Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | Apr. 25, 2016 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | SGEN | |
Entity Registrant Name | SEATTLE GENETICS INC /WA | |
Entity Central Index Key | 1,060,736 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 140,167,032 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Assets | ||
Cash and cash equivalents | $ 119,547 | $ 102,255 |
Short-term investments | 489,943 | 547,396 |
Accounts receivable, net | 52,392 | 52,930 |
Inventories | 60,050 | 56,963 |
Prepaid expenses and other current assets | 14,211 | 11,515 |
Total current assets | 736,143 | 771,059 |
Property and equipment, net | 49,882 | 49,598 |
Long-term investments | 82,191 | 63,060 |
Other non-current assets | 11,170 | 11,378 |
Total assets | 879,386 | 895,095 |
Liabilities and Stockholders' Equity | ||
Accounts payable and accrued liabilities | 83,381 | 88,031 |
Current portion of deferred revenue | 39,329 | 46,235 |
Total current liabilities | 122,710 | 134,266 |
Long-term liabilities | ||
Deferred revenue, less current portion | 69,125 | 71,249 |
Deferred rent and other long-term liabilities | 3,445 | 3,669 |
Total long-term liabilities | $ 72,570 | $ 74,918 |
Commitments and contingencies (note 1) | ||
Stockholders' equity | ||
Preferred stock, $0.001 par value, 5,000 shares authorized; none issued | $ 0 | $ 0 |
Common stock, $0.001 par value, 250,000 shares authorized; 140,087 shares issued and outstanding at March 31, 2016 and 139,674 shares issued and outstanding at December 31, 2015 | 140 | 140 |
Additional paid-in capital | 1,631,263 | 1,613,383 |
Accumulated other comprehensive income (loss) | 110 | (683) |
Accumulated deficit | (947,407) | (926,929) |
Total stockholders' equity | 684,106 | 685,911 |
Total liabilities and stockholders' equity | $ 879,386 | $ 895,095 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 250,000,000 | 250,000,000 |
Common stock, shares issued | 140,087,000 | 139,674,000 |
Common stock, shares outstanding | 140,087,000 | 139,674,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Revenues | ||
Net product sales | $ 58,648 | $ 48,886 |
Collaboration and license agreement revenues | 20,176 | 22,221 |
Royalty revenues | 32,331 | 11,050 |
Total revenues | 111,155 | 82,157 |
Costs and expenses | ||
Cost of sales | 5,944 | 5,210 |
Cost of royalty revenues | 3,615 | 3,174 |
Research and development | 92,871 | 63,395 |
Selling, general and administrative | 29,747 | 32,121 |
Total costs and expenses | 132,177 | 103,900 |
Loss from operations | (21,022) | (21,743) |
Investment income | 544 | 53 |
Net loss | $ (20,478) | $ (21,690) |
Net loss per share-basic and diluted | $ (0.15) | $ (0.17) |
Shares used in computation of net loss per share-basic and diluted | 139,890 | 124,312 |
Comprehensive loss: | ||
Net loss | $ (20,478) | $ (21,690) |
Other comprehensive income: | ||
Unrealized gain on securities available for sale | 785 | 18 |
Foreign currency translation gain | 8 | 0 |
Comprehensive loss | $ (19,685) | $ (21,672) |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Operating activities | ||
Net loss | $ (20,478) | $ (21,690) |
Adjustments to reconcile net loss to net cash used in operating activities | ||
Share-based compensation | 12,182 | 7,735 |
Depreciation and amortization | 4,230 | 3,423 |
Amortization of premiums and accretion of discounts | 2,343 | 308 |
Deferred rent and other long-term liabilities | (224) | (194) |
Changes in operating assets and liabilities | ||
Accounts receivable, net | 538 | (10,339) |
Inventories | (3,087) | 382 |
Prepaid expenses and other assets | (2,672) | 3,652 |
Accounts payable and accrued liabilities | (1,639) | 3,118 |
Deferred revenue | (9,030) | (13,526) |
Net cash used in operating activities | (17,837) | (27,131) |
Investing activities | ||
Purchases of securities available for sale | (112,736) | (63,346) |
Proceeds from maturities of securities available for sale | 149,500 | 86,100 |
Purchases of property and equipment | (7,333) | (2,371) |
Net cash provided by investing activities | 29,431 | 20,383 |
Financing activities | ||
Proceeds from exercise of stock options and employee stock purchase plan | 5,698 | 12,392 |
Net cash provided by financing activities | 5,698 | 12,392 |
Net increase in cash and cash equivalents | 17,292 | 5,644 |
Cash and cash equivalents at beginning of period | 102,255 | 56,927 |
Cash and cash equivalents at end of period | $ 119,547 | $ 62,571 |
Summary of significant accounti
Summary of significant accounting policies | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Summary of significant accounting policies | 1. Summary of significant accounting policies Basis of presentation The accompanying unaudited condensed consolidated financial statements reflect the accounts of Seattle Genetics, Inc. and its wholly-owned subsidiaries (collectively “Seattle Genetics” or the “Company”). All intercompany transactions and balances have been eliminated. Management has determined that the Company operates in one segment: the development and sale of pharmaceutical products on its own behalf or in collaboration with others. Substantially all of the Company’s assets and revenues are related to operations in the United States; however, the Company also has subsidiaries in the United Kingdom, Switzerland and Canada. The condensed consolidated balance sheet data as of December 31, 2015 were derived from audited financial statements not included in this quarterly report on Form 10-Q. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or SEC, and generally accepted accounting principles in the United States of America, or GAAP, for unaudited condensed consolidated financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the Company’s financial position and results of its operations, as of and for the periods presented. Unless indicated otherwise, all amounts presented in financial tables are presented in thousands, except for per share and par value amounts. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the SEC. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The results of the Company’s operations for the three month period ended March 31, 2016 are not necessarily indicative of the results to be expected for the full year. Non-cash investing activities The Company had $2.4 and $5.4 million of accrued capital expenditures as of March 31, 2016 and December 31, 2015, respectively. Accrued capital expenditures have been treated as a non-cash investing activity and, accordingly, have not been included in the statement of cash flows until such amounts have been paid in cash. Other non-current assets Other non-current assets include a $5.0 million non-controlling investment in a privately-held company that is accounted for under the cost method of accounting. The Company periodically evaluates the carrying value of the investment if significant adverse events or circumstances indicate a possible impairment. As of March 31, 2016, no impairment in value has been observed. Revenue Recognition The Company’s revenues are comprised of ADCETRIS net product sales, amounts earned under its collaboration and licensing agreements and royalties. Revenue recognition is predicated upon persuasive evidence of an agreement existing, delivery of products or services being rendered, amounts payable being fixed or determinable, and collectibility being reasonably assured. Net product sales The Company sells ADCETRIS through a limited number of pharmaceutical distributors in the U.S. and Canada. Customers order ADCETRIS through these distributors and the Company typically ships product directly to the customer. The Company records product sales when title and risk of loss pass, which generally occurs upon delivery of the product to the customer. Product sales are recorded net of estimated government-mandated rebates and chargebacks, distribution fees, estimated product returns and other deductions. Accruals are established for these deductions and actual amounts incurred are offset against applicable accruals. The Company reflects these accruals as either a reduction in the related account receivable from the distributor, or as an accrued liability depending on the nature of the sales deduction. Sales deductions are based on management’s estimates that consider payer mix in target markets and experience to date. These estimates involve a substantial degree of judgment. Government-mandated rebates and chargebacks Distribution fees, product returns and other deductions Collaboration and license agreement revenues The Company has developed a proprietary technology for linking cytotoxic agents to monoclonal antibodies called antibody-drug conjugates, or ADCs. This proprietary technology is the basis of ADC collaborations that the Company has entered into in the ordinary course of its business with a number of biotechnology and pharmaceutical companies. Under these ADC collaboration agreements, the Company grants its collaborators research and commercial licenses to the Company’s technology and provides technology transfer services, technical advice, supplies and services for a period of time. If there are continuing performance obligations, the Company uses a time-based proportional performance model to recognize revenue over the Company’s performance period for the related agreement. Collaboration and license agreements are evaluated to determine whether the multiple elements and associated deliverables can be considered separate units of accounting. To date, the pre-commercial deliverables under the Company’s collaboration and license agreements have not qualified as separate units of accounting. The assessment of multiple element arrangements requires judgment in order to determine the appropriate point in time, or period of time, that revenue should be recognized. The Company believes that the development period in each agreement is a reasonable estimate of the performance obligation period of such agreement. Accordingly, all amounts received or due, including any upfront payments, maintenance fees, development and regulatory milestone payments and reimbursement payments, are recognized as revenue over the performance obligation periods of each agreement. These performance obligation periods typically range from one to three years. The agreements with Takeda Pharmaceutical Company Limited, or Takeda, and Genentech, Inc., a member of the Roche Group, or Genentech, have performance obligation periods of ten and eighteen years, respectively. All of the remaining performance obligation periods for our active collaborations are currently expected to be completed in four years or less. When no performance obligations are required of the Company, or following the completion of the performance obligation period, such amounts are recognized as revenue when collectibility is reasonably assured. Generally, all amounts received or due other than sales-based milestones and royalties are classified as collaboration and license agreement revenues as they are earned. Sales-based milestones and royalties are recognized as royalty revenue as they are reported to the Company. The Company’s collaboration and license agreements include contractual milestones. Generally, the milestone events contained in the Company’s collaboration and license agreements coincide with the progression of the collaborators’ product candidates from development, to regulatory approval and then to commercialization and fall into the following categories. Development milestones in the Company’s collaborations may include the following types of events: • Designation of a product candidate or initiation of pre-clinical studies. The Company’s collaborators must undertake significant pre-clinical research and studies to make a determination of the suitability of a product candidate and the time from those studies or designation to