UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended September 30, 20182019

OR

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

For the transition period from          to          

Commission File Number 000-50513001-31938

 

ACORDA THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

13-3831168

(State or other jurisdiction of incorporation

or organization)

 

(I.R.S. Employer

Identification No.)

 

420 Saw Mill River Road, Ardsley, New York

 

10502

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (914) 347-4300

(Registrant’s telephone number,Securities registered pursuant to Section 12(b) of the Act:

including area code)

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock $0.001 par value

ACOR

Nasdaq Global Market

 

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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes      No  

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

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

Small reporting company

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding at October 31, 20182019

Common Stock, $0.001 par value

per share

 

47,558,33948,030,198 shares

 

 


 

ACORDA THERAPEUTICS, INC.

TABLE OF CONTENTS

 

 

 

Page

PART I—FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements

 

1

 

Consolidated Balance Sheets as of September 30, 20182019 (unaudited) and December 31, 20172018

 

1

 

Consolidated Statements of Operations (unaudited) for the Three and Nine-month Periods Ended September 30, 20182019 and 20172018

 

2

 

Consolidated Statements of Comprehensive (Loss) Income (Loss) (unaudited) for the Three and Nine-month Periods Ended September 30, 20182019 and 20172018

 

3

 

Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the Three and Nine-month Periods Ended September 30, 2019 and 2018

4

Consolidated Statements of Cash Flows (unaudited) for the Nine-month Periods Ended September 30, 20182019 and 20172018

 

46

 

Notes to Consolidated Financial Statements (unaudited)

 

57

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

 

36

Item 4.

Controls and Procedures

37

PART II—OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

37

Item 1A.

Risk Factors

37

Item 6.

Exhibits

 

38

Item 1A.

Risk Factors

39

Item 6.

Exhibits

46

Signatures

 

 

4739

 

 


 

This Quarterly Report on Form 10-Q contains forward‑looking statements relating to future events and our future performance within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Stockholders are cautioned that such statements involve risks and uncertainties, including: we may not be able to successfully market Inbrija or any other products under development; risks associated with complex, regulated manufacturing processes for pharmaceuticals, which could affect whether we have sufficient commercial supply of Inbrija to meet market demand; third party payers (including governmental agencies) may not reimburse for the use of Inbrija or our other products at acceptable rates or at all and may impose restrictive prior authorization requirements that limit or block prescriptions; competition for Inbrija, Ampyra and other products we may develop and market in the future, including increasing competition and accompanying loss of revenues in the U.S. from generic versions of Ampyra (dalfampridine) following our loss of patent exclusivity; the ability to realize the benefits anticipated from acquisitions, among other reasons because acquired development programs are generally subject to all the risks inherent in the drug development process and our knowledge of the risks specifically relevant to acquired programs generally improves over time; we may need to raise additional funds to finance our operations and may not be able to do so on acceptable terms; increasing competition and accompanying loss of revenues in the U.S. from generic versions of Ampyra (dalfampridine) following our loss of patent exclusivity; the risk of unfavorable results from future studies of Inbrija (levodopa inhalation powder) or from our other research and development programs, or any other acquired or in-licensed programs; we may not be able to complete development of, obtain regulatory approval for, or successfully market Inbrija or any other products under development; risks associated with complex, regulated manufacturing processes for pharmaceuticals, which could affect whether we have sufficient commercial supply of Inbrija to meet market demand, if it receives regulatory approval; third party payers (including governmental agencies) may not reimburse for the use of Ampyra, Inbrija or our other products at acceptable rates or at all and may impose restrictive prior authorization requirements that limit or block prescriptions; the occurrence of adverse safety events with our products; the outcome (by judgment or settlement) and costs of legal, administrative or regulatory proceedings, investigations or inspections, including, without limitation, collective, representative or class action litigation; competition;litigation; failure to protect our intellectual property, to defend against the intellectual property claims of others or to obtain third party intellectual property licenses needed for the commercialization of our products; and failure to comply with regulatory requirements could result in adverse action by regulatory agencies. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which we operate and management’s beliefs and assumptions. All statements, other than statements of historical facts, included in this report regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make, and investors should not place undue reliance on these statements. In addition to the risks and uncertainties described above, we have included important factors in the cautionary statements included in this report and in our Annual Report on Form 10-K as amended by Amendment No.1 on Form 10-K/A, for the year ended December 31, 2017,2018, particularly in the “Risk Factors” section (as updated by the disclosures in our subsequent quarterly reports, including this report), that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make. Forward-looking statements in this report are made only as of the date hereof, and we do not assume any obligation to publicly update any forward-looking statements as a result of developments occurring after the date of this report.

We and our subsidiaries own several registered trademarks in the U.S. and in other countries. These registered trademarks include, in the U.S., the marks “Acorda Therapeutics,” our stylized Acorda Therapeutics logo, “Biotie Therapies,” “Ampyra,” “Inbrija,” and “ARCUS.”  Also, our mark “Fampyra” is a registered mark in the European Community Trademark Office and we have registrations or pending applications for this mark in other jurisdictions. Our trademark portfolio also includes several registered trademarks and pending trademark applications (e.g., “Inbrija”) in the U.S. and worldwide for potential product names or for disease awareness activities. Third party trademarks, trade names, and service marks used in this report are the property of their respective owners.

 

 

 


 

PARTPART I

Item 1.  Financial Statements

ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

 

(In thousands, except share data)

 

September 30, 2018

 

 

December 31, 2017

 

 

September 30, 2019

 

 

December 31, 2018

 

 

(unaudited)

 

 

 

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

321,011

 

 

$

307,068

 

 

$

119,521

 

 

$

293,564

 

Restricted cash

 

 

365

 

 

 

410

 

 

 

387

 

 

 

532

 

Short term investments

 

 

139,935

 

 

 

 

 

 

133,636

 

 

 

151,989

 

Trade accounts receivable, net of allowances of $2,336 and $845, as of

September 30, 2018 and December 31, 2017, respectively

 

 

51,461

 

 

 

81,403

 

Trade accounts receivable, net of allowances of $886 and $2,681, as of

September 30, 2019 and December 31, 2018, respectively

 

 

17,553

 

 

 

23,430

 

Prepaid expenses

 

 

16,221

 

 

 

13,333

 

 

 

11,839

 

 

 

19,384

 

Finished goods inventory held by the Company

 

 

10,800

 

 

 

37,501

 

Inventory, net

 

 

27,396

 

 

 

29,014

 

Other current assets

 

 

6,802

 

 

 

1,983

 

 

 

4,005

 

 

 

10,194

 

Total current assets

 

 

546,595

 

 

 

441,698

 

 

 

314,337

 

 

 

528,107

 

Property and equipment, net of accumulated depreciation

 

 

52,061

 

 

 

36,669

 

 

 

130,585

 

 

 

60,519

 

Goodwill

 

 

283,435

 

 

 

286,611

 

 

 

 

 

 

282,059

 

Intangible assets, net of accumulated amortization

 

 

428,575

 

 

 

430,603

 

 

 

410,023

 

 

 

428,570

 

Non-current portion of deferred cost of license revenue

 

 

 

 

 

1,638

 

Right of use assets

 

 

24,675

 

 

 

 

Other assets

 

 

419

 

 

 

750

 

 

 

293

 

 

 

411

 

Total assets

 

$

1,311,085

 

 

$

1,197,969

 

 

$

879,913

 

 

$

1,299,666

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

29,554

 

 

$

27,367

 

 

$

26,777

 

 

$

48,859

 

Accrued expenses and other current liabilities

 

 

97,816

 

 

 

100,128

 

 

 

43,235

 

 

 

76,882

 

Current portion of deferred license revenue

 

 

 

 

 

9,057

 

Current portion of acquired contingent consideration

 

 

3,887

 

 

 

4,914

 

Current portion of lease liabilities

 

 

7,696

 

 

 

 

Current portion of loans payable

 

 

624

 

 

 

645

 

 

 

587

 

 

 

616

 

Current portion of liability related to sale of future royalties

 

 

7,714

 

 

 

6,763

 

 

 

9,811

 

 

 

8,985

 

Total current liabilities

 

 

135,708

 

 

 

143,960

 

 

 

91,993

 

 

 

140,256

 

Convertible senior notes (due 2021)

 

 

316,160

 

 

 

308,805

 

 

 

326,381

 

 

 

318,670

 

Non-current portion of acquired contingent consideration

 

 

131,229

 

 

 

112,722

 

 

 

107,313

 

 

 

163,086

 

Non-current portion of deferred license revenue

 

 

 

 

 

23,398

 

Non-current portion of lease liabilities

 

 

24,393

 

 

 

 

Non-current portion of loans payable

 

 

24,673

 

 

 

25,670

 

 

 

24,518

 

 

 

24,470

 

Deferred tax liability

 

 

70,656

 

 

 

22,459

 

 

 

2,804

 

 

 

7,483

 

Non-current portion of liability related to sale of future royalties

 

 

24,251

 

 

 

29,025

 

 

 

16,437

 

 

 

21,731

 

Other non-current liabilities

 

 

9,783

 

 

 

11,943

 

 

 

4,732

 

 

 

11,987

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value. Authorized 20,000,000 shares at September 30,

2018 and December 31, 2017; no shares issued as of September 30,

2018 and December 31, 2017, respectively

 

 

 

 

 

 

Common stock, $0.001 par value. Authorized 80,000,000 shares at September 30,

2018 and December 31, 2017; issued 47,310,300 and 46,441,428 shares,

including those held in treasury, as of September 30, 2018 and

December 31, 2017, respectively

 

 

47

 

 

 

46

 

Treasury stock at cost (79,275 shares at September 30, 2018 and 16,151 shares

at December 31, 2017)

 

 

(1,976

)

 

 

(389

)

Preferred stock, $0.001 par value. Authorized 20,000,000 shares at September 30,

2019 and December 31, 2018; 0 shares issued as of September 30,

2019 and December 31, 2018, respectively

 

 

 

 

 

 

Common stock, $0.001 par value. Authorized 80,000,000 shares at September 30,

2019 and December 31, 2018; issued 47,539,910 and 47,508,505 shares,

including those held in treasury, as of September 30, 2019 and

December 31, 2018, respectively

 

 

48

 

 

 

48

 

Treasury stock at cost (29,304 shares at September 30, 2019 and 87,737 shares

at December 31, 2018)

 

 

(638

)

 

 

(2,133

)

Additional paid-in capital

 

 

999,880

 

 

 

968,580

 

 

 

1,015,037

 

 

 

1,005,105

 

Accumulated deficit

 

 

(403,439

)

 

 

(455,108

)

 

 

(732,469

)

 

 

(393,843

)

Accumulated other comprehensive income

 

 

4,113

 

 

 

6,858

 

Accumulated other comprehensive (loss) income

 

 

(636

)

 

 

2,806

 

Total stockholders’ equity

 

 

598,625

 

 

 

519,987

 

 

 

281,342

 

 

 

611,983

 

Total liabilities and stockholders’ equity

 

$

1,311,085

 

 

$

1,197,969

 

 

$

879,913

 

 

$

1,299,666

 

 

 

See accompanying Unaudited Notes to Consolidated Financial Statements


ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(unaudited)

 

(In thousands, except per share data)

 

Three-month period ended September 30, 2018

 

 

Three-month period ended September 30, 2017

 

 

Nine-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2017

 

 

Three-month period ended September 30, 2019

 

 

Three-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2019

 

 

Nine-month period ended September 30, 2018

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net product revenues

 

$

139,973

 

 

$

134,357

 

 

$

393,388

 

 

$

379,705

 

 

$

44,800

 

 

$

139,973

 

 

$

133,325

 

 

$

393,388

 

Royalty revenues

 

 

2,841

 

 

 

4,444

 

 

 

8,893

 

 

 

13,391

 

 

 

2,922

 

 

 

2,841

 

 

 

8,586

 

 

 

8,893

 

License revenue

 

 

 

 

 

2,264

 

 

 

 

 

 

6,793

 

Total net revenues

 

 

142,814

 

 

 

141,065

 

 

 

402,281

 

 

 

399,889

 

 

 

47,722

 

 

 

142,814

 

 

 

141,911

 

 

 

402,281

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

25,391

 

 

 

29,992

 

 

 

77,834

 

 

 

84,840

 

 

 

7,986

 

 

 

25,152

 

 

 

26,183

 

 

 

76,164

 

Cost of license revenue

 

 

 

 

 

159

 

 

 

 

 

 

476

 

Research and development

 

 

22,855

 

 

 

33,286

 

 

 

79,325

 

 

 

130,963

 

 

 

16,073

 

 

 

22,855

 

 

 

51,060

 

 

 

79,325

 

Selling, general and administrative

 

 

43,571

 

 

 

40,741

 

 

 

135,435

 

 

 

142,100

 

 

 

48,702

 

 

 

43,571

 

 

 

151,622

 

 

 

135,435

 

Asset impairment

 

 

 

 

 

39,446

 

 

 

 

 

 

39,446

 

Goodwill impairment

 

 

277,561

 

 

 

 

 

 

277,561

 

 

 

 

Amortization of intangible assets

 

 

7,692

 

 

 

239

 

 

 

17,945

 

 

 

1,670

 

Changes in fair value of acquired contingent consideration

 

 

22,700

 

 

 

(400

)

 

 

21,900

 

 

 

16,800

 

 

 

(50,942

)

 

 

22,700

 

 

 

(56,342

)

 

 

21,900

 

Total operating expenses

 

 

114,517

 

 

 

143,224

 

 

 

314,494

 

 

 

414,625

 

 

 

307,072

 

 

 

114,517

 

 

 

468,029

 

 

 

314,494

 

Operating income (loss)

 

 

28,297

 

 

 

(2,159

)

 

 

87,787

 

 

 

(14,736

)

Operating (loss) income

 

 

(259,350

)

 

 

28,297

 

 

 

(326,118

)

 

 

87,787

 

Other (expense) income, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and amortization of debt discount expense

 

 

(5,415

)

 

 

(4,180

)

 

 

(16,326

)

 

 

(13,783

)

 

 

(4,500

)

 

 

(5,415

)

 

 

(16,302

)

 

 

(16,326

)

Interest income

 

 

1,176

 

 

 

30

 

 

 

2,412

 

 

 

103

 

 

 

333

 

 

 

1,176

 

 

 

3,327

 

 

 

2,412

 

Realized loss on foreign currency transactions

 

 

(1

)

 

 

(18

)

 

 

(8

)

 

 

(458

)

 

 

(1

)

 

 

(1

)

 

 

(17

)

 

 

(8

)

Other income

 

 

 

 

 

 

 

 

24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24

 

Total other expense, net

 

 

(4,240

)

 

 

(4,168

)

 

 

(13,898

)

 

 

(14,138

)

 

 

(4,168

)

 

 

(4,240

)

 

 

(12,992

)

 

 

(13,898

)

Income (loss) before taxes

 

 

24,057

 

 

 

(6,327

)

 

 

73,889

 

 

 

(28,874

)

Provision for income taxes

 

 

(37,968

)

 

 

(18,868

)

 

 

(49,802

)

 

 

(23,421

)

(Loss) income before taxes

 

 

(263,518

)

 

 

24,057

 

 

 

(339,110

)

 

 

73,889

 

Benefit from (Provision for) income taxes

 

 

(17

)

 

 

(37,968

)

 

 

484

 

 

 

(49,802

)

Net (loss) income

 

$

(13,911

)

 

$

(25,195

)

 

$

24,087

 

 

$

(52,295

)

 

$

(263,535

)

 

$

(13,911

)

 

$

(338,626

)

 

$

24,087

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share—basic

 

$

(0.29

)

 

$

(0.55

)

 

$

0.51

 

 

$

(1.14

)

 

$

(5.55

)

 

$

(0.29

)

 

$

(7.13

)

 

$

0.51

 

Net (loss) income per share—diluted

 

$

(0.29

)

 

$

(0.55

)

 

$

0.51

 

 

$

(1.14

)

 

$

(5.55

)

 

$

(0.29

)

 

$

(7.13

)

 

$

0.51

 

Weighted average common shares outstanding used in

computing net (loss) income per share—basic

 

 

47,184

 

 

 

46,002

 

 

 

46,840

 

 

 

45,918

 

 

 

47,511

 

 

 

47,184

 

 

 

47,491

 

 

 

46,840

 

Weighted average common shares outstanding used in

computing net (loss) income per share—diluted

 

 

47,184

 

 

 

46,002

 

 

 

47,251

 

 

 

45,918

 

 

 

47,511

 

 

 

47,184

 

 

 

47,491

 

 

 

47,251

 

 

See accompanying Unaudited Notes to Consolidated Financial Statements


ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive (Loss) Income (Loss)

(unaudited)

 

(In thousands)

 

Three-month period ended September 30, 2018

 

 

Three-month period ended September 30, 2017

 

 

Nine-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2017

 

 

Three-month period ended September 30, 2019

 

 

Three-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2019

 

 

Nine-month period ended September 30, 2018

 

Net (loss) income

 

$

(13,911

)

 

$

(25,195

)

 

$

24,087

 

 

$

(52,295

)

 

$

(263,535

)

 

$

(13,911

)

 

$

(338,626

)

 

$

24,087

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(721

)

 

 

7,266

 

 

 

(2,703

)

 

 

19,838

 

 

 

(3,190

)

 

 

(721

)

 

 

(3,671

)

 

 

(2,703

)

Unrealized income (loss) on available for sale debt securities

 

 

35

 

 

 

 

 

(42

)

 

 

 

Other comprehensive (loss) income, net of tax

 

 

(686

)

 

 

7,266

 

 

 

(2,745

)

 

 

19,838

 

Unrealized (loss) income on available for sale debt securities

 

 

(63

)

 

 

35

 

 

 

229

 

 

 

(42

)

Other comprehensive loss, net of tax

 

 

(3,253

)

 

 

(686

)

 

 

(3,442

)

 

 

(2,745

)

Comprehensive (loss) income

 

$

(14,597

)

 

$

(17,929

)

 

$

21,342

 

 

$

(32,457

)

 

$

(266,788

)

 

$

(14,597

)

 

$

(342,068

)

 

$

21,342

 

 

See accompanying Unaudited Notes to Consolidated Financial Statements


ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash FlowsChanges in Stockholders’ Equity

(unaudited)

 

(In thousands)

 

Nine-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2017

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

24,087

 

 

$

(52,295

)

Adjustments to reconcile net income (loss) to net cash provided by

   operating activities:

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

16,246

 

 

 

25,264

 

Amortization of net premiums and discounts on investments

 

 

(807

)

 

 

Amortization of debt discount and debt issuance costs

 

 

11,917

 

 

 

8,918

 

Depreciation and amortization expense

 

 

9,118

 

 

 

17,484

 

Change in acquired contingent consideration obligation

 

 

21,900

 

 

 

16,800

 

Unrealized foreign currency transaction loss

 

 

 

 

 

247

 

Intangible asset impairment

 

 

 

 

 

39,446

 

Non-cash royalty revenue

 

 

(7,826

)

 

 

 

Deferred tax provision

 

 

42,565

 

 

 

16,746

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Decrease (increase)  in accounts receivable

 

 

29,942

 

 

 

(1,505

)

(Increase) decrease in prepaid expenses and other current assets

 

 

(5,319

)

 

 

1,614

 

Decrease in inventory

 

 

26,701

 

 

 

3,266

 

Decrease in non-current portion of deferred cost of license revenue

 

 

 

 

 

476

 

Decrease (increase) in other assets

 

 

25

 

 

 

(3,610

)

Decrease in accounts payable, accrued expenses and other current

   liabilities

 

 

(5,508

)

 

 

(29,557

)

Decrease in non-current portion of deferred license revenue

 

 

 

 

 

(6,793

)

Increase in other non-current liabilities

 

 

90

 

 

 

102

 

Net cash provided by operating activities

 

 

163,131

 

 

 

36,603

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(22,548

)

 

 

(10,370

)

Purchases of intangible assets

 

 

(375

)

 

 

(294

)

Purchases of investments

 

 

(191,652

)

 

 

Proceeds from maturities of investments

 

 

52,539

 

 

 

 

Net cash used in investing activities

 

 

(162,036

)

 

 

(10,664

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock and option exercises

 

 

14,978

 

 

 

7,001

 

Refund of deposit for purchase of noncontrolling interest

 

 

 

 

 

2,722

 

Purchase of treasury stock

 

 

(1,587

)

 

 

(60

)

Repayment of loans payable

 

 

(656

)

 

 

(2,409

)

Net cash provided by financing activities

 

 

12,735

 

 

 

7,254

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(238

)

 

 

1,060

 

Net increase in cash, cash equivalents and restricted cash

 

 

13,592

 

 

 

34,253

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

308,039

 

 

 

158,871

 

Cash, cash equivalents and restricted cash at end of period

 

$

321,631

 

 

$

193,124

 

Supplemental disclosure:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

3,045

 

 

$

3,047

 

Cash paid for taxes

 

 

16,665

 

 

 

11,363

 

 

 

Common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

Number

of

shares

 

 

Par

value

 

 

Treasury stock

 

 

Additional

paid-in

capital

 

 

Accumulated

deficit

 

 

Accumulated

other

comprehensive

income

 

 

Total

stockholders

equity

 

Balance at December 31, 2018

 

 

47,508

 

 

$

48

 

 

$

(2,133

)

 

$

1,005,105

 

 

$

(393,843

)

 

$

2,806

 

 

$

611,983

 

Compensation expense for

   issuance of stock options

   to employees

 

 

 

 

 

 

 

 

 

 

 

2,745

 

 

 

 

 

 

 

 

 

2,745

 

Compensation expense for

   issuance of restricted

   stock to employees

 

 

49

 

 

 

 

 

 

 

 

 

922

 

 

 

 

 

 

 

 

 

922

 

Exercise of stock options

 

 

2

 

 

 

 

 

 

 

 

 

24

 

 

 

 

 

 

 

 

 

24

 

Purchase of Treasury Stock

 

 

4

 

 

 

 

 

 

(52

)

 

 

 

 

 

 

 

 

 

 

 

(52

)

Other comprehensive loss,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,431

)

 

 

(1,431

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(47,605

)

 

 

 

 

 

(47,605

)

Balance at March 31, 2019

 

 

47,563

 

 

$

48

 

 

$

(2,185

)

 

$

1,008,796

 

 

$

(441,448

)

 

$

1,375

 

 

$

566,586

 

Compensation expense for

   issuance of stock options

   to employees

 

 

 

 

 

 

 

 

 

 

 

3,180

 

 

 

 

 

 

 

 

 

3,180

 

Compensation expense for

   issuance of restricted

   stock to employees

 

34

 

 

 

 

 

 

 

 

 

1,354

 

 

 

 

 

 

 

 

 

1,354

 

Adjustments to Treasury Stock

 

 

(65

)

 

 

 

 

 

1,586

 

 

 

(1,586

)

 

 

 

 

 

 

 

 

 

Purchase of Treasury Stock

 

 

3

 

 

 

 

 

 

(39

)

 

 

 

 

 

 

 

 

 

 

 

(39

)

Other comprehensive income,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,242

 

 

 

1,242

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,486

)

 

 

 

 

 

(27,486

)

Balance at June 30, 2019

 

 

47,535

 

 

$

48

 

 

$

(638

)

 

$

1,011,744

 

 

$

(468,934

)

 

$

2,617

 

 

$

544,837

 

Compensation expense for

   issuance of stock options

   to employees

 

 

 

 

 

 

 

 

 

 

 

2,057

 

 

 

 

 

 

 

 

 

2,057

 

Compensation expense for

   issuance of restricted

   stock to employees

 

 

5

 

 

 

 

 

 

 

 

 

1,236

 

 

 

 

 

 

 

 

 

1,236

 

Other comprehensive loss,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,253

)

 

 

(3,253

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(263,535

)

 

 

 

 

 

(263,535

)

Balance at September 30, 2019

 

 

47,540

 

 

$

48

 

 

$

(638

)

 

$

1,015,037

 

 

$

(732,469

)

 

$

(636

)

 

$

281,342

 

See accompanying Unaudited Notes to Consolidated Financial Statements


ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity (Continued)

(unaudited)

 

 

Common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

Number

of

shares

 

 

Par

value

 

 

Treasury stock

 

 

Additional

paid-in

capital

 

 

Accumulated

deficit

 

 

Accumulated

other

comprehensive

income

 

 

Total

stockholders

equity

 

Balance at December 31, 2017

 

 

46,441

 

 

$

46

 

 

$

(389

)

 

$

968,580

 

 

$

(455,108

)

 

$

6,858

 

 

$

519,987

 

Adjustment to accumulated deficit

   (pursuant to adoption of

   ASU 2014-09)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27,582

 

 

 

 

 

 

27,582

 

Compensation expense for

   issuance of stock options

   to employees

 

 

 

 

 

 

 

 

 

 

 

4,095

 

 

 

 

 

 

 

 

 

4,095

 

Compensation expense for

   issuance of restricted

   stock to employees

 

 

100

 

 

 

 

 

 

 

 

 

1,840

 

 

 

 

 

 

 

 

 

1,840

 

Exercise of stock options

 

 

137

 

 

 

1

 

 

 

 

 

 

 

3,366

 

 

 

 

 

 

 

 

 

3,367

 

Purchase of Treasury Stock

 

 

47

 

 

 

 

 

 

 

(1,202

)

 

 

 

 

 

 

 

 

 

 

 

(1,202

)

Other comprehensive income,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,455

 

 

 

2,455

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,199

)

 

 

 

 

 

(8,199

)

Balance at March 31, 2018

 

 

46,725

 

 

$

47

 

 

$

(1,591

)

 

$

977,881

 

 

$

(435,725

)

 

$

9,313

 

 

$

549,925

 

Compensation expense for

   issuance of stock options

   to employees

 

 

 

 

 

 

 

 

 

 

 

3,797

 

 

 

 

 

 

 

 

 

3,797

 

Compensation expense for

   issuance of restricted

   stock to employees

 

16

 

 

 

 

 

 

 

 

 

1,457

 

 

 

 

 

 

 

 

 

1,457

 

Exercise of stock options

 

458

 

 

 

 

 

 

 

 

 

10,157

 

 

 

 

 

 

 

 

 

10,157

 

Purchase of Treasury Stock

 

 

24

 

 

 

 

 

 

(385

)

 

 

 

 

 

 

 

 

 

 

 

(385

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,514

)

 

 

(4,514

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46,197

 

 

 

 

 

 

46,197

 

Balance at June 30, 2018

 

 

47,223

 

 

$

47

 

 

$

(1,976

)

 

$

993,292

 

 

$

(389,528

)

 

$

4,799

 

 

$

606,634

 

Compensation expense for

   issuance of stock options

   to employees

 

 

 

 

 

 

 

 

 

 

 

3,866

 

 

 

 

 

 

 

 

 

3,866

 

Compensation expense for

   issuance of restricted

   stock to employees

 

 

5

 

 

 

 

 

 

 

 

 

1,269

 

 

 

 

 

 

 

 

 

1,269

 

Exercise of stock options

 

 

82

 

 

 

 

 

 

 

 

 

1,454

 

 

 

 

 

 

 

 

 

1,454

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(686

)

 

 

(686

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,911

)

 

 

 

 

 

(13,911

)

Balance at September 30, 2018

 

 

47,310

 

 

$

47

 

 

$

(1,976

)

 

$

999,880

 

 

$

(403,439

)

 

$

4,113

 

 

$

598,625

 

 

See accompanying Unaudited Notes to Consolidated Financial Statements


ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(unaudited)

(In thousands)

 

Nine-month period ended September 30, 2019

 

 

Nine-month period ended September 30, 2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(338,626

)

 

$

24,087

 

Adjustments to reconcile (net loss) income to net cash (used in) provided by

   operating activities:

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

11,494

 

 

 

16,246

 

Amortization of net premiums and discounts on investments

 

 

(1,325

)

 

 

(807

)

Amortization of debt discount and debt issuance costs

 

 

12,202

 

 

 

11,917

 

Depreciation and amortization expense

 

 

24,697

 

 

 

9,118

 

Goodwill impairment

 

 

277,561

 

 

 

 

Change in acquired contingent consideration obligation

 

 

(56,342

)

 

 

21,900

 

Non-cash royalty revenue

 

 

(7,556

)

 

 

(7,826

)

Deferred tax (benefit) provision

 

 

(3,667

)

 

 

42,565

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Decrease in accounts receivable

 

 

5,877

 

 

 

29,942

 

Decrease (increase) in prepaid expenses and other current assets

 

 

13,725

 

 

 

(5,319

)

Decrease in inventory

 

 

1,619

 

 

 

26,701

 

Decrease in other assets

 

 

 

 

 

25

 

Decrease in accounts payable, accrued expenses and other current

   liabilities

 

 

(56,141

)

 

 

(5,508

)

(Decrease) increase in other non-current liabilities

 

 

(256

)

 

 

90

 

Net cash (used in) provided by operating activities

 

 

(116,738

)

 

 

163,131

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(76,414

)

 

 

(22,548

)

Purchases of intangible assets

 

 

 

 

 

(375

)

Purchases of investments

 

 

(171,431

)

 

 

(191,652

)

Proceeds from maturities of investments

 

 

191,342

 

 

 

52,539

 

Net cash used in investing activities

 

 

(56,503

)

 

 

(162,036

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock and option exercises

 

 

24

 

 

 

14,978

 

Purchase of treasury stock

 

 

(91

)

 

 

(1,587

)

Repayment of loans payable

 

 

(614

)

 

 

(656

)

Net cash (used in) provided by financing activities

 

 

(681

)

 

 

12,735

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(265

)

 

 

(238

)

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(174,187

)

 

 

13,592

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

294,351

 

 

 

308,039

 

Cash, cash equivalents and restricted cash at end of period

 

$

120,164

 

 

$

321,631

 

Supplemental disclosure:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

3,037

 

 

$

3,045

 

Cash paid for taxes

 

 

2,562

 

 

 

16,665

 

See accompanying Unaudited Notes to Consolidated Financial Statements


ACORDA THERAPEUTICS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(unaudited)

(1) Organization and Business Activities

Acorda Therapeutics, Inc. (“Acorda” or the “Company”) is a biopharmaceutical company focused on developing therapies that restore function and improve the lives of people with neurological disorders.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information, Accounting Standards Codification (ASC) Topic 270-10 and with the instructions to Form 10-Q. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In management’s opinion, all adjustments considered necessary for a fair presentation have been included in the interim periods presented and all adjustments are of a normal recurring nature. The Company has evaluated subsequent events through the date of this filing. Operating results for the three and nine-month periods ended September 30, 20182019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.2019. When used in these notes, the terms “Acorda” or “the Company” mean Acorda Therapeutics, Inc. The December 31, 20172018 consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. You should read these unaudited interim condensed consolidated financial statements in conjunction with the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K, as amended by Amendment No. 1 on Form 10-K/A, for the year ended December 31, 2017.2018.

