Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | 7-May-15 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | FALSE | |
Document Period End Date | 31-Mar-15 | |
Document Fiscal Year Focus | 2015 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | ARDM | |
Entity Registrant Name | ARADIGM CORP | |
Entity Central Index Key | 1013238 | |
Current Fiscal Year End Date | -19 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 14,748,189 |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | ||
Current assets: | ||
Cash and cash equivalents | $48,576 | $47,990 |
Receivables | 511 | 1,058 |
Restricted cash | 250 | 250 |
Prepaid and other current assets | 1,442 | 1,207 |
Total current assets | 50,779 | 50,505 |
Property and equipment, net | 416 | 502 |
Other assets | 2,941 | 2,956 |
Total assets | 54,136 | 53,963 |
Current liabilities: | ||
Accounts payable | 2,046 | 2,706 |
Accrued clinical and cost of other studies | 4,044 | 2,070 |
Accrued compensation | 550 | 819 |
Deferred revenue-related party | 837 | 790 |
Facility lease exit obligation | 199 | 193 |
Deferred rent | 85 | 97 |
Other accrued liabilities | 256 | 191 |
Total current liabilities | 8,017 | 6,866 |
Accrued clinical and cost of other studies, non-current | 82 | 33 |
Deferred revenue-related party, non-current | 7,845 | 7,845 |
Facility lease exit obligation, non-current | 55 | 104 |
Total liabilities | 15,999 | 14,848 |
Commitments and contingencies | ||
Shareholders' equity: | ||
Preferred stock, 5,000,000 shares authorized, none outstanding | ||
Common stock, no par value; authorized shares: 25,045,765 at March 31, 2015 and December 31, 2014; issued and outstanding shares: 14,726,960 at March 31, 2015 and December 31, 2014 | 427,572 | 427,387 |
Accumulated deficit | -389,435 | -388,272 |
Total shareholders' equity | 38,137 | 39,115 |
Total liabilities and shareholders' equity | $54,136 | $53,963 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $0 | $0 |
Common stock, shares authorized | 25,045,765 | 25,045,765 |
Common stock, shares issued | 14,726,960 | 14,726,960 |
Common stock, shares outstanding | 14,726,960 | 14,726,960 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Revenue: | ||
Contract revenue - related party | $8,739 | $6,242 |
Grant revenue | 29 | 189 |
Royalty revenue | 200 | |
Total revenue | 8,768 | 6,631 |
Operating expenses: | ||
Research and development | 8,361 | 5,796 |
General and administrative | 1,542 | 1,651 |
Restructuring and asset impairment | 4 | 6 |
Total operating expenses | 9,907 | 7,453 |
Loss from operations | -1,139 | -822 |
Interest income | 8 | 2 |
Interest expense | -288 | |
Other expense | -32 | -1 |
Gain on assignment of royalty interests | 5,823 | |
Gain from extinguishment of debt | 3,041 | |
Net income (loss) and comprehensive income (loss) | ($1,163) | $7,755 |
Basic and diluted net income (loss) per common share | ($0.08) | $0.53 |
Shares used in computing basic net income (loss) per common share | 14,727 | 14,669 |
Shares used in computing diluted net income (loss) per common share | 14,727 | 14,713 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Cash Flows (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Cash flows from operating activities: | ||
Net income (loss) | ($1,163) | $7,755 |
Adjustments to reconcile net income (loss) to cash used in operating activities: | ||
Depreciation and amortization | 77 | 74 |
Stock-based compensation expense | 185 | 193 |
Amortization of note discount | 19 | |
Gain on assignment of royalty interests | -5,823 | |
Gain from extinguishment of debt | -3,041 | |
Changes in operating assets and liabilities: | ||
Receivables | 547 | -2,601 |
Prepaid and other current assets | -235 | 167 |
Restricted cash | -250 | |
Other assets | 15 | 26 |
Accounts payable | -660 | 947 |
Accrued compensation | -269 | 241 |
Current deferred revenue | 47 | -3,688 |
Deferred rent | -12 | -6 |
Accrued liabilities | 2,039 | -235 |
Accrued clinical and cost of other studies, non-current | 49 | |
Facility lease exit obligation | -43 | -37 |
Net cash provided by (used in) operating activities | 577 | -6,259 |
Cash flows from investing activities: | ||
Capital expenditures | 9 | -167 |
Net cash provided by (used in) investing activities | 9 | -167 |
Net increase (decrease) in cash and cash equivalents | 586 | -6,426 |
Cash and cash equivalents at beginning of period | 47,990 | 48,131 |
Cash and cash equivalents at end of period | 48,576 | 41,705 |
Supplemental disclosure of cash flow information: | ||
Non cash reduction in other assets from extinguishment of debt and assignment of royalty interests | -237 | |
Non cash reduction in note payable from extinguishment of debt and assignment of royalty interests | ($9,101) |
Organization_Basis_of_Presenta
Organization, Basis of Presentation and Liquidity | 3 Months Ended |
Mar. 31, 2015 | |
Accounting Policies [Abstract] | |
Organization, Basis of Presentation and Liquidity | 1. Organization, Basis of Presentation and Liquidity |
Organization | |
Aradigm Corporation (the “Company,” “we,” “our,” or “us”) is a California corporation, incorporated in 1991, focused on the development and commercialization of drugs delivered by inhalation for the treatment and prevention of severe respiratory diseases. The Company’s principal activities to date have included conducting research and development and developing collaborations. Management does not anticipate receiving revenues from the sale of any of its products during the 2015 fiscal year. The Company operates as a single operating segment. | |
Basis of Presentation | |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, the financial statements reflect all adjustments, which are of a normal recurring nature, necessary for fair presentation. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the SEC on March 18, 2015 (the “2014 Annual Report on Form 10-K”). The results of the Company’s consolidated operations for the interim periods presented are not necessarily indicative of operating results for the full fiscal year or any future interim period. | |
The consolidated balance sheet at December 31, 2014 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, please refer to the consolidated financial statements and notes thereto included in the 2014 Annual Report on Form 10-K. | |
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. | |
Liquidity | |
The Company has incurred significant operating losses and negative cash flows from operations. At March 31, 2015, the Company had an accumulated deficit of $389.4 million, working capital of $42.8 million and shareholders’ equity of $38.1 million. The Company had cash and cash equivalents of approximately $48.6 million as of March 31, 2015. Management believes that this amount will be sufficient to meet its obligations through at least the year ended December 31, 2015. However, the Company’s business strategy may require it to, or it may otherwise determine to, raise additional capital at any time through equity financing(s), strategic transactions or otherwise. Such additional funding may be necessary to develop the Company’s potential product candidates. In addition, the Company may determine to raise capital opportunistically. | |
Reverse Stock Split | |
On May 13, 2014, the Company filed an amendment to its Amended and Restated Articles of Incorporation which effected on May 23, 2014 a 1-for-40 reverse split of all outstanding shares of the Company’s common stock (the “Reverse Split”) and reduced the number of authorized shares of common stock from 1,001,830,627 to 25,045,765. Any fractional shares of common stock resulting from the Reverse Split were settled in cash equal to the fraction of a share to which the holder was entitled. | |
All shares, stock options, warrants to purchase common stock and per share information presented in the consolidated financial statements have been adjusted to reflect the Reverse Split on a retroactive basis for all periods presented and all share information is rounded down to the nearest whole share after reflecting the Reverse Split. |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2015 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies |
Use of Estimates | |
The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates include useful lives for property and equipment and related depreciation calculations, assumptions for valuing options and warrants, and income taxes. Actual results could differ from these estimates. | |
Cash and Cash Equivalents | |
All highly liquid investments with maturities of three months or less at the time of purchase are classified as cash equivalents. | |
Property and Equipment | |
The Company records property and equipment at cost and calculates depreciation using the straight-line method over the estimated useful lives of the respective assets. Machinery and equipment includes external costs incurred for validation of the equipment. The Company does not capitalize internal validation expense. Computer equipment and software includes capitalized computer software. All of the Company’s capitalized software is purchased; the Company has no internally-developed computer software. Leasehold improvements are depreciated over the shorter of the term of the lease or useful life of the improvement. | |
Impairment of Long-Lived Assets | |
The Company reviews for impairment whenever events or changes in circumstances indicate that the carrying amount of property and equipment may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written down to their estimated fair values and the loss is recognized in the consolidated statements of operations. | |
Accounting for Costs Associated with Exit or Disposal Activities | |
