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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-35092
EXACT SCIENCES CORPORATION
(Exact name of registrant as specified in its charter)
| | | | | |
Delaware | 02-0478229 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
| |
5505 Endeavor Lane, Madison WI | 53719 |
(Address of principal executive offices) | (Zip Code) |
(608) 535-8815 (Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, $0.01 par value per share | | EXAS | | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. | | | | | | | | | | | |
Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
Emerging growth company | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 1, 2022, the registrant had 176,959,543 shares of common stock outstanding.
EXACT SCIENCES CORPORATION
EXACT SCIENCES CORPORATION
Condensed Consolidated Balance Sheets
(Amounts in thousands, except share data - unaudited)
Part I — Financial Information
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
ASSETS | | | |
Current Assets: | | | |
Cash and cash equivalents | $ | 213,421 | | | $ | 315,471 | |
Marketable securities | 514,623 | | | 715,005 | |
Accounts receivable, net | 186,542 | | | 216,645 | |
Inventory | 115,172 | | | 104,994 | |
Prepaid expenses and other current assets | 71,875 | | | 74,122 | |
Total current assets | 1,101,633 | | | 1,426,237 | |
Long-term Assets: | | | |
Property, plant and equipment, net | 663,653 | | | 580,248 | |
Operating lease right-of-use assets | 182,494 | | | 174,225 | |
Goodwill | 2,345,922 | | | 2,335,172 | |
Intangible assets, net | 2,046,773 | | | 2,094,411 | |
Other long-term assets, net | 96,680 | | | 74,591 | |
Total assets | $ | 6,437,155 | | | $ | 6,684,884 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current Liabilities: | | | |
Accounts payable | $ | 84,167 | | | $ | 67,829 | |
Accrued liabilities | 308,219 | | | 398,556 | |
Operating lease liabilities, current portion | 25,813 | | | 19,710 | |
Other current liabilities | 25,132 | | | 30,973 | |
Total current liabilities | 443,331 | | | 517,068 | |
Long-term Liabilities: | | | |
Convertible notes, net | 2,183,145 | | | 2,180,232 | |
Long-term debt | 50,000 | | | — | |
Other long-term liabilities | 364,107 | | | 417,782 | |
Operating lease liabilities, less current portion | 187,226 | | | 182,166 | |
Total liabilities | 3,227,809 | | | 3,297,248 | |
Commitments and contingencies (Note 14) | | | |
Stockholders’ Equity: | | | |
Preferred stock, $0.01 par value Authorized—5,000,000 shares issued and outstanding—no shares at June 30, 2022 and December 31, 2021 | — | | | — | |
Common stock, $0.01 par value Authorized—400,000,000 shares issued and outstanding—176,801,434 and 173,674,067 shares at June 30, 2022 and December 31, 2021 | 1,769 | | | 1,738 | |
Additional paid-in capital | 6,204,742 | | | 6,028,861 | |
Accumulated other comprehensive loss | (8,645) | | | (1,443) | |
Accumulated deficit | (2,988,520) | | | (2,641,520) | |
Total stockholders’ equity | 3,209,346 | | | 3,387,636 | |
Total liabilities and stockholders’ equity | $ | 6,437,155 | | | $ | 6,684,884 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
EXACT SCIENCES CORPORATION
Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share data - unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Revenue | $ | 521,640 | | | $ | 434,819 | | | $ | 1,008,211 | | | $ | 836,896 | |
| | | | | | | |
Operating expenses | | | | | | | |
Cost of sales (exclusive of amortization of acquired intangible assets) | 144,600 | | | 113,968 | | | 279,305 | | | 223,961 | |
