments resulting from changes in exchange rates are included in the condensed consolidated balance sheet as a component of accumulated other comprehensive loss in total Exact Sciences Corporation’s stockholders’ equity. Transaction gains and losses are included in the condensed consolidated statement of operations.

Reclassifications

Reclassifications

 

Certain prior period amounts have been reclassified to conform to the current period presentation in the condensed consolidated financial statements and accompanying notes to the condensed consolidated financial statements.

v3.8.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
3 Months Ended
Mar. 31, 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
Schedule of available-for-sale securities

Available-for-sale securities at March 31, 2018 consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 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

 

$

346,193

 

 

 3

 

 

(1,073)

 

$

345,123

 

Asset backed securities

 

 

254,390

 

 

 —

 

 

(843)

 

 

253,547

 

U.S. government agency securities

 

 

194,307

 

 

 —

 

 

(283)

 

 

194,024

 

Commercial paper

 

 

52,015

 

 

 —

 

 

(21)

 

 

51,994

 

Certificates of deposit

 

 

48,864

 

 

 1

 

 

(79)

 

 

48,786

 

Total available-for-sale securities

 

$

895,769

 

$

 4

 

$

(2,299)

 

$

893,474

 

 

Available-for-sale securities at December 31, 2017 consisted 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

 

 

Schedule of amounts recognized in accumulated other comprehensive income (loss) (AOCI)

The amounts recognized in accumulated other comprehensive income (loss) (“AOCI”) for the three months ended March 31, 2018 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Cumulative

 

Unrealized

 

Other

 

 

 

Translation

 

Gain (Loss)

 

Comprehensive

 

(In thousands)

    

Adjustment

    

on Securities

    

Income (Loss)

 

Balance at December 31, 2017

 

$

(61)

 

$

(689)

 

$

(750)

 

Other comprehensive loss before reclassifications

 

 

20

 

 

(1,630)

 

 

(1,610)

 

Amounts reclassified from accumulated other comprehensive loss

 

 

 —

 

 

24

 

 

24

 

Net current period change in accumulated other comprehensive loss

 

 

20

 

 

(1,606)

 

 

(1,586)

 

Balance at March 31, 2018

 

$

(41)

 

$

(2,295)

 

$

(2,336)

 

 

The amounts recognized in AOCI for the three months ended March 31, 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Cumulative

 

Unrealized

 

Other

 

 

 

Translation

 

Gain (Loss)

 

Comprehensive

 

(In thousands)

    

Adjustment

    

on Securities

    

Income (Loss)

 

Balance at December 31, 2016

 

$

(204)

 

$

(214)

 

$

(418)

 

Other comprehensive loss before reclassifications

 

 

(8)

 

 

(3)

 

 

(11)

 

Amounts reclassified from accumulated other comprehensive loss

 

 

 —

 

 

(2)

 

 

(2)

 

Net current period change in accumulated other comprehensive loss

 

 

(8)

 

 

(5)

 

 

(13)

 

Balance at March 31, 2017

 

$

(212)

 

$

(219)

 

$

(431)

 

 

Schedule of amounts reclassified from accumulated other comprehensive income (loss)

Amounts reclassified from AOCI for the three months ended March 31, 2018 and 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Affected Line Item in the

 

Three Months Ended March 31,

 

Details about AOCI Components (In thousands)

 

Statement of Operations

 

2018

 

2017

 

Change in value of available-for-sale investments

 

 

 

 

 

 

 

 

 

Sales and maturities of available-for-sale investments

 

Investment income

 

$

24

 

$

(2)

 

Total reclassifications

 

 

 

$

24

 

$

(2)

 

 

Schedule of Property, plant and equipment, net

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

March 31,

 

December 31,

 

(In thousands)

 

Useful Life

 

2018

 

2017

    

Property, plant and equipment

 

 

 

 

 

 

 

 

 

 

Land

 

 

(1)

 

$

4,466

 

$

4,466

 

Leasehold and building improvements

 

 

(2)

 

 

17,452

 

 

17,629

 

Land improvements

 

 

15 years

 

 

1,419

 

 

1,419

 

Buildings

 

 

30 years

 

 

7,928

 

 

7,928

 

Computer equipment and computer software

 

 

3 years

 

 

32,716

 

 

30,148

 

Laboratory equipment

 

 

3 - 5 years

 

 

26,234

 

 

23,296

 

Furniture and fixtures

 

 

3 years

 

 

4,554

 

 

4,531

 

Assets under construction

 

 

(3)

 

 

50,922

 

 

28,655

 

Property, plant and equipment, at cost

 

 

 

 

 

145,691

 

 

118,072

 

Accumulated depreciation

 

 

 

 

 

(42,243)

 

 

(38,086)

 

Property, plant and equipment, net

 

 

 

 

$

103,448

 

$

79,986

 


(1)

Not depreciated.

(2)

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

(3)

Not depreciated until placed into service.

