Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | May 04, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | DEPOMED INC | |
Entity Central Index Key | 1,005,201 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
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 | 63,587,401 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 101,693 | $ 126,884 |
Short-term investments | 1,205 | |
Accounts receivable, net | 62,428 | 72,482 |
Inventories | 5,368 | 13,042 |
Prepaid and other current assets | 23,815 | 17,238 |
Total current assets | 193,304 | 230,851 |
Property and equipment, net | 11,658 | 13,024 |
Intangible assets, net | 768,429 | 793,873 |
Other long-term assets | 28,680 | 869 |
Total assets | 1,002,071 | 1,038,617 |
Current liabilities: | ||
Accounts payable | 10,203 | 14,732 |
Accrued rebates, returns and discounts | 93,099 | 135,828 |
Accrued liabilities | 32,609 | 60,496 |
Income taxes payable | 126 | 126 |
Current portion of Senior Notes | 107,500 | 82,500 |
Contingent consideration liability, current portion | 156 | |
Interest payable | 11,164 | 13,220 |
Other current liabilities | 2,427 | 3,522 |
Total current liabilities | 257,128 | 310,580 |
Contingent consideration liability, long-term portion | 1,249 | 1,457 |
Senior Notes | 250,727 | 274,720 |
Convertible Notes | 273,920 | 269,510 |
Other long-term liabilities | 12,957 | 12,842 |
Commitments and contingencies | ||
Shareholders’ equity: | ||
Common stock | 316,727 | 313,857 |
Additional paid-in capital | 75,050 | 75,164 |
Accumulated deficit | (185,684) | (219,508) |
Accumulated other comprehensive loss, net of tax | (3) | (5) |
Total shareholders’ equity | 206,090 | 169,508 |
Total liabilities and shareholders' equity | $ 1,002,071 | $ 1,038,617 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Revenues: | ||
Total revenues | $ 128,404 | $ 90,447 |
Costs and expenses: | ||
Cost of sales (excluding amortization of intangible assets) | 12,044 | 17,774 |
Research and development expenses | 1,528 | 5,084 |
Selling, general and administrative expenses | 29,033 | 48,519 |
Amortization of intangible assets | 25,444 | 25,735 |
Restructuring charges | 9,017 | |
Total costs and expenses | 77,066 | 97,112 |
Income (loss) from operations | 51,338 | (6,665) |
Other income (expense): | ||
Interest and other income | 229 | 250 |
Interest expense | (18,068) | (20,124) |
Total other expense | (17,839) | (19,874) |
Net income (loss) before income taxes | 33,499 | (26,539) |
Benefit from (provision for) income taxes | 325 | (202) |
Net income (loss) | $ 33,824 | $ (26,741) |
Basic net income (loss) per share (in dollars per share) | $ 0.53 | $ (0.43) |
Diluted net income (loss) per share (in dollars per share) | $ 0.48 | $ (0.43) |
Shares used in computing basic net income (loss) per share (in shares) | 63,502,566 | 62,128,862 |
Shares used in computing diluted net income (loss) per share (in shares) | 81,877,097 | 62,128,862 |
Product sales, net | ||
Revenues: | ||
Total revenues | $ 44,354 | $ 90,285 |
Commercialization agreement | ||
Revenues: | ||
Total revenues | 83,800 | |
Royalties | ||
Revenues: | ||
Total revenues | $ 250 | $ 162 |
CONDENSED CONSOLIDATED STATEME4
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | ||
Net income (loss) | $ 33,824 | $ (26,741) |
Unrealized gain on available-for-sale securities, net of tax | 2 | 15 |
Comprehensive income (loss) | $ 33,826 | $ (26,726) |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Operating Activities | ||
Net income (loss) | $ 33,824 | $ (26,741) |
Adjustments for non-cash items: | ||
Depreciation and amortization | 26,918 | 26,349 |
Accretion of debt discount and debt issuance costs | 5,418 | 4,650 |
Provision for inventory obsolescence | 218 | 201 |
Gain on disposal of property and equipment | (134) | (50) |
Stock-based compensation | 2,234 | 3,556 |
Change in fair value of contingent consideration | (201) | (5,301) |
Other | 34 | 192 |
Changes in assets and liabilities: | ||
Accounts receivable | 10,055 | 34,775 |
Inventories | 7,457 | 873 |
Prepaid and other assets | (34,497) | 703 |
Accounts payable and other accrued liabilities | (33,515) | (17,833) |
Accrued rebates, returns and discounts | (42,730) | (2,970) |
Interest payable | (2,055) | (2,440) |
Income taxes payable | (1) | 42 |
Net cash (used in) provided by operating activities | (26,975) | 16,006 |
Investing Activities | ||
Purchases of property and equipment | (1) | (470) |
Proceeds from disposal of property and equipment | 145 | 50 |
Proceeds from sale of other assets | 80 | |
Maturities of marketable securities | 1,200 | 52,831 |
Net cash provided by investing activities | 1,424 | 52,411 |
Financing Activities | ||
Payment of contingent consideration liability | (162) | (913) |
Proceeds from issuance of common stock | 636 | 2,597 |
Shares withheld for payment of employee's withholding tax liability | (114) | |
Net cash provided in financing activities | 360 | 1,684 |
Net (decrease) increase in cash and cash equivalents | (25,191) | 70,101 |
Cash and cash equivalents at beginning of year | 126,884 | 117,709 |
Cash and cash equivalents at end of period | 101,693 | 187,810 |
Supplemental Disclosure of Cash Flow Information | ||
Net cash paid for income taxes | 1 | |
Cash paid for interest | 14,653 | 17,362 |
Capital expenditures incurred but not yet paid | $ 119 | $ 123 |
ORGANIZATION AND SUMMARY OF SIG
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2018 | |
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 (Depomed or the Company) is a specialty pharmaceutical company focused on pain and other central nervous system (CNS) conditions. The Company’s current specialty pharmaceutical business includes the following three products which we market in the United States (U.S.): • Gralise® (gabapentin), a once daily product for the management of postherpetic neuralgia (PHN), was launched in October 2011. • CAMBIA® (diclofenac potassium for oral solution), a non-steroidal anti-inflammatory drug for the acute treatment of migraine attacks, was acquired in December 2013. • Zipsor® (diclofenac potassium) liquid filled capsules, a non-steroidal anti-inflammatory drug for the treatment of mild to moderate acute pain, was acquired in June 2012. In January 2018, pursuant to the terms of a Commercialization Agreement the Company entered into with Collegium Pharmaceutical, Inc. (Collegium) in December 2017, the Company granted Collegium the right to commercialize the NUCYNTA franchise of pain products in the U.S. Pursuant to the Commercialization Agreement, Collegium assumed all commercialization responsibilities for the NUCYNTA franchise effective January 9, 2018, including sales and marketing. The Company will receive a royalty on all NUCYNTA revenues based on certain net sales thresholds, with a minimum royalty of $132.0 million for the year ended December 31, 2018 and $135.0 million per year for the years ended December 31, 2019 to December 31, 2021, subject to certain conditions. Both the Company and Collegium may terminate the agreement under certain circumstances. The Company may terminate the agreement if aggregate net sales of the NUCYNTA products fall below certain thresholds or within the first year upon the payment of an $80.0 million termination fee. Collegium may terminate at any time after the first anniversary of the transaction by giving 12 months’ notice and, if the termination date is prior to the fourth anniversary of the transaction, by paying us a $25.0 million termination fee. The NUCYNTA franchise includes two products currently marketed in the U.S. by Collegium: • 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 alternate treatment options are inadequate; and • NUCYNTA® IR (NUCYNTA ) (tapentadol), an immediate release version of tapentadol for the management of moderate to severe acute pain in adults. In November 2017, we entered into definitive agreements with Slán Medicinal Holdings Limited (Slán) pursuant to which the Company acquired Slán’s rights to market the specialty drug cosyntropin (Synthetic ACTH Depot) in the U.S., and Slán acquired the Company’s rights to Lazanda® (fentanyl) nasal spray. The Company believes cosyntropin can be second-to-market behind Mallinckrodt plc's marketed product, H-P Acthar gel. The Company expects Slán to file an NDA for cosyntropin in late 2018. The Company actively seeks to expand our product portfolio through acquiring or in licensing commercially available products or late stage product candidates that may be marketed and sold effectively with our existing products through our sales and marketing capabilities. The Company also has royalty and milestone producing license arrangements based on our proprietary Acuform® gastroretentive drug delivery technology, including with Ironwood Pharmaceuticals, Inc. (Ironwood). 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 months ended March 31, 2018 are not necessarily indicative of results to be expected for the entire year ending December 31, 2018 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, 2017 included in the Company’s Annual Report on Form 10-K filed with the SEC (the 2017 Form 10-K). The balance sheet as of December 31, 2017 has been derived from the audited financial statements at that date, as filed in the Company’s 2017 Form 10-K. Principles of Consolidation The 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, 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 PDL BioPharma, Inc. (PDL) Transaction. The Company contributed to Depo DR Sub all of its rights, title and interests in each of the license agreements to receive royalty and contingent milestone payments. Immediately following the transaction, Depo DR Sub sold to PDL, among other things, such rights to receive royalty and contingent 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, reimbursable expenses and set offs. 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 consolidated 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 sales discounts and returns, depreciable and amortizable lives, share-based compensation assumptions 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. Acquisitions The Company accounts for acquired businesses using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recorded at 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 and liabilities assumed 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 present value expected future net cash flows, the assessment of each asset’s life cycle, and 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 is 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. If the acquired net assets do not constitute a business under the acquisition method of accounting, the transaction is accounted for as an asset acquisition and no goodwill is recognized. In an asset acquisition, the amount allocated to acquired in-process research and development (IPR&D) with no alternative future use is charged to expense at the acquisition date. Revenue Recognition The Company accounts for revenue arising from contracts and customers in accordance with Accounting Standards Update (ASU or Update) No. 2014-09, Revenue from Contracts with Customers (ASC 606), which was adopted on January 1, 2018 using the modified retrospective transition method. There was no adjustment to the Company’s opening balance of accumulated deficit resulting from the adoption of this guidance. Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price, that is allocated to the respective performance obligation, when (or as) the performance obligation is satisfied. Variable consideration arising from sales or usage-based royalties, promised in exchange for a license of the Company’s Intellectual Property, is recognized at the later of (i) when the subsequent product sales occur or (ii) the performance obligation, to which some or all of the sales-based royalty has been allocated, has been satisfied. The Company recognizes a contract asset relating to its conditional right to consideration for completed performance obligations. Accounts receivable are recorded when the right to consideration becomes unconditional. A contract liability is recorded for payments received in advance of the related performance obligation being satisfied under the contract. The Company derives revenue from license fees, under its Commercialization Agreement with Collegium, sale of its products, and from license fees, milestones and royalties earned on license and collaborative arrangements. Product Sales The Company sells commercial products to wholesale distributors and retail pharmacies. Product 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. The Company’s performance obligation is to deliver product to the customer, and the performance obligation is completed upon delivery. The transaction price consists of a fixed invoice price and variable product sales allowances, which include rebates, discounts and returns. Product sales revenues are recorded net of applicable reserves for these product sales allowances. Receivables related to product sales are typically collected one to two months after delivery. Product Sales Allowances—The Company considers products sales allowances to be variable consideration and estimates and 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 actual or estimated amounts owed 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, 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. The Company uses the most likely method in estimating product sales allowances. 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 within six months before and up to 12 months after its product expiration date. The Company estimates product returns and associated credit on NUCYNTA ER and NUCYNTA, Gralise, CAMBIA, Zipsor and Lazanda. 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 the product at the time of shipment, shipment and prescription trends, estimated distribution channel inventory levels and consideration of the introduction of competitive products. 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. Under the Commercialization Agreement with Collegium for NUCYNTA ER and NUCYNTA and the divestiture of Lazanda to Slán, the Company is only financially responsible for product returns for product that were sold by the Company, which are identified by specific lot numbers. The shelf life of NUCYNTA ER and NUCYNTA is 24 months to 36 months from the date of tablet manufacture. The shelf life of Gralise is 24 months to 36 months from the date of tablet manufacture. The shelf life of CAMBIA is 24 months 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. 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 these 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 For arrangements that include sales-based royalties and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes royalty revenue at the later of (1) when the related sales occur, or (2) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). The Company currently receives royalties based on sales of Cambia in Canada and sales of NUCYNTA ER in Canada and Japan, which are recognized as revenue when the related sales occur as there are no continuing performance obligations by the Company under those agreements. Stock Based Compensation The Company uses the Black Scholes option valuation model to determine the fair value of stock options and employee stock purchase plan (ESPP) shares. The determination of the fair value of stock based payment awards on the date of grant using an option valuation model is affected by the Company’s stock price as well as assumptions, which include the Company’s expected term of the award, the expected stock price volatility, risk free interest rate and expected dividends over the expected term of the award. The Company uses historical option exercise data to estimate the expected term of the options. The Company estimates the volatility of its common stock price by using the historical volatility over the expected term of the options. The Company bases the risk free interest rate on U.S. Treasury zero coupon issues with terms similar to the expected term of the options as of the date of grant. The Company does not anticipate paying any cash dividends in the foreseeable future and therefore uses an expected dividend yield of zero in the option valuation models. As a result of adopting ASU 2016-09 Improvements to Employee Share-Based Payment Accounting, the Company made an accounting policy election to account for forfeitures as they occur, rather than estimating expected forfeitures at the time of the grant. The fair value of each restricted stock unit (RSU) that does not contain a market condition is equal to the market value of our common stock as of the date of the grant. The Company’s Performance Stock Units (PSUs) vest over a three year period based on the Relative Total Shareholder Return (TSR) of the Company’s common stock against the Russell 3000 Pharmaceuticals Total Return Index over the period. The grant-date fair value of the PSUs is determined using the Monte Carlo simulation method. Recently Adopted Accounting Pronouncements 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 requires 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. The Company adopted ASC 606 using the modified retrospective method as of January 1, 2018. The Company determined that there was no cumulative effect of applying the new guidance to all contracts with customers that were not completed as of January 1, 2018, therefore no adjustment was required to the accumulated deficit as of the adoption date. Furthermore, upon adoption of the new guidance no adjustments to any prior year periods would have been reportable to present the condensed consolidated balance sheets, statements of operations, or statements of cash flows on a comparable basis to any current year reported balances or amounts. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard was effective for us beginning January 1, 2018. 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 January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which provides clarification on the definition of a business and adds guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard was effective for us beginning January 1, 2018. The future impact of ASU No. 2017-01 will be dependent upon the nature of the Company’s future acquisition or disposition transactions, if any. In May 2017, the FASB issued accounting guidance to clarify which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The new standard was required to be applied prospectively. The guidance was effective for us beginning January 1, 2018. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740 ) : Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118, which provides clarification and guidance on the income tax accounting implications of the Tax Cuts and Jobs Act. The standard was effective for us beginning January 1, 2018. In January of 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 405-20), Recognition and Measurement of Financial Assets and Financial Liabilities . ASU 2016-01 changed accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, it clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The guidance became effective for us on January 1, 2018 and required adoption using a modified retrospective approach, with certain exceptions. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. Recently Issued Accounting Standards 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. Additionally, in January 2018, the FASB issued ASU 2018-01, Leases , (Topic 842); which allows a Land Easement Practical Expedient for Transition to Topic 842. 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 the impact that implementation will have on 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. In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, that provides companies with an option to reclassify stranded tax effects resulting from enactment of the Tax Cuts and Jobs Act (TCJA) from accumulated other comprehensive income to retained earnings. The guidance will be effective for the Company beginning in the first quarter of 2019 with early adoption permitted, and would be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the tax rate as a result of TCJA is recognized. The Company has not made a determination as to which alternative methods it will use when it adopts this standard, but does not expect the adoption of this ASU to have a material impact on its results of operations, financial position and cash flows. |
CASH, CASH EQUIVALENTS AND SHOR
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 and December 31, 2017 are summarized below (in thousands). Estimated fair value is based on quoted market prices for these investments. Gross Gross Amortized Unrealized Unrealized March 31, 2018 Cost Gains Losses Fair Value Cash and cash equivalents Cash $ 76,631 $ — $ — $ 76,631 Money market funds 46 — — 46 Commercial paper 2,400 — — 2,400 U.S. Agency discount notes 22,615 1 — 22,616 Total cash and cash equivalents $ 101,692 $ 1 $ — $ 101,693 Gross Gross Amortized Unrealized Unrealized December 31, 2017 Cost Gains Losses Fair Value Cash and cash equivalents Cash $ $ — $ — $ Money market funds — — Commercial paper — — Total cash and cash equivalents — — Short-term investments Corporate debt securities and commercial paper with maturities less than 1 year — (5) Total short-term investments — (5) Total $ $ — $ (5) $ The Company considers all highly liquid investments with a maturity at date of purchase of three months or less to be cash equivalents. Cash and cash equivalents generally consist of cash on deposit with banks, money market instruments, U.S. Agency discount notes, commercial paper and corporate debt securities. The Company invests its cash in money market funds and marketable securities including U.S. Treasury and government agency securities, commercial paper, and high quality debt 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 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 consolidated statement of operations. As of March 31, 2018, the Company held zero securities in an unrealized loss position or that have been in a continuous loss position. The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses that were 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 December 31, 2017 (in thousands): Less than 12 months 12 months or greater Total Gross Gross Gross Unrealized Unrealized Unrealized December 31, 2017 Fair Value Losses Fair Value Losses Fair Value Losses Corporate Debt Securities $ 1,205 $ (5) $ — $ — $ 1,205 $ (5) 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 maturity, there were no material other than temporary impairments for these securities at March 31, 2018 or December 31, 2017. Gross realized gains and losses on marketable securities were not material for the three months ended March 31, 2018 or 2017. 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. · 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 March 31, 2018 and December 31, 2017 (in thousands): March 31, 2018 Level 1 Level 2 Level 3 Total Assets: Money market funds $ 46 $ — $ — $ 46 Commercial paper — 2,400 — 2,400 U.S. Agency discount notes — 22,616 — 22,616 Total $ 46 $ 25,016 $ — $ 25,062 Liabilities: Contingent consideration—Zipsor $ — $ — $ 238 $ 238 Contingent consideration—CAMBIA — — 1,011 1,011 Total $ — $ — $ 1,249 $ 1,249 December 31, 2017 Level 1 Level 2 Level 3 Total Assets: Money market funds $ 95 $ — $ — $ 95 Commercial paper — 23,670 — 23,670 Corporate debt securities — 1,205 — 1,205 Total $ 95 $ 24,875 $ — $ 24,970 Liabilities: Contingent consideration—Zipsor $ — $ — $ 464 $ 464 Contingent consideration—Lazanda — — 156 156 Contingent consideration—CAMBIA — — 993 993 Total $ — $ — $ 1,613 $ 1,613 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 contingent milestone payments and royalties payable under the respective agreements which are determined using Level 3 inputs. The remaining contingent consideration liability following the divestiture of Lazanda in November 2017 was $0.2 million. This liability was settled in the first quarter of 2018. The key assumptions in determining the fair value are the 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 months ended March 31, 2018 and 2017: Three Months Ended March 31, 2018 2017 Fair value, beginning of the period $ 1,613 $ 14,825 Changes in fair value recorded in interest expense 40 531 Changes in fair value recorded in selling, general and administrative expenses (242) (5,000) Royalties and milestone paid (162) (1,745) Total $ 1,249 $ 8,611 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 was approximately $281.5 million and $295.4 million (par value $345.0 million) as of March 31, 2018 and December 31, 2017, respectively, and represents a Level 2 valuation. The principal amount of the Senior Notes approximates their fair value as of March 31, 2018 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 months ended March 31, 2018 and 2017. |
NET INCOME (LOSS) PER SHARE
NET INCOME (LOSS) PER SHARE | 3 Months Ended |
Mar. 31, 2018 | |
NET INCOME (LOSS) PER SHARE | |
NET INCOME (LOSS) PER SHARE | NOTE 3. NET INCOME (LOSS) PER SHARE Basic net income (loss) per share is calculated by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is calculated by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding during the period, plus potentially dilutive common shares, consisting of stock options, RSUs, PSUs, ESPP and convertible debt. The Company uses the treasury-stock method to compute diluted earnings per share with respect to its stock options and equivalents. The Company uses the if-converted method to compute diluted earnings per share with respect to its convertible debt. For purposes of this calculation, options to purchase stock, including stock options, RSUs, PSUs and ESPP, are considered to be potential common shares and are only included in the calculation of diluted net income (loss) per share when their effect is dilutive. Basic and diluted earnings per common share are calculated as follows: Three Months Ended March 31, (in thousands, except for per share amounts) 2018 2017 Basic and diluted net income (loss) per share Net income (loss) $ 33,824 $ (26,741) Denominator 63,503 62,129 Basic net income (loss) per share $ 0.53 $ (0.43) Diluted net income (loss) per share Numerator: Net income (loss) $ 33,824 $ (26,741) Add interest expense on convertible debt, net of tax 5,187 — $ 39,011 $ (26,741) Denominator: Denominator for basic income (loss) per share 63,503 62,129 Add effect of diluted securities: Stock options and equivalents 443 — Convertible debt 17,931 — Denominator for diluted income (loss) per share 81,877 62,129 Diluted net income (loss) per share $ 0.48 $ (0.43) The following table sets forth outstanding potentially dilutive common shares that are not included in the computation of diluted net income (loss) per share because to do so would be anti-dilutive: Three Months Ended March 31, (in thousands) 2018 2017 Convertible debt — 17,931 Stock options and equivalents 4,248 8,517 Total potentially dilutive common shares 4,248 26,448 |
REVENUE
REVENUE | 3 Months Ended |
Mar. 31, 2018 | |
Revenue | |
REVENUE | NOTE 4. REVENUE Disaggregated Revenue The following table summarizes revenue from contracts with customers for the three months ended March 31, 2018 and 2017 (in thousands): Three Months Ended March 31, 2018 2017 Product sales, net Gralise $ 14,827 $ 17,600 CAMBIA 6,416 7,190 Zipsor 4,746 4,651 Total neurology product sales, net 25,989 29,441 NUCYNTA products 18,145 56,919 Lazanda 220 3,925 Total product sales, net 44,354 90,285 Commercialization agreement: Commercialization rights and facilitation services 28,095 — Revenue from transfer of inventory 55,705 — Royalties 250 162 Total revenues $ 128,404 $ 90,447 During the three months ended March 31, 2018, the Company released $12.5 million of NUCYNTA sales reserves which were primarily recorded in the fourth quarter of 2017, as financial responsibility for those reserves transferred to Collegium upon closing of the Commercialization Agreement. The benefit of this released is reflected within the NUCYNTA product sales recorded for the three months ended March 31, 2018. Commercialization Agreement with Collegium In January 2018, the Company entered into a Commercialization Agreement with Collegium (Commercialization Agreement), pursuant to which the Company granted Collegium the right to commercialize the NUCYNTA pain products in the U.S. Under the Commercialization Agreement, Collegium assumed all commercialization responsibilities for NUCYNTA effective January 9, 2018, including sales and marketing. The Company will receive a royalty on all NUCYNTA revenues based on certain net sales thresholds, with a minimum royalty of $132 million for the year ended December 31, 2018 and $135 million per year for the years ended December 31, 2019, to December 31, 2021. In addition to the minimum royalties, the Company will also receive (i) a 25% royalty on annual net sales of NUCYNTA between $233.0 million to $258.0 million and (ii) 17.5% on annual net sales of NUCYNTA above $258.0 million for the years ended December 31, 2018 to December 31, 2021. From and after January 1, 2022, the Company will receive (i) a 58% royalty on annual net sales of NUCYNTA up to $233.0 million (ii) 25% royalty on annual net sales of NUCYNTA of $233.0 million to $258.0 million and (iii) 17.5% on annual net sales of NUCYNTA above $258.0 million. The Company received an upfront payment of $10.0 million as well as $6.2 million with respect to the inventory of finished goods which was transferred to Collegium on closing of the transaction in January 2018. The Company identified the following three performance obligations under the Commercialization Agreement: 1. License to commercialize the NUCYNTA pain products, 2. Services to arrange for supplies of NUCYNTA pain products using the Company’s existing contract manufacturing contracts with third parties; and 3. Transfer control of all NUCYNTA finished goods held at closing. The Company determined the total transaction price to be $553 million, which consists of $537 million in total annual minimum royalty payments, the $10.0 million upfront fee, and a $6.2 million payment for NUCYNTA finished goods inventory at cost. In accordance with the relevant Accounting Standard, the Company determined that the duration of the Commercialization Agreement begins on the effective date of January 9th, 2018 and lasts through December 31, 2021, which is consistent with the contractual period in which the Company and Collegium has enforceable rights and obligations which include the minimum royalty period and the period in which Collegium would incur a $25 million termination penalty on terminating the agreement. The transaction price was allocated to the performance obligations noted above in proportion to their standalone selling prices and will be recognized as this performance obligations are satisfied by the Company. The transaction price allocated to the inventory transferred to Collegium on closing was $55.7 million and was recognized on the closing date as the control of such inventory was transferred to Collegium. The transaction price allocated to the other remaining performance obligations of the license to commercialize NUCYNTA and the related services to arrange for supplies was $497.5 million. This amount will be recognized ratably over the time through December 31, 2021, which represents the period over which enforceable rights and obligations exist after considering the various termination rights for either parties that exist in the contract. For the three months ended March 31, 2018, the Company recognized $28.1 million related to the right to commercialize NUCYNTA and related facilitation services. Total revenue recognized for the three months ended March 31, 2018 was $83.8 million. Any amounts receivable in excess of the minimum royalties due up to December 31, 2021, will be recognized during the period that NUCYNTA net sales by Collegium exceed $233.0 million. Royalties receivable after January 1, 2022 will be recognized based on subsequent NUCYNTA net sales recorded by Collegium. The annual minimum royalty amounts are payable by Collegium in equal quarterly installments of $33.8 million, and are initially received through a lockbox sweep mechanism. Remittances from customers on product sales of NUCYNTA made by Collegium are deposited to a designated lockbox account, separate from Collegium’s other receivables. On a daily basis, 35% of the cash receipts in this lockbox account are swept to Depomed’s bank accounts up to the minimum cash royalty amounts which are $30.8 million for the three months ended March 31, 2018 and $33.8 million per quarter, thereafter. If the cash receipts received by Depomed in a quarter are lower than the minimum quarterly royalty, or if the royalty receivable to Depomed is above the minimum quarterly amount, Collegium is responsible to remit the remaining royalty payment within 45 days after the end of the each quarter. For the three months ended March 31, 2018, $13.1 million was received by Depomed during the quarter and $17.7 million has been classified as a receivable on the unaudited Condensed Consolidated Balance Sheets. Contract Assets and Liabilities The following table presents changes in the Company’s contract assets and liabilities for the three months ended March 31, 2018 (in thousands): Balance Balance Beginning End of Period Additions Deductions of Period Contract assets: Contract asset $ — $ 55,705 $ (18,855) $ 36,850 The Company receives payments from Collegium based on the above described schedule as established in our contracts. Contract asset relates to our conditional right to consideration for our completed performance under the Commercialization agreement. This contract asset relates to the revenue recognized by the Company from transfer of inventory to Collegium on the date of closing of the agreement in January 2018. Accounts receivable are recorded when the right to consideration becomes unconditional. $9.9 million and $27.0 million of the contract asset has been recorded within “Prepaid and other assets” and “Other long-term assets,” respectively. The Company acquired the U.S. rights to NUCYNTA from Janssen