Cover Page - USD ($)	12 Months Ended
Cover Page - USD ($)	Dec. 31, 2019	Feb. 20, 2020	Jun. 28, 2019
Cover page.
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2019
Document Transition Report	false
Entity File Number	001-35092
Entity Registrant Name	EXACT SCIENCES CORPORATION
Entity Central Index Key	0001124140
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	441 Charmany Drive
Entity Address, City or Town	Madison
Entity Address, State or Province	WI
Entity Tax Identification Number	02-0478229
Entity Address, Postal Zip Code	53719
City Area Code	608
Local Phone Number	284‑5700
Title of 12(b) Security	Common Stock, $0.01 Par Value
Trading Symbol	EXAS
Security Exchange Name	NASDAQ
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Amendment Flag	false
Entity Filer Category	Large Accelerated Filer
Current Fiscal Year End Date	--12-31
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Public Float			$ 15,069,783,760
Entity Common Stock, Shares Outstanding		147,967,507
Documents Incorporated by Reference	The registrant intends to file a definitive proxy statement pursuant to Regulation 14A within 120 days after the end of the fiscal year ended December 31, 2019. Portions of such proxy statement are incorporated by reference into Part III of this Form 10‑K.
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Current Assets:
Cash and cash equivalents	$ 177,254	$ 160,430
Marketable securities	146,401	963,752
Accounts receivable, net	130,667	45,329
Inventory, net	61,724	39,148
Prepaid expenses and other current assets	40,913	19,408
Total current assets	556,959	1,228,067
Long-term Assets:
Property, plant and equipment, net	455,325	245,259
Operating lease right-of-use assets	126,444
Goodwill	1,203,197	17,279
Intangibles, net	1,143,550	29,002
Other long-term assets, net	20,293	4,415
Total assets	3,505,768	1,524,022
Current Liabilities:
Accounts payable	25,973	28,141
Accrued liabilities	193,329	100,644
Operating lease liabilities, current portion	7,891
Debt, current portion	834	8
Other current liabilities	8,467	7,376
Total current liabilities	236,494	136,169
Convertible notes, net	803,605	664,749
Long-term debt, less current portion	24,032	24,494
Other long-term liabilities	34,911	17,669
Operating lease liabilities, less current portion	118,665
Total liabilities	1,217,707	843,081
Commitments and contingencies
Stockholders’ Equity:
Preferred stock, $0.01 par value Authorized—5,000,000 shares issued and outstanding—no shares at December 31, 2019 and December 31, 2018	0	0
Common stock, $0.01 par value Authorized—200,000,000 shares issued and outstanding—147,625,696 and 123,192,540 shares at December 31, 2019 and December 31, 2018	1,477	1,232
Additional paid-in capital	3,406,440	1,716,894
Accumulated other comprehensive loss	(100)	(1,422)
Accumulated deficit	(1,119,756)	(1,035,763)
Total stockholders’ equity	2,288,061	680,941
Total liabilities and stockholders’ equity	$ 3,505,768	$ 1,524,022

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Income Statement [Abstract]
Revenue	$ 876,293	$ 454,462	$ 265,989
Operating expenses:
Cost of sales (exclusive of amortization of acquired intangibles)	216,717	116,644	78,305
Research and development	139,694	67,285	42,099
Sales and marketing	385,176	249,448	153,924
General and administrative	352,453	178,016	108,988
Amortization of acquired intangibles	16,035	2,540	983
Total operating expenses	1,110,075	613,933	384,299
Loss from operations	(233,782)	(159,471)	(118,310)
Other income (expense)
Investment income	26,530	21,203	3,932
Interest expense	(61,599)	(36,789)	(206)
Total other income (expense)	(35,069)	(15,586)	3,726
Net loss before tax	(268,851)	(175,057)	(114,584)
Income tax benefit (expense)	184,858	(92)	187
Net loss	$ (83,993)	$ (175,149)	$ (114,397)
Net loss per share-basic and diluted (in dollars per share)	$ (0.64)	$ (1.43)	$ (0.99)
Weighted average common shares outstanding-basic and diluted (in shares)	131,257	122,207	115,684

Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Statement of Comprehensive Income [Abstract]
Net Income (Loss) Attributable to Parent	$ (83,993)	$ (175,149)	$ (114,397)
Other comprehensive loss, net of tax:
Foreign currency translation gain	0	36	143
Unrealized gain (loss) on available-for-sale investments	1,322	(708)	(475)
Comprehensive loss	$ (82,671)	$ (175,821)	$ (114,729)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Consolidated Statements of Stockholders’ Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid In Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit
Beginning balance at Dec. 31, 2016	$ 335,295	$ 1,102	$ 1,080,432	$ (418)	$ (745,821)
Beginning balance (in shares) at Dec. 31, 2016		110,236,127
Increase (Decrease) in Stockholders' Equity
Settlement of equity component of convertible notes	0
Issuance of common stock, net of issuance costs	253,388	$ 74	253,314
Issuance of common stock, net of issuance costs (in shares)		7,450,000
Exercise of common stock options	$ 5,103	$ 11	5,092
Exercise of common stock options (in shares)	1,067,120	1,067,047
Issuance of common stock to fund the Company's 401(k) match	$ 3,008	$ 2	3,006
Issuance of common stock to fund the Company's 401(k) match (in shares)		158,717
Compensation expense related to issuance of stock options and restricted stock awards	35,512	$ 12	35,500
Compensation expense related to issuance of stock options and restricted stock awards (in shares)		1,162,112
Purchase of employee stock purchase plan shares	2,841	$ 4	2,837
Purchase of employee stock purchase plan shares (in shares)		423,423
Issuance of common stock to fund business combinations	0
Issuance of common stock, issuance costs	(7,400)
Net Income (Loss) Attributable to Parent	(114,397)				(114,397)
Accumulated other comprehensive income (loss)	(332)			(332)
Ending balance at Dec. 31, 2017	520,418	$ 1,205	1,380,577	(750)	(860,614)
Ending balance (in shares) at Dec. 31, 2017		120,497,426
Increase (Decrease) in Stockholders' Equity
Cumulative-effect adjustment - ASU 2016-09 adoption \| ASU 2016-09			396		(396)
Settlement of equity component of convertible notes	0
Equity component of convertible debt, net of issuance costs	260,246		260,246
Exercise of common stock options	$ 6,636	$ 10	6,626
Exercise of common stock options (in shares)	1,033,012	1,033,012
Issuance of common stock to fund the Company's 401(k) match	$ 4,303	$ 1	4,302
Issuance of common stock to fund the Company's 401(k) match (in shares)		86,882
Compensation expense related to issuance of stock options and restricted stock awards	60,264	$ 13	60,251
Compensation expense related to issuance of stock options and restricted stock awards (in shares)		1,228,611
Purchase of employee stock purchase plan shares	4,895	$ 3	4,892
Purchase of employee stock purchase plan shares (in shares)		346,609
Issuance of common stock to fund business combinations	0
Net Income (Loss) Attributable to Parent	(175,149)				(175,149)
Accumulated other comprehensive income (loss)	(672)			(672)
Ending balance at Dec. 31, 2018	$ 680,941	$ 1,232	1,716,894	(1,422)	(1,035,763)
Ending balance (in shares) at Dec. 31, 2018	123,192,540	123,192,540
Increase (Decrease) in Stockholders' Equity
Settlement of convertible notes	$ (300,768)		(300,768)
Settlement of equity component of convertible notes	(300,768)
Shares issued to settle convertible notes	$ 182,477	$ 22	182,455
Shares issued to settle convertible notes (in shares)	2,159,716	2,159,716
Equity component of convertible debt, net of issuance costs	$ 268,368		268,368
Exercise of common stock options	$ 8,787	$ 6	8,781
Exercise of common stock options (in shares)	641,925	641,925
Issuance of common stock to fund the Company's 401(k) match	$ 7,409	$ 1	7,408
Issuance of common stock to fund the Company's 401(k) match (in shares)		86,532
Compensation expense related to issuance of stock options and restricted stock awards	108,483	$ 43	108,440
Compensation expense related to issuance of stock options and restricted stock awards (in shares)		4,322,366
Purchase of employee stock purchase plan shares	8,396	$ 2	8,394
Purchase of employee stock purchase plan shares (in shares)		176,458
Issuance of common stock to fund business combinations	$ 1,407,080	$ 171	1,406,909
Issuance of common stock to fund business combinations (in shares)	17,046,159	17,046,159
Issuance of common stock, issuance costs	$ (441)		(441)
Net Income (Loss) Attributable to Parent	(83,993)				(83,993)
Accumulated other comprehensive income (loss)	1,322			1,322
Ending balance at Dec. 31, 2019	$ 2,288,061	$ 1,477	$ 3,406,440	$ (100)	$ (1,119,756)
Ending balance (in shares) at Dec. 31, 2019	147,625,696	147,625,696

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Cash flows from operating activities:
Net loss	$ (83,993)	$ (175,149)	$ (114,397)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and other amortization	34,212	20,544	14,572
Loss on disposal of property, plant and equipment	1,394	353	954
Realized gain on sale of marketable securities	(3,355)	(385)	(23)
Unrealized net loss on revaluation of equity securities	207	0	0
Loss on preferred stock investment	0	765	0
Deferred tax benefit	(185,109)	0	(115)
Stock-based compensation	108,483	60,264	35,512
Loss on settlement of convertible notes	10,558	0	0
Amortization of convertible note debt discount and issuance costs	42,256	28,564	0
Amortization of liabilities	(4,467)	(2,394)	(1,620)
Amortization of premium on short-term investments	(3,102)	(3,516)	88
Amortization of acquired intangibles	16,035	2,540	983
Non-cash lease expense	5,427	0	0
Changes in assets and liabilities, net of effects of acquisition:
Accounts receivable, net	(27,938)	(17,292)	(17,529)
Inventory, net	(19,041)	(12,729)	(19,194)
Operating lease liabilities	(4,114)	0	0
Accounts payable and accrued liabilities	3,469	33,076	30,537
Other assets and liabilities	(5,932)	(3,966)	(1,492)
Net cash used in operating activities	(115,010)	(69,325)	(71,724)
Cash flows from investing activities:
Purchases of marketable securities	(634,117)	(1,192,506)	(357,051)
Maturities of marketable securities	1,660,559	579,171	271,466
Purchases of property, plant and equipment	(171,802)	(150,093)	(48,480)
Business combination, net of cash acquired	(973,861)	(17,908)	(2,980)
Purchases of intangible assets	0	0	(20,690)
Other investing activities	(1,852)	(578)	(3,070)
Net cash used in investing activities	(121,073)	(781,914)	(160,805)
Cash flows from financing activities:
Proceeds from issuance of convertible notes, net	729,477	896,430	0
Proceeds from financing obligation, net payments on mortgage payable	0	2,084	(174)
Proceeds from exercise of common stock options	8,787	6,636	5,103
Proceeds from sale of common stock, net of issuance costs	0	0	253,388
Proceeds in connection with the Company's employee stock purchase plan	8,396	4,895	2,841
Payments on settlement of convertible notes	(493,356)	0	0
Proceeds from construction loan, net deferred financing costs	319	24,236	(202)
Other financing activities	(442)	(139)	0
Net cash provided by financing activities	253,181	934,142	260,956
Effects of exchange rate changes on cash and cash equivalents	0	36	143
Net increase in cash, cash equivalents and restricted cash	17,098	82,939	28,570
Cash, cash equivalents and restricted cash at the beginning of period	160,430	77,491	48,921
Cash, cash equivalents and restricted cash at the end of period	177,528	160,430	77,491
Supplemental disclosure of non-cash investing and financing activities:
Property, plant and equipment acquired but not paid	10,265	33,452	8,818
Property acquired under build-to-suit lease	0	2,092	0
Unrealized loss on available-for-sale investments	1,322	(708)	(475)
Issuance of 86,532, 86,882, and 158,717 shares of common stock to fund the Company’s 401(k) matching contribution for 2018, 2017, and 2016, respectively	7,409	4,303	3,008
Issuance of 2,159,716 shares of common stock upon settlement of convertible notes	(182,477)	0	0
Retirement of equity component of convertible notes settled	(300,768)	0	0
Issuance of common stock to fund business combinations	(1,407,080)	0	0
Business acquisition contingent consideration liability	0	3,060	0
Supplemental disclosure of cash flow information:
Interest paid	$ 9,301	$ 4,638	$ 201

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized shares (in shares)	5,000,000	5,000,000
Preferred stock, issued shares (in shares)	0	0
Preferred stock, outstanding shares (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized shares (in shares)	200,000,000	200,000,000
Common stock, issued shares (in shares)	147,625,696	123,192,540
Common stock, outstanding shares (in shares)	147,625,696	123,192,540

Consolidated Statements of Stockholders’ Equity (Parenthetical) - USD ($) $ in Thousands	1 Months Ended	12 Months Ended
	Nov. 30, 2019	Dec. 31, 2019	Dec. 31, 2017
Statement of Stockholders' Equity [Abstract]
Issuance of common stock, issuance costs	$ 400	$ 441	$ 7,400

Consolidated Statements of Cash Flows (Parenthetical) - shares	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Statement of Cash Flows [Abstract]
Issuance of shares of common stock to fund the Company's 401(k) matching contribution (in shares)	86,532	86,882	158,717
Shares issued to settle convertible notes (in shares)	2,159,716
Issuance of common stock to fund business combinations (in shares)	17,046,159

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Exact Sciences Corporation (together with its subsidiaries, “Exact,” or the “Company”) was incorporated in February 1995. Exact is a leading global cancer diagnostics company. It has developed some of the most impactful brands in cancer screening and diagnostics, including Cologuard and Oncotype DX. Exact is currently working on the development of additional tests for other types of cancer, with the goal of bringing new innovative cancer tests to patients throughout the world.

On November 8, 2019, Exact completed a combination (the “Combination”) with Genomic Health, Inc. (“Genomic Health”), under which the Company acquired Genomic Health, which is a leading provider of genomic based diagnostic tests to help to optimize cancer care.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company’s wholly-owned subsidiaries and variable interest entities. See Note 12 for the discussion of financing arrangements involving certain entities that are variable interest entities that are included in the Company’s consolidated financial statements. The functional currency for the Company's wholly-owned subsidiaries incorporated outside the United States (“U.S.”) is the U.S. dollar. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

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

Marketable Securities

Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date. Debt securities carried at amortized cost are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Debt securities not classified as held-to-maturity are classified as available-for-sale. Available-for-sale securities are carried at fair value. The unrealized gains and losses, net of tax, on the Company's debt securities are reported in other comprehensive income. Marketable equity securities are measured at fair value and the unrealized gains and losses, net of tax, are recognized in other income (expense) in the consolidated statement of operations. The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity computed under the straight-line method. Such amortization is included in investment income. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in investment income. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in investment income.

The Company’s investment policy limits investments to certain types of instruments issued by institutions with investment grade credit ratings and places restrictions on maturities and concentration by type and issuer. Investments in which the Company has the ability and intent, if necessary, to liquidate in order to support its current operations (including those with a contractual term greater than one year from the date of purchase) are classified as current. Realized gains were $3.4 million, $0.4 million, and $23,000, net of insignificant realized losses, for the years ended December 31, 2019, 2018, and 2017, respectively and are included in investment income in the Company's consolidated statements of operations.

The Company periodically evaluates investments in unrealized loss positions for other-than-temporary impairments. This evaluation includes, but is not limited to, significant quantitative and qualitative assessments and estimates regarding credit ratings, collateralized support, the length of time and significance of a security’s loss position, the Company’s intent not to sell the security, and whether it is more likely than not that the Company will have to sell the security before recovery of its cost basis. As of December 31, 2019 and 2018, no investments were identified with other-than-temporary declines in value.

The following table sets forth the Company’s cash, cash equivalents, restricted cash, and marketable securities at December 31, 2019 and 2018:


(In thousands)	December 31, 2019		December 31, 2018
Cash, cash equivalents, and restricted cash
Cash and money market	$	146,932	$	75,375
Cash equivalents	30,322		85,055
Restricted cash (1)	274		—
Total cash, cash equivalents and restricted cash	177,528		160,430
Marketable securities
Available-for-sale debt securities	144,685		963,752
Equity securities	1,716		—
Total marketable securities	146,401		963,752
Total cash and cash equivalents, restricted cash and marketable securities	$	323,929	$	1,124,182

(1) Restricted cash is included in other long-term assets on the consolidated balance sheets. The Company had no restricted cash at December 31, 2018 or December 31, 2017.

Available-for-sale debt securities at December 31, 2019 consisted of the following:


	December 31, 2019
(In thousands)	Amortized Cost		Gains in Accumulated Other Comprehensive Income (Loss) (1)		Losses in Accumulated Other Comprehensive Income (Loss) (1)		Estimated Fair Value
Cash equivalents
U.S. government agency securities	$	30,320	$	2	$	—	$	30,322
Total cash equivalents	30,320		2		—		30,322
Marketable securities
Corporate bonds	4,017		—		(14)		4,003
U.S. government agency securities	140,745		10		(73)		140,682
Total marketable securities	144,762		10		(87)		144,685
Total available-for-sale debt securities	$	175,082	$	12	$	(87)	$	175,007

(1) Gains and losses in accumulated other comprehensive income (loss) are reported net of tax.