The Company recognizes a liability for the cost associated with an exit or disposal activity that is measured initially at its fair value in the period in which the liability is incurred. The Company accounted for the partial sublease of its headquarters building as an exit activity and recorded the sublease loss in its Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) (see Note 5). | |
Costs to terminate an operating lease or other contracts are (a) costs to terminate the contract before the end of its term or (b) costs that will continue to be incurred under the contract for its remaining term without economic benefit to the entity. In periods subsequent to initial measurement, changes to the liability are measured using the credit-adjusted risk-free rate that was used to measure the liability initially. | |
Revenue Recognition | |
Contract revenues consist of revenues from grants, collaboration agreements and feasibility studies. License and collaboration revenue is primarily generated through agreements with strategic partners for the development and commercialization of our product candidates. The terms of the agreement typically include non-refundable upfront fees, funding of research and development activities, payments based upon achievement of milestones and royalties on net product sales. The Company recognizes revenue under the provisions of the Securities and Exchange Commission issued Staff Accounting Bulletin 104, Topic 13, Revenue Recognition Revised and Updated (“SAB Topic 13”) and ASC 605-25, Revenue Recognition-Multiple Elements. Revenue for arrangements not having multiple deliverables, as outlined in ASC 605-25, is recognized once costs are incurred and collectability is reasonably assured. | |
Revenue is recognized when there is persuasive evidence that an arrangement exists, delivery has occurred, the price is fixed and determinable and collection is reasonably assured. Multiple-deliverable arrangements, such as license and development agreements, are analyzed to determine whether the deliverables can be separated or whether they must be accounted for as a single unit of accounting. When deliverables are separable, consideration received is allocated to the separate units of accounting based on the relative selling price method and the appropriate revenue recognition principles are applied to each unit. When the Company determines that an arrangement should be accounted for as a single unit of accounting, it must determine the period over which the performance obligations will be performed and revenue will be recognized. | |
The Company estimates its performance period used for revenue recognition based on the specific terms of each agreement, and adjusts the performance periods, if appropriate, based on the applicable facts and circumstances. Significant management judgment may be required to determine the level of effort required under an arrangement and the period over which the Company is expected to complete its performance obligations under the arrangement. If the Company cannot reasonably estimate when its performance obligations either are completed or become inconsequential, then revenue recognition is deferred until the Company can reasonably make such estimates. Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up method. | |
The Company adopted the provisions of Accounting Standards Update No. 2009-13, Revenue Recognition (Topic 605); Multiple-Deliverable Revenue Arrangements (“ASU 2009-13”) for new and materially modified arrangements originating on or after January 1, 2010. ASU 2009-13 provides updated guidance on how the deliverables in an arrangement should be separated, and how consideration should be allocated, and it changes the level of evidence of standalone selling price required to separate deliverables by allowing a vendor to make its best estimate of the standalone selling price of deliverables when vendor-specific objective evidence or third-party evidence of selling price is not available. | |
The Company allocates non-contingent consideration to each stand-alone deliverable based upon the relative selling price of each element. When applying the relative selling price method, the Company determines the selling price for each deliverable using vendor-specific objective evidence, or VSOE, of selling price, if it exists, or third-party evidence, or TPE, of selling price, if it exists. If neither VSOE nor TPE of selling price exist for a deliverable, the Company uses best estimated selling price, or BESP, for that deliverable. | |
Assuming the elements meet the revenue recognition guidelines, the revenue recognition methodology prescribed for each unit of accounting is summarized below: | |
Upfront Fees—The Company defers recognition of non-refundable upfront fees if there are continuing performance obligations without which the technology licensed has no utility to the licensee. If the Company has continuing performance obligations through research and development services that are required because know-how and expertise related to the technology is proprietary to the Company, or can only be performed by the Company, then such up-front fees are deferred and recognized over the estimated period of the performance obligation. The Company bases the estimate of the period of performance on factors in the contract. Actual time frames could vary and could result in material changes to the results of operations. When the collaboration partners request the Company to continue performing the research and development services in collaboration beyond the initial period of performance the remaining unamortized deferred revenue and any new continuation or license fees are recognized over the extended period of performance. | |
Funded Research and Development and Grant Revenue—Revenue from research and development services is recognized during the period in which the services are performed and is based upon the number of full-time-equivalent personnel working on the specific project at the agreed-upon rate. The full-time equivalent amount can vary each year if the contracts allow for a percentage increase determined by relevant salary surveys, if applicable. Reimbursements from collaborative partners and grants for agreed upon direct costs including direct materials and outsourced, or subcontracted, pre-clinical and clinical studies and contract manufacturing are classified as revenue and recognized in the period the reimbursable expenses are incurred. Payments received in advance are recorded as deferred revenue until the research and development services are performed or costs are incurred. | |
Milestones—Substantive milestone payments are considered to be performance bonuses that are recognized upon achievement of the milestone only if all of the following conditions are met: the milestone payments are non-refundable; achievement of the milestone involves a degree of risk and was not reasonably assured at the inception of the arrangement; substantive effort is involved in achieving the milestone; the amount of the milestone is reasonable in relation to the effort expended or the risk associated with achievement of the milestone; and a reasonable amount of time passes between the up-front license payment and the first milestone payment as well as between each subsequent milestone payment. If any of these conditions are not met, the milestone payments are deferred and recognized as revenue over the term of the arrangement as the Company completes its performance obligations. | |
Royalties—The Company recognizes royalty revenues from licensed products upon the sale of the related products. | |
Research and Development | |
Research and development expenses consist of costs incurred for company-sponsored, collaborative and contracted research and development activities. These costs include direct and research-related overhead expenses. The Company expenses research and development costs as such costs are incurred. | |
Stock-Based Compensation | |
The Company accounts for share-based payment arrangements in accordance with ASC 718, Compensation-Stock Compensation and ASC 505-50, Equity-Equity Based Payments to Non-Employees which requires the recognition of compensation expense, using a fair-value based method, for all costs related to share-based payments including stock options and restricted stock awards and stock issued under the employee stock purchase plan. These standards require companies to estimate the fair value of share-based payment awards on the date of the grant using an option-pricing model. See Note 8 for further discussion of the Company’s stock-based compensation plans. | |
Income Taxes | |
The Company makes certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes. As part of the process of preparing the financial statements, the Company is required to estimate income taxes in each of the jurisdictions in which it operates. This process involves the Company estimating its current tax exposure under the most recent tax laws and assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities which are included in the Company’s consolidated balance sheets. The Company estimated its current tax exposure to be zero as it expects to be able to utilize its net operating loss carryovers (NOLs) to offset the income recognized in the quarter and year to date. The Company has updated its Section 382 analysis through December 31, 2014 and noted no additional changes since the last change in 2010. | |