Research and development | 106,083 | | | 106,235 | | | 208,331 | | | 221,802 | |
Sales and marketing | 215,922 | | | 194,827 | | | 448,103 | | | 380,968 | |
General and administrative | 181,672 | | | 167,629 | | | 351,442 | | | 435,356 | |
Amortization of acquired intangible assets | 26,356 | | | 23,824 | | | 51,010 | | | 47,014 | |
Intangible asset impairment charge | 6,591 | | | — | | | 6,591 | | | — | |
Total operating expenses | 681,224 | | | 606,483 | | | 1,344,782 | | | 1,309,101 | |
Loss from operations | (159,584) | | | (171,664) | | | (336,571) | | | (472,205) | |
| | | | | | | |
Other income (expense) | | | | | | | |
Investment income (expense), net | (3,719) | | | 3,429 | | | (5,206) | | | 34,617 | |
Interest expense | (4,511) | | | (4,652) | | | (8,989) | | | (9,268) | |
Total other income (expense) | (8,230) | | | (1,223) | | | (14,195) | | | 25,349 | |
| | | | | | | |
Net loss before tax | (167,814) | | | (172,887) | | | (350,766) | | | (446,856) | |
| | | | | | | |
Income tax benefit (expense) | 1,751 | | | (4,025) | | | 3,766 | | | 238,780 | |
| | | | | | | |
Net loss | $ | (166,063) | | | $ | (176,912) | | | $ | (347,000) | | | $ | (208,076) | |
| | | | | | | |
Net loss per share—basic and diluted | $ | (0.94) | | | $ | (1.03) | | | $ | (1.98) | | | $ | (1.22) | |
| | | | | | | |
Weighted average common shares outstanding—basic and diluted | 176,364 | | | 171,494 | | | 175,396 | | | 170,469 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
EXACT SCIENCES CORPORATION
Condensed Consolidated Statements of Comprehensive Loss
(Amounts in thousands - unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Net loss | $ | (166,063) | | | $ | (176,912) | | | $ | (347,000) | | | $ | (208,076) | |
Other comprehensive loss, before tax: | | | | | | | |
Unrealized loss on available-for-sale investments | (1,488) | | | (297) | | | (6,455) | | | (629) | |
Foreign currency translation loss | (510) | | | — | | | (747) | | | — | |
Comprehensive loss, before tax | (168,061) | | | (177,209) | | | (354,202) | | | (208,705) | |
Income tax benefit related to items of other comprehensive loss | — | | | — | | | — | | | 170 | |
Comprehensive loss, net of tax | $ | (168,061) | | | $ | (177,209) | | | $ | (354,202) | | | $ | (208,535) | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
EXACT SCIENCES CORPORATION
Condensed Consolidated Statements of Stockholders’ Equity
(Amounts in thousands, except share data - unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total Stockholders’ Equity |
| Number of Shares | | $0.01 Par Value | | | | |
Balance, January 1, 2022 | 173,674,067 | | | $ | 1,738 | | | $ | 6,028,861 | | | $ | (1,443) | | | $ | (2,641,520) | | | $ | 3,387,636 | |
Exercise of common stock options | 485,537 | | | 5 | | | 4,277 | | | — | | | — | | | 4,282 | |
Compensation expense related to issuance of stock options and restricted stock awards | 1,391,797 | | | 14 | | | 52,427 | | | — | | | — | | | 52,441 | |
Other | 7 | | | — | | | (7) | | | — | | | — | | | (7) | |
Net loss | — | | | — | | | — | | | — | | | (180,937) | | | (180,937) | |
Other comprehensive loss | — | | | — | | | — | | | (5,204) | | | — | | | (5,204) | |
Balance, March 31, 2022 | 175,551,408 | | | $ | 1,757 | | | $ | 6,085,558 | | | $ | (6,647) | | | $ | (2,822,457) | | | $ | 3,258,211 | |
Exercise of common stock options | 84,485 | | | 1 | | | 742 | | | — | | | — | | | 743 | |
Issuance of common stock to fund the Company’s 2021 401(k) match | 391,129 | | | 4 | | | 29,198 | | | — | | | — | | | 29,202 | |
Compensation expense related to issuance of stock options and restricted stock awards | 183,095 | | | 2 | | | 58,930 | | | — | | | — | | | 58,932 | |
