MAYO LICENSE AGREEMENT	12 Months Ended
Dec. 31, 2015
MAYO LICENSE AGREEMENT
MAYO LICENSE AGREEMENT	(4) MAYO LICENSE AGREEMENT On June 11, 2009, the Company entered into a patent licensing agreement with MAYO Foundation for Medical Education and Research (“MAYO”). The Company’s license agreement with MAYO was most recently amended and restated in February 2015 and further amended in January 2016. Under the license agreement, MAYO granted the Company an exclusive, worldwide license to certain MAYO patents and patent applications, as well as a non‑exclusive, worldwide license with regard to certain MAYO know‑how. The scope of the license initially covered diagnostics and screenings for stool or blood based cancer, but was later amended to cover gastrointestinal cancers, pre-cancers, diseases and conditions. Under the January 2016 amendment to the license agreement, the scope has been expanded to cover any screening, surveillance or diagnostic tests or tools for use in connection with any type of cancers, pre-cancers, diseases or conditions. The licensed MAYO patents and patent applications contain both method and composition‑of‑matter claims that relate to sample processing, analytical testing and data analysis associated with nucleic screening for cancers and other diseases. The jurisdictions covered by these patents and patent applications include the U.S., Canada, the European Union and Japan. In addition to granting the Company a license to the covered MAYO intellectual property, MAYO agreed to make available personnel to provide the Company product development and research and development assistance. Under the license agreement, the Company assumed the obligation and expense of prosecuting and maintaining the licensed MAYO patents and are obligated to make commercially reasonable efforts to bring to market products using the licensed MAYO intellectual property. MAYO has agreed to make available personnel through January 2020 to provide us product development and research and development assistance. Pursuant to the Company’s agreement with MAYO, the Company is required to pay MAYO a low single digit royalty on the Company’s net sales of products using the licensed MAYO intellectual property, with minimum annual royalty fees of $25,000 each year through 2033, the year the last patent expires. The January 2016 amendment to the MAYO license agreement established various low single digit royalty rates on net sales of current and future products and clarified how net sales will be calculated. As part of the amendment, the royalty rate on the Company’s net sales of Cologuard increased and, if in the future, improvements are made to the Cologuard product, the royalty rate may further increase. However, the amendment provides that the Cologuard royalty will remain a low single digit percentage of net sales. The Company is also required to issue MAYO shares of the Company’s common stock with a value of $200,000 upon commercial launch of our second and third products that use the licensed MAYO intellectual property, as well as to pay MAYO, for each of the Company’s products that use licensed MAYO intellectual property, $200,000 cash upon such product reaching $5 million in cumulative net sales, $750,000 cash upon such product reaching $20 million in cumulative net sales, and $2 million cash upon such product reaching $50 million in cumulative net sales. As part of the February 2015 amendment and restatement of the license agreement, the Company agreed to pay MAYO an additional $5,000,000, payable in five annual installments, through 2019. In addition, the Company is paying MAYO for research and development efforts. As part of the Company’s research collaboration with MAYO, the Company has incurred charges of $2.6 million and has made payments of $2.6 million for the year ended December 31, 2015. The Company has recorded an estimated liability in the amount of $1.3 million for research and development efforts as of December 31, 2015. The Company incurred charges of $2.3 million and made payments of $0.7 million for the year ended December 31, 2014. The Company recorded an estimated liability in the amount of $1.5 million for research and development efforts at December 31, 2014. The Company incurred charges of $1.7 million and made payments of $1.0 million for the year ended December 31, 2013. The MAYO license agreement required, among other things, a $0.5 million milestone payment upon FDA approval of the Company’s Cologuard test. The Company received this FDA approval, and paid the milestone payment in August 2014. 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 warrant covering 1,000,000 shares was fully exercised as of September 2011. The warrant covering 250,000 shares was exercised at various dates in 2013 and 2014 and became fully exercised as of June 2014. The license agreement will remain in effect, unless earlier terminated by the parties in accordance with the agreement, until the last of the licensed patents expires in 2033 (or later, if certain licensed patent applications are issued). However, if we are still using the licensed MAYO know‑how or certain MAYO‑provided biological specimens or their derivatives on such expiration date, the term shall continue until the earlier of the date we stop using such know‑how and materials and the date that is five years after the last licensed patents expires. The license agreement contains customary termination provisions and permits MAYO to terminate the license agreement if the Company sues MAYO or its affiliates, other than any such suit claiming an uncured material breach by MAYO of the license agreement.

