Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 06, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | DEPOMED INC | |
Entity Central Index Key | 1,005,201 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 63,013,451 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 107,585 | $ 117,709 |
Short-term investments | 5,872 | 59,711 |
Accounts receivable, net | 77,192 | 102,056 |
Receivables from collaborative partners | 506 | 533 |
Inventories | 10,415 | 13,033 |
Prepaid and other current assets | 17,704 | 13,162 |
Total current assets | 219,274 | 306,204 |
Property and equipment, net | 13,943 | 15,526 |
Intangible assets, net | 824,944 | 902,149 |
Other assets | 1,346 | 1,458 |
Total assets | 1,059,507 | 1,225,337 |
Current liabilities: | ||
Accounts payable | 7,033 | 14,855 |
Accrued rebates, returns and discounts | 136,998 | 131,536 |
Accrued liabilities | 47,599 | 59,398 |
Income taxes payable | 28 | 59 |
Current portion of Senior Notes | 57,500 | |
Contingent consideration liability, current portion | 1,757 | 4,578 |
Interest payable | 11,308 | 15,924 |
Other current liabilities | 927 | 892 |
Total current liabilities | 263,150 | 227,242 |
Contingent consideration liability, long-term portion | 3,879 | 10,247 |
Senior Notes | 311,726 | 466,051 |
Convertible Notes | 265,163 | 252,725 |
Other long-term liabilities | 16,942 | 18,284 |
Commitments and Contingencies | ||
Shareholders' equity: | ||
Common stock | 309,351 | 291,634 |
Additional paid-in capital | 75,707 | 75,917 |
Accumulated deficit | (186,404) | (116,744) |
Accumulated other comprehensive loss, net of tax | (7) | (19) |
Total shareholders' equity | 198,647 | 250,788 |
Total liabilities and shareholders' equity | $ 1,059,507 | $ 1,225,337 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Revenues: | ||||
Product sales, net | $ 95,204 | $ 110,303 | $ 285,721 | $ 331,391 |
Royalties | 209 | 221 | 596 | 595 |
Total revenues | 95,413 | 110,524 | 286,317 | 331,986 |
Costs and expenses: | ||||
Cost of sales (excluding amortization of intangible assets) | 17,396 | 20,243 | 54,895 | 64,757 |
Research and development expenses | 1,761 | 10,412 | 12,459 | 23,477 |
Selling, general and administrative expenses | 48,850 | 51,574 | 147,379 | 156,036 |
Amortization of intangible assets | 25,734 | 27,037 | 77,204 | 81,111 |
Restructuring charges | 434 | 3,875 | ||
Total costs and expenses | 94,175 | 109,266 | 295,812 | 325,381 |
(Loss) Income from operations | 1,238 | 1,258 | (9,495) | 6,605 |
Other (expense) income: | ||||
Interest and other income | 72 | 113 | 604 | 310 |
Loss on prepayment of Senior Notes | (5,364) | (5,777) | ||
Interest expense | (17,815) | (20,307) | (55,697) | (63,182) |
Total other expense | (17,743) | (20,194) | (60,457) | (68,649) |
Net income (loss) before income taxes | (16,505) | (18,936) | (69,952) | (62,044) |
Benefit from income taxes | 513 | 6,042 | 560 | 17,692 |
Net loss | $ (15,992) | $ (12,894) | $ (69,392) | $ (44,352) |
Basic and diluted net loss per share (in dollars per share) | $ (0.25) | $ (0.21) | $ (1.11) | $ (0.73) |
Shares used in computing basic and diluted net loss per share (in shares) | 62,997,484 | 61,422,015 | 62,555,921 | 61,163,059 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | ||||
Net loss | $ (15,992) | $ (12,894) | $ (69,392) | $ (44,352) |
Unrealized gains (losses) on available-for-sale securities: | ||||
Unrealized (loss) gain on available-for-sale securities, net of tax | (5) | (12) | 12 | 23 |
Comprehensive loss | $ (15,997) | $ (12,906) | $ (69,380) | $ (44,329) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Operating Activities | ||
Net loss | $ (69,392) | $ (44,352) |
Adjustments for non-cash items: | ||
Depreciation and amortization | 79,031 | 83,019 |
Accretion of debt discount and debt issuance costs | 14,249 | 13,084 |
Loss on prepayment of Senior Notes | 5,364 | 5,777 |
Provision for inventory obsolescence | 2,345 | 754 |
Gain on disposal of property and equipment | (275) | |
Stock-based compensation | 9,922 | 12,602 |
Change in fair value of contingent consideration | (7,517) | 918 |
Deferred income taxes | (17,826) | |
Other | 244 | 617 |
Changes in assets and liabilities: | ||
Accounts receivable | 24,864 | (15,833) |
Receivables from collaborative partners | 27 | 134 |
Inventories | 272 | (1,519) |
Prepaid and other assets | (4,428) | (9,134) |
Accounts payable and other accrued liabilities | (20,648) | 3,276 |
Accrued rebates, returns and discounts | 5,463 | 3,614 |
Interest payable | (4,616) | (4,903) |
Net cash provided by operating activities | 34,905 | 30,228 |
Investing Activities | ||
Purchases of property and equipment | (563) | (2,786) |
Proceeds from disposal of property and equipment | 281 | |
Purchases of marketable securities | (7,074) | (48,861) |
Maturities of marketable securities | 60,681 | 108,207 |
Sales of marketable securities | 2,007 | |
Net cash provided by investing activities | 53,325 | 58,567 |
Financing Activities | ||
Payment of contingent consideration liability | (1,673) | (940) |
Repayment of Senior Notes | (100,000) | (100,000) |
Prepayment fees for repayment of Senior Notes | (4,000) | (5,000) |
Proceeds from issuance of common stock | 7,529 | 6,785 |
Net cash used in financing activities | (98,354) | (99,522) |
Shares withheld for payment of employee's withholding tax liability | (210) | (367) |
Net decrease in cash and cash equivalents | (10,124) | (10,727) |
Cash and cash equivalents at beginning of year | 117,709 | 101,084 |
Cash and cash equivalents at end of period | 107,585 | 90,357 |
Supplemental Disclosure of Cash Flow Information | ||
Net cash paid for income taxes | 121 | 83 |
Cash paid for interest | 44,832 | 53,043 |
Capitalized expenditures incurred but not yet paid | 87 | 392 |
Convertible Notes | ||
Adjustments for non-cash items: | ||
Accretion of debt discount and debt issuance costs | 12,438 | 11,421 |
Senior Notes | ||
Adjustments for non-cash items: | ||
Accretion of debt discount and debt issuance costs | $ 1,811 | $ 1,663 |
ORGANIZATION AND SUMMARY OF SIG
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2017 | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Depomed, Inc. (Depomed or the Company) is a specialty pharmaceutical company focused on pain and other central nervous system (CNS) conditions. The products that comprise the Company’s current specialty pharmaceutical business are (i) NUCYNTA ® ER (tapentadol extended release tablets), a product for the management of pain severe enough to require daily, around-the-clock, long term opioid treatment, including neuropathic pain associated with diabetic peripheral neuropathy (DPN) in adults, and for which alternative treatment options are inadequate, and NUCYNTA ® IR (NUCYNTA) (tapentadol), a product for the management of moderate to severe acute pain in adults, each of which the Company acquired the U.S. rights to in April 2015, (ii) Gralise ® (gabapentin), a once-daily product for the management of postherpetic neuralgia (PHN) that the Company launched in October 2011, (iii) CAMBIA ® (diclofenac potassium for oral solution), a product for the acute treatment of migraine attacks that the Company acquired in December 2013, (iv) Zipsor ® (diclofenac potassium) liquid filled capsules, a product for the treatment of mild to moderate acute pain that the Company acquired in June 2012, and (v) Lazanda ® (fentanyl) nasal spray, a product for the management of breakthrough pain in cancer patients 18 years of age and older who are already receiving and who are tolerant to opioid therapy for their underlying persistent cancer pain that the Company acquired in July 2013. We divested our rights to Lazanda to Slán Medicinal Holdings Limited ("Slán") on November 7, 2017. As of September 30, 2017, the Company has one product candidate, cebranopadol initially for the treatment of chronic lower back pain and potentially for chronic nociceptive and neuropathic pain. The Company is currently evaluating the development plan for cebranopadol, including the timing of potential Phase 3 trials. Basis of Presentation The unaudited condensed consolidated financial statements and the related footnote information of the Company have been prepared pursuant to the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules and regulations, certain footnotes or other financial information that are normally required by U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company’s management, the accompanying interim unaudited condensed consolidated financial statements include all adjustments necessary for a fair presentation of the information for the periods presented. The results for the three and nine months ended September 30, 2017 are not necessarily indicative of results to be expected for the entire year ending December 31, 2017 or future operating periods. The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K filed with the SEC (the 2016 Form 10-K). The balance sheet as of December 31, 2016 has been derived from the audited financial statements at that date, as filed in the Company’s 2016 Form 10-K. See Note 14 herein for information regarding impact of an out of period adjustment related to the Branded Prescription Drug fee (BPD) on our consolidated financial statements. Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Depomed Bermuda Ltd (Depo Bermuda), Depo NF Sub, LLC (Depo NF Sub) and Depo DR Sub, LLC (Depo DR Sub). All intercompany accounts and transactions have been eliminated on consolidation. On November 17, 2015, the Company entered into a definitive agreement to acquire the U.S. and Canadian rights to cebranopadol and its related follow-on compound from Grünenthal GmbH (Grünenthal). The acquisition of these rights closed on December 30, 2015, at which point the Company assigned its rights under the agreement to Depo Bermuda, a Company which was formed in Bermuda on December 22, 2015. Depo NF Sub was formed on March 26, 2015, in connection with a Note Purchase Agreement dated March 12, 2015 (Note Purchase Agreement) governing the Company’s issuance of $575.0 million aggregate principal amount of Senior Notes on April 2, 2015, for aggregate gross proceeds of approximately $562.0 million. On April 2, 2015, the Company and Depo NF Sub entered into a Pledge and Security Agreement with the Collateral Agent pursuant to which the Company and Depo NF Sub each granted the Collateral Agent (on behalf of the Purchasers) a security interest in substantially all of their assets, other than specifically excluded assets. Depo DR Sub was formed in October 2013 for the sole purpose of facilitating the license of certain rights to PDL Biopharma (the PDL Transaction). The Company contributed to Depo DR Sub all of its rights, title and interests in certain license agreements to receive royalty and milestone payments. Immediately following the transaction, Depo DR Sub sold to PDL, among other things, such rights to receive royalty and milestone payments, for an upfront cash purchase price of $240.5 million. The Company and Depo DR Sub continue to retain certain administrative duties and obligations under the specified license agreements. These include the collection of the royalty and milestone amounts due and enforcement of related provisions under the specified license agreements, among others. In addition, the Company and Depo DR Sub must prepare a quarterly distribution report relating to the specified license agreements, containing, among other items, the amount of royalty payments received by the Company and reimbursable expenses. The Company and Depo DR Sub must also provide PDL with notice of certain communications, events or actions with respect to the specified license agreements and infringement of any underlying intellectual property. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates are used when accounting for amounts recorded in connection with acquisitions, including initial fair value determinations of assets and liabilities as well as subsequent fair value measurements. Additionally, estimates are used in determining items such as, but not limited to, sales discounts and returns, depreciable and amortizable lives, share-based compensation assumptions, fair value of contingent consideration and taxes on income. Although management believes these estimates are based upon reasonable assumptions within the bounds of its knowledge of the Company’s business and operations, actual results could differ materially from these estimates. Change in estimate – During the three months ended March 31, 2017, the Company established a reserve with respect to a dispute with a Pharmacy Benefit Manager (PBM) over rebates relating to NUCYNTA ER, NUCYNTA and Gralise. The dispute relates to rebate claims submitted with respect to the year ended December 31, 2015 and the first half of 2016. As of December 31, 2016, the Company established a reserve for $1.0 million with respect to these claims, and had determined the likely amount payable on settlement would not be material to the consolidated financial statements. However, as a result of further communication with the PBM during the three months ended March 31, 2017, it became clear that the Company’s failure to pay the disputed amount would adversely impact the Company’s ability to maintain a favorable position on the PBM’s formulary. Accordingly, despite the Company’s belief that the claims in dispute are invalid, the Company increased the reserve against this matter by $4.7 million which is an offset to net sales for the three months ended March 31, 2017. The Company will adjust net sales in the future if it resolves this matter for an amount different than currently reserved. Measuring the Fair Value of Assets and Liabilities associated with Business Combinations The Company accounts for acquired businesses using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values. The fair value of the consideration paid, including contingent consideration, is assigned to the underlying net assets of the acquired business based on their respective fair values. Any excess or shortfall of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill or bargain purchase, as applicable. Significant judgments are used in determining the estimated fair values assigned to the assets acquired, liabilities assumed, contingent consideration and in determining estimates of useful lives of long-lived assets. Fair value determinations and useful life estimates are based on, among other factors, estimates of expected future net cash flows, estimates of appropriate discount rates used to calculate present value of expected future net cash flows, the assessment of each asset's life cycle, the impact of competitive trends on each asset's life cycle and other factors. These judgments can materially impact the estimates used to allocate acquisition date fair values to assets acquired and liabilities assumed and the resulting timing and amounts charged to, or recognized in, current and future operating results. For these and other reasons, actual results may vary significantly from estimated results. Any changes in the fair value of contingent consideration resulting from a change in the underlying inputs are recognized in operating expenses until the contingent consideration arrangement is settled. Changes in the fair value of contingent consideration resulting from the passage of time are recorded within interest expense until the contingent consideration is settled. Revenue Recognition The Company recognizes revenue from the sale of its products, royalties and milestones earned under its contractual arrangements. Revenue is recognized when there is persuasive evidence that an arrangement exists, delivery has occurred and title has passed, the price is fixed or determinable and the Company is reasonably assured of collecting the resulting receivable. Revenue arrangements with multiple elements are evaluated to determine whether the multiple elements meet certain criteria for dividing the arrangement into separate units of accounting, including whether the delivered element(s) have stand-alone value to the Company's customer or licensee. Where there are multiple deliverables combined as a single unit of accounting, revenues are deferred and recognized over the period that the Company remains obligated to perform services. · Product Sales—The Company sells commercial products to wholesale distributors and retail pharmacies. Products sales revenue is recognized when title has transferred to the customer and the customer has assumed the risks and rewards of ownership, which typically occurs on delivery to the customer. · Product Sales Allowances—The Company recognizes product sales allowances as a reduction of product sales in the same period the related revenue is recognized. Product sales allowances are based on amounts owed or to be claimed on the related sales. These estimates take into consideration the terms of the Company's agreements with customers, historical product returns, rebates or discounts taken or expected to be taken, estimated levels of inventory in the distribution channel, the shelf life of the product and specific known market events, such as competitive pricing and new product introductions. If actual future results vary from the Company's estimates, the Company may need to adjust these estimates, which could have an effect on product sales and earnings in the period of adjustment. The Company's sales allowances include: · Product Returns—The Company allows customers to return product for credit with respect to product that is within six months before and up to 12 months after its product expiration date. The Company estimates product returns on NUCYNTA ER and NUCYNTA, Gralise, CAMBIA, Zipsor and Lazanda. Under the terms of the Zipsor asset purchase agreement, the Company assumed financial responsibility for returns of Zipsor product previously sold by Xanodyne Pharmaceuticals, Inc. (Xanodyne). Under the terms of the CAMBIA asset purchase agreement, the Company also assumed financial responsibility for returns of CAMBIA product previously sold by Nautilus. The Company did not assume financial responsibility for returns of NUCYNTA ER and NUCYNTA previously sold by Janssen Pharma or Lazanda product previously sold by Archimedes Pharma US Inc. See Note 12 for further information on the acquisition of NUCYNTA ER and NUCYNTA, CAMBIA, Lazanda and Zipsor. The shelf life of NUCYNTA ER is 24 to 36 months and NUCYNTA is 36 months from the date of tablet manufacture, respectively. The shelf life of Gralise is 24 to 36 months from the date of tablet manufacture. The shelf life of CAMBIA is 24 to 48 months from the manufacture date. The shelf life of Zipsor is 36 months from the date of tablet manufacture. The shelf life of Lazanda