EXACT SCIENCES CORP, 10-Q filed on 8/2/2013
Quarterly Report
Document and Entity Information
6 Months Ended
Jun. 30, 2013
Jul. 31, 2013
Document and Entity Information
 
 
Entity Registrant Name
EXACT SCIENCES CORP 
 
Entity Central Index Key
0001124140 
 
Document Type
10-Q 
 
Document Period End Date
Jun. 30, 2013 
 
Amendment Flag
false 
 
Current Fiscal Year End Date
--12-31 
 
Entity Current Reporting Status
Yes 
 
Entity Filer Category
Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
70,698,697 
Document Fiscal Year Focus
2013 
 
Document Fiscal Period Focus
Q2 
 
Condensed Balance Sheets (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2013
Dec. 31, 2012
Current Assets:
 
 
Cash and cash equivalents
$ 21,518 
$ 13,345 
Marketable securities
136,211 
94,776 
Prepaid expenses and other current assets
1,087 
593 
Total current assets
158,816 
108,714 
Property and Equipment, at cost:
 
 
Laboratory equipment
5,042 
4,051 
Office and computer equipment
1,396 
824 
Leasehold improvements
283 
283 
Furniture and fixtures
28 
28 
Property and Equipment, gross
6,749 
5,186 
Less-Accumulated depreciation
(2,355)
(1,781)
Property and Equipment, net
4,394 
3,405 
TOTAL ASSETS
163,210 
112,119 
Current Liabilities:
 
 
Accounts payable
1,084 
3,652 
Accrued expenses
4,227 
3,327 
Capital lease obligation, current portion
342 
333 
Deferred license fees, current portion
2,366 
4,143 
Total current liabilities
8,019 
11,455 
Long-term debt
1,000 
1,000 
Long-term accrued interest
73 
63 
Capital lease obligation, less current portion
538 
711 
Deferred license fees, less current portion
 
295 
Commitments and contingencies
   
   
Stockholders' Equity:
 
 
Preferred stock, $0.01 par value Authorized-5,000,000 shares Issued and outstanding-no shares at June 30, 2013 and December 31, 2012
   
   
Common stock, $0.01 par value Authorized-100,000,000 shares Issued and outstanding-70,662,697 and 63,909,800 shares at June 30, 2013 and December 31, 2012
707 
639 
Additional paid-in capital
450,269 
372,123 
Other comprehensive income
17 
78 
Accumulated deficit
(297,413)
(274,245)
Total stockholders' equity
153,580 
98,595 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 163,210 
$ 112,119 
Condensed Balance Sheets (Parenthetical) (USD $)
Jun. 30, 2013
Dec. 31, 2012
Condensed Balance Sheets
 
 
Preferred stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Preferred stock, Authorized shares
5,000,000 
5,000,000 
Preferred stock, Issued shares
Preferred stock, outstanding shares
Common stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Common stock, Authorized shares
100,000,000 
100,000,000 
Common stock, Issued shares
70,662,697 
63,909,800 
Common stock, outstanding shares
70,662,697 
63,909,800 
Condensed Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Condensed Statements of Operations
 
 
 
 
License fees
$ 1,036 
$ 1,036 
$ 2,072 
$ 2,072 
Operating expenses:
 
 
 
 
Research and development
6,457 
12,202 
13,983 
21,201 
General and administrative
3,628 
2,393 
6,276 
4,538 
Sales and marketing
3,302 
1,331 
5,061 
1,925 
Total operating expenses
13,387 
15,926 
25,320 
27,664 
Loss from operations
(12,351)
(14,890)
(23,248)
(25,592)
Investment income
55 
59 
117 
121 
Interest expense
(18)
(5)
(37)
(10)
Net loss
$ (12,314)
$ (14,836)
$ (23,168)
$ (25,481)
Net loss per share-basic and diluted (in dollars per share)
$ (0.19)
$ (0.26)
$ (0.36)
$ (0.45)
Weighted average common shares outstanding-basic and diluted (in shares)
64,699 
57,037 
64,270 
56,877 
Condensed Statements of Comprehensive Loss (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Condensed Statements of Comprehensive Loss
 
 
 
 
Net loss
$ (12,314)
$ (14,836)
$ (23,168)
$ (25,481)
Other comprehensive loss, net of tax
 
 
 
 
Unrealized holding gain (loss) on available-for-sale investments
(54)
32 
(61)
67 
Comprehensive loss
$ (12,368)
$ (14,804)
$ (23,229)
$ (25,414)
Condensed Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Cash flows from operating activities:
 
 
Net loss
$ (23,168)
$ (25,481)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
Depreciation of property and equipment
646 
417 
Loss on disposal of property and equipment
91 
 
Stock-based compensation
3,811 
2,459 
Amortization of deferred license fees
(2,072)
(2,072)
Warrant licensing expense
 
152 
Restricted stock licensing expense
 
1,000 
Amortization of premium on short-term investments
270 
220 
Changes in assets and liabilities:
 
 
Prepaid expenses and other current assets
(494)
(1,313)
Accounts payable
(2,568)
Accrued expenses
1,515 
1,128 
Accrued interest
10 
10 
Net cash used in operating activities
(21,959)
(23,478)
Cash flows from investing activities:
 
 
Purchases of marketable securities
(71,833)
(33,764)
Maturities of marketable securities
30,067 
26,352 
Purchases of property and equipment
(1,726)
(729)
Net cash used in investing activities
(43,492)
(8,141)
Cash flows from financing activities:
 
 
Proceeds from sale of common stock, net of issuance costs
73,302 
 
Proceeds from exercise of common stock options and stock purchase plan
486 
1,864 
Payments on capital lease obligations
(164)
 
Net cash provided by financing activities
73,624 
1,864 
Net increase (decrease) in cash and cash equivalents
8,173 
(29,755)
Cash and cash equivalents, beginning of period
13,345 
35,781 
Cash and cash equivalents, end of period
21,518 
6,026 
Supplemental disclosure of non-cash investing and financing activities:
 
 
Unrealized gain (loss) on available-for-sale investments
67 
Issuance of 30,534 and 32,872 shares of common stock to fund the Company's 401(k) matching contribution for 2012 and 2011, respectively
354 
274 
Conversion of accrued expenses into 34,442 and 34,336 shares of common stock in connection with the Company's Employee Stock Purchase Plan for 2013 and 2012, respectively.
$ 261 
$ 194 
Condensed Statements of Cash Flows (Parenthetical)
6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Condensed Statements of Cash Flows
 
 
Issuance of shares of common stock to fund the Company's 401(k) matching contribution
30,534 
32,872 
Conversion of accrued expenses into shares of common stock
34,442 
34,336 
ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION AND BASIS OF PRESENTATION

(1) ORGANIZATION AND BASIS OF PRESENTATION

 

Organization

 

Exact Sciences Corporation (“Exact,” “we,” “us” or the “Company”) was incorporated in February 1995. Exact is a molecular diagnostics company currently focused on the early detection and prevention of colorectal cancer. The Company’s non-invasive stool-based DNA (sDNA) screening technology includes proprietary and patented methods that isolate and analyze human DNA present in stool to screen for the presence of colorectal pre-cancer and cancer.

 

Basis of Presentation

 

The accompanying condensed financial statements of the Company 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, 2012 included in the Company’s Annual Report on Form 10-K (the “2012 Form 10-K”). These condensed financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and follow the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. In the opinion of management, all adjustments (consisting only of adjustments of a normal and recurring nature) considered necessary for a fair presentation of the results of operations have been included. The results of the Company’s operations for any interim period are not necessarily indicative of the results of the Company’s operations for any other interim period or for a full fiscal year. The statements should be read in conjunction with the audited financial statements and related notes included in the 2012 Form 10-K.  Management has evaluated subsequent events for disclosure or recognition in the accompanying financial statements up to the filing of this report.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

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

 

Cash and Cash Equivalents

 

The Company considers cash on hand, demand deposits in bank, money market funds, and all highly liquid investments with an original maturity of 90 days or less to be cash and cash equivalents. The Company had no restricted cash at June 30, 2013 and December 31, 2012.

 

Marketable Securities

 

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

 

At June 30, 2013 and December 31, 2012, the Company’s investments were comprised of fixed income investments and all were deemed available-for-sale. The objectives of the Company’s investment strategy are to provide liquidity and safety of principal while striving to achieve the highest rate of return consistent with these two objectives.  The Company’s investment policy limits investments to certain types of instruments issued by institutions with investment grade credit ratings and places restrictions on maturities and concentration by type and issuer. Investments in which the Company has the ability and intent, if necessary, to liquidate in order to support its current operations (including those with a contractual term greater than one year from the date of purchase) are classified as current. All of the Company’s investments are considered current. There were no realized losses for the six months ended June 30, 2013 and June 30, 2012.  Realized gains were $2,760 and $2,528 for the six months ended June 30, 2013 and 2012, respectively. Unrealized gains or losses on investments are recorded in other comprehensive loss.