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


	December 31, 2018
(In thousands)	Amortized Cost		Gains in Accumulated Other Comprehensive Income (Loss) (1)		Losses in Accumulated Other Comprehensive Income (Loss) (1)		Estimated Fair Value
Cash equivalents
U.S. government agency securities	$	49,982	$	3	$	—	$	49,985
Commercial paper	24,072		—		(2)		24,070
Certificates of deposit	11,000		—		—		11,000
Total cash equivalents	85,054		3		(2)		85,055
Marketable securities
Corporate bonds	392,973		33		(719)		392,287
Asset backed securities	277,538		30		(569)		276,999
U.S. government agency securities	250,606		43		(178)		250,471
Commercial paper	12,158		—		(7)		12,151
Certificates of deposit	31,875		—		(31)		31,844
Total marketable securities	965,150		106		(1,504)		963,752
Total available-for-sale debt securities	$	1,050,204	$	109	$	(1,506)	$	1,048,807

(1) Gains and losses in accumulated other comprehensive income (loss) are reported net of tax.

Changes in Accumulated Other Comprehensive Income (Loss)

The amount recognized in accumulated other comprehensive income (loss) (“AOCI”) for the years ended December 31, 2019, 2018 and 2017 were as follows:


(In thousands)	Cumulative Translation Adjustment		Unrealized Gain (Loss) on Securities		Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2017	$	(204)	$	(214)	$	(418)
Other comprehensive income (loss) before reclassifications	143		(530)		(387)
Amounts reclassified from accumulated other comprehensive loss	—		55		55
Net current period change in accumulated other comprehensive income (loss)	143		(475)		(332)
Balance at December 31, 2017	$	(61)	$	(689)	$	(750)
Other comprehensive income (loss) before reclassifications	36		(1,025)		(989)
Amounts reclassified from accumulated other comprehensive loss	—		317		317
Net current period change in accumulated other comprehensive income (loss)	36		(708)		(672)
Balance at December 31, 2018	$	(25)	$	(1,397)	$	(1,422)
Other comprehensive income (loss) before reclassifications	—		681		681
Amounts reclassified from accumulated other comprehensive loss	—		641		641
Net current period change in accumulated other comprehensive income (loss)	—		1,322		1,322
Balance at December 31, 2019	$	(25)	$	(75)	$	(100)

Amounts reclassified from accumulated other comprehensive loss for the years ended December 31, 2019, 2018 and 2017 were as follows:


		Year Ended December 31,
Details about AOCI Components (In thousands)	Affected Line Item in the Statements of Operations	2019		2018		2017
Change in value of available-for-sale investments
Sales and maturities of available-for-sale investments	Investment income	$	641	$	317	$	55
Total reclassifications		$	641	$	317	$	55

Allowance for Doubtful Accounts

The Company estimates an allowance for doubtful accounts against accounts receivable based on estimates of expected collections consistent with historical cash collection experience. The allowance for doubtful accounts is evaluated on a regular basis and adjusted when trends, significant events or other substantive evidence indicate that expected collections will be less than applicable accrual rates. At December 31, 2019 and 2018 there was no allowance for doubtful accounts recorded. For the years ended December 31, 2019, 2018 and 2017, there was no bad debt expense written off against the allowance and charged to operating expense.

Inventory

Inventory is stated at the lower of cost or net realizable value. The Company determines the cost of inventory using the first-in, first out method (“FIFO”). The Company estimates the recoverability of inventory by reference to internal estimates of future demands and product life cycles, including expiration. The Company periodically analyzes its inventory levels to identify inventory that may expire prior to expected sale, no longer meets quality specifications, or has a cost basis in excess of its estimated realizable value and records a charge to cost of sales for such inventory as appropriate.

Direct and indirect manufacturing costs incurred during process validation and for other research and development activities, which are not permitted to be sold, have been expensed to research and development in the Company’s consolidated statements of operations.

Inventory consisted of the following:


(In thousands)	December 31, 2019		December 31, 2018
Raw materials	$	24,958	$	12,761
Semi-finished and finished goods	36,766		26,387
Total inventory	$	61,724	$	39,148

Property, Plant and Equipment

Property, plant and equipment are stated at cost and depreciated using the straight-line method over the assets’ estimated useful lives. Land is stated at cost and does not depreciate. Maintenance and repairs are expensed when incurred; additions and improvements are capitalized. The estimated useful lives of property and equipment are as follows:


(In thousands)	Estimated Useful Life	December 31, 2019		December 31, 2018
Property, plant and equipment
Land	n/a	$	4,466	$	4,466
Leasehold and building improvements	(1)	80,352		38,895
Land improvements	15 years	1,766		1,530
Buildings	30 years	112,815		7,928
Computer equipment and computer software	3 years	65,323		36,969
Laboratory equipment	3 - 10 years	104,008		37,518
Furniture and fixtures	3 years	14,539		8,353
Assets under construction	n/a	149,687		167,462
Property, plant and equipment, at cost		532,956		303,121
Accumulated depreciation		(77,631)		(57,862)
Property, plant and equipment, net		$	455,325	$	245,259

(1)Lesser of remaining lease term, building life, or estimated useful life.

Depreciation expense for the years ended December 31, 2019, 2018, and 2017 was $33.9 million, $20.5 million, and $14.5 million, respectively.

At December 31, 2019, the Company had $149.7 million of assets under construction which consisted of $126.2 million related to building and leasehold improvements, $18.9 million of costs related to laboratory equipment under construction, $3.9 million of capitalized costs related to software projects, and $0.7 million of furniture and fixtures. Depreciation will begin on these assets once they are placed into service. The Company expects to incur an additional $111.0 million to complete the building projects and leasehold improvements, $3.7 million to complete the laboratory equipment, $2.2 million of costs to complete the computer software projects, and minimal costs to complete the furniture and fixtures. These projects are expected to be completed in 2020 and 2021.

Software Development Costs

Software development costs related to internal use software are incurred in three stages of development: the preliminary project stage, the application development stage, and the post-implementation stage. Costs incurred during the preliminary project and post-implementation stages are expensed as incurred. Costs incurred during the application development stage that meet the criteria for capitalization are capitalized and amortized, when the software is ready for its intended use, using the straight‑line basis over the estimated useful life of the software, which is generally 3 years.

Investments in Privately Held Companies

The Company determines whether its investments in privately held companies are debt or equity based on their characteristics, in accordance with the applicable accounting guidance for such investments. The Company also evaluates the investee to determine if the entity is a variable interest entity (“VIE”) and, if so, whether the Company is the primary beneficiary of the VIE, in order to determine whether consolidation of the VIE is required. If consolidation is not required and the Company owns less than 50.1% of the voting interest of the entity, the investment is evaluated to determine if the equity method of accounting should be applied. The equity method applies to investments in common stock or in substance common stock where the Company exercises significant influence over the investee.

Prior to January 1, 2018, if the equity method did not apply, investments in privately held companies determined to be equity securities were accounted for using the cost method. As discussed below, on January 1, 2018, the Company adopted ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which changed the way it accounts for non-marketable securities. The Company adjusts the carrying value of its non-marketable equity securities for changes from observable transactions for identical or similar investments of the same issuer, less impairment. All gains and losses on non-marketable equity securities, realized and unrealized, are recognized in other income (expense), net in the consolidated statements of operations.

Investments in privately held companies determined to be debt securities are accounted for as available-for-sale or held to maturity securities, in accordance with the applicable accounting guidance for such investments.

Derivative Financial Instruments

The Company hedges a portion of its foreign currency exposures related to outstanding monetary assets and liabilities using foreign currency forward contracts. The foreign currency forward contracts, included in prepaid expenses and other current assets or in accrued liabilities, depending on the contracts’ net position, the Company uses to hedge the exposure are not designated as hedges, and as a result, changes in their fair value are recorded in other income (expense). As of December 31, 2019, the Company had open foreign currency forward contracts with notional amounts of $17.9 million. The Company's foreign exchange derivative instruments are classified as Level 2 within the fair value hierarchy as they are valued using inputs that are observable in the market or can be derived principally from or corroborated by observable market data. The fair value of the foreign currency forward contracts was $0 at December 31, 2019. As of December 31, 2018, the Company had no open foreign currency forward contracts.

Intangible Assets

Intangible assets consisted of the following:


(In thousands)	December 31, 2019		December 31, 2018
Intangible assets
Finite-lived intangible assets	$	963,690	$	33,058
Less: Accumulated amortization	(20,411)		(4,107)
Finite-lived intangible assets, net	943,279		28,951
In-process research and development	200,000		—
Internally developed technology in process	271		51
Intangible assets, net	$	1,143,550	$	29,002

Finite-Lived Intangible Assets

The following table summarizes the net-book-value and estimated remaining life of the Company’s finite-lived intangible assets as of December 31, 2019:


(In thousands)	Net Balance at December 31, 2019		Weighted Average Remaining Life (Years)
Trade name	$	99,739	15.9
Customer relationships	2,476		13.8
Patents	16,715		8.8
Supply agreements	29,429		7.5
Acquired developed technology	794,027		9.9
Internally developed technology	893		2.5
Total	$	943,279

As of December 31, 2019, the estimated future amortization expense associated with the Company’s finite-lived intangible assets for each of the five succeeding fiscal years is as follows:


(In thousands)
2020	$	93,610
2021	93,508
2022	93,302
2023	93,159
2024	92,825
Thereafter	476,875
	$	943,279

Patent costs are capitalized as incurred, only if the Company determines that there is some probable future economic benefit derived from the transaction. A capitalized patent is amortized over its estimated useful life, beginning when such patent is approved. Capitalized patent costs are expensed upon disapproval, upon a decision by the Company to no longer pursue the patent or when the related intellectual property is either sold or deemed to be no longer of value to the Company. Other than the transactions discussed below, the Company determined that all patent costs incurred during the years ended December 31, 2019, 2018 and 2017 should be expensed and not capitalized as the future economic benefit derived from the transactions cannot be determined.

Under a technology license and royalty agreement entered into with MDx Health (“MDx”), dated July 26, 2010 (as subsequently amended, the “MDx License Agreement”), the Company was required to pay MDx milestone-based royalties on sales of products or services covered by the licensed intellectual property. Once the achievement of a milestone occurred or was considered probable, an intangible asset and corresponding liability was reported in intangible assets and accrued liabilities, respectively. The liability was relieved once the milestone was achieved and payment made. The intangible asset is being amortized over the estimated 10-year useful life of the licensed intellectual property through 2024, and such amortization is reported in amortization of acquired intangibles. Payment for all remaining milestones under the License Agreement was made as part of the Royalty Buy-Out agreement outlined below.

Effective April 2017, the Company and MDx entered into a royalty buy-out agreement (“Royalty Buy-Out Agreement”), which terminated the MDx License Agreement. Pursuant to the Royalty Buy-Out Agreement, the Company paid MDx a one-time fee of $8.0 million in exchange for an assignment of certain patents covered by the MDx License Agreement and the elimination of all ongoing royalties and other payments by the Company to MDx under the MDx License Agreement. Also included in the Royalty Buy-Out Agreement is a mutual release of liabilities, which includes all amounts previously accrued under the MDx License Agreement. Concurrently with entering into the Royalty Buy-Out Agreement, the Company entered into a patent purchase agreement (“Patent Purchase Agreement”) with MDx under which it paid MDx an additional $7.0 million in exchange for the assignment of certain other patent rights that were not covered by the MDx License Agreement. The total $15.0 million paid by the Company pursuant to the Royalty Buy-Out Agreement and Patent Purchase Agreement, net of liabilities relieved of $6.6 million, was recorded as an intangible asset and is being amortized over the estimated remaining useful life of the licensed intellectual property through 2024, and such amortization is reported in amortization of acquired intangibles on the consolidated statements of operations. The $6.6 million of liabilities relieved were related to historical milestones and accrued royalties under the License Agreement.

As of December 31, 2019 and 2018, an intangible asset of $6.4 million and $7.7 million, respectively, related to historical milestone payments made under the MDx License Agreement and intangible assets acquired as part of the Royalty Buy-Out Agreement and Patent Purchase Agreement is reported in intangible assets, net. Amortization expense for the years ended December 31, 2019, 2018, and 2017 was $1.3 million, $1.3 million, and $1 million, respectively.

In December 2017, the Company entered into an asset purchase agreement (the “Armune Purchase Agreement”) with Armune BioScience, Inc. (“Armune”), pursuant to which the Company acquired intellectual property and certain other assets underlying Armune’s APIFINY®, APIFINY® PRO and APIFINY® ACTIVE SURVEILLANCE prostate cancer diagnostic tests. The portfolio of Armune assets the Company acquired is expected to complement its product pipeline. The total consideration was comprised of an up-front cash payment of $12.0 million and $17.5 million in contingent payment obligations that will become payable upon the Company’s achievement of development and commercial milestones using the acquired intellectual property. The satisfaction of these milestones is subject to many risks and is therefore uncertain. The Company will not record the contingent consideration until it is probable that the milestones will be met. There is no other

consideration due to Armune beyond the milestone payments and the Company is not subject to future royalty obligations should a product be developed and commercialized. The transaction costs directly related to the asset acquisition were added to the asset in accordance with GAAP. As such, the collective asset value from the acquisition resulted in an intangible asset of $12.2 million. The intellectual property asset, which includes related transaction costs, is being amortized on a straight-line basis over the period the Company expects to be benefited, which is consistent with the legal life of the patents acquired. For the years ended December 31, 2019, 2018, and 2017 the Company recorded amortization expense of $0.9 million, $0.9 million, and $40,000, respectively, which is included in amortization of acquired intangibles on the consolidated statements of operations. At December 31, 2019 and 2018, the net balances of $10.4 million and $11.3 million, respectively are reported in intangible assets, net in the Company’s consolidated balance sheets.

As a result of the Biomatrica Acquisition discussed in Note 13, the Company recorded an intangible asset of $8.8 million which was comprised of acquired developed technology of $5.4 million, customer relationships of $2.7 million, and trade names of $0.7 million. The intangible assets acquired are being amortized over the remaining useful life which was determined to be 15 years for the acquired developed technology, customer relationships, and trade names. For the years ended December 31, 2019 and 2018, the Company recorded amortization expense of $0.6 million and $0.1 million, respectively, which is included in amortization of acquired intangibles on the consolidated statements of operations. At December 31, 2019 and 2018 the net balances of $8.1 million and $8.7 million, respectively, are reported in net intangible assets in the Company’s consolidated balance sheets.

As a result of the combination with Genomic Health discussed in Note 13, the Company recorded intangible assets of $1.1 billion which was comprised of acquired developed technology of $800.0 million, in-process research and development of $200.0 million, trade names of $100.0 million, and supply agreement of $30.0 million. The intangible assets acquired are being amortized over the remaining useful life which was determined to be 10 years for the acquired developed technology, 16 years for the trade names, and 7.6 years for the supply agreement. For the year ended December 31, 2019, the Company recorded amortization expense of $13.0 million, which is included in amortization of acquired intangibles on the consolidated statement of operations, and the net balance of $1.1 billion is reported in net intangible assets in the Company’s consolidated balance sheet.

Acquired In-process Research and Development (IPR&D)

Acquired IPR&D represents the fair value assigned to research and development assets that have not reached technological feasibility. The value assigned to acquired IPR&D is determined by estimating the costs to develop the acquired technology into commercially viable products, estimating the resulting revenues from the projects and discounting the net cash flows to present value. The revenues and costs projections used to value acquired IPR&D are, as applicable, reduced based on the probability of success. IPR&D projects acquired in a business combination that are not complete are capitalized and accounted for as indefinite-lived intangible assets until completion or abandonment of the related R&D efforts. Upon successful completion of the project, the capitalized amount is amortized over its estimated useful life. If a project is abandoned, all remaining capitalized amounts are written off immediately. There are often major risks and uncertainties associated with IPR&D projects as we are required to obtain regulatory approvals in order to be able to market the resulting products. Such approvals reuqire completing clinical trials that demonstrate the products effectiveness. Consequently, the eventual realized value of the IPR&D project may vary from its fair value at the date of acquisition, and IPR&D impairment charges may occur in future periods.

Capitalized IPR&D projects are tested for impairment annually and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company considers various factors for potential impairment, including the current legal and regulatory environment and the competitive landscape. Adverse clinical trial results, significant delays in obtaining marketing approval, the inability to bring a product to market and the introduction or advancement of competitors' products could result in partial or full impairment of the related intangible assets.

Goodwill

In 2017, the Company recognized goodwill of $2.0 million from the acquisition of Sampleminded, Inc. In 2018, the Company recognized goodwill of $15.3 million from the acquisition of Biomatrica, Inc. In November 2019, the Company recognized goodwill of $1.2 billion from the combination with Genomic Health. Refer to Note 13 for further discussion of the goodwill recorded.

The Company evaluates goodwill for possible impairment in accordance with ASC 350 on an annual basis during the fourth quarter, or more frequently if events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Qualitative factors considered in this assessment include industry and market conditions, overall financial performance, and other relevant events and factors affecting the Company's business. Based on the qualitative assessment, if it is determined that the fair value of goodwill is more likely than not to be less than its carrying amount, the fair value of a reporting unit will be calculated and compared with its carrying amount and an impairment charge will be recognized for the amount that the carrying value exceeds the fair value. There were no impairment losses for the years ended December 31, 2019, 2018, and 2017.