Certain reclassifications were made to prior period amounts in the consolidated financial statements and accompanying notes to conform withto the current year presentation due to the adoption of ASU 2016-18 “Statement of Cash Flows” and Topic 230: Restricted Cash. See Note 2.presentation.

(2) Summary of Significant Accounting Policies

Our criticalsignificant accounting policies are detailed in our Annual Report on Form 10-K as amended by Amendment No. 1 on Form 10-K/A, for the year ended December 31, 2017.2018. Effective January 1, 2018,2019, the Company adopted ASU 2014-09, 2016-02, Revenue from Contracts with Customers”Leases” (Topic 606)842), ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”2018-05, “Income Taxes” (Topic 740),ASU 2016-15 2018-09,Statement of Cash Flows” (Topic 230): Classification of Certain Cash Receipts and Cash Payments, ASU 2016-18 “Statement of Cash Flows” (Topic 230): Restricted Cash, ASU 2017-01, “Business Combinations” (Topic 805): Clarifying the Definition of a Business,Codification Improvements” and ASU 2017-09, “Compensation2018-02, “Income Statement—Reporting Comprehensive Income” (Topic 220). Effective April 1, 2019, the Company adopted ASU 2017-04, “IntangiblesStock Compensation”Goodwill and Other” (Topic 718): Scope of Modification Accounting and ASU 2017-01350). Other than the adoption of the new accounting guidance, our criticalsignificant accounting policies have not changed materially from December 31, 2017.2018.

Revenue RecognitionRestricted Cash

On January 1, 2018, we adoptedThe following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the new accounting standard ASC 606, “Revenue from Contracts with Customers” (Topic 606) (“ASC 606”) andstatement of financial position that sum to the related amendments to all contracts with customers that were not completed astotal of the datesame amounts shown in the statement of adoption using the modified retrospective method. ASC 606 supersedes prior revenue guidance under ASC 605 “Revenue Recognition” (“ASC 605”) and requires entities to recognize revenue to depict the transfer of promised goods or services to customers at an amount that reflects the consideration to which the entity expectscash flows:

 

Nine-month period ended September 30, 2019

 

 

Nine-month period ended September 30, 2018

 

(In thousands)

Beginning of period

 

 

End of period

 

 

Beginning of period

 

 

End of period

 

Cash and cash equivalents

$

293,564

 

 

$

119,521

 

 

$

307,068

 

 

$

321,011

 

Restricted cash

 

532

 

 

 

387

 

 

 

410

 

 

 

365

 

Restricted cash included in Other assets

 

255

 

 

 

256

 

 

 

561

 

 

 

255

 

Total Cash, cash equivalents and restricted cash per statement of cash flows

$

294,351

 

 

$

120,164

 

 

$

308,039

 

 

$

321,631

 

Amounts included in restricted cash represent those amounts required to be entitled in exchange for those goods or services. The Company completed its assessment of the new guidance and evaluated the new requirements as appliedset aside to its existing revenue contracts not completed as of the date of initial application. As a result of the assessment, with the exception of the changes to our recognition of license revenue as further described below, the Company determined that adoption of the new standard did not have a significant impact on its revenue recognition methodology. In accordance with ASC 606, the Company recognizes revenue when the customer obtains control of a promised good or service, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for the good or service.

The Company determined that the revenue recognition methodology for the deferred license revenue changed as a result of the adoption of ASC 606. License revenue recorded by the Company prior to January 1, 2018 related exclusively to the recognition of the upfront payment received from Biogen upon the execution of the License and Collaboration agreement


that granted Biogen an exclusive non sub-licensable license to sell Fampyra outside of the U.S. License revenue recorded prior to January 1, 2018 was recognized under ASC 605 on a pro rata basis ascover the Company’s self-funded employee health insurance. Restricted cash included in other assets on the statement of financial position relates to cash collateralized standby letters of credit in connection with obligations were satisfied throughout the duration of the license and collaboration agreement. As of January 1, 2018, the Company adopted ASC 606under facility leases, which changed the Company’s determination of its distinct performance obligations resultingis included with other assets in an acceleration of the recognition of the revenue in the arrangement. The material performance obligations were completed prior to January 1, 2018, and as a result, the Company recognized its previously deferred revenue as a cumulative effect adjustment of $27.6 million within the accumulated deficit on the consolidated balance sheet asdue to the long-term nature of January 1, 2018.the letters of credit.


Inventory

The cumulative effectmajor classes of applying ASC 606 to the company’s consolidated balance sheet wasinventory were as follows:

(In thousands)

Balance as of December 31, 2017

 

Net Adjustments

 

Balance as of

January 1, 2018

 

Assets

 

 

 

 

 

 

 

 

 

Other current assets

$

1,983

 

$

(634

)

$

1,349

 

Non-current portion of deferred cost of license revenue

 

1,638

 

 

(1,638

)

 

 

    Total Assets

$

1,197,969

 

$

(2,272

)

$

1,195,697

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

Current portion of deferred license revenue

$

9,057

 

$

(9,057

)

$

 

Non-current portion of deferred license revenue

 

23,398

 

 

(23,398

)

 

 

Deferred tax liability

 

22,459

 

 

2,600

 

 

25,059

 

Accumulated deficit

 

(455,108

)

 

27,583

 

 

(427,525

)

    Total liabilities and stockholders' equity

$

1,197,969

 

$

(2,272

)

$

1,195,697

 

(In thousands)

 

September 30, 2019

 

 

December 31, 2018

 

Raw materials

 

$

996

 

 

$

 

Work-in-progress

 

 

15,561

 

 

 

 

Finished goods

 

 

10,839

 

 

 

29,014

 

Total

 

$

27,396

 

 

$

29,014

 

The impact of the adoption of ASC 606 on the Company’s consolidated balance sheet as of September 30, 2018 was as follows:

(In thousands)

Balance as of

September 30, 2018

Prior to Adoption

of ASC 606

 

Net Adjustments

 

Balance as of

September 30, 2018

as Reported

Under ASC 606

 

Assets

 

 

 

 

 

 

 

 

 

Other current assets

$

7,436

 

$

(634

)

$

6,802

 

Non-current portion of deferred cost of license revenue

 

1,161

 

 

(1,161

)

 

 

    Total Assets

$

1,312,880

 

$

(1,795

)

$

1,311,085

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

Current portion of deferred license revenue

$

9,057

 

$

(9,057

)

$

 

Non-current portion of deferred license revenue

 

16,606

 

 

(16,606

)

 

 

Deferred tax liability

 

68,056

 

 

2,600

 

 

70,656

 

Accumulated deficit

 

(424,707

)

 

21,268

 

 

(403,439

)

    Total liabilities and stockholders' equity

$

1,312,880

 

$

(1,795

)

$

1,311,085

 


The impact of the adoption of ASC 606 on the Company’s consolidated statement of operations for the three-month period ended September 30, 2018 was as follows:

(In thousands)

Three-Month Period Ended September 30, 2018 Balance Prior to Adoption of ASC 606

 

Effect of Change

 

Three-Month Period Ended September 30, 2018 Balance as Reported Under ASC 606

 

License revenue

$

2,264

 

$

(2,264

)

$

 

Cost of license revenue

 

159

 

 

(159

)

 

 

Operating income (loss)

$

30,402

 

$

(2,105

)

$

28,297

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

$

(11,806

)

$

(2,105

)

$

(13,911

)

Net (loss) income per share—basic

$

(0.25

)

$

(0.04

)

$

(0.29

)

Net (loss) income per share—diluted

$

(0.25

)

$

(0.04

)

$

(0.29

)

The impact of the adoption of ASC 606 on the Company’s consolidated statement of operations for the nine-month period ended September 30, 2018 was as follows:

(In thousands)

Nine-Month Period

Ended September 30, 2018

Balance Prior to

Adoption of ASC 606

 

Effect of Change

 

Nine-Month Period

Ended September 30, 2018

Balance as Reported

Under ASC 606

 

License revenue

$

6,792

 

$

(6,792

)

$

 

Cost of license revenue

 

477

 

 

(477

)

 

 

Operating income (loss)

$

94,102

 

$

(6,315

)

$

87,787

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

30,402

 

$

(6,315

)

$

24,087

 

Net income (loss) per share—basic

$

0.65

 

$

(0.14

)

$

0.51

 

Net income (loss) per share—diluted

$

0.64

 

$

(0.13

)

$

0.51

 

 

 

 

 

 

 

 

 

 

 

ASC 606 did not have an aggregate impact on the Company’s net cash provided by operating activities.

ASC 606 outlines a five-step process for recognizing revenue from contracts with customers: i) identify the contract with the customer, ii) identify the performance obligations in the contract, (iii) determine the transaction price, iv) allocate the transaction price to the separate performance obligations in the contract, and (v) recognize revenue associated with the performance obligations as they are satisfied.

The Company only appliesreviews inventory, including inventory purchase commitments, for slow moving or obsolete amounts based on expected product sales volume and provides reserves against the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606, the Company determines the performance obligations that are distinct. The Company recognizes as revenues thecarrying amount of the transaction price that is allocated to each respective performance obligation when the performance obligation is satisfied orinventory as it is satisfied. Generally, the Company's performance obligations are transferred to customers at a point in time, typically upon receipt of the product by the customer.appropriate.

ASC 606 requires entities to record a contract asset when a performance obligation has been satisfied or partially satisfied, but the amount of consideration has not yet been received because the receipt of the consideration is conditioned on something other than the passage of time. ASC 606 also requires an entity to present a revenue contract as a contract liability in instances when a customer pays consideration, or an entity has a right to an amount of consideration that is unconditional (e.g. receivable), before the entity transfers a good or service to the customer.

We currently do not have any contract assets. We recognize contract liabilities when a customer pays an upfront deposit upon contract execution for future obligations to be performed by us. As of September 30, 2018, we had a contract liability in the amount of $5.5 million which reflects an upfront deposit paid by a customer upon contract execution for future obligations to be performed by us. The amount is currently reported in accrued expenses and other current liabilities in the Balance Sheet. If the contract is canceled, these upfront deposits are refundable only if certain obligations have not been performed by us. We did not have any contract liability as of December 31, 2017.


Product Revenue, Net

 Net revenue from product sales is recognized at the transaction price when the customer obtains control of the Company’s products, which occurs at a point in time, typically upon receipt of the product by the customer. The Company’s products are sold primarily to a network of specialty providers which are contractually obligated to hold no more than an agreed upon number of days of inventory. The Company’s payment terms are between 30 to 35 days.

The Company’s net revenues represent total revenues adjusted for discounts and allowances, including estimated cash discounts, chargebacks, rebates, returns, copay assistance, data fees and wholesaler fees for services. These adjustments represent variable consideration under ASC 606 and are recorded for the Company’s estimate of cash consideration expected to be given by the Company to a customer that is presumed to be a reduction of the transaction price of the Company’s products and, therefore, are characterized as a reduction of revenue. These adjustments are established by management as its best estimate based on available information and will be adjusted to reflect known changes in the factors that impact such allowances. Adjustments for variable consideration are determined based on the contractual terms with customers, historical trends, communications with customers and the levels of inventory remaining in the distribution channel, as well as expectations about the market for the product and anticipated introduction of competitive products.

Discounts and Allowances

Revenue from product sales are recorded at the transaction price, which includes estimates for discounts and allowances for which reserves are established and includes cash discounts, chargebacks, rebates, returns, copay assistance, data fees and wholesaler fees for services. Actual discounts and allowances are recorded following shipment of product and the appropriate reserves are credited. These reserves are classified as reductions of accounts receivable (if the amount is payable to the Customer and right of offset exists) or a current liability (if the amount is payable to a party other than a Customer). These allowances are established by management as its best estimate based on historical experience and data points available and are adjusted to reflect known changes in the factors that impact such reserves. Allowances for customer credits, chargebacks, rebates, data fees and wholesaler fees for services, returns, and discounts are established based on contractual terms with customers and analyses of historical usage of these items. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.The nature of our allowances and accruals requiring critical estimates, and the specific considerations it uses in estimating their amounts are as follows:

Government Chargebacks and Rebates: We contract for Medicaid and other U.S. Federal government programs to allow for our products to remain eligible for reimbursement under these programs. For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom the Company will owe an additional liability under the Medicare Part D program. Based upon our contracts and the most recent experience with respect to sales through each of these channels, we provide an allowance for chargebacks and rebates. We monitor the sales trends and adjust the chargeback and rebate percentages on a regular basis to reflect the most recent chargebacks and rebate experience. The Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but remains in the distribution channel inventories at the end of each reporting period.

Managed Care Contract Rebates: We contract with various managed care organizations including health insurance companies and pharmacy benefit managers. These contracts stipulate that rebates and, in some cases, administrative fees, are paid to these organizations provided our product is placed on a specific tier on the organization’s drug formulary. Based upon our contracts and the most recent experience with respect to sales through managed care channels, we provide an allowance for managed care contract rebates. We monitor the sales trends and adjust the allowance on a regular basis to reflect the most recent rebate experience. The Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but remains in the distribution channel inventories at the end of each reporting period.

Copay Mitigation Rebates: We offer copay mitigation to commercially insured patients who have coverage for our products (in accordance with applicable law) and are responsible for a cost share. Based upon our contracts and the most recent experience with respect to actual copay assistance provided, we provide an allowance for copay


mitigation rebates. We monitor the sales trends and adjust the rebate percentages on a regular basis to reflect the most recent rebate experience.

Cash Discounts: We sell directly to companies in our distribution network, which primarily includes specialty pharmacies and ASD Specialty Healthcare, Inc. We generally provide invoice discounts for prompt payment for our products. We estimate our cash discounts based on the terms offered to our customers. Discounts are estimated based on rates that are explicitly stated in the Company’s contracts as it is expected they will take the discount and are recorded as a reduction of revenue at the time of product shipment when product revenue is recognized. We adjust estimates based on actual activity as necessary.

Product Returns:We either offer customers no return except for products damaged in shipping or consistent with industry practice, a limited right of return based on the product’s expiration date. The Company estimates the amount of its product sales that may be returned by its customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized. The company currently estimates product return liabilities using historical sales information and inventory remaining in the distribution channel.

Data Fees and Fees for Services Payable to Specialty Pharmacies: We have contracted with certain specialty pharmacies to obtain transactional data related to our products in order to develop a better understanding of our selling channel as well as patient activity and utilization by the Medicaid program and other government agencies and managed care organizations. We pay a variable fee to the specialty pharmacies to provide us the data. We also pay the specialty pharmacies a fee in exchange for providing distribution and inventory management services, including the provision of inventory management data to the Company. We estimate our fee for service accruals and allowances based on sales to each specialty pharmacy and the applicable contracted rate.

Royalty Revenue

Royalty revenue recorded by the Company relates exclusively to the Company’s License and Collaboration agreement with Biogen which provides for ongoing royalties based on sales of Fampyra outside of the U.S. The Company recognizes revenue for royalties under ASC 606, which provides revenue recognition constraints by requiring the recognition of revenue at the later of the following: 1) sale or usage of the products or 2) satisfaction of the performance obligations. The Company has satisfied its performance obligations and therefore recognizes royalty revenue when the sales to which the royalties relate are completed.

Milestone Revenue

Milestone revenue relates to the License and Collaboration agreement with Biogen which provides for milestone payments for the achievement of certain regulatory and sales milestones during the term of the agreement. Regulatory milestones are contingent upon the approval of Fampyra for new indications outside of the U.S. Sales milestones are contingent upon the achievement of certain net sales targets for Fampyra sales outside of the U.S. The Company recognizes milestone revenue under ASC 606, which provides constraints for entities to recognize milestone revenue which is deemed to be variable by requiring the Company to estimate the amount of consideration to which it is entitled in exchange for transferring the promised goods or services to a customer. The Company recognizes an estimate of revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the milestone is achieved. For regulatory milestones, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. For sales-based milestones, the Company recognizes revenue upon the achievement of the specific sale milestones.


The following table disaggregates our revenue by major source (in thousands):

 

Three-month period ended September 30, 2018

 

 

Three-month period ended September 30, 2017

 

 

Nine-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2017

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net product revenues

$

139,973

 

 

$

134,357

 

 

$

393,388

 

 

$

379,705

 

Royalty revenues

 

2,841

 

 

 

4,444

 

 

 

8,893

 

 

 

13,391

 

License revenue

 

 

 

 

2,264

 

 

 

 

 

 

6,793

 

Total net revenues

$

142,814

 

 

$

141,065

 

 

$

402,281

 

 

$

399,889

 

Foreign Currency Translation

The functional currency of operations outside the United States of America is deemed to be the currency of the local country, unless otherwise determined that the United States dollar would serve as a more appropriate functional currency given the economic operations of the entity. Accordingly, the assets and liabilities of the Company’s foreign subsidiary, Biotie, are translated into United States dollars using the period-end exchange rate; income and expense items are translated using the average exchange rate during the period; and equity transactions are translated at historical rates. Cumulative translation adjustments are reflected as a separate component of equity. Foreign currency transaction losses and gains are recognized in the period incurred and are reported as other (expense) income, net in the statement of operations.

Segment and Geographic Information

The Company is managed and operated as one1 business which is focused on developing therapies that restore function and improve the lives of people with neurological disorders. The entire business is managed by a single management team that reports to the Chief Executive Officer. The Company does not operate separate lines of business with respect to any of its products or product candidates and the Company does not prepare discrete financial information with respect to separate products or product candidates or by location. Accordingly, the Company views its business as one1 reportable operating segment. Net product revenues reported to date are derived from the sales of Ampyra and QutenzaInbrija in the U.S. for the three and nine-month periods ended September 30, 2019 and from the sales of Ampyra in the U.S. for the three and nine-month periods ended September 30, 2019 and 2018.

Goodwill

Goodwill represents the amount of consideration paid in excess of the fair value of net assets acquired in a business combination accounted for using the acquisition method of accounting. Goodwill is not amortized and is subject to impairment testing on an annual basis or when a triggering event occurs that may indicate the carrying value of the goodwill is impaired. We perform our impairment testing at the reporting level where we have determined that we have a single reporting unit and operating segment. The impairment test for goodwill uses an approach which compares the estimated fair value of the reporting unit including goodwill to its carrying value. If the carrying value of the reporting unit exceeds the estimated fair value of the reporting unit, an impairment loss is recognized in an amount equal to the excess of the carrying value over the estimated fair value.

During the second quarter of 2019, we experienced a significant decline in our stock price that reduced the market capitalization below the carrying value of the Company. This circumstance required the Company to perform a quantitative assessment to assess the value of the goodwill for impairment. The Company performed an assessment of the goodwill and concluded that there was 0 impairment. During the third quarter of 2019, we experienced a further significant decline in our stock price that reduced the market capitalization below the carrying value of the Company. The Company performed a quantitative assessment of the goodwill and concluded that there was an impairment to the goodwill. The Company utilized the income approach in the goodwill assessment process. The determination of the fair value of the reporting unit requires us to make significant estimates and assumptions. This valuation approach considers a number of factors that include, but are not limited to, prospective financial information, growth rates, terminal value, and discount rates and require us to make certain assumptions and estimates. When performing our income approach, we incorporate the use of projected financial


information and a discount rate that are developed based on certain assumptions. Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates. The Company then corroborates the reasonableness of the total fair value of the reporting unit by reconciling the aggregate fair value of the reporting unit to the Company’s total market capitalization adjusted to include an estimated control premium. The estimated control premium is derived from reviewing observable transactions involving the purchase of controlling interests in comparable companies. The market capitalization is calculated using the relevant shares outstanding and the closing stock price at the test date. After completing our impairment assessment during the third quarter of 2019, we concluded that the carrying value of the Company exceeded its estimated fair value as of September 30, 2019 and therefore, the goodwill was fully impaired. The Company recorded an impairment charge of $277.6 million for the three and nine-month periods ended September 30, 2019 in the statement of operations.

Impairment of Long-Lived Assets

The Company continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful lives of its long-lived assets, including identifiable intangible assets subject to amortization and property plant and equipment, may warrant revision or that the carrying value of the assets may be impaired. Factors the Company considers important that could trigger an impairment review include significant changes in the use of any assets, changes in historical trends in operating performance, changes in projected operating performance, stock price, loss of a major customer and significant negative economic trends. The decline in the trading price of the Company's common stock during the quarter ended September 30, 2019, and related decrease in the Company's market capitalization, was determined to be a triggering event in connection with the Company's review of the recoverability of its long-lived assets for the three-month period ended September 30, 2019. The Company performed a recoverability test during the third quarter of fiscal 2019 using the undiscounted cash flows, which are the sum of the future undiscounted cash flows expected to be derived from the direct use of the long-lived assets to the carrying value of the long-lived assets. Estimates of future cash flows were based on the Company’s own assumptions about its own use of the long-lived assets. The cash flow estimation period was based on the long-lived assets’ estimated remaining useful life to the Company. After performing the recoverability test, the Company determined that the undiscounted cash flows exceeded the carrying value and the long-lived assets were not impaired. Changes in these assumptions and resulting valuations or further declines in our stock price could result in future long-lived asset impairment charges. Management will continue to monitor any changes in circumstances for indicators of impairment. Any write‑downs are treated as permanent reductions in the carrying amount of the assets.

Subsequent Events

Subsequent events are defined as those events or transactions that occur after the balance sheet date, but before the financial statements are filed with the Securities and Exchange Commission. The Company completed an evaluation of the impact of any subsequent events through the date these financial statements were issued, and determined the following subsequent eventsevent that required disclosure in these financial statements.

On October 30, 2018,23, 2019, we soldannounced a corporate restructuring to reduce costs and focus our Qutenza assetsresources on the commercial launch of Inbrija, which is our key strategic priority for the remainder of 2019. As part of the restructuring, we are reducing headcount by approximately 25% through a reduction in force. The majority of the reduction took place in the fourth quarter of 2019 immediately after the announcement, and NP-1998 development program. Qutenza is a dermal patch containing 8% prescription strength capsaicin the effects of which can last up to three months and is approvedremainder will be completed by the FDA for the managementfirst quarter of neuropathic pain associated with post-herpetic neuralgia, also known as post-shingles pain. NP-1998 is a Phase 3 ready, 20% prescription strength capsaicin topical solution that we were previously assessing for the treatment of neuropathic pain. Under the asset purchase agreement, the buyer made aggregate cash payments to us of approximately $7.9 million for the assets.2020.

Accounting Pronouncements Adopted

As noted above, in May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (Topic 606). This new standard replaced all previous U.S. GAAP guidance on this topic and eliminated all industry-specific guidance. The new standard requires the application of a five-step model to determine the amount and timing of revenue to be recognized. The underlying principle is that revenue is to be recognized for the transfer of goods or services to customers that reflects the amount of consideration that the Company expects to be entitled to in exchange for those goods or services. The Company adopted the new standard effective January 1, 2018 using the modified retrospective transition method. See discussion of the adoption above in Revenue Recognition.

In November 2016, the FASB issued ASU 2016-18 “Statement of Cash Flows” (Topic 230); Restricted Cash (ASU 2016-18), which defines new requirements for the presentation of restricted cash and restricted cash equivalents in the


statement of cash flows. The amendments in this ASU require retrospective application to each period presented. The Company adopted this guidance effective January 1, 2018 retrospectively. This ASU requires the entities to present statement of cash flows in a manner such that it reconciles beginning and ending totals of cash, cash equivalents, restricted cash or restricted cash equivalents. Also, when cash, cash equivalents, restricted cash or restricted cash equivalents are presented in more than one line item within the statement of financial position, an entity should, for each period that a statement of financial position is presented, present on the face of the statement of cash flows or disclose in the notes to the financial statements, the line items and amounts of cash, cash equivalents, and restricted cash or restricted cash equivalents reported within the statement of financial position. The amounts, disaggregated by the line item in which they appear within the statement of financial position, shall sum to the total amount of cash, cash equivalents, and restricted cash or restricted cash equivalents at the end of the corresponding period shown in the statement of cash flows.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same amounts shown in the statement of cash flows:

 

Nine-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2017

 

(In thousands)

Beginning of period

 

 

End of period

 

 

Beginning of period

 

 

End of period

 

Cash and cash equivalents

$

307,068

 

 

$

321,011

 

 

$

158,537

 

 

$

192,496

 

Restricted cash

 

410

 

 

 

365

 

 

 

79

 

 

 

68

 

Restricted cash included in Other assets

 

561

 

 

 

255

 

 

 

255

 

 

 

560

 

Total Cash, cash equivalents and restricted cash per statement of cash flows

$

308,039

 

 

$

321,631

 

 

$

158,871

 

 

$

193,124

 

Amounts included in restricted cash represent those amounts required to be set aside to cover the Company’s self-funded employee health insurance. Restricted cash included in other assets on the statement of financial position relates to cash collateralized standby letters of credit in connection with obligations under facility leases, which is included with other assets in the consolidated balance sheet due to the long-term nature of the letters of credit.