 

Available-for-sale securities at June 30, 2013 consist of the following:

 

 

 

June 30, 2013

 

(In thousands)

 

Amortized
Cost

 

Gains in
Accumulated
Other
Comprehensive
Income

 

Losses in
Accumulated
Other
Comprehensive
Income

 

Estimated
Fair Value

 

U.S. government agency securities

 

$

49,156

 

$

40

 

$

 

$

49,196

 

Corporate bonds

 

73,771

 

 

(35

)

73,736

 

Certificates of deposit

 

8,272

 

12

 

 

8,284

 

Commercial paper

 

4,995

 

 

 

4,995

 

Total available-for-sale securities

 

$

136,194

 

$

52

 

$

(35

)

$

136,211

 

 

Available-for-sale securities at December 31, 2012 consist of the following:

 

 

 

December 31, 2012

 

(In thousands)

 

Amortized
Cost

 

Gains in
Accumulated
Other
Comprehensive
Income

 

Losses in
Accumulated
Other
Comprehensive
Income

 

Estimated
Fair Value

 

U.S. government agency securities

 

$

44,270

 

$

38

 

$

 

$

44,308

 

Corporate bonds

 

43,303

 

27

 

 

43,330

 

Certificates of deposit

 

5,926

 

13

 

 

5,939

 

Commercial paper

 

1,199

 

 

 

1,199

 

Total available-for-sale securities

 

$

94,698

 

$

78

 

$

 

$

94,776

 

 

Net Loss Per Share

 

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

 

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

 

 

 

June 30,

 

(In thousands)

 

2013

 

2012

 

Shares issuable upon exercise of stock options

 

6,249

 

6,320

 

Shares issuable upon exercise of outstanding warrants (1)

 

155

 

325

 

Shares issuable upon the release of restricted stock awards

 

875

 

884

 

Shares issuable upon the vesting of restricted stock awards related to a licensing agreement

 

49

 

73

 

 

 

7,328

 

7,602

 

 

(1)  At June 30, 2013, represents warrants to purchase 80,000 shares of common stock issued under a license agreement and warrants to purchase 75,000 shares of common stock issued under a consulting agreement.  At June 30, 2012, represents warrants to purchase 250,000 shares of common stock issued under a license agreement and warrants to purchase 75,000 shares of common stock issued under a consulting agreement.

 

Revenue Recognition

 

License fees.   License fees for the licensing of product rights are recorded as deferred revenue upon receipt of cash and recognized as revenue on a straight-line basis over the license period. As more fully described in the 2012 Form 10-K, in connection with our January 2009 strategic transaction with Genzyme Corporation, Genzyme agreed to pay us a total of $18.5 million, of which $16.65 million was paid on January 27, 2009 and $1.85 million was subject to a holdback by Genzyme to satisfy certain potential indemnification obligations in exchange for the assignment and licensing of certain intellectual property to Genzyme. The Company’s on-going performance obligations to Genzyme under the Collaboration, License and Purchase Agreement (the “CLP Agreement”), as described below, including its obligation to deliver through licenses certain intellectual property improvements to Genzyme, if improvements are made during the initial five-year collaboration period, were deemed to be undelivered elements of the CLP Agreement on the date of closing. Accordingly, the Company deferred the initial $16.65 million in cash received at closing and is amortizing that up-front payment on a straight-line basis into revenue over the initial five-year collaboration period ending in January 2014. The Company received the first holdback amount of $962,000, which included accrued interest due, from Genzyme during the first quarter of 2010. The Company received the second holdback amount of $934,250, which included accrued interest due, from Genzyme during the third quarter of 2010.  The amounts were deferred and are being amortized on a straight-line basis into revenue over the remaining term of the collaboration at the time of receipt.

 

In addition, Genzyme purchased 3,000,000 shares of common stock on January 27, 2009 for $2.00 per share, representing a premium of $0.51 per share above the closing price of the Company’s common stock on that date of $1.49 per share. The aggregate premium paid by Genzyme over the closing price of the Company’s common stock on the date of the transaction of $1.53 million is deemed to be a part of the total consideration for the CLP Agreement. Accordingly, the Company deferred the aggregate $1.53 million premium and is amortizing that amount on a straight-line basis into revenue over the initial five-year collaboration period ending in January 2014.

 

The Company recognized approximately $1.0 million in license fee revenue in connection with the amortization of the up-front payments from Genzyme, during each of the three months ended June 30, 2013 and June 30, 2012. The Company recognized approximately $2.1 million in license fee revenue in connection with the amortization of up-front payments from Genzyme during each of the six months ended June 30, 2013 and June 30, 2012.

 

Reclassifications

 

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

MAYO LICENSE AGREEMENT
MAYO LICENSE AGREEMENT

(3) MAYO LICENSE AGREEMENT

 

Overview

 

On June 11, 2009, the Company entered into a license agreement (the “License Agreement”) with MAYO Foundation for Medical Education and Research (“MAYO”). Under the License Agreement, MAYO granted the Company an exclusive, worldwide license within the field (the “Field”) of stool or blood based cancer diagnostics and screening (excluding a specified proteomic target) with regard to certain MAYO patents, and a non-exclusive worldwide license within the Field with regard to certain MAYO know-how. The licensed patents cover advances in sample processing, analytical testing and data analysis associated with non-invasive, stool-based DNA screening for colorectal cancer. Under the License Agreement, the Company assumes the obligation and expense of prosecuting and maintaining the licensed patents and is obligated to make commercially reasonable efforts to bring products covered by the license to market. Pursuant to the License Agreement, the Company granted MAYO two common stock purchase warrants with an exercise price of $1.90 per share covering 1,000,000 and 250,000 shares of common stock, respectively. The Company is also required to make payments to MAYO for up-front fees, fees once certain milestones are reached by the Company, and other payments as outlined in the License Agreement. In addition to the license to intellectual property owned by MAYO, the Company receives product development and research and development efforts from MAYO personnel. The Company determined that the payments made for intellectual property should not be capitalized as the future economic benefit derived from the transactions is uncertain. The Company is also obligated to make royalty payments to MAYO on potential future net sales of any products developed from the licensed technology.

 

Warrants

 

The warrants granted to MAYO were valued based on a Black-Scholes pricing model at the date of the grant. The warrants were granted with an exercise price of $1.90 per share of common stock. The grant to purchase 1,000,000 shares was immediately exercisable and the grant to purchase 250,000 shares vests and becomes exercisable over a four year period.

 

In March of 2010, MAYO partially exercised its warrant covering 1,000,000 shares by utilizing the cashless exercise provision contained in the warrant.  As a result of this exercise for a gross amount of 200,000 shares, in lieu of paying a cash exercise price, MAYO forfeited its rights with respect to 86,596 shares leaving it with a net amount of 113,404 shares.

 

In September of 2010, MAYO partially exercised this warrant by utilizing the cashless exercise provision contained in the warrant.  As a result of this exercise for a gross amount of 300,000 shares, in lieu of paying a cash exercise price, MAYO forfeited its rights with respect to 97,853 shares leaving it with a net amount of 202,147 shares.

 

In June of 2011, MAYO partially exercised this warrant by utilizing the cashless exercise provision contained in the warrant. As a result of this exercise for a gross amount of 250,000 shares, in lieu of paying a cash exercise price, MAYO forfeited its rights with respect to 60,246 shares leaving it with a net amount of 189,754 shares.

 

In September of 2011, MAYO partially exercised this warrant by utilizing the cashless exercise provision contained in the warrant. As a result of this exercise for a gross amount of 250,000 shares, in lieu of paying a cash exercise price, MAYO forfeited its right with respect to 56,641 shares leaving it with a net amount of 193,359 shares. Following this exercise, the warrant covering 1,000,000 shares was fully exercised.

 

In January of 2013, MAYO partially exercised its warrant covering 250,000 shares by utilizing the cashless exercise provision contained in the warrant. As a result of this exercise for a gross amount of 85,000 shares, in lieu of paying a cash exercise price, MAYO forfeited its right with respect to 14,008 shares leaving it with a net amount of 70,992 shares.

 

In June of 2013, MAYO partially exercised its warrant covering a remaining 165,000 shares by utilizing the cashless exercise provision contained in the warrant. As a result of this exercise for a gross amount of 85,000 shares, in lieu of paying a cash exercise price, MAYO forfeited its right with respect to 12,765 shares leaving it with a net amount of 72,235 shares. The warrant now covers a total of 80,000 shares.

 

Royalty Payments

 

The Company will make royalty payments to MAYO based on a percentage of net sales of products developed from the licensed technology starting in the third year of the agreement.  Minimum royalty payments were $10,000 in 2012 and will be $25,000 per year through 2029, the year the last patent expires.

