Collaboration and Commercial Technology Licensing Agreements	9 Months Ended
Sep. 30, 2016
Collaboration and Commercial Technology Licensing Agreements
Collaboration and Commercial Technology Licensing Agreements	Note 4. Collaboration and Commercial Technology Licensing Agreements The Company has entered into a variety of collaboration and specimen transfer agreements relating to its development efforts. The Company recorded collaboration expenses of $1.4 million and $3.9 million for the three and nine months ended September 30, 2016, respectively, and $1.4 million and $10.8 million for the three and nine months ended September 30, 2015, respectively, relating to services provided in connection with these agreements. In addition to these expenses, some of the agreements contain provisions for royalties from inventions resulting from the collaborations. The $10.8 million of collaboration expense for the nine months ended September 30, 2015 includes a one-time $5.5 million expense for the wind-down of a license agreement and development program as described below. The Company has specified options and rights relating to joint inventions arising out of the collaborations. The Company is a party to various agreements under which it licenses technology on a non-exclusive basis in the field of human diagnostics. Access to these licenses enables the Company to process its Oncotype DX tests. While certain agreements contain provisions for fixed annual payments, license fees are generally calculated as a percentage of product revenues, with rates that vary by agreement and may be tiered, and payments that may have annual minimum or maximum amounts. The Company recognized costs recorded under these agreements totaling $95,000 and $5.2 million for the three and nine months ended September 30, 2016, respectively, and $2.3 million and $6.9 million for the three and nine months ended September 30, 2015, respectively, which were included in cost of product revenues. The decrease in costs for these agreements for the three and nine months ended September 30, 2016 compared to the same periods in 2015, was primarily due to the satisfaction of certain royalty payment obligations. On October 28, 2016, the Company provided notice of termination of a license agreement with Roche Molecular Systems, Inc. (“Roche”), whereby the Company non-exclusively licensed from Roche a number of U.S. patents claiming nucleic acid amplification processes known as PCR, homogeneous polymerase chain reaction, and RT‑PCR. The Company is entitled to terminate this license agreement for any reason upon 30 days’ notice, and the effective date of the termination will be November 25, 2016. The Company was required to provide royalty payments to Roche consisting of a specified percentage of the Company’s net product revenues until the date of expiration of the last to expire of the relevant patents specified in the license agreement. In November 2013, the Company entered into an exclusive license agreement to develop and commercialize a test to predict benefit from DNA damage-based chemotherapy drugs, such as anthracycline-based regimens, in high risk breast cancer. The Company made an up-front payment of $9.0 million, which was recognized in research and development expense in the fourth quarter of 2013, and milestone payments would have been required if certain clinical and commercial endpoints were achieved in the future. With successful commercialization of a test, the Company would have been obligated to pay royalties. During the quarter ended March 31, 2015, the Company accrued $5.5 million in anticipation of the wind-down of this license agreement and development program, which was recognized as research and development expense in the accompanying condensed consolidated statements of operations. The license agreement was terminated in May 2015 and, as a result, the Company has no future obligations under this agreement. In June 2016, the Company entered into a collaboration agreement with Epic Sciences, Inc. (“Epic”), under which the Company has been granted exclusive distribution rights to commercialize Epic’s AR-V7 liquid biopsy test in the United States. The Company has primary responsibility, in accordance with applicable laws and regulations, for marketing and promoting the test, order fulfillment, billing and collections of receivables, customer support, and providing order management systems for the test. Epic is responsible for performing analysis for all tests, performing studies including analytic and clinical validation studies, and seeking Medicare coverage and a Medicare payment rate from the Centers for Medicare and Medicaid Services (“CMS”) for the test. Future revenues generated from the test will be shared by the Company and Epic in accordance with the terms of the agreement. Additional terms of the agreement include the Company’s obligation to pay Epic $4.0 million upon achievement of certain milestones. Also, the Company has agreed, subject to certain conditions, to invest up to an aggregate amount of $7.5 million in subordinated convertible promissory notes of Epic that will convert into preferred stock of Epic upon the satisfaction of certain conditions and, upon achievement of one of the milestones, to invest an additional $2.5 million in Epic preferred stock. The agreement has a term of 10 years, unless terminated earlier under certain circumstances. During the three and nine months ended September 30, 2016, the Company invested $6.1 million in subordinated convertible promissory notes of Epic. The subordinated convertible promissory notes have been recognized at fair value, which the Company believes is approximately $5.8 million while the difference of $305,000 has been deferred and will be recognized as additional cost of future expected purchases of Epic tests, which the Company believes will be at a discount to fair value. The Company is required to make a series of fixed annual payments under a collaboration agreement beginning with the one year anniversary of achieving a key milestone for the Company’s DCIS clinical study in June 2014. As of September 30, 2016, a final payment of $504,000 is due in 2017.