Schedule of intangible assets

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

(In thousands)

    

2018

    

2017

 

Intangible assets:

 

 

 

 

 

 

 

Finite-lived intangible assets

 

$

23,660

 

$

23,660

 

Less: Accumulated amortization

 

 

(2,102)

 

 

(1,500)

 

Net carrying value

 

$

21,558

 

$

22,160

 

 

Schedule of net-book value and estimated remaining life and finite lived intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

Net Balance at

 

Average

 

 

 

March 31,

 

Remaining

 

(In thousands)

    

2018

    

Life (Years)

 

Licensed intellectual property and patents

 

$

20,675

 

 

10.2

 

Developed technology

 

 

883

 

 

7.3

 

Total

 

$

21,558

 

 

 

 

 

Schedule of estimated future amortization expense, intangible assets

The table below represents estimated future amortization expense associated with the Company’s finite-lived intangible assets as of March 31, 2018:

 

 

 

 

 

 

(In thousands)

    

 

    

 

2018

 

$

1,805

 

2019

 

 

2,407

 

2020

 

 

2,407

 

2021

 

 

2,373

 

2022

 

 

2,370

 

Thereafter

 

 

10,196

 

 

 

$

21,558

 

 

Schedule of potentially issuable common shares not included in the computation of diluted net loss per share because they would have an anti-dilutive effect

 

 

 

 

 

 

 

 

March 31,

 

(In thousands)

    

2018

    

2017

    

Shares issuable upon exercise of stock options

 

3,284

 

3,613

 

Shares issuable upon the release of restricted stock awards

 

6,315

 

5,553

 

Shares issuable upon conversion of convertible notes

 

9,148

 

 —

 

 

 

18,747

 

9,166

 

 

Schedule of disaggregation or revenue source

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

(In thousands)

    

2018

    

2017

 

Medicare Parts B & C

 

$

52,475

 

$

31,812

 

Commercial

 

 

34,834

 

 

15,136

 

Other

 

 

2,987

 

 

1,415

 

Total

 

$

90,296

 

$

48,363

 

 

Schedule of inventory

Inventory consists of the following:

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

(In thousands)

    

2018

    

2017

 

Raw materials

 

$

10,935

 

$

10,344

 

Semi-finished and finished goods

 

 

21,445

 

 

15,683

 

Total inventory

 

$

32,380

 

$

26,027

 

 

v3.8.0.1
STOCK-BASED COMPENSATION (Tables)
3 Months Ended
Mar. 31, 2018
STOCK-BASED COMPENSATION  
Schedule of valuation assumptions

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

 

    

2018

    

2017

    

    

Option Plan Shares

 

 

 

 

 

 

Risk-free interest rates

 

 2.79%

 

2.13%

 

 

Expected term (in years)

 

6.44

 

6.59

 

 

Expected volatility

 

61.8%

 

62.9%

 

 

Dividend yield

 

0%

 

0%

 

 

Weighted average fair value per share of options granted during the period

 

$26.84

 

$13.20

 

 

 

 

 

Summary of stock option activity under the Stock Plans

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

    

Weighted

    

 

 

 

 

 

 

 

Weighted

 

Average

 

 

 

 

 

 

 

 

Average

 

Remaining

 

Aggregate

 

 

 

 

 

Exercise

 

Contractual

 

Intrinsic

 

Options

 

Shares

 

Price

 

Term (Years)

 

Value(1)

 

(Aggregate intrinsic value in thousands)

 

 

 

 

 

 

 

 

 

 

 

Outstanding, January 1, 2018

 

3,360,461

 

$

11.89

 

6.4

 

 

 

 

Granted

 

343,566

 

 

44.37

 

 

 

 

 

 

Exercised

 

(420,129)

 

 

3.31

 

 

 

 

 

 

Forfeited

 

 —

 

 

 —

 

 

 

 

 

 

Outstanding, March 31, 2018

 

3,283,898

 

$

16.39

 

7.0

 

$

80,098

 

Exercisable, March 31, 2018

 

1,757,384

 

$

10.80

 

5.4

 

$

51,901

 

 


(1)

The aggregate intrinsic value of options outstanding, exercisable and vested and expected to vest is calculated as the difference between the exercise price of the underlying options and the market price of the Company’s common stock for options that had exercise prices that were lower than the $40.33 market price of the Company’s common stock at March 31, 2018.  The total intrinsic value of options exercised during the three months ended March 31, 2018 and 2017 was $19.1 million and $0.2 million, respectively.

 

Summary of restricted stock and restricted stock unit activity under the Stock Plans

 

 

 

 

 

 

 

 

    

 

    

Weighted

 

 

 

Restricted

 

Average Grant

 

 

 

Shares

 

Date Fair Value

 

Outstanding, January 1, 2018

 

6,148,778

 

$

15.76

 

Granted

 

1,079,223

 

 

45.16

 

Released

 

(880,022)

 

 

17.67

 

Forfeited

 

(33,307)

 

 

26.37

 

Outstanding, March 31, 2018

 

6,314,672

 

$

20.36

 

 

v3.8.0.1
FAIR VALUE MEASUREMENTS (Tables)
3 Months Ended
Mar. 31, 2018
FAIR VALUE MEASUREMENTS  
Schedule of fair value measurements along with the level within the fair value hierarchy in which the fair value measurements fall

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement at March 31, 2018 Using:

 

 

    

 

 

    

Quoted Prices

    

Significant

    

 

 

 

 

 

 

 

 

in Active

 

Other

 

Significant

 

 

 

 

 

 

Markets for

 

Observable

 

Unobservable

 

 

 

Fair Value at

 

Identical Assets

 

Inputs

 

Inputs

 

(In thousands)

 

March 31, 2018

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and money market

 

$

101,103

 

$

101,103

 

$

 —

 

$

 —

 

Certificates of deposit

 

 

25,198

 

 

 —

 

 

25,198

 

 

 —

 

Commercial paper

 

 

11,998

 

 

 —

 

 

11,998

 

 

 —

 

U.S. government agency securities

 

 

8,398

 

 

 —

 

 

