10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number:  000-32179

EXACT SCIENCES CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE	02-0478229
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)
505 S. Rosa Road, Suite 123, Madison WI	53719
(Address of principal executive offices)	(Zip Code)

(608) 284-5700

(Registrant’s telephone number, including area code)

100 Campus Drive, Marlborough, MA  01752

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x   No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes £No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer   o	Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o   No  x

As of August 7, 2009, the registrant had 35,446,456 shares of Common Stock outstanding.

EXACT SCIENCES CORPORATION

INDEX

		Page
		Number
	Part I - Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets (Unaudited) as of June 30, 2009 and December 31, 2008	3
	Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2009 and 2008	4
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2009 and 2008	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 4.	Controls and Procedures	25
	Part II - Other Information
Item 6.	Exhibits	26
	Signatures	27
	Exhibit Index	28

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EXACT SCIENCES CORPORATION

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share data - - unaudited)

	June 30,			December 31,
	2009			2008
ASSETS
Current Assets:
Cash and cash equivalents	$	12,288		$	4,937
Marketable securities		15,510		—
Prepaid expenses and other current assets	426			190
Total current assets	28,224			5,127
Property and Equipment, at cost:
Laboratory equipment	174			174
Office and computer equipment	57			13
Leasehold improvements	13			—
Furniture and fixtures	10			—
	254			187
Less—Accumulated depreciation and amortization	(136		)	(111		)
	118			76
Patent costs, net of accumulated amortization of $2,820 at December 31, 2008	—			95
Restricted cash	600			600
	$	28,942		$	5,898
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current Liabilities:
Accounts payable	$	284		$	683
Accrued expenses	1,085			1,498
Third party royalty obligation	1,000			1,500
Deferred revenue	4,986			1,350
Total current liabilities	7,355			5,031
Third party royalty obligation, less current portion	965			1,950
Deferred revenue	13,654			1,350
Commitments and contingencies
Stockholders’ (Deficit) Equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized; no shares issued and outstanding at June 30, 2009 and December 31, 2008	—			—
Common stock, $0.01 par value; 100,000,000 shares authorized; 35,267,069 and 27,522,931 shares issued and outstanding at June 30, 2009 and December 31, 2008	353			275
Additional paid-in capital	185,372			169,854
Treasury stock, at cost, 85,550 shares	(97		)	(97		)
Accumulated other comprehensive income	38			—
Accumulated deficit	(178,698		)	(172,465		)
Total stockholders’ (deficit) equity	6,968			(2,433		)
	$	28,942		$	5,898

The accompanying notes are an integral part of these condensed consolidated financial statements.

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EXACT SCIENCES CORPORATION

Condensed Consolidated Statements of Operations

(Amounts in Thousands, except per share data-unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Revenue:
Product royalty fees	$	11		$	(495	)	$	18		$	(787	)
License fees	1,247			338			2,240			676
Product	—			11			—			16
	1,258			(146		)	2,258			(95		)
Cost of revenue:
Product royalty fees	8			—			8			1
Gross profit (loss)	1,250			(146		)	2,250			(96		)
Operating expenses:
Research and development (1)	2,015			528			2,123			1,387
General and administrative (1)	1,638			1,495			6,406			3,330
Sales and marketing	40			—			40			—
Restructuring	—			(5		)	(3		)	(7		)
	3,693			2,018			8,566			4,710
Loss from operations	(2,443		)	(2,164		)	(6,316		)	(4,806		)
Interest income	49			64			83			188
Net loss	$	(2,394	)	$	(2,100	)	$	(6,233	)	$	(4,618	)
Net loss per share - basic and diluted	$	(0.08	)	$	(0.08	)	$	(0.21	)	$	(0.17	)
Weighted average common shares outstanding - basic and diluted	31,283			27,175			30,360			27,160
(1) Non-cash stock-based compensation expense included in these amounts are as follows:
Research and development	$	50		$	25		$	50		$	70
General and administrative	661			204			1,284			460

The accompanying notes are an integral part of these condensed consolidated financial statements.

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EXACT SCIENCES CORPORATION

Consolidated Statements of Cash Flows

(Amounts in thousands-unaudited)

	Six Months Ended June 30,
	2009			2008
Cash flows from operating activities:
Net loss	$	(6,233	)	$	(4,618	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	121			431
Stock-based compensation	1,334			530
Warrant expense for license fees	1,725			—
Changes in assets and liabilities:
Prepaid expenses and other current assets	(236		)	(127		)
Amortization of deferred revenue	(2,240		)	(676		)
Accounts payable	(399		)	105
Accrued expenses	(381		)	(1,185		)
Third party royalty obligation	(1,485		)	800
Net cash used in operating activities	(7,794		)	(4,740		)
Cash flows from investing activities:
Purchases of marketable securities	(16,972		)	(3,458		)
Maturities of marketable securities	1,500			9,293
Purchases of property and equipment	(68		)	—
Increase in patent costs and other assets	—			(83		)
Net cash (used in) provided by investing activities	(15,540		)	5,752
Cash flows from financing activities:
Proceeds from Genzyme Collaboration, License and Purchase Agreement	16,650			—
Proceeds from sale of common stock to Genzyme	6,000			—
Proceeds from sale of common stock, net of issuance costs	8,062			—
Proceeds from exercise of common stock options and stock purchase plan	23			6
Payment to repurchase stock options	(50		)	—
Net cash provided by financing activities	30,685			6
Net increase in cash and cash equivalents	7,351			1,018
Cash and cash equivalents, beginning of period	4,937			4,486
Cash and cash equivalents, end of period	$	12,288		$	5,504

The accompanying notes are an integral part of these consolidated financial statements.

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EXACT SCIENCES CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(1) ORGANIZATION AND BASIS OF PRESENTATION

Organization

EXACT Sciences Corporation (“EXACT” or the “Company”) was incorporated in February 1995. EXACT  is a molecular diagnostics company focused on 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.  Effective April 2, 2009 the Company’s board of directors appointed Kevin T. Conroy as president and chief executive, and Maneesh K. Arora as senior vice president and chief financial officer. They were most recently president and chief executive, and chief financial officer, respectively, of Third Wave Technologies Inc.

Basis of Presentation

The accompanying condensed consolidated 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, 2008 included in the Company’s Annual Report on Form 10-K. These condensed consolidated 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. 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 financial statements and footnotes thereto included in our audit for the year ended December 31, 2008.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company’s wholly-owned subsidiary, EXACT Sciences Securities Corporation, a Massachusetts securities corporation.  All significant intercompany transactions and balances have been eliminated in consolidation.

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 all highly-liquid investments with maturities of 90 days or less at the time of acquisition to be cash equivalents.  Cash equivalents primarily consist of money market funds.

Restricted Cash

At June 30, 2009 and December 31, 2008, $0.6 million of the Company’s cash has been pledged as collateral for an outstanding letter of credit in connection with the lease for the Company’s corporate headquarters.

Marketable Securities

The Company accounts for its investments in marketable securities in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 115, Accounting for Certain Investments in Debt and Equity Securities.  Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such

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designation as of each balance sheet date.  Debt securities 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 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, 2009, the Company’s investments were comprised of fixed income investments and all were deemed available-for-sale.  At December 31, 2008, the Company held no marketable securities.  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.  There were no realized gains or losses on the sale of available-for-sale securities during the six months ended June 30, 2009 and 2008.

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. During the second quarter of 2009 the Company determined that the patent costs incurred should be expensed and not capitalized as the future economic benefit derived from the transactions was indeterminate.

As more fully described in Note 3 below, in connection with the Genzyme Strategic Transaction the Company sold its then-remaining capitalized intellectual property to Genzyme on January 27, 2009, and accordingly, wrote off the remaining unamortized capitalized patent costs at that time. There are no capitalized patent costs recorded in the Company’s financial statements as of June 30, 2009.

The following table summarizes activity with respect to the Company’s capitalized patents for the six months ended June 30, 2009 and 2008.  Amounts included in the table are in thousands.

	Six Months			Six Months
	Ended June 30,			Ended June 30,
	2009			2008
Patents, net of accumulated amortization, Beginning of period	$	95		$	432
Patent costs capitalized	—			83
Amortization of patents	—			(62		)
Write-offs of patents	(95		)	(253		)
Patents, net of accumulated amortization, End of period	$	—		$	200

Net Loss Per Share

Basic and diluted net loss per share is presented in conformity with SFAS No. 128, Earnings per Share (“SFAS No. 128”), for all periods presented.  In accordance with SFAS No. 128, 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.

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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)	2009	2008
Shares issuable upon exercise of stock options	6,861	4,396
Shares issuable upon exercise of outstanding warrants	1,250	1,000
	8,111	5,396

Accounting for Stock-Based Compensation

The Company accounts for share-based payments to employees in accordance with SFAS No. 123(R), Share-Based Payment (“SFAS No. 123(R)”), which requires all share-based payments to employees, including grants of employee stock options and shares purchased under an employee stock purchase plan (if certain parameters are not met), to be recognized in the financial statements based on their fair values.  Share-based payment transactions with parties other than employees are accounted for in accordance with EITF 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.

Revenue Recognition

License fees.  License fees for the licensing of product rights on initiation of strategic agreements are recorded as deferred revenue upon receipt 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 amortizes 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 ends in December 2010.

As more fully described in Note 3 below, in connection with the Genzyme Strategic Transaction, the Company received an up-front payment of $16.65 million on January 27, 2009 in exchange for the assignment and licensing of certain intellectual property to Genzyme.  Pursuant to the provisions of SEC Staff Accounting Bulletin No. 104 and EITF No. 00-21, Revenue Arrangements with Multiple Deliverables, which govern revenue recognition, 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 certain intellectual property improvements to Genzyme 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 will amortize that up-front payment on a straight line basis into revenue over the initial five-year collaboration period ending in January 2014.  Receipt of any holdback amounts, as defined below, will similarly be deferred and amortized on a straight line basis into revenue over the remaining term of the collaboration at the time of receipt.

In addition, Genzyme paid $2.00 per share for the 3,000,000 shares of common stock purchased from the Company on January 27, 2009, 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.  Under FASB Technical Bulletin No. 85-6, Accounting for a Purchase of Treasury Shares at a Price Significantly in Excess of the Current Market Price of the Shares and the Income Statement Classification of Costs Incurred in Defending against a Takeover Attempt, (“FTB No. 85-6”), 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 will amortize that amount on a straight line basis into revenue over the initial five-year collaboration period ending in January 2014.  The Company recognized approximately $1.6  million in license fee revenue in connection with the amortization of the up-front payments from Genzyme during the six months ended June 30, 2009.

Product royalty fees.  The Company has licensed certain of its technologies, including improvements to such technologies, on an exclusive basis through December 2010 to LabCorp.  LabCorp developed and commercially offered PreGen-Plus, a non-invasive stool-based DNA colorectal cancer screening service for the average-risk population based on the Company’s Version 1 technology, from August 2003 through June 2008.  In June 2008, LabCorp stopped offering PreGen-Plus.  On July 14, 2008, LabCorp began to commercially offer ColoSure, its next generation non-invasive, stool-based DNA

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testing service for the detection of colorectal cancer in the average-risk population, which is based on certain of the Company’s intellectual property.  The Company will be entitled to the same royalty and milestone structure on any sales of ColoSure as it was entitled to on sales of PreGen-Plus.

Prior to the effective date of the Second Amendment, the Company’s product royalty fees were based on a specified contractual percentage of LabCorp’s cash receipts from performing PreGen-Plus tests.  Accordingly, the Company recorded product royalty fees based on this specified percentage of LabCorp’s cash receipts, as reported to the Company each month by LabCorp.  Subsequent to the effective date of the Second Amendment, the Company’s product royalty fees are based on a specified contractual percentage of LabCorp’s net revenues from sales of PreGen-Plus through June 1, 2008, when LabCorp stopped offering PreGen-Plus, and from sales of ColoSure from and after July 2008.  Accordingly, subsequent to the effective date of the Second Amendment, 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 15%, subject to an increase to 17% in the event that LabCorp achieves a specified significant threshold of annual net revenues from the sales of such colorectal cancer screening tests.

Additionally, pursuant to the Second Amendment, the Company is potentially obligated to reimburse LabCorp for certain third-party royalty payments, as described in Note 6 below.  To the extent the Company incurs liabilities in connection with this provision of the Second Amendment, the accretion of such liabilities will be recorded as a reduction in the product royalty fee line item in the Company’s condensed consolidated statements of operations.

Other revenue.  Revenue from milestone and other performance-based payments is recognized as revenue when the milestone or performance is achieved and collection of the receivable is estimable and probable.

Comprehensive Loss

SFAS No. 130, Reporting Comprehensive Income, establishes presentation and disclosure requirements for comprehensive income (loss).  Comprehensive loss consists of net loss and the change in unrealized gains and losses on marketable securities.   Comprehensive loss for the three months ended June 30, 2009 and 2008 was as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2009			2008			2009			2008
Net loss	$	(2,394	)	$	(2,100	)	$	(6,233	)	$	(4,618	)
Unrealized gain (loss) on marketable securities	(33		)	(23		)	38			(22		)
Comprehensive loss	$	(2,427	)	$	(2,123	)	$	(6,195	)	$	(4,640	)

(3) GENZYME STRATEGIC TRANSACTION

Transaction summary

On January 27, 2009, the Company entered into a Collaboration, License and Purchase Agreement (the “CLP Agreement”) with Genzyme Corporation (“Genzyme”).  Pursuant to the CLP Agreement, the Company (i) assigned to Genzyme all of its intellectual property applicable to the fields of prenatal and reproductive health (the “Transferred Intellectual Property”), (ii) granted Genzyme an irrevocable, perpetual, exclusive, worldwide, fully-paid, royalty-free license to use and sublicense all of the Company’s remaining intellectual property (the “Retained Intellectual Property”) in the fields of prenatal and reproductive health (the “Genzyme Core Field”), and (iii) granted Genzyme an irrevocable, perpetual, non-exclusive, worldwide, fully-paid, royalty-free license to use and sublicense the Retained Intellectual Property in all fields other than the Genzyme Core Field and other than colorectal cancer detection and stool-based disease protection (the “Company Field”).  Following the Genzyme Transaction, EXACT retains rights in its intellectual property to pursue only the fields of colorectal cancer detection and stool-based detection of any disease or condition.  As part of the transaction, the Company entered into an Assignment, Sublicense, Consent and Eighth Amendment to License Agreement with Genzyme and JHU (the “JHU Amendment”) (collectively, with the licenses and assignment described herein, the “Genzyme Strategic Transaction”) on January 27, 2009, whereby the Company assigned its rights under the license agreement between the Company and The Johns Hopkins University (“JHU”) dated March 25, 2003, as amended (the “JHU Agreement”) to Genzyme. Pursuant to the JHU Amendment, Genzyme sublicensed to the Company the intellectual property subject to the JHU Agreement for colorectal cancer detection and stool-based disease detection, including the BEAMing technology for the detection of colorectal cancer.  Under the JHU Amendment, the Company and Genzyme will share in the royalty and annual payment obligations to JHU.

Also as part of the Genzyme Strategic Transaction, the Company entered into an Amended and Restated License Agreement (the “Restated License”) with Genzyme on January 27, 2009, which amends and restates the License Agreement between the parties dated March 25, 1999, effective as of January 27, 2009.  Pursuant to the Restated License, Genzyme

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granted to the Company a non-exclusive license to use technology related to the use of certain genes, specifically APC and p53, and methodologies related thereto.  In exchange for the license, which continues until the expiration of the last to expire licensed patent, the Company has agreed to pay Genzyme royalties based on net revenues received from performing tests that incorporate the licensed technology and sales of reagents and diagnostic test kits that incorporate the licensed technology, as well as certain minimum royalties, milestone payments and maintenance fees.

Pursuant to the Genzyme Strategic Transaction, Genzyme agreed to pay an aggregate of $18.5 million to the Company, of which $16.65 million was paid at closing and $1.85 million (the “Holdback Amount”) is subject to a holdback by Genzyme to satisfy certain potential indemnification obligations of the Company. Subject to the terms and conditions of the CLP Agreement, one-half of the Holdback Amount will be released to the Company in 12 months and one-half will be released in 18 months.  Genzyme also agreed to pay a double-digit royalty to the Company on income received by Genzyme as a result of any licenses or sublicenses to third parties of the Transferred Intellectual Property or the Retained Intellectual Property in any field other than the Genzyme Core Field or the Company Field.