In June 2018, the FASB issued ASU 2018-07, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. Currently, share-based payment arrangements with employees are accounted for under ASC 718, while nonemployee share-based payments issued for goods and services are accounted for under ASC 505-50. ASC 505-50, before the amendments, differed significantly from ASC 718. However, FASB concluded that awards granted to employees are economically similar to awards granted to nonemployees and therefore two different accounting models were not justified. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods therein with early adoption permitted. The Company early adopted this guidance beginning April 1, 2018. The adoption of this guidance did not have an impact on its consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842)Topic 842, which amends the guidance in former ASC Topic 840, Leases. The main objective of this update is to increasenew standard increases transparency and comparability among organizationsmost significantly by recognizing leaserequiring the recognition by lessees of right-of-use (“ROU”) assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize an ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. LeasesUnder the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. For lessees, leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

This ASU isThe Company adopted the new lease guidance effective for the Company on January 1, 2019. We expect to adopt2019 using the new standard on its effective date. A modified retrospective transition approach, is required, applying the new standard to all of its leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. We expect to adopt the new standard on January 1, 2019 and useapplication which is the effective date as our date of initial application.adoption. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019.

The new standard provides a number of optional practical expedients in transition. We expect to electelected the ‘packagepackage of practical expedients’,expedients which permits us to not to reassess under(1) whether any expired or existing contracts are or contain leases, (2) the new standard our prior conclusions about lease classification for any


identification, lease classificationexpired or existing leases, and (3) any initial direct costs.costs for any existing leases as of the effective date. We dodid not expect to elect the use-of-hindsight or thehindsight practical expedient pertainingwhich permits entities to land easements;use hindsight in determining the latter not being applicable to us.

While we continue to assess alllease term and assessing impairment. The adoption of the effectslease standard did not change our previously reported consolidated statements of adoption, we currently believe the most significant effects relate to (1) the recognition of new ROU assetsoperations and lease liabilities on our balance sheet for our real estate operating leases and (2) providing significant new disclosures for our leasing activities. While we continue to assess our contracts, we dodid not expect a significant change in our leasing activities between now and adoption. The new standard also provides practical expedients for an entity’s ongoing accounting. We currently expect to elect the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also currently expect to elect the practical expedient to not separate lease and non-lease components for all of our leases.

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other” (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04). This new standard simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. ASU 2017-04 allows for prospective application and is effective for fiscal years beginning after December 15, 2019, and interim periods therein with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating whether it will adopt this guidance early. The Company does not expect the adoption of this guidance to have a significant impact on its consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, ‘Income Statement—Reporting Comprehensive Income’ (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). This new standard provides entities with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. ASC 740-10-35-4 requires that deferred tax assets and liabilities should be adjusted to account for any changes in tax laws or rates within the period that the enactment of these changes occurs and any adjustments to flow through income from continuing operations. Since the adjustments due to the Tax Cuts and Jobs Act are required to flow through income from continuing operations, the tax effects of items within accumulated other comprehensive income known now as “stranded tax effects,” do not reflect the appropriate tax rate. As such, FASB issued ASU 2018-02, in order to address these stranded income tax effects. The new standard requires entities to disclose the following:

A description of the accounting policy for releasing income tax effects from AOCI;

Whether they elect to reclassify the stranded income tax effects from the Tax Cuts and Jobs Act, and

Information about the other income tax effects that are reclassified.

The ASU is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact it may have on its consolidated financial statements.

In March 2018, the FASB issued ASU 2018-05, “Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 118’. The ASU adds seven paragraphs to ASC 740, Income Taxes, that contain SEC guidance related to SAB 118 (codified as SEC SAB Topic 5.EE, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act”), which provides guidance for companies that are not able to complete their accounting for the income tax effects of the Tax Cuts and Jobs Act in the period of enactment which is the period that includes December 22, 2017. The measurement period should not extend beyond one year from the enactment date. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.

In July 2018, the FASB issued ASU 2018-09, “Codification Improvements.” The ASU’s amendments clarify, correct errors in, or make minor improvements to a variety of ASC topics. The changes in ASU 2018-09 are not expected to have a significant effect on current accounting practices. Some of the amendments in this update do not require transition guidance and will be effective upon issuance of this update. However, many of the amendments in this update do have transition guidance with effective dates for annual periods beginning after December 15, 2018, for public business entities. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13 “Fair Value Measurement (Topic 820): “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” The amendment in this ASU eliminate, add and modify certain disclosure requirements for fair value measurements as part of its disclosure framework project. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value


hierarchy, but public business entities will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The ASU is effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact it may have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurredresult in a Cloud Computing Arrangement That Is a Service Contract.” The ASU clarifies certain aspects of ASU 2015-05, “Customer’s Accountingcumulative catch-up adjustment to opening equity. See Note 12 for Fees Paid in a Cloud Computing Arrangement,” which was issued in April 2015. Specifically, the ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).” The ASU is effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact it may have on its consolidated financial statements.further information.

In August 2018, the Securities Exchange Commission (“SEC”) adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. The Company anticipatesadopted the rule in the three-month period ended March 31, 2019 and included its first presentation of changes in stockholders’ equity as required under the new SEC guidance will be included in its Form 10-Q for the three-month period ended March 31, 2019.

In February 2018, the FASB issued ASU 2018-02, “Income Statement—Reporting Comprehensive Income” (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). This new standard provides entities with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. The reclassification is the difference between the amount previously recorded in other comprehensive income at the historical U.S. federal tax rate that remains in accumulated other comprehensive loss at the time the Act was effective and the amount that would have been recorded using the newly enacted rate. This guidance became effective in Q1 2019; however, the Company did not elect to make the optional reclassification.

In July 2018, the FASB issued ASU 2018-09, “Codification Improvements.” The ASU’s amendments clarify, correct errors in, or make minor improvements to a variety of ASC topics. The changes in ASU 2018-09 are not expected to have a significant effect on current accounting practices. Some of the amendments in this update do not require transition guidance and will be effective upon issuance of this update. However, many of the amendments in this update do have transition guidance with effective dates for annual periods beginning after December 15, 2018, for public business entities. The ASU became effective in Q1 2019. The ASU did not have a significant impact on its consolidated financial statements. 

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other” (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04). This new standard simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. ASU 2017-04 allows for prospective application and is effective for fiscal years beginning after December 15, 2019, and interim periods therein with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted this guidance on April 1, 2019. The ASU did not have an impact upon adoption on its consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequently amended by ASU 2019-04 and ASU 2019-05 which introduces a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. This new standard amends the current guidance on the impairment of financial instruments. The ASU adds to U.S. GAAP an impairment model known as current expected credit loss (CECL) model that is based on expected losses rather than incurred losses. Under the new guidance, an entity will recognize as an allowance its estimate of expected credit losses. The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements and will adopt the guidance when effective.

In August 2018, the FASB issued ASU 2018-13 “Fair Value Measurement (Topic 820): “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” The amendment in this ASU eliminate, add and modify certain disclosure requirements for fair value measurements as part of its disclosure framework project. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public business entities will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The ASU is effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.


In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The ASU clarifies certain aspects of ASU 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement,” which was issued in April 2015. Specifically, the ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).” The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.

In November 2018, the FASB issued ASU 2018-18, Collaborative arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606. ASU 2018-18 clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer and precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.

(3) Revenue

In accordance with ASC 606, the Company recognizes revenue when the customer obtains control of a promised good or service, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for the good or service. ASC 606 outlines a five-step process for recognizing revenue from contracts with customers: i) identify the contract with the customer, ii) identify the performance obligations in the contract, iii) determine the transaction price, iv) allocate the transaction price to the separate performance obligations in the contract, and v) recognize revenue associated with the performance obligations as they are satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606, the Company determines the performance obligations that are distinct. The Company recognizes as revenue the amount of the transaction price that is allocated to each respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company's performance obligations are transferred to customers at a point in time, typically upon receipt of the product by the customer.

ASC 606 requires entities to record a contract asset when a performance obligation has been satisfied or partially satisfied, but the amount of consideration has not yet been received because the receipt of the consideration is conditioned on something other than the passage of time. ASC 606 also requires an entity to present a revenue contract as a contract liability in instances when a customer pays consideration, or an entity has a right to an amount of consideration that is unconditional (e.g. receivable), before the entity transfers a good or service to the customer. We did not have any contract assets or any contract liabilities as of September 30, 2019 and 2018.

The following table disaggregates our revenue by major source:

(In thousands)

Three-month period ended September 30, 2019

 

 

Three-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2019

 

 

Nine-month period ended September 30, 2018

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net product revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ampyra

$

37,647

 

 

$

137,815

 

 

$

122,383

 

 

$

390,900

 

Inbrija

 

4,889

 

 

 

 

 

 

9,164

 

 

 

 

Other

 

2,264

 

 

 

2,158

 

 

 

1,778

 

 

 

2,488

 

Total net product revenues

 

44,800

 

 

 

139,973

 

 

 

133,325

 

 

 

393,388

 

Royalty revenues

 

2,922

 

 

 

2,841

 

 

 

8,586

 

 

 

8,893

 

Total net revenues

$

47,722

 

 

$

142,814

 

 

$

141,911

 

 

$

402,281

 

(4) Share-based Compensation

During the three‑month periods ended September 30, 20182019 and 2017,2018, the Company recognized share-based compensation expense of $5.1$3.3 million and $6.7$5.1 million, respectively. During the nine‑monthnine-month periods ended September 30,


2019 and 2018, and 2017, the Company recognized share-based compensation expense of $16.3 million$11.5 and $26.2$16.2 million, respectively. Activity in options and restricted stock during the nine-month period ended September 30, 20182019 and related balances outstanding as of that date are reflected below. The weighted average fair value per share of options granted to employees for the three-month periods ended September 30, 20182019 and 20172018 were approximately $2.69 and $12.39, and $9.46, respectivelyrespectively. The weighted average fair value per share of options granted to employees for the nine-month periods ended September 30, 20182019 and 20172018 were approximately $6.49 and $12.81, and $10.68, respectively.

The following table summarizes share-based compensation expense included within the consolidated statements of operations:

 

 

For the three-month period ended September 30,

 

 

For the nine-month period ended September 30,

 

 

For the three-month period ended September 30,

 

 

For the nine-month period ended September 30,

 

(In millions)

 

2018

 

 

2017

 

 

2018

 

 

2017

 

(In thousands)

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Research and development expense

 

$

1.1

 

 

$

2.0

 

 

$

4.4

 

 

$

8.4

 

 

$

719

 

 

$

1,112

 

 

$

2,203

 

 

$

4,336

 

Selling, general and administrative expense

 

 

4.0

 

 

 

4.7

 

 

 

11.9

 

 

 

17.8

 

 

 

2,424

 

 

 

4,023

 

 

 

8,785

 

 

 

11,910

 

Cost of Sales

 

 

149

 

 

 

 

 

 

505

 

 

 

 

Total

 

$

5.1

 

 

$

6.7

 

 

$

16.3

 

 

$

26.2

 

 

$

3,292

 

 

$

5,135

 

 

$

11,493

 

 

$

16,246

 

 


A summary of share-based compensation activity for the nine-month period ended September 30, 20182019 is presented below:

Stock Option Activity

 

 

 

Number of

Shares

(In thousands)

 

 

Weighted

Average

Exercise

Price

 

 

Weighted

Average

Remaining

Contractual

Term

 

 

Intrinsic

Value

(In thousands)

 

Balance at January 1, 2018

 

 

8,930

 

 

$

29.46

 

 

 

 

 

 

 

 

 

Granted

 

 

748

 

 

 

25.04

 

 

 

 

 

 

 

 

 

Cancelled

 

 

(595

)

 

 

28.07

 

 

 

 

 

 

 

 

 

Exercised

 

 

(721

)

 

 

20.78

 

 

 

 

 

 

 

 

 

Balance at September 30, 2018

 

 

8,362

 

 

$

29.91

 

 

 

5.6

 

 

$

2,163

 

Vested and expected to vest at

    September 30, 2018

 

 

8,328

 

 

$

29.93

 

 

 

5.6

 

 

$

2,159

 

Vested and exercisable at

    September 30, 2018

 

 

6,763

 

 

$

30.52

 

 

 

5.0

 

 

$

1,857

 

 

 

Number of

Shares

(In thousands)

 

 

Weighted

Average

Exercise

Price

 

 

Weighted

Average

Remaining

Contractual

Term

 

 

Intrinsic

Value

(In thousands)

 

Balance at January 1, 2019

 

 

8,194

 

 

$

29.81

 

 

 

 

 

 

 

 

 

Granted

 

 

640

 

 

 

12.16

 

 

 

 

 

 

 

 

 

Cancelled

 

 

(494

)

 

 

24.83

 

 

 

 

 

 

 

 

 

Exercised

 

 

(2

)

 

 

16.00

 

 

 

 

 

 

 

 

 

Balance at September 30, 2019

 

 

8,339

 

 

$

28.76

 

 

 

4.8

 

 

$

 

Vested and expected to vest at

    September 30, 2019

 

 

8,316

 

 

$

28.79

 

 

 

4.8

 

 

$

 

Vested and exercisable at

    September 30, 2019

 

 

7,165

 

 

$

30.23

 

 

 

4.2

 

 

$

 

 

Restricted Stock and Performance Stock Unit Activity

 

(In thousands)

 

 

 

 

Restricted Stock and Performance Stock Units

 

Number of Shares

 

Nonvested at January 1, 20182019

 

 

697231

 

Granted

 

 

(148628

)

Vested

 

 

(96

)

Forfeited

 

 

(12752

)

Nonvested at September 30, 20182019

 

 

422711

 

 

Unrecognized compensation cost for unvested stock options, restricted stock awards and performance stock units as of September 30, 20182019 totaled $24.3$17.1 million and is expected to be recognized over a weighted average period of approximately 1.72.1 years.

The Company did not repurchase shares of common stock duringDuring the thee-monththree‑month period ended September 30, 2018.2019, the Company did 0t make any repurchases of shares. During the nine‑month period ended September 30, 2018,2019, the Company repurchased 63,1247,360 shares of common stock at an average price of $25.15$12.31 per share or approximately $1.6 million.$91 thousand. The share repurchase consists primarily of common stock tendered to cover tax liabilities in connection with the vesting of restricted stock awards and common stock withheld to cover the


tax liabilityliabilities in connection with the settlement of vested restricted stock units and stock options that were exercised in the nine-month period ended September 30, 2018.2019.


(4)(5) (Loss) EarningsIncome Per Share

The following table sets forth the computation of basic and diluted earnings (loss) income per share for the three and nine-month periods ended September 30, 20182019 and 2017:2018:

 

(In thousands, except per share data)

 

Three-month period ended September 30, 2018

 

 

Three-month period ended September 30, 2017

 

 

Nine-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2017

 

 

Three-month period ended September 30, 2019

 

 

Three-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2019

 

 

Nine-month period ended September 30, 2018

 

Basic and diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(13,911

)

 

$

(25,195

)

 

$

24,087

 

 

$

(52,295

)

 

$

(263,535

)

 

$

(13,911

)

 

$

(338,626

)

 

$

24,087

 

Weighted average common shares outstanding used in

computing net (loss) income per share—basic

 

 

47,184

 

 

 

46,002

 

 

 

46,840

 

 

 

45,918

 

 

 

47,511

 

 

 

47,184

 

 

 

47,491

 

 

 

46,840

 

Plus: net effect of dilutive stock options and restricted

common shares

 

 

 

 

 

 

 

 

411

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

411

 

Weighted average common shares outstanding used in

computing net (loss) income per share—diluted

 

 

47,184

 

 

 

46,002

 

 

 

47,251

 

 

 

45,918

 

 

 

47,511

 

 

 

47,184

 

 

 

47,491

 

 

 

47,251

 

Net (loss) income per share—basic

 

$

(0.29

)

 

$

(0.55

)

 

$

0.51

 

 

$

(1.14

)

 

$

(5.55

)

 

$

(0.29

)

 

$

(7.13

)

 

$

0.51

 

Net (loss) income per share—diluted

 

$

(0.29

)

 

$

(0.55

)

 

$

0.51

 

 

$

(1.14

)

 

$

(5.55

)

 

$

(0.29

)

 

$

(7.13

)

 

$

0.51

 

 

Securities that could potentially be dilutive are excluded from the computation of diluted earningsloss per share when a loss from continuing operations exists or when the exercise price exceeds the average closing price of the Company’s common stock during the period, because their inclusion would result in an anti-dilutive effect on per share amounts.

The following amounts were not included in the calculation of net (loss) incomeloss per diluted share because their effects were anti-dilutive:

 

(In thousands)

 

Three-month period ended September 30, 2018

 

 

Three-month period ended September 30, 2017

 

 

Nine-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2017

 

 

Three-month period ended September 30, 2019

 

 

Three-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2019

 

 

Nine-month period ended September 30, 2018

 

Denominator

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options and restricted common shares

 

 

8,825

 

 

 

9,147

 

 

 

7,262

 

 

 

9,232

 

 

 

8,995

 

 

 

8,825

 

 

 

8,995

 

 

 

7,262

 

 

Performance share units are excluded from the calculation of net loss per diluted share as the performance criteria has not been met for the three and nine-month periods ended September 30, 2019.Additionally, the impact of the convertible debtsenior notes was determined to be anti-dilutive and excluded from the calculation of net (loss) incomeloss per diluted share for the three and nine-month periods ended September 30, 20182019 and 2017.2018.

(5)(6) Income Taxes

The Company’s effective income tax rate differs from the U.S. statutory rate principally due to state taxes, Federal research and development tax credits, jurisdictions with pretax losses for which no tax benefit can be recognized, changes in the valuation allowance and the effects of share based compensation which are recorded discretely in the quarters in which they occur.

For the three-month periods ended September 30, 20182019 and 2017,2018, the Company recorded a provision of $38.0$0.02 million and $18.9$38.0 million for income taxes, respectively. The effective income tax rates for the Company for the three-month periods ended September 30, 2019 and 2018 were 0% and 2017 were 157.8% and (298.2%), respectively. The variance in the effective tax rates for the three-month period ended September 30, 20182019 as compared to the three-month period ended September 30, 20172018 was due primarily to differences in pre-tax book incomeloss between the periods, the decrease in the Federal statutorygoodwill impairment for which no tax rate as a result of tax reform,benefit is recognized, the valuation allowance recorded on deferred tax assets for which no tax benefit can be recognized, state taxes, and the reduction in the research & development tax credit.

For the nine-month periods ended September 30, 20182019 and 2017,2018, the Company recorded a benefit of $0.5 million and a provision of $49.8 million and $23.4 million for income taxes, respectively. The effective income tax rates for the Company for the nine-month


periods ended September 30, 2019 and 2018 were 0.14% and 2017 were 67.4% and (81.1%), respectively. The variance in the effective tax rates for the nine-month period ended September 30, 20182019 as compared to the nine-month period ended September 30, 20172018 was due primarily to differences in pre-tax book (loss) income between the periods, the decrease in the Federal statutorygoodwill impairment for which no tax rate as a result of tax reform,benefit is recognized, the valuation allowance recorded on deferred tax assets for which no tax benefit can be recognized, state taxes, and the reduction in the research & development tax credit.


The Company continues to evaluate the realizability of its deferred tax assets and liabilities on a quarterly basis and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant tax authorities, the progress of ongoing tax audits and the regulatory approval of products currently under development. Any changes to the valuation allowance or deferred tax assets and liabilities in the future would impact the Company's income taxes.

The Tax Cuts and Jobs Act of 2017 (the “Act”) was enacted on December 22, 2017. The Act reduces the U.S. Federal corporate tax rate from 35% to 21% effective for tax years beginning after December 31, 2017, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred and includes a variety of other changes.

On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. For the three and nine-month periods ended September 30, 2018, the Company has not completed its accounting for the tax effects of the enactment of the Act; however, in certain cases, we have made a reasonable estimate of the effects on our existing deferred tax balances. In other cases, we have not been able to make a reasonable estimate and continue to account for those items based on our existing accounting under ASC 740, Income Taxes, and the provisions of the tax laws that were in effect immediately prior to the enactment. The Company has not obtained additional information affecting the provisional amounts initially recorded. The Company did not record a provision related to the one-time transition tax on mandatory repatriation of undistributed foreign earnings and profits per the Act, since a preliminary analysis has determined that there is no accumulated earnings and profits.

Additional work is still necessary for a more detailed analysis of the Company's deferred tax assets and liabilities and its historical foreign earnings as well as potential correlative adjustments. Any subsequent adjustment to these amounts will be recorded to current tax expense in the three-month period ending December 31, 2018 when the analysis is complete. The Company did not make any adjustments in the nine-month period ended September 30, 2018.

The Internal Revenue Service completed its examination of the Company’s U.S. income tax return for 2015 in the second quarter of 2018 with no material impact.

The Internal Revenue Service commenced its examination of the Company’s wholly-owned subsidiary, Biotie Therapies, Inc.’s, U.S. income tax return for the short period ended December 31, 2016 in the third quarter of 2018. ThereThe audit has been substantially completed, and the IRS has proposed an adjustment that we do not believe would have been no proposed adjustments at this stage ofa material impact on the examination.

tax provision.

The New York State Department of Tax commenced an examination of the Company’s income tax returns for the years 2014-2016. 2014-2016 in the third quarter of 2018.There have been no proposed adjustments at this stage of the examination.

(7) Goodwill

The following table represents a summary of activities in goodwill from December 31, 2018 through September 30, 2019:

(In thousands)

 

 

 

 

Balance at December 31, 2018

 

$

282,059

 

Impairment

 

 

(277,561

)

Foreign currency translation adjustment

 

 

(4,498

)

Balance at September 30, 2019

 

$

 

At September 30, 2019 and December 31, 2018, the Company had $0.0 million and $282.1 million of goodwill, respectively. In connection with the Company's review of the recoverability of its goodwill for the three month period ended September 30, 2019, the Company determined that a triggering event occurred due to the decline in the trading price of the Company's common stock at and around the end of the third quarter of 2019 and related decrease in the Company's market capitalization. Given this circumstance, the Company performed a quantitative goodwill impairment test. Based on the results of its impairment test, the Company recorded an impairment charge of $277.6 million which was the carrying amount of its goodwill immediately before the charge. Refer to Note 2 for the discussion of the impairment charge.


(6)(8) Fair Value Measurements

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 20182019 and December 31, 20172018 and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices, interest rates, exchange rates and yield curves. Fair values determined by Level 3 inputs utilize unobservable data points for the asset or liability. The Company’s Level 1 assets consist of time deposits and investments in a Treasury money market fund.fund and U.S. government securities. The Company’s level 2 assets consist of investments in corporate bonds, and commercial paper and U.S. government securities which are categorized as short-term investments for investments with original maturities between three months and one year. The Company’s Level 3 liabilities represent acquired contingent consideration related to the acquisition of Civitas and are valued using a probability weighted discounted cash flow valuation approach. No changes in valuation techniques occurred during the three or nine-month periods ended September 30, 2018.2019. The estimated fair values of all of our financial instruments approximate their carrying values at September 30, 2018,2019, except for the fair value of the Company’s convertible senior notes, which was approximately $298.4$264.3 million as of September 30, 2018.2019. The Company estimates the fair value of its notes utilizing market quotations for the debt (Level 2).

 

(In thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Assets Carried at Fair Value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

20,729

 

 

$

 

 

$

 

Short-term investments

 

 

 

 

 

139,935

 

 

 

 

Money market funds

 

$

28,899

 

 

$

 

 

$

 

U.S. government securities

 

 

2,500

 

 

 

13,246

 

 

 

 

Commercial paper

 

 

 

 

 

49,054

 

 

 

 

Corporate bonds

 

 

 

 

 

71,336

 

 

 

 

Liabilities Carried at Fair Value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired contingent consideration

 

 

 

 

 

 

 

 

134,900

 

 

 

 

 

 

 

 

 

111,200

 

December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

Assets Carried at Fair Value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

9,163

 

 

$

 

 

$

 

Money market funds

 

$

9,586

 

 

$

 

 

$

 

Commercial paper

 

 

 

 

 

47,108

 

 

 

 

Corporate bonds

 

 

 

 

 

104,881

 

 

 

 

Liabilities Carried at Fair Value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired contingent consideration

 

 

 

 

 

 

 

 

113,000

 

 

 

 

 

 

 

 

 

168,000

 

 

The following table presents additional information about liabilities measured at fair value on a recurring basis and for which the Company utilizes Level 3 inputs to determine fair value.

Acquired contingent consideration

 

(In thousands)

 

Three-month period ended September 30, 2018

 

 

Three-month period ended September 30, 2017

 

 

Nine-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2017

 

 

Three-month period ended September 30, 2019

 

 

Three-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2019

 

 

Nine-month period ended September 30, 2018

 

Acquired contingent consideration:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

112,200

 

 

$

89,300

 

 

$

113,000

 

 

$

72,100

 

 

$

162,537

 

 

$

112,200

 

 

$

168,000

 

 

$

113,000

 

Fair value change to contingent consideration

included in the statement of operations

 

 

22,700

 

 

 

(400

)

 

 

21,900

 

 

 

16,800

 

 

 

(50,942

)

 

 

22,700

 

 

 

(56,342

)

 

 

21,900

 

Royalty payments

 

 

(395

)

 

 

 

 

 

(458

)

 

 

 

Balance, end of period

 

$

134,900

 

 

$

88,900

 

 

$

134,900

 

 

$

88,900

 

 

$

111,200

 

 

$

134,900

 

 

$

111,200

 

 

$

134,900

 

 

The Company estimates the fair value of its acquired contingent consideration using a probability weighted discounted cash flow valuation approach based on estimated future sales expected from Inbrija(levodopa inhalation powder), an FDA approved drug for the treatment of OFF periods in Parkinson’s disease. Using this approach, expected probability adjusted future cash flows are calculated over the expected life of the agreement and discounted to estimate the current value of the

The Company estimates the fair value of its acquired contingent consideration using a probability weighted discounted cash flow valuation approach based on estimated future sales expected from Inbrija(levodopa inhalation powder), our most advanced development program for the treatment of OFF periods in people with Parkinson’s taking a carbidopa/levodopa regimen and CVT-427, a Phase I candidate. CVT-427 is an inhaled triptan intended for acute treatment of migraine using the ARCUS drug delivery technology. Using this approach, expected probability adjusted future cash flows are calculated over the expected life of the agreement and discounted to estimate the current value of the liability at the period end date. Some of the more significant assumptions made in the valuation include (i) the estimated Inbrija and CVT-427 revenue forecasts, (ii) probabilities of success, and (iii) discount periods and rate. The probability of achievement of revenue milestones ranged from 26.3% to 85.0% with milestone payment outcomes ranging from $0 to $60.0 million in the aggregate for Inbrija and CVT-427. The valuation is performed quarterly. Gains and losses are included in


liability at the period end date. Some of the more significant assumptions made in the valuation include (i) the estimated revenue forecasts for Inbrija, (ii) probabilities of success, and (iii) discount periods and rate. Milestone payments ranged from $1.0 million to $59.0 million for Inbrija. The valuation is performed quarterly and changes in the fair value of the contingent consideration are included in the statement of operations. For the three and nine-month periods ended September 30, 2019 and 2018, changes in the fair value of the acquired contingent consideration were primarilydue to the re-calculation of cash flows for the passage of time and updates to certain other estimated assumptions. The Company has deferred consideration of further investment in the ARCUS program for acute treatment of migraine pending additional progress with the Inbrija launch.

the statement of operations. For the three and nine-month periods ended September 30, 2018 and 2017, changes in the fair value of the acquired contingent consideration were due to the re-calculation of cash flows for the passage of time and updates to certain other estimated assumptions.