8,398

 

 

 —

 

Corporate bonds

 

 

1,998

 

 

 —

 

 

1,998

 

 

 —

 

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

345,123

 

 

 —

 

 

345,123

 

 

 —

 

Asset backed securities

 

 

253,547

 

 

 —

 

 

253,547

 

 

 —

 

U.S. government agency securities

 

 

194,024

 

 

 —

 

 

194,024

 

 

 —

 

Commercial paper

 

 

51,994

 

 

 —

 

 

51,994

 

 

 —

 

Certificates of deposit

 

 

48,786

 

 

 —

 

 

48,786

 

 

 —

 

Total

 

$

1,042,169

 

$

101,103

 

$

941,066

 

$

 —

 

 

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

 

$

 —

 

 

Schedule of gross unrealized losses and fair values of investments in an unrealized loss position

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 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

 

$

328,935

 

$

(1,073)

 

$

 —

 

$

 —

 

$

328,935

 

$

(1,073)

 

Asset backed securities

 

 

252,105

 

 

(841)

 

 

1,442

 

 

(2)

 

 

253,547

 

 

(843)

 

U.S. government agency securities

 

 

169,071

 

 

(237)

 

 

24,953

 

 

(46)

 

 

194,024

 

 

(283)

 

Commercial paper

 

 

51,425

 

 

(21)

 

 

 —

 

 

 —

 

 

51,425

 

 

(21)

 

Certificates of deposit

 

 

41,551

 

 

(79)

 

 

 —

 

 

 —

 

 

41,551

 

 

(79)

 

Total

 

$

843,087

 

$

(2,251)

 

$

26,395

 

$

(48)

 

$

869,482

 

$

(2,299)

 

 

Schedule of contractual maturities of available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due one year or less

 

Due after one year through four years

(In thousands)

    

 

Cost

    

 

Fair Value

 

 

Cost

    

 

Fair Value

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

224,976

 

$

224,287

 

$

121,217

 

$

120,836

U.S. government agency securities

 

 

174,495

 

 

174,218

 

 

19,812

 

 

19,806

Commercial paper

 

 

52,015

 

 

51,994

 

 

 —

 

 

 —

Certificates of deposit

 

 

46,888

 

 

46,820

 

 

1,976

 

 

1,966

Asset backed securities

 

 

30,844

 

 

30,753

 

 

223,546

 

 

222,794

Total

 

$

529,218

 

$

528,072

 

$

366,551

 

$

365,402

 

v3.8.0.1
CONVERTIBLE NOTES (Tables)
3 Months Ended
Mar. 31, 2018
CONVERTIBLE NOTES.  
Schedule of debt, net of discounts and deferred financing costs

 

 

 

 

 

(In thousands)

    

 

    

 

Principal

 

$

690,000

 

Debt discount, net

 

 

(190,206)

 

Deferred financing costs

 

 

(13,106)

 

Net carrying amount

 

$

486,688

 

 

