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| Revenue | Revenue Exclusive License Agreement with Exact Sciences Corporation (“Exact”) In August 2025, the Company signed an exclusive collaboration and license agreement (the “Exact Sciences License Agreement”) with Exact Sciences Corporation (“Exact”) to commercialize the Company’s blood-based screening test for colorectal cancer (“CRC”) in the United States (“U.S.”). The Exact Sciences License Agreement was deemed effective for accounting purposes upon receipt of approval from the relevant governmental authority on November 7, 2025 (the “Antitrust Clearance Date”). On March 23, 2026, Abbott Laboratories (“Abbott”) completed its acquisition of Exact, and Exact became a subsidiary of Abbott. Pursuant to the Exact Sciences License Agreement, the Company granted Exact (a) a non-exclusive, fully paid, royalty-free, sublicensable (subject to certain restrictions) license under certain of the Company’s intellectual property rights to develop in accordance with the development plan certain in vitro, blood-based products or services for diagnosis, screening or evaluation of CRC or colorectal pre-cancer (excluding certain multi-cancer tests) (each a “Collaboration Product”) for all uses and purposes, excluding the diagnosis, screening or evaluation of measurable residual disease (the “Field”), (b) a co-exclusive, royalty-bearing, sublicensable (subject to certain restrictions) license under certain of the Company’s intellectual property rights to commercialize Collaboration Products that are laboratory developed tests until the later of (i) the date of approval by the FDA of a premarket approval application for a class III medical device for CRC or colorectal pre-cancer that meets certain requirements for the first Collaboration Product and (ii) antitrust clearance, which occurred on November 7, 2025 and (c) upon approval by the FDA of a Collaboration Product, an exclusive, royalty bearing, sublicensable (subject to certain restrictions) license under certain of the Company’s intellectual property rights to commercialize Collaboration Products in the Field in the U.S. In addition, the Company granted Exact Sciences a non-exclusive, worldwide license to manufacture Collaboration Products for purposes of developing and commercializing Collaboration Products as expressly permitted above. Collaboration Products exclude certain future CRC products for which Exact Sciences is granted a certain right of first negotiation in the U.S. Pursuant to the Exact License Agreement, the Company received a one-time, non-refundable, non-creditable, upfront payment of $75.0 million from Exact on November 3, 2025 as partial consideration for the rights and license granted. The Company is also eligible to receive up to $700.0 million in certain development and regulatory milestones; annual development payments of up to $20.0 million per year over three years for funding of R&D development expenses leveraging the technology for those three years; and tiered royalties ranging from low to high double-digit percentages on U.S. sales of any commercial products that may result from the collaboration, subject to customary deductions under certain circumstances. The Exact License Agreement is subject to termination by either party for the other party’s uncured material breach or its insolvency. Subject to certain limitations, the Company and Exact both have certain termination for convenience rights, exercisable upon sufficient prior written notice. Specifically, the Company’s right to terminate for convenience may be exercised if Exact ceases commercialization activities for all Collaboration Products; or if there is a patent challenge with respect to the Company’s patent rights in the U.S.; or if Exact’s licensees commercially launch, as a standalone product, the in vitro, blood-based product for the diagnosis, screening or evaluation of colorectal cancer in the U.S. that Exact is developing. Exact may terminate the agreement in its entirety, upon prior written notice to the Company, upon earlier of not meeting a certain development milestone event or by January 1, 2028. Exact also has the right to terminate the collaborative activities under the Exact License Agreement at specified points during the collaboration term. At the commencement of the arrangement, the Company concluded that Exact was a customer and that the Exact License Agreement should be accounted for under ASC 606. The performance obligations identified under the Exact License Agreement included the delivery of intellectual property and licenses related to development, co-exclusive commercialization, manufacturing, and data; research and development services; the exclusive commercialization license; technology transfers; and a material right to certain laboratory tests that the Company will bill at cost. The promises related to the development license, co-exclusive commercialization license, manufacturing license, and data license were considered functional intellectual property and determined to be distinct from the remaining promises in the Exact Sciences License Agreement. These licenses were delivered at the same time, therefore, they are considered one performance obligation at contract inception. The Company determined the transaction price under ASC 606 at the inception of the Exact License Agreement to be $143.4 million, consisting of the $75.0 million up front payment, $60.0 million reimbursement for development costs, and $8.4 million allocated to the Exact License Agreement from the proceeds received in the Exact Convertible Note. The reimbursement for development costs includes $20.0 million of variable consideration per year, that is expected to be paid by Exact over a three year period from the effective date of the contract. The Exact Convertible Note converted into 3,364,814 