Pursuant to the provisions of SEC Staff Accounting Bulletin No. 104 and EITF No. 00-21, which govern revenue recognition, the Company’s on-going performance obligations to Genzyme under the CLP, including the obligation to deliver certain intellectual property improvements to Genzyme 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 will amortize that up-front payment on a straight line basis into the License Fee Revenue line item in its statements of operations over the initial five year collaboration period.  Receipt of any Holdback Amounts will similarly be deferred and amortized on a straight line basis into the License Fee Revenue line item in the Company’s statements of operations over the remaining term of the collaboration at the time of receipt.

In addition, the Company entered into a Common Stock Subscription Agreement with Genzyme (the “Purchase Agreement”) on January 27, 2009, which provided for the private issuance and sale to Genzyme of 3,000,000 shares (the “Shares”) of the Company’s common stock, $0.01 par value per share (“Common Stock”), at a per share price of $2.00, for an aggregate purchase price of $6.0 million.  The price paid by Genzyme for the Shares  represented 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.  Under FTB No. 85-6 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 included as a part of the total consideration for the CLP.  Accordingly, the Company deferred the aggregate $1.53 million premium and will amortize that amount on a straight line basis into the License Fee Revenue line item in the Company’s statements of operations over the initial five-year collaboration period.  The Company recognized approximately $1.6 million in license fee revenue in connection with the amortization of the up-front payments from Genzyme during the six months ended June 30, 2009.

(4) MAYO LICENSING 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) (the “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 License Agreement grants the Company an option to include the Proteomic Target within the Field upon written notice by the Company to MAYO during the first year of the term.  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 licenses 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 will also make payments to MAYO for up-front fees, fees once certain milestones are reached by the Company, and other payments as outlined in the agreement. In addition to the license to intellectual property owned by MAYO, the Company will  receive 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 liable to make royalty payments to MAYO on potential future net sales of any products developed from the licensed technology.

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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 vested immediately and the grant to purchase 250,000 shares vest over a four year period. The total value of the warrants was calculated to be $2.1 million and a non cash charge of $1.7 million was recognized as research and development expense in the second quarter of 2009 and the remaining $0.4 million non cash charge will be recognized straight-line over the four year vesting period. The assumptions for the Black-Scholes pricing model are represented in the table below.

Assumptions for Black-Scholes Pricing Model:

Exercise price	$	1.90
Stock price	$	1.99
Volatility	86.30		%
Life of warrant (in years)	10
Treasury rate	3.88		%
Yield	0		%
Fair value per warrant	$	1.72

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 will be $10,000 in 2012 and $25,000 per year thereafter.

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 a human cancer screening clinical, and  a $500,000 payment upon FDA approval of the Company’s cancer screening test. The upfront payment of $80,000 has been accrued for at June 30, 2009 and payment will be made in the third quarter of 2009.  In addition, the Company will pay a minimum of $659,516 to MAYO over the next 12 months for research and development efforts.

(5) CHANGES IN SENIOR MANAGEMENT AND EMPLOYMENT AGREEMENTS

Former Chief Executive Officer and Former Chief Financial Officer

Effective April 2, 2009, Jeffrey R. Luber resigned as the Company’s President and Chief Executive Officer and member of the Company’s Board of Directors, and Charles R. Carelli, Jr. resigned as the Company’s Chief Financial Officer.  Mr. Carelli remained employed by the Company as a non-executive employee through April 30, 2009. The expenses related to the departure discussed below were recorded in the quarter ended March 31, 2009.

In connection with their departure, Messrs. Luber and Carelli were entitled to receive severance benefits pursuant to their previously disclosed retention agreements, including salary continuation of $472,500 and $287,500, which is equal to eighteen months and fifteen months, respectively, of their base salaries as of the date of termination.  On March 31, 2009, the Company entered into release agreements with Messrs. Luber and Carelli that provided, in exchange for a general release in favor of the Company, for the accelerated payment of the salary continuation obligations.  In addition, the release agreements also provided for the repurchase by the Company of options held by Messrs. Luber and Carelli for an aggregate of 804,026 shares of common stock, in lieu of accelerated vesting and an extension of the option exercise period arising from the prior retention agreements.  The Company paid Messrs. Luber and Carelli approximately $39,000 and $11,000, respectively, to repurchase Mr. Luber’s options to purchase 553,333 shares and Mr. Carelli’s options to purchase 250,693 shares.  The purchase price of the outstanding options represented a 75 percent discount from the estimated fair value of the vested options as of March 31, 2009 and was recorded as a reduction to additional paid-in-capital.  Messrs. Luber and Carelli retained the balance of their existing options, the vesting of which was accelerated by nine months.

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In connection with the repurchase of options from Messrs. Luber and Carelli, the Company recorded non-cash stock-based compensation charges of approximately $0.2 million in the quarter ended March 31, 2009 in accordance with the provisions of SFAS No. 123(R).  In addition, the Company recorded non-cash stock-based compensation charges of approximately $60,000 in the quarter ended March 31, 2009 in connection with modifications in vesting and period of exercise for options being retained by Messrs. Luber and Carelli.

A summary of options repurchased as of June 30, 2009 from Mr. Luber and options retained subsequent to Mr. Luber’s termination is below.

Options Repurchased

			Number of Securities
			Underlying Unexercised Options			Total	Total
Option	Grant		As of March 31, 2009		Total	Options	Options
Grant Date	Price		Exercisable	Unexercisable	Options	Repurchased	Forfeited
11/18/2002	$	14.33	50,000	—	50,000	50,000	—
2/11/2004	$	7.72	80,000	—	80,000	80,000	—
12/23/2004	$	3.61	60,000	—	60,000	60,000	—
2/17/2005	$	4.22	20,000	—	20,000	20,000	—
2/16/2006	$	2.61	55,000	—	55,000	55,000	—
4/11/2006	$	3.07	29,166	834	30,000	30,000	—
2/15/2007	$	2.77	52,083	22,917	75,000	70,833	4,167
9/4/2007	$	2.90	125,000	125,000	250,000	187,500	62,500
			471,249	148,751	620,000	553,333	66,667

Options Retained

			Number of
Option	Grant		Options	Expiration
Grant Date	Price		Retained	Date
2/21/2008	$	1.83	80,207	1/2/2011

A summary of options repurchased as of June 30, 2009 from Mr. Carelli and options retained subsequent to Mr. Carelli’s termination is below.

Options Repurchased

			Number of Securities
			Underlying Unexercised Options			Total	Total
Option	Grant		As of March 31, 2009		Total	Options	Options
Grant Date	Price		Exercisable	Unexercisable	Options	Repurchased	Forfeited
11/9/2004	$	3.28	20,000	—	20,000	20,000	—
7/29/2005	$	2.65	27,499	2,501	30,000	30,000	—
2/16/2006	$	2.61	25,000	—	25,000	25,000	—
4/11/2006	$	3.07	24,305	695	25,000	25,000	—
2/15/2007	$	2.77	52,083	22,917	75,000	72,916	2,084
9/4/2007	$	2.90	50,000	50,000	100,000	77,777	22,223
			198,887	76,113	275,000	250,693	24,307

Options Retained

			Number of
Option	Grant		Options	Expiration
Grant Date	Price		Retained	Date
2/21/2008	$	1.83	43,124	1/31/2011

New Chief Executive Officer and Chief Financial Officer

On March 18, 2009, the Company’s Board of Directors appointed Kevin T. Conroy as President and Chief Executive Officer of the Company, effective April 2, 2009.  Also on March 18, 2009, based on the recommendation of the Corporate Governance and Nominating Committee, the Board of Directors elected Mr. Conroy to the Board. In connection with his appointment, Mr. Conroy entered into an employment agreement with the Company on March 18, 2009 (the “Conroy Agreement”).  Under the terms of the Conroy Agreement, Mr. Conroy serves as President and Chief Executive Officer of the Company at a base salary of $340,000 and is eligible to earn up to 50% of his base salary in annual bonuses, with the exact amount of any such bonus to be determined by the Compensation Committee. Pursuant to the Conroy Agreement, Mr. Conroy was granted options to purchase 2.5 million shares of the common stock of the Company, par value $0.01 per share (the “Common Stock”), at a price per share of $0.83, which is equal to the closing price of the Common Stock on the NASDAQ Capital Market on March 18, 2009.  Twenty-five percent (25%) of the

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shares underlying the stock options become exercisable on the one-year anniversary of the date of grant, with the remainder vesting quarterly over the subsequent three years.

On March 18, 2009, the Company’s Board of Directors appointed Maneesh K. Arora as Senior Vice President and Chief Financial Officer of the Company, effective April 2, 2009.  In connection with his appointment, Mr. Arora entered into an employment agreement with the Company on March 18, 2009 (the “Arora Agreement”).  Under the terms of the Arora Agreement, Mr. Arora serves as Senior Vice President and Chief Financial Officer of the Company at a base salary of $240,000 and is eligible to earn up to 40% of his base salary in annual bonuses, with the exact amount of any such bonus to be determined by the Compensation Committee.  Pursuant to the Arora Agreement, Mr. Arora was granted options to purchase 1.25 million shares of Common Stock, at a price per share of $0.83, which is equal to the closing price of the Common Stock on the NASDAQ Capital Market on March 18, 2009.  Twenty-five percent (25%) of the shares underlying the stock options become exercisable on the one-year anniversary of the date of grant, with the remainder vesting quarterly over the subsequent three years.

(6) CONTINGENCIES

Third Party Royalty Obligation

Pursuant to the terms of the Second Amendment to the Company’s license agreement with LabCorp, the Company is obligated to reimburse LabCorp for certain third-party royalty payments if LabCorp’s third-party royalty rate is greater than a specified royalty rate during the measuring period, as outlined in the table below.  During the quarter ended March 31, 2009, the Company paid LabCorp approximately $1.5 million related to its obligation for the first measurement period, which ended on December 31, 2008.  The Company’s future obligation to pay LabCorp pursuant to this provision of the Second Amendment is based on LabCorp’s sales volumes of colorectal cancer screening tests using the Company’s technology during two separate measurement periods, as defined below.  A significant increase in such sales volumes during either measurement period, as compared to historical PreGen-Plus sales volumes, could reduce the Company’s potential obligation during such measurement period, while test volumes consistent with historical PreGen-Plus sales levels could result in aggregate future payments to LabCorp totaling up to $2.0 million during the remaining measurement periods.  Until LabCorp’s sales of colorectal cancer screening tests using the Company’s technology increase to a level that would reduce this potential maximum obligation, if ever, the Company intends to record its estimated obligation under this provision of the Second Amendment as a reduction in the product royalty fee line item in its consolidated statements of operations, in accordance with EITF No. 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).  Based on sales volumes of PreGen-Plus through June 1, 2008 (when LabCorp ceased selling this service) and anticipated sales volumes of ColoSure, as of March 31, 2009, the Company had accrued a total of $1.97 million related to the total potential $2.0 million remaining obligation to LabCorp.  The Company recorded charges of $2.25 million and $1.2 million during the years ended December 31, 2008 and 2007, respectively, in connection with this third-party royalty obligation.  These charges were recorded under the caption “Product royalty fees” in the Company’s consolidated statements of operations.  Future increases in this obligation, to the extent necessary, will continue to be recorded as charges to the product royalty revenue line item of the Company’s consolidated statements of operations. Amounts included in the table are in thousands.

			Potential		Potential
			Minimum		Maximum
			Third Party		Third Party
		Payment Due Date	Royalty		Royalty
Measurement period	Measurement period	for Measurement	Obligation During		Obligation During
Start Date	End Date	Period	Measurement Period		Measurement Period
January 1, 2009	December 31, 2009	January 30, 2010	$	—	$	1,000
January 1, 2010	December 31, 2010	January 30, 2011	—		1,000
			$	—	$	2,000

(7) RESTRUCTURING

2008 Restructuring

On July 16, 2008, the Company implemented certain cost reduction initiatives, including the suspension of the clinical validation study for its Version 2 technology and the elimination of eight positions, or 67% of the Company’s

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workforce (the “2008 Restructuring”), in connection with the Company’s revised corporate strategy of reducing costs to better preserve existing cash.

In connection with the 2008 Restructuring, the Company recorded restructuring charges of approximately $0.5 million during the three months ended September 30, 2008, including $0.3 million in one-time termination benefits arising under retention and severance agreements with each of the terminated employees and $0.2 million resulting from the write-off of leasehold improvements abandoned by the Company in connection with the reduction in force.  The Company’s decision to eliminate 67% of its workforce was deemed to be an impairment indicator under SFAS No. 144.  As a result of performing the impairment evaluations, non-cash asset impairment charges of $0.3 million were recorded to adjust the carrying value of the related leasehold improvements to their net realizable value.

In addition, in connection with the 2008 Restructuring, the Company accelerated the vesting of 15,523 shares under terminated employees’ previously unvested stock options, with a weighted average exercise price of $2.65 per share, and extended the expiration date of all the terminated employees’ outstanding options as of their date of termination, covering an aggregate of 181,828 shares with a weighted average exercise price of $4.50 per share, through August 1, 2009.  Pursuant to the measurement provisions of SFAS No. 123(R), the Company recorded one-time non-cash stock-based compensation charges of approximately $3,000 in the “Restructuring” line item of the Company’s condensed consolidated statements of operations during the quarter ended September 30, 2008.

During the fourth quarter of 2008, the Company entered into a sublease agreement (the “2008 Sublease Agreement”) with QTEROS, Inc. (“QTEROS”) to sublease to QTEROS approximately 25,537 square feet of rentable area in the Company’s corporate headquarters.  The term of the 2008 Sublease Agreement, which commenced on December 9, 2008, is 20 months with a base rent of $625,657 per year. Pursuant to the 2008 Sublease Agreement, QTEROS has no rights to renew or extend the 2008 Sublease Agreement.  Under the terms of the 2008 Sublease Agreement, QTEROS is required to pay its pro rata share of any increases in building operating expenses and real estate taxes and to provide a security deposit in the form of an irrevocable, standby letter of credit from a national commercial bank reasonably acceptable to the Company in the amount of approximately $52,000 naming the Company as beneficiary.  The 2008 Sublease Agreement provides for the Company’s employees to continue to occupy approximately 1,100 square feet in the premises subleased to QTEROS.

In connection with the 2008 Sublease Agreement, the Company also recorded the following restructuring charges during the fourth quarter of 2008 (included opposite the caption “Facility consolidation costs” in the table below): approximately $0.1 million in future cash payments related to the difference between the Company’s committed lease payments and the estimated sublease rental income under the 2008 Sublease Agreement; approximately $0.1 million in one time real estate transaction and laboratory decommissioning fees; and approximately $0.1 million of non-cash charges related to the write-off of leasehold improvements abandoned by the Company in connection with the 2008 Sublease Agreement.  These charges were offset by cash receipts of approximately $0.3 million received in connection with sales of fully depreciated fixed assets upon commencement of the 2008 Sublease Agreement.  During the quarter ended March 31, 2009, certain of the cost estimates related to the 2008 Restructuring were adjusted, resulting in a credit of approximately $3,000 to the restructuring line item in the Company’s condensed consolidated statements of operations.

Amounts remaining in the 2008 Restructuring accrual at June 30, 2009, which are expected to be paid out in cash through July 2010, are recorded under the caption “Accrued expenses” in the Company’s condensed consolidated balance sheets.  The following table summarizes changes made to the restructuring accrual during the six months ended June 30, 2009 relating to the 2008 Restructuring.  Amounts included in the table are in thousands.

	Balance,								Balance,
	December 31,					Cash			June 30,
Type of Liability	2008		Charges			Payments			2009
Employee separation costs	$	16	$	(2	)	$	(14	)	$	—
Facility consolidation costs	165		(1		)	(57		)	107
Total	$	181	$	(3	)	$	(71	)	$	107

2007 Restructuring

During the third quarter of 2007, in connection with the Third Amendment to the LabCorp agreement, the Company notified six employees of their termination from the Company (the “2007 Restructuring”).  The 2007

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Restructuring was principally designed to eliminate the Company’s sales and marketing functions to reduce costs and help preserve the Company’s cash resources.  In connection with the 2007 Restructuring, the Company recorded restructuring charges of approximately $0.8 million during the three months ended September 30, 2007, primarily related to one-time termination benefits arising under retention and severance agreements with each of the terminated employees.