The acquired contingent consideration is classified as a Level 3 liability as its valuation requires substantial judgment and estimation of factors that are not currently observable in the market. If different assumptions were used for the various inputs to the valuation approach, including but not limited to, assumptions involving probability adjusted sales estimates for Inbrija and CVT-427 andthe estimated discount rates, the estimated fair value could be significantly higher or lower than the fair value determined.

(7)(9) Investments

The Company has determined that all of its investments are classified as available-for-sale. Available-for-sale debt securities are carried at fair value with interest on these investments included in interest income and are recorded based on quoted market prices. Available-for-sale investments consisted of the following at September 30, 2018:2019 and December 31, 2018, respectively:

 

 

 

 

 

 

Gross

 

 

Gross

 

 

Estimated

 

 

 

 

 

 

Gross

 

 

Gross

 

 

Estimated

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

(In thousands)

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Short Term Investments

 

$

139,977

 

 

$

4

 

 

$

(46

)

 

$

139,935

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Paper

 

$

49,041

 

 

$

24

 

 

$

(11

)

 

$

49,054

 

Corporate Bonds

 

 

71,241

 

 

 

104

 

 

 

(9

)

 

 

71,336

 

U.S. government securities

 

 

13,250

 

 

 

 

 

 

(4

)

 

 

13,246

 

Total Short-term investments

 

$

133,532

 

 

$

128

 

 

$

(24

)

 

$

133,636

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Paper

 

$

47,149

 

 

$

 

 

$

(41

)

 

$

47,108

 

Corporate Bonds

 

 

104,965

 

 

 

6

 

 

 

(90

)

 

 

104,881

 

Total Short-term investments

 

$

152,114

 

 

$

6

 

 

$

(131

)

 

$

151,989

 

Short-term investments with maturities of three months or less from date of purchase have been classified as cash equivalents, and amounted to approximately $20.7$31.4 million and $9.6 million as of September 30, 2018.2019 and December 31, 2018, respectively. Short-term investments have original maturities of greater than 3 months but less than 1 year and amounted to approximately $139.9$133.6 million and $152.0 million as of September 30, 2018.2019 and December 31, 2018, respectively. The aggregate fair value of short-term investments in an unrealized loss position amounted to approximately $104.9$48.7 million as of September 30, 2018. The Company held no short-term investments at December 31, 2017.2019. Short-term investments at September 30, 20182019 primarily consisted of high-grade commercial paper, corporate bonds and corporate bonds.U.S. government securities. Long-term investments have original maturities of greater than 1 year. There were no0 investments classified as long-term at September 30, 20182019 or December 31, 2017.2018. The Company has determined that there were no other-than-temporary declines in the fair values of its investments as of September 30, 20182019 as the Company does not intend to sell its investments and it is not more likely than not that the Company will be required to sell its investments prior to the recovery of its amortized cost basis.

Unrealized holding gains and losses, which relate to debt instruments, are reported within accumulated other comprehensive income (AOCI) in the statements of comprehensive income. The changes in AOCI associated with the unrealized holding lossesgains on available-for-sale investments during the nine-month period ended September 30, 2018,2019, were as follows (in thousands):

 

(In thousands)

 

Net Unrealized Gains (Losses) on Marketable Securities

 

Balance at December 31, 2017

 

$

 

Other comprehensive loss before reclassifications

 

 

(42

)

Amounts reclassified from accumulated other comprehensive income

 

 

 

Net current period other comprehensive loss

 

 

(42

)

Balance at September 30, 2018

 

$

(42

)


(In thousands)

 

Net Unrealized Gains (Losses) on Marketable Securities

 

Balance at December 31, 2018

 

$

(125

)

Other comprehensive income before reclassifications

 

 

229

 

Amounts reclassified from accumulated other comprehensive income

 

 

 

Net current period other comprehensive income

 

 

229

 

Balance at September 30, 2019

 

$

104

 

 

(8)(10) Liability Related to Sale of Future Royalties

As of October 1, 2017, the Company completed a royalty purchase agreement with HealthCare Royalty Partners, or HCRP (“Royalty Agreement”). In exchange for the payment of $40 million to the Company, HCRP obtained the right to receive Fampyra royalties payable by Biogen under the License and Collaboration Agreement between the Company and Biogen, up to an agreed upon threshold of royalties. When this threshold is met, if ever, the Fampyra royalties will revert


back to the Company and the Company will continue to receive the Fampyra royalties from Biogen until the revenue stream ends. The transaction does not include potential future milestones to be paid.

The Company maintained the rights under the license and collaboration agreement with Biogen, therefore, the Royalty Agreement has been accounted for as a liability that will be amortized using the effective interest method over the life of the arrangement, in accordance with the relevant accounting guidance. The Company recorded the receipt of the $40 million payment from HCRP and established a corresponding liability in the amount of $40 million, net of transaction costs of approximately $2.2 million. The net liability is classified between the current and non-current portion of liability related to the sale of future royalties in the consolidated balance sheets based on the recognition of the interest and principal payments to be received by HCRP in the next 12 months from the financial statement reporting date. The total net royalties to be paid, less the net proceeds received will be recorded to interest expense using the effective interest method over the life of the Royalty Agreement. The Company will estimate the payments to be made to HCRP over the term of the Agreement based on forecasted royalties and will calculate the interest rate required to discount such payments back to the liability balance. Over the course of the Royalty Agreement, the actual interest rate will be affected by the amount and timing of net royalty revenue recognized and changes in forecasted revenue. On a quarterly basis, the Company will reassess the effective interest rate and adjust the rate prospectively as necessary.

The Company recognized non-cash royalty revenue of approximately $2.5 million, non-cash interest expense of approximately $1.1 million and debt discount amortization costs of approximately $0.2 millionfollowing table shows the activity within the liability account for the three-month period ended September 30, 2018. The Company recognized non-cash royalty revenue of approximately $7.8 million, non-cash interest expense of approximately $3.4 million2019 and debt discount amortization costs of approximately $0.6 million for the nine-month period ended September 30, 2018. The interest and debt discount amortization expense is reflected as interest and amortization of debt discount expense in the Statement of Operations.December 31, 2018, respectively:

(In thousands)

 

Three-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2018

 

 

September 30, 2019

 

 

December 31, 2018

 

Liability related to sale of future royalties - beginning balance

 

$

33,183

 

 

$

35,788

 

 

$

30,716

 

 

$

35,788

 

Deferred transaction costs recognized

 

 

195

 

 

 

596

 

 

 

495

 

 

 

784

 

Non-cash royalty revenue payable to HCRP

 

 

(2,500

)

 

 

(7,826

)

 

 

(7,556

)

 

 

(10,291

)

Non-cash interest expense recognized

 

 

1,087

 

 

 

3,407

 

 

 

2,593

 

 

 

4,435

 

Liability related to sale of future royalties - ending balance

 

$

31,965

 

 

$

31,965

 

 

$

26,248

 

 

$

30,716

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9)(11) Convertible Senior Notes

On June 17, 2014, the Company issued $345 million aggregate principal amount of 1.75% Convertible Senior Notes due 2021 (the Notes) in an underwritten public offering. The net proceeds from the offering were $337.5 million after deducting the Underwriter’s discount and offering expenses paid by the Company.

The Notes are convertible into cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, under certain circumstances as outlined in the indenture, based on an initial conversion rate, subject to adjustment, of 23.4968 shares per $1,000 principal amount of Notes (representing an initial conversion price of approximately $42.56 per share).


The Company may not redeem the Notes prior to June 20, 2017. The Company may redeem for cash all or part of the Notes, at the Company’s option, on or after June 20, 2017, under certain circumstances as outlined in the indenture.

The Company pays 1.75% interest per annum on the principal amount of the Notes, payable semiannually in arrears in cash on June 15 and December 15 of each year. The Notes will mature on June 15, 2021.

If the Company undergoes a “fundamental change” (as defined in the Indenture), subject to certain conditions, holders may require the Company to repurchase for cash all or part of their Notes in principal amounts of $1,000 or an integral multiple thereof. The Indenture contains customary terms and covenants and events of default. If an event of default (other than certain events of bankruptcy, insolvency or reorganization involving the Company) occurs and is continuing, the Trustee by notice to the Company, or the holders of at least 25% in principal amount of the outstanding Notes by notice to the Company and the Trustee, may declare 100% of the principal of and accrued and unpaid interest, if any, on all the Notes to be due and payable. Upon such a declaration of acceleration, such principal and accrued and unpaid interest, if any, will be


due and payable immediately. Upon the occurrence of certain events of bankruptcy, insolvency or reorganization involving the Company, 100% of the principal and accrued and unpaid interest, if any, on all of the Notes will become due and payable automatically. Notwithstanding the foregoing, the Indenture provides that, to the extent the Company elects and for up to 270 days, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right to receive additional interest on the Notes.

The Notes will be senior unsecured obligations and will rank equally with all of the Company’s existing and future senior debt and senior to any of the Company’s subordinated debt. The Notes will be structurally subordinated to all existing or future indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries and will be effectively subordinated to the Company’s existing or future secured indebtedness to the extent of the value of the collateral. The Indenture does not limit the amount of debt that the Company or its subsidiaries may incur.

In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the Notes as a whole. The equity component is not re-measured as long as it continues to meet the conditions for equity classification.

The outstanding note balance as of September 30, 20182019 and December 31, 20172018 consisted of the following:

 

(In thousands)

 

September 30, 2018

 

 

December 31, 2017

 

 

September 30, 2019

 

 

December 31, 2018

 

Liability component:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal

 

$

345,000

 

 

$

345,000

 

 

$

345,000

 

 

$

345,000

 

Less: debt discount and debt issuance costs, net

 

 

(28,840

)

 

 

(36,195

)

 

 

(18,619

)

 

 

(26,330

)

Net carrying amount

 

$

316,160

 

 

$

308,805

 

 

$

326,381

 

 

$

318,670

 

Equity component

 

$

61,195

 

 

$

61,195

 

 

$

61,195

 

 

$

61,195

 

 

In connection with the issuance of the Notes, the Company incurred approximately $7.5 million of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees, and allocated these costs to the liability and equity components based on the allocation of the proceeds. Of the total $7.5 million of debt issuance costs, $1.3 million were allocated to the equity component and recorded as a reduction to additional paid-in capital and $6.2 million were allocated to the liability component and recorded as a reduction in the carrying amount of the debt liability on the balance sheet. The portion allocated to the liability component is amortized to interest expense over the expected life of the Notes using the effective interest method.

As of September 30, 2018,2019, the remaining contractual life of the Notes is approximately 2.752 years. The effective interest rate on the liability component was approximately 4.8% for the period from the date of issuance through September 30, 2018.2019.


The following table sets forth total interest expense recognized related to the Notes for the three and nine monthsnine-month periods ended September 30, 20182019 and 2017:2018:

 

(In thousands)

 

Three-month period ended September 30, 2018

 

 

Three-month period ended September 30, 2017

 

 

Nine-month period ended September 30, 2018

 

 

 

 

Nine-month period ended September 30, 2017

 

 

Three-month period ended September 30, 2019

 

 

Three-month period ended September 30, 2018

 

 

Nine-month period ended September 30, 2019

 

 

 

 

Nine-month period ended September 30, 2018

 

Contractual interest expense

 

$

1,509

 

 

$

1,509

 

 

$

4,528

 

 

 

$

4,528

 

 

$

1,509

 

 

$

1,509

 

 

$

4,528

 

 

 

$

4,528

 

Amortization of debt issuance costs

 

 

229

 

 

 

219

 

 

 

680

 

 

 

649

 

 

 

241

 

 

 

229

 

 

 

713

 

 

 

680

 

Amortization of debt discount

 

 

2,252

 

 

 

2,147

 

 

 

6,675

 

 

 

 

6,367

 

 

 

2,360

 

 

 

2,252

 

 

 

6,997

 

 

 

 

6,675

 

Total interest expense

 

$

3,990

 

 

$

3,875

 

 

$

11,883

 

 

 

$

11,544

 

 

$

4,110

 

 

$

3,990

 

 

$

12,238

 

 

 

$

11,883

 

 

(12) Leases

(10)In February 2016, the FASB issued ASU 2016-02, “Leases” Topic 842, which amends the guidance in former ASC Topic 840, Leases. The new standard increases transparency and comparability most significantly by requiring the recognition by lessees of right-of-use (“ROU”) assets and lease liabilities on the balance sheet for all leases longer than 12 months. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. For lessees, leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

The Company adopted the new lease guidance effective January 1, 2019 using the modified retrospective transition approach, applying the new standard to all of its leases existing at the date of initial application which is the effective date of adoption. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. We elected the package of practical expedients which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment. The adoption of the lease standard did not change our previously reported consolidated statements of operations and did not result in a cumulative catch-up adjustment to opening equity. The adoption of the new guidance resulted in the recognition of ROU assets of $28.0 million and lease liabilities of $35.1 million at January 1, 2019. The difference between the ROU assets and the lease liabilities is primarily due to unamortized initial direct costs, lease incentives and deferred rent related to the Company’s operating leases at December 31, 2018.

The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. In calculating the present value of the lease payments, the Company elected to utilize its incremental borrowing rate based on the remaining lease terms as of the January 1, 2019 adoption date.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred, if any. Our leases have remaining lease terms of 2 years to 8 years, some of which include options to extend the lease term for up to 15 years, and some of which include options to terminate the lease within 2 years.

The Company has elected the practical expedient to combine lease and non-lease components as a single component. The lease expense is recognized over the expected term on a straight-line basis. Operating leases are recognized on the balance sheet as right-of-use assets, current operating lease liabilities and non-current operating lease liabilities.

The new standard also provides practical expedients and certain exemptions for an entity’s ongoing accounting. We have elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases where the initial lease term is one year or less or for which the ROU asset at inception is deemed immaterial, we will not recognize ROU assets or lease liabilities. Those leases are expensed on a straight line basis over the term of the lease.


Operating Leases

We lease certain office space, manufacturing and warehouse space under arrangements classified as leases under ASC 842. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Most leases include one or more options to renew, with renewal options ranging from 5 to 15 years. The exercise of lease renewal options is at our sole discretion. One of our leases also includes an option to early terminate the lease within 2 years.

Ardsley, New York

In June 2011, the Company entered into a 15-year lease for an aggregate of approximately 138,000 square feet of office and laboratory space in Ardsley, New York. In 2014, the Company exercised its option to expand into an additional 25,405 square feet of office space, which the Company occupied in January 2015. The Company has options to extend the term of the lease for 3 additional five-year periods, and the Company has an option to terminate the lease after 10 years subject to payment of an early termination fee. Also, the Company has a right of first refusal until mid-2020 to lease up to approximately 95,000 additional square feet of space in additional buildings at the same location. The Company’s extension, early termination, and expansion rights are subject to specified terms and conditions, including specified time periods when they must be exercised, and are also subject to limitations including that the Company not be in default under the lease.

The Ardsley lease provides for monthly payments of rent during the lease term. These payments consist of base rent, which takes into account the costs of the facility improvements funded by the facility owner prior to the Company’s occupancy, and additional rent covering customary items such as charges for utilities, taxes, operating expenses, and other facility fees and charges. The base rent is currently $4.7 million per year, which reflects an annual 2.5% escalation factor.

Chelsea, Massachusetts

Through our Civitas subsidiary, we lease a manufacturing facility in Chelsea, Massachusetts with commercial-scale capabilities. The approximately 90,000 square foot facility also includes office and laboratory space. Civitas leases this facility from North River Everett Ave, LLC pursuant to a lease with a term that expires on December 31, 2025, and Civitas has 2 additional extension options of five years each. The base rent under the lease is currently $1.6 million per year, which reflects an annual escalation factor of 2.5% as well as an amendment to the lease to add additional property at the Chelsea, Massachusetts site as further described below.

In 2017, the Company’s Civitas subsidiary amended its existing Chelsea, Massachusetts lease. The amendment added expansion property located in Chelsea, Massachusetts next to the existing facility. The additional property includes land being used for parking and a free-standing warehouse building on the same site. The base rent for the additional property under the lease included in the rent number above, is currently $0.5 million per year with an annual escalation factor of 3.0%.

In 2018, the Company initiated a renovation and expansion of a building within the Chelsea manufacturing facility that will increase the size of the facility to approximately 95,000 square feet. The project will add a new manufacturing production line for Inbrija and other ARCUS products that has greater capacity than the existing manufacturing line, and it will create additional warehousing space for manufactured product. Pursuant to a 2018 lease amendment that enabled the renovation and expansion, upon completion of the project, annual rent under the lease will increase to $1.7 million. Construction of the project was substantially completed in October 2019, but it will take additional time to obtain the FDA approval needed to use the new production line for commercial manufacturing. All costs to renovate and expand the facility are borne by the Company, therefore, the lease for that building is accounted for as a build to suit lease.

Additional Facilities

In October 2016, we entered into a 10-year lease agreement with a term commencing January 1, 2017, for approximately 26,000 square feet of lab and office space in Waltham, MA. The lease provides for monthly rental payments over the lease term. The base rent under the lease is currently $1.1 million per year.

Our leases have remaining lease terms of 2 years to 8 years which assumes exercise of the early termination of our Ardsley, NY lease. We do not include any renewal options in our lease terms when calculating our lease liabilities as we are not reasonably certain that we will exercise these options. One of our leases includes the early termination option in the lease


term when calculating the lease liability. The weighted-average remaining lease term for our operating leases was 5 years at September 30, 2019. The weighted-average discount rate was 7.13% at September 30, 2019.

ROU assets and lease liabilities related to our operating leases are as follows:

(In thousands)

 

Balance Sheet Classification

 

September 30, 2019

 

Right-of-use assets

 

Right of use assets

 

$

24,675

 

Current lease liabilities

 

Current portion of lease liabilities

 

 

7,696

 

Non-current lease liabilities

 

Non-current portion of lease liabilities

 

 

24,393

 

We have lease agreements that contain both lease and non-lease components. We account for lease components together with non-lease components (e.g., common-area maintenance). The components of lease costs were as follows:

(In thousands)

 

Three-month period ended September 30, 2019

 

 

Nine-month period ended September 30, 2019

 

Operating lease cost

 

$

1,776

 

 

$

5,293

 

Variable lease cost

 

 

1,119

 

 

 

3,544

 

Short-term lease cost

 

 

440

 

 

 

1,094

 

Total lease cost

 

$

3,335

 

 

$

9,931

 

Future minimum commitments under all non-cancelable operating leases are as follows:

(In thousands)

 

 

 

 

2019 (excluding the nine months ended Sep 30, 2019)

 

$

1,902

 

2020

 

 

7,746

 

2021

 

 

7,935

 

2022

 

 

9,972

 

2023

 

 

3,043

 

Later years

 

 

7,666

 

Total lease payments

 

 

38,264

 

Less: Imputed interest

 

 

(6,175

)

Present value of lease liabilities

 

$

32,089

 

Supplemental cash flow information and non-cash activity related to our operating leases are as follows:

(In thousands)

 

Nine-month period ended September 30, 2019

 

Operating cash flow information:

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities

 

$

5,605

 

Non-cash activity:

 

 

 

 

Right-of-use assets obtained in exchange for lease obligations

 

$

770

 

(13) Commitments and Contingencies

The Company is currently party to various legal proceedings which are principally patent litigation matters. The Company has assessed such legal proceedings and does not believe that it is probable that a liability has been incurred or that


the amount of any potential liability or range of losses can be reasonably estimated. As a result, the Company did not record any loss contingencies for any of these matters. Litigation expenses are expensed as incurred.


Item 2.2.  Management’s Discussion and Analysis ofof Financial Condition and Results of Operations

The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q.

Background

We are a biopharmaceutical company focused on developing therapies that restore function and improve the lives of people with neurological disorders. We market Inbrija (levodopa inhalation powder), our most advanced development program,which is an investigational inhaled formulation of levodopaapproved in the U.S. for symptomsintermittent treatment of OFF episodes, also known as OFF periods, forin people with Parkinson’s on adisease treated with carbidopa/levodopa regimen.levodopa. Inbrija is for on-demand use and utilizes our innovative ARCUS pulmonary delivery system, a technology platform designed to deliver medication through inhalation that we believe has potential applicationsto be used in multiple disease areas.the development of a variety of inhaled medicines. We also market branded Ampyra (dalfampridine) Extended Release Tablets, 10 mg, as well as an authorized generic version of Ampyra marketed through Mylan AG.mg.

In February 2018, ourOur New Drug Application, or NDA, for Inbrija was accepted for filingapproved by the U.S. Food and Drug Administration, or FDA, on December 21, 2018. The approval is for a single dose of 84 mg, with no titration required. Inbrija became commercially available in the U.S. on February 28, 2019. Inbrija is marketed in the U.S. through our own specialty sales force and the FDA setcommercial infrastructure, and is being distributed primarily through a goal datenetwork of specialty pharmacies. Our sales representatives are targeting approximately 10,000 healthcare providers, currently focusing on a priority list of approximately 2,000 physicians who are high volume prescribers of levodopa/carbidopa. As of October 5, 2018, under30, 2019, Inbrija is available in the Prescription Drug User Fee Act, or PDUFA,U.S. without the need for reviewa medical exception for approximately 66% of commercial and 25% of Medicare plan lives. Our Inbrija launch activities have thus far been focused on physician awareness and market access. As we enter our next phase of the NDA. On September 13, 2018launch, we announced that the FDA extended the PDUFA date to January 5, 2019. This extension is related to recent submissions that we made in response to requests from the FDA for additional informationwill be maintaining these efforts while increasing focus on chemistry, manufacturing and controls (CMC). The FDA determined that these submissions constitute a major amendment and will take additional time to review. Our commercial preparations for the potential launch of Inbrija continue, including sales force training and education, managed care discussions, market research, disease statepatient awareness and social media initiatives.education. We are progressing development of a pricing strategy and analyzing expected product margins, which we plan to finalize near launch, if Inbrija is approved. We are projectingproject that if approved, annual peak net revenue of Inbrija in the U.S. alone could exceed $800 million.We have received letters from the FDA regarding the FDA’s pre-approval inspections of our Chelsea, Massachusetts manufacturing facility and the Inbrija inhaler device manufacturer's facility, indicating

On September 24, 2019, we announced that the FDA’s inspections of these facilities are successfully closed, without need for any further action by the FDA.

We are seeking approval to market Inbrija in the European Union, and accordingly we filed aCommission, or EC, approved our Marketing Authorization Application, or MAA, withfor Inbrija 33 mg inhalation powder, hard capsules. Under the MAA, Inbrija is indicated in the European Medicines Agency,Union, or EMA,EU, for the intermittent treatment of episodic motor fluctuations (OFF episodes) in March 2018. In May 2018, we announced thatadult patients with Parkinson’s disease treated with a levodopa/dopa-decarboxylase inhibitor. The MAA approves Inbrija for use in the EMA completed formal validation28 countries of the MAA for Inbrija,EU, as well as Iceland, Norway and that the review of the MAA will be according to standard timelines, with an opinion of the Committee for Medicinal Products for Human Use, or CHMP, expected within 210 days of the May 24, 2018 validation notification date (plus any clock-stops to provide answers to questions which may arise during the review). After the adoption of a CHMP opinion, a final decision regarding the MAA is carried out by the European Commission.Liechtenstein. We are in discussions with potential partners regarding the distribution of Inbrija outside of the U.S., with potential partners in Europe and Japan.

We currently derivehave been engaged in litigation with generic drug manufacturers relating to certain Ampyra patents, which is further described below and in Part II, Item 1 of this report. In 2017, a U.S. District Court issued a ruling that upheld our Ampyra Orange Book-listed patent that expired on July 30, 2018, but invalidated other Ampyra patents that were set to expire between 2025 and 2027. In September 2018, a U.S. Court of Appeals upheld this decision, and in October 2019, the U.S. Supreme Court denied our petition for certiorari requesting review of the case. As a result, our patent exclusivity with respect to Ampyra terminated on July 30, 2018, and we have experienced a significant decline in Ampyra sales due to competition from generic versions of Ampyra that have been marketed since the Court of Appeals decision. Additional manufacturers may market generic versions of Ampyra, and we expect our Ampyra sales will continue to decline over time.

On October 23, 2019, we announced a corporate restructuring to reduce costs and focus our resources on the commercial launch of Inbrija, which is our key strategic priority for the remainder of 2019. As part of the restructuring, we are reducing headcount by approximately 25% through a reduction in force. The majority of the reduction took place in the fourth quarter of 2019 immediately after the announcement, and the remainder will be completed by the first quarter of 2020. We expect to realize estimated annualized cost savings related to headcount reduction of approximately $21.0 million, beginning in the second quarter of 2020. We estimate that we will incur approximately $8.0 million of pre-tax charges, substantially all of which will be cash expenditures, for severance and other employee separation related costs in the fourth quarter of 2019 and the first quarter of 2020. As a result of the restructuring, we reduced our 2019 operating expense projections, as further described below under Financial Guidance for 2019 and 2020.

As of September 30, 2019, we had cash, cash equivalents and short-term investments of approximately $253.2 million, and we expect our 2019 year-end balance to be greater than $225 million. We have $345 million of convertible senior notes due in 2021 with a conversion price of $42.56. We have engaged an advisor to assist us in addressing this debt, a top priority in addition to our focus on the Inbrija launch.


Inbrija (levodopa inhalation powder)/Parkinson’s Disease

Inbrija (levodopa inhalation powder) is the first and only inhaled levodopa, or L-dopa, for intermittent treatment of OFF episodes, also known as OFF periods, in people with Parkinson’s disease treated with carbidopa/levodopa regimen. Our New Drug Application, or NDA, for Inbrija was approved by the U.S. Food and Drug Administration, or FDA, on December 21, 2018. The approval is for a single dose of 84 mg, with no titration required. Inbrija became commercially available in the U.S. on February 28, 2019.As of October 30, 2019, Inbrija is available in the U.S. without the need for a medical exception for approximately 66% of commercial and 25% of Medicare plan lives. Net revenue for Inbrija was $4.9 million for the quarter ended September 30, 2019. We project that annual peak net revenue of Inbrija in the U.S. alone could exceed $800 million.