The change in the carrying amount of goodwill for the years ended December 31, 2019 and 2018 is as follows:


(In thousands)
Balance, January 1, 2018	$	1,979
Biomatrica acquisition	15,300
Balance, December 31, 2018	17,279
Genomic Health acquisition	1,185,918
Balance, December 31, 2019	$	1,203,197

Impairment of Long-Lived Assets

The Company evaluates the fair value of long-lived assets, which include property and equipment, intangible assets, and investments in privately held companies, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. There were no impairment losses for the years ended December 31, 2019, 2018, and 2017.

Net Loss Per Share

Basic net loss per common share was determined by dividing net loss applicable to common stockholders by the weighted average common shares outstanding during the period. Basic and diluted net loss per share is the same because all outstanding common stock equivalents have been excluded, as they are anti-dilutive as a result of the Company’s losses.

The following potentially issuable common shares were not included in the computation of diluted net loss per share because they would have an anti-dilutive effect due to net losses for each period:


	December 31,
(In thousands)	2019	2018	2017
Shares issuable upon exercise of stock options	2,700	2,532	3,360
Shares issuable upon the release of restricted stock awards	4,384	6,246	6,149
Shares issuable upon conversion of convertible notes	12,196	12,044	—
	19,280	20,822	9,509

Accounting for Stock-Based Compensation

The Company requires all share-based payments to employees, including grants of employee stock options, restricted stock, restricted stock units and shares purchased under an employee stock purchase plan (if certain parameters are not met), to be recognized in the financial statements based on their grant date fair values.

Revenue Recognition

The Company’s revenue is primarily generated by its laboratory testing services utilizing its Cologuard and Oncotype DX tests. The services are completed upon delivery of a patient’s test result to the ordering healthcare provider. The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), which was adopted on January 1, 2018, using the modified retrospective method, which was elected to apply to all contracts. Application of the modified retrospective method did not impact amounts previously reported by the Company, nor did it require a cumulative effect adjustment upon adoption, as the Company’s method of recognizing revenue under ASC 606 was analogous to the method utilized immediately prior to adoption. Accordingly, there is no need for the Company to disclose the amount by which each financial statement line item was affected as a result of applying the new standard and an explanation of significant changes.

The core principle of ASC 606 is that the Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company recognizes revenues from its products in accordance with that core principle, and key aspects considered by the Company include the following:

Contracts

The Company’s customer is the patient. However, the Company does not enter into a formal reimbursement contract with a patient, as formal reimbursement contracts are established with payers. Accordingly, the Company establishes a contract with a patient in accordance with other customary business practices.

•Approval of a contract is established via the order submitted by the patient’s healthcare provider and the receipt of a sample in the laboratory.

•The Company is obligated to perform its laboratory services upon acceptance of a sample from a patient, and the patient and/or applicable payer are obligated to reimburse the Company for services rendered based on the patient’s insurance benefits.

•Payment terms are a function of a patient’s existing insurance benefits, including the impact of coverage decisions with CMS and any applicable reimbursement contracts established between the Company and payers, unless the patient is a self-pay patient, whereby the Company requires payment from the patient prior to commencement of the Company's performance obligations.

•Once the Company releases a patient’s test result to the ordering healthcare provider, the Company is legally able to collect payment and bill an insurer, patient and/or health system, depending on payer contract status or patient insurance benefit status.

•The Company’s consideration is deemed to be variable, and the Company considers collection of such consideration to be probable to the extent that it is unconstrained.

Performance obligations

A performance obligation is a promise in a contract to transfer a distinct good or service (or a bundle of goods or services) to the customer. The Company’s contracts have a single performance obligation, which is satisfied upon rendering of services, which culminates in the release of a patient’s test result to the ordering healthcare provider. The Company elects the practical expedient related to disclosure of unsatisfied performance obligations, as the duration of time between sample receipt and the release of a valid test result to the ordering healthcare provider is far less than one year.

Transaction price

The transaction price is the amount of consideration that the Company expects to collect in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration expected from a contract with a customer may include fixed amounts, variable amounts, or both.

The consideration derived from the Company’s contracts is deemed to be variable due to several factors such as the amount of contractual adjustments, any patient co-payments, deductibles or patient adherence incentives, the existence of secondary payers, and claim denials.

The Company estimates the amount of variable consideration using the expected value method, which represents the sum of probability-weighted amounts in a range of possible consideration amounts. When estimating the amount of variable consideration, the Company considers several factors, such as historical collections experience, patient insurance eligibility and payer reimbursement contracts.

The Company limits the amount of variable consideration included in the transaction price to the unconstrained portion of such consideration. In other words, the Company recognizes revenue up to the amount of variable consideration that is not subject to a significant reversal until additional information is obtained or the uncertainty associated with the additional payments or refunds is subsequently resolved. Differences between original estimates and subsequent revisions, including final settlements, represent changes in the estimate of variable consideration and are included in the period in which such revisions are made. Revenue recognized from changes in transaction prices was $9.9 million and $15.0 million for the years ended December 31, 2019 and 2018, respectively.

The Company monitors its estimates of transaction price to depict conditions that exist at each reporting date. If the Company subsequently determines that it will collect more consideration than it originally estimated for a contract with a patient, it will account for the change as an increase in the estimate of the transaction price (i.e., an upward revenue adjustment) in the period identified. Similarly, if the Company subsequently determines that the amount it expects to collect from a patient is less than it originally estimated, it will generally account for the change as a decrease in the estimate of the transaction price (i.e., a downward revenue adjustment), provided that such downward adjustment does not result in a significant reversal of cumulative revenue recognized.

When the Company does not have significant historical experience or that experience has limited predictive value, the constraint over estimates of variable consideration may result in no revenue being recognized upon release of the performance obligations associated with the Company's tests, with recognition, generally occurring at the date of cash receipt.

Allocate transaction price

The transaction price is allocated entirely to the performance obligation contained within the contract with a patient.

Point in time recognition

The Company’s single performance obligation is satisfied at a point in time, and that point in time is defined as the date a patient’s successful test result is released to the patient’s ordering healthcare provider. The Company considers this date to be the time at which the patient obtains control of the promised test service.

Disaggregation of Revenue

The following table presents the Company's revenues disaggregated by revenue source:


	December 31,
(In thousands)	2019		2018		2017
Screening
Medicare Parts B & C	$	404,331	$	254,431	$	172,255
Commercial	368,006		184,538		84,842
Other	37,783		15,493		8,892
Total Screening	810,120		454,462		265,989
Precision Oncology
Medicare Parts B & C	$	24,325	$	—	$	—
Commercial	29,976		—		—
International	11,444		—		—
Other	428		—		—
Total Precision Oncology	66,173		—		—
Total	$	876,293	$	454,462	$	265,989

Screening includes laboratory service revenue from Cologuard and revenue from Biomatrica products. Precision Oncology includes laboratory service revenue from global Oncotype DX products.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable and deferred revenue on the consolidated balance sheets. Generally, billing occurs subsequent to the release of a patient’s test result to the ordering healthcare provider, resulting in an account receivable. However, the Company sometimes receives advance payment from a patient, particularly a self-pay patient, before a test result is completed, resulting in deferred revenue. The deferred revenue balance is relieved upon release of the applicable patient’s test result to the ordering healthcare provider. As of December 31, 2019 and 2018, the deferred revenue balance is not material to the Company's consolidated financial statements.

Practical Expedients

The Company does not adjust the transaction price for the effects of a significant financing component, as at contract inception, the Company expects the collection cycle to be one year or less.

The Company expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses in the Company’s consolidated statements of operations.

The Company incurs certain other costs that are incurred regardless of whether a contract is obtained. Such costs are primarily related to legal services and patient communications (e.g. adherence reminder letters). These costs are expensed as incurred and recorded within general and administrative expenses in the Company’s consolidated statements of operations.

Advertising Costs

The Company expenses the costs of media advertising at the time the advertising takes place. The Company expensed approximately $88.7 million, $93.7 million, and $58.0 million of media advertising during the years ended December 31, 2019, 2018, and 2017, respectively, which is recorded in sales and marketing expenses on the Company's consolidated statements of operations.

Fair Value Measurements

The FASB has issued authoritative guidance that requires fair value to be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under that standard, fair value measurements are separately disclosed by level within the fair value hierarchy. The fair value hierarchy establishes and prioritizes the inputs used to measure fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are inputs that reflect the assumptions that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The three levels of the fair value hierarchy established are as follows:

Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3 Unobservable inputs that reflect the Company’s assumptions about the assumptions that market participants would use in pricing the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available.

The Company's available-for-sale debt securities are classified as Level 2. They are valued using a third-party pricing agency where the valuation is based on observable inputs including pricing for similar assets and other observable market factors. The Company's marketable equity securities are classified as Level 1. There were no transfers between Level 1 and Level 2 categories during the year ended December 31, 2019. The fair value of contingent consideration related to the Biomatrica Acquisition was categorized as a Level 3 liability, as the measurement amount is based primarily on significant inputs not observable in the market. The Company evaluates the fair value of expected contingent consideration and the corresponding liability each annual reporting period using the Monte Carlo Method, which is consistent with the initial measurement of the expected Biomatrica Acquisition earn-out liability. This fair value measurement is considered a Level 3 measurement because the Company estimates projections during the earn-out period utilizing various potential pay-out scenarios. Probabilities were applied to each potential scenario and the resulting values were discounted using a rate that considers weighted average cost of capital as well as a specific risk premium associated with the riskiness of the earn out itself, the related projections, and the overall business. The contingent earn-out liability is classified as a component of other long-term liabilities in the Company’s consolidated balance sheets. The change in the fair value between the acquisition date and December 31, 2019 was due to an earn-out payment made during that time resulting in a decrease in the liability at December 31, 2019. See Note 13 for further detail on the Biomatrica Acquisition. Of the Company's non-marketable equity investments, $10.8 million is related to the preferred stock investment in Epic Sciences and is categorized as a Level 3 asset in the fair value hierarchy because the value is estimated using an option pricing model that considered a recent observable transaction and other unobservable inputs including volatility and long-term plan of Epic Sciences. There were no changes to the fair value based on observable transactions during the period end from the combination date to December 31, 2019 utilizing the option pricing model discussed above. See Note 6, for additional information regarding the terms of this investment.

The following table presents the Company’s fair value measurements as of December 31, 2019 along with the level within the fair value hierarchy in which the fair value measurements, in their entirety, fall.


			Fair Value Measurement at December 31, 2019 Using:
(In thousands)	Fair value at December 31, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash, cash equivalents, and restricted cash
Cash and money market	$	146,932	$	146,932	$	—	$	—
U.S. government agency securities	30,322		—		30,322		—
Restricted cash	274		274		—		—
Marketable securities
Corporate bonds	4,003		—		4,003		—
U.S. government agency securities	140,682		—		140,682		—
Equity securities	1,716		1,716		—		—
Non-marketable equity investments	11,821		—		—		11,821
Contingent consideration	(2,879)		—		—		(2,879)
Total	$	332,871	$	148,922	$	175,007	$	8,942

The following table presents the Company’s fair value measurements as of December 31, 2018 along with the level within the fair value hierarchy in which the fair value measurements, in their entirety, fall.


			Fair Value Measurement at December 31, 2018 Using:
(In thousands)	Fair Value at December 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents
Cash and money market	$	75,375	$	75,375	$	—	$	—
U.S. government agency securities	49,985		—		49,985		—
Commercial paper	24,070		—		24,070		—
Certificates of deposit	11,000		—		11,000
Marketable securities
Corporate bonds	392,287		—		392,287		—
Asset backed securities	276,999		—		276,999		—
U.S. government agency securities	250,471		—		250,471		—
Certificates of deposit	31,844		—		31,844		—
Commercial paper	12,151		—		12,151		—
Contingent consideration	(3,060)		—		—		(3,060)
Total	$	1,121,122	$	75,375	$	1,048,807	$	(3,060)

The Company evaluates investments including investments in privately-held companies for other-than-temporary impairment. It was determined that unrealized gains and losses at December 31, 2019, 2018, and 2017 are temporary in nature because the change in market value for those securities resulted from fluctuating interest rates rather than a deterioration of the credit worthiness of the issuers. So long as the Company holds these securities to maturity, it is unlikely to experience gains or losses. In the event that the Company disposes of these securities before maturity, it is expected that realized gains or losses, if any, will be immaterial.

The following table summarizes the gross unrealized losses and fair values of available-for-sale debt securities in an unrealized loss position as of December 31, 2019, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:


	December 31, 2019
	Less than 12 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	$	4,003	$	(14)	$	—	$	—	$	4,003	$	(14)
U.S. government agency securities	140,682		(73)		—		—		140,682		(73)
Total	$	144,685	$	(87)	$	—	$	—	$	144,685	$	(87)

The following table summarizes the gross unrealized losses and fair value of available-for-sale debt securities in an unrealized loss position as of December 31, 2018, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:


	December 31, 2018
	Less than 12 months						12 months or greater						Total
(In thousands)	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Cash equivalents
Commercial paper	$	24,070	$	(2)	$	—	$	—	$	24,070	$	(2)
Total cash equivalents	24,070		(2)		—		—		24,070		(2)
Marketable Securities
Corporate bonds	$	340,287	$	(638)	$	35,773	$	(81)	$	376,060	$	(719)
Asset backed securities	201,036		(178)		—		—		201,036		(178)
U.S. government agency securities	243,846		(501)		18,335		(67)		262,181		(568)
Certificates of deposit	31,843		(31)		—		—		31,843		(31)
Commercial paper	12,151		(7)		—		—		12,151		(7)
Total marketable securities	829,163		(1,355)		54,108		(148)		883,271		(1,503)
Total	$	853,233	$	(1,357)	$	54,108	$	(148)	$	907,341	$	(1,505)

The following table summarizes contractual underlying maturities of the Company’s available-for-sale debt securities at December 31, 2019:


	December 31, 2019
	Due one year or less						Due after one year through four years
(In thousands)	Cost		Fair Value		Cost		Fair Value
Cash equivalents
U.S. government agency securities	$	30,320	$	30,321	$	—	$	—
Total cash equivalents	30,320		30,321		—		—
Marketable securities
U.S. government agency securities	140,745		140,682		—		—
Corporate bonds	4,017		4,003		—		—
Total marketable securities	144,762		144,685		—		—
Total available-for-sale securities	$	175,082	$	175,006	$	—	$	—

Fair Value of Long-Term Debt and Convertible Notes

The Company measures the fair value of its convertible notes and long-term debt for disclosure purposes. The following table summarizes the Company’s outstanding convertible notes and long-term debt:


	December 31, 2019						December 31, 2018
(In thousands)	Carrying Amount (1)		Fair Value		Carrying Amount (1)		Fair Value
2027 Convertible notes (2)	$	483,909	$	843,741	$	—	$	—
2025 Convertible notes (2)	319,696		592,482		664,749		956,196
Construction loan (3)	24,866		24,866		24,502		24,502

(1) The carrying amounts presented are net of debt discounts and debt issuance costs (See Note 8 and Note 9 of the consolidated financial statements for further information).

(2) The fair values are based on observable market prices for this debt, which are traded in active markets and therefore are classified as a Level 2 fair value measurement. A portion of the 2025 convertible notes were settled in 2019 resulting in a decrease in the liability.

(3) The carrying amount of the construction loan approximates fair value due to the short-term nature of this instrument. The construction loan is privately held with no public market for this debt and therefore is classified as a Level 3 fair value measurement. The change in the fair value was due to payments made on the loan resulting in a decrease in the liability.

Concentration of Credit Risk

Financial instruments that subject the Company to credit risk consist of cash, cash equivalents and marketable securities. As of December 31, 2019, the Company had cash and cash equivalents deposited in financial institutions in which the balances exceed the federal government agency insured limit of $250,000 by approximately $145.6 million. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant credit risk.

Through December 31, 2019, the Company’s revenues have been primarily derived from the sale of Cologuard and Oncotype DX tests. The following is a breakdown of revenue and accounts receivable from major payers:


	% Revenue for the years ended December 31,					% Accounts Receivable at December 31,
Major Payer	2019	2018	2017	2019	2018	2017
Centers for Medicare and Medicaid Services	29%	36%	44%	19%	32%	39%
UnitedHealthcare	13%	13%	11%	7%	10%	10%

Tax Positions

A valuation allowance to reduce the deferred tax assets is reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has incurred significant losses since its inception and due to the uncertainty of the amount and timing of future taxable income, the Company has determined that a $120.7 million and $209.9 million valuation allowance at December 31, 2019 and 2018 is necessary to reduce the tax assets to the amount that is more likely than not to be realized. The change in valuation allowance as of December 31, 2019 and 2018 was a decrease of $89.2 million and $4.4 million, respectively. An income tax benefit of $185.1 million was recorded as a result of a change in the deferred tax asset valuation allowance resulting from the Genomic Health combination. In connection with the Genomic Health combination, a deferred tax liability was recorded for identified intangible assets. These deferred tax liabilities are considered a source of future taxable income which allowed the Company to reduce its pre-combination deferred tax asset valuation allowance. The change in pre-combination deferred tax asset valuation allowance of an acquirer is a transaction recognized separate from the business combination and reduces income tax expense in the period of the business combination. Due to the existence of the valuation allowance, future changes in our unrecognized tax benefits will not impact our effective tax rate.