v3.8.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Marketable Securities (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2018
USD ($)
item
Mar. 31, 2017
USD ($)
Dec. 31, 2017
USD ($)
Available-for-sale securities      
Number of objectives of the entity's investment strategy | item 2    
Realized gains $ 30 $ 4  
Other than temporary declines in value $ 0    
Minimum contractual term of certain current investments which can be liquidated 1 year    
Amortized Cost $ 895,769   $ 347,913
Gains in Accumulated Other Comprehensive Income (Loss) 4   11
Losses in Accumulated Other Comprehensive Income (Loss) (2,299)   (700)
Estimated Fair Value 893,474   347,224
Realized losses 0 $ 0  
Corporate bonds      
Available-for-sale securities      
Amortized Cost 346,193   181,639
Gains in Accumulated Other Comprehensive Income (Loss) 3   10
Losses in Accumulated Other Comprehensive Income (Loss) (1,073)   (344)
Estimated Fair Value 345,123   181,305
Asset backed securities      
Available-for-sale securities      
Amortized Cost 254,390   94,700
Losses in Accumulated Other Comprehensive Income (Loss) (843)   (185)
Estimated Fair Value 253,547   94,515
U.S. government agency securities      
Available-for-sale securities      
Amortized Cost 194,307   54,974
Losses in Accumulated Other Comprehensive Income (Loss) (283)   (162)
Estimated Fair Value 194,024   54,812
Commercial paper      
Available-for-sale securities      
Amortized Cost 52,015   9,953
Losses in Accumulated Other Comprehensive Income (Loss) (21)   (7)
Estimated Fair Value 51,994   9,946
Certificates of deposit      
Available-for-sale securities      
Amortized Cost 48,864   6,647
Gains in Accumulated Other Comprehensive Income (Loss) 1   1
Losses in Accumulated Other Comprehensive Income (Loss) (79)   (2)
Estimated Fair Value $ 48,786   $ 6,646
v3.8.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Changes in AOCI (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Changes in Accumulated Other Comprehensive Income (Loss)    
Beginning Balance $ (750) $ (418)
Other comprehensive loss before reclassifications (1,610) (11)
Amounts reclassified from accumulated other comprehensive loss 24 (2)
Net current period change in accumulated other comprehensive loss (1,586) (13)
Ending Balance (2,336) (431)
Cumulative Translation Adjustment    
Changes in Accumulated Other Comprehensive Income (Loss)    
Beginning Balance (61) (204)
Other comprehensive loss before reclassifications 20 (8)
Net current period change in accumulated other comprehensive loss 20 (8)
Ending Balance (41) (212)
Unrealized Gain (Loss) on Securities    
Changes in Accumulated Other Comprehensive Income (Loss)    
Beginning Balance (689) (214)
Other comprehensive loss before reclassifications (1,630) (3)
Amounts reclassified from accumulated other comprehensive loss 24 (2)
Net current period change in accumulated other comprehensive loss (1,606) (5)
Ending Balance $ (2,295) $ (219)
v3.8.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - AOCI Components (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Details about AOCI Components    
Investment income $ (3,673) $ (595)
Reclassification Out Of Accumulated Other Comprehensive Income (Loss)    
Details about AOCI Components    
Investment income 24 (2)
Unrealized Gain (Loss) on Securities | Reclassification Out Of Accumulated Other Comprehensive Income (Loss)    
Details about AOCI Components    
Investment income $ 24 $ (2)
v3.8.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property & Equipment, Patent Costs and Intangibles (Details)
3 Months Ended 12 Months Ended
Dec. 15, 2017
USD ($)
Aug. 01, 2017
USD ($)
Mar. 31, 2018
USD ($)
item
Mar. 31, 2017
USD ($)
Dec. 31, 2018
USD ($)
Dec. 31, 2017
USD ($)
Sep. 30, 2017
USD ($)
Apr. 25, 2017
USD ($)
Property, plant and equipment                
Property, plant and equipment, gross     $ 145,691,000     $ 118,072,000    
Less-Accumulated depreciation     (42,243,000)     (38,086,000)    
Property, plant and equipment, net     103,448,000     79,986,000    
Assets under construction     50,900,000          
Impairment of long-lived assets     $ 0     0    
Software Capitalization Policy                
Software development stages | item     3          
Patent Costs and Intangible Assets                
Finite-lived intangible assets     $ 23,660,000     23,660,000    
Less: Accumulated amortization     (2,102,000)     (1,500,000)    
Total     21,558,000   $ 21,558,000 22,160,000    
Amortization expense over remaining useful life                
2018         1,805,000      
2019         2,407,000      
2020         2,407,000      
2021         2,373,000      
2022         2,370,000      
Thereafter         10,196,000      
Total     21,558,000   21,558,000 22,160,000    
Accrued liabilities     56,716,000     49,126,000    
Amortization of intangible assets     612,000 $ 50,000        
Impairment losses     0          
Sampleminded Inc                
Patent Costs and Intangible Assets                
Total     900,000     900,000    
Amortization expense over remaining useful life                
Total     900,000     900,000    
Amortization of intangible assets     36,000          
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill   $ 1,000,000            
Goodwill             $ 2,000,000  
Licensed intellectual property and patents                
Patent Costs and Intangible Assets                
Total         $ 20,675,000      
Estimated useful life         10 years 2 months 12 days      
Amortization expense over remaining useful life                
Total         $ 20,675,000      
Amortization of intangible assets     300,000 $ 50,000        
Developed Technology                
Patent Costs and Intangible Assets                
Total         $ 883,000      
Estimated useful life         7 years 3 months 18 days      
Amortization expense over remaining useful life                
Total         $ 883,000      
Developed Technology | Sampleminded Inc                
Property, plant and equipment                
Estimated Useful Life   8 years            
Amortization expense over remaining useful life                
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill   $ 900,000            
Customer Relationships | Sampleminded Inc                
Property, plant and equipment                
Estimated Useful Life   3 years            
Amortization expense over remaining useful life                
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill   $ 100,000            
Noncompete Agreements | Sampleminded Inc                