Pharmaceuticals, Inc. (Janssen) in April 2015. As part of that transaction, the Company also acquired the related royalty obligations for NUCYNTA to Grünenthal, the originator of tapentadol. Pursuant to the terms of the commercialization agreement, Collegium is now responsible for those royalty obligations. However, as a condition of giving its consent to the commercialization agreement with Collegium, Grünenthal amended the terms of the original royalty agreement to require payment of a minimum royalty of $34.0 million per year on net sales of NUCYNTA greater than $180.0 million and equal to, or less than, $243.0 million for each of the years ended December 31, 2018 through 2021. Collegium is responsible for payments of royalties to Grünenthal and the Company is obligated to cover any shortfall between the minimum royalty amount of $34.0 million and the amounts paid to Grünenthal by Collegium for each of the years ended December 31, 2018 through 2021. Under the terms of this amended royalty agreement, the maximum amount that the Company could be obligated to pay is $8.8 million per year for each of the years ended December 31, 2018 through 2021. In return for this agreement to pay minimum royalties, we received the right to share royalties with Grünenthal on net sales of NUCYNTA above $243.0 million during the same period. The Company reviews the net sales of NUCYNTA by Collegium and recognizes an estimated liability for the amount it believes is likely to be paid for the year. As this estimation process requires a significant amount of judgment and is based on expected net sales of NUCYNTA by Collegium, the liability recorded as of a reporting period may not necessarily be reflective of the amount ultimately due to Grünenthal for the year. Collaboration and License Agreements Ironwood Pharmaceuticals, Inc. In July 2011, the Company entered into a collaboration and license agreement with Ironwood (Ironwood Agreement) granting Ironwood a license for worldwide rights to certain patents and other intellectual property rights to our Acuform drug delivery technology for IW 3718, an Ironwood product candidate under evaluation for refractory GERD. The Company has received $3.4 million under the agreement, including a contingent milestone payment of $1.0 million in March 2014 as a result of the initiation of clinical trials relating to IW 3718 by Ironwood. The Company is entitled to receive additional contingent milestone payments upon the occurrence of certain development milestones and royalties on net sales of the product if approved, including a $5.0 million contingent milestone payment if Ironwood commences Phase 3 clinical trials for IW-3718. The Company identified the following two performance obligations under the Ironwood Agreement: (1) the license to the Acuform technology and (2) formulation work associated with IW-3718. The license was granted in 2011 and the formulation work was completed in 2012. The Company has no ongoing performance obligations and has recognized all proceeds received to date as revenue. The future contingent milestones under the Ironwood Agreement are considered variable consideration and are estimated using the most likely method. As part of implementation of ASC 606, the Company evaluated whether the future milestones under the Ironwood Agreement should have been included as part of the transaction price in periods before January 1, 2018. The Company concluded that because of development and regulatory risks at the time, it was probable that a significant revenue reversal could have occurred. Accordingly, the associated future contingent milestone values were not included in the transaction price for periods before January 1, 2018. At the end of each subsequent reporting period, the Company re-evaluates the probability or achievement of each such milestone and any related constraint, and if necessary, adjusts its estimates of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. The Company did not recognize any revenue under this agreement for the three months ended March 31, 2018 or March 31, 2017, respectively. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2018 | |
STOCK-BASED COMPENSATION | |
STOCK-BASED COMPENSATION | NOTE 5. STOCK-BASED COMPENSATION Employee Stock Purchase Plan 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 March 31, 2018 2017 Cost of sales $ 14 $ Research and development expense 53 Selling, general and administrative expense 1,909 Restructuring charges 258 — Total $ 2,234 $ At March 31, 2018, the Company had $19.4 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 2.34 years. Performance-based Restricted Stock Units During the three months ended March 31, 2018, the Company granted Performance Stock Units (PSUs) with an aggregate target award of 344,700 units and a weighted-average grant-date fair value of $10.07 per unit. The PSUs vest in annual cliffs over a three year period based on the Relative Total Shareholder Return (TSR) of the Company’s common stock against the Russell 3000 Pharmaceuticals Total Return Index over the period. The ultimate award, which is determined at the end of the three-year cycle, can range from zero to 200% of the target. The recipients of the PSU awards will have voting rights and the right to receive a dividend once the underlying shares have been issued. The grant-date fair value is based upon the Monte Carlo simulation method. The following table summarizes the PSU activity for the three months ended March 31, 2018 under the 2014 Plan (in thousands, except per share data): Weighted Weighted Average Average Grant Date Remaining Fair Contractual Aggregate Number of Value Term Intrinsic Shares Per Share (in years) Value Non-vested performance-based restricted stock units at December 31, 2017 — $ — Granted 344,700 10.07 Vested — — Forfeited — — Non-vested performance-based restricted stock units at March 31, 2018 344,700 $ 10.07 $ 3,472 As of March 31, 2018, total unrecognized compensation cost related to PSUs was $3.5 million, which is expected to be recognized over the remaining weighted-average vesting period of 2.85 years. |
INVENTORIES
INVENTORIES | 3 Months Ended |
Mar. 31, 2018 | |
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): March 31, December 31, 2018 2017 Raw materials $ 2,317 $ 3,008 Work-in-process 801 204 Finished goods 2,250 9,830 Total $ 5,368 $ 13,042 |
ACCOUNTS RECEIVABLES
ACCOUNTS RECEIVABLES | 3 Months Ended |
Mar. 31, 2018 | |
ACCOUNTS RECEIVABLES | |
ACCOUNTS RECEIVABLES | NOTE 7. ACCOUNTS RECEIVABLES Accounts receivables consist of the following (in thousands): March 31, December 31, 2018 2017 Product sales, net $ 23,733 $ 71,919 Commercialization agreement 38,353 — Receivables from collaborative partners 342 563 Total accounts receivable, net $ 62,428 $ 72,482 |
ACCRUED LIABILITIES
ACCRUED LIABILITIES | 3 Months Ended |
Mar. 31, 2018 | |
ACCRUED LIABILITIES | |
ACCRUED LIABILITIES | NOTE 8. ACCRUED LIABILITIES Accrued liabilities consist of the following (in thousands): March 31, December 31, 2018 2017 Accrued compensation $ 2,920 $ 7,345 Accrued royalties 3,197 17,370 Accrued restructuring and one-time termination costs 6,820 9,483 Other accrued liabilities 19,672 26,298 Total accrued liabilities $ 32,609 $ 60,496 |
DEBT
DEBT | 3 Months Ended |
Mar. 31, 2018 | |
DEBT. | |
DEBT | NOTE 9. 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, among 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 for 2015. The Senior Notes will mature on April 14, 2021 (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 as of March 31, 2018 and 2017 was 11.45% and 10.75%, respectively. In April 2017, the Company prepaid and retired $100.0 million of the Senior Notes and paid a $4.0 million prepayment fee; and in November 2017, the Company prepaid and retired an additional $10 million of the Senior Notes and paid a $0.4 million prepayment fee. The Company recorded a net loss on prepayment of the Senior Notes of $5.9 million which represented the prepayment fees of $4.4 million and the immediate recognition of unamortized balances of debt discount and debt issuance costs of $1.5 million in 2017. This loss is recorded as a loss on prepayment of Senior Notes in the consolidated statements of operations for 2017. The remaining $365.0 million of Senior Notes can be prepaid, 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. 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. On December 4, 2017, the Company and the Purchasers entered into an Amendment to the existing Note Purchase Agreement. The Amendment facilitated the Company’s entry into a Commercialization Agreement, by and between the Company and Collegium and Collegium NF, LLC, a Delaware limited liability company and wholly owned subsidiary of Collegium, on December 4, 2017, pursuant to which the Company, or one of its subsidiaries, granted the right to Collegium and its sub licensees to commercialize NUCYNTA® in the U.S. of America, the District of Columbia and Puerto Rico. In connection with its entry into the Commercialization Agreement, the Purchasers (i) waived the requirement that some or all of the Asset Disposition Proceeds realized from the granting of the Exclusive License be used to prepay the outstanding principal amount of the Notes pursuant to Section 2.7(b) of the Note Purchase Agreement and (ii) agreed to (a) replace the minimum net sales covenant in Section 6.7 of the Note Purchase Agreement with a minimum EBITDA covenant, and (b) made certain other amendments related to the amortization of the Notes. In addition, the prepayment premiums were amended to 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 fifth anniversary of the Purchase Date; and (iii) zero, if such prepayment occurs after the fifth anniversary of the Purchase Date. The minimum EBITDA covenants stipulate that the Company’s EBITDA, measured as of the last day of the twelve month measurement period be (i) for the twelve month period from October 1, 2017 through to September 30, 2018 be at least $90 million and (ii) $125 million, thereafter. The Amendment also modified the repayment schedule; and required the Company to prepay and retire $10.0 million of the Senior Notes and pay a $0.4 million prepayment fee. The Company paid a $3.0 million upfront non-refundable amendment fee which, pursuant to the terms of the modification, can be off-set dollar for dollar against any future prepayment fees. The Company accounted for the amendment as a debt modification in accordance with the applicable accounting standards. Accordingly, the $3.0 million amendment fee paid to the Purchasers was capitalized and is being amortized over the remaining term of the Senior Notes. The Senior Notes and related indenture 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. The principal amount of the Senior Notes is repayable as of March 31, 2018 is as follows (amounts in thousands): 2018 (remainder) $ 82,500 2019 120,000 2020 80,000 2021 82,500 Total $ 365,000 The Company is scheduled to make the 2018 Senior Notes principal payments of $57.5 million in April 2018 and $25.0 million in October 2018. The following is a summary of the carrying value of the Senior Notes as of March 31, 2018 and December 31, 2017 (in thousands): March 31, December 31, 2018 2017 Principal amount of the Senior Notes $ 365,000 $ 365,000 Unamortized debt discount balance (4,106) (4,717) Unamortized debt issuance costs (2,667) (3,063) Total Senior Notes $ 358,227 $ 357,220 The debt discount and debt issuance costs are being amortized as interest expense through April 2021 using the effective interest method. The following is a summary of interest expense for the three months ended March 31, 2018 and 2017 (in thousands): Three Months Ended March 31, 2018 2017 Contractual interest expense $ 10,441 $ 12,766 Amortization of debt discount and debt issuance costs 1,008 602 Total interest expense Senior Notes $ 11,449 $ 13,368 Convertible Debt 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 dated September 9, 2014, 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 2021 Convertible Notes can convert their securities, at their option: (i) during any calendar quarter commencing after December 31, 2015, 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 2021 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. 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 quarter ended March 31, 2018. As a result, the Convertible Notes are not convertible as of March 31, 2018. 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 initial recognition of $226.0 million as the liability component net of a $119.0 million debt discount with a corresponding net of tax increase to paid-in capital of $73.3 million, 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. Equity issuance costs of $3.7 million related to the convertible notes were recorded as an offset to additional paid-in capital. The following is a summary of the liability component of the Convertible Notes as of March 31, 2018 and December 31, 2017 (in thousands): March 31, December 31, 2018 2017 Principal amount of the Convertible Notes $ 345,000 $ 345,000 Unamortized discount of the liability component (67,642) (71,799) Unamortized debt issuance costs (3,438) (3,691) Total Convertible Notes $ 273,920 $ 269,510 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 months ended March 31, 2018 and 2017 (in thousands): Three Months Ended March 31, 2018 2017 Stated coupon interest $ 2,156 $ 2,156 Amortization of debt discount and debt issuance costs 4,410 4,048 Total interest expense Convertible Notes $ 6,566 $ 6,204 |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2018 | |
SHAREHOLDERS' EQUITY | |
SHAREHOLDERS' EQUITY | NOTE 10. SHAREHOLDERS’ EQUITY Option Exercises For the three months ended March 31, 2018, employees exercised options to purchase 120,302 shares of the Company’s common stock with net proceeds to the Company of approximately $0.6 million. For the three months ended March 31, 2017, employees exercised options to purchase 283,797 shares of the Company’s common stock with net proceeds to the Company of approximately $2.6 million. Restricted Stock Units For the three months ended March 31, 2018 and March 31, 2017, the Company issued 32,699 shares and zero shares, respectively, of the Company’s common stock due to vesting of restricted stock units. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2018 | |
INCOME TAXES | |
INCOME TAXES | NOTE 11. INCOME TAXES On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the Tax Act). The Tax Act includes significant changes to the U.S. corporate income tax system including, but not limited to, a federal corporate rate reduction from 35% to 21% and limitations on the deductibility of interest expense and executive compensation. In order to calculate the effects of the new corporate tax rate on our deferred tax balances, ASC 740 Income Taxes (ASC 740) required the re-measurement of our deferred tax balances as of the enactment date of the Tax Act, based on the rates at which the balances were expected to reverse in the future. Due to the Company’s full valuation allowance position, there was no change to the presentation of the deferred tax balances on the financial statements, except for the re-measurement of these deferred tax balances in the income tax footnote. The re-measurement resulted in a one-time reduction in federal & state deferred tax assets as of December 31, 2017 of approximately $25.5 million, which was fully offset by a corresponding change to the Company's valuation allowance. As of March 31, 2018, 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 recorded a full valuation allowance against our net deferred assets beginning in the fourth quarter of 2016. We have continued to provide a full valuation allowance against our net deferred assets in subsequent quarters. 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. In the three months ended March 31, 2018, the Company recorded a benefit from income taxes of approximately $0.3 million that represents an effective tax rate of (1.0%) on income from continuing operations. The difference between the income tax benefit of $0.3 million and the tax at the statutory rate of 21% on current year operations is principally due to the change in valuation allowance. For the three months ended March 31, 2017, the difference between the recorded provision 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. The Company files income tax returns in the United States federal jurisdiction and in various states, and the tax returns filed for the years 1997 through 2016 and the applicable statutes of limitation have not expired with respect to those returns. Because of net operating losses and unutilized R&D credits, substantially all of the Company’s tax years remain open to examination. Interest and penalties, if any, related to unrecognized tax benefits, would be recognized as income tax expense by the Company. At March 31, 2018 the Company had approximately $0.9 million of accrued interest and penalties associated with unrecognized tax benefits. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2018 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 12. COMMITMENTS AND CONTINGENCIES Leases We have a non-cancelable operating lease for our office buildings 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 March 31, 2018 were as follows (in thousands): Year Ending December 31, Lease Payments 2018 (remainder) $ 1,887 2019 2,678 2020 2,559 2021 2,360 2022 2,192 Thereafter 632 Total $ 12,308 In April 2012, the Company entered into an office and laboratory lease agreement to lease approximately 52,500 rentable square feet in Newark, California (Newark Lease) commencing on December 1, 2012. The Company occupied approximately 8,000 additional rentable square feet commencing in July 2015. The lease is due to expire on November 30, 2022. The Company is relocating its corporate headquarters from Newark, California to Lake Forest, Illinois sometime in mid-2018. The Company began preliminary discussions with the Newark Lease Landlord during the first quarter of 2018 and discussed the options to exit the premises by either subleasing the space or negotiating an exit in the second or the third quarter of 2018. Effective February 28, 2018, the Company entered into an Office Lease, in Lake Forest, Illinois (Lake Forest Lease) for its corporate headquarters, where the Company will lease approximately 31,000 rentable square feet of space. The Office Lease will commence on the completion of the Company’s initial tenant improvements in the space which are expected to be around July 1, 2018, but no later than August 1, 2018. The Lake Forest Lease term is for five years and six months. The Company has the right to renew the term of the Lease for one period of five years, provided that written notice is made to the Landlord no later than twelve months prior to the expiration of the initial term of the Lease. Prior to the Lake Forest Lease Commencement Date, the Company has the right to use temporary space in the Building containing approximately 6,700 rentable square feet. The Lake Forest Lease initial annual base rent will be $18.00 per rentable square foot and will increase annually by $0.50 per rentable square foot. The lease is a triple net lease, with the Company required to pay its pro rata share of real estate taxes and operating expenses. The Landlord will make available to the Company a tenant improvement allowance of $28.00 per square rentable square foot, which the Company may use towards the initial build-out or apply to the payment of rent. As of March 31, 2018, the aggregate rent payable over the remaining term of the lease agreements was approximately $7.6 million on the Newark Lease and $3.3 million on the Lake Forest Lease, including the Company’s option to renew. Deferred rent was approximately $1.4 million as of March 31, 2018 and $1.4 million as of December 31, 2017. Gross rent expense relating to the office lease agreements for the three months ended March 31, 2018 and 2017, was $0.4 million and $0.3 million, 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. As of March 31, 2018, the aggregate rent payable over the remaining lease term of the vehicle lease agreement was approximately $1.4 million. Rent expense relating to the lease of cars for the three months ended March 31, 2018 and March 31, 2017 was $0.5 million and $0.8 million, 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 newly issued U.S. Patent No. 8,536,130 (the ’130 Patent) was also infringed by 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 new Paragraph IV Notice from Roxane with respect to NUCYNTA ER, Janssen Pharma filed an additional complaint in the D.N.J. 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 non-infringement 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 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 non-infringement 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. On March 9, 2016, a two-week bench trial on the validity of the three asserted patents and infringement of the ’130 patent commenced. 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, but that Roxane and Actavis will not infringe the ’130 patent. 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 regard to 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 validity of the ’364 and ’130 patents. 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. Briefing concluded in March 2018. It is estimated that the Federal Circuit will hold oral argument by late summer 2018 and issue a written decision by the end of 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. On June 10, 2016, the Company filed a motion for leave to file a second amended Complaint to plead willful infringement. On June 21, 2016, Purdue filed an opposition to the Company’s motion for leave to plead willful infringement. On January 31, 2017, the Court granted the Company’s motion for leave to plead willful infringement. On February 1, 2017, the Company filed a Second Amended Complaint pleading willful infringement. On July 10, 2017, the case was reassigned to Judge Wolfson. On February 15, 2017, Purdue answered the Company’s Second Amended Complaint and pled counterclaims of non-infringement, invalidity, unenforceability and certain affirmative defenses. On September 26, 2017, the case was reassigned to Judge Martinotti. On December 22, 2017, the Court set the close of expert discovery for March 30, 2018. On January 5, 2018, the Court vacated the January 25, 2018 pretrial conference. No trial dates have been set by the Court, though the Company expects a bench trial on Purdue’s claim of inequitable conduct and a jury trial may be scheduled in the second half of 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. On December 8, 2017, the “Depomed Investor Group” was appointed lead plaintiff. On February 6, 2018, the lead plaintiff filed an amended complaint that asserted the same claims arising out of the same and similar disclosures against the Company and the same individuals as were involved in the original complaint. The Company and the individuals filed a motion to dismiss the amended complaint on April 9, 2018. The lead plaintiff must oppose the motion by June 8, 2018. The Company and the individuals must then file a reply in support of their motion to dismiss by July 23, 2018. The Company believes that the action is without merit and intends to contest it vigorously. In addition, three shareholder derivative actions were filed on behalf of the Company and purport to assert claims by the Company against its officers and directors for breach of fiduciary duty, arising out of the same factual allegations as the class action. Two of these actions were filed in the Northern District of California, the first on November 10, 2017 (Solak v. Higgins et al., No. 3:17-cv-06546-JST) and the second on November 15, 2017 (Ross v. Fogarty et al., No. 3:17-cv-06592-JST). The third derivative action was filed in the Superior Court of California, Alameda County (Singh v. Higgins, et al., RG17877280) on September 29, 2017. On December 7, 2017, the plaintiffs in Solak v. Higgins, et al. voluntarily dismissed the first federal derivative action. And, on January 18, 2018 and January 23, 2018, respectively, the remaining federal and state derivative actions were stayed pending the resolution of the motion to dismiss in the securities class action. The Company believes that these actions are without merit and intends to contest them vigorously. Opioid-Related Request and Subpoenas In March 2017, the Company, and a number of other pharmaceutical companies, 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, like a number of other pharmaceutical companies, has received subpoenas or civil investigative demands in connection with our prior sales and marketing of opioid products. We have received subpoenas or civil investigative demands from the Attorneys General of Kentucky, Maryland, Missouri, Montana, New Jersey and Washington seeking documents and information in connection with our prior sales and marketing of opioid products. We are cooperating with each of the foregoing states in their investigations. We have also received subpoenas from the U.S. Department of Justice (DOJ) seeking documents and information in connection with our prior sales and marketing of opioid products. We are cooperating with the DOJ in its investigation. The Company also from time to time receives and complies with subpoenas from governmental authorities related to investigations primarily directed at third parties, including health care practitioners, pursuant to which the Company’s records related to agreements with and payments made to those third parties, among other items, are produced. Multidistrict Opioid Litigation A number of pharmaceutical manufacturers, distributors and other industry participants have been named in numerous lawsuits around the country brought by various groups of plaintiffs, including city and county governments, hospitals and others. In general, the lawsuits assert claims arising from defendants’ manufacturing, distributing, marketing and promoting of FDA-approved opioid drugs. The specific legal theories asserted vary from case to case, but most of the lawsuits include federal and state statutory claims as well as claims arising under state common law. Plaintiffs seek various forms of damages, injunctive and other relief and attorneys’ fees and costs. For such cases filed in or removed to federal court, the Judicial Panel on Multi-District Litigation issued an order in December 2017, establishing a Multi-District Litigation court (MDL Court) in the Northern District of Ohio (In re National Prescription Opiate Litigation, Case No. 1:17-MD-2804). Since that time, more than 600 such cases that were originally filed in U.S. District Courts, or removed to federal court from state court, have been transferred to the MDL Court. The Company is currently involved in five lawsuits that have been transferred to the MDL Court. Plaintiffs may file additional lawsuits in which the Company may be named. Plaintiffs in these cases are municipalities, health clinics and health insurance providers who assert federal and state statutory claims and state common law claims, such as conspiracy, nuisance, fraud, negligence or deceptive trade practices. In these cases, plaintiffs seek a variety of forms of relief, including actual damages to compensate for alleged past and future costs to provide care and services to persons with opioid-related addiction or related conditions, injunctive relief to prohibit alleged deceptive marketing practices and abate an alleged nuisance, establishment of a compensation fund, punitive damages, attorneys’ fees and costs. These lawsuits are in the earliest stages of proceedings, and the Company intends to defend itself vigorously in these matters. State Opioid Litigation Related to the cases in the MDL Court noted above, there have been over 100 similar lawsuits filed in state courts around the country, in which various groups of plaintiffs assert opioid-drug related claims against similar groups of defendants. The Company is named in two such cases, one in Arkansas and one in Pennsylvania. Plaintiffs may file additional lawsuits in which the Company may be named. In these cases, plaintiffs are asserting state common law and statutory claims against the defendants similar in nature to the claims asserted in the MDL cases. Plaintiffs are seeking past and future damages, injunctive relief, and punitive and statutory treble damages. These lawsuits are likewise in their earliest stages, and the Company intends to defend itself vigorously in these matters. General The Company cannot reasonably predict the outcome of the legal proceedings 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 litigation 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 our business, including actions with respect to intellectual property claims, breach of contract claims, labor and employment claims and other matters. The Company may also become party to further litigation in federal and state courts relating to opioid drugs. 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 the Company believes may have a material adverse effect on its business, results of operations or financial condition. However, regardless of the outcome, litigation can have an adverse impact on the Company because of associated cost and diversion of management time. |
ACQUISITIONS
ACQUISITIONS | 3 Months Ended |
Mar. 31, 2018 | |
ACQUISITIONS | |
ACQUISITIONS | NOTE 13. ACQUISITIONS Asset Purchase Agreement with Slán On November 7, 2017, the Company entered into an Asset Purchase Agreement (the Asset Purchase Agreement) with Slán Medicinal Holdings Limited (Slán) under which the Company acquired a license to market the specialty drug, cosyntropin in the United States and Canada. The term of the License Agreement runs from November 7, 2017, through the end of the 10-year period following the first commercial sale of an approved product (Licensed Product), but the Company may terminate the License Agreement if the FDA determines that a Licensed Product is not approvable in the U.S. Under the terms of the Agreement, Slán is responsible for clinical and regulatory expenses associated with cosyntropin prior to its first approval by the U.S. Food and Drug Administration. Upon approval, the Company will be responsible for marketing and selling cosyntropin for the first seven years following the first commercial sale of a Licensed Product in the U.S., and Slán will be responsible for selling the Licensed Product during the remaining three years of the 10-year period. The acquisition of cosyntropin was treated as an asset acquisition under the applicable guidance contained with U.S. GAAP. The fair value of the license to market cosyntropin was estimated to be approximately $24.9 million which, in accordance with the applicable accounting rules, was recorded as “acquired in process research and development” during the fourth quarter of 2017, as cosyntropin is still under development and the rights the Company acquired were deemed to have no alternative future use. As consideration for this acquisition, the Company provided the seller all of the rights and obligations, as defined under the arrangement, associated with Lazanda and together with $5.0 million in cash to Slán. The divestiture of Lazanda was treated as a disposition of a business for accounting purposes and resulted in a gain of approximately $17.1 million which was recorded as “gain on divestiture of Lazanda” in the Company’s 2017 consolidated statements of operations. The Company determined that the divestiture of Lazanda does not qualify for reporting as discontinued operations as the divestiture does not constitute on its own a strategic shift that will have a major effect on Depomed’s operations and financial results. 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. The acquisition was completed on December 30, 2015. Under the terms of the acquisition agreement, Depomed 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 million in cash. The Company also agreed to pay Grünenthal royalties on net sales and one-time net sales milestones. There are no clinical, regulatory or approval contingent milestone payments. The cebranopadol acquisition was treated as an asset acquisition under the applicable guidance contained with U.S. GAAP. Accordingly, the total purchase consideration of $54.9 million was expensed to research and development expenses. The total expense of $54.9 million consists of $25.0 million paid in cash upon the closing of the acquisition and $29.9 million reflecting a one-time accounting adjustment to recognize the total non-cash fair value of each of the elements of the Settlement reached with Endo. The $29.9 million was recorded as income within “Non-cash gain on settlement agreement” and as an additional expense within “acquired in-process research and development” in the Company’s 2015 consolidated statements of operations. 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. In January 2018, the Company gave 120 days’ written notice of termination to Grünenthal of the cebranopadol license agreement. 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 GmbH (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: (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. The actual amount of rebates paid by Janssen Pharma, determined in the fourth quarter of 2015, was approximately $0.5 million lower than the Company’s estimate of $10.5 million recorded as of the acquisition date. Consequently, the total purchase consideration and the fair value of the NUCYNTA U.S. Product Rights was increased by $0.5 million. 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 assigned to the assets acquired: (in thousands) NUCYNTA U.S. Product Rights $ 1,019,978 Inventories 11,590 Manufacturing Equipment 8,455 $ 1,040,023 The fair value of inventories acquired included a step-up in the value of NUCYNTA inventories of $5.9 million that was fully amortized to cost of sales in 2015 as the acquired inventories were sold. The Company incurred non-recurring transaction costs of $12.3 million in 2015 with respect to the NUCYNTA Acquisition which were recorded in “Selling, general and administrative expense” within the Company’s Consolidated Statement of Operations. NUCYNTA U.S. Product Rights The valuation of the NUCYNTA U.S. 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 U.S. 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 U.S. 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 U.S. Product Rights are expected to contribute to the Company’s future cash flows. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2018 | |
