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What changed in EXACT SCIENCES CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of EXACT SCIENCES CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+529 added−617 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-21)

Top changes in EXACT SCIENCES CORP's 2023 10-K

529 paragraphs added · 617 removed · 392 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

114 edited+28 added−29 removed78 unchanged
Biggest changeThe following laws and regulations establish coverage requirements relevant to our Cologuard test. • Section 2713 of the Patient Protection and Affordable Care Act (“ACA”) mandates that certain health insurers cover, without imposing any patient cost-sharing, evidence-based items or services that have in effect a rating of “A” or “B” in the current recommendations of USPSTF (“ACA Mandate”). • Federal regulations require that Medicare Advantage plans cover “A” or “B” rated preventive services without patient cost-sharing, and CMS has issued a notice affirming that Medicare Advantage plans must include coverage of our Cologuard test every three years without patient cost-sharing. • We believe the laws of approximately 30 states currently mandate coverage of our Cologuard test by certain health insurance plans.
Biggest changeMedicare Part B covers our Cologuard test once every three years for beneficiaries who are age 45 to 85, asymptomatic and at average risk for developing colorectal cancer. 8 Table of Contents The following laws and regulations establish coverage requirements relevant to our Cologuard test. • Section 2713 of the Patient Protection and Affordable Care Act (“ACA”) mandates that certain health insurers cover, without imposing any patient cost-sharing, evidence-based items or services that have in effect a rating of “A” or “B” in the current recommendations of USPSTF (“ACA Mandate”), which includes follow-up colonoscopy after a positive non-invasive stool-based screening test be covered without cost sharing. • Federal regulations require that Medicare Advantage plans cover “A” or “B” rated preventive services without patient cost-sharing, and CMS has issued a notice affirming that Medicare Advantage plans must include coverage of our Cologuard test every three years without patient cost-sharing including coverage of a follow-up colonoscopy after a positive non-invasive stool-based screening test effective January 1, 2023.
Oncotype DX Breast DCIS Score ® Test Our Oncotype DX DCIS test provides ductal carcinoma in situ (“DCIS”) patients an individualized prediction of the 10-year risk of local recurrence (DCIS or invasive carcinoma), represented by a DCIS Score® result. This test helps guide treatment decision-making in women with DCIS treated by local excision, with or without tamoxifen.
Oncotype DX Breast DCIS Score ® Test Our Oncotype DX Breast DCIS Score test provides ductal carcinoma in situ (“DCIS”) patients an individualized prediction of the 10-year risk of local recurrence (DCIS or invasive carcinoma), represented by a DCIS Score ® result. This test helps guide treatment decision-making in women with DCIS treated by local excision, with or without tamoxifen.
As noted below, a number of companies are developing liquid biopsy tests for colorectal cancer screening, as well as other applications. We also are aware of at least three companies, Mainz Biomed, Prescient Metabiomics, and Geneoscopy, that are seeking to develop or have developed stool-based colorectal cancer tests in the United States.
As noted below, a number of companies are developing liquid biopsy tests for colorectal cancer screening, as well as other applications. We also are aware of at least three companies, Geneoscopy, Mainz Biomed, and Prescient Metabiomics, that are seeking to develop or have developed stool-based colorectal cancer tests in the United States.
We face competition from a variety of sources, including Ambry Genetics, a subsidiary of Konica Minolta Inc.; Myriad Genetics, Inc.; Invitae; Natera, Inc.; Color Health, Inc.; and Sema4 Genomics; a few large, established general testing companies such as Laboratory Corporation of America Holdings and Quest Diagnostics Incorporated; and clinical laboratories in an academic or healthcare provider setting that perform clinical genetic testing on behalf of their affiliated institutions.
We face competition from a variety of sources, including Ambry Genetics, a subsidiary of Konica Minolta Inc.; Myriad Genetics, Inc.; Invitae; Natera; Color Health, Inc.; and Sema4 Genomics; a few large, established general testing companies such as Laboratory Corporation of America Holdings and Quest Diagnostics Incorporated; and clinical laboratories in an academic or healthcare provider setting that perform clinical genetic testing on behalf of their affiliated institutions.
To foster a culture of care and compassion, we offer eligible employees an employee assistance program with employer-paid counseling coverage for employee and household members, charitable donation matches, commuter benefits, family care assistance, wellness programs, including fitness and mental health/well being, and more. Training and Development We invest significant resources to develop the talent needed to achieve long-term success.
To foster a culture of care and compassion, we offer eligible employees an employee assistance program with employer-paid counseling coverage for employee and household members, charitable donation matches, commuter benefits, wellness programs, including fitness and mental health/well-being, and more. Training and Development We invest significant resources to develop the talent needed to achieve long-term success.
We are firmly committed to providing equitable opportunity in all aspects of employment and will not discriminate in any employment decision because of a person’s race, color, sex, religion, national origin, age, disability, sexual orientation, gender identity, genetic information, veteran status, or any other basis prohibited by applicable law.
We are firmly committed to providing equitable opportunity in all aspects of employment and will not discriminate in any employment decision because of a person’s race, color, sex, religion, national origin, age, disability, sexual orientation, marital status, gender identity, genetic information, veteran status, or any other basis prohibited by applicable law.
Johns Hopkins University (“JHU”) Through the acquisition of Thrive Earlier Detection Corporation (“Thrive”), we acquired a worldwide exclusive license agreement with JHU for use of several JHU patents and licensed know-how. We are seeking to utilize the JHU licensed technology to develop and commercialize a blood-based MCED test.
Johns Hopkins University Through the acquisition of Thrive Earlier Detection Corporation (“Thrive”), we acquired a worldwide exclusive license agreement with JHU for use of several JHU patents and licensed know-how. We are seeking to utilize the JHU licensed technology to develop and commercialize a blood-based MCED test.
In addition to granting us a license to the covered Mayo intellectual property, Mayo provides us with 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 addition to granting us a license to the covered Mayo intellectual property, Mayo provides us with product development 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.
The Oncotype DX colon cancer test is supported by three rigorous clinical validation studies confirming the test’s ability to provide additional and independent value beyond the currently used measures for determining colon cancer recurrence risk.
The Oncotype DX Colon Recurrence Score test is supported by three rigorous clinical validation studies confirming the test’s ability to provide additional and independent value beyond the currently used measures for determining colon cancer recurrence risk.
Newer screening technologies include liquid biopsy tests, such as Epi proColon, which was approved by the FDA in April 2016, and pill-based imaging solutions like PillCam COLON, which was cleared by the FDA in February 2014, and C-Scan, which obtained a CE Mark in early 2019.
Other screening technologies include liquid biopsy tests, such as Epi proColon, which was approved by the FDA in April 2016, pill-based imaging solutions like PillCam COLON, which was cleared by the FDA in February 2014, and C-Scan, which obtained a CE Mark in early 2019.
Some payers may apply various medical management requirements, including a requirement that they give prior authorization for an Oncotype test before they are willing to pay for it. Where there is no payer policy in place, we pursue third-party reimbursement on behalf of each patient on a case-by-case basis.
Some payers may apply various medical management requirements, including a requirement that they give prior authorization for an precision oncology test before they are willing to pay for it. Where there is no payer policy in place, we pursue third-party reimbursement on behalf of each patient on a case-by-case basis.
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.
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 E.U., China, Japan, and Korea.
Reimbursement of our Oncotype tests by third-party payers is essential to our commercial success. Where there is a payer policy, contract or agreement in place, we bill the third-party payer, the hospital or referring laboratory and/or the patient (for deductibles and coinsurance or co-payments, where applicable) in accordance with established policy, contract or agreement terms.
Reimbursement of our precision oncology tests by third-party payers is essential to our commercial success. Where there is a payer policy, contract or agreement in place, we bill the third-party payer, the hospital or referring laboratory and/or the patient (for deductibles and coinsurance or co-payments, where applicable) in accordance with established policy, contract or agreement terms.
Postal Service, and the Centers for Disease Control and Prevention that apply to the surface and air transportation, as well as importation, of clinical laboratory specimens. 16 Table of Contents Environmental . The cost of compliance with federal, state, and local provisions related to the protection of the environment has had no material effect on our business.
Postal Service, and the Centers for Disease Control and Prevention that apply to the surface and air transportation, as well as importation, of clinical laboratory specimens. Environmental . The cost of compliance with federal, state, and local provisions related to the protection of the environment has had no material effect on our business.
The updated guidelines include our Cologuard test (referred to in their statement as sDNA-FIT) as a recommended screening method for all average-risk patients in the 45-75 age group. • The American Cancer Society has specifically included our Cologuard test as a recommended colorectal cancer screening test in average-risk, asymptomatic individuals.
The updated guidelines include our Cologuard test (referred to in their statement as sDNA-FIT) as a recommended screening method for all average-risk patients in the 45-75 age group. • The ACS has specifically included our Cologuard test as a recommended colorectal cancer screening test in average-risk, asymptomatic individuals.
Thanks, in large part, to our training and development investments, in 2022 we were able to fill 36% of our open positions with internal candidates. Financial Information See our consolidated financial statements included elsewhere in this Form 10-K and accompanying notes to the consolidated financial statements. Available Information We were incorporated in the State of Delaware on February 10, 1995.
Thanks, in large part, to our training and development investments, in 2023 we were able to fill 38% of our open positions with internal candidates. Financial Information See our consolidated financial statements included elsewhere in this Form 10-K and accompanying notes to the consolidated financial statements. Available Information We were incorporated in the State of Delaware on February 10, 1995.
We believe the combination of these approaches is our best means to increase patient and healthcare provider awareness of our Oncotype products and services and the number of favorable reimbursement coverage decisions by third-party payers.
We believe the combination of these approaches is our best means to increase patient and healthcare provider awareness of our precision oncology products and services and the number of favorable reimbursement coverage decisions by third-party payers.
We believe that our Oncotype tests compete primarily on the basis of the value of the information they provide, the clinical validation of their utility, their level of adoption and reimbursement coverage, and their inclusion in clinical practice guidelines.
We believe that our precision oncology tests compete primarily on the basis of the value of the information they provide, the clinical validation of their utility, their level of adoption and reimbursement coverage, and their inclusion in clinical practice guidelines.
Historically, our principal competition for our Oncotype tests has also come from existing diagnostic methods used by pathologists and oncologists which can be difficult to compete with or supplement.
Historically, our principal competition for our precision oncology tests has also come from existing diagnostic methods used by pathologists and oncologists which can be difficult to compete with or supplement.
Throughout 2020 and 2021, we manufactured and assembled our COVID-19 test kits at our manufacturing facilities in Madison, Wisconsin. In 2022, we continued to manufacture COVID-19 reagents out of our manufacturing facilities, and provided all the components for the test kits to a third-party vendor for assembly.
Throughout 2020 and 2021, we manufactured and assembled our COVID-19 test kits at our manufacturing facilities in Madison, Wisconsin. From 2022 through June 2023, we continued to manufacture COVID-19 reagents out of our manufacturing facilities, and provided all the components for the test kits to a third-party vendor for assembly.
To facilitate talent attraction and retention, we strive to make Exact Sciences a diverse and inclusive workplace, with opportunities for our employees to grow and develop in their careers, supported by strong compensation, benefits, and health and wellness programs. At December 31, 2022, we had approximately 6,400 full-time, part-time and temporary employees, 6,300 of which were full-time employees.
To facilitate talent attraction and retention, we strive to make Exact Sciences a diverse and inclusive workplace, with opportunities for our employees to grow and develop in their careers, supported by strong compensation, benefits, and health and wellness programs. At December 31, 2023, we had approximately 6,600 full-time, part-time and temporary employees, 6,500 of which were full-time employees.
Oncotype ® Commercial Operations We promote our Oncotype tests through our precision oncology sales force. Our commercial infrastructure, including our sales force, managed care group, and patient support network, is critical to the success of our Oncotype products. In our domestic sales, marketing and reimbursement efforts, we interact directly with medical, radiation, and surgical oncologists, pathologists, and payers.
Our commercial infrastructure, including our sales force, managed care group, and patient support network, is critical to the success of our precision oncology products. In our domestic sales, marketing and reimbursement efforts, we interact directly with medical, radiation, and surgical oncologists, pathologists, and payers.
Although it appears that EKRA was intended to reach patient brokering and similar arrangements to induce patronage of substance use recovery and treatment, the language in EKRA is broadly written and can apply to laboratory services covered under public or private payer arrangements.
Although it appears that EKRA was intended to reach patient brokering and similar arrangements to induce patronage of substance use recovery and treatment, the language in EKRA is broadly written and could apply to laboratory services covered under public or private payer arrangements. Self-Referral Law.
As our Oncotype DX test has a pre-existing certification from our notified body, we have until May 2026 to meet certain of the new, more stringent regulatory requirements of EU IVDR with respect to our Oncotype DX test, including obtaining a new positive conformity assessment from our notified body.
As our Oncotype DX Breast Recurrence Score test has a pre-existing certification from our notified body, we had until May 2026 to meet certain of the new, more stringent regulatory requirements of EU IVDR with respect to our Oncotype DX Breast Recurrence Score test, including obtaining a new positive conformity assessment from our notified body.
More than 95% of our employees are located in the United States and none of our employees are represented by a labor union. During fiscal year 2022, our voluntary turnover rate was approximately 15%, below the healthcare industry benchmark, which is comprised of certain of our key competitors (Aon, 2022 Salary Increase and Turnover Study — Second Edition, September 2022).
More than 95% of our employees are located in the United States and none of our employees are represented by a labor union. During fiscal year 2023, our voluntary turnover rate was approximately 8%, below the healthcare industry benchmark, which is comprised of certain of our key competitors (Aon, 2023 Salary Increase and Turnover Study — Second Edition, June 2023).
Reimbursement for Future Products Successful commercialization of our newly developed products will also depend on our ability to obtain adequate reimbursement from government insurance plans, managed care organizations, private insurance plans, and public healthcare systems outside the U.S. for such products.
Reimbursement for Future Products Successful commercialization of our newly developed products will also depend on our ability to obtain and maintain reimbursement at adequate reimbursement rates from government insurance plans, managed care organizations, commercial insurance plans, and public healthcare systems outside the U.S. for such products.
State Medicaid agencies generally assign a reimbursement rate for our Oncotype tests equal to or less than the prevailing Medicare rate, often determined by state law as a percentage of the Medicare reimbursement rate. 9 Table of Contents International Reimbursement In many countries, public healthcare systems are primarily responsible for financing and establishing reimbursement for diagnostic tests.
State Medicaid agencies generally assign a reimbursement rate for our precision oncology tests equal to or less than the prevailing Medicare rate, often determined by state law as a percentage of the Medicare reimbursement rate. International Reimbursement In many countries, public healthcare systems are primarily responsible for financing and establishing reimbursement for diagnostic tests.
In addition, we have a number of pending patent applications in the U.S. and in other countries, including provisional and non-provisional filings. Our issued U.S. patents expire at various times between 2023 and 2040. Some of these U.S. patent applications also have corresponding pending or granted applications under the Patent Cooperation Treaty in Canada, Europe, Japan, Australia, and other jurisdictions.
Our issued U.S. patents expire at various times between 2024 and 2043. In addition, we have pending patent applications in the U.S. and in other countries, including provisional and non-provisional filings. Some of these U.S. patent applications also have corresponding pending or granted applications under the Patent Cooperation Treaty in Canada, Europe, Japan, Australia, and other jurisdictions.
CCPA protects personal information other than health information covered by HIPAA and allows certain data access and erasure rights to California consumers as well as rights to limit use and disclosure of sensitive personal information. Other similar state laws have been enacted in Utah, Colorado, Virginia, and Connecticut.
CCPA protects personal information other than health information covered by HIPAA and allows certain data access and erasure rights to California consumers as well as rights to limit use and disclosure of sensitive personal information. Other similar state laws have been enacted.
Our Oncotype DX breast cancer test is reimbursed for certain patients in the public health systems in more than ten countries, including Germany, the United Kingdom (“U.K.”), and Canada. We are exploring opportunities to establish local laboratories in certain locations outside of the U.S. and established local testing capacity in Germany beginning in late 2021.
Our Oncotype DX breast cancer test is reimbursed for certain patients in the public health systems in more than ten countries. We are exploring opportunities to establish local laboratories in certain locations outside of the U.S. and established local testing capacity in Germany beginning in late 2021.