 

Other Payments

 

Other payments under the MAYO agreement include an upfront payment of $80,000, a milestone payment of $250,000 on the commencement of patient enrollment in FDA trials for the Company’s Cologuard pre-cancer and cancer screening test, and a $500,000 payment upon FDA approval of the Company’s Cologuard test.  The upfront payment of $80,000 was made in the third quarter of 2009 and expensed to research and development in the second quarter of 2009. The Company began enrollment in its FDA trial in June of 2011 and the milestone payment of $250,000 was made in June of 2011 and expensed to research and development in the second quarter of 2011.  It is uncertain as to when the FDA will approve the Company’s pre-cancer and cancer screening test. Therefore, the $500,000 milestone payment has not been recorded as a liability. The Company evaluates the status of the FDA trial at each reporting date to determine if a liability should be recorded for the milestone payment.

 

In addition, the Company is making payments to MAYO for research and development efforts.  During the three and six months ended June 30, 2013, the Company made payments of $0.3 million and $0.5 million, respectively. At June 30, 2013 the Company recorded an estimated liability in the amount of $0.5 million for research and development efforts.  During the three and six months ended June 30, 2012, the Company made payments of $0.2 million. At June 30, 2012 the Company recorded an estimated liability in the amount of $0.2 million for research and development efforts.

 

May 2012 Amendment

 

In May 2012 the Company expanded the relationship with MAYO through an amendment to the License Agreement. As part of the amendment, MAYO expanded the Company’s license to include all gastrointestinal cancers and diseases, and new cancer screening applications of stool- and blood-based testing. As consideration for the expanded license, the Company granted MAYO 97,466 shares of restricted stock, one quarter of which vested immediately, with the remainder to vest in three equal annual installments. The Company recognized $1.0 million in licensing expense during the twelve months ended December 31, 2012 in connection with the restricted stock grant due to the uncertainty in the license providing a future benefit.

 

As part of the amendment, the Company will also be responsible for making additional restricted stock grants to MAYO as certain milestones are met with respect to commercial launch of the Company’s second and third licensed products. Additionally, the Company will make milestone payments once certain sales levels are reached on the second and third licensed products. It is uncertain as to when these milestones will be met; therefore, the milestone payments have not been recorded as a liability. The Company evaluates the status of the milestone payments at each reporting date to determine if a liability should be recorded for the milestone payment.

STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION

(4) STOCK-BASED COMPENSATION

 

Stock-Based Compensation Plans

 

The Company maintains the 2010 Omnibus Long-Term Incentive Plan, the 2010 Employee Stock Purchase Plan,  the 2000 Stock Option and Incentive Plan and the 2000 Employee Stock Purchase Plan (collectively, the “Stock Plans”).

 

Stock-Based Compensation Expense

 

The Company recorded $2.8 million and $3.8 million in stock-based compensation expense during the three and six months ended June 30, 2013 in connection with the amortization of restricted stock and restricted stock unit awards, stock purchase rights granted under the Company’s employee stock purchase plan and stock options granted to employees, non-employee consultants and non-employee directors.   The Company recorded $1.5 million and $2.5 million in stock-based compensation expense during the three and six months ended June 30, 2012 in connection with the amortization of restricted stock and restricted stock unit awards, stock purchase rights granted under the Company’s employee stock purchase plan and stock options granted to employees and non-employee directors.

 

In connection with the June 7, 2013 resignation of Laura Stoltenberg, the Company’s former Chief Commercial Officer, the Company modified the vesting of 100,000 shares of Ms. Stoltenberg’s previously unvested restricted stock units of which 41,250 of the restricted stock units vested upon the execution of the separation agreement, 10,000 will vest in March 2014, and the remaining 48,750 will vest in twenty-four equal monthly installments beginning in April 2014, subject to Ms. Stoltenberg’s continuing compliance with the terms of the separation agreement.  Ms. Stoltenberg forfeited all other unvested restricted stock units and stock option awards. It was determined that the continuing compliance and service to be provided to the Company under the separation agreement was not substantive and, as a result, the Company recorded the full value of the modified restricted stock units as additional stock-based compensation expense in the second quarter of 2013.

 

Determining Fair Value

 

Valuation and Recognition - The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model based on the assumptions in the table below. The estimated fair value of employee stock options is recognized to expense using the straight-line method over the vesting period.

 

Expected Term - The Company uses the simplified calculation of expected life, described in the SEC’s Staff Accounting Bulletins 107 and 110, as the Company does not currently have sufficient historical exercise data on which to base an estimate of expected life.  Using this method, the expected term is determined using the average of the vesting period and the contractual life of the stock options granted.

 

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

 

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

 

Forfeitures - The Company records stock-based compensation expense only for those awards that are expected to vest.  A forfeiture rate is estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates.  The Company’s forfeiture rate used in the six months ended June 30, 2013 was 2.76%. The Company’s forfeiture rate used in the six months ended June 30, 2012 was 1.38%.

 

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

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Option Plan Shares

 

 

 

 

 

 

 

 

 

Risk-free interest rates

 

0.94%

 

0.82%

 

0.94% - 1.15%

 

0.82% - 0.84%

 

Expected term (in years)

 

6

 

6

 

6

 

6

 

Expected volatility

 

82.9%

 

87.1%

 

82.9% - 84.0%

 

87.1% - 91.6%

 

Dividend yield

 

0%

 

0%

 

0%

 

0%

 

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

 

$

6.55

 

$

7.38

 

$

7.66

 

$

6.86

 

 

 

 

 

 

 

 

 

 

 

ESPP Shares

 

 

 

 

 

 

 

 

 

Risk-free interest rates

 

0.11% - 0.20%

 

0.19% - 0.27%

 

0.11% - 0.20%

 

0.19% - 0.27%

 

Expected term (in years)

 

0.5-2

 

0.5 - 2

 

0.5-2

 

0.5 - 2

 

Expected volatility

 

39.1% - 45.6%

 

39.6% - 54.9%

 

39.1% - 45.6%

 

39.6% - 54.9%

 

Dividend yield

 

0%

 

0%

 

0%

 

0%

 

Weighted average fair value per share of stock purchase rights granted during the period

 

$

2.80

 

$

3.47

 

$

2.80

 

$

3.47

 

 

Stock Option and Restricted Stock Activity

 

A summary of stock option activity under the Stock Plans during the six months ended June 30, 2013 is as follows:

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Weighted

 

Average

 

 

 

 

 

 

 

Average

 

Remaining

 

Aggregate

 

 

 

 

 

Exercise

 

Contractual

 

Intrinsic

 

Options

 

Shares

 

Price

 

Term (Years)

 

Value (1)

 

(Aggregate intrinsic value in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, January 1, 2013

 

6,181,996

 

$

2.62

 

6.6

 

$

49,439

 

Granted

 

240,570

 

$

10.72

 

 

 

 

 

Exercised

 

(98,869

)

$

4.99

 

 

 

 

 

Forfeited

 

(74,250

)

$

8.67

 

 

 

 

 

Outstanding, June 30, 2013

 

6,249,447

 

$

2.83

 

6.2

 

$

69,266

 

 

 

 

 

 

 

 

 

 

 

Exercisable, June 30, 2013

 

5,205,858

 

$

1.84

 

5.8

 

$

62,849

 

 

 

 

 

 

 

 

 

 

 

Vested and expected to vest June 30, 2013

 

6,220,586

 

$

2.84

 

6.2

 

$

69,089

 

 

(1)The aggregate intrinsic value of options outstanding, exercisable and vested and expected to vest is calculated as the difference between the exercise price of the underlying options and the market price of the Company’s common stock for options that had exercise prices that were lower than the $13.91 market price of the Company’s common stock at June 30, 2013.  The total intrinsic value of options exercised during the six months ended June 30, 2013 was $0.5 million. The total intrinsic value of options exercised during the six months ended June 30, 2012 was $3.4 million.

 

As of June 30, 2013, there was $11.0 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under all Stock Plans.  Total unrecognized compensation cost will be adjusted for future changes in forfeitures.  The Company expects to recognize that cost over a weighted average period of 2.85 years.

 

A summary of restricted stock activity under the Stock Plans during the six months ended June 30, 2013 is as follows:

 

 

 

 

 

Weighted

 

 

 

Restricted

 

Average Grant

 

 

 

Shares

 

Date Fair Value

 

Outstanding, January 1, 2013

 

813,955

 

$

8.51

 

Granted

 

581,124

 

$

10.77

 

Released

 

(166,843

)

$

8.63

 

Forfeited

 

(352,836

)

$

9.45

 

Outstanding, June 30, 2013

 

875,400

 

$

9.61

 

 

During the first quarter of 2012, the Company granted a total of 262,500 restricted stock units to certain executives that would have vested based upon the satisfaction of certain service and performance conditions. These performance conditions were not met and the awards were forfeited during the first quarter of 2013. The expense recorded through December 31, 2012 for these awards totaling $0.6 million was reversed during the first quarter of 2013 due to the forfeiture.