is 24 to 36 months from the manufacture date. Estimates for returns are based on historical return trends by product or by return trends of similar products, taking into consideration the shelf life of product at the time of shipment, shipment and prescription trends, estimated distribution channel inventory levels and consideration of the introduction of competitive products. Because of the shelf life of the Company's products and its return policy of issuing credits with respect to product that is returned within six months before and up to 12 months after its product expiration date, there may be a significant period of time between when the product is shipped and when the Company issues credit on a returned product. Accordingly, the Company may have to adjust product return estimates, which could have an effect on product sales and earnings in the period of adjustments. · Wholesaler and Retail Pharmacy Discounts—The Company offers contractually determined discounts to certain wholesale distributors and retail pharmacies that purchase directly from it. These discounts are either taken off-invoice at the time of shipment or paid to the customer on a quarterly basis one to two months after the quarter in which product was shipped to the customer. · Prompt Pay Discounts—The Company offers cash discounts to its customers (generally 2% of the sales price) as an incentive for prompt payment. Based on the Company's experience, the Company expects its customers to comply with the payment terms to earn the cash discount. · Patient Discount Programs—The Company offers patient discount co-pay assistance programs in which patients receive certain discounts off their prescriptions at participating retail pharmacies. The discounts are reimbursed by the Company approximately one month after the prescriptions subject to the discount are filled. · Medicaid Rebates—The Company participates in Medicaid rebate programs, which provide assistance to certain low-income patients based on each individual state's guidelines regarding eligibility and services. Under the Medicaid rebate programs, the Company pays a rebate to each participating state, generally two to three months after the quarter in which prescriptions subject to the rebate are filled. · Chargebacks—The Company provides discounts to authorized users of the Federal Supply Schedule (FSS) of the General Services Administration under an FSS contract with the Department of Veterans Affairs. These federal entities purchase products from the wholesale distributors at a discounted price, and the wholesale distributors then charge back to the Company the difference between the current retail price and the price the federal entity paid for the product. · Managed Care Rebates—The Company offers discounts under contracts with certain managed care providers. The Company generally pays managed care rebates one to three months after the quarter in which prescriptions subject to the rebate are filled. · Medicare Part D Coverage Gap Rebates—The Company participates in the Medicare Part D Coverage Gap Discount Program under which it provides rebates on prescriptions that fall within the "donut hole" coverage gap. The Company generally pays Medicare Part D Coverage Gap rebates two to three months after the quarter in which prescriptions subject to the rebate are filled. · Royalties—Royalties are recognized as earned in accordance with the contract terms when royalties from licensees can be reliably measured and collectability is reasonably assured. · License and Collaborative Arrangements—Revenue from license and collaborative arrangements is recognized when the Company has substantially completed its obligations under the terms of the arrangement and the Company's remaining involvement is inconsequential and perfunctory. If the Company has significant continuing involvement under such an arrangement, license and collaborative fees are recognized over the estimated performance period. The Company recognizes milestone payments for its research and development collaborations upon the achievement of specified milestones if (1) the milestone is substantive in nature, and the achievement of the milestone was not reasonably assured at the inception of the agreement, (2) consideration earned relates to past performance and (3) the milestone payment is nonrefundable. A milestone is considered substantive if the consideration earned from the achievement of the milestone is consistent with the Company's performance required to achieve the milestone or consistent with the increase in value to the collaboration resulting from the Company's performance; the consideration earned relates solely to past performance; and the consideration earned is reasonable relative to all of the other deliverables and payments within the arrangement. License, milestones and collaborative fee payments received in excess of amounts earned are classified as deferred revenue until earned. Recently Issued Accounting Standards In July 2015, the FASB issued ASU 2015-11 Inventory (Topic 330): Simplifying the Measurement of Inventory . ASU 2015-11 requires an entity to measure inventory, other than inventory accounted for under last-in, first-out method or retail inventory method, at the lower of cost or net realizable value. ASU 2015-11 is effective for annual and interim periods beginning after December 15, 2016 on a prospective basis. The Company adopted this guidance on January 1, 2017, and the adoption of this guidance did not materially affect our consolidated financial statements. In March 2016, the FASB issued ASU No 2016-09 “ Improvements to Employee Share-Based Payment Accounting ”. This guidance simplifies the accounting for the taxes related to stock based compensation, requiring excess tax benefits and deficiencies to be recognized as a component of income tax expense rather than equity. This guidance also requires excess tax benefits and deficiencies to be presented as an operating activity on the statement of cash flows and allows an entity to make an accounting policy election to either estimate expected forfeitures or to account for them as they occur. The inclusion of excess tax benefits and deficiencies as a component of our income tax expense will increase volatility within our provision for income taxes as the amount of excess tax benefits or deficiencies from stock-based compensation awards are dependent on our stock price at the date the awards vest. The magnitude of such impacts will depend upon future movements in the Company’s share price as well as the timing of stock award exercises, which are both difficult to estimate. The Company adopted this ASU as of January 1, 2017. As a result of adopting this standard, the Company has made an accounting policy election to account for forfeitures as they occur, rather than estimate expected forfeitures. This change has been applied on a modified retrospective basis, resulting in a cumulative-effect adjustment to increase accumulated deficit by $0.3 million as of January 1, 2017, the date of adoption. The adoption of this guidance also requires excess tax benefits and tax deficiencies be recorded in the income statement as opposed to additional paid-in capital when the awards vest or are settled. Additionally, the Company has applied the provisions of this ASU on a retrospective basis in our condensed consolidated statements of cash flows, which includes presenting: (i) excess tax benefits as an operating activity, which were previously presented as a financing activity; and (ii) cash payments to tax authorities for employee taxes when shares are withheld to meet statutory withholding requirements as a financing activity, which were previously presented as an operating activity. The adoption requires recognition through opening retained earnings of any pre-adoption date net operating loss (NOL) carryforwards from non-qualified stock options and other employee share- based payments. As a result, the Company determined the impact of the adoption to be a $5.8 million increase to deferred tax assets related to share-based compensation incurred as of December 31, 2016 with a corresponding increase to the Company's valuation allowance for financial statement purposes since the Company is in a full valuation allowance position. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU or Update) No. 2014-09, "Revenue from Contracts with Customers" . This guidance outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. On July 9, 2015, the FASB deferred the effective date of this Update to fiscal years beginning after December 15, 2017, with early adoption permitted on the original effective date of fiscal years beginning after December 15, 2016. This guidance can be adopted on a full retrospective basis or on a modified retrospective basis. The Company plans to adopt this guidance on January 1, 2018, using the modified retrospective transition method applied to those contracts which were not completed as of that date. Upon adoption, the Company will recognize the cumulative effect of adopting this guidance as an adjustment to its opening balance of accumulated deficit. Prior periods will not be retrospectively adjusted. The Company has substantially completed an analysis of existing contracts with its customers and has assessed the differences in accounting for such contracts under this guidance compared with current revenue accounting standards. Based on its review of current customer contracts, the Company does not expect the implementation of this guidance to have a material impact on its consolidated financial statements as the timing of revenue recognition for product sales is not expected to significantly change. In February 2016, the FASB issued ASU No. 2016-02, " Leases ". This guidance requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. If the available accounting election is made, leases with a term of twelve months or less can be accounted for similar to existing guidance for operating leases. For a public entity, the amendments in this guidance are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in this guidance is permitted for all entities. The Company is currently evaluating and has not yet determined the impact implementation will have on the Company’s consolidated financial statements. In August 2016, the FASB issued ASU 2016-15 “ Classification of Certain Cash Receipts and Cash Payments”. ASU 2016-15 provides guidance on the classification of certain cash receipts and cash payments in the statement of cash flows. The guidance is effective for the Company in the first quarter of fiscal 2018 and will be applied on a retrospective basis. Early adoption is permitted. The Company early adopted this guidance on January 1, 2017, and the adoption of this guidance did not materially affect the Company’s consolidated financial statements. In June 2016, the FASB issued ASU 2016-13 (ASU 2016-13) " Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2019. The Company is currently in the process of evaluating the impact of the adoption of ASU 2016-13 on the Company’s consolidated financial statements. |
CASH, CASH EQUIVALENTS AND SHOR
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS | 9 Months Ended |
Sep. 30, 2017 | |
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS | |
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS | NOTE 2. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Securities classified as cash and cash equivalents and short-term investments as of September 30, 2017 and December 31, 2016 are summarized below (in thousands). Estimated fair value is based on quoted market prices for these investments. Gross Gross Amortized Unrealized Unrealized September 30, 2017 Cost Gains Losses Fair Value Cash and cash equivalents: Cash $ 88,559 $ — $ — $ 88,559 Money market funds 101 — — 101 US Treasury securities 3,605 — — 3,605 Corporate debt securities and commercial paper 15,320 — — 15,320 Total cash and cash equivalents $ 107,585 $ — $ — $ 107,585 Short-term investments Corporate debt securities and commercial paper with maturities less than 1 year $ 5,873 $ — $ (1) $ 5,872 Total short-term investments $ 5,873 $ — $ (1) $ 5,872 Total $ 113,458 $ — $ (1) $ 113,457 Gross Gross Amortized Unrealized Unrealized December 31, 2016 Cost Gains Losses Fair Value Cash and cash equivalents: Cash $ $ — $ — $ Money market funds — — Corporate debt securities and commercial paper — (2) Total cash and cash equivalents $ $ — $ (2) $ Short-term investments Corporate debt securities and commercial paper with maturities less than 1 year $ $ — $ (17) $ Total short-term investments $ $ — $ (17) $ Total $ $ — $ (19) $ The Company considers all highly liquid investments with a maturity at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks, money market instruments and corporate debt securities. The Company invests its cash in marketable securities, U.S. Treasury and government agency securities, and high quality securities of financial and commercial institutions. To date, the Company has not experienced material losses on any of its balances. These securities are carried at fair value, which is based on readily available market information, with unrealized gains and losses included in “accumulated other comprehensive loss” within shareholders’ equity on the Condensed Consolidated Balance Sheets. The Company uses the specific identification method to determine the amount of realized gains or losses on sales of marketable securities. Realized gains or losses have been insignificant and are included in “interest and other income” in the Condensed Consolidated Statement of Operations. As of September 30, 2017, the Company had 2 securities in an unrealized loss position. The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2017 (in thousands): Less than 12 months 12 months or greater Total Gross Gross Gross Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses Corporate debt securities $ 2,308 $ (1) $ — $ — $ 2,308 $ (1) The gross unrealized losses above were caused by interest rate increases. No significant facts or circumstances have arisen to indicate that there has been any deterioration in the creditworthiness of the issuers of the securities held by the Company. Based on the Company’s review of these securities, including the assessment of the duration and severity of the unrealized losses and the Company’s ability and intent to hold the investments until the recovery or maturity of such investments, there were no material other-than-temporary impairments for these securities at September 30, 2017. For debt securities, the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of the amortized cost. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes the following fair value hierarchy based on three levels of inputs: · Level 1: Quoted prices in active markets for identical assets or liabilities. · Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. · Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The following tables represent the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016 (in thousands): September 30, 2017 Level 1 Level 2 Level 3 Total Assets: Money market funds $ 101 $ — $ — $ 101 Commercial paper — 18,883 — 18,883 Corporate debt securities — 2,308 — 2,308 US Treasury securities — 3,605 — 3,605 Total $ 101 $ 24,796 $ — $ 24,897 Liabilities: Contingent consideration—Zipsor $ — $ — $ 452 $ 452 Contingent consideration—Lazanda — — 4,219 4,219 Contingent consideration—CAMBIA — — 965 965 $ — $ — $ 5,636 $ 5,636 December 31, 2016 Level 1 Level 2 Level 3 Total Assets: Money market funds $ 532 $ — $ — $ 532 Commercial paper — 52,192 — 52,192 Corporate debt securities — 36,850 — 36,850 Total $ 532 $ 89,042 $ — $ 89,574 Liabilities: Contingent consideration—Zipsor $ — $ — $ 1,489 $ 1,489 Contingent consideration—Lazanda — — 11,742 11,742 Contingent consideration—CAMBIA — — 1,594 1,594 $ — $ — $ 14,825 $ 14,825 The fair value measurement of the contingent consideration obligations arises from the Zipsor, CAMBIA and Lazanda acquisitions and relates to fair value of the potential future milestone payments and royalties payable under the respective agreements which are determined using Level 3 inputs. The key assumptions in determining the fair value are the revenue forecast, discount rate and the probability assigned to the potential milestones and royalties being achieved. At each reporting date, the Company re-measures the contingent consideration obligation arising from the above acquisitions to their estimated fair values. Any changes in the fair value of contingent consideration resulting from a change in the underlying inputs are recognized in operating expenses until the contingent consideration arrangement is settled. Changes in the fair value of contingent consideration resulting from the passage of time are recorded within interest expense until the contingent consideration is settled. The table below provides a summary of the changes in fair value recorded in interest expense and selling, general and administrative expenses for the three and nine months ended September 30, 2017 and September 30, 2016: Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Fair value, beginning of the period $ 7,356 $ 14,898 $ 14,825 $ 14,971 Changes in fair value recorded in interest expense 221 608 1,017 1,802 Changes in fair value recorded in selling, general and administrative expenses (1,415) 78 (7,542) (209) Royalties and milestone paid (526) (635) (2,664) (1,615) Total 5,636 14,949 5,636 14,949 The estimated fair value of the 2.50% Convertible Senior Notes Due 2021, which the Company issued on September 9, 2014 is based on a market approach. The estimated fair value, based on quoted market prices of the Company’s debt, was approximately $257.3 million and $390.0 million (par value $345.0 million) as of September 30, 2017 and December 31, 2016, respectively, and represents a Level 2 valuation. The principal amount of the Senior Notes approximates their fair value as of September 30, 2017 and represents a Level 2 valuation. When determining the estimated fair value of the Company’s debt, the Company uses a commonly accepted valuation methodology and market-based risk measurements that are indirectly observable, such as credit risk. There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the three and nine months ended September 30, 2017 and September 30, 2016. |
NET LOSS PER SHARE
NET LOSS PER SHARE | 9 Months Ended |
Sep. 30, 2017 | |
NET LOSS PER SHARE | |
