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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
12 Months Ended
Dec. 31, 2012
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
Use of Estimates

Use of Estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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

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 December 31, 2012 and 2011.

Marketable Securities

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 income. 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. 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 December 31, 2012 and December 31, 2011 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. Realized gains were $6,231, $419, and $13,149 for the years ended December 31, 2012, 2011, and 2010 respectively. Unrealized gains on investments recorded in other comprehensive income were $77,808 and $721 for the years ended December 31, 2012 and December 31, 2010. Unrealized losses on investments recorded in other comprehensive income were $13,784 for the year ended December 31, 2011.

        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  
                   

        Available-for-sale securities at December 31, 2011 consist of the following:

 
  December 31, 2011  
(In thousands)
  Amortized Cost   Gains in Accumulated
Other Comprehensive
Income
  Losses in Accumulated
Other Comprehensive
Income
  Estimated
Fair Value
 

U.S. government agency securities

  $ 28,004   $   $ (10 ) $ 27,994  

Corporate bonds

    19,124           (2 )   19,122  

Certificates of deposit

    9,467         (2 )   9,465  

Commercial paper

    999             999  
                   

Total available-for-sale securities

  $ 57,594   $   $ (14 ) $ 57,580  
                   
Property and Equipment

Property and Equipment

        Property and equipment are stated at cost and depreciated using the straight-line method over the assets' estimated useful lives. Maintenance and repairs are expensed when incurred; additions and improvements are capitalized. The estimated useful lives of fixed assets are as follows:

Asset Classification
  Estimated Useful Life

Laboratory equipment

  3 - 5 years

Office and computer equipment

  3 years

Leasehold improvements

  Lesser of the remaining

 

  lease term or useful life

Furniture and fixtures

  3 years

        Depreciation expense for the years ended December 31, 2012, 2011, and 2010 was $1.0 million, $0.4 million, and $0.2 million, respectively.

Patent Costs

Patent Costs

        Patent costs, which have historically consisted of related legal fees, are capitalized as incurred only if the Company determines that there is some probable future economic benefit derived from the transaction. The capitalized patents are amortized beginning when patents are approved over an estimated useful life of five years. Capitalized patent costs are expensed upon disapproval, upon a decision by the Company to no longer pursue the patent or when the related intellectual property is either sold or deemed to be no longer of value to the Company. The Company determined that all patent costs incurred during the year ended December 31, 2012, 2011 and 2010 should be expensed and not capitalized as the future economic benefit derived from the transactions cannot be determined.

  • Clinical Trial Accrual

        Accruals are recorded for clinical trial patient site costs when the liability is probable and reasonably estimable. For our pivotal FDA clinical trial and other sample procurement studies we undertake periodically, an accrual is made for a patient site cost once the patient has progressed past certain steps in the patient assessment and sample processing procedure. The accrual is estimated based on historical average patient reimbursement fees. Management has recorded an accrual of $0.4 million at December 31, 2012 and 2011 for clinical trial costs related to site payments. We do not expect that actual amounts paid for these patient costs will materially differ from the amounts accrued.

Net Loss Per Share

Net Loss Per Share

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

        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 (amounts are in thousands):

 
  2012   2011   2010  

Shares issuable upon exercise of stock options

    6,182     6,454     6,217  

Shares issuable upon exercise of outstanding warrants(1)

    325     325     825  

Shares issuable upon the release of restricted stock awards

    814     401     264  

Shares issuable upon exercise of restricted stock awards related to licensing agreement

    73          
               

 

    7,394     7,180     7,306  
               

(1)
At December 31, 2012 and December 31, 2011, represents warrants to purchase 250,000 shares of common stock issued under a licensing agreement and warrants to purchase 75,000 shares of common stock issued under a consulting agreement. At December 31, 2010 represents represents warrants to purchase 750,000 shares of common stock issued under a licensing agreement and warrants to purchase 75,000 shares of common stock issued under a consulting agreement.
Accounting for Stock-Based Compensation

Accounting for Stock-Based Compensation

        The Company requires all share-based payments to employees, including grants of employee stock options, restricted stock, restricted stock units and shares purchased under an ESPP (if certain parameters are not met), to be recognized in the financial statements based on their fair values.

Revenue Recognition

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. On June 27, 2007, the Company entered into an amendment to its exclusive license agreement with LabCorp (the "Second Amendment") that, among other modifications to the terms of the license, extended the exclusive license period from August 2008 to December 2010, subject to carve-outs for certain named organizations. Accordingly, the Company amortized the remaining deferred revenue balance resulting from its license agreement with LabCorp at the time of the Second Amendment ($4.7 million) on a straight-line basis over the remaining exclusive license period, which ended in December 2010.