 

During the first quarter of 2013, the Company granted a total of 180,750 restricted stock units to certain executives that will vest based upon the satisfaction of certain service and performance conditions.  The Company performed an evaluation of internal and external factors, and determined the number of shares that are most likely to vest based on the probability of which performance conditions will be met. The expense for the fair value of the awards that are expected to vest is being recognized ratably over the vesting period.

 

Warrants to purchase 75,000 shares of common stock were issued in connection with a consulting agreement in 2009. The warrants contain a performance condition and vest if the Company successfully receives FDA approval for its Cologuard test. The Company is uncertain if the performance conditions will be attained, and therefore no expense has been recorded on this warrant as of June 30, 2013. The exercise price of the warrant is $0.01.

FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS

(5) FAIR VALUE MEASUREMENTS

 

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

 

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

 

Level 1

 

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

 

 

 

Level 2

 

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

 

 

 

Level 3

 

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

 

Fixed-income securities and mutual funds are valued using a third party pricing agency. The valuation is based on observable inputs including pricing for similar assets and other observable market factors. There has been no material change from period to period.  The estimated fair value of our long-term debt based on a market approach was approximately $1.0 million as of June 30, 2013 and December 31, 2012 and represent Level 2 measurements.  When determining the estimated fair value of our long-term debt, we used market-based risk measurements, such as credit risk.

 

The following table presents the Company’s fair value measurements as of June 30, 2013 along with the level within the fair value hierarchy in which the fair value measurements in their entirety fall. Amounts in the table are in thousands.

 

 

 

 

 

Fair Value Measurement at June 30, 2013 Using:

 

 

 

 

 

Quoted Prices in Active

 

Significant Other

 

Significant Unobservable

 

 

 

Fair Value at

 

Markets for Identical Assets

 

Observable Inputs

 

Inputs

 

Description

 

June 30, 2013

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

Cash and money market

 

$

12,567

 

$

12,567

 

$

 

$

 

Certificates of deposit

 

8,951

 

 

8,951

 

 

Available-for-Sale

 

 

 

 

 

 

 

 

 

Marketable securities

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

49,196

 

 

49,196

 

 

Corporate bonds

 

73,736

 

 

73,736

 

 

Certificates of deposit

 

8,284

 

 

8,284

 

 

Commercial paper

 

4,995

 

 

4,995

 

 

Total

 

$

157,729

 

$

12,567

 

$

145,162

 

$

 

 

The following table presents the Company’s fair value measurements as of December 31, 2012 along with the level within the fair value hierarchy in which the fair value measurements in their entirety fall.  Amounts in the table are in thousands.

 

 

 

 

 

Fair Value Measurement at December 31, 2012 Using:

 

 

 

 

 

Quoted Prices in Active

 

Significant Other

 

Significant Unobservable

 

 

 

Fair Value at

 

Markets for Identical Assets

 

Observable Inputs

 

Inputs

 

Description

 

December 31, 2012

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

Cash and money market

 

$

13,095

 

$

13,095

 

$

 

$

 

Corporate bonds

 

250

 

 

250

 

 

Available-for-Sale

 

 

 

 

 

 

 

 

 

Marketable securities

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

44,308

 

 

44,308

 

 

Certificates of deposit

 

5,939

 

 

5,939

 

 

Corporate bonds

 

43,330

 

 

43,330

 

 

Commercial paper

 

1,199

 

 

1,199

 

 

Total

 

$

108,121

 

$

13,095

 

$

95,026

 

$

 

 

As of June 30, 2013 and December 31, 2012 there were available-for-sale securities in a continuous unrealized loss position for less than twelve months where the total unrealized losses were $58,184 and $4,800 respectively. At June 30, 2013 and December 31, 2012 there were no available-for-sale securities in a continuous loss position for greater than twelve months.

 

The following summarizes contractual underlying maturities of the Company’s available-for-sale investments in debt securities at June 30, 2013 (in thousands):

 

 

 

Cost

 

Fair Value

 

Due in one year or less

 

$

71,915

 

$

71,940

 

Due after one year through two years

 

64,279

 

64,271

 

 

 

$

136,194

 

$

136,211

 

EQUITY
EQUITY

(6) EQUITY

 

On June 21, 2013, the Company completed an underwritten public offering of 6,325,000 shares of common stock at a price of $12.35 per share to the public. The Company received approximately $73.3 million of net proceeds from the offering, after deducting $4.8 million for the underwriting discount and other stock issuance costs paid by the Company.

OPERATING LEASE
OPERATING LEASE

(7) OPERATING LEASE

 

During the second quarter of 2013, the Company entered into a five year lease for a 29,000 square foot facility in Madison, Wisconsin to house our commercial lab operations. This lease contains periodic rent escalation adjustments and includes provisions for tenant improvements. The Company has two, five year options to extend the term of the lease.

 

Future minimum payments under the operating lease are as follows as of June 30, 2013. Amounts included in the table are in thousands.

 

Year Ending December 31,

 

 

 

2013

 

$

112

 

2014

 

676

 

2015

 

680

 

2016

 

684

 

2017

 

689

 

2018

 

578

 

Total lease obligations

 

$

3,419

 

RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS

(8) RELATED PARTY TRANSACTIONS

 

During the three months ended September 30, 2012, the Company entered into a one year consulting agreement with a non-employee director under which the director provides advisory services in support of the Company’s commercialization activities. In accordance with the agreement, the Company granted a restricted stock award for 4,873 shares of common stock that vests over one year, and will make cash payments totaling $60,000 over the one year term of the agreement.

INCOME TAXES
INCOME TAXES

(9) INCOME TAXES

 

The Company is subject to taxation in the U.S. and various state jurisdictions. All of the Company’s tax years are subject to examination by the U.S. and state tax authorities due to the carryforward of unutilized net operating losses.

 

Under financial accounting standards, deferred tax assets or liabilities are computed based on the differences between the financial statement and income tax bases of assets and liabilities using the enacted tax rates. Deferred income tax expense or benefit represents the change in the deferred tax assets or liabilities from period to period.

 

A valuation allowance to reduce the deferred tax assets is reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has incurred significant losses since its inception and due to the uncertainty of the amount and timing of future taxable income, management has determined that a full valuation allowance at June 30, 2013 is necessary to reduce the tax assets to the amount that is more likely than not to be realized. Due to the existence of the valuation allowance, future changes in our unrecognized tax benefits will not impact the Company’s effective tax rate.

 

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.  At June 30, 2013 the Company had no unrecognized tax benefits, nor are there any tax positions where it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the 12 months following June 30, 2013.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

Use of Estimates

 

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

Cash and Cash Equivalents

 

The Company considers cash on hand, demand deposits in bank, money market funds, and all highly liquid investments with an original maturity of 90 days or less to be cash and cash equivalents. The Company had no restricted cash at June 30, 2013 and December 31, 2012.

Marketable Securities

 

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

 

At June 30, 2013 and December 31, 2012, the Company’s investments were comprised of fixed income investments and all were deemed available-for-sale. The objectives of the Company’s investment strategy are to provide liquidity and safety of principal while striving to achieve the highest rate of return consistent with these two objectives.  The Company’s investment policy limits investments to certain types of instruments issued by institutions with investment grade credit ratings and places restrictions on maturities and concentration by type and issuer. Investments in which the Company has the ability and intent, if necessary, to liquidate in order to support its current operations (including those with a contractual term greater than one year from the date of purchase) are classified as current. All of the Company’s investments are considered current. There were no realized losses for the six months ended June 30, 2013 and June 30, 2012.  Realized gains were $2,760 and $2,528 for the six months ended June 30, 2013 and 2012, respectively. Unrealized gains or losses on investments are recorded in other comprehensive loss.