NET INCOME PER SHARE | NOTE 3. NET LOSS PER SHARE Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, plus potentially dilutive common shares, related to unexercised stock options, unvested restricted stock awards, outstanding shares under the employee stock purchase plan and convertible debt. As the Company had net losses for the three and nine months ended September 30, 2017 and September 30, 2016, all potentially dilutive common shares were determined to be anti-dilutive. Basic and diluted earnings per common share are calculated as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except for per share amounts) 2017 2016 2017 2016 Basic and diluted net loss per share Net loss $ (15,992) $ (12,894) $ (69,392) $ (44,352) Denominator 62,997 61,422 62,556 61,163 Basic and diluted net loss per share $ (0.25) $ (0.21) $ (1.11) $ (0.73) The following table sets forth outstanding potentially dilutive common shares that are not included in the computation of diluted net loss per share because to do so would be anti-dilutive: September 30, September 30, (in thousands) 2017 2016 Convertible debt 17,931 17,931 Stock options and equivalents 7,393 9,482 Total potentially dilutive common shares 25,324 27,413 |
LICENSE ARRANGEMENTS
LICENSE ARRANGEMENTS | 9 Months Ended |
Sep. 30, 2017 | |
LICENSE ARRANGEMENTS | |
LICENSE ARRANGEMENTS | NOTE 4. LICENSE ARRANGEMENTS Janssen Pharmaceuticals, Inc. In August 2012, the Company entered into a license agreement with Janssen Pharma that granted Janssen Pharma a non-exclusive license to certain patents and other intellectual property rights to its Acuform ® drug delivery technology for the development and commercialization of tapentadol extended release products, including NUCYNTA ER (tapentadol extended-release tablets). The Company receives low single digit royalties on net sales of NUCYNTA ER in Canada and Japan through December 31, 2021. The Company was also previously receiving royalties on sales of NUCYNTA ER in the U.S. until its acquisition of the U.S. rights to NUCYNTA ER from Janssen Pharma on April 2, 2015. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2017 | |
STOCK-BASED COMPENSATION | |
STOCK-BASED COMPENSATION | NOTE 5. STOCK-BASED COMPENSATION The following table presents stock-based compensation expense recognized for stock options, stock awards, restricted stock units and the Company’s Employee Stock Purchase Program (ESPP) in the Company’s Condensed Consolidated Statements of Operations (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Cost of sales $ 9 $ $ 84 $ Research and development expense 45 652 Selling, general and administrative expense 2,857 9,134 Restructuring charges 52 — 52 — Total $ 2,963 $ $ 9,922 $ At September 30, 2017, the Company had $25.4 million of total unrecognized compensation expense related to stock option grants and restricted stock units that will be recognized over an average vesting period of 2.42 years. |
INVENTORIES
INVENTORIES | 9 Months Ended |
Sep. 30, 2017 | |
INVENTORIES | |
INVENTORIES | NOTE 6. INVENTORIES Inventories consist of finished goods, raw materials and work in process and are stated at the lower of cost or market and consist of the following (in thousands): September 30, December 31, 2017 2016 Raw materials $ 1,710 $ Work-in-process 331 Finished goods 8,374 Total $ $ |
ACCRUED LIABILITIES
ACCRUED LIABILITIES | 9 Months Ended |
Sep. 30, 2017 | |
ACCRUED LIABILITIES | |
ACCRUED LIABILITIES | NOTE 7. ACCRUED LIABILITIES Accrued liabilities consist of the following (in thousands): September 30, December 31, 2017 2016 Accrued compensation $ 7,650 $ 11,730 Accrued royalties 9,111 21,703 Other accrued liabilities 30,838 25,965 Total accrued liabilities $ 47,599 $ 59,398 |
DEBT
DEBT | 9 Months Ended |
Sep. 30, 2017 | |
DEBT. | |
DEBT | NOTE 8. DEBT Senior Notes On April 2, 2015, the Company issued $575.0 million aggregate principal amount of senior secured notes (the Senior Notes) for aggregate gross proceeds of approximately $562.0 million pursuant to a Note Purchase Agreement dated March 12, 2015 (Note Purchase Agreement) between the Company and Deerfield Private Design Fund III, L.P., Deerfield Partners, L.P., Deerfield International Master Fund, L.P., Deerfield Special Situations Fund, L.P., Deerfield Private Design Fund II, L.P., Deerfield Private Design International II, L.P., BioPharma Secured Investments III Holdings Cayman LP, Inteligo Bank Ltd. and Phemus Corporation (collectively, the Purchasers) and Deerfield Private Design Fund III, L.P., as collateral agent. The Company used $550.0 million of the net proceeds received upon the sale of the Senior Notes to fund a portion of the Purchase Price paid to Janssen Pharma in connection with the NUCYNTA acquisition. The Company incurred debt issuance costs of $0.5 million during 2015. The Senior Notes will mature on April 2, 2022 (unless earlier prepaid or repurchased), are secured by substantially all of the assets of the Company and any subsidiary guarantors, and bear interest at the rate equal to the lesser of (i) 9.75% over the three month London Inter-Bank Offer Rate (LIBOR), subject to a floor of 1.0% and (ii) 11.95% (through the third anniversary of the purchase date) and 12.95% (thereafter). The interest rate is determined at the first business day of each fiscal quarter, commencing with the first such date following April 2, 2015. The interest rate for the three months ended March 31, 2017 was 10.75%; the interest rate for the three months ended June 30, 2017 was 10.90%; and the interest rate for the three months ended September 30, 2017 was 11.05%. Pursuant to the repayment terms specified in the Note Purchase Agreement, in April 2016, the Company prepaid and retired $100.0 million of the Senior Notes and paid a $5.0 million prepayment fee. The Company recorded a net loss on prepayment of the Senior Notes of $5.8 million which represented the prepayment fee of $5.0 million and the immediate recognition of unamortized balances of debt discount and debt issuance costs of $0.8 million in April 2016. In April 2017, the Company prepaid and retired $100.0 million of the Senior Notes and paid a $4.0 million prepayment fee. The Company recorded a net loss on prepayment of the Senior Notes of $5.4 million which represented the prepayment fee of $4.0 million and the immediate recognition of unamortized balances of debt discount and debt issuance costs of $1.4 million in April 2017. The remaining $375.0 million of Senior Notes can be repaid prior to maturity, at the Company’s option. The Company is required to repay the outstanding Senior Notes in full if the principal amount outstanding on its existing 2.50% Convertible Senior Notes due 2021 as of March 31, 2021, is greater than $100.0 million. In addition, if the successor entity in a Major Transaction, as defined in the Note Purchase Agreement, does not satisfy specified qualification criteria, the Purchasers may require the Company to prepay the Senior Notes upon consummation of the Major Transaction in an amount equal to the principal amount of outstanding Senior Notes, accrued and unpaid interest and a prepayment premium in an amount equal to what the Company would have otherwise paid in an optional prepayment described in the following paragraph. The Company is required to make mandatory prepayments on the Senior Notes in an amount equal to the proceeds it receives in connection with asset dispositions in excess of $10.0 million, together with accrued and unpaid interest on the principal amount prepaid. The Company paid a prepayment premium of $5.0 million in connection with the April 2016 prepayment of Senior Notes and a prepayment premium of $4.0 million with the April 2017 prepayment of Senior Notes. The Company is required to pay a prepayment premium equal to (i) 4% of the principal amount of the Notes to be prepaid, if such prepayment occurs after the second anniversary of the Purchase Date but on or prior to the third anniversary of the Purchase Date; (ii) 3% of the principal amount of the Notes to be prepaid, if such prepayment occurs after the third anniversary of the Purchase Date but on or prior to the fourth anniversary of the Purchase Date; (iii) 2% of the principal amount of the Notes to be prepaid, if such prepayment occurs after the fourth anniversary of the Purchase Date but on or prior to the fifth anniversary of the Purchase Date; (iv) 1% of the principal amount of the Notes to be prepaid, if such prepayment occurs after the fifth anniversary of the Purchase Date but on or prior to the sixth anniversary of the Purchase Date; and (v) zero, if such prepayment occurs after the sixth anniversary of the Purchase Date. The Senior Notes and related indentures contain customary covenants, including, among other things, and subject to certain qualifications and exceptions, covenants that restrict the Company’s ability and the ability of its subsidiaries to: incur or guarantee additional indebtedness; create or permit liens on assets; pay dividends on capital stock or redeem, repurchase or retire capital stock or subordinated indebtedness; make certain investments and other restricted payments; engage in mergers, acquisitions, consolidations and amalgamations; transfer and sell certain assets; and engage in transactions with affiliates. Pursuant to the Note Purchase Agreement, upon the consummation of the sale of the Senior Notes on April 2, 2015, the Company and Depo NF Sub, LLC entered into a Pledge and Security Agreement with the Deerfield Private Design Fund III, L.P. (the Collateral Agent), pursuant to which the Company and Depo NF Sub each granted the Collateral Agent (on behalf of the Purchasers) a security interest in substantially all of their assets, other than specifically excluded assets. The principal amount of the Senior Notes is repayable as follows (amounts in thousands): April 2, 2018 $ 57,500 April 2, 2019 115,000 April 2, 2020 115,000 April 2, 2021 87,500 $ 375,000 The following is a summary of the carrying value of the Senior Notes as of September 30, 2017 and December 31, 2016 (in thousands): September 30, December 31, 2017 2016 Principal amount of the Senior Notes $ 375,000 $ 475,000 Unamortized debt discount balance (5,551) (8,605) Unamortized debt issuance costs (223) (344) $ 369,226 $ 466,051 The debt discount and debt issuance costs are being amortized as interest expense through April 2022 using the effective interest method. The following is a summary of interest expense for the three and nine months ended September 30, 2017 and September 30, 2016 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Contractual interest expense $ 10,589 13,049 33,748 41,671 Amortization of debt discount and debt issuance costs 614 581 1,811 1,663 Total interest expense $ 11,203 $ 13,630 $ 35,559 $ 43,334 Convertible Notes On September 9, 2014, the Company issued $345.0 million aggregate principal amount of 2.50% Convertible Senior Notes Due 2021 (the Convertible Notes) resulting in net proceeds to the Company of $334.2 million after deducting the underwriting discount and offering expenses of $10.4 million and $0.4 million, respectively. The Convertible Notes were issued pursuant to an indenture, as supplemented by a supplemental indenture between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (the Trustee), and mature on September 1, 2021, unless earlier converted, redeemed or repurchased. The Convertible Notes bear interest at the rate of 2.50% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, beginning March 1, 2015. Prior to March 1, 2021, holders of the Convertible Notes can convert their securities, at their option: (i) during any calendar quarter commencing after December 31, 2014, if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to $25.01 (130% of the $19.24 conversion price) on each applicable trading day; (ii) during the five business day period after any five consecutive trading day 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 our common stock and the conversion rate on each such trading day; and (iii) at any time upon the occurrence of specified corporate transactions, to include a change of control (as defined in the Notes Indenture). On or after March 1, 2021 to the close of business on the second scheduled trading day immediately preceding the maturity date, the holders of the Convertible Notes may convert all or any portion of their notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. The initial conversion rate of 51.9852 shares of common stock per $1,000 principal amount of Convertible Notes is equivalent to a conversion price of approximately $19.24 per share of common stock. Upon conversion, the Company will pay or deliver, as the case may be, 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. As more fully described in the prospectus supplement relating to the issuance of the Convertible Notes filed with the SEC on September 5, 2014, if the conversion obligation is satisfied solely in cash or through payment and delivery of a combination of cash and shares, the amount of cash and shares, if any, due upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 40 trading day observation period. The closing price of the Company’s common stock did not exceed 130% of the $19.24 conversion price, for the required period during the three months ended September 30, 2017. As a result, the Convertible Notes were not convertible as of September 30, 2017. The Convertible Notes were accounted for in accordance with ASC Subtopic 470-20, Debt with Conversion and Other Options. Pursuant to ASC Subtopic 470-20, since the Convertible Notes can be settled in cash, shares of common stock or a combination of cash and shares of common stock at the Company’s option, the Company is required to separately account for the liability (debt) and equity (conversion option) components of the instrument. The carrying amount of the liability component of any outstanding debt instrument is computed by estimating the fair value of a similar liability without the conversion option. The amount of the equity component is then calculated by deducting the fair value of the liability component from the principal amount of the convertible debt instrument. The effective interest rate used in determining the liability component of the Convertible Notes was 9.34%. This resulted in the recognition of $226.0 million as the liability component net of a $119.0 million debt discount with a corresponding increase to paid-in capital representing the equity component of the Convertible Notes. The underwriting discount of $10.4 million and offering expenses of $0.4 million were allocated between debt issuance costs and equity issuance costs in proportion to the allocation of the proceeds. The following is a summary of the liability component of the Convertible Notes as of September 30, 2017 and December 31, 2016 (in thousands): September 30, December 31, 2017 2016 Principal amount of the Convertible Notes $ 345,000 $ 345,000 Unamortized discount of the liability component (75,892) (87,570) Unamortized debt issuance costs (3,945) (4,705) $ 265,163 $ 252,725 The debt discount and debt issuance costs are being amortized as interest expense through September 2021. The following is a summary of interest expense for the three and nine months ended September 30, 2017 and September 30, 2016 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Stated coupon interest $ 2,156 2,157 6,468 6,469 Amortization of debt discount and debt issuance costs 4,225 3,879 12,438 11,421 Total interest expense $ 6,381 $ 6,036 $ 18,906 $ 17,890 |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2017 | |
SHAREHOLDERS' EQUITY | |
SHAREHOLDERS' EQUITY | NOTE 9. SHAREHOLDERS’ EQUITY Option Exercises For the three and nine months ended September 30, 2017, employees exercised options to purchase 50,159 and 863,511 shares of the Company’s common stock with net proceeds to the Company of approximately $0.3 million and $6.3 million, respectively. For the three and nine months ended September 30, 2016, employees exercised options to purchase 154,789 and 569,288 shares of the Company’s common stock with net proceeds to the Company of approximately $1.6 million and $5.0 million, respectively. Restricted Stock Units For the three and nine months ended September 30, 2017, the Company issued zero and 42,068 shares of the Company’s common stock due to vesting of restricted stock units, respectively. For the three and nine months ended September 30, 2016, the Company issued zero and 42,697 shares of the Company’s common stock due to vesting of restricted stock units, respectively. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2017 | |
INCOME TAXES | |