initiation of a clinical trial may take several years. • Initiation of a phase 1 clinical trial. Generally, phase 1 clinical trials may take one to two years to complete. • Initiation of a phase 2 clinical trial. Generally, phase 2 clinical trials may take one to three years to complete. • Initiation of a phase 3 clinical trial. Generally, phase 3 clinical trials may take two to six years to complete. Regulatory milestones in the Company’s collaborations may include the following types of events: • Filing of regulatory applications for marketing approval such as a Biologics License Application in the United States or a Marketing Authorization Application in Europe. Generally, it may take up to twelve months to prepare and submit regulatory filings. • Receiving marketing approval in a major market, such as in the United States, Europe, Japan or other significant countries. Generally it may take up to three years after a marketing application is submitted to obtain approval for marketing and pricing from the applicable regulatory agency. Commercialization milestones in the Company’s collaborations may include the following types of events: • First commercial sale in a particular market, such as in the United States, Europe, Japan or other significant countries. • Product sales in excess of a pre-specified threshold. The amount of time to achieve this type of milestone depends on several factors, including, but not limited to, the dollar amount of the threshold, the pricing of the product, market penetration of the product and the rate at which customers begin using the product. The Company’s ADC collaborators are solely responsible for the development of their product candidates and the achievement of milestones in any of the categories identified above is based solely on the collaborators’ efforts. In the case of the Company’s ADCETRIS collaboration with Takeda, the Company may be involved in certain development activities; however, the achievement of milestone events under the agreement is primarily based on activities undertaken by Takeda. The process of successfully developing a product candidate, obtaining regulatory approval and ultimately commercializing a product candidate is highly uncertain and the attainment of any milestones is therefore uncertain and difficult to predict. In addition, since the Company does not take a substantive role or control the research, development or commercialization of any products generated by its ADC collaborators, the Company is not able to reasonably estimate when, if at all, any milestone payments or royalties may be payable to the Company by its ADC collaborators. As such, the milestone payments associated with its ADC collaborations involve a substantial degree of uncertainty and risk that they may never be received. Similarly, even in those collaborations where the Company may have an active role in the development of the product candidate, such as the Company’s ADCETRIS collaboration with Takeda, the attainment of a milestone is based on the collaborator’s activities and is generally outside the direction and control of the Company. The Company generally invoices its collaborators and licensees on a monthly or quarterly basis, or upon the completion of the effort or achievement of a milestone, based on the terms of each agreement. Deferred revenue arises from amounts received in advance of the culmination of the earnings process and is recognized as revenue in future periods when the applicable revenue recognition criteria have been met. Deferred revenue expected to be recognized within the next twelve months is classified as a current liability. Royalty revenues and cost of royalty revenues Royalty revenues primarily reflect amounts earned under the ADCETRIS collaboration with Takeda. These royalties include sales royalties, which are based on a percentage of Takeda’s net sales at rates that range from the mid-teens to the mid-twenties based on sales volume, and commercial sales-based milestones. Takeda bears a portion of third-party royalty costs owed on its sales of ADCETRIS. This amount is included in royalty revenue in the Company’s consolidated financial statements. Cost of royalty revenues reflects amounts owed to the Company’s third party licensors related to Takeda’s sales of ADCETRIS. These amounts are recognized in the quarter in which Takeda reports its sales activity to the Company, which is the quarter following the related sales. Royalty revenues also include amounts earned in connection with the Company’s ADC collaborations. Recent accounting pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update entitled “ASU 2014-09, Revenue from Contracts with Customers.” The standard requires entities to recognize revenue through an evaluation that includes identification of the contract, identification of the performance obligations, determination of the transaction price, allocation of the transaction price to the performance obligations, and recognition of revenue as the entity satisfies the performance obligations. In August 2015, FASB issued an Accounting Standards Update entitled “ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date”, which defers the effective date of ASU 2014-09 to the Company’s fiscal year beginning January 1, 2018. In March 2016, FASB issued an Accounting Standards Update entitled “ASU 2016-08, Revenue from Contract with Customers: Principal versus Agent Considerations” which clarifies certain implementation guidance on principal versus agent considerations under the new revenue recognition framework. The Company is currently evaluating the guidance to determine the potential impact on its financial condition, results of operations and cash flows, and financial statement disclosures. In January 2016, FASB issued an Accounting Standards Update entitled “ASU 2016-01, Financial Instruments—Overall.” The standard addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The