Collaboration and Commercial Technology Licensing Agreements	3 Months Ended
Mar. 31, 2018
Collaboration and Commercial Technology Licensing Agreements
Collaboration and Commercial Technology Licensing Agreements	Note 6. 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 $573,000 and $935,000 for the three months ended March 31, 2018 and 2017, 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 Company has specified options and rights relating to joint inventions arising out of these 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 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 $69,000 and $95,000 for the three months ended March 31, 2018 and 2017, respectively, which were included in cost of product revenues. In June 2016, the Company entered into a collaboration agreement with Epic Sciences, under which the Company was granted exclusive distribution rights to commercialize Epic Sciences’ AR-V7 Nucleus Detect test in the United States, which is marketed as Oncotype DX AR-V7 Nucleus Detect. 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, claims appeals, customer support, and providing and maintaining order management systems for the test. Epic Sciences is responsible for performing 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 Sciences in accordance with the terms of the agreement. During 2016 and 2017, the Company invested $7.5 million in subordinated convertible promissory notes of Epic Sciences that converted into shares of Epic Sciences preferred stock in March 2017. The subordinated convertible promissory notes had been recognized at fair value, which the Company estimated to be approximately $7.1 million while the difference of $375,000 was deferred as of December 31, 2017 and will be recognized as an additional cost of future purchases of Oncotype DX AR-V7 Nucleus Detect tests, which the Company believes will be at a discount to fair value. Additional terms of the agreement include the Company’s obligation to pay Epic Sciences $4.0 million upon achievement of certain milestones. Also, the Company has agreed, upon achievement of one of the milestones, to invest an additional $2.5 million in Epic Sciences preferred stock. The collaboration agreement has a term of 10 years, unless terminated earlier under certain circumstances. In September 2017, the Company entered into an exclusive license and development agreement with Biocartis, a molecular diagnostics company based in Belgium, to develop and commercialize an in vitro diagnostic (“IVD”) version of the Oncotype DX breast cancer test on Biocartis’ Idylla platform that can be performed locally by laboratory partners and in hospitals around the world. Under the terms of the license and development agreement, the Company has an exclusive, worldwide, royalty-bearing license to develop and commercialize an IVD version of the Oncotype DX breast cancer tests on the Biocartis Idylla platform, and an option to expand the collaboration to include additional tests in oncology and urology. The Company has primary responsibility for developing, validating and obtaining regulatory authorizations and registrations for IVD Oncotype DX tests to be performed on the Idylla platform. The Company is also responsible for manufacturing and commercialization activities with respect to such tests. Pursuant to the license and development agreement, the Company recorded a one-time upfront license and option fee of €2.8 million, or $3.2 million, which is included in research and development expenses in the year ended December 31, 2017. In December 2017, the Company purchased 270,000 ordinary shares of Biocartis at the market price of €12.50 for a total cost of €3.4 million or $4.0 million. This investment is subject to a lock-up agreement that expires in December 2018. The investment has been recognized at fair value, which the Company believes to be $3.8 million and $3.5 million at March 31, 2018 and December 31, 2017, respectively. Additional terms of the license and development agreement include the Company’s obligation to pay Biocartis an aggregate of €6.5 million in cash upon achievement of certain milestones, and royalties based primarily on the future sales volumes of the Company’s test performed on the Idylla platform. In November 2017, the Company entered into an exclusive licensing agreement with Cleveland Diagnostics to develop and commercialize new prostate cancer tests based on Cleveland Diagnostics' IsoPSA reagents and technology. Initial efforts under this agreement will focus on the Company’s development of a high-PSA (prostate specific antigen) reflex test to accurately predict the presence of high-grade cancer (Gleason score > 7) prior to prostate biopsy. During the year ended December 31, 2017, the Company invested $2.0 million in a convertible promissory note of Cleveland Diagnostics. The convertible promissory note has been recognized at fair value, which the Company estimated to be approximately $1.4 million and $1.3 million at March 31, 2018 and December 31, 2017, respectively, based on the Company’s estimate of the fair value of the underlying preferred stock into which the note is convertible. The Company records an accretion of the discount of the convertible promissory note in other income, net of consolidated statement of operations. Additional terms of the license agreement include the Company’s obligation to pay Cleveland Diagnostics up to an aggregate of $18.5 million in cash upon achievement of certain future milestones, a potential future investment in a convertible promissory note of Cleveland Diagnostics in the amount of $3.0 million upon achievement of certain future milestones, and royalties based primarily on the future sales volume of tests performed by the Company utilizing technology licensed from Cleveland Diagnostics.