INCOME TAXES | NOTE 10. INCOME TAXES As of September 30, 2017, our net deferred tax assets are fully offset by a valuation allowance. The valuation allowance is determined in accordance with the provisions of ASC 740, Income taxes , which require an assessment of both negative and positive evidence when measuring the need for a valuation allowance. Based on the weight of available evidence, we provided a full valuation allowance against our net deferred assets in December of 2016. We reassess the need for a valuation allowance on a quarterly basis. If it is determined that a portion or all of the valuation allowance is not required, it will generally be a benefit to the income tax provision in the period such determination is made. For the three and nine months ended September 30, 2017, the difference between the recorded benefit for income taxes and the tax benefit based on the federal statutory rate of 35%, was primarily attributable to the impact of the valuation allowance. For the three and nine months ended September 30, 2016, the difference between the recorded benefit for income taxes and the tax benefit based on the federal statutory rate of 35%, was primarily attributable to the impact of net non-deductible expenses and minor discrete adjustments. Tax years 2013-2017 remain open to examination by the Internal Revenue Service and tax years 2007-2017 remain open in certain state taxing jurisdictions in which the Company operates. The Company’s net operating losses and credits from earlier tax years may remain open to adjustment by taxing authorities until the statute of limitation tolls on the year all carryovers are utilized in full. Interest and penalties, if any, related to unrecognized tax benefits, would be recognized as income tax expense by the Company. The Company has approximately $0.9 million of accrued interest and penalties associated with unrecognized tax benefits. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 11. COMMITMENTS AND CONTINGENCIES Leases We have a non-cancelable operating lease for our office building and we are obligated to make payments under non-cancelable operating leases for automobiles used by our sales force. Future minimum lease payments under our non-cancelable operating leases at September 30, 2017 were as follows (in thousands): Year Ending December 31, Lease Payments 2017 (remainder) $ 1,082 2018 3,909 2019 2,433 2020 1,972 2021 1,673 Thereafter 1,572 Total $ 12,641 In April 2012, the Company entered into an office and laboratory lease agreement to lease approximately 52,500 rentable square feet in Newark, California commencing on December 1, 2012. The Company occupied approximately 8,000 additional rentable square feet commencing in July 2015. The lease will expire on November 30, 2022. However, the Company has the right to renew the lease for one additional five year term, provided that written notice is made to the landlord no later than 12 months prior to the lease expiration. The Company was allowed to control physical access to the premises upon signing the lease. Therefore, in accordance with the applicable accounting guidance, the lease term was deemed to have commenced in April 2012. Accordingly, the rent free periods and the escalating rent payments contained within the lease are being recognized on a straight-line basis from April 2012. The Company will pay approximately $8.3 million in aggregate rent over the remaining term of the lease for the above premises. Deferred rent was approximately $1.5 million as of September 30, 2017 and $1.6 million as of December 31, 2016. Rent expense relating to the office and laboratory lease agreement for the three months ended September 30, 2017 and September 30, 2016, was $0.1 million and $0.1 million, respectively, and $0.4 million and $0.4 million for the nine months ended September 30, 2017 and September 30, 2016, respectively. The Company has an operating lease agreement with Enterprise FM Trust (Enterprise) for the lease of vehicles to be used by the Company's sales force, with the lease terms ranging from 18 to 48 months. The Company will pay approximately $4.2 million in aggregate rent over the remaining term of the lease for the vehicles. Rent expense relating to the lease of cars for the three months ended September 30, 2017 and September 30, 2016 was $0.8 million and $0.8 million, respectively, and $2.4 million and $2.4 million for the nine months ended September 30, 2017 and September 30, 2016, respectively. Legal Matters Depomed v. NUCYNTA and NUCYNTA ER ANDA Filers Actavis & Alkem : In July 2013, Janssen Pharma filed patent infringement lawsuits in the U.S. District Court for the District of New Jersey (D.N.J.) against Actavis Elizabeth LLC, Actavis Inc. and Actavis LLC (collectively, Actavis), as well as Alkem Laboratories Limited and Ascend Laboratories, LLC (collectively, Alkem). The patent infringement claims against Actavis and Alkem relate to their respective ANDAs seeking approval to market generic versions of NUCYNTA and NUCYNTA ER before the expiration of U.S. Reissue Patent No. 39,593 (the ’593 Patent), U.S. Patent No. 7,994,364 (the ’364 Patent) and, as to Actavis only, U.S. Patent No. 8,309,060 (the ’060 Patent). In December 2013, Janssen Pharma filed an additional complaint in the D.N.J. against Alkem asserting that U.S. Patent No. 8,536,130 (the ’130 Patent) relates to Alkem’s ANDA seeking approval to market a generic version of NUCYNTA ER. In August 2014, Janssen Pharma amended the complaint against Alkem to add additional dosage strengths. Sandoz & Roxane : In October 2013, Janssen Pharma received a Paragraph IV Notice from Sandoz, Inc. (Sandoz) with respect to NUCYNTA related to the ’364 Patent, and a Paragraph IV Notice from Roxane Laboratories, Inc. (Roxane) with respect to NUCYNTA related to the ’364 and ’593 Patents. In response to those notices, Janssen Pharma filed an additional complaint in the D.N.J. against Roxane and Sandoz asserting the ’364 Patent against Sandoz and the ’364 and ’593 Patents against Roxane. In April 2014, Janssen Pharma and Sandoz entered into a joint stipulation of dismissal of the case against Sandoz, based on Sandoz's agreement not to market a generic version of NUCYNTA products prior to the expiration of the asserted patents. In June 2014, in response to a Paragraph IV Notice from Roxane with respect to NUCYNTA ER, Janssen Pharma filed an additional complaint in the U.S. District Court for the District of New Jersey asserting the ’364, ’593, and ’130 Patents against Roxane. Watson : In July 2014, in response to a Paragraph IV Notice from Watson Laboratories, Inc. (Watson) with respect to the NUCYNTA oral solution product and the ’364 and ’593 Patents, Janssen Pharma filed a lawsuit in the D.N.J. asserting the ’364 and ’593 Patents against Watson. In each of the foregoing actions, the ANDA filers counterclaimed for declaratory relief of noninfringement and patent invalidity. At the time that the actions were commenced, Janssen Pharma was the exclusive U.S. licensee of the patents referred to above. On April 2, 2015, the Company acquired the U.S. rights to the NUCYNTA ER and NUCYNTA from Janssen Pharma. As part of the acquisition, the Company became the exclusive U.S. licensee of the patents referred to above. The Company was added as a plaintiff to the pending cases and is actively litigating them. In September 2015, the Company filed an additional complaint in the D.N.J. asserting the ’130 Patent against Actavis. The ’130 Patent issued in September 2013 and was timely listed in the Orange Book for NUCYNTA ER, but Actavis did not file a Paragraph IV Notice with respect to this patent. In its new lawsuit, the Company claimed that Actavis would infringe or induce infringement of the ’130 Patent if its proposed generic products were approved. In response, Actavis counterclaimed for declaratory relief of noninfringement and patent invalidity, as well as an order requiring the Company to change the corrected use code listed in the Orange Book for the ’130 Patent. In February 2016, Actavis, Actavis UT, Roxane and Alkem each stipulated to infringement of the ’593 and ’364 patents. A two-week bench trial on the validity of the three asserted patents and infringement of the ’130 Patent was commenced on March 9, 2016. Closing arguments took place on April 27, 2016. On September 30, 2016, the Court issued its final decision. The Court found that the ’593, ’364 Patent, and ’130 Patents are all valid and enforceable, that Alkem will induce infringement of the ’130 Patent, and that Roxane and Actavis will not infringe the ’130 Patent. On November 3, 2016, Alkem filed an appeal in the United States Court of Appeals for the Federal Circuit appealing the Court’s finding that the ’364 and ’130 Patents are not invalid and that Alkem infringes the ’130 Patent. The Company moved to terminate Alkem’s appeal on the grounds that a final judgment had not yet been entered by the Court, and the Federal Circuit deactivated Alkem’s appeal on December 16, 2016. On April 11, 2017, the Court entered final judgment in favor of the Company on the validity and enforceability of all three patents, on infringement of the ’593 and ’364 Patents by all defendants, and on infringement of the ’130 Patent against Alkem. The judgment includes an injunction enjoining all three defendants from engaging in certain activities with tapentadol (the active ingredient in NUCYNTA), and ordering the effective date of any approval of Actavis, Actavis UT, and Roxane’s ANDAs, and Alkem’s ANDA for NUCYNTA IR to be no earlier than the expiry of the ’364 Patent (June 27, 2025), and the effective date of any approval of Alkem’s ANDA for NUCYNTA ER to be no early than the expiry of the ’130 Patent (September 22, 2028). The period of exclusivity with respect to all four defendants may in the future be extended with the award of pediatric exclusivity. Notices of appeal were filed by defendants Alkem and Roxane concerning the ’364 and ’130 patent issues. The Company filed its own cross-appeal with regard to the Court’s finding that Roxane and Actavis will not infringe the claims of the ’130 Patent. The appeals have been consolidated at the Federal Circuit, and the briefing schedule is expected to continue until the first quarter of 2018, with a hearing scheduled later in 2018. The ’593 patent is not the subject of any appeals. Depomed v. Purdue The Company has sued Purdue Pharma L.P (Purdue) for patent infringement in a lawsuit filed in January 2013 in the U.S. District Court for the District of New Jersey. The lawsuit arises from Purdue’s commercialization of reformulated OxyContin® (oxycodone hydrochloride controlled-release) in the U.S. and alleges infringement of U.S. Patent Nos. 6,340,475 (the ‘475 Patent) and 6,635,280 (the ‘280 Patent), which expired in September 2016. On September 28, 2015, the district court stayed the Purdue lawsuit pending the decision of the U.S. Court of Appeals for the Federal Circuit (CAFC) in Purdue’s appeal of the PTAB’s Final Written Decisions described below. On June 30, 2016, the district court lifted the stay based on the CAFC’s opinion and judgment affirming the PTAB’s Final Written Decisions confirming the patentability of the patent claims of the ‘475 and ‘280 Patents Purdue had challenged. The parties filed opening Markman briefs on June 3, 2016 and their responsive Markman briefs in July 2016. The Markman hearing was held on November 2, 2016 and on April 6, 2017, the Court issued a Markman order which is available on the docket. On June 10, 2016, the Company filed a motion for leave to file a second amended Complaint to plead willful infringement and remove claims of infringement related to U.S. Patent No. 6,723,340 (the ‘340 Patent) and 8,329,215 (the ‘215 Patent). On June 21, 2016, Purdue filed an opposition to the Company’s motion for leave to plead willful infringement, but did not oppose removing claims related to the ‘340 and ‘215 Patents. On June 28, 2016, the Company filed a reply brief to its motion for leave. On January 31, 2017, the Court granted the Company’s motion for leave to plead willful infringement. On June 1, 2016, Purdue filed a motion for leave to amend its invalidity contentions to add allegations of indefiniteness and confirm that certain invalidity defenses remained in the case post-IPR proceedings. On June 21, 2016 the Company filed an opposition to Purdue’s motion for leave and a cross-motion to strike Purdue’s invalidity contentions. On November 4, 2016, the Court granted Purdue’s motion for leave to amend its invalidity contentions, and denied the Company’s cross-motion to strike. On October 28, 2016, Purdue moved for leave to amend its answer to add a counterclaim of unenforceability and affirmative defenses of inequitable conduct and unclean hands. On November 7, 2016, Depomed filed its opposition to Purdue’s motion for leave to amend its Answer. On November 14, 2016, Purdue filed a reply to its motion for leave to amend its Answer. On February 1, 2017, Depomed filed a Second Amended Complaint pleading willful infringement. On February 15, 2017, Purdue answered Depomed’s Second Amended Complaint asserting counterclaims of non-infringement, invalidity and unenforceability. On March 6, 2017, Depomed moved to dismiss Purdue’s counterclaim of inequitable conduct and moved to strike affirmative defenses of inequitable conduct, unclean hands, and patent misuse. On March 20, 2017, Purdue filed an opposition to Depomed’s motion, and on March 27, 2017, Depomed filed a reply brief. On April 17, 2017, the Court issued an order finding Purdue’s motion to amend its Answer was moot. On June 28, 2017, the Court issued an order granting Depomed’s motion to dismiss Purdue’s affirmative defense of patent misuse and theory of inequitable conduct related to interrogatory responses, and the order denied the remainder of Depomed’s motion. On July 10, 2017, the case was reassigned to Judge Wolfson. On July 11, 2017, the Court scheduled fact discovery regarding inequitable conduct to close on August 2, 2017, expert discovery to close on November 16, 2017, the deadline for dispositive motions as December 19, 2017, and a pretrial conference on January 25, 2018. The Court also scheduled a teleconference for October 12, 2017. No trial date has been set by the Court, though the Company expects a trial may be scheduled in early 2018. In response to petitions filed by Purdue, the PTAB instituted IPRs of certain of the claims asserted in the Company’s lawsuit against Purdue. In the IPRs initiated by Purdue, in July 2014, the PTAB declined to institute an IPR as to two claims of the ‘475 patent and two claims of the ‘280 Patent. The PTAB instituted an IPR as to the other 15 claims of the ‘475 Patent and as to the other ten claims of the ‘280 Patent asserted against Purdue. In July 2015, the PTAB issued Final Written Decisions confirming the patentability of all claims at issue. In March 2016, following Purdue’s appeal of the PTAB’s decisions, the CAFC affirmed the PTAB’s Final Written Decisions. Depomed v. Strides Pharma Inc. and Strides Pharma Global Pte Limited On May 5, 2017, the Company filed suit in the U.S. District Court for the District of New Jersey against Strides Pharma Inc. and Strides Pharma Global Pte Limited (collectively, Strides) based on Strides’ filing of an ANDA to market a generic version of ZIPSOR prior to the expiration of U.S. Patent Nos. 7,662,858; 7,884,095; 7,939,518; 8,110,606; 8,623,920; and 9,561,200 (the patents-in-suit). By letter dated March 27, 2017, Strides informed the Company that it had filed an ANDA for a generic version of ZIPSOR with Paragraph IV certifications against each of the patents-in-suit. The Company’s filing of the complaint against Strides resulted in an automatic 30-month stay of FDA approval of Strides’ ANDA, lasting until September 2019. On August 11, 2017, the Company and the defendants reached a settlement of the case that permits Strides to begin selling their generic version of ZIPSOR in September 2022, or earlier in certain circumstances. In accordance with applicable legal requirements, the Company and Strides submitted the ZIPSOR settlement agreement to the United States Federal Trade Commission and United States Department of Justice for review. The ZIPSOR settlement agreement provides for a full settlement and release by both the Company and Strides of all claims that were or could have been asserted in the litigation and that arise out of the issues that were the subject of the litigation or Strides’ generic version of ZIPSOR. Previously, in July 2013, the Company filed suit against Banner Pharmacaps Inc. (Banner) and Watson Laboratories, Inc. (Watson) based on Banner’s filing of an ANDA for a generic version of ZIPSOR. The Company and the defendants reached a settlement of the case that permits Watson to begin selling their generic version of ZIPSOR on March 24, 2022, or earlier under certain circumstances. The Company believes that Banner and Watson may be entitled to 180-day exclusivity with respect to generic ZIPSOR. Securities Class Action Lawsuit On August 23, 2017, the Company, its current chief executive officer and president, its former chief executive officer and president, and its current chief financial officer were named as defendants in a purported federal securities law class action filed in the United States District Court for the Northern District of California (Huang v. Depomed et al., No. 3:17-cv-04830-JST, N.D. Cal.). The action alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 relating to certain prior disclosures of the Company about its business, compliance, and operational policies; and practices concerning the sales and marketing of its opioid products. The plaintiff, who seeks to represent a class consisting of all purchasers of Company common stock between February 26, 2015 and August 7, 2017, contends that the conduct supporting the alleged violations affected the value of Company common stock and is seeking damages and other relief. Motions to appoint lead plaintiff and lead counsel were filed on October 17, 2017, with a motion hearing set for December 7, 2017. The Company believes that the action is without merit and intends to contest it vigorously. Opioid-Related Request and Subpoenas The Company, and a number of other pharmaceutical companies, recently received a request for information from the ranking minority member of the United States Senate Committee on Homeland Security and Governmental Affairs related to the promotion of opioids. The Company has voluntarily furnished information responsive to such request. The Company, and a number of other pharmaceutical companies, recently received subpoenas or civil investigative demands related to opioid sales and marketing from the Office of the Attorney General of Maryland, the Office of the Attorney General of New Jersey, the Attorney General of Missouri and the United States Department of Justice. The Company is currently cooperating with the each of the foregoing states and the Department of Justice in their respective investigations. General The Company cannot reasonably predict the outcome of the pending legal proceedings or other matters described above, nor can the Company estimate the amount of loss, range of loss or other adverse consequence, if any, that may result from these proceedings or the amount of any gain in the event we prevail in litigation involving a claim for damages. As such, the Company is not currently able to estimate the impact of the above matters on its financial position or results of operations. The Company may from time to time become party to actions, claims, suits, investigations or proceedings arising from the ordinary course of its business, including actions with respect to intellectual property claims, breach of contract claims, labor and employment claims and other matters. Although actions, claims, suits, investigations and proceedings are inherently uncertain and their results cannot be predicted with certainty, other than the matters set forth above, the Company is not currently involved in any matters that it believes may have a material adverse effect on its business, results of operations or financial condition. However, regardless of the outcome, litigation, actions, claims, suits, investigations and proceedings can have an adverse impact on the Company because of associated cost and diversion of management time. |
ACQUISITIONS
ACQUISITIONS | 9 Months Ended |
Sep. 30, 2017 | |
ACQUISITIONS | |
