SEC Form 10-Q filed by Exact Sciences Corporation

11/5/24 5:08:43 PM ET

$EXAS

Medical Specialities

Health Care

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-35092

EXACT SCIENCES CORPORATION

(Exact name of registrant as specified in its charter)


Delaware			02-0478229
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)

5505 Endeavor Lane, Madison WI			53719
(Address of principal executive offices)			(Zip Code)

(608) 535-8815 (Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

EXAS

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 4, 2024, the registrant had 185,076,293 shares of common stock outstanding.

EXACT SCIENCES CORPORATION

INDEX


		Page Number
	Part I - Financial Information

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets (unaudited) as of September 30, 2024 and December 31, 2023	3

	Condensed Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended September 30, 2024 and 2023	4

	Condensed Consolidated Statements of Comprehensive Loss (unaudited) for the Three and Nine Months Ended September 30, 2024 and 2023	5

	Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the Three and Nine Months Ended September 30, 2024 and 2023	6

	Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2024 and 2023	8

	Notes to Condensed Consolidated Financial Statements (unaudited)	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45

Item 4.	Controls and Procedures	46

	Part II - Other Information

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 3.	Defaults Upon Senior Securities	47

Item 4.	Mine Safety Disclosures	47

Item 5.	Other Information	47

Item 6.	Exhibits	48

	Signatures	49

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EXACT SCIENCES CORPORATION

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share data - unaudited)

Part I — Financial Information


	September 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	588,830	$	605,378
Marketable securities	432,301		172,266
Accounts receivable, net	264,819		203,623
Inventory	136,987		127,475
Prepaid expenses and other current assets	110,180		85,627
Total current assets	1,533,117		1,194,369
Long-term Assets:
Property, plant and equipment, net	690,332		698,354
Operating lease right-of-use assets	122,452		143,708
Goodwill	2,367,450		2,367,120
Intangible assets, net	1,864,399		1,890,396
Other long-term assets, net	170,821		177,387
Total assets	$	6,748,571	$	6,471,334
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	97,653	$	78,816
Accrued liabilities	313,997		341,683
Operating lease liabilities, current portion	27,170		29,379
Convertible notes, net, current portion	249,038		—
Debt, current portion	—		50,000
Other current liabilities	35,804		14,823
Total current liabilities	723,662		514,701
Long-term liabilities:
Convertible notes, net, less current portion	2,319,490		2,314,276
Other long-term liabilities	332,213		335,982
Operating lease liabilities, less current portion	162,695		161,070
Total liabilities	3,538,060		3,326,029
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.01 par value Authorized—5,000,000; shares issued and outstanding—no shares at September 30, 2024 and December 31, 2023	—		—
Common stock, $0.01 par value Authorized—400,000,000; shares issued and outstanding—185,054,760 and 181,364,180 shares at September 30, 2024 and December 31, 2023	1,852		1,815
Additional paid-in capital	6,837,476		6,611,237
Accumulated other comprehensive income	4,630		1,428
Accumulated deficit	(3,633,447)		(3,469,175)
Total stockholders’ equity	3,210,511		3,145,305
Total liabilities and stockholders’ equity	$	6,748,571	$	6,471,334

The accompanying notes are an integral part of these condensed consolidated financial statements.

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EXACT SCIENCES CORPORATION

Condensed Consolidated Statements of Operations

(Amounts in thousands, except per share data - unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue	$	708,655	$	628,338	$	2,045,443	$	1,852,881

Operating expenses
Cost of sales (exclusive of amortization of acquired intangible assets)	196,070		168,526		556,019		482,383
Research and development	100,101		111,446		331,593		310,960
Sales and marketing	194,653		173,159		572,288		536,613
General and administrative	217,201		217,393		662,174		672,653
Amortization of acquired intangible assets	24,435		22,992		71,057		68,849
Impairment of long-lived assets	18,698		—		31,296		621
Total operating expenses	751,158		693,516		2,224,427		2,072,079

Other operating income	3,100		72,027		6,632		72,027
Income (loss) from operations	(39,403)		6,849		(172,352)		(147,171)

Other income (expense)
Investment income, net	11,582		2,065		29,596		7,383
Interest expense	(9,607)		(7,871)		(17,439)		(11,582)
Total other income (expense)	1,975		(5,806)		12,157		(4,199)

Net income (loss) before tax	(37,428)		1,043		(160,195)		(151,370)

Income tax expense	(808)		(249)		(4,077)		(3,013)

Net income (loss)	$	(38,236)	$	794	$	(164,272)	$	(154,383)

Net income (loss) per share—basic	$	(0.21)	$	0.00	$	(0.89)	$	(0.86)

Net income (loss) per share—diluted	$	(0.21)	$	0.00	$	(0.89)	$	(0.86)

Weighted average common shares outstanding—basic	184,795		180,649		183,823		179,817

Weighted average common shares outstanding—diluted	184,795		184,075		183,823		179,817

The accompanying notes are an integral part of these condensed consolidated financial statements.

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EXACT SCIENCES CORPORATION

Condensed Consolidated Statements of Comprehensive Loss

(Amounts in thousands - unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net income (loss)	$	(38,236)	$	794	$	(164,272)	$	(154,383)
Other comprehensive income (loss), net of tax:
Unrealized gain on available-for-sale investments	3,700		423		2,775		4,327
Foreign currency adjustment	1,873		(1,235)		427		(626)
Comprehensive loss	$	(32,663)	$	(18)	$	(161,070)	$	(150,682)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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EXACT SCIENCES CORPORATION

Condensed Consolidated Statements of Stockholders’ Equity

(Amounts in thousands, except share data - unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Number of Shares	$0.01 Par Value
Balance, January 1, 2024	181,364,180	$	1,815	$	6,611,237	$	1,428	$	(3,469,175)	$	3,145,305
Exercise of common stock options, net of shares withheld for taxes	71,537	1		(1,409)		—		—		(1,408)
Issuance of common stock upon settlement of restricted stock awards, net of shares withheld for taxes	1,792,087	17		(61)		—		—		(44)
Issuance of common stock to fund the Company’s 2023 401(k) match	617,384	6		40,544		—		—		40,550
Stock-based compensation expense	—	—		60,370		—		—		60,370
Net loss	—	—		—		—		(110,228)		(110,228)
Other comprehensive loss	—	—		—		(1,927)		—		(1,927)
Balance, March 31, 2024	183,845,188	$	1,839	$	6,710,681	$	(499)	$	(3,579,403)	$	3,132,618
Exercise of common stock options, net of shares withheld for taxes	8,184	1		42		—		—		43
Issuance of common stock upon settlement of restricted stock awards, net of shares withheld for taxes	210,590	2		(6)		—		—		(4)
Stock-based compensation expense	—	—		56,555		—		—		56,555
Purchase of employee stock purchase plan shares	604,226	6		19,396		—		—		19,402
Net loss	—	—		—		—		(15,808)		(15,808)
Other comprehensive loss	—	—		—		(444)		—		(444)
Balance, June 30, 2024	184,668,188	$	1,848	$	6,786,668	$	(943)	$	(3,595,211)	$	3,192,362
Exercise of common stock options, net of shares withheld for taxes	79,871	1		2,131		—		—		2,132
Issuance of common stock upon settlement of restricted stock awards, net of shares withheld for taxes	306,701	3		(80)		—		—		(77)
Stock-based compensation expense	—	—		48,757		—		—		48,757
Net loss	—	—		—		—		(38,236)		(38,236)
Other comprehensive income	—	—		—		5,573		—		5,573
Balance, September 30, 2024	185,054,760	$	1,852	6,837,476		$	4,630	(3,633,447)		$	3,210,511

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EXACT SCIENCES CORPORATION

Condensed Consolidated Statements of Stockholders’ Equity

(Amounts in thousands, except share data - unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Number of Shares	$0.01 Par Value
Balance, January 1, 2023	177,925,631	$	1,780	$	6,311,644	$	(5,236)	$	(3,265,026)	$	3,043,162
Exercise of common stock options, net of shares withheld for taxes	88,228	1		963		—		—		964
Issuance of common stock upon settlement of restricted stock awards, net of shares withheld for taxes	1,299,071	13		(13)		—		—		—
Issuance of common stock to fund the Company’s 2022 401(k) match	517,215	5		35,072		—		—		35,077
Stock-based compensation expense	—	—		49,139		—		—		49,139
Net loss	—	—		—		—		(74,151)		(74,151)
Other comprehensive income	—	—		—		3,517		—		3,517
Balance, March 31, 2023	179,830,145	$	1,799	$	6,396,805	$	(1,719)	$	(3,339,177)	$	3,057,708
Exercise of common stock options, net of shares withheld for taxes	36,728	1		851		—		—		852
Issuance of common stock upon settlement of restricted stock awards, net of shares withheld for taxes	134,002	1		(1)		—		—		—
Issuance of common stock to fund the Company’s 2022 401(k) match	335	—		23		—		—		23
Stock-based compensation expense	—	—		61,725		—		—		61,725
Purchase of employee stock purchase plan shares	544,453	5		16,339		—		—		16,344
Net loss	—	—		—		—		(81,026)		(81,026)
Other comprehensive income	—	—		—		996		—		996
Balance, June 30, 2023	180,545,663	$	1,806	$	6,475,742	$	(723)	$	(3,420,203)	$	3,056,622
Exercise of common stock options, net of shares withheld for taxes	51,262	1		1,076		—		—		1,077
Issuance of common stock upon settlement of restricted stock awards, net of shares withheld for taxes	217,482	2		(2)		—		—		—
Stock-based compensation expense	—	—		61,871		—		—		61,871
Issuance of common stock for business combinations	—	—		1,675		—		—		1,675
Net income	—	—		—		—		794		794
Other comprehensive loss	—	—		—		(812)		—		(812)
Balance, September 30, 2023	180,814,407	$	1,809	$	6,540,362	$	(1,535)	$	(3,419,409)	$	3,121,227

The accompanying notes are an integral part of these condensed consolidated financial statements.

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EXACT SCIENCES CORPORATION

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands - unaudited)


	Nine Months Ended September 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(164,272)	$	(154,383)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation	90,655		83,587
Loss on non-marketable and marketable equity securities	1,772		10,264
Deferred tax expense	1,827		(279)
Stock-based compensation	165,682		172,735
Gain on settlements of convertible notes, net	(10,254)		(10,324)
Amortization of acquired intangible assets	71,057		68,849
Impairment of long-lived assets	31,296		621
Remeasurement of contingent consideration from sale of asset	(6,632)		(68,900)
Remeasurement of contingent consideration liabilities	(2,326)		(13,051)
Non-cash lease expense	20,645		20,918
Other	(1,437)		3,530
Changes in assets and liabilities:
Accounts receivable, net	(61,410)		(40,306)
Inventory, net	(9,516)		(13,074)
Operating lease liabilities	(19,345)		(19,741)
Accounts payable and accrued liabilities	38,258		51,084
Other assets	6,358		(3,686)
Other liabilities	11,115		(1,274)
Net cash provided by operating activities	163,473		86,570
Cash flows from investing activities:
Purchases of marketable securities	(405,385)		(75,096)
Maturities and sales of marketable securities	150,916		328,054
Purchases of property, plant and equipment	(99,673)		(89,268)
Business combination, net of cash acquired	—		(50,000)
Asset acquisition, net of cash acquired	(45,000)		—
Purchases of non-marketable securities	(916)		(6,290)
Sales of investments in non-marketable securities	—		9,296
Other investing activities	(225)		(250)
Net cash provided by (used in) investing activities	(400,283)		116,446
Cash flows from financing activities:
Proceeds from exercise of common stock options, net of cash paid for taxes	767		2,893
Proceeds in connection with the Company’s employee stock purchase plan	19,402		16,344
Proceeds from issuance of convertible notes	266,750		137,976
Payments on accounts receivable securitization facility	(50,000)		—
Other financing activities	(15,544)		(7,484)
Net cash provided by financing activities	221,375		149,729
Effects of exchange rate changes on cash and cash equivalents	427		(626)
Net increase (decrease) in cash, cash equivalents and restricted cash	(15,008)		352,119
Cash, cash equivalents and restricted cash, beginning of period	609,675		242,790
Cash, cash equivalents and restricted cash, end of period	$	594,667	$	594,909

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EXACT SCIENCES CORPORATION

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands - unaudited)


	Nine Months Ended September 30,
	2024		2023
Supplemental disclosure of non-cash investing and financing activities
Property, plant and equipment acquired but not paid	$	11,904	$	14,422
Supplemental disclosure of cash flow information:
Interest paid	$	21,109	$	18,176
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	588,830	$	594,612
Restricted cash — included in other long-term assets, net	5,837		297
Total cash, cash equivalents and restricted cash	$	594,667	$	594,909

The accompanying notes are an integral part of these condensed consolidated financial statements.

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EXACT SCIENCES CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Exact Sciences Corporation (together with its subsidiaries, “Exact,” or the “Company”) was incorporated in February 1995. A leading provider of cancer screening and diagnostic tests, Exact Sciences gives patients and health care professionals the clarity needed to take life-changing action earlier. Building on the success of the Cologuard® and Oncotype DX® tests, Exact Sciences is investing in its pipeline to develop innovative solutions for use before, during, and after a cancer diagnosis.

Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated financial statements, which include the accounts of the Company and those of its wholly owned subsidiaries and variable interest entities, are unaudited and have been prepared on a basis substantially consistent with the Company’s audited financial statements and notes as of and for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K (the “2023 Form 10-K”). All intercompany transactions and balances have been eliminated upon consolidation. These condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted (“GAAP”) in the United States of America (“U.S.”) and follow the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of adjustments of a normal and recurring nature) considered necessary for a fair statement of its financial position, operating results and cash flows for the periods presented. The condensed consolidated balance sheet at December 31, 2023 has been derived from audited financial statements, but does not contain all of the footnote disclosures from the 2023 Form 10-K. The results of the Company’s operations for any interim period are not necessarily indicative of the results of the Company’s operations for any other interim period or for a full fiscal year. The statements should be read in conjunction with the audited financial statements and related notes included in the 2023 Form 10-K.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting policies are those that affect the Company’s financial statements materially and involve difficult, subjective or complex judgments by management, and actual results could differ from those estimates. These estimates include revenue recognition, valuation of intangible assets and goodwill, contingent consideration, and accounting for income taxes. The Company’s critical accounting policies and estimates are explained further in the notes to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q and the 2023 Form 10-K.

