Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2013 |
Accounting Policies [Abstract] | ' |
Basis of Presentation | ' |
Basis of Presentation |
The accompanying consolidated financial statements include the accounts of Antares Pharma, Inc. and its three wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. |
Certain prior year amounts have been reclassified in the consolidated financial statements to conform to the current year presentation. These reclassifications were made to present sales and marketing as a separate line item as the Company commences commercialization of OTREXUP™. Business development expenses previously included within sales, marketing and business development have been reclassified to general and administrative expense. These reclassifications had no effect on previously reported net income or total operating expenses. |
Use of Estimates | ' |
Use of Estimates |
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s significant accounting estimates relate to the revenue recognition periods for license revenues, product warranty accruals and determination of the fair value and recoverability of goodwill and patent rights. Actual results could differ from these estimates. |
Foreign Currency Translation | ' |
Foreign Currency Translation |
The majority of the foreign subsidiaries revenues are denominated in U.S. dollars, and any required funding of the subsidiaries is provided by the U.S. parent. Nearly all operating expenses of the foreign subsidiaries, including labor, materials, leasing arrangements and other operating costs, are denominated in Swiss Francs. Additionally, bank accounts held by foreign subsidiaries are denominated in Swiss Francs, there is a low volume of intercompany transactions and there is not an extensive interrelationship between the operations of the subsidiaries and the parent company. As such, the Company has determined that the Swiss Franc is the functional currency for its foreign subsidiaries. The reporting currency for the Company is the United States Dollar (“USD”). The financial statements of the Company’s foreign subsidiaries are translated into USD for consolidation purposes. All assets and liabilities are translated using period-end exchange rates and statements of operations items are translated using average exchange rates for the period. The resulting translation adjustments are recorded as a separate component of stockholders’ equity, comprising all of the accumulated other comprehensive income (loss). Sales to certain customers by the U.S. parent are in currencies other than the U.S. dollar and are subject to foreign currency exchange rate fluctuations. Foreign currency transaction gains and losses are included in foreign exchange gain (loss) in the consolidated statements of operations. |
Cash Equivalents | ' |
Cash Equivalents |
The Company considers highly liquid debt instruments with original maturities of 90 days or less to be cash equivalents. |
Allowance for Doubtful Accounts | ' |
Allowance for Doubtful Accounts |
Trade accounts receivable are stated at the amount the Company expects to collect. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. The Company’s accounts receivable balance is typically due from its large pharmaceutical customers such as Teva and Ferring, and at December 31, 2013, over 95% of the accounts receivable balance was due from these organizations. These companies have historically paid timely and have been financially stable organizations. Due to the nature of the accounts receivable balance, the Company believes the risk of doubtful accounts is minimal. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. The Company provides for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. The Company recorded no bad debt expense in each of the last three years. The allowance for doubtful accounts balance was $10,000 at December 31, 2013 and 2012. |
Inventories | ' |
Inventories |
Inventories are stated at the lower of cost or market. Cost is determined on a first-in, first-out basis. Certain components of the Company’s products are provided by a limited number of vendors, and the Company’s production and assembly operations are outsourced to third-party suppliers where substantially all of the Company’s inventory is located. Disruption of supply from key vendors or third-party suppliers may have a material adverse impact on the Company’s operations. |
Equipment, Molds, Furniture, and Fixtures | ' |
Equipment, Molds, Furniture, and Fixtures |
Equipment, molds, furniture, and fixtures are stated at cost and are depreciated using the straight-line method over their estimated useful lives ranging from three to ten years. Depreciation expense was $359,471, $145,775 and $86,636 for the years ended December 31, 2013, 2012 and 2011, respectively. |
Goodwill | ' |
Goodwill |
The Company has $1,095,355 of goodwill recorded as of December 31, 2013 that relates to the Minnesota reporting unit. The Company evaluates the carrying amount of goodwill on December 31 of each year and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the Minnesota reporting unit below its carrying amount. Such circumstances could include, but are not limited to: (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, (3) an adverse action or assessment by a regulator, or (4) a sustained significant drop in the Company’s stock price. When evaluating whether goodwill is impaired, the Company compares the fair value of the Minnesota reporting unit to the carrying amount, including goodwill. If the carrying amount of the Minnesota reporting unit exceeded its fair value, then the amount of the impairment loss would be measured. The impairment loss would be calculated by comparing the implied fair value of goodwill to its carrying amount. In calculating the implied fair value of goodwill, the fair value of the Minnesota reporting unit would be allocated to all of its other assets and liabilities based on their fair values. The excess of the fair value of the Minnesota reporting unit over the amount assigned to its other assets and liabilities is the implied fair value of goodwill. An impairment loss would be recognized when the carrying amount of goodwill exceeds its implied fair value. |