INTANGIBLE ASSETS. | |
INTANGIBLE ASSETS | NOTE 14. INTANGIBLE ASSETS The gross carrying amounts and net book values of our intangible assets were as follows (in thousands): March 31, 2018 December 31, 2017 Remaining Gross Gross Useful Life Carrying Accumulated Net Book Carrying Accumulated Net Book Product rights (In years) Amount Amortization Value Amount Amortization Value NUCYNTA 7.7 $ 1,019,978 $ (290,165) $ 729,813 $ 1,019,978 $ (266,590) $ 753,388 CAMBIA 5.7 51,360 (22,039) 29,321 51,360 (20,755) 30,605 Zipsor 4.0 27,250 (17,955) 9,295 27,250 (17,370) 9,880 Total $ 1,098,588 $ (330,159) $ 768,429 $ 1,098,588 $ (304,715) $ 793,873 Based on finite-lived intangible assets recorded as of March 31, 2018, 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 2018 (remainder) $ 76,330 2019 101,774 2020 101,774 2021 101,774 2022 99,969 Thereafter 286,808 Total $ 768,429 |
RESTRUCTURING CHARGES
RESTRUCTURING CHARGES | 3 Months Ended |
Mar. 31, 2018 | |
RESTRUCTURING CHARGES. | |
RESTRUCTURING CHARGES | NOTE 15. RESTRUCTURING CHARGES In June 2017, the Company announced a limited reduction-in-force in order to streamline operations and achieve operating efficiencies, the activities related to that reduction-in-force were completed during the third quarter of 2017. In December 2017, the Company initiated a company-wide restructuring plan following the entry into the Commercialization Agreement with Collegium. This plan focused on a reduction of the Company’s pain sales force during the first quarter of 2018, a reduction of the staff at its headquarters office by mid-2018 and a move from its headquarters facility in Newark, California to Lake Forest, Illinois sometime in mid-2018. The following table summarizes the total expenses recorded related to the 2017 restructuring and one-time termination cost activities by type of activity and the locations recognized within the consolidated statements of operations as restructuring costs (in thousands): Three Months Ended March 31, 2018 2017 Employee compensation costs $ 8,779 $ — Other exit costs 238 — Total restructuring costs $ 9,017 $ — Selected information relating to accrued restructuring, severance costs and one-time termination costs is as follows (in thousands): Employee compensation costs Other exit costs Total Balance at December 31, 2017 $ 9,483 $ — $ 9,483 Net accruals 8,779 238 9,017 Non-cash reductions (258) — (258) Cash paid (11,184) (238) (11,422) Balance at March 31, 2018 $ 6,820 $ - $ 6,820 As of March 31, 2018, the full $6.8 million accrued restructuring liability balance was classified as a current liability in the Condensed Consolidated Balance Sheet. The Company has incurred $18.5 million in related restructuring costs since the announcement of the plan in December 2017 through March 31, 2018. The Company expects to incur additional related restructuring costs of $9.0 million to $12.0 million through June 30, 2019. |
OUT OF PERIOD ADJUSTMENT
OUT OF PERIOD ADJUSTMENT | 3 Months Ended |
Mar. 31, 2018 | |
OUT OF PERIOD ADJUSTMENT | |
OUT OF PERIOD ADJUSTMENT | NOTE 16. 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. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2018 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 17. SUBSEQUENT EVENTS The following subsequent events occurred in May 2018: The Company amended its existing licensing agreement with Applied Pharma Research S.A. to in-license a new presentation of Cambia. The Company expects to pay an initial fee of $1.25 million with royalties and milestones payable based on certain sales thresholds. The Company expects to file for FDA approval of this new Cambia presentation in 2019 and, if approved, this presentation would provide patent protection through at least 2026. The Company also entered into a new co-promotion relationship with Allegis Pharmaceuticals, LLC (Allegis) for Zipsor. Under the terms of the agreement, beginning in June 2018, Allegis will supplement the Company’s existing sales force outreach by adding approximately 30 new sales reps that focus exclusively on primary care physicians in targeted geographic regions. The Company’s shareholders approved a change in the Company's state of incorporation from California to Delaware (the Reincorporation). The Reincorporation would be effectuated pursuant to the terms of a merger agreement providing for the Company to merge into a newly formed, wholly-owned subsidiary of the Company incorporated in the State of Delaware. The shareholders also approved a proposal to change the name of the Company after Reincorporation to Assertio Therapeutics, Inc. The Company expects that these changes will be implemented in the third quarter of 2018. |
ORGANIZATION AND SUMMARY OF S23
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Organization | Organization Depomed (Depomed or the Company) is a specialty pharmaceutical company focused on pain and other central nervous system (CNS) conditions. The Company’s current specialty pharmaceutical business includes the following three products which we market in the United States (U.S.): • Gralise® (gabapentin), a once daily product for the management of postherpetic neuralgia (PHN), was launched in October 2011. • CAMBIA® (diclofenac potassium for oral solution), a non-steroidal anti-inflammatory drug for the acute treatment of migraine attacks, was acquired in December 2013. • Zipsor® (diclofenac potassium) liquid filled capsules, a non-steroidal anti-inflammatory drug for the treatment of mild to moderate acute pain, was acquired in June 2012. In January 2018, pursuant to the terms of a Commercialization Agreement the Company entered into with Collegium Pharmaceutical, Inc. (Collegium) in December 2017, the Company granted Collegium the right to commercialize the NUCYNTA franchise of pain products in the U.S. Pursuant to the Commercialization Agreement, Collegium assumed all commercialization responsibilities for the NUCYNTA franchise effective January 9, 2018, including sales and marketing. The Company will receive a royalty on all NUCYNTA revenues based on certain net sales thresholds, with a minimum royalty of $132.0 million for the year ended December 31, 2018 and $135.0 million per year for the years ended December 31, 2019 to December 31, 2021, subject to certain conditions. Both the Company and Collegium may terminate the agreement under certain circumstances. The Company may terminate the agreement if aggregate net sales of the NUCYNTA products fall below certain thresholds or within the first year upon the payment of an $80.0 million termination fee. Collegium may terminate at any time after the first anniversary of the transaction by giving 12 months’ notice and, if the termination date is prior to the fourth anniversary of the transaction, by paying us a $25.0 million termination fee. The NUCYNTA franchise includes two products currently marketed in the U.S. by Collegium: • 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 alternate treatment options are inadequate; and • NUCYNTA® IR (NUCYNTA ) (tapentadol), an immediate release version of tapentadol for the management of moderate to severe acute pain in adults. In November 2017, we entered into definitive agreements with Slán Medicinal Holdings Limited (Slán) pursuant to which the Company acquired Slán’s rights to market the specialty drug cosyntropin (Synthetic ACTH Depot) in the U.S., and Slán acquired the Company’s rights to Lazanda® (fentanyl) nasal spray. The Company believes cosyntropin can be second-to-market behind Mallinckrodt plc's marketed product, H-P Acthar gel. The Company expects Slán to file an NDA for cosyntropin in late 2018. The Company actively seeks to expand our product portfolio through acquiring or in licensing commercially available products or late stage product candidates that may be marketed and sold effectively with our existing products through our sales and marketing capabilities. The Company also has royalty and milestone producing license arrangements based on our proprietary Acuform® gastroretentive drug delivery technology, including with Ironwood Pharmaceuticals, Inc. (Ironwood). |
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 months ended March 31, 2018 are not necessarily indicative of results to be expected for the entire year ending December 31, 2018 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, 2017 included in the Company’s Annual Report on Form 10-K filed with the SEC (the 2017 Form 10-K). The balance sheet as of December 31, 2017 has been derived from the audited financial statements at that date, as filed in the Company’s 2017 Form 10-K. |
Principles of Consolidation | Principles of Consolidation The 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, 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 PDL BioPharma, Inc. (PDL) Transaction. The Company contributed to Depo DR Sub all of its rights, title and interests in each of the license agreements to receive royalty and contingent milestone payments. Immediately following the transaction, Depo DR Sub sold to PDL, among other things, such rights to receive royalty and contingent 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, reimbursable expenses and set offs. 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 consolidated 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 sales discounts and returns, depreciable and amortizable lives, share-based compensation assumptions 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. |
Acquisitions | Acquisitions The Company accounts for acquired businesses using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recorded at 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 and liabilities assumed 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 present value expected future net cash flows, the assessment of each asset’s life cycle, and 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 is 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. If the acquired net assets do not constitute a business under the acquisition method of accounting, the transaction is accounted for as an asset acquisition and no goodwill is recognized. In an asset acquisition, the amount allocated to acquired in-process research and development (IPR&D) with no alternative future use is charged to expense at the acquisition date. |
Revenue Recognition | Revenue Recognition The Company accounts for revenue arising from contracts and customers in accordance with Accounting Standards Update (ASU or Update) No. 2014-09, Revenue from Contracts with Customers (ASC 606), which was adopted on January 1, 2018 using the modified retrospective transition method. There was no adjustment to the Company’s opening balance of accumulated deficit resulting from the adoption of this guidance. Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price, that is allocated to the respective performance obligation, when (or as) the performance obligation is satisfied. Variable consideration arising from sales or usage-based royalties, promised in exchange for a license of the Company’s Intellectual Property, is recognized at the later of (i) when the subsequent product sales occur or (ii) the performance obligation, to which some or all of the sales-based royalty has been allocated, has been satisfied. The Company recognizes a contract asset relating to its conditional right to consideration for completed performance obligations. Accounts receivable are recorded when the right to consideration becomes unconditional. A contract liability is recorded for payments received in advance of the related performance obligation being satisfied under the contract. The Company derives revenue from license fees, under its Commercialization Agreement with Collegium, sale of its products, and from license fees, milestones and royalties earned on license and collaborative arrangements. Product Sales The Company sells commercial products to wholesale distributors and retail pharmacies. Product 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. The Company’s performance obligation is to deliver product to the customer, and the performance obligation is completed upon delivery. The transaction price consists of a fixed invoice price and variable product sales allowances, which include rebates, discounts and returns. Product sales revenues are recorded net of applicable reserves for these product sales allowances. Receivables related to product sales are typically collected one to two months after delivery. Product Sales Allowances—The Company considers products sales allowances to be variable consideration and estimates and 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 actual or estimated amounts owed 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, 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. The Company uses the most likely method in estimating product sales allowances. 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 within six months before and up to 12 months after its product expiration date. The Company estimates product returns and associated credit on NUCYNTA ER and NUCYNTA, Gralise, CAMBIA, Zipsor and Lazanda. 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 the product at the time of shipment, shipment and prescription trends, estimated distribution channel inventory levels and consideration of the introduction of competitive products. 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. Under the Commercialization Agreement with Collegium for NUCYNTA ER and NUCYNTA and the divestiture of Lazanda to Slán, the Company is only financially responsible for product returns for product that were sold by the Company, which are identified by specific lot numbers. The shelf life of NUCYNTA ER and NUCYNTA is 24 months to 36 months from the date of tablet manufacture. The shelf life of Gralise is 24 months to 36 months from the date of tablet manufacture. The shelf life of CAMBIA is 24 months 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. 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 these 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 For arrangements that include sales-based royalties and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes royalty revenue at the later of (1) when the related sales occur, or (2) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). The Company currently receives royalties based on sales of Cambia in Canada and sales of NUCYNTA ER in Canada and Japan, which are recognized as revenue when the related sales occur as there are no continuing performance obligations by the Company under those agreements. |
Stock-Based Compensation | Stock Based Compensation The Company uses the Black Scholes option valuation model to determine the fair value of stock options and employee stock purchase plan (ESPP) shares. The determination of the fair value of stock based payment awards on the date of grant using an option valuation model is affected by the Company’s stock price as well as assumptions, which include the Company’s expected term of the award, the expected stock price volatility, risk free interest rate and expected dividends over the expected term of the award. The Company uses historical option exercise data to estimate the expected term of the options. The Company estimates the volatility of its common stock price by using the historical volatility over the expected term of the options. The Company bases the risk free interest rate on U.S. Treasury zero coupon issues with terms similar to the expected term of the options as of the date of grant. The Company does not anticipate paying any cash dividends in the foreseeable future and therefore uses an expected dividend yield of zero in the option valuation models. As a result of adopting ASU 2016-09 Improvements to Employee Share-Based Payment Accounting, the Company made an accounting policy election to account for forfeitures as they occur, rather than estimating expected forfeitures at the time of the grant. The fair value of each restricted stock unit (RSU) that does not contain a market condition is equal to the market value of our common stock as of the date of the grant. The Company’s Performance Stock Units (PSUs) vest over a three year period based on the Relative Total Shareholder Return (TSR) of the Company’s common stock against the Russell 3000 Pharmaceuticals Total Return Index over the period. The grant-date fair value of the PSUs is determined using the Monte Carlo simulation method. |