Significant Accounting Policies

During the nine months ended September 30, 2024, there were no changes to the Company’s significant accounting policies as described in the Company’s 2023 Form 10-K, except as described in the Recently Adopted Accounting Pronouncements sections below.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In March 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2024-02: Codification Improvement – Amendments to Remove References to the Concepts Statements. This update amends the Accounting Standards Codification (“ASC”) to remove references to various FASB Concepts Statements. The Company early adopted and prospectively applied the amendments in this update during the first quarter of fiscal year 2024. There was no significant impact to the Company’s condensed consolidated financial statements.

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EXACT SCIENCES CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Recently Issued Accounting Pronouncements Not Yet Adopted

In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This update modifies the disclosure or presentation requirements of a variety of topics in the ASC to conform with certain SEC amendments in Release No. 33-10532, Disclosure Update and Simplification. The amendments in this update should be applied prospectively, and the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or S-K becomes effective. However, if the SEC has not removed the related disclosure from its regulations by June 30, 2027, the amendments will be removed from the Codification and not become effective. Early adoption is prohibited. The Company is currently evaluating the potential impact of this guidance on its condensed consolidated financial statements.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This update improves reportable segment disclosure requirements, primarily through enhanced disclosures of significant segment expenses. The amendments in this update should be applied retrospectively to all prior periods presented in the consolidated financial statements and are effective for fiscal years beginning after December 31, 2023 and interim periods within fiscal years beginning after December 31, 2024. Early adoption is permitted. The Company is currently evaluating the potential impact of this guidance on its condensed consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures. This update improves income tax disclosure requirements, primarily through enhanced transparency and decision usefulness of disclosures. The amendments in this update should be applied prospectively with the option to apply retrospectively and are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the potential impact of this guidance on its condensed consolidated financial statements.

Net Income (Loss) Per Share

Basic net income (loss) per common share (“EPS”) was determined by dividing net income (loss) applicable to common stockholders by the weighted average common shares outstanding during the period. Diluted EPS is based on shares that are outstanding per the calculation of basic EPS and on potentially dilutive shares.

The following is a reconciliation of the numerator and denominator used to calculate basic EPS and diluted EPS for the periods indicated:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2024		2023		2024		2023
Net income (loss) available to common shareholders	$	(38,236)	$	794	$	(164,272)	$	(154,383)
Weighted average common shares outstanding - basic	184,795		180,649		183,823		179,817
Effect of dilutive shares:
Restricted stock awards	—		2,153		—		—
Stock options	—		646		—		—
Employee stock purchase plan	—		589		—		—
Performance share units	—		38		—		—
Dilutive potential common shares	—		3,426		—		—
Weighted average common shares outstanding - diluted	184,795		184,075		183,823		179,817
Earnings per common share from net earnings - basic	$	(0.21)	$	0.00	$	(0.89)	$	(0.86)
Earnings per common share from net earnings - diluted	$	(0.21)	$	0.00	$	(0.89)	$	(0.86)

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EXACT SCIENCES CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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:


	Three Months Ended September 30,		Nine Months Ended September 30,
(In thousands)	2024	2023	2024	2023
Shares issuable upon conversion of convertible notes	26,526	23,231	26,526	23,231
Shares issuable upon the release of restricted stock awards	7,487	—	7,487	6,423
Shares issuable upon the release of performance share units	2,037	—	2,037	1,584
Shares issuable upon exercise of stock options	1,028	—	1,028	1,305
	37,078	23,231	37,078	32,543

(2) REVENUE

The Company’s revenue is primarily generated by its laboratory testing services utilizing its Cologuard and Oncotype® tests. The services are considered completed upon release of a patient’s test result to the ordering healthcare provider.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2024		2023		2024		2023
Screening
Medicare Parts B & C	$	201,423	$	173,624	$	570,550	$	521,370
Commercial	289,637		253,401		827,509		732,182
Other	53,841		44,988		153,246		124,443
Total Screening	544,901		472,013		1,551,305		1,377,995
Precision Oncology
Medicare Parts B & C	$	47,080	$	46,383	$	142,597	$	141,352
Commercial	47,685		44,430		143,572		135,574
International	49,433		38,599		140,688		111,453
Other	19,556		26,913		67,281		80,552
Total Precision Oncology	163,754		156,325		494,138		468,931
COVID-19 Testing	$	—	$	—	$	—	$	5,955
Total	$	708,655	$	628,338	$	2,045,443	$	1,852,881

Screening revenue primarily includes laboratory service revenue from Cologuard and Prevention Genetics, LLC (“PreventionGenetics”) tests while Precision Oncology revenue primarily includes laboratory service revenue from global Oncotype DX and therapy selection tests.

At each reporting period end, the Company conducts an analysis of the estimates used to calculate the transaction price to determine whether any new information available impacts those estimates made in prior reporting periods. Adjustments to revenue recognized during the period relating to prior period estimates were less than 1% of revenue recorded in the Company’s condensed consolidated statement of operations for the three and nine months ended September 30, 2024. Adjustments to revenue recognized during the period relating to prior period estimates were less than 2% of revenue recorded in the Company’s condensed consolidated statement of operations for the three and nine months ended September 30, 2023.

The Company’s deferred revenue, which is reported in other current liabilities in the Company’s condensed consolidated balance sheets, was not significant as of September 30, 2024 and December 31, 2023.

Revenue recognized for the three and nine months ended September 30, 2024 and 2023 that was included in the deferred revenue balance at the beginning of the period was not significant.

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EXACT SCIENCES CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(3) MARKETABLE SECURITIES

The following table sets forth the Company’s cash, cash equivalents, and marketable securities at September 30, 2024 and December 31, 2023:


(In thousands)	September 30, 2024		December 31, 2023
Cash and cash equivalents
Cash and money market	$	582,741	$	530,100
Cash equivalents	6,089		75,278
Total cash and cash equivalents	588,830		605,378
Marketable securities
Available-for-sale debt securities	$	427,072	$	168,425
Equity securities	5,229		3,841
Total marketable securities	432,301		172,266
Total cash, cash equivalents and marketable securities	$	1,021,131	$	777,644

Available-for-sale debt securities, including the classification within the condensed consolidated balance sheet at September 30, 2024, consisted of the following:


(In thousands)	Amortized Cost		Gains in Accumulated Other Comprehensive Income (1)		Losses in Accumulated Other Comprehensive Income (1)		Estimated Fair Value
Cash equivalents
U.S. government agency securities	$	6,089	$	—	$	—	$	6,089
Total cash equivalents	6,089		—		—		6,089
Marketable securities
Corporate bonds	$	212,590	$	2,039	$	(14)	$	214,615
U.S. government agency securities	126,676		436		(19)		127,093
Asset backed securities	84,977		441		(54)		85,364
Total marketable securities	424,243		2,916		(87)		427,072
Total available-for-sale securities	$	430,332	$	2,916	$	(87)	$	433,161

______________

(1)There was no tax impact from the gains and losses in accumulated other comprehensive income (“AOCI”).

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EXACT SCIENCES CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Available-for-sale debt securities, including the classification within the condensed consolidated balance sheet at December 31, 2023, consisted of the following:


(In thousands)	Amortized Cost		Gains in Accumulated Other Comprehensive Income (1)		Losses in Accumulated Other Comprehensive Income (1)		Estimated Fair Value
Cash equivalents
Commercial paper	$	72,243	$	—	$	—	$	72,243
U.S. government agency securities	3,035		—		—		3,035
Total cash equivalents	75,278		—		—		75,278
Marketable securities
U.S. government agency securities	$	56,594	$	166	$	(44)	$	56,716
Corporate bonds	55,712		175		(59)		55,828
Asset backed securities	35,081		65		(249)		34,897
Commercial paper	20,984		—		—		20,984
Total marketable securities	168,371		406		(352)		168,425
Total available-for-sale securities	$	243,649	$	406	$	(352)	$	243,703

______________

(1)There was no tax impact from the gains and losses in AOCI.

The following table summarizes contractual underlying maturities of the Company’s available-for-sale debt securities at September 30, 2024:


	Due one year or less				Due after one year through five years
(In thousands)	Cost		Fair Value		Cost		Fair Value
Cash equivalents
U.S. government agency securities	$	6,089	$	6,089	$	—	$	—
Total cash equivalents	6,089		6,089		—		—
Marketable securities
U.S. government agency securities	$	89,800	$	90,048	$	36,876	$	37,045
Corporate bonds	51,706		51,890		160,884		162,725
Asset backed securities	11,388		11,448		73,589		73,916
Total marketable securities	152,894		153,386		271,349		273,686
Total available-for-sale securities	$	158,983	$	159,475	$	271,349	$	273,686

The following table summarizes the gross unrealized losses and fair values of available-for-sale debt securities in an unrealized loss position as of September 30, 2024 aggregated by investment category and length of time those individual securities have been in a continuous unrealized loss position:


	Less than one year				One year or greater				Total
(In thousands)	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Marketable securities
Corporate bonds	$	9,501	$	(13)	$	3,290	$	(1)	$	12,791	$	(14)
U.S. government agency securities	8,551		(16)		3,963		(3)		12,514		(19)
Asset backed securities	3,399		(3)		3,986		(51)		7,385		(54)
Total available-for-sale securities	$	21,451	$	(32)	$	11,239	$	(55)	$	32,690	$	(87)

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EXACT SCIENCES CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company evaluates investments that are in an unrealized loss position for impairment as a result of credit loss. It was determined that no credit losses exist as of September 30, 2024 and December 31, 2023 because the change in market value for those securities in an unrealized loss position resulted from fluctuating interest rates rather than a deterioration of the credit worthiness of the issuers.

The gains and losses recorded on available-for-sale debt securities and equity securities are included in investment income, net in the Company’s condensed consolidated statements of operations. The gains and losses recorded were not material for the three and nine months ended September 30, 2024 and 2023.

(4) INVENTORY

Inventory consisted of the following:


(In thousands)	September 30, 2024		December 31, 2023
Raw materials	$	54,714	$	58,593
Semi-finished and finished goods	82,273		68,882
Total inventory	$	136,987	$	127,475

(5) PROPERTY, PLANT AND EQUIPMENT

The carrying value and estimated useful lives of property, plant and equipment are as follows:


(In thousands)	Estimated Useful Life	September 30, 2024		December 31, 2023
Property, plant and equipment
Land	n/a	$	4,716	$	4,716
Leasehold and building improvements	(1)	227,600		214,562
Land improvements	15 years	6,747		6,729
Buildings	30 - 40 years	290,777		290,777
Computer equipment and computer software	3 years	199,715		168,131
Machinery and equipment	3 - 10 years	324,129		290,294
Furniture and fixtures	3 - 10 years	36,976		35,756
Assets under construction	n/a	80,063		104,592
Property, plant and equipment, at cost		1,170,723		1,115,557
Accumulated depreciation		(480,391)		(417,203)
Property, plant and equipment, net		$	690,332	$	698,354

______________

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

Depreciation expense for the three months ended September 30, 2024 and 2023 was $30.3 million and $29.3 million, respectively. Depreciation expense for the nine months ended September 30, 2024 and 2023 was $90.7 million and $83.6 million, respectively.

At September 30, 2024, the Company had $80.1 million of assets under construction, which consisted of $52.3 million in machinery and equipment, $12.7 million in capitalized costs related to software projects, $10.0 million in leasehold and building improvements, $5.1 million related to buildings, and minimal furniture and fixtures. Depreciation will begin on these assets once they are placed into service upon completion.

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EXACT SCIENCES CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(6) INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

The following table summarizes the net-book-value and estimated remaining life of the Company’s intangible assets as of September 30, 2024:


(In thousands)	Weighted Average Remaining Life (Years)	Cost		Accumulated Amortization		Net Balance at September 30, 2024
Finite-lived intangible assets
Trade name	11.0	$	104,000	$	(33,340)	$	70,660
Customer relationships	6.3	4,000		(1,222)		2,778
Patents and licenses	9.7	56,542		(11,811)		44,731
Acquired developed technology (1)	6.6	887,708		(391,478)		496,230
Total finite-lived intangible assets		1,052,250		(437,851)		614,399
In-process research and development	n/a	1,250,000		—		1,250,000
Total intangible assets		$	2,302,250	$	(437,851)	$	1,864,399

The following table summarizes the net-book-value and estimated remaining life of the Company’s intangible assets as of December 31, 2023:


(In thousands)	Weighted Average Remaining Life (Years)	Cost		Accumulated Amortization		Net Balance at December 31, 2023
Finite-lived intangible assets
Trade name	11.6	$	104,000	$	(27,903)	$	76,097
Customer relationships	7.0	4,000		(889)		3,111
Patents and licenses	4.5	11,542		(9,600)		1,942
Acquired developed technology (1)	7.3	887,789		(328,543)		559,246
Total finite-lived intangible assets		1,007,331		(366,935)		640,396
In-process research and development	n/a	1,250,000		—		1,250,000
Total intangible assets		$	2,257,331	$	(366,935)	$	1,890,396

______________

(1)The gross carrying amount includes an insignificant foreign currency translation adjustment related to the intangible asset acquired as a result of the acquisition of OmicEra Diagnostics GmbH (“OmicEra”).

As of September 30, 2024, 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)
2024 (remaining three months)	$	24,100
2025	96,361
2026	95,300
2027	95,300
2028	95,300
Thereafter	208,038
	$	614,399

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EXACT SCIENCES CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company’s acquired intangible assets are being amortized on a straight-line basis over their estimated useful lives.

There were no impairment losses recorded on finite-lived intangible assets during the three and nine months ended September 30, 2024 and 2023. Updates to key assumptions used to calculate the fair value of the Company’s in-process research and development asset (“IPR&D”) could change the Company’s estimate that it will recover the carrying amount of the IPR&D asset in the near term.