Restructuring charges recorded during the third quarter of 2007 of $0.8 million included $0.6 million in severance and related benefit costs which were paid in cash through May 2008, and $0.2 million in non-cash stock-based compensation charges associated with extending the period of exercise for vested stock option awards for terminated employees.

During the fourth quarter of 2007, the Company entered into a sublease agreement (the “2007 Sublease Agreement”) with INTRINSIX Corporation to sublease to INTRINSIX approximately 11,834 square feet of rentable area in the Company’s corporate headquarters.  The term of the 2007 Sublease Agreement, which commenced on December 15, 2007, is 32 months with a base rent of $266,265 per year.  Pursuant to the 2007 Sublease Agreement, INTRINSIX has no rights to renew or extend the 2007 Sublease Agreement.  Under the terms of the 2007 Sublease Agreement, INTRINSIX was required to provide a security deposit of $35,000 and is required to pay its pro rata share of any building operating expenses and real estate taxes.

In connection with the 2007 Sublease Agreement, the Company recorded restructuring charges of approximately $0.4 million during the fourth quarter of 2007, which consist of approximately $0.3 million in future cash payments related to the difference between the Company’s committed lease payments and the estimated sublease rental income under the 2007 Sublease Agreement and approximately $0.1 million of non-cash charges related to the write-off of leasehold improvements abandoned by the Company in connection with the Sublease Agreement.  The Company’s decision to enter into the 2007 Sublease Agreement was deemed to be an indicator of impairment.  As a result of performing the impairment evaluations, asset impairment charges of $0.1 million were recorded to adjust the carrying value of the related leasehold improvements to their net realizable value.  Facility consolidation costs also include one time real estate transaction fees in connection with the Sublease Agreement.

Amounts remaining in the 2007 Restructuring accrual at June 30, 2009, which are expected to be paid out through July 2010, are recorded under the caption “Accrued expenses” in the Company’s condensed consolidated balance sheets.  The following table summarizes the 2007 Restructuring activities during the six months ended June 30, 2009.  Amounts included in the table are in thousands.

	Balance,							Balance,
	December 31,				Cash			June 30,
Type of Liability	2008		Charges		Payments			2009
Employee separation costs	$	—	$	—	$	—		$	—
Facility consolidation costs	161		—		(46		)	115
Total	$	161	$	—	$	(46	)	$	115

(8) STOCK-BASED COMPENSATION

Stock-Based Compensation Plans

The Company maintains the 1995 Stock Option Plan (“1995 Option Plan”), the 2000 Stock Option and Incentive Plan (“2000 Option Plan”) and the 2000 Employee Stock Purchase Plan.

Stock-Based Compensation Expense

The Company recorded $0.7 million and $1.3 million in stock-based compensation during the three and six months ended June 30, 2009 in connection with the amortization of restricted common stock awards and stock options granted to employees, non-employee directors and non-employee consultants as well as the modification of certain stock options.  The Company recorded $0.2 million and $0.5 million, respectively, in stock-based compensation during the three and six months ended June 30, 2008 in connection with the amortization of awards of common stock, restricted common stock and stock options granted to employees, non-employee directors and non-employee consultants, as well as stock-based compensation expense of $32,000 related to the Company’s 2008 401(k) match.

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Determining Fair Value

Valuation and Amortization Method - The fair value of each option award is estimated on the date of grant using the Black-Scholes pricing model based on the assumptions in the table below.  The estimated fair value of employee stock options is amortized 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 term.  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 remaining term.

Forfeitures - As required by SFAS No. 123(R), the Company records stock-based compensation expense only for those awards that are expected to vest.  The Company did not estimate forfeitures for awards prior to 2009 because all such share based awards vest monthly. Awards granted in 2009 that vest annually are all expected to vest and no forfeiture rate was utilized. The Company does not have significant history to calculate a forfeiture rate for awards that vest annually and the Company’s best estimate is that all of these awards will vest.

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 following table.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2009			2008	2009		2008
Option Plan Shares
Risk-free interest rates	2.54		%	(1)	1.76% - 2.54%		2.80		%
Expected term (in years)	6			(1)	6		6
Expected volatility	92		%	(1)	85% - 92%		70		%
Dividend yield	0		%	(1)	0%		0		%
Weighted average fair value per share of options granted during the period	$	0.99		(1)	$	0.64	$	1.17

(1)The Company did not issue stock options or stock purchase rights under its stock-based compensation plans during the periods indicated.

Stock Option and Restricted Stock Activity

A summary of stock option and restricted stock activity under the 1995 Option Plan and the 2000 Option Plan during the six months ended June 30, 2009 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, 2009	3,703,899		$	3.99	4.9
Granted	4,463,754		$	0.81
Exercised	(80,161	)	$	0.26
Cancelled or redeemed	(1,226,863	)	$	3.98
Outstanding, June 30, 2009	6,860,629		$	1.96	7.4	$	9,181
Exercisable, June 30, 2009	2,152,702		$	4.47	2.5	$	534
Vested and expected to vest, June 30, 2009	6,814,683		$	1.96	7	$	9,059

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(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 $2.65 market price of the Company’s common stock at June 30, 2009.

The table above includes outstanding restricted stock awards of 508,754 shares as of June 30, 2009 reflected as options with an exercise price of $0.  The Company granted 363,754 shares of common stock pursuant to restricted stock awards during the six months ended June 30, 2009.  There were 40,000 common stock awards that vested and were no longer subject to restriction during the six months ended June 30, 2009.

As of June 30, 2009, there was $2.5 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under all equity compensation 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 2.7 years.

(9) FAIR VALUE MEASUREMENTS

In September 2006, the FASB issued Statement No. 157, Accounting for Fair Value Measurements (“SFAS No. 157”).  SFAS No. 157 clarifies the principle 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.  SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years.  The Company adopted SFAS No. 157 on January 1, 2008 and it did not have any impact on its consolidated results of operations, financial position or cash flows.

SFAS No. 157 establishes a fair value hierarchy that 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 by SFAS No. 157 in order of priority 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.

In accordance with the disclosure provisions of SFAS No. 157, the following table presents the Company’s fair value measurements as of June 30, 2009 along with the level within the fair value hierarchy prescribed by SFAS No. 157 in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).  Cash and cash equivalents are recorded at cost, which approximates fair value.  Amounts in the table are in thousands.

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			Fair Value Measurement at June 30, 2009 Using:
			Quoted Prices in Active		Significant Other		Significant Unobservable
	Fair Value at		Markets for Identical Assets		Observable Inputs		Inputs
Description	June 30, 2009		(Level 1)		(Level 2)		(Level 3)
Available-for-Sale
Marketable Securities	$	15,510	$	—	$	15,510	$	—
Total	$	15,510	$	—	$	15,510	$	—

(10) EQUITY FINANCING

On June 11, 2009, the Company completed a private placement transaction pursuant to which the Company sold 4,315,792 shares of common stock at a per share price of $1.90 for net proceeds of $8.1 million after issuance costs. Management intends to use the proceeds to fund future research and development efforts.

(11) NEW ACCOUNTING PRONOUNCEMENTS

In May 2009, the Financial Accounting Standards Board issued Statement 165, Subsequent Events, to incorporate the accounting and disclosure requirements for subsequent events into U.S. generally accepted accounting principles. Statement 165 introduces new terminology, defines a date through which management must evaluate subsequent events, and lists the circumstances under which an entity must recognize and disclose events or transactions occurring after the balance-sheet date. The Company adopted Statement 165 as of June 30, 2009, which was the required effective date. The Company evaluated its June 30, 2009 financial statements for subsequent events through August 13, 2009, the date the financial statements were available to be issued. The Company is not aware of any subsequent events which would require recognition or disclosure in the financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the financial condition and results of operations of EXACT Sciences Corporation should be read in conjunction with the condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2008, which has been filed with the Securities and Exchange Commission, or SEC.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, that are intended to be covered by the “safe harbor” created by those sections.  Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “could,” “seek,” “intend,” “plan,” “estimate,” “anticipate” or other comparable terms.  Forward-looking statements in this Quarterly Report on Form 10-Q may address the following subjects among others: statements regarding the sufficiency of our capital resources, expected operating losses, expected license fee revenues, expected research and development expenses, expected general and administrative expenses and our expectations concerning our business strategy.  Forward-looking statements involve inherent risks and uncertainties which could cause actual results to differ materially from those in the forward-looking statements, as a result of various factors including those risks and uncertainties described in the Risk Factors and in Management’s Discussion and Analysis of Financial Condition and Results of Operations sections of this report and our Annual Report on Form 10-K for the year ended December 31, 2008.  We urge you to consider those risks and uncertainties in evaluating our forward-looking statements.  We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made.  Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Overview

EXACT Sciences Corporation is a molecular diagnostics company focused on colorectal cancer.  Our 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.  We believe that our proprietary methods and technologies have several advantages over other screening options that may ultimately lead to decreased mortality associated with colorectal cancer, which is the third leading cause of cancer death overall, the second leading cause of death from cancers that affect both men and women, and the leading cause of cancer death among non-smokers in the United States.

The American Cancer Society estimates that 80-90 million people in the United States are eligible for colorectal cancer screening.  The Company will approach this market opportunity by remaining focused on key priorities.  The Company’s priorities for 2009 are: 1) product development, 2) clinical trial planning and 3) creating a performance culture. Currently, we license certain of our colorectal cancer screening technologies on an exclusive basis in the U.S. and Canada through December 2010 to Laboratory Corporation of America® Holdings, or LabCorp®.  LabCorp has developed and commercially offers a non-invasive stool-based DNA (sDNA) colorectal cancer screening service for the average-risk population, which is based on certain of our technologies.

Our primary goal is to become the market leader for a patient-friendly diagnostic screening product for the early detection of colorectal pre-cancer and cancer.  Our strategic roadmap to achieve this goal includes the following key components:

·develop and refine our non-invasive sDNA colorectal pre-cancer and cancer screening test;

·advance our product through U.S. Food and Drug Administration, or FDA, clinical trials;

·secure insurance coverage and reimbursement for our product; and

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·commercialize an FDA-cleared product that detects colorectal pre-cancer and cancer.

We believe obtaining FDA approval is critical to building broad demand and successful commercialization for our sDNA colorectal cancer screening technologies.  In 2009, we intend to focus on further refining our product design to demonstrate the clinical superiority of the test to detect pre-cancer and adenomas while balancing its product attributes to enable ease of commercialization and widespread adoption.  Additionally, we intend to finalize plans for clinical trials in 2009—with the goal of confirming our trial protocols with the FDA.

We have generated limited operating revenues since inception and, as of June 30, 2009, we had an accumulated deficit of approximately $178.7 million.  Losses have historically resulted from costs incurred in conjunction with research, development and clinical study initiatives; salaries and benefits associated with the hiring of personnel; the initiation of marketing programs; and prior to August 31, 2007, the build-out of our sales infrastructure to support the commercialization of SDNA screening.  We expect to continue to incur losses for the next several years, and it is possible we may never achieve profitability.

Recent Developments

Mayo Strategic Licensing Agreement

On June 11, 2009, we entered into a strategic transaction with the MAYO Foundation for Medical Education and Research (MAYO) to obtain a world-wide exclusive license to certain intellectual property. As part of the licensing agreement, we granted MAYO two common stock purchase warrants for 1,000,000 and 250,000 shares of common stock, respectively. We will also make payments to MAYO for up-front fees, fees upon our attainment of certain milestones, and other payments as outlined in the agreement. In addition to the license to intellectual property owned by MAYO, we will  receive product development and research and development efforts from MAYO personnel. We determined that the payments made for intellectual property should not be capitalized as the future economic benefit derived from the transactions is uncertain. In addition to such payments, we are obligated to make royalty payments to MAYO on potential future net sales of any products developed from the licensed technology.

New Senior Management Team

Effective April 2, 2009, Jeffrey R. Luber resigned as our President, Chief Executive Officer and member of our board of directors and Charles R. Carelli, Jr. resigned as our Chief Financial Officer.

On March 18, 2009, our board of directors appointed Kevin T. Conroy as President and Chief Executive Officer, effective April 2, 2009.  Also on March 18, 2009, based on the recommendation of our corporate governance and nominating committee, the board of directors appointed Mr. Conroy to fill a vacancy on our board.  Our board of directors also appointed Maneesh K. Arora as our Senior Vice President and Chief Financial Officer, effective April 2, 2009.

Genzyme Strategic Transaction

In January 2009, we completed a strategic transaction with Genzyme Corporation, pursuant to which we assigned to Genzyme all of our intellectual property applicable to the fields of prenatal and reproductive health and granted Genzyme an irrevocable, perpetual, exclusive, worldwide, fully-paid, royalty-free license to use and sublicense all of our remaining intellectual property in all fields other than colorectal cancer detection and stool-based disease detection. We retained our rights in both the assigned and licensed intellectual property in the fields of colorectal cancer detection and stool-based disease detection. We and Genzyme also agreed to form a joint advisory committee to assist Genzyme in the achievement of product development goals related to the purchased intellectual property and to assist us with our regulatory goals.

Genzyme agreed to pay us an aggregate of $18.5 million, of which $16.65 million was paid at closing and $1.85 million is subject to a holdback by Genzyme to satisfy certain of our potential indemnification obligations. Subject to terms of the strategic agreement, one-half of the holdback amount will be released to us in 12 months and one-half will be released in 18 months. Genzyme also agreed to pay a double-digit royalty to us on income received by Genzyme as a result of any licenses or sublicenses to third parties of the assigned or licensed intellectual property in any field other than prenatal and reproductive health or colorectal cancer detection and stool-based disease detection.

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In addition, we sold to Genzyme 3,000,000 shares of our common stock at a per share price of $2.00, for a total purchase price of $6.0 million.

Messrs. Luber and Carelli Severance

In connection with their departures in March 2009, Messrs. Luber and Carelli were entitled to receive severance benefits pursuant to their existing retention agreements, including salary continuation of $472,500 and $287,500, which is equal to eighteen months and fifteen months, respectively, of their base salaries as of the date of termination.  On March 31, 2009, we entered into release agreements with Messrs. Luber and Carelli that provided, in exchange for a general release in favor of us, for the accelerated payment of the salary continuation obligations on March 31, 2009.  In addition, the release agreements also provided for the repurchase by us of certain options held by Messrs. Luber and Carelli for an aggregate of 804,026 shares of common stock, in lieu of accelerated vesting and an extension of the option exercise period arising from their retention agreements.  We paid Messrs. Luber and Carelli approximately $39,000 and $11,000, respectively, to repurchase Mr. Luber’s options to purchase 553,333 shares and Mr. Carelli’s options to purchase 250,693 shares.  The purchase price of the outstanding options represented a 75 percent discount from the estimated fair value of the vested options as of March 31, 2009.  Messrs. Luber and Carelli retained options to purchase 80,207 and 43,124 shares respectively at an exercise price of $1.83, following the termination of their employment.

Private Placement Transaction

On June 11, 2009, we completed a private placement transaction pursuant to which we sold 4,315,792 shares of common stock at a per share price of $1.90 for total proceeds of $8.2 million.

Significant Accounting Policies

This management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenues and expenses during the reporting periods.  On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition and intangible assets.  We base our estimates on historical experience and on various other factors that are believed to be appropriate under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

The notes to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2008 include a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements.  As described below, we believe that that the following accounting policies and judgments are critical to fully understand and evaluate our reported financial results.

Revenue Recognition.

License fees.  License fees for the licensing of product rights on initiation of strategic agreements are recorded as deferred revenue upon receipt and recognized as revenue on a straight-line basis over the license period.  On June 27, 2007, we entered into an amendment to our exclusive license agreement with LabCorp, or 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, we are amortizing the remaining deferred revenue balance resulting from our 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 ends in December 2010.