Our Oncotype DX breast cancer test has been recommended to guide certain patients' chemotherapy treatment decisions by the National Institute for Health and Care Excellence in England, the Gynecologic Oncology Working Group in Germany, and the Japan Breast Cancer Society.
Gallen International Breast Cancer Expert Panel and European Society for Medical Oncology. Our Oncotype DX breast cancer test has been recommended to guide certain patients’ chemotherapy treatment decisions by the National Institute for Health and Care Excellence in England, the Gynecologic Oncology Working Group in Germany, and the Japan Breast Cancer Society.
For example, the European Union has amended its existing regulatory framework for in vitro diagnostics by introducing the Regulation 2017/746 (EU) (“EU IVDR”), which amends the existing framework and imposes stricter requirements for the development, marketing and sale of in vitro diagnostics such as our Oncotype DX test in the European Union.
For example, the E.U. has amended its existing regulatory framework for in vitro diagnostics by introducing the Regulation 2017/746 (EU) (“EU IVDR”), which amends the existing framework and imposes stricter requirements for the development, marketing and sale of in vitro diagnostics such as our Oncotype DX Breast Recurrence Score test in the E.U.
As of December 31, 2022, we had 166 issued patents in the U.S. and 824 issued patents outside of the U.S., which includes validated patents issued by the European Patent Office in key European Union countries, covering genes and methods that are components of the Cologuard test, Oncoguard™ Liver test, Oncotype DX tests, pipeline technologies or research methods, and platform technologies.
As of December 31, 2023, we had 208 issued patents in the U.S. and 878 issued patents outside of the U.S., which includes validated patents issued by the European Patent Office in key E.U. countries, covering genes and methods that are components of the Cologuard test, Oncoguard ® Liver test, Oncotype DX tests, pipeline technologies or research methods, and platform technologies.
Pursuant to our license agreement with Mayo, we are required to pay Mayo various single-digit royalty rates on net sales of current and future products using the licensed Mayo intellectual property during the term of the Mayo agreement.
Pursuant to our license agreement with Mayo, we are required to pay Mayo a low-single-digit royalty on net sales of current and future products using the licensed Mayo intellectual property each year during the term of the Mayo agreement.
Thanks, in part, to our competitive benefits and the positive results of our diversity and inclusion program, women make up approximately 54% of total employees (full-time and part-time), and 42% of management positions. Our ten-member Board of Directors includes four female members to support diversity of opinion and perspective at the board level as well.
Thanks, in part, to our compelling mission, competitive benefits and the positive results of our diversity and inclusion program, women make up approximately 54% of total employees (full-time and part-time), and 49% of management positions. Our eleven-member Board of Directors includes four female members to support diversity of opinion and perspective at the board level.
Our Cologuard test is now indicated for average risk adults 45 years of age and older. 4 Table of Contents Our peer-reviewed study, “Multi-target Stool DNA Testing for Colorectal-Cancer Screening,” published in the New England Journal of Medicine in April 2014, highlighted the performance of the Cologuard test in its 10,000 patient Deep-C clinical trial: • Cancer Sensitivity: 92% • Stage I and II Cancer Sensitivity: 94% • High-Grade Dysplasia Sensitivity: 69% • Specificity: 87% We believe the competitive advantages of sDNA screening provide a significant market opportunity.
Our peer-reviewed study, “Multi-target Stool DNA Testing for Colorectal-Cancer Screening,” published in the New England Journal of Medicine in April 2014, highlighted the performance of the Cologuard test in its 10,000 patient Deep-C clinical trial: • Cancer Sensitivity: 92% • Stage I and II Cancer Sensitivity: 94% • High-Grade Dysplasia Sensitivity: 69% • Specificity: 87% We believe the competitive advantages of sDNA screening provide a significant market opportunity.
Through recent business development activities, we have also acquired exclusive access to technologies developed by The Johns Hopkins University, The Translational Genomics Research Institute (“TGen”), Oxford University, and the Ludwig Institute for Cancer Research. We are focusing our research and development efforts on three main areas: • Colorectal Cancer Screening .
Through recent business development activities, we have also acquired exclusive access to technologies developed by The Johns Hopkins University (“JHU”), Broad Institute, Inc. (“Broad Institute”), Oxford University, and the Ludwig Institute for Cancer Research. We are focusing our research and development efforts on three main areas: • Colorectal Cancer Screening .
We plan to offer both a tumor-informed and tumor-naive MRD test to help detect small amounts of tumor DNA that may remain in patients’ blood after they have undergone initial cancer treatment. These tests will help patients and oncologists understand the success of initial treatment and monitor for cancer recurrence.
We plan to offer our Oncodetect test, a tumor-informed MRD test to help detect small amounts of tumor DNA that may remain in patients’ blood after they have undergone initial cancer treatment. This test will help patients and oncologists understand the success of initial treatment, guide further treatment, and monitor for cancer recurrence.
International Commercial Operations We now commercialize or plan to commercialize our Oncotype tests outside the United States through employees in Canada, Japan, and eight European countries, as well as through exclusive distribution agreements. We do not offer our Cologuard test outside of the U.S. We have provided our Oncotype tests in more than 90 countries.
International Commercial Operations We commercialize or plan to commercialize our Oncotype ® tests outside the United States 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. We do not offer our Cologuard test outside of the U.S.
We will then begin recruiting patients for the FDA registrational Study of All comeRs (“SOAR”) trial, which we expect to be the largest prospective, interventional MCED trial ever conducted in the United States. • MRD Test Development.
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 MCED trial ever conducted in the U.S. • MRD Test Development.
Additionally, FIT testing suffers from low adherence over time. One study published in the American Journal of Managed Care demonstrated that only 3 out of every 1,000 patients studied adhered to fecal test screening guidelines during a continuous 10-year observation period. The blood-based DNA tests currently available are also disadvantaged by relatively low sensitivity.
Additionally, FIT testing suffers from low adherence over time. One study published in the American Journal of Managed Care demonstrated that only 3 out of every 1,000 patients studied adhered to fecal test screening guidelines during a continuous 10-year observation period.
Action by the FDA to exercise enforcement discretion over LDTs may materially impact our development and commercialization of LDTs, including without limitation our Oncotype tests. Laboratory Certification, Accreditation, and Licensing We are also subject to U.S. and state laws and regulations regarding the operation of clinical laboratories.
Action by the FDA to phase out its current policy of enforcement discretion over LDTs may materially impact our development and commercialization of LDTs, including our Oncotype tests. 13 Table of Contents Laboratory Certification, Accreditation, and Licensing We are also subject to U.S. and state laws and regulations regarding the operation of clinical laboratories.
We also focus on healthcare provider groups and larger regional and national health systems. 7 Table of Contents A critical part of the value proposition of our Cologuard test is its adherence program, which involves active engagement with patients and providers by our adherence team.
We focus on specific healthcare providers based on a combination of Cologuard order history and ordering potential data. We also focus on healthcare provider groups and larger regional and national health systems. A critical part of the value proposition of our Cologuard test is its adherence program, which involves active engagement with patients and providers by our adherence team.
Some states have similar transparency laws. Our failure to comply with any applicable transparency reporting requirements may subject us to substantial penalties. International When marketing our tests outside of the U.S., we are subject to other countries' regulatory requirements governing human clinical testing, export of tissue, marketing approval for our products, and performance and reporting of tests in each market.
Some states have similar transparency laws. 15 Table of Contents International When marketing our tests outside of the U.S., we are subject to other countries' regulatory requirements governing human clinical testing, export of tissue, marketing approval for our products, and performance and reporting of tests in each market.
In addition, we have been awarded with a Great Place to Work® Certification TM in 2022, Fortune's Best Workplaces in Health Care & Biopharma TM in 2022, and Forbes' Best-in-State Employer in 2022. 18 Table of Contents Compensation and Benefits Attracting the best talent starts with offering industry-leading compensation and benefits.
In addition, we have been awarded with a Great Place to Work Certification ® in 2023, Forbes' Best-in-State Employer in 2023, and Wisconsin State Journal Top Workplaces in 2023. 18 Table of Contents Compensation and Benefits Attracting the best talent starts with offering industry-leading compensation and benefits.
We are currently seeking to develop a MCED test to help detect many different types of cancer from a single blood draw.
We are seeking to develop a MCED test, which will be branded as Cancerguard TM to help detect many different types of cancer from a single blood draw.
Failure to comply with applicable requirements can lead to sanctions, including withdrawal of products from the market, recalls, refusal to authorize government contracts, product seizures, exclusion from participation in federal and state healthcare programs, civil money penalties, injunctions, and criminal prosecution. U.S.
Failure to comply with applicable requirements can lead to significant sanctions, including interruption of our operations, withdrawal of products from the market, recalls, payment denials, refunds and recoupments, refusal to authorize government contracts, product seizures, exclusion from participation in federal and state healthcare programs, civil money penalties, injunctions, and criminal prosecution. For more information, see “Item 1A.
There are a number of private and public companies that offer products or have announced that they are developing products that compete with ours. 10 Table of Contents Some of our current and potential competitors may have significant competitive advantage over us, which may make them more attractive to hospitals, clinics, group purchasing organizations and physicians, including: • technology breakthroughs that we do not have access to; • entrenched leaders in new areas that we are entering; and • alternative distribution models that customers prefer.
Certain of these companies have or may be acquired by, or enter into commercial partnerships with, larger companies with greater expertise or resources, which may increase their ability to offer or develop products that compete with ours. 10 Table of Contents Some of our current and potential competitors may have significant competitive advantage over us, which may make them more attractive to hospitals, clinics, group purchasing organizations and physicians, including: • technology breakthroughs that we do not have access to; • entrenched leaders in new areas that we are entering; and • alternative distribution models that customers prefer.
CLIA requirements and laws of certain states, including those of California, New York, Maryland, Pennsylvania, and Rhode Island, impose certification requirements for clinical laboratories, and establish standards for quality assurance and quality control, among other things.
CLIA requirements and laws of certain states impose certification requirements for clinical laboratories, and establish standards for quality assurance and quality control, among other things.
Our Screening Tests Cologuard Test 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. Eleven biomarkers are targeted that have been shown to be strongly associated with colorectal cancer and pre-cancer.
Our current products and services focus on screening and precision oncology tests. Our Screening Tests Cologuard Test 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.
These amendments could subject our procedures for identifying and processing payments to greater scrutiny. Overpayments may occur from time to time in the healthcare industry without any fraudulent intent. For example, overpayments may result from mistakes in reimbursement claim forms or from improper processing by governmental payers. We maintain protocols intended to identify any overpayments.
Overpayments may occur from time to time in the healthcare industry without any fraudulent intent. For example, overpayments may result from mistakes in reimbursement claim forms or from improper processing by governmental payers. We maintain protocols intended to identify any overpayments. From time to time we have identified overpayments and made refunds to government payers.
In order to increase the pool of diverse candidates for open positions, we partner with community resource groups and participate in diversity-focused career fairs. Our Executive VP of Human Resources is part of the executive leadership team and has direct responsibility for our diversity and inclusion efforts.
In order to increase the pool of diverse candidates for open positions, we partner with community resource groups and participate in diversity-focused career recruiting efforts. Our talent strategy and inclusion team, led by our Executive VP of Human Resources, is responsible for developing and implementing our inclusion and diversity programs.
While we believe that our Oncotype tests compete favorably with respect to these factors, to continue to do so we must innovate and adopt advanced technology, successfully market, sell and enhance our tests, obtain peer-reviewed publications of our clinical studies in a timely manner, continue to obtain positive reimbursement determinations, continue to expand in countries outside of the U.S., continue to develop our technological and clinical operations, encourage healthcare provider participation in Medicare-required information collection efforts, and successfully expand our reach into additional product markets, including through collaborations with third parties.
While we believe that our precision oncology tests compete favorably with respect to these factors, to continue to do so we must innovate and adopt advanced technology, successfully market, sell and enhance our tests, obtain peer-reviewed publications of our clinical studies in a timely manner, continue to obtain positive reimbursement determinations, continue to expand in countries outside of the U.S., continue to develop our technological and clinical operations, encourage healthcare provider participation in Medicare-required information collection efforts, and successfully expand our reach into additional product markets, including through collaborations with third parties. 11 Table of Contents In addition to our on-market products, we intend to offer additional liquid biopsy solutions, including tests that screen for colorectal cancer, screen for multiple types of cancers in a single test, provide prognostic information, guide therapy selection, and measure molecular residual disease and cancer recurrence.
A majority of our internally developed Oncotype tests for domestic and international patients are currently processed in our CLIA-certified and CAP-accredited clinical reference laboratory facilities in Redwood City, California. Beginning in 2022, Oncotype DX breast cancer tests for German patients have been processed in our newly constructed facility in Trier, Germany, which is operated by a third-party partner.
Beginning in 2022, Oncotype DX breast cancer tests for German patients have been processed in our newly constructed facility in Trier, Germany, a portion of which is operated by a third-party partner. Our OncoExTra tests, along with tests completed under certain of our reference lab agreements, are processed in our CLIA-certified and CAP-accredited clinical reference laboratory facilities in Phoenix, Arizona.
In December of 2022, we finished enrollment of our multi-center, prospective BLUE-C study, which we expect to support FDA approval of our enhanced Cologuard test. We are also working to develop a blood-based screening test for colorectal cancer as a second-line option for people who haven't been screened with more accurate methods. • MCED Test Development.
We submitted our next-generation Cologuard test for FDA approval in December 2023. We are also working to develop a blood-based screening test for colorectal cancer as a second-line option for people who haven’t been screened with more accurate methods. • MCED Test Development.
State Medicaid agencies generally assign a reimbursement rate for our Cologuard test equal to or less than the prevailing Medicare rate, often determined by state law as a percentage of the Medicare reimbursement rate.
State Medicaid agencies generally assign a reimbursement rate for our Cologuard test equal to or less than the prevailing Medicare rate, often determined by state law as a percentage of the Medicare reimbursement rate. Reimbursement for our Precision Oncology Tests We depend on government insurance plans, managed care organizations, and commercial insurance plans for reimbursement of our precision oncology tests.
In 2017, we recalled one of the components of our Cologuard test kit and circumstances may arise that cause us to recall other products or components used in connection with our Cologuard test. Certain of our products in development or additional diagnostic products and services that we seek to develop may be regulated by the FDA as medical devices.
In 2017, we recalled one of the components of our Cologuard test kit and circumstances may arise that cause us to recall other products or components used in connection with our Cologuard test.
Our Oncotype products compete against a number of companies that offer products or have conducted research to profile genes and gene expression in breast and colon cancer such as Agendia Inc., Veracyte, Inc., Myriad Genetics, Inc., and Hologic, Inc.
In February 2023, Epigenomics AG announced that it would stop the sale of Epi proColon and recall the product. Our precision oncology products compete against a number of companies that offer products or have conducted research to profile genes and gene expression in breast and colon cancer such as Agendia Inc., Veracyte, Inc., Myriad Genetics, Inc., and Hologic, Inc.
New USPSTF colorectal cancer screening guidelines became final in May 2021 and after a transition period, mandate coverage of our Cologuard test beginning at age 45 for ACA covered health plans. We believe most commercial plans covered by this mandate have implemented this change.
Reimbursement for our Tests Reimbursement for our Cologuard Test Our Cologuard test has broad reimbursement coverage from Medicare and commercial payers. Updated USPSTF colorectal cancer screening guidelines became final in May 2021 and after a transition period, mandate coverage of our Cologuard test beginning at age 45 for ACA covered health plans.
We are subject to comparable state laws, some of which apply to all payers regardless of source of payment, and do not contain identical exceptions to the Stark law.
We are subject to comparable state laws, some of which apply to all payers regardless of source of payment, and do not contain identical exceptions to the Stark law. Sunshine Act In 2010, Congress enacted a statute commonly known as the Sunshine Act, which aims to promote transparency.
From time to time we have identified overpayments and made refunds to government payers. 14 Table of Contents To avoid liability, we must carefully and accurately code claims for reimbursement, proactively monitor the accuracy and appropriateness of Medicare claims and payments received, diligently investigate any credible information indicating that we may have received an overpayment, and promptly return any overpayments.