Recently Adopted Accounting Pronouncements and Recent Accounting Pronouncements | Recently Adopted Accounting Pronouncements 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 requires 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. The Company adopted ASC 606 using the modified retrospective method as of January 1, 2018. The Company determined that there was no cumulative effect of applying the new guidance to all contracts with customers that were not completed as of January 1, 2018, therefore no adjustment was required to the accumulated deficit as of the adoption date. Furthermore, upon adoption of the new guidance no adjustments to any prior year periods would have been reportable to present the condensed consolidated balance sheets, statements of operations, or statements of cash flows on a comparable basis to any current year reported balances or amounts. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard was effective for us beginning January 1, 2018. 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 January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which provides clarification on the definition of a business and adds guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard was effective for us beginning January 1, 2018. The future impact of ASU No. 2017-01 will be dependent upon the nature of the Company’s future acquisition or disposition transactions, if any. In May 2017, the FASB issued accounting guidance to clarify which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The new standard was required to be applied prospectively. The guidance was effective for us beginning January 1, 2018. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740 ) : Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118, which provides clarification and guidance on the income tax accounting implications of the Tax Cuts and Jobs Act. The standard was effective for us beginning January 1, 2018. In January of 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 405-20), Recognition and Measurement of Financial Assets and Financial Liabilities . ASU 2016-01 changed accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, it clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The guidance became effective for us on January 1, 2018 and required adoption using a modified retrospective approach, with certain exceptions. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. Recently Issued Accounting Standards 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. Additionally, in January 2018, the FASB issued ASU 2018-01, Leases , (Topic 842); which allows a Land Easement Practical Expedient for Transition to Topic 842. 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 the impact that implementation will have on 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. In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, that provides companies with an option to reclassify stranded tax effects resulting from enactment of the Tax Cuts and Jobs Act (TCJA) from accumulated other comprehensive income to retained earnings. The guidance will be effective for the Company beginning in the first quarter of 2019 with early adoption permitted, and would be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the tax rate as a result of TCJA is recognized. The Company has not made a determination as to which alternative methods it will use when it adopts this standard, but does not expect the adoption of this ASU to have a material impact on its results of operations, financial position and cash flows. |
CASH, CASH EQUIVALENTS AND SH24
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 and December 31, 2017 are summarized below (in thousands). Estimated fair value is based on quoted market prices for these investments. Gross Gross Amortized Unrealized Unrealized March 31, 2018 Cost Gains Losses Fair Value Cash and cash equivalents Cash $ 76,631 $ — $ — $ 76,631 Money market funds 46 — — 46 Commercial paper 2,400 — — 2,400 U.S. Agency discount notes 22,615 1 — 22,616 Total cash and cash equivalents $ 101,692 $ 1 $ — $ 101,693 Gross Gross Amortized Unrealized Unrealized December 31, 2017 Cost Gains Losses Fair Value Cash and cash equivalents Cash $ $ — $ — $ Money market funds — — Commercial paper — — Total cash and cash equivalents — — Short-term investments Corporate debt securities and commercial paper with maturities less than 1 year — (5) Total short-term investments — (5) Total $ $ — $ (5) $ |
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 were 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 December 31, 2017 (in thousands): Less than 12 months 12 months or greater Total Gross Gross Gross Unrealized Unrealized Unrealized December 31, 2017 Fair Value Losses Fair Value Losses Fair Value Losses Corporate Debt Securities $ 1,205 $ (5) $ — $ — $ 1,205 $ (5) |
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 March 31, 2018 and December 31, 2017 (in thousands): March 31, 2018 Level 1 Level 2 Level 3 Total Assets: Money market funds $ 46 $ — $ — $ 46 Commercial paper — 2,400 — 2,400 U.S. Agency discount notes — 22,616 — 22,616 Total $ 46 $ 25,016 $ — $ 25,062 Liabilities: Contingent consideration—Zipsor $ — $ — $ 238 $ 238 Contingent consideration—CAMBIA — — 1,011 1,011 Total $ — $ — $ 1,249 $ 1,249 December 31, 2017 Level 1 Level 2 Level 3 Total Assets: Money market funds $ 95 $ — $ — $ 95 Commercial paper — 23,670 — 23,670 Corporate debt securities — 1,205 — 1,205 Total $ 95 $ 24,875 $ — $ 24,970 Liabilities: Contingent consideration—Zipsor $ — $ — $ 464 $ 464 Contingent consideration—Lazanda — — 156 156 Contingent consideration—CAMBIA — — 993 993 Total $ — $ — $ 1,613 $ 1,613 |
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 March 31, 2018 2017 Fair value, beginning of the period $ 1,613 $ 14,825 Changes in fair value recorded in interest expense 40 531 Changes in fair value recorded in selling, general and administrative expenses (242) (5,000) Royalties and milestone paid (162) (1,745) Total $ 1,249 $ 8,611 |
NET INCOME (LOSS) PER SHARE (Ta
NET INCOME (LOSS) PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
NET INCOME (LOSS) PER SHARE | |
Schedule of calculation of basic and diluted earnings per common share | Three Months Ended March 31, (in thousands, except for per share amounts) 2018 2017 Basic and diluted net income (loss) per share Net income (loss) $ 33,824 $ (26,741) Denominator 63,503 62,129 Basic net income (loss) per share $ 0.53 $ (0.43) Diluted net income (loss) per share Numerator: Net income (loss) $ 33,824 $ (26,741) Add interest expense on convertible debt, net of tax 5,187 — $ 39,011 $ (26,741) Denominator: Denominator for basic income (loss) per share 63,503 62,129 Add effect of diluted securities: Stock options and equivalents 443 — Convertible debt 17,931 — Denominator for diluted income (loss) per share 81,877 62,129 Diluted net income (loss) per share $ 0.48 $ (0.43) |
Schedule of antidilutive securities excluded from computation of diluted net income (loss) per share | Three Months Ended March 31, (in thousands) 2018 2017 Convertible debt — 17,931 Stock options and equivalents 4,248 8,517 Total potentially dilutive common shares 4,248 26,448 |
REVENUE (Tables)
REVENUE (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Revenue | |
Schedule of disaggregated revenue from contracts with customers | The following table summarizes revenue from contracts with customers for the three months ended March 31, 2018 and 2017 (in thousands): Three Months Ended March 31, 2018 2017 Product sales, net Gralise $ 14,827 $ 17,600 CAMBIA 6,416 7,190 Zipsor 4,746 4,651 Total neurology product sales, net 25,989 29,441 NUCYNTA products 18,145 56,919 Lazanda 220 3,925 Total product sales, net 44,354 90,285 Commercialization agreement: Commercialization rights and facilitation services 28,095 — Revenue from transfer of inventory 55,705 — Royalties 250 162 Total revenues $ 128,404 $ 90,447 |
Summary of contract assets and liabilities | The following table presents changes in the Company’s contract assets and liabilities for the three months ended March 31, 2018 (in thousands): Balance Balance Beginning End of Period Additions Deductions of Period Contract assets: Contract asset $ — $ 55,705 $ (18,855) $ 36,850 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 2017 Cost of sales $ 14 $ Research and development expense 53 Selling, general and administrative expense 1,909 Restructuring charges 258 — Total $ 2,234 $ |
Performance-based Restricted Stock Units | The 2014 Plan | |
Stock-based compensation | |
Schedule of restricted stock units | The following table summarizes the PSU activity for the three months ended March 31, 2018 under the 2014 Plan (in thousands, except per share data): Weighted Weighted Average Average Grant Date Remaining Fair Contractual Aggregate Number of Value Term Intrinsic Shares Per Share (in years) Value Non-vested performance-based restricted stock units at December 31, 2017 — $ — Granted 344,700 10.07 Vested — — Forfeited — — Non-vested performance-based restricted stock units at March 31, 2018 344,700 $ 10.07 $ 3,472 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
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): March 31, December 31, 2018 2017 Raw materials $ 2,317 $ 3,008 Work-in-process 801 204 Finished goods 2,250 9,830 Total $ 5,368 $ 13,042 |
ACCOUNTS RECEIVABLES (Tables)
ACCOUNTS RECEIVABLES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
ACCOUNTS RECEIVABLES | |
Summary of accounts receivables | Accounts receivables consist of the following (in thousands): March 31, December 31, 2018 2017 Product sales, net $ 23,733 $ 71,919 Commercialization agreement 38,353 — Receivables from collaborative partners 342 563 Total accounts receivable, net $ 62,428 $ 72,482 |
ACCRUED LIABILITIES (Tables)
ACCRUED LIABILITIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
ACCRUED LIABILITIES | |
Schedule of accounts payable and accrued liabilities | Accrued liabilities consist of the following (in thousands): March 31, December 31, 2018 2017 Accrued compensation $ 2,920 $ 7,345 Accrued royalties 3,197 17,370 Accrued restructuring and one-time termination costs 6,820 9,483 Other accrued liabilities 19,672 26,298 Total accrued liabilities $ 32,609 $ 60,496 |
DEBT (Tables)
DEBT (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Senior Notes | |
Debt | |
Schedule of principal amount of the Senior Notes is repayable | The principal amount of the Senior Notes is repayable as of March 31, 2018 is as follows (amounts in thousands): 2018 (remainder) $ 82,500 2019 120,000 2020 80,000 2021 82,500 Total $ 365,000 |
Summary of the carrying value of the Senior Notes | The following is a summary of the carrying value of the Senior Notes as of March 31, 2018 and December 31, 2017 (in thousands): March 31, December 31, 2018 2017 Principal amount of the Senior Notes $ 365,000 $ 365,000 Unamortized debt discount balance (4,106) (4,717) Unamortized debt issuance costs (2,667) (3,063) Total Senior Notes $ 358,227 $ 357,220 |
Summary of interest expense for the Notes | The following is a summary of interest expense for the three months ended March 31, 2018 and 2017 (in thousands): Three Months Ended March 31, 2018 2017 Contractual interest expense $ 10,441 $ 12,766 Amortization of debt discount and debt issuance costs 1,008 602 Total interest expense Senior Notes $ 11,449 $ 13,368 |
Convertible debt | |
Debt | |
Summary of the liability component of the Convertible Notes | The following is a summary of the liability component of the Convertible Notes as of March 31, 2018 and December 31, 2017 (in thousands): March 31, December 31, 2018 2017 Principal amount of the Convertible Notes $ 345,000 $ 345,000 Unamortized discount of the liability component (67,642) (71,799) Unamortized debt issuance costs (3,438) (3,691) Total Convertible Notes $ 273,920 $ 269,510 |
Summary of interest expense for the Notes | The following is a summary of interest expense for the three months ended March 31, 2018 and 2017 (in thousands): Three Months Ended March 31, 2018 2017 Stated coupon interest $ 2,156 $ 2,156 Amortization of debt discount and debt issuance costs 4,410 4,048 Total interest expense Convertible Notes $ 6,566 $ 6,204 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 were as follows (in thousands): Year Ending December 31, Lease Payments 2018 (remainder) $ 1,887 2019 2,678 2020 2,559 2021 2,360 2022 2,192 Thereafter 632 Total $ 12,308 |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) - NUCYNTA | 3 Months Ended |
Mar. 31, 2018 | |
ACQUISITIONS AND DISPOSITIONS | |
Summary of the purchase price consideration | (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 | (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) | 3 Months Ended |
Mar. 31, 2018 | |
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): March 31, 2018 December 31, 2017 Remaining Gross Gross Useful Life Carrying Accumulated Net Book Carrying Accumulated Net Book Product rights (In years) Amount Amortization Value Amount Amortization Value NUCYNTA 7.7 $ 1,019,978 $ (290,165) $ 729,813 $ 1,019,978 $ (266,590) $ 753,388 CAMBIA 5.7 51,360 (22,039) 29,321 51,360 (20,755) 30,605 Zipsor 4.0 27,250 (17,955) 9,295 27,250 (17,370) 9,880 Total $ 1,098,588 $ (330,159) $ 768,429 $ 1,098,588 $ (304,715) $ 793,873 |
Summary of the future amortization expenses of intangible assets | Based on finite-lived intangible assets recorded as of March 31, 2018, 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 2018 (remainder) $ 76,330 2019 101,774 2020 101,774 2021 101,774 2022 99,969 Thereafter 286,808 Total $ 768,429 |
RESTRUCTURING CHARGES (Tables)
RESTRUCTURING CHARGES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
RESTRUCTURING CHARGES. | |
Schedule of restructuring costs | The following table summarizes the total expenses recorded related to the 2017 restructuring and one-time termination cost activities by type of activity and the locations recognized within the consolidated statements of operations as restructuring costs (in thousands): Three Months Ended March 31, 2018 2017 Employee compensation costs $ 8,779 $ — Other exit costs 238 — Total restructuring costs $ 9,017 $ — |
Schedule of accrued restructuring and severance costs | Selected information relating to accrued restructuring, severance costs and one-time termination costs is as follows (in thousands): Employee compensation costs Other exit costs Total Balance at December 31, 2017 $ 9,483 $ — $ 9,483 Net accruals 8,779 238 9,017 Non-cash reductions (258) — (258) Cash paid (11,184) (238) (11,422) Balance at March 31, 2018 $ 6,820 $ - $ 6,820 |
ORGANIZATION AND SUMMARY OF S36
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Organization (Details) $ in Millions | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||
Jan. 31, 2018USD ($) | Mar. 31, 2018product | Dec. 31, 2021USD ($) | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | |
Organization | ||||||
Number of products | product | 3 | |||||
Commercialization agreement | Collegium | ||||||
Organization | ||||||
Termination fee the Company could pay | $ 80 | |||||
Period of notice (in months) | 12 months | |||||
Termination fee Collegium could pay | $ 25 | |||||
Number of products marketed by Collegium | product | 2 | |||||
Commercialization agreement | NUCYNTA products | Collegium | ||||||
Organization | ||||||
Termination fee Collegium could pay | $ 25 | |||||
Commercialization agreement | NUCYNTA products | Collegium | Forecast | ||||||
Organization | ||||||
Minimum annual royalties | $ 135 | $ 135 | $ 135 | $ 132 |
ORGANIZATION AND SUMMARY OF S37
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Principles of Consolidation and Estimates (Details) - USD ($) $ in Millions | Apr. 02, 2015 | Oct. 31, 2013 | Mar. 31, 2018 |
Senior Notes | |||
Summary Of Significant Accounting Policies | |||
Aggregate principal amount of notes issued | $ 575 | $ 365 | |
Proceeds from the issuance of debt | $ 562 | ||
Liability related to sale of future royalties | PDL BioPharma | |||
Summary Of Significant Accounting Policies | |||
Royalty and contingent milestone payments received | $ 240.5 |
ORGANIZATION AND SUMMARY OF S38
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Financial Statement Impact of Adopting ASC 606 (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Jan. 01, 2018 | Dec. 31, 2017 |
Revenue Recognition | |||
Accumulated deficit | $ (185,684) | $ (219,508) | |
ASU 2014-09 | Adjustments | |||
Revenue Recognition | |||
Accumulated deficit | $ 0 |
ORGANIZATION AND SUMMARY OF S39
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Product Sales and Royalties (Details) | 3 Months Ended |
Mar. 31, 2018 | |
Product Sales and Royalties | |
Cash discount (as a percent) | 2.00% |
Discount reimbursement period after filling of prescription subject to discount | 1 month |
Minimum | |
Product Sales and Royalties | |
Collection period after delivery | 1 month |
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 | |
Product Sales and Royalties | |
Period after the quarter in which prescription is filled for rebate | 1 month |
Minimum | Medicare Part D Coverage Gap Rebates | |
Product Sales and Royalties | |
Period after the quarter in which prescription is filled for rebate | 2 months |
Maximum | |
Product Sales and Royalties | |
Collection period after delivery | 2 months |
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 | |
Product Sales and Royalties | |