Subsequent Events

The Company evaluates events that occur through the filing date and discloses those events or transactions that provide additional evidence with respect to conditions that existed at the date of the balance sheet. In addition, the financial statements are adjusted for any changes in estimates resulting from the use of such evidence.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board issued ASU No. 2016-02, Leases (Topic 842) and subsequent amendments to the initial guidance: ASU 2017-13, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01, (collectively, “Update 2016-02”). Update 2016-02 requires recognition of right-of-use assets and lease liabilities on the balance sheet, including those leases classified as operating leases under previous GAAP. Update 2016-02 provides an option of recognizing a cumulative-effect adjustment to the opening balance of retained earnings upon adoption. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted Update 2016-02 on January 1, 2019 using the modified retrospective method of adoption. The Company elected the package of practical expedients permitted under the transition guidance, including (i) not reassessing whether expired or existing contracts contain leases, (ii) not reassessing lease classification, and (iii) not revaluing initial direct costs for existing leases. As a result of the adoption, the Company recorded an opening right-of-use asset balance of $20.6 million, which is included in operating lease right-of-use assets in the Company’s consolidated financial statements. The Company also recorded an opening lease liability of $20.1 million, of which $3.0 million was classified in operating lease liabilities, current portion and $17.1 million was classified in operating lease liabilities, less current portion in the Company’s consolidated financial statements. See Note 6 for more detail.

In June 2018, the Financial Accounting Standards Board issued ASU No. 2018-07 (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting, (“Update 2018-07”). Update 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for certain exemptions specified in the amendment. The guidance is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption of Topic 606. The Company adopted this guidance on January 1, 2019, and it did not have an impact on its consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the Financial Accounting Standards Board issued ASU No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (“Update 2016-13”). Update 2016-13 requires companies to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets, including trade receivables. The guidance is effective for fiscal years beginning after December 15, 2019 and will not have a material impact on the Company's consolidated financial statements.

In August 2018, the Financial Accounting Standards Board issued ASU 2018-13, Fair Value Measurement (Topic 820); Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, ("Update 2018-13"). Update 2018-13 provided an update to the disclosure requirements for fair value measurements under the scope of ASC 820. The guidance is effective for fiscal years beginning after December 15, 2019 and will not have a material impact on the Company's consolidated financial statements.

In August 2018, the Financial Accounting Standards Board issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software, (“Update 2018-15”). Update 2018-15 provided guidance for evaluating the accounting for fees paid by a customer in a cloud computing arrangement that is a service contract. The guidance is effective for fiscal years beginning after December 15, 2019 and will not have a material impact on the Company's consolidated financial statements.

In November 2018, the Financial Accounting Standards Board issued ASU 2018-18, Collaborative Arrangements (Topic 808), (“Update 2018-18”). Update 2018-18 provided additional guidance regarding the interaction between Topic 808 on Collaborative Arrangements and Topic 606 on Revenue Recognition. The guidance is effective for fiscal years beginning after December 15, 2019 and will not have a material impact on the Company's consolidated financial statements.

In April 2019, the Financial Accounting Standards Board issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, (“Update 2019-04”). Update 2019-04 represents changes to clarify, correct errors in, or improve the codification for these topics. The guidance is effective for fiscal years beginning after December 15, 2019 and will not have a material impact on the Company's consolidated financial statements.

In December 2019, the Financial Accounting Standards Board issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The update simplifies the accounting for income taxes through certain targeted improvements to various subtopics within Topic 740. The amendments in this update are effective for fiscal years and interim periods beginning after December 15, 2020. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

Guarantees and Indemnifications

The Company, as permitted under Delaware law and in accordance with its bylaws, indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum amount of potential future indemnification is unlimited; however, the Company has a directors and officers insurance policy that limits its exposure and may enable it to recover a portion of any future amounts paid. The Company believes the fair value of these indemnification agreements is minimal. Accordingly, the Company has not recorded any liabilities for these agreements as of December 31, 2019 and 2018.

Foreign Currency Translation

In 2017 and 2018, the Company's international subsidiaries functional currency was the local currency and assets and liabilities were translated into United States dollars at the period-end exchange rate or historical rates, as appropriate. Consolidated statements of operations were translated at average exchange rates for the period, and the cumulative translation adjustments resulting from changes in exchange rates were included in the Company's consolidated balance sheet as a component of accumulated other comprehensive income (loss). In 2019 the Company’s international subsidiaries use the U.S. dollar as the functional currency, resulting in the Company not being subject to gains and losses from foreign currency translation of the subsidiary financial statements. Net foreign currency transaction gains (losses) were not significant for the years ended December 31, 2019, 2018, and 2017.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation in the consolidated financial statements and accompanying notes to the consolidated financial statements including the amortization of acquired intangible assets, which is now presented as a separate line item on the Company's consolidated statements of operations and was previously included in cost of sales, research and development, and general and administrative expenses. Due to these reclassifications, the Company is no longer presenting gross margin on the Company's consolidated statements of operations.

MAYO LICENSE AGREEMENT	12 Months Ended
MAYO LICENSE AGREEMENT	Dec. 31, 2019
MAYO LICENSE AGREEMENT
MAYO LICENSE AGREEMENT	MAYO LICENSE AGREEMENT In June 2009, the Company entered into a license agreement with Mayo Foundation for Medical Education and Research (“Mayo”). The Company’s license agreement with Mayo was amended and restated in February 2015 and further amended in January 2016, October 2017 and January 2019. Under the license agreement, Mayo granted the Company an exclusive, worldwide license to certain Mayo patents and patent applications, as well as a non-exclusive, worldwide license with regard to certain Mayo know-how. The scope of the license covers any screening, surveillance or diagnostic test or tool for use in connection with any type of cancer, pre-cancer, disease or condition. The licensed Mayo patents and patent applications contain both method and composition claims that relate to sample processing, analytical testing and data analysis associated with nucleic acid screening for cancers and other diseases. The jurisdictions covered by these patents and patent applications include the U.S., Australia, Canada, the European Union, China, Japan and Korea. Under the license agreement, the Company assumed the obligation and expense of prosecuting and maintaining the licensed Mayo patents and is obligated to make commercially reasonable efforts to bring to market products using the licensed Mayo intellectual property. Pursuant to the Company’s agreement with Mayo, the Company is required to pay Mayo a low single-digit royalty on the Company’s net sales of products using the licensed Mayo intellectual property each year during the term of the Mayo agreement. 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. As part of the January 2016 and October 2017 amendments, the royalty rate on the Company's net sales of Cologuard increased but the rate remains a low-single-digit percentage of net sales. In addition to the royalties described above, the Company is required 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 through 2019. The license agreement will remain in effect, unless earlier terminated by the parties in accordance with the agreement, until the last of the licensed patents expires in 2037 (or later, if certain licensed patent applications are issued). However, if the Company is still using the licensed Mayo know-how or certain Mayo-provided biological specimens or their derivatives on such expiration date, the term shall continue until the earlier of the date the Company stops using such know-how and materials and the date that is five years after the last licensed patent expires. The license agreement contains customary termination provisions and permits Mayo to terminate the license agreement if the Company sues Mayo or its affiliates, other than any such suit claiming an uncured material breach by Mayo of the license agreement. In addition to granting the Company a license to the covered Mayo intellectual property, Mayo provides the Company with product development and research and development assistance pursuant to the license agreement and other collaborative arrangements. In connection with this collaboration, the Company incurred charges of $4.8 million, $4.5 million, and $3.8 million for the years ended December 31, 2019, 2018 and 2017, respectively. Certain of Mayo's obligations to provide development assistance expired in January 2020. The Company and Mayo are in discussions to amend the license agreement to extend that date.

PFIZER PROMOTION AGREEMENT	12 Months Ended
PFIZER PROMOTION AGREEMENT	Dec. 31, 2019
PFIZER PROMOTION AGREEMENT
PFIZER PROMOTION AGREEMENT	PFIZER PROMOTION AGREEMENTIn August 2018, the Company entered into a Promotion Agreement (“Promotion Agreement”) with Pfizer, Inc. (“Pfizer”). Under the terms of the Promotion Agreement, Pfizer promotes Cologuard and provides certain sales, marketing, analytical and other commercial operations support. The Company agreed to pay Pfizer for promotion, sales and marketing costs incurred on behalf of the Company. The Company incurred charges of $68.9 million and $0.5 million for promotion, sales and marketing services performed by Pfizer on behalf of the Company during the years ended December 31, 2019 and 2018, respectively. These costs are recorded in sales and marketing in the Company’s consolidated statements of operations. The Company agreed to pay Pfizer a service fee based on incremental gross profits over specified baselines during the term of the Promotion Agreement and royalties for Cologuard related revenues for a specified period after the expiration or termination of the Promotion Agreement. The initial term of the Promotion Agreement runs through December 31, 2021. The Company incurred charges of $68.5 million and $4.8 million for the service fee during the years ended December 31, 2019 and 2018, respectively. These costs are recorded in sales and marketing in the Company’s consolidated statements of operations.

ISSUANCES OF EQUITY	12 Months Ended
ISSUANCES OF EQUITY	Dec. 31, 2019
Equity [Abstract]
ISSUANCES OF EQUITY	ISSUANCES OF EQUITY Underwritten Public Offerings In June 2017, the Company completed an underwritten public offering of 7.5 million shares of common stock at a price of $35.00 per share to the public. The Company received, in the aggregate, approximately $253.4 million of net proceeds from the offering, after deducting $7.3 million for the underwriting discount and commissions and other stock issuance costs paid by the Company. Convertible Notes Settlement Stock Issuance In March 2019, the Company used cash of $494.0 million and an aggregate of 2.2 million shares of the Company’s common stock valued at $182.4 million for total consideration of $676.5 million to settle $493.4 million of the 2025 convertible notes. Refer to Note 9 for further discussion of this settlement transaction. Genomic Health Combination Stock Issuance In November 2019, the Company completed the combination with Genomic Health in a cash and stock transaction valued at approximately $2.5 billion. Of the $2.5 billion purchase price, approximately $1.4 billion was settled through the issuance of 17.0 million shares of common stock. The Company incurred $0.4 million in stock issuance costs as part of the transaction. Refer to Note 13 for further discussion of the consideration transferred as part of the combination with Genomic Health.

STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

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 2019 Omnibus Long-Term Incentive Plan, the 2010 Employee Stock Purchase Plan, the 2016 Inducement Award Plan and the 2000 Stock Option and Incentive Plan (collectively, the “Stock Plans”).

2000 Stock Option and Incentive Plan. The Company adopted the 2000 Stock Option and Incentive Plan (the “2000 Option Plan”) on October 17, 2000. The 2000 Option Plan expired October 17, 2010 and after such date no further awards could be granted under the plan. Under the terms of the 2000 Option Plan, the Company was authorized to grant incentive stock options, as defined under the Internal Revenue Code, non-qualified options, restricted stock awards and other stock awards to employees, officers, directors, consultants and advisors. Options granted under the 2000 Option Plan expire ten years from the date of grant. Grants made from the 2000 Option Plan generally vest over a period of three to four years.

The 2000 Option Plan was administered by the compensation committee of the Company’s board of directors, which selected the individuals to whom equity-based awards would be granted and determined the option exercise price and other terms of each award, subject to the provisions of the 2000 Option Plan. The 2000 Option Plan provides that upon an acquisition of the Company, all options to purchase common stock will accelerate by a period of one year. In addition, upon the termination of an employee without cause or for good reason prior to the first anniversary of the completion of the acquisition, all options then outstanding under the 2000 Option Plan held by that employee will immediately become exercisable. At December 31, 2019, options to purchase 6,505 shares were outstanding under the 2000 Option Plan. There were no shares of restricted stock outstanding under the 2000 Option Plan.

2010 Omnibus Long-Term Incentive Plan. The Company adopted the 2010 Omnibus Long-Term Incentive Plan (the “2010 Stock Plan”) on July 16, 2010. The 2010 Stock Plan will expire on July 16, 2020 and after such date no further awards may be granted under the plan. Under the terms of the 2010 Stock Plan, the Company is authorized to grant incentive stock options, as defined under the Internal Revenue Code, non-qualified options, restricted stock awards and other stock awards to employees, officers, directors, consultants and advisors. Options granted under the 2010 Stock Plan expire ten years from the date of grant. Grants made from the 2010 Stock Plan generally vest over a period of three to four years.

The 2010 Stock Plan is administered by the compensation committee of the Company’s board of directors, which selects the individuals to whom equity-based awards will be granted and determines the option exercise price and other terms of each award, subject to the provisions of the 2010 Stock Plan. The 2010 Stock Plan provides that upon an acquisition of the Company, all equity will accelerate by a period of one year. In addition, upon the termination of an employee without cause or for good reason prior to the first anniversary of the completion of the acquisition, all equity awards then outstanding under the 2010 Stock Plan held by that employee will immediately vest. At December 31, 2019, options to purchase 2,043,383 shares were outstanding under the 2010 Stock Plan and 3,462,321 shares of restricted stock and restricted stock units were outstanding. At December 31, 2019, there were no shares available for future grant under the 2010 Stock Plan.

2019 Omnibus Long-Term Incentive Plan. The Company adopted the 2019 Omnibus Long-Term Incentive Plan (the “2019 Stock Plan”) on July 25, 2019. The 2019 Stock Plan will expire on July 25, 2029 and after such date no further awards may be granted under the plan. Under the terms of the 2019 Stock Plan, the Company is authorized to grant incentive stock options, as defined under the Internal Revenue Code, non-qualified options, restricted stock awards and other stock awards to employees, officers, directors, consultants and advisors. Options granted under the 2019 Stock Plan expire ten years from the date of grant. Grants made from the 2019 Stock Plan generally vest over a period of three to four years.

The 2019 Stock Plan is administered by the compensation committee of the Company’s board of directors, which selects the individuals to whom equity-based awards will be granted and determines the option exercise price and other terms of each award, subject to the provisions of the 2019 Stock Plan. The 2019 Stock Plan provides that upon an acquisition of the Company, all equity will accelerate by a period of one year. In addition, upon the termination of an employee without cause or for good reason prior to the first anniversary of the completion of the acquisition, all equity awards then outstanding under the 2019 Stock Plan held by that employee will immediately vest. At December 31, 2019, options to purchase 650,405 shares were outstanding under the 2019 Stock Plan and 356,594 shares of restricted stock and restricted stock units were outstanding. At December 31, 2019, there were 7,560,301 shares available for future grant under the 2019 Stock Plan.

2016 Inducement Award Plan. The Company adopted the 2016 Inducement Award Plan (the “2016 Inducement Plan”) on January 25, 2016. The 2016 Inducement Plan expired on July 27, 2017, and after such date no further awards could be granted under the plan. Under the terms of the 2016 Inducement Plan, the Company was authorized to grant incentive stock options, as defined under the Internal Revenue Code, non-qualified options, restricted stock awards and other stock awards to employees who were not previously an employee of the Company or any of its Subsidiaries. Options granted under the 2016 Inducement Plan expire ten years from the date of grant. Grants made from the 2016 Inducement Plan generally vest over a period of three to four years.

The 2016 Inducement Plan was administered by the compensation committee of the Company’s board of directors, which selected the individuals to whom equity-based awards would be granted and determines the option exercise price and other terms of each award, subject to the provisions of the 2016 Inducement Plan. The 2016 Inducement Plan provides that upon an acquisition of the Company, all equity will accelerate by a period of one year. In addition, upon termination of an employee without cause or for good reason prior to the first anniversary of the completion of the acquisition, all equity awards then outstanding under the 2016 Inducement Plan held by that employee will immediately vest. At December 31, 2019, there were 229,691 shares of restricted stock and restricted stock units outstanding under the 2016 Inducement Award Plan. At December 31, 2019, there were no shares available for future grant under the 2016 Inducement Plan.

2010 Employee Stock Purchase Plan. The 2010 Employee Stock Purchase Plan (the “2010 Purchase Plan”) was adopted by the Company on July 16, 2010. The 2010 Purchase Plan provides participating employees the right to purchase shares of common stock at a discount through a series of offering periods. The 2010 Purchase Plan will expire on October 31, 2030. On July 24, 2014, the Company’s stockholders approved an amendment to the 2010 Employee Stock Purchase Plan to increase the number of shares available for purchase thereunder by 500,000 shares. On July 28, 2016 the Company’s stockholders approved an amendment to the 2010 Employee Stock Purchase Plan to increase the number of shares available for purchase thereunder by 2,000,000 shares. At December 31, 2019, there were 1,879,636 shares of common stock available for purchase by participating employees under the 2010 Purchase Plan.