standard will become effective for the Company beginning January 1, 2018. The Company is currently evaluating the guidance to determine the potential impact on its financial condition, results of operations and cash flows, and financial statement disclosures. In February 2016, FASB issued an Accounting Standards Update entitled “ASU 2016-02, Leases.” The standard requires entities to recognize in the consolidated balance sheet a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. The standard will become effective for the Company beginning January 1, 2019, with early adoption permitted. The Company is currently evaluating the guidance to determine the potential impact on its financial condition, results of operations and cash flows, and financial statement disclosures. In March 2016, FASB issued an Accounting Standard Update entitled “ASU 2016-09, Compensation – Stock Compensation.” The standard is intended to simplify certain elements of accounting for share-based payment transactions, including the income tax consequences and classification on the statement of cash flows. The standards will become effective for the Company beginning on January 1, 2017, with early adoption permitted. The Company is currently evaluating the guidance to determine the potential impact on its financial condition, results of operations and cash flows, and financial statement disclosures. |
Net Loss per share
Net Loss per share | 3 Months Ended |
Mar. 31, 2016 | |
Earnings Per Share [Abstract] | |
Net Loss per share | 2. Net Loss per share Basic and diluted net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. The Company excluded all restricted stock units and options to purchase common stock from the calculation of basic and diluted net loss per share as such securities are anti-dilutive for all periods presented. The weighted-average number of restricted stock units and options to purchase common stock that have been excluded from the number of shares used to calculate basic and diluted net loss per share totaled 12,321,000 and 12,204,000 for the three months ended March 31, 2016 and 2015, respectively |
Investments
Investments | 3 Months Ended |
Mar. 31, 2016 | |
Investments, Debt and Equity Securities [Abstract] | |
Investments | 3. Investments Investments consisted of available-for-sale securities as follows (in thousands): Amortized cost Gross unrealized gains Gross unrealized losses Fair value March 31, 2016 U.S. Treasury securities $ 572,021 $ 190 $ (77 ) $ 572,134 Contractual Maturities Due in one year or less $ 391,167 $ 391,225 Due in one to two years 180,854 180,909 Total $ 572,021 $ 572,134 Amortized cost Gross unrealized gains Gross unrealized losses Fair value December 31, 2015 U.S. Treasury securities $ 611,128 $ 1 $ (673 ) $ 610,456 Contractual Maturities Due in one year or less $ 532,823 $ 532,418 Due in one to two years 78,305 78,038 Total $ 611,128 $ 610,456 Investments are presented in the accompanying consolidated balance sheets as follows (in thousands): March 31, December 31, Short-term investments $ 489,943 $ 547,396 Long-term investments 82,191 63,060 Total $ 572,134 $ 610,456 The aggregate estimated fair value of the Company’s investments with unrealized losses was as follows (in thousands): Period of continuous unrealized loss 12 Months or less Greater than 12 months Fair Gross Fair Gross March 31, 2016 U.S. Treasury securities $ 180,511 $ (77 ) $ NA $ NA December 31, 2015 U.S. Treasury securities $ 605,457 $ (673 ) $ NA $ NA |
Fair Value
Fair Value | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value | 4. Fair Value The Company holds short-term and long-term available-for-sale securities that are measured at fair value which is determined on a recurring basis according to a fair value hierarchy that prioritizes the inputs and assumptions used, and the valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described as follows: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2: Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly. Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. The determination of a financial instrument’s level within the fair value hierarchy is based on an assessment of the lowest level of any input that is significant to the fair value measurement. The Company considers observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. Level 1 investments, which include investments that are valued based on quoted market prices in active markets, consisted of U.S. Treasury securities. The Company did not hold any Level 2 or 3 investments as of March 31, 2016 or December 31, 2015 and did not transfer any investments between Levels 1, 2 and 3 during the three month period ended March 31, 2016. The following table presents the Company’s available-for-sale securities by level within the fair value hierarchy for the periods presented (in thousands): Fair value measurement using: Quoted prices in active markets for identical assets (Level 1) Other Significant Total As of March 31, 2016 Short-term investments—U.S. Treasury securities $ 489,943 $ 0 $ 0 $ 489,943 Long-term investments—U.S. Treasury securities 82,191 0 0 82,191 Total $ 572,134 $ 0 $ 0 $ 572,134 Fair value measurement using: Quoted prices Other Significant Total As of December 31, 2015 Short-term investments—U.S. Treasury securities $ 547,396 $ 0 $ 0 $ 547,396 Long-term investments—U.S. Treasury securities 63,060 0 0 63,060 Total $ 610,456 $ 0 $ 0 $ 610,456 |
Inventories
Inventories | 3 Months Ended |
Mar. 31, 2016 | |
Inventory Disclosure [Abstract] | |
Inventories | 5. Inventories The following table presents the Company’s inventories of ADCETRIS (in thousands): March 31, December 31, Raw materials $ 50,393 $ 50,501 Work in process 3,620 1,693 Finished goods 6,037 4,769 Total $ 60,050 $ 56,963 The Company capitalizes ADCETRIS inventory costs. ADCETRIS inventory that is deployed into clinical, research or development use is charged to research and development expense when it is no longer available for use in commercial sales. The Company does not capitalize manufacturing costs for any of its product candidates. |