 

Available-for-sale securities at June 30, 2013 consist of the following:

 

 

 

June 30, 2013

 

(In thousands)

 

Amortized
Cost

 

Gains in
Accumulated
Other
Comprehensive
Income

 

Losses in
Accumulated
Other
Comprehensive
Income

 

Estimated
Fair Value

 

U.S. government agency securities

 

$

49,156

 

$

40

 

$

 

$

49,196

 

Corporate bonds

 

73,771

 

 

(35

)

73,736

 

Certificates of deposit

 

8,272

 

12

 

 

8,284

 

Commercial paper

 

4,995

 

 

 

4,995

 

Total available-for-sale securities

 

$

136,194

 

$

52

 

$

(35

)

$

136,211

 

 

Available-for-sale securities at December 31, 2012 consist of the following:

 

 

 

December 31, 2012

 

(In thousands)

 

Amortized
Cost

 

Gains in
Accumulated
Other
Comprehensive
Income

 

Losses in
Accumulated
Other
Comprehensive
Income

 

Estimated
Fair Value

 

U.S. government agency securities

 

$

44,270

 

$

38

 

$

 

$

44,308

 

Corporate bonds

 

43,303

 

27

 

 

43,330

 

Certificates of deposit

 

5,926

 

13

 

 

5,939

 

Commercial paper

 

1,199

 

 

 

1,199

 

Total available-for-sale securities

 

$

94,698

 

$

78

 

$

 

$

94,776

 

Net Loss Per Share

 

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

 

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

 

 

 

June 30,

 

(In thousands)

 

2013

 

2012

 

Shares issuable upon exercise of stock options

 

6,249

 

6,320

 

Shares issuable upon exercise of outstanding warrants (1)

 

155

 

325

 

Shares issuable upon the release of restricted stock awards

 

875

 

884

 

Shares issuable upon the vesting of restricted stock awards related to a licensing agreement

 

49

 

73

 

 

 

7,328

 

7,602

 

 

(1)  At June 30, 2013, represents warrants to purchase 80,000 shares of common stock issued under a license agreement and warrants to purchase 75,000 shares of common stock issued under a consulting agreement.  At June 30, 2012, represents warrants to purchase 250,000 shares of common stock issued under a license agreement and warrants to purchase 75,000 shares of common stock issued under a consulting agreement.

Revenue Recognition

 

License fees.   License fees for the licensing of product rights are recorded as deferred revenue upon receipt of cash and recognized as revenue on a straight-line basis over the license period. As more fully described in the 2012 Form 10-K, in connection with our January 2009 strategic transaction with Genzyme Corporation, Genzyme agreed to pay us a total of $18.5 million, of which $16.65 million was paid on January 27, 2009 and $1.85 million was subject to a holdback by Genzyme to satisfy certain potential indemnification obligations in exchange for the assignment and licensing of certain intellectual property to Genzyme. The Company’s on-going performance obligations to Genzyme under the Collaboration, License and Purchase Agreement (the “CLP Agreement”), as described below, including its obligation to deliver through licenses certain intellectual property improvements to Genzyme, if improvements are made during the initial five-year collaboration period, were deemed to be undelivered elements of the CLP Agreement on the date of closing. Accordingly, the Company deferred the initial $16.65 million in cash received at closing and is amortizing that up-front payment on a straight-line basis into revenue over the initial five-year collaboration period ending in January 2014. The Company received the first holdback amount of $962,000, which included accrued interest due, from Genzyme during the first quarter of 2010. The Company received the second holdback amount of $934,250, which included accrued interest due, from Genzyme during the third quarter of 2010.  The amounts were deferred and are being amortized on a straight-line basis into revenue over the remaining term of the collaboration at the time of receipt.

 

In addition, Genzyme purchased 3,000,000 shares of common stock on January 27, 2009 for $2.00 per share, representing a premium of $0.51 per share above the closing price of the Company’s common stock on that date of $1.49 per share. The aggregate premium paid by Genzyme over the closing price of the Company’s common stock on the date of the transaction of $1.53 million is deemed to be a part of the total consideration for the CLP Agreement. Accordingly, the Company deferred the aggregate $1.53 million premium and is amortizing that amount on a straight-line basis into revenue over the initial five-year collaboration period ending in January 2014.

 

The Company recognized approximately $1.0 million in license fee revenue in connection with the amortization of the up-front payments from Genzyme, during each of the three months ended June 30, 2013 and June 30, 2012. The Company recognized approximately $2.1 million in license fee revenue in connection with the amortization of up-front payments from Genzyme during each of the six months ended June 30, 2013 and June 30, 2012.

Reclassifications

 

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

 

 

 

June 30, 2013

 

(In thousands)

 

Amortized
Cost

 

Gains in
Accumulated
Other
Comprehensive
Income

 

Losses in
Accumulated
Other
Comprehensive
Income

 

Estimated
Fair Value

 

U.S. government agency securities

 

$

49,156

 

$

40

 

$

 

$

49,196

 

Corporate bonds

 

73,771

 

 

(35

)

73,736

 

Certificates of deposit

 

8,272

 

12

 

 

8,284

 

Commercial paper

 

4,995

 

 

 

4,995

 

Total available-for-sale securities

 

$

136,194

 

$

52

 

$

(35

)

$

136,211

 

 

 

 

 

December 31, 2012

 

(In thousands)

 

Amortized
Cost

 

Gains in
Accumulated
Other
Comprehensive
Income

 

Losses in
Accumulated
Other
Comprehensive
Income

 

Estimated
Fair Value

 

U.S. government agency securities

 

$

44,270

 

$

38

 

$

 

$

44,308

 

Corporate bonds

 

43,303

 

27

 

 

43,330

 

Certificates of deposit

 

5,926

 

13

 

 

5,939

 

Commercial paper

 

1,199

 

 

 

1,199

 

Total available-for-sale securities

 

$

94,698

 

$

78

 

$

 

$

94,776

 

 

 

 

June 30,

 

(In thousands)

 

2013

 

2012

 

Shares issuable upon exercise of stock options

 

6,249

 

6,320

 

Shares issuable upon exercise of outstanding warrants (1)

 

155

 

325

 

Shares issuable upon the release of restricted stock awards

 

875

 

884

 

Shares issuable upon the vesting of restricted stock awards related to a licensing agreement

 

49

 

73

 

 

 

7,328

 

7,602

 

 

(1)  At June 30, 2013, represents warrants to purchase 80,000 shares of common stock issued under a license agreement and warrants to purchase 75,000 shares of common stock issued under a consulting agreement.  At June 30, 2012, represents warrants to purchase 250,000 shares of common stock issued under a license agreement and warrants to purchase 75,000 shares of common stock issued under a consulting agreement.

STOCK-BASED COMPENSATION (Tables)

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Option Plan Shares

 

 

 

 

 

 

 

 

 

Risk-free interest rates

 

0.94%

 

0.82%

 

0.94% - 1.15%

 

0.82% - 0.84%

 

Expected term (in years)

 

6

 

6

 

6

 

6

 

Expected volatility

 

82.9%

 

87.1%

 

82.9% - 84.0%

 

87.1% - 91.6%

 

Dividend yield

 

0%

 

0%

 

0%

 

0%

 

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

 

$

6.55

 

$

7.38

 

$

7.66

 

$

6.86

 

 

 

 

 

 

 

 

 

 

 

ESPP Shares

 

 

 

 

 

 

 

 

 

Risk-free interest rates

 

0.11% - 0.20%

 

0.19% - 0.27%

 

0.11% - 0.20%

 

0.19% - 0.27%

 

Expected term (in years)

 

0.5-2

 

0.5 - 2

 

0.5-2

 

0.5 - 2

 

Expected volatility

 

39.1% - 45.6%

 

39.6% - 54.9%

 

39.1% - 45.6%

 

39.6% - 54.9%

 

Dividend yield

 

0%

 

0%

 

0%

 

0%

 

Weighted average fair value per share of stock purchase rights granted during the period

 

$

2.80

 

$

3.47

 

$

2.80

 

$

3.47

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Weighted

 

Average

 

 

 

 

 

 

 

Average

 

Remaining

 

Aggregate

 

 

 

 

 

Exercise

 

Contractual

 

Intrinsic

 

Options

 

Shares

 

Price

 

Term (Years)

 

Value (1)

 

(Aggregate intrinsic value in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, January 1, 2013

 

6,181,996

 

$

2.62

 

6.6

 

$

49,439

 

Granted

 

240,570

 

$

10.72

 

 

 

 

 

Exercised

 

(98,869

)

$

4.99

 

 

 

 

 

Forfeited

 

(74,250

)

$

8.67

 

 

 

 

 

Outstanding, June 30, 2013

 

6,249,447

 

$

2.83

 

6.2

 

$

69,266

 

 

 

 

 

 

 

 

 

 

 

Exercisable, June 30, 2013

 

5,205,858

 

$

1.84

 

5.8

 

$

62,849

 

 

 

 

 

 

 

 

 

 

 

Vested and expected to vest June 30, 2013

 

6,220,586

 

$

2.84

 

6.2

 

$

69,089

 

 

(1)The aggregate intrinsic value of options outstanding, exercisable and vested and expected to vest is calculated as the difference between the exercise price of the underlying options and the market price of the Company’s common stock for options that had exercise prices that were lower than the $13.91 market price of the Company’s common stock at June 30, 2013.  The total intrinsic value of options exercised during the six months ended June 30, 2013 was $0.5 million. The total intrinsic value of options exercised during the six months ended June 30, 2012 was $3.4 million.