Note 4. Collaboration and Commercial Technology Licensing Agreements

The Company has entered into a variety of collaboration and specimen transfer agreements relating to its development efforts. The Company recorded collaboration expenses of $1.4 million and $3.9 million for the three and nine months ended September 30, 2016, respectively, and $1.4 million and $10.8 million for the three and nine months ended September 30, 2015, respectively, relating to services provided in connection with these agreements. In addition to these expenses, some of the agreements contain provisions for royalties from inventions resulting from the collaborations. The $10.8 million of collaboration expense for the nine months ended September 30, 2015 includes a one-time $5.5 million expense for the wind-down of a license agreement and development program as described below. The Company has specified options and rights relating to joint inventions arising out of the collaborations.

The Company is a party to various agreements under which it licenses technology on a non-exclusive basis in the field of human diagnostics. Access to these licenses enables the Company to process its Oncotype DX tests. While certain agreements contain provisions for fixed annual payments, license fees are generally calculated as a percentage of product revenues, with rates that vary by agreement and may be tiered, and payments that may have annual minimum or maximum amounts. The Company recognized costs recorded under these agreements totaling $95,000 and $5.2 million for the three and nine months ended September 30, 2016, respectively, and $2.3 million and $6.9 million for the three and nine months ended September 30, 2015, respectively, which were included in cost of product revenues. The decrease in costs for these agreements for the three and nine months ended September 30, 2016 compared to the same periods in 2015, was primarily due to the satisfaction of certain royalty payment obligations. On October 28, 2016, the Company provided notice of termination of a license agreement with Roche Molecular Systems, Inc. (“Roche”), whereby the Company non-exclusively licensed from Roche a number of U.S. patents claiming nucleic acid amplification processes known as PCR, homogeneous polymerase chain reaction, and RT‑PCR. The Company is entitled to terminate this license agreement for any reason upon 30 days’ notice, and the effective date of the termination will be November 25, 2016. The Company was required to provide royalty payments to Roche consisting of a specified percentage of the Company’s net product revenues until the date of expiration of the last to expire of the relevant patents specified in the license agreement.

In November 2013, the Company entered into an exclusive license agreement to develop and commercialize a test to predict benefit from DNA damage-based chemotherapy drugs, such as anthracycline-based regimens, in high risk breast cancer. The Company made an up-front payment of $9.0 million, which was recognized in research and development expense in the fourth quarter of 2013, and milestone payments would have been required if certain clinical and commercial endpoints were achieved in the future. With successful commercialization of a test, the Company would have been obligated to pay royalties. During the quarter ended March 31, 2015, the Company accrued $5.5 million in anticipation of the wind-down of this license agreement and development program, which was recognized as research and development expense in the accompanying condensed consolidated statements of operations. The license agreement was terminated in May 2015 and, as a result, the Company has no future obligations under this agreement.

In June 2016, the Company entered into a collaboration agreement with Epic Sciences, Inc. (“Epic”), under which the Company has been granted exclusive distribution rights to commercialize Epic’s AR-V7 liquid biopsy test in the United States. The Company has primary responsibility, in accordance with applicable laws and regulations, for marketing and promoting the test, order fulfillment, billing and collections of receivables, customer support, and providing order management systems for the test. Epic is responsible for performing analysis for all tests, performing studies including analytic and clinical validation studies, and seeking Medicare coverage and a Medicare payment rate from the Centers for Medicare and Medicaid Services (“CMS”) for the test. Future revenues generated from the test will be shared by the Company and Epic in accordance with the terms of the agreement. Additional terms of the agreement include the Company’s obligation to pay Epic $4.0 million upon achievement of certain milestones. Also, the Company has agreed, subject to certain conditions, to invest up to an aggregate amount of $7.5 million in subordinated convertible promissory notes of Epic that will convert into preferred stock of Epic upon the satisfaction of certain conditions and, upon achievement of one of the milestones, to invest an additional $2.5 million in Epic preferred stock. The agreement has a term of 10 years, unless terminated earlier under certain circumstances. During the three and nine months ended September 30, 2016, the Company invested $6.1 million in subordinated convertible promissory notes of Epic. The subordinated convertible promissory notes have been recognized at fair value, which the Company believes is approximately $5.8 million while the difference of $305,000 has been deferred and will be recognized as additional cost of future expected purchases of Epic tests, which the Company believes will be at a discount to fair value.

The Company is required to make a series of fixed annual payments under a collaboration agreement beginning with the one year anniversary of achieving a key milestone for the Company’s DCIS clinical study in June 2014. As of September 30, 2016, a final payment of $504,000 is due in 2017.