Legal Matters
Legal Matters | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Legal Matters | 6. Legal Matters The Company is involved in various legal proceedings in the normal course of its business. The Company does not expect any current legal proceedings to have a material adverse effect on the Company’s business. Legal fees incurred as a result of the Company’s involvement in legal procedures are expensed as incurred. |
Summary of significant accoun12
Summary of significant accounting policies (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Basis of presentation | Basis of presentation The accompanying unaudited condensed consolidated financial statements reflect the accounts of Seattle Genetics, Inc. and its wholly-owned subsidiaries (collectively “Seattle Genetics” or the “Company”). All intercompany transactions and balances have been eliminated. Management has determined that the Company operates in one segment: the development and sale of pharmaceutical products on its own behalf or in collaboration with others. Substantially all of the Company’s assets and revenues are related to operations in the United States; however, the Company also has subsidiaries in the United Kingdom, Switzerland and Canada. The condensed consolidated balance sheet data as of December 31, 2015 were derived from audited financial statements not included in this quarterly report on Form 10-Q. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or SEC, and generally accepted accounting principles in the United States of America, or GAAP, for unaudited condensed consolidated financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the Company’s financial position and results of its operations, as of and for the periods presented. Unless indicated otherwise, all amounts presented in financial tables are presented in thousands, except for per share and par value amounts. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the SEC. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The results of the Company’s operations for the three month period ended March 31, 2016 are not necessarily indicative of the results to be expected for the full year. |
Non-cash investing activities | Non-cash investing activities The Company had $2.4 and $5.4 million of accrued capital expenditures as of March 31, 2016 and December 31, 2015, respectively. Accrued capital expenditures have been treated as a non-cash investing activity and, accordingly, have not been included in the statement of cash flows until such amounts have been paid in cash. |
Other non-current assets | Other non-current assets Other non-current assets include a $5.0 million non-controlling investment in a privately-held company that is accounted for under the cost method of accounting. The Company periodically evaluates the carrying value of the investment if significant adverse events or circumstances indicate a possible impairment. As of March 31, 2016, no impairment in value has been observed. |
Revenue Recognition | Revenue Recognition The Company’s revenues are comprised of ADCETRIS net product sales, amounts earned under its collaboration and licensing agreements and royalties. Revenue recognition is predicated upon persuasive evidence of an agreement existing, delivery of products or services being rendered, amounts payable being fixed or determinable, and collectibility being reasonably assured. Net product sales The Company sells ADCETRIS through a limited number of pharmaceutical distributors in the U.S. and Canada. Customers order ADCETRIS through these distributors and the Company typically ships product directly to the customer. The Company records product sales when title and risk of loss pass, which generally occurs upon delivery of the product to the customer. Product sales are recorded net of estimated government-mandated rebates and chargebacks, distribution fees, estimated product returns and other deductions. Accruals are established for these deductions and actual amounts incurred are offset against applicable accruals. The Company reflects these accruals as either a reduction in the related account receivable from the distributor, or as an accrued liability depending on the nature of the sales deduction. Sales deductions are based on management’s estimates that consider payer mix in target markets and experience to date. These estimates involve a substantial degree of judgment. Government-mandated rebates and chargebacks Distribution fees, product returns and other deductions Collaboration and license agreement revenues The Company has developed a proprietary technology for linking cytotoxic agents to monoclonal antibodies called antibody-drug conjugates, or ADCs. This proprietary technology is the basis of ADC collaborations that the Company has entered into in the ordinary course of its business with a number of biotechnology and pharmaceutical companies. Under these ADC collaboration agreements, the Company grants its collaborators research and commercial licenses to the Company’s technology and provides technology transfer services, technical advice, supplies and services for a period of time. If there are continuing performance obligations, the Company uses a time-based proportional performance model to recognize revenue over the Company’s performance period for the related agreement. Collaboration and license agreements are evaluated to determine whether the multiple elements and associated deliverables can be considered separate units of accounting. To date, the pre-commercial deliverables under the Company’s collaboration and license agreements have not qualified as separate units of accounting. The assessment of multiple element arrangements requires judgment in order to determine the appropriate point in time, or