Goodwill

The change in the carrying amount of goodwill for the periods ended September 30, 2024 and December 31, 2023 is as follows:


(In thousands)
Balance, January 1, 2023	$	2,346,040
Resolution Bioscience acquisition	20,692
Effects of changes in foreign currency exchange rates (1)	388
Balance, December 31, 2023	2,367,120
Resolution Bioscience acquisition adjustments	225
Effects of changes in foreign currency exchange rates (1)	105
Balance September 30, 2024	$	2,367,450

______________

(1)Represents the impact of foreign currency translation related to the goodwill acquired as a result of the acquisition of OmicEra.

There were no impairment losses for the three and nine months ended September 30, 2024 and 2023.

(7) FAIR VALUE MEASUREMENTS

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

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

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

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

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EXACT SCIENCES CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table presents the Company’s fair value measurements as of September 30, 2024 along with the level within the fair value hierarchy in which the fair value measurements, in their entirety, fall.


(In thousands)	Fair Value at September 30, 2024		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	$	582,741	$	582,741	$	—	$	—
U.S. government agency securities	6,089		—		6,089		—
Restricted cash (1)	5,837		5,837		—		—
Marketable securities
Corporate bonds	$	214,615	$	—	$	214,615	$	—
U.S. government agency securities	127,093		—		127,093		—
Asset backed securities	85,364		—		85,364		—
Equity securities	5,229		5,229		—		—
Non-marketable securities	$	686	$	—	$	—	$	686
Liabilities
Contingent consideration	$	(283,231)	$	—	$	—	$	(283,231)
Total	$	744,423	$	593,807	$	433,161	$	(282,545)

The following table presents the Company’s fair value measurements as of December 31, 2023 along with the level within the fair value hierarchy in which the fair value measurements, in their entirety, fall.


(In thousands)	Fair Value at December 31, 2023		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	$	530,100	$	530,100	$	—	$	—
Commercial paper	72,243		—		72,243		—
Restricted cash (1)	4,297		4,297		—		—
U.S. government agency securities	3,035		—		3,035		—
Marketable securities
U.S. government agency securities	$	56,716	$	—	$	56,716	$	—
Corporate bonds	55,828		—		55,828		—
Asset backed securities	34,897		—		34,897		—
Commercial paper	20,984		—		20,984		—
Equity securities	3,841		3,841		—		—
Non-marketable securities	$	7,650	$	—	$	—	$	7,650
Liabilities
Contingent consideration	$	(288,657)	$	—	$	—	$	(288,657)
Total	$	500,934	$	538,238	$	243,703	$	(281,007)

_________________________________

(1)Restricted cash primarily represents cash held by a third-party financial institution as part of a cash collateral agreement related to the Company’s credit card program. The restrictions will lapse upon the termination of the agreements or the removal of the cash collateral requirement by the third-parties.

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EXACT SCIENCES CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

There have been no material changes in valuation techniques or transfers between fair value measurement levels during the three and nine months ended September 30, 2024. The fair value of Level 2 instruments classified as cash equivalents and marketable debt securities are valued using a third-party pricing agency where the valuation is based on observable inputs including pricing for similar assets and other observable market factors.

The Company has elected the fair value option under the income approach to measure certain Level 3 non-marketable securities. Gains and losses recorded on non-marketable securities are included in investment income, net in the condensed consolidated statement of operations. The following table provides a reconciliation of the beginning and ending balances of non-marketable securities valued using the fair value option:


(In thousands)	Non-Marketable Securities
Beginning balance, January 1, 2024	$	7,650
Changes in fair value	(714)
Settlement of non-marketable securities	(6,250)
Ending balance, September 30, 2024	$	686

Contingent Consideration Liabilities

The fair value of the contingent consideration liabilities was $283.2 million and $288.7 million as of September 30, 2024 and December 31, 2023, respectively, of which $19.4 million was included in other current liabilities and $263.8 million was included in other long-term liabilities in the condensed consolidated balance sheet as of September 30, 2024. The contingent consideration liabilities were included in other long-term liabilities as of December 31, 2023.

The following table provides a reconciliation of the beginning and ending balances of contingent consideration:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2024		2023		2024		2023
Beginning balance	$	277,921	$	302,141	$	288,657	$	306,927
Changes in fair value (1)	5,310		(8,364)		(2,326)		(13,051)
Payments (2)	—		—		(3,100)		(99)
Ending balance	$	283,231	$	293,777	$	283,231	$	293,777

______________

(1)The change in fair value of the contingent consideration liability is included in general and administrative expenses in the condensed consolidated statement of operations for the three and nine months ended September 30, 2024 and 2023.

(2)Payment was made in the second quarter of 2024 to settle the contingent consideration liability previously recorded related to the Company’s acquisition of OmicEra.

This fair value measurement of contingent consideration is categorized as a Level 3 liability, as the measurement amount is based primarily on significant inputs not observable in the market.

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EXACT SCIENCES CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The fair value of the contingent consideration liabilities recorded from the Company’s acquisitions of Thrive Earlier Detection Corporation (“Thrive”), Ashion Analytics, LLC (“Ashion”), and OmicEra related to regulatory and product development milestones was $283.2 million and $288.7 million as of September 30, 2024 and December 31, 2023, respectively. The Company estimates the fair value of the contingent consideration liabilities related to the regulatory and product development milestones using the probability-weighted scenario based discounted cash flow model, which is consistent with the initial measurement of the contingent consideration liabilities. Probabilities of success are applied to each potential scenario and the resulting values are discounted using a present-value factor. The passage of time in addition to changes in projected milestone achievement timing, present-value factor, the degree of achievement, if applicable, and probabilities of success may result in adjustments to the fair value measurement. The fair value of the contingent consideration liability recorded related to regulatory and product development milestones was determined using a weighted average probability of success of 90% and 89% as of September 30, 2024 and December 31, 2023, respectively, and a weighted average present-value factor of 6.0% and 5.8% as of September 30, 2024 and December 31, 2023, respectively. The projected fiscal year of payment range is from 2025 to 2031. Unobservable inputs were weighted by the relative fair value of the contingent consideration liabilities.

The revenue milestone associated with the Ashion acquisition is not expected to be achieved and therefore no liability has been recorded for this milestone.

Non-Marketable Equity Securities

Non-marketable equity securities without readily determinable fair values, which are classified as a component of other long-term assets, net, had the following cumulative upward and downward adjustments and aggregate carrying amounts:


(In thousands)	September 30, 2024		September 30, 2023
Cumulative upward adjustments (1)	$	5,102	$	779
Cumulative downward adjustments and impairments (2)	15,071		15,071
Aggregate carrying value (3)	52,227		31,654

_________________________________

(1) There were no material upward adjustments recorded on non-marketable equity securities held for the three and nine months ended September 30, 2024 and 2023.

(2) There were no material downward adjustments or impairments recorded on non-marketable equity securities held for the three and nine months ended September 30, 2024 and 2023, respectively.

(3) The aggregate carrying value of non-marketable equity securities was $46.0 million as of December 31, 2023.

There were no material realized gains or losses recorded during the three and nine months ended September 30, 2024 and 2023.

The Company has committed capital to venture capital investment funds of $18.0 million, of which $11.7 million remains callable through 2033 as of September 30, 2024. The aggregate carrying amount of these funds, which are classified as a component of other long-term assets, net in the Company’s condensed consolidated balance sheets, was $6.7 million and $5.2 million as of September 30, 2024 and December 31, 2023, respectively.

Derivative Financial Instruments

The Company enters into foreign currency forward contracts on the last day of each month to mitigate the impact of adverse movements in foreign exchange rates related to the remeasurement of monetary assets and liabilities and hedge the Company’s foreign currency exchange rate exposure. As of September 30, 2024 and December 31, 2023 the Company had open foreign currency forward contracts with notional amounts of $47.7 million and $39.5 million, respectively. The Company's foreign exchange derivative instruments are classified as Level 2 within the fair value hierarchy as they are valued using inputs that are observable in the market or can be derived principally from or corroborated by observable market data. The fair value of the open foreign currency forward contracts was zero at September 30, 2024 and December 31, 2023 and there were no gains or losses recorded to adjust the fair value of the open foreign currency contract held as of September 30, 2024. The contracts are closed subsequent to each month-end, and the gains and losses recorded from the contracts were not significant for the three and nine months ended September 30, 2024 and 2023.

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EXACT SCIENCES CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(8) LONG-TERM DEBT

Accounts Receivable Securitization Facility

On June 29, 2022, the Company, through a wholly-owned special purpose entity, Exact Receivables LLC (“Exact Receivables”) entered into an accounts receivable securitization program (the “Securitization Facility”) with PNC Bank, National Association (“PNC”), with a scheduled maturity date of June 29, 2024. The Securitization Facility required the Company to maintain minimum borrowings under the facility of $50.0 million. Upon the maturity of the Securitization Facility in June 2024, the Company repaid the previously outstanding balance of $50.0 million in full. The Securitization Facility provided Exact Receivables with a revolving line-of-credit of up to $150.0 million of borrowing capacity, subject to certain borrowing base requirements, by collateralizing a security interest in the domestic customer accounts receivable of certain wholly-owned subsidiaries of the Company. The amount available under the Securitization Facility fluctuated over time based on the total amount of eligible customer accounts receivable generated by the Company during the normal course of operations. The debt issuance costs incurred related to the Securitization Facility were not significant and were amortized over the life of the Securitization Facility through interest expense within the condensed consolidated statements of operations.

In connection with the Securitization Facility, the Company also entered into two Receivables Purchase Agreements (“Receivable Purchase Agreements”) on June 29, 2022. The Receivable Purchase Agreements were among the Company and certain wholly-owned subsidiaries of the Company, and between the Company and Exact Receivables. Under the agreements, the wholly-owned subsidiaries sold all of their right, title and interest in their accounts receivables to Exact Receivables. The receivables were used to collateralize borrowings made under the Securitization Facility. The Company retained the responsibility of servicing the accounts receivable balances pledged as collateral under the Securitization Facility and provided a performance guaranty.

As of December 31, 2023, the Company had an outstanding balance of $50.0 million, which was included in debt, current portion on the Company’s condensed consolidated balance sheet. Prior to the repayment, the outstanding balance accrued interest at a rate equal to a daily secured overnight financing rate (“SOFR”) plus a SOFR adjustment and an applicable margin. The interest rate was 6.89% as of the maturity date.

Revolving Loan Agreement

During November 2021, the Company entered into a revolving loan agreement (the “Revolving Loan Agreement”) with PNC. The Revolving Loan Agreement provides the Company with a revolving line of credit of up to $150.0 million (the “Revolver”). The Revolver is collateralized by the Company’s marketable securities held by PNC, which must continue to maintain a minimum market value of $150.0 million. The Revolver is available for general working capital purposes and all other lawful corporate purposes. In addition, the Company may request, in lieu of cash advances, letters of credit with an aggregate stated amount outstanding not to exceed $20.0 million. The availability of advances under the line of credit will be reduced by the stated amount of each letter of credit issued and outstanding.

Borrowings under the Revolving Loan Agreement accrue interest at an annual rate equal to the sum of the daily Bloomberg Short-Term Bank Yield Index Rate plus the applicable margin of 0.60%. Loans under the Revolving Loan Agreement may be prepaid at any time without penalty. In October 2022, the Revolving Loan Agreement was amended to extend the maturity date from November 5, 2023 to November 5, 2025. There were no other amendments to the Revolver.

The Company has agreed to various financial covenants under the Revolving Loan Agreement, and as of September 30, 2024, the Company is in compliance with all covenants.

In December 2021 and January 2023, PNC issued letters of credit of $2.9 million and $1.5 million, respectively, which reduced the amount available for cash advances under the line of credit to $145.6 million as of September 30, 2024 and December 31, 2023. As of September 30, 2024 and December 31, 2023, the Company has not drawn funds from, nor are any amounts outstanding under, the Revolving Loan Agreement.

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EXACT SCIENCES CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(9) CONVERTIBLE NOTES

Convertible note obligations included in the condensed consolidated balance sheet consisted of the following as of September 30, 2024:


							Fair Value (1)
(In thousands)	Principal Amount		Unamortized Debt Discount and Issuance Costs		Net Carrying Amount		Amount		Leveling
2031 Convertible Notes - 1.750%	$	620,709	$	(14,090)	$	606,619	$	623,558	2
2030 Convertible Notes - 2.000%	572,993		(3,820)		569,173		652,244		2
2028 Convertible Notes - 0.375%	589,380		(5,346)		584,034		546,650		2
2027 Convertible Notes - 0.375%	563,822		(4,158)		559,664		547,668		2
2025 Convertible Notes - 1.000% (2)	249,172		(134)		249,038		254,155		2

Convertible note obligations included in the condensed consolidated balance sheet consisted of the following as of December 31, 2023:


							Fair Value (1)
(In thousands)	Principal Amount		Unamortized Debt Discount and Issuance Costs		Net Carrying Amount		Amount		Leveling
2030 Convertible Notes - 2.000%	$	572,993	$	(4,349)	$	568,644	$	684,475	2
2028 Convertible Notes - 0.375%	949,042		(10,499)		938,543		887,354		2
2027 Convertible Notes - 0.375%	563,822		(5,429)		558,393		549,839		2
2025 Convertible Notes - 1.000%	249,172		(476)		248,696		293,300		2

______________

(1)The fair values are based on observable market prices for this debt, which is traded in less active markets and therefore is classified as a Level 2 fair value measurement.

(2)The Company’s convertible notes due in 2025 (the “2025 Notes”) mature on January 15, 2025 and are included in convertible notes, net, current portion on the condensed consolidated balance sheet as of September 30, 2024. The 2025 Notes were included in convertible notes, net, less current portion as of December 31, 2023.

Issuances and Settlements

In February 2023, the Company entered into a privately negotiated exchange and purchase agreement with a single holder of certain of the Company’s convertible notes due in 2027 (the “2027 Notes”) and 2028 (the “2028 Notes”). The Company issued the holder $500.0 million aggregate principal amount of 2.0% Convertible Notes due in 2030 (the “2030 Notes”) in exchange for $183.7 million of aggregate principal of 2027 Notes, $201.0 million of aggregate principal of 2028 Notes, and $138.0 million of cash. The extinguishment resulted in a gain on settlement of convertible notes of $17.7 million, which is included in interest expense in the condensed consolidated statement of operations for the nine months ended September 30, 2023. The gain represents the difference between (i) the fair value of the consideration transferred and (ii) the carrying value of the debt at the time of exchange.