shares of the Company’s common stock on September 8, 2026 (see Note 8). The Exact License Agreement includes $700.0 million milestone payments, of which $100.0 million is payable upon FDA approval of the Company’s initial version of a Collaboration Product, $100.0 million is payable upon first-line FDA approval for the next-generation test contingent on meeting predefined performance benchmarks, and $500.0 million is payable if a Collaboration Product is rated as a first-line A or B test in the USPSTF guidelines or meets specified payer coverage requirements. The agreement provides for reductions to the applicable milestone payments if the performance benchmarks are not achieved or the Collaboration Product is rated as a second-line A or B test in the USPSTF guidelines. Because achievement depends on regulatory decisions and other conditions outside the Company’s and licensee’s control, the Company concluded that the milestones were not probable of achievement until the applicable approval, rating, or coverage condition occurred and constrained the related consideration. The Exact License Agreement also includes sales-based royalty payments, determined on a level of sales for which the license is deemed to be the predominant item to which the royalties relate. The Company will recognize revenue for these payments at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied. At contract inception, the Company allocated the transaction price to each performance obligation based on its relative SSP. The SSPs were estimated using an income approach based on discounted cash flows for the exclusive commercialization license; a replacement cost approach for the data, development, and manufacturing licenses; and a cost-plus margin approach for technology transfers, research and development services, and the material right for laboratory tests. For the latter items, estimates were based on expected costs and a market participant margin; for the material right, the estimate also considered the expected reimbursed cost of the laboratory tests. The Company recognizes revenue allocated to the intellectual property licenses and technology transfers at a point in time when control of the related performance obligations transfers to the customer. It recognizes revenue allocated to research and development services over time using a cost input method as the services are performed. It recognizes revenue allocated to the material right over time using an output method as the laboratory tests are performed, which the Company believes best depicts the transfer of control to the customer. During the three months ended September 30, 2026, FDA approval of the Company’s initial version of a Collaboration Product made the exclusive commercialization license effective and transferred control of the license to Exact, resolving the constraint on the related $100.0 million milestone. The Company therefore satisfied the related performance obligation, and the associated milestone payment was determined to no longer be constrained. This resulted in immediate revenue recognition of $157.5 million related to the exclusive commercialization license and $22.5 million cumulative catch up related to the intellectual property licenses that were transferred at contract inception and development cost reimbursements that are recognized over time. The $100.0 million was included in the transaction price during the period and allocated to all the performance obligations in the Exact Sciences License Agreement. During the three months ended September 30, 2026, the Company recognized revenue of $182.5 million under the Exact Sciences License Agreement. Of the $182.5 million recognized as revenue, $157.5 million related to the exclusive commercialization license, $22.5 million related to the cumulative catch-up adjustment, and $2.5 million related to research and development services provided during the three-month period. At each reporting date the Company reviews the total costs incurred to date and the total expected costs necessary to fulfill the development cost reimbursement performance obligation. The Company recognized $2.5 million of revenue for research and development services performed during the quarter using the cost input method as the services are performed. The following table summarizes the changes in deferred revenue (in millions):
(1) During the nine months ended September 30, 2026, the Company recognized $187.7 million of revenue and a contract asset of $11.4 million which the Company expects to bill in future periods as the contractual right to payment for collaboration services under the Exact Sciences License Agreement has not yet been raised. The contract asset was included as part of prepaid and other current assets on the condensed consolidated balance sheet. As of September 30, 2026, there was no deferred revenue under the agreement. As of September 30, 2026, the aggregate transaction price allocated to unsatisfied performance obligations under the Exact Sciences License Agreement was $28.6 million. The Company expects to recognize $21.7 million as it performs research and development services (over approximately two years), $6.1 million as it performs laboratory tests under the material right, and $0.7 million when it completes certain technology transfers. Service and Other Revenue The Company derives revenue from diagnostic and research services performed under a research and services agreement with Roche, and from the sale and distribution of tests and services through its U.K.-based subsidiary, Freenome Ltd. Revenue is recognized at a point in time when the Company satisfies its performance obligations by transferring the related goods or services to customers. The following table summarizes service and other revenue by type (in millions):
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