Property, plant and equipment                
Estimated Useful Life   5 years            
Amortization expense over remaining useful life                
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill   $ 32,000            
Armune | Licensed intellectual property and patents                
Patent Costs and Intangible Assets                
Total     12,000,000     12,200,000    
Amortization expense over remaining useful life                
Total     12,000,000     12,200,000    
Amortization of intangible assets     40,000          
Land                
Property, plant and equipment                
Property, plant and equipment, gross     4,466,000     4,466,000    
Leasehold and building improvements                
Property, plant and equipment                
Property, plant and equipment, gross     17,452,000     17,629,000    
Assets under construction     32,900,000          
Expected cost to complete project     239,200,000          
Land improvements                
Property, plant and equipment                
Property, plant and equipment, gross     $ 1,419,000     $ 1,419,000    
Estimated Useful Life     15 years     15 years    
Buildings                
Property, plant and equipment                
Property, plant and equipment, gross     $ 7,928,000     $ 7,928,000    
Estimated Useful Life     30 years     30 years    
Computer equipment and computer software                
Property, plant and equipment                
Property, plant and equipment, gross     $ 32,716,000     $ 30,148,000    
Estimated Useful Life     3 years     3 years    
Assets under construction     $ 1,700,000          
Expected cost to complete project     1,600,000          
Laboratory equipment                
Property, plant and equipment                
Property, plant and equipment, gross     26,234,000     $ 23,296,000    
Assets under construction     16,300,000          
Expected cost to complete project     $ 16,000,000          
Laboratory equipment | Minimum                
Property, plant and equipment                
Estimated Useful Life     3 years     3 years    
Laboratory equipment | Maximum                
Property, plant and equipment                
Estimated Useful Life     5 years     5 years    
Furniture and fixtures                
Property, plant and equipment                
Property, plant and equipment, gross     $ 4,554,000     $ 4,531,000    
Estimated Useful Life     3 years     3 years    
Assets under construction                
Property, plant and equipment                
Property, plant and equipment, gross     $ 50,922,000     $ 28,655,000    
Royalty Buy-Out Agreement | MDx                
Amortization expense over remaining useful life                
One-time fee for a royalty-free, fully-paid, perpetual and assignable license to patents               $ 8,000,000
Payment for the assignment of certain other patent rights which were not covered by the original agreement               7,000,000
Total payment under second amendment to license agreement               15,000,000
Current liabilities related to the second amendment to the license agreement               $ 6,600,000
Royalty Buy-Out Agreement | MDx | Licensed intellectual property and patents                
Patent Costs and Intangible Assets                
Total     8,700,000     9,000,000    
Amortization expense over remaining useful life                
Total     $ 8,700,000     $ 9,000,000    
Asset Purchase Agreement | Armune | Licensed intellectual property and patents                
Amortization expense over remaining useful life                
Purchases of intangible assets $ 12,000,000              
Contingent payment obligations 17,500,000              
Intangible asset acquired $ 12,200,000              
v3.8.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Investment in Privately-Held Company (Details) - USD ($)
$ in Thousands
1 Months Ended 3 Months Ended 12 Months Ended
Nov. 30, 2017
Mar. 31, 2018
Dec. 31, 2017
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES      
Cost method investment, percentage 10.00%    
Impairment of long-lived assets   $ 0 $ 0
Investment in privately-held company   3,000  
Adjustments to the carrying value   $ 0  
v3.8.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Net Loss Per Share (Details) - shares
shares in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Common shares not included in the computation of diluted net loss per share    
Potentially issuable common shares not included in the computation of diluted net loss per share because they would have an anti-dilutive effect 18,747 9,166
Stock Options    
Common shares not included in the computation of diluted net loss per share    
Potentially issuable common shares not included in the computation of diluted net loss per share because they would have an anti-dilutive effect 3,284 3,613
Restricted Stock Awards    
Common shares not included in the computation of diluted net loss per share    
Potentially issuable common shares not included in the computation of diluted net loss per share because they would have an anti-dilutive effect 6,315 5,553
Convertible Notes    
Common shares not included in the computation of diluted net loss per share    
Potentially issuable common shares not included in the computation of diluted net loss per share because they would have an anti-dilutive effect 9,148  
v3.8.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition and Inventory (Details) - USD ($)
3 Months Ended 9 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Disaggregation of Revenue [Line Items]      
Revenue recognized $ 90,296,000 $ 48,363,000  
Contract with Customer, Asset and Liability [Abstract]      
Deferred revenue balances, included in other short-term liabilities 200,000   $ 200,000
Deferred revenue balance $ 56,000 0  
Revenue, Practical Expedient [Abstract]      
Company expects the collection cycle true    
amortization period true    
Medicare Parts B & C      
Disaggregation of Revenue [Line Items]      
Revenue recognized $ 52,475,000 31,812,000  
Commercial      
Disaggregation of Revenue [Line Items]      
Revenue recognized 34,834,000 15,136,000  
Other      
Disaggregation of Revenue [Line Items]      
Revenue recognized 2,987,000 $ 1,415,000  
Variable consideration      
Disaggregation of Revenue [Line Items]      
Revenue recognized $ 8,500,000    
One-time impact of certain payers      
Disaggregation of Revenue [Line Items]      
Revenue recognized     4,300,000
One-time impact of certain payers | Tests from previous year      
Disaggregation of Revenue [Line Items]      