(4) MAYO LICENSE AGREEMENT

On June 11, 2009, the Company entered into a patent licensing agreement with MAYO Foundation for Medical Education and Research (“MAYO”). The Company’s license agreement with MAYO was most recently amended and restated in February 2015 and further amended in January 2016. Under the license agreement, MAYO granted the Company an exclusive, worldwide license to certain MAYO patents and patent applications, as well as a non‑exclusive, worldwide license with regard to certain MAYO know‑how. The scope of the license initially covered diagnostics and screenings for stool or blood based cancer, but was later amended to cover gastrointestinal cancers, pre-cancers, diseases and conditions. Under the January 2016 amendment to the license agreement, the scope has been expanded to cover any screening, surveillance or diagnostic tests or tools for use in connection with any type of cancers, pre-cancers, diseases or conditions.

The licensed MAYO patents and patent applications contain both method and composition‑of‑matter claims that relate to sample processing, analytical testing and data analysis associated with nucleic screening for cancers and other diseases. The jurisdictions covered by these patents and patent applications include the U.S., Canada, the European Union and Japan. In addition to granting the Company a license to the covered MAYO intellectual property, MAYO agreed to make available personnel to provide the Company product development and research and development assistance. Under the license agreement, the Company assumed the obligation and expense of prosecuting and maintaining the licensed MAYO patents and are obligated to make commercially reasonable efforts to bring to market products using the licensed MAYO intellectual property.

MAYO has agreed to make available personnel through January 2020 to provide us product development and research and development assistance.

Pursuant to the Company’s agreement with MAYO, the Company is required to pay MAYO a low single digit royalty on the Company’s net sales of products using the licensed MAYO intellectual property, with minimum annual royalty fees of $25,000 each year through 2033, the year the last patent expires. The January 2016 amendment to the MAYO license agreement established various low single digit royalty rates on net sales of current and future products and clarified how net sales will be calculated. As part of the amendment, the royalty rate on the Company’s net sales of Cologuard increased and, if in the future, improvements are made to the Cologuard product, the royalty rate may further increase. However, the amendment provides that the Cologuard royalty will remain a low single digit percentage of net sales.

The Company is also required to issue MAYO shares of the Company’s common stock with a value of $200,000 upon commercial launch of our second and third products that use the licensed MAYO intellectual property, as well as to pay MAYO, for each of the Company’s products that use licensed MAYO intellectual property, $200,000 cash upon such product reaching $5 million in cumulative net sales, $750,000 cash upon such product reaching $20 million in cumulative net sales, and $2 million cash upon such product reaching $50 million in cumulative net sales.

As part of the February 2015 amendment and restatement of the license agreement, the Company agreed to pay MAYO an additional $5,000,000, payable in five annual installments, through 2019.

In addition, the Company is paying MAYO for research and development efforts. As part of the Company’s research collaboration with MAYO, the Company has incurred charges of $2.6 million and has made payments of $2.6 million for the year ended December 31, 2015. The Company has recorded an estimated liability in the amount of $1.3 million for research and development efforts as of December 31, 2015. The Company incurred charges of $2.3 million and made payments of $0.7 million for the year ended December 31, 2014. The Company recorded an estimated liability in the amount of $1.5 million for research and development efforts at December 31, 2014. The Company incurred charges of $1.7 million and made payments of $1.0 million for the year ended December 31, 2013.

The MAYO license agreement required, among other things, a $0.5 million milestone payment upon FDA approval of the Company’s Cologuard test. The Company received this FDA approval, and paid the milestone payment in August 2014.

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 warrant covering 1,000,000 shares was fully exercised as of September 2011. The warrant covering 250,000 shares was exercised at various dates in 2013 and 2014 and became fully exercised as of June 2014.

The license agreement will remain in effect, unless earlier terminated by the parties in accordance with the agreement, until the last of the licensed patents expires in 2033 (or later, if certain licensed patent applications are issued). However, if we are still using the licensed MAYO know‑how or certain MAYO‑provided biological specimens or their derivatives on such expiration date, the term shall continue until the earlier of the date we stop using such know‑how and materials and the date that is five years after the last licensed patents expires. The license agreement contains customary termination provisions and permits MAYO to terminate the license agreement if the Company sues MAYO or its affiliates, other than any such suit claiming an uncured material breach by MAYO of the license agreement.