period of time, that revenue should be recognized. The Company believes that the development period in each agreement is a reasonable estimate of the performance obligation period of such agreement. Accordingly, all amounts received or due, including any upfront payments, maintenance fees, development and regulatory milestone payments and reimbursement payments, are recognized as revenue over the performance obligation periods of each agreement. These performance obligation periods typically range from one to three years. The agreements with Takeda Pharmaceutical Company Limited, or Takeda, and Genentech, Inc., a member of the Roche Group, or Genentech, have performance obligation periods of ten and eighteen years, respectively. All of the remaining performance obligation periods for our active collaborations are currently expected to be completed in four years or less. When no performance obligations are required of the Company, or following the completion of the performance obligation period, such amounts are recognized as revenue when collectibility is reasonably assured. Generally, all amounts received or due other than sales-based milestones and royalties are classified as collaboration and license agreement revenues as they are earned. Sales-based milestones and royalties are recognized as royalty revenue as they are reported to the Company. The Company’s collaboration and license agreements include contractual milestones. Generally, the milestone events contained in the Company’s collaboration and license agreements coincide with the progression of the collaborators’ product candidates from development, to regulatory approval and then to commercialization and fall into the following categories. Development milestones in the Company’s collaborations may include the following types of events: • Designation of a product candidate or initiation of pre-clinical studies. The Company’s collaborators must undertake significant pre-clinical research and studies to make a determination of the suitability of a product candidate and the time from those studies or designation to initiation of a clinical trial may take several years. • Initiation of a phase 1 clinical trial. Generally, phase 1 clinical trials may take one to two years to complete. • Initiation of a phase 2 clinical trial. Generally, phase 2 clinical trials may take one to three years to complete. • Initiation of a phase 3 clinical trial. Generally, phase 3 clinical trials may take two to six years to complete. Regulatory milestones in the Company’s collaborations may include the following types of events: • Filing of regulatory applications for marketing approval such as a Biologics License Application in the United States or a Marketing Authorization Application in Europe. Generally, it may take up to twelve months to prepare and submit regulatory filings. • Receiving marketing approval in a major market, such as in the United States, Europe, Japan or other significant countries. Generally it may take up to three years after a marketing application is submitted to obtain approval for marketing and pricing from the applicable regulatory agency. Commercialization milestones in the Company’s collaborations may include the following types of events: • First commercial sale in a particular market, such as in the United States, Europe, Japan or other significant countries. • Product sales in excess of a pre-specified threshold. The amount of time to achieve this type of milestone depends on several factors, including, but not limited to, the dollar amount of the threshold, the pricing of the product, market penetration of the product and the rate at which customers begin using the product. The Company’s ADC collaborators are solely responsible for the development of their product candidates and the achievement of milestones in any of the categories identified above is based solely on the collaborators’ efforts. In the case of the Company’s ADCETRIS collaboration with Takeda, the Company may be involved in certain development activities; however, the achievement of milestone events under the agreement is primarily based on activities undertaken by Takeda. The process of successfully developing a product candidate, obtaining regulatory approval and ultimately commercializing a product candidate is highly uncertain and the attainment of any milestones is therefore uncertain and difficult to predict. In addition, since the Company does not take a substantive role or control the research, development or commercialization of any products generated by its ADC collaborators, the Company is not able to reasonably estimate when, if at all, any milestone payments or royalties may be payable to the Company by its ADC collaborators. As such, the milestone payments associated with its ADC collaborations involve a substantial degree of uncertainty and risk that they may never be received. Similarly, even in those collaborations where the Company may have an active role in the development of the product candidate, such as the Company’s ADCETRIS collaboration with Takeda, the attainment of a milestone is based on the collaborator’s activities and is generally outside the direction and control of the Company. The Company generally invoices its collaborators and licensees on a monthly or quarterly basis, or upon the completion of the effort or achievement of a milestone, based on the terms of each agreement. Deferred revenue arises from amounts received in advance of the culmination of the earnings process and is recognized as revenue in future periods when the applicable revenue recognition criteria have been met. Deferred revenue expected to be recognized within the next twelve months is classified as a current liability. Royalty revenues and cost of royalty revenues Royalty revenues primarily reflect amounts earned under the ADCETRIS collaboration with Takeda. These royalties include sales royalties, which are based on a percentage of Takeda’s net sales at rates that range from the mid-teens to the mid-twenties based on sales volume, and commercial sales-based milestones. Takeda bears a portion of third-party royalty costs owed on its sales of ADCETRIS. This amount is included in royalty revenue in the Company’s consolidated financial statements. Cost of royalty revenues reflects amounts owed to the Company’s third party licensors related to Takeda’s sales of ADCETRIS. These amounts are recognized in the quarter in which Takeda reports its sales activity to the Company, which is the quarter following the related sales. Royalty revenues also include amounts earned in connection with the Company’s ADC collaborations. |