Issuance of common stock for business combinations | 265,186 | | | 2 | | | 14,788 | | | — | | | — | | | 14,790 | |
Purchase of employee stock purchase plan shares | 326,131 | | | 3 | | | 15,526 | | | — | | | — | | | 15,529 | |
Net loss | — | | | — | | | — | | | — | | | (166,063) | | | (166,063) | |
Other comprehensive loss | — | | | — | | | — | | | (1,998) | | | — | | | (1,998) | |
Balance, June 30, 2022 | 176,801,434 | | | $ | 1,769 | | | $ | 6,204,742 | | | $ | (8,645) | | | $ | (2,988,520) | | | $ | 3,209,346 | |
EXACT SCIENCES CORPORATION
Condensed Consolidated Statements of Stockholders’ Equity
(Amounts in thousands, except share data - unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss) | | Accumulated Deficit | | Total Stockholders’ Equity |
| Number of Shares | | $0.01 Par Value | | | | |
Balance, January 1, 2021 | 159,423,410 | | | $ | 1,595 | | | $ | 4,279,327 | | | $ | 526 | | | $ | (2,045,896) | | | $ | 2,235,552 | |
Settlement of convertible notes, net of tax | 344 | | | — | | | 26 | | | — | | | — | | | 26 | |
Exercise of common stock options | 967,107 | | | 10 | | | 8,749 | | | — | | | — | | | 8,759 | |
Issuance of common stock to fund the Company’s 2020 401(k) match | 162,606 | | | 2 | | | 22,932 | | | — | | | — | | | 22,934 | |
Compensation expense related to issuance of stock options and restricted stock awards | 1,355,435 | | | 13 | | | 158,239 | | | — | | | — | | | 158,252 | |
Issuance of common stock for business combinations, net of issuance costs | 9,384,410 | | | 94 | | | 1,254,704 | | | — | | | — | | | 1,254,798 | |
Net loss | — | | | — | | | — | | | — | | | (31,164) | | | (31,164) | |
Other comprehensive loss | — | | | — | | | — | | | (162) | | | — | | | (162) | |
Balance, March 31, 2021 | 171,293,312 | | | $ | 1,714 | | | $ | 5,723,977 | | | $ | 364 | | | $ | (2,077,060) | | | $ | 3,648,995 | |
Settlement of convertible notes, net of tax | 197 | | | — | | | 14 | | | — | | | — | | | 14 | |
Exercise of common stock options | 140,478 | | | 1 | | | 2,857 | | | — | | | — | | | 2,858 | |
Compensation expense related to issuance of stock options and restricted stock awards | 121,575 | | | 2 | | | 56,283 | | | — | | | — | | | 56,285 | |
Issuance of common stock for business combinations | 126,026 | | | 1 | | | 16,119 | | | — | | | — | | | 16,120 | |
Purchase of employee stock purchase plan shares | 173,717 | | | 2 | | | 12,036 | | | — | | | — | | | 12,038 | |
Net loss | — | | | — | | | — | | | — | | | (176,912) | | | (176,912) | |
Other comprehensive loss | — | | | — | | | — | | | (297) | | | — | | | (297) | |
Balance, June 30, 2021 | 171,855,305 | | | $ | 1,720 | | | $ | 5,811,286 | | | $ | 67 | | | $ | (2,253,972) | | | $ | 3,559,101 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
EXACT SCIENCES CORPORATION
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands - unaudited)
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2022 | | 2021 |
Cash flows from operating activities: | | | |
Net loss | $ | (347,000) | | | $ | (208,076) | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | |
Depreciation | 48,498 | | | 42,007 | |
Loss on disposal of property, plant and equipment | 166 | | | 639 | |
Unrealized (gain) loss on equity investments | 4,247 | | | (2,486) | |
Deferred tax benefit | (4,940) | | | (244,509) | |
Stock-based compensation | 111,373 | | | 133,577 | |
Post-combination expense for acceleration of unvested equity | — | | | 80,960 | |
Realized gain on preferred stock investment | — | | | (30,500) | |