On September 24, 2019, we announced that the European Commission, or EC, approved our Marketing Authorization Application, or MAA, for Inbrija 33 mg inhalation powder, hard capsules. Under the MAA, Inbrija is indicated in the EU for the intermittent treatment of episodic motor fluctuations (OFF episodes) in adult patients with Parkinson’s disease treated with a levodopa/dopa-decarboxylase inhibitor. The MAA approves Inbrija for use in the 28 countries of the EU, as well as Iceland, Norway and Liechtenstein. We are in discussions with potential partners regarding the distribution of Inbrija outside of the U.S., with potential partners in Europe and Japan.

Inbrija is marketed in the U.S. through our own specialty sales force and commercial infrastructure, and is distributed in the U.S. primarily through a network of specialty pharmacies. We believe we have built a leading neuro-specialty sales and marketing team through our commercialization of Ampyra, and that our commercial sale of Inbrija in the U.S. will benefit from the saleexperiences and capabilities of Ampyra. this team. We currently have approximately 90 sales representatives as well as established teams of Medical Science Liaisons, Regional Reimbursement Directors, and Market Access Account Directors who provide information to payers and physicians on our marketed products; a National Trade Account Director who works with our network of specialty pharmacies for Inbrija; and Market Development Managers who work collaboratively with field teams and corporate personnel to assist in the execution of the Company’s strategic initiatives. Our sales representatives are targeting approximately 10,000 healthcare providers, currently focusing on a priority list of approximately 2,000 physicians who are high volume prescribers of levodopa/carbidopa. Our Inbrija launch activities have thus far been focused on physician awareness and market access. As we enter our next phase of the launch, we will be maintaining these efforts while increasing focus on patient awareness and education.

In January 2019, we established Prescription Support Services, which we sometimes refer to as the Inbrija hub, a service provided by Acorda which is designed to help patients navigate their insurance coverage and offer reimbursement support services, when appropriate. Services fall into one of these four categories: insurance verification, to research patient insurance benefits and confirm insurance coverage; prior authorization support, to identify prior authorization requirements; appeals support; and assistance identifying which specialty pharmacy a patient will utilize based on their insurance coverage. For patients that may need assistance paying for their medication, Prescription Support Services offers several support options, including: a program that provides no cost medication to patients who meet specific program eligibility requirements; co-pay support, which may help commercially insured (non-government funded) patients lower their out-of-pocket costs; and a bridge program, for federally-insured patients who experience a delay in coverage determination. We have implemented a no-cost sample program, available at physician offices, to enable patients and their physicians to assess the value of Inbrija before the patient has to incur out-of-pocket co-pay or co-insurance costs. In addition, we have implemented a free trial program, available through the Inbrija hub, for commercially insured patients who cannot access the free samples because of offices and institutions that have policies that prohibit samples.

Parkinson’s disease is a progressive neurodegenerative disorder resulting from the gradual loss of certain neurons in the brain. These neurons are responsible for producing dopamine and that loss causes a range of symptoms including impaired movement, muscle stiffness and tremors. The standard baseline treatment of Parkinson’s disease is oral carbidopa/levodopa, but oral medication can be associated with wide variability in the timing and amount of absorption and there are significant challenges in creating a regimen that consistently maintains therapeutic effects. As Parkinson’s progresses, people are likely to experience OFF periods, which are characterized by the return of Parkinson’s symptoms that result from low levels of dopamine between doses oral carbidopa/levodopa. OFF periods are often highly disruptive to people with Parkinson’s. Approximately one million people in the U.S. and 1.2 million Europeans are diagnosed with Parkinson’s; it is estimated that approximately 40% of people with Parkinson’s in the U.S. experience OFF periods.

Inbrija is for on-demand use and utilizes our ARCUS platform for inhaled therapeutics. ARCUS is a dry-powder pulmonary drug delivery technology that we believe has potential to be used in the development of a variety of inhaled medicines. The ARCUS platform allows systemic delivery of medication through inhalation, by transforming molecules into a light, porous dry powder. This allows delivery of substantially higher doses of medication than can be delivered via


conventional dry powder technologies. We acquired the ARCUS technology platform as part of our 2014 acquisition of Civitas Therapeutics. We have worldwide rights to our ARCUS drug delivery technology, which is protected by extensive know-how and trade secrets and various U.S. and foreign patents, including patents that protect the Inbrija dry powder capsules beyond 2030. We have several patents listed in the Orange Book for Inbrija, including patents expiring between 2022 and 2032, and Inbrija is entitled to three years of data exclusivity, through December 2021, as posted in the Orange book.

FDA and European Commission approvals of Inbrija were based on a clinical program that included approximately 900 people with Parkinson’s on a carbidopa/levodopa regimen experiencing OFF periods. The Phase 3 pivotal trial for Inbrija – SPAN-PD – was a 12-week, randomized, placebo controlled, double blind study evaluating the effectiveness of Inbrija in patients with mild to moderate Parkinson’s experiencing OFF periods. In January 2019, we announced that The Lancet Neurology published results from the SPAN-PD clinical trial.

The SPAN-PD trial met its primary endpoint, with patients showing a statistically significant improvement in motor function at the week 12 visit, as measured by a reduction in Unified Parkinson’s Disease Rating Scale (UPDRS) Part III score for Inbrija 84 mg (n=114) compared to placebo (n=112) at 30 minutes post-dose (-9.83 points and -5.91 points respectively; p=0.009). Onset of action was seen as early as 10 minutes. Maintenance of effect continued to 60 minutes post-dose, which is the longest time point assessed in the trial. UPDRS III is a validated scale, which measures Parkinson’s disease motor impairment.

The most common adverse reactions with Inbrija (at least 5% and greater than placebo) in the pivotal trial were cough (15% vs. 2%), upper respiratory tract infection (6% vs. 3%), nausea (5% vs. 3%) and discolored sputum (5% vs. 0%).

Inbrija was also studied in a Phase 3 long-term, active-controlled, randomized, open-label study (N=398) assessing safety and tolerability over one year. This study showed the average reduction in FEV1 (forced expiratory volume in 1 second) from baseline was the same (-0.1 L) for the Inbrija and observational cohorts. Patients with chronic obstructive pulmonary disease (COPD), asthma, or other chronic respiratory disease within the last five years were excluded from this study.

Inbrija is not to be used by patients who take or have taken a nonselective monoamine oxidase inhibitor such as phenelzine or tranylcypromine within the last two weeks.

It is not known if Inbrija is safe or effective in children.

Ampyra

General

Ampyra was approved by the FDA in January 2010 to improve walking in adults with multiple sclerosis. To our knowledge, Ampyra is the first drug approved for this indication. Efficacy was shown in people with all four major types of MS (relapsing remitting, secondary progressive, progressive relapsing and primary progressive). Net revenue for Ampyra was $37.6 million for the quarter ended September 30, 2019 and $137.8 million for the quarter ended September 30, 2018.

Ampyra is marketed in the U.S. through our own specialty sales force and commercial infrastructure, and is distributed in the U.S. primarily through a network of specialty pharmacies which deliver the medication to patients by mail. We have contracted with a third party organization with extensive experience in coordinating patient benefits to run Ampyra Patient Support Services, or APSS, a dedicated resource that coordinates the prescription process among healthcare providers, people with multiple sclerosis, and insurance carriers. We have a 60-day free trial program that provides eligible patients with two months of Ampyra at no cost. We are evaluating the level of our continuing investment in certain Ampyra sales and marketing programs, including our free trial program and APSS, due to the introduction of generic competition and corresponding decline in Ampyra sales.

We have been engaged in litigation with certain generic drug manufacturers relating to our five initial Orange Book-listed Ampyra patents. In 2017, the United States District Court for the District of Delaware (the “District Court”) issued a ruling that upheld our Ampyra Orange Book-listed patent that expired on July 30, 2018, but invalidated our four other Orange Book-listed patents pertaining to Ampyra that were set to expire between 2025 and 2027. Under this decision, our patent exclusivity with respect to Ampyra terminated on July 30, 2018. We appealed the District Court decision to the United


States Court of Appeals for the Federal Circuit (the “Federal Circuit”), which issued a ruling onin September 10, 2018 upholding the District Court’s decision (the “Appellate Decision”). In October 2018, we filed aJanuary 2019, the Federal Circuit denied our petition for rehearing en banc regardingbanc. In October 2019, the Appellate Decision atU.S. Supreme Court denied our petition for certiorari requesting review of the Federal Circuit, which subsequently invited the generic drug manufacturers to respond to our petition.case. This litigation is discussed in further detail in Part II, Item 1 of this report. We are experiencinghave experienced a rapid and significant decline in Ampyra sales due to competition from generic versions of Ampyra that are being marketed following the Appellate Decision, including our own authorized generic version being marketed by Mylan AG. We expect that additionalDecision. Additional manufacturers willmay market generic versions of Ampyra, which may accelerate the decline in Ampyra sales.

Our strategic priorities for the remainder of 2018 and 2019 are as follows:

Attain approval for and initiate the U.S. launch of Inbrija. Importantly, we kept our commercial team intact despite a 2017 restructuring. We believe we have built a leading neuro-specialty sales and marketing team through our commercialization of Ampyra, and that our commercial launch of Inbrija in the U.S., if approved, will benefit from the experiences and capabilities of this team.


Subject to attaining approval for and launching Inbrija in the U.S., accelerate our efforts to develop additional therapeutics based on our proprietary ARCUS pulmonary drug delivery technology, looking at central nervous system, or CNS, as well as non-CNS opportunities. We expect our first priority in further ARCUS development to be accelerating our CVT-427 program to develop an inhalable triptan for treatment of acute migraine, which is further described below. A Phase 1 clinical trial of CVT-427 showed increased bioavailability and faster absorption compared to oral and nasal administration of the same active ingredient in healthy adults. However, our next step for this program is to reformulate to address evidence of bronchoconstriction shown in some subjects in a 2016 special population study of safe inhalation in people with asthma and in smokers.

We are also continuing to evaluate business development opportunities for late stage neurology assets that would leverage our neurology expertise and commercial capabilities.

As of September 30, 2018, we had cash, cash equivalents and short-term investments of approximately $460.9 million and we are projecting a 2018 year-end cash balance in excess of $400.0 million. We have $345 million of convertible senior notes due in 2021 with a conversion price of $42.56. We believe that we are sufficiently capitalized to fund operations through the launch of Inbrija in the U.S., pending approval from the FDA.

On October 30, 2018, we sold our Qutenza assets and NP-1998 development program. Qutenza is a dermal patch containing 8% prescription strength capsaicin the effects of which can last up to three months and is approved by the FDA for the management of neuropathic pain associated with post-herpetic neuralgia, also known as post-shingles pain. NP-1998 is a Phase 3 ready, 20% prescription strength capsaicin topical solution that we were previously assessing for the treatment of neuropathic pain. Under the asset purchase agreement, the buyer made aggregate cash payments to us of approximately $7.9 million for the assets and we are entitled to receive up to an additional $35.0 million in cash based on achievement of specified U.S. sales milestones for Qutenza and, if it receives FDA approval, NP-1998.

Ampyra

General

Ampyra was approved by the FDA in January 2010 to improve walking in adults with MS. To our knowledge, Ampyra is the first drug approved for this indication. Efficacy was shown in people with all four major types of MS (relapsing remitting, secondary progressive, progressive relapsing and primary progressive). Net revenue for Ampyra was $137.8 million for the three-month period ended September 30, 2018 and $132.6 million for the three-month period ended September 30, 2017.

We have been engaged in litigation with certain generic drug manufacturers relating to our five initial Orange Book-listed Ampyra patents. In 2017, the United States District Court for the District of Delaware (the “District Court”) issued a ruling that upheldexpect our Ampyra Orange Book-listed patent that expired on July 30, 2018, but invalidated our four other Orange Book-listed patents pertainingsales will continue to Ampyra that were set to expire between 2025 and 2027. Under this decision, our patent exclusivity with respect to Ampyra terminated on July 30, 2018. We appealed the District Court decision to the United States Court of Appeals for the Federal Circuit (the “Federal Circuit”), which issued a ruling on September 10, 2018 upholding the District Court’s decision (the “Appellate Decision”). In October 2018, we filed a petition for rehearing en banc regarding the Appellate Decision at the Federal Circuit, which subsequently invited the generic drug manufacturers to respond to our petition. This litigation is discussed in further detail in Part II, Item 1 of this report. We are experiencing a rapid and significant decline in Ampyra sales due to competition from generic versions of Ampyra that are being marketed following the Appellate Decision, including our own authorized generic version being marketed by Mylan AG. Mylan announced the launch of the authorized generic in mid-September 2018. We expect that additional manufacturers will market generic versions of Ampyra, which may accelerate the decline in Ampyra sales.

Ampyra is marketed in the U.S. through our own specialty sales force and commercial infrastructure. We currently have approximately 90 sales representatives in the field calling on a priority target list of approximately 7,000 physicians. We also have established teams of Medical Science Liaisons, Regional Reimbursement Directors, and Market Access Account Directors who provide information and assistance to payers and physicians on Ampyra; a National Trade Account Director who works with our limited network of specialty pharmacies; and Market Development Managers who work collaboratively with field teams and corporate personnel to assist in the execution of the Company’s strategic initiatives. We have a 60-day free trial program that provides eligible patients with two months of Ampyra at no cost.


Ampyra is distributed in the U.S. primarily through a limited network of specialty pharmacy providers, which deliver the medication to patients by mail, and ASD Specialty Healthcare, Inc. (an AmerisourceBergen affiliate), which distributes Ampyra to the U.S. Bureau of Prisons, the U.S. Department of Defense, the U.S. Department of Veterans Affairs, or VA, and other federal agencies. We have contracted with a third party organization with extensive experience in coordinating patient benefits to run Ampyra Patient Support Services, or APSS, a dedicated resource that coordinates the prescription process among healthcare providers, people with MS, and insurance carriers. We recently established relationships with six new pharmacies through which Ampyra is available, each of which is either affiliated with an integrated health delivery network or an academic medical center. These pharmacies are not part of our specialty pharmacy network, but rather receive prescriptions for Ampyra directly from prescribers without first being routed through APSS.over time.

License and Collaboration Agreement with Biogen

Ampyra is marketed as Fampyra outside the U.S. by Biogen International GmbH, or Biogen, under a license and collaboration agreement that we entered into in June 2009. Fampyra has been approved in a number of countries across Europe, Asia and the Americas. Under our agreement with Biogen, we are entitled to receive double-digit tiered royalties on sales of Fampyra and we are also entitled to receive additional payments based on achievement of certain regulatory and sales milestones. We received a $25 million milestone payment from Biogen in 2011, which was triggered by Biogen’s receipt of conditional approval from the European Commission for Fampyra. The next expected milestone payment would be $15 million, due when ex-U.S. net sales exceed $100 million over four consecutive quarters. In November 2017, we announced a $40 million Fampyra royalty monetization transaction with HealthCare Royalty Partners, or HCRP. In return for the payment to us, HCRP obtained the right to receive these Fampyra royalties up to an agreed-upon threshold. Until this threshold is met, if ever, we will not receive Fampyra royalties although we have retained the right to receive any potential future milestone payments, described above. The HCRP transaction is accounted for as a liability, as described in Note 810 to our Consolidated Financial Statements included in this report.

Ampyra Patent Update

Six issued Ampyra patents have been listed in the Orange Book. The five initial Orange Book-listed patents have been the subject of litigation with certain generic drug manufacturers, as described above. In connection with the litigation, our Orange Book-listed patent that expired on July 30, 2018, was upheld, but four other Ampyra patents set to expire between 2025 and 2027 were invalidated. We have filed a request to have these four patents delisted from the Orange Book. The litigation is discussed in further detail in Part II, Item 1 of this report.

The sixth Orange Book-listed patent (U.S. Patent No. 9,918,973), set to expire in 2024, was more recently issued and was not involved in the litigation, was issued more recently and was listed inlitigation. We have filed a request to have this patent delisted from the Orange Book in April 2018. The sixth Orange Book-listed patent is U.S. Patent No. 9,918,973, the claims of which relate to methods of increasing walking speed in patients with MS by administering 10 mg of sustained release 4-aminopyridine (dalfampridine) twice daily. This patent will expire in 2024.Book. We note that this patent doesdid not entitle us to any additional statutory stay of approval under the Hatch-Waxman Act against the generic drug manufacturers that arewere involved in the patent litigation described in this report.

In 2011, the European Patent Office, or EPO, granted EP 1732548, with claims relating to, among other things, use of a sustained release aminopyridine composition, such as dalfampridine (known under the trade name Fampyra in the European Union), to increase walking speed. In March 2012, Synthon B.V. and neuraxpharm Arzneimittel GmBH filed oppositions with the EPO challenging the EP 1732548 patent. We defended the patent, and in December 2013, we announced that the EPO Opposition Division upheld amended claims in this patent covering a sustained release formulation of dalfampridine for increasing walking in patients with MS through twice daily dosing at 10 mg. Both Synthon B.V. and neuraxpharm Arzneimittel GmBH have appealed the decision. In December 2013, Synthon B.V., neuraxpharm Arzneimittel GmBH and Actavis Group PTC EHF filed oppositions with the EPO challenging our EP 2377536 patent, which is a divisional of the EP 1732548 patent. In February 2016, the EPO Opposition Division rendered a decision that revoked the EP 2377536 patent. We believe the claims of this patent are valid and we have appealed the decision. In the Appeal Hearings in September 2019, the European Technical Board of Appeals upheld claims covering Fampyra in both the EP 1732548 patent and the EP 2377536 patent. Both European patents if upheld as valid, are set to expire in 2025, absent any additional exclusivity granted based on regulatory review timelines. In June 2019, the EPO granted EP 2460521, which is a divisional of the EP 2377536 patent. The EP 2460521 patent may be opposed by a third party within nine months of the date of grant. This patent is also set to expire in 2025. Fampyra also has 10 years of market exclusivity in the European Union that is set to expire in 2021.

We will vigorously defend our intellectual property rights.


Research & Development Programs

We have a pipeline of novel neurological therapies addressing a range of disorders, including Parkinson’s disease and MS. Inbrija (levodopa inhalation powder) is our most advanced development program and our highest priority. This program and the other programs in our pipeline are described below.

Inbrija (levodopa inhalation powder)/Parkinson’s Disease

Inbrija is a self-administered, inhaled formulation of levodopa, or L-dopa, for the treatment of OFF periods in people with Parkinson’s disease who are taking a carbidopa/levodopa regimen. Parkinson’s disease is a progressive neurodegenerative disorder resulting from the gradual loss of certain neurons in the brain responsible for producing dopamine. The disease causes a range of symptoms such as impaired ability to move, muscle stiffness and tremor. The standard of care for the treatment of Parkinson’s disease is oral carbidopa/levodopa, but oral medication can be associated with wide variability in the timing and amount of absorption and there are significant challenges in creating a regimen that consistently maintains therapeutic effects as Parkinson’s disease progresses. The re-emergence of symptoms is referred to as an OFF period, and despite optimized regimens with current therapeutic options and strategies, OFF periods remain one of the most challenging aspects of the disease.

Inbrija delivers a precise dose of dry-powder formulation of L-dopa to the lung using a breath-actuated proprietary inhaler. Oral medication can be associated with slow and variable onset of action, as the medicine is absorbed through the gastrointestinal (digestive) tract before reaching the brain. Inhaled treatments enter the body through the lungs and reach the brain shortly thereafter, bypassing the digestive system. Inbrija is based on our proprietary ARCUS platform, a dry-powder pulmonary drug delivery technology that we believe has potential applications in multiple disease areas. A key feature of our ARCUS technology is the large porous particles that allow for consistent and precise delivery of significantly larger doses of medication than are possible with conventional dry powder pulmonary systems. This in turn provides the potential for pulmonary delivery of a much wider variety of pharmaceutical agents. We have worldwide rights to our ARCUS drug delivery technology, which is protected by extensive know-how and trade secrets and various U.S. and foreign patents, including patents that protect the Inbrija dry powder capsules beyond 2030.

In 2016, we completed a Phase 3 efficacy and safety clinical trial of Inbrija for the treatment of OFF periods in Parkinson’s disease. In February 2017, we announced efficacy and safety data from this clinical trial, showing a statistically significant improvement in motor function in people with Parkinson’s experiencing OFF periods. The clinical trial had three arms: Inbrija 84 mg and 60 mg doses (equivalent to 50 mg and 35 mg fine particle doses, respectively), and placebo. The trial met its primary outcome measure of improvement in motor function as measured by the Unified Parkinson’s Disease Rating Scale-Part 3 (UPDRS Part III) in people with Parkinson’s experiencing OFF periods. UPDRS III is a validated scale, which measures Parkinson’s disease motor impairment. The primary endpoint was measured at 30 minutes post-treatment for the 84 mg dose at the 12-week visit. UPDRS Part III change was -9.83 compared to -5.91 for placebo with a p value of 0.009. The magnitude of Inbrija’s benefit versus baseline was consistent with the data from the prior Phase 2b clinical trial, further described below, and represents a statistically significant, clinically meaningful improvement in motor function. The placebo-adjusted difference was lower in the Phase 3 clinical trial than the Phase 2b clinical trial but still represented a clinically important difference. In June 2017, we announced additional data from the Inbrija Phase 3 efficacy and safety trial at the International Congress of Parkinson’s Disease and Movement Disorders (MDS). The secondary endpoints of achievement of an ON state with maintenance through 60 minutes (statistically significant), Patient Global Impression of Change (PGIC), and reduction in UPDRS III score at 10 minutes were supportive of the primary endpoint result.

The safety profile of Inbrija in the trial was consistent with that observed in a prior Phase 2b clinical trial:

84 mg, 60 mg and Placebo: Adverse events reported in any study arm at greater than 5% were cough, upper respiratory tract infection, throat irritation, nausea and sputum discoloration. Cough was the most common adverse event, reported by approximately 15% of subjects who received Inbrija. When reported, it was typically mild and reported once per participant during the course of treatment. Three of 227 participants receiving Inbrija discontinued the study due to cough. Reports of serious adverse events were: 3, or 2.7% in the placebo arm, 6, or 5.3% in the 60 mg arm, and 2, or 1.8% in the 84 mg arm. There was one death in the study, a suicide in the 60 mg group, judged by the investigator not to be related to drug.

84 mg: The most commonly reported adverse events in the Inbrija 84 mg group compared to the placebo group were: cough (14.9% vs. 1.8%, reported mostly once/subject), upper respiratory tract infection (6.1% vs. 2.7%), nausea (5.3% vs. 2.7%), sputum discoloration (5.3% vs. 0%) and dyskinesia (3.5% vs. 0.0%). When cough was


reported, it was typically characterized as mild. Two of 114 participants receiving Inbrija 84 mg discontinued the study due to cough.

Results from a separate Phase 3 study to assess the long-term safety profile of Inbrija in people with Parkinson’s showed no statistical difference in pulmonary function between the group receiving Inbrija and an observational control group. These results are consistent with the previously reported Phase 2b and Phase 3 clinical trials. In March 2017, we announced results from separate clinical studies that assessed the safety profile of Inbrija in people with asthma, smokers and early morning OFF.

In February 2018, our Inbrija NDA was accepted for filing by the FDA, and the FDA set a goal date of October 5, 2018, under the Prescription Drug User Fee Act, or PDUFA, for review of the NDA. On September 13, 2018, we announced that the FDA extended the PDUFA date to January 5, 2019. This extension is related to recent submissions we made in response to requests from the FDA for additional information on chemistry, manufacturing and controls (CMC). The FDA determined that these submissions constitute a major amendment and will take additional time to review.

The NDA was submitted under section 505(b)(2) of the Food Drug and Cosmetic Act, referencing data from the branded L-dopa product Sinemet®. We believe the Phase 3 efficacy and safety clinical trial, combined with data from additional Phase 3 long-term safety studies and supported by existing Phase 2b data, are sufficient for the NDA filing. Our commercial preparations for the launch of Inbrija continue, including sales force training and education, managed care discussions, market research, disease state awareness and social media initiatives. We are progressing development of a pricing strategy and analyzing expected product margins, which we plan to finalize near launch, if Inbrija is approved. We believe we have built a leading neuro-specialty sales and marketing team through our commercialization of Ampyra, and that our launch of Inbrija in the U.S., if approved, will benefit from the experiences and capabilities of this team. We are projecting that, if approved, annual peak net revenue of Inbrija in the U.S. alone could exceed $800 million. We have received letters from the FDA regarding the FDA’s pre-approval inspections of our Chelsea, Massachusetts manufacturing facility and the Inbrija inhaler device manufacturer's facility, indicating that the FDA’s inspections of these facilities are successfully closed, without need for any further action by the FDA.

We are seeking approval to market Inbrija in the European Union, and accordingly we filed a Marketing Authorization Application, or MAA, with the European Medicines Agency, or EMA, in March 2018. In May 2018, we announced that the EMA completed formal validation of the MAA for Inbrija, and that the review of the MAA will be according to standard timelines, with an opinion of the Committee for Medicinal Products for Human Use, or CHMP, expected within 210 days of the May 24, 2018 validation notification date (plus any clock-stops to provide answers to questions which may arise during the review). After the adoption of a CHMP opinion, a final decision regarding the MAA is carried out by the European Commission. We are in discussions with potential partners regarding Inbrija outside of the U.S.

In April 2018, we presented new Inbrija data from four accepted abstracts during two oral platform presentations at the American Academy of Neurology Annual Meeting. These presentations included a safety assessment in early morning OFF symptoms in patients with Parkinson’s disease and long-term pulmonary safety and efficacy of inhaled levodopa in Parkinson’s disease.

ARCUS Product Development

In addition to Inbrija (levodopa inhalation powder), discussed above, our strategic priorities includeWe have been exploring opportunities for other proprietary products in which inhaled delivery of medicine using our ARCUS drug delivery technology can provide a significant therapeutic benefit to patients. Disorders of theWe believe there are potential opportunities with central nervous system, or CNS, in addition to Parkinson’s disease, may be addressed byas well as non-CNS, disorders.


Our ARCUS products with the delivery of active agents to the CNS with rapid onset and reduced systemic exposure. We are also considering non-CNS opportunities for ARCUS.

CVT-427 is our most advanced ARCUSdevelopment has been focused on a program other than Inbrija, and one of our strategic priorities. CVT-427 is an inhaled triptan (zolmitriptan) intended for acute treatment of migraine by using the ARCUS drug delivery technology. Triptans are the class of drug most commonly prescribed for acute treatment of migraine. Oral triptans, which accountExisting oral therapies for the majority of all triptan doses,migraine can be associated with slow onset of action and gastrointestinal challenges. The slow onset of action, usually 30 minutes or longer, can result in poor response rates. Patients cite the need for rapid relief from migraine symptoms as their most desired medication attribute. Additionally, individuals with migraine may suffer from nausea and delayed gastric emptying which further impact the consistency and efficacy of the oral route of administration. Triptans delivered subcutaneously (injection) provideWe have been evaluating therapeutic candidates for their suitability to move forward with this program. Due to the most rapid onsetrestructuring described above and associated cost-cutting measures, we have deferred consideration of action, but are not convenient for patients. Many triptans


are also available in nasally delivered formulations. However, based on available data, we believe that nasally delivered triptans generally have an onset of action similar to orally administered triptans.