Revenue recognized     $ 1,000,000
v3.8.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Inventory (Details) - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Inventory    
Raw materials $ 10,935 $ 10,344
Semi-finished and finished goods 21,445 15,683
Total inventory $ 32,380 $ 26,027
v3.8.0.1
MAYO LICENSE AGREEMENT (Details)
$ in Thousands
1 Months Ended 3 Months Ended
Oct. 31, 2017
USD ($)
Mar. 31, 2018
USD ($)
Mar. 31, 2017
USD ($)
Mar. 31, 2016
USD ($)
Mar. 31, 2015
USD ($)
Feb. 28, 2015
USD ($)
installment
Other Payments            
Charges incurred as part of the research collaboration   $ 14,935 $ 8,002      
Licensing Agreements | MAYO            
Other Payments            
Charges incurred as part of the research collaboration   1,300 1,100      
Payments for research and development efforts   1,800 1,400      
Estimated liability for research and development efforts   1,300 600      
Amendments            
License fees payable in five annual installments           $ 5,000
License fee payments   $ 1,000   $ 1,000 $ 1,000  
Number of annual installments in which license fees are payable | installment           5
Number of periods each installment is amortized over   12 months        
Amortization of installments   $ 300 $ 300      
Licensing Agreements | MAYO | Sales Milestone Range One            
Warrants            
Amount agreed to be paid upon reaching the specified amount of net sales $ 200          
Net sales of a licensed product 5,000          
Licensing Agreements | MAYO | Sales Milestone Range Two            
Warrants            
Amount agreed to be paid upon reaching the specified amount of net sales 800          
Net sales of a licensed product 20,000          
Licensing Agreements | MAYO | Sales Milestone Range Three            
Warrants            
Amount agreed to be paid upon reaching the specified amount of net sales 2,000          
Net sales of a licensed product $ 50,000          
Licensing Agreements | MAYO | Minimum            
Warrants            
Royalty payments   $ 25        
v3.8.0.1
STOCK-BASED COMPENSATION (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Stock-based compensation      
Stock-based compensation expense $ 12,500 $ 6,100  
Valuation assumptions      
Risk-free interest rates (as a percent) 2.79%    
Expected volatility (as a percent) 61.80%    
Additional disclosures      
Market price (in dollars per share) $ 40.33    
Total intrinsic value of options exercised $ 19,100 200  
Weighted Average Grant Date Fair Value      
Unrecognized compensation cost $ 137,600    
Weighted average period for recognition of unrecognized compensation cost 3 years 2 months 12 days    
Share based compensation expense $ 12,500 $ 6,100  
Stock Options      
Valuation assumptions      
Risk-free interest rates (as a percent)   2.13%  
Expected term 6 years 5 months 9 days 6 years 7 months 2 days  
Expected volatility (as a percent)   62.90%  
Dividend yield (as a percent) 0.00% 0.00%  
Weighted average fair value per share of options granted during the period (in dollars per share) $ 26.84 $ 13.20  
Shares      
Outstanding at the beginning of the period (in shares) 3,360,461    
Granted (in shares) 343,566    
Exercised (in shares) (420,129)    
Outstanding at the end of the period (in shares) 3,283,898   3,360,461
Exercisable at the end of the period (in shares) 1,757,384    
Weighted Average Exercise Price      
Outstanding at the beginning of the period (in dollars per share) $ 11.89    
Granted (in dollars per share) 44.37    
Exercised (in dollars per share) 3.31    
Outstanding at the end of the period (in dollars per share) 16.39   $ 11.89
Exercisable at the end of the period (in dollars per share) $ 10.80    
Weighted Average Remaining Contractual Term      
Outstanding at the end of the period 7 years   6 years 4 months 24 days
Exercisable at the end of the period 5 years 4 months 24 days    
Aggregate Intrinsic Value      
Outstanding at the end of the period $ 80,098    
Exercisable at the end of the period $ 51,901    
Restricted Stock Awards And Restricted Stock Units RSU      
Valuation assumptions      
Weighted average fair value per share of stock purchase rights granted during the period (in dollars per share) $ 45.16    
Restricted Shares      
Outstanding at the beginning of the period (in shares) 6,148,778    
Granted (in shares) 1,079,223    
Released (in shares) (880,022)    
Forfeited (in shares) (33,307)    
Outstanding at the end of the period (in shares) 6,314,672   6,148,778
Weighted Average Grant Date Fair Value      
Outstanding at the beginning of the period (in dollars per share) $ 15.76    
Granted (in dollars per share) 45.16    
Released (in dollars per share) 17.67    
Forfeited (in dollars per share) 26.37    
Outstanding at the end of the period (in dollars per share) $ 20.36   $ 15.76
ASU 2016-09      
Stock-based compensation      
Cumulative-effect adjustment   $ 400  
v3.8.0.1
FAIR VALUE - Fair Value Measurements (Details) - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Mar. 31, 2017
Dec. 31, 2016
Fair value measurements        
Cash and cash equivalents $ 148,695 $ 77,491 $ 39,206 $ 48,921
Marketable securities 893,474 347,224    
Fair Value        
Fair value measurements        
Total 1,042,169 424,715    
Level 1        
Fair value measurements        
Total 101,103 61,297    
Level 2        
Fair value measurements        
Total 941,066 363,418    
Long-term debt 4,400 4,500    
Cash and money market | Fair Value        
Fair value measurements        
Cash and cash equivalents 101,103 61,297    
Cash and money market | Level 1        
Fair value measurements        
Cash and cash equivalents 101,103 61,297    
Corporate bonds | Fair Value        
Fair value measurements        
Cash and cash equivalents 1,998      
Marketable securities 345,123 181,305    
Corporate bonds | Level 2        
Fair value measurements        
Cash and cash equivalents 1,998      
Marketable securities 345,123 181,305    
U.S. government agency securities | Fair Value        
Fair value measurements        
Cash and cash equivalents 8,398 3,700    
Marketable securities 194,024 54,812    
U.S. government agency securities | Level 2        
Fair value measurements        
Cash and cash equivalents 8,398 3,700    
Marketable securities 194,024 54,812    
Asset backed securities | Fair Value        
Fair value measurements        
Marketable securities 253,547 94,515    
Asset backed securities | Level 2        
Fair value measurements        
Marketable securities 253,547 94,515    
Commercial paper. | Fair Value        