The Company assesses the likelihood that it will be able to recover its deferred tax assets. The Company considers all available evidence, both positive and negative, including the historical levels of income and losses, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. If the Company does not consider it more likely than not that it will recover its deferred tax assets, the Company records a valuation allowance against the deferred tax assets that it estimates will not ultimately be recoverable. At March 31, 2015, and December 31, 2014 the Company believed that the amount of its deferred income taxes would not be ultimately recovered. Accordingly, the Company recorded a full valuation allowance for deferred tax assets. However, should there be a change in the Company’s ability to recover its deferred tax assets the Company would recognize a benefit to its tax provision in the period in which it determines that it is more likely than not that it will recover its deferred tax assets. | |
Net Income/(Loss) Per Common Share | |
Basic net income/(loss) per common share is computed using the weighted-average number of shares of common stock outstanding during the period less the weighted-average number of restricted shares of common stock subject to repurchase. Potentially dilutive securities were not included in the net loss per common share calculation for the three months ended March 31, 2015, because the inclusion of such shares would have had an anti-dilutive effect but were included for the three months ended March 31, 2014. | |
Recently Issued Accounting Pronouncements | |
There have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2015, as compared to the recent accounting pronouncements described in the Company’s 2014 Annual Report on Form 10-K that are of significance or potential significance to the Company. |
Cash_and_Cash_Equivalents
Cash and Cash Equivalents | 3 Months Ended |
Mar. 31, 2015 | |
Cash and Cash Equivalents [Abstract] | |
Cash and Cash Equivalents | 3. Cash and Cash Equivalents |
At March 31, 2015 and December 31, 2014, the amortized cost of the Company’s cash and cash equivalents approximated their fair values. The Company currently invests its cash and cash equivalents in money market funds. |
Fair_Value_Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 4. Fair Value Measurements |
The Company follows ASC 820, Fair Value Measurements, which clarifies the definition of fair value, prescribes methods for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value and requires disclosures about the use of fair value measurements. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 values are based on quoted prices in active markets. Level 2 values are based on significant other observable inputs. Level 3 values are based on significant unobservable inputs. | |
The Company’s cash and cash equivalents at March 31, 2015 consist of cash and money market funds. Money market funds are valued using quoted market prices. |
Sublease_Agreement_and_Lease_E
Sublease Agreement and Lease Exit Liability | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Restructuring and Related Activities [Abstract] | |||||
Sublease Agreement and Lease Exit Liability | 5. Sublease Agreement and Lease Exit Liability | ||||
On July 18, 2007, the Company entered into a sublease agreement with Mendel Biotechnology, Inc. (“Mendel”) to lease approximately 48,000 square feet of the Company’s 72,000 square foot headquarters facility located in Hayward, California. In April 2009, the Company entered into an amendment to its sublease agreement with Mendel to sublease an additional 1,550 square feet. In January 2012, the Company entered into a second amendment to the sublease with Mendel in which Mendel leased an additional 3,300 square feet and at that time Mendel waived their right to early termination. The sublease with Mendel now expires concurrently with the Company’s master lease for the Hayward facility in July of 2016. | |||||
During the year ended December 31, 2007, the Company recorded a $2.1 million lease exit liability and related expense for the expected loss on the sublease, because the monthly payments the Company expects to receive under the sublease are less than the amounts that the Company will owe the lessor for the sublease space. The Company recorded an additional sublease loss on the subsequent amendment of the lease in April of 2009. The fair value of the lease exit liability was determined using a credit-adjusted risk-free rate to discount the estimated future net cash flows, consisting of the minimum lease payments to the lessor for the sublease space and payments the Company will receive under the sublease. The sublease loss and ongoing accretion expense required to record the lease exit liability at its fair value using the interest method have been recorded as part of restructuring and asset impairment expense in the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss). | |||||
The lease exit liability activity for the three months ended March 31, 2015 is as follows (in thousands): | |||||
Three | |||||
Months | |||||
Ended | |||||
March 31, | |||||
2015 | |||||
Balance at January 1, 2015 | $ | 297 | |||
Accretion expense | 4 | ||||
Lease payments | (47 | ) | |||
Balance at March 31, 2015 | $ | 254 | |||
As of March 31, 2015, $199,000 of the $254,000 balance was recorded as a current liability and $55,000 was recorded as a non-current liability. |
Collaboration_Agreement
Collaboration Agreement | 3 Months Ended |
Mar. 31, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Collaboration Agreement | 6. Collaboration Agreement |
Grifols License and Collaboration Agreement | |
On May 20, 2013, the Company and Grifols, S.A., (“Grifols”) and certain other investors (the “Investors”) entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”), pursuant to which the Company agreed, subject to the terms and conditions set forth in the Stock Purchase Agreement, to issue and sell a total of 5,244,363 shares of the Company’s common stock (“Common Stock”) to Grifols and an additional 3,104,838 shares of Common Stock to the Investors, for a total sale 8,349,201 shares of Common Stock (the “Company Stock Sale”) for a purchase price of $4.96 per share. The aggregate gross consideration paid to the Company on August 27, 2013 in the Company Stock Sale was approximately $41.4 million. | |
In conjunction with signing the Stock Purchase Agreement, the Company and Grifols agreed to enter into a License and Collaboration Agreement (the “License Agreement”) at the closing of the Company Stock Sale; Grifols and the Company are considered to be related parties and as a result, all transactions between the two entities will be recognized as related party transactions. The License Agreement exclusively licenses the Company’s inhaled liposomal ciprofloxacin compounds for the indication of non-cystic fibrosis bronchiectasis and other indications (the “Program”) to Grifols on a worldwide basis. Grifols funds development expenses and will commercialize products from the Program (“Products”), and pay development milestones and royalties on future commercial sales of Products. The License Agreement is described further below. | |
On July 15, 2013 shareholders of the Company approved the Company’s closing of the Company Stock Sale and entering into the License Agreement, Governance Agreement and other agreements described below and in the Stock Purchase Agreement (the “Transactions”). Shareholders of the Company holding more than 50% of the outstanding shares of the Company’s Common Stock voted in favor of these proposals at the special meeting. | |
In August of 2013 Grifols paid approximately $26.0 million for the shares of the Company’s common stock at a purchase price of $4.96 per share which reflected the contractual price for the Company’s common stock as stated in the Stock Purchase Agreement on May 20, 2013. Following the announcement of the collaboration, execution of a supply agreement and satisfaction of the other conditions of closing, the stock price rose to $8.00 per share at the time of. Consequently, the contractual price of $4.96 per share resulted in a $3.04 per share discount from the August 27, 2013 closing price of $8.00 per share, or a discount of approximately $15.9 million from the fair market value of the common stock on the effective date of the Grifols License and Collaboration Agreement. The Company determined this transaction was not within the scope of ASC 605-25 and accordingly, the Company recorded the sale of common stock to Grifols at fair value based on the closing price of the Company’s stock on August 27, 2013 at $8.00 per share ($0.20 per share price prior to the 1-for-40 Reverse Split). This discount, which is a non-cash charge, was recorded as Collaboration Arrangement Acquisition Cost in the Company’s Consolidated Statement of Operations and Comprehensive Loss for the year ended December 31, 2013. | |
License Agreement | |
The License Agreement was signed on the closing of the Company Stock Sale. Under the License Agreement, the Company granted to Grifols an exclusive license to the Program, the lead product candidate of which is named Pulmaquin®. The license permits Grifols to commercialize Products throughout the world and grants Grifols a back-up manufacturing right to produce Products. | |
The Company is responsible for developing the Product for non-cystic fibrosis bronchiectasis or pulmonary infections associated with non-cystic fibrosis bronchiectasis, in accordance with an agreed upon development plan and pursuant to a Grifols-funded budget of $65 million (which includes allocations for the Company’s internal, fully-burdened expenses). Any excess expenses are the responsibility of the Company. The Company will develop the Product for additional indications at Grifols’ sole expense if Grifols elects to pursue such development. | |