Amortization of deferred financing costs, convertible note debt discount and issuance costs, and other liabilities | 3,420 | | | 3,282 | |
Amortization of premium on short-term investments | 1,493 | | | 1,616 | |
Amortization of acquired intangible assets | 51,010 | | | 47,014 | |
Intangible asset impairment charge | 6,591 | | | — | |
Asset acquisition IPR&D expense | — | | | 85,337 | |
Remeasurement of contingent consideration | (51,759) | | | 9,201 | |
Non-cash lease expense | 17,281 | | | 11,837 | |
Changes in assets and liabilities: | | | |
Accounts receivable, net | 30,632 | | | 8,995 | |
Inventory, net | (10,178) | | | 4,267 | |
Operating lease liabilities | (10,668) | | | (7,095) | |
Accounts payable and accrued liabilities | (79,339) | | | 27,138 | |
Other assets and liabilities | (5,497) | | | (94) | |
Net cash used in operating activities | (234,670) | | | (36,890) | |
Cash flows from investing activities: | | | |
Purchases of marketable securities | (79,110) | | | (915,289) | |
Maturities and sales of marketable securities | 269,310 | | | 325,380 | |
Purchases of property, plant and equipment | (96,949) | | | (37,504) | |
Business combination, net of cash acquired and issuance costs | 685 | | | (415,549) | |
Asset acquisition | — | | | (58,073) | |
Investments in privately held companies | (26,667) | | | (10,000) | |
Other investing activities | (49) | | | (244) | |
Net cash provided by (used in) investing activities | 67,220 | | | (1,111,279) | |
Cash flows from financing activities: | | | |
Proceeds from accounts receivable securitization facility | 50,000 | | | — | |
Proceeds from exercise of common stock options | 5,025 | | | 11,617 | |
Proceeds in connection with the Company’s employee stock purchase plan | 15,529 | | | 12,038 | |
Other financing activities | (4,407) | | | (3,068) | |
Net cash provided by financing activities | 66,147 | | | 20,587 | |
Effects of exchange rate changes on cash and cash equivalents | (747) | | | — | |
Net decrease in cash, cash equivalents and restricted cash | (102,050) | | | (1,127,582) | |
Cash, cash equivalents and restricted cash, beginning of period | 315,768 | | | 1,491,594 | |
Cash, cash equivalents and restricted cash, end of period | $ | 213,718 | | | $ | 364,012 | |
EXACT SCIENCES CORPORATION
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands - unaudited)
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2022 | | 2021 |
Supplemental disclosure of non-cash investing and financing activities | | | |
Property, plant and equipment acquired but not paid | $ | 34,604 | | | $ | 15,139 | |
Business combination contingent consideration liability | $ | 4,600 | | | $ | 350,348 | |
Supplemental disclosure of cash flow information: | | | |
Interest paid | $ | 5,133 | | | $ | 5,414 | |
Reconciliation of cash, cash equivalents and restricted cash: | | | |
Cash and cash equivalents | $ | 213,421 | | | $ | 363,715 | |
Restricted cash — included in prepaid expenses and other current assets as of June 30, 2022, and other long-term assets, net as of June 30, 2021 | 297 | | | 297 | |
Total cash, cash equivalents and restricted cash | $ | 213,718 | | | $ | 364,012 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Exact Sciences Corporation (together with its subsidiaries, “Exact,” or the “Company”) was incorporated in February 1995. Exact is a leading global cancer diagnostics company. It has developed some of the most impactful tests in cancer screening and diagnostics, including Cologuard® and Oncotype DX®. Exact is currently working on the development of additional tests, with the goal of bringing new, innovative cancer tests to patients throughout the world.
Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements, which include the accounts of Exact Sciences Corporation and those of its wholly owned subsidiaries and variable interest entities, are unaudited and have been prepared on a basis substantially consistent with the Company’s audited financial statements and notes as of and for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K (the “2021 Form 10-K”). All intercompany transactions and balances have been eliminated upon consolidation. These condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and follow the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of adjustments of a normal and recurring nature) considered necessary for a fair statement of its financial position, operating results and cash flows for the periods presented. The condensed consolidated balance sheet at December 31, 2021 has been derived from audited financial statements, but does not contain all of the footnote disclosures from the 2021 Form 10-K. The results of the Company’s operations for any interim period are not necessarily indicative of the results of the Company’s operations for any other interim period or for a full fiscal year. The statements should be read in conjunction with the audited financial statements and related notes included in the 2021 Form 10-K.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting policies are those that affect the Company’s financial statements materially and involve difficult, subjective or complex judgments by management, and actual results could differ from those estimates. These estimates include revenue recognition, valuation of intangible assets and goodwill, and accounting for income taxes among others. The Company’s critical accounting policies and estimates are explained further in the notes to the condensed consolidated financial statements in this Quarterly Report and the 2021 Form 10-K.
The spread of the coronavirus (“COVID-19”) has affected many segments of the global economy, including the cancer screening and diagnostics industry. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of June 30, 2022 and through the date of the filing of this Quarterly Report on Form 10-Q. The accounting matters assessed included, but were not limited to, the Company’s allowance for doubtful accounts and credit losses, marketable and non-marketable investments, software, and the carrying value of the goodwill and other long-lived assets. The Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in additional material impacts to the Company’s consolidated financial statements in future reporting periods.
The pandemic and related precautionary measures began to materially disrupt the Company's operations in March 2020 and may continue to disrupt the business for an unknown period of time. As a result, the pandemic had an impact on the Company’s revenues and operating results.
The ultimate impact of COVID-19 depends on factors beyond the Company’s knowledge or control, including the duration and severity of the outbreak, as well as third-party actions taken to contain its spread and mitigate its public health effects. As a result, the Company is unable to estimate the extent to which COVID-19 will negatively impact its financial results or liquidity.
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Significant Accounting Policies
During the six months ended June 30, 2022, there were no changes to the Company’s significant accounting policies as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, except as described in the Collateralized Debt Instruments and Recently Adopted Accounting Pronouncements sections below.
Collateralized Debt Instruments
Debt instruments that are collateralized by security interests in financial assets held by the Company are accounted for as a secured borrowing and therefore: (i) the asset balances pledged as collateral are included within the applicable balance sheet line item and the borrowings are included within long-term debt in the condensed consolidated balance sheet; (ii) interest expense is included within the condensed consolidated statements of operations; and (iii) in the case of collateralized accounts receivable, receipts from customers related to the underlying accounts receivable are reflected as operating cash flows, and (iv) borrowings and repayments under the collateralized loans are reflected as financing cash flows within the condensed consolidated statements of cash flows.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation in the condensed consolidated financial statements and accompanying notes to the condensed consolidated financial statements.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In October 2021, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-08, Business Combinations (Topic 805). This update requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Accounting Standards Codification (“ASC”) 606. This differs from the current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. The amendments in this update should be applied prospectively, and are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company early adopted the amendments in this update during the first quarter of fiscal year 2022. There was no material impact to the Company’s condensed consolidated financial statements.
Net Loss Per Share
Basic net loss per common share was determined by dividing net loss applicable to common stockholders by the weighted average common shares outstanding during the period. Basic and diluted net loss per share is the same because all outstanding common stock equivalents have been excluded, as they are anti-dilutive as a result of the Company’s losses.
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following potentially issuable common shares were not included in the computation of diluted net loss per share because they would have an anti-dilutive effect due to net losses for each period:
| | | | | | | | | | | | | | |
| | June 30, |
(In thousands) | | 2022 | | 2021 |
Shares issuable in connection with acquisitions (1) | | 45 | | | 157 | |
Shares issuable upon exercise of stock options | | 1,683 | | | 2,486 | |
Shares issuable upon the release of restricted stock awards | | 5,772 | | | 4,334 | |
Shares issuable upon the release of performance share units | | 992 | | | 867 | |
Shares issuable upon conversion of convertible notes | | 20,309 | | | 20,309 | |
| | 28,801 | | | 28,153 | |
______________
(1)During the third quarter of 2021, shares were issued related to holdback amounts on the previously closed acquisition of Viomics, Inc. (“Viomics”) causing the decrease in shares issuable as of June 30, 2022 as compared to June 30, 2021. The remaining issuable shares relate to the previously closed acquisition of Paradigm Diagnostics, Inc. (“Paradigm”) in March 2020.