To avoid liability, we must carefully and accurately code claims for reimbursement, proactively monitor the accuracy and appropriateness of Medicare claims and payments received, diligently investigate any credible information indicating that we may have received an overpayment, and promptly return any overpayments. Federal and State “Self-Referral” and “Anti-Kickback” Restrictions Anti-Kickback Statute.
Additionally, in many countries outside of the U.S., coverage, pricing, and reimbursement approvals are also required in order for our tests to be made available to patients in substantial volume.
Failure to meet these requirements could adversely impact our business in the E.U. and other regions that tie their product registrations to the E.U. requirements. Additionally, in many countries outside of the U.S., coverage, pricing, and reimbursement approvals are also required in order for our tests to be made available to patients in substantial volume.
The Oncotype DX Breast Recurrence Score test examines the activity of 21 genes in a patient’s breast tumor tissue to provide personalized information for tailoring treatment based on the biology of the patient's individual disease.
Worldwide, it is estimated that there are approximately 2.3 million newly diagnosed cases of breast cancer each year. The Oncotype DX Breast Recurrence Score test examines the activity of 21 genes in a patient’s breast tumor tissue to provide personalized information for tailoring treatment based on the biology of the patient’s individual disease.
Based on our experience to date, we expect some seasonal variations in our financial results due to a variety of factors, such as the year-end holiday period and other major holidays, vacation patterns of both patients and healthcare providers, climate and weather conditions in our markets, seasonal conditions that may affect medical practices and provider activity, including influenza outbreaks that may reduce the percentage of patients that can be seen, and other factors relating to the timing of patient deductibles and co-insurance limits.
Based on our experience to date, we expect some seasonal variations in our financial results due to a variety of factors, such as the year-end holiday period and other major holidays, vacation patterns of both patients and healthcare providers, climate and weather conditions in our markets, seasonal conditions that may affect medical practices and patient and provider activity, including influenza outbreaks that may reduce the percentage of patients that can be seen or decrease patient’s willingness to visit medical practices, and other factors relating to the timing of patient deductibles and co-insurance limits. 12 Table of Contents Regulation Certain of our activities are subject to regulatory oversight by the FDA under provisions of the Federal Food, Drug, and Cosmetic Act (“FDCA”) and regulations thereunder, including regulations governing the development, marketing, labeling, promotion, manufacturing, distribution, and export of diagnostic products.
In these patent applications, we have either sole or joint ownership positions. In certain cases where joint ownership positions were created, we have negotiated contractual provisions providing us with the opportunity to acquire exclusive rights under the patent applications. Under some patent applications, we have elected to allow exclusive options to lapse without exercising the option.
We solely own, jointly own, or exclusively license these patents and patent applications. In certain cases where joint ownership positions were created, we have negotiated contractual provisions providing us with the opportunity to acquire exclusive rights under the patents and patent applications.
We are in the process of expanding our existing facilities to prepare for the expected future growth in our operations. Competition We operate in a rapidly evolving and highly competitive industry.
We are in the process of expanding our existing facilities to prepare for the expected future growth in our operations. Competition We operate in a rapidly evolving and highly competitive industry. There are a number of private and public companies that offer products or have announced that they are developing products that compete with ours.
Our goal is to support all patients in MRD and recurrence monitoring, whether there is access to tumor tissue to inform patient-specific biomarker targets or no access to tissue and a predefined biomarker panel is used. We are currently evaluating different technological approaches for both test types, and have presented promising proof of concept data.
Our goal is to support all patients in MRD and recurrence monitoring, whether there is access to tumor tissue to inform patient-specific biomarker targets or no access to tissue and a predefined biomarker panel is used.
Generally, the license agreements require us to pay single-digit royalties based on certain net revenues received using the technologies and may require minimum royalty amounts, milestone payments, or maintenance fees. Mayo In June 2009, we entered into a license agreement with Mayo, which was most recently amended in September 2020.
Generally, the license agreements require us to pay single-digit royalties based on net revenues received using the technologies and may require minimum royalty amounts, milestone payments, or maintenance fees.
There can be no assurance that the results of this study will be satisfactory and will not cause the FDA to modify or withdraw our approval for the Cologuard test. 12 Table of Contents Additionally, manufacturers of medical devices must comply with various regulatory requirements under the FDCA and regulations thereunder, including, but not limited to, quality system regulations, unless they are exempt, facility registration, product listing, labeling requirements, and certain post-market surveillance requirements.
Additionally, manufacturers of medical devices must comply with various regulatory requirements under the FDCA and regulations thereunder, including, but not limited to, quality system regulations, unless they are exempt, facility registration, product listing, labeling requirements, and certain post-market surveillance requirements.
Federal and State Billing and Fraud and Abuse Laws Anti-fraud Laws/Overpayments. We are subject to numerous federal and state anti-fraud and abuse laws, including the Federal False Claims Act. Many of these anti-fraud laws are broad in scope, and neither the courts nor government agencies have extensively interpreted these laws.
Many of these anti-fraud laws are broad in scope, and neither the courts nor government agencies have extensively interpreted these laws.
The joint ownership agreements generally are in the form of material data transfer agreements that were executed at the onset of our collaborations with third parties. License Agreements We license certain technologies that are, or may be, incorporated into our technology under several license agreements, as well as the rights to commercialize certain diagnostic tests through collaboration agreements.
License Agreements We license certain technologies that are, or may be, incorporated into our technology under several license agreements, as well as the rights to commercialize certain diagnostic tests through collaboration agreements.
In addition to granting us a license to the covered JHU intellectual property, JHU provides us with research and development assistance pursuant to other collaboration arrangements. Human Capital Our vision to provide the clarity to take life-changing action earlier drives us to find ambitious, dynamic individuals who thrive in a team-based environment.
Human Capital Our vision to provide the clarity to take life-changing action earlier drives us to find ambitious, dynamic individuals who thrive in a team-based environment.
In-network agreements with payers have varying terms and conditions, including reimbursement rate, term, and termination. Other payers may perform post-payment reviews or audits, which may lead to payment recoupments.
Most commercial payers have issued positive coverage decisions for our Cologuard test, and we continue to negotiate contracts with payers to include our Cologuard test as an in-network service. In-network agreements with payers have varying terms and conditions, including reimbursement rate, term, and termination. Other payers may perform post-payment reviews or audits, which may lead to payment recoupments.
Guardant Health reported pivotal trial results in December 2022, and Freenome Inc. is expected to report pivotal trial results in 2023. Guardant Health, Inc. made its blood-based colorectal cancer screening test, Shield, available as a laboratory developed test beginning in May 2022 and is expected to file for FDA approval in early 2023.
Guardant made its blood-based colorectal cancer screening test, Shield, available as a laboratory developed test beginning in May 2022 and filed for FDA approval in March 2023.
Food and Drug Administration Devices subject to FDA regulation must undergo premarket review prior to commercialization unless the device is exempt from such review. The FDA granted premarket approval (“PMA”) for our Cologuard test in August 2014. The regulations governing our Cologuard test’s approval place substantial restrictions on how our Cologuard test is marketed and sold, specifically, by prescription only.
Our Cologuard test is regulated by the FDA as a Class III medical device. The FDA granted premarket approval (“PMA”) for our Cologuard test in August 2014. The regulations governing our Cologuard test’s approval place substantial restrictions on how our Cologuard test is marketed and sold, specifically, by prescription only.
We track and monitor workforce diversity data to ensure we are fulfilling our diversity and inclusion aspiration – to be known as a great place to work for all.
The Human Capital Committee of our Board of Directors oversees and monitors our policies and strategies relating to culture, talent, and human capital management, including diversity, equity, and inclusion. We track and monitor workforce diversity data to ensure we are fulfilling our diversity and inclusion aspiration – to be known as a great place to work for all.
Item 1. Business Overview Exact Sciences Corporation (together with its subsidiaries, “Exact,” “we,” “us,” “our” or the “Company”) is a leading, global, advanced cancer diagnostics company. We have developed some of the most impactful tests in cancer diagnostics, and are currently working to bring new, innovative cancer tests to patients throughout the world.
Item 1. Business Overview Exact Sciences Corporation (together with its subsidiaries, “Exact,” “we,” “us,” “our” or the “Company”) is a leading, global, advanced cancer diagnostics company.
Food and Drug Administration (“FDA”) in August 2014, our Cologuard test became the first and only FDA-approved sDNA non-invasive colorectal cancer screening test. In September 2019, the FDA expanded its indication to include average-risk individuals ages 45-49.
Each year in the U.S. there are approximately 153,000 new cases of colorectal cancer and approximately 53,000 deaths. 4 Table of Contents 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. In September 2019, the FDA expanded its indication to include average-risk individuals ages 45-49.
As the only test proven to predict chemotherapy benefit, the Oncotype DX Breast Recurrence Score test is included in all major cancer guidelines worldwide, and on this basis can be considered a standard of care for most women with early-stage breast cancer.
As the only test proven to predict both the likelihood of chemotherapy benefit and cancer recurrence, the Oncotype DX Breast Recurrence Score test is globally recognized as standard of care and included in all major breast cancer treatment guidelines.
Clinical 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. Our hereditary cancer test, Riskguard TM , helps people understand their inherited risk of cancer, arming them with critical information to make better treatment decisions.
Clinical 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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Relating to Governmental Regulation and Reimbursement • We face uncertainty related to healthcare reform, pricing, coverage, and reimbursement. • If third-party payers, including managed care organizations, do not approve and maintain reimbursement for our tests at adequate reimbursement rates, our commercial success could be compromised. • Because of Medicare billing rules or changes in Medicare billing rules and processes, we may not receive reimbursement for all tests provided to Medicare patients or may experience delays in receiving payments. • If we are unable to obtain or maintain adequate reimbursement for our Oncotype tests outside of the U.S., our ability to expand internationally will be compromised. • If we fail to meet any applicable requirements of CLIA or similar state laws, that failure could adversely affect any future payer consideration of our technologies, prevent their approval entirely, and/or interrupt the commercial sale and/or marketing of any products and services and otherwise cause us to incur significant expense. • Failure to maintain compliance with FDA requirements may prevent or delay the development, marketing or manufacturing of our Cologuard test, or future improvements to that test. • Delays in obtaining regulatory clearances or approvals for new tests, products, or services, or improvements to or expanded indications for our current offerings, could prevent, delay, or adversely impact future product commercialization. 20 Table of Contents • If the FDA were to change its position with respect to its regulation of the laboratory developed tests we offer or plan to offer, we could incur substantial costs and time delays and decreased demand for or reimbursement of our tests. • We are subject to numerous U.S. and foreign laws and governmental regulations, and any governmental enforcement action may materially affect our financial condition and business operations. • Our business is subject to various complex laws and regulations applicable to clinical diagnostics.
Biggest changeRisks Relating to Governmental Regulation and Reimbursement • We face uncertainty related to healthcare reform, pricing, coverage, and reimbursement. • If payers, including managed care organizations, do not approve and maintain reimbursement for our tests at adequate reimbursement rates, our commercial success could be compromised. • If we are unable to obtain or maintain reimbursement at adequate reimbursement rates for our Oncotype DX tests outside of the U.S., our ability to expand internationally will be compromised. • Failure to comply with federal, state and foreign laboratory licensing and related requirements could cause us to lose the ability to perform our tests, experience disruptions to our business, or become subject to administrative or judicial sanctions. • Our products could be subject to recall. • Delays in receipt of, or failure to obtain, required FDA clearances or approvals for our products in development, or improvements to or expanded indications for our current offerings, could materially delay or prevent us from commercializing or otherwise adversely impact future product commercialization. 20 Table of Contents • The FDA may change its position with respect to its regulation of the laboratory developed tests we offer or may seek to offer in the future, causing us to incur substantial costs and time delays and decreased demand for or reimbursement of our tests. • We are subject to numerous U.S. and foreign laws and governmental regulations, and any governmental enforcement action may materially affect our financial condition and business operations. • Our business is subject to various complex laws and regulations applicable to providers of clinical diagnostics and services. • Due to billing complexities in the diagnostic and laboratory service industry, we may have difficulties receiving timely payment for the tests we perform, and may face write-offs, disputes with payers and patients, and long collection cycles. • Some of our activities may subject us to risks under federal, state, and foreign laws prohibiting “kickbacks” and false or fraudulent claims as well as the Foreign Corrupt Practices Act and similar anti-bribery laws. • Failure to comply with privacy, security, and consumer protection laws and regulations could result in fines, penalties and damage to our reputation and have a material adverse effect on our business. • Our employees, independent contractors, consultants, commercial partners, and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements. • We expect to rely on third parties to conduct any future studies of our technologies that may be required by the FDA or other U.S. or foreign regulatory bodies, and those third parties may not perform satisfactorily. • Changes in tax laws or regulations or exposure to tax liabilities could adversely affect our financial condition and results of operations.
If we raise additional funds through collaborations, licensing arrangements or other structured financing transactions, we may relinquish rights to our technologies or products or services, grant security interests in our assets or grant licenses to third parties on terms that are unfavorable to us.
If we raise additional funds through collaborations, licensing arrangements or other structured financing transactions, we may relinquish rights to our technologies, products or services, grant security interests in our assets or grant licenses to third parties on terms that are unfavorable to us.
If pre-market review is required for our current LDTs, our business could be negatively impacted in the U.S. until such review is completed and clearance or approval is obtained, and the FDA could require that we stop selling our tests pending pre-market clearance or approval.
If pre-market review is required for our current LDTs, the FDA could require that we stop selling our tests pending pre-market clearance or approval and our business could be negatively impacted in the U.S. until such review is completed and clearance or approval is obtained.
Violation of any FDA requirement could result in enforcement actions, such as seizures, injunctions, civil penalties and criminal prosecutions, and violation of any FTC or state law requirement could result in injunctions and other associated remedies, all of which could have a material adverse effect on our business. Most states also have similar regulatory and enforcement authority for devices.
Violation of any FDA requirement could result in enforcement actions, such as seizures, injunctions, civil penalties and criminal prosecutions, and violation of any FTC or state law requirement could result in injunctions and other associated remedies, all of which could have a material adverse effect on our business. Most states also have similar regulatory and enforcement authority for medical devices.
Billing for diagnostic and laboratory services is a complex process. Laboratories bill many different payers including patients, private insurance companies, Medicare, Medicaid, and employer groups, all of which have different billing requirements. We are continuing to work with third-party payers to cover and reimburse our tests.
Billing for diagnostic and laboratory services is a complex process. We bill many different payers including patients, private insurance companies, Medicare, Medicaid, and employer groups, all of which have different billing requirements. We are continuing to work with third-party payers to cover and reimburse our tests.
The inability to perform our tests or the backlog of tests that could develop if any of our facilities become inoperable for even a short period of time may result in the loss of customers or harm our reputation, and we may be unable to regain those customers in the future.
The inability to perform our tests or the backlog of tests that could develop if any of our facilities become inoperable for even a short period of time may result in the loss of customers or harm our reputation, and we may be unable to regain those customers or rebuild our reputation in the future.
Significant adverse differences between initial or interim data and final data could significantly harm our reputation and business prospects. Any cancer screening test we develop will need to demonstrate in clinical studies a high level of accuracy.
Significant adverse differences between initial or interim data and final data could significantly harm our reputation and business prospects. Any cancer screening or diagnostic test we develop will need to demonstrate in clinical studies a high level of accuracy.
Many countries in which we offer our tests have regulations prohibiting providers, as well as medical and in vitro diagnostic device manufacturers, from offering or providing a benefit to a healthcare professional in order to induce business.
Many countries in which we or our distributors offer our tests have regulations prohibiting providers, as well as medical and in vitro diagnostic device manufacturers, from offering or providing a benefit to a healthcare professional in order to induce business.
Our business strategy incorporates international expansion, which includes growing our direct sales and healthcare provider outreach and education capabilities outside of the U.S. and developing our relationships with payers and distributors in foreign markets.
Our business strategy incorporates continued international expansion, which includes growing our direct sales and healthcare provider outreach and education capabilities outside of the U.S. and developing our relationships with payers and distributors in foreign markets.
If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if the third parties need to be replaced or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our studies may be extended, delayed, suspended or terminated, and we may not be able to obtain a required regulatory approval.
If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if the third parties need to be replaced or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our studies may be extended, delayed, suspended or terminated, the study data may be invalidated, and we may not be able to obtain a required regulatory approval.