The Company is responsible for obtaining regulatory approval of the first indication for the Product in the United States and the European Union. Grifols is responsible for additional regulatory expenses, including the cost of obtaining approval outside the United States and European Union, and the cost of maintaining approvals globally. Grifols is responsible to use diligent efforts to commercialize the Product in countries where regulatory approval has been obtained. | |
The Company is responsible for supplying Grifols’ requirements of the Product, and must establish primary and back-up suppliers acceptable to Grifols. Grifols will purchase Products from the Company on a cost pass-through basis plus a margin. | |
With respect to the US and EU development and approval of Pulmaquin for non-cystic fibrosis bronchiectasis management, Grifols will pay to Aradigm reimbursements of development costs up to $65 million and development milestone payments of up to $25 million. Additionally, royalty payments on a country-by-country basis on net sales at a rate of either 12.5% or 20% (depending on the amount of net sales) for so long as there is patent coverage or orphan drug designation (or, if longer, 10 years), except that payments will be reduced by half on a country-by-country basis in the event that another inhaled liposomal product containing ciprofloxacin is being sold for an indication for which the Aradigm product has regulatory approval. Royalty payments may also be reduced by 50% if Aradigm has no valid patent claim or orphan drug protection in that country. | |
The Company’s deliverables include an exclusive license for inhaled ciprofloxacin compounds for the indication of non-cystic fibrosis bronchiectasis and other indications, payment of development costs over $65 million for the non-cystic fibrosis bronchiectasis indication and participation on a Joint Steering Committee (“JSC”). Having determined that both the development and JSC do not have standalone value from the license, the Company combined these deliverables into a single unit of accounting. The Company is recognizing reimbursements of development expenses as collaboration services are performed and costs are incurred. During the three months ended March 31, 2015, the Company recognized $8.7 million in contract revenue-related party for services performed and costs incurred during the period under the License Agreement related to development of Pulmaquin for non-cystic fibrosis bronchiectasis. In addition, the Company has a current deferred revenue balance at March 31, 2015 of $837 thousand and a long-term deferred revenue balance of $7.8 million. The long term deferred revenue balance consists of: (i) a $5 million milestone received upon the dosing of the first patient in a Phase III clinical trial and (ii) reimbursements billed in advance of collaboration services to be performed beyond a one year period. The $5 million milestone payment will be recognized as revenue upon receiving the first regulatory approval. | |
Costs incurred under the Grifols License Agreement in the quarters ended March 31, 2015 and 2014 are $8.7 million and $6.2 million. Development expenses are fully burdened and include direct costs reported as research and development expenses and collaboration-related general and administrative expenses. | |
Governance Agreement | |
The Governance Agreement sets forth certain rights and obligations of the Company and Grifols concerning, among other things, certain corporate governance matters, certain limitations on future acquisitions of shares of Common Stock by Grifols, and certain rights by Grifols to maintain a target level of ownership in the Company. | |
On the date the Governance Agreement was executed, the Company’s board of directors was reconstituted to consist of its chief executive officer, three independent directors under the NASDAQ Marketplace Rules and two persons designated by Grifols. The number of persons Grifols is entitled to designate for consideration for election to the Company’s board of directors by the Company’s nominating committee will thereafter depend on the percentage of beneficial ownership of the Company held by Grifols and the total number of directors on the board. | |
The Governance Agreement also provides that during the period beginning on the date of Closing and ending 12 months after the first commercial sale of a Product (the “Restricted Period”), Grifols will not directly or indirectly acquire or offer to acquire any shares of Common Stock except (i) with the approval of the Company’s board of directors and a majority of its independent directors, (ii) effected solely to the extent necessary to maintain the beneficial ownership of Grifols and its affiliates at an amount equal to 35% (the “Target Percentage”) of the shares of Common Stock on a Fully Diluted Basis (as defined in the Governance Agreement), or (iii) in order to maintain its ownership percentage in the event that the Company issues new securities, in accordance with the provisions of the Governance Agreement. The Restricted Period terminates upon the occurrence of certain events, including a change in control of the Company and a third party publicly proposing to acquire the Company. The Governance Agreement further imposes certain “standstill” obligations on Grifols during the Restricted Period, pursuant to which Grifols and certain related persons are prohibited from soliciting proxies from the Company’s shareholders, granting proxies or entering into voting agreements and seeking additional representation on the Company’s Board of Directors. | |
The Governance Agreement provides Grifols with certain preemptive rights to participate in future issuances of Common Stock or equivalents of Common Stock by the Company, or the right to acquire shares of Common Stock from third parties or on the open market to maintain its Fully Diluted Ownership at the Target Percentage. | |
The Governance Agreement requires the approval of Grifols for certain actions by the Company which would adversely affect Grifols’ rights under the Governance Agreement, and for the Company to terminate the employment of its Chief Executive Officer or to appoint any successor Chief Executive Officer. | |
Registration Rights Agreements | |
In connection with and concurrently with the closing of the Company Stock Sale, the Company entered into a Registration Rights Agreement with Grifols (the “Grifols Registration Rights Agreement”), pursuant to which the Company agreed to provide registration rights to Grifols with respect to the shares of Common Stock issued to Grifols in the Company Stock Sale. Under such agreement, Grifols will be entitled to require the Company to file with the SEC certain registration statements under the Securities Act of 1933, as amended (the “Securities Act”), with respect to the resale of the shares of Common Stock acquired by Grifols in the Company Stock Sale up to three times on Form S-1 and up to six times on Form S-3, and to include its shares of Common Stock in any registration the Company proposes for its own account or for the account of one or more of its shareholders. | |
In connection with and concurrently with the closing of the Company Stock Sale, the Company and the Investors also entered into a Registration Rights Agreement (the “Investors Registration Rights Agreement”). Pursuant to the Investors Registration Rights Agreement, the Company filed a registration statement covering the resale of the shares of the Common Stock issued to the investors in the Company Stock Sale. The failure on the part of the Company to satisfy the deadlines set forth in the Investors Registration Rights Agreement may subject the Company to payment of certain monetary penalties. |
Royalty_Agreement_Note_Payable
Royalty Agreement, Note Payable and Accrued Interest | 3 Months Ended |
Mar. 31, 2015 | |
Text Block [Abstract] | |
Royalty Agreement, Note Payable and Accrued Interest | 7. Royalty Agreement, Note Payable and Accrued Interest |
Royalty Financing | |
In June 2011, the Company entered into an $8.5 million royalty financing agreement with a syndicate of lenders. The agreement created a debt obligation (the “Term Loan”) that was to be repaid through and secured by royalties from net sales of the SUMAVEL DosePro needle-free delivery system payable to the Company under its Asset Purchase Agreement (“APA”) with Zogenix. | |
Under the terms of the royalty financing agreement, the Company received a loan of $8.5 million, less fees and expenses (approximately $473,000) and $250,000 set aside for an Interest Reserve Account. The lenders were entitled to receive 100% of all royalties payable to the Company under the APA until the principal and accrued interest of the Term Loan were fully repaid. The lenders had no recourse to the assets of Aradigm other than the right to receive the royalty payments for repayment of the loan. | |
The Company capitalized the fees and expenses of approximately $473,000 and recorded this amount in other assets. The capitalized expenses were to be amortized to interest expense using the effective interest method over a period of 48 months, however, the full amount of the remaining capitalized fees and expenses were recognized in the three months ended March 31, 2014, which was the accounting period following the completion of the transfer of payment rights to the lenders as described below. | |