As more fully described under the heading “Genzyme Strategic Transaction” above, in connection with the Genzyme strategic transaction, we received an up-front payment of $16.65 million on January 27, 2009 in exchange for the assignment and licensing of certain of our intellectual property to Genzyme.  Our on-going performance obligations to Genzyme under the Collaboration, License and Purchase Agreement, or the CLP Agreement, including our obligation to deliver certain intellectual property improvements to Genzyme during the initial five year collaboration period, were deemed to be undelivered elements of the CLP Agreement on the date of closing.  Accordingly, we deferred the initial $16.65 million in cash received at closing and are amortizing that up-front payment on a straight line basis into revenue over the initial five-year collaboration period ending in January 2014.  Receipt of any holdback amounts will similarly

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be deferred and amortized on a straight line basis into revenue over the remaining term of the collaboration at the time of receipt.

In addition, Genzyme paid $2.00 per share for the 3.0 million shares purchased from us on January 27, 2009, 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 our common stock on the date of the transaction of $1.53 million was deemed to be a part of the total consideration for the CLP Agreement.  Accordingly, we deferred the aggregate $1.53 million premium and will amortize that amount on a straight line basis into revenue over the initial five year collaboration period ending in January 2014.  We recognized approximately $1.6 million in license fee revenue in connection with the amortization of the up-front payments from Genzyme during the six months ended June 30, 2009.

Product royalty fees.  We have licensed certain of our technologies, including improvements to such technologies, on an exclusive basis through December 2010 to LabCorp.  LabCorp developed and commercially offered PreGen-Plus, a non-invasive sDNA colorectal cancer screening service for the average-risk population based on our Version 1 technology, from August 2003 through June 2008.  In June 2008, LabCorp stopped offering PreGen-Plus.  On July 14, 2008, LabCorp began to commercially offer ColoSure, its next generation non-invasive, sDNA testing service for the detection of colorectal cancer in the average-risk population, which is based on certain of our intellectual property.  We are entitled to the same royalty and milestone structure on any sales of ColoSure as we were entitled to on sales of PreGen-Plus.

Prior to the effective date of the Second Amendment, our product royalty fees were based on a specified contractual percentage of LabCorp’s cash receipts from performing PreGen-Plus tests.  Accordingly, we recorded product royalty fees based on this specified percentage of LabCorp’s cash receipts, as reported to us each month by LabCorp.  Subsequent to the effective date of the Second Amendment, our product royalty fees are based on a specified contractual percentage of LabCorp’s net revenues from sales of PreGen-Plus through June 1, 2008, when LabCorp stopped offering PreGen-Plus, and from sales of ColoSure from and after July 2008.  Accordingly, subsequent to the effective date of the Second Amendment, we record 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 us each month by LabCorp.  The current royalty rate is 15%, subject to an increase to 17% in the event that LabCorp achieves a specified significant threshold of annual net revenues from the sales of such colorectal cancer screening tests.

Additionally, as described below under the heading “Critical Accounting Estimate — Third Party Royalty Obligation,” pursuant to the Second Amendment, we are potentially obligated to reimburse LabCorp for certain third-party royalty payments.  To the extent we incur liabilities in connection with this provision of the Second Amendment, the accretion of such liabilities will be recorded as a reduction in the product royalty fee line item in our statements of operations.

Other revenue.  Revenue from milestone and other performance-based payments is recognized as revenue when the milestone or performance is achieved and collection of the receivable is estimable and probable.

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. During the quarter ended June 30, 2009, the Company determined that the patent costs incurred should not be capitalized as the future economic benefit derived from the transactions was not considered probable. In connection with the Genzyme Strategic Transaction, the Company sold its then-remaining capitalized intellectual property to Genzyme on January 27, 2009, and accordingly, wrote off the remaining unamortized capitalized patent costs at that time.

Stock-Based Compensation.  We adopted SFAS No. 123(R) effective January 1, 2006 using the modified prospective transition method.  SFAS No. 123(R) requires all stock-based payments to employees, including grants of employee stock options and shares purchased under an employee stock purchase plan (if certain parameters are not met), to be recognized in the financial statements based on their fair values. SFAS No. 123(R) did not change the accounting guidance for share-based payment transactions with parties other than employees provided in SFAS No. 123, as originally issued and EITF 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.

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Critical Accounting Estimate - Third Party Royalty Obligation

Pursuant to the terms of the Second Amendment to our license agreement with LabCorp, we are obligated to reimburse LabCorp for certain third-party royalty payments if LabCorp’s third-party royalty rate is greater than a specified royalty rate during the measuring period, as outlined in the table below.  During the quarter ended March 31, 2009, we paid LabCorp approximately $1.5 million related to our obligation for the first measurement period, which ended on December 31, 2008.  Our future obligation to pay LabCorp pursuant to this provision of the Second Amendment is based on LabCorp’s sales volumes of colorectal cancer screening tests using our technology during two separate measurement periods, as defined below.  A significant increase in such sales volumes during either measurement period, as compared to historical PreGen-Plus sales volumes, could reduce our potential obligation during such measurement period, while test volumes consistent with historical PreGen-Plus sales levels could result in aggregate future payments to LabCorp totaling up to $2.0 million during the remaining measurement periods.  Until LabCorp’s sales of colorectal cancer screening tests using our technology increase to a level that would reduce this potential maximum obligation, if ever, we intend to record our estimated obligation under this provision of the Second Amendment as a reduction in the product royalty fee line item in our statements of operations, in accordance with EITF No. 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).  Based on sales volumes of PreGen-Plus through June 1, 2008 (when LabCorp ceased selling this service) and anticipated sales volumes of ColoSure, as of June 30, 2009, we have accrued a total of $1.97 million related to the total potential $2.0 million remaining obligation to LabCorp.  Amounts included in the table are in thousands.

			Potential		Potential
			Minimum		Maximum
			Third Party		Third Party
		Payment Due Date	Royalty		Royalty
Measurement period	Measurement period	for Measurement	Obligation During		Obligation During
Start Date	End Date	Period	Measurement Period		Measurement Period
January 1, 2009	December 31, 2009	January 30, 2010	$	—	$	1,000
January 1, 2010	December 31, 2010	January 30, 2011	—		1,000
			$	—	$	2,000

Recent Accounting Pronouncements

In May 2009, the Financial Accounting Standards Board issued Statement 165, Subsequent Events, to incorporate the accounting and disclosure requirements for subsequent events into U.S. generally accepted accounting principles. Statement 165 introduces new terminology, defines a date through which management must evaluate subsequent events, and lists the circumstances under which an entity must recognize and disclose events or transactions occurring after the balance-sheet date. The Company adopted Statement 165 as of June 30, 2009, which was the required effective date. The Company evaluated its June 30, 2009 financial statements for subsequent events through August 13, 2009, the date the financial statements were available to be issued. The Company is not aware of any subsequent events which would require recognition or disclosure in the financial statements.

Results of Operations

Revenue.  Net revenue is primarily composed of the amortization of up-front technology license fees associated with our amended license agreement with LabCorp and our collaboration, license and purchase agreement with Genzyme.  The unamortized LabCorp up-front payment is being amortized on a straight-line basis over the remaining exclusive license period, which ends in December 2010.  The unamortized Genzyme up-front payment is being amortized on a straight-line basis over the initial Genzyme collaboration period, which ends in January 2014.  While we expect license fee revenue resulting from the amortization of the up-front license payment from LabCorp in 2009 to be consistent with amounts recorded in 2008, we expect that total license fee revenue for 2009 will be higher than amounts recorded in 2008 as a result of amortization of payments received from Genzyme in January 2009 in connection with the Genzyme strategic transaction.

Net revenue increased to $1.3 million for the three months ended June 30, 2009, from ($0.1) million for the same period in 2008 and increased to 2.3 million for the six months ended June 30, 2009 from ($0.1) million for the same period in 2008.  The increase in net revenue for the three and six months ended June 30, 2009 when compared to the same periods of 2008, was primarily due to an increase of approximately $0.9 million and $1.6 million, respectively, for

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the three and six months ended June 30, 2009 in license fee amortization as a direct result of the commencement of amortization of the upfront payment received from Genzyme in January 2009.  In addition, product royalty revenues were higher for the three months and six months ended June 30, 2009 when compared to the same period in 2008 due to product royalty revenue charges of $0.5 million and $0.8 million recorded during the three months and six months ended  June 30, 2008.  These charges related to our third-party royalty reimbursement obligation to LabCorp, and resulted in negative product royalty revenue for the three and six months ended June 30, 2008.

Research and development expenses.  Research and development expenses increased to $2.0 million for the three months ended June 30, 2009 from $0.5 million for the three months ended June 30, 2008, and increased to $2.1 million for the six months ended June 30, 2009 from $1.4 million for the six months ended June 30, 2008.  The increase is primarily due to the $1.7 million non-cash charge incurred as a result of the issuance of warrants pursuant to the Mayo licensing agreement and increased research and development efforts.

As a result of the activities anticipated in support of our objectives toward developing an FDA-approved in vitro diagnostic test, we expect research and development costs in 2009 to be higher than 2008 levels.

General and administrative expenses.  General and administrative expenses increased to $1.6 million for the three months ended June 30, 2009, compared to $1.5 million for the same period in 2008.  The increase is primarily due to a $0.5 million increase in non-cash stock-based compensation expense included in general and administrative expense in the quarter ended June 30, 2009, which was partially offset by a decrease in general operating expenses in the second quarter of 2009 of $0.3 million compared to the prior year period.

General and administrative expenses increased to $6.4 million for the  six months ended June 30, 2009, compared to $3.3 million for the same period in 2008.  This increase was primarily the result of $1.9 million in transaction costs related to the Genzyme strategic transaction in January 2009, including legal, audit, and investment banking fees as well as approximately $0.8 million in retention bonus payments made to employees pursuant to board-approved retention agreements. In addition, in connection with the departure of Jeffrey R. Luber, our former President and Chief Executive Officer, and Charles R. Carelli, Jr., our former Chief Financial Officer, we recorded approximately $0.8 million in cash severance charges in the quarter ended March 31, 2009. Non-cash stock-based compensation expense included in general and administrative expense for the six months ended June 30, 2009 also increased by $0.8 million compared to the same period in 2008.  In the second quarter, these increases were partially offset by decreases in professional fees related to on-going operations and in general operating expenses.

We expect general and administrative expenses in 2009 to be higher than 2008 levels, primarily as a result of professional fees in connection with the Genzyme strategic transaction and the transition of our senior management team as described above.

Interest income.  Primarily as a result of less favorable interest rates on investments held, interest income decreased to $49,000 for the three months ended June 30, 2009 from $64,000 for the same period in 2008 and decreased to $83,000 for the six months ended June 30, 2009 from $188,000 for the same period in 2008.

Liquidity and Capital Resources

We have financed our operations since inception primarily through private and public offerings of our equity securities, cash received from LabCorp in connection with our license agreement, and cash received in January 2009 from Genzyme in connection with the Genzyme strategic transaction described above.  On June 11, 2009, we completed a private placement transaction pursuant to which we sold 4,315,792 shares of common stock at a per share price of $1.90 for net proceeds of $8.1 million after issuance costs.  As of June 30, 2009, we had approximately $12.3 million in unrestricted cash and cash equivalents, $0.6 million in restricted cash, which has been pledged as collateral for an outstanding letter of credit in connection with the lease for our Marlborough, Massachusetts facility, and approximately $15.5 million in investments in marketable securities.  All of our investments in marketable securities are comprised of fixed income investments and all are deemed available-for-sale.

Net cash used in operating activities was $7.8 million for six months ended June 30, 2009 as compared to $4.7 million for the six months ended June 30, 2008.  The principal use of cash in operating activities for the six months ended June 30, 2009 and 2008 was to fund our net loss.  The increase in net cash used in operating activities for the six months ended June 30, 2009 as compared to the same period in 2008, was primarily due to the payment of the $1.5 million to LabCorp to satisfy our third party royalty obligation for 2008, one-time transaction payments for professional fees in connection with the Genzyme strategic transaction of approximately $1.1 million, one time retention bonus

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payments to employees pursuant to board-approved retention payments of approximately $0.8 million, and one-time severance payments of approximately $0.8 million to former executives, each as described elsewhere in this report.  Cash flows from operations can vary significantly due to various factors, including changes in our operations, prepaid expenses, accounts payable and accrued expenses.

Net cash used in investing activities was $15.5 million for the six months ended June 30, 2009 and represented the investment of a portion of the funds received in January 2009 from the Genzyme strategic transaction.    Net cash provided by investing activities was $5.8 million for the six months ended June 30, 2008 and primarily resulted from the maturity of marketable securities.  Purchases of property and equipment were not material during the six months ended June 30, 2009 and 2008.  As a result of the cash received in January 2009 in connection with the Genzyme strategic transaction, and based on our plans for further development of our sDNA technology for colorectal cancer detection, we expect that purchases of property and equipment during 2009 will be higher than amounts invested in 2008.

Net cash provided by financing activities was $30.7 million for the six months ended June 30, 2009 and was comprised primarily of the receipt of $22.6 million of cash in connection with the Genzyme strategic transaction and net proceeds after issuance costs of $8.1 million from the issuance of common stock in the private placement transaction.  We also paid $50,000 to repurchase outstanding options from former executives as described elsewhere in this report.

We expect that cash, cash equivalents and marketable securities on hand at June 30, 2009 will be sufficient to fund our current operations for at least the next twelve months, based on current operating plans.  This projection is based on our currently anticipated cost structure and operating assumptions and does not provide for the full funding of our current strategic plan, the centerpiece of which is the commercialization of our sDNA technology through completion of the development an FDA-approved in vitro diagnostic test for sDNA colorectal pre-cancer and cancer screening.  We do not expect that product royalty payments or milestone payments from LabCorp will materially supplement our liquidity position in the next twelve months, if at all.  Since we have no current sources of material ongoing revenue, we believe that we will need to raise additional capital to complete our strategic plan.  If we are unable to obtain sufficient additional funds to enable us to fund our operations through the completion of such plan, our results of operations and financial condition would be materially adversely affected and we may be required to delay the implementation of our plan and otherwise scale back operations.  Even if we successfully raise sufficient funds to continue the implementation of our strategic plan, we cannot assure you that our business will ever generate sufficient cash flow from operations to become profitable.

Off-Balance Sheet Arrangements

As of June 30, 2009, we had no off-balance sheet arrangements.

Item 4. Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15b promulgated under the Exchange Act of 1934, as amended.  Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of June 30, 2009, our disclosure controls and procedures were effective in enabling us to record, process, summarize and report information required to be included in our periodic SEC filings within the required time period.  Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the periodic reports filed with the SEC is accumulated and communicated to our management, including our principal executive, financial and accounting officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

During the fiscal quarter covered by this report, there have been no significant changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Item 6.  Exhibits

Exhibit Number	Description
4.1	Warrant No. W-1 issued to MAYO Foundation for Medical and Educational Research dated June 11, 2009
4.2	Warrant No. W-2 issued to MAYO Foundation for Medical and Educational Research dated June 11, 2009
10.1	Form of Securities Purchase Agreement, dated June 11, 2009 (previously filed as Exhibit 10 to our Report on Form 8-K filed on June 12, 2009, which is incorporated herein by reference).
10.2*	License Agreement, dated June 11, 2009, by and among the Registrant and MAYO Foundation for Medical and Educational Research
31.1	Certification Pursuant to Rule 13(a)-14(a) or Rule 15d-14(a) of Securities Exchange Act of 1934.
31.2	Certification Pursuant to Rule 13(a)-14(a) or Rule 15d-14(a) of Securities Exchange Act of 1934.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Portions of this document are confidential and have been omitted and filed separately with the Securities and Exchange Commission in connection with a request for confidential treatment of such omitted material in accordance with Rule 24b-2 under the Securities and Exchange Act of 1934.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		EXACT SCIENCES CORPORATION
Date: August 13, 2009	By:	/s/ Kevin T. Conroy
		Kevin T. Conroy
		President and Chief Executive Officer
		(Authorized Officer)
Date: August 13, 2009	By:	/s/ Maneesh K. Arora
		Maneesh K. Arora
		Chief Financial Officer
		(Authorized Officer and Principal Financial Officer)

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EXHIBIT INDEX

Exhibit Number	Description
4.1	Warrant No. W-1 issued to MAYO Foundation for Medical and Educational Research dated June 11, 2009
4.2	Warrant No. W-2 issued to MAYO Foundation for Medical and Educational Research dated June 11, 2009
10.1	Form of Securities Purchase Agreement, dated June 11, 2009 (previously filed as Exhibit 10 to our Report on Form 8-K filed on June 12, 2009, which is incorporated herein by reference).
10.2*	License Agreement, dated June 11, 2009, by and among the Registrant and MAYO Foundation for Medical and Educational Research
31.1	Certification Pursuant to Rule 13(a)-14(a) or Rule 15d-14(a) of Securities Exchange Act of 1934.
31.2	Certification Pursuant to Rule 13(a)-14(a) or Rule 15d-14(a) of Securities Exchange Act of 1934.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Portions of this document are confidential and have been omitted and filed separately with the Securities and Exchange Commission in connection with a request for confidential treatment of such omitted material in accordance with Rule 24b-2 under the Securities and Exchange Act of 1934.