In evaluating whether the fair value of the Minnesota reporting unit was below its carrying amount, the Company used the market capitalization of the Company at December 31, 2013, which was approximately $575 million, to calculate an estimate of fair value of the Minnesota reporting unit. The Company determined that the percentage of the total market capitalization of the Company at December 31, 2013 attributable to the Minnesota reporting unit would have to be unreasonably low before the fair value of the Minnesota reporting unit would be less than its carrying amount. In making this determination, the Company evaluated the activity at the Minnesota reporting unit compared to the total Company activity, and considered the source and potential value of agreements currently in place, the source of recent product sales and development revenue growth, the source of total Company revenue and the source of cash generating activities. After performing the market capitalization analysis and concluding that the fair value of the Minnesota reporting unit was not below its carrying amount, the Company determined that no further detailed determination of fair value was required. |
The Company’s evaluation of goodwill resulted in no impairment losses in 2013, 2012 and 2011. |
Patent Rights | ' |
Patent Rights |
The Company capitalizes the cost of obtaining and defending patent rights when there are projected future cash flows for marketed or partnered products associated with the patent. These capitalized costs are being amortized on a straight-line basis over periods ranging from five to fifteen years beginning on the earlier of the date the patent is issued or the first commercial sale of product utilizing such patent rights. Amortization expense for the years ended December 31, 2013, 2012 and 2011 was $133,788, $85,253 and $81,535, respectively, and is recorded in general and administrative expenses in the consolidated statements of operations. |
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of | ' |
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of |
Long-lived assets, including patent rights, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset or asset group. This analysis can be very subjective as the Company relies upon signed distribution or license agreements with variable cash flows to substantiate the recoverability of long-lived assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. |
Each year the Company reviews patent costs for impairment and identifies patents related to products for which there are no signed distribution or license agreements or for which no revenues or cash flows are anticipated. In 2013, the Company recognized expense of $65,022 in connection with the write off of patent costs related to abandoned patents or patents no longer connected with current products. No impairment charges were recognized in 2012 or 2011. The gross carrying amount and accumulated amortization of patents, which are the only intangible assets of the Company subject to amortization, were $2,635,706 and $1,290,529, respectively, at December 31, 2013 and were $2,244,086 and $1,120,434, respectively, at December 31, 2012. The Company’s estimated aggregate patent amortization expense for the next five years is approximately $145,000, $152,000, $160,000, $160,000 and $160,000 in 2014, 2015, 2016, 2017 and 2018, respectively. |
Fair Value of Financial Instruments | ' |
Fair Value of Financial Instruments |
Cash and cash equivalents are stated at cost, which approximates fair value. |
All short-term and long-term investments are U.S. Treasury bills or U.S. Treasury notes that are classified as held-to-maturity because the Company has the positive intent and ability to hold the securities to maturity. The securities are carried at their amortized cost. The fair value of all securities is determined by quoted market prices, which is a Level 1 fair value measurement. All long-term investments mature in less than two years. At December 31, 2013 the short-term investments had a fair value of $24,021,522 and a carrying value of $24,014,305 and the long-term investments had a fair value of $6,007,851 and a carrying value of $6,008,169. At December 31, 2012 the short-term investments had a fair value of $21,116,952 and a carrying value of $21,112,623 and the long-term investments had a fair value of $12,016,530 and a carrying value of $12,015,906. |
Revenue Recognition | ' |
Revenue Recognition |
The Company recognizes revenue from the sale of products and from license fees, milestones and royalties. Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred and title has passed, (iii) the price is fixed or determinable and (iv) collectability is reasonably assured. |
The Company sells its proprietary reusable needle-free injectors and related disposable products to pharmaceutical partners and through medical product distributors. The Company’s reusable injectors and related disposable products are not interchangeable with any competitive products and must be used together. The Company recognizes revenue upon shipment when title transfers. The Company offers no price protection or return rights other than for customary warranty claims. Sales terms and pricing are governed by license and distribution agreements. |