In connection with the original royalty financing transaction, the Company issued to the lenders warrants to purchase a total of 71,022 shares of the Company’s common stock at a strike price of $8.80 per share representing a 20% premium above the average closing price of the Company’s common stock for the ten trading days immediately preceding the closing of the royalty financing transaction. The warrants expire on December 31, 2016. In accordance with Accounting Standards Topic 815 – Derivatives and Hedging, the warrants were accounted for as equity instruments and their fair value was determined to be approximately $390,000. The relative fair value of the warrants is considered a discount against the note and was recorded as a reduction of the note payable. The note discount was being amortized to interest expense using the effective interest method with an annual rate of 18.7% over a period of 48 months, however, the full amount of the remaining note discount was recognized in the three months ended March 31, 2014, which was the accounting period following the completion of the transfer of payment rights to the lenders as described below. | |
While the term loan is non-recourse to the assets of Aradigm Corporation, the term loan agreement contained a minimum royalty covenant. If the minimum royalty covenant was breached and the subsidiary did not cure the breach through a cash contribution to pay down the accrued principal and interest, then the lenders had the right to declare the agreement in default and obtain the right to all future royalties and payments due to Aradigm under the Zogenix asset purchase agreement. In 2012, the minimum royalty covenant was breached and the Company made cash payments of approximately $167,000 to the lenders for accrued interest in order to cure the breach. In the twelve months ended December 31, 2013, the covenant was again breached and the cumulative cash shortfall the Company would need to contribute to keep the agreement from default stood at $525,000. In the first quarter of 2014, the Company elected not to make this or any future contributions. | |
On March 4, 2014, the Company and the other parties executed an Assignment Agreement that transferred the rights to the lenders, effective February 28, 2014, for all future royalty payments from Zogenix under the APA in full and complete satisfaction of the Company’s obligations under the loan agreement and the other agreements entered into in connection with the royalty financing. Under the Assignment Agreement, the parties agreed that the value of the Assigned Interest is $5.8 million. Zogenix consented to the Assignment. The Company valued the assignment of the royalty rights at $5.8 million in the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) in accordance with the Assignment Agreement which was recorded as a gain on fair value of assigned royalty rights in the quarter ended March 31, 2014. The balance of the note payable and accrued interest extinguished in the transaction offset by deferred loan costs and unamortized debt discount as of the assignment date less the fair value of the royalty rights resulted in a gain from debt extinguishment of $3.0 million which was recognized in the quarter ended March 31, 2014 in the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss). All debts and obligations of Aradigm and its subsidiary are considered to be paid and satisfied in full. |
StockBased_Compensation_and_St
Stock-Based Compensation and Stock Options and Awards | 3 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||
Stock-Based Compensation and Stock Options and Awards | 8. Stock-Based Compensation and Stock Options and Awards | ||||||||||||||||
The following table shows the stock-based compensation expense included in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2015 and 2014 (in thousands): | |||||||||||||||||
March 31, | March 31, | ||||||||||||||||
2015 | 2014 | ||||||||||||||||
Costs and expenses: | |||||||||||||||||
Research and development | $ | 78 | $ | 57 | |||||||||||||
General and administrative | 107 | 136 | |||||||||||||||
Total stock-based compensation expense | $ | 185 | $ | 193 | |||||||||||||
There was no capitalized stock-based employee compensation cost for the three months ended March 31, 2015 and 2014. Since the Company did not record a tax provision during the quarters ended March 31, 2015 and 2014, there was no recognized tax benefit associated with stock-based compensation expense. | |||||||||||||||||
For restricted stock awards, the Company recognizes compensation expense over the vesting period for the fair value of the stock award on the measurement date. The total fair value of restricted stock awards that vested during the three months ended March 31, 2015 was zero. The Company retained purchase rights with respect to 300 shares of unvested restricted stock awards issued pursuant to stock purchase agreements at no cost per share as of March 31, 2015. | |||||||||||||||||
Stock Option Plans: 1996 Equity Incentive Plan, 2005 Equity Incentive Plan, 1996 Non-Employee Directors’ Plan and 2015 Equity Incentive Plan | |||||||||||||||||
On March 13, 2015 the Board adopted the 2015 Equity Incentive Plan (the “2015 Plan”), subject to the approval of the Company’s shareholders, which will be submitted to them at the next annual meeting. The next annual meeting is scheduled to be held on May 14, 2015. The 2015 Plan would replace the Company’s existing 2005 Equity Incentive Plan (the “2005 Plan”), which is described in further detail below. The 2015 Plan is intended to promote our long-term success and increase shareholder value by attracting, motivating, and retaining non-employee directors, officers, employees, advisors, consultants and independent contractors, and allows the flexibility to grant a variety of awards to eligible individuals, thereby strengthening their commitment to the Company’s success and aligning their interests with those of the Company’s shareholders. The Company did not request that shareholders authorize any new shares of Common Stock in connection with the approval of the 2015 Plan, rather, the remaining shares authorized under the 2005 Plan will be available for issuance under the 2015 Plan. | |||||||||||||||||
The 1996 Equity Incentive Plan (the “1996 Plan”) and the 2005 Plan, which amended, restated and retitled the 1996 Plan, were adopted to provide a means by which selected eligible service providers to the Company and its affiliates could be given an opportunity to acquire an equity interest in the Company. The 2005 Plan expired by its terms on March 2, 2015. During 2000, the Board of Directors approved the termination of the 1996 Non-Employee Directors’ Stock Option Plan (the “Directors’ Plan”). Neither termination of the 2005 Plan, not the Director’s Plan, had any effect on options already outstanding under the Directors’ Plan. | |||||||||||||||||
Stock Option Activity | |||||||||||||||||
The following is a summary of activity under the 1996 Plan, the 2005 Plan and the Directors’ Plan for the three months ended March 31, 2015: | |||||||||||||||||
Shares Available for | |||||||||||||||||
Future Grant | |||||||||||||||||
Balance at January 1, 2015 | 688,001 | ||||||||||||||||
Options granted | (223,178 | ) | |||||||||||||||
Options cancelled | 944 | ||||||||||||||||
Balance at March 31, 2015 | 465,767 | ||||||||||||||||
Options Outstanding | |||||||||||||||||
Number of | Weighted | Weighted | Aggregate | ||||||||||||||
Shares | Average | Remaining | Intrinsic | ||||||||||||||
Exercise | Contractual | Value | |||||||||||||||
Price | Term | ||||||||||||||||
Outstanding at January 1, 2015 | 515,366 | $ | 15.55 | ||||||||||||||
Options granted | 223,178 | $ | 7.33 | ||||||||||||||
Options cancelled | (944 | ) | $ | 262.06 | |||||||||||||
Outstanding at March 31, 2015 | 737,600 | $ | 12.75 | 8.16 | $ | 19,964 | |||||||||||
Exercisable at March 31, 2015 | 215,020 | $ | 23.21 | 5.22 | $ | 19,964 | |||||||||||
No stock options were exercised during the three months ended March 31, 2015. The total amount of unrecognized compensation cost related to non-vested stock options and stock purchases, net of forfeitures, was $1,950,000 as of March 31, 2015. This amount will be recognized over a weighted average period of 2.78 years. |
Net_Income_Loss_and_Comprehens
Net Income (Loss) and Comprehensive Income (Loss) Per Common Share | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Earnings Per Share [Abstract] | |||||||||
Net Income (Loss) and Comprehensive Income (Loss) Per Common Share | 9. Net Income (Loss) and Comprehensive Income (Loss) Per Common Share | ||||||||
The following data was used in computing net income/(loss) per share and the effect on the weighted-average number of shares of potentially dilutive common stock. | |||||||||
Three Months Ended | |||||||||
March 31 | |||||||||
2015 | 2014 | ||||||||
(In thousands, except per share amounts) | |||||||||
Numerator: | |||||||||
Net income/(loss) | $ | (1,163 | ) | $ | 7,755 | ||||
Denominator: | |||||||||
Weighted average number of common shares used in basic net income/(loss) per share | 14,727 | 14,669 | |||||||
Effect of dilutive securities (using treasury stock method): | |||||||||
Common stock options and restricted stock awards and units | — | 44 | |||||||
Weighted average number of common shares and dilutive potential common shares used in diluted net income/(loss) per share | 14,727 | 14,713 | |||||||
Basic and diluted net income/(loss) per share | $ | (0.08 | ) | $ | 0.53 | ||||
For the three months ended March 31, 2015, dilutive securities were not included in the computation of net loss per share as the effect would be anti-dilutive due to the Company’s net loss position. For the three months ended March 31, 2014, the Company excluded 179,000 shares of outstanding stock options and 71,000 shares of warrants, from the calculation of diluted net income/(loss) per share. These shares were excluded because the exercise prices of these stock options and warrants were greater than or equal to the average market price of the common shares during the period and the inclusion of these shares would be anti- dilutive. | |||||||||
At March 31, 2015 and 2014, the Company had the following dilutive securities outstanding (in thousands): | |||||||||