In March 2023, the Company entered into a privately negotiated exchange agreement with two holders of certain of the 2025 Notes. The Company issued the holder $73.0 million aggregate principal amount of 2030 Notes in exchange for $65.8 million of aggregate principal of 2025 Notes. The extinguishment resulted in a loss on settlement of convertible notes of $7.4 million, which is included in interest expense in the condensed consolidated statement of operations for the nine months ended September 30, 2023. The loss represents the difference between (i) the fair value of the consideration transferred and (ii) the carrying value of the debt at the time of exchange.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

The net proceeds from the issuance of the 2030 Notes were approximately $133.0 million, after deducting commissions and offering expenses payable by the Company.

The 2030 Notes will mature on March 1, 2030 and bear interest at a rate of 2.0% per year, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2023.

In April 2024, the Company entered into a privately negotiated exchange and purchase agreement with certain holders of the Company’s 2028 Notes. The Company issued $620.7 million aggregate principal amount of 1.75% Convertible Notes due in 2031 (the “2031 Notes” and, collectively with the 2025 Notes, 2027 Notes, 2028 Notes, and 2030 Notes, the “Notes”) in exchange for $359.7 million of aggregate principal of 2028 Notes, and $266.8 million of cash after deducting underwriting discounts. The extinguishment resulted in a gain on settlement of convertible notes of $10.3 million, which is included in interest expense in the condensed consolidated statement of operations for the nine months ended September 30, 2024. The gain represents the difference between (i) the fair value of the consideration transferred and (ii) the carrying value of the debt at the time of exchange.

The net proceeds from the issuance of the 2031 Notes were approximately $259.8 million, after deducting commissions and offering expenses payable by the Company.

The 2031 Notes will mature on April 15, 2031 and bear interest at a rate of 1.75% per year, payable semi-annually in arrears on October 15 and April 15 of each year, beginning on October 15, 2024. The Company has the ability to repurchase the 2031 Notes after April 17, 2029 upon the occurrence of certain events and during certain periods, as set forth in the Indenture filed at the time of the offering.

Summary of Conversion Features

Until the six-months immediately preceding the maturity date of the applicable series of the Company’s convertible notes, each series of Notes is convertible only upon the occurrence of certain events and during certain periods, as set forth in the Indentures filed at the time of the original offerings. 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 elect to convert such Notes at any time, and if elected, the conversion would occur on the maturity date. The Notes will be convertible into cash, shares of the Company’s common stock (plus, if applicable, cash in lieu of any fractional share), or a combination of cash and shares of the Company’s common stock, at the Company’s election. If the Notes are not converted prior to the maturity date, the principal amount will be settled in cash upon maturity.

It is the Company’s intent to settle all conversions through combination settlement. The initial conversion rate is 13.26, 8.96, 8.21, 12.37, and 10.06 shares of common stock per $1,000 principal amount for the 2025 Notes, 2027 Notes, 2028 Notes, 2030 Notes, and 2031 Notes, respectively, which is equivalent to an initial conversion price of approximately $75.43, $111.66, $121.84, $80.83, and $99.36 per share of the Company’s common stock for the 2025 Notes, 2027 Notes, 2028 Notes, 2030 Notes, and 2031 Notes, respectively. The 2025 Notes, 2027 Notes, 2028 Notes, 2030 Notes, and 2031 Notes are potentially convertible into up to 3.3 million, 5.0 million, 4.8 million, 7.1 million, and 6.2 million shares, respectively. The conversion rate is subject to adjustment upon the occurrence of certain specified events as set forth in the Indentures filed at the time of the original offerings 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 Indentures), will, under certain circumstances, be entitled to an increase in the conversion rate.

If the Company undergoes a “fundamental change” (as defined in the Indentures), 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.

Based on the closing price of the Company’s common stock of $68.12 on September 30, 2024, the if-converted values on the Notes do not exceed the principal amount.

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.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

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; (ii) rank equal in right of payment to each outstanding series thereof and to all of the Company’s future liabilities that are not so subordinated, unsecured indebtedness; (iii) are effectively junior to all of the Company’s 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 (iv) are structurally subordinated to all indebtedness and other liabilities of the Company’s subsidiaries.

Issuance Costs

Issuance costs are amortized to interest expense over the term of the Notes. The following table summarizes the original issuance costs at the time of issuance for each set of Notes:


(In thousands)
2031 Convertible Notes	$	6,820
2030 Convertible Notes	4,938
2028 Convertible Notes	24,453
2027 Convertible Notes	14,285
2025 Convertible Notes	17,646

Interest Expense

Interest expense on the Notes includes the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2024		2023		2024		2023
Debt issuance costs amortization	$	1,334	$	1,329	$	3,965	$	4,021
Debt discount amortization	322		25		611		81
Gain on settlements of convertible notes	—		—		(10,254)		(10,324)
Coupon interest expense	7,285		4,906		19,054		13,166
Total interest expense (income) on convertible notes	$	8,941	$	6,260	$	13,376	$	6,944

The following table summarizes the effective interest rates of the Notes:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
2031 Convertible Notes	2.10	%	—	%	2.06	%	—	%
2030 Convertible Notes	2.12	%	2.12	%	2.09	%	2.09	%
2028 Convertible Notes	0.64	%	0.64	%	0.63	%	0.63	%
2027 Convertible Notes	0.68	%	0.68	%	0.67	%	0.67	%
2025 Convertible Notes	1.18	%	1.18	%	1.17	%	1.17	%

The remaining period over which the unamortized debt discount will be recognized as non-cash interest expense is 0.29, 2.45, 3.42, 5.42, and 6.54 years for the 2025 Notes, 2027 Notes, 2028 Notes, 2030 Notes, and 2031 Notes, respectively.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

(10) LICENSE AND COLLABORATION AGREEMENTS

The Company licenses certain technologies that are, or may be, incorporated into its technology under several license agreements, as well as the rights to commercialize certain diagnostic tests through collaboration agreements. Generally, the license agreements require the Company to pay single-digit royalties based on net revenues received using the technologies and may require minimum royalty amounts, milestone payments, or maintenance fees.

Mayo Foundation for Medical Education and Research

In June 2009, the Company entered into an exclusive, worldwide license agreement with the Mayo Foundation for Medical Education and Research (“Mayo”), under which 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 Company’s license agreement with Mayo was most recently amended and restated in September 2020.

The licensed Mayo patents and patent applications contain both method and composition claims that relate to sample processing, analytical testing and data analysis associated with nucleic acid screening for cancers and other diseases. The jurisdictions covered by these patents and patent applications include the U.S., Australia, Canada, the European Union, China, Japan and Korea. Under the license agreement, the Company assumed the obligation and expense of prosecuting and maintaining the licensed Mayo patents and is obligated to make commercially reasonable efforts to bring to market products using the licensed Mayo intellectual property.

Pursuant to the Company’s agreement with Mayo, the Company is required to pay Mayo a low-single-digit royalty on the Company’s net sales of current and future products using the licensed Mayo intellectual property each year during the term of the Mayo agreement.

The Company is also required to pay Mayo up to $3.0 million in sales-based milestone payments upon cumulative net sales of each product using the licensed Mayo intellectual property reaching specified levels.

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 2039 (or later, if certain licensed patent applications are issued). However, if the Company is still using the licensed Mayo know-how or certain Mayo-provided biological specimens or their derivatives on such expiration date, the term shall continue until the earlier of the date the Company stops using such know-how and materials and the date that is five years after the last licensed patent expires. The license agreement contains customary termination provisions and permits Mayo to terminate the license agreement if the Company sues Mayo or its affiliates, other than any such suit claiming an uncured material breach by Mayo of the license agreement.

In addition to granting the Company a license to the covered Mayo intellectual property, Mayo provides the Company with product development and research and development assistance pursuant to the license agreement and other collaborative arrangements. In September 2020, Mayo also agreed to make available certain personnel to provide such assistance through January 2025. In connection with this collaboration, the Company has incurred insignificant charges for the three months ended September 30, 2024 and 2023, respectively. The charges incurred in connection with this collaboration are recorded in research and development expenses in the Company’s condensed consolidated statements of operations.

Johns Hopkins University

Through the acquisition of Thrive, the Company acquired a worldwide exclusive license agreement with Johns Hopkins University (“JHU”) for use of several JHU patents and licensed know-how. The license is designed to enable the Company to leverage JHU intellectual property in the development and commercialization of a blood-based, multi-cancer screening test. The agreement terms would require the Company to pay single-digit sales-based royalties and up to $45.0 million in sales-based milestone payments for each JHU licensed product that reaches specified net sales levels. The Company will record the sales-based royalties once sales of licensed products have occurred and sales-based milestones once achievement is deemed probable. The Company has not incurred charges related to the achievement of any sales-based royalties or sales-based milestones as of September 30, 2024.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

Targeted Digital Sequencing (“TARDIS”) License Agreement

In January 2021, the Company entered into an exclusive, worldwide license to the proprietary TARDIS technology from The Translational Genomics Research Institute (“TGen”). Under the agreement, the Company acquired a royalty-free, worldwide exclusive license to proprietary TARDIS patents and know-how. Under the agreement, the Company was obligated to make milestone payments to TGen of up to $45.0 million in sales-based milestone payments upon cumulative net sales related to molecular residual disease (“MRD”) detection and/or treatment reaching specified levels. These payments were contingent upon achievement of these cumulative revenues on or before December 31, 2030, which was not achieved prior to the termination.

Effective May 1, 2024, the Company entered into termination agreements (the “Termination Agreements”) with TGen for the purpose of terminating the license and sponsored research agreement relating to the TARDIS technology and an additional sponsored research agreement with a broader scope (collectively, the “Original Agreements”). As part of the Termination Agreements, the Company will pay TGen $27.6 million in compensation for the termination of the Original Agreements, which will be allocated into three annual installments of $9.2 million per year beginning in the second quarter of 2024. The fair value of the termination payments as of the date of the Termination Agreements was $25.8 million, which was recorded as research and development expense in the condensed consolidated statement of operations in the second quarter of 2024. The remaining $1.8 million in expense is being recognized ratably through the date of the final payment in the second quarter of 2026. The Company has recorded a liability of $17.1 million representing the fair value of the remaining payments, of which $8.8 million is included in accrued liabilities and $8.3 million is included in other long-term liabilities on the condensed consolidated balance sheet as of September 30, 2024. The termination payments eliminate the Company’s obligation to pay TGen any further payments, equities, fees, costs, or other amounts that would have been due under the Original Agreements, including the milestone payments. The Company’s ongoing development efforts for its pipeline tests are not impacted by the Termination Agreements.

Broad Institute, Inc.

In June 2023, the Company entered into an exclusive license agreement with Broad Institute, Inc. (“Broad Institute”) to utilize the Minor Allele Enriched Sequencing Through Recognition Oligonucleotides (“MAESTRO”) technology in the Company’s MRD testing. Under the license agreement, the Company is obligated to make development milestone payments to Broad Institute of up to $6.5 million upon achievement of certain development milestones related to prospective MRD tests that use the MAESTRO technology. In addition, the Company is obligated to make sales-based milestone payments to Broad Institute that equate up to a mid-single-digit royalty upon the achievement of certain cumulative net sales targets of licensed products using the MAESTRO technology beginning at $500.0 million. The Company will record the development milestones once achieved and the sales milestones once achievement is deemed probable. The Company has not incurred charges related to the achievement of development milestones or sales milestones as of September 30, 2024.

Watchmaker Genomics, Inc.

In July 2023, the Company entered into a co-exclusive development and license agreement with Watchmaker Genomics, Inc. (“Watchmaker”) under which the Company granted Watchmaker a co-exclusive license to the non-bisulfite technology for the detection of methylated DNA and other epigenetic modifications (“TAPS”). TAPS is based on patents obtained by the Company through an exclusive license agreement with the Ludwig Institute for Cancer Research. Under the agreement, both parties have the right to use and develop TAPS for commercial purposes. The Company has the potential to receive up to $82.0 million in sales-based milestone payments and mid-single-digit royalties based on future Watchmaker net sales of licensed products including TAPS. Additionally, Watchmaker has the right to sublicense TAPS, and the Company has the potential to receive royalties based on future Watchmaker sublicense receipts.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

TwinStrand Biosciences, Inc.

On July 1, 2024, the Company entered into an agreement with TwinStrand Biosciences, Inc. (“TwinStrand”), under which TwinStrand licensed to the Company intellectual property related to the error correction technology in next-generation sequencing. The Company’s rights are broadly exclusive with respect to cell-free nucleic acid sequencing, subject to certain non-exclusive relationships in the field. Under the license agreement, the Company made upfront payments to TwinStrand totaling $45.0 million in July 2024. The upfront payments were capitalized as a patent and license intangible asset in the condensed consolidated balance sheet, which is amortized through amortization of acquired intangible assets in the condensed consolidated statement of operations over its estimated useful life of 10 years. In addition, the Company agreed to pay TwinStrand a low-single-digit royalty on the Company’s net sales of certain licensed products and services. The Company will record the sales-based royalties once sales using relevant licensed products and services have occurred. The Company has not incurred charges related to the sales-based royalties as of September 30, 2024.

(11) STOCKHOLDERS’ EQUITY

Changes in Accumulated Other Comprehensive Income

The amounts recognized in AOCI for the nine months ended September 30, 2024 were as follows:


(In thousands)	Cumulative Translation Adjustment		Unrealized Gain on Securities (1)		AOCI
Balance at December 31, 2023	$	1,374	$	54	$	1,428
Other comprehensive loss before reclassifications	427		2,723		3,150
Amounts reclassified from accumulated other comprehensive income	—		52		52
Net current period change in accumulated other comprehensive income	427		2,775		3,202
Balance at September 30, 2024	$	1,801	$	2,829	$	4,630

______________

(1)There was no tax impact from the amounts recognized in AOCI for the three and nine months ended September 30, 2024.

The amounts recognized in AOCI for the nine months ended September 30, 2023 were as follows:


(In thousands)	Cumulative Translation Adjustment		Unrealized Gain (Loss) on Securities (1)		AOCI
Balance at December 31, 2022	$	53	$	(5,289)	$	(5,236)
Other comprehensive income before reclassifications	(626)		748		122
Amounts reclassified from accumulated other comprehensive income	—		3,579		3,579
Net current period change in accumulated other comprehensive income	(626)		4,327		3,701
Balance at September 30, 2023	$	(573)	$	(962)	$	(1,535)

______________

(1)There was no tax impact from the amounts recognized in AOCI for the nine months ended September 30, 2023.