 

 

 

 

 

 

Weighted

 

 

 

Restricted

 

Average Grant

 

 

 

Shares

 

Date Fair Value

 

Outstanding, January 1, 2013

 

813,955

 

$

8.51

 

Granted

 

581,124

 

$

10.77

 

Released

 

(166,843

)

$

8.63

 

Forfeited

 

(352,836

)

$

9.45

 

Outstanding, June 30, 2013

 

875,400

 

$

9.61

 

FAIR VALUE MEASUREMENTS (Tables)

The following table presents the Company’s fair value measurements as of June 30, 2013 along with the level within the fair value hierarchy in which the fair value measurements in their entirety fall. Amounts in the table are in thousands.

 

 

 

 

 

Fair Value Measurement at June 30, 2013 Using:

 

 

 

 

 

Quoted Prices in Active

 

Significant Other

 

Significant Unobservable

 

 

 

Fair Value at

 

Markets for Identical Assets

 

Observable Inputs

 

Inputs

 

Description

 

June 30, 2013

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

Cash and money market

 

$

12,567

 

$

12,567

 

$

 

$

 

Certificates of deposit

 

8,951

 

 

8,951

 

 

Available-for-Sale

 

 

 

 

 

 

 

 

 

Marketable securities

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

49,196

 

 

49,196

 

 

Corporate bonds

 

73,736

 

 

73,736

 

 

Certificates of deposit

 

8,284

 

 

8,284

 

 

Commercial paper

 

4,995

 

 

4,995

 

 

Total

 

$

157,729

 

$

12,567

 

$

145,162

 

$

 

 

The following table presents the Company’s fair value measurements as of December 31, 2012 along with the level within the fair value hierarchy in which the fair value measurements in their entirety fall.  Amounts in the table are in thousands.

 

 

 

 

 

Fair Value Measurement at December 31, 2012 Using:

 

 

 

 

 

Quoted Prices in Active

 

Significant Other

 

Significant Unobservable

 

 

 

Fair Value at

 

Markets for Identical Assets

 

Observable Inputs

 

Inputs

 

Description

 

December 31, 2012

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

Cash and money market

 

$

13,095

 

$

13,095

 

$

 

$

 

Corporate bonds

 

250

 

 

250

 

 

Available-for-Sale

 

 

 

 

 

 

 

 

 

Marketable securities

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

44,308

 

 

44,308

 

 

Certificates of deposit

 

5,939

 

 

5,939

 

 

Corporate bonds

 

43,330

 

 

43,330

 

 

Commercial paper

 

1,199

 

 

1,199

 

 

Total

 

$

108,121

 

$

13,095

 

$

95,026

 

$

 

 

The following summarizes contractual underlying maturities of the Company’s available-for-sale investments in debt securities at June 30, 2013 (in thousands):

 

 

 

Cost

 

Fair Value

 

Due in one year or less

 

$

71,915

 

$

71,940

 

Due after one year through two years

 

64,279

 

64,271

 

 

 

$

136,194

 

$

136,211

 

 

OPERATING LEASE (Tables)
Schedule of future minimum payments under the operating lease

Future minimum payments under the operating lease are as follows as of June 30, 2013. Amounts included in the table are in thousands.

 

Year Ending December 31,

 

 

 

2013

 

$

112

 

2014

 

676

 

2015

 

680

 

2016

 

684

 

2017

 

689

 

2018

 

578

 

Total lease obligations

 

$

3,419

 

 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
item
Jun. 30, 2013
Jun. 30, 2012
Dec. 31, 2012
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 
 
 
Restricted cash
$ 0 
$ 0 
 
$ 0 
Number of objectives of the entity's investment strategy
 
 
 
Realized losses
 
 
Realized gains
 
2,760 
2,528 
 
Minimum contractual term of certain current investments which can be liquidated
1 year 
 
 
 
Available-for-sale securities
 
 
 
 
Amortized Cost
136,194 
136,194 
 
94,698 
Gains in Accumulated Other Comprehensive Income
52 
52 
 
78 
Losses in Accumulated Other Comprehensive Income
(35)
(35)
 
 
Estimated Fair Value
136,211 
136,211 
 
94,776 
U.S. government agency securities
 
 
 
 
Available-for-sale securities
 
 
 
 
Amortized Cost
49,156 
49,156 
 
44,270 
Gains in Accumulated Other Comprehensive Income
40 
40 
 
38 
Estimated Fair Value
49,196 
49,196 
 
44,308 
Corporate bonds
 
 
 
 
Available-for-sale securities
 
 
 
 
Amortized Cost
73,771 
73,771 
 
43,303 
Gains in Accumulated Other Comprehensive Income
 
 
 
27 
Losses in Accumulated Other Comprehensive Income
(35)
(35)
 
 
Estimated Fair Value
73,736 
73,736 
 
43,330 
Certificates of deposit
 
 
 
 
Available-for-sale securities
 
 
 
 
Amortized Cost
8,272 
8,272 
 
5,926 
Gains in Accumulated Other Comprehensive Income
12 
12 
 
13 
Estimated Fair Value
8,284 
8,284 
 
5,939 
Commercial paper
 
 
 
 
Available-for-sale securities
 
 
 
 
Amortized Cost
4,995 
4,995 
 
1,199 
Estimated Fair Value
$ 4,995 
$ 4,995 
 
$ 1,199 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2)
6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Common shares not included in the computation of diluted net loss per share
 
 
Potentially issuable common shares not included in the computation of diluted net loss per share because they would have an anti-dilutive effect
7,328,000 
7,602,000 
Additional disclosure
 
 
Number of shares of common stock that can be purchased through issuance of warrants under a license agreement
80,000 
250,000 
Number of shares of common stock that can be purchased through issuance of warrants under a consulting agreement
75,000 
75,000 
Shares issuable upon exercise of stock options
 
 
Common shares not included in the computation of diluted net loss per share
 
 
Potentially issuable common shares not included in the computation of diluted net loss per share because they would have an anti-dilutive effect
6,249,000 
6,320,000 
Shares issuable upon exercise of outstanding warrants
 
 
Common shares not included in the computation of diluted net loss per share
 
 
Potentially issuable common shares not included in the computation of diluted net loss per share because they would have an anti-dilutive effect
155,000 
325,000 
Shares of restricted stock awards outstanding
 
 
Common shares not included in the computation of diluted net loss per share
 
 
Potentially issuable common shares not included in the computation of diluted net loss per share because they would have an anti-dilutive effect
875,000 
884,000 
Shares issuable upon the vesting of restricted stock awards related to licensing agreement
 
 
Common shares not included in the computation of diluted net loss per share
 
 
Potentially issuable common shares not included in the computation of diluted net loss per share because they would have an anti-dilutive effect
49,000 
73,000 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) (USD $)
3 Months Ended 6 Months Ended 0 Months Ended 1 Months Ended 3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Jun. 21, 2013
Dec. 31, 2012
Jan. 27, 2009
CLP Agreement
Genzyme Corporation
Jan. 31, 2009
CLP Agreement
Genzyme Corporation
Jun. 30, 2013
CLP Agreement
Genzyme Corporation
Jun. 30, 2012
CLP Agreement
Genzyme Corporation
Sep. 30, 2010
CLP Agreement
Genzyme Corporation
Mar. 31, 2010
CLP Agreement
Genzyme Corporation
Jun. 30, 2013
CLP Agreement
Genzyme Corporation
Jun. 30, 2012
CLP Agreement
Genzyme Corporation
License fees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount received
 
 
 
 
 
 
$ 16,650,000 
 
 
 
$ 934,250 
$ 962,000 
 
 
Amount of Deferred Revenue
 
 
 
 
 
 
16,650,000 
 
 
 
 
 
 
 
Total agreed consideration amount
 
 
 
 
 
 
 
18,500,000 
 
 
 
 
 
 
Amount subject to holdback
 
 
 
 
 
 
 
1,850,000 
 
 
 
 
 
 
Initial collaboration period
 
 
 
 
 
 
 
5 years 
 
 
 
 
 
 
Sale of common stock (in shares)
70,662,697 
 
70,662,697 
 
 
63,909,800 
3,000,000 
 
 
 
 
 
 
 
Price at which share of common stock are sold (in dollars per share)
 
 
 
 
 
 
$ 2.00 
 
 
 
 
 
 
 
Premium above closing price of common stock at which shares are sold (in dollars per share)
 
 
 
 
 
 
$ 0.51 
 
 
 
 
 
 
 
Closing price of common stock (in dollars per share)
 
 
 
 
$ 12.35 
 
$ 1.49 
 
 
 
 
 
 
 
Aggregate premium received over the closing price of common stock
 
 
 
 
 
 
1,530,000 
 
 
 
 
 
 
 
Amount of premium being amortized
 
 
 
 
 
 
1,530,000 
 
 
 
 
 
 
 
License fee revenue
$ 1,036,000 
$ 1,036,000 
$ 2,072,000 
$ 2,072,000 
 
 
 