Period after the quarter in which prescription is filled for rebate | 3 months |
Maximum | Medicare Part D Coverage Gap Rebates | |
Product Sales and Royalties | |
Period after the quarter in which prescription is filled for rebate | 3 months |
NUCYNTA ER and NUCYNTA | Minimum | |
Product Sales and Royalties | |
Product shelf-life | 24 months |
NUCYNTA ER and NUCYNTA | Maximum | |
Product Sales and Royalties | |
Product shelf-life | 36 months |
Gralise | Minimum | |
Product Sales and Royalties | |
Product shelf-life | 24 months |
Gralise | Maximum | |
Product Sales and Royalties | |
Product shelf-life | 36 months |
CAMBIA | Minimum | |
Product Sales and Royalties | |
Product shelf-life | 24 months |
CAMBIA | Maximum | |
Product Sales and Royalties | |
Product shelf-life | 48 months |
Zipsor | |
Product Sales and Royalties | |
Product shelf-life | 36 months |
Lazanda | Minimum | |
Product Sales and Royalties | |
Product shelf-life | 24 months |
Lazanda | Maximum | |
Product Sales and Royalties | |
Product shelf-life | 36 months |
CASH, CASH EQUIVALENTS AND SH40
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS - SUMMARY (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2017 | Dec. 31, 2016 |
Cash, cash equivalents, short-term and marketable securities | ||||
Cash | $ 76,631 | $ 103,119 | ||
Money market funds | 46 | 95 | ||
Commercial paper | 2,400 | 23,670 | ||
Agency discount notes, Amortized Cost | 22,615 | |||
Total cash and cash equivalents, Amortized Cost | 101,692 | 126,884 | ||
Total short-term investments | 1,210 | |||
Total cash, cash equivalents and short-term investments | 128,094 | |||
Gross Unrealized Gains | ||||
Cash and cash equivalents | 1 | |||
Gross Unrealized Losses | ||||
Total short-term investments | (5) | |||
Total cash, cash equivalents and short-term investments | (5) | |||
Fair Value | ||||
Cash | 76,631 | 103,119 | ||
Money market funds | 46 | 95 | ||
Commercial paper | 2,400 | 23,670 | ||
U.S. Agency discount notes | 22,616 | |||
Total cash and cash equivalents | $ 101,693 | 126,884 | $ 187,810 | $ 117,709 |
Total short-term investments | 1,205 | |||
Total cash, cash equivalents and short-term investments | 128,089 | |||
Corporate debt securities and commercial paper | ||||
Cash, cash equivalents, short-term and marketable securities | ||||
Short-term investments, Maturities less than 1 year | 1,210 | |||
Gross Unrealized Losses | ||||
Short-term investments, Maturities less than 1 year | (5) | |||
Fair Value | ||||
Short-term investments, Maturities less than 1 year | $ 1,205 |
CASH, CASH EQUIVALENTS AND SH41
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS - UNREALIZED LOSS POSITION (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017USD ($) | Mar. 31, 2018item | |
Cash, cash equivalents, short-term and marketable securities | ||
Number of securities in an unrealized loss position | item | 0 | |
Corporate debt securities | ||
Cash, cash equivalents, short-term and marketable securities | ||
Fair Value, Less Than 12 Months | $ (1,205) | |
Gross Unrealized Losses, Less than 12 months | (5) | |
Fair Value, Total | 1,205 | |
Gross Unrealized Losses, Total | $ (5) |
CASH, CASH EQUIVALENTS AND SH42
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS - FAIR VALUE (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | Nov. 30, 2017 |
Lazanda | |||
Fair value hierarchy for financial assets and liabilities | |||
Liabilities, contingent consideration | $ 200 | ||
Recurring | |||
Fair value hierarchy for financial assets and liabilities | |||
Assets | $ 25,062 | $ 24,970 | |
Liabilities | 1,249 | 1,613 | |
Recurring | Zipsor | |||
Fair value hierarchy for financial assets and liabilities | |||
Liabilities, contingent consideration | 238 | 464 | |
Recurring | Lazanda | |||
Fair value hierarchy for financial assets and liabilities | |||
Liabilities, contingent consideration | 156 | ||
Recurring | CAMBIA | |||
Fair value hierarchy for financial assets and liabilities | |||
Liabilities, contingent consideration | 1,011 | 993 | |
Recurring | Corporate debt securities | |||
Fair value hierarchy for financial assets and liabilities | |||
Assets | 1,205 | ||
Recurring | Money market funds | |||
Fair value hierarchy for financial assets and liabilities | |||
Assets | 46 | 95 | |
Recurring | Commercial paper | |||
Fair value hierarchy for financial assets and liabilities | |||
Assets | 2,400 | 23,670 | |
Recurring | U.S. Agency discount notes | |||
Fair value hierarchy for financial assets and liabilities | |||
Assets | 22,616 | ||
Recurring | Level 1 | |||
Fair value hierarchy for financial assets and liabilities | |||
Assets | 46 | 95 | |
Recurring | Level 1 | Money market funds | |||
Fair value hierarchy for financial assets and liabilities | |||
Assets | 46 | 95 | |
Recurring | Level 2 | |||
Fair value hierarchy for financial assets and liabilities | |||
Assets | 25,016 | 24,875 | |
Recurring | Level 2 | Corporate debt securities | |||
Fair value hierarchy for financial assets and liabilities | |||
Assets | 1,205 | ||
Recurring | Level 2 | Commercial paper | |||
Fair value hierarchy for financial assets and liabilities | |||
Assets | 2,400 | 23,670 | |
Recurring | Level 2 | U.S. Agency discount notes | |||
Fair value hierarchy for financial assets and liabilities | |||
Assets | 22,616 | ||
Recurring | Level 3 | |||
Fair value hierarchy for financial assets and liabilities | |||
Liabilities | 1,249 | 1,613 | |
Recurring | Level 3 | Zipsor | |||
Fair value hierarchy for financial assets and liabilities | |||
Liabilities, contingent consideration | 238 | 464 | |
Recurring | Level 3 | Lazanda | |||
Fair value hierarchy for financial assets and liabilities | |||
Liabilities, contingent consideration | 156 | ||
Recurring | Level 3 | CAMBIA | |||
Fair value hierarchy for financial assets and liabilities | |||
Liabilities, contingent consideration | $ 1,011 | $ 993 |
CASH, CASH EQUIVALENTS AND SH43
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS - LEVEL 3 (Details) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | Sep. 09, 2014 | |
Fair value transfers between hierarchy levels 1 and 2 | ||||
Transfers of assets from Level 1 to Level 2 | $ 0 | $ 0 | ||
Transfer of assets from Level 2 to Level 1 | 0 | 0 | ||
Fair value transfers in or out of hierarchy level 3 | ||||
Net transfer of liabilities into/out of level 3 | $ 0 | 0 | ||
Convertible debt | ||||
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 | |
Level 2 | Convertible debt | Fair Value | ||||
Estimated fair value of debt instruments | ||||
Estimated fair value of debt | 281,500 | $ 295,400 | ||
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 | 1,613 | 14,825 | ||
Total | 1,249 | 8,611 | ||
Contingent consideration | Level 3 | Royalties | ||||
Changes in fair value of all financial liabilities measured at fair value on a recurring basis | ||||
Net accretion value adjustments | 162 | 1,745 | ||
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 | 40 | 531 | ||
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 | $ (242) | $ (5,000) |
NET INCOME (LOSS) PER SHARE (De
NET INCOME (LOSS) PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Basic and diluted net income (loss) per share | ||
Net income (loss) | $ 33,824 | $ (26,741) |
Denominator (in shares) | 63,502,566 | 62,128,862 |
Basic net income (loss) per share (in dollars per share) | $ 0.53 | $ (0.43) |
Diluted net income (loss) per share | ||
Net income (loss) | $ 33,824 | $ (26,741) |
Add interest expense on convertible debt, net of tax | 5,187 | |
Net income (loss) attributable to parent, diluted | $ 39,011 | $ (26,741) |
Denominator for basic income (loss) per share (in shares) | 63,502,566 | 62,128,862 |
Denominator for diluted loss per share: (in shares) | 81,877,097 | 62,128,862 |
Diluted net income (loss) per share (in dollars per share) | $ 0.48 | $ (0.43) |
Potentially dilutive common shares: | ||
Total potentially dilutive common shares (in shares) | 4,248,000 | 26,448,000 |
Convertible debt | ||
Diluted net income (loss) per share | ||
Add effect of diluted securities | 17,931,000 | |
Potentially dilutive common shares: | ||
Total potentially dilutive common shares (in shares) | 17,931,000 | |
Stock options and equivalents | ||
Diluted net income (loss) per share | ||
Add effect of diluted securities | 443,000 | |
Potentially dilutive common shares: | ||
Total potentially dilutive common shares (in shares) | 4,248,000 | 8,517,000 |
REVENUE - Disaggregated Revenue
REVENUE - Disaggregated Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Disaggregated Revenue | ||
Total revenues | $ 128,404 | |
Calculated under Revenue Guidance in Effect before Topic 606 | ||
Disaggregated Revenue | ||
Total revenues | $ 90,447 | |
Product sales, net | ||
Disaggregated Revenue | ||
Total revenues | 44,354 | |
Product sales, net | Calculated under Revenue Guidance in Effect before Topic 606 | ||
Disaggregated Revenue | ||
Total revenues | 90,285 | |
Total neurology product sales, net | ||
Disaggregated Revenue | ||
Total revenues | 25,989 | |
Total neurology product sales, net | Calculated under Revenue Guidance in Effect before Topic 606 | ||
Disaggregated Revenue | ||
Total revenues | 29,441 | |
Gralise | ||
Disaggregated Revenue | ||
Total revenues | 14,827 | |
Gralise | Calculated under Revenue Guidance in Effect before Topic 606 | ||
Disaggregated Revenue | ||
Total revenues | 17,600 | |
CAMBIA | ||
Disaggregated Revenue | ||
Total revenues | 6,416 | |
CAMBIA | Calculated under Revenue Guidance in Effect before Topic 606 | ||
Disaggregated Revenue | ||
Total revenues | 7,190 | |
Zipsor | ||
Disaggregated Revenue | ||
Total revenues | 4,746 | |
Zipsor | Calculated under Revenue Guidance in Effect before Topic 606 | ||
Disaggregated Revenue | ||
Total revenues | 4,651 | |
NUCYNTA | ||
Disaggregated Revenue | ||
Total revenues | 18,145 | |
Reversal of sales reserves | 12,500 | |
NUCYNTA | Calculated under Revenue Guidance in Effect before Topic 606 | ||
Disaggregated Revenue | ||
Total revenues | 56,919 | |
Lazanda | ||
Disaggregated Revenue | ||
Total revenues | 220 | |
Lazanda | Calculated under Revenue Guidance in Effect before Topic 606 | ||
Disaggregated Revenue | ||
Total revenues | 3,925 | |
Commercialization rights and facilitation services | ||
Disaggregated Revenue | ||
Total revenues | 28,095 | |
Revenue from transfer of inventory | ||
Disaggregated Revenue | ||
Total revenues | 55,705 | |
Royalties | ||
Disaggregated Revenue | ||
Total revenues | $ 250 | |
Royalties | Calculated under Revenue Guidance in Effect before Topic 606 | ||
Disaggregated Revenue | ||
Total revenues | $ 162 |
REVENUE - Commercialization Agr
REVENUE - Commercialization Agreement with Collegium (Details) - USD ($) $ in Thousands | Jan. 01, 2022 | Apr. 01, 2018 | Jan. 31, 2018 | Mar. 31, 2018 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Collaboration and License Agreements | |||||||||
Total revenues | $ 128,404 | ||||||||
Accounts receivable, net | 62,428 | $ 72,482 | |||||||
Commercialization agreement | Collegium | |||||||||
Collaboration and License Agreements | |||||||||
Termination fee Collegium could pay | $ 25,000 | ||||||||
Commercialization agreement | NUCYNTA products | Collegium | |||||||||
Collaboration and License Agreements | |||||||||
Equal quarterly installments of annual minimum royalty payable | 33,800 | ||||||||
Minimum cash royalty amounts | $ 33,800 | $ 30,800 | |||||||
Upfront payment | 10,000 | ||||||||
Proceeds from transfer of inventory | 6,200 | ||||||||
Transaction price | 553,000 | ||||||||
Total minimum royalties | 537,000 | ||||||||
Termination fee Collegium could pay | 25,000 | ||||||||
Percentage of cash receipts in lockbox account are swept to bank accounts up to the minimum cash royalty amount for the quarter | 35.00% | ||||||||
Threshold period for remitting the remaining royalty payment | 45 days | ||||||||
Amount received | $ 13,100 | ||||||||
Accounts receivable, net | 17,700 | ||||||||
Commercialization agreement | Forecast | NUCYNTA products | Collegium | |||||||||
Collaboration and License Agreements | |||||||||
Minimum annual royalties | $ 135,000 | $ 135,000 | $ 135,000 | $ 132,000 | |||||
Commercialization agreement | Performance Obligation Transfer Of Finished Goods | NUCYNTA products | Collegium | |||||||||
Collaboration and License Agreements | |||||||||
Transaction price | 55,700 | ||||||||
Commercialization agreement | Performance Obligation Commercialize And Facilitation Services | NUCYNTA products | Collegium | |||||||||
Collaboration and License Agreements | |||||||||
Transaction price | $ 497,500 | ||||||||
Total revenues | 28,100 | ||||||||
25% royalty on annual net sales | Forecast | NUCYNTA products | |||||||||
Collaboration and License Agreements | |||||||||
Percentage of royalty on annual net sales | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | ||||
25% royalty on annual net sales | Forecast | NUCYNTA products | Minimum | |||||||||
Collaboration and License Agreements | |||||||||
Minimum annual royalties | $ 233,000 | $ 233,000 | $ 233,000 | $ 233,000 | $ 233,000 | ||||
25% royalty on annual net sales | Forecast | NUCYNTA products | Maximum | |||||||||
Collaboration and License Agreements | |||||||||
Minimum annual royalties | 258,000 | 258,000 | 258,000 | 258,000 | 258,000 | ||||
17.5% royalty on annual net sales | Forecast | NUCYNTA products | |||||||||
Collaboration and License Agreements | |||||||||
Minimum annual royalties | $ 258,000 | $ 258,000 | $ 258,000 | $ 258,000 | $ 258,000 | ||||
Percentage of royalty on annual net sales | 17.50% | 17.50% | 17.50% | 17.50% | 17.50% | ||||
58% royalty on annual net sales | Forecast | NUCYNTA products | |||||||||
Collaboration and License Agreements | |||||||||
Minimum annual royalties | $ 233,000 | ||||||||
Percentage of royalty on annual net sales | 58.00% | ||||||||
Product sales, net | |||||||||
Collaboration and License Agreements | |||||||||
Total revenues | 44,354 | ||||||||
Accounts receivable, net | 23,733 | $ 71,919 | |||||||
Royalties | |||||||||
Collaboration and License Agreements | |||||||||
Total revenues | $ 250 |
REVENUE - Contract Assets and L
REVENUE - Contract Assets and Liabilities (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Contract assets: | |||||||
Additions | $ 55,705 | ||||||
Deletions | (18,855) | ||||||
Contract asset, End of Period | 36,850 | ||||||
Net revenues | 128,404 | $ 90,447 | |||||
Accrued royalties | 3,197 | $ 17,370 | |||||
Prepaid and other assets | |||||||
Contract assets: | |||||||
Contract asset, End of Period | 9,900 | ||||||
Other long-term assets | |||||||
Contract assets: | |||||||
Contract asset, End of Period | 27,000 | ||||||
Grunenthal | Maximum | Forecast | |||||||
Contract assets: | |||||||
Royalty obligation | $ 8,800 | $ 8,800 | $ 8,800 | $ 8,800 | |||
NUCYNTA products | Grunenthal | Minimum | Forecast | |||||||
Contract assets: | |||||||
Royalty obligation | 34,000 | 34,000 | 34,000 | 34,000 | |||
Net revenues | 180,000 | 180,000 | 180,000 | 180,000 | |||
NUCYNTA products | Grunenthal | Maximum | |||||||
Contract assets: | |||||||
Net revenues | 243,000 | 243,000 | 243,000 | 243,000 | |||
Collegium | NUCYNTA products | Grunenthal | Minimum | Forecast | |||||||
Contract assets: | |||||||
Royalty obligation | $ 34,000 | $ 34,000 | $ 34,000 | $ 34,000 | |||
Product sales, net | |||||||
Contract assets: | |||||||
Net revenues | 44,354 | 90,285 | |||||
Royalties | |||||||
Contract assets: | |||||||
Net revenues | $ 250 | $ 162 |
REVENUE - Collaboration and Lic
REVENUE - Collaboration and License Agreements (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended |
Mar. 31, 2014 | Mar. 31, 2018 | |
Collaboration and License Agreements | ||
Total revenues | $ 128,404 | |
Mallinckrodt, Inc. | ||
Collaboration and License Agreements | ||
Milestone payment received | $ 1,000 | |
Ironwood Pharmaceuticals, Inc. | ||
Collaboration and License Agreements | ||
Upfront fees, initial product formulation work and milestone payments received | $ 3,400 | |
Milestone payment to be received if Ironwood commences with Phase 3 clinical trials | $ 5,000 |
STOCK-BASED COMPENSATION - Empl
STOCK-BASED COMPENSATION - Employee Stock Purchase Plan (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Stock-based compensation | ||
Compensation expense | $ 2,234 | $ 3,556 |
Total unrecognized compensation expense | $ 19,400 | |
Average vesting period for recognition of unrecognized compensation expense | 2 years 4 months 2 days | |
Cost of sales | ||
Stock-based compensation | ||
Compensation expense | $ 14 | 36 |
Research and development expense. | ||
Stock-based compensation | ||
Compensation expense | 53 | 346 |
Selling general and administrative expense | ||
Stock-based compensation | ||
Compensation expense | 1,909 | $ 3,174 |
Restructuring charges | ||
Stock-based compensation | ||
Compensation expense | $ 258 |
STOCK-BASED COMPENSATION - Perf
STOCK-BASED COMPENSATION - Performance-based Restricted Stock Units (Details) $ / shares in Units, $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($)$ / sharesshares | |
Additional disclosures | |
Expected to be recognized over remaining weighted-average vesting period | 2 years 4 months 2 days |