The compensation committee of the Company’s board of directors administers the 2010 Purchase Plan. Generally, all employees whose customary employment is more than 20 hours per week and more than five months in any calendar year are eligible to participate in the 2010 Purchase Plan. Participating employees authorize an amount, between 1 percent and 15 percent of the employee’s compensation, to be deducted from the employee’s pay during the offering period. On the last day of the offering period, the employee is deemed to have exercised the employee’s option to purchase shares of Company common stock, at the option exercise price, to the extent of accumulated payroll deductions. Under the terms of the 2010 Purchase Plan, the option exercise price is an amount equal to 85 percent of the fair market value, as defined under the 2010 Purchase Plan, and no employee can purchase more than $25,000 of Company common stock under the 2010 Purchase Plan in any calendar year. Rights granted under the 2010 Purchase Plan terminate upon an employee’s voluntary withdrawal from the 2010 Purchase Plan at any time or upon termination of employment. At December 31, 2019, there were 1,739,921 cumulative shares issued under the 2010 Purchase Plan, and 176,458 shares were issued in the year ended December 31, 2019, as follows:


Offering period ended	Number of Shares	Weighted Average price per Share
April 30, 2019	93,591	$	44.23
October 31, 2019	82,867	$	51.51

Stock-Based Compensation Expense

The Company recorded approximately $108.5 million, $60.3 million, and $35.5 million in stock-based compensation expense during the years ended December 31, 2019, 2018, and 2017, respectively, 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. Non-cash stock-based compensation expense by expense category for the years ended December 31, 2019, 2018, and 2017 is as follows:


	December 31,
(In thousands)	2019		2018		2017
Cost of sales	$	5,799	$	3,531	$	1,783
Research and development	17,196		10,189		6,836
General and administrative	64,222		34,181		20,221
Sales and marketing	21,266		12,363		6,672
Total stock-based compensation	$	108,483	$	60,264	$	35,512

In connection with the April 2018 transition of the Company’s former Chief Operating Officer, the Company accelerated the vesting of 69,950 shares under his previously unvested stock options and 54,350 shares under his previously unvested restricted stock units whereby such unvested stock options and unvested restricted stock units vest on December 31, 2018. It was determined that the continuing service to be provided by the Company’s Chief Operating Officer to the Company through December 31, 2018 was substantive and, as a result, the Company recognized the additional non-cash stock-based compensation expense for the modified awards evenly over the transition term of April 25, 2018 to December 31, 2018. During the year ended December 31, 2018, the Company recorded $3.9 million of non-cash stock-based compensation expense for the modified awards.

In connection with the combination with Genomic Health, the Company accelerated the vesting of 364,281 shares of previously unvested stock options and 70,138 shares of previously unvested restricted stock units for employees with qualifying termination events. The Company recognized the additional non-cash stock-based compensation as of December 31, 2019. During the year ended December 31, 2019, the Company recorded $21.6 million of non-cash stock-based compensation expense for the accelerated awards.

Determining Fair Value

Valuation and Recognition—The fair value of each service-based 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. For awards that vest when a performance condition is achieved, the Company performs an evaluation of internal and external factors to determine the number of shares that are most likely to vest based on the probability of what performance conditions will be met. 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 on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent expected term.

Forfeitures—The Company recognizes forfeitures as they occur.

The fair value of each option is based on the assumptions in the following table:


	Year Ended December 31
	2019	2018	2017
Option Plan Shares
Risk-free interest rates	2.54% - 2.59%	2.73% - 2.79%	2.1% - 2.2%
Expected term (in years)	6.28	5.45 - 6.44	6.51 - 6.59
Expected volatility	64.95% - 64.99%	61.82% - 66.17%	62.1% - 62.95%
Dividend yield	0%	0%	0%
Weighted average fair value per share of options granted during the period	$57.11	$24.55	$25.23
ESPP Shares
Risk-free interest rates	1.6%-2.4%	2.1%-2.8%	1% - 1.6%
Expected term (in years)	0.4 - 2.0	0.5 - 2.0	0.5 - 2.0
Expected volatility	43.2% - 57.6%	51.7% - 65.4%	45% - 85.5%
Dividend yield	0%	0%	0%
Weighted average fair value per share of stock purchase rights granted during the period	$29.21	$20.47	$17.87

Stock Option, Restricted Stock, and Restricted Stock Unit Activity

A summary of stock option activity under the Stock Plans during the years ended December 31, 2019, 2018, and 2017 is as follows:


Options	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value(1)
(Aggregate intrinsic value in thousands)
Outstanding, January 1, 2017	3,505,481	$	7.00	5.5
Granted	953,097	21.97
Exercised	(1,067,120)	4.78
Forfeited	(30,997)	13.90
Outstanding, December 31, 2017	3,360,461	$	11.89	6.4
Granted	343,566	44.37
Exercised	(1,033,012)	6.42
Forfeited	(139,454)	24.07
Outstanding, December 31, 2018	2,531,561	$	17.86	6.6
Granted	186,044	92.61
Assumed through acquisition	650,405	60.02
Exercised	(641,925)	13.69
Forfeited	(25,792)	33.25
Outstanding, December 31, 2019	2,700,293	$	34.01	6.7	$	158,466
Exercisable, December 31, 2019	1,411,179	$	24.17	5.7	$	96,608

_________________________________

(1)The total intrinsic value of options exercised during the years ended December 31, 2019, 2018, and 2017 was $52.0 million, $53.0 million, and $47.0 million, respectively, determined as of the date of exercise.

A summary of restricted stock and restricted stock unit activity under the Stock Plans during the years ended December 31, 2019, 2018, and 2017 is as follows:


	Restricted Shares	Weighted Average Grant Date Fair Value
Outstanding, January 1, 2017	5,601,316	$	9.19
Granted	2,035,679	33.04
Released	(1,132,265)	14.24
Forfeited	(355,952)	19.68
Outstanding, December 31, 2017	6,148,778	$	9.19
Granted	1,686,385	50.49
Released	(1,277,727)	21.66
Forfeited	(311,262)	24.39
Outstanding, December 31, 2018	6,246,174	$	23.16
Granted	1,800,467	93.26
Assumed through acquisition	528,420	79.95
Released	(3,952,372)	16.50
Forfeited	(238,684)	57.28
Outstanding, December 31, 2019	4,384,005	$	63.30

As of December 31, 2019, there was approximately $214.4 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under all equity compensation plans. The Company expects to recognize that cost over a weighted average period of 2.43 years.

The Company received approximately $8.8 million, $6.6 million, and $5.1 million from stock option exercises during the years ended December 31, 2019, 2018 and 2017, respectively. During the years ended December 31, 2019, 2018, and 2017, 176,458, 346,609, and 423,423 shares of common stock, respectively, were issued under the Company’s 2010 Purchase Plan, resulting in proceeds to the Company of $8.4 million, $4.9 million, and $2.8 million, respectively.

Shares Reserved for Issuance

The Company has reserved shares of its authorized common stock for issuance pursuant to its employee stock purchase and equity plans, including all outstanding stock option grants noted above at December 31, 2019, as follows:


Shares reserved for issuance
2019 Stock Plan			7,560,301
2010 Purchase Plan			1,879,636
			9,439,937

COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

The Company acts as lessee under all of its lease agreements, which includes operating leases for corporate offices, laboratory space, warehouse space, vehicles and certain laboratory and office equipment. The Company also has finance leases for certain equipment, which are not material to the Company's consolidated financial statements. The leases have remaining lease terms of 1 year to 9 years, some of which include options to extend the lease for up to 10 years, and some of which include options to terminate the lease within 1 year. The Company includes any renewal or termination option in its lease payment calculations if it is reasonably certain to exercise the option. “Reasonably certain” is assessed internally based on economic, industry, company, strategic and contractual factors. The components of lease expense were as follows:


(In thousands)	Year Ended December 31, 2019
Operating lease cost	$	9,200
Short-term lease cost	219
Variable lease cost	896
Total Lease Cost	$	10,315

Certain vehicle leases include variable lease payments that depend on an index or rate. Those lease payments are initially measured using the index or rate at the lease commencement date.

The Company calculates its incremental borrowing rates for specific lease terms, used to discount future lease payments, as a function of the U.S. Treasury rate and an indicative Moody’s rating for operating leases. The Company’s weighted average discount rate and weighted average lease term remaining on lease liabilities is approximately 6.80% and 9.8 years, respectively.

Supplemental disclosure of cash flow information related to the Company's cash and non-cash activities with its operating leases are as follows:


(In thousands)	Year Ended December 31, 2019
Other Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	9,641

Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities (1)	$	51,030

(1) For the year ended December 31, 2019, this includes right-of-use assets obtained from the initial adoption of ASC 842 of approximately $20.6 million.

As of December 31, 2019, the Company’s right-of-use assets are $126.4 million, which are reported in operating lease right-of-use assets in the Company’s consolidated balance sheet. As of December 31, 2019, the Company has outstanding lease obligations of $126.6 million, of which $7.9 million is reported in operating lease liabilities, current portion and $118.7 million is reported in operating lease liabilities, less current portion in the Company’s consolidated balance sheet.

The Company has taken advantage of certain practical expedients offered to registrants at the adoption of ASC 842. The Company does not apply the recognition requirements of ASC 842 to short-term leases. Instead, those lease payments are recognized in profit or loss on a straight-line basis over the lease term. Further, as a practical expedient, all lease contracts are accounted for as one single lease component, as opposed to separating lease and non-lease components to allocate the consideration within a single lease contract.

Maturities of operating lease liabilities on an annual basis as of December 31, 2019 were as follows (amounts in thousands):


(In thousands)
2020	$	15,967
2021	17,048
2022	17,068
2023	18,701
2024	18,913
Thereafter	91,852
Total minimum lease payments	179,549
Imputed interest	(52,993)
Total	$	126,556

On January 1, 2019, the Company elected the modified retrospective method of transition to adopt the new lease standard ASC 842. At December 31, 2018, prior to adoption of the new lease standard, operating lease obligations were not included as a liability on the balance sheet. Therefore, the operating lease obligations are included in the table for comparative purposes only and the total lease liability is not included as it is not applicable.

The Company’s future minimum lease payments as of December 31, 2018, were as follows:


Year Ending December 31,
2019	$	3,861
2020	5,135
2021	4,995
2022	5,027
2023	5,146
Thereafter	44,286
Total lease obligations	$	68,450

The Company evaluates whether it is the accounting owner of leased assets during the construction period when it is involved in the construction of the leased asset. Due to the funding provided by the Company for costs related to the construction of its new headquarters, as of December 31, 2018, the Company was considered, for accounting purposes only, the owner of the construction project in accordance with build-to-suit accounting under the accounting guidance that was superseded by ASC 842 on January 1, 2019. As of December 31, 2018, the Company had contributed $2.7 million towards the project. All project construction costs paid by the landlord were accounted for as assets under construction. As of December 31, 2018, the landlord funded $3.9 million towards construction costs related to this project, of which $2.1 million was included as a financing obligation and recorded in other long-term liabilities and $1.8 million was included as a financing obligation and recorded in accrued expenses in the Company’s consolidated balance sheets. Upon transition to ASC 842 on January 1, 2019, the Company is no longer considered to be the owner of the construction project under build-to-suit accounting. As such, the amounts funded by the landlord, previously recognized as an asset under construction and corresponding financing obligation, were de-recognized.

The Company executed a lease agreement for a new facility in Redwood City, California in 2019 that will commence in June 2020. Upon commencement, the Company anticipates to recognize $11.3 million for the operating lease right-of-use assets and $11.3 million for the operating lease liabilities in the consolidated balance sheet, respectively.

Rent expense included in the accompanying consolidated statements of operations was approximately $3.6 million and $2.6 million for the years ended December 31, 2018 and 2017, respectively.

License Agreements

The Company licenses certain technologies that are, or may be, incorporated into its technology under several license agreements. Generally, the license agreements require the Company to pay royalties based on net revenues received using the technologies and may require minimum royalty amounts or maintenance fees.

Mayo. See Note 2 for information related to the Mayo license agreement.

Hologic. In October 2009, the Company entered into a technology license agreement with Hologic, Inc. (“Hologic”). Under the license agreement, Hologic granted the Company an exclusive, worldwide license within the field of human stool based colorectal cancer and pre-cancer detection or identification with regard to certain Hologic patents, patent applications and improvements, including Hologic’s Invader detection chemistry (the “Covered Hologic IP”). The license agreement also provided the Company with non-exclusive, worldwide licenses to the Covered Hologic IP within a field covering clinical diagnostic purposes relating to colorectal cancer (including cancer diagnosis, treatment, monitoring or staging) and the field of detection or identification of colorectal cancer and pre-cancers through means other than human stool samples. In December 2012, the Company entered into an amendment to this license agreement with Hologic pursuant to which Hologic granted the Company a non-exclusive worldwide license to the Covered Hologic IP within the field of any disease or condition within, related to or affecting the gastrointestinal tract and/or appended mucosal surfaces. The Company is required to pay Hologic a low single-digit royalty on the Company’s net sales of products using the Covered Hologic IP.

Epic Sciences. In June 2016, Genomic Health (now a wholly-owned subsidiary of the Company) entered into a collaboration agreement with Epic Sciences, which was superseded and replaced in March 2019 by a license agreement and laboratory services agreement with Epic Sciences, under which Genomic Health was granted exclusive distribution rights to commercialize Epic Sciences’ AR-V7 Nucleus Detect test in the United States, which is marketed as Oncotype DX AR-V7 Nucleus Detect. The Company has primary responsibility, in accordance with applicable laws and regulations, for marketing and promoting the test, order fulfillment, billing and collections of receivables, claims appeals, customer support, and providing and maintaining order management systems for the test. Epic Sciences is responsible for performing all tests, performing studies including analytic and clinical validation studies, and seeking Medicare coverage and a Medicare payment rate from the CMS for the test. The license and laboratory service agreement has a term of 10 years from June 2016, unless terminated earlier under certain circumstances. The Oncotype DX AR-V7 Nucleus Detect test became commercially available in February 2018. The Company recognizes revenues for the test performed under this arrangement and Epic Sciences receives a fee per test performed that represents the fair market value for the testing services they perform.

As of December 31, 2019, the Company owns 18,258,838 shares of preferred stock of Epic Sciences recorded at a fair value of $10.8 million which is included in other-long term assets on the Company’s consolidated balance sheet. The Company has concluded it is not the primary beneficiary and thus has not consolidated the investee pursuant to the requirements of ASC 810, Consolidation. The Company will continue to assess its investment and future commitments to the investee and to the extent its relationship with the investee changes, may be required to consolidate the investee in future periods. The Company determined that the investment is an equity investment for which the Company does not have the ability to exercise significant influence. The Company adjusts the carrying value of its non-marketable equity securities for changes from observable transactions for identical or similar investments of the same issuer, less impairment. All gains and losses on non-marketable equity securities, realized and unrealized, are recognized in other income (expense), net.

Biocartis N.V. In September 2017, Genomic Health entered into an exclusive license and development agreement with Biocartis, a molecular diagnostics company based in Belgium, to develop and commercialize an in vitro diagnostic (“IVD”) version of the Oncotype DX Breast Recurrence Score test on the Biocartis Idylla platform. Under the terms of the license and development agreement, the Company has an exclusive, worldwide, royalty-bearing license to develop and commercialize an IVD version of the Oncotype DX Breast Recurrence Score test on the Biocartis Idylla platform, and an option to expand the collaboration to include additional tests in oncology and urology. The Company has primary responsibility for developing, validating and obtaining regulatory authorizations and registrations for IVD Oncotype DX tests to be performed on the Idylla platform. The Company is also responsible for manufacturing and commercialization activities with respect to such tests.

Pursuant to the license and development agreement, Genomic Health recorded a one-time upfront license and option fee of €2.8 million, or $3.2 million. In December 2017, Genomic Health purchased 270,000 ordinary shares of Biocartis at the market price of €12.50 for a total cost of €3.4 million or $4.0 million. This investment was subject to a lock-up agreement that expired in December 2018. The investment has been recognized at fair value, which the Company estimated to be $1.7 million as of December 31, 2019 and is included in marketable securities on the Company's consolidated balance sheet.

Under a November 2018 addendum to the license and development agreement, the Company exercised its option to expand the collaboration to include tests in urology and obtained a right of first refusal to add a test for the non-invasive detection of prostate cancer in a pre-biopsy setting.

Additional terms of the license and development agreement and the addendum include the Company’s obligation to pay Biocartis an aggregate of €2.5 million in cash upon achievement of certain milestones and €2.0 million for the expansion of the collaboration to include additional tests in oncology. In addition, the Company will pay royalties based primarily on the future sales volumes of the Company’s tests performed on the Idylla platform.

Legal Matters

The United States Department of Justice (“DOJ”) is investigating Genomic Health's compliance with the Medicare Date of Service billing regulation. In March 2017, Genomic Health received a civil investigative demand (“CID”) from the U.S. Attorney's Office for the Eastern District of New York in connection with this matter and has produced specific documents in response to the CID. In July 2019 and January 2020, Genomic Health received additional subpoenas from the DOJ related to this inquiry and the Company is cooperating with those requests. An adverse outcome could include the Company being required to pay treble damages, incur civil and criminal penalties, paying attorneys' fees, entering into a corporate integrity agreement, being excluded from participation in government healthcare programs, including Medicare and Medicaid, and other adverse actions that could materially and adversely affect the Company's business, financial condition and results of operation..