If we are not able to generate sufficient cash flow to service our debt obligations, we may need to refinance or restructure our debt, sell assets , reduce or delay capital investments, share-settling the convertible notes or seek to raise additional capital and of which such events could have an adverse effect on our business, financial condition, and results of operations or be highly dilutive to our shareholders.
If we are not able to generate sufficient cash flow to service our debt obligations, we may need to refinance or restructure our debt, sell assets , reduce or delay capital investments, share-settling the convertible notes or seek to raise additional capital, any of which events could have an adverse effect on our business, financial condition, and results of operations or be highly dilutive to our shareholders.
Our success in raising additional capital may be significantly affected by general market conditions, the market price of our common stock, our financial condition, uncertainty about the future commercial success of our current products and services, the development and commercial success of future products or services, regulatory developments, the status and scope of our intellectual property, any ongoing litigation, our compliance with applicable laws and regulations and other factors.
Our success in raising additional capital may be significantly affected by general market conditions, the market price of our common stock, our financial condition and existing indebtedness, uncertainty about the future commercial success of our current products and services, the development and commercial success of future products or services, regulatory developments, the status and scope of our intellectual property, any ongoing litigation, our compliance with applicable laws and regulations and other factors.
We may not be able, or it may take considerable time, to replicate our testing processes or results in a new facility.
We also may not be able, or it may take considerable time, to replicate our testing processes or results in a new facility.
The risk of our being found in violation of these or other laws and regulations is further increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations.
The risk of our being found in violation of these or other laws and regulations is further increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. The U.S.
A default, if not waived, could result in acceleration of the debt outstanding under the agreement and in a default with respect to, and an acceleration of, the debt outstanding under other debt agreements. If that occurs, we may not be able to make all of the required payments or borrow sufficient funds to refinance such debt.
A default, if not waived, could result in (i) acceleration of the debt outstanding under the agreement and (ii) a default with respect to, and an acceleration of the debt outstanding under, other debt agreements. If that occurs, we may not be able to make all of the required payments or borrow sufficient funds to refinance such debt.
If we raise additional funds through the sale of equity, convertible debt or other equity-linked securities, our stockholders’ ownership will be diluted, and the market price of our common stock could be depressed. We may issue securities that have rights, preferences and privileges senior to our common stock.
If we raise additional funds through the sale of equity, convertible debt or other equity-linked securities, our shareholders’ ownership will be diluted, and the market price of our common stock could be depressed. We may issue securities that have rights, preferences and privileges senior to our common stock.
Coverage of our Cologuard test and other screening products that we may develop may also depend, in whole or in part, on whether payers determine, or courts and/or regulatory authorities determine, coverage is required under applicable federal or state laws mandating coverage of certain cancer screening services.
Coverage of our Cologuard test and other screening or diagnostic products that we may develop may also depend, in whole or in part, on whether payers determine, or courts and/or legislative or regulatory authorities determine, coverage is required under applicable federal or state laws mandating coverage of certain cancer screening or diagnostic services.
The development of our tax strategies requires additional expertise and may impact how we conduct our business. Our future effective tax rates could be unfavorably affected by changes in or interpretations of tax rules and regulations in the jurisdictions in which we do business or by changes in the valuation of our deferred tax assets and liabilities.
As we grow, the development of our tax strategies requires additional expertise and may impact how we conduct our business. Our future effective tax rates could be unfavorably affected by changes in, or interpretations of, tax rules and regulations in the jurisdictions in which we do business or by changes in the valuation of our deferred tax assets and liabilities.
Sometimes, when we have a contract with a commercial payer to cover our tests, we are not permitted to bill patients insured by that payer for amounts beyond deductibles, co-payments, and co-insurance as prescribed in the coverage agreement between the payer and the patients.
Similarly, when we have a contract with a commercial payer to cover our tests, we are not permitted to bill patients insured by that payer for amounts beyond deductibles, co-payments, and co-insurance as prescribed in the coverage agreement between the payer and the patients.
FCPA. 40 Table of Contents The FCPA prohibits any U.S. individual, business entity or employee of a U.S. business entity from offering or providing, directly or through a third party, including the distributors we rely on in certain markets, anything of value to a foreign government official with corrupt intent to influence an award or continuation of business or to gain an unfair advantage, whether or not such conduct violates local laws.
The FCPA prohibits any U.S. individual, business entity or employee of a U.S. business entity from offering or providing, directly or through a third party, including the distributors we rely on in certain markets, anything of value to a foreign government official with corrupt intent to influence an award or continuation of business or to gain an unfair advantage, whether or not such conduct violates local laws.
We intend to continue to grow our business internationally, and to do so we may need to attract additional distributors to expand the territories in which we sell our tests. Despite contractual obligations, distributors may not commit the necessary resources to market and sell our tests to the level of our expectations.
We intend to continue growing our business internationally, and to do so we may need to attract additional distributors to expand the territories in which we sell our tests. Despite contractual obligations, distributors may not commit the necessary resources to market and sell our tests to the level of our expectations.
We may need to raise significant additional capital to bring any new products or services to market, which may not be available on acceptable terms, if at all. Our dependence on distributors for sales in many markets outside of the U.S. could limit or prevent us from selling our tests in those markets and impact our revenue.
We may need to raise significant additional capital to bring any new products or services to market, which may not be available on acceptable terms, if at all. 42 Table of Contents Our dependence on distributors for sales in many markets outside of the U.S. could limit or prevent us from selling our tests in those markets and impact our revenue.
As of December 31, 2022, we have entered into exclusive distribution agreements for the sale of our Oncotype tests with distributors covering dozens of countries. We may enter into other similar arrangements to distribute our tests in other countries in the future.
As of December 31, 2023, we have entered into exclusive distribution agreements for the sale of our Oncotype tests with distributors covering dozens of countries. We may enter into other similar arrangements to distribute our tests in other countries in the future.
The degree of market acceptance of our Cologuard test, our Oncotype tests, and other products and services that we offer will depend on a number of factors, including: • demonstrated performance and utility; • price; • the availability and attractiveness of alternative tests; • the willingness of healthcare providers to prescribe our products and services; • the ease of use of our ordering process for healthcare providers; and • adequate third-party coverage or reimbursement.
The degree of market acceptance of our Cologuard test, our precision oncology tests, and other products and services that we offer will depend on a number of factors, including: • demonstrated performance and utility; • price; • the availability and attractiveness of alternative tests; • the willingness of healthcare providers to prescribe our products and services; • the ease of use of our ordering process for healthcare providers; and • adequate third-party coverage or reimbursement.
Any update to the USPSTF recommendations that may have the effect of reducing screening, that does not include FIT-DNA in a favorable manner, or that adds new technologies could have a material adverse effect on our business. 44 Table of Contents Maintaining a high USPSTF recommendation for our Cologuard test may have certain potentially significant implications.
Any update to the USPSTF recommendations that may have the effect of reducing screening, that does not include FIT-DNA in a favorable manner, or that adds new technologies could have a material adverse effect on our business. Maintaining a high USPSTF recommendation for our Cologuard test may have certain potentially significant implications.
Congress, or the USPTO may change the standards of patentability and validity of patents within the cancer screening and diagnostics space, and any such changes could have a negative impact on our business. There have been several cases involving “gene patents” and diagnostic claims that have been considered by the U.S.
Congress, or the USPTO may change the standards of patentability and validity of patents within the cancer screening and diagnostics space, and any such changes could have a negative impact on our business. 44 Table of Contents There have been several cases involving “gene patents” and diagnostic claims that have been considered by the U.S.
Any cancer diagnostic test we develop will need to address an unmet medical need with accurate performance and utility. 45 Table of Contents We may need to explore a number of different biomarker combinations, alter our candidate products or platform technologies, and repeat clinical studies before we identify a potentially successful candidate.
Any cancer diagnostic test we develop will need to address an unmet medical need with accurate performance and utility. We may need to explore a number of different biomarker combinations, alter our candidate products or platform technologies, and repeat clinical studies before we identify a potentially successful candidate.
In exiting a business, we may still retain liabilities associated with those businesses and other indemnification obligations. We may also need to provide transition services to the buyer for an extended period of time following the closing, which may cause us to incur unanticipated costs and distraction.
In exiting a business, we may still retain liabilities associated with that business and other indemnification obligations. We may also need to provide transition services to the buyer for an extended period of time following the closing, which may cause us to incur unanticipated costs and distraction.
Further, a court or regulatory agency may agree with arguments that have been made, or that may in the future be made, by insurers and determine that the ACA Mandate does not require that they cover our Cologuard test or may otherwise interpret the ACA Mandate in a manner unfavorable to us.
Further, a court or regulatory agency may agree with arguments that have been made, or that may in the future be made, by insurers and determine that the ACA Mandate does not require that they cover our Cologuard test or future tests we may develop or may otherwise interpret the ACA Mandate in a manner unfavorable to us.
We may face lawsuits by government or commercial payers if they believe they have overpaid us for our test services or as a result of other circumstances. We may face write-offs of doubtful accounts, disputes with payers and patients, and long collection cycles.
As a result of the above, we may face write-offs of doubtful accounts, disputes with payers and patients, and long collection cycles. We also may face lawsuits by government or commercial payers if they believe they have overpaid us for our test services or as a result of other circumstances.
The loss of a critical supplier, the failure to perform by a critical supplier, the deterioration of our relationship with a critical supplier or any unilateral modification to the contractual terms under which we are supplied materials could have a disruptive effect on our business, and could adversely affect our results of operations for an extended period of time, particularly if we are required to validate an alternative supplier.
The loss of a critical supplier, the failure to perform by a critical supplier, the deterioration of our relationship with a critical supplier or any unilateral modification to the contractual terms under which we are supplied certain supplies and/or products could have a disruptive effect on our business, and could adversely affect our results of operations for an extended period of time, particularly if we are required to validate an alternative supplier.
Our revenues and results of operations may fluctuate significantly, depending on a variety of factors, including the following: • the impact of the COVID-19 pandemic on our business and operations; • our success in marketing and selling, and changes in demand for, our Cologuard and Oncotype tests, and the level of reimbursement and collection obtained for such tests; • seasonal variations or non-seasonal events or circumstances affecting healthcare provider recommendations for our tests and patient compliance with healthcare provider recommendations, including without limitation, holidays, weather events, and circumstances such as the outbreak of influenza that may limit patient access to medical practices or institutions for diagnostic tests and preventive services; • our success in collecting payments from third-party and other payers, patients and collaborative partners, variation in the timing of these payments and recognition of these payments as revenues; • the pricing of our tests, including potential changes in CMS or other reimbursement rates; • circumstances affecting our ability to provide our tests, including weather events, supply shortages, or regulatory or other circumstances that adversely affect our ability to manufacture our tests or process tests in our clinical laboratories; • fluctuations in the amount and timing of our selling and marketing costs and our ability to manage costs and expenses and effectively implement our business; and • our research and development activities, including the timing, size, complexity, and cost of clinical studies.
Our revenues and results of operations have historically, and may in the future, fluctuate significantly, depending on a variety of factors, including the following: • our success in marketing and selling, and changes in demand for, our Cologuard and precision oncology tests, and the level of reimbursement and collection obtained for such tests; • seasonal variations or non-seasonal events or circumstances affecting healthcare provider recommendations for our tests and patient compliance with healthcare provider recommendations, including without limitation, holidays, weather events, and circumstances such as the outbreak of influenza that may limit patient access to medical practices or institutions for diagnostic tests and preventive services; • our success in collecting payments from third-party and other payers, patients and collaborative partners, variation in the timing of these payments and recognition of these payments as revenues; • the pricing of our tests, including potential changes in CMS or other reimbursement rates; • circumstances affecting our ability to provide our tests, including weather events, supply shortages, or regulatory or other circumstances that adversely affect our ability to manufacture our tests or process tests in our clinical laboratories; • fluctuations in the amount and timing of our selling and marketing costs and our ability to manage costs and expenses and effectively implement our business; and • our research and development activities, including the timing, size, complexity, and cost of clinical studies.
Congress, DOJ, Office of Inspector General of the Department of Health and Human Services, and Department of Defense have all issued subpoenas and other requests for information to conduct investigations of and commenced civil and criminal litigation against healthcare companies related to financial arrangements with healthcare providers, regulatory compliance, product promotional practices, and documentation, coding and billing practices.
Department of Justice (“DOJ”), Office of Inspector General of the Department of Health and Human Services, and Department of Defense have all issued subpoenas and other requests for information to conduct investigations of, and commenced, civil and criminal litigation against healthcare companies related to financial arrangements with healthcare providers, regulatory compliance, product promotional practices, and documentation, coding and billing practices.
Misconduct by these parties could include intentional, reckless and negligent conduct that fails to: comply with the rules and regulations of the CMS, FDA, and other comparable foreign regulatory authorities; provide true, complete and accurate information to such regulatory authorities; comply with manufacturing and clinical laboratory standards; comply with healthcare fraud and abuse laws in the United States and similar foreign fraudulent misconduct laws; or report financial information or data accurately or to disclose unauthorized activities to us.
Misconduct by these parties could include intentional, reckless and negligent conduct that fails to comply with the rules and regulations of the CMS, FDA, and other comparable foreign regulatory authorities; provide true, complete and accurate information to such regulatory authorities; comply with manufacturing and clinical laboratory standards; comply with healthcare fraud and abuse laws in the U.S. and similar foreign laws; or report financial information or data accurately or to disclose unauthorized activities to us.
We are dependent on our IT systems to receive and process test orders, securely store patient health records and deliver the results of our tests. The integrity and protection of our own data, and that of our customers and employees, is critical to our business.
We depend on our IT systems to receive and process test orders, securely store patient health records and deliver the results of our tests. The integrity and protection of our own data, and that of our customers and employees, is critical to our business.
A successful divestiture depends on various factors, including our ability to effectively transfer liabilities, contracts, facilities and employees to the purchaser, identify and separate the personnel, contracts and assets, including intellectual property, to be divested from the intellectual property that we wish to keep and reduce fixed costs previously associated with the divested assets or business.
A successful divestiture depends on various factors, including our ability to effectively transfer liabilities, contracts, facilities and employees to the buyer, identify and separate the personnel, contracts, and assets, including intellectual property, to be divested from the portion of the business and assets that we wish to keep, and reduce fixed costs previously associated with the divested assets or business.
Additionally, the sale and use of our tests could lead to product or professional liability claims. Legal proceedings can be complex and take many months, or even years, to reach resolution, with the final outcome depending on a number of variables, some of which are not within our control.
Additionally, the distribution, sale, use and results of our tests could lead to liability claims. Legal proceedings can be complex and take many months, or even years, to reach resolution, with the final outcome depending on a number of variables, some of which are not within our control.
Our commercial success depends, in large part, on the availability of adequate reimbursement for our current tests, including our flagship Cologuard and Oncotype tests and our products in development, from government insurance plans, managed care organizations and private insurance plans.
Our commercial success depends, in large part, on the availability of reimbursement at adequate reimbursement rates for our current tests, including our flagship Cologuard and Oncotype tests and our products in development, from government insurance plans, managed care organizations and commercial insurance plans.
Healthcare providers may be reluctant to prescribe, and patients may be reluctant to complete, our tests if they are not confident that patients will be reimbursed for our tests. Third-party payers, both in the United States and internationally, are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement for healthcare products and services.
Healthcare providers may be reluctant to prescribe, and patients may be reluctant to complete, our tests if they are not confident that patients will be reimbursed for our tests. Third-party payers, both in the U.S. and internationally, are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement for healthcare products and services.
If the FDA were to change its position with respect to its regulation of the laboratory developed tests we offer or may seek to offer in the future, we could incur substantial costs and time delays associated with meeting requirements for pre-market clearance or approval or we could experience decreased demand for or reimbursement of our tests.
The FDA may change its position with respect to its regulation of the laboratory developed tests we offer or may seek to offer in the future, causing us to incur substantial costs and time delays associated with meeting requirements for pre-market clearance or approval or we could experience decreased demand for or reimbursement of our tests.
The ability of the FDA to review and clear or approve new products or changes to existing products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, federal government shutdowns, and other events that may otherwise affect the FDA’s ability to perform routine functions.
In addition, the FDA’s ability to review and clear or approve new products or changes to existing products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions.
In situations involving healthcare providers employed by public or state-funded institutions or national healthcare services, violation of local anti-corruption or anti-gift laws may also constitute a violation of the U.S.