ACQUISITIONS | NOTE 12. ACQUISITIONS The Cebranopadol Acquisition On November 17, 2015, the Company entered into a definitive agreement to acquire the U.S. and Canadian rights to cebranopadol and its related follow-on compound from Grünenthal. Cebranopadol is a novel, first-in-class analgesic in development for the treatment of moderate to severe chronic nociceptive and neuropathic pain. The Company is currently evaluating the development plan for cebranopadol, including the timing of potential Phase 3 trials. The acquisition was completed on December 30, 2015. Under the terms of the acquisition agreement, the Company entered into a settlement agreement with Endo Pharmaceuticals, Inc., a subsidiary of Endo International Plc (Endo), to resolve Depomed's ongoing patent litigation against Endo for alleged infringement of three of the Company's patents by Endo's OPANA ER product (the Settlement). As the formulator of OPANA ER, Grünenthal indemnified Endo for certain intellectual property matters, including the Company's ongoing patent infringement lawsuit against Endo. The settlement agreement granted Endo a non-exclusive patent license in the United States, and a covenant not to sue outside the United States, for the currently marketed form of OPANA ER. In addition, the Company provided Grünenthal with a limited covenant not to sue under certain of the Company's Acuform® drug delivery patents with specific drug substances as well as $25.0 million in cash. The Company will also pay Grünenthal royalties on net sales and one-time net sales milestones. There are no clinical, regulatory or approval milestone payments. The cebranopadol acquisition was treated as an asset acquisition under the applicable guidance contained within U.S. GAAP. The total purchase consideration of $54.9 million consisting of $25 million paid in cash upon the closing of the acquisition and $29.9 million reflecting the fair value of each of the elements of the Settlement, was recorded as in-process research and development expense in the fourth quarter of 2015. Significant judgments were used in determining the estimated fair values assigned to the elements of the Settlement, such as but not limited to, the probability of the Company succeeding in its litigation against Endo had the litigation not been resolved, estimates of royalty rates and any damages that may have been awarded by the court, the timing of such an award and estimates of appropriate discount rates used to present value these expected future net cash flows. An actual judgment awarded by the court may have differed materially from the amounts recorded. The NUCYNTA Acquisition On January 15, 2015, the Company, entered into an asset purchase agreement pursuant to which the Company acquired from Janssen and its affiliates the U.S. rights to the NUCYNTA franchise of pharmaceutical products (the NUCYNTA U.S. Product Rights) as well as certain related assets for $1.05 billion in cash (the Purchase Price). The NUCYNTA franchise includes NUCYNTA ER (tapentadol) extended release tablets indicated for the management of pain, including neuropathic pain associated with diabetic peripheral neuropathy (DPN), severe enough to require daily, around-the-clock, long-term opioid treatment, NUCYNTA (tapentadol), an immediate release version of tapentadol, for management of moderate to severe acute pain in adults, and NUCYNTA (tapentadol) oral solution, an approved oral form of tapentadol that has not been commercialized (collectively, the Products). Upon the consummation of the transaction on April 2, 2015, the Company acquired (i) rights to commercialize the Products in the United States, and (ii) certain other assets relating to the Products, including finished goods product inventory and certain manufacturing equipment. In addition, Janssen Pharma assigned to the Company all of its rights and obligations under the License Agreement (U.S.) (the License Agreement) by and among Janssen Pharma, Janssen Research & Development, LLC and Grünenthal pursuant to which Janssen has a royalty-bearing license to certain Grünenthal patents and other intellectual property rights covering the commercialization of the Products in the United States. In connection with the transaction, the Company assumed responsibility for the ongoing legal proceedings relating to certain of the Grünenthal patents licensed under the License Agreement and Janssen Pharma’s clinical obligations relating to the Products and will be responsible for the associated post acquisition costs. Other than as set forth in the Asset Purchase Agreement, Janssen Pharma retained all liabilities relating to the Products associated with Janssen Pharma’s commercialization of the Products prior to the consummation of the transaction. In connection with the transaction, the Company, Janssen Pharma and certain affiliates of Janssen also entered into (i) supply agreements pursuant to which Janssen Pharma will manufacture and supply the Products to the Company until the Company, or its contract manufacturer, begins commercial production of the Products, following which the Company will manufacture and supply Janssen Pharma for its requirements for NUCYNTA outside of the United States and (ii) a supply agreement pursuant to which an affiliate of Janssen will manufacture and supply the Company with the active pharmaceutical ingredient contained in the Products. In connection with the consummation of the transaction, on April 2, 2015, the Company sold an aggregate of $575.0 million principal amount of the Senior Notes for gross proceeds of approximately $562.0 million. The Company used $550.0 million of the net proceeds received upon the sale of the Senior Notes to fund a portion of the Purchase Price paid to Janssen Pharma. Pursuant to ASC Topic 805, Business Combinations, the Transaction was determined to be a business combination and was accounted for using the acquisition method of accounting. The following table presents a summary of the purchase price consideration for the Transaction: (Amounts in thousands) Cash Paid $ 1,050,000 Rebates payable by Seller (9,977) Total Purchase Consideration $ 1,040,023 The rebates payable by Janssen Pharma represent a reduction to the total purchase consideration. The fair value of the rebates payable by Janssen Pharma was determined based on estimates that take into consideration the terms of agreements with customers, historical rebates taken, and the estimated amount of time it takes the product to flow through the distribution channel. Under the acquisition method of accounting, we have recognized net tangible and intangible assets acquired based upon their respective estimated fair values as of the acquisition date. The table below shows the fair values of the assets acquired: (Amounts in thousands) NUCYNTA U.S. Product Rights $ 1,019,978 Inventories 11,590 Manufacturing Equipment 8,455 $ 1,040,023 NUCYNTA U.S. Product Rights The valuation of the NUCYNTA US Product Rights was based on management’s estimates, information and reasonable and supportable assumptions. This estimated fair value was determined using the income approach under the discounted cash flow method. Significant assumptions used in valuing the NUCYNTA US Product Rights included revenue projections based on assumptions relating to pricing and reimbursement rates, market size and market penetration rates, general and administrative expenses, sales and marketing expenses, research and development expenses for clinical and regulatory support and developing an appropriate discount rate. If the Company’s assumptions are not correct, there could be an impairment loss or, in the case of a change in the estimated useful life of the asset, a change in amortization expense. The NUCYNTA US Product Rights intangible asset is amortized using the straight-line method over an estimated useful life of approximately ten years. The estimated useful life was determined based on the period of time over which the NUCYNTA US Product Rights are expected to contribute to the Company’s future cash flows. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2017 | |
INTANGIBLE ASSETS. | |
INTANGIBLE ASSETS | NOTE 13. INTANGIBLE ASSETS The gross carrying amounts and net book values of our intangible assets were as follows (in thousands): September 30, 2017 December 31, 2016 Remaining Gross Gross Useful Life Carrying Accumulated Net Book Carrying Accumulated Net Book Amounts in thousands (In years) Amount Amortization Value Amount Amortization Value NUCYNTA product rights 8.3 $ 1,019,978 $ (243,016) $ 776,962 $ 1,019,978 $ (172,288) $ 847,690 CAMBIA product rights 6.3 51,360 (19,471) 31,889 51,360 (15,619) 35,741 Lazanda product rights 4.9 10,480 (4,852) 5,628 10,480 (3,979) 6,501 Zipsor product rights 4.6 27,250 (16,785) 10,465 27,250 (15,033) 12,217 $ 1,109,068 $ (284,124) $ 824,944 $ 1,109,068 $ (206,919) $ 902,149 In September 2016, the United States District Court for the District of New Jersey ruled in favor of the Company in the Company's patent litigation against all three ANDA filers for the Company’s NUCYNTA franchise. Based upon the Court’s ruling, the Company expects market exclusivity until December 2025 for NUCYNTA ER, NUCYNTA and NUCYNTA oral solution (an unmarketed form of NUCYNTA). Based upon the Court’s ruling in 2016, the Company reviewed the useful life of the NUCYNTA product rights and extended that from the previous estimate of June 2025 to December 2025. Based on finite-lived intangible assets recorded as of September 30, 2017, and assuming the underlying assets will not be impaired and that we will not change the expected lives of the assets, future amortization expenses were estimated as follows (in thousands): Estimated Amortization Year Ending December 31, Expense 2017 (remainder) $ 25,734 2018 102,939 2019 102,939 2020 102,939 2021 102,939 Thereafter 387,454 Total $ 824,944 |
OUT OF PERIOD ADJUSTMENT
OUT OF PERIOD ADJUSTMENT | 9 Months Ended |
Sep. 30, 2017 | |
OUT OF PERIOD ADJUSTMENT | |
OUT OF PERIOD ADJUSTMENT | NOTE 14. OUT OF PERIOD ADJUSTMENT During the three months ended March 31, 2017, the Company identified that it had understated the amount payable for the Branded Prescription Drug fee (BPD) relating to net sales of the NUCYNTA franchise since its acquisition in the second quarter of 2015. Accordingly, the Company recorded an adjustment during the three months ended March 31, 2017 to increase its BPD accrual relating to the net sales of the NUCYNTA franchise in the cumulative amount of $3.4 million of which $1.4 million and $2.0 million related to the years ended December 31, 2015 and 2016, respectively. This adjustment resulted in an increase in loss per share by $0.05 in the three months ended March 31, 2017. In accordance with the relevant guidance, management evaluated the materiality of the error from a qualitative and quantitative perspective. Based on such evaluation, we concluded that correcting the cumulative error would not be material to the expected full year results for 2017, and correcting the error would not have had a material impact on any individual prior period financial statements or affect the trend of financial results. |
RESTRUCTURING CHARGES
RESTRUCTURING CHARGES | 9 Months Ended |
Sep. 30, 2017 | |
RESTRUCTURING CHARGES. | |
RESTRUCTURING CHARGES | NOTE 15. RESTRUCTURING CHARGES The Company announced a reduction-in-force during the three months ended June 30, 2017 in order to streamline operations and achieve operating efficiencies. The Company recorded $0.5 million and $3.9 million in severance and benefits charges during the three and nine months ended September 30, 2017. Restructuring and related liabilities payable as of September 30, 2017 is $0.7 million. The restructuring activities were completed by September 30, 2017. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2017 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 16. SUBSEQUENT EVENTS On November 7, 2017, the Company entered into an agreement with Slán Medicinal Holdings Limited (Slán) under which it (i) acquired from Slán certain rights to market the specialty drug, cosyntropin (Synthetic ACTH Depot) in the United States and (ii) divested to Slán all of its rights to Lazanda® (fentanyl) nasal spray CII. On November 8, 2017, the Company, in accordance with the terms of the Senior Notes, prepaid $10 million of the remaining $375 million principal amount thereunder. In addition, the Company also paid a $0.4 million prepayment fee and recorded an expense for related unamortized balances of debt discount and debt issuance costs in November 2017. |
ORGANIZATION AND SUMMARY OF S22
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Organization | Organization Depomed, Inc. (Depomed or the Company) is a specialty pharmaceutical company focused on pain and other central nervous system (CNS) conditions. The products that comprise the Company’s current specialty pharmaceutical business are (i) NUCYNTA ® ER (tapentadol extended release tablets), a product for the management of pain severe enough to require daily, around-the-clock, long term opioid treatment, including neuropathic pain associated with diabetic peripheral neuropathy (DPN) in adults, and for which alternative treatment options are inadequate, and NUCYNTA ® IR (NUCYNTA) (tapentadol), a product for the management of moderate to severe acute pain in adults, each of which the Company acquired the U.S. rights to in April 2015, (ii) Gralise ® (gabapentin), a once-daily product for the management of postherpetic neuralgia (PHN) that the Company launched in October 2011, (iii) CAMBIA ® (diclofenac potassium for oral solution), a product for the acute treatment of migraine attacks that the Company acquired in December 2013, (iv) Zipsor ® (diclofenac potassium) liquid filled capsules, a product for the treatment of mild to moderate acute pain that the Company acquired in June 2012, and (v) Lazanda ® (fentanyl) nasal spray, a product for the management of breakthrough pain in cancer patients 18 years of age and older who are already receiving and who are tolerant to opioid therapy for their underlying persistent cancer pain that the Company acquired in July 2013. We divested our rights to Lazanda to Slán Medicinal Holdings Limited ("Slán") on November 7, 2017. As of September 30, 2017, the Company has one product candidate, cebranopadol initially for the treatment of chronic lower back pain and potentially for chronic nociceptive and neuropathic pain. The Company is currently evaluating the development plan for cebranopadol, including the timing of potential Phase 3 trials. |
Basis of Presentation | Basis of Presentation The unaudited condensed consolidated financial statements and the related footnote information of the Company have been prepared pursuant to the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules and regulations, certain footnotes or other financial information that are normally required by U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company’s management, the accompanying interim unaudited condensed consolidated financial statements include all adjustments necessary for a fair presentation of the information for the periods presented. The results for the three and nine months ended September 30, 2017 are not necessarily indicative of results to be expected for the entire year ending December 31, 2017 or future operating periods. The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K filed with the SEC (the 2016 Form 10-K). The balance sheet as of December 31, 2016 has been derived from the audited financial statements at that date, as filed in the Company’s 2016 Form 10-K. See Note 14 herein for information regarding impact of an out of period adjustment related to the Branded Prescription Drug fee (BPD) on our consolidated financial statements. |
Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Depomed Bermuda Ltd (Depo Bermuda), Depo NF Sub, LLC (Depo NF Sub) and Depo DR Sub, LLC (Depo DR Sub). All intercompany accounts and transactions have been eliminated on consolidation. On November 17, 2015, the Company entered into a definitive agreement to acquire the U.S. and Canadian rights to cebranopadol and its related follow-on compound from Grünenthal GmbH (Grünenthal). The acquisition of these rights closed on December 30, 2015, at which point the Company assigned its rights under the agreement to Depo Bermuda, a Company which was formed in Bermuda on December 22, 2015. Depo NF Sub was formed on March 26, 2015, in connection with a Note Purchase Agreement dated March 12, 2015 (Note Purchase Agreement) governing the Company’s issuance of $575.0 million aggregate principal amount of Senior Notes on April 2, 2015, for aggregate gross proceeds of approximately $562.0 million. On April 2, 2015, the Company and Depo NF Sub entered into a Pledge and Security Agreement with the Collateral Agent pursuant to which the Company and Depo NF Sub each granted the Collateral Agent (on behalf of the Purchasers) a security interest in substantially all of their assets, other than specifically excluded assets. Depo DR Sub was formed in October 2013 for the sole purpose of facilitating the license of certain rights to PDL Biopharma (the PDL Transaction). The Company contributed to Depo DR Sub all of its rights, title and interests in certain license agreements to receive royalty and milestone payments. Immediately following the transaction, Depo DR Sub sold to PDL, among other things, such rights to receive royalty and milestone payments, for an upfront cash purchase price of $240.5 million. The Company and Depo DR Sub continue to retain certain administrative duties and obligations under the specified license agreements. These include the collection of the royalty and milestone amounts due and enforcement of related provisions under the specified license agreements, among others. In addition, the Company and Depo DR Sub must prepare a quarterly distribution report relating to the specified license agreements, containing, among other items, the amount of royalty payments received by the Company and reimbursable expenses. The Company and Depo DR Sub must also provide PDL with notice of certain communications, events or actions with respect to the specified license agreements and infringement of any underlying intellectual property. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates are used when accounting for amounts recorded in connection with acquisitions, including initial fair value determinations of assets and liabilities as well as subsequent fair value measurements. Additionally, estimates are used in determining items such as, but not limited to, sales discounts and returns, depreciable and amortizable lives, share-based compensation assumptions, fair value of contingent consideration and taxes on income. Although management believes these estimates are based upon reasonable assumptions within the bounds of its knowledge of the Company’s business and operations, actual results could differ materially from these estimates. Change in estimate – During the three months ended March 31, 2017, the Company established a reserve with respect to a dispute with a Pharmacy Benefit Manager (PBM) over rebates relating to NUCYNTA ER, NUCYNTA and Gralise. The dispute relates to rebate claims submitted with respect to the year ended December 31, 2015 and the first half of 2016. As of December 31, 2016, the Company established a reserve for $1.0 million with respect to these claims, and had determined the likely amount payable on settlement would not be material to the consolidated financial statements. However, as a result of further communication with the PBM during the three months ended March 31, 2017, it became clear that the Company’s failure to pay the disputed amount would adversely impact the Company’s ability to maintain a favorable position on the PBM’s formulary. Accordingly, despite the Company’s belief that the claims in dispute are invalid, the Company increased the reserve against this matter by $4.7 million which is an offset to net sales for the three months ended March 31, 2017. The Company will adjust net sales in the future if it resolves this matter for an amount different than currently reserved. |