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EX-4.1

Exhibit 4.1

Warrant No. W-1

THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW, AND MAY NOT BE ACQUIRED UPON EXERCISE HEREUNDER, SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.

COMMON STOCK PURCHASE WARRANT

To Purchase Shares of Common Stock of

EXACT SCIENCES CORPORATION

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, MAYO Foundation for Medical Education and Research (“Mayo”, and together with any other registered holder(s) hereunder, the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the six-year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from EXACT Sciences Corporation, a Delaware corporation (the “Company”), up to One Million (1,000,000) shares (the “Warrant Shares”) of Common Stock, par value $0.01 per share, of the Company (the “Common Stock”).  The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

Section 1.License Agreement.  This Warrant is being issued in connection with that certain License Agreement (the “License Agreement”), dated June 11, 2009, between the Company and Mayo, as consideration for the licenses granted to the Company thereunder.

Section 2.Exercise.

a)Exercise of Warrant.  Subject to compliance with applicable securities laws, exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company); provided, however, within five Trading Days (as defined below) of the date said Notice of Exercise is delivered to the Company, if this Warrant is exercised in full, the Holder shall have surrendered this Warrant to the Company and the Company shall have received payment of the aggregate Exercise Price of the Warrant Shares thereby purchased by wire

transfer or cashier’s check drawn on a United States bank.  Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full.  Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases.  The Company shall deliver any objection to any Notice of Exercise Form within five Business Days (as defined below) of receipt of such notice.  In the event of any dispute or discrepancy, the records of the Company shall be controlling and determinative in the absence of manifest error.  The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.  As used in this Warrant, “Trading Day” means a day on which the Common Stock is traded on one of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the Nasdaq Capital Market, the American Stock Exchange, the New York Stock Exchange, the Nasdaq Global Market, the Nasdaq Global Select Market or the OTC Bulletin Board (each, a “Trading Market”).  If for any period prior to the Termination Date the Common Stock ceases to trade on a Trading Market, the term “Business Day”, meaning any day other than a Saturday, Sunday or legal holiday, shall replace the term “Trading Day” in this Warrant for such period.

b)Exercise Price.  The per share exercise price of the Common Stock under this Warrant shall be $1.90, subject to adjustment hereunder (the “Exercise Price”).

c)Cashless Exercise.  This Warrant may also be exercised at any time in whole or in part by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A)= the VWAP on the Trading Day immediately preceding the date of such election;

(B)= the Exercise Price of this Warrant, as adjusted; and

(X)= the number of Warrant Shares for which the cashless exercise is elected that are issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise.

For the purposes of this Section 2(c), “VWAP” means, for any date, the price determined by the first of the following clauses that applies:  (i) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted for trading as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time); (ii) if the Common Stock is not then quoted for trading on a Trading Market and if prices for the Common Stock are then

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reported in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (iii) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith and paid for by the Company and reasonably acceptable to the Holder.

d)Mechanics of Exercise.

i.Authorization of Warrant Shares.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

ii.Delivery of Certificates Upon Exercise.  Certificates for shares purchased hereunder shall be transmitted by the transfer agent of the Company to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the Company is a participant in such system, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise within three Trading Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant (if required) and payment of the aggregate Exercise Price as set forth above (“Warrant Share Delivery Date”).  This Warrant shall be deemed to have been exercised on the date the Exercise Price is received by the Company.  The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price.

iii.Restrictive Legend. The Holder understands that unless the Warrant Shares may be sold pursuant to Rule 144 under the Securities Act or another exemption from registration under the Securities Act without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Warrant Shares may bear a restrictive legend in substantially the form included on this Warrant (and a stop-transfer order may be placed against transfer of the certificates for such securities).

iv.Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

v.No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the

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Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price.

Section 3.Certain Adjustments.

a)Stock Dividends and Splits.  If the Company, at any time while this Warrant is outstanding:  (A) pays a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company pursuant to this Warrant or the other Warrants), (B) subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted.  Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

b)Sale of Assets and Mergers.  Upon the sale by the Company of all or substantially all of its assets, or the merger or consolidation of the Company with or into another entity in a transaction where the shares of Common Stock outstanding immediately prior to the closing of such merger or consolidation represent or are converted into or exchanged for shares that represent less than a majority of the shares of capital stock of the resulting or surviving entity outstanding immediately after the closing of such merger or consolidation (each, a “Business Event”), this Warrant shall be deemed exercised pursuant to a cashless exercise, with VWAP meaning the fair market value of a share of Common Stock based on such Business Event.

c)Calculations.  All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.  For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

Section 4.Transfer of Warrant.

a)Transferability.  Subject to the Securities Act and any other restrictions set forth herein, this Warrant and all rights hereunder are transferable (but only with all related obligations) with the prior written consent of the Company and upon surrender of the Warrant with a properly executed assignment, reasonably satisfactory to the Company, at the principal office of the Company or such other office or agency as the Company may designate.  Each Holder (i) acknowledges that this Warrant and the Warrant Shares have not been registered under the Securities Act, and (ii) agrees not to sell, pledge, distribute, offer for sale, transfer or

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otherwise dispose of this Warrant or any Warrant Shares in the absence of (A) an effective registration statement under the Securities Act as to this Warrant or the Warrant Shares and registration or qualification of this Warrant or the Warrant Shares under any applicable blue sky or state securities law then in effect, or (B) an opinion of counsel, reasonably satisfactory to the Company, that such registration and qualification are not required.

b)New Warrants.  This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

c)Warrant Register.  The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

Section 5.Notice of Certain Events.  In case at any time or from time to time:

a)the Company shall take a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right;

b)the Company shall declare a dividend (or any other distribution) on the shares of Common Stock or other equity interests, if any, of the Company;

c)the Company shall authorize the granting to the holders of the shares of Common Stock or other equity interests, if any, of the Company of rights or warrants to subscribe for or purchase any equity interests of any class or of any other rights or warrants;

d)there shall be any reclassification of the shares of Common Stock or other equity interests, if any, of the Company, or any consolidation or merger to which the Company is a party and for which approval of any holders of shares of Common Stock of the Company is required, or any sale or other disposition of all or substantially all of the assets of the Company; or

e)of the voluntary or involuntary dissolution, liquidation or winding up of the Company;

then the Company shall mail to Holder at the last address of the Holder appearing on the books of the Company, as promptly as possible but in any event at least twenty days prior to the applicable date hereinafter specified, a notice stating (i) the date on which a record is to be taken for the purpose of such dividend, distribution or rights or warrants or, if a record is not to be taken, the date as of which the holders of shares of Common Stock of

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record to be entitled to such dividend, distribution or rights are to be determined, (ii) the date of the distribution, together with a description of the property to be distributed, (iii) the date of such issuance, together with a description of the security so issued and the consideration received by the Company therefor, and (iv) the date on which such reclassification, consolidation, merger, sale, conveyance, dissolution, liquidation or winding up is expected to become effective, the time, if any such time is to be fixed, as of which the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for the securities or other property deliverable upon such reclassification, consolidation, merger, sale, conveyance, dissolution, liquidation or winding up, and a description in reasonable detail of the transaction.  Such notice shall be mailed at least twenty days prior to the date or expected date therein specified.

Section 6.Miscellaneous.

a)No Rights as Stockholder Until Exercise.  This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Company prior to the exercise hereof.  Upon the surrender of this Warrant and the payment of the aggregate Exercise Price (or by means of a cashless exercise), the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment.

b)Loss, Theft, Destruction or Mutilation of Warrant.  The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

c)Business Days. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

d)Authorized Shares.

The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation.

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Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.  Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

e)Governing Law.  This Warrant shall be governed by and construed in accordance with Delaware law without regard for its conflicts of law principals.

f)Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date.  If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

g)Notices.  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the License Agreement.

h)Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

i)Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

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j)Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

k)Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

********************

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

Dated:  June 11, 2009

EXACT SCIENCES CORPORATION
By:	/s/ Kevin T. Conroy
	Name:	Kevin T. Conroy
	Title:	CEO and President

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NOTICE OF EXERCISE

TO:EXACT Sciences Corporation

(1)The undersigned hereby elects to purchase              Warrant Shares of the Company pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price, together with all applicable transfer taxes, if any, in accordance with paragraph (2) below.

(2)Payment shall take the form of (check applicable box):

o$                                     in lawful money of the United States; or

othe cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

(3)Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

The Warrant Shares shall be delivered to the following:

EX-4.2

Exhibit 4.2

Warrant No. W-2

THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW, AND MAY NOT BE ACQUIRED UPON EXERCISE HEREUNDER, SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.

COMMON STOCK PURCHASE WARRANT

To Purchase Shares of Common Stock of

EXACT SCIENCES CORPORATION

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, MAYO Foundation for Medical Education and Research (“Mayo”, and together with any other registered holder(s) hereunder, the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, to subscribe for and purchase from EXACT Sciences Corporation, a Delaware corporation (the “Company”), up to Two Hundred Fifty Thousand (250,000) shares (the “Warrant Shares”) of Common Stock, par value $0.01 per share, of the Company (the “Common Stock”).  The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

Section 1.               License Agreement.  This Warrant is being issued in connection with that certain License Agreement (the “License Agreement”), dated June 11, 2009, between the Company and Mayo, as consideration for the Know-How (as defined in the License Agreement) as services provided to the Company thereunder.

Section 2.               Exercise.

a)             Exercise of Warrant.

i.              Vesting.  The Warrant Shares shall vest, and the Holder shall be entitled to exercise this Warrant with respect to such Warrant Shares, according to the following schedule (in each case subject to share adjustment pursuant to Section 3):  (A) 62,500 Warrant Shares shall vest on the first anniversary of the date hereof; (B) 62,500 Warrant Shares shall vest on the second anniversary of the date hereof; (C) 62,500 Warrant Shares shall vest on the third anniversary of the date hereof; and (D) 62,500 Warrant Shares shall vest on the fourth anniversary of the date hereof, with each such vesting date becoming the “Initial Exercise Date” for such Warrant Shares vesting on such date.  Once the Warrant Shares have vested pursuant to this Section 2(a)(i), the Holder may exercise this

Warrant with respect to such Warrant Shares at any time on or after the Initial Exercise Date for such Warrant Shares up until the close of business on the six-year anniversary of such Initial Exercise Date (each such six-year anniversary date being a “Termination Date”) but not thereafter.  This Warrant shall become void and shall cease to be exercisable following the Termination Date for the Warrant Shares vesting on the fourth anniversary of the date hereof, or June 11, 2019 (such date, subject to adjustment pursuant to Section 3(b), the “Final Termination Date”).  As used in this Warrant, the terms “Initial Exercise Date” and “Termination Date” shall mean the Initial Exercise Date and Termination Dates, respectively, as may be applicable to each of the four vesting dates for the Warrant Shares.

ii.             Exercise.  Subject to compliance with applicable securities laws, exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the applicable Initial Exercise Date and on or before the applicable Termination Date by delivery to the Company of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company); provided, however, within five Trading Days (as defined below) of the date said Notice of Exercise is delivered to the Company, if this Warrant is exercised in full, the Holder shall have surrendered this Warrant to the Company and the Company shall have received payment of the aggregate Exercise Price of the Warrant Shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank.  Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full.  Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases.  The Company shall deliver any objection to any Notice of Exercise Form within five Business Days (as defined below) of receipt of such notice.  In the event of any dispute or discrepancy, the records of the Company shall be controlling and determinative in the absence of manifest error.  The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.  As used in this Warrant, “Trading Day” means a day on which the Common Stock is traded on one of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the Nasdaq Capital Market, the American Stock Exchange, the New York Stock Exchange, the Nasdaq Global Market, the Nasdaq Global Select Market or the OTC Bulletin Board (each, a “Trading Market”).  If for any period prior to the Final Termination Date the Common Stock ceases to trade on a Trading Market, the term “Business Day”, meaning any day other than a Saturday, Sunday or legal holiday, shall replace the term “Trading Day” in this Warrant for such period.

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b)            Exercise Price.  The per share exercise price of the Common Stock under this Warrant shall be $1.90, subject to adjustment hereunder (the “Exercise Price”).

c)             Cashless Exercise.  This Warrant may also be exercised at any time in whole or in part by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A)= the VWAP on the Trading Day immediately preceding the date of such election;

(B)= the Exercise Price of this Warrant, as adjusted; and

(X)= the number of Warrant Shares for which the cashless exercise is elected that are issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise.

For the purposes of this Section 2(c), “VWAP” means, for any date, the price determined by the first of the following clauses that applies:  (i) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted for trading as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time); (ii) if the Common Stock is not then quoted for trading on a Trading Market and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (iii) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith and paid for by the Company and reasonably acceptable to the Holder.

d)            Mechanics of Exercise.

i.              Authorization of Warrant Shares.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

ii.             Delivery of Certificates Upon Exercise.  Certificates for shares purchased hereunder shall be transmitted by the transfer agent of the Company to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the Company is a participant in such system, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise within three Trading Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant (if required) and payment of the aggregate Exercise Price as set forth above (“Warrant Share Delivery Date”).  This Warrant shall be deemed to have been exercised on the date the Exercise Price is received by the Company.  The Warrant Shares shall be deemed to have been

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issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price.

iii.            Restrictive Legend. The Holder understands that unless Warrant Shares may be sold pursuant to Rule 144 under the Securities Act or another exemption from registration under the Securities Act without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Warrant Shares may bear a restrictive legend in substantially the form included on this Warrant (and a stop-transfer order may be placed against transfer of the certificates for such securities).

iv.            Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

v.             No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price.