In December 2015, we initiated and completed a Phase 1 safety/tolerability and pharmacokinetic clinical trial of CVT-427 for acute treatment of migraine. In June 2016, at the 58th Annual Scientific Meeting of the American Headache Society, we presented pharmacokinetic data from the Phase 1 trial which showed increased bioavailability and faster absorption compared to oral and nasal administration of the same active ingredient in healthy adults. In particular, the data showed that CVT-427 had a median Tmax of about 12 minutes for all dose levels compared to 1.5 hours for the oral tablet and 3.0 hours for the nasal spray. There were no serious adverse events, dose-limiting toxicities, evidence of bronchoconstriction or discontinuations due to adverse events reportedfurther investment in this study. The most commonly reported treatment-emergent adverse events were cough, chest discomfort, headache, and feeling hot. Apart from cough, single dose CVT-427 tolerability was generally consistentprogram pending additional progress with the known safety profile of zolmitriptan. In December 2016, we completed a special population study to evaluate safe inhalation of CVT-427 in people with asthma and in smokers. Some subjects showed evidence of acute, reversible bronchoconstriction, post-inhalation. We plan to accelerate work on reformulating to move the program forward as a strategic priority, subject attaining approval for and launching Inbrija in the U.S.launch.

In July 2015, the Bill & Melinda Gates Foundation awarded us a $1.4 million grant to support the development of a formulation and delivery system for a dry powder version of lung surfactant, a treatment for neonatal respiratory distress syndrome, or nRDS. In collaboration with the Massachusetts Institute of Technology, we developed a novel formulation and delivery device based on our proprietary ARCUS drug delivery technology. nRDS is a condition affecting prematurely born infants in which their lungs are underdeveloped and thus lack a sufficient amount of lung surfactant. It can be fatal, or lead to severe, chronic health issues caused by a lack of oxygen getting to the baby’s brain and other organs. Delivering liquid surfactant to the lungs via intubation is the standard of care. We believe that our formulation and delivery system may present a more practical alternative for use in developing areas of the world, where intubation poses numerous problems. Based on recent achievement of pre-clinical proof of concept, the foundation has expanded the funding to include pre-IND development. This program is not aimed at developing a commercial product, but our work on this program (funding for which has not been impacted by the restructuring) could potentially generate information that is useful for adapting the ARCUS drug delivery technology to commercial pediatric uses.

We are also beginning to formulate potential ARCUS products for two different rare lung diseases.

Other Research and Development Programs

Following is a description of ourOur other research and development programs include rHIgM22 and Cimaglermin alpha. rHIgM22 is a remyelinating antibody that is a potential therapeutic for multiple sclerosis. Data from a Phase 1 safety and tolerability trial showed that a single dose of rHIgM22 was not associated with any safety signals. The study was not powered to show efficacy and exploratory measures showed no difference between the treatment groups. Cimaglermin alfa is a member of the neuregulin growth factor family, and has been shown to promote recovery after neurological injury, as well as enhance heart function in animal models of heart failure. We initiated a Phase 1b clinical trial assessing three doses of cimaglermin in people with heart failure, but discontinued enrollment and then received an FDA clinical hold based on the occurrence of a case of hepatotoxicity (liver injury). The FDA clinical hold was lifted after we presented additional data on the hepatotoxicity, but we have not since restarted any clinical study of cimaglermin. We are considering next steps for these programs, which could include potential partnering or out-licensing, but due to the restructuring described above and associated cost-cutting measures, we have deferred consideration of any further investment pending additional progress with the Inbrija launch.

We were previously developing SYN120 and BTT1023, but have no current plans to further invest in these programs.

SYN120: SYN120 is a potential treatment for Parkinson’s-related dementia, which we acquired with Biotie Therapies. Data from a Phase 2 exploratory study that we completed in 2017 showed that several of the outcome measures trended in favor of drug versus placebo, particularly with respect to neuropsychiatric symptoms. However, neither the primary nor key secondary endpoints achieved statistical significance. We are continuing to review the data.

BTT1023: Through Biotie Therapies, we are alsowere developing BTT1023 (timolumab), a product candidate for the orphan disease Primary Sclerosing Cholangitis, or PSC, a chronic and progressive liver disease. There are no approved drug therapies for PSC and liver transplant is the only treatment. Interim data from an ongoingThe University of Birmingham was conducting a Phase 2 proof-of-concept clinical trial of BTT1023 for PSC, are expectedbut the university informed us in January 2019 that they terminated the fourth quartertrial. Pending review of 2018.

rHIgM22: We are developing rHIgM22, a remyelinating antibody, as a potential therapeutic for MS. We believe a therapy that could repair myelin sheaths hasfinal data from the discontinued trial, we intend to evaluate the potential to restore neurological function to those affected by demyelinating conditions. We have completed and analyzed data from a Phase 1 trial using one of two doses of rHIgM22 or placebo in 27 people with MS who experienced an acute relapse. In addition to assessing safety and tolerability during an acute relapse, the study included exploratory efficacy measures such as a timed walk, magnetization transfer ratio imaging of lesion myelination in the brain and various biomarkers. Data from the trial showed that a single dose of rHIgM22 was not associated with any safety signals. The trial’s primary objectives were safety and tolerability of a single dose following a relapse. The study was not powered to show efficacy and exploratory measures showed no difference between the treatment groups. We are considering next steps for the program.out-licensing.

Cimaglermin alfa: Cimaglermin alfa is a member of the neuregulin growth factor family, and has been shown to promote recovery after neurological injury, as well as enhance heart function in animal models of heart failure. In


2013, we commenced a Phase 1b single-infusion trial in people with heart failure, which assessed the tolerability of three dose levels of cimaglermin, and also included an assessment of drug-drug interactions and several exploratory measures of efficacy. In 2015 we announced that we had stopped enrollment in this trial based on the occurrence of a case of hepatotoxicity (liver injury) manifested by clinical symptoms and an elevation in liver chemistry tests meeting the FDA Drug-Induced Liver Injury Guidance (FDA 2009) stopping rules. We also received a notification of clinical hold from the FDA following submission of this information. The abnormal blood tests resolved within two to three weeks. We subsequently conducted additional analyses and non-clinical studies to further define the nature of the hepatoxicity, and met with the FDA to present these data as part of our request that the program be removed from the clinical hold. The FDA lifted the clinical hold in April 2017. We are seeking to partner or out-license this program.

Financial Guidance for 20182019 and 2020

We are providing the following guidance with respect to our 20182019 financial performance:

We expect 2018 net revenueperformance, which is an update from the sale of Ampyra to be more than $400 million. This guidance is raised from or prior guidance of $330 million to $350 million.

Researchon research and development (R&D) expenses in 2018 are expected to range from $100 million to $110 million, excluding share-based compensation charges and including pre-launch manufacturing expenses associated with Inbrija.

Selling,selling, general and administrative (SG&A) operating expenses in 2018due to the restructuring described above:

We expect 2019 net revenue from the sale of Ampyra to be greater than $140 million.

R&D expenses in 2019 are expected to range from $55 million to $60 million, reduced from our prior guidance of $70 million to $80 million, excluding restructuring costs and share-based compensation charges.

SG&A expenses in 2019 are expected to range from $185 million to $190 million, reduced from our prior guidance of $200 million to $210 million, excluding restructuring costs and share-based compensation charges.


We are expectedproviding the following guidance with respect to range from $170 million to $180 million, excluding share-based compensation charges.

We have increased our projected 2018 year-end cash balance from our prior guidance of more than $300 million to more than $400 million.2020 financial performance:

R&D expenses in 2020 are expected to range from $20 million to $25 million, excluding restructuring costs and share-based compensation charges.

SG&A expenses in 2020 are expected to range from $160 million to $165 million, excluding restructuring costs and share-based compensation charges.

The projected rangeranges of R&D and SG&A expenses in 20182019 and 2020 are provided on a non-GAAP basis, as both excludingexclude restructuring costs and share-based compensation charges. Due to the forward looking nature of this information, the amount of compensation charges and benefits needed to reconcile these measures to the most directly comparable GAAP financial measures is dependent on future changes in the market price of our common stock and is not available at this time. Non-GAAP financial measures are not an alternative for financial measures prepared in accordance with GAAP. However, we believe the presentation of these non-GAAP financial measures, when viewed in conjunction with actual GAAP results, provides investors with a more meaningful understanding of our projected operating performance because they exclude (i) expenses that pertain to non-routine restructuring events, and (ii) non-cash charges that are substantially dependent on changes in the market price of our common stock. We believe these non-GAAP financial measures help indicate underlying trends in our business, and are important in comparing current results with prior period results and understanding expected operating performance. Also, our management uses these non-GAAP financial measures to establish budgets and operational goals, and to manage our business and to evaluate its performance.

Results of Operations

Three-Month Period Ended September 30, 20182019 Compared to September 30, 20172018

Net Product Revenues

AmpyraInbrija

We recognize product sales of AmpyraInbrija following receipt of product by companies in our distribution network, which primarily includes specialty pharmacy providers and ASD Specialty Healthcare, Inc. We recognized net revenue from the sale of Inbrija of $4.9 million for the three-month period ended September 30, 2019.

Ampyra

We recognize product sales of Ampyra following receipt of product by companies in our distribution network, which primarily includes specialty pharmacy providers. We recognized net revenue from the sale of Ampyra of $137.8$37.6 million and $132.6$137.8 million for the three-month periods ended September 30, 2019 and 2018, and 2017, respectively, an increasea decrease of $5.2$100.2 million, or 3.9%73%. The net revenue increase isdecrease comprised decreased net volume of net price increases, net of$100.3 million partially offset by discount and allowance adjustments of $7.3 million offset by decreased net volume of $2.1 million. Effective January 1 and July 1, 2018, we increased our list sale price to our customers by 9.5%.


Discounts and allowances which are included as an offset in net revenue consist of allowances for customer credits, including estimated chargebacks, rebates and discounts. Discounts and allowances are recorded following shipment of Ampyra tablets to our customers. Adjustments are recorded for estimated chargebacks, rebates, and discounts. Discounts and allowances also consist of discounts provided to Medicare beneficiaries whose prescription drug costs cause them to be subject to the Medicare Part D coverage gap (i.e., the “donut hole”). Payment of coverage gap discounts is required under the Affordable Care Act, the health care reform legislation enacted in 2010. Discounts and allowances may increase as a percentage of sales as we enter into managed care contracts in the future.

Other Net Product Revenues

We recognized net revenue from the sale of other products of $2.2 million for the three-month period ended September 30, 2018, as compared to $1.8 million for the three-month period ended September 30, 2017, an increase of $0.4$0.1 million.

Discounts and allowances which are included as an offset in net revenue consist of allowances for customer credits, including estimated chargebacks, rebates, returns and discounts.

Royalty Revenue

We recognized $2.8 million and $3.1 million in royalty revenue for the three-month periods ended September 30, 2018 and 2017, respectively related to ex-U.S. sales of Fampyra by Biogen.

We recognized $0.5 million and $0.8 million in royalty revenue for the three-month period ended September 30, 2017, related to the authorized generic sale of Zanaflex Capsules and Selincro, respectively. We sold Zanaflex and monetized Selincro in fiscal 2017.

License Revenue

We recognized $2.3 million in license revenue for the three-month period ended September 30, 2017, related to the $110.0 million received from Biogen in 2009 as part of our collaboration agreement. As of January 1, 2018, we adopted ASC 606 “Revenue from Contracts with Customers” (“ASC 606). Under ASC 606, revenue related to the upfront payment is recognized at a point in time rather than over time. As a result of adopting ASC 606, we recognized the remaining deferred revenue as of January 1, 2018 as a cumulative effect adjustment to the accumulated deficit on the consolidated balance sheet as of January 1, 2018.

Cost of Sales

We recorded cost of sales of $25.4 million for the three-month period ended September 30, 2018 as compared to $30.0 million for the three-month period ended September 30, 2017. Cost of sales for the three-month period ended September 30, 2018 consisted primarily of $23.1 million in inventory costs related to recognized revenues, $1.7 million in royalty fees based on net product shipments, $0.2 million for costs related to the amortization of intangible assets and $0.2 million for costs related to sales of the authorized generic version of Ampyra. Cost of sales for the three-month period ended September 30, 2017 consisted primarily of $22.8 million in inventory costs related to recognized revenues, $3.0 million in royalty fees based on net product shipments, $2.4 million for costs related to Selincro, $0.9 million related to the cost of Zanaflex Capsules authorized generic product sold and $0.7 million related to the amortization of intangible assets.

Cost of License Revenue

We recorded cost of license revenue of $0.2 million for the three-month period ended September 30, 2017. Cost of license revenue represented the recognition of a portion of the deferred $7.7 million paid to Alkermes in 2009 in connection with the $110.0 million received from Biogen as a result of our collaboration agreement. As of January 1, 2018, we adopted ASC 606 “Revenue from Contracts with Customers” (“ASC 606). As a result of adopting ASC 606, we recognized the remaining deferred cost of license revenue as of January 1, 2018 as a cumulative effect adjustment to the accumulated deficit on the consolidated balance sheet as of January 1, 2018.


Research and Development

Research and development expenses for the three-month period ended September 30, 2018 were $22.9 million as compared to $33.3 million for the three-month period ended September 30, 2017, a decrease of approximately $10.4 million, or 31%. The decrease was due primarily to reductions in spending of $11.6 million due to the termination of tozadenant development program and $0.8 million in reduced spending for certain other programs partially offset by an increase of $1.9 million related to manufacturing cost in preparation for the upcoming Inbrija launch.

Selling, General and Administrative

Sales and marketing expenses for the three-month period ended September 30, 2018 were $22.7 million compared to $20.8 million for the three-month period ended September 30, 2017, an increase of approximately $1.9 million, or 9.1%. The increase was attributable to an increase in overall salaries and benefits of $1.1 million, an increase in marketing related spending of $0.5 million and an increase in other selling related expenses of $0.3 million.

General and administrative expenses for the three-month period ended September 30, 2018 were $20.9 million compared to $20.0 million for the three-month period ended September 30, 2017, an increase of approximately $0.9 million, or 4.5%. This increase was primarily due to an increase in legal costs of $0.9 million and certain other costs of $0.5 million, partially offset by a decrease in salaries and benefits related costs of $0.4 million.

Asset Impairments

We recognized an asset impairment charge of $39.4 million in the three-month period ended September 30, 2017 related to our intangible asset for Selincro. We reviewed the intangible asset for impairment due to a downward revision to the projected royalty revenue we expect to receive. As a result of the review, we determined that the carrying value of the asset was greater than the estimated fair market value as of September 30, 2017. We did not recognize any asset impairment charge in the three-month period ended September 30, 2018.

Changes in Fair Value of Acquired Contingent Consideration

As a result of the original Civitas spin out of Alkermes, part of the consideration to Alkermes was a future royalty to be paid to Alkermes on Civitas products. Acorda acquired this contingent consideration as part of the Civitas acquisition. The fair value of that future royalty is assessed quarterly. We recorded expense pertaining to changes in the fair-value of acquired contingent consideration of $22.7 million for the three-month period ended September 30, 2018 as compared to an income of $0.4 million for the three-month period ended September 30, 2017. Changes in the fair-value of the acquired contingent consideration were due to the re-calculation of discounted cash flows for the passage of time and changes to certain other estimated assumptions.

Other Expense, Net

Other expense, net was $4.2 million for the three-month periods ended September 30, 2018 and September 30, 2017. This was due primarily to an increase in interest income of $1.0 million offset by an increase in interest and amortization of debt discount expense of $1.2 million.

Provision for Income Taxes

For the three-month periods ended September 30, 2018 and 2017, the Company recorded a $38.0 million and $18.9 million provision for income taxes, respectively. The effective income tax rates for the Company for the three-month periods ended September 30, 2018 and 2017 were 157.8% and (298.2%), respectively. The variance in the effective tax rates for the three-month period ended September 30, 2018 as compared to the three-month period ended September 30, 2017 was due primarily to differences in pre-tax book income between the periods, the decrease in the federal statutory tax rate as a result of tax reform, the valuation allowance recorded on deferred tax assets for which no tax benefit can be recognized, state taxes, and the reduction in the research and development tax credit.


The Company continues to evaluate the realizability of its deferred tax assets and liabilities on a quarterly basis and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant tax authorities, the progress of ongoing tax audits and the regulatory approval of products currently under development. Any changes to the valuation allowance or deferred tax assets and liabilities in the future would impact the Company's income taxes.

Nine-Month Period Ended September 30, 2018 Compared to September 30, 2017

Net Product Revenues

Ampyra

We recognize product sales of Ampyra following receipt of product by companies in distribution network, which primarily includes specialty pharmacy providers and ASD Specialty Healthcare, Inc. We recognized net revenue from the sale of Ampyra of $390.9 million and $376.1 million for the nine-month periods ended September 30, 2018 and 2017, respectively, an increase of $14.8 million, or 4%. The net revenue increase is comprised of net price increases, net of discount and allowance adjustments of $20.2 million, offset by decreased net volume of $5.4 million. Effective January 1 and July 1, 2018, we increased our list sale price to our customers by 9.5%.

Discounts and allowances which are included as an offset in net revenue consist of allowances for customer credits, including estimated chargebacks, rebates and discounts. Discounts and allowances are recorded following shipment of Ampyra tabletsour products to our customers. Adjustments are recorded for estimated chargebacks, rebates, and discounts. Discounts and allowances also consist of discounts provided to Medicare beneficiaries whose prescription drug costs cause them to be subject to the Medicare Part D coverage gap (i.e., the “donut hole”). Payment of coverage gap discounts is required under the Affordable Care Act, the health care reform legislation enacted in 2010. Discounts and allowances may increase as a percentage of sales as we enter into managed care contracts in the future.

Other Net Product Revenues

We recognized net revenue from the sale of other products of $2.5$2.3 million for the nine-monththree-month period ended September 30, 2018,2019 as compared to $3.6$2.2 million for the nine-monththree-month period ended September 30, 2017, a decrease of $1.1 million. The decrease was due primarily to the sale of Zanaflex assets in fiscal 2017.2018.


Discounts and allowances, which are included as an offset in net revenue, consist of allowances for customer credits, including estimated chargebacks, rebates, returns and discounts.

Royalty Revenue

We recognized $8.9$2.9 million and $8.5$2.8 million in royalty revenue for the nine-monththree-month periods ended September 30, 20182019 and 2017,2018, respectively, related to ex-U.S. sales of Fampyra by Biogen.

We recognized $2.6 million and $2.3 million in royalty revenue for the nine-month period ended September 30, 2017, related to the authorized generic sale of Zanaflex Capsules and Selincro, respectively. We sold Zanaflex and monetized Selincro in fiscal 2017.

License Revenue

We recognized $6.8 million in license revenue for the nine-month period ended September 30, 2017, related to the $110.0 million received from Biogen in 2009 as part of our collaboration agreement. As of January 1, 2018, we adopted ASC 606 “Revenue from Contracts with Customers” (“ASC 606). Under ASC 606, revenue related to the upfront payment is recognized at a point in time rather than over time. As a result of adopting ASC 606, we recognized the remaining deferred revenue as of January 1, 2018 as a cumulative effect adjustment to the accumulated deficit on the consolidated balance sheet as of January 1, 2018.


Cost of Sales

We recorded cost of sales of $77.8$8.0 million for the nine-monththree-month period ended September 30, 20182019 as compared to $84.8$25.2 million for the nine-monththree-month period ended September 30, 2017.2018. Cost of sales for the nine-monththree-month period ended September 30, 20182019 consisted primarily of $68.2$7.2 million in inventory costs related to recognized revenues, $7.5$0.2 million in royalty fees based on net product shipments $1.6and $0.5 million for costs related to sales of the amortizationauthorized generic version of intangible assetsAmpyra. Cost of sales for the three-month period ended September 30, 2018 consisted primarily of $23.1 million in inventory costs related to recognized revenues, $1.7 million in royalty fees based on net product shipments and $0.2 million for costs related to sales of the authorized generic version of Ampyra. Cost of sales for inventory manufactured pre-launch for Inbrija was not recorded for the nine-monththree-month period ended September 30, 2017 consisted primarily2019, since the inventory manufactured prior to the FDA approval was expensed as research and development expense as incurred and was combined with other research and development expenses in 2018.

Amortization of $66.0 million in inventory costs related to recognized revenues, $8.5 million in royalty fees based on net product shipments, costs related to Selincro of $6.9 million, the cost of Zanaflex Capsules authorized generic product sold of $1.6 million and 1.6 million related to theintangibles

We recorded amortization of intangible assets.

Costasset related to Inbrija of License Revenue

We recorded cost of license revenue of $0.5$7.7 million for the nine-monththree-month period ended September 30, 2017. Cost of license revenue represented2019 as compared to $0.2 million related to Ampyra for the recognition of a portion of the deferred $7.7 million paid to Alkermes in 2009 in connection with the $110.0 million received from Biogen as a result of our collaboration agreement. As of January 1, 2018, we adopted ASC 606 “Revenue from Contracts with Customers” (“ASC 606). As a result of adopting ASC 606, we recognized the remaining deferred cost of license revenue as of January 1, 2018 as a cumulative effect adjustment to the accumulated deficit on the consolidated balance sheet as of January 1,three-month period ended September 30, 2018.

Research and Development

Research and development expenses for the nine-monththree-month period ended September 30, 2019 were $16.1 million as compared to $22.9 million for the three-month period ended September 30, 2018, were $79.3 million as compared to $131.0 million for the nine-month period ended September 30, 2017, a decrease of approximately $51.7$6.8 million, or 39.5%30%. The decrease was due primarily to reductions in spending of $26.8$5.5 million due to the terminationcommercialization of the tozadenant development program, $6.8 million primarily for Inbrija, as the clinical trials for Inbrija are winding down, $4.4 million for Ampyra life cycle management program, $6.7 million forand decreases in overall salaries and benefits related costs, $4.3 million decrease in restructuring costs and $2.4 million for certain other programs.programs of $1.5 million, partially offset by other programs of $0.2 million.

Selling, General and Administrative

Sales and marketing expenses for the nine-monththree-month period ended September 30, 2019 were $27.5 million compared to $22.7 million for the three-month period ended September 30, 2018, were $68.7 million compared to $71.8 million for the nine-month period ended September 30, 2017, a decreasean increase of approximately $3.1$4.8 million, or 4.3%21.1%. The decreaseincrease was attributable primarily to a decreasean increase in marketing related spending of $3.7$7.4 million due to launch activities for Inbrija, partially offset by an increasea decrease in overall salaries and benefits of $0.8 million.$1.5 million and a decrease in spending of $1.0 million for marketing related cost of Ampyra.

General and administrative expenses for the nine-monththree-month period ended September 30, 2019 were $21.2 million compared to $20.9 million for the three-month period ended September 30, 2018, were $66.7an increase of approximately $0.2 million, comparedor 1.0%. The increase was primarily due to $70.3an increase in costs related to medical affairs of $0.4 million and launch activities for Inbrija of $1.3 million. This was partially offset by a decrease in legal costs and certain other costs of $1.5 million.

Goodwill Impairment

We recognized a goodwill impairment charge of $277.6 million in the nine-monththree-month period ended September 30, 2017,2019. During the third quarter of 2019, we experienced a decrease of approximately $3.6 million, or 5.1%. This decrease was primarily due to a decreasesignificant decline in restructuring costs of $2.0 million, a decrease in salaries and benefits related costs of $2.4 million, partially offset by an increase in legal and other related cost of $0.6 million.

Asset Impairment

We recognized an asset impairment charge of $39.4 million inour stock price that reduced the nine-month period ended September 30, 2017 related to our intangible asset for Selincro. We reviewedmarket capitalization below the intangible asset for impairment due to a downward revision to the projected royalty revenue we expect to receive. As a resultcarrying value of the review,Company. We performed a quantitative assessment and after completing the assessment during the third quarter of 2019, we determinedconcluded that the carrying value of the asset was greater than theCompany exceeded its estimated fair market value as of September 30, 2017. 2019 and therefore, the goodwill was fully impaired. We did not recognize an assetany goodwill impairment charge in the nine-monththree-month period ended September 30, 2018.


Changes in Fair Value of Acquired Contingent Consideration

As a result of the original Civitas spin out of Alkermes, part of the consideration to Alkermes was a future royalty to be paid to Alkermes on Civitas products. Acorda acquired this contingent consideration as part of the Civitas acquisition. The fair value of thatthose future royaltyroyalties is assessed quarterly. We recorded expenseincome pertaining to changes in the fair-value of acquired contingent consideration of $21.9$50.9 million for the nine-monththree-month period ended September 30, 20182019 as compared to an expense of $16.8$22.7 million for the nine-monththree-month period ended September 30, 2017. Changes2018. The changes in the fair-value of the acquired contingent


consideration were due to the re-calculation of discounted cash flows for the passage of time and changesupdates to certain other estimated assumptions.

Other Expense, Net

Other expense, net was $13.9$4.2 million for the nine-month period ended September 30, 2018 compared to other expense of $14.1 million for the nine-month period ended September 30, 2017, a decrease in expense of $0.2 million. The decrease was due primarily to an increase in interest income of approximately $2.3 million and a decrease in realized losses on foreign currency exchange of approximately $0.4 million partially offset by an increase in interest and amortization of debt discount expense of $2.5 million.

Provision for Income Taxes

For the nine-monththree-month periods ended September 30, 20182019 and 2017,2018.

Benefit from (Provision for) Income Taxes

For the three-month periods ended September 30, 2019 and 2018, the Company recorded a $49.8provision of $0.02 million and $23.4$38.0 million provision for income taxes, respectively. The effective income tax rates for the Company for the nine-monththree-month periods ended September 30, 2019 and 2018 were 0% and 2017 were 67.4% and (81.1%)157.8%, respectively. The variance in the effective tax rates for the nine-monththree-month period ended September 30, 20182019 as compared to the nine-monththree-month period ended September 30, 20172018 was due primarily to differences in pre-tax book income between the periods, the decrease in the federal statutorygoodwill impairment for which no tax rate as a result of tax reform,benefit is recognized, the valuation allowance recorded on deferred tax assets for which no tax benefit can be recognized, state taxes, and the reduction in the research and development tax credit.

The Company continues to evaluate the realizability of its deferred tax assets and liabilities on a quarterly basis and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant tax authorities, the progress of ongoing tax audits and the regulatory approval of products currently under development. Any changes to the valuation allowance or deferred tax assets and liabilities in the future would impact the Company's income taxes.

Nine-Month Period Ended September 30, 2019 Compared to September 30, 2018

Net Product Revenues

Inbrija

We recognize product sales of Inbrija following receipt of product by companies in our distribution network, which primarily includes specialty pharmacy providers and ASD Specialty Healthcare, Inc. We recognized net revenue from the sale of Inbrija of $9.2 million for the nine-month period ended September 30, 2019.

Ampyra

We recognize product sales of Ampyra following receipt of product by companies in our distribution network, which primarily includes specialty pharmacy providers. We recognized net revenue from the sale of Ampyra of $122.4 million and $390.9 million for the nine-month periods ended September 30, 2019 and 2018, respectively, a decrease of $268.5 million, or 69%. The net revenue decrease comprised decreased net volume of $295.0 million partially offset by discount and allowance adjustments of $26.5 million.