Measuring the Fair Value of Assets and Liabilities associated with Business Combinations | Measuring the Fair Value of Assets and Liabilities associated with Business Combinations The Company accounts for acquired businesses using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values. The fair value of the consideration paid, including contingent consideration, is assigned to the underlying net assets of the acquired business based on their respective fair values. Any excess or shortfall of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill or bargain purchase, as applicable. Significant judgments are used in determining the estimated fair values assigned to the assets acquired, liabilities assumed, contingent consideration and in determining estimates of useful lives of long-lived assets. Fair value determinations and useful life estimates are based on, among other factors, estimates of expected future net cash flows, estimates of appropriate discount rates used to calculate present value of expected future net cash flows, the assessment of each asset's life cycle, the impact of competitive trends on each asset's life cycle and other factors. These judgments can materially impact the estimates used to allocate acquisition date fair values to assets acquired and liabilities assumed and the resulting timing and amounts charged to, or recognized in, current and future operating results. For these and other reasons, actual results may vary significantly from estimated results. Any changes in the fair value of contingent consideration resulting from a change in the underlying inputs are recognized in operating expenses until the contingent consideration arrangement is settled. Changes in the fair value of contingent consideration resulting from the passage of time are recorded within interest expense until the contingent consideration is settled. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue from the sale of its products, royalties and milestones earned under its contractual arrangements. Revenue is recognized when there is persuasive evidence that an arrangement exists, delivery has occurred and title has passed, the price is fixed or determinable and the Company is reasonably assured of collecting the resulting receivable. Revenue arrangements with multiple elements are evaluated to determine whether the multiple elements meet certain criteria for dividing the arrangement into separate units of accounting, including whether the delivered element(s) have stand-alone value to the Company's customer or licensee. Where there are multiple deliverables combined as a single unit of accounting, revenues are deferred and recognized over the period that the Company remains obligated to perform services. · Product Sales—The Company sells commercial products to wholesale distributors and retail pharmacies. Products sales revenue is recognized when title has transferred to the customer and the customer has assumed the risks and rewards of ownership, which typically occurs on delivery to the customer. · Product Sales Allowances—The Company recognizes product sales allowances as a reduction of product sales in the same period the related revenue is recognized. Product sales allowances are based on amounts owed or to be claimed on the related sales. These estimates take into consideration the terms of the Company's agreements with customers, historical product returns, rebates or discounts taken or expected to be taken, estimated levels of inventory in the distribution channel, the shelf life of the product and specific known market events, such as competitive pricing and new product introductions. If actual future results vary from the Company's estimates, the Company may need to adjust these estimates, which could have an effect on product sales and earnings in the period of adjustment. The Company's sales allowances include: · Product Returns—The Company allows customers to return product for credit with respect to product that is within six months before and up to 12 months after its product expiration date. The Company estimates product returns on NUCYNTA ER and NUCYNTA, Gralise, CAMBIA, Zipsor and Lazanda. Under the terms of the Zipsor asset purchase agreement, the Company assumed financial responsibility for returns of Zipsor product previously sold by Xanodyne Pharmaceuticals, Inc. (Xanodyne). Under the terms of the CAMBIA asset purchase agreement, the Company also assumed financial responsibility for returns of CAMBIA product previously sold by Nautilus. The Company did not assume financial responsibility for returns of NUCYNTA ER and NUCYNTA previously sold by Janssen Pharma or Lazanda product previously sold by Archimedes Pharma US Inc. See Note 12 for further information on the acquisition of NUCYNTA ER and NUCYNTA, CAMBIA, Lazanda and Zipsor. The shelf life of NUCYNTA ER is 24 to 36 months and NUCYNTA is 36 months from the date of tablet manufacture, respectively. The shelf life of Gralise is 24 to 36 months from the date of tablet manufacture. The shelf life of CAMBIA is 24 to 48 months from the manufacture date. The shelf life of Zipsor is 36 months from the date of tablet manufacture. The shelf life of Lazanda is 24 to 36 months from the manufacture date. Estimates for returns are based on historical return trends by product or by return trends of similar products, taking into consideration the shelf life of product at the time of shipment, shipment and prescription trends, estimated distribution channel inventory levels and consideration of the introduction of competitive products. Because of the shelf life of the Company's products and its return policy of issuing credits with respect to product that is returned within six months before and up to 12 months after its product expiration date, there may be a significant period of time between when the product is shipped and when the Company issues credit on a returned product. Accordingly, the Company may have to adjust product return estimates, which could have an effect on product sales and earnings in the period of adjustments. · Wholesaler and Retail Pharmacy Discounts—The Company offers contractually determined discounts to certain wholesale distributors and retail pharmacies that purchase directly from it. These discounts are either taken off-invoice at the time of shipment or paid to the customer on a quarterly basis one to two months after the quarter in which product was shipped to the customer. · Prompt Pay Discounts—The Company offers cash discounts to its customers (generally 2% of the sales price) as an incentive for prompt payment. Based on the Company's experience, the Company expects its customers to comply with the payment terms to earn the cash discount. · Patient Discount Programs—The Company offers patient discount co-pay assistance programs in which patients receive certain discounts off their prescriptions at participating retail pharmacies. The discounts are reimbursed by the Company approximately one month after the prescriptions subject to the discount are filled. · Medicaid Rebates—The Company participates in Medicaid rebate programs, which provide assistance to certain low-income patients based on each individual state's guidelines regarding eligibility and services. Under the Medicaid rebate programs, the Company pays a rebate to each participating state, generally two to three months after the quarter in which prescriptions subject to the rebate are filled. · Chargebacks—The Company provides discounts to authorized users of the Federal Supply Schedule (FSS) of the General Services Administration under an FSS contract with the Department of Veterans Affairs. These federal entities purchase products from the wholesale distributors at a discounted price, and the wholesale distributors then charge back to the Company the difference between the current retail price and the price the federal entity paid for the product. · Managed Care Rebates—The Company offers discounts under contracts with certain managed care providers. The Company generally pays managed care rebates one to three months after the quarter in which prescriptions subject to the rebate are filled. · Medicare Part D Coverage Gap Rebates—The Company participates in the Medicare Part D Coverage Gap Discount Program under which it provides rebates on prescriptions that fall within the "donut hole" coverage gap. The Company generally pays Medicare Part D Coverage Gap rebates two to three months after the quarter in which prescriptions subject to the rebate are filled. · Royalties—Royalties are recognized as earned in accordance with the contract terms when royalties from licensees can be reliably measured and collectability is reasonably assured. · License and Collaborative Arrangements—Revenue from license and collaborative arrangements is recognized when the Company has substantially completed its obligations under the terms of the arrangement and the Company's remaining involvement is inconsequential and perfunctory. If the Company has significant continuing involvement under such an arrangement, license and collaborative fees are recognized over the estimated performance period. The Company recognizes milestone payments for its research and development collaborations upon the achievement of specified milestones if (1) the milestone is substantive in nature, and the achievement of the milestone was not reasonably assured at the inception of the agreement, (2) consideration earned relates to past performance and (3) the milestone payment is nonrefundable. A milestone is considered substantive if the consideration earned from the achievement of the milestone is consistent with the Company's performance required to achieve the milestone or consistent with the increase in value to the collaboration resulting from the Company's performance; the consideration earned relates solely to past performance; and the consideration earned is reasonable relative to all of the other deliverables and payments within the arrangement. License, milestones and collaborative fee payments received in excess of amounts earned are classified as deferred revenue until earned. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In July 2015, the FASB issued ASU 2015-11 Inventory (Topic 330): Simplifying the Measurement of Inventory . ASU 2015-11 requires an entity to measure inventory, other than inventory accounted for under last-in, first-out method or retail inventory method, at the lower of cost or net realizable value. ASU 2015-11 is effective for annual and interim periods beginning after December 15, 2016 on a prospective basis. The Company adopted this guidance on January 1, 2017, and the adoption of this guidance did not materially affect our consolidated financial statements. In March 2016, the FASB issued ASU No 2016-09 “ Improvements to Employee Share-Based Payment Accounting ”. This guidance simplifies the accounting for the taxes related to stock based compensation, requiring excess tax benefits and deficiencies to be recognized as a component of income tax expense rather than equity. This guidance also requires excess tax benefits and deficiencies to be presented as an operating activity on the statement of cash flows and allows an entity to make an accounting policy election to either estimate expected forfeitures or to account for them as they occur. The inclusion of excess tax benefits and deficiencies as a component of our income tax expense will increase volatility within our provision for income taxes as the amount of excess tax benefits or deficiencies from stock-based compensation awards are dependent on our stock price at the date the awards vest. The magnitude of such impacts will depend upon future movements in the Company’s share price as well as the timing of stock award exercises, which are both difficult to estimate. The Company adopted this ASU as of January 1, 2017. As a result of adopting this standard, the Company has made an accounting policy election to account for forfeitures as they occur, rather than estimate expected forfeitures. This change has been applied on a modified retrospective basis, resulting in a cumulative-effect adjustment to increase accumulated deficit by $0.3 million as of January 1, 2017, the date of adoption. The adoption of this guidance also requires excess tax benefits and tax deficiencies be recorded in the income statement as opposed to additional paid-in capital when the awards vest or are settled. Additionally, the Company has applied the provisions of this ASU on a retrospective basis in our condensed consolidated statements of cash flows, which includes presenting: (i) excess tax benefits as an operating activity, which were previously presented as a financing activity; and (ii) cash payments to tax authorities for employee taxes when shares are withheld to meet statutory withholding requirements as a financing activity, which were previously presented as an operating activity. The adoption requires recognition through opening retained earnings of any pre-adoption date net operating loss (NOL) carryforwards from non-qualified stock options and other employee share- based payments. As a result, the Company determined the impact of the adoption to be a $5.8 million increase to deferred tax assets related to share-based compensation incurred as of December 31, 2016 with a corresponding increase to the Company's valuation allowance for financial statement purposes since the Company is in a full valuation allowance position. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU or Update) No. 2014-09, "Revenue from Contracts with Customers" . This guidance outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. On July 9, 2015, the FASB deferred the effective date of this Update to fiscal years beginning after December 15, 2017, with early adoption permitted on the original effective date of fiscal years beginning after December 15, 2016. This guidance can be adopted on a full retrospective basis or on a modified retrospective basis. The Company plans to adopt this guidance on January 1, 2018, using the modified retrospective transition method applied to those contracts which were not completed as of that date. Upon adoption, the Company will recognize the cumulative effect of adopting this guidance as an adjustment to its opening balance of accumulated deficit. Prior periods will not be retrospectively adjusted. The Company has substantially completed an analysis of existing contracts with its customers and has assessed the differences in accounting for such contracts under this guidance compared with current revenue accounting standards. Based on its review of current customer contracts, the Company does not expect the implementation of this guidance to have a material impact on its consolidated financial statements as the timing of revenue recognition for product sales is not expected to significantly change. In February 2016, the FASB issued ASU No. 2016-02, " Leases ". This guidance requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. If the available accounting election is made, leases with a term of twelve months or less can be accounted for similar to existing guidance for operating leases. For a public entity, the amendments in this guidance are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in this guidance is permitted for all entities. The Company is currently evaluating and has not yet determined the impact implementation will have on the Company’s consolidated financial statements. In August 2016, the FASB issued ASU 2016-15 “ Classification of Certain Cash Receipts and Cash Payments”. ASU 2016-15 provides guidance on the classification of certain cash receipts and cash payments in the statement of cash flows. The guidance is effective for the Company in the first quarter of fiscal 2018 and will be applied on a retrospective basis. Early adoption is permitted. The Company early adopted this guidance on January 1, 2017, and the adoption of this guidance did not materially affect the Company’s consolidated financial statements. In June 2016, the FASB issued ASU 2016-13 (ASU 2016-13) " Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2019. The Company is currently in the process of evaluating the impact of the adoption of ASU 2016-13 on the Company’s consolidated financial statements. |
CASH, CASH EQUIVALENTS AND SH23
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS | |
Summary of securities included in cash and cash equivalents and short-term investments | Securities classified as cash and cash equivalents and short-term investments as of September 30, 2017 and December 31, 2016 are summarized below (in thousands). Estimated fair value is based on quoted market prices for these investments. Gross Gross Amortized Unrealized Unrealized September 30, 2017 Cost Gains Losses Fair Value Cash and cash equivalents: Cash $ 88,559 $ — $ — $ 88,559 Money market funds 101 — — 101 US Treasury securities 3,605 — — 3,605 Corporate debt securities and commercial paper 15,320 — — 15,320 Total cash and cash equivalents $ 107,585 $ — $ — $ 107,585 Short-term investments Corporate debt securities and commercial paper with maturities less than 1 year $ 5,873 $ — $ (1) $ 5,872 Total short-term investments $ 5,873 $ — $ (1) $ 5,872 Total $ 113,458 $ — $ (1) $ 113,457 Gross Gross Amortized Unrealized Unrealized December 31, 2016 Cost Gains Losses Fair Value Cash and cash equivalents: Cash $ $ — $ — $ Money market funds — — Corporate debt securities and commercial paper — (2) Total cash and cash equivalents $ $ — $ (2) $ Short-term investments Corporate debt securities and commercial paper with maturities less than 1 year $ $ — $ (17) $ Total short-term investments $ $ — $ (17) $ Total $ $ — $ (19) $ |