Fair value measurements        
Cash and cash equivalents 11,998 10,995    
Marketable securities 51,994 9,946    
Commercial paper. | Level 2        
Fair value measurements        
Cash and cash equivalents 11,998 10,995    
Marketable securities 51,994 9,946    
Certificates of deposit | Fair Value        
Fair value measurements        
Cash and cash equivalents 25,198 1,499    
Marketable securities 48,786 6,646    
Certificates of deposit | Level 2        
Fair value measurements        
Cash and cash equivalents 25,198 1,499    
Marketable securities $ 48,786 $ 6,646    
v3.8.0.1
FAIR VALUE - Unrealized loss positions (Details)
$ in Thousands
Mar. 31, 2018
USD ($)
Fair value of investments in unrealized loss positions  
Total fair value of available-for-sale securities in a continuous unrealized loss position for less than twelve months $ 843,087
Total fair value of available for sale securities in a continuous unrealized loss position for greater than twelve months 26,395
Total fair value of available-for-sale securities in a continuous unrealized loss position 869,482
Gross unrealized loss of investments in unrealized loss positions  
Total gross unrealized losses of available-for-sale securities in a continuous unrealized loss position for less than twelve months (2,251)
Total gross unrealized losses of available-for-sale securities in a continuous unrealized loss position for greater than twelve months (48)
Total gross unrealized losses of available-for-sale securities in a continuous unrealized loss position (2,299)
Contractual maturities of the available-for-sale investments in debt securities, Cost  
Due in one year or less 529,218
Due after one year through four years 366,551
Contractual maturities of the available-for-sale investments in debt securities, Fair Value  
Due in one year or less 528,072
Due after one year through four years 365,402
Corporate bonds  
Fair value of investments in unrealized loss positions  
Total fair value of available-for-sale securities in a continuous unrealized loss position for less than twelve months 328,935
Total fair value of available-for-sale securities in a continuous unrealized loss position 328,935
Gross unrealized loss of investments in unrealized loss positions  
Total gross unrealized losses of available-for-sale securities in a continuous unrealized loss position for less than twelve months (1,073)
Total gross unrealized losses of available-for-sale securities in a continuous unrealized loss position (1,073)
Contractual maturities of the available-for-sale investments in debt securities, Cost  
Due in one year or less 224,976
Due after one year through four years 121,217
Contractual maturities of the available-for-sale investments in debt securities, Fair Value  
Due in one year or less 224,287
Due after one year through four years 120,836
Asset backed securities  
Fair value of investments in unrealized loss positions  
Total fair value of available-for-sale securities in a continuous unrealized loss position for less than twelve months 252,105
Total fair value of available for sale securities in a continuous unrealized loss position for greater than twelve months 1,442
Total fair value of available-for-sale securities in a continuous unrealized loss position 253,547
Gross unrealized loss of investments in unrealized loss positions  
Total gross unrealized losses of available-for-sale securities in a continuous unrealized loss position for less than twelve months (841)
Total gross unrealized losses of available-for-sale securities in a continuous unrealized loss position for greater than twelve months (2)
Total gross unrealized losses of available-for-sale securities in a continuous unrealized loss position (843)
Contractual maturities of the available-for-sale investments in debt securities, Cost  
Due in one year or less 30,844
Due after one year through four years 223,546
Contractual maturities of the available-for-sale investments in debt securities, Fair Value  
Due in one year or less 30,753
Due after one year through four years 222,794
U.S. government agency securities  
Fair value of investments in unrealized loss positions  
Total fair value of available-for-sale securities in a continuous unrealized loss position for less than twelve months 169,071
Total fair value of available for sale securities in a continuous unrealized loss position for greater than twelve months 24,953
Total fair value of available-for-sale securities in a continuous unrealized loss position 194,024
Gross unrealized loss of investments in unrealized loss positions  
Total gross unrealized losses of available-for-sale securities in a continuous unrealized loss position for less than twelve months (237)
Total gross unrealized losses of available-for-sale securities in a continuous unrealized loss position for greater than twelve months (46)
Total gross unrealized losses of available-for-sale securities in a continuous unrealized loss position (283)
Contractual maturities of the available-for-sale investments in debt securities, Cost  
Due in one year or less 174,495
Due after one year through four years 19,812
Contractual maturities of the available-for-sale investments in debt securities, Fair Value  
Due in one year or less 174,218
Due after one year through four years 19,806
Commercial paper.  
Fair value of investments in unrealized loss positions  
Total fair value of available-for-sale securities in a continuous unrealized loss position for less than twelve months 51,425
Total fair value of available-for-sale securities in a continuous unrealized loss position 51,425
Gross unrealized loss of investments in unrealized loss positions  
Total gross unrealized losses of available-for-sale securities in a continuous unrealized loss position for less than twelve months (21)
Total gross unrealized losses of available-for-sale securities in a continuous unrealized loss position (21)
Contractual maturities of the available-for-sale investments in debt securities, Cost  
Due in one year or less 52,015
Contractual maturities of the available-for-sale investments in debt securities, Fair Value  
Due in one year or less 51,994
Certificates of deposit  
Fair value of investments in unrealized loss positions  
Total fair value of available-for-sale securities in a continuous unrealized loss position for less than twelve months 41,551
Total fair value of available-for-sale securities in a continuous unrealized loss position 41,551
Gross unrealized loss of investments in unrealized loss positions  
Total gross unrealized losses of available-for-sale securities in a continuous unrealized loss position for less than twelve months (79)