In situations involving healthcare providers employed by public or state-funded institutions or national healthcare services, violation of local anti-corruption or anti-gift laws may also constitute a violation of the FCPA.
There can be no assurance that our process of improving existing systems, developing new systems to support our expanding operations, integrating new systems, protecting confidential patient information, and improving service levels will not be delayed or that additional systems issues will not arise in the future.
There can be no assurance that our process of improving existing systems, developing new systems to support our expanding operations, protecting confidential patient information, and improving service levels will not be delayed or will not give rise to additional systems issues in the future.
Although we believe that we have sufficient capital to fund our operations for at least the next twelve months, we may require additional capital to fully fund our current strategic plan, which includes continuing to scale our Cologuard and Oncotype tests and developing a pipeline of future products and services.
Although we believe that we have sufficient capital to fund our operations for at least the next 12 months, we may require additional capital to fully fund our current strategic plan, which includes continuing to scale our Cologuard and precision oncology tests and developing a pipeline of future products and services.
From time to time, we are a party to or otherwise involved in legal proceedings, claims and government investigations and other legal matters, both inside and outside the United States, arising in the ordinary course of our business or otherwise.
From time to time, we are a party to or otherwise involved in legal proceedings, claims and government investigations and other legal matters, both inside and outside the U.S., arising in the ordinary course of our business or otherwise.
Our reliance on third parties that we do not control will not relieve us of our requirement to prepare, and ensure our compliance with, various procedures required under good clinical practices, even though third-party contract research organizations may prepare and comply with their own, comparable procedures.
Our reliance on these third parties will not relieve us of our requirement to prepare, and ensure our compliance with, various procedures required under good clinical practices, even though third-party contract research organizations may prepare and comply with their own, comparable procedures.
When hospitals disclaim responsibility for or delay payment of our bills for tests affected by the Medicare Date of Service rule, and when our collection efforts are unsuccessful, we may be forced to accept payments from hospitals that are less than the original invoice or we may be unable to collect from hospitals at all.
When hospitals disclaim responsibility for or delay payment of our bills for tests affected by the Medicare Laboratory Date of Service billing regulation, and when our collection efforts are unsuccessful, we may be forced to accept payments from hospitals that are less than the original invoice or we may be unable to collect from hospitals at all despite diligent efforts.
We heavily rely upon certain suppliers, including suppliers that are the sole source of certain products; the loss or interruption of supply from our suppliers could have a disruptive effect on our business. We purchase certain supplies from third-party suppliers and manufacturers.
We heavily rely upon certain suppliers, including suppliers that are the sole source of certain supplies and products used in our tests and business operations. The loss or interruption of supply from our suppliers could have a disruptive effect on our business. We purchase certain supplies and products from third-party suppliers.
The taxes imposed by new legislation, cost reduction measures and the expansion in the government’s role in the U.S. healthcare industry may result in decreased profits to us, which may adversely affect our business, financial condition and results of operations. PAMA presents significant uncertainty for future CMS reimbursement rates.
The taxes imposed by new legislation, cost reduction measures and the expansion in the government’s role in the U.S. healthcare industry may result in decreased profits to us, which may adversely affect our business, financial condition and results of operations. The Protecting Access to Medicare Act of 2014 (“PAMA”) presents significant uncertainty for future CMS reimbursement rates.
Additionally, the ACA has also been the subject of various legal challenges and, if the plaintiffs are successful in any such challenges, insurance coverage for our Cologuard test could be materially and adversely affected.
Additionally, the ACA has also been the subject of various legal challenges and, if the plaintiffs are successful in any such challenges, insurance coverage for our Cologuard test or future tests we develop could be materially and adversely affected.
We may not be able to successfully establish and maintain such intellectual property. • We may be subject to substantial costs and liability, or be prevented from using technologies incorporated in our tests, as a result of litigation or other proceedings relating to patent or other intellectual property rights. • If we are unable to protect or enforce our intellectual property effectively, we may be unable to prevent third parties from using our intellectual property, which would impair any competitive advantage we may otherwise have.
We may not be able to successfully establish and maintain such intellectual property. • We may be subject to substantial costs and liability, or be prevented from using technologies incorporated in our tests as a result of litigation or other proceedings relating to patent or other intellectual property rights. • If we are unable to protect or enforce our intellectual property effectively, we may be unable to prevent third parties from using our intellectual property, which would impair any competitive advantage we may otherwise have. • If patent regulations or standards are modified, such changes could have a negative impact on our business.
If our Cologuard test fails to maintain its current position within any updated USPSTF colorectal cancer screening recommendations, our Cologuard test may, as a result, become excluded from the HEDIS measures and the Star Ratings. We expect to make significant investments to research and develop new cancer tests, which may not be successful.
If our Cologuard test fails to maintain its current position within any updated USPSTF colorectal cancer screening recommendations, our Cologuard test may, as a result, become excluded from the HEDIS measures and the Star Ratings. We expect to continue to make significant investments in our research and development efforts, which may not be successful.
We cannot assure you that we would be able to find another CLIA or ISO 15189-certified facility willing to comply with the required procedures, that this laboratory would be willing to perform the tests for us on commercially reasonable terms, or that it would be able to meet our quality or regulatory standards.
We cannot assure you that we would be able to find an appropriately certified facility willing to comply with the required procedures, that this laboratory would be willing to perform the tests for us on commercially reasonable terms, or that it would be able to meet our quality or regulatory standards.
Increasing interest rates and reduced access to capital markets could also adversely affect the ability of our suppliers, distributors, licensors, collaborators, contract manufacturers and other commercial partners to remain effective business partners or to remain in business.
The high interest rate environment and reduced access to capital markets could also adversely affect the ability of our suppliers, distributors, licensors, collaborators, contract manufacturers and other commercial partners to remain effective business partners or to remain in business.
Additionally, any new clinical reference laboratory facility opened by us would be subject to certification under CLIA and licensing by several states, including California and New York, which could take a significant amount of time and result in delays in our ability to resume operations.
Additionally, any such new facility would be subject to certification under CLIA and licensing by several states, including California and New York, which could take a significant amount of time and result in delays in our ability to resume operations.
Doing business internationally involves a number of risks, including: • difficulties in complying with multiple, conflicting and changing laws and regulations such as tax laws, export and import restrictions, employment laws, privacy and data protection laws, regulatory requirements and other governmental approvals, permits and licenses; • significant competition from local and regional product offerings; • difficulties in complying with unclear product regulations in various jurisdictions, including the changing regulation in Europe with regard to medical device and in vitro diagnostic (“IVD”) regulations; • restrictions or prohibitions of transmitting personal data, including patient data, from foreign jurisdictions to our centralized laboratories in the U.S.; • difficulties in staffing and managing foreign operations; • complexities associated with managing multiple payer reimbursement regimes, public payers or patient self-pay systems; 28 Table of Contents • logistics and regulations associated with shipping tissue samples, performing tests locally or complying with local regulations concerning the analysis of tissue, including infrastructure conditions and transportation delays; • limits in our ability to access or penetrate international markets if we are not able to process tests locally; • lack of intellectual property protection in certain markets; • financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our tests and exposure to foreign currency exchange rate fluctuations; • natural disasters, political and economic instability, including wars, strikes, terrorism, and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; • staffing difficulties, funding restrictions, and other difficulties facing medical institutions and payers; • regulatory and compliance risks that relate to maintaining accurate information and control over the activities of our sales force and distributors that may fall within the purview of the U.S.
Doing business internationally involves a number of risks, including: • difficulties in complying with multiple, conflicting, and changing laws and regulations, such as tax laws, export and import restrictions, employment laws, privacy and data protection laws, regulatory requirements and other governmental approvals, permits and licenses, including the changing regulation in Europe with regard to medical device and in vitro diagnostic regulations; • significant competition from local and regional product offerings and the fact that products designed for U.S. markets may not be preferred by foreign authorities, payers, medical providers and patients; • restrictions or prohibitions of transmitting personal data, including patient data, from foreign jurisdictions to our centralized laboratories in the U.S.; • difficulties in staffing and managing foreign operations; • difficulties in managing distributor relationships; • complexities associated with managing multiple payer reimbursement regimes, public payers, or patient self-pay systems; • logistics and regulations associated with shipping tissue samples, performing tests locally or complying with local regulations concerning the analysis of tissue, including infrastructure conditions and transportation delays; • limits in our ability to access or penetrate international markets if we are not able to process tests locally; • lack of intellectual property protection in certain markets; • financial risks, such as longer payment cycles, difficulty collecting accounts receivable, lower margins resulting from smaller scale foreign operations, the impact of local and regional financial crises on demand and payment for our tests, and exposure to foreign currency exchange rate fluctuations; • natural disasters, political and economic instability, including wars, strikes, terrorism, and political unrest, outbreak of disease, boycotts, curtailment of trade, and other business restrictions; • staffing difficulties, funding restrictions, and other difficulties facing medical institutions and payers; 28 Table of Contents • regulatory and compliance risks that relate to maintaining accurate information and control over the activities of our sales force and distributors that may fall within the purview of the FCPA, its books and records provisions or its anti-bribery provisions, or similar anti-bribery or anti-corruption laws or regulations, such as the U.K.
We are subject to regulation in the United States by both the federal government and the states in which we conduct our business, as well as in other jurisdictions outside of the United States, including: • Federal, state, and local laws regarding the use, storage, handling and disposal of medical and hazardous waste, as well as regulations relating to the safety and health of laboratory employees; • the Federal Anti-Kickback Statute and state anti-kickback prohibitions and EKRA; • the Federal Physician Self-Referral Law, commonly known as the Stark Law, and the state equivalents; • the HIPAA and the CCPA including expansions and amendments pursuant to the California Privacy Rights Act; • the Medicare civil money penalty and exclusion requirements; • the Federal False Claims Act civil and criminal penalties and state equivalents; and • the FCPA, the United Kingdom Anti-Bribery Act, the GDPR and other national or provincial laws protecting personal information, the E.U.
We are subject to regulation in the U.S. by both the federal government and the states in which we conduct our business, as well as in other jurisdictions outside of the U.S., including: • Federal, state, and local laws regarding the use, storage, handling and disposal of medical and hazardous waste, as well as regulations relating to the safety and health of laboratory employees; • the Federal Anti-Kickback Statute and state anti-kickback prohibitions and EKRA; • the Federal Physician Self-Referral Law, commonly known as the Stark Law, and the state equivalents; • the HIPAA, the CCPA, including expansions and amendments pursuant to the California Privacy Rights Act, and other state privacy laws; • Federal, state, and local consumer protection laws governing communications, including the Telephone Consumer Protection Act (“TCPA”) and the Controlling the Assault of Non-Solicited Pornography and Marketing Act (“CAN-SPAM Act”); • the Medicare civil money penalty and exclusion requirements; • the Federal False Claims Act civil and criminal penalties and state equivalents; and • the FCPA, the United Kingdom Anti-Bribery Act, the GDPR and other national or provincial laws protecting personal information, the E.U.
Even if regulatory approval or clearance is granted, such approval may include significant limitations on indicated uses, which could materially and adversely affect the prospects of any new medical device. 35 Table of Contents FDA regulatory approval or clearance is not just required for new medical devices we develop, but would also be required for certain enhancements we may seek to make to our Cologuard test or future FDA-approved or -cleared tests.
Even if regulatory approval or clearance is granted, such approval may include significant limitations on indicated uses, which could materially and adversely affect the prospects of any new medical device. 33 Table of Contents FDA regulatory approval or clearance is also required for certain enhancements we may make to our Cologuard test or future FDA-approved or -cleared tests.
We may not be able to successfully establish and maintain such intellectual property. The development and commercialization of our products and services rely, directly or indirectly, upon strategic collaborations and licensing agreements with third parties.
Risks Relating to our Intellectual Property We rely on strategic collaborative and licensing arrangements with third parties to develop critical intellectual property. We may not be able to successfully establish and maintain such intellectual property. The development and commercialization of our products and services rely, directly or indirectly, upon strategic collaborations and licensing agreements with third parties.
Moreover, coverage determinations and reimbursement rates are subject to change, and we cannot guarantee that even if we initially achieve adequate coverage and reimbursement rates for our tests, they will continue to apply in the future or remain adequate as we face increases in operating costs, such as labor and supply costs that are subject to inflation.
Moreover, coverage determinations and reimbursement rates are subject to change, and we cannot guarantee that even if we initially achieve adequate coverage and reimbursement rates for our tests, they will continue to apply in the future or remain adequate as we face increases in operating costs, such as labor and supply costs that are subject to inflation, and government and commercial payers may cause us to accept lower prices.
Similarly, as an additional example, we rely on Hamilton Company (“Hamilton”) to provide us laboratory equipment and related supplies (such as racking and pipette tips) necessary to perform certain critical DNA analysis steps in our clinical laboratory tests, including our Cologuard, Oncotype DX, and COVID-19 tests.
Similarly, as an additional example, we rely on Hamilton Company (“Hamilton”) to provide us laboratory equipment and related supplies (such as racking and pipette tips) necessary to perform certain critical steps in our clinical laboratory tests, including our Cologuard and precision oncology tests.
Our sales efforts have grown in size and complexity, and we may not be able to successfully manage our dispersed or inside sales forces or our sales force may not be effective.
In addition, as our sales efforts grow in size and complexity, we may not be able to successfully manage our dispersed or inside sales forces or our sales force may not be effective.
Our balance sheet includes goodwill and intangible assets that represent 69% of our total assets at December 31, 2022 . These assets consist primarily of goodwill and identified intangible assets associated with our acquisitions. On at least an annual basis, we assess whether there have been impairments in the carrying value of goodwill.
Our balance sheet includes goodwill and intangible assets that represent 66% of our total assets at December 31, 2023, which are primarily associated with our acquisitions. On at least an annual basis, we assess whether there have been impairments in the carrying value of goodwill.
In connection with the commercialization of our tests, we have added, and expect to continue to add personnel to certain areas of our business including laboratory operations, quality assurance, and compliance. Our number of full-time employees has increased from 4,833, as of December 31, 2020, to 6,278, as of December 31, 2021 and to 6,300, as of December 31, 2022.
In connection with the commercialization of our tests, we have added, and expect to continue adding, personnel to certain areas of our business, including laboratory operations, quality assurance, and compliance. Our number of full-time employees has increased from 4,800 as of December 31, 2020 to 6,500, as of December 31, 2023.
Our ability to manage our growth effectively requires us to expend funds to improve our operational, financial and management controls, reporting systems and procedures. As we move forward in commercializing our tests, we will also need to effectively manage our growing manufacturing, laboratory operations, and sales and marketing needs.
Our ability to manage our growth effectively requires us to expend funds to improve our operational, financial and management controls, reporting systems and procedures. As we expand the commercialization of our current tests and move towards commercializing new tests, we will also need to effectively manage our growing manufacturing, laboratory operations, and sales and marketing needs.
The commercial success of our tests and our ability to generate revenues will depend on a variety of factors, including the following: • acceptance in the medical community; • inclusion in healthcare guidelines and recommendations, such as those developed by ACS, USPSTF, American Society of Clinical Oncology, and NCCN and similar guidelines and recommendations outside the United States; • inclusion in quality measures including the HEDIS measures and the CMS Medicare Advantage Star Ratings; • recommendations and studies that may be published by government agencies, companies, professional organizations, academic or medical journals or other key opinion leaders; • patient acceptance and demand; • patient compliance with orders for our tests by healthcare providers, and patient adherence to recommendations regarding periodic re-testing; • successful sales, marketing, and educational programs, including successful direct-to-patient marketing such as television advertising and social media; • the number of patients screened for colorectal cancer, as well as the number of patients who use our Cologuard test for that purpose; • the number of women diagnosed with breast cancer; • sufficient coverage and reimbursement by third-party payers within and outside the U.S.; • the existence of federal or state laws that mandate coverage for colorectal cancer and other types of screening, the extent to which those laws mandate coverage of our tests and the enforcement of those laws; • the amount and nature of competition from other products and procedures; • maintaining regulatory approvals to legally market; • the ease of use of our ordering process for healthcare providers; • maintaining and defending patent protection for the intellectual property relevant to our products and services; and • our ability to establish and maintain adequate commercial manufacturing, distribution, sales and CLIA laboratory testing capabilities. 22 Table of Contents If we are unable to continue to grow sales of our Cologuard and Oncotype tests or if we are delayed or limited in doing so, our business prospects, financial condition and results of operations would be adversely affected.