Section 3.               Certain Adjustments.

a)             Stock Dividends and Splits.  If the Company, at any time while this Warrant is outstanding:  (A) pays a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company pursuant to this Warrant or the other Warrants), (B) subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted.  Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

b)            Sale of Assets and Mergers.  Upon the sale by the Company of all or substantially all of its assets, or the merger or consolidation of the Company with or into another entity in a transaction where the shares of Common Stock outstanding immediately prior to the closing of

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such merger or consolidation represent or are converted into or exchanged for shares that represent less than a majority of the shares of capital stock of the resulting or surviving entity outstanding immediately after the closing of such merger or consolidation (each, a “Business Event”), this Warrant shall be deemed exercised pursuant to a cashless exercise, with VWAP meaning the fair market value of a share of Common Stock based on such Business Event, and with all unvested Warrant Shares vested and exercisable as part of such cashless exercise.

c)             Calculations.  All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.  For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

Section 4.               Transfer of Warrant.

a)             Transferability.  Subject to the Securities Act and any other restrictions set forth herein, this Warrant and all rights hereunder are transferable (but only with all related obligations) with the prior written consent of the Company and upon surrender of the Warrant with a properly executed assignment, reasonably satisfactory to the Company, at the principal office of the Company or such other office or agency as the Company may designate.  Each Holder (i) acknowledges that this Warrant and the Warrant Shares have not been registered under the Securities Act, and (ii) agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Shares in the absence of (A) an effective registration statement under the Securities Act as to this Warrant or the Warrant Shares and registration or qualification of this Warrant or the Warrant Shares under any applicable blue sky or state securities law then in effect, or (B) an opinion of counsel, reasonably satisfactory to the Company, that such registration and qualification are not required.

b)            New Warrants.  This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

c)             Warrant Register.  The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

Section 5.               Notice of Certain Events.  In case at any time or from time to time:

a)             the Company shall take a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or

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other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right;

b)            the Company shall declare a dividend (or any other distribution) on the shares of Common Stock or other equity interests, if any, of the Company;

c)             the Company shall authorize the granting to the holders of the shares of Common Stock or other equity interests, if any, of the Company of rights or warrants to subscribe for or purchase any equity interests of any class or of any other rights or warrants;

d)            there shall be any reclassification of the shares of Common Stock or other equity interests, if any, of the Company, or any consolidation or merger to which the Company is a party and for which approval of any holders of shares of Common Stock of the Company is required, or any sale or other disposition of all or substantially all of the assets of the Company; or

e)             of the voluntary or involuntary dissolution, liquidation or winding up of the Company;

then the Company shall mail to Holder at the last address of the Holder appearing on the books of the Company, as promptly as possible but in any event at least twenty days prior to the applicable date hereinafter specified, a notice stating (i) the date on which a record is to be taken for the purpose of such dividend, distribution or rights or warrants or, if a record is not to be taken, the date as of which the holders of shares of Common Stock of record to be entitled to such dividend, distribution or rights are to be determined, (ii) the date of the distribution, together with a description of the property to be distributed, (iii) the date of such issuance, together with a description of the security so issued and the consideration received by the Company therefor, and (iv) the date on which such reclassification, consolidation, merger, sale, conveyance, dissolution, liquidation or winding up is expected to become effective, the time, if any such time is to be fixed, as of which the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for the securities or other property deliverable upon such reclassification, consolidation, merger, sale, conveyance, dissolution, liquidation or winding up, and a description in reasonable detail of the transaction.  Such notice shall be mailed at least twenty days prior to the date or expected date therein specified.

Section 6.               Miscellaneous.

a)             No Rights as Stockholder Until Exercise.  This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Company prior to the exercise hereof.  Upon the surrender of this Warrant and the payment of the aggregate Exercise Price (or by means of a cashless exercise), the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment.

b)            Loss, Theft, Destruction or Mutilation of Warrant.  The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares,

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and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

c)             Business Days.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

d)            Authorized Shares.

The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation.

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.  Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

e)             Governing Law.  This Warrant shall be governed by and construed in accordance with Delaware law without regard for its conflicts of law principals.

f)             Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise

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prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Final Termination Date.  If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

g)            Notices.  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the License Agreement.

h)            Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

i)              Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

j)              Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

k)             Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

Dated:  June 11, 2009

EXACT SCIENCES CORPORATION
By:	/s/ Kevin T. Conroy
	Name:	Kevin T. Conroy
	Title:	CEO and President

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NOTICE OF EXERCISE

TO:         EXACT Sciences Corporation

(1)The undersigned hereby elects to purchase              Warrant Shares of the Company pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price, together with all applicable transfer taxes, if any, in accordance with paragraph (2) below.

(2)Payment shall take the form of (check applicable box):

o$                                     in lawful money of the United States; or

othe cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

(3)Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

The Warrant Shares shall be delivered to the following:

EX-10.2

Exhibit 10.2

CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.  CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR SUCH PORTIONS.  ASTERISKS DENOTE OMISSIONS.

MAYO FOUNDATION FOR MEDICAL EDUCATION AND RESEARCH

LICENSE AGREEMENT

This patent license agreement (“Agreement”) is by and between MAYO Foundation for Medical Education and Research, a Minnesota charitable corporation, located at 200 First Street SW, Rochester, Minnesota 55905-0001 (“MAYO”), and Exact Sciences, Inc., a for-profit company located at 100 Campus Drive, Marlborough, MA 01752 (“EXACT”).

WHEREAS, MAYO desires to make its intellectual property rights available for the development and commercialization of products, methods and processes for public use and benefit;

WHEREAS, EXACT represents itself as being knowledgeable in developing and commercializing stool based tests for the detection of colorectal cancer; and

WHEREAS, MAYO is willing to grant and EXACT is willing to accept an exclusive license under such rights for the purpose of developing such diagnostic tests.

NOW THEREFORE, in consideration of the foregoing and the terms and conditions set forth below, the parties hereby agree as follows:

Article 1.00 — Definitions

For purposes of this Agreement, the terms defined in this Article will have the meaning specified and will be applicable both to the singular and plural forms:

1.01For MAYO, “Affiliate”:  any corporation or other entity within the same “controlled group of corporations” as MAYO or its parent Mayo Clinic.  For purposes of this definition, the term “controlled group of corporations” will have the same definition as Section 1563 of the Internal Revenue Code as of November 10, 1998, but will include corporations or other entities which, if not a stock corporation, more than 50% of the board of directors or other governing body of such corporation or other entity is controlled by a corporation within the controlled group of corporations of MAYO or Mayo Clinic.  MAYO’s Affiliates include, but are not limited to: Mayo Clinic; Mayo Collaborative Services, Inc.; Rochester Methodist Hospital; Saint Marys Hospital; Mayo Clinic Rochester; Mayo Clinic Florida; Mayo Clinic Arizona; and its Mayo Health System entities.

For EXACT, “Affiliate”: any corporation or other entity that controls, is controlled by, or is under common control with, EXACT. For purposes of this definition, “control” means ownership of: (a) at least 50% of the outstanding voting securities of such entity; or (b) at least 50% of the decision-making authority of such entity.

1.02“Confidential Information”: any information or material disclosed by one party, the disclosing party, to the other, the receiving party, identified in writing as confidential at the time of disclosure or, if first disclosed orally, identified as confidential and confirmed in writing

within forty-five days.  Confidential Information expressly includes Know How and data and inventions generated in connection with the Sponsored Research Agreement.  Confidential Information does not include any information or material that the receiving party evidences is: (a) already known to the receiving party at the time of disclosure (other than from the disclosing party); (b) publicly known other than through acts or omissions of the receiving party; (c) disclosed to the receiving party by a third party who was not and is not under any obligation of confidentiality; or (d) independently developed by employees of the receiving party without knowledge of or access to the Confidential Information.

1.03“Effective Date”:  June 12, 2009.

1.04“Field”: stool or blood based cancer screening, excluding use of a proteomic target (Mayo files #2007-207 and 2007-212 and patent applications “Removing Polypeptides from Stool”, U.S. application # 60/989,578 and PCT application # PCT/US2008/084278).  For one year from the Effective Date, EXACT shall have an exclusive option to expand the Field to include the use of a proteomic target Such option may be exercised by EXACT by providing thirty (30) days written notice to MAYO.

1.05“Know-How”:

(a)research and development information, materials, technical data, unpatented inventions, know-how and supportive information of Dr. Ahlquist and his laboratory as of the Effective Date to the extent it is necessary for the development or manufacture of a Licensed Product.  As of the Effective Date, such Know-How includes the Invention and Assignment Records in Exhibit B hereto;

(b)research and development information, technical data, unpatented inventions, know-how and supportive information developed by Dr. Ahlquist as a result of his activities pursuant to Section 2.06 to the extent it is necessary for the development or manufacture of a Licensed Product; and

(c)research and development information, technical data, unpatented inventions, know-how and supportive information developed by MAYO as a result of MAYO’s activities under the work plans that are part of the Sponsored Research Agreement to the extent it is necessary for the development or manufacture of a Licensed Product.

1.06“Licensed Product”: any product or process:  (a) described by a pending claim of the Patent Rights; (b) infringing an issued claim of the Patent Rights, or that would infringe but for the exception in 35 U.S.C. §271(e)(1), or similar exception in the United States or other countries; and/or (c) the development, manufacture, use, sale, offer for sale or importation of which incorporates, uses, was derived from, identified by, validated, or developed in whole or in part using the Know-How or Materials.

1.07“Materials”: Biological specimens of human origin, including without limitation tissues, blood, plasma, urine, stool and derivatives thereof used by MAYO pursuant to work in Dr.

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Ahlquist’s laboratory or provided by MAYO (i.e. Dr. Ahlquist) to EXACT.

1.08“Net Sales”: the amount invoiced by EXACT or Sublicensee for the transfer of a Licensed Product to a third party less documented: (a) sales, excise or use taxes shown on the face of the invoice, excluding value-added tax; (b) credits for defective or returned Licensed Products actually given; and (c) regular trade and discount allowances given.  Leasing, lending, consigning or any other activity by means of which a third party acquires the right to possess or use a Licensed Product is a transfer for the purpose of determining Net Sales.  Net Sales on Licensed Products transferred as part of a non-cash exchange or other than to third parties shall be calculated at the then-current customary sales price invoiced to third parties or fair market value if there are no current invoices to third parties.  Net Sales accrues with the first of delivery or invoice

1.09“Patent Rights”:

(a)U.S. patents and applications listed in Exhibit A hereto, together with divisionals, continuations, and continuations-in-part (but only for subject matter supported pursuant to 35 U.S.C. §112 by the foregoing) therefrom, patents issuing thereon, re-examinations and re-issues thereof, as well as extensions and supplementary protection certificates and any foreign counterpart of any of the foregoing;

(b)Any patent applications filed as a result of Dr. Ahlquist’s activities pursuant to Section 2.06 hereto, together with divisionals, continuations, and continuations-in-part (but only for subject matter supported pursuant to 35 U.S.C. §112 by the foregoing) therefrom, patents issuing thereon, re-examinations and re-issues thereof, as well as extensions and supplementary protection certificates and any foreign counterpart of any of the foregoing; and

(c)Any patent applications filed with MAYO inventors as a result of activities performed by MAYO under the work plans that are part of the Sponsored Research Agreement, together with divisionals, continuations, and continuations-in-part (but only for subject matter supported pursuant to 35 U.S.C. §112 by the foregoing) therefrom, patents issuing thereon, re-examinations and re-issues thereof, as well as extensions and supplementary protection certificates and any foreign counterpart of any of the foregoing.

1.10“Sponsored Research Agreement”  the agreement outlining the research to be funded by EXACT and performed at MAYO, as agreed upon by the parties in accordance with this Agreement.

1.11“Sublicensee”: any third party or any Affiliate to whom EXACT has conveyed rights or the forbearance of suit under the Patent Rights, Know-How & Materials.

1.12“Term”: begins on the Effective Date and ends, subject to Article 10, upon the date of the last to expire of the Patent Rights, unless the Know-How or Materials are still in use in a manner generating Net Sales, in which case upon the earlier of five (5) years following the last to expire of the Patent Rights or the date upon which EXACT ceases such use of the Know-How or

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Materials.

1.13“Territory”:  worldwide

Article 2.00 - Grant of Rights

2.0lGRANT.  Subject to the terms and conditions of this Agreement, MAYO grants to EXACT: (a) an exclusive license with the right to sublicense, within the Field and Territory, under the Patent Rights to make, have made, use, offer for sale, sell, and import Licensed Products; and (b) a nonexclusive license with the right to sublicense, within the Field and Territory, to use the Know-How to develop, make, have made, use, offer for sale, sell, and import Licensed Products.

2.02RESERVATION OF RIGHTS.  All rights herein are subject to (a) the rights and obligations to and requirements of the U.S. government, if any have arisen or may arise, regarding the Patent Rights, including as set forth in 35 U.S.C. §§200 et al., 37 C.F.R. Part 401 et al. (“Bayh Dole Act”); and (b) MAYO’s and its Affiliates’ reserved, irrevocable right to practice and have practiced the Patent Rights in connection with MAYO’s and its Affiliates’ educational, research and clinical programs, including MAYO’s reference laboratory, Mayo Collaborative Services, Inc.  EXACT agrees to comply with the provisions of the Bayh-Dole Act, to the extent such act applies, including promptly providing to MAYO with information requested to enable MAYO to meet its compliance requirements and substantially manufacturing Licensed Product in the U.S.

2.03NO OTHER RIGHTS GRANTED.  This Agreement does not grant any right, title or interest in or to any tangible or intangible property right of MAYO or its Affiliates, including any improvements thereon, or to any Patent Rights or Know-How & Materials outside the Field or Territory that is not expressly stated in Section 2.01.  All such rights, titles and interests are expressly reserved by MAYO and EXACT agrees that in no event will this Agreement be construed as a sale, an assignment, or an implied license by MAYO or its Affiliates to EXACT of any such tangible or intangible property rights.

2.04SUBLICENSES.  Any sublicense by EXACT shall be to a Sublicensee that agrees in writing to be bound by substantially the same terms and conditions as EXACT herein, and with the financial terms and conditions at least as favorable to MAYO as set forth in the Agreement, or such sublicense shall be null and void.  Sublicenses granted hereunder shall not be transferable, including by further sublicensing, delegatable or assignable without the prior written approval of MAYO.  EXACT will provide MAYO with a copy of each sublicense agreement promptly after execution.  EXACT is responsible for the performance of all Sublicensees as if such performance were carried out by EXACT itself, including the payment of any royalties or other payments provided for hereunder triggered by Sublicensee, regardless of whether the terms of any sublicense require that Sublicensee pay such amounts (such as in a fully paid-up license), or that such amounts be paid by the Sublicensee directly to MAYO.  Each sublicense agreement shall name MAYO as a third party beneficiary and unless MAYO has provided written consent, all rights of Sublicensees shall terminate when EXACT’s rights terminate.

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2.05USE OF MATERIALS.

(a)Use of the Materials by MAYO or EXACT shall be subject to the prior approvals of MAYO’s Institutional Review Board and the Mayo Clinic Research Biospecimen Subcommittee.

(b)Materials are owned by MAYO and any transfer of such Materials to EXACT under the terms of this Agreement shall not affect MAYO’s ownership interest therein.  MAYO shall clearly mark and identify all Materials transferred to EXACT.  All Materials will be maintained by EXACT so that such Materials are readily identifiable.  The transfer of Materials to EXACT gives EXACT no rights in such Materials other than those specifically set forth in this Agreement.  EXACT agrees to use the Materials solely for research purposes and shall not transfer, deliver or otherwise release such Materials to a third party without the express prior written consent of MAYO.  Upon expiration of a project and at the instructions of MAYO, EXACT shall either return to MAYO or destroy all unused Materials.

(c)EXACT agrees to use the Materials in accordance with the rights granted to EXACT under this Agreement.  All research conducted using the Materials shall be conducted in accordance with all applicable state and federal laws regarding such research.

(d)Nothing in this Agreement provides EXACT the right to transfer nucleic acids or any other material extracted from Materials to any third party.

2.06AHLQUIST COMMITMENT TO CONFER.

(a)Subject to MAYO approval and for so long as Dr. Ahlquist is an employee of MAYO, Dr. Ahlquist will confer on EXACT product development efforts, as a special advisor to the EXACT board of directors and senior management.  EXACT will confer with Dr. Ahlquist in person in Rochester, MN, Madison, WI or as mutually agreed, or by telephone.  All travel expenses incurred by Dr. Ahlquist in this role as advisor shall be paid by EXACT.  Dr. Ahlquist shall contribute on average seventy five percent (75%) of his time (i.e. approximately 3.75 days per week) during the first six months of this Agreement.  Should the parties agree that Dr. Ahlquist will continue to work with EXACT in this capacity, the percent time contributed by Dr. Ahlquist in a following period will be mutually determined no later than three (3) months prior to the beginning of such period.  Except as provided in Section 3.01 or in the Sponsored Research Agreement, MAYO shall be solely responsible for compensating Dr. Ahlquist and his staff, provided, however, that in consideration of the services provided under this Section 2.06(a), EXACT shall pay MAYO the amounts set forth in Section 3.05.

(b)Notwithstanding EXACT’s rights to sublicense pursuant to Section 2.01 hereto, EXACT shall not have the right to sublicense any obligation of Dr. Ahlquist to confer.

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Article 3.00 - Royalties

3.01UP-FRONT.

(a)Within thirty days of the Effective Date, EXACT will make a nonrefundable and noncreditable up-front payment to MAYO of EIGHTY THOUSAND DOLLARS (US $80,000).