Amounts reclassified from AOCI for the nine months ended September 30, 2024 and 2023 were as follows:


	Affected Line Item in the Statements of Operations	Nine Months Ended September 30,
Details about AOCI Components (In thousands)		2024		2023
Change in value of available-for-sale investments
Sales and maturities of available-for-sale investments	Investment income, net	$	52	$	3,579
Total reclassifications		$	52	$	3,579

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

(12) STOCK-BASED COMPENSATION

Stock-Based Compensation Plans

The Company maintains the following plans for which awards were granted from or had awards outstanding in 2023: the 2010 Omnibus Long-Term Incentive Plan (as Amended and Restated effective July 27, 2017), the 2019 Omnibus Long-Term Incentive Plan, and the 2010 Employee Stock Purchase Plan. These plans are collectively referred to as the “Stock Plans” and are administered in conjunction with the Company’s Equity Award Death, Disability and Retirement Policy, which was adopted in February 2023. Refer to the Company’s 2023 Form 10-K for further information regarding this policy.

Stock-Based Compensation Expense

The Company records stock-based compensation expense in connection with the amortization of restricted stock and restricted stock unit awards (“RSUs”), performance share units (“PSUs”), stock purchase rights granted under the Company’s employee stock purchase plan (“ESPP”) and stock options granted to employees, non-employee consultants and non-employee directors. The Company recorded $48.8 million and $61.9 million in stock-based compensation expense during the three months ended September 30, 2024 and 2023, respectively. The Company recorded $165.7 million and $172.7 million in stock-based compensation expense during the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, there was approximately $383.8 million of expected total unrecognized compensation cost related to non-vested stock-based compensation arrangements granted under all equity compensation plans. The Company expects to recognize that cost over a weighted average period of 2.6 years.

Stock Options

A summary of stock option activity under the Stock Plans is as follows:


	Option Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (1)
(Aggregate intrinsic value in thousands)
Outstanding, January 1, 2024	1,286,173	$	47.67	3.8
Exercised	(221,374)	19.50
Forfeited	(36,575)	91.37
Outstanding, September 30, 2024	1,028,224	$	52.18	3.3	$	26,970
Vested and expected to vest, September 30, 2024	1,028,224	$	52.18	3.3	$	26,970
Exercisable, September 30, 2024	1,028,224	$	52.18	3.3	$	26,970

______________

(1)The total intrinsic value of options exercised, net of shares withheld for taxes, during the nine months ended September 30, 2024 and 2023 was $6.2 million and $10.6 million, respectively, determined as of the date of exercise.

Restricted Stock and Restricted Stock Units

The fair value of restricted stock and RSUs is determined on the date of grant using the closing stock price on that day.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

A summary of restricted stock and RSU activity during the nine months ended September 30, 2024 is as follows:


	Restricted Shares	Weighted Average Grant Date Fair Value (1)
Outstanding, January 1, 2024	6,272,763	$	73.39
Granted	4,227,223	56.67
Released (2)	(2,232,590)	77.62
Forfeited	(780,430)	61.93
Outstanding, September 30, 2024	7,486,966	$	63.07

______________

(1)The weighted average grant date fair value of the RSUs granted during the nine months ended September 30, 2023 was $62.28.

(2)The fair value of RSUs vested and converted to shares of the Company’s common stock was $173.3 million and $146.7 million during the nine months ended September 30, 2024 and 2023, respectively.

Performance Share Units

The Company has issued performance-based equity awards to certain employees which vest upon the achievement of certain performance goals, including financial performance targets and operational milestones.

A summary of PSU activity during the nine months ended September 30, 2024 is as follows:


	Performance Share Units (1)	Weighted Average Grant Date Fair Value (2)
Outstanding, January 1, 2024	1,597,801	$	92.73
Granted	913,533	63.68
Released (3)	(70,662)	140.20
Forfeited	(403,454)	92.47
Outstanding, September 30, 2024	2,037,218	$	75.47

______________

(1)The PSUs listed above assumes attainment of maximum payout rates as set forth in the performance criteria. Applying actual or expected payout rates, the number of outstanding PSUs as of September 30, 2024 was 820,015.

(2)The weighted average grant date fair value of the PSUs granted during the nine months ended September 30, 2023 was $79.11.

(3)The fair value of PSUs vested and converted to shares of the Company’s common stock was $9.9 million and $1.0 million for the nine months ended September 30, 2024 and 2023, respectively.

Employee Stock Purchase Plan

The fair value of shares purchased during the three and nine months ended September 30, 2024 and 2023 under the ESPP is based on the assumptions in the following table:

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Notes to Condensed Consolidated Financial Statements

(Unaudited)


	Three Months Ended September 30,		Nine Months Ended September 30,
	2024	2023	2024	2023
ESPP Shares
Risk-free interest rates	(1)	(1)	4.71% - 5.30%	4.68%
Expected term (in years)	(1)	(1)	1.17	1.25
Expected volatility	(1)	(1)	55.67% - 63.13%	67.30%
Dividend yield	(1)	(1)	—%	—%

______________

(1)The Company did not issue stock purchase rights under its 2010 Employee Stock Purchase Plan during the period indicated.

(13) COMMITMENTS AND CONTINGENCIES

Leases

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


	Nine Months Ended September 30,
(In thousands)	2024			2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	28,658		$	29,212
Operating cash flows from finance leases	991			559
Finance cash flows from finance leases	4,890			2,545
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	17,860		$	2,097
Right-of-use assets obtained in exchange for new finance lease liabilities	15,995			4,940
Weighted-average remaining lease term - operating leases (in years)	7.58			7.00
Weighted-average remaining lease term - finance leases (in years)	3.08			2.99
Weighted-average discount rate - operating leases	6.55		%	6.50		%
Weighted-average discount rate - finance leases	6.71		%	7.32		%

As of September 30, 2024 and December 31, 2023, the Company’s right-of-use assets from operating leases are $122.5 million and $143.7 million, respectively, which are reported in operating lease right-of-use assets in the Company’s condensed consolidated balance sheets. As of September 30, 2024, the Company has outstanding operating lease obligations of $189.9 million, of which $27.2 million is reported in operating lease liabilities, current portion and $162.7 million is reported in operating lease liabilities, less current portion in the Company’s condensed consolidated balance sheets. As of December 31, 2023, the Company had outstanding operating lease obligations of $190.4 million, of which $29.4 million is reported in operating lease liabilities, current portion and $161.1 million is reported in operating lease liabilities, less current portion in the Company’s condensed consolidated balance sheets.

In the third quarter of 2024, the Company recorded an impairment charge of $18.7 million, which consisted of a right-of-use asset of $11.8 million and associated leasehold improvements of $6.9 million relating to one of its domestic facilities that will be vacated in the fourth quarter of 2024 as a result of a change in strategic priorities. The Company used the income approach, under which the recoverability of the assets was measured by comparing the carrying amount of the asset to future undiscounted, pre-tax cash flows generated by the assets held. The fair value of the assets was determined using discounted cash flows, and the impairment charge recorded represents the difference between the carrying value and fair value of the impaired assets. The impairment charge recorded is included in impairment of long-lived assets in the Company’s condensed consolidated statement of operations for the three and nine months ended September 30, 2024.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

As of September 30, 2024 and December 31, 2023, the Company’s right-of-use assets from finance leases are $21.6 million and $11.3 million, respectively, which are reported in other long-term assets, net in the Company’s condensed consolidated balance sheets. As of September 30, 2024, the Company has outstanding finance lease obligations of $22.7 million, of which $7.9 million is reported in other current liabilities and $14.8 million is reported in other long-term liabilities in the Company’s condensed consolidated balance sheets. As of December 31, 2023, the Company had outstanding finance lease obligations of $11.9 million, of which $4.4 million is reported in other current liabilities and $7.5 million is reported in other long-term liabilities in the Company’s condensed consolidated balance sheets.

Legal Matters

In addition to commitments and obligations incurred in the ordinary course of business, from time to time the Company may be subject to a variety of claims and legal proceedings, including legal actions for damages, governmental investigations and other matters. The Company has also instituted, and may in the future institute, additional legal proceedings to enforce its rights and seek remedies, such as monetary damages, injunctive relief and declaratory relief.

The Company accrues costs for certain legal proceedings and regulatory matters to the extent that it determines an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. While such accrued costs reflect the Company’s best estimate of the probable loss for such matters, the recorded amounts may differ materially from the actual amount of any such losses. In some cases, no estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal and regulatory proceedings, which may be exacerbated by various factors, including but not limited to, that they may involve indeterminate claims for monetary damages or may involve fines, penalties or punitive damages; present novel legal theories or legal uncertainties; involve disputed facts; represent a shift in regulatory policy; involve a large number of parties, claimants or regulatory bodies; are in the early stages of the proceedings; involve a number of separate proceedings and/or a wide range of potential outcomes; or result in a change of business practices.

As of the date of this Quarterly Report on Form 10-Q, amounts accrued for legal proceedings and regulatory matters were not material. The Company believes that the ultimate outcome of any of the regulatory and legal proceedings that are currently pending against it should not have a material adverse effect on financial condition, results of operations, cash flow or liquidity. However, it is possible that in a particular quarter or annual period the Company’s financial condition, results of operations, cash flow and/or liquidity could be materially adversely affected by an ultimate unfavorable resolution of, or development in, legal and/or regulatory proceedings.

Refer to the Company’s 2023 Form 10-K for detailed disclosures on legal matters that were settled in 2023.

Intellectual Property Litigation Matters

In May 2023, after receiving a cease-and-desist letter from the Company regarding its patent infringement, Geneoscopy Inc. (“Geneoscopy”) requested a reexamination of the Company’s U.S. Patent No. 11,634,781 (the “’781 Patent”) by the United States Patent and Trademark Office (the “USPTO”). Upon completion of the reexamination in October 2023, the USPTO rejected Geneoscopy’s challenge. In November 2023, the Company filed suit against Geneoscopy in the United States District Court for the District of Delaware, alleging that certain of Geneoscopy’s products infringe the ‘781 Patent and seeking unspecified monetary damages and injunctive relief (the “’781 Action”) and in May 2024, the Company filed a second complaint against Geneoscopy alleging infringement of the Company’s U.S. Patent No. 11,970,746 (the “’746 Patent”), which has been consolidated with the ’781 Action. On June 28, 2024, Geneoscopy filed counterclaims against the Company challenging the validity of the patents at issue and alleging breach of contract, misappropriation of trade secrets, unfair competition, and other violations of state and federal law seeking unspecified monetary damages and injunctive relief, which were amended on August 16, 2024. On July 16, 2024, the Company filed a motion for preliminary injunction seeking an order prohibiting Geneoscopy from selling its infringing Colosense test in the United States. On August 8, 2024, Geneoscopy filed a motion to stay pending inter partes review of the ‘781 Patent, which is fully briefed. On August 30, 2024, the Company filed a motion to dismiss the amended counterclaim, which is fully briefed. On September 3, 2024, the Court entered a stipulated order for briefing and expedited discovery for the Company’s preliminary injunction motion. On September 27, 2024, Geneoscopy filed its opposition to the Company’s motion for preliminary injunction, and the parties are currently engaged in expedited discovery. Briefing for the Company’s motion for preliminary injunction will be complete by the end of November 2024.

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EXACT SCIENCES CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

In January 2024, Geneoscopy petitioned the USPTO to institute an inter partes review (“IPR”) challenging the validity of the ‘781 Patent before the Patent Trial and Appeals Board (“PTAB”). On July 26, 2024, the PTAB notified the Company that it decided to institute review. The Company filed its Patent Owner Response on October 25, 2024, and the parties are currently engaged in discovery. The Company intends to defend the validity of the ‘781 Patent, and a final decision of that review will be made on or before July 30, 2025.

On August 20, 2024, Geneoscopy filed a petition for inter partes review of the ‘746 Patent before the PTAB. The Company’s Patent Owner Preliminary Response is due November 27, 2024. The PTAB is expected to decide on or before February 27, 2025, whether it will institute the IPR. If the IPR is instituted, the Company intends to defend the validity of the ‘746 Patent, and a final decision of that review will be made on or before February 27, 2026.

(14) WISCONSIN ECONOMIC DEVELOPMENT TAX CREDITS

During December 2021, the Company entered into an amended agreement (“Amended WEDC Agreement”) with the Wisconsin Economic Development Corporation (“WEDC”) to earn an additional $18.5 million in refundable tax credits on the condition that the Company expends $350.0 million in capital investments and establishes and maintains 1,300 additional full-time positions over a five-year period. The capital investment credits are earned at a rate of 10% of eligible capital investments up to a maximum of $7.0 million, while the jobs creation credits are earned annually pursuant to the Amended WEDC Agreement.

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 term of the Amended WEDC Agreement. 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 occurs. The tax credits earned from capital investment are recognized as a reduction to capital expenditures at the time the costs are incurred, and then 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 in the period in which the credits are earned.

As of September 30, 2024, the Company has earned $14.3 million of the refundable tax credits under the Amended WEDC Agreement. The unpaid portion is $8.8 million, of which $4.2 million is reported in prepaid expenses and other current assets and $4.6 million is reported in other long-term assets, net in the Company’s condensed consolidated balance sheets reflecting when collection of the refundable tax credits is expected to occur. During the three and nine months ended September 30, 2024 and 2023, the amounts recorded as an offset to capital expenditures and operating expenses for the tax credits earned were not significant.

(15) ACQUISITIONS AND DIVESTITURES

Business Combinations

Resolution Bioscience, Inc.

On September 12, 2023, the Company completed the acquisition of all of the outstanding capital stock of Resolution Bioscience, Inc. (“Resolution Bioscience”) from Agilent Technologies, Inc. The acquisition provides the Company with a high-quality blood-based therapy selection platform, complementing its comprehensive, tissue-based OncoExTra® test.