The commercial success of our tests, our successful commercialization of any new products and our ability to generate revenues will depend on a variety of factors, including the following: • acceptance in the medical community; • inclusion in healthcare guidelines and recommendations, such as those developed by ACS, USPSTF, American Society of Clinical Oncology, and NCCN, and similar guidelines and recommendations outside the U.S.; • inclusion in quality measures, including the HEDIS measures and the CMS Medicare Advantage Star Ratings; • recommendations and studies that may be published by government agencies, companies, professional organizations, academic or medical journals or other key opinion leaders; • patient acceptance and demand; • patient compliance with orders for our tests by healthcare providers, and patient adherence to recommendations regarding periodic re-testing; • successful new screening initiatives, including gap closure programs through which we partner with health systems and payers to deliver Cologuard test kits to their patients or members who are due for colorectal cancer screening under applicable guidelines; • effective marketing and educational programs, including successful direct-to-patient marketing such as television advertising and social media; • the number of patients screened for colorectal cancer, as well as the number of patients who use our Cologuard test for that purpose; 22 Table of Contents • the number of women diagnosed with breast cancer; • sufficient coverage and reimbursement by payers; • the existence of federal or state laws that mandate coverage for colorectal cancer and other types of screening, the extent to which those laws mandate coverage of our tests and the enforcement of those laws; • the amount and nature of competition from other products and procedures; • maintaining regulatory approvals to legally market; • the ease of use of our ordering process for healthcare providers; • maintaining and defending patent protection for the intellectual property relevant to our products and services; and • our ability to establish and maintain adequate commercial manufacturing, distribution, sales and CLIA laboratory testing capabilities.
Litigation is subject to significant uncertainty and may be expensive, time-consuming, and disruptive to our operations. Although we will vigorously defend ourselves in such legal proceedings, their ultimate resolution and potential financial and other impacts on us are uncertain. For these and other reasons, we may choose to settle legal proceedings and claims, regardless of their actual merit.
Litigation is subject to significant uncertainty and may be expensive, time-consuming, and disruptive to our operations. Although we will vigorously defend ourselves in such legal proceedings, their ultimate resolution and potential financial and other impacts on us are uncertain.
We have adopted a code of business conduct and ethics, but it is not always possible to identify and deter misconduct by employees and third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws.
We maintain a global compliance program, including a code of business conduct and ethics and processes and systems for reporting, reviewing and remediating allegations of potential non-compliance or other misconduct, but it is not always possible to identify and deter misconduct by employees and third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws.
Although Illumina has made an irrevocable standing offer to supply any customer with its sequencing products on certain terms, that offer may not provide pricing or other terms necessary for us or others to successfully compete against GRAIL, 24 Table of Contents including outside of the U.S.
Illumina has made an irrevocable standing offer to supply any customer with its sequencing products, which we have accepted. However, that offer may not provide pricing or other terms necessary for us or others to successfully compete against GRAIL, including outside of the U.S.
Even if payers do agree to cover our tests, our billing and collections process may be complicated by the following and other factors, which may be beyond our control: • disputes among payers as to which payer is responsible for payment; • disparity in coverage among various payers or among various healthcare plans offered by a single payer; • payer medical management requirements, including prior authorization requirements; • differing information and billing requirements among payers; • failure by patients or healthcare providers to provide complete and correct billing information; and • limitations and requirement for patient billing, including those related to deductibles, co-payments, and co-insurance originating from contracts with commercial payers.
To the extent patients express dissatisfaction with our billing practices to their healthcare providers, those healthcare providers may be less likely to prescribe our tests for other patients, and our business would be adversely affected. 36 Table of Contents Even if payers agree to cover our tests, our billing and collections process may be complicated by the following and other factors, which may be beyond our control: • complex and disparate reimbursement rules and requirements; • disputes among payers as to which payer is responsible for payment; • disparity in coverage among various payers or among various healthcare plans offered by a single payer; • payer medical management requirements, including prior authorization requirements; • differing information and billing requirements among payers; • failure by patients or healthcare providers to provide complete and correct billing information; and • limitations and requirement for patient billing, including those related to deductibles, co-payments, and co-insurance originating from contracts with commercial payers.
We are continuing to expand our current facilities and exploring the need to add new facilities to support anticipated demand for our current and future tests. We face various risks in managing these expansion efforts, including financing, construction delays, budget management, quality control, design efficiency, and transition execution.
We are continuing to explore the need to add new facilities to support anticipated demand for our current and future tests. We face various risks in managing these expansion efforts, including financing, construction delays, budget management, quality control, design efficiency, and transition execution. If we are unable to manage our anticipated growth effectively, our business could be harmed.
Even if public or private reimbursement is obtained, it may cover competing tests, or the reimbursement may be limited to a subset of the eligible patient population or conditioned upon local performance of the tests or other requirements we may have difficulty satisfying. Reimbursement levels outside of the U.S. may vary considerably from the domestic reimbursement amounts we receive.
Even if public or private reimbursement is obtained, it may be discontinued, cover competing tests, or the reimbursement may be limited to a subset of the eligible patient population or conditioned upon local performance of the tests or other requirements we may have difficulty satisfying.
In addition, governmental enforcement action may result in substantial fines, penalties or administrative remedies, including exclusion from government reimbursement programs and entry into corporate integrity agreements with governmental agencies, which could entail significant obligations and costs.
In addition, qui tam litigation or governmental enforcement action may result in substantial damages (including treble damages), fines, civil and criminal penalties, payment of attorney's fees or administrative remedies, including exclusion from government reimbursement programs and entry into corporate integrity agreements with governmental agencies, which could entail significant obligations and costs.
The regulatory environment governing information, security and privacy laws is increasingly demanding and continues to evolve. IT systems are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious human acts from criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage and employee malfeasance, breaches due to employee error and natural disasters.
IT systems are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious human acts from criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage and employee malfeasance, breaches due to employee error and natural disasters.
In order to rely on a third party to perform certain of our tests, we could use only another facility with established state licensure and CLIA accreditation, and for tests provided internationally, ISO 15189 accreditation, under the scope of which Oncotype DX tests could be performed following validation and other required procedures.
We could use only another facility with established state licensure and CLIA accreditation, and for tests provided internationally, ISO 15189 accreditation, under the scope of which Oncotype tests could be performed following validation and other required procedures.
Existing legislation, and possible future legal and regulatory changes, including potential repeal or modification of the ACA, elimination of penalties regarding the individual mandate for coverage, or approval of health plans that allow lower levels of coverage for preventive services, could materially change the structure and finances of the health insurance system and the methodology for reimbursing medical services, drugs and devices, including our current and future products and services.
Existing legislation, and possible future legal and regulatory changes, including potential repeal or modification of the ACA, could materially change the structure and finances of the health insurance system and the methodology for reimbursing medical services, drugs and devices, including our current and future products and services.
Various macroeconomic factors could adversely affect our business and the results of our operations and financial condition, including changes in inflation, interest rates, and foreign currency exchange rates and overall economic conditions and uncertainties, including those resulting from the current and future conditions in the global financial markets.
Various macroeconomic factors could adversely affect our business and the results of our operations and financial condition, including changes in inflation, high interest rates, foreign currency exchange rates, weakness in general economic conditions and threatened or actual recessions, including those resulting from the current and future conditions in the global financial markets, and budgeting constraints of governmental entities.
There can be no assurance that any current contractual arrangements between us and third parties or between our strategic partners and other third parties will be continued on materially similar terms and will not be breached or terminated early.
Our dependence on licensing, collaboration, and other similar agreements with third parties may subject us to a number of risks. There can be no assurance that any current contractual arrangements between us and third parties or between our strategic partners and other third parties will be continued on materially similar terms and will not be breached or terminated early.
Additionally, such actions could result in challenges to the validity, enforceability, or applicability of our patents. Because the U.S. Patent and Trademark Office (“USPTO”) maintains patent applications in secrecy until a patent application publishes or the patent is issued, we have no way of knowing if others may have filed patent applications covering technologies used by our partners or us.
Patent and Trademark Office (“USPTO”) maintains patent applications in secrecy until a patent application publishes or the patent is issued, we have no way of knowing if others may have filed patent applications covering technologies used by our partners or us.
These and other ethical, legal and social concerns may limit market acceptance of our genetic tests or reduce the potential markets for these tests, either of which could have an adverse effect on our business, financial condition or results of operations. Our business and operations are subject to risks related to climate change.
These and other ethical, legal and social concerns may limit market acceptance of our genetic tests or reduce the potential markets for these tests, either of which could have an adverse effect on our business, financial condition or results of operations. 29 Table of Contents Climate change, or legal or regulatory measures to address climate change or other corporate social responsibility and sustainability matters, could adversely affect our business, financial condition and results of operations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperties As of December 31, 2022 , our material facilities are as follows: Location Primary Function Total Square Feet (approx.) Leased or Owned Madison, Wisconsin Research and development, corporate, operations and clinical laboratory 1,573,000 Leased/Owned Redwood City, California Research and development, corporate, operations and clinical laboratory 254,000 Leased 52 Table of Contents See Note 15 in the Notes to Consolidated Financial Statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” for further discussion surrounding our leased facilities.
Biggest changeProperties As of December 31, 2023 , our material facilities are as follows: Location Primary Function Total Square Feet (approx.) Leased or Owned Madison, Wisconsin Research and development, corporate, operations and clinical laboratory 1,581,000 Leased/Owned Redwood City, California Research and development, corporate, operations and clinical laboratory 243,000 Leased See Note 15 in the Notes to Consolidated Financial Statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” for further discussion surrounding our leased facilities.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph assumes that the value of the investment in our stock and in each index was $100 on December 31, 2017 and assumes that all dividends were reinvested. _________________________________ * $100 invested on December 31, 2017 in stock or index including reinvestment of dividends. Unregistered Sales of Equity Securities Not applicable. Item 6. Reserved 54 Table of Contents
Biggest changeThe graph assumes that the value of the investment in our stock and in each index was $100 on December 31, 2018 and assumes that all dividends were reinvested. _________________________________ * $100 invested on December 31, 2018 in stock or index including reinvestment of dividends. Unregistered Sales of Equity Securities Not applicable. Item 6. Reserved 49 Table of Contents
The following graph compares the cumulative total return on our common stock with the cumulative total return of the NASDAQ Composite Index and the NASDAQ Biotechnology Index for the five-year period ended December 31, 2022 .
The following graph compares the cumulative total return on our common stock with the cumulative total return of the NASDAQ Composite Index and the NASDAQ Biotechnology Index for the five-year period ended December 31, 2023 .
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is currently listed on the NASDAQ Capital Market under the symbol “EXAS.” As of February 20, 2023, there were 178,217,142 shares of our common stock outstanding held by approximately 182 holders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is currently listed on the NASDAQ Capital Market under the symbol “EXAS.” As of February 20, 2024, there were 181,530,967 shares of our common stock outstanding held by approximately 179 holders of record.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCash provided by financing activities for the year ended December 31, 2021 consisted of proceeds of $23.1 million in connection with our employee stock purchase plan and $14.4 million from the exercise of stock options, which was partially offset by payments on our construction loan of $23.7 million and $5.3 million for other financing activities. 60 Table of Contents Material Cash Requirements Convertible Notes As of December 31, 2022, we had outstanding aggregate principal of $2.21 billion on our convertible notes with maturity dates of January 15, 2025 (the “2025 Notes”), March 15, 2027 (the “2027 Notes”), and March 1, 2028 Notes (the "2028 Notes" and collectively, the “Notes”).
Biggest changeMaterial Cash Requirements Convertible Notes As of December 31, 2023, we had outstanding aggregate principal of $2.34 billion on our convertible notes with maturity dates of January 15, 2025 (the “2025 Notes”), March 15, 2027 (the “2027 Notes”), March 1, 2028 Notes (the “2028 Notes”), and March 1, 2030 (the “2030 Notes” and collectively, the “Notes”).
Key assumptions used to value developed technology under the income approach include projected revenue growth, projected gross margin and operating expenses, discount rate, tax rate, terminal growth rate, and obsolescence factor. We believe that the estimates applied are based on reasonable assumptions, but the estimates are inherently uncertain.
Key assumptions used to value developed technology under the income approach include projected revenue growth, projected gross margin and operating expenses, discount rate, tax rate, and obsolescence factor. We believe that the estimates applied are based on reasonable assumptions, but the estimates are inherently uncertain.
Key assumptions used to calculate the fair value of the IPR&D asset included inputs such as projected revenues, projected gross margin and operating expenses, discount rate, tax rate, terminal growth rate, obsolescence factor, and probability of commercial success, We believe that the estimates applied are based on reasonable assumptions, but the estimates are inherently uncertain.
Key assumptions used to calculate the fair value of the IPR&D asset included inputs such as projected revenues, projected gross margin and operating expenses, discount rate, tax rate, obsolescence factor, and probability of commercial success. We believe that the estimates applied are based on reasonable assumptions, but the estimates are inherently uncertain.
The 2025 Notes, 2027 Notes, and 2028 Notes accrue interest at a fixed rate of 1.0%, 0.375%, and 0.375% per year, respectively, which is payable in cash semi-annually in arrears each year until the maturity date. See Note 10 in the Notes to Consolidated Financial Statements for further information.
The 2025 Notes, 2027 Notes, 2028 Notes, and 2030 Notes accrue interest at a fixed rate of 1.0%, 0.375%, 0.375%, and 2.0% per year, respectively, which is payable in cash semi-annually in arrears each year until the maturity date. See Note 10 in the Notes to Consolidated Financial Statements for further information.
The net operating loss and tax credit carryforwards will expire at various dates through 2040, if not utilized. The Internal Revenue Code and applicable state laws impose substantial restrictions on a corporation’s utilization of net operating loss and tax credit carryforwards if an ownership change is deemed to have occurred.
The net operating loss and tax credit carryforwards will expire at various dates through 2041, if not utilized. The Internal Revenue Code and applicable state laws impose substantial restrictions on a corporation’s utilization of net operating loss and tax credit carryforwards if an ownership change is deemed to have occurred.
We expect that cash, cash equivalents and marketable securities on hand at December 31, 2022, 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 expect that cash, cash equivalents and marketable securities on hand at December 31, 2023, 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.
For the years ended December 31, 2022, 2021, and 2020, we've recognized an upward or downward adjustment to revenues from a change in transaction price representing approximately 1% of prior year revenues.
For the years ended December 31, 2023, 2022, and 2021, we've recognized an upward or downward adjustment to revenues from a change in transaction price representing approximately 1% of prior year revenues.
Based on the qualitative assessment, if it is determined that the fair value of indefinite-lived intangible assets is more likely than not to be less than its carrying amount, the fair value will be calculated and compared with its carrying amount 64 Table of Contents and an impairment charge will be recognized for the amount that the carrying value exceeds the fair value.
Based on the qualitative assessment, if it is determined that the fair value of indefinite-lived intangible assets is more likely than not to be less than its carrying amount, the fair value will be calculated and compared with its carrying amount and an impairment charge will be recognized for the amount that the carrying value exceeds the fair value.
The projected fiscal year of payment range is from 2026 to 2028. See Note 18 in the Notes to Consolidated Financial Statements for further information.
The projected fiscal year of payment range is from 2028 to 2030. See Note 18 in the Notes to Consolidated Financial Statements for further information.
We recorded impairment charges totaling $16.0 million during the year ended December 31, 2022 related to the supply agreement intangible asset acquired as part of the combination with Genomic Health, the developed technology intangible asset acquired as part of the acquisition of Paradigm, and building leases at certain of our domestic locations.
We recorded impairment charges totaling $0.6 million during the year ended December 31, 2023 related to building leases on certain of our domestic facilities We recorded impairment charges totaling $16.0 million during the year ended December 31, 2022 related to the supply agreement intangible asset acquired as part of the combination with Genomic Health, the developed technology intangible asset acquired as part of the acquisition of Paradigm, and building leases at certain of our domestic locations.
As a result, the eventual realized value of the IPR&D project may vary from its fair value at the date of acquisition, and material IPR&D impairment charges may occur in future periods. Contingent Consideration Liabilities.