(b)Within thirty (30) days of the Effective Date, EXACT will issue to MAYO the following nonrefundable and noncreditable warrants:

(i)1,000,000 warrants (as consideration for the licenses granted hereunder) under the terms and conditions of the warrant agreement attached hereto as Exhibit C; and

(ii)250,000 warrants (as partial consideration for the Know-How services provided pursuant to Section 2.06) with a four-year vesting schedule under the terms and conditions of the warrant agreement attached hereto as Exhibit D.

The strike price of the warrants will be based on an average of the daily closing price of EXACT shares for the two weeks prior to the Effective Date of this Agreement.  The warrant agreements shall include a cashless exercise provision and a six year term extending from the date of issuance of the warrant or, in the case of warrants subject to vesting, the date the warrants vest.

3.02MILESTONE FEES.  EXACT will pay the following nonrefundable and noncreditable milestone fees to MAYO for the first Licensed Product developed by EXACT upon the first achievement of the following events:

(a)TWO HUNDRED FIFTY THOUSAND DOLLARS (US $250,000) on the commencement of patient enrollment in the human cancer screening clinical trial, in support of a 510k or PMA; and

(b)FIVE HUNDRED THOUSAND DOLLARS (US $500,000) upon FDA approval.

3.03EARNED ROYALTIES.  EXACT will make nonrefundable and noncreditable earned royalty payments to MAYO of [***] of Net Sales of Licensed Products (“Earned Royalties”).  The Earned Royalties are payable as described in Section 4.01.   Licensed Products transferred to MAYO or its Affiliates are not considered transfers for purposes of determining Net Sales or for calculating Earned Royalties.  No Earned Royalties are due MAYO on transfers to MAYO or MAYO Affiliates.

3.04MINIMUM ROYALTIES.  EXACT will pre-pay to MAYO minimum, annual, nonrefundable, noncreditable royalties of TEN THOUSAND DOLLARS (US $10,000) on the third anniversary of the Effective Date, and TWENTY-FIVE THOUSAND DOLLARS (US $ 25,000) on the fourth anniversary of the Effective Date and on each anniversary thereafter.  Ongoing royalty payments in the year following the third anniversary of the Effective Date are due only on Net Sales of Licensed Product greater than SIX HUNDRED SIXTY-SIX THOUSAND, SIX HUNDRED SIXTY-SEVEN DOLLARS (US $666,667).  Ongoing royalty

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payments in the year following the fourth anniversary of the Effective Date and in each year thereafter are due only on Net Sales of Licensed Product greater than ONE MILLION, SIX HUNDRED SIXTY-SIX THOUSAND, SIX HUNDRED SIXTY-SEVEN DOLLARS (US $1,666,667).

3.05COMPENSATION TO MAYO FOR AHLQUIST KNOW-HOW.  EXACT will pay MAYO [***].  This amount will be payable monthly, following receipt by EXACT of an invoice from MAYO.

3.06SPONSORED RESEARCH FUNDING.

(a)The parties shall negotiate in good faith the terms of the Sponsored Research Agreement with the goal of executing such agreement no later than thirty (30) days following the Effective Date.

(b)EXACT agrees to support research in the laboratory of Dr. Ahlquist during the first year after the Effective Date at a minimum level of FIVE HUNDRED THOUSAND DOLLARS (US $500,000), subject to mutually agreed upon work plans and budgets and the execution of the Sponsored Research Agreement.  Such funding is contingent upon the continued availability of Dr. Ahlquist pursuant to Section 2.06.  Failure to provide this minimum level of funding in the first year after the Effective Date shall be considered a material breach of this Agreement.

(c)The degree of financial support to be provided by EXACT for research in the second year and any following years will be determined no later than three (3) months before the expiration of the Sponsored Research Agreement, and will be subject to mutually agreed upon work plans and budgets.

3.07TAXES.  EXACT is responsible for all taxes, duties, import deposits, assessments, and other governmental charges, however designated, which are now or hereafter imposed by any authority on EXACT: (a) by reason of the performance by MAYO of its obligations under this Agreement, or the payment of any amounts by EXACT to MAYO under this Agreement; (b) based on the Patent Rights; or (c) related to use, sale or import of the Licensed Product.  Any withholding taxes which EXACT is required by law to withhold on remittance of the royalty payments shall be deducted from the royalty paid and EXACT shall promptly furnish MAYO with original copies of all official receipts for such taxes.  EXACT will obtain, or assist MAYO in obtaining, any tax reduction (including avoidance of double taxation), tax refund or tax exemption available to MAYO by treaty or otherwise.  Notwithstanding the foregoing, MAYO shall be responsible for paying and withholding all employment related taxes with respect to the services of Dr. Ahlquist and his laboratory staff.

3.08U.S. CURRENCY.  All payments to MAYO under this Agreement will be made by draft drawn on a U.S. bank, and payable in U.S. dollars.  In the event that conversion from foreign

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currency is required in calculating a payment under this Agreement, the exchange rate used shall be the Interbank rate quoted by Citibank at the end of the last business day of the quarter in which the payment accrued.

3.09OVERDUE PAYMENTS.  If overdue, the payments due under this Agreement shall bear interest until paid at a per annum rate 2% above the prime rate in effect at Citibank on the due date and MAYO shall be entitled to recover, in addition to all other remedies, reasonable attorneys’ fees and costs related to the administration or enforcement of this Agreement, including collection of payments, following such failure to pay.  The acceptance of any payment, including of such interest shall not foreclose MAYO from exercising any other right or seeking any other remedy that it may have as a consequence of the failure of EXACT to make any payment when due.

Article 4.00 - Accounting and Reports

4.01REPORTS AND PAYMENT.  EXACT will deliver to MAYO on or before the following dates: 1 February, 1 May, 1 August, and 1 November, a written report setting forth a full accounting showing how any amounts due to MAYO for the preceding calendar quarter have been calculated as provided in this Agreement, including an accounting of total Net Sales with a reporting of any applicable foreign exchange rates, deductions, allowances, and charges.  If no Licensed Product transfers have occurred and no other amounts are due to MAYO, EXACT will submit a report so stating. Each such report will be accompanied by the payment of all amounts due for such calendar quarter.

4.02ACCOUNTING.  EXACT will keep complete, continuous, true, and accurate books of accounts and records sufficient to support and verify diligence and the calculation of Net Sales, all royalties and any other amount believed due and payable to MAYO under this Agreement.  Such books and records will be kept at EXACT’s principal place of business for at least three years after the end of the calendar year to which they pertain, and will be open at all reasonable times for inspection by a representative of MAYO for verification of royalty statements or compliance with other aspects of this Agreement.  The MAYO representative will treat as confidential all relevant matters and will be a person or firm reasonably acceptable to EXACT.  In the event such audit reveals an underpayment by EXACT, EXACT will within thirty (30) days pay the royalty due in excess of the royalty actually paid.  In the event the audit reveals an underpayment by EXACT of more than five percent (5%) of the amount due, EXACT will pay interest on the royalty due in excess of the royalty actually paid at a per annum rate two per cent (2%) above the prime rate in effect at Citibank on the date notice of the deficiency is provided to EXACT, and EXACT will pay all of MAYO’s costs in conducting the audit.

Article 5.00 -Diligence

5.01DEVELOPMENT PLAN.  EXACT will make commercially reasonable efforts to bring Licensed Products to market.

5.02DEVELOPMENT MILESTONES.  In partial satisfaction of its obligations to bring

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Licensed Products to market, EXACT will provide MAYO with development milestones within six (6) months of the Effective Date.  EXACT will promptly notify MAYO upon the achievement each of the development milestones, identify whether EXACT or a Sublicensee is responsible for the achievement of such milestone, and the actual date of such achievement.

5.03DILIGENCE REPORTS.EXACT will provide MAYO with annual reports within thirty (30)days of each anniversary of the Effective Date describing in detail: (a) as of that reporting period, all development and marketing activities for each Licensed Product and the names of all Sublicensees, including which of the Sublicensees are Affiliates; and (b) an updated development plan for the next annual period.  MAYO shall have the right to audit EXACT’s records relating to development of Licensed Products as provided in Section 4.02.

Article 6.00 — Intellectual Property Management

6.01 CONTROL.

(a)EXACT shall diligently prosecute and maintain the United States and foreign patents and patent applications covering Patent Rights as it deems appropriate, at EXACT’s expense, using counsel of its choice and after due consultation with MAYO.  EXACT shall provide MAYO with copies of all relevant documentation so that MAYO may be informed and apprised of the continuing prosecution and MAYO agrees to keep this documentation confidential.  EXACT shall also notify MAYO of its intention to not apply for patent protection for any invention with a MAYO inventor or to abandon the prosecution of any patent within the Patent Rights thirty (30) days prior to any applicable deadlines affecting such application or abandonment.  Following such written notification and discussion between the parties, MAYO shall be entitled to take over prosecution of such patent, at its own expense, of those patents within the Patent Rights that EXACT has elected not to pursue and EXACT shall then have no further rights to any patent that issues under such prosecution.

(b)The parties shall take commercially reasonable steps to ensure that the Know-How & Materials remain confidential in accordance with Article 8.

6.02PATENT TERM EXTENSION.  EXACT shall consult with MAYO in selecting the patent covering each Licensed Product for term extension for or supplementary protection certificate under in accordance with the applicable laws of any country.  Each party agrees to execute any documents and to take any additional actions as the other party may reasonably request in connection therewith.

6.03PATENT MARKING.  To the extent commercially feasible, EXACT will mark all Licensed Products that are manufactured or sold under this Agreement with the number of each issued patent within the Patent Rights that cover such Licensed Product(s).  Any such marking will be in conformance with the patent laws and other laws of the country of manufacture or sale.

6.04ENFORCEMENT.  EXACT shall promptly inform MAYO in writing of any alleged or threatened infringement of any of the Patent Rights and/or Know-How & Materials and provide

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MAYO with any available evidence of such infringement.

(a)First Right.  EXACT shall have the first right, but not the obligation, to enforce the Patent Rights so long as MAYO is kept fully informed and given the right and opportunity to advise and comment.  MAYO shall reasonably cooperate in any such action at EXACT’s expense but shall not be required to join such action unless: (i) it has agreed to do so in writing prior to commencement thereof, or (ii) EXACT determines that MAYO is a necessary party in the action.  EXACT shall pay to MAYO twenty-five percent (25%) of the any recovery or damages, net of all reasonable costs and expenses associated with each suit or settlement.

(b)Non-Election to Enforce.  If EXACT elects not to enforce the Patent Rights, it shall so notify MAYO in writing within ninety (90) days of receiving notice that an infringement may exist, and MAYO may, in its sole judgment and without any obligation, enforce, settle, and defend the Patent Rights and keep for its own account any recovery and damages.  EXACT shall reasonably cooperate in any such actions if requested to do so by MAYO, at MAYO’s expense.

6.05DEFENSE.   EXACT will have the first right, but not the obligation, to take any measures deemed appropriate by EXACT in consultation with MAYO, regarding challenges to the Patent Rights, Know-How or Materials brought (including interferences in the U.S. Patent and Trademark Office and oppositions in foreign jurisdictions) and defense of the Patent Rights, Know-How or Materials required (including declaratory judgment actions).  MAYO shall reasonably cooperate in any such measures if requested to do so by EXACT at EXACT’S expense, but shall not be required to join any action unless: (i) it has agreed to do so in writing prior to commencement thereof, or (ii) the court determines that MAYO is a necessary party in the action.  EXACT shall be entitled to retain any related recovery, provided that all costs of MAYO related to such action have been fully paid by EXACT.  If EXACT elects not to defend the Patent Rights, it shall so notify MAYO in writing within ninety (90) days of receiving notice that a challenge has been made, and MAYO may, in its sole judgment and without any obligation, enforce, settle, and defend the Patent Rights and keep for its own account any related recovery.  EXACT shall reasonably cooperate in any such actions if requested to do so by MAYO, at MAYO’s expense.

6.06THIRD PARTY LITIGATION.  In the event a third party institutes a suit against EXACT for patent infringement involving a Licensed Product, EXACT will promptly inform MAYO and keep MAYO regularly informed of the proceedings.

Article 7.00 — Use of Name

7.01USE OF NAME AND LOGO.  EXACT will not use for publicity, promotion, or otherwise, any logo, name, trade name, service mark, or trademark of MAYO or its Affiliates, including, but not limited to, the terms “MAYO®,” “MAYO Clinic®,” and the triple shield MAYO logo, or any simulation, abbreviation, or adaptation of the same, or the name of any MAYO employee or agent, without MAYO’s prior, written, express consent.  MAYO may withhold such consent in MAYO’s absolute discretion.  With regard to the use of MAYO’s name, all requests for approval pursuant to this Section must be submitted to the Mayo Clinic

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 Public Affairs Business Relations Group, at the following e-mail address: PublicAffairsBR@MAYO.edu at least five (5) business days prior to the date on which a response is needed.

Article 8.00 - Confidentiality

8.01TREATMENT OF CONFIDENTIAL INFORMATION.  Except as provided for in Section 8.02, neither party will disclose, use or otherwise make available the other’s Confidential Information during Term or for three years thereafter and will use the same degree of care it employs to protect its own confidential information.

8.02RIGHT TO DISCLOSE.

(a)To the extent it is reasonably necessary or appropriate to fulfill its obligations or exercise its rights under this Agreement; a party may use or disclose Confidential Information to its Sublicensees, consultants, and outside contractors on the condition that each such entity agrees to obligations of confidentiality and non-use at least as stringent as those therein.

(b)If a party is required by law, regulation or court order to disclose any of the Confidential Information, it will have the right to do so, provided it: (i) promptly notifies the disclosing party; and (ii) reasonably assists the disclosing party to obtain a protective order or other remedy of disclosing party’s election and at disclosing party’s expense.

8.03CONFIDENTIALITY OF AGREEMENTS.  Except as otherwise required by law, the specific terms and conditions of this Agreement shall be Confidential Information but the existence and Field of this Agreement will not be Confidential Information and the parties may state that EXACT is licensed under the Patent Rights.  Notwithstanding the foregoing, a party may disclose the contents of this Agreement to its actual or prospective investors, professional advisors, and as required by law or the rules of any applicable securities exchange.

Article 9.00 — Warranties, Representations, Disclaimers and Indemnification

9.01REPRESENTATIONS AND WARRANTIES OF EXACT.  EXACT warrants and represents to MAYO that:

(a)it is experienced in the development, production, quality control, service, manufacture, marketing, and sales of products similar to the subject matter of the Patent Rights, and that it will commit itself to a thorough, vigorous, and diligent program of developing and marketing the Licensed Products;

(b)it has independently evaluated the Patent Rights, Know-How, Materials and Confidential Information, if any, their applicability or utility in EXACT’s activities, is entering into this Agreement on the basis of its own evaluation and not in reliance of any representation by MAYO, and assumes all risk and liability in connection with such determination;

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(c)the execution and delivery of this Agreement has been duly authorized and no further approval, corporate or otherwise, is required in order to execute this binding Agreement;

(d)it shall comply and require its Sublicensees to comply with all applicable international, national, and state laws, ordinances and regulations in its performance under this Agreement; and

(e)its rights and obligations under this Agreement do not conflict with any contractual obligation or court or administrative order by which it is bound.

9.02REPRESENTATIONS AND WARRANTIES OF MAYO.  MAYO warrants and represents to EXACT that:

(a)it is the owner of the Patent Rights and has full power and authority to grant the licenses which are provided for in this Agreement;

(b)the execution and delivery of this Agreement has been duly authorized and no further approval, corporate or otherwise, is required in order to execute this binding Agreement;

(c)to the best of its internal counsel’s knowledge, its rights and obligations under this Agreement do not conflict with any contractual obligation or court or administrative order by which it is bound;

(d)no claim, suit or action has been made or initiated alleging that the Patent Rights are invalid or that the practice of the Patent Rights will infringe the rights of any third party; and

(e)to the best of its internal counsel’s knowledge the Patent Rights are valid and subsisting.

9.02DISCLAIMERS.

(a)EXCEPT AS EXPRESSLY SET FORTH HEREIN, NEITHER PARTY HAS MADE ANY PROMISES, COVENANTS, GUARANTEES, REPRESENTATIONS OR WARRANTIES OF ANY NATURE, DIRECTLY OR INDIRECTLY, EXPRESS, STATUTORY OR IMPLIED, INCLUDING WITHOUT LIMITATION, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, SUITABILITY, DURABILITY, CONDITION, QUALITY, OR ANY OTHER CHARACTERISTIC OF THE LICENSED PRODUCT, KNOW-HOW, MATERIALS OR PATENT RIGHTS.