        As more fully described in Note 3 below, in connection with the Company's transaction with Genzyme Corporation, Genzyme agreed to pay the Company 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 purchased from the Company 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 $4.1 million in license fee revenue in connection with the amortization of the up-front payments from Genzyme during the years ended December 31, 2012 and December 31, 2011. The Company recognized $5.3 million in license fee revenue in connection with the amortization of the up-front payments from LabCorp and Genzyme during the year ended December 31, 2010.

        Product royalty fees.    The Company has licensed certain of its technologies, including improvements to such technologies, on an exclusive basis to LabCorp. LabCorp developed and commercially offered a non-invasive stool-based DNA colorectal cancer screening service for the average-risk population based on the Company's technology. The Company is entitled to certain royalties on any sales of this product. Accordingly, the Company records product royalty fees based on the specified contractual percentage of LabCorp's net revenues from its sales of such colorectal cancer screening tests, as reported to the Company each month by LabCorp. The current royalty rate is subject to an increase in the event that LabCorp achieves a specified significant threshold of annual net revenues from the sales of such colorectal cancer screening tests. No sales of this product were reported to the Company during the year ended December 31, 2012 and no product royalty fees were recorded. Product royalty fees were $20,000 and $26,000 for the years ended December 31, 2011 and 2010, respectively.

Other Income

Other Income

        The Company recognizes other income as earned. Other income consists of income received related to activities not related to the Company's core business operations. The Company had no other income during the years ended December 31, 2012 and 2011. During 2010, the Company received notice that it had been awarded a total cash grant of $244,479 under the Qualifying Therapeutic Discovery Project program administered under Section 48D of the Internal Revenue Code, all of which relates to qualifying expenses that have previously been incurred. The Company recognized the full amount of the grant as other income for the year ended December 31, 2010 as the Company has incurred all of the qualifying expenses and the amount had been received in full.

Advertising Costs

Advertising Costs

        The Company expenses the costs of media advertising at the time the advertising takes place. The Company expensed approximately $57,400, $110,000 and $68,100 of media advertising during the years ended December 31, 2012, 2011, and 2010, respectively.

Fair Value Measurements

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. This guidance was adopted in 2009 for non-financial assets and liabilities. 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 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:  
Description
  Fair Value at
December 31, 2012
  Quoted Prices
in Active
Markets for Identical Assets
(Level 1)
  Significant Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Cash equivalents(1)

  $ 8,405   $ 8,405   $   $  

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

  $ 103,181   $ 8,405   $ 94,776   $  
                   

(1)
The $8.4 million of cash equivalents above is included in the cash and cash equivalents balance of $13.3 million at December 31, 2012.

        The following table presents the Company's fair value measurements as of December 31, 2011 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, 2011 Using:  
Description
  Fair Value at
December 31, 2011
  Quoted Prices
in Active
Markets for Identical Assets
(Level 1)
  Significant Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Cash equivalents(1)

  $ 35,385   $ 35,385   $   $  

Available-for-Sale

                         

Marketable securities

                         

U.S. government agency securities

    27,994         27,994      

Certificates of deposit

    9,465         9,465      

Corporate bonds

    19,122         19,122      

Commercial paper

    999         999      
                   

Total

  $ 92,965   $ 35,385   $ 57,580   $  
                   

(1)
The $35.4 million of cash equivalents above is included in the cash and cash equivalents balance of $35.8 million at December 31, 2011.

        As of December 31, 2012 and 2011 there were available for sale securities in a continuous unrealized loss position for less than twelve months where the total unrealized losses were $4,800 and $28,500 respectively. At December 31, 2012 and 2011 there were no available for sale securities in a continuous unrealized loss position for greater than twelve months.

        The following summarizes contractual underlying maturities of the Company's available-for-sale investments at December 31, 2012 (in thousands):

 
  Cost   Fair Value  

Due in one year or less

  $ 58,882   $ 58,922  

Due after one year through two years

    35,816     35,854  
           

 

  $ 94,698   $ 94,776  
           
Concentration of Credit Risk

Concentration of Credit Risk

        In accordance with GAAP, the Company is required to disclose any significant off-balance-sheet risk and credit risk concentration. The Company has no significant off-balance-sheet risk, such as foreign exchange contracts or other hedging arrangements. Financial instruments that subject the Company to credit risk consist of cash, cash equivalents and marketable securities. As of December 31, 2012, the Company had cash and cash equivalents deposited in financial institutions in which the balances exceed the federal government agency insured limit of $250,000 by approximately $13.1 million. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant credit risk.

Subsequent Events

Subsequent Events

        The Company evaluates events that occur through the filing date and discloses those events or transactions that provide additional evidence with respect to conditions that existed at the date of the balance sheet. In addition, the financial statements are adjusted for any changes in estimates resulting from the use of such evidence.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

        In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210)—Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. Entities are required to disclose both gross and net information about these instruments. ASU 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The adoption of this ASU is not expected to have a material impact on our financial statements.

Reclassifications

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.