As a result, the eventual realized value of the IPR&D project may vary from its fair value at the date of acquisition, and material IPR&D impairment charges may occur in future periods. 58 Table of Contents Contingent Consideration Liabilities.
The impairment charges recorded during the year ended December 31, 2022 included impairments to the supply agreement intangible asset acquired as part of the combination with Genomic Health, the acquired developed technology intangible asset acquired as part of the acquisition of Paradigm Diagnostics, Inc. (“Paradigm”), and building leases at certain of our domestic locations.
The impairment charges recorded during the year ended December 31, 2022 included an impairment to the supply agreement intangible asset acquired as part of the acquisition of Genomic Health, an impairment of the acquired developed technology intangible asset acquired as part of the acquisition of Paradigm Diagnostics, Inc. (“Paradigm”), and building leases at certain of our domestic locations.
As a result of the acquisition of Ashion in April 2021, an additional $20.0 million would be payable in cash to Ashion's former shareholders upon the commercial launch, on or before the tenth anniversary of the acquisition of Ashion, of a test for MRD detection and/or treatment. The projected fiscal year of payment range is from 2023 to 2024.
As a result of the acquisition of Ashion in April 2021, an additional $20.0 million would be payable in cash to Ashion's former shareholders upon the commercial launch, on or before the tenth anniversary of the acquisition of Ashion, of a test for MRD detection and/or treatment. The projected fiscal year of payment is 2025.
Liquidity and Capital Resources Overview We have incurred losses and negative cash flows from operations 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.
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.
Interest expense recorded from our outstanding convertible notes totaled $16.1 million and $16.1 million for the years ended December 31, 2022 and 2021, respectively. The convertible notes are further described in Note 10 of our consolidated financial statements included in this Annual Report on Form 10-K. Income tax benefit.
Interest expense recorded from our outstanding convertible notes totaled $16.1 million for the year ended December 31, 2022. The convertible notes are further described in Note 10 of our consolidated financial statements included in this Annual Report on Form 10-K. Income tax benefit (expense).
Due to the existence of the valuation allowance, future changes in our unrecognized tax benefits will not impact our effective tax rate. Acquired Intangible Assets. We acquire finite-lived intangible assets through our business combinations and asset acquisitions, which primarily consist of developed technology. As of December 31, 2022, our developed technology intangible assets have a carrying value of $615.9 million.
Due to the existence of the valuation allowance, future changes in our unrecognized tax benefits will not impact our effective tax rate. Acquired Intangible Assets. We acquire finite-lived intangible assets through our business combinations and asset acquisitions, which primarily consist of developed technology. As of December 31, 2023, our developed technology intangible assets have a carrying value of $559.2 million.
We have developed some of the most impactful tests in cancer diagnostics, and we are currently working on the development of additional tests, with the goal of bringing new innovative cancer tests to patients throughout the world.
We have developed some of the most impactful tests in cancer screening and diagnostics, and we are currently working to develop additional tests, with the goal of bringing new, innovative cancer tests to patients throughout the world.
We expect that cost of sales will generally continue to increase in future years as a result of an increase in tests completed of our existing laboratory testing services and as we launch our pipeline products.
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.
Given the future limitations on and expiration of certain Federal and State deferred tax assets, the recording of a valuation allowance resulted in a deferred tax liability of approximately $19.7 million remaining as of December 31, 2022, which is included in other long-term liabilities on our consolidated balance sheet.
Given the future limitations on and expiration of certain Federal and State deferred tax assets, the recording of a valuation allowance resulted in a deferred tax liability of approximately $17.3 million remaining as of December 31, 2023, which is included in other long-term liabilities on our consolidated balance sheet.
Management has determined that a valuation allowance of $419.4 million and $262.2 million at December 31, 2022 and 2021, respectively is necessary to reduce the tax assets to the amount that is more likely than not to be realized.
Management has determined that a valuation allowance of $465.8 million and $419.4 million at December 31, 2023 and 2022, respectively is necessary to reduce the tax assets to the amount that is more likely than not to be realized.
Due to changes in macroeconomic conditions and a delay in the projected fiscal year of payment for the regulatory and product development milestones associated with our acquisition of Thrive, the weighted average present-value factor increased from 2.3% as of December 31, 2021 to 6.2% as of December 31, 2022, and the fair value of the contingent consideration liability was remeasured from $338.6 million as of December 31, 2021 to $284.1 million as of December 31, 2022.
Due to changes in macroeconomic conditions and a delay in the projected fiscal year of payment for the regulatory and product development milestones associated with our acquisition of Thrive, the weighted average present-value factor decreased from 6.2% as of December 31, 2022 to 5.8% as of December 31, 2023, and the fair value of the contingent consideration liability was remeasured from $284.1 million as of December 31, 2022 to $270.1 million as of December 31, 2023.
Further changes in the key assumptions made in determining the fair value of the contingent consideration liability recorded related to the acquisition of Thrive could impact the estimated fair value as follows: Assumption Unit of Measure Change Fair Value Impact (In Thousands) Probability of success 5% $ 15,800 Projected fiscal year of payment 1 Year 16,500 Present-Value Factor 1% 12,200 Impairment of Indefinite-Lived Assets.
Further changes in the key assumptions made in determining the fair value of the contingent consideration liability recorded related to the acquisition of Thrive could impact the estimated fair value as follows: Assumption Unit of Measure Change Fair Value Impact (In Thousands) Probability of success 5% $ 15,000 Projected fiscal year of payment 1 Year 14,900 Present-value factor 1% 14,400 Impairment of Indefinite-Lived Assets.
Provide Outstanding Experiences for Patients and Teams 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.
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.
Lease Commitments We act as lessee in our lease agreements, which include operating leases for corporate offices, laboratory space, warehouse space, vehicles, and certain laboratory and office equipment, and finance leases for certain equipment and vehicles. As of December 31, 2022, we had minimum operating and finance lease payments of $267.3 million and $11.7 million, respectively.
Lease Commitments We act as lessee in our lease agreements, which include operating leases for corporate offices, laboratory space, warehouse space, vehicles, and certain laboratory and office equipment, and finance leases for certain equipment and vehicles. As of December 31, 2023, we had minimum operating and finance lease payments of $239.7 million and $13.2 million, respectively.
A 1% change in our estimated transaction price for revenue recognized for the year ended December 31, 2022 would result in an adjustment to revenue of approximately $20.8 million in 2023.
A 1% change in our estimated transaction price for revenue recognized for the year ended December 31, 2023 would result in an adjustment to revenue of approximately $25.0 million in 2024.
As a result of the acquisition of Thrive in January 2021, an additional $450.0 million would be payable in cash to Thrive’s former shareholders upon the achievement of two discrete events, FDA approval and CMS coverage, for $150.0 million, and $300.0 million, respectively, in relation to the development and commercialization of a blood-based, multi-cancer early detection test.
A liability is recorded when achievement of a milestone becomes probable for asset acquisitions. 55 Table of Contents As a result of the acquisition of Thrive in January 2021, an additional $450.0 million would be payable in cash to Thrive’s former shareholders upon the achievement of two discrete events, FDA approval and CMS coverage, for $150.0 million, and $300.0 million, respectively, in relation to the development and commercialization of a blood-based, multi-cancer early detection test.
As a result of the acquisition of the proprietary TARDIS technology from TGen in January 2021, an additional $45.0 million would be payable in cash to TGen upon the achievement of cumulative product revenue milestones related to MRD detection and/or treatment.
As a result of the acquisition of the proprietary Targeted Digital Sequencing (“TARDIS”) technology from The Translational Genomics Research Institute (“TGen”) in January 2021, an additional $45.0 million would be payable in cash to TGen upon the achievement of cumulative product revenue milestones related to MRD detection and/or treatment.
The decrease in other general and administrative expenses is primarily due to a gain of $56.6 million recorded during the year ended December 31, 2022 as a result of the change in fair value of our outstanding contingent consideration as further described in Note 7 of our consolidated financial statements included in this Annual Report on Form 10-K.
The increase in other general and administrative expenses was primarily due to a $38.6 million decrease in the gain recorded on our outstanding contingent consideration liabilities as a result of change in fair value, as further described in Note 7 of our consolidated financial statements included in this Annual Report on Form 10-K.
Of the outstanding operating lease obligations, $38.3 million matures in 2023, and the remaining $229.0 million will mature in periods subsequent to 2023. Of the outstanding finance lease obligations, $3.7 million matures in 2023, and the remaining $8.0 million will mature in periods subsequent to 2023. See Note 15 in the Notes to Consolidated Financial Statements for further information.
Of the outstanding operating lease obligations, $39.5 million matures in 2024, and the remaining $200.3 million will mature in periods subsequent to 2024. Of the outstanding finance lease obligations, $5.0 million matures in 2024, and the remaining $8.2 million will mature in periods subsequent to 2024. See Note 15 in the Notes to Consolidated Financial Statements for further information.
Judgment is required in evaluating our tax positions and determining our annual tax provision. We have incurred significant losses since our inception and due to the uncertainty of the amount and timing of future taxable income, it may be necessary to record an allowance to reduce the tax assets we have recognized.
We have incurred significant losses since our inception and due to the uncertainty of the amount and timing of future taxable income, it may be necessary to record an allowance to reduce the tax assets we have recognized.
The net investment loss for the year ended December 31, 2022 was primarily due to losses recorded on our investments in privately held companies and marketable securities.
The net investment loss for the year ended December 31, 2023 was primarily due to gains recorded on our marketable securities and investments in privately held companies. The net investment loss for the year ended December 31, 2022 was primarily due to losses recorded on our investments in privately held companies and marketable securities. 53 Table of Contents Interest expense.
Our current projects include the build out of additional lab and warehouse space and certain lab automation projects at our existing facilities in Madison, WI. These projects are expected to be completed in 2023 and beyond. We also have assets under construction related to leasehold and building improvements, laboratory equipment, and software projects.
Our current projects include the build out of certain lab automation projects at our existing facilities in Madison, WI. These projects are expected to be completed in 2024 and beyond. We also have assets under construction related to leasehold and building improvements, laboratory equipment, and software projects. We expect to incur approximately $150.0 million in capital expenditures in 2024.
We determine the amount we expect to ultimately collect using historical collections, established reimbursement rates, and other adjustments. The expected amount is typically lower than, if applicable, the agreed-upon reimbursement amount due to several factors, such as the amount of any patient co-payments, out-of-network payers, the existence of secondary payers, and claim denials.
The expected amount is typically lower than, if applicable, the agreed-upon reimbursement amount due to several factors, such as the amount of any patient co-payments, out-of-network payers, the existence of secondary payers, and claim denials.
Investment income (loss), net decreased to a net investment loss of $19.4 million for the year ended December 31, 2022 compared to net investment income of $31.8 million for the year ended December 31, 2021.
Investment income (loss), net increased to net investment income of $32.7 million for the year ended December 31, 2023 compared to a net investment loss of $19.4 million for the year ended December 31, 2022.
The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K.
The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K. We have omitted discussion of 2021 results where it would be redundant to the discussion previously included in Item 7.
The sale of the GPS test is further discussed in Note 18 of our consolidated financial statements included in this Annual Report on Form 10-K. Investment income (loss), net.
The $13.2 million loss for the year ended December 31, 2022 represents the loss on the sale of our GPS test to MDxHealth. The sale of the GPS test is further discussed in Note 18 of our consolidated financial statements included in this Annual Report on Form 10-K. Investment income (loss), net.
This was partially offset by a decrease in amortization on the intangible asset that was disposed of with the sale of the GPS test in August 2022 and the intangible assets that were impaired during the year. Impairment of long-lived assets.
This decrease was primarily due to a decrease in amortization on the intangible asset that was disposed of with the sale of the GPS test in August 2022 and the intangible assets that were impaired during the year ended December 31, 2022.
Milestone payments of $10.0 million and $35.0 million would be payable upon achieving $100.0 million and $250.0 million, respectively, in cumulative revenue on or before December 31, 2030.
Milestone payments of $10.0 million and $35.0 million would be payable upon achieving $100.0 million and $250.0 million, respectively, in cumulative revenue on or before December 31, 2030. See Note 18 in the Notes to Consolidated Financial Statements for further information.
We continuously evaluate our liquidity and capital resources, including access to external capital, in light of current economic and market conditions and our operational performance. As of December 31, 2022, we had no off-balance sheet arrangements.
However, we may need to raise additional capital to fully fund our current business plan and meet all commitments discussed above. We continuously evaluate our liquidity and capital resources, including access to external capital, in light of current economic and market conditions and our operational performance. As of December 31, 2023, we had no off-balance sheet arrangements.
This was partially offset by an increase in revenue, which was primarily driven by an increase in completed Cologuard and Oncotype tests.
The increase in revenue was primarily driven by an increase in the number of completed Cologuard and Oncotype tests.
For these reasons, even if we attain profitability, our ability to utilize our NOLs may be limited, potentially significantly so. 62 Table of Contents A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before we are able to realize their benefit, or that future deductibility is uncertain.
A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before we are able to realize their benefit, or that future deductibility is uncertain.
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. 59 Table of Contents Cash, Cash Equivalents and Marketable Securities As of December 31, 2022, we had approximately $242.5 million in unrestricted cash and cash equivalents and approximately $389.6 million in marketable securities.
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.
We believe that the estimates applied are based on reasonable assumptions, but the estimates are inherently uncertain. As a result, the eventual realized value of the impaired asset may vary from its fair value. Recent Accounting Pronouncements See Note 1 in the Notes to Consolidated Financial Statements for the discussion of Recent Accounting Pronouncements.
As a result, the eventual realized value of the impaired asset may vary from its fair value. 59 Table of Contents Recent Accounting Pronouncements See Note 1 in the Notes to Consolidated Financial Statements for the discussion of Recent Accounting Pronouncements.
We utilized the income approach to measure the fair value of the acquired developed technology intangible asset, supply agreement intangible asset, and building leases during the years ended December 31, 2022 and 2021, which required management to make estimates including revenue projections, cash flow projections, and discount rates.
We utilized the income approach to measure the fair value of the acquired developed technology intangible asset, supply agreement intangible asset, and building leases, which required management to make estimates including revenue projections, cash flow projections, and discount rates. We believe that the estimates applied are based on reasonable assumptions, but the estimates are inherently uncertain.
See Note 18 in the Notes to Consolidated Financial Statements for further information. 61 Table of Contents License Agreements We license certain technologies that are, or may be, incorporated into our technology under several license agreements, as well as the rights to commercialize certain diagnostic tests through collaboration agreements.
License Agreements We license certain technologies that are, or may be, incorporated into our technology under several license agreements, as well as the rights to commercialize certain diagnostic tests through collaboration agreements.
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.
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.
We expect to incur approximately $120.0 million in capital expenditures in 2023. Sources of Cash 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.
Sources of Cash 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.
We record a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. 63 Table of Contents We compute our provision for income taxes based on the statutory tax rates and tax planning opportunities available to us in the various jurisdictions that we operate.
We record a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
We have omitted discussion of 2020 results where it would be redundant to the discussion previously included in Management's Discussion and Analysis of Financial Condition and Results of Operations on Form 10-K for the year ended December 31, 2021, which has been filed with the SEC. Overview Exact Sciences Corporation is a leading, global, advanced cancer diagnostics company.
Management's Discussion and Analysis of Financial Condition and Results of Operations of our Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 21, 2023. Overview Exact Sciences Corporation is a leading, global, advanced cancer diagnostics company.
The increase in completed Cologuard tests for the year ended December 31, 2022 was due to improved sales team productivity, more patients rescreening with our Cologuard test, and first-time users in the 45 to 49 age group.
The increase in completed Cologuard tests for the year ended December 31, 2023 was due to improved sales team productivity, growth across all customer segments, more patients rescreening with our Cologuard test, and improvements in patient adherence.
Net Operating Loss Carryforwards As of December 31, 2022, we had federal, state, and foreign NOL carryforwards of approximately $475.2 million, $70.9 million, and $7.2 million, respectively. We also had federal and state research tax credit carryforwards of approximately $59.2 million and $27.8 million, respectively.
Net Operating Loss Carryforwards As of December 31, 2023, we had federal, state, and foreign net operating loss (“NOL”) carryforwards of approximately $402.9 million, $66.0 million, and $10.4 million, respectively. We also had federal and state research tax credit carryforwards of approximately $70.9 million and $33.0 million, respectively.