Three months ended | |||||||||
March 31, | |||||||||
2015 | 2014 | ||||||||
Outstanding stock options | 738 | 460 | |||||||
Restricted stock | — | 16 | |||||||
Unvested restricted stock units | 10 | 10 |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2015 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates |
The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates include useful lives for property and equipment and related depreciation calculations, assumptions for valuing options and warrants, and income taxes. Actual results could differ from these estimates. | |
Cash and Cash Equivalents | Cash and Cash Equivalents |
All highly liquid investments with maturities of three months or less at the time of purchase are classified as cash equivalents. | |
Property and Equipment | Property and Equipment |
The Company records property and equipment at cost and calculates depreciation using the straight-line method over the estimated useful lives of the respective assets. Machinery and equipment includes external costs incurred for validation of the equipment. The Company does not capitalize internal validation expense. Computer equipment and software includes capitalized computer software. All of the Company’s capitalized software is purchased; the Company has no internally-developed computer software. Leasehold improvements are depreciated over the shorter of the term of the lease or useful life of the improvement. | |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets |
The Company reviews for impairment whenever events or changes in circumstances indicate that the carrying amount of property and equipment may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written down to their estimated fair values and the loss is recognized in the consolidated statements of operations. | |
Accounting for Costs Associated with Exit or Disposal Activities | Accounting for Costs Associated with Exit or Disposal Activities |
The Company recognizes a liability for the cost associated with an exit or disposal activity that is measured initially at its fair value in the period in which the liability is incurred. The Company accounted for the partial sublease of its headquarters building as an exit activity and recorded the sublease loss in its Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) (see Note 5). | |
Costs to terminate an operating lease or other contracts are (a) costs to terminate the contract before the end of its term or (b) costs that will continue to be incurred under the contract for its remaining term without economic benefit to the entity. In periods subsequent to initial measurement, changes to the liability are measured using the credit-adjusted risk-free rate that was used to measure the liability initially. | |
Revenue Recognition | Revenue Recognition |
Contract revenues consist of revenues from grants, collaboration agreements and feasibility studies. License and collaboration revenue is primarily generated through agreements with strategic partners for the development and commercialization of our product candidates. The terms of the agreement typically include non-refundable upfront fees, funding of research and development activities, payments based upon achievement of milestones and royalties on net product sales. The Company recognizes revenue under the provisions of the Securities and Exchange Commission issued Staff Accounting Bulletin 104, Topic 13, Revenue Recognition Revised and Updated (“SAB Topic 13”) and ASC 605-25, Revenue Recognition-Multiple Elements. Revenue for arrangements not having multiple deliverables, as outlined in ASC 605-25, is recognized once costs are incurred and collectability is reasonably assured. | |
Revenue is recognized when there is persuasive evidence that an arrangement exists, delivery has occurred, the price is fixed and determinable and collection is reasonably assured. Multiple-deliverable arrangements, such as license and development agreements, are analyzed to determine whether the deliverables can be separated or whether they must be accounted for as a single unit of accounting. When deliverables are separable, consideration received is allocated to the separate units of accounting based on the relative selling price method and the appropriate revenue recognition principles are applied to each unit. When the Company determines that an arrangement should be accounted for as a single unit of accounting, it must determine the period over which the performance obligations will be performed and revenue will be recognized. | |
The Company estimates its performance period used for revenue recognition based on the specific terms of each agreement, and adjusts the performance periods, if appropriate, based on the applicable facts and circumstances. Significant management judgment may be required to determine the level of effort required under an arrangement and the period over which the Company is expected to complete its performance obligations under the arrangement. If the Company cannot reasonably estimate when its performance obligations either are completed or become inconsequential, then revenue recognition is deferred until the Company can reasonably make such estimates. Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up method. | |
The Company adopted the provisions of Accounting Standards Update No. 2009-13, Revenue Recognition (Topic 605); Multiple-Deliverable Revenue Arrangements (“ASU 2009-13”) for new and materially modified arrangements originating on or after January 1, 2010. ASU 2009-13 provides updated guidance on how the deliverables in an arrangement should be separated, and how consideration should be allocated, and it changes the level of evidence of standalone selling price required to separate deliverables by allowing a vendor to make its best estimate of the standalone selling price of deliverables when vendor-specific objective evidence or third-party evidence of selling price is not available. | |
The Company allocates non-contingent consideration to each stand-alone deliverable based upon the relative selling price of each element. When applying the relative selling price method, the Company determines the selling price for each deliverable using vendor-specific objective evidence, or VSOE, of selling price, if it exists, or third-party evidence, or TPE, of selling price, if it exists. If neither VSOE nor TPE of selling price exist for a deliverable, the Company uses best estimated selling price, or BESP, for that deliverable. | |
Assuming the elements meet the revenue recognition guidelines, the revenue recognition methodology prescribed for each unit of accounting is summarized below: | |
Upfront Fees—The Company defers recognition of non-refundable upfront fees if there are continuing performance obligations without which the technology licensed has no utility to the licensee. If the Company has continuing performance obligations through research and development services that are required because know-how and expertise related to the technology is proprietary to the Company, or can only be performed by the Company, then such up-front fees are deferred and recognized over the estimated period of the performance obligation. The Company bases the estimate of the period of performance on factors in the contract. Actual time frames could vary and could result in material changes to the results of operations. When the collaboration partners request the Company to continue performing the research and development services in collaboration beyond the initial period of performance the remaining unamortized deferred revenue and any new continuation or license fees are recognized over the extended period of performance. | |
Funded Research and Development and Grant Revenue—Revenue from research and development services is recognized during the period in which the services are performed and is based upon the number of full-time-equivalent personnel working on the specific project at the agreed-upon rate. The full-time equivalent amount can vary each year if the contracts allow for a percentage increase determined by relevant salary surveys, if applicable. Reimbursements from collaborative partners and grants for agreed upon direct costs including direct materials and outsourced, or subcontracted, pre-clinical and clinical studies and contract manufacturing are classified as revenue and recognized in the period the reimbursable expenses are incurred. Payments received in advance are recorded as deferred revenue until the research and development services are performed or costs are incurred. | |
Milestones—Substantive milestone payments are considered to be performance bonuses that are recognized upon achievement of the milestone only if all of the following conditions are met: the milestone payments are non-refundable; achievement of the milestone involves a degree of risk and was not reasonably assured at the inception of the arrangement; substantive effort is involved in achieving the milestone; the amount of the milestone is reasonable in relation to the effort expended or the risk associated with achievement of the milestone; and a reasonable amount of time passes between the up-front license payment and the first milestone payment as well as between each subsequent milestone payment. If any of these conditions are not met, the milestone payments are deferred and recognized as revenue over the term of the arrangement as the Company completes its performance obligations. | |
Royalties—The Company recognizes royalty revenues from licensed products upon the sale of the related products. | |
Research and Development | Research and Development |