Recent accounting pronouncements | Recent accounting pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update entitled “ASU 2014-09, Revenue from Contracts with Customers.” The standard requires entities to recognize revenue through an evaluation that includes identification of the contract, identification of the performance obligations, determination of the transaction price, allocation of the transaction price to the performance obligations, and recognition of revenue as the entity satisfies the performance obligations. In August 2015, FASB issued an Accounting Standards Update entitled “ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date”, which defers the effective date of ASU 2014-09 to the Company’s fiscal year beginning January 1, 2018. In March 2016, FASB issued an Accounting Standards Update entitled “ASU 2016-08, Revenue from Contract with Customers: Principal versus Agent Considerations” which clarifies certain implementation guidance on principal versus agent considerations under the new revenue recognition framework. The Company is currently evaluating the guidance to determine the potential impact on its financial condition, results of operations and cash flows, and financial statement disclosures. In January 2016, FASB issued an Accounting Standards Update entitled “ASU 2016-01, Financial Instruments—Overall.” The standard addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The standard will become effective for the Company beginning January 1, 2018. The Company is currently evaluating the guidance to determine the potential impact on its financial condition, results of operations and cash flows, and financial statement disclosures. In February 2016, FASB issued an Accounting Standards Update entitled “ASU 2016-02, Leases.” The standard requires entities to recognize in the consolidated balance sheet a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. The standard will become effective for the Company beginning January 1, 2019, with early adoption permitted. The Company is currently evaluating the guidance to determine the potential impact on its financial condition, results of operations and cash flows, and financial statement disclosures. In March 2016, FASB issued an Accounting Standard Update entitled “ASU 2016-09, Compensation – Stock Compensation.” The standard is intended to simplify certain elements of accounting for share-based payment transactions, including the income tax consequences and classification on the statement of cash flows. The standards will become effective for the Company beginning on January 1, 2017, with early adoption permitted. The Company is currently evaluating the guidance to determine the potential impact on its financial condition, results of operations and cash flows, and financial statement disclosures. |
Investments (Tables)
Investments (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Investments, Debt and Equity Securities [Abstract] | |
Available-for-Sale Securities | Investments consisted of available-for-sale securities as follows (in thousands): Amortized cost Gross unrealized gains Gross unrealized losses Fair value March 31, 2016 U.S. Treasury securities $ 572,021 $ 190 $ (77 ) $ 572,134 Contractual Maturities Due in one year or less $ 391,167 $ 391,225 Due in one to two years 180,854 180,909 Total $ 572,021 $ 572,134 Amortized cost Gross unrealized gains Gross unrealized losses Fair value December 31, 2015 U.S. Treasury securities $ 611,128 $ 1 $ (673 ) $ 610,456 Contractual Maturities Due in one year or less $ 532,823 $ 532,418 Due in one to two years 78,305 78,038 Total $ 611,128 $ 610,456 |
Summary of Investments | Investments are presented in the accompanying consolidated balance sheets as follows (in thousands): March 31, December 31, Short-term investments $ 489,943 $ 547,396 Long-term investments 82,191 63,060 Total $ 572,134 $ 610,456 |
Estimated Fair Value of Investments with Unrealized Losses | The aggregate estimated fair value of the Company’s investments with unrealized losses was as follows (in thousands): Period of continuous unrealized loss 12 Months or less Greater than 12 months Fair Gross Fair Gross March 31, 2016 U.S. Treasury securities $ 180,511 $ (77 ) $ NA $ NA December 31, 2015 U.S. Treasury securities $ 605,457 $ (673 ) $ NA $ NA |
Fair Value (Tables)
Fair Value (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Schedule of Financial Assets by Level within Fair Value Hierarchy | The following table presents the Company’s available-for-sale securities by level within the fair value hierarchy for the periods presented (in thousands): Fair value measurement using: Quoted prices in active markets for identical assets (Level 1) Other Significant Total As of March 31, 2016 Short-term investments—U.S. Treasury securities $ 489,943 $ 0 $ 0 $ 489,943 Long-term investments—U.S. Treasury securities 82,191 0 0 82,191 Total $ 572,134 $ 0 $ 0 $ 572,134 Fair value measurement using: Quoted prices Other Significant Total As of December 31, 2015 Short-term investments—U.S. Treasury securities $ 547,396 $ 0 $ 0 $ 547,396 Long-term investments—U.S. Treasury securities 63,060 0 0 63,060 Total $ 610,456 $ 0 $ 0 $ 610,456 |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | The following table presents the Company’s inventories of ADCETRIS (in thousands): March 31, 2016 December 31, 2015 Raw materials $ 50,393 $ 50,501 Work in process 3,620 1,693 Finished goods 6,037 4,769 Total $ 60,050 $ 56,963 |