 
$ 1,000,000 
$ 1,000,000 
 
 
$ 2,100,000 
$ 2,100,000 
MAYO LICENSE AGREEMENT (Details) (USD $)
0 Months Ended 1 Months Ended 1 Months Ended 3 Months Ended 6 Months Ended 12 Months Ended 1 Months Ended 0 Months Ended 1 Months Ended 6 Months Ended
Jun. 21, 2013
May 31, 2012
item
Jun. 30, 2013
Dec. 31, 2009
May 31, 2012
License Agreement
MAYO
Jun. 30, 2011
License Agreement
MAYO
Jun. 30, 2009
License Agreement
MAYO
item
Jun. 30, 2013
License Agreement
MAYO
Jun. 30, 2012
License Agreement
MAYO
Sep. 30, 2009
License Agreement
MAYO
Jun. 30, 2013
License Agreement
MAYO
Jun. 30, 2012
License Agreement
MAYO
Dec. 31, 2012
License Agreement
MAYO
Sep. 30, 2011
License Agreement
MAYO
Warrant covering 1,000,000 shares of common stock
Jun. 30, 2011
License Agreement
MAYO
Warrant covering 1,000,000 shares of common stock
Sep. 30, 2010
License Agreement
MAYO
Warrant covering 1,000,000 shares of common stock
Mar. 31, 2010
License Agreement
MAYO
Warrant covering 1,000,000 shares of common stock
Jun. 11, 2009
License Agreement
MAYO
Warrant covering 1,000,000 shares of common stock
Jun. 11, 2009
License Agreement
MAYO
Warrant covering 250,000 shares of common stock
Jun. 30, 2013
License Agreement
MAYO
Warrant covering 250,000 shares of common stock
Jan. 31, 2013
License Agreement
MAYO
Warrant covering 250,000 shares of common stock
Jun. 30, 2013
License Agreement
MAYO
Warrant covering 250,000 shares of common stock
Warrants
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of common stock purchase warrants granted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercise price (in dollars per share)
 
 
$ 0.01 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 1.90 
$ 1.90 
 
 
 
Number of shares of common stock covered by warrants
 
 
 
75,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,000,000 
250,000 
80,000 
 
80,000 
Vesting period of warrant (in years)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4 years 
 
 
4 years 
Warrants exercised, gross (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
250,000 
250,000 
300,000 
200,000 
 
 
85,000 
85,000 
 
Warrants forfeited (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
56,641 
60,246 
97,853 
86,596 
 
 
12,765 
14,008 
 
Warrants exercised, net of forfeiture (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
193,359 
189,754 
202,147 
113,404 
 
 
72,235 
70,992 
165,000 
Royalty Payments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Minimum royalty payments
 
 
 
 
 
 
 
$ 25,000 
 
 
$ 25,000 
 
$ 10,000 
 
 
 
 
 
 
 
 
 
Other Payments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Upfront payment
 
 
 
 
 
 
 
 
 
80,000 
 
 
 
 
 
 
 
 
 
 
 
 
Milestone payment on the commencement of patient enrollment in a human cancer screening clinical
 
 
 
 
 
 
 
 
 
 
250,000 
 
 
 
 
 
 
 
 
 
 
 
Milestone payment contingent upon FDA approval
 
 
 
 
 
250,000 
 
 
 
 
500,000 
 
 
 
 
 
 
 
 
 
 
 
Payments for research and development efforts
 
 
 
 
 
 
 
300,000 
200,000 
 
500,000 
200,000 
 
 
 
 
 
 
 
 
 
 
Estimated liability for research and development efforts
 
 
 
 
 
 
 
500,000 
200,000 
 
500,000 
200,000 
 
 
 
 
 
 
 
 
 
 
Amendments - May 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of shares of restricted stock granted as a consideration for the expanded license
6,325,000 
 
 
 
97,466 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vesting right percentage of restricted stock
 
25.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of equal annual installments in which restricted stock are to be vested
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Licensing expense recognized in connection with the restricted stock grant
 
 
 
 
 
 
 
 
 
 
 
 
$ 1,000,000 
 
 
 
 
 
 
 
 
 
STOCK-BASED COMPENSATION (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
STOCK-BASED COMPENSATION
 
 
 
 
Stock-based compensation
$ 2,800 
$ 1,500 
$ 3,811 
$ 2,459 
STOCK-BASED COMPENSATION (Details 2) (Restricted stock units)
6 Months Ended
Jun. 30, 2013
item
Jun. 30, 2013
Chief Commercial Officer
Jun. 7, 2013
Chief Commercial Officer
Shares reserved for issuance
 
 
 
Number of shares affected by modification of options held by Ms. Laura Stoltenberg
 
41,250 
100,000 
Number of shares that will vest
48,750 
10,000 
 
Number of installments for vesting of shares
24 
 
 
STOCK-BASED COMPENSATION (Details 3) (USD $)
3 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended 3 Months Ended 12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Jun. 21, 2013
Dec. 31, 2009
Jun. 30, 2013
Option Plan Shares
Jun. 30, 2012
Option Plan Shares
Jun. 30, 2013
Option Plan Shares
Jun. 30, 2012
Option Plan Shares
Dec. 31, 2012
Option Plan Shares
Jun. 30, 2013
Option Plan Shares
Maximum
Jun. 30, 2012
Option Plan Shares
Maximum
Jun. 30, 2013
Option Plan Shares
Minimum
Jun. 30, 2012
Option Plan Shares
Minimum
Jun. 30, 2013
ESPP Shares
Jun. 30, 2012
ESPP Shares
Jun. 30, 2013
ESPP Shares
Jun. 30, 2012
ESPP Shares
Jun. 30, 2013
ESPP Shares
Maximum
Jun. 30, 2012
ESPP Shares
Maximum
Jun. 30, 2013
ESPP Shares
Maximum
Jun. 30, 2012
ESPP Shares
Maximum
Jun. 30, 2013
ESPP Shares
Minimum
Jun. 30, 2012
ESPP Shares
Minimum
Jun. 30, 2013
ESPP Shares
Minimum
Jun. 30, 2012
ESPP Shares
Minimum
Jun. 30, 2013
Restricted stock and restricted stock unit
Mar. 31, 2013
Restricted stock and restricted stock unit
Mar. 31, 2012
Restricted stock and restricted stock unit
Dec. 31, 2012
Restricted stock and restricted stock unit
STOCK-BASED COMPENSATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Forfeiture rate (as a percent)
 
 
2.76% 
1.38% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Valuation assumptions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk-free interest rates (as a percent)
 
 
 
 
 
 
0.94% 
0.82% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk-free interest rates, minimum (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
0.94% 
0.82% 
 
 
 
 
 
 
 
 
0.11% 
0.19% 
0.11% 
0.19% 
 
 
 
 
Risk-free interest rates, maximum (as a percent)
 
 
 
 
 
 
 
 
 
 
 
1.15% 
0.84% 
 
 
 
 
 
 
0.20% 
0.27% 
0.20% 
0.27% 
 
 
 
 
 
 
 
 
Expected term
 
 
 
 
 
 
6 years 
6 years 
6 years 
6 years 
 
 
 
 
 
 
 
 
 
2 years 
2 years 
2 years 
2 years 
6 months 
6 months 
6 months 
6 months 
 
 
 
 
Expected volatility (as a percent)
 
 
 
 
 
 
82.90% 
87.10% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expected volatility, minimum (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
82.90% 
87.10% 
 
 
 
 
 
 
 
 
39.10% 
39.60% 
39.10% 
39.60% 
 
 
 
 
Expected volatility, maximum (as a percent)
 
 
 
 
 
 
 
 
 
 
 
84.00% 
91.60% 
 
 
 
 
 
 
45.60% 
54.90% 
45.60% 
54.90% 
 
 
 
 
 
 
 
 
Dividend yield (as a percent)
 
 
 
 
 
 
0.00% 
0.00% 
0.00% 
0.00% 
 
 
 
 
 
0.00% 
0.00% 
0.00% 
0.00% 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average fair value per share of options granted during the period (in dollars per share)
 
 
 
 
 
 
$ 6.55 
$ 7.38 
$ 7.66 
$ 6.86 
 
 
 
 
 
$ 2.80 
$ 3.47 
$ 2.80 
$ 3.47 
 
 
 
 
 
 
 
 
 
 
 
 
Shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at the beginning of the period (in shares)
 
 
 
 
 
 
 
 
6,181,996 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted (in shares)
 
 
 
 
 
 
240,570 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
180,750 
262,500 
 
Exercised (in shares)
 
 
 
 
 
 
(98,869)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Forfeited (in shares)
 
 
 
 
 
 
(74,250)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at the end of the period (in shares)
 
 
 
 
 
 
6,249,447 
 
6,249,447 
 
6,181,996 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercisable at the end of the period (in shares)
 
 
 
 
 
 
5,205,858 
 
5,205,858 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vested and expected to vest at the end of the period (in shares)
 