Refer to the Company’s 2023 Form 10-K for detailed disclosures on the combination, including the fair value of the consideration transferred, purchase price allocation, and goodwill and intangible assets identified in the transaction. During the three and nine months ended September 30, 2024, there were no significant changes to the purchase price and purchase price allocation, and the measurement period has closed.

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EXACT SCIENCES CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Divestitures

Oncotype DX Genomic Prostate Score Test

On August 2, 2022, pursuant to an asset purchase agreement (the “Asset Purchase Agreement”) with MDxHealth SA (“MDxHealth”), the Company completed the sale of the intellectual property and know-how related to the Company’s Oncotype DX Genomic Prostate Score test (“GPS test”). On August 23, 2023, the Company and MDxHealth executed the Second Amendment to the Asset Purchase Agreement (the “Second Amendment”). Under the Second Amendment, the Company agreed to allow MDxHealth to defer the 2023 contingent consideration payment by three years in exchange for additional consideration and more favorable contingent consideration terms, including elimination of the minimum revenue thresholds previously required to be met under the Asset Purchase Agreement. Refer to the Company’s 2023 Form 10-K for additional details on the agreements.

As of September 30, 2024 and December 31, 2023, a portion of the contingent consideration is classified as a contract asset. As of September 30, 2024, the contract asset was $48.3 million, of which $25.8 million is included in prepaid expenses and other current assets and $22.5 million is included in other long-term assets, net on the condensed consolidated balance sheet. As of December 31, 2023, the contract asset was $41.7 million, which is included in other long-term assets on the condensed consolidated balance sheet. The contract asset was estimated using historical GPS test revenues by MDxHealth under the most likely amount method. The remaining consideration balance as of September 30, 2024 and December 31, 2023 was $31.6 million, which includes the amount earned during the 2023 earnout year and is classified as a receivable within other long-term assets, net on the condensed consolidated balance sheet. The Company recorded an insignificant contingent consideration gain for the three and nine months ended September 30, 2024, which is included in other operating income in the condensed consolidated statement of operations.

(16) 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 allowing healthcare providers and patients to make individualized treatment decisions. Management assessed the financial information routinely reviewed by the Company's Chief Operating Decision Maker, 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.


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2024		2023		2024		2023
United States	$	659,222	$	589,739	$	1,904,755	$	1,741,428
Outside of United States	49,433		38,599		140,688		111,453
Total revenues	$	708,655	$	628,338	$	2,045,443	$	1,852,881

Long-lived assets located in countries outside of the U.S. are not significant.

(17) INCOME TAXES

The Company recorded income tax expense of $0.8 million and $0.2 million for the three months ended September 30, 2024 and 2023, respectively. The Company recorded income tax expense of $4.1 million and $3.0 million for the nine months ended September 30, 2024 and 2023, respectively. The Company’s income tax expense recorded during the three and nine months ended September 30, 2024 is primarily related to current foreign and state tax expense. A deferred tax liability of $19.3 million and $17.3 million was recorded as of September 30, 2024 and December 31, 2023, respectively, which is included in other long-term liabilities on the Company’s condensed consolidated balance sheet. The Company continues to maintain a full valuation allowance against its deferred tax assets based on management’s determination that it is more likely than not the benefit will not be realized.

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EXACT SCIENCES CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company had $42.0 million and $36.4 million of unrecognized tax benefits at September 30, 2024 and December 31, 2023, respectively. These amounts have been recorded as a reduction to the Company’s deferred tax asset, if recognized they would not have an impact on the effective tax rate due to the existing valuation allowance. Certain of the Company's unrecognized tax benefits could change due to activities of various tax authorities, including possible settlement of audits, or through normal expiration of various statutes of limitations. The Company does not expect a material change in unrecognized tax benefits in the next twelve months.

As of September 30, 2024, 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 2024, and to state income tax examinations for the tax years 2000 through 2024. No interest or penalties related to income taxes have been accrued or recognized as of September 30, 2024.

The Organization for Economic Co-operation and Development has endorsed a framework (“Pillar Two”) with model rules introducing a global minimum corporate tax rate via a system where multinational groups with consolidated revenue over €750.0 million are subject to a minimum effective tax rate of 15% on income arising in low-tax jurisdictions on a country-by-country basis. Many countries have implemented laws based on these model rules, with effective dates beginning January 1, 2024. These rules do not have a material impact on the Company for the current period and, as currently designed, are not expected to materially increase the Company’s global tax costs. The Company will continue to monitor U.S. and global legislative action related to Pillar Two for potential impacts.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Objective

The purpose of this Management’s Discussion and Analysis is to better allow our investors to understand and view our Company from management’s perspective. We are providing an overview of our business and strategy including a discussion of our financial condition and results of operations. The following discussion of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”), which has been filed with the U.S. Securities and Exchange Commission (“SEC”).

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are intended to be covered by the “safe harbor” created by those sections. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “would,” “could,” “seek,” “intend,” “plan,” “goal,” “project,” “estimate,” “anticipate” or other comparable terms. All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q regarding our strategies, prospects, expectations, financial condition, operations, costs, plans and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements we make regarding expected future operating results; expectations for development of new or improved products and services and their impact on patients; our strategies, positioning, resources, capabilities and expectations for future events or performance; and the anticipated benefits of our acquisitions, including estimated synergies and other financial impacts. Forward-looking statements are neither historical facts nor assurances of future performance or events. Instead, they are based only on current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Actual results, conditions and events may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause actual results, conditions and events to differ materially from those indicated in the forward-looking statements include, among others, the following: our ability to successfully and profitably market our products and services; the acceptance of our products and services by patients and healthcare providers; our ability to meet demand for our products and services; our reliance upon certain suppliers, including suppliers that are the sole source of certain supplies and products used in our tests and operations; approval and maintenance of adequate reimbursement rates for our products and services within and outside of the U.S.; the amount and nature of competition for our products and services; the effects of any judicial, executive or legislative action affecting us or the healthcare system; recommendations, guidelines and quality metrics issued by various organizations regarding cancer screening or our products and services; our ability to successfully develop and commercialize new products and services and assess potential market opportunities; our ability to effectively enter into and utilize strategic partnerships and acquisitions; our success establishing and maintaining collaborative, licensing and supplier arrangements; our ability to obtain and maintain regulatory approvals and comply with applicable regulations; our ability to protect and enforce our intellectual property; the results of our validation studies and clinical trials, including the risks that the results of future studies and trials may differ materially from the results of previously completed studies and trials; our ability to manage an international business and our expectations regarding our international expansion and opportunities; our ability to raise the capital necessary to support our operations or meet our payment obligations under our indebtedness; the potential effects of changing macroeconomic conditions, including the effects of inflation, interest rate and foreign currency exchange rate fluctuations, and geopolitical conflict; the possibility that the anticipated benefits from our business acquisitions will not be realized in full or at all or may take longer to realize than expected; the possibility that costs or difficulties related to the integration of acquired businesses’ operations or the divestiture of business operations will be greater than expected and the possibility that integration or divestiture efforts will disrupt our business and strain management time and resources; the outcome of any litigation, government investigations, enforcement actions or other legal proceedings; and our ability to retain and hire key personnel. The risks included above are not exhaustive. Other important risks and uncertainties are described in the Risk Factors and in Management’s Discussion and Analysis of Financial Condition and Results of Operations sections of the 2023 Form 10-K and subsequently filed Quarterly Reports on Form 10-Q. You are further cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

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Overview

A leading provider of cancer screening and diagnostic tests, Exact Sciences Corporation (together with its subsidiaries, “Exact,” “we,” “us,” “our” or the “Company”) gives patients and health care professionals the clarity needed to take life-changing action earlier. Building on the success of the Cologuard® and Oncotype DX® tests, we are investing in our pipeline to develop innovative solutions for use before, during, and after a cancer diagnosis.

During the third quarter of 2024, we achieved many critical milestones, including:

•delivering tests results to 1.2 million people including a record number for Cologuard and Oncotype DX,

•growing total revenue 13% year-over-year while leveraging efficiencies in our operating expenses,

•generating cash provided by operating activities of $138.7 million for the three months ended September 30, 2024, an improvement of $114.4 million in comparison to the three months ended September 30, 2023,

•increasing customer satisfaction and brand awareness to all-time highs,

•receiving U.S. Food and Drug Administration (“FDA”) approval for Cologuard PlusTM, our next-generation Cologuard test,

•showcasing data at the European Society for Medical Oncology (“ESMO”) 2024 congress for our liquid biopsy colon cancer screening and multi-cancer screening tests, and

•gaining acceptance from a top-tier journal for the first publication of OncodetectTM, our molecular residual disease (“MRD”) test.

Our Screening Tests

Cologuard Test

Colorectal cancer is the second leading cause of cancer deaths in the United States (“U.S.”) and the leading cause of cancer deaths in the U.S. among non-smokers. Each year in the U.S., there are approximately 153,000 new cases of colorectal cancer and approximately 53,000 deaths. It is widely accepted that colorectal cancer is among the most preventable, yet least prevented cancers.

Our flagship screening product, the Cologuard test, is a patient-friendly, non-invasive stool-based DNA (“sDNA”) screening test that utilizes a multi-target approach to detect DNA and hemoglobin biomarkers associated with colorectal cancer and pre-cancer. Upon approval by the FDA in August 2014, our Cologuard test became the first and only FDA-approved sDNA non-invasive colorectal cancer screening test. Our Cologuard test is now indicated for average risk adults 45 years of age and older. In October 2024, the FDA approved Cologuard Plus, our next-generation Cologuard test, which we expect to launch with Medicare coverage and guideline inclusion in 2025.

Genetic Testing

We provide more than 5,000 predefined genetic tests for nearly all clinically relevant genes, additional custom panels, and comprehensive germline, whole exome (“PGxome®”), and whole genome (“PGnome®”) sequencing tests.

RiskguardTM, our hereditary cancer test, helps people understand their inherited risk of cancer, arming them with critical information to make more informed treatment decisions.

Our Precision Oncology Tests

Our precision oncology portfolio delivers actionable genomic insights to inform prognosis and cancer treatment after a diagnosis. In breast cancer, the Oncotype DX Breast Recurrence Score® test is the only test shown to predict the likelihood of chemotherapy benefit as well as the chance of cancer recurrence in the most common sub-type of early-stage breast cancer. As the only test proven to predict both the likelihood of chemotherapy benefit and cancer recurrence, the Oncotype DX test is recognized globally as standard of care and is included in all major breast cancer treatment guidelines. The OncoExTra® test applies comprehensive tumor profiling, utilizing whole exome and whole transcriptome sequencing, to aid in therapy selection for patients with advanced, metastatic, refractory, relapsed, or recurrent cancer. With an extensive panel of approximately 20,000 genes and 169 introns, the OncoExTra test is one of the most comprehensive genomic (DNA) and transcriptomic (RNA) panels available today. We enable patients to take a more active role in their cancer care and make it easy for providers to order tests, interpret results, and personalize medicine.

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International Business Background and Products

We commercialize or plan to commercialize our Oncotype® tests internationally through employees in Canada, Japan and a number of European countries, as well as through exclusive distribution agreements. We have provided our Oncotype tests in approximately 120 countries outside of the U.S. We do not offer our Cologuard test outside of the U.S.

Upcoming Test Launches

We are preparing to launch in 2025 new screening and diagnostic tests to address unmet patient needs and enhance our existing products.

•Cologuard Plus - Our Cologuard Plus test sets a new performance standard in non-invasive colorectal cancer screening. Our Cologuard Plus test detects cancers and precancerous polyps with even greater sensitivity than our Cologuard test while reducing false positives by more than 30 percent. In October 2024, the FDA approved our Cologuard Plus test for adults ages 45 and older of average risk for colorectal cancer. This approval was based on results from our pivotal BLUE-C study, which showed 95% overall cancer sensitivity and 43% sensitivity for advanced precancerous lesions at 94% specificity when age-weighted to the U.S. population with no findings on colonoscopy. We expect to launch our Cologuard Plus test with Medicare coverage and guideline inclusion in 2025.

•Oncodetect - We expect to launch our Oncodetect MRD test for patients with colorectal cancer, supported by forthcoming data releases and medical journal publications. We recently completed clinical validation of our tumor-informed platform utilizing colorectal cancer samples. Results will be submitted to MolDx for approval and subsequent Medicare reimbursement. Our tumor-informed Oncodetect test is designed to detect small amounts of tumor DNA that may remain in patients’ blood after they have undergone initial colorectal cancer treatment. This test will help patients and oncologists understand the success of initial treatment, guide further treatment, and monitor for cancer recurrence.

Pipeline Research and Development

We are continuing to advance our pipeline of future screening and diagnostic products, including risk assessment, screening and prevention, early disease diagnosis, adjuvant and/or neoadjuvant disease treatment, metastatic disease treatment selection, and patient monitoring.

Through our collaboration with Mayo Foundation for Medical Education and Research (“Mayo”), we have successfully performed validation studies involving multiple types of cancer using tissue, blood, and other sample types. Our research and development programs are also powered by technologies we have exclusively licensed from The Johns Hopkins University, Broad Institute, Inc. (“Broad Institute”), Oxford University, the Ludwig Institute for Cancer Research, and TwinStrand Biosciences, Inc. (“TwinStrand”).

We are focusing our research and development efforts on three main areas:

•Colorectal Cancer Screening. Over the past decade, together with Mayo, we have been seeking to develop even better colorectal cancer screening tests. Beyond Cologuard Plus, we are also working to develop a blood-based screening test for colorectal cancer. In September 2024, we presented performance data for our blood-based colorectal cancer screening test at the ESMO Congress, showing sensitivities of 88% for colorectal cancer and 31% for advanced precancerous lesions at specificity of 90% for negative samples confirmed by colonoscopy. BLUE-C pivotal study results for our blood-based colorectal cancer screening test are expected in the first half of 2025.

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•MRD Test Development. In addition to our expected 2025 launch of Oncodetect for patients with colorectal cancer, we plan to validate Oncodetect for other cancer types, including breast cancer, and continually enhance the performance characteristics of our MRD test offerings over time. We recently completed clinical validation of our tumor-informed platform utilizing colorectal cancer samples. Results will be submitted to MolDx for approval and subsequent Medicare reimbursement. In June 2023, we entered into a sponsored research agreement and exclusive license agreement with Broad Institute to utilize their Minor Allele Enriched Sequencing Through Recognition Oligonucleotides (“MAESTRO”) diagnostic testing technology to further our ability to develop and launch impactful MRD tests. We are developing the MAESTRO platform for use in certain future MRD tests.