(2) REVENUE
The Company’s revenue is primarily generated by its laboratory testing services utilizing its Cologuard, Oncotype, and COVID-19 tests. The services are completed upon release of a patient’s test result to the ordering healthcare provider.
Disaggregation of Revenue
The following table presents the Company’s revenues disaggregated by revenue source:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
(In thousands) | | 2022 | | 2021 | | 2022 | | 2021 |
Screening | | | | | | | | |
Medicare Parts B & C | | $ | 135,252 | | | $ | 111,387 | | | $ | 249,007 | | | $ | 212,946 | |
Commercial | | 181,186 | | | 140,149 | | | 342,866 | | | 268,023 | |
Other | | 37,456 | | | 12,401 | | | 68,543 | | | 23,296 | |
Total Screening | | 353,894 | | | 263,937 | | | 660,416 | | | 504,265 | |
Precision Oncology | | | | | | | | |
Medicare Parts B & C | | $ | 52,621 | | | $ | 48,310 | | | $ | 105,186 | | | $ | 93,147 | |
Commercial | | 45,940 | | | 47,144 | | | 92,002 | | | 93,956 | |
International | | 28,341 | | | 26,848 | | | 57,784 | | | 52,904 | |
Other | | 27,093 | | | 15,507 | | | 51,643 | | | 27,209 | |
Total Precision Oncology | | 153,995 | | | 137,809 | | | 306,615 | | | 267,216 | |
COVID-19 Testing | | $ | 13,751 | | | $ | 33,073 | | | $ | 41,180 | | | $ | 65,415 | |
Total | | $ | 521,640 | | | $ | 434,819 | | | $ | 1,008,211 | | | $ | 836,896 | |
Screening revenue primarily includes laboratory service revenue from the Cologuard test while Precision Oncology revenue primarily includes laboratory service revenue from global Oncotype® products.
At each reporting period end, the Company conducts an analysis of the estimates used to calculate the transaction price to determine whether any new information available impacts those estimates made in prior reporting periods. The Company recognized revenue from a change in transaction price of $7.1 million and $11.3 million for the three and six months ended June 30, 2022, respectively. The Company recorded a downward adjustment to revenue from a change in transaction price of $14.7 million and $13.0 million for the three and six months ended June 30, 2021, respectively.
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The Company had deferred revenue of $1.2 million and $1.0 million as of June 30, 2022 and December 31, 2021, respectively. Deferred revenue is reported in other current liabilities in the Company’s condensed consolidated balance sheets.
Revenue recognized for the three months ended June 30, 2022 and 2021, which was included in the deferred revenue balance at the beginning of each period, was $0.1 million and $10.4 million, respectively. Of the $10.4 million of revenue recognized for the three months ended June 30, 2021, $10.3 million related to COVID-19 testing. Revenue recognized for the six months ended June 30, 2022 and 2021, which was included in the deferred revenue balance at the beginning of each period, was $0.4 million and $24.4 million, respectively. Of the $24.4 million of revenue recognized for the six months ended June 30, 2021, $24.1 million related to COVID-19 testing.