Performance-based Restricted Stock Units | |
Additional disclosures | |
Total unrecognized compensation cost | $ | $ 3,500 |
Expected to be recognized over remaining weighted-average vesting period | 2 years 10 months 6 days |
The 2014 Plan | Performance-based Restricted Stock Units | |
Stock-based compensation | |
Vesting period | 3 years |
Number of Shares | |
Granted (in shares) | shares | 344,700 |
Non-vested performance-based restricted stock units at the end of the period (in shares) | shares | 344,700 |
Weighted Average Grant Date Fair Value Per Share | |
Granted (in dollars per share) | $ / shares | $ 10.07 |
Non-vested performance-based restricted stock units at the end of the period (in dollars per share) | $ / shares | $ 10.07 |
Weighted Average Remaining Contractual Term | |
Non-vested performance-based restricted stock units at the end of the period | 2 years 10 months 6 days |
Aggregate Intrinsic Value | |
Non-vested performance-based restricted stock units at the end of the period | $ | $ 3,472 |
The 2014 Plan | Performance-based Restricted Stock Units | Minimum | |
Stock-based compensation | |
Annual vesting percentage | 0.00% |
The 2014 Plan | Performance-based Restricted Stock Units | Maximum | |
Stock-based compensation | |
Annual vesting percentage | 200.00% |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Inventory | ||
Raw materials | $ 2,317 | $ 3,008 |
Work-in-process | 801 | 204 |
Finished goods | 2,250 | 9,830 |
Total | $ 5,368 | $ 13,042 |
ACCOUNTS RECEIVABLES (Details)
ACCOUNTS RECEIVABLES (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Accounts receivables | ||
Receivables from collaborative partners | $ 342 | $ 563 |
Accounts receivable, net | 62,428 | 72,482 |
Product sales, net | ||
Accounts receivables | ||
Accounts receivable, net | 23,733 | $ 71,919 |
Commercialization agreement | ||
Accounts receivables | ||
Accounts receivable, net | $ 38,353 |
ACCRUED LIABILITIES (Details)
ACCRUED LIABILITIES (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
ACCRUED LIABILITIES | ||
Accrued compensation | $ 2,920 | $ 7,345 |
Accrued royalties | 3,197 | 17,370 |
Accrued restructuring and one-time termination costs | 6,820 | 9,483 |
Other accrued liabilities | 19,672 | 26,298 |
Total accrued liabilities | $ 32,609 | $ 60,496 |
DEBT (Details)
DEBT (Details) | Apr. 02, 2015USD ($) | Sep. 09, 2014USD ($)item$ / shares | Oct. 31, 2018USD ($) | Apr. 30, 2018USD ($) | Nov. 30, 2017USD ($) | Apr. 30, 2017USD ($) | Mar. 31, 2018USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2015USD ($) |
Carrying amounts of the liability component | ||||||||||
Net carrying amount of the Senior Notes | $ 250,727,000 | $ 274,720,000 | ||||||||
Interest expense incurred | ||||||||||
Amortization of debt discount and debt issuance costs | 5,418,000 | $ 4,650,000 | ||||||||
Net carrying amount of the liability component | 273,920,000 | 269,510,000 | ||||||||
Senior Notes | ||||||||||
Debt | ||||||||||
Aggregate principal amount of notes issued | $ 575,000,000 | $ 365,000,000 | ||||||||
Proceeds from the issuance of debt | $ 562,000,000 | |||||||||
Debt issuance costs | $ 500,000 | |||||||||
Interest rate (as a percent) | 2.50% | |||||||||
Effective interest rate (as a percent) | 11.45% | 10.75% | ||||||||
Amount of debt prepaid | $ 10,000,000 | $ 100,000,000 | ||||||||
Payment of a prepayment fee | 400,000 | 4,000,000 | 4,400,000 | |||||||
Loss on prepayment of debt | (5,900,000) | |||||||||
Unamortized balances of debt discount and debt issuance costs | $ 1,500,000 | |||||||||
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 | |||||||||
Maturity of debt | ||||||||||
2018 (remainder) | 82,500,000 | |||||||||
2,019 | 120,000,000 | |||||||||
2,020 | 80,000,000 | |||||||||
2,021 | 82,500,000 | |||||||||
Total | 365,000,000 | 365,000,000 | ||||||||
Principal payments | $ 57,500,000 | |||||||||
Carrying amounts of the liability component | ||||||||||
Principal amount of the Notes | 365,000,000 | 365,000,000 | ||||||||
Unamortized debt discount balance | (4,106,000) | (4,717,000) | ||||||||
Unamortized debt issuance costs | (2,667,000) | (3,063,000) | ||||||||
Net carrying amount of the Senior Notes | 358,227,000 | 357,220,000 | ||||||||
Interest expense incurred | ||||||||||
Contractual/Stated coupon interest | 10,441,000 | $ 12,766,000 | ||||||||
Amortization of debt discount and debt issuance costs | 1,008,000 | 602,000 | ||||||||
Total interest expense | $ 11,449,000 | 13,368,000 | ||||||||
Amendment fee | $ 3,000,000 | |||||||||
Senior Notes | After Fifth Anniversary | ||||||||||
Debt | ||||||||||
Prepayment premium | 0.00% | |||||||||
Senior Notes | After Second Anniversary and on or Prior to Third Anniversary | ||||||||||
Debt | ||||||||||
Prepayment premium | 4.00% | |||||||||
Senior Notes | October 1, 2017 to September 30, 2018 | Minimum | ||||||||||
Debt | ||||||||||
Twelve month EBITDA required per the covenants | $ 90,000,000 | |||||||||
Senior Notes | After September 30, 2018 | Minimum | ||||||||||
Debt | ||||||||||
Twelve month EBITDA required per the covenants | 125,000,000 | |||||||||
Senior Notes | Forecast | ||||||||||
Maturity of debt | ||||||||||
Principal payments | $ 25,000,000 | |||||||||
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 debt | ||||||||||
Debt | ||||||||||
Aggregate principal amount of notes issued | $ 345,000,000 | $ 345,000,000 | $ 345,000,000 | |||||||
Interest rate (as a percent) | 2.50% | 2.50% | 2.50% | |||||||
Effective interest rate (as a percent) | 9.34% | |||||||||
Maturity of debt | ||||||||||
Total | $ 345,000,000 | $ 345,000,000 | ||||||||
Carrying amounts of the liability component | ||||||||||
Principal amount of the Notes | 345,000,000 | 345,000,000 | ||||||||
Unamortized debt discount balance | (67,642,000) | (71,799,000) | ||||||||
Unamortized debt issuance costs | (3,438,000) | (3,691,000) | ||||||||
Net carrying amount of the Senior Notes | 273,920,000 | $ 269,510,000 | ||||||||
Interest expense incurred | ||||||||||
Contractual/Stated coupon interest | 2,156,000 | 2,156,000 | ||||||||
Amortization of debt discount and debt issuance costs | 4,410,000 | 4,048,000 | ||||||||
Total interest expense | $ 6,566,000 | $ 6,204,000 | ||||||||
Net proceeds from debt offering | $ 334,200,000 | |||||||||
Underwriting discount | 10,400,000 | |||||||||
Offering expenses | $ 400,000 | |||||||||
Trading days, number | item | 20 | |||||||||
Consecutive trading days, period | item | 30 | |||||||||
Stock price trigger | $ / shares | $ 25.01 | |||||||||
Stock price trigger (as a percent) | 130.00% | |||||||||
Conversion price (in dollars per share) | $ / shares | $ 19.24 | |||||||||
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% | |||||||||
Conversion rate of common stock per $1 of principal amount | 0.0519852 | |||||||||
Observation period | 40 days | |||||||||
Liability component of debt | $ 226,000,000 | |||||||||
Equity component of debt | 119,000,000 | |||||||||
Equity component of convertible debt issued, net of tax | 73,300,000 | |||||||||
Convertible debt | Additional Paid-In Capital | ||||||||||
Interest expense incurred | ||||||||||
Equity issuance costs | $ 3,700,000 |
SHAREHOLDERS' EQUITY (Details)
SHAREHOLDERS' EQUITY (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Stock options | ||
Option Exercises | ||
Options exercised during period (in shares) | 120,302 | 283,797 |
Net proceeds from options exercised during the period | $ 0.6 | $ 2.6 |
Restricted stock units | ||
Restricted Stock Units | ||
Number of shares issued due to vesting (in shares) | 32,699 | 0 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
INCOME TAXES | |||
Federal statutory rate (as a percent) | 21.00% | 35.00% | 35.00% |
One-time reduction in federal and state deferred tax assets | $ 25.5 | ||
Benefit from income taxes | 0.3 | ||
Accrued interest and penalties associated with unrecognized tax benefits | $ 0.9 | ||
Effective tax rate | (1.00%) |
COMMITMENTS AND CONTINGENCIES57
COMMITMENTS AND CONTINGENCIES (Details) | Feb. 28, 2018USD ($)ft²item | Apr. 30, 2012ft² | Mar. 31, 2018USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2017USD ($) |
Non-Cancelable Operating Lease | |||||
2,018 | $ 1,887,000 | ||||
2,019 | 2,678,000 | ||||
2,020 | 2,559,000 | ||||
2,021 | 2,360,000 | ||||
2,022 | 2,192,000 | ||||
Thereafter | 632,000 | ||||
Total | 12,308,000 | ||||
Lease of cars | |||||
Non-Cancelable Operating Lease | |||||
Rent expense | 500,000 | $ 800,000 | |||
Office and laboratory | |||||
Non-Cancelable Operating Lease | |||||
Rent expense | 400,000 | $ 300,000 | |||
New lease Newark | |||||
Non-Cancelable Operating Lease | |||||
Total | 7,600,000 | ||||
Square feet agreed to lease | ft² | 52,500 | ||||
Additional square feet obligated lease | ft² | 8,000 | ||||
Deferred rent | 1,400,000 | $ 1,400,000 | |||
Lake Forest Illinois Building | |||||
Non-Cancelable Operating Lease | |||||
Total | 3,300,000 | ||||
Square feet agreed to lease | ft² | 31,000 | ||||
Lease terms | 5 years 6 months | ||||
Number of renewal periods | item | 1 | ||||
Renewal terms | 5 years | ||||
Written notice period (in months) | 12 months | ||||
Temporary space available to use | ft² | 6,700 | ||||
Initial annual base rent (per square foot) | $ 18 | ||||
Annual increase in base rent (per square foot) | 0.50 | ||||
Tenant improvement allowance (per square foot) | $ 28 | ||||
Enterprise FM Trust | |||||
Non-Cancelable Operating Lease | |||||
Total | $ 1,400,000 | ||||
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) | Nov. 15, 2017action | May 05, 2017 | Apr. 11, 2017defendantpatent | Nov. 17, 2015patent | Feb. 29, 2016patent | Jul. 31, 2014claim | Mar. 31, 2018actionlawsuit | Dec. 31, 2017 |
Legal matters | ||||||||
Number of shareholder derivative actions filed | action | 3 | |||||||
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 | claim | 2 | |||||||
No of claims declined for 280 patent | claim | 2 | |||||||
Number of claims instituted for 475 patent | claim | 15 | |||||||
Number of claims instituted for 280 patent | claim | 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 | |||||||
Endo | ||||||||
Legal matters | ||||||||
Number of patents infringed | patent | 3 | |||||||
Northern District of California | ||||||||
Legal matters | ||||||||
Number of shareholder derivative actions filed | action | 2 | |||||||
Multidistrict Opioid Litigation | ||||||||
Legal matters | ||||||||
Number of lawsuits | 5 | |||||||
Multidistrict Opioid Litigation | Minimum | ||||||||
Legal matters | ||||||||
Number of industry-wide opioid litigation cases | 600 | |||||||
State Opioid Litigation | ||||||||
Legal matters | ||||||||
Number of lawsuits | 2 | |||||||
State Opioid Litigation | Minimum | ||||||||
Legal matters | ||||||||
Number of industry-wide opioid litigation cases | 100 | |||||||
Opioid Litigation - Arkansas | ||||||||
Legal matters | ||||||||
Number of lawsuits | 1 | |||||||
Opioid Litigation - Pennsylvania | ||||||||
Legal matters | ||||||||
Number of lawsuits | 1 |
ACQUISITIONS (Details)
ACQUISITIONS (Details) $ in Thousands | Nov. 07, 2017USD ($) | Nov. 17, 2015USD ($)patent | Apr. 02, 2015USD ($) | Jan. 31, 2018 | Mar. 31, 2018USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2015USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) |
Purchase price consideration | |||||||||
Research and development expenses | $ 1,528 | $ 5,084 | |||||||
Endo | |||||||||
ACQUISITIONS AND DISPOSITIONS | |||||||||
Number of patents infringed | patent | 3 | ||||||||
Slan | License Agreement | |||||||||
ACQUISITIONS AND DISPOSITIONS | |||||||||
License agreement term (in years) | 10 years | ||||||||
License fee | $ 5,000 | ||||||||
Company's marketing and selling term (in years) | 7 years | ||||||||
Slan's selling term after the Company's (in years) | 3 years | ||||||||
Purchase price consideration | |||||||||
Research and development expenses | $ 24,900 | ||||||||
Cebranopadol | |||||||||
ACQUISITIONS AND DISPOSITIONS | |||||||||
Period of time written notice of termination (in days) | 120 days | ||||||||
Purchase price consideration | |||||||||
Cash Paid | $ 25,000 | ||||||||
Contingent consideration payable | 0 | ||||||||
Research and development expenses | 54,900 | ||||||||
Cebranopadol | Endo | |||||||||
Purchase price consideration | |||||||||
Non-cash adjustment | 29,900 | ||||||||
Cebranopadol | Endo | Non-cash gain on settlement agreement | |||||||||
Purchase price consideration | |||||||||
Non-cash adjustment | $ 29,900 | ||||||||
NUCYNTA | |||||||||
Purchase price consideration | |||||||||
Cash Paid | $ 1,050,000 | ||||||||
Rebates Payable By Seller | 9,977 | ||||||||
Total Purchase Consideration | 1,040,023 | ||||||||
Amount of decrease in the rebate payment | $ 500 | ||||||||
Amount of rebate payable estimated on the acquisition date | 10,500 | ||||||||
Increase in the purchase consideration and fair value of NUCYNTA U.S product rights | $ 500 | ||||||||
Fair values of tangible and identifiable intangible assets acquired and liabilities assumed | |||||||||
Intangible asset - acquired entity product rights | 1,019,978 | ||||||||
Inventories | 11,590 | ||||||||
Property, plant and equipment | 8,455 | ||||||||
Total | $ 1,040,023 | ||||||||
Other information | |||||||||
Estimated useful life of intangible asset | 10 years | ||||||||
Business acquisition step up in value of inventories | $ 5,900 | ||||||||
NUCYNTA | Selling general and administrative expense | |||||||||
Fair values of tangible and identifiable intangible assets acquired and liabilities assumed | |||||||||
Non-recurring transaction costs | $ 12,300 | ||||||||
Lazanda | |||||||||
ACQUISITIONS AND DISPOSITIONS | |||||||||
Gain on divestiture | $ 17,100 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | Apr. 02, 2015 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 |
Intangible assets | ||||
Gross Carrying Amount | $ 1,098,588 | $ 1,098,588 | ||
Accumulated amortization | (330,159) | (304,715) | ||
Total | 768,429 | 793,873 | ||
Amortization of intangible assets | 25,444 | $ 25,735 | ||
Future amortization expenses of intangible assets | ||||
2018 (remainder) | 76,330 | |||
2,019 | 101,774 | |||
2,020 | 101,774 | |||
2,021 | 101,774 | |||
2,022 | 99,969 | |||
Thereafter | $ 286,808 | |||
NUCYNTA | ||||
Intangible assets | ||||
Remaining Useful Life (In years) | 10 years | |||
Product rights | NUCYNTA | ||||
Intangible assets | ||||
Remaining Useful Life (In years) | 7 years 8 months 12 days | |||
Gross Carrying Amount | $ 1,019,978 | 1,019,978 | ||
Accumulated amortization | (290,165) | (266,590) | ||
Total | $ 729,813 | 753,388 | ||
Product rights | CAMBIA | ||||
Intangible assets | ||||
Remaining Useful Life (In years) | 5 years 8 months 12 days | |||
Gross Carrying Amount | $ 51,360 | 51,360 | ||
Accumulated amortization | (22,039) | (20,755) | ||
Total | $ 29,321 | 30,605 | ||
Product rights | Zipsor | ||||
Intangible assets | ||||
Remaining Useful Life (In years) | 4 years | |||
Gross Carrying Amount | $ 27,250 | 27,250 | ||
Accumulated amortization | (17,955) | (17,370) | ||
Total | $ 9,295 | $ 9,880 |
RESTRUCTURING CHARGES (Details)
RESTRUCTURING CHARGES (Details) - USD ($) $ in Thousands | 3 Months Ended | 4 Months Ended |
Mar. 31, 2018 | Mar. 31, 2018 | |
Restructuring costs | ||
Employee compensation costs | $ 8,779 | |
Other exit costs | 238 | |
Total restructuring costs | $ 9,017 | $ 18,500 |
RESTRUCTURING - ROLLFORWARD (De
RESTRUCTURING - ROLLFORWARD (Details) $ in Thousands | 3 Months Ended | 4 Months Ended |
Mar. 31, 2018USD ($) | Mar. 31, 2018USD ($) | |
Accrued restructuring and severance costs rollforward | ||
Balance at beginning of period | $ 9,483 | |
Net accruals | 9,017 | $ 18,500 |
Non-cash additions/(reductions) | (258) | |
Cash paid | (11,422) | |
Balance at end of period | 6,820 | 6,820 |
Restructuring and related liabilities payables | 6,800 | 6,800 |
Restructuring Charges | 9,017 | 18,500 |
Minimum | ||
Accrued restructuring and severance costs rollforward | ||
Estimated additional restructuring and related expenses | 9,000 | 9,000 |
Maximum | ||
Accrued restructuring and severance costs rollforward | ||
Estimated additional restructuring and related expenses | 12,000 | 12,000 |
Employee compensation costs | ||
Accrued restructuring and severance costs rollforward | ||
Balance at beginning of period | 9,483 | |
Net accruals | 8,779 | |
Non-cash additions/(reductions) | (258) | |
Cash paid | (11,184) | |
Balance at end of period | 6,820 | $ 6,820 |
Restructuring Charges | 8,779 | |
Other exit costs | ||
Accrued restructuring and severance costs rollforward | ||
Net accruals | 238 | |
Cash paid | (238) | |
Restructuring Charges | $ 238 |
OUT OF PERIOD ADJUSTMENT (Detai
OUT OF PERIOD ADJUSTMENT (Details) - NUCYNTA products - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Out of period adjustment | |||
Increase in BPD accrual | $ 3.4 | $ 2 | $ 1.4 |
Change in net loss per share, basic and diluted | $ 0.05 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Subsequent events $ in Thousands | May 10, 2018USD ($)item |
Applied Pharma Research S.A. | CAMBIA | |
Subsequent events | |
Initial fee expected to be paid | $ | $ 1,250 |
Allegis | Zipsor | |
Subsequent events | |
Number of sales reps | item | 30 |