•Multi-cancer Screening Test Development. We are currently seeking to develop a multi-cancer screening test, which will be branded as CancerguardTM, to help detect many different types of cancer from a single blood draw. ASCEND-2, a multi-center, prospective, case-control study of over 11,000 clinically characterized participants, validates the sensitivity and specificity of our multi-biomarker class approach across a broad range of cancer types, including the most aggressive cancers and cancers with no current standard of care for screening. We presented initial ASCEND-2 data in April 2024 at the American Association for Cancer Research (“AACR”) annual meeting, which demonstrated the ability to detect cancer signals from 21 cancer types with a mean sensitivity of 50.9% with 98.5% specificity and 56.8% sensitivity when breast and prostate cancer were excluded from the analysis. We plan to share additional analyses from ASCEND-2 at an upcoming scientific conference. Our multi-cancer screening test was recently approved by the FDA to be used within a real-world evidence study, providing an opportunity to test 25,000 people over the next three years. The first patient was enrolled within this study at Baylor Scott & White, the primary study site, in August 2024. In the future, we plan to begin recruiting patients for the FDA registrational Study of All comeRs (“SOAR”) trial, which we expect to be the largest prospective, interventional multi-cancer screening trial ever conducted in the U.S.

Research and development, which includes our clinical study programs, accounts for a material portion of our operating expenses. As we seek to enhance our product portfolio and advance our pipeline, we expect that our research and development expenditures will continue to be a significant portion of our operating expenditures.

2024 Priorities

Our top priorities for 2024 are to (1) focus on our people and customers, (2) bring our portfolio to life, and (3) magnify our impact.

Focus on our People and Customers

We want to continue to provide an exceptional experience for our patients and team members. We plan to improve customer relations by delivering simple and smooth workflows, providing communication that is clear and easy to understand, and providing results that are fast and accurate. We will also strive to ensure that Exact Sciences remains a great place to work by taking care of our people.

Bring our Portfolio to Life

We will focus on advancing new tests in our highest priority programs including colorectal cancer screening, MRD, and multi-cancer screening. We plan to continue investing in our clinical trials to enhance existing products and bring new products to patients and providers, including obtaining FDA approval and securing coverage for our next generation Cologuard test, Cologuard Plus.

Magnify our Impact

We are committed to improving lives through testing more people with our laboratory testing services in 2024 including expanding screening access to underserved populations. By testing more people, we will continue to expand our business in a cost-efficient manner allowing us to generate sustainable profits and increase shareholder value. Generating sustained profits will put the company in a better position to continue investing in life-changing cancer diagnostics to help achieve our mission.

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Recent Developments and Trends

We estimate there are up to 60 million Americans that are not up to date with their colon cancer screenings. The capacity for screening colonoscopies in the U.S. is relatively fixed because it is dependent on the number of gastroenterologists available to perform the procedures. Health systems, payers, and health care providers are motivated to increase screening rates because they are measured as part of the Healthcare Effectiveness Data and Information Set (“HEDIS”) and Medicare Stars quality measure systems. More health systems and payers are recognizing the opportunity to partner with Exact Sciences to address their screening rates and related quality measures through large, organized screening programs. We aim to partner with them to implement our Cologuard test within these programs as a solution for patients who infrequently visit their health care provider. Cologuard utilization is increasing in this setting, helping us screen more Americans.

We have an opportunity to impact even more lives by increasing adoption of Oncotype DX tests internationally. In 2023, we secured reimbursement for the Oncotype DX test in Japan. Breast cancer is the most common cancer among Japanese women, with about 45,000 new diagnoses of early-stage HR+, HER2- breast cancer each year. With reimbursement in place, we estimate our Oncotype DX test could help more than 100 women per day understand if their cancer is likely to recur and whether chemotherapy should be used in their treatment plan.

Results of Operations

We have incurred losses since our inception and, as of September 30, 2024, we had an accumulated deficit of approximately $3.63 billion. While our operating results have continued to improve, we expect to incur net losses for the near future, and it is possible we may never become profitable or sustain profitability.

Revenue. Our Screening revenue primarily includes laboratory service revenue from our Cologuard and Prevention Genetics, LLC (“PreventionGenetics”) tests while our Precision Oncology revenue primarily includes laboratory service revenue from global Oncotype DX and therapy selection tests.


	Three Months Ended September 30,
Amounts in millions	2024		2023		Change
Screening	$	544.9	$	472.0	$	72.9
Precision Oncology	163.8		156.3		7.4
Total	$	708.7	$	628.3	$	80.3


	Nine Months Ended September 30,
Amounts in millions	2024		2023		Change
Screening	$	1,551.3	$	1,378.0	$	173.3
Precision Oncology	494.1		468.9		25.2
COVID-19 Testing	—		6.0		(6.0)
Total	$	2,045.4	$	1,852.9	$	192.5

The increase in Screening revenue was mainly due to an increase in the number of completed Cologuard tests. The increase in completed Cologuard tests for the three and nine months ended September 30, 2024 was due to growth across all customer segments, more patients rescreening with our Cologuard test, and expansion of organized screening programs run by payers and health systems. The increase in Precision Oncology revenue was mainly due to an increase in the number of completed Oncotype DX breast cancer tests, both domestically and internationally, led by an increased number of ordering providers outside the U.S., specifically in Japan. We discontinued our COVID-19 testing business in the second quarter of 2023 due to lower demand, which led to the decrease in COVID-19 testing revenue. A discussion on our COVID-19 testing business was provided in our Annual Report on Form 10-K for the year ended December 31, 2023.

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Adjustments to revenue recognized during the period relating to prior period estimates were less than 1% of revenue recorded in our condensed consolidated statement of operations for the three and nine months ended September 30, 2024. Adjustments to revenue recognized during the period relating to prior period estimates were less than 2% of revenue recorded in our condensed consolidated statement of operations for the three and nine months ended September 30, 2023. The impact to revenue for the three and nine months ended September 30, 2023 was due to improvements made in our billing systems and processes, including international contracting and collections.

We expect continuing revenue growth for our Cologuard and Oncotype tests subject to seasonal variability. Our revenues are affected by the test volume of our products, patient adherence rates, payer mix, the levels of reimbursement, our order to cash operations, and payment patterns of payers and patients.

Cost of sales (exclusive of amortization of acquired intangible assets). The increase in cost of sales for the three and nine months ended September 30, 2024 was primarily due to an increase in production costs, personnel expenses, and facility and support services, which was a result of an increase in completed Cologuard and Oncotype tests and the corresponding increase in headcount to support the increase in tests completed. Cost of sales (exclusive of amortization of acquired intangible assets) as a percentage of revenue increased for the three and nine months ended September 30, 2024 compared to the same periods in 2023, primarily due to higher Cologuard test volume from organized screening programs run by payers and health systems. We expect that cost of sales will generally continue to increase in future periods as a result of an increase in our existing laboratory testing services and as we launch our pipeline products. We also expect to see a corresponding increase in personnel and support services associated with this growth.


	Three Months Ended September 30,
Amounts in millions	2024		2023		Change
Production costs	$	125.6	$	102.6	$	23.0
Personnel expenses	48.2		45.8		2.4
Facility and support services	17.3		13.6		3.7
Stock-based compensation	4.9		5.3		(0.4)
Other cost of sales expenses	0.1		1.2		(1.1)
Total cost of sales expense	$	196.1	$	168.5	$	27.6


	Nine Months Ended September 30,
Amounts in millions	2024		2023		Change
Production costs	$	341.6	$	289.2	$	52.4
Personnel expenses	146.4		134.4		12.0
Facility and support services	50.4		40.3		10.1
Stock-based compensation	15.7		15.6		0.1
Other cost of sales expenses	1.9		2.9		(1.0)
Total cost of sales expense	$	556.0	$	482.4	$	73.6

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Research and development expenses. The decrease in research and development expenses for the three months ended September 30, 2024 was primarily due to a decrease in resources needed to support our ongoing clinical studies as discussed in further detail above. The increase in research and development expenses for the nine months ended September 30, 2024 was primarily due to the termination of a license agreement with The Translational Genomics Research Institute (“TGen”) resulting in the recognition of an expense of $25.8 million in the second quarter of 2024. In addition, personnel expenses grew for the nine months ended September 30, 2024 is primarily due to an increase in average headcount during the year. This was partially offset by a decrease in direct research and development costs as discussed above. We expect that research and development expenses will generally continue to increase in future periods as we continue to invest to advance new tests.


	Three Months Ended September 30,
Amounts in millions	2024		2023		Change
Personnel expenses	$	43.7	$	44.3	$	(0.6)
Direct research and development	28.4		36.6		(8.2)
Facility and support services	14.4		17.0		(2.6)
Stock-based compensation	9.3		10.5		(1.2)
Professional fees	3.2		2.3		0.9
Other research and development	1.1		0.7		0.4
Total research and development expenses	$	100.1	$	111.4	$	(11.3)


	Nine Months Ended September 30,
Amounts in millions	2024		2023		Change
Personnel expenses	$	141.0	$	129.9	$	11.1
Direct research and development	81.2		96.1		(14.9)
Facility and support services	43.0		46.5		(3.5)
Stock-based compensation	31.1		31.0		0.1
License agreement termination	25.8		—		25.8
Professional fees	7.7		5.5		2.2
Other research and development	1.8		2.0		(0.2)
Total research and development expenses	$	331.6	$	311.0	$	20.6

Sales and marketing expenses. Sales and marketing expenses increased for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 due to continued investment in high impact sales and marketing opportunities. We anticipate sales and marketing expenses will generally increase in future periods as we reinvest in sales and marketing to meet demand for current products and the launch of new products, while continuing to decrease as a percentage of revenue over time, driven by the growth of Cologuard and Oncotype testing services.


	Three Months Ended September 30,
Amounts in millions	2024		2023		Change
Personnel expenses	$	110.6	$	99.7	$	10.9
Direct marketing costs	49.3		39.4		9.9
Professional and legal fees	15.4		12.1		3.3
Stock-based compensation	14.5		17.5		(3.0)
Facility and support services	4.5		4.0		0.5
Other sales and marketing expenses	0.4		0.5		(0.1)
Total sales and marketing expenses	$	194.7	$	173.2	$	21.5

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	Nine Months Ended September 30,
Amounts in millions	2024		2023		Change
Personnel expenses	$	326.9	$	310.8	$	16.1
Direct marketing costs	145.2		131.3		13.9
Stock-based compensation	44.8		48.8		(4.0)
Professional and legal fees	44.3		30.7		13.6
Facility and support services	10.0		12.6		(2.6)
Other sales and marketing expenses	1.1		2.4		(1.3)
Total sales and marketing expenses	$	572.3	$	536.6	$	35.7

General and administrative expenses. The decrease in general and administrative expenses for the three months ended September 30, 2024 was primarily due to a reduction in certain incentive-based compensation arrangements and a reduction in other discretionary spend including professional and legal fees as a result of our cost savings measures that were implemented. The decrease in general and administrative expenses for the nine months ended September 30, 2024 was primarily due to the settlement of certain legal matters in 2023, as further described in Note 15 of our Annual Report on Form 10-K for the year ended December 31, 2023.These reductions were partially offset by increases in other general and administrative expense as a result of the change in fair value of our outstanding contingent consideration liabilities. Refer to Note 7 of our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion of our outstanding contingent consideration liabilities. We expect general and administrative expenses throughout the remainder of 2024 will remain relatively consistent with costs incurred thus far in 2024. We expect general and administrative expenses will decrease over time as we leverage efficiencies in our personnel and information technology systems.


	Three Months Ended September 30,
Amounts in millions	2024		2023		Change
Personnel expenses	$	98.1	$	101.3	$	(3.2)
Facility and support services	48.8		45.9		2.9
Professional and legal fees	30.8		34.5		(3.7)
Stock-based compensation	20.1		28.6		(8.5)
Other general and administrative	19.4		7.1		12.3
Total general and administrative expenses	$	217.2	$	217.4	$	(0.2)


	Nine Months Ended September 30,
Amounts in millions	2024		2023		Change
Personnel expenses	$	312.2	$	294.0	$	18.2
Facility and support services	138.0		133.2		4.8
Professional and legal fees	98.1		136.2		(38.1)
Stock-based compensation	74.1		77.3		(3.2)
Other general and administrative	39.8		32.0		7.8
Total general and administrative expenses	$	662.2	$	672.7	$	(10.5)

Amortization of acquired intangible assets. Amortization of acquired intangible assets increased to $24.4 million for the three months ended September 30, 2024 compared to $23.0 million for the three months ended September 30, 2023. Amortization of acquired intangible assets increased to $71.1 million for the nine months ended September 30, 2024 compared to $68.8 million for the nine months ended September 30, 2023. The increase was primarily due to amortization of the intangible asset acquired as part of our acquisition of Resolution Bioscience in September 2023 and our acquisition of intellectual property through a license from TwinStrand in July 2024.

Impairment of long-lived assets. Impairment of long-lived assets was $18.7 million and $31.3 million for the three and nine months ended September 30, 2024, respectively, compared to zero and $0.6 million for the three and nine months ended September 30, 2023. The impairment charges recorded during the three and nine months ended September 30, 2024 and 2023 related to the closure of certain of our domestic facilities.

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Other operating income. Other operating income was $3.1 million and $6.6 million for the three and nine months ended September 30, 2024 compared to $72.0 million for the three and nine months ended September 30, 2023. The income recorded for the three and nine months ended September 30, 2024 represents the remeasurement of the contingent consideration asset from the sale of the Oncotype DX Genomic Prostate Score test to MDxHealth SA (“MDxHealth”). The income recorded for the three and nine months ended September 30, 2023 included a $68.9 million contingent consideration gain and $3.1 million in additional consideration received from MDxHealth.

Investment income, net. Investment income, net increased to $11.6 million for the three months ended September 30, 2024 compared to $2.1 million for the three months ended September 30, 2023. Investment income, net increased to $29.6 million for the nine months ended September 30, 2024 compared to $7.4 million for the nine months ended September 30, 2023. The investment income recorded for the three and nine months ended September 30, 2024 and 2023 was primarily due to gains recorded on our marketable securities.