Revenue arrangements with multiple deliverables are divided into separate units of accounting if certain criteria are met, including whether the deliverable has stand-alone value to the customer, the customer has a general right of return relative to the delivered item and delivery or performance of the undelivered item is probable and substantially within the vendor’s control. Arrangement consideration is allocated at the inception of the arrangement to all deliverables on the basis of their relative selling price. The selling price for each deliverable is determined using: (i) vendor-specific objective evidence of selling price (VSOE), if it exists, (ii) third-party evidence of selling price (TPE) if VSOE does not exist, and (iii) the Company’s best estimate of the selling price if neither VSOE nor TPE exists. For transactions entered into prior to January 1, 2011, revenue is recognized for each deliverable based upon the applicable revenue recognition criteria discussed above and upon acceptance of goods or performance of service. Effective January 1, 2011, for new or significantly modified transactions, the Company allocates revenue consideration, excluding contingent consideration, based on the relative selling prices of the separate units of accounting contained within an arrangement containing multiple deliverables. |
Royalty revenues are recognized in the quarter earned when the Company has information available to determine the royalty amount, however, the majority of the Company’s royalty revenues are recognized one quarter in arrears as information is typically not available to determine quarterly royalty earnings until royalty statements are received from partners. |
At December 31, 2013, $6,386,416 of non-refundable cash payments received have been recorded as deferred revenue in cases where the revenue is not immediately recognized due to the earnings process not yet having been completed. |
Shipping and Handling Costs | ' |
Shipping and Handling Costs |
The Company records shipping and handling costs in cost of product sales. |
Stock-Based Compensation | ' |
Stock-Based Compensation |
The Company records compensation expense associated with share based awards granted to employees at the fair value of the award on the date of grant. The expense is recognized over the period during which an employee is required to provide services in exchange for the award. The Company uses the Black-Scholes option valuation model to determine the fair value of stock options. The fair value model includes various assumptions, including the expected volatility and expected life of the awards. |
Product Warranty | ' |
Product Warranty |
The Company provides a warranty on its reusable needle-free injector devices. Warranty terms for these devices sold to end-users by dealers and distributors are included in the device instruction manual included with each device sold. Warranty terms for these devices sold to pharmaceutical partners who provide their own warranty terms to end-users are included in the contracts with the pharmaceutical partners. The Company is obligated to repair or replace, at the Company’s option, a needle-free injector device found to be defective due to use of defective materials or faulty workmanship. The warranty does not apply to any product that has been used in violation of instructions as to the use of the product or to any product that has been neglected, altered, abused or used for a purpose other than the one for which it was manufactured. The warranty also does not apply to any damage or defect caused by unauthorized repair or the use of unauthorized parts. The warranty period on a needle-free injector device is typically 24 months from either the date of retail sale of the device by a dealer or distributor or the date of shipment to a customer if specified by contract. The Company recognizes the estimated cost of warranty obligations at the time the products are shipped based on historical claims incurred by the Company. The Company increased the warranty liability in 2011 due to an increase in product sales. Actual warranty claim costs could differ from these estimates. Warranty liability activity is as follows: |
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| | Balance at | | | Provisions | | | Claims | | | Balance at | |
Beginning of | End of |
Year | Year |
2013 | | $ | 100,000 | | | $ | 50,819 | | | $ | (50,819 | ) | | $ | 100,000 | |
2012 | | $ | 100,000 | | | $ | 72,893 | | | $ | (72,893 | ) | | $ | 100,000 | |
2011 | | $ | 20,000 | | | $ | 95,766 | | | $ | (15,766 | ) | | $ | 100,000 | |
Research and Development | ' |
Research and Development |
Research and development costs are expensed as incurred. |
Income Taxes | ' |
Income Taxes |
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. As of December 31, 2012, a valuation allowance was established to offset all of the Company’s deferred tax assets, and as of December 31, 2013, a valuation allowance was established to offset all of the U.S. deferred tax assets. For the year ended December 31, 2013, the Company recorded an income tax benefit of $300,000 after releasing $300,000 of the valuation allowance related to the Switzerland deferred tax assets. |
Net Loss Per Share | ' |
Net Loss Per Share |
Basic net loss per share is computed by dividing net income or loss available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed similar to basic net loss per share except that the weighted average shares outstanding are increased to include additional shares from the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options or warrants were exercised and that the proceeds from such exercise were used to acquire shares of common stock at the average market price during the reporting period. All potentially dilutive common shares were excluded from the calculation because they were anti-dilutive for all periods presented. Potentially dilutive securities at December 31, 2013, 2012 and 2011, excluded from dilutive loss per share as their effect is anti-dilutive, are as follows: |
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| | 2013 | | | 2012 | | | 2011 | | | | | |
Stock options and warrants | | | 8,242,992 | | | | 10,830,530 | | | | 17,860,956 | | | | | |