 
 
 
 
 
6,220,586 
 
6,220,586 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Exercise Price
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at the beginning of the period (in dollars per share)
 
 
 
 
 
 
 
 
$ 2.62 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted (in dollars per share)
 
 
 
 
 
 
$ 10.72 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercised (in dollars per share)
 
 
 
 
 
 
$ 4.99 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Forfeited (in dollars per share)
 
 
 
 
 
 
$ 8.67 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at the end of the period (in dollars per share)
 
 
 
 
 
 
$ 2.83 
 
$ 2.83 
 
$ 2.62 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercisable at the end of the period (in dollars per share)
 
 
 
 
 
 
$ 1.84 
 
$ 1.84 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vested and expected to vest at the end of the period (in dollars per share)
 
 
 
 
 
 
$ 2.84 
 
$ 2.84 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Remaining Contractual Term
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at the end of the period
 
 
 
 
 
 
6 years 2 months 12 days 
 
 
 
6 years 7 months 6 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercisable at the end of the period
 
 
 
 
 
 
5 years 9 months 18 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vested and expected to vest at the end of the period
 
 
 
 
 
 
6 years 2 months 12 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate Intrinsic Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at the end of the period
 
 
 
 
 
 
$ 69,266,000 
 
$ 69,266,000 
 
$ 49,439,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercisable at the end of the period
 
 
 
 
 
 
62,849,000 
 
62,849,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vested and expected to vest at the end of the period
 
 
 
 
 
 
69,089,000 
 
69,089,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional disclosures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Market price (in dollars per share)
 
 
 
 
$ 12.35 
 
$ 13.91 
 
$ 13.91 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total intrinsic value of options exercised
 
 
 
 
 
 
 
 
500,000 
3,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restricted Shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at the beginning of the period (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
813,955 
 
 
Granted (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
581,124 
 
 
 
Released (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(166,843)
 
 
 
Forfeited (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(352,836)
 
 
 
Outstanding at the end of the period (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
875,400 
 
 
813,955 
Unrecognized compensation cost
11,000,000 
 
11,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average period for recognition of unrecognized compensation cost
 
 
2 years 10 months 6 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Grant Date Fair Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at the beginning of the period (in dollars per share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 8.51 
 
 
Granted (in dollars per share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 10.77 
 
 
 
Released (in dollars per share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 8.63 
 
 
 
Forfeited (in dollars per share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 9.45 
 
 
 
Outstanding at the end of the period (in dollars per share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 9.61 
 
 
$ 8.51 
Stock-based compensation
2,800,000 
1,500,000 
3,811,000 
2,459,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(600,000)
 
600,000 
Number of shares of common stock covered by warrants issued in connection with a consulting agreement
 
 
 
 
 
75,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expense related to stock warrants
 
 
$ 0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercise price (in dollars per share)
$ 0.01 
 
$ 0.01 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FAIR VALUE MEASUREMENTS (Details) (USD $)
Jun. 30, 2013
Dec. 31, 2012
Marketable securities
 
 
Available-for-sale securities
$ 136,211,000 
$ 94,776,000 
Available-for-sale securities in a continuous unrealized loss position
 
 
Total unrealized losses of available-for-sale securities in a continuous unrealized loss position for less than twelve months
58,184 
4,800 
Contractual maturities of the available-for-sale investments in debt securities, Fair Value
 
 
Due in one year or less
71,940,000 
 
Due after one year through two years
64,271,000 
 
Estimated Fair Value
136,211,000 
94,776,000 
Contractual maturities of the available-for-sale investments in debt securities, Cost
 
 
Due in one year or less
71,915,000 
 
Due after one year through two years
64,279,000 
 
Cost
136,194,000 
 
Total unrealized losses of available for sale securities in a continuous unrealized loss position for greater than twelve months
Fair Value
 
 
Marketable securities
 
 
Available-for-sale securities
157,729,000 
108,121,000 
Contractual maturities of the available-for-sale investments in debt securities, Fair Value
 
 
Estimated Fair Value
157,729,000 
108,121,000 
Fair Value |
Cash equivalents
 
 
Marketable securities
 
 
Cash and money market
12,567,000 
13,095,000 
Certificates of deposit
8,951,000 
 
Fair Value |
U.S. government agency securities
 
 
Marketable securities
 
 
Available-for-sale securities
49,196,000 
44,308,000 
Contractual maturities of the available-for-sale investments in debt securities, Fair Value
 
 
Estimated Fair Value
49,196,000 
44,308,000 
Fair Value |
Corporate bonds
 
 
Marketable securities
 
 
Corporate bond
 
250,000 
Available-for-sale securities
73,736,000 
43,330,000 
Contractual maturities of the available-for-sale investments in debt securities, Fair Value
 
 
Estimated Fair Value
73,736,000 
43,330,000 
Fair Value |
Certificates of deposit
 
 
Marketable securities
 
 
Available-for-sale securities
8,284,000 
5,939,000 
Contractual maturities of the available-for-sale investments in debt securities, Fair Value
 
 
Estimated Fair Value
8,284,000 
5,939,000 
Fair Value |
Commercial paper
 
 
Marketable securities
 
 
Available-for-sale securities
4,995,000 
1,199,000 
Contractual maturities of the available-for-sale investments in debt securities, Fair Value
 
 
Estimated Fair Value
4,995,000 
1,199,000 
Quoted Prices in Active Markets for Identical Assets (Level1)
 
 
Marketable securities
 
 
Cash and money market
12,567,000 
13,095,000 
Quoted Prices in Active Markets for Identical Assets (Level1) |
Cash equivalents
 
 
Marketable securities
 
 
Cash and money market
12,567,000 
13,095,000 
Significant Other Observable Inputs (Level 2)
 
 
Marketable securities
 
 
Long-term debt
1,000,000 
1,000,000 
Available-for-sale securities
145,162,000 
95,026,000 
Contractual maturities of the available-for-sale investments in debt securities, Fair Value
 
 
Estimated Fair Value
145,162,000 
95,026,000 
Significant Other Observable Inputs (Level 2) |
Cash equivalents
 
 
Marketable securities
 
 
Certificates of deposit
8,951,000 
 
Significant Other Observable Inputs (Level 2) |
U.S. government agency securities
 
 
Marketable securities
 
 
Available-for-sale securities
49,196,000 
44,308,000 
Contractual maturities of the available-for-sale investments in debt securities, Fair Value
 
 
Estimated Fair Value
49,196,000 
44,308,000 
Significant Other Observable Inputs (Level 2) |
Corporate bonds
 
 
Marketable securities
 
 
Corporate bond
 
250,000 
Available-for-sale securities
73,736,000 
43,330,000 
Contractual maturities of the available-for-sale investments in debt securities, Fair Value
 
 
Estimated Fair Value
73,736,000 
43,330,000 
Significant Other Observable Inputs (Level 2) |
Certificates of deposit
 
 
Marketable securities
 
 
Available-for-sale securities
8,284,000 
5,939,000 
Contractual maturities of the available-for-sale investments in debt securities, Fair Value
 
 
Estimated Fair Value
8,284,000 
5,939,000 
Significant Other Observable Inputs (Level 2) |
Commercial paper
 
 
Marketable securities
 
 
Available-for-sale securities
4,995,000 
1,199,000 
Contractual maturities of the available-for-sale investments in debt securities, Fair Value
 
 
Estimated Fair Value
$ 4,995,000 
$ 1,199,000 
EQUITY (Details) (USD $)
0 Months Ended 6 Months Ended
Jun. 21, 2013
Jun. 30, 2013
EQUITY
 
 
Issuance of stock on underwritten public offering (in shares)
6,325,000 
 
Price of common stock (in dollars per share)
$ 12.35 
 
Net proceeds received from the offerings
$ 73,300,000 
$ 73,302,000 
Underwriting discount and other stock issuance costs
$ 4,800,000 
 
OPERATING LEASE (Details) (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2013
sqft
item
OPERATING LEASE
 
Lease term
5 years 
Area of laboratory office facility under operating lease (in square feet)
29,000 
Number of extensions of lease term
Future minimum payments under operating leases
 
2013
$ 112 
2014
676 
2015
680 
2016
684 
2017
689 
2018
578 
Total lease obligations
$ 3,419 
RELATED PARTY TRANSACTIONS (Details) (Non-employee director, USD $)
3 Months Ended
Sep. 30, 2012
RELATED PARTY TRANSACTIONS
 
Consulting agreement term
1 year 
Restricted stock award
 
RELATED PARTY TRANSACTIONS
 
Shares of common stock granted
4,873 
Vesting period of awards granted
1 year 
Cash payable over term of agreement
$ 60,000 
INCOME TAXES (Details) (USD $)
Jun. 30, 2013
INCOME TAXES
 
Unrecognized tax benefits
$ 0