(b)KNOW-HOW, MATERIALS, CONFIDENTIAL INFORMATION AND PATENT RIGHTS ARE PROVIDED “AS IS,” “WITH ALL FAULTS,” AND “WITH ALL DEFECTS,” AND EXACT EXPRESSLY WAIVES ALL RIGHTS TO MAKE ANY CLAIM WHATSOEVER AGAINST MAYO FOR MISREPRESENTATION OR FOR BREACH OF

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PROMISE, GUARANTEE, REPRESENTATION OR WARRANTY OF ANY KIND RELATING TO THE LICENSED PRODUCTS, KNOW-HOW, MATERIALS, CONFIDENTIAL INFORMATION OR PATENT RIGHTS, EXCEPT AS EXPRESSLY SET FORTH HEREIN.  MAYO EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTIES ARISING FROM ANY COURSE OF DEALING, USAGE, OR TRADE PRACTICE, WITH RESPECT TO: THE SCOPE, VALIDITY OR ENFORCEABILITY OF THE PATENT RIGHTS, KNOW-HOW, OR MATERIALS; THAT ANY PATENT WILL ISSUE BASED UPON ANY OF PENDING PATENT APPLICATION; OR THAT THE MANUFACTURE, USE, SALE, OFFER FOR SALE OR IMPORTATION OF THE LICENSED PRODUCTS WILL NOT INFRINGE OTHER INTELLECTUAL PROPERTY RIGHTS.  NOTHING IN THIS AGREEMENT WILL BE CONSTRUED AS AN OBLIGATION FOR MAYO TO BRING, PROSECUTE OR DEFEND ACTIONS REGARDING THE PATENT RIGHTS, KNOW-HOW OR MATERIALS.

(c)EXACT AGREES THAT MAYO AND ITS AFFILIATES WILL NOT BE LIABLE FOR ANY LOSS OR DAMAGE CAUSED BY OR ARISING OUT OF ANY RIGHTS GRANTED OR PERFORMANCE MADE UNDER THIS AGREEMENT, WHETHER TO OR BY EXACT, A SUBLICENSEE OR A THIRD PARTY.  IN NO EVENT WILL MAYO’S LIABILITY OF ANY KIND INCLUDE ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE LOSSES OR DAMAGES, EVEN IF MAYO HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, OR EXCEED THE TOTAL AMOUNT OF ROYALTIES WHICH HAVE ACTUALLY BEEN PAID TO MAYO BY EXACT AS OF THE DATE OF FILING AN ACTION AGAINST MAYO WHICH RESULTS IN THE SETTLEMENT OR AWARD OF DAMAGES TO EXACT.

9.03INDEMNIFICATION AND INSURANCE.

(a)EXACT will defend, indemnify, and hold harmless MAYO, MAYO’s Affiliates and their respective trustees, officers, agents, independent contractors and employees (“MAYO Indemnitees”) from any and all claims, actions, demands, judgments, losses, costs, expenses, damages and liabilities (including attorneys’ fees, court costs and other expenses of litigation), regardless of the legal theory asserted, arising out of or connected with: (a) the practice or exercise of any rights granted hereunder by or on behalf of EXACT or any Sublicensee; (b) research, development, design, manufacture, distribution, use, sale, importation, exportation or other disposition of Licensed Products; and (c) any act or omission of EXACT or any Sublicensee hereunder, including the negligence or willful misconduct thereof.  MAYO and MAYO Affiliates shall have no obligation to indemnify EXACT hereunder.  Notwithstanding the foregoing, the indemnity obligations of EXACT shall not apply with respect to any claims, actions, demands, judgments, losses, costs, expenses, damages and liabilities which arise due to a breach of this Agreement by MAYO or the gross negligence or willful misconduct of MAYO or its agents or employees.

(b)The parties agree that this indemnity should be construed and applied in favor of maximum indemnification of MAYO Indemnitees.

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(c)           Commencing on the date of first commercial sale of a Licensed Product by EXACT, EXACT will continuously carry occurrence-based liability insurance, including products liability and contractual liability, in an amount and for a time period sufficient to cover the liability assumed by EXACT hereunder during the Term and after, such amount being at least THREE MILLION DOLLARS (US $3,000,000).  In addition, such policy will name MAYO and its Affiliates as additional-named insureds.

9.04        PROHIBITION AGAINST INCONSISTENT STATEMENTS.  EXACT shall not make any statements, representations or warranties, or accept any liabilities or responsibilities whatsoever which are inconsistent with any disclaimer or limitation included in this section or any other provision of this Agreement.  EXACT shall not settle any matter that will incur liability for MAYO or require MAYO to make any admission of liability without MAYO’s prior written consent.

Article 10.00 - Term and Termination

10.01      TERM.  This Agreement will expire at the end of the Term.

10.02      TERMINATION FOR BREACH.      If EXACT commits a material breach of this Agreement, including without limitation, the failure to make any required royalty or fee payments hereunder, MAYO will notify EXACT in writing of such breach and EXACT will have thirty (30) days after such notice to cure such breach to MAYO’s satisfaction.   If EXACT fails to cure such breach, MAYO may, at its sole option, terminate this Agreement in whole or in part by sending EXACT written notice of termination.

10.03      TERMINATION FOR SUIT. MAYO does not license entities that bring suit against MAYO or its Affiliates and as such, MAYO may immediately terminate this Agreement if EXACT or any Sublicensee directly or indirectly bring any action or proceeding against MAYO or its Affiliates, except for an uncured material breach of this Agreement by MAYO.

10.04      TERMINATION BY EXACT.  Subject to the terms of the Sponsored Research Agreement, EXACT may without cause terminate this Agreement at any time following payment and delivery of the compensation provided for in Section 3.01, upon written notice to MAYO.

10.05      INSOLVENCY OF EXACT.  This Agreement terminates immediately without an obligation of notice of termination to EXACT in the event EXACT ceases conducting business in the normal course, becomes insolvent or bankrupt, makes a general assignment for the benefit of creditors, admits in writing its inability to pay its debts as they are due, permits the appointment of a receiver for its business or assets, or avails itself of or becomes subject to any proceeding under any statute of any governing authority relating to insolvency or the protection of rights of creditors.

10.05      SURVIVAL.  The termination or expiration of this Agreement does not relieve either party of its rights and obligations that have previously accrued.  After the Term, all rights granted immediately revert to MAYO.  All Confidential Information of the other party shall be returned

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or destruction certified, at the disclosing party’s election.  Rights and obligations that by their nature prescribe continuing rights and obligations shall survive the termination or expiration of this Agreement including Sections 4.02, 9.03, 10.5 and Articles 7, 8 and 11.  EXACT and its Sublicensees shall provide an accounting for and pay, within thirty (30) days of termination or expiration, of all amounts due hereunder.  Upon any termination of this Agreement, the licenses granted hereunder shall cease.  Upon expiration of this Agreement, the licenses granted hereunder shall become fully paid up.

Article 11.00 - General Provisions

11.01      ASSIGNMENT AND TRANSFER.  Each party is strictly prohibited from assigning, delegating or otherwise transferring any of its obligations or rights under this Agreement without the other party’s prior, express and written consent, which shall not be unreasonably withheld.  Any assignment, delegation or transfer in contravention hereof is null and void.  Notwithstanding the foregoing, either party may assign this Agreement without approval in connection with a sale, merger or other transaction which involves the transfer of substantially all of the assets of a party used in connection with the business of such party that relates to this Agreement.  Any assignment shall not in any manner relieve the assignor from liability for the performance of this Agreement by its assignee.  The assignor shall provide prompt notice to the other party upon making such assignment.

11.02      WAIVER.  No part of this Agreement may be waived except by the further written agreement of the party granting such waiver.  Forbearance in any form from demanding the performance of a duty owed under this Agreement is not a waiver of that duty.  Until complete performance of a duty owed under this Agreement is accomplished, the party to which that duty is owed may invoke any remedy under this Agreement or under law, despite its past forbearance in demanding performance of that duty.

11.03      GOVERNING LAW AND JURISDICTION.  This Agreement is made and performed in Minnesota.  The terms and conditions of this Agreement, as well as all disputes arising under or relating to this Agreement, shall be governed by Minnesota law, specifically excluding its choice-of-law principles, except that the interpretation, validity and enforceability of the Patent Rights will be governed by the patent laws of the country in which the patent application is pending or issued.  This is not an Agreement for the sale of goods and as such Article 2 of the Uniform Commercial Code as enacted in Minnesota does not apply.

11.04      HEADINGS.  The headings of articles and sections used in this document are for convenience of reference only.

11.05      NOTICES.  Any notice required to be given under this Agreement is properly provided if in writing and sent to the party at its address or facsimile number below, or as otherwise designated by the party in accordance with this provision, and duly given or made: (a) on the date delivered in person; (b) on the date transmitted by facsimile, if confirmation is received; (c) three (3) days after deposit in the mail if sent by certified U.S. mail postage prepaid, return receipt requested; and (d) one (1) day after deposit with a nationally recognized overnight carrier service

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with charges prepaid.

For MAYO:	Mayo Foundation for Medical Education and Research
	Office of Intellectual Property — MCHS — BB4
	200 First Street SW
	Rochester, Minnesota 55905-0001
For EXACT:	EXACT Sciences Corporation
	100 Campus Drive
	Marlborough, MA 01752
	Attn:	Maneesh Arora
	Phone:	508-683-1200
	Fax:	508-683-1201
	Email:	marora@exactsciences.com

11.06      LIMITATION OF RIGHTS CREATED.  This Agreement is personal to the parties and shall be binding on and inure to the sole benefit of the parties and their permitted successors and assigns and shall not be construed as conferring any rights to any third party.  Specifically, no interests are intended to be created for any customer, patient, research subjects, or other persons (or their relatives, heirs, dependents, or personal representatives) by or upon whom the Licensed Products may be used.

11.07      INDEPENDENT CONTRACTORS.  EXACT and any Sublicensee is an independent contractor not an agent, employee, partner, joint venturer or servant of MAYO and has no right to obligate or bind MAYO in any manner.

11.08      ENTIRE AGREEMENT.  This Agreement states the entire agreement and understanding between the parties about its subject matter.  All past and contemporaneous discussions, writings, agreements, proposals, promises, covenants, warranties, representations, guarantees, correspondence, and understandings, whether oral or written, formal or informal, are entirely superseded by this Agreement, with the exception of (a) the material transfer agreement for 200 stool and tissue samples, effective 9 November 2000 and attached hereto as Exhibit E (Mayo agreement # 1683); and (b) the material transfer agreement for 80 blood samples, effective 9 November 2000 and attached hereto as Exhibit F (Mayo agreement # 1684).  For the avoidance of doubt, (a) the letter to Don Hardison regarding prosecution of joint intellectual property, dated 3 January 2003 and attached hereto as Exhibit G (Mayo agreement #1685); and (b) the confidentiality agreement effective 16 February 2009 and attached hereto as Exhibit H (Mayo agreement #6049) are entirely superseded by this Agreement.

11.09      SEVERABILITY.  If any terms or conditions of this Agreement are or become in

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conflict with the laws, regulations or court order of any jurisdiction or any governmental entity having jurisdiction over the parties or this Agreement, those terms and conditions shall be deemed automatically deleted in such jurisdiction(s) only, and the remaining terms and conditions of this Agreement shall remain in full force and effect.  If such a deletion is not so allowed in a given jurisdiction or if such a deletion leaves terms and conditions thereby made clearly illogical or inappropriate in effect, the parties agree to substitute new terms and conditions as similar in effect to the present terms of this Agreement as may be allowed under the applicable laws, regulations or court order of such jurisdiction.  The parties desire the terms and conditions herein to be valid and enforced to the maximum extent not prohibited by law, regulation or court order in a given jurisdiction.

11.10      CHANGES TO AGREEMENT.  No terms or conditions of this Agreement may be changed except in writing, through another document signed by both parties, and expressly referencing this Agreement.

11.11      CONSTRUCTION.  Each party acknowledges that it was provided an opportunity to seek advice of counsel and as such this Agreement shall not be construed for or against either party.

11.12      REGISTRATION OF LICENSES.  EXACT will register and give required notice concerning this Agreement, at its expense, in each country in the Territory where an obligation under law exists to so register or give notice.

11.13      EXPORT CONTROL.  MAYO is subject to U.S. laws and regulations controlling the export of technical data, computer software, laboratory prototypes, and other commodities that may require a license from the applicable agency of the United States government and/or may require written assurances by EXACT that it will not export data or commodities to certain foreign countries without prior approval of such agency.  MAYO neither represents that a license is required, nor that, if required, it will be issued.

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The parties execute this Agreement in one or more counterparts, each of which shall be deemed an original but all of which taken together constitute one and the same instrument, as of the Effective Date.

MAYO FOUNDATION FOR MEDICAL EDUCATION AND RESEARCH:

Signed:	/s/ Steven P. VanNurden		June 10, 2009
	Steven P. VanNurden		Date
	Assistant Treasurer
EXACT SCIENCES CORPORATION:
Signed:	/s/ Maneesh K. Arora		June 11, 2009
	Name:	Maneesh K. Arora	Date
	Title:	Chief Financial Officer

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EXHIBIT A

LICENSED PATENTS

MAYO OWNED IP

Appln No.	Domain	Patent Title	Filing Date	Mayo File #
12/018,273	USA	Detecting Methylated Mammalian Nucleic Acid in Stool	1/23/2008	2006-274
60/886,278	USA		1/23/2007
61/029,221	USA	Detecting Neoplasm	2/15/2008	2007-208 2007-210 2007-211 2007-212 2007-213
PCT/US2009/033793	USA		2/11/2009
61/094,770	USA	Collecting and Processing Complex Macromolecular Mixtures	9/5/2008	2007-211 2008-147 2008-199

JOINTLY (MAYO & EXACT) OWNED IP

			Filing Date
Pat App # or			or
Patent #	Domain	Patent Title	Issue Date	Mayo file #
12/042,988	USA	Supracolonic Aerodigestive Neoplasm Detection	3/5/2008	2000-026
2,394,921	Canada		12/7/2000
992876.3	Europe - EPO		12/7/2000
2001-544020	Japan		12/7/2000
PCT/US2000/042683	USA		12/7/2000
7,368,233	USA	Methods of Screening for Lung Neoplasm Based on Stool Samples Containing a Nucleic Acid Marker Indicative of a Neoplasm	5/6/2008

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EXHIBIT B

LICENSED KNOW-HOW

MAYO FILE #	TITLE	DISCLOSURE DATE
2009-128	Method to Enrich Genomic DNA in Stool	4/27/2009
2009-130	In Vivo Approaches to Improve Fecal Recovery of Nucleic Acids Exfoliated for Aerodigestive Neoplasms	4/27/2009
2009-133	Combination of Epithelial and Blood Markers in Stool for Detection of Colorectal and Gastrointestinal Neoplasms	4/25/2009
2009-134	Stool DNA Marker Panel for Detection of Colorectal Neoplasia	4/27/2009

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EX-31.1

Exhibit 31.1

I, Kevin T. Conroy, certify that:

1.I have reviewed this quarterly report on Form 10-Q of EXACT Sciences Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2009	By:	/s/ Kevin T. Conroy
		Kevin T. Conroy
		President and Chief Executive Officer

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EX-31.2

Exhibit 31.2

I, Maneesh K. Arora, certify that:

1.I have reviewed this quarterly report on Form 10-Q of EXACT Sciences Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2009	By:	/s/ Maneesh K. Arora
		Maneesh K. Arora
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of EXACT Sciences Corporation (the “Company”) on Form 10-Q for the period ending March 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Kevin T. Conroy, President and Chief Executive Officer of the Company and Maneesh K. Arora, Senior Vice President, Chief Financial Officer, Treasurer and Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to our knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Kevin T. Conroy

Kevin T. Conroy

President and Chief Executive Officer

August 13, 2009

/s/ Maneesh K. Arora

Maneesh K. Arora

Chief Financial Officer

August 13, 2009