Schedule of the gross unrealized losses and fair value of investments | The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2017 (in thousands): Less than 12 months 12 months or greater Total Gross Gross Gross Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses Corporate debt securities $ 2,308 $ (1) $ — $ — $ 2,308 $ (1) |
Schedule of fair value hierarchy for financial assets and liabilities measured at fair value on a recurring basis | The following tables represent the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016 (in thousands): September 30, 2017 Level 1 Level 2 Level 3 Total Assets: Money market funds $ 101 $ — $ — $ 101 Commercial paper — 18,883 — 18,883 Corporate debt securities — 2,308 — 2,308 US Treasury securities — 3,605 — 3,605 Total $ 101 $ 24,796 $ — $ 24,897 Liabilities: Contingent consideration—Zipsor $ — $ — $ 452 $ 452 Contingent consideration—Lazanda — — 4,219 4,219 Contingent consideration—CAMBIA — — 965 965 $ — $ — $ 5,636 $ 5,636 December 31, 2016 Level 1 Level 2 Level 3 Total Assets: Money market funds $ 532 $ — $ — $ 532 Commercial paper — 52,192 — 52,192 Corporate debt securities — 36,850 — 36,850 Total $ 532 $ 89,042 $ — $ 89,574 Liabilities: Contingent consideration—Zipsor $ — $ — $ 1,489 $ 1,489 Contingent consideration—Lazanda — — 11,742 11,742 Contingent consideration—CAMBIA — — 1,594 1,594 $ — $ — $ 14,825 $ 14,825 |
Summary of the changes in fair value of all financial liabilities measured at fair value on a recurring basis using significant unobservable inputs | Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Fair value, beginning of the period $ 7,356 $ 14,898 $ 14,825 $ 14,971 Changes in fair value recorded in interest expense 221 608 1,017 1,802 Changes in fair value recorded in selling, general and administrative expenses (1,415) 78 (7,542) (209) Royalties and milestone paid (526) (635) (2,664) (1,615) Total 5,636 14,949 5,636 14,949 |
NET LOSS PER SHARE (Tables)
NET LOSS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
NET LOSS PER SHARE | |
Schedule of calculation of basic and diluted earnings per common share | Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except for per share amounts) 2017 2016 2017 2016 Basic and diluted net loss per share Net loss $ (15,992) $ (12,894) $ (69,392) $ (44,352) Denominator 62,997 61,422 62,556 61,163 Basic and diluted net loss per share $ (0.25) $ (0.21) $ (1.11) $ (0.73) |
Schedule of antidilutive securities excluded from computation of diluted net income per share | September 30, September 30, (in thousands) 2017 2016 Convertible debt 17,931 17,931 Stock options and equivalents 7,393 9,482 Total potentially dilutive common shares 25,324 27,413 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
STOCK-BASED COMPENSATION | |
Schedule of stock-based compensation expense recognized for stock options, stock awards, restricted stock units and the Company's employee stock purchase program (ESPP) | The following table presents stock-based compensation expense recognized for stock options, stock awards, restricted stock units and the Company’s Employee Stock Purchase Program (ESPP) in the Company’s Condensed Consolidated Statements of Operations (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Cost of sales $ 9 $ $ 84 $ Research and development expense 45 652 Selling, general and administrative expense 2,857 9,134 Restructuring charges 52 — 52 — Total $ 2,963 $ $ 9,922 $ |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
INVENTORIES | |
Schedule of inventories | Inventories consist of finished goods, raw materials and work in process and are stated at the lower of cost or market and consist of the following (in thousands): September 30, December 31, 2017 2016 Raw materials $ 1,710 $ Work-in-process 331 Finished goods 8,374 Total $ $ |
ACCRUED LIABILITIES (Tables)
ACCRUED LIABILITIES (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
ACCRUED LIABILITIES | |
Schedule of accounts payable and accrued liabilities | Accrued liabilities consist of the following (in thousands): September 30, December 31, 2017 2016 Accrued compensation $ 7,650 $ 11,730 Accrued royalties 9,111 21,703 Other accrued liabilities 30,838 25,965 Total accrued liabilities $ 47,599 $ 59,398 |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Debt | |
Schedule of principal amount of the Senior Notes is repayable | The principal amount of the Senior Notes is repayable as follows (amounts in thousands): April 2, 2018 $ 57,500 April 2, 2019 115,000 April 2, 2020 115,000 April 2, 2021 87,500 $ 375,000 |
Summary of the carrying value of the Senior Notes | The following is a summary of the carrying value of the Senior Notes as of September 30, 2017 and December 31, 2016 (in thousands): September 30, December 31, 2017 2016 Principal amount of the Senior Notes $ 375,000 $ 475,000 Unamortized debt discount balance (5,551) (8,605) Unamortized debt issuance costs (223) (344) $ 369,226 $ 466,051 |
Summary of the liability component of the Convertible Notes | The following is a summary of the liability component of the Convertible Notes as of September 30, 2017 and December 31, 2016 (in thousands): September 30, December 31, 2017 2016 Principal amount of the Convertible Notes $ 345,000 $ 345,000 Unamortized discount of the liability component (75,892) (87,570) Unamortized debt issuance costs (3,945) (4,705) $ 265,163 $ 252,725 |
Senior Notes | |
Debt | |
Summary of interest expense for the Notes | The following is a summary of interest expense for the three and nine months ended September 30, 2017 and September 30, 2016 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Contractual interest expense $ 10,589 13,049 33,748 41,671 Amortization of debt discount and debt issuance costs 614 581 1,811 1,663 Total interest expense $ 11,203 $ 13,630 $ 35,559 $ 43,334 |
Convertible Notes | |
Debt | |
Summary of interest expense for the Notes | The following is a summary of interest expense for the three and nine months ended September 30, 2017 and September 30, 2016 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Stated coupon interest $ 2,156 2,157 6,468 6,469 Amortization of debt discount and debt issuance costs 4,225 3,879 12,438 11,421 Total interest expense $ 6,381 $ 6,036 $ 18,906 $ 17,890 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
Schedule of future minimum lease payments under non-cancelable operating leases | Future minimum lease payments under our non-cancelable operating leases at September 30, 2017 were as follows (in thousands): Year Ending December 31, Lease Payments 2017 (remainder) $ 1,082 2018 3,909 2019 2,433 2020 1,972 2021 1,673 Thereafter 1,572 Total $ 12,641 |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) - NUCYNTA | 9 Months Ended |
Sep. 30, 2017 | |
ACQUISITIONS | |
Summary of the purchase price consideration | (Amounts in thousands) Cash Paid $ 1,050,000 Rebates payable by Seller (9,977) Total Purchase Consideration $ 1,040,023 |
Summary of the fair values of the tangible and identifiable intangible assets acquired and liabilities assumed | (Amounts in thousands) NUCYNTA U.S. Product Rights $ 1,019,978 Inventories 11,590 Manufacturing Equipment 8,455 $ 1,040,023 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
INTANGIBLE ASSETS. | |
Summary of the gross carrying amounts and net book values of our intangible assets | The gross carrying amounts and net book values of our intangible assets were as follows (in thousands): September 30, 2017 December 31, 2016 Remaining Gross Gross Useful Life Carrying Accumulated Net Book Carrying Accumulated Net Book Amounts in thousands (In years) Amount Amortization Value Amount Amortization Value NUCYNTA product rights 8.3 $ 1,019,978 $ (243,016) $ 776,962 $ 1,019,978 $ (172,288) $ 847,690 CAMBIA product rights 6.3 51,360 (19,471) 31,889 51,360 (15,619) 35,741 Lazanda product rights 4.9 10,480 (4,852) 5,628 10,480 (3,979) 6,501 Zipsor product rights 4.6 27,250 (16,785) 10,465 27,250 (15,033) 12,217 $ 1,109,068 $ (284,124) $ 824,944 $ 1,109,068 $ (206,919) $ 902,149 |
Summary of the future amortization expenses of intangible assets | Based on finite-lived intangible assets recorded as of September 30, 2017, and assuming the underlying assets will not be impaired and that we will not change the expected lives of the assets, future amortization expenses were estimated as follows (in thousands): Estimated Amortization Year Ending December 31, Expense 2017 (remainder) $ 25,734 2018 102,939 2019 102,939 2020 102,939 2021 102,939 Thereafter 387,454 Total $ 824,944 |
ORGANIZATION AND SUMMARY OF S32
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - PROPERTY AND EQUIPMENT (Details) $ in Thousands | Jan. 01, 2017USD ($) | Apr. 02, 2015USD ($) | Oct. 31, 2013USD ($) | Sep. 30, 2017USD ($) | Mar. 31, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)item | Sep. 30, 2016USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Apr. 30, 2016USD ($) | Sep. 09, 2014USD ($) |
Summary Of Significant Accounting Policies | ||||||||||||
Number of product candidates under clinical development | item | 1 | |||||||||||
Royalty and milestone payments received | $ 240,500 | |||||||||||
Use of Estimates | ||||||||||||
Cash discount (as a percent) | 2.00% | |||||||||||
Discount reimbursement period after filling of prescription subject to discount | 1 month | |||||||||||
Recently Issued Accounting Standards | ||||||||||||
Benefit from income taxes | $ (513) | $ (6,042) | $ (560) | $ (17,692) | ||||||||
Other assets, long-term | 1,346 | 1,346 | $ 1,458 | |||||||||
Convertible Notes | 265,163 | 265,163 | 252,725 | |||||||||
Senior Notes | 311,726 | $ 311,726 | 466,051 | |||||||||
ASU 2016-09 | ||||||||||||
Recently Issued Accounting Standards | ||||||||||||
Accumulated deficit | $ (300) | |||||||||||
Deferred tax assets related to share-based compensation | 5,800 | |||||||||||
Valuation allowance for deferred tax assets | 5,800 | |||||||||||
Minimum | ||||||||||||
Use of Estimates | ||||||||||||
Discount taken off period after the quarter in which product shipped to the customer | 1 month | |||||||||||
Period after the quarter in which prescription is filled for paying rebate | 2 months | |||||||||||
Minimum | Managed Care Rebates | ||||||||||||
Use of Estimates | ||||||||||||
Period after the quarter in which prescription is filled for rebate | 1 month | |||||||||||
Minimum | Medicare Part D Coverage Gap Rebates | ||||||||||||
Use of Estimates | ||||||||||||
Period after the quarter in which prescription is filled for rebate | 2 months | |||||||||||
Maximum | ||||||||||||
Use of Estimates | ||||||||||||
Product return period prior to expiration | 6 months | |||||||||||
Period after expiration for accepting unsalable product | 12 months | |||||||||||
Discount taken off period after the quarter in which product shipped to the customer | 2 months | |||||||||||
Period after the quarter in which prescription is filled for paying rebate | 3 months | |||||||||||
Maximum | Managed Care Rebates | ||||||||||||
Use of Estimates | ||||||||||||
Period after the quarter in which prescription is filled for rebate | 3 months | |||||||||||
Maximum | Medicare Part D Coverage Gap Rebates | ||||||||||||
Use of Estimates | ||||||||||||
Period after the quarter in which prescription is filled for rebate | 3 months | |||||||||||
NUCYNTA ER, NUCYNTA and Gralise | ||||||||||||
Use of Estimates | ||||||||||||
Rebates | $ 4,700 | 1,000 | ||||||||||
NUCYNTA ER | Minimum | ||||||||||||
Use of Estimates | ||||||||||||
Product shelf-life | 24 months | |||||||||||
NUCYNTA ER | Maximum | ||||||||||||
Use of Estimates | ||||||||||||
Product shelf-life | 36 months | |||||||||||
NUCYNTA | ||||||||||||
Use of Estimates | ||||||||||||
Product shelf-life | 36 months | |||||||||||
Gralise | Minimum | ||||||||||||
Use of Estimates | ||||||||||||
Product shelf-life | 24 months | |||||||||||
Gralise | Maximum | ||||||||||||
Use of Estimates | ||||||||||||
Product shelf-life | 36 months | |||||||||||
CAMBIA | Minimum | ||||||||||||
Use of Estimates | ||||||||||||
Product shelf-life | 24 months | |||||||||||
CAMBIA | Maximum | ||||||||||||
Use of Estimates | ||||||||||||
Product shelf-life | 48 months | |||||||||||
Zipsor | ||||||||||||
Use of Estimates | ||||||||||||
Product shelf-life | 36 months | |||||||||||
Lazanda | Minimum | ||||||||||||
Use of Estimates | ||||||||||||
Product shelf-life | 24 months | |||||||||||
Lazanda | Maximum | ||||||||||||
Use of Estimates | ||||||||||||
Product shelf-life | 36 months | |||||||||||
Convertible Notes | ||||||||||||
Summary Of Significant Accounting Policies | ||||||||||||
Aggregate principal amount of notes issued | 345,000 | $ 345,000 | 345,000 | $ 345,000 | ||||||||
Recently Issued Accounting Standards | ||||||||||||
Convertible Notes | $ 226,000 | |||||||||||
Senior Notes | 265,163 | 265,163 | 252,725 | |||||||||
Senior Notes | ||||||||||||
Summary Of Significant Accounting Policies | ||||||||||||
Aggregate principal amount of notes issued | $ 575,000 | 375,000 | 375,000 | $ 375,000 | ||||||||
Proceeds from the issuance of debt | $ 562,000 | |||||||||||
Recently Issued Accounting Standards | ||||||||||||
Senior Notes | $ 369,226 | $ 369,226 | $ 466,051 | |||||||||
Payments of Debt Issuance Costs | $ 500 |
CASH, CASH EQUIVALENTS AND SH33
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS - SUMMARY (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Gross Unrealized Losses | ||
Cash and cash equivalents gross unrealized losses | $ (2) | |
Total short-term investments, Gross Unrealized Losses | $ (1) | (17) |
Total cash, cash equivalents and short-term investments, Gross Unrealized Losses | (1) | (19) |
Amortized Cost | ||
Cash, cash equivalents and short-term investments | ||
Cash and cash equivalents | 107,585 | 117,711 |
Amortized Cost | ||
Total short-term investments, Amortized Cost | 5,873 | 59,728 |
Total Amortized Cost | ||
Fair Value | ||
Total cash, cash equivalents and short-term investments | 113,458 | 177,439 |
Fair Value | ||
Cash, cash equivalents and short-term investments | ||
Cash and cash equivalents | 107,585 | 117,709 |
Fair Value | ||
Total short-term investments, Fair Value | 5,872 | 59,711 |
Total cash, cash equivalents and short-term investments | 113,457 | 177,420 |
Corporate debt securities and commercial paper | ||
Gross Unrealized Losses | ||
Total maturing within 1 year and included in marketable securities | (1) | (17) |
Corporate debt securities and commercial paper | Amortized Cost | ||
Amortized Cost | ||
Total maturing within 1 year | 5,873 | 59,728 |
Corporate debt securities and commercial paper | Fair Value | ||
Fair Value | ||
Total maturing within 1 year and included in short-term investments | 5,872 | 59,711 |
Cash | Amortized Cost | ||
Cash, cash equivalents and short-term investments | ||
Cash and cash equivalents | 88,559 | 87,845 |
Cash | Fair Value | ||
Cash, cash equivalents and short-term investments | ||
Cash and cash equivalents | 88,559 | 87,845 |
Money market funds | Amortized Cost | ||
Cash, cash equivalents and short-term investments | ||
Cash and cash equivalents | 101 | 532 |
Money market funds | Fair Value | ||
Cash, cash equivalents and short-term investments | ||
Cash and cash equivalents | 101 | 532 |
U.S. Treasury securities | Amortized Cost | ||
Cash, cash equivalents and short-term investments | ||
Cash and cash equivalents | 3,605 | |
U.S. Treasury securities | Fair Value | ||
Cash, cash equivalents and short-term investments | ||
Cash and cash equivalents | 3,605 | |
Corporate debt securities and commercial paper | ||
Gross Unrealized Losses | ||
Cash and cash equivalents gross unrealized losses | (2) | |
Corporate debt securities and commercial paper | Amortized Cost | ||
Cash, cash equivalents and short-term investments | ||
Cash and cash equivalents | 15,320 | 29,334 |
Corporate debt securities and commercial paper | Fair Value | ||
Cash, cash equivalents and short-term investments | ||
Cash and cash equivalents | $ 15,320 | $ 29,332 |
CASH, CASH EQUIVALENTS AND SH34
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS - UNREALIZED LOSS POSITION (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2017USD ($)item | |
Cash, cash equivalents and short-term investments | |
Number of securities in an unrealized loss position | item | 2 |
Corporate debt securities | |
Cash, cash equivalents and short-term investments | |
Fair Value, Less Than 12 Months | $ 2,308 |
Gross Unrealized Losses, Less than 12 months | (1) |
Fair Value, Total | 2,308 |
Gross Unrealized Losses, Total | $ (1) |
CASH, CASH EQUIVALENTS AND SH35
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS - FAIR VALUE (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Fair value hierarchy for financial assets and liabilities | ||
Assets | $ 24,897 | $ 89,574 |
Liabilities | 5,636 | 14,825 |
Zipsor | ||
Fair value hierarchy for financial assets and liabilities | ||
Liabilities, contingent consideration | 452 | 1,489 |
Lazanda | ||
Fair value hierarchy for financial assets and liabilities | ||
Liabilities, contingent consideration | 4,219 | 11,742 |
CAMBIA | ||
Fair value hierarchy for financial assets and liabilities | ||
Liabilities, contingent consideration | 965 | 1,594 |
Corporate debt securities | ||
Fair value hierarchy for financial assets and liabilities | ||
Assets | 2,308 | 36,850 |
U.S. Treasury securities | ||
Fair value hierarchy for financial assets and liabilities | ||
Assets | 3,605 | |
Money market funds | ||
Fair value hierarchy for financial assets and liabilities | ||
Assets | 101 | 532 |
Commercial paper | ||
Fair value hierarchy for financial assets and liabilities | ||
Assets | 18,883 | 52,192 |
Level 1 | ||
Fair value hierarchy for financial assets and liabilities | ||
Assets | 101 | 532 |
Level 1 | Money market funds | ||
Fair value hierarchy for financial assets and liabilities | ||
Assets | 101 | 532 |
Level 2 | ||
Fair value hierarchy for financial assets and liabilities | ||
Assets | 24,796 | 89,042 |
Level 2 | Corporate debt securities | ||
Fair value hierarchy for financial assets and liabilities | ||
Assets | 2,308 | 36,850 |
Level 2 | U.S. Treasury securities | ||
Fair value hierarchy for financial assets and liabilities | ||
Assets | 3,605 | |
Level 2 | Commercial paper | ||
Fair value hierarchy for financial assets and liabilities | ||
Assets | 18,883 | 52,192 |
Level 3 | ||
Fair value hierarchy for financial assets and liabilities | ||
Liabilities | 5,636 | 14,825 |
Level 3 | Zipsor | ||
Fair value hierarchy for financial assets and liabilities | ||
Liabilities, contingent consideration | 452 | 1,489 |
Level 3 | Lazanda | ||
Fair value hierarchy for financial assets and liabilities | ||
Liabilities, contingent consideration | 4,219 | 11,742 |
Level 3 | CAMBIA | ||
Fair value hierarchy for financial assets and liabilities | ||
Liabilities, contingent consideration | $ 965 | $ 1,594 |
CASH, CASH EQUIVALENTS AND SH36