Research and development expenses consist of costs incurred for company-sponsored, collaborative and contracted research and development activities. These costs include direct and research-related overhead expenses. The Company expenses research and development costs as such costs are incurred. | |
Stock-Based Compensation | Stock-Based Compensation |
The Company accounts for share-based payment arrangements in accordance with ASC 718, Compensation-Stock Compensation and ASC 505-50, Equity-Equity Based Payments to Non-Employees which requires the recognition of compensation expense, using a fair-value based method, for all costs related to share-based payments including stock options and restricted stock awards and stock issued under the employee stock purchase plan. These standards require companies to estimate the fair value of share-based payment awards on the date of the grant using an option-pricing model. See Note 8 for further discussion of the Company’s stock-based compensation plans. | |
Income Taxes | Income Taxes |
The Company makes certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes. As part of the process of preparing the financial statements, the Company is required to estimate income taxes in each of the jurisdictions in which it operates. This process involves the Company estimating its current tax exposure under the most recent tax laws and assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities which are included in the Company’s consolidated balance sheets. The Company estimated its current tax exposure to be zero as it expects to be able to utilize its net operating loss carryovers (NOLs) to offset the income recognized in the quarter and year to date. The Company has updated its Section 382 analysis through December 31, 2014 and noted no additional changes since the last change in 2010. | |
The Company assesses the likelihood that it will be able to recover its deferred tax assets. The Company considers all available evidence, both positive and negative, including the historical levels of income and losses, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. If the Company does not consider it more likely than not that it will recover its deferred tax assets, the Company records a valuation allowance against the deferred tax assets that it estimates will not ultimately be recoverable. At March 31, 2015, and December 31, 2014 the Company believed that the amount of its deferred income taxes would not be ultimately recovered. Accordingly, the Company recorded a full valuation allowance for deferred tax assets. However, should there be a change in the Company’s ability to recover its deferred tax assets the Company would recognize a benefit to its tax provision in the period in which it determines that it is more likely than not that it will recover its deferred tax assets. | |
Net Income/(Loss) Per Common Share | Net Income/(Loss) Per Common Share |
Basic net income/(loss) per common share is computed using the weighted-average number of shares of common stock outstanding during the period less the weighted-average number of restricted shares of common stock subject to repurchase. Potentially dilutive securities were not included in the net loss per common share calculation for the three months ended March 31, 2015, because the inclusion of such shares would have had an anti-dilutive effect but were included for the three months ended March 31, 2014. | |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements |
There have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2015, as compared to the recent accounting pronouncements described in the Company’s 2014 Annual Report on Form 10-K that are of significance or potential significance to the Company. |
Sublease_Agreement_and_Lease_E1
Sublease Agreement and Lease Exit Liability (Tables) | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Restructuring and Related Activities [Abstract] | |||||
Schedule of Lease Exit Liability Activity | The lease exit liability activity for the three months ended March 31, 2015 is as follows (in thousands): | ||||
Three | |||||
Months | |||||
Ended | |||||
March 31, | |||||
2015 | |||||
Balance at January 1, 2015 | $ | 297 | |||
Accretion expense | 4 | ||||
Lease payments | (47 | ) | |||
Balance at March 31, 2015 | $ | 254 |
StockBased_Compensation_and_St1
Stock-Based Compensation and Stock Options and Awards (Tables) | 3 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||
Schedule of Stock-Based Compensation Expense | The following table shows the stock-based compensation expense included in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2015 and 2014 (in thousands): | ||||||||||||||||
March 31, | March 31, | ||||||||||||||||
2015 | 2014 | ||||||||||||||||
Costs and expenses: | |||||||||||||||||
Research and development | $ | 78 | $ | 57 | |||||||||||||
General and administrative | 107 | 136 | |||||||||||||||
Total stock-based compensation expense | $ | 185 | $ | 193 | |||||||||||||
Schedule of Activity Under Stock Option Plan | The following is a summary of activity under the 1996 Plan, the 2005 Plan and the Directors’ Plan for the three months ended March 31, 2015: | ||||||||||||||||
Shares Available for | |||||||||||||||||
Future Grant | |||||||||||||||||
Balance at January 1, 2015 | 688,001 | ||||||||||||||||
Options granted | (223,178 | ) | |||||||||||||||
Options cancelled | 944 | ||||||||||||||||
Balance at March 31, 2015 | 465,767 | ||||||||||||||||
Options Outstanding | |||||||||||||||||
Number of | Weighted | Weighted | Aggregate | ||||||||||||||
Shares | Average | Remaining | Intrinsic | ||||||||||||||
Exercise | Contractual | Value | |||||||||||||||
Price | Term | ||||||||||||||||
Outstanding at January 1, 2015 | 515,366 | $ | 15.55 | ||||||||||||||
Options granted | 223,178 | $ | 7.33 | ||||||||||||||
Options cancelled | (944 | ) | $ | 262.06 | |||||||||||||
Outstanding at March 31, 2015 | 737,600 | $ | 12.75 | 8.16 | $ | 19,964 | |||||||||||
Exercisable at March 31, 2015 | 215,020 | $ | 23.21 | 5.22 | $ | 19,964 | |||||||||||
Net_Income_Loss_and_Comprehens1
Net Income (Loss) and Comprehensive Income (Loss) Per Common Share (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Earnings Per Share [Abstract] | |||||||||
Schedule of Computing Net Income/(Loss) Per Share and Effect on Weighted-Average Number of Shares of Potentially Dilutive Common Stock | The following data was used in computing net income/(loss) per share and the effect on the weighted-average number of shares of potentially dilutive common stock. | ||||||||
Three Months Ended | |||||||||
March 31 | |||||||||
2015 | 2014 | ||||||||
(In thousands, except per share amounts) | |||||||||
Numerator: | |||||||||
Net income/(loss) | $ | (1,163 | ) | $ | 7,755 | ||||
Denominator: | |||||||||
Weighted average number of common shares used in basic net income/(loss) per share | 14,727 | 14,669 | |||||||
Effect of dilutive securities (using treasury stock method): | |||||||||
Common stock options and restricted stock awards and units | — | 44 | |||||||
Weighted average number of common shares and dilutive potential common shares used in diluted net income/(loss) per share | 14,727 | 14,713 | |||||||
Basic and diluted net income/(loss) per share | $ | (0.08 | ) | $ | 0.53 | ||||
Schedule of Dilutive Securities Outstanding not Included in Computation of Net Loss Per Share | At March 31, 2015 and 2014, the Company had the following dilutive securities outstanding (in thousands): | ||||||||
Three months ended | |||||||||
March 31, | |||||||||
2015 | 2014 | ||||||||
Outstanding stock options | 738 | 460 | |||||||
Restricted stock | — | 16 | |||||||
Unvested restricted stock units | 10 | 10 |
Organization_Basis_of_Presenta1
Organization, Basis of Presentation and Liquidity - Additional Information (Detail) (USD $) | 3 Months Ended | 0 Months Ended | |||
Mar. 31, 2015 | 23-May-14 | Dec. 31, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | |
Segment | |||||
Summary Of Organization And Operations [Line Items] | |||||
Number of operating segment | 1 | ||||
Accumulated deficit | ($389,435,000) | ($388,272,000) | |||
Working capital | 42,800,000 | ||||
Shareholders' equity | 38,137,000 | 39,115,000 | |||
Cash and cash equivalents | $48,576,000 | $47,990,000 | $41,705,000 | $48,131,000 | |
Common stock, shares authorized | 25,045,765 | 25,045,765 | 25,045,765 | ||
Common Stock [Member] | |||||
Summary Of Organization And Operations [Line Items] | |||||
Reverse stock split ratio | 1-for-40 | ||||
Reverse stock split conversion ratio | 0.025 | ||||
Before Stock Split [Member] | |||||
Summary Of Organization And Operations [Line Items] | |||||
Common stock, shares authorized | 1,001,830,627 |
Summary_of_Significant_Account2
Summary of Significant Accounting Policies - Additional Information (Detail) (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
Estimated current tax exposure | $0 |
Sublease_Agreement_and_Lease_E2
Sublease Agreement and Lease Exit Liability - Additional Information (Detail) (USD $) | 3 Months Ended | 12 Months Ended | ||||
Mar. 31, 2015 | Dec. 31, 2007 | Dec. 31, 2014 | Jul. 18, 2007 | Jan. 31, 2012 | Apr. 30, 2009 | |
sqft | sqft | sqft | ||||
Lease Rental Expenses [Line Items] | ||||||
Lease agreement initiation date | 18-Jul-07 | |||||
Sublease agreement, number of square feet | 72,000 | |||||
Lease agreement expiration date | 2016-07 | |||||
Impairment expense related to the sublease | $2,100,000 | |||||
Lease exit current liability | 199,000 | 193,000 | ||||
Lease exit non-current liability | 55,000 | 104,000 | ||||
Lease exit liability | $254,000 | $297,000 | ||||
Mendel [Member] | ||||||
Lease Rental Expenses [Line Items] | ||||||
Sublease agreement, number of square feet | 48,000 | |||||
Amendment to sublease agreement, number of square feet | 3,300 | 1,550 |
Sublease_Agreement_and_Lease_E3