Note 6. 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 $573,000 and $935,000 for the three months ended March 31, 2018 and 2017, 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 Company has specified options and rights relating to joint inventions arising out of these 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 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 $69,000 and $95,000 for the three months ended March 31, 2018 and 2017, respectively, which were included in cost of product revenues.

In June 2016, the Company entered into a collaboration agreement with Epic Sciences, under which the Company was granted exclusive distribution rights to commercialize Epic Sciences’ AR-V7 Nucleus Detect test in the United States, which is marketed as Oncotype DX AR-V7 Nucleus Detect. 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, claims appeals, customer support, and providing and maintaining order management systems for the test. Epic Sciences is responsible for performing 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 Sciences in accordance with the terms of the agreement. During 2016 and 2017, the Company invested $7.5 million in subordinated convertible promissory notes of Epic Sciences that converted into shares of Epic Sciences preferred stock in March 2017. The subordinated convertible promissory notes had been recognized at fair value, which the Company estimated to be approximately $7.1 million while the difference of $375,000 was deferred as of December 31, 2017 and will be recognized as an additional cost of future purchases of Oncotype DX AR-V7 Nucleus Detect tests, which the Company believes will be at a discount to fair value. Additional terms of the agreement include the Company’s obligation to pay Epic Sciences $4.0 million upon achievement of certain milestones. Also, the Company has agreed, upon achievement of one of the milestones, to invest an additional $2.5 million in Epic Sciences preferred stock. The collaboration agreement has a term of 10 years, unless terminated earlier under certain circumstances.

In September 2017, the Company entered into an exclusive license and development agreement with Biocartis, a molecular diagnostics company based in Belgium, to develop and commercialize an in vitro diagnostic (“IVD”) version of the Oncotype DX breast cancer test on Biocartis’ Idylla platform that can be performed locally by laboratory partners and in hospitals around the world. Under the terms of the license and development agreement, the Company has an exclusive, worldwide, royalty-bearing license to develop and commercialize an IVD version of the Oncotype DX breast cancer tests on the Biocartis Idylla platform, and an option to expand the collaboration to include additional tests in oncology and urology. The Company has primary responsibility for developing, validating and obtaining regulatory authorizations and registrations for IVD Oncotype DX tests to be performed on the Idylla platform. The Company is also responsible for manufacturing and commercialization activities with respect to such tests. Pursuant to the license and development agreement, the Company recorded a one-time upfront license and option fee of €2.8 million, or $3.2 million, which is included in research and development expenses in the year ended December 31, 2017. In December 2017, the Company purchased 270,000 ordinary shares of Biocartis at the market price of €12.50 for a total cost of €3.4 million or $4.0 million. This investment is subject to a lock-up agreement that expires in December 2018. The investment has been recognized at fair value, which the Company believes to be $3.8 million and $3.5 million at March 31, 2018 and December 31, 2017, respectively. Additional terms of the license and development agreement include the Company’s obligation to pay Biocartis an aggregate of €6.5 million in cash upon achievement of certain milestones, and royalties based primarily on the future sales volumes of the Company’s test performed on the Idylla platform.

In November 2017, the Company entered into an exclusive licensing agreement with Cleveland Diagnostics to develop and commercialize new prostate cancer tests based on Cleveland Diagnostics' IsoPSA reagents and technology. Initial efforts under this agreement will focus on the Company’s development of a high-PSA (prostate specific antigen) reflex test to accurately predict the presence of high-grade cancer (Gleason score > 7) prior to prostate biopsy. During the year ended December 31, 2017, the Company invested $2.0 million in a convertible promissory note of Cleveland Diagnostics. The convertible promissory note has been recognized at fair value, which the Company estimated to be approximately $1.4 million and $1.3 million at March 31, 2018 and December 31, 2017, respectively, based on the Company’s estimate of the fair value of the underlying preferred stock into which the note is convertible. The Company records an accretion of the discount of the convertible promissory note in other income, net of consolidated statement of operations. Additional terms of the license agreement include the Company’s obligation to pay Cleveland Diagnostics up to an aggregate of $18.5 million in cash upon achievement of certain future milestones, a potential future investment in a convertible promissory note of Cleveland Diagnostics in the amount of $3.0 million upon achievement of certain future milestones, and royalties based primarily on the future sales volume of tests performed by the Company utilizing technology licensed from Cleveland Diagnostics.