Vanda Pharmaceuticals (VNDA) 10-Q 3 Nov 16 2016 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Oct. 24, 2016
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2016
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q3
Trading Symbol	VNDA
Entity Registrant Name	Vanda Pharmaceuticals Inc.
Entity Central Index Key	1,347,178
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		43,946,680

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 32,765	$ 50,843
Marketable securities	109,814	92,337
Accounts receivable, net	15,928	16,331
Inventory	865	1,294
Prepaid expenses and other current assets	11,036	5,742
Total current assets	170,408	166,547
Property and equipment, net	4,731	4,570
Intangible assets, net	29,924	38,752
Non-current inventory and other	3,380	3,181
Total assets	208,443	213,050
Current liabilities:
Accounts payable and accrued liabilities	17,572	15,767
Accrued