Discounts and allowances which are included as an offset in net revenue consist of allowances for customer credits, including estimated chargebacks, rebates, returns and discounts. Discounts and allowances are recorded following shipment of our products to our customers. Adjustments are recorded for estimated chargebacks, rebates, and discounts. Discounts and allowances also consist of discounts provided to Medicare beneficiaries whose prescription drug costs cause them to be subject to the Medicare Part D coverage gap (i.e., the “donut hole”). Payment of coverage gap discounts is required under the


Affordable Care Act, the health care reform legislation enacted in 2010. Discounts and allowances may increase as a percentage of sales as we enter into managed care contracts in the future.

Other Product Revenues

We recognized net revenue from the sale of other products of $1.8 million for the nine-month period ended September 30, 2019 as compared to $2.5 million for the nine-month period ended September 30, 2018.

Royalty Revenue

We recognized $8.6 million and $8.9 million in royalty revenue for the nine-month periods ended September 30, 2019 and 2018, respectively related to ex-U.S. sales of Fampyra by Biogen.

Cost of Sales

We recorded cost of sales of $26.2 million for the nine-month period ended September 30, 2019 as compared to $76.2 million for the nine-month period ended September 30, 2018. Cost of sales for the nine-month period ended September 30, 2019 consisted primarily of $24.9 million in inventory costs related to recognized revenues, $0.7 million in royalty fees based on net product shipments and $0.5 million for costs related to sales of the authorized generic version of Ampyra. Cost of sales for the nine-month period ended September 30, 2018 consisted primarily of $68.2 million in inventory costs related to recognized revenues, $7.5 million in royalty fees based on net product shipments and $0.2 million for costs related to sales of the authorized generic version of Ampyra. Cost of sales for inventory manufactured pre-launch for Inbrija was not recorded for the nine-month period ended September 30, 2019, since the inventory manufactured prior to the FDA approval was expensed as research and development expense as incurred and was combined with other research and development expenses in 2018.

Amortization of intangibles

We recorded amortization of intangible asset related to Inbrija of $17.9 million for the nine-month period ended September 30, 2019 as compared to $1.7 million related to Ampyra for the nine-month period ended September 30, 2018.

Research and Development

Research and development expenses for the nine-month period ended September 30, 2019 were $51.1 million as compared to $79.3 million for the nine-month period ended September 30, 2018, a decrease of approximately $28.2 million, or 35.6%. The decrease was due primarily to reductions in spending of $9.4 million due to the termination of the tozadenant development program, reductions in spending of $12.0 million due to the commercialization of Inbrija, and decreases in overall salaries and benefits and certain other programs of $6.8 million.

Selling, General and Administrative

Sales and marketing expenses for the nine-month period ended September 30, 2019 were $86.3 million compared to $68.7 million for the nine-month period ended September 30, 2018, an increase of approximately $17.6 million, or 25.6%. The increase was attributable primarily to an increase in marketing related spending of $22.9 million due to launch activities for Inbrija, partially offset by a decrease in overall salaries and benefits of $2.3 million and a decrease in spending related to marketing for Ampyra of $3.0 million.

General and administrative expenses for the nine-month period ended September 30, 2019 were $65.3 million compared to $66.7 million for the nine-month period ended September 30, 2018, a decrease of approximately $1.4 million, or 2.0%. The decrease was primarily due to a reduction in salaries and benefits related costs of $2.1 million, business development costs of $1.8 million and legal costs and certain other costs of $2.6 million, partially offset by an increase in spending related of launch activities of $2.8 million and costs related to medical affairs of $2.2 million.


Goodwill Impairment

We recognized a goodwill impairment charge of $277.6 million in the nine-month period ended September 30, 2019. During the third quarter of 2019, we experienced a significant decline in our stock price that reduced the market capitalization below the carrying value of the Company. We performed a quantitative assessment and after completing the assessment during the third quarter of 2019, we concluded that the carrying value of the Company exceeded its estimated fair value as of September 30, 2019 and therefore, the goodwill was fully impaired. We did not recognize any goodwill impairment charge in the nine-month period ended September 30, 2018.

Changes in Fair Value of Acquired Contingent Consideration

As a result of the original Civitas spin out of Alkermes, part of the consideration to Alkermes was a future royalty to be paid to Alkermes on Civitas products. Acorda acquired this contingent consideration as part of the Civitas acquisition. The fair value of those future royalties is assessed quarterly. We recorded income pertaining to changes in the fair-value of acquired contingent consideration of $56.3 million for the nine-month period ended September 30, 2019 as compared to an expense of $21.9 million for the nine-month period ended September 30, 2018. The changes in the fair-value of the acquired contingent consideration were primarily due to the re-calculation of discounted cash flows for the passage of time and updates to certain other estimated assumptions.

Other Expense, Net

Other expense, net was $13.0 million for the nine-month period ended September 30, 2019 as compared to $13.9 million for the three month period ended September 30, 2018. This was due primarily to an increase in interest income of $0.8 million.

Benefit from (Provision for) Income Taxes

For the nine-month periods ended September 30, 2019 and 2018, the Company recorded a $0.5 million benefit and a $49.8 million provision for income taxes, respectively. The effective income tax rates for the Company for the nine-month periods ended September 30, 2019 and 2018 were 0.14% and 67.4%, respectively. The variance in the effective tax rates for the nine-month period ended September 30, 2019 as compared to the nine-month period ended September 30, 2018 was due primarily to differences in pre-tax book income between the periods, goodwill impairment for which no tax benefit is recognized, the valuation allowance recorded on deferred tax assets for which no tax benefit can be recognized, state taxes, and the reduction in the research and development tax credit.

The Company continues to evaluate the realizability of its deferred tax assets on a quarterly basis and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant tax authorities, the progress of ongoing tax audits and the regulatory approval of products currently under development. Any changes to the valuation allowance or deferred tax assets and liabilities in the future would impact the Company's income taxes

Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through private placements and public offerings of our common stock and preferred stock, a convertible debt offering, payments received under our collaboration and licensing agreements, sales of Ampyra, Fampyra, Zanaflex and Qutenza, and, to a lesser extent, from loans, government and non-government grants and other financing arrangements. We expect sales of Inbrija to become a source of financing for our operations.

At September 30, 2018,2019, we had $460.9$253.2 million of cash, cash equivalents and short-term investments, compared to $307.1$445.6 million at December 31, 2017.2018. We expect that our existing cash and cash flows from operations will be sufficient to fund our ongoing operations over the next 12 months from the financial statement filing date.

In April 2017, following a Federal District Court’s decision which invalidated certain of As discussed in greater detail below, the Company’s patents relating to Ampyra, we implemented a corporate restructuring to reduce our cost structure and focus our resources on our most important and valuable initiatives, including our Inbrija development program and maximizing Ampyra value. As part of this restructuring, we reduced headcount by approximately 20%. The majority of the reduction was completed in April 2017. We believe that the operating expense reductions from the restructuring, as well as additional expense reductions due to the terminationprincipal of our tozadenant development programConvertible Senior Notes due 2021 becomes due and payable in November 2017, will enable usJune 2021. We intend to fund operations through the launchopportunistically repurchase or refinance such indebtedness prior to maturity, which may include issuance of Inbrija, pending approval from the FDA. However, there can be no guarantee that we will have sufficient funding to do so. We may need to seek additionalnew debt or equity, privately negotiated exchange transactions and/or debt financing or strategic collaborations to complete our product development activities, and could require substantial funding to commercialize any products that we successfully develop. We may not be able to raise additional capital on favorable terms, or at all.open-market repurchases.


Our future capital requirements will depend on a number of factors, including the amount of revenue generated from sales of Ampyra, the time of approval (if ever)Inbrija and launch of Inbrija,Ampyra, the continued progress of our research and development activities, the amount and timing of milestone or other payments payable under collaboration, license and acquisition agreements, the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims and other intellectual property rights, and capital required or used for future acquisitions or to in-license new products and compounds including the development costs relating to those products or compounds. To the extent our capital resources are insufficient to meet future operating requirements we will need to raise additional capital, reduce planned expenditures, or incur


indebtedness to fund our operations. If we require additional financing in the future, we cannot assure you that it will be available to us on favorable terms, or at all.

Financing Arrangements

Convertible Senior Notes

In June 2014, the Company entered into an underwriting agreement (the Underwriting Agreement) with J.P. Morgan Securities LLC (the Underwriter) relating to the issuance by the Company of $345 million aggregate principal amount of 1.75% Convertible Senior Notes due 2021 (the Notes) in an underwritten public offering pursuant to the Company’s Registration Statement on Form S-3 (the Registration Statement) and a related preliminary and final prospectus supplement, filed with the Securities and Exchange Commission (the Offering). The net proceeds from the offering, after deducting the Underwriter’s discount and the offering expenses paid by the Company, were approximately $337.5 million.

The Notes are governed by the terms of an indenture, dated as of June 23, 2014 (the Base Indenture) and the first supplemental indenture, dated as of June 23, 2014 (the Supplemental Indenture, and together with the Base Indenture, the Indenture), each between the Company and Wilmington Trust, National Association, as trustee (the Trustee). The Notes will be convertible into cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, based on an initial conversion rate, subject to adjustment, of 23.4968 shares per $1,000 principal amount of Notes (which represents an initial conversion price of approximately $42.56 per share), only in the following circumstances and to the following extent: (1) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; (2) during any calendar quarter commencing after the calendar quarter ending on September 30, 2014 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (3) if the Company calls any or all of the Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; (4) upon the occurrence of specified events described in the Indenture; and (5) at any time on or after December 15, 2020 through the second scheduled trading day immediately preceding the maturity date. As of September 30, 2018,2019, the Notes did not meet the criteria to be convertible.

The Company may redeem for cash, all or part of the Notes, at the Company’s option, on or after June 20, 2017 if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending within five trading days prior to the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

The Company will pay 1.75% interest per annum on the principal amount of the Notes, payable semiannually in arrears in cash on June 15 and December 15 of each year.

If the Company undergoes a “fundamental change” (as defined in the Indenture), subject to certain conditions, holders may require the Company to repurchase for cash all or part of their Notes in principal amounts of $1,000 or an integral multiple thereof. The fundamental change repurchase price will be equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. If a make-whole fundamental change, as described in the Indenture, occurs and a holder elects to convert its Notes in connection with such make-whole fundamental change, such holder may be entitled to an increase in the conversion rate as described in the Indenture.


The Indenture contains customary terms and covenants and events of default. If an event of default (other than certain events of bankruptcy, insolvency or reorganization involving the Company) occurs and is continuing, the Trustee by notice to the Company, or the holders of at least 25% in principal amount of the outstanding Notes by notice to the Company and the Trustee, may declare 100% of the principal of and accrued and unpaid interest, if any, on all the Notes to be due and payable. Upon such a declaration of acceleration, such principal and accrued and unpaid interest, if any, will be due and payable immediately. Upon the occurrence of certain events of bankruptcy, insolvency or reorganization involving the Company,


100% of the principal and accrued and unpaid interest, if any, on all of the Notes will become due and payable automatically. Notwithstanding the foregoing, the Indenture provides that, to the extent the Company elects and for up to 270 days, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right to receive additional interest on the Notes.

The Notes will be senior unsecured obligations and will rank equally with all of the Company’s existing and future senior debt and senior to any of the Company’s subordinated debt. The Notes will be structurally subordinated to all existing or future indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries and will be effectively subordinated to the Company’s existing or future secured indebtedness to the extent of the value of the collateral. The Indenture does not limit the amount of debt that the Company or its subsidiaries may incur.

In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the Notes as a whole. The excess of the principal amount of the liability component over its carrying amount, referred to as the debt discount, is amortized to interest expense over the seven-year term of the Notes using the effective interest method. The equity component is not re-measured as long as it continues to meet the conditions for equity classification.

Our outstanding note balances as of September 30, 20182019 consisted of the following:

 

(In thousands)

 

September 30,

2018

 

 

September 30,

2019

 

Liability component:

 

 

 

 

 

 

 

 

Principal

 

$

345,000

 

 

$

345,000

 

Less: debt discount and debt issuance costs, net

 

 

(28,840

)

 

 

(18,619

)

Net carrying amount

 

$

316,160

 

 

$

326,381

 

Equity component

 

$

61,195

 

 

$

61,195

 

Non-Convertible Capital Loans

The Non-Convertible Capital Loans (“Tekes Loans”) whichNon-convertible capital loans were granted to Biotie by Tekes, a Finnish Funding Agency for Technology and Innovation, had aBusiness Finland (formerly Tekes), with an adjusted acquisition-date fair value of $20.5 million (€18.2 million) at the date of acquisition. The Tekes loans haveand a carrying value of approximately $23.4$24.0 million as of September 30, 2018.2019. The Tekes Loans consistloans are composed of fourteen non-convertible loans. The loans that bear interest based on the greater of 3% or the base rate set by Finland’s Ministry of Finance minus one (1) percentage point. The maturity dates for these loans range from eight to ten years from the date of issuance, however, according to certain terms and conditions of the loans, Biotiethe Company may repay the principal and accrued and unpaid interest of the loans only when the consolidated retained earnings of Biotie is sufficient to fully repay the loans.

Research and Development Loans

The Research and Development Loans (“R&D Loans”) which were granted to Biotie by Tekes had aBusiness Finland with an acquisition-date fair value of $2.9 million (€2.6 million) at the date of acquisition. The R&D Loans haveand a carrying value of approximately $1.9$1.2 million as of September 30, 2018.2019. The R&D Loans bear interest based on the greater of 1% or the base rate set by Finland’s Ministry of Finance minus three (3) percentage points. The principal onrepayment of these loans began in January 2017. The loan principal will be paid in five equal annual installments beginning in 2017 throughover a 5 year period, ending January 2021.


Investment Activities

At September 30, 2018,2019, cash, cash equivalents and short-term investment were approximately $460.9$253.2 million, as compared to $307.1$445.6 million at December 31, 2017.2018. Our cash equivalents consist of highly liquid investments with original maturities of three months or less at date of purchase and consist of time deposits and investments in a Treasury money market funds.fund. Our short term investments consist of high-grade corporate debt securities, and commercial paper and U.S. government securities with original maturities of twelve months or less at date of purchase. Also, we maintain cash balances with financial institutions in excess of insured limits. We do not anticipate any losses with respect to such cash balances.


Net Cash Provided byUsed in Operations

Net cash provided byused in operations was $163.1$116.7 million for the nine-month period ending September 30, 2018.2019. Cash providedused by operations for the nine-month period ended September 30, 20182019 was primarily due to net incomeloss of $24.1$338.6 million, a decrease in accounts receivablenon-cash royalty revenue of $29.9$7.6 million, deferred tax benefit of $3.7 million, a change in contingent consideration liability of $21.9$56.3 million, amortization of net premiums and discounts on investments of $1.3 million and a decrease in accounts payable and accrued expenses of $56.1 million. This was offset by a goodwill impairment charge of $277.6 million, a decrease in accounts receivable of $5.9 million, stock compensation expense of $16.2$11.5 million, depreciation and amortization of $9.1$24.7 million, a decrease in inventory of $1.6 million, amortization of debt discount and debt issuance costs of $11.9 million, deferred tax provision of $42.6$12.2 million, and a decrease in inventory of $26.7 million. This was partially offset by a decrease in accounts payableother prepaid expenses and accrued expenses of $5.5 million, non-cash royalty revenue of $7.8 million, and an increase in other current assets of $5.3$13.7 million

Net Cash Used in Investing

Net cash used in investing activities for the nine-month period ended September 30, 20182019 was $162.0$56.5 million, which was due primarily to purchases of short-term investments and property and equipment of $191.7$171.4 million and $22.5$76.4 million, respectively. This was partially offset by proceeds from maturities of investments of $52.5$191.3 million.

Net Cash Provided byUsed in Financing

Net cash provided byused in financing activities for the nine-month period ended September 30, 20182019 was $12.7$0.7 million, which was primarily due to $15.0 million in net proceeds from the issuance of common stock and stock option exercises, partially offset by the repurchase of treasury stock of $1.6 million and repayment of loans payable of $0.7$0.6 million and purchases of treasury stock of $0.1 million.

Contractual Obligations and Commitments

A summary of our minimum contractual obligations related to our material outstanding contractual commitments is included in Note 14 of our Annual report on Form 10-K as amended by Amendment No. 1 on Form 10-K/A, for the year ended December 31, 2017.2018. Our long-term contractual obligations include commitments and estimated purchase obligations entered into in the normal course of business.

Under certain agreements, we are required to pay royalties or license fees and milestones for the use of technologies and products in our R&D activities and in the commercialization of products. The amount and timing of any of the foregoing payments are not known due to the uncertainty surrounding the successful research, development and commercialization of the products. During the nine-month period ended September 30, 2018,2019, commitments related to the purchase of inventory increaseddecreased as compared to December 31, 2017.2018. As of September 30, 2018,2019, we have inventory-related purchase commitments totaling approximately $30.4$2.0 million.

Critical Accounting Policies and Estimates

Our critical accounting policies are detailed in our Annual Report on Form 10-K as amended by Amendment No. 1 on Form 10-K/A, for the year ended December 31, 2017.2018. As of September 30, 2018,2019, with the exception of the adoption of ASU 2014-09, “Revenue from Contracts with Customers”2016-02, “Leases” (Topic 606)842), ASU 2016-152018-05, “Income Taxes” (Topic 740), ASU 2018-09, “Codification Improvements”, ASU 2017-04, “Intangibles – Goodwill and Other” (Topic 350) and ASU 2016-18 “Statement of Cash Flows”2018-02, “Income Statement—Reporting Comprehensive Income” (Topic 230)220), ASU 2017-09, “Compensation – Stock Compensation” (Topic 718): Scope of Modification Accounting and ASU 2017-01, and “Business Combinations” (Topic 805): Clarifying the Definition of a Business, our critical accounting policies have not changed materially from December 31, 2017.2018.


Goodwill

Goodwill represents the amount of consideration paid in excess of the fair value of net assets acquired in a business combination accounted for using the acquisition method of accounting. Goodwill is not amortized and is subject to impairment testing on an annual basis or when a triggering event occurs that may indicate the carrying value of the goodwill is impaired. We perform our impairment testing at the reporting level where we have determined that we have a single reporting unit and operating segment. The impairment test for goodwill uses an approach which compares the estimated fair value of the reporting unit including goodwill to its carrying value. If the carrying value of the reporting unit exceeds the estimated fair value of the reporting unit, an impairment loss is recognized in an amount equal to the excess of the carrying value over the estimated fair value.

During the second quarter of 2019, we experienced a significant decline in our stock price that reduced the market capitalization below the carrying value of the Company. This circumstance required the Company to perform a quantitative assessment to assess the value of the goodwill for impairment. The Company performed an assessment of the goodwill and concluded that there was no impairment. During the third quarter of 2019, we experienced a further significant decline in our stock price that reduced the market capitalization further below the carrying value of the Company. The Company performed a quantitative assessment of the goodwill and concluded that there was an impairment to the goodwill. The Company utilized the income approach in the goodwill assessment process. The determination of the fair value of the reporting unit requires us to make significant estimates and assumptions. This valuation approach considers a number of factors that include, but are not limited to, prospective financial information, growth rates, terminal value, and discount rates and require us to make certain assumptions and estimates. When performing our income approach, we incorporate the use of projected financial information and a discount rate that are developed based on certain assumptions. Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates. The Company then corroborates the reasonableness of the total fair value of the reporting unit by reconciling the aggregate fair value of the reporting unit to the Company’s total market capitalization adjusted to include an estimated control premium. The estimated control premium is derived from reviewing observable transactions involving the purchase of controlling interests in comparable companies. The market capitalization is calculated using the relevant shares outstanding and the closing stock price at the test date. After completing our impairment assessment during the third quarter of 2019, we concluded that the carrying value of the Company exceeded its estimated fair value as of September 30, 2019 and therefore, the goodwill was fully impaired. The Company recorded an impairment charge of $277.6 million for the three and nine month periods ended September 30, 2019 in the statement of operations.

Impairment of Long-Lived Assets

The Company continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful lives of its long-lived assets, including identifiable intangible assets subject to amortization and property plant and equipment, may warrant revision or that the carrying value of the assets may be impaired. Factors the Company considers important that could trigger an impairment review include significant changes in the use of any assets, changes in historical trends in operating performance, changes in projected operating performance, stock price, loss of a major customer and significant negative economic trends. The decline in the trading price of the Company's common stock during the quarter ended September 30, 2019 and related decrease in the Company's market capitalization was determined to be a triggering event in connection with the Company's review of the recoverability of its long-lived assets for the three-month period ended September 30, 2019. The Company performed a recoverability test during the third quarter of fiscal 2019 using the undiscounted cash flows, which are the sum of the future undiscounted cash flows expected to be derived from the direct use of the long-lived assets to the carrying value of the long-lived assets. Estimates of future cash flows were based on the Company’s own assumptions about its own use of the long-lived assets. The cash flow estimation period was based on the long-lived assets’ estimated remaining useful life to the Company. After performing the recoverability test, the Company determined that the undiscounted cash flows exceeded the carrying value and the long-lived assets were not impaired. Changes in these assumptions and resulting valuations or further declines in our stock price could result in future long-lived asset impairment charges. Management will continue to monitor any changes in circumstances for indicators of impairment. Any write‑downs are treated as permanent reductions in the carrying amount of the assets.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Our financial instruments consist of cash equivalents, short-term investments, convertible senior notes, non-convertible capital loans, research and development loans and accounts payable. The estimated fair values of all of our financial


instruments approximate their carrying values at September 30, 2018,2019, except for the fair value of the Company’s convertible senior notes which was approximately $298.4$264.3 million as of September 30, 2018.2019.

We have cash equivalents and short-term investments at September 30, 2018,2019, which are exposed to the impact of interest rate changes and our interest income fluctuates as our interest rates change. Due to the nature of our investments in money market funds, high-grade corporate bonds, and commercial paper and U.S. government securities, the carrying value of our cash equivalents and short-


termshort-term investments approximate their fair value at September 30, 2018.2019. At September 30, 2018,2019, we held $460.9$253.2 million in cash, cash equivalents and short-term investments which had an average interest rate of approximately 1.9%2.4%.

We maintain an investment portfolio in accordance with our investment policy. The primary objective of our investment policy is to preserve principal, maintain proper liquidity and to meet operating needs. Although our investments are subject to credit risk, our investment policy specifies credit quality standards for our investments and limits the amount of credit exposure from any single issue, issuer or type of investment. Our investments are also subject to interest rate risk and will decrease in value if market interest rates increase. However, interest rate risk is mitigated due to the conservative nature and relatively short duration of our investments.

Item 4.  Controls and Procedures

Evaluation of disclosure controls and procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the Exchange Act) we carried out an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the third quarter of 2018,2019, the period covered by this report. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief, Business Operations and Principal Accounting Officer. Based on that evaluation, these officers have concluded that, as of September 30, 2018,2019, our disclosure controls and procedures were effective to achieve their stated purpose.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules, regulations, and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief, Business Operations and Principal Accounting Officer, as appropriate, to allow timely decisions regarding disclosure.

Change in internal control over financial reporting

In connection with the evaluation required by Exchange Act Rule 13a-15(d), our management, including our Chief Executive Officer and Chief, Business Operations and Principal Accounting Officer, concluded that there were no changes in our internal control over financial reporting during the quarter ended September 30, 2018,2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Beginning January 1, 2018,2019, we implemented ASC 606842 - Revenue from Contracts with CustomersLeases. As a result of our implementation of ASC 606,842, in the first quarter of 2019 we enhanced our control documentation related to revenue, although, with the exception of the adjustments to the recognition of our license revenue, the adoption of ASC 606 did not have a significant impact on our results of operations, cash flows, or financial position.lease accounting. The enhancements included revisions to our revenue recognition policy to apply the five-step model provided for in ASC 606 and other documentation enhancements to support ongoing monitoring activities in order to provide reasonable assurance regarding the fair presentation of our consolidated financial statements and related disclosures.

Limitations on the effectiveness of controls

Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.


PART II—OTHER INFORMATION

Ampyra ANDA Litigation

Overview. As further described below, weWe have been engaged in litigation with certain generic drug manufacturers relating to our five initial Orange Book-listed Ampyra patents. We filed lawsuits against these generic drug manufacturers in response to their submitting Abbreviated New Drug Applications, or ANDAs, to the FDA seeking marketing approval for generic versions of Ampyra (dalfampridine) Extended Release Tablets, 10mg. As previously reported, we settled with some, but not all, of these companies. In March 2017, the U.S. District Court for the District of Delaware (the “District Court”) rendered a decision from a bench trial held in September 2016. The District Court upheld our Ampyra Orange Book-listed patent that expired in July 2018, but invalidated the four other Orange Book-listed patents pertaining to Ampyra that arewere the subject of the litigation that were set to expire between 2025 and 2027. We appealed the decision on the four invalidated patents to the United States Court of Appeals for the Federal Circuit (the “Federal Circuit”), which issued a ruling on September 10, 2018 upholding the District Court’s decision (the “Appellate Decision”). In October 2018, we filed aJanuary 2019, the Federal Circuit denied our petition for rehearing en banc regardingbanc. On October 7, 2019, the Appellate Decision at the Federal Circuit, which subsequently invited the generic drug manufacturers to respond toU.S. Supreme Court denied our petition.

A sixth Ampyra patent was recently issued and listed in the Orange Book. We note that this patent does not entitle us to any additional statutory stay of approval under the Hatch-Waxman Act against the generic drug manufacturers that are involved in the patent litigation.

First ANDA Filers. In June and July of 2014, we received separate Paragraph IV Certification Notices from Accord Healthcare, Inc. (“Accord”), Actavis Laboratories FL, Inc. ("Actavis"), Alkem Laboratories Ltd. and its affiliate Ascend Laboratories, LLC ("Alkem"), Apotex Inc. (“Apotex”), Aurobindo Pharma Ltd. ("Aurobindo"), Mylan Pharmaceuticals Inc. (“Mylan”), Roxane Laboratories, Inc., and Teva Pharmaceuticals USA, Inc., advising that each of these companies had submitted an ANDA to the FDA seeking marketing approval for generic versions of Ampyra (dalfampridine) Extended Release Tablets, 10 mg. The ANDA filers challenged the validitycertiorari requesting review of the five initial Orange Book-listed patents for Ampyra, and they also asserted that generic versions of their products do not infringe certain claims of these patents. In response to the filing of these ANDAs, in July 2014, we filed lawsuits against these generic drug manufacturers and certain affiliates in the District Court asserting infringement of our U.S. Patent Nos. 5,540,938, 8,007,826, 8,354,437, 8,440,703, and 8,663,685. Requested judicial remedies included recovery of litigation costs and injunctive relief, including a request that the effective date of any FDA approval for these generic companies to make, use, offer for sale, sell, market, distribute, or import the proposed generic products be no earlier than the dates on which the Ampyra Orange Book-listed patents expire, or any later expiration of exclusivity to which we are or become entitled. These lawsuits with the ANDA filers were consolidated into a single case.

A bench trial was completed in September 2016, and the District Court issued a decision in March 2017. The District Court upheld U.S. Patent No. 5,540,938 (the ‘938 patent), which expired on July 30, 2018, but invalidated U.S. Patent Nos. 8,663,685, 8,007,826, 8,440,703, and 8,354,437. In May 2017, we appealed the ruling on these patents to the Federal Circuit. The Federal Circuit issued a decision on September 10, 2018 upholding the District Court’s decision. We are experiencing a rapid and significant decline in Ampyra sales due to competition from generic versions of Ampyra that are being marketed following the decision of the Federal Circuit, including our own authorized generic version being marketed by Mylan AG. Mylan announced the U.S. launch of the authorized generic in mid-September 2018. We expect that additional manufacturers will market generic versions of Ampyra, which may accelerate the decline in Ampyra sales. In October 2018, we filed a petition for rehearing en banc regarding the Appellate Decision at the Federal Circuit, which subsequently invited the generic drug manufacturers to respond to our petition.