Sublease Agreement and Lease Exit Liability - Schedule of Lease Exit Liability Activity (Detail) (USD $) | 3 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2015 |
Leases [Abstract] | |
Balance at January 1, 2015 | $297 |
Accretion expense | 4 |
Lease payments | -47 |
Balance at March 31, 2015 | $254 |
Collaboration_Agreement_Grifol
Collaboration Agreement - Grifols License and Collaboration Agreement - Additional Information (Detail) (USD $) | 1 Months Ended | 3 Months Ended | ||||
Aug. 31, 2013 | Mar. 31, 2015 | Dec. 31, 2014 | Aug. 27, 2013 | Jul. 15, 2013 | 20-May-13 | |
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||
Common stock, shares issued and sell | 14,726,960 | 14,726,960 | ||||
Sale of common stock | 427,572,000 | $427,387,000 | $41,400,000 | |||
Shareholders holding percentage | 50.00% | |||||
Before Stock Split [Member] | ||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||
Common stock, shares issued and sell | 8,349,201 | |||||
Common stock, purchase price per share | $4.96 | |||||
Grifols [Member] | ||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||
Stock Purchase Agreement | 20-May-13 | |||||
Payment received from investors and related party | 26,000,000 | |||||
Closing price of common stock | $8 | |||||
Common stock discount per share | $3.04 | |||||
Common stock discount on share | $15,900,000 | |||||
Grifols [Member] | Before Stock Split [Member] | ||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||
Common stock, shares issued and sell | 5,244,363 | |||||
Closing price of common stock | $0.20 | |||||
Investors [Member] | Before Stock Split [Member] | ||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||||
Common stock, shares issued and sell | 3,104,838 |
Collaboration_Agreement_Licens
Collaboration Agreement - License Agreement - Additional Information (Detail) (USD $) | 3 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||
Contract revenue - related party | $8,739,000 | $6,242,000 | |
Deferred revenue | 837,000 | 790,000 | |
Long-term deferred revenue | 7,845,000 | 7,845,000 | |
Long term deferred Revenue, milestone payment received | 5,000,000 | ||
Milestone payment will be recognized as revenue upon receiving the first regulatory approval | 5,000,000 | ||
License Agreement with Grifols [Member] | |||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||
Future reimbursable research and development expenses by partner | 65,000,000 | ||
Payments for development milestones by partner | 25,000,000 | ||
Patent coverage or orphan drug designation period | 10 years | ||
Percentage of reduction on royalty payment | 50.00% | ||
Fully burdened development expenses | $8,700,000 | $6,200,000 | |
License Agreement with Grifols [Member] | Minimum [Member] | |||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||
Royalty payments on net sales rate | 12.50% | ||
License Agreement with Grifols [Member] | Maximum [Member] | |||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||
Royalty payments on net sales rate | 20.00% |
Collaboration_Agreement_Govern
Collaboration Agreement - Governance Agreement - Additional Information (Detail) | 3 Months Ended |
Mar. 31, 2015 | |
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |
Minimum target percentage of beneficial ownership to be maintain under governance agreement | 35.00% |
Governance Agreement [Member] | |
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |
Number of independent directors | 3 |
Number of directors designated by partner | 2 |
Number of chief executive officer | 1 |
Period to be consider after the first commercial sale for restriction to acquire and sale of stock | 12 months |
Royalty_Agreement_Note_Payable1
Royalty Agreement, Note Payable, and Accrued Interest - Additional Information (Detail) (USD $) | 3 Months Ended | 12 Months Ended | |||
Mar. 31, 2015 | Mar. 31, 2014 | Jun. 30, 2011 | Dec. 31, 2012 | Dec. 31, 2013 | |
Payables and Accruals [Abstract] | |||||
Royalty financing agreement with a syndicate of lenders | $8,500,000 | ||||
Royalty financing agreement fees and expenses | 473,000 | ||||
Royalty financing agreement, Interest Reserve Account | 250,000 | ||||
Royalties payable rate | 100.00% | ||||
Capitalization of fees expenses | 473,000 | ||||
Lender warrants to purchase common stock | 71,022 | ||||
Class of warrant or right, exercise price of warrants or rights | $8.80 | ||||
Common stock premium rate | 20.00% | ||||
Number of trading days for the average closing price | 10 days | ||||
Warrants expiration date | 31-Dec-16 | ||||
Warrants account for as equity instrument, fair value | 390,000 | ||||
Discount interest rate | 18.70% | ||||
Capitalized expenses amortization period | 48 months | ||||
Cash payments to lenders for accrued interest | 167,000 | ||||
Cumulative cash shortfall agreement from default stands | 525,000 | ||||
Transferred rights, effective date | 28-Feb-14 | ||||
Gain from fair value of assigned interests | 5,823,000 | ||||
Gain from extinguishment of debt | $3,041,000 |
StockBased_Compensation_and_St2
Stock-Based Compensation and Stock Options and Awards - Schedule of Stock-Based Compensation Expense (Detail) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Costs and expenses: | ||
Total stock-based compensation expense | $185 | $193 |
Research and development [Member] | ||
Costs and expenses: | ||
Total stock-based compensation expense | 78 | 57 |
General and administrative [Member] | ||
Costs and expenses: | ||
Total stock-based compensation expense | $107 | $136 |
StockBased_Compensation_and_St3
Stock-Based Compensation and Stock Options and Awards - Additional Information (Detail) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Capitalized stock-based employee compensation cost | $0 | $0 |
Tax benefit associated with stock-based compensation expense | 0 | 0 |
Unvested restricted stock [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total fair value of restricted stock awards vested | 0 | |
Company retained purchase rights on unvested restricted stock awards, shares | 300 | |
Stock options [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock options exercised during the period | 0 | |
Unvested stock options and stock purchases [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Unrecognized compensation cost related to non-vested stock options and stock purchases | $1,950,000 | |
Unrecognized compensation costs, weighted average period expected to be recognized | 2 years 9 months 11 days |
StockBased_Compensation_and_St4
Stock-Based Compensation and Stock Options and Awards - Schedule of Activity Under Stock Option Plan - Shares Available for Future Grant (Detail) (Stock options [Member]) | 3 Months Ended |
Mar. 31, 2015 | |
Stock options [Member] | |
Shares Available for Future Grant | |
Balance at January 1, 2015 | 688,001 |
Options granted | -223,178 |
Options cancelled | 944 |
Balance at March 31, 2015 | 465,767 |
StockBased_Compensation_and_St5
Stock-Based Compensation and Stock Options and Awards - Schedule of Activity Under Stock Option Plan - Options Outstanding (Detail) (Stock options [Member], USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Stock options [Member] | |
Number of Shares | |
Outstanding at January 1, 2015 | 515,366 |
Options granted | 223,178 |
Options cancelled | -944 |
Outstanding at March 31, 2015 | 737,600 |
Exercisable at March 31, 2015 | 215,020 |
Weighted Average Exercise Price | |
Outstanding at January 1, 2015 | $15.55 |
Options granted | $7.33 |
Options cancelled | $262.06 |
Outstanding at March 31, 2015 | $12.75 |
Exercisable at March 31, 2015 | $23.21 |
Weighted Average Remaining Contractual Term | |
Outstanding at March 31, 2015 | 8 years 1 month 28 days |
Exercisable at March 31, 2015 | 5 years 2 months 19 days |
Aggregate Intrinsic Value | |
Outstanding at March 31, 2015 | $19,964 |
Exercisable at March 31, 2015 | $19,964 |
Net_Income_Loss_and_Comprehens2
Net Income (Loss) and Comprehensive Income (Loss) Per Common Share - Schedule of Computing Net Income/(Loss) Per Share and Effect on Weighted-Average Number of Shares of Potentially Dilutive Common Stock (Detail) (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Numerator: | ||
Net income/(loss) | ($1,163) | $7,755 |
Denominator: | ||
Weighted average number of common shares used in basic net income/(loss) per share | 14,727 | 14,669 |
Effect of dilutive securities (using treasury stock method): | ||
Common stock options and restricted stock awards and units | 44 | |
Weighted average number of common shares and dilutive potential common shares used in diluted net income/(loss) per share | 14,727 | 14,713 |
Basic and diluted net income/(loss) per share | ($0.08) | $0.53 |
Net_Income_Loss_and_Comprehens3
Net Income (Loss) and Comprehensive Income (Loss) Per Common Share - Additional Information (Detail) | 3 Months Ended |
Mar. 31, 2015 | |
Stock Option [Member] | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Shares excluded from calculation of diluted net income/ (loss) per share | 179,000 |
Warrants [Member] | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Shares excluded from calculation of diluted net income/ (loss) per share | 71,000 |
Net_Income_Loss_and_Comprehens4
Net Income (Loss) and Comprehensive Income (Loss) Per Common Share - Schedule of Dilutive Securities Outstanding not Included in Computation of Net Loss Per Share (Detail) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Stock options [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Dilutive securities outstanding | 738,000 | 460,000 |
Unvested restricted stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Dilutive securities outstanding | 16,000 | |
Restricted Stock Units [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Dilutive securities outstanding | 10,000 | 10,000 |