Amounts in millions 2022 2021 Change Personnel expenses $ 444.9 $ 381.1 $ 63.8 Direct marketing costs 237.5 193.9 43.6 Stock-based compensation 62.6 55.7 6.9 Professional and legal fees 49.0 150.2 (101.2) Facility and support services 48.6 74.4 (25.8) Other sales and marketing expenses 3.4 6.6 (3.2) Total sales and marketing expenses $ 846.0 $ 861.9 $ (15.9) General and administrative expenses.
(Amounts in millions) 2023 2022 Change Personnel expenses $ 412.9 $ 444.9 $ (32.0) Direct marketing costs 183.7 237.5 (53.8) Stock-based compensation 65.6 62.6 3.0 Professional and legal fees 44.7 49.0 (4.3) Facility and support services 16.9 48.6 (31.7) Other sales and marketing expenses 3.3 3.4 (0.1) Total sales and marketing expenses $ 727.1 $ 846.0 $ (118.9) 52 Table of Contents General and administrative expenses.
Amounts in millions 2022 2021 Change Personnel expenses $ 390.8 $ 316.0 $ 74.8 Facility and support services 136.7 86.3 50.4 Professional and legal fees 116.4 125.7 (9.3) Stock-based compensation 91.2 217.0 (125.8) Other general and administrative 2.2 56.3 (54.1) Total general and administrative expenses $ 737.3 $ 801.3 $ (64.0) 58 Table of Contents Amortization of acquired intangible assets.
(Amounts in millions) 2023 2022 Change Personnel expenses $ 395.6 $ 390.8 $ 4.8 Facility and support services 182.2 136.7 45.5 Professional and legal fees 171.9 116.4 55.5 Stock-based compensation 103.7 91.2 12.5 Other general and administrative 39.8 2.2 37.6 Total general and administrative expenses $ 893.2 $ 737.3 $ 155.9 Amortization of acquired intangible assets.
Cash Flows Amounts In millions 2022 2021 Net cash used in operating activities $ (223.6) $ (102.2) Net cash provided by (used in) investing activities 74.1 (1,082.1) Net cash provided by financing activities 76.5 8.5 Operating activities The increase in cash used in operating activities for the year ended December 31, 2022 was primarily to fund our net loss.
Cash Flows (Amounts In millions) 2023 2022 Net cash provided by (used in) operating activities $ 156.1 $ (223.6) Net cash provided by investing activities 49.7 74.1 Net cash provided by financing activities 159.8 76.5 Operating activities The increase in cash provided by operating activities for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to an increase in revenue, a decrease in operating expenses as a percentage of revenue, and timing of payments on our accounts payable and accrued expenses.
We recognize revenues when we release a result to the ordering healthcare provider, in an amount that reflects the consideration we expect to collect in exchange for those services. The amount of revenue we recognize is based on the established billing rates less contractual and other adjustments, which yields the unconstrained amount that we expect to ultimately collect.
We recognize revenues when we release an approved patient test result to the ordering healthcare provider, in an amount that reflects the consideration we expect to collect in exchange for those services.
Amounts in millions 2022 2021 Change Production costs $ 329.5 $ 252.8 $ 76.7 Personnel expenses 160.1 126.8 33.3 Facility and support services 63.6 61.1 2.5 Stock-based compensation 19.2 16.8 2.4 Other cost of sales expenses 2.0 1.3 0.7 Total cost of sales expense $ 574.4 $ 458.8 $ 115.6 Research and development expenses .
We also expect to see a corresponding increase in personnel and support services associated with this growth. 51 Table of Contents (Amounts in millions) 2023 2022 Change Production costs $ 393.4 $ 329.5 $ 63.9 Personnel expenses 182.0 160.1 21.9 Facility and support services 54.4 63.6 (9.2) Stock-based compensation 20.8 19.2 1.6 Other cost of sales expenses 3.6 2.0 1.6 Total cost of sales expense $ 654.2 $ 574.4 $ 79.8 Research and development expenses .
Financing activities Cash provided by financing activities for the year ended December 31, 2022 consisted of proceeds of $50.0 million from our accounts receivable securitization facility, $25.5 million in connection with our employee stock purchase plan, and $6.5 million from the exercise of stock options, which was partially offset by cash outflows of $5.5 million for other financing activities.
Cash provided by financing activities for the year ended December 31, 2022 was primarily due to proceeds of $50.0 million from our accounts receivable securitization facility in the second quarter of 2022.
The increase in cost of sales is primarily due to an increase in production costs and personnel expenses to support the growth in completed Cologuard and Oncotype tests. In addition, our production costs and personnel expenses have risen as a result of the inflationary environment discussed above.
The increase in cost of sales for the year ended December 31, 2023 was primarily due to an increase in production costs and personnel expenses, 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.
We expect significant leverage in general and administrative expenses going forward, but expenses will generally continue to increase in future years due to an increase in headcount necessary to support the growth of our existing and pipeline products.
We expect general and administrative expenses will generally continue to increase in future periods to support the growth in our existing and pipeline products, but we expect it will decrease as a percentage of revenue over time as we leverage efficiencies in our personnel and information technology systems.
Impairment of long-lived assets decreased to $16.0 million for the year ended December 31, 2022 compared to $20.2 million for the year ended December 31, 2021.
Amortization of acquired intangible assets decreased to $92.2 million for the year ended December 31, 2023 compared to $97.5 million for the year ended December 31, 2022.
As of December 31, 2022, we had $50.0 million outstanding under the Securitization Facility, which is the minimum amount that we must borrow under the terms of the Securitization Facility. The Revolver and Securitization Facility are further described in Note 9 of our consolidated financial statements included in this Annual Report on Form 10-K.
As of December 31, 2023, we had $50.0 million outstanding under the Securitization Facility, which is the minimum amount that we must borrow under the terms of the Securitization Facility.
Both provisions are applicable for losses arising in tax years beginning after December 31, 2017. As of December 31, 2022, we had $300.2 million of NOLs incurred after December 31, 2017.
Both provisions are applicable for losses arising in tax years beginning after December 31, 2017. As of December 31, 2023, we had $278.5 million of NOLs incurred after December 31, 2017. For these reasons, even if we attain profitability, our ability to utilize our NOLs may be limited, potentially significantly so.
Income tax benefit decreased to $9.1 million for the year ended December 31, 2022 compared to $246.9 million for the year ended December 31, 2021.
Income tax expense was $2.4 million for the year ended December 31, 2023 compared to a benefit of $9.1 million for the year ended December 31, 2022. Income tax expense for the year ended December 31, 2023 was primarily related to current foreign and state tax expense.
When excluding the impact of these asset acquisitions, research and development expenses increased by $93.1 million primarily due to an increase in our BLUE-C clinical trial and MCED related expenses. In addition, personnel expenses and facility and support services increased due to an increase in headcount and other resources needed to support our ongoing clinical trials.
The increase in research and development expenses for the year ended December 31, 2023 was primarily due to an increase in personnel expenses and facility and support services. These increases were a result of an increase in headcount and other resources needed to support our ongoing clinical trials and other research and development efforts.
Amortization of acquired intangible assets increased to $97.5 million for the year ended December 31, 2022 compared to $95.0 million for the year ended December 31, 2021. This increase was primarily due to the amortization of intangible assets acquired as part of our acquisitions of Ashion in April 2021, PreventionGenetics in December 2021, and OmicEra in May 2022.
This was partially offset by amortization of the intangible assets acquired as part of our acquisition of OmicEra Diagnostics, GmbH in May 2022 and Resolution Bioscience in September 2023. Impairment of long-lived assets. Impairment of long-lived assets decreased to $0.6 million for the year ended December 31, 2023 compared to $16.0 million for the year ended December 31, 2022.
We expect that research and development expenses will generally continue to increase in future years as we continue to invest to advance new tests. 57 Table of Contents Amounts in millions 2022 2021 Change Direct research and development expenses $ 158.7 $ 111.5 $ 47.2 Personnel expenses 143.3 98.8 44.5 Facility and support services 45.5 25.4 20.1 Stock-based compensation 33.8 49.7 (15.9) Other research and development expenses 8.2 5.9 2.3 Professional fees 3.9 9.0 (5.1) Intellectual property acquisition — 85.3 (85.3) Total research and development expenses $ 393.4 $ 385.6 $ 7.8 Sales and marketing expenses.
(Amounts in millions) 2023 2022 Change Personnel expenses $ 180.3 $ 143.3 $ 37.0 Direct research and development expenses 129.7 158.7 (29.0) Facility and support services 64.1 45.5 18.6 Stock-based compensation 41.2 33.8 7.4 Professional fees 7.2 3.9 3.3 Other research and development expenses 3.4 8.2 (4.8) Total research and development expenses $ 425.9 $ 393.4 $ 32.5 Sales and marketing expenses.
Amounts in millions 2022 2021 Change Screening $ 1,424.7 $ 1,062.3 $ 362.4 Precision Oncology 601.5 561.7 39.8 COVID-19 Testing 58.1 143.1 (85.0) Total $ 2,084.3 $ 1,767.1 $ 317.2 56 Table of Contents The increase in Screening revenue, which primarily includes laboratory service revenue from our Cologuard test, was mainly due to an increase in the number of completed Cologuard tests and revenue generated from new products as a result of our acquisition of PreventionGenetics in the fourth quarter of 2021.
(Amounts in millions) 2023 2022 Change Screening $ 1,864.7 $ 1,424.7 $ 440.0 Precision Oncology 629.1 601.5 27.6 COVID-19 Testing 6.0 58.1 (52.1) Total $ 2,499.8 $ 2,084.3 $ 415.5 The increase in Screening revenue was mainly due to an increase in the number of completed Cologuard tests.
The increase in Precision Oncology revenue, which primarily includes laboratory service revenue from our global Oncotype products, was mainly due to an increase in the number of completed Oncotype DX breast cancer tests, both domestically and internationally, and revenue generated from new products and reference lab agreements as a result of our acquisition of Ashion in the second quarter of 2021.
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. The increase in completed Oncotype DX tests was partially offset by a decrease of $19.4 million in revenues from our divested GPS test.
The decrease in sales and marketing expenses was primarily due to reduced professional and legal fees incurred related to our promotion agreement with Pfizer, Inc.
The decrease in direct marketing costs and professional fees was driven by decreases in advertising spend and costs incurred under our promotion agreement with Pfizer Inc., which ended in the third quarter of 2022. The decrease in personnel expenses was due to a realignment of the sales force, which reduced overlap and increased productivity.
We're working to deliver a common technology platform for our cancer tests and improve our digital tools for providers and patients. We will also strive to ensure that Exact Sciences remains a great place to work by taking care of our people.
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 MCED.
We also performed our annual IPR&D assessment using a qualitative assessment and concluded there were no impairments for the year ended December 31, 2022. Qualitative factors considered in this assessment included industry and market conditions, financial and strategic factors, the status of product development, and the consideration of legal, competitive, regulatory, and technical risks.
We also elected to bypass the qualitative assessment and performed a quantitative assessment for our annual IPR&D assessment and concluded that there were no impairments for the year ended December 31, 2023.
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.
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.
As of December 31, 2022, we had not drawn any funds under the Revolver. In addition to the Revolver, we have access to $150.0 million under an accounts receivable securitization facility (the “Securitization Facility”), which expires in June 2024.
In addition to the Revolver, we have access to $150.0 million under an accounts receivable securitization facility (the “Securitization Facility”), which expires in June 2024 at which point we will need to repay the outstanding balance or refinance the Securitization Facility. Any refinancing is subject to market conditions and other factors, including evaluating other financing options available to us.
The impairment charge recorded during the year ended December 31, 2021 primarily related to the supply agreement intangible asset acquired as part of the combination with Genomic Health. Other operating income (loss). Other operating income (loss) decreased to a loss of $13.2 million for the year ended December 31, 2022 compared to zero for the year ended December 31, 2021.
Other operating income (loss). Other operating income (loss) increased to a gain of $78.4 million for the year ended December 31, 2023 compared to a loss of $13.2 million for the year ended December 31, 2022.
The increase in our net loss was primarily due to an increase in expenses incurred to process our tests and an increase in operating expenses incurred to support the growth of our operations as further discussed above.
The increase in facility and support services was incurred to support the growth in our operations.
The 2025 Notes have a maturity date of January 15, 2025 and an outstanding principal balance of $315.0 million. The 2027 Notes have a maturity date of March 15, 2027 and an outstanding principal balance of $747.5 million. The 2028 Notes have a maturity date of March 1, 2028 and an outstanding principal balance of $1.15 billion.
The 2025 Notes have an outstanding principal balance of $249.2 million. The 2027 Notes have an outstanding principal balance of $563.8 million. The 2028 Notes have an outstanding principal balance of $949.0 million. The 2030 Notes have an outstanding principal balance of $573.0 million.
During the year ended December 31, 2021, there was a downward adjustment to revenue from a change in transaction price of $11.8 million. The revenue recognized from changes in transaction price during the year ended December 31, 2022 is a result of improvements made in our billing systems and processes.
The revenue recognized from changes in transaction price is a result of 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.
Investing activities Cash provided by investing activities for the year ended December 31, 2022 was primarily due to a net cash inflow from purchases, sales, and maturities of marketable securities of $321.6 million and proceeds from the sale of our GPS test in the third quarter of $25.0 million, which was partially offset by purchases of property and equipment of $214.5 million, investments in privately held companies of $42.8 million, and payments related to our business combinations of $14.7 million.
Additionally, we received $19.8 million in proceeds from maturities and sales of investments in privately held companies for the year ended December 31, 2023, compared to proceeds of $25.0 million from the sale of the GPS test for the year ended December 31, 2022.
We expect sales and marketing expenses to decrease in 2023 due to improved efficiency from our commercial organization. We expect sales and marketing expenses to continue decreasing as a percentage of revenue over time as our Cologuard and Oncotype testing services grow and we make new tests available.
The decrease in facility and support services was due to fewer costs incurred on commercial related information technology projects. We anticipate sales and marketing expenses will generally increase in future periods while continuing to decrease as a percentage of revenue over time, driven by the growth of Cologuard and Oncotype testing services and the introduction to new tests.
The increase in completed Oncotype tests was partially offset by a decrease in revenues from our GPS test, which was divested on August 2, 2022. During the year ended December 31, 2022, revenue recognized from changes in transaction price was $20.3 million.
We discontinued COVID-19 testing in the second quarter of 2023 due to lower demand, which led to a decrease in COVID-19 testing revenue. During the years ended December 31, 2023 and 2022, revenue recognized from changes in transaction price was $25.2 million and $20.3 million, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+1 added−1 removed8 unchanged
Biggest changeWe 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 December 31, 2022, we had open foreign currency forward contracts with notional amounts of $22.3 million.
Biggest changeAs 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.
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 December 31, 2022 and December 31, 2021 were classified as available-for-sale.
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 December 31, 2023 and December 31, 2022 were classified as available-for-sale.
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. 66 Table of Contents
Although the impact of currency fluctuations on our financial results has been insignificant 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. 60 Table of Contents
Based on a hypothetical 100 basis point increase in market interest rates, annual interest expense on variable rate debt as of December 31, 2022 would increase by approximately $0.5 million. If we were to draw down additional amounts under either our Revolving Loan or Securitization Facility, the impact of increases in prevailing market interest rates would be even greater.
If we were to draw down additional amounts under either our Revolving Loan or Securitization Facility, the impact of increases in prevailing market interest rates would be even greater.
We do not utilize interest rate hedging agreements or other interest rate derivative instruments. 65 Table of Contents As of December 31, 2022, we had $50.0 million in outstanding variable rate debt.
We do not utilize interest rate hedging agreements or other interest rate derivative instruments. As of December 31, 2023, we had $50.0 million in outstanding variable rate debt. Based on a hypothetical 100 basis point increase in market interest rates, annual interest expense on variable rate debt as of December 31, 2023 would increase by approximately $0.5 million.
Removed
As a result, factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets will affect our financial results. With the strengthening of the U.S. dollar against certain foreign currencies this past year, the remeasurement of our international revenues has resulted in decreased revenues.
Added
As of December 31, 2023, we had open foreign currency forward contracts with notional amounts of $39.5 million.

Other EXAS 10-K year-over-year comparisons