As previously reported, prior to the 2017 District Court decision, we entered into settlement agreements with Accord, Actavis, Alkem, Apotex and Aurobindo (and certain affiliates). More recently, in August 2018, we reported a conditioned settlement agreement with Mylan.

Second ANDA Filers. In 2015 and 2017, we received Paragraph IV Certification Notices from Sun Pharmaceutical Industries Limited, Sun Pharmaceuticals Industries Inc., Par Pharmaceutical, Inc., and Micro Labs Ltd. advising that each of these companies had submitted ANDAs to the FDA seeking marketing approval for generic versions of Ampyra (dalfampridine) Extended Release Tablets, 10 mg. These ANDA filers challenged the validity of four of the five initial


Orange Book-listed patents for Ampyra, and did not file against our U.S. Patent No. 5,540,938, and also asserted that generic versions of their products may not infringe certain claims of these patents. In response to the filing of the ANDAs, as previously reported, we filed lawsuits against these companies that were subsequently settled.

We will vigorously defend our intellectual property rights.

Item 1 of Part II of our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2019, and June 30, 2018,2019, include prior updates to the legal proceedings described above.

Item 1A.  Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A. Risk Factors, in our Annual Report on Form 10-K as amended by Amendment No. 1 on Form 10-K/A for the year ended December 31, 2017,2018, as updated in our Quarterly Reports subsequently filed during the current fiscal year, all of which could materially affect our business, financial condition or future results. These risks are not the only risks facing our Company.Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. Following is the restated text of certain risk factors to report changes since our publication of risk factors in our 2017 Annual Report on Form 10-K, as amended by Amendment No. 1 on Form 10-K/A and our updates in subsequent Quarterly Reports on Form 10-Q.

Risks related to our business

We have a history of operating losses and may not be able to achieve or sustain profitability in the future; we are and will remain substantially dependent on revenues from the sale of Ampyra, which are rapidly and significantly declining due to generic competition, unless and until we obtain marketing approval for, and can commercially launch, Inbrija (levodopa inhalation powder).

We have been highly dependent on the sales of Ampyra in the U.S. and derive substantially all of our revenue from the sale of Ampyra. Our Orange Book-listed patents have been the subject of litigation with certain generic drug manufacturers, who submitted Abbreviated New Drug Applications, or ANDAs, to the FDA seeking marketing approval for generic versions of Ampyra (dalfampridine) Extended Release Tablets, 10mg. In 2017, the United States District Court for the District of Delaware (the “District Court”) issued a ruling upholding our Ampyra Orange Book-listed patent that expired on July 30, 2018, but invalidating our four other Orange Book-listed patents pertaining to Ampyra set to expire between 2025 and 2027. Under this ruling, our patent exclusivity with respect to Ampyra terminated on July 30, 2018. We appealed the decision on the four invalidated patents to the United States Court of Appeals for the Federal Circuit, which issued a ruling on September 10, 2018 upholding the District Court’s decision (the “Appellate Decision”). We are experiencing a rapid and significant decline in Ampyra sales due to competition from generic versions of Ampyra that are being marketed following the Appellate Decision. We expect that additional manufacturers will market generic versions of Ampyra, which may accelerate the decline in Ampyra sales.

As of September 30, 2018, we had an accumulated deficit of approximately $403.4 million. We had net losses of $223.4 million for the year ended December 31, 2017 and $34.6 million for the year ended December 31, 2016. Our prospects for achieving and sustaining profitability in the future will depend primarily on how successful we are in:

obtaining NDA approval for Inbrija (levodopa inhalation powder), a self-administered, inhaled formulation of levodopa using our proprietary ARCUS drug delivery technology, for the treatment of OFF periods in people with Parkinson’s taking a carbidopa/levodopa regimen;

successfully launching Inbrija in the U.S., if approved;

obtaining MAA approval in the E.U. for Inbrija and commercializing through potential ex-U.S. partner

continuing to advance and/or out-license our earlier-stage clinical development programs; and

expanding our product development pipeline through the potential in-licensing and/or acquisition of additional products and technologies.

If we are not successful in executing our business plan, we may not achieve or sustain profitability and even if we do so, we may not meet sales expectations. Also, even if we are successful in executing our business plan, our profitability may


fluctuate from period to period due to our level of investments in sales and marketing, research and development, and product and product candidate acquisitions. For example, in 2018 and 2019 we expect to invest a significant amount to support our most advanced program, Inbrija.

Our restructuring may not adequately reduce our expenses, and we may encounter difficulties associated with the related organizational change.

In April 2017, following a decision by the United States District Court for the District of Delaware to invalidate certain patents relating to Ampyra, which has been upheld by the Court of Appeals for the Federal Circuit, (the “Federal Circuit”), we implemented a corporate restructuring to reduce our cost structure and focus our resources on Inbrija (levodopa inhalation powder) and our other strategic priorities. As part of this restructuring, we reduced headcount by approximately 20%. If our restructuring does not adequately reduce our expenses, further restructuring activities may be required in the future. In any event, the benefits of the restructuring are not expected to offset the loss of revenues from decreased long-term Ampyra sales following the invalidation of our patents. We are experiencing a rapid and significant decline in revenues due to competition from generic versions of Ampyra that are being marketed following the decision of the Federal Circuit. We expect that additional manufacturers will market generic versions of Ampyra, which may accelerate the decline in revenues.

Our restructuring may have other unintended consequences as well, including, for example, making it more difficult for us to attract and retain highly skilled personnel in a competitive environment. We may also experience operational disruptions from our reduction in personnel. The loss of key personnel such as regulatory or manufacturing functions could disrupt our operations and sales force attrition could harm our ability to maintain Ampyra sales and, if we obtain FDA approval for Inbrija, commercialize that product.

We operate in the highly-regulated pharmaceutical industry.

Our research, development, preclinical and clinical trial activities, as well as the manufacture and marketing of any products that we have developed or in the future may successfully develop, are subject to an extensive regulatory approval process by the FDA and other regulatory agencies abroad.

In order to conduct clinical trials to obtain FDA approval to commercialize any drug or biological product candidate, an investigational new drug, or IND, application must first be submitted to the FDA and must become effective before clinical trials may begin. Subsequently, if the product candidate is regulated as a drug, a new drug application, or NDA, must be submitted to the FDA and approved before commercial marketing may begin. The NDA must include the results of adequate and well-controlled clinical trials demonstrating, among other things, that the product candidate is safe and effective for use in humans for each target indication. If the product candidate, such as an antibody, is regulated as a biologic, a biologic license application, or BLA, must be submitted and approved before commercial marketing may begin. Extensive submissions of preclinical and clinical trial data are required to demonstrate the safety, potency and purity for each intended use. The FDA may refuse to accept our regulatory submissions for filing if they are incomplete. For example, in August 2017, we received a “Refuse to File,” or RTF, letter from the FDA regarding the NDA we had submitted in June 2017 for Inbrija (levodopa inhalation powder), to treat symptoms of OFF periods in people with Parkinson's disease taking a carbidopa/levodopa regimen. The FDA specified two reasons for the RTF: first, the date when the manufacturing site would be ready for inspection, and second, a question regarding the submission of the drug master production record. The FDA also requested that we submit additional information when we resubmit the NDA, though this was not part of the basis for the RTF. We resubmitted the Inbrija NDA in December 2017. In February 2018, the resubmitted NDA was accepted for filing by the FDA, and under the Prescription Drug User Fee Act, or PDUFA, the FDA set a goal date of October 5, 2018 for its review of the NDA. On September 13, 2018, we announced that the FDA extended the PDUFA date to January 5, 2019. Of the large number of drugs in development, only a small percentage result in the submission of an NDA or BLA to the FDA, and even fewer are approved for commercialization.


The process of obtaining required regulatory approvals for drugs is lengthy, expensive and uncertain. Any regulatory approvals may be for fewer or narrower indications than we request, may include distribution restrictions, or may be conditioned on burdensome post-approval study or other requirements, including the requirement that we institute and follow a special risk evaluation and mitigation strategy, or REMS, to monitor and manage potential safety issues, all of which may eliminate or reduce the drug's market potential. Additional adverse events that could impact commercial success, or even continued regulatory approval, might emerge with more extensive post-approval patient use. Investigational products, such as Inbrija, are regulated as combination products and require that we satisfy FDA that both the drug and device component of the products satisfy FDA requirements. Failure to satisfy the FDA’s requirements for either the drug or device component of Inbrija or other such combination products could delay approval of these products or result in these products not receiving FDA approval.

Any product for which we currently have or may in the future obtain marketing approval is subject to continual post-approval requirements including, among other things, record-keeping and reporting requirements, packaging and labeling requirements, requirements for reporting adverse drug experiences, import/export controls, restrictions on advertising and promotion, cGMP requirements as well as any other requirements imposed by the applicants NDA or BLA. All of our products and operations are subject to periodic inspections by the FDA and other regulatory bodies. Regulatory approval of a product may be subject to limitations on the indicated uses for which the product may be marketed or to other restrictive conditions of approval that limit our ability to promote, sell or distribute a product. Furthermore, any approval may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product. Post-market evaluation of a product could result in marketing restrictions or withdrawal from the market.

We may fail to comply with existing legal or regulatory requirements or be slow to adapt, or be unable to adapt, to new legal or regulatory requirements. We may encounter problems with our manufacturing processes, and we may discover previously unknown problems with our products. These circumstances could result in:

voluntary or mandatory recalls;

voluntary or mandatory patient or physician notification;

withdrawal of product approvals;

shut-down of manufacturing facilities;

receipt of warning letters or untitled letters;

product seizures;

restrictions on, or prohibitions against, marketing our products;

restrictions on importation of our product candidates;

fines and injunctions;

civil and criminal penalties;

exclusion from participation in government programs; and

suspension of review or refusal to approve pending applications.

In addition, we are subject to regulation under other state and federal laws, including requirements regarding occupational safety, laboratory practices, environmental protection and hazardous substance control, controlled substances and we may be subject to other local, state, federal and foreign regulations. We cannot predict the impact of those regulations on us, although they could impose significant restrictions on our business and we may have to incur additional expenses to comply with them.

If our competitors develop and market products that are more effective, safer or more convenient than our approved products, or obtain marketing approval before we obtain approval of future products, our commercial opportunity will be reduced or eliminated.

Competition in the pharmaceutical and biotechnology industries is intense and is expected to increase. Many biotechnology and pharmaceutical companies, as well as academic laboratories, are involved in research and/or product development for various neurological conditions, including Parkinson’s disease, or PD, and multiple sclerosis, or MS.


Our competitors may succeed in developing products that are more effective, safer or more convenient than our products or the ones we have under development or that render our approved or proposed products or technologies noncompetitive or obsolete. In addition, our competitors may achieve product commercialization before we do. If any of our competitors develops a product that is more effective, safer or more convenient for patients, or is able to obtain FDA approval for commercialization before we do, we may not be able to achieve market acceptance for our products, which would harm our ability to generate revenues and recover the substantial development costs we have incurred and will continue to incur.

Our products may be subject to competition from lower-priced versions of such products and competing products imported into the U.S. from Canada, Mexico and other countries where there are government price controls or other market dynamics that cause the products to be priced lower.

Ampyra. Ampyra has become subject to competition from generic drug manufacturers. In 2017, in litigation with certain generic drug manufacturers, the United States District Court for the District of Delaware (the “District Court”) issued a ruling upholding our Ampyra Orange Book-listed patent that expired on July 30, 2018, but invalidating four other Orange Book-listed patents that were set to expire between 2025 and 2027. Under this ruling, our patent exclusivity with respect to Ampyra terminated on July 30, 2018. The United States Court of Appeals for the Federal Circuit issued a ruling on September 10, 2018 upholding the District Court’s decision (the “Appellate Decision”).We are experiencing a rapid and significant decline in Ampyra sales due to competition from generic versions of Ampyra that are being marketed following the Appellate Decision. We expect that additional manufacturers will market generic versions of Ampyra, which may accelerate the decline in Ampyra sales.Our litigation with the generic drug manufacturers is described in further detail in Part II, Item I of this report.

In addition to competition from generic versions of Ampyra, we are aware of other companies developing products that may compete with Ampyra. These include Adamas Pharmaceuticals, Inc., which is developing ADS-5102 (amantadine hydrochloride) for patients with MS who have walking impairment, and Catalyst Pharmaceuticals, Inc., which is developing a 3,4-diaminopyridine product, licensed from Biomarin. Furthermore, several companies are engaged in developing products that include novel immune system approaches and cell therapy approaches to remyelination for the treatment of people with MS. These programs are in early stages of development and may compete in the future with Ampyra or some of our product candidates. In addition, in certain circumstances, pharmacists are not prohibited from formulating certain drug compounds to fill prescriptions on an individual patient basis, which is referred to as compounding. We are aware that at present compounded dalfampridine is used by some people with MS and it is possible that some people will want to continue to use compounded formulations even though Ampyra is commercially available.

Inbrija (levodopa inhalation powder). If approved for the treatment of OFF periods, (re-emergence of symptoms) Inbrija would compete against on-demand therapies that aim to specifically address Parkinson’s disease symptoms. Apokyn, an injectable formulation of apomorphine, is approved for the treatment of OFF periods. Apokyn was approved for this use in the U.S. in 2004 and in Europe in 1993. Also, Sunovion Pharmaceuticals Inc. is developing a sublingual, or under the tongue, formulation of apomorphine. This program is in Phase 3 clinical development and could potentially be commercially launched ahead of Inbrija. In January 2018, Sunovion announced positive topline results from their pivotal Phase 3 study for this program. In March 2018, Sunovion submitted a New Drug Application, or NDA, to the FDA, and in June 2018 they reported that the FDA accepted the NDA and that the expected action date by the FDA under the Prescription Drug User Fee Act is January 29, 2019.

The standard of care for the treatment of Parkinson’s disease is oral carbidopa/levodopa, but oral medication can be associated with wide variability in the timing and the amount of absorption and there are significant challenges in creating a regimen that consistently maintains therapeutic effects as Parkinson’s disease progresses. Inbrija may face competition from therapies that can limit the occurrence of OFF periods. Approaches to achieve consistent levodopa plasma concentrations include new formulations of carbidopa/levodopa, such as extended-release and intestinal infusions, and therapies that prolong the effect of levodopa. Amneal Pharmaceuticals, Inc. (formerly Impax Laboratories) has received FDA approval for RYTARY, an extended-release formulation of oral carbidopa/levodopa, and extended release formulations of oral and patch carbidopa/levodopa are being developed by others including Intec Pharma and Mitsubishi Tanabe Pharma Corporation. Also, Abbvie Inc. has developed a continuous administration of a gel-containing levodopa through a tube that is surgically implanted into the intestine. This therapy, known as Duopa, has been approved by the FDA and is approved in the EU.

One or more of our competitors may utilize their expertise in pulmonary delivery of drugs to develop and obtain approval for pulmonary delivery products that may compete with Inbrija and any other of our other ARCUS drug delivery technology product candidates. These competitors may include smaller companies such as Alexza Pharmaceuticals, Inc.,


MannKind Corporation, Pulmatrix, Inc. and Vectura Group plc and larger companies such as Allergan, Inc., GlaxoSmithKline plc and Novartis AG. If approved, our product candidates may face competition in the target commercial areas.

Our operations could be curtailed if we are unable to obtain any necessary additional financing on favorable terms or at all.

As of September 30, 2018, we had approximately $460.9 million in cash and cash equivalents. We have product candidates in various stages of development, and each will require significant further investment to develop, test and obtain regulatory approval prior to commercialization. In connection with our corporate restructuring announced in 2017, we are focusing our resources on Inbrija (levodopa inhalation powder) and other strategic priorities. While we believe that the cost savings from the restructuring and subsequent operating expense reductions, as well as the cost savings from the discontinuation of our tozadenant program, will enable us to fund operations through the commercial launch of Inbrija, if approved by the FDA, there can be no guarantee that we will have sufficient funding to do so. We are experiencing a rapid and significant decline in Ampyra revenue due to the marketing of generic versions of Ampyra following the September 10, 2018 decision of the United States Court of Appeals for the Federal Circuit which upheld the United States District Court for the District of Delaware’s decision to invalidate certain Ampyra patents. We expect that additional manufacturers will market generic versions of Ampyra, which may accelerate the decline in Ampyra sales. Also, on September 13, 2018, we announced that the FDA extended the PDUFA goal date for its review of the NDA of Inbrija from October 5, 2018 to January 5, 2019. If there are further delays in the approval of Inbrija, or it fails to receive FDA approval, we may need to seek additional equity or debt financing or strategic collaborations to complete our product development activities, and could require substantial funding to commercialize any products that we successfully develop. We may not be able to raise additional capital on favorable terms or at all.

To the extent that we are able to raise additional capital through the sale of equity securities, the issuance of those securities would result in dilution to our stockholders. Holders of such new equity securities may also have rights, preference or privileges that are senior to yours. If additional capital is raised through the incurrence of indebtedness, we may become subject to various restrictions and covenants that could limit our ability to respond to market conditions, provide for unanticipated capital investments or take advantage of business opportunities. To the extent funding is raised through collaborations or intellectual property-based financings, we may be required to give up some or all of the rights and related intellectual property to one or more of our products, product candidates or preclinical programs. If we are unable to obtain sufficient financing on favorable terms when and if needed, we may be required to reduce, defer or discontinue one or more of our product development programs or devote fewer resources to marketing Ampyra or our other commercial products.

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including our convertible senior notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. For example, we are experiencing a rapid and significant decline in Ampyra revenue due to the marketing of generic versions of Ampyra following the September 2018 decision of the United States Court of Appeals for the Federal Circuit to uphold the United States District Court for the District of Delaware’s decision to invalidate certain Ampyra patents. We expect that additional manufacturers will market generic versions of Ampyra, which may accelerate the decline in Ampyra sales. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

Our inability to attract and retain key management and other personnel, or maintain access to expert advisors, may hinder our ability to execute our business plan.

We are highly dependent on the services of Dr. Ron Cohen, our President and Chief Executive Officer, as well as the other principal members of our management and scientific, regulatory, manufacturing and commercial personnel. Our success depends in large part upon our ability to attract and retain highly qualified personnel with the knowledge and experience needed for these and other areas of our business. We face intense competition in our hiring efforts with other


pharmaceutical and biotechnology companies, as well as universities and nonprofit research organizations, and we may have to pay higher salaries to attract and retain qualified personnel. In addition, the discontinuation of our tozadenant program, the United States District Court for the District of Delaware’s decision to invalidate certain Ampyra patents (which has been upheld by the United States Court of Appeals for the Federal Circuit), and our 2017 reduction in force may impede our ability to attract and retain highly qualified personnel. We do not maintain "key man" life insurance policies on the lives of our officers, directors or employees. The loss of one or more of our key employees, or our inability to attract additional qualified personnel, could substantially impair our ability to implement our business plan, particularly our efforts to obtain regulatory approval for, and if approved, manufacture and successfully launch Inbrija.

We also have scientific, medical, clinical, marketing and other advisors who assist us in our research and development, clinical, and commercial strategies. These advisors are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. Similarly, they may have arrangements with other companies to assist in the development and commercialization of products that may compete with ours.

Risks related to our intellectual property

If we cannot protect, maintain and, if necessary, enforce our intellectual property, our ability to develop and commercialize our products will be severely limited.

Our success will depend in part on our and our licensors' ability to obtain, maintain and enforce patent and trademark protection for the technologies, compounds and products, if any, resulting from our licenses and research and development programs. Without protection for the intellectual property we use or intend to use, other companies could offer substantially identical products for sale without incurring the sizable discovery, research, development and licensing costs that we have incurred. Our ability to recover these expenditures and realize profits upon the sale of products could be diminished.

We have patent portfolios relating to Ampyra/aminopyridines, Inbrija (levodopa inhalation powder), CVT-427 and our ARCUS drug delivery technology, SYN120, BTT1023, cimaglermin alfa/neuregulins, remyelinating antibodies/antibodies relating to nervous system disorders, Qutenza and NP-1998/topical capsaicin formulations, comprised of both our own and in-licensed patents and patent applications. For some of our proprietary technologies, for example our ARCUS drug delivery technology, we rely on a combination of patents, trade secret protection and confidentiality agreements to protect our intellectual property rights. Our intellectual property also includes copyrights and a portfolio of trademarks.

The process of obtaining patents and trademarks can be time consuming and expensive with no certainty of success. Even if we spend the necessary time and money, a patent or trademark may not issue, it may not issue in a timely manner, or it may not have sufficient scope or strength to protect the technology it was intended to protect or to provide us with any commercial advantage. We may never be certain that we were the first to develop the technology or that we were the first to file a patent application for the particular technology because patent applications are confidential until they are published, and publications in the scientific or patent literature lag behind actual discoveries. The degree of future protection for our proprietary rights will remain uncertain if our pending patent applications are not allowed or issued for any reason or if we are unable to develop additional proprietary technologies that are patentable. Furthermore, third parties may independently develop similar or alternative technologies, duplicate some or all of our technologies, design around our patented technologies or challenge our issued patents or trademarks or the patents or trademarks of our licensors.

For example, in 2014 and 2015, several generic drug manufacturers filed Abbreviated New Drug Applications, or ANDAs, for generic versions of Ampyra to the FDA and challenged the Orange Book-listed patents that protected the Ampyra franchise. As such, to protect our intellectual property rights we filed lawsuits against the ANDA filers (other than those with whom we settled), which were consolidated into a single case, asserting the challenged Orange Book-listed patents against these generic drug manufacturers. In March 2017, the United States District Court for the District of Delaware (the “District Court”) issued a ruling upholding our Ampyra Orange Book-listed patent that expired on July 30, 2018, but invalidating four other Orange Book-listed patents pertaining to Ampyra set to expire between 2025 and 2027. In September 2018, the United States Court of Appeals for the Federal Circuit issued a ruling upholding the District Court’s decision (the “Appellate Decision”). We are experiencing a rapid and significant decline in Ampyra sales due to competition from generic versions of Ampyra that are being marketed following the Appellate Decision. We expect that additional manufacturers will market generic versions of Ampyra, which may accelerate the decline in Ampyra sales.

Also, the validity of our patents can be challenged by third parties pursuant to procedures introduced by American Invents Act, specifically inter partes review and/or post grant review before the U.S. Patent and Trademark Office. For


example, in February 2015, a hedge fund (acting with affiliated entities and individuals and proceeding under the name of the Coalition for Affordable Drugs) filed two separate inter partes review (IPR) petitions with the U.S. Patent and Trademark Office, challenging two of our Ampyra Orange Book-listed patents. The U.S. Patent and Trademark Office Patent Trials and Appeals Board, or PTAB, chose not to institute inter partes review of these patents. The hedge fund filed motions for reconsideration requesting that the denial to institute these two IPRs be reversed, but the motions were denied in April 2016. In addition, in September 2015 the same hedge fund filed four additional IPR petitions challenging four of our Orange Book-listed patents, including two of the same patents that were the subject of the February 2015 IPR petitions. We opposed the requests to institute these IPRs, but in March 2016 the PTAB decided to institute the IPR proceedings on all four patents. In March 2017 the PTAB issued a ruling and upheld all four of the challenged patents. The ruling has become final, as the hedge fund did not appeal the ruling before the May 2017 appeal deadline. However, the PTAB decision does not prevent parties from filing additional IPR petitions challenging our patents. Also, the PTAB’s decision does not affect the District Court’s decision invalidating the four patents in the ANDA litigation described above.

Patent litigation, IPR proceedings, and other legal proceedings involve complex legal and factual questions. We need to devote significant resources to the existing ANDA and IPR legal proceedings, and we may need to devote significant resources to other legal proceedings that arise in the future. If we are not successful, we could lose some or all of our Orange Book listed patents and our business could be materially harmed. We can provide no assurance concerning the duration or the outcome of any such lawsuits and legal proceedings.

We may initiate actions to protect our intellectual property (including, for example, in connection with the filing of an ANDA as described above) and in any litigation in which our intellectual property or our licensors' intellectual property is asserted, a court may determine that the intellectual property is invalid or unenforceable. Even if the validity or enforceability of that intellectual property is upheld by a court, a court may not prevent alleged infringement on the grounds that such activity is not covered by, for example, the patent claims. In addition, effective intellectual property enforcement may be unavailable or limited in some foreign countries for a variety of legal and public policy reasons. From time to time we may receive notices from third parties alleging infringement of their intellectual property rights. Any litigation, whether to enforce our rights to use our or our licensors' patents or to defend against allegations that we infringe third party rights, would be costly, time consuming, and may distract management from other important tasks.

As is commonplace in the biotechnology and pharmaceutical industry, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. To the extent our employees are involved in areas that are similar to those areas in which they were involved at their former employers, we may be subject to claims that such employees and/or we have inadvertently or otherwise used or disclosed the alleged trade secrets or other proprietary information of the former employers. Litigation may be necessary to defend against such claims, which could result in substantial costs and be a distraction to management and which could have an adverse effect on us, even if we are successful in defending such claims.

We also rely in our business on trade secrets, know-how and other proprietary information. We seek to protect this information, in part, through the use of confidentiality agreements with employees, consultants, collaborators, advisors and others. Nonetheless, those agreements may not provide adequate protection for our trade secrets, know-how or other proprietary information and prevent their unauthorized use or disclosure. To the extent that consultants, collaborators, key employees or other third parties apply technological information independently developed by them or by others to our proposed products, joint ownership may result, which could undermine the value of the intellectual property to us or disputes may arise as to the proprietary rights to such information which may not be resolved in our favor. The risk that other parties may breach confidentiality agreements or that our trade secrets become known or independently discovered by competitors, could harm us by enabling our competitors, who may have greater experience and financial resources, to copy or use our trade secrets and other proprietary information in the advancement of their products, methods or technologies. Policing unauthorized use of our or our licensors' intellectual property is difficult, expensive and time-consuming, and we may be unable to determine the extent of any unauthorized use. Adequate remedies may not exist in the event of unauthorized use or disclosure.


Item 6.  Exhibits

 

Exhibit No.

 

Description

10.1*

Amendment to December 19, 2005 Employment Agreement, dated August 13, 2019, by and between the Registrant and David Lawrence.

10.2*

Amendment to December 19, 2005 Employment Agreement, dated August 13, 2019, by and between the Registrant and Jane Wasman.

31.1

 

Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

 

31.2

 

Certification by the Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

 

32.1

 

Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

32.2

 

Certification by the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

101.INS

 

Inline XBRL Instance Document.

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document.

 

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document.

 

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document.

 

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

 

104

Cover Page Interactive Data File, formatted in Inline XBRL (included in Exhibit 101).

 

*

Indicates management contract or compensatory plan or arrangement.

 


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.

 

 

Acorda Therapeutics, Inc.

 

 

 

By:

 

/s/ Ron Cohen

Date:  November 6, 20187, 2019

 

 

Ron Cohen, M.D.

President, Chief Executive Officer and Director

 

 

 

 

 

By:

 

/s/ David Lawrence

Date:  November 6, 20187, 2019

 

 

David Lawrence

Chief, Business Operations and Principal Accounting Officer

 

 

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