The DOJ's investigation is still in process and the scope and outcome of the investigation is not determinable at this time. See Note 13 for additional information on the Company's fair value determination of this pre-acquisition loss contingency. There can be no assurance that any settlement, resolution, or other outcome of this matter during any subsequent reporting period will not have a material adverse effect on the Company’s results of operations or cash flows for that period or on the Company’s financial positionposition.

ACCRUED LIABILITIES

12 Months Ended

Dec. 31, 2019

Payables and Accruals [Abstract]

ACCRUED LIABILITIES

Accrued liabilities at December 31, 2019 and 2018 consisted of the following:


	December 31
(In thousands)	2019		2018
Compensation	$	95,166	$	37,133
Pfizer Promotion Agreement related costs	33,230		5,364
Professional fees	29,108		13,779
Other	13,976		4,052
Assets under construction	10,720		32,021
Research and trial related expenses	8,368		6,245
Licenses	2,761		2,050
	$	193,329	$	100,644

LONG-TERM DEBT

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

LONG-TERM DEBT

Building Purchase Mortgage

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

In September 2018, the Company entered into a Purchase and Sale Agreement with a third-party to sell its research and development facility. The Company also simultaneously entered into a Master Lease Agreement with the third-party to lease the facility back. The sale-leaseback arrangement is recorded under the financing method of accounting, as the Company has continuing involvement in planned expansions of the facility and construction of the adjacent corporate headquarters facility. Under the financing method, the Company does not recognize the proceeds received from the third-party as a sale of the facility. The facility remains in property, plant and equipment on the Company’s consolidated balance sheet, and the consideration of $6.8 million received in the sale is recorded as a financing obligation in other long-term liabilities on the Company’s consolidated balance sheet as of December 31, 2019. A portion of the proceeds received from the sale were used to repay the outstanding balance on the mortgage on the facility of $4.5 million, which occurred in 2018, and as of December 31, 2019, the mortgage had been fully repaid in connection with the termination of the credit agreement. The remaining proceeds were utilized to fund the initial construction of the Company’s corporate headquarters discussed in more detail in Note 6.

Construction Loan Agreement

During December 2017, the Company entered into a loan agreement with Fifth Third Bank (formerly MB Financial Bank, N.A.) (the “Construction Loan Agreement”), which provides the Company with a non-revolving construction loan (the “Construction Loan”) of $25.6 million. The Company is using the Construction Loan proceeds to finance the construction of an additional clinical laboratory and related facilities in Madison, Wisconsin. The 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 the Construction Loan Agreement may be prepaid at any time without penalty. The maturity date of the Construction Loan Agreement is December 10, 2022.

In November 2017, Fifth Third Bank, on behalf of the Company, issued an Irrevocable Standby Letter of Credit in the amount of $0.6 million in favor of the City of Madison, Wisconsin (the “City Letter of Credit”). The City Letter of Credit is deemed to have been issued pursuant to the Construction Loan Agreement. 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 Fifth Third’s initial advance of loan proceeds under the Construction Loan Agreement, the Company was required to first invest at least $16.4 million of its own cash into the construction project. The Company fulfilled its required initial investment and made its first draw on the Construction Loan in June 2018. In accordance with the Construction Loan Agreement, the Company began making monthly interest-only payments of $0.6 million through November 2019. Starting in December 2019, the Company began making monthly payments towards the outstanding principal balance plus accrued interest. As of December 31, 2019, the Company has drawn $25.0 million from the Construction Loan, including $0.7 million of interest incurred, which is accrued for as an interest reserve and represents a portion of the $25.0 million loan balance as of December 31, 2019. The Company capitalized the $0.7 million of interest to the construction project. As of December 31, 2018, the Company had drawn $24.7 million from the Construction Loan. The Company incurred approximately $0.2 million of debt issuance costs related to the Construction Loan, which are recorded as a direct deduction from the liability. The debt issuance costs are being amortized over the life of the Construction Loan.

The Company agreed in the Construction Loan Agreement to various financial covenants including minimum liquidity and minimum tangible net worth. As of December 31, 2019, the Company is in compliance with all of those covenants.

The table below represents the future principal obligations as of December 31, 2019. Amounts included in the table are in thousands:


Year ending December 31
2020	$	834
2021	787
2022	23,379
Total	$	25,000

Tax Increment Financing Loan Agreements

The Company entered into two separate Tax Increment Financing Loan Agreements (“TIFs”) in February 2019 and June 2019 with the City of Madison, Wisconsin. The TIFs provide for $4.6 million of financing in the aggregate. In consideration for the loans, the Company is obligated to create and maintain 500 full-time jobs over a five-year period, starting on the date of occupancy of the buildings constructed. In the event that the job creation goals are not met, the Company would be required to pay a penalty.

The Company records the earned financial benefits as the full-time equivalent positions are filled. The amount earned is recorded as a liability and amortized as a reduction of operating expenses over a two-year period, which is the timeframe when the TIFs will be repaid through property taxes.

As of December 31, 2019, the Company has earned and received payment of $4.6 million from the City of Madison. As of December 31, 2019, the Company has recorded a $2.7 million liability in other current liabilities on the Company’s consolidated balance sheet, reflecting when the expected benefit of the financial benefits amortization will reduce future operating expenses.

CONVERTIBLE DEBT

12 Months Ended

Dec. 31, 2019

CONVERTIBLE DEBT

CONVERTIBLE DEBT

CONVERTIBLE NOTES

Convertible note obligations included in the consolidated balance sheets consisted of the following:


							December 31,
(In thousands)	Coupon Interest Rate		Effective Interest Rate		Fair Value of Liability Component at Issuance (1)		2019		2018
2027 Convertible notes	0.375	%	6.3	%	$	472,501	$	747,500	$	—
2025 Convertible notes	1.000	%	6.0	%	299,187		415,049		908,500
Total Convertible notes							1,162,549		908,500
Less: Debt discount (2)							(342,463)		(227,403)
Less: Debt issuance costs (3)							(16,481)		(16,348)
Net convertible debt including current maturities							$	803,605	$	664,749

(1) As each of the convertible instruments may be settled in cash upon conversion, for accounting purposes, they were separated into a liability component and an equity component. The amount allocated to the equity component is the difference between the principal value of the instrument and the fair value of the liability component at issuance. The resulting debt discount is being amortized to interest expense at the respective effective interest rate over the contractual term of the debt. In March 2019, a portion of the 2025 Convertible Notes were extinguished. The fair value of the liability component at issuance reflected above represents the liability value at issuance for the applicable portion of the 2025 Notes which remain outstanding at December 31, 2019. The fair value of the liability component of the 2025 Notes at December 31, 2018 was $654.8 million with the equity component being $267.9 million including a $14.2 million premium.

(2) The unamortized discount consists of the following:


	December 31,
(In thousands)	2019		2018
2027 Convertible notes	$	253,340	$	—
2025 Convertible notes	89,123		227,403
Total unamortized discount	$	342,463	$	227,403

(3) Debt issuance costs consist of the following:


	December 31,
(In thousands)	2019		2018
2027 Convertible notes	$	10,251	$	—
2025 Convertible notes	6,230		16,348
Total debt issuance costs	$	16,481	$	16,348

Issuances and Settlements

In January 2018, the Company issued and sold $690.0 million in aggregate principal amount of 1.0% Convertible Notes (the “January 2018 Notes”) with a maturity date of January 15, 2025 (the “Maturity Date”). The January 2018 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 January 2018 Notes were approximately $671.1 million, after deducting underwriting discounts and commissions and the offering expenses payable by the Company.

In June 2018, the Company issued and sold an additional $218.5 million in aggregate principal amount of 1.0% Convertible Notes (the “June 2018 Notes”). The June 2018 Notes were issued under the same indenture pursuant to which the Company previously issued the January 2018 Notes (the “Indenture”). The January 2018 Notes and the June 2018 Notes (collectively, the “2025 Notes”) have identical terms and are treated as a single series of securities. The net proceeds from the issuance of the June 2018 Notes were approximately $225.3 million, after deducting underwriting discounts and commissions and the offering expenses payable by the Company.

In March 2019, the Company issued and sold $747.5 million in aggregate principal amount of 0.375% Convertible Notes (the “2027 Notes” and, collectively with the 2025 Notes, the “Notes”) with a maturity date of March 15, 2027 (the “Maturity Date”). The 2027 Notes accrue interest at a fixed rate of 0.375% per year, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2019. The net proceeds from the issuance of the 2027 Notes were approximately $729.5 million, after deducting underwriting discounts and commissions and the offering expenses payable by the Company.

The Company utilized a portion of the proceeds from the issuance of the 2027 Notes to settle a portion of the 2025 Notes in privately negotiated transactions. In March 2019, the Company used cash of $494.0 million and an aggregate of 2.2 million shares of the Company’s common stock valued at $182.4 million for total consideration of $676.5 million to settle $493.4 million of the 2025 Notes, of which $375.1 million was allocated to the liability component, $300.8 million was allocated to the equity component, and $0.6 million was used to pay off interest accrued on the 2025 Notes. The consideration transferred was allocated to the liability and equity components of the 2025 Notes using the equivalent rate that reflected the borrowing rate for a similar non-convertible debt instrument immediately prior to settlement. The transaction resulted in a loss on settlement of convertible notes of $10.6 million, which is recorded in interest expense in the Company’s consolidated statement of operations. The loss represents the difference between (i) the fair value of the liability component and (ii) the sum of the carrying value of the debt component and any unamortized debt issuance costs at the time of repurchase.

Summary of Conversion Features

Until the six-months immediately preceding the maturity date of the applicable series of Notes, each series of Notes is convertible only upon the occurrence of certain events and during certain periods, as set forth in the Indenture. 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 the date that is six-months immediately preceding the maturity date of the applicable series of Notes until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert such Notes at any time.

It is the Company’s intent and policy to settle all conversions through combination settlement. The initial conversion rate is 13.2569 and 8.9554 shares of common stock per $1,000 principal amount for the 2025 Notes and 2027 Notes, respectively, which is equivalent to an initial conversion price of approximately $75.43 and $111.66 per share of the Company’s common stock for the 2025 Notes and 2027 Notes, respectively. 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.

As of December 31, 2019, the 2027 and 2025 Notes were not convertible. The holders of the 2025 Notes had the right to convert their debentures between July 1, 2019 and December 31, 2019, and 55 notes were converted during the period, which were settled through the issuance of common shares equivalent to the conversion rate with any fractional shares settled in cash. The 2025 Notes no longer met any of the conversion features as of December 31, 2019.

Based on the closing price of our common stock of $92.48 on December 31, 2019, the if-converted values on our 2025 Notes exceed the principal amount by $93.8 million and the 2027 Notes do not exceed the principal amount.

Ranking of Convertible Notes

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 consolidated balance sheets at December 31, 2019 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.

The Company allocated the total transaction costs of approximately $18.8 million related to the issuance of the January 2018 Notes to the liability and equity components of the January 2018 Notes based on their relative values, with $13.1 million being allocated to the liability component of the January 2018 Notes. Transaction costs attributable to the liability component are amortized to interest expense over the seven years term of the January 2018 Notes, and transaction costs attributable to the equity component are netted with the equity component in stockholders’ equity.

The Company allocated the total transaction costs of approximately $7.4 million related to the issuance of the June 2018 Notes to the liability and equity components of the June 2018 Notes based on their relative values, with $5.1 million being allocated to the liability component of the June 2018 Notes. Transaction costs attributable to the liability component are amortized to interest expense over the remaining six-and-a-half-year term of the June 2018 Notes, and transaction costs attributable to the equity component are netted with the equity component in stockholders’ equity.

The Company allocated the total transaction costs of approximately $18.0 million related to the issuance of the 2027 Notes to the liability and equity components of the 2027 Notes based on their relative values, with $11.4 million being allocated to the liability component of the 2027 Notes. Transaction costs attributable to the liability component are amortized to interest expense over the eight-year term of the 2027 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.

Interest expense for all indebtedness includes the following:


	Year Ended December 31,
(In thousands)	2019		2018		2017
Debt issuance costs amortization	$	2,661	$	2,273	$	—
Debt discount amortization	39,595		26,291		—
Loss on settlement of convertible notes	10,558		—		—
Coupon interest expense	7,325		7,823		—
Total interest expense on convertible notes	60,139		36,387		—
Other interest expense	1,460		402		206
Total interest expense	$	61,599	$	36,789	$	206

The remaining period over which the unamortized debt discount will be recognized as non-cash interest expense is 5.05 years and 7.21 years for the 2025 Notes and 2027 Notes, respectively.

EMPLOYEE BENEFIT PLAN	12 Months Ended
EMPLOYEE BENEFIT PLAN	Dec. 31, 2019
Retirement Benefits [Abstract]
EMPLOYEE BENEFIT PLAN	EMPLOYEE BENEFIT PLAN The Company currently maintains two qualified 401(k) retirement savings plan, one plan for legacy Exact Sciences employees (the “401(k) Plan”), and one for legacy Genomic Health employees (the "Genomic Health Plan") covering all employees. Under the terms of the 401(k) Plan and the Genomic Health Plan, participants may elect to defer a portion of their compensation into the 401(k) Plan, subject to certain limitations. Company matching contributions may be made at the discretion of the Board of Directors. The Genomic Health Plan is expected to be combined with the 401(k) Plan during the first quarter of 2020. The Company’s Board of Directors approved 401(k) Plan matching contributions for the years ended December 31, 2019, 2018 and 2017 in the form of Company common stock equal to 100 percent up to 6 percent of the participant’s eligible compensation for that year. The Company recorded compensation expense of approximately $11.8 million, $7.4 million, and $4.3 million, respectively, in the statements of operations for the years ended December 31, 2019, 2018 and 2017. The Genomic Health Plan match was for employee contributions dollar for dollar up to $4,000 in cash for the year ended December 31, 2019. For the period from the combination date to December 31, 2019, the Company recorded compensation expense of approximately $0.7 million in the statement of operations.

NEW MARKET TAX CREDIT	12 Months Ended
NEW MARKET TAX CREDIT	Dec. 31, 2019
NEW MARKET TAX CREDIT
NEW MARKET TAX CREDIT	NEW MARKET TAX CREDIT 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 (the “Investor”), 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 Company is required to be in compliance through December 2021with various regulations and contractual provisions that apply to the NMTC arrangement. Noncompliance with applicable requirements could result in the Investor’s projected tax benefits not being realized and, therefore, require the Company to indemnify the Investor for any loss or recapture of NMTC related to the financing until such time as the recapture provisions have expired under the applicable statute of limitations. The Company does not anticipate any credit recapture will be required in connection with this financing arrangement. The Investor and its majority owned community development entity are considered Variable Interest Entities (“VIEs”) and the Company is the primary beneficiary of the VIEs. This conclusion was reached based on the following: •the ongoing activities of the VIEs—collecting and remitting interest and fees and NMTC compliance—were all considered in the initial design and are not expected to significantly affect performance throughout the life of the VIE; •contractual arrangements obligate the Company to comply with NMTC rules and regulations and provide various other guarantees to the Investor and community development entity; •the Investor lacks a material interest in the underling economics of the project; and •the Company is obligated to absorb losses of the VIEs. Because the Company is the primary beneficiary of the VIEs, they have been included in the consolidated financial statements. There are no other assets, liabilities or transactions in these VIEs outside of the financing transactions executed as part of the NMTC arrangement.

WISCONSIN ECONOMIC DEVELOPMENT TAX CREDITS	12 Months Ended
WISCONSIN ECONOMIC DEVELOPMENT TAX CREDITS	Dec. 31, 2019
WISCONSIN ECONOMIC DEVELOPMENT TAX CREDITS.
WISCONSIN ECONOMIC DEVELOPMENT TAX CREDITS	WISCONSIN ECONOMIC DEVELOPMENT TAX CREDITSDuring 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 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 December 31, 2019, the Company has earned $9.0 million of tax credits and has received payment of $5.9 million from the WEDC. The unpaid portion is $3.1 million, of which $1.6 million is reported in prepaid expenses and other current assets and $1.5 million is reported in other long-term assets, reflecting when collection of the refundable tax credits is expected to occur. As of December 31, 2019, the Company also has recorded a $2.2 million liability in other current liabilities, reflecting when the expected benefit of the tax credit amortization will reduce future operating expenses. During the year ended December 31, 2019, the Company amortized $2.4 million of the tax credits earned as a reduction of operating expenses.

BUSINESS COMBINATIONS

12 Months Ended

Dec. 31, 2019

Business Combinations [Abstract]

BUSINESS COMBINATIONS

Genomic Health, Inc.

On November 8, 2019, the Company acquired all of the outstanding capital stock of Genomic Health. Genomic Health, headquartered in Redwood City, California, provides genomic-based diagnostic tests that address both the overtreatment and optimal treatment of early and late stage cancer. The Company has included the financial results of Genomic Health in the consolidated financial statements from the date of the combination.

The Company entered into this combination to create a leading global cancer diagnostics company and provide a robust platform for continued growth. This combination provides the Company with a commercial presence in more than 90 countries in which the combined company expects to continue to increase adoption of current tests, and to bring new innovative cancer tests to patients around the world.