Summary of significant accoun16
Summary of significant accounting policies - Additional Information (Detail) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016USD ($)Segment | Dec. 31, 2015USD ($) | |
Summary Of Significant Accounting Policies [Line Items] | ||
Number of reporting segment operated | Segment | 1 | |
Accrued capital expenditures | $ 2,400,000 | $ 5,400,000 |
Cost method investment, carrying value | 5,000,000 | |
Impairment of investments | $ 0 | |
Number of days allowed to the customer to return product for expiration or damage | 30 days | |
Collaboration and License Agreement Revenues [Member] | Takeda [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Performance obligation period, years | 10 years | |
Collaboration and License Agreement Revenues [Member] | Genentech [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Performance obligation period, years | 18 years | |
Minimum [Member] | Collaboration and License Agreement Revenues [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Performance obligation periods of each agreement, years | 1 year | |
Maximum [Member] | Collaboration and License Agreement Revenues [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Performance obligation periods of each agreement, years | 3 years | |
Performance obligation period, years | 4 years |
Net Loss per share - Additional
Net Loss per share - Additional Information (Detail) - shares | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Earnings Per Share [Abstract] | ||
Weighted-average shares that have been excluded from the number of shares used to calculate basic and diluted net loss per share | 12,321,000 | 12,204,000 |
Investments - Available-for-Sal
Investments - Available-for-Sale Securities (Detail) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale securities, Amortized cost | $ 572,021 | $ 611,128 |
Available-for-sale securities, Fair value | 572,134 | 610,456 |
U.S. Treasury Securities [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale securities, Amortized cost | 572,021 | 611,128 |
Available-for-sale securities, Gross unrealized gains | 190 | 1 |
Available-for-sale securities, Gross unrealized losses | (77) | (673) |
Available-for-sale securities, Fair value | 572,134 | 610,456 |
Contractual Maturities Due in One Year or Less [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale securities, Amortized cost | 391,167 | 532,823 |
Available-for-sale securities, Fair value | 391,225 | 532,418 |
Contractual Maturities Due in One to Two Years [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale securities, Amortized cost | 180,854 | 78,305 |
Available-for-sale securities, Fair value | $ 180,909 | $ 78,038 |
Investments - Summary of Invest
Investments - Summary of Investments (Detail) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Investments, Debt and Equity Securities [Abstract] | ||
Short-term investments | $ 489,943 | $ 547,396 |
Long-term investments | 82,191 | 63,060 |
Total | $ 572,134 | $ 610,456 |
Investments - Estimated Fair Va
Investments - Estimated Fair Value of Investments with Unrealized Losses (Detail) - U.S. Treasury Securities [Member] - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale securities, Period of continuous unrealized loss, 12 Months or less, Fair value | $ 180,511 | $ 605,457 |
Available-for-sale securities, Period of continuous unrealized loss, 12 Months or less, Gross unrealized losses | (77) | (673) |
Available-for-sale securities, Period of continuous unrealized loss, Greater than 12 months, Fair value | 0 | 0 |
Available-for-sale securities, Period of continuous unrealized loss, Greater than 12 months, Gross unrealized losses | $ 0 | $ 0 |
Fair Value - Additional Informa
Fair Value - Additional Information (Detail) | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Fair Value Disclosures [Abstract] | |
Transfer of investments between Levels 1, 2 and 3 | $ 0 |
Fair Value - Schedule of Financ
Fair Value - Schedule of Financial Assets by Level within Fair Value Hierarchy (Detail) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | $ 572,134 | $ 610,456 |
U.S. Treasury Securities [Member] | Short-term Investments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 489,943 | 547,396 |
U.S. Treasury Securities [Member] | Long-term Investments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 82,191 | 63,060 |
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 572,134 | 610,456 |
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Treasury Securities [Member] | Short-term Investments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 489,943 | 547,396 |
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Treasury Securities [Member] | Long-term Investments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 82,191 | 63,060 |
Other Observable Inputs (Level 2) [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Other Observable Inputs (Level 2) [Member] | U.S. Treasury Securities [Member] | Short-term Investments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Other Observable Inputs (Level 2) [Member] | U.S. Treasury Securities [Member] | Long-term Investments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) [Member] | U.S. Treasury Securities [Member] | Short-term Investments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) [Member] | U.S. Treasury Securities [Member] | Long-term Investments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | $ 0 | $ 0 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventories (Detail) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 50,393 | $ 50,501 |
Work in process | 3,620 | 1,693 |
Finished goods | 6,037 | 4,769 |
Total | $ 60,050 | $ 56,963 |