Interest expense. Interest expense was $9.6 million for the three months ended September 30, 2024 compared to $7.9 million for the three months ended September 30, 2023. Interest expense recorded from our outstanding convertible notes totaled $8.9 million and $6.3 million for the three months ended September 30, 2024 and 2023, respectively. Interest expense increased to $17.4 million for the nine months ended September 30, 2024 compared to $11.6 million for the nine months ended September 30, 2023. Interest expense recorded from our outstanding convertible notes totaled $23.6 million and $17.3 million for the nine months ended September 30, 2024 and 2023, respectively. Interest expense included a net gain on settlement of convertible notes of $10.3 million and $10.3 million for the nine months ended September 30, 2024 and 2023, respectively. The convertible notes are further described in Note 9 of our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Income tax expense. Income tax expense increased to $0.8 million for the three months ended September 30, 2024 compared to $0.2 million for the three months ended September 30, 2023. Income tax expense increased to $4.1 million for the nine months ended September 30, 2024 compared to $3.0 million for the nine months ended September 30, 2023. Income tax expense for the three and nine months ended September 30, 2024 and 2023 was primarily related to current foreign and state tax expense.

Liquidity and Capital Resources

Overview

We have incurred losses since our inception, and have historically financed our operations primarily through public offerings of our common stock and convertible debt and through revenue generated by the sale of our laboratory testing services. We expect our operating expenditures to continue to increase to support future growth of our laboratory testing services, as well as an increase in research and development and clinical trial costs to support the advancement of our pipeline products and bringing new tests to market. We expect that cash, cash equivalents and marketable securities on hand at September 30, 2024, along with cash flows generated through our operations, will be sufficient to fund our current operations for at least the next twelve months based on current operating plans.

We have access to a revolving line-of-credit (the “Revolver”) of up to $150.0 million, which had its maturity date extended to November 2025 through an amended agreement in October 2022. The Revolver is collateralized by certain marketable securities which must continue to maintain a minimum market value of $150.0 million. PNC Bank, National Association has issued letters of credit totaling $4.4 million, which reduces the amount available for cash advances under the line of credit to $145.6 million. As of September 30, 2024, we had not drawn any funds under the Revolver. The Revolver is further described in Note 8 of our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

We may raise additional capital to expand our business, to pursue strategic investments, to take advantage of financing opportunities or for other reasons. If we are unable to obtain sufficient additional funds to enable us to fund our business plans and strategic investments, our results of operations and financial condition could be materially adversely affected, and we may be required to delay the implementation of our plans or otherwise scale back our operations. There can be no certainty that we will ever be successful in generating sufficient cash flow from operations to achieve and maintain profitability and meet all of our obligations as they come due.

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Cash, Cash Equivalents and Marketable Securities

As of September 30, 2024, we had approximately $588.8 million in unrestricted cash and cash equivalents and approximately $432.3 million in marketable securities.

The majority of our investments in marketable securities consist of fixed income investments, and all are deemed available-for-sale. The objectives of this portfolio are to provide liquidity and safety of principal while striving to achieve the highest rate of return. Our 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.

Cash Flows


	Nine Months Ended September 30,
Amounts In millions	2024		2023
Net cash provided by operating activities	$	163.5	$	86.6
Net cash provided by (used in) investing activities	(400.3)		116.4
Net cash provided by financing activities	221.4		149.7

Operating activities

The increase in cash provided by operating activities for the nine months ended September 30, 2024 was primarily due to an increase in revenue. This was partially offset by an increase in operating expenses and cost of sales to support the increase in revenue as discussed in the Results of Operations section above and timing of payments on our accounts payable and accrued expenses and collections of our accounts receivable.

Investing activities

The increase in cash used in investing activities for the nine months ended September 30, 2024 compared to cash provided by investing activities for the nine months ended September 30, 2023 was due to a net increase of $507.4 million in cash used for purchases, maturities and sales of marketable securities as a result of a change in investing strategy towards more fixed income securities compared to money market funds as money market yields have decreased. We also increased our purchases of property, plant and equipment by $10.4 million due to additional investments in information technology infrastructure and lab automation. The increase in cash used in investing activities was partially offset by a decrease in cash used related to business combinations and asset acquisitions. We made payments of $45.0 million for our license of intellectual property from TwinStrand during the third quarter of 2024 compared to a cash payment of $50.0 for our acquisition of Resolution Bioscience, Inc. in the third quarter of 2023.

Financing activities

The increase in cash provided by financing activities during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was primarily due to proceeds of $266.8 million from the issuance of convertible notes in the second quarter of 2024 compared to proceeds of $138.0 million from the issuance of convertible notes in the first quarter of 2023. This was partially offset by a payment of $50.0 million in settlement of our previously outstanding accounts receivable securitization facility (“Securitization Facility”) upon maturity in June 2024.

Material Cash Requirements

A discussion of our material cash requirements as of December 31, 2023 was provided in the Management’s Discussion and Analysis of Financial Condition and Results of Operation of our 2023 Form 10-K. Other than the matters described below, there were no material changes outside the ordinary course of our business in our specified material cash requirements during the nine months ended September 30, 2024.

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In April 2024, we entered into privately negotiated agreements (the “Agreements”) with certain holders of our convertible notes due in 2028 (“2028 Notes”). Pursuant to the Agreements, we issued $620.7 million aggregate principal amount of a new series of Convertible Notes due in 2031 (the “2031 Notes”) in exchange for (i) the retirement of $359.7 million in aggregate principal amount of 2028 Notes, and (ii) payment to the Company of $266.8 million in cash. The net proceeds from the issuance of the Notes were approximately $259.8 million, after deducting commissions and the offering expenses payable by the Company. The 2031 Notes mature on April 15, 2031 and bear interest at a fixed rate of 1.75% per year, payable semiannually in arrears on October 15 and April 15 of each year, beginning on October 15, 2024.

As of September 30, 2024, we had outstanding aggregate principal of $249.2 million on our convertible notes with a maturity date of January 15, 2025 (the “2025 Notes”), which are classified as convertible notes, net, current portion on the condensed consolidated balance sheet. Beginning July 15, 2024, which is six months prior to the maturity date of the 2025 Notes, holders of the 2025 Notes may elect to convert such notes at any time. In accordance with the terms of the 2025 Notes, any 2025 Notes that are converted after July 15, 2024 will be settled through a combination settlement under which the par value will be settled in cash and any amount in excess of par value will be settled in shares of our common stock. 2025 Notes that are not converted prior to the maturity date will be settled in cash upon maturity.

In June 2024, we repaid the previously outstanding balance of $50.0 million in full upon maturity of the Securitization Facility. Prior to maturity, the Securitization Facility accrued interest at a rate equal to a daily secured overnight financing rate (“SOFR”) plus a SOFR adjustment and an applicable margin. The interest rate was 6.87% as of the maturity date.

As of September 30, 2024, we had no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience and on various other factors that are believed to be appropriate under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

For a discussion of our critical accounting policies and estimates, refer to our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Form 10-K. There have been no material changes to our critical accounting policies and estimates since our 2023 Form 10-K.

Recent Accounting Pronouncements

See Note 1 of our condensed consolidated financial statements for the discussion of Recent Accounting Pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our exposure to market risk is principally confined to our cash, cash equivalents and marketable securities and our outstanding variable-rate debt. We invest our cash, cash equivalents, and marketable securities in securities of the U.S. governments and its agencies and in investment-grade, highly liquid investments consisting of commercial paper, bank certificates of deposit, and corporate bonds, which as of September 30, 2024 and December 31, 2023 were classified as available-for-sale. We place our cash, cash equivalents, restricted cash, and marketable securities with high-quality financial institutions, limit the amount of credit exposure to any one institution, and have established investment guidelines relative to diversification and maturities designed to maintain safety and liquidity.

Based on a hypothetical 100 basis point decrease in market interest rates, the potential losses in future earnings, fair value of risk-sensitive financial instruments, and cash flows are immaterial, although the actual effects may differ materially from the hypothetical analysis. While we believe our cash, cash equivalents, restricted cash, and marketable securities do not contain excessive risk, we cannot provide absolute assurance that, in the future, our investments will not be subject to adverse changes

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in market value. In addition, we maintain significant amounts of cash, cash equivalents, restricted cash, and marketable securities at one or more financial institutions that are in excess of federally insured limits. Given the potential instability of financial institutions, we cannot provide assurance that we will not experience losses on these deposits. We do not utilize interest rate hedging agreements or other interest rate derivative instruments.

As of September 30, 2024, we had no outstanding variable rate debt. If we were to draw down amounts under our Revolving Loan, we would be impacted by increases in prevailing market interest rates. All of our other significant interest-bearing liabilities bear interest at fixed rates and therefore are not subject to fluctuations in market interest rates; however, because these interest rates are fixed, we may be paying a higher interest rate, relative to market, in the future if circumstances change.

Foreign Currency Risk

The functional currency for most of our international subsidiaries is the U.S. dollar, and as a result we are not subject to material gains and losses from foreign currency translation of the subsidiary financial statements. Substantially all of our revenues are recognized in U.S. dollars, although a small portion is denominated in foreign currency as we continue to expand into markets outside of the U.S. Certain expenses related to our international activities are payable in foreign currencies. As a result, factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets will affect our financial results.

We enter into forward contracts to mitigate the impact of adverse movements in foreign exchange rates related to the re-measurement of monetary assets and liabilities and hedge our foreign currency exchange rate exposure. As of September 30, 2024, we had open foreign currency forward contracts with notional amounts of $47.7 million. Although the impact of currency fluctuations on our financial results has been immaterial in the past, there can be no guarantee that the impact of currency fluctuations related to our international activities will not be material in the future.

Item 4. Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, our principal executive officer and our principal financial officer concluded that, as of September 30, 2024, our disclosure controls and procedures were effective. Disclosure controls and procedures enable us to record, process, summarize and report information required to be included in our Exchange Act filings within the required time period. Our disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by us in the periodic reports filed with the SEC is accumulated and communicated to our management, including our principal executive, financial and accounting officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There have been no significant changes in internal control over financial reporting during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II - Other Information

Item 1. Legal Proceedings

From time to time we are a party to various legal proceedings arising in the ordinary course of our business. Legal proceedings, including litigation, government investigations and enforcement actions could result in material costs, occupy significant management resources and entail civil and criminal penalties. The information called for by this item is incorporated by reference to the information in Note 13 of our condensed consolidated financial statements included in Part I of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this report, the risks and uncertainties that we believe are most important for you to consider are discussed in Part I, “Item 1A. Risk Factors” in the 2023 Form 10-K and in Part II, “Item 1A. Risk Factors” in our subsequently filed Quarterly Reports on Form 10-Q. There have been no material changes to the risk factors described in the 2023 Form 10-K and subsequently filed Quarterly Report on Form 10-Q.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Rule 10b5-1 Trading Plans

During the third quarter of 2024, none of the Company’s directors or executive officers adopted or terminated any “Rule 10b5-1 trading arrangement” or any “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

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Item 6. Exhibits

The following documents are filed as part of this Form 10-Q.

Exhibit
Number

Exhibit Description

Filed
with
This
Report

Incorporated
by Reference
herein from
Form or
Schedule

Filing
Date

SEC File /
Registration
Number

3.1

Sixth Amended and Restated Certificate of Incorporation of the Registrant

S-1 (Exhibit 3.3)

12/4/2000

333-48812

3.2

Certificate of Amendment, dated July 23, 2020, to the Sixth Amended and Restated Certificate of Incorporation of the Registrant

8-K (Exhibit 3.1)

7/24/2020

001-35092

3.3

Certificate of Amendment, dated June 9, 2023, to the Sixth Amended and Restated Certificate of Incorporation of the Registrant

8-K (Exhibit 3.1)

6/12/2023

001-35092

3.4

Seventh Amended and Restated By-Laws of the Registrant

8-K (Exhibit 3.2)

6/12/2023

001-35092

10.1*

First Amendment to Employment Agreement, dated July 31, 2024, by and between Aaron Bloomer and the Registrant

10.2*

First Amendment to Employment Agreement, dated July 31, 2024, by and between Jake Orville and the Registrant

10.3*

First Amendment to Employment Agreement, dated July 31, 2024, by and between Brian Baranick and the Registrant

10.4*

Second Amendment to Employment Agreement, dated July 31, 2024, by and between Sarah Condella and the Registrant

1 0.5*

The Registrant’s 2010 Employee Stock Purchase Plan (as amended and restated on July 31, 2024)

31.1

Certification Pursuant to Rule 13(a)-14(a) or Rule 15d-14(a) of Securities Exchange Act of 1934

31.2

Certification Pursuant to Rule 13(a)-14(a) or Rule 15d-14(a) of Securities Exchange Act of 1934

32.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101

The following materials from the Quarterly Report on Form 10-Q of Exact Sciences Corporation for the quarter ended September 30, 2024 filed on November 5, 2024, formatted in Inline eXtensible Business Reporting Language (“iXBRL”): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statement of Changes in Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) related notes to these financial statements

104

The cover page from our Quarterly Report for the period ended September 30, 2024, filed with the Securities and Exchange Commission on November 5, 2024, is formatted in Inline Extensible Business Reporting Language (“iXBRL”)

(*) Indicates a management contract or any compensatory plan, contract or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		EXACT SCIENCES CORPORATION

Date: November 5, 2024	By:	/s/ Kevin T. Conroy
		Kevin T. Conroy
		President and Chief Executive Officer (Principal Executive Officer)

Date: November 5, 2024	By:	/s/ Aaron Bloomer
		Aaron Bloomer
		Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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Date	Price Target	Rating	Analyst
8/28/2024	$75.00	Overweight	Wells Fargo
6/27/2024	$70.00	Sector Outperform	Scotiabank
6/3/2024	$75.00	Buy	Jefferies
1/2/2024	$91.00	Hold → Buy	The Benchmark Company
12/14/2023	$90.00	Buy	Guggenheim
12/13/2023	$95.00	Outperform	Wolfe Research
10/10/2023	$90.00	Neutral → Overweight	Piper Sandler
9/28/2023	$83.00	Outperform	Bernstein

SEC Form 10-Q filed by Exact Sciences Corporation

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