During 2019, the Company incurred $22.5 million of acquisition-related costs recorded in general and administrative expense. These costs include fees associated with financial, legal, accounting and other advisors incurred to complete the combination.

The combination date fair value of the consideration transferred for Genomic Health was approximately $2.5 billion, which consisted of the following:


(In millions)
Cash	$	1,062
Common stock issued	1,389
Fair value of replacement stock options and restricted stock awards	18
Total purchase price	$	2,469

The fair value of the common stock issued as part of consideration was determined on the basis of the closing market price of the Company's shares at the acquisition date. The fair value of the stock options assumed by the Company was determined using the Black-Scholes option pricing model. The share conversion ratio of 0.76534 was applied to convert Genomic Health’s outstanding equity awards for Genomic Health’s common stock into equity awards for shares of the Company’s common stock.

The fair value of options assumed were based on the assumptions in the following table:


Option Plan Shares Assumed
Risk-free interest rates						0.88% - 2.90%
Expected term (in years)						3.28 - 6.73
Expected volatility						63.54% - 69.09%
Dividend yield						0%
Weighted average fair value per share of options assumed						$45.75 - $57.44

The purchase price was allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of combination as follows:


(In thousands)
Cash and cash equivalents	$	87,627
Marketable securities	201,519
Accounts receivable	57,400
Inventory	3,535
Prepaid expenses and other current assets	8,360
Property, plant and equipment	69,905
Goodwill	1,185,918
Trade name	100,000
Supply agreement intangible	30,000
Developed technology	800,000
In-process research and development (IPR&D)	200,000
Operating lease right-of-use assets	80,790
Other long-term assets	14,972
Accounts payable, accrued liabilities and other current liabilities	(88,995)
Deferred tax liability	(205,536)
Operating lease liabilities, current portion	(3,258)
Operating lease liabilities, less current portion	(71,270)
Other long-term liabilities	(2,399)
Total fair value consideration	$	2,468,568

The fair value of identifiable intangible assets has been determined using the income approach, which involves significant unobservable inputs (Level 3 inputs). These inputs include projected sales, margin, required rate of return and tax rate, as well as an estimated royalty rate in the cases of the developed technology and trade name intangibles. The developed technology and tradename intangibles are valued using a relief-from-royalty method.

Trade names represent the value associated with the Oncotype DX trade name in the market. The trade name intangible is amortized on a straight-line basis over its estimated useful life of 16 years.

Developed technology represents purchased technology that had reached technological feasibility and for which Genomic Health had substantially completed development as of the date of combination. Fair value was determined using future discounted cash flows related to the projected income stream of the developed technology for a discrete projection period. Cash flows were discounted to their present value as of the closing date. Developed technology is amortized on a straight-line basis over its estimated useful life of 10 years.

IPR&D represent capitalized incomplete research projects as of the combination date and had no alternative future use. The amounts capitalized are being accounted for as indefinite-lived intangible assets, subject to impairment testing, until completion or abandonment of the R&D efforts associated with the projects. The primary basis for determining technological

feasibility of these projects is obtaining regulatory approval to market the underlying product and expected commercial release. The Company recorded $200.0 million of IPR&D related to the development of an IVD version of the Oncotype DX Breast Recurrence Score test. The IPR&D asset was valued using the multiple-period excess earnings method approach.

The calculation of the excess of the purchase price over the estimated fair value of the tangible net assets and intangible assets acquired was recorded to goodwill, which is primarily attributed to the assembled workforce and expanded market opportunities including a broader global presence. The total goodwill related to this combination is not deductible for tax purposes.

The Company assumed unvested stock options and restricted stock awards with combination-date fair values of $34.3 million and $42.3 million, respectively. Of the total consideration for stock options and restricted stock awards, $2.2 million and $15.6 million, respectively, was allocated to the purchase consideration and $32.1 million and $26.7 million, respectively, was allocated to future services and will be expensed over a weighted average period of 1.69 years and 2.12 years, respectively.

The amounts of revenue and net loss before tax of Genomic Health included in the Company’s consolidated statement of operations from the combination date of November 8, 2019 to December 31, 2019 are as follows:


(In thousands)
Total revenues	$	66,174
Net loss before tax	(40,446)

The following unaudited pro forma financial information summarized the combined results of operations for the Company and Genomic Health, as though the companies were combined as of the beginning of January 1, 2018.


	December 31,
(In thousands)	2019		2018
Total revenues	$	1,266,591	$	848,573
Net loss before tax	(252,203)		(302,173)

The unaudited pro forma financial information for all periods presented above has been calculated after adjusting the results of Genomic Health to reflect the business combination accounting effects resulting from this combination, including the amortization expense from acquired intangible assets and the stock-based compensation expense for unvested stock options and restricted stock awards assumed as though the combination occurred as of January 1, 2018. The historical consolidated financial statements have been adjusted in the unaudited pro forma combined financial information to give effect to pro forma events that are directly attributable to the business combination and factually supportable. The unaudited pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the combination had taken place as of January 1, 2018.

Given the timing of the close of the combination and the time necessary to complete the allocation of the purchase price to the identified assets, the initial accounting for the business combination was not complete at the time the financial statements were issued. The total purchase price allocation reflected in the accompanying financial statements is provisional and is based upon estimates and assumptions that are subject to change within the measurement period. The measurement period remains open pending the completion of valuation procedures related to the certain acquired assets and liabilities assumed, primarily in connection with acquired leases, as well as finalization of the pre-combination income tax returns. As described in Note 6, the Company identified a pre-acquisition contingency relating to the DOJ investigation. The Company has assigned a provisional fair value estimate of zero to this pre-acquisition contingency. The Company will reevaluate this matter based upon facts and circumstances that existed as of the acquisition date and any adjustments to the preliminary fair value estimate will be recorded to goodwill if identified within the measurement period. Subsequent to the measurement period or the Company's final determination of the pre-acquisition contingency’s estimated value, whichever comes first, changes to this estimate could have a material impact on our results of operations and financial position.

In connection with the combination, the Company decided to terminate certain Genomic Health executives in the fourth quarter of 2019 and recorded $32.1 million in severance benefits charges.

Biomatrica, Inc.

In November 2017, the Company made a $3.0 million cash investment (the “2017 Biomatrica Investment”) in Biomatrica, Inc. (“Biomatrica”), then a privately held company specializing in the collection and preservation of biological materials. The Company made the 2017 Biomatrica Investment in connection with entering into an agreement for Biomatrica to supply certain products to the Company. Through the 2017 Biomatrica Investment, the Company acquired shares of Biomatrica’s Series E Preferred Stock representing 10 percent of Biomatrica’s then-outstanding shares of capital stock on an as-converted basis. In June 2018, the Company loaned Biomatrica $1.0 million pursuant to a Senior Secured Promissory Note and Security Agreement (the "Promissory Note").

In October 2018, the Company completed a full acquisition of Biomatrica. In the acquisition, the Company acquired all of the outstanding equity interests for an aggregate purchase price of $20.0 million net of cash received, debt repaid and certain other adjustments. Contingent consideration for an additional $20.0 million could be earned based upon certain revenue milestones being met. The purpose of the acquisition was to secure a key supplier for the Company’s pipeline products and expand the Company’s commercial offerings. The acquisition-related costs incurred were not material to the consolidated financial statements.

The total purchase consideration for the 2018 Biomatrica Acquisition was $24.5 million consisting of a cash payment at closing of $17.9 million including $0.1 million for a post-closing working capital adjustment, contingent consideration payable in cash and having a fair value of $3.4 million, exchange of Series E Preferred stock with an acquisition date fair value of $2.2 million and the reduction of the $1.0 million Promissory Note previously provided to Biomatrica and considered part of the consideration transferred. The Company’s previously held Series E Preferred stock ownership and the contingent consideration fair value were determined through a valuation using the income approach and involved significant unobservable inputs including revenue and operating margin forecasts, an applicable tax rate, a terminal growth rate and discount rate (Level 3). The valuation of the previously held investment indicated a loss on the investment of $0.8 million. The contingent consideration has been recognized in other long-term liabilities in the consolidated financial statements.

The total purchase consideration was allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition as follows:


(In thousands)
Net operating assets	$	2,168
Goodwill	15,300
Trade name	700
Customer relationships and contracts	2,700
Developed technology	5,400
Net operating liabilities	(1,754)
Total purchase price	$	24,514

The fair value of identifiable intangible assets has been determined using the income approach, which involves significant unobservable inputs (Level 3 inputs). These inputs include projected sales, margin, required rate of return and tax rate, as well as an estimated royalty rate in the cases of the developed technology and trade name intangibles. The developed technology and tradename intangibles are valued using a relief-from-royalty method. The customer relationships are valued using the multi-period excess earnings method.

Trade names represent the value identified associated with the Biomatrica trade name in the market. The trade name intangible is amortized on a straight-line basis over its estimated useful life of 15 years.

Developed technology represents purchased technology that had reached technological feasibility and for which Biomatrica had substantially completed development as of the date of acquisition. Fair value was determined using future discounted cash flows related to the projected income stream of the developed technology for a discrete projection period. Cash flows were discounted to their present value as of the closing date. Developed technology is amortized on a straight-line basis over its estimated useful life of 15 years.

Customer relationships and contracts represent agreements with existing Biomatrica customers. Customer relationships and contracts are amortized on a straight-line basis over their estimated useful life of 15 years.

The goodwill generated from the acquisition of Biomatrica is primarily related to expected synergies. The total goodwill related to this acquisition is not deductible for tax purposes.

The partial year results for Biomatrica’s operations are included in the Company’s consolidated financial statements and not disclosed separately due to immateriality. Pro forma disclosures have not been included due to immateriality.

SEGMENT REPORTING

12 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

Segment Reporting Disclosure

SEGMENT INFORMATION

Management determined that the Company functions as a single operating segment, and thus reports as a single reportable segment. This operating segment is focused on the development and global commercialization of clinical laboratory services that focus on the early detection of cancer and analysis of the underlying biology of cancer, allowing healthcare providers and patients to make individualized treatment decisions. Management assessed the discrete financial information routinely reviewed by the Company's Chief Operating Decision Maker (“CODM”), its President and Chief Executive Officer, to monitor the Company's operating performance and support decisions regarding allocation of resources to its operations. Performance is continuously monitored at the consolidated level to timely identify deviations from expected results.

The following table summarizes total revenue from customers by geographic region. Product revenues are attributed to countries based on ship-to location.


	Year Ended December 31,
(In thousands)	2019		2018		2017
United States	$	864,849	$	454,462	$	265,989
Outside of United States	11,444		—		—
Total revenues	$	876,293	$	454,462	$	265,989

Long-lived assets located in countries outside of the United States are not significant.

INCOME TAXES

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

Under financial accounting standards, deferred tax assets or liabilities are computed based on the differences between the financial statement and income tax bases of assets and liabilities using the enacted tax rates. Deferred income tax expense or benefit represents the change in the deferred tax assets or liabilities from period to period. At December 31, 2019, the Company had federal net operating loss, state net operating loss, and foreign net operating loss carryforwards of approximately $1,548.4 million, $672.7 million, and $18.1 million, respectively for financial reporting purposes, which may be used to offset future taxable income. The Company also had federal and state research tax credit carryforwards of $39.1 million and $27.5 million, respectively which may be used to offset future income tax liability. The federal credit carryforwards expire at various dates through 2039 with a portion expiring in 2019, and the remaining credits are subject to review and possible adjustment by the Internal Revenue Service. A portion of the state credit carryforwards expired in 2019 and the remainder begin to expire in 2020 through 2034 with the exception of California research and development tax credits that have an indefinite carryforward period. All state tax credits are subject to review and possible adjustment by local tax jurisdictions. In the event of a change of ownership, the federal and state net operating loss and research and development tax credit carryforwards may be subject to annual limitations provided by the Internal Revenue Code and similar state provisions.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, the following that impact the Company: (1) reducing the U.S. federal corporate income tax rate from 35 percent to 21 percent; (2) eliminating the corporate alternative minimum tax; (3) creating a new limitation on deductible interest expense; (4) limiting the deductibility of certain executive compensation; and (5) limiting certain other deductions.

The expense (benefit) for income taxes consists of:


	December 31,
(In thousands)	2019		2018		2017
Current expense (benefit):
Federal	$	—	$	—	$	—
State	314		92		106
Foreign	(63)		—		—

Deferred tax expense (benefit):
Federal	(169,727)		—		(290)
State	(15,397)		—		(3)
Foreign	15		—		—
Total income tax expense (benefit)	$	(184,858)	$	92	$	(187)

The Company recorded an income tax benefit for the year ended December 31, 2019 of $184.9 million. This was primarily due to an income tax benefit of $185.1 million recorded as a result of a change in the deferred tax asset valuation allowance resulting from the Genomic Health combination. In connection with the Genomic Health combination, a deferred tax liability was recorded for identified intangible assets. These deferred tax liabilities are considered a source of future taxable income which allowed the Company to reduce its pre-combination deferred tax asset valuation allowance. The change in pre-combination deferred tax asset valuation allowance of an acquirer is a transaction recognized separate from the business combination and reduces income tax expense in the period of the business combination.

The components of the net deferred tax asset with the approximate income tax effect of each type of carryforward, credit and temporary differences are as follows:


	December 31,
(In thousands)	2019		2018
Deferred tax assets:
Operating loss carryforwards	$	369,695	$	226,276
Tax credit carryforwards	51,030		21,417
Compensation related differences	33,378		18,265
Lease assets	30,782		—
Other temporary differences	7,049		6,103
Tax assets before valuation allowance	491,934		272,061
Less - Valuation allowance	(120,679)		(209,868)
Total deferred tax assets	$	371,255	$	62,193
Deferred tax liabilities
Convertible notes	$	(83,163)	$	(55,698)
Amortization	(270,421)		(2,182)
Property, plant and equipment	(5,913)		(3,966)
Lease liabilities	(29,586)		—
Other temporary differences	(2,607)		(347)
Total deferred tax liabilities	(391,690)		(62,193)
Net deferred tax liabilities	$	(20,435)	$	—

A valuation allowance to reduce the deferred tax assets is reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has incurred significant losses since its inception and due to the uncertainty of the amount and timing of future taxable income and the realization of deferred tax liabilities, management has determined that a valuation allowance of $120.7 million and $209.9 million at

December 31, 2019 and 2018, respectively, is necessary to reduce the tax assets to the amount that is more likely than not to be realized. Given the future limitations on and expiration of certain federal and state deferred tax assets, the recording of a valuation allowance resulted in a deferred tax liability of approximately $20.4 million remaining at the end of 2019, which is included in other long-term liabilities on the Company's consolidated balance sheet. The overall change in valuation allowance for December 31, 2019 and 2018 was a decrease of $89.2 million and $4.4 million, respectively.

The effective tax rate differs from the statutory tax rate due to the following:


	December 31,
	2019		2018		2017
U.S. Federal statutory rate	21.0	%	21.0	%	35.0	%
State taxes	5.8		3.4		2.4
Federal and state tax rate changes	(0.4)		—		(99.2)
Foreign tax rate differential	0.6		—		0.1
Research and development tax credits	1.1		1.9		(1.9)
Stock-based compensation expense	22.1		9.1		16.7
Non-deductible executive compensation	(4.1)		(4.9)		(10.7)
Transaction costs	(0.7)		—		—
Other adjustments	(0.6)		1.1		(2.6)
Valuation allowance	24.0		(31.7)		60.4
Effective tax rate	68.8	%	(0.1)	%	0.2	%

As of December 31, 2019, the Company had a total of $10.3 million of unrecognized tax benefits related to federal and state research and development tax credits. These amounts have been recorded as a reduction to our deferred tax asset. Included in this amount is $6.2 million of unrecognized tax benefits related to research and development tax credits acquired as a result of the Genomic Health combination. The balance of unrecognized tax benefits as of December 31, 2019 and 2018 of $10.3 million and $1.9 million respectively, if recognized, would affect the effective tax rate.

The following is a tabular reconciliation of the amounts of unrecognized tax benefits:


	December 31,
(In thousands)	2019		2018
January 1,	$	1,926	$	—
Increase due to current year tax positions	2,142		392
Increase due to prior year tax positions	6,208		1,534
Decrease due to prior year tax positions	—		—
Settlements	—		—
December 31,	$	10,276	$	1,926

As of December 31, 2019, due to the carryforward of unutilized net operating losses and research and development credits, the Company is subject to U.S. federal income tax examinations for the tax years 2000 through 2019, and to state income tax examinations for the tax years 2003 through 2019. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2019, 2018 and 2017.

RELATED PARTY TRANSACTION	12 Months Ended
RELATED PARTY TRANSACTION	Dec. 31, 2019
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTION	RELATED PARTY TRANSACTIONSThe Company did not enter into any transactions material to the financial statements with related parties for the years ended December 31, 2019, 2018 and 2017.