Total gross unrealized losses of available-for-sale securities in a continuous unrealized loss position (79)
Contractual maturities of the available-for-sale investments in debt securities, Cost  
Due in one year or less 46,888
Due after one year through four years 1,976
Contractual maturities of the available-for-sale investments in debt securities, Fair Value  
Due in one year or less 46,820
Due after one year through four years $ 1,966
v3.8.0.1
NEW MARKET TAX CREDIT (Details)
$ in Millions
3 Months Ended
Mar. 31, 2018
USD ($)
Mar. 31, 2017
USD ($)
Dec. 31, 2014
USD ($)
facility
Other long-term liabilities      
Disclosures related to New Market Tax Credit      
Financing arrangement, amount outstanding $ 2.4    
New Market Tax Credit Program      
Disclosures related to New Market Tax Credit      
Net proceeds received from financing arrangements     $ 2.4
Number of facilities receiving working capital and capital improvements from financing agreements | facility     1
Amortization of contribution liability recognized as a decrease in expenses 0.1 $ 0.1  
New Market Tax Credit Program | Other long-term liabilities      
Disclosures related to New Market Tax Credit      
Financing arrangement, amount outstanding 1.3    
Variable Interest Entity, Primary Beneficiary      
Disclosures related to New Market Tax Credit      
Debt issuance costs     $ 0.2
Investor | New Market Tax Credit Program      
Disclosures related to New Market Tax Credit      
Recapture period     7 years
Investor | Variable Interest Entity, Primary Beneficiary | Cash and cash equivalents      
Disclosures related to New Market Tax Credit      
Financing arrangement, investor contribution $ 2.4    
Investor | Variable Interest Entity, Primary Beneficiary | Other long-term liabilities      
Disclosures related to New Market Tax Credit      
Financing arrangement, amount outstanding   $ 1.6  
v3.8.0.1
LONG-TERM DEBT (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Jun. 30, 2015
Long-term debt      
Amortization of debt issuance costs $ 402    
Debt Agreement to Finance Building Purchase and Improvements      
Long-term debt      
Maximum funds available under debt agreement     $ 5,100
Interest rate (as a percent)     4.15%
Total amount of principal and interest payments to be paid through the maturity date of the debt agreement     $ 31
Final principal and interest payment due under the debt agreement     4,400
Deferred financing costs     $ 73
Amortization of debt issuance costs $ 4 $ 4  
v3.8.0.1
LONG-TERM DEBT - Revolving Loan Agreement (Details) - USD ($)
$ in Thousands
1 Months Ended
Dec. 31, 2017
Mar. 31, 2018
Long-term debt    
Deferred financing costs   $ 13,106
Construction Loan Agreement    
Long-term debt    
Maximum borrowing capacity $ 600  
Revolving Loan Agreement    
Long-term debt    
Term 24 months  
Maximum borrowing capacity $ 15,000  
Outstanding   0
Revolving Loan Agreement | 1-month LIBOR    
Long-term debt    
Variable rate 2.00%  
Revolving Loan Agreement | 3-month LIBOR    
Long-term debt    
Variable rate 2.00%  
Revolving Loan Agreement | MB Bank Reference Rate    
Long-term debt    
Variable rate 0.50%  
City Letter of Credit    
Long-term debt    
Face amount $ 25,600  
Interest-only payment, period 24 months  
Amortization period 20 years  
Initial investment $ 16,400  
Invested amount   $ 2,300
Deferred financing costs $ 200  
City Letter of Credit | Construction Loan Agreement | 1-month LIBOR    
Long-term debt    
Variable rate 2.25%  
v3.8.0.1
WISCONSIN ECONOMIC DEVELOPMENT TAX CREDIT (Details) - Wisconsin Economic Development Tax Credit Agreement
$ in Millions
3 Months Ended
Mar. 31, 2018
USD ($)
Mar. 31, 2017
USD ($)
Mar. 31, 2015
USD ($)
item
Agreements      
Refundable tax credits available, contingent on the Company expending $26.3 million in capital investments and establishing 758 full-time positions     $ 9.0
Capital investment expenditures over specified period, requirement to earn the refundable tax credits     $ 26.3
Full-time positions that must be created over a specified time period to earn the refundable tax credits | item     758
Period over which the capital investment expenditures must be incurred and the creation of full-time positions must be completed     7 years
Refundable tax credits earned $ 7.8    
Refundable tax credit received 2.4    
Refundable tax credit receivable 5.4    
Amortization of tax credits 0.4 $ 0.3  
Prepaid expenses and other current assets      
Agreements      
Refundable tax credit receivable 1.9    
Other long-term assets      
Agreements      
Refundable tax credit receivable 3.5    
Short-term other liabilities      
Agreements      
Refundable tax credit, offsetting liability 1.9    
Other long-term liabilities      
Agreements      
Refundable tax credit, offsetting liability $ 3.2    
v3.8.0.1
CONVERTIBLE NOTES (Details)
$ / shares in Units, $ in Thousands
3 Months Ended
Jan. 17, 2018
USD ($)
Mar. 31, 2018
USD ($)
$ / shares
Debt Instrument [Line Items]    
Proceeds from issuance of notes   $ 671,091
Debt, net of discounts and deferred financing costs:    
Principal   690,000
Debt discount, net   (190,206)
Deferred financing costs   (13,106)
Total   $ 486,688
Convertible Notes    
Debt Instrument [Line Items]    
Aggregate principal amount $ 690,000  
Fixed interest rate (as a percent) 1.00%  
Proceeds from issuance of notes $ 671,100  
Conversion rate, number of shares to be issued per $1000 of principal amount (in shares)   13.2569
Conversion price (in dollars per share) | $ / shares   $ 75.43
Repurchase price, as percentage of principal amount, if company undergoes change of control   100
Liability component of debt   $ 495,100
Effective interest rate (as a percent)   6.00%
Equity component of debt   $ 194,900
Total transaction costs   $ 18,800
Interest expense amortization term   7 years
Convertible Notes | Maximum    
Debt Instrument [Line Items]    
Total transaction costs   $ 13,100
v3.8.0.1
RELATED PARTY TRANSACTION (Details) - USD ($)
1 Months Ended 3 Months Ended 12 Months Ended
Nov. 30, 2017
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
RELATED PARTY TRANSACTIONS          
Charges incurred   $ 58,000 $ 0    
Cost method investment, percentage 10.00%        
Director | Professional Services Agreement          
RELATED PARTY TRANSACTIONS          
Charges incurred   50,000      
Payments to related party   $ 50,000      
Director | Professional Services Agreement | Maximum          
RELATED PARTY TRANSACTIONS          
Payments to related party       $ 400,000 $ 400,000