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS - LEVEL 3 (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Sep. 09, 2014 | |
Changes in fair value of all financial liabilities measured at fair value on a recurring basis | ||||||
Earnings Per Share, Basic and Diluted | $ (0.25) | $ (0.21) | $ (1.11) | $ (0.73) | ||
Fair value transfers between hierarchy levels 1 and 2 | ||||||
Transfers of assets from Level 1 to Level 2 | $ 0 | $ 0 | $ 0 | $ 0 | ||
Transfer of assets from Level 2 to Level 1 | 0 | 0 | 0 | 0 | ||
Fair value transfers in or out of hierarchy level 3 | ||||||
Net transfer of liabilities into/out of level 3 | $ 0 | 0 | $ 0 | 0 | ||
Convertible Notes | ||||||
Estimated fair value of debt instruments | ||||||
Interest rate (as a percent) | 2.50% | 2.50% | 2.50% | |||
Par value of debt | $ 345,000 | $ 345,000 | $ 345,000 | $ 345,000 | ||
Level 2 | Convertible Notes | Fair Value | ||||||
Estimated fair value of debt instruments | ||||||
Estimated fair value of debt | 257,300 | 257,300 | $ 390,000 | |||
Contingent consideration | Level 3 | ||||||
Changes in fair value of all financial liabilities measured at fair value on a recurring basis | ||||||
Fair value, beginning of the period | 7,356 | 14,898 | 14,825 | 14,971 | ||
Total | 5,636 | 14,949 | 5,636 | 14,949 | ||
Contingent consideration | Level 3 | Interest Expense. | ||||||
Changes in fair value of all financial liabilities measured at fair value on a recurring basis | ||||||
Net accretion value adjustments | 221 | 608 | 1,017 | 1,802 | ||
Contingent consideration | Level 3 | Selling general and administrative expense | ||||||
Changes in fair value of all financial liabilities measured at fair value on a recurring basis | ||||||
Net accretion value adjustments | (1,415) | 78 | (7,542) | (209) | ||
Contingent consideration | Level 3 | Royalties and milestone paid | ||||||
Changes in fair value of all financial liabilities measured at fair value on a recurring basis | ||||||
Net accretion value adjustments | $ (526) | $ (635) | $ (2,664) | $ (1,615) |
NET LOSS PER SHARE (Details)
NET LOSS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Basic and diluted net loss per share | ||||
Net loss | $ (15,992) | $ (12,894) | $ (69,392) | $ (44,352) |
Denominator (in shares) | 62,997,484 | 61,422,015 | 62,555,921 | 61,163,059 |
Basic and diluted net loss per share (in dollars per share) | $ (0.25) | $ (0.21) | $ (1.11) | $ (0.73) |
Potentially dilutive common shares: | ||||
Total potentially dilutive common shares (in shares) | 25,324,000 | 27,413,000 | ||
Convertible Notes | ||||
Potentially dilutive common shares: | ||||
Total potentially dilutive common shares (in shares) | 17,931,000 | 17,931,000 | ||
Stock options and equivalents | ||||
Potentially dilutive common shares: | ||||
Total potentially dilutive common shares (in shares) | 7,393,000 | 9,482,000 |
LICENSE AND COLLABORATIVE ARRAN
LICENSE AND COLLABORATIVE ARRANGEMENTS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
LICENSE ARRANGEMENTS | ||||
Royalty revenue | $ 209 | $ 221 | $ 596 | $ 595 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Stock-based compensation | ||||
Compensation expense | $ 2,963 | $ 4,364 | $ 9,922 | $ 12,602 |
Total unrecognized compensation expense | 25,400 | $ 25,400 | ||
Average vesting period for recognition of unrecognized compensation expense | 2 years 5 months 1 day | |||
Cost of sales | ||||
Stock-based compensation | ||||
Compensation expense | 9 | 11 | $ 84 | 27 |
Research and development expense. | ||||
Stock-based compensation | ||||
Compensation expense | 45 | 121 | 652 | 329 |
Selling general and administrative expense | ||||
Stock-based compensation | ||||
Compensation expense | 2,857 | $ 4,232 | 9,134 | $ 12,246 |
Restructuring charges | ||||
Stock-based compensation | ||||
Compensation expense | $ 52 | $ 52 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Inventory | ||
Raw materials | $ 1,710 | $ 2,362 |
Work-in-process | 331 | 869 |
Finished goods | 8,374 | 9,802 |
Total | $ 10,415 | $ 13,033 |
ACCRUED LIABILITIES (Details)
ACCRUED LIABILITIES (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
ACCRUED LIABILITIES | ||
Accrued compensation | $ 7,650 | $ 11,730 |
Accrued royalties | 9,111 | 21,703 |
Other accrued liabilities | 30,838 | 25,965 |
Total accrued liabilities | $ 47,599 | $ 59,398 |
DEBT (Details)
DEBT (Details) | Apr. 02, 2015USD ($) | Sep. 09, 2014USD ($)item$ / shares | Apr. 30, 2017USD ($) | Apr. 30, 2016USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Dec. 31, 2015USD ($) | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016USD ($) |
Debt | ||||||||||||
Payment of a prepayment fee | $ 4,000,000 | $ 5,000,000 | ||||||||||
Loss on prepayment of debt | (5,364,000) | (5,777,000) | ||||||||||
Current portion of Senior Notes | $ 57,500,000 | 57,500,000 | ||||||||||
Carrying amounts of the liability component | ||||||||||||
Net carrying amount of the liability component | 265,163,000 | 265,163,000 | $ 252,725,000 | |||||||||
Net carrying amount of the Notes | 311,726,000 | 311,726,000 | 466,051,000 | |||||||||
Interest expense incurred | ||||||||||||
Amortization of debt discount and debt issuance costs | 14,249,000 | 13,084,000 | ||||||||||
Senior Notes | ||||||||||||
Debt | ||||||||||||
Aggregate principal amount of notes issued | $ 575,000,000 | $ 375,000,000 | $ 375,000,000 | $ 375,000,000 | ||||||||
Debt issuance costs | $ 500,000 | |||||||||||
Interest rate (as a percent) | 2.50% | 2.50% | ||||||||||
Effective interest rate (as a percent) | 11.05% | 11.05% | 10.90% | 10.75% | ||||||||
Proceeds from the issuance of debt | $ 562,000,000 | |||||||||||
April 2, 2018 | $ 57,500,000 | |||||||||||
April 2, 2019 | 115,000,000 | |||||||||||
April 2, 2020 | 115,000,000 | |||||||||||
April 2, 2021 | 87,500,000 | |||||||||||
Threshold limit to repay principal amount outstanding in full | 100,000,000 | |||||||||||
Threshold limit of asset dispositions which is required to make mandatory prepayments on senior notes | 10,000,000 | |||||||||||
Amount of debt prepaid | $ 100,000,000 | 100,000,000 | ||||||||||
Payment of a prepayment fee | 4,000,000 | 5,000,000 | ||||||||||
Loss on prepayment of debt | (5,400,000) | (5,800,000) | ||||||||||
Unamortized balances of debt discount and debt issuance costs | $ 1,400,000 | $ 800,000 | ||||||||||
Principal amount | $ 375,000,000 | 375,000,000 | ||||||||||
Carrying amounts of the liability component | ||||||||||||
Principal amount of the Notes | 375,000,000 | 375,000,000 | 475,000,000 | |||||||||
Unamortized debt discount balance | (5,551,000) | (5,551,000) | (8,605,000) | |||||||||
Unamortized debt issuance costs | (223,000) | (223,000) | (344,000) | |||||||||
Net carrying amount of the Notes | 369,226,000 | 369,226,000 | 466,051,000 | |||||||||
Interest expense incurred | ||||||||||||
Contractual/Stated coupon interest | 10,589,000 | $ 13,049,000 | 33,748,000 | 41,671,000 | ||||||||
Amortization of debt discount and debt issuance costs | 614,000 | 581,000 | 1,811,000 | 1,663,000 | ||||||||
Total interest expense | 11,203,000 | 13,630,000 | 35,559,000 | 43,334,000 | ||||||||
Senior Notes | After Second Anniversary and on or Prior to Third Anniversary | ||||||||||||
Debt | ||||||||||||
Prepayment premium | 4.00% | |||||||||||
Senior Notes | After Third Anniversary and on or Prior to Fourth Anniversary | ||||||||||||
Debt | ||||||||||||
Prepayment premium | 3.00% | |||||||||||
Senior Notes | After Fourth Anniversary and on or Prior to Fifth Anniversary | ||||||||||||
Debt | ||||||||||||
Prepayment premium | 2.00% | |||||||||||
Senior Notes | After Fifth Anniversary and on or Prior to Sixth Anniversary | ||||||||||||
Debt | ||||||||||||
Prepayment premium | 1.00% | |||||||||||
Senior Notes | After Sixth Anniversary | ||||||||||||
Debt | ||||||||||||
Prepayment premium | 0.00% | |||||||||||
Senior Notes | Three month LIBOR | ||||||||||||
Debt | ||||||||||||
Basis spread (as a percent) | 9.75% | |||||||||||
Interest rate through third anniversary (as a percent) | 11.95% | |||||||||||
Interest rate after third anniversary (as a percent) | 12.95% | |||||||||||
Senior Notes | Three month LIBOR | Minimum | ||||||||||||
Debt | ||||||||||||
Interest rate (as a percent) | 1.00% | |||||||||||
Senior Notes | NUCYNTA | ||||||||||||
Debt | ||||||||||||
Proceeds from the issuance of debt | $ 550,000,000 | |||||||||||
Convertible Notes | ||||||||||||
Debt | ||||||||||||
Aggregate principal amount of notes issued | $ 345,000,000 | $ 345,000,000 | $ 345,000,000 | 345,000,000 | ||||||||
Net proceeds from debt offering | 334,200,000 | |||||||||||
Underwriting discount | 10,400,000 | |||||||||||
Offering expenses | $ 400,000 | |||||||||||
Interest rate (as a percent) | 2.50% | 2.50% | 2.50% | |||||||||
Conversion rate of common stock per $1 of principal amount | 0.0519852 | |||||||||||
Conversion price (in dollars per share) | $ / shares | $ 19.24 | |||||||||||
Effective interest rate (as a percent) | 9.34% | |||||||||||
Trading days, number | item | 20 | |||||||||||
Consecutive trading days, period | 30 days | |||||||||||
Stock price trigger | $ / shares | $ 25.01 | |||||||||||
Stock price trigger (as a percent) | 130.00% | |||||||||||
Business days, period | 5 days | |||||||||||
Consecutive trading-day period | 5 days | |||||||||||
Principal amount | $ 1,000 | |||||||||||
Maximum product of the closing sale price of shares of the Company's common stock and the applicable conversion rate for such trading day (as a percent) | 98.00% | |||||||||||
Observation period | 40 days | |||||||||||
Carrying amounts of the liability component | ||||||||||||
Net carrying amount of the liability component | $ 226,000,000 | |||||||||||
Principal amount of the Notes | $ 345,000,000 | $ 345,000,000 | 345,000,000 | |||||||||
Unamortized debt discount balance | $ (119,000,000) | (75,892,000) | (75,892,000) | (87,570,000) | ||||||||
Unamortized debt issuance costs | (3,945,000) | (3,945,000) | (4,705,000) | |||||||||
Net carrying amount of the Notes | 265,163,000 | 265,163,000 | $ 252,725,000 | |||||||||
Interest expense incurred | ||||||||||||
Contractual/Stated coupon interest | 2,156,000 | 2,157,000 | 6,468,000 | 6,469,000 | ||||||||
Amortization of debt discount and debt issuance costs | 4,225,000 | 3,879,000 | 12,438,000 | 11,421,000 | ||||||||
Total interest expense | $ 6,381,000 | $ 6,036,000 | $ 18,906,000 | $ 17,890,000 |
SHAREHOLDERS' EQUITY (Details)
SHAREHOLDERS' EQUITY (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Stock options | ||||
Option Exercises | ||||
Options exercised during period (in shares) | 50,159 | 154,789 | 863,511 | 569,288 |
Net proceeds from options exercised during the period | $ 0.3 | $ 1.6 | $ 6.3 | $ 5 |
Restricted stock units | ||||
Restricted Stock Units | ||||
Number of shares issued due to vesting (in shares) | 0 | 0 | 42,068 | 42,697 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
INCOME TAXES | ||||
Federal statutory rate (as a percent) | 35.00% | 35.00% | 35.00% | 35.00% |
Accrued interest and penalties associated with unrecognized tax benefits | $ 0.9 | $ 0.9 |
COMMITMENTS AND CONTINGENCIES45
COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||
Dec. 31, 2013 | Apr. 30, 2012ft²item | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Dec. 31, 2016USD ($) | |
Non-Cancelable Operating Lease | |||||||
2017 (remainder) | $ 1,082 | $ 1,082 | |||||
2,018 | 3,909 | 3,909 | |||||
2,019 | 2,433 | 2,433 | |||||
2,020 | 1,972 | 1,972 | |||||
2,021 | 1,673 | 1,673 | |||||
Thereafter | 1,572 | 1,572 | |||||
Total | 12,641 | 12,641 | |||||
Lease of cars | |||||||
Non-Cancelable Operating Lease | |||||||
Rent expense | 800 | $ 800 | 2,400 | $ 2,400 | |||
Office and laboratory | |||||||
Non-Cancelable Operating Lease | |||||||
Rent expense | 100 | $ 100 | 400 | $ 400 | |||
New lease Newark | |||||||
Non-Cancelable Operating Lease | |||||||
Total | 8,300 | 8,300 | |||||
Square feet agreed to lease | ft² | 52,500 | ||||||
Additional square feet obligated lease | ft² | 8,000 | ||||||
Number of lease renewal terms | item | 1 | ||||||
Lease renewal option period | 5 years | ||||||
Lease renewal, minimum notice period prior to lease expiration | 12 months | ||||||
Deferred rent | 1,500 | 1,500 | $ 1,600 | ||||
Enterprise FM Trust | |||||||
Non-Cancelable Operating Lease | |||||||
Total | $ 4,200 | $ 4,200 | |||||
Enterprise FM Trust | Minimum | |||||||
Non-Cancelable Operating Lease | |||||||
Lease terms | 18 months | ||||||
Enterprise FM Trust | Maximum | |||||||
Non-Cancelable Operating Lease | |||||||
Lease terms | 48 months |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - LEGAL MATTERS (Details) | May 05, 2017 | Apr. 11, 2017defendantpatent | Feb. 29, 2016patent | Jul. 31, 2014claim | Sep. 30, 2017 |
Gralise ANDA Filers | |||||
Legal matters | |||||
Number of patents infringed | patent | 3 | 3 | |||
Number of defendants | defendant | 3 | ||||
130 Patent | |||||
Legal matters | |||||
Number of defendants | defendant | 4 | ||||
Purdue | |||||
Legal matters | |||||
No of claims declined for 475 patent | 2 | ||||
No of claims declined for 280 patent | 2 | ||||
Number of claims instituted for 475 patent | 15 | ||||
Number of claims instituted for 280 patent | 10 | ||||
Strides | |||||
Legal matters | |||||
Period of stay for FDA approval | 30 months | ||||
Banner and Watson | Zipsor | |||||
Legal matters | |||||
Eligible period of regulatory exclusivity | 180 days |
ACQUISITIONS (Details)
ACQUISITIONS (Details) $ in Thousands | Nov. 17, 2015USD ($)patent | Apr. 02, 2015USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Apr. 30, 2016USD ($) |
Purchase price consideration | |||||||
Research and development expenses | $ 1,761 | $ 10,412 | $ 12,459 | $ 23,477 | |||
Amortization expense | 25,734 | 27,037 | 77,204 | 81,111 | |||
Pro forma financial information (unaudited) | |||||||
Net revenues | 95,413 | $ 110,524 | 286,317 | $ 331,986 | |||
Endo | |||||||
ACQUISITIONS | |||||||
Number of patents infringed | patent | 3 | ||||||
Senior Notes | |||||||
Purchase price consideration | |||||||
Aggregate principal amount of notes issued | $ 575,000 | $ 375,000 | $ 375,000 | $ 375,000 | |||
Proceeds from the issuance of debt | 562,000 | ||||||
Cebranopadol | |||||||
Purchase price consideration | |||||||
Cash Paid | $ 25,000 | ||||||
Research and development expenses | 54,900 | ||||||
Cebranopadol | Endo | |||||||
Purchase price consideration | |||||||
Amount of one-time accounting adjustment | $ 29,900 | ||||||
NUCYNTA | |||||||
Purchase price consideration | |||||||
Cash Paid | 1,050,000 | ||||||
Rebates payable by seller | (9,977) | ||||||
Total Purchase Consideration | 1,040,023 | ||||||
Fair values of tangible and identifiable intangible assets acquired and liabilities assumed | |||||||
Intangible asset - acquired entity product rights | 1,019,978 | ||||||
Inventories | 11,590 | ||||||
Manufacturing Equipment | 8,455 | ||||||
Estimated fair value of the assets acquired | $ 1,040,023 | ||||||
Estimated useful life of intangible asset | 10 years | ||||||
NUCYNTA | Senior Notes | |||||||
Purchase price consideration | |||||||
Proceeds from the issuance of debt | $ 550,000 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) $ in Thousands | Apr. 02, 2015 | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($)item | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($)item | Dec. 31, 2016USD ($) |
Intangible assets | ||||||
Gross Carrying Amount | $ 1,109,068 | $ 1,109,068 | $ 1,109,068 | |||
Accumulated amortization | (284,124) | (284,124) | (206,919) | |||
Total | 824,944 | 824,944 | 902,149 | |||
Amortization of intangible assets | 25,734 | $ 27,037 | 77,204 | $ 81,111 | ||
Legal Matters | ||||||
Number of filers the Company found in favor against | item | 3 | 3 | ||||
Future amortization expenses of intangible assets | ||||||
2017 (remainder) | 25,734 | 25,734 | ||||
2,018 | 102,939 | 102,939 | ||||
2,019 | 102,939 | 102,939 | ||||
2,020 | 102,939 | 102,939 | ||||
2,021 | 102,939 | 102,939 | ||||
Thereafter | 387,454 | $ 387,454 | ||||
NUCYNTA | ||||||
Intangible assets | ||||||
Remaining Useful Life (In years) | 10 years | |||||
Product rights | NUCYNTA | ||||||
Intangible assets | ||||||
Remaining Useful Life (In years) | 8 years 3 months 18 days | |||||
Gross Carrying Amount | 1,019,978 | $ 1,019,978 | 1,019,978 | |||
Accumulated amortization | (243,016) | (243,016) | (172,288) | |||
Total | 776,962 | $ 776,962 | 847,690 | |||
Product rights | CAMBIA | ||||||
Intangible assets | ||||||
Remaining Useful Life (In years) | 6 years 3 months 18 days | |||||
Gross Carrying Amount | 51,360 | $ 51,360 | 51,360 | |||
Accumulated amortization | (19,471) | (19,471) | (15,619) | |||
Total | 31,889 | $ 31,889 | 35,741 | |||
Product rights | Lazanda | ||||||
Intangible assets | ||||||
Remaining Useful Life (In years) | 4 years 10 months 24 days | |||||
Gross Carrying Amount | 10,480 | $ 10,480 | 10,480 | |||
Accumulated amortization | (4,852) | (4,852) | (3,979) | |||
Total | 5,628 | $ 5,628 | 6,501 | |||
Product rights | Zipsor | ||||||
Intangible assets | ||||||
Remaining Useful Life (In years) | 4 years 7 months 6 days | |||||
Gross Carrying Amount | 27,250 | $ 27,250 | 27,250 | |||
Accumulated amortization | (16,785) | (16,785) | (15,033) | |||
Total | $ 10,465 | $ 10,465 | $ 12,217 |
OUT OF PERIOD ADJUSTMENT (Detai
OUT OF PERIOD ADJUSTMENT (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2017 | Mar. 31, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Out of period adjustment | |||||||
Change in net loss per share, basic and diluted | $ (0.25) | $ (0.21) | $ (1.11) | $ (0.73) | |||
NUCYNTA products | Understatement of Payable | |||||||
Out of period adjustment | |||||||
Increase in BPD accrual | $ 3.4 | ||||||
Understatement of the amount payable for the BPD | $ 2 | $ 1.4 | |||||
Change in net loss per share, basic and diluted | $ (0.05) |
RESTRUCTURING CHARGES (Details)
RESTRUCTURING CHARGES (Details) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2017USD ($) | Sep. 30, 2017USD ($) | |
RESTRUCTURING CHARGES. | ||
Severance and benefits charges | $ 434 | $ 3,875 |
Restructuring and related liabilities payables | $ 700 | $ 700 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) $ in Thousands | Nov. 08, 2017 | Apr. 30, 2017 | Apr. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Apr. 02, 2015 |
Subsequent events | ||||||
Payment of a prepayment fee | $ 4,000 | $ 5,000 | ||||
Senior Notes | ||||||
Subsequent events | ||||||
Amount of debt prepaid | $ 100,000 | $ 100,000 | ||||
Aggregate principal amount of notes issued | 375,000 | $ 375,000 | $ 575,000 | |||
Payment of a prepayment fee | $ 4,000 | $ 5,000 | ||||
Subsequent events | Senior Notes | ||||||
Subsequent events | ||||||
Amount of debt prepaid | $ 10,000 | |||||
Payment of a prepayment fee | $ 400 |