Subsequent Events	12 Months Ended
Subsequent Events	Dec. 31, 2019
Subsequent Events [Abstract]
Subsequent Events	SUBSEQUENT EVENTSOn February 11, 2020, the Company entered into a definitive agreement and plan of merger (the “Paradigm Merger Agreement”) with Paradigm Diagnostics, Inc. (“Paradigm”), pursuant to which, among other things, one of the Company's wholly owned subsidiaries will be merged with and into Paradigm, with Paradigm surviving as a wholly owned subsidiary of the Company (the "Paradigm Merger"), in a stock transaction. The Paradigm Merger was unanimously approved by the boards of directors of Paradigm and the Company. The Company currently expects the Paradigm Merger to close by the end of March 2020, subject to customary closing conditions, including the approval of stockholders of Paradigm. On February 11, 2020, the Company entered into a definitive agreement and plan of merger (the “Viomics Merger Agreement”) with Viomics, Inc. (“Viomics”), pursuant to which, among other things, one of the Company's wholly owned subsidiaries will be merged with and into Viomics, with Viomics surviving as a wholly owned subsidiary of the Company (the “Viomics Merger”), in a cash and stock transaction. The Viomics Merger was unanimously approved by the board of directors of Viomics and the Company. The Company currently expects the Viomics Merger to close by the end of March 2020, subject to customary closing conditions, including the approval of stockholders of Viomics.

QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

12 Months Ended

Dec. 31, 2019

Quarterly Financial Information Disclosure [Abstract]

QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following table sets forth unaudited quarterly statements of operations data for each of the eight quarters ended December 31, 2019 and 2018. In the opinion of management, this information has been prepared on the same basis as the audited consolidated financial statements appearing elsewhere in this Form 10‑K, and all necessary adjustments, consisting only of normal recurring adjustments, have been included in the amounts stated below to present fairly the unaudited quarterly results of operations. The quarterly data should be read in conjunction with the Company’s audited consolidated financial statements and the notes to the consolidated financial statements appearing elsewhere in this Form 10-K.


	Quarter Ended
	March 31,		June 30,		September 30,		December 31,
	(Amounts in thousands, except per share data)
2019
Revenue	$	162,043	199,870		218,805		295,575
Operating expenses:
Cost of sales (exclusive of amortization of acquired intangibles)	42,827		51,139		52,335		70,416
Research and development	31,785		29,972		34,714		43,223
Sales and marketing	90,939		88,190		86,196		119,851
General and administrative	63,926		63,641		80,472		144,414
Amortization of acquired intangibles	760		748		748		13,779
Loss from operations	(68,194)		(33,820)		(35,660)		(96,108)
Investment income	6,655		7,669		9,093		3,113
Interest expense	(21,990)		(12,712)		(13,209)		(13,688)
Net loss before tax	(83,529)		(38,863)		(39,776)		(106,683)
Income tax benefit (expense)	470		443		(683)		184,628
Net income (loss)	$	(83,059)	$	(38,420)	$	(40,459)	$	77,945
Net income (loss) per share—basic	$	(0.66)	$	(0.30)	$	(0.31)	$	0.56
Net income (loss) per share—diluted	$	(0.66)	$	(0.30)	$	(0.31)	$	0.54
Weighted average common shares outstanding—basic	126,248		129,182		129,567		139,901
Weighted average common shares outstanding—diluted	126,248		129,182		129,567		143,200
2018
Revenue	$	90,296	102,894		118,291		142,981
Operating expenses:
Cost of sales (exclusive of amortization of acquired intangibles)	22,579		26,553		29,685		37,827
Research and development	14,704		14,481		17,400		20,700
Sales and marketing	53,408		54,431		64,836		76,773
General and administrative	35,531		39,529		46,693		56,263
Amortization of acquired intangibles	602		602		602		734
Loss from operations	(36,528)		(32,702)		(40,925)		(49,316)
Investment income	3,673		4,917		6,292		6,321
Interest expense	(6,510)		(8,603)		(10,704)		(10,972)
Net loss before tax	(39,365)		(36,388)		(45,337)		(53,967)
Income tax benefit (expense)	(59)		1		(27)		(7)
Net loss	$	(39,424)	$	(36,387)	$	(45,364)	$	(53,974)
Net loss per share—basic and diluted	$	(0.33)	$	(0.30)	$	(0.37)	$	(0.44)
Weighted average common shares outstanding—basic and diluted	121,016		122,129		122,671		122,981

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Business

Exact Sciences Corporation (together with its subsidiaries, “Exact,” or the “Company”) was incorporated in February 1995. Exact is a leading global cancer diagnostics company. It has developed some of the most impactful brands in cancer screening and diagnostics, including Cologuard and Oncotype DX. Exact is currently working on the development of additional tests for other types of cancer, with the goal of bringing new innovative cancer tests to patients throughout the world.

On November 8, 2019, Exact completed a combination (the “Combination”) with Genomic Health, Inc. (“Genomic Health”), under which the Company acquired Genomic Health, which is a leading provider of genomic based diagnostic tests to help to optimize cancer care.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company’s wholly-owned subsidiaries and variable interest entities. See Note 12 for the discussion of financing arrangements involving certain entities that are variable interest entities that are included in the Company’s consolidated financial statements. The functional currency for the Company's wholly-owned subsidiaries incorporated outside the United States (“U.S.”) is the U.S. dollar. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

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

Marketable Securities

Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date. Debt securities carried at amortized cost are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Debt securities not classified as held-to-maturity are classified as available-for-sale. Available-for-sale securities are carried at fair value. The unrealized gains and losses, net of tax, on the Company's debt securities are reported in other comprehensive income. Marketable equity securities are measured at fair value and the unrealized gains and losses, net of tax, are recognized in other income (expense) in the consolidated statement of operations. The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity computed under the straight-line method. Such amortization is included in investment income. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in investment income. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in investment income.

The Company’s investment policy limits investments to certain types of instruments issued by institutions with investment grade credit ratings and places restrictions on maturities and concentration by type and issuer. Investments in which the Company has the ability and intent, if necessary, to liquidate in order to support its current operations (including those with a contractual term greater than one year from the date of purchase) are classified as current. Realized gains were $3.4 million, $0.4 million, and $23,000, net of insignificant realized losses, for the years ended December 31, 2019, 2018, and 2017, respectively and are included in investment income in the Company's consolidated statements of operations.

The Company periodically evaluates investments in unrealized loss positions for other-than-temporary impairments. This evaluation includes, but is not limited to, significant quantitative and qualitative assessments and estimates regarding credit ratings, collateralized support, the length of time and significance of a security’s loss position, the Company’s intent not to sell the security, and whether it is more likely than not that the Company will have to sell the security before recovery of its cost basis. As of December 31, 2019 and 2018, no investments were identified with other-than-temporary declines in value.

The following table sets forth the Company’s cash, cash equivalents, restricted cash, and marketable securities at December 31, 2019 and 2018:


(In thousands)	December 31, 2019		December 31, 2018
Cash, cash equivalents, and restricted cash
Cash and money market	$	146,932	$	75,375
Cash equivalents	30,322		85,055
Restricted cash (1)	274		—
Total cash, cash equivalents and restricted cash	177,528		160,430
Marketable securities
Available-for-sale debt securities	144,685		963,752
Equity securities	1,716		—
Total marketable securities	146,401		963,752
Total cash and cash equivalents, restricted cash and marketable securities	$	323,929	$	1,124,182

(1) Restricted cash is included in other long-term assets on the consolidated balance sheets. The Company had no restricted cash at December 31, 2018 or December 31, 2017.

Available-for-sale debt securities at December 31, 2019 consisted of the following:


	December 31, 2019
(In thousands)	Amortized Cost		Gains in Accumulated Other Comprehensive Income (Loss) (1)		Losses in Accumulated Other Comprehensive Income (Loss) (1)		Estimated Fair Value
Cash equivalents
U.S. government agency securities	$	30,320	$	2	$	—	$	30,322
Total cash equivalents	30,320		2		—		30,322
Marketable securities
Corporate bonds	4,017		—		(14)		4,003
U.S. government agency securities	140,745		10		(73)		140,682
Total marketable securities	144,762		10		(87)		144,685
Total available-for-sale debt securities	$	175,082	$	12	$	(87)	$	175,007

(1) Gains and losses in accumulated other comprehensive income (loss) are reported net of tax.

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


	December 31, 2018
(In thousands)	Amortized Cost		Gains in Accumulated Other Comprehensive Income (Loss) (1)		Losses in Accumulated Other Comprehensive Income (Loss) (1)		Estimated Fair Value
Cash equivalents
U.S. government agency securities	$	49,982	$	3	$	—	$	49,985
Commercial paper	24,072		—		(2)		24,070
Certificates of deposit	11,000		—		—		11,000
Total cash equivalents	85,054		3		(2)		85,055
Marketable securities
Corporate bonds	392,973		33		(719)		392,287
Asset backed securities	277,538		30		(569)		276,999
U.S. government agency securities	250,606		43		(178)		250,471
Commercial paper	12,158		—		(7)		12,151
Certificates of deposit	31,875		—		(31)		31,844
Total marketable securities	965,150		106		(1,504)		963,752
Total available-for-sale debt securities	$	1,050,204	$	109	$	(1,506)	$	1,048,807

(1) Gains and losses in accumulated other comprehensive income (loss) are reported net of tax.

Changes in Accumulated Other Comprehensive Income (Loss)

The amount recognized in accumulated other comprehensive income (loss) (“AOCI”) for the years ended December 31, 2019, 2018 and 2017 were as follows:


(In thousands)	Cumulative Translation Adjustment		Unrealized Gain (Loss) on Securities		Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2017	$	(204)	$	(214)	$	(418)
Other comprehensive income (loss) before reclassifications	143		(530)		(387)
Amounts reclassified from accumulated other comprehensive loss	—		55		55
Net current period change in accumulated other comprehensive income (loss)	143		(475)		(332)
Balance at December 31, 2017	$	(61)	$	(689)	$	(750)
Other comprehensive income (loss) before reclassifications	36		(1,025)		(989)
Amounts reclassified from accumulated other comprehensive loss	—		317		317
Net current period change in accumulated other comprehensive income (loss)	36		(708)		(672)
Balance at December 31, 2018	$	(25)	$	(1,397)	$	(1,422)
Other comprehensive income (loss) before reclassifications	—		681		681
Amounts reclassified from accumulated other comprehensive loss	—		641		641
Net current period change in accumulated other comprehensive income (loss)	—		1,322		1,322
Balance at December 31, 2019	$	(25)	$	(75)	$	(100)

Amounts reclassified from accumulated other comprehensive loss for the years ended December 31, 2019, 2018 and 2017 were as follows:


		Year Ended December 31,
Details about AOCI Components (In thousands)	Affected Line Item in the Statements of Operations	2019		2018		2017
Change in value of available-for-sale investments
Sales and maturities of available-for-sale investments	Investment income	$	641	$	317	$	55
Total reclassifications		$	641	$	317	$	55

Allowance for Doubtful Accounts

The Company estimates an allowance for doubtful accounts against accounts receivable based on estimates of expected collections consistent with historical cash collection experience. The allowance for doubtful accounts is evaluated on a regular basis and adjusted when trends, significant events or other substantive evidence indicate that expected collections will be less than applicable accrual rates. At December 31, 2019 and 2018 there was no allowance for doubtful accounts recorded. For the years ended December 31, 2019, 2018 and 2017, there was no bad debt expense written off against the allowance and charged to operating expense.

Inventory

Inventory is stated at the lower of cost or net realizable value. The Company determines the cost of inventory using the first-in, first out method (“FIFO”). The Company estimates the recoverability of inventory by reference to internal estimates of future demands and product life cycles, including expiration. The Company periodically analyzes its inventory levels to identify inventory that may expire prior to expected sale, no longer meets quality specifications, or has a cost basis in excess of its estimated realizable value and records a charge to cost of sales for such inventory as appropriate.

Direct and indirect manufacturing costs incurred during process validation and for other research and development activities, which are not permitted to be sold, have been expensed to research and development in the Company’s consolidated statements of operations.

Inventory consisted of the following:


(In thousands)	December 31, 2019		December 31, 2018
Raw materials	$	24,958	$	12,761
Semi-finished and finished goods	36,766		26,387
Total inventory	$	61,724	$	39,148

Property, Plant and Equipment

Property, plant and equipment are stated at cost and depreciated using the straight-line method over the assets’ estimated useful lives. Land is stated at cost and does not depreciate. Maintenance and repairs are expensed when incurred; additions and improvements are capitalized. The estimated useful lives of property and equipment are as follows:


(In thousands)	Estimated Useful Life	December 31, 2019		December 31, 2018
Property, plant and equipment
Land	n/a	$	4,466	$	4,466
Leasehold and building improvements	(1)	80,352		38,895
Land improvements	15 years	1,766		1,530
Buildings	30 years	112,815		7,928
Computer equipment and computer software	3 years	65,323		36,969
Laboratory equipment	3 - 10 years	104,008		37,518
Furniture and fixtures	3 years	14,539		8,353
Assets under construction	n/a	149,687		167,462
Property, plant and equipment, at cost		532,956		303,121
Accumulated depreciation		(77,631)		(57,862)
Property, plant and equipment, net		$	455,325	$	245,259

(1)Lesser of remaining lease term, building life, or estimated useful life.

Depreciation expense for the years ended December 31, 2019, 2018, and 2017 was $33.9 million, $20.5 million, and $14.5 million, respectively.

At December 31, 2019, the Company had $149.7 million of assets under construction which consisted of $126.2 million related to building and leasehold improvements, $18.9 million of costs related to laboratory equipment under construction, $3.9 million of capitalized costs related to software projects, and $0.7 million of furniture and fixtures. Depreciation will begin on these assets once they are placed into service. The Company expects to incur an additional $111.0 million to complete the building projects and leasehold improvements, $3.7 million to complete the laboratory equipment, $2.2 million of costs to complete the computer software projects, and minimal costs to complete the furniture and fixtures. These projects are expected to be completed in 2020 and 2021.

Software Development Costs

Software development costs related to internal use software are incurred in three stages of development: the preliminary project stage, the application development stage, and the post-implementation stage. Costs incurred during the preliminary project and post-implementation stages are expensed as incurred. Costs incurred during the application development stage that meet the criteria for capitalization are capitalized and amortized, when the software is ready for its intended use, using the straight‑line basis over the estimated useful life of the software, which is generally 3 years.

Investments in Privately Held Companies

The Company determines whether its investments in privately held companies are debt or equity based on their characteristics, in accordance with the applicable accounting guidance for such investments. The Company also evaluates the investee to determine if the entity is a variable interest entity (“VIE”) and, if so, whether the Company is the primary beneficiary of the VIE, in order to determine whether consolidation of the VIE is required. If consolidation is not required and the Company owns less than 50.1% of the voting interest of the entity, the investment is evaluated to determine if the equity method of accounting should be applied. The equity method applies to investments in common stock or in substance common stock where the Company exercises significant influence over the investee.

Prior to January 1, 2018, if the equity method did not apply, investments in privately held companies determined to be equity securities were accounted for using the cost method. As discussed below, on January 1, 2018, the Company adopted ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which changed the way it accounts for non-marketable securities. The Company adjusts the carrying value of its non-marketable equity securities for changes from observable transactions for identical or similar investments of the same issuer, less impairment. All gains and losses on non-marketable equity securities, realized and unrealized, are recognized in other income (expense), net in the consolidated statements of operations.

Investments in privately held companies determined to be debt securities are accounted for as available-for-sale or held to maturity securities, in accordance with the applicable accounting guidance for such investments.

Derivative Financial Instruments

Derivative Financial InstrumentsThe Company hedges a portion of its foreign currency exposures related to outstanding monetary assets and liabilities using foreign currency forward contracts. The foreign currency forward contracts, included in prepaid expenses and other current assets or in accrued liabilities, depending on the contracts’ net position, the Company uses to hedge the exposure are not designated as hedges, and as a result, changes in their fair value are recorded in other income (expense). As of December 31, 2019, the Company had open foreign currency forward contracts with notional amounts of $17.9 million. The Company's foreign exchange derivative instruments are classified as Level 2 within the fair value hierarchy as they are valued using inputs that are observable in the market or can be derived principally from or corroborated by observable market data. The fair value of the foreign currency forward contracts was $0 at December 31, 2019. As of December 31, 2018, the Company had no open foreign currency forward contracts.

Intangible Assets

Intangible assets consisted of the following:


(In thousands)	December 31, 2019		December 31, 2018
Intangible assets
Finite-lived intangible assets	$	963,690	$	33,058
Less: Accumulated amortization	(20,411)		(4,107)
Finite-lived intangible assets, net	943,279		28,951
In-process research and development	200,000		—
Internally developed technology in process	271		51
Intangible assets, net	$	1,143,550	$	29,002

Finite-Lived Intangible Assets

The following table summarizes the net-book-value and estimated remaining life of the Company’s finite-lived intangible assets as of December 31, 2019:


(In thousands)	Net Balance at December 31, 2019		Weighted Average Remaining Life (Years)
Trade name	$	99,739	15.9
Customer relationships	2,476		13.8
Patents	16,715		8.8
Supply agreements	29,429		7.5
Acquired developed technology	794,027		9.9
Internally developed technology	893		2.5
Total	$	943,279

As of December 31, 2019, the estimated future amortization expense associated with the Company’s finite-lived intangible assets for each of the five succeeding fiscal years is as follows:


(In thousands)
2020	$	93,610
2021	93,508
2022	93,302
2023	93,159
2024	92,825
Thereafter	476,875
	$	943,279