(3) MARKETABLE SECURITIES
The following table sets forth the Company’s cash, cash equivalents, restricted cash, and marketable securities at June 30, 2022 and December 31, 2021:
| | | | | | | | | | | | | | |
(In thousands) | | June 30, 2022 | | December 31, 2021 |
Cash, cash equivalents, and restricted cash | | | | |
Cash and money market | | $ | 157,219 | | | $ | 247,335 | |
Cash equivalents | | 56,202 | | | 68,136 | |
Restricted cash | | 297 | | | 297 | |
Total cash, cash equivalents, and restricted cash | | 213,718 | | | 315,768 | |
Marketable securities | | | | |
Available-for-sale debt securities | | $ | 513,520 | | | $ | 711,669 | |
Equity securities | | 1,103 | | | 3,336 | |
Total marketable securities | | 514,623 | | | 715,005 | |
Total cash and cash equivalents, restricted cash and marketable securities | | $ | 728,341 | | | $ | 1,030,773 | |
Available-for-sale debt securities at June 30, 2022 consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | Amortized Cost | | Gains in Accumulated Other Comprehensive Income (Loss) (1) | | Losses in Accumulated Other Comprehensive Income (Loss) (1) | | Estimated Fair Value |
Cash equivalents | | | | | | | | |
Commercial paper | | $ | 53,265 | | | $ | — | | | $ | — | | | $ | 53,265 | |
U.S. government agency securities | | 2,937 | | | — | | | — | | | 2,937 | |
Total cash equivalents | | 56,202 | | | — | | | — | | | 56,202 | |
Marketable securities | | | | | | | | |
Corporate bonds | | $ | 157,170 | | | $ | 1 | | | $ | (2,290) | | | $ | 154,881 | |
U.S. government agency securities | | 250,731 | | | 1 | | | (4,555) | | | 246,177 | |
Certificates of deposit | | 24,211 | | | — | | | (12) | | | 24,199 | |
Commercial paper | | 10,208 | | | — | | | (1) | | | 10,207 | |
Asset backed securities | | 79,121 | | | — | | | (1,065) | | | 78,056 | |
Total marketable securities | | 521,441 | | | 2 | | | (7,923) | | | 513,520 | |
Total available-for-sale securities | | $ | 577,643 | | | $ | 2 | | | $ | (7,923) | | | $ | 569,722 | |
______________
(1)Gains and losses in accumulated other comprehensive income (loss) (“AOCI”) are reported before tax impact.
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Available-for-sale debt securities at December 31, 2021 consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | Amortized Cost | | Gains in Accumulated Other Comprehensive Income (Loss) (1) | | Losses in Accumulated Other Comprehensive Income (Loss) (1) | | Estimated Fair Value |
Cash equivalents | | | | | | | | |
U.S. government agency securities | | $ | 3,543 | | | $ | — | | | $ | — | | | $ | 3,543 | |
Commercial paper | | 64,593 | | | — | | | — | | | 64,593 | |
Total cash equivalents | | 68,136 | | | — | | | — | | | 68,136 | |
Marketable securities | | | | | | | | |
U.S. government agency securities | | $ | 250,793 | | | $ | — | | | $ | (873) | | | $ | 249,920 | |
Asset backed securities | | 94,565 | | | 2 | | | (107) | | | 94,460 | |
Commercial paper | | 6,996 | | | — | | | — | | | 6,996 | |
Certificates of deposit | | 47,147 | | | 2 | | | (10) | | | 47,139 | |
Corporate bonds | | 313,634 | | | 13 | | | (493) | | | 313,154 | |
Total marketable securities | | 713,135 | | | 17 | | | (1,483) | | | 711,669 | |
Total available-for-sale securities | | $ | 781,271 | | | $ | 17 | | | $ | (1,483) | | | $ | 779,805 | |
______________
(1)Gains and losses in AOCI are reported before tax impact.
The following table summarizes contractual underlying maturities of the Company’s available-for-sale debt securities at June 30, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Due one year or less | | Due after one year through five years |
(In thousands) | | Cost | | Fair Value | | Cost | | Fair Value |
Cash equivalents | | | | | | | | |
Commercial paper | | $ | 53,265 | | | $ | 53,265 | | | $ | — | | | $ | — | |
U.S. government agency securities | | 2,937 | | | 2,937 | | | — | | | — | |
Total cash equivalents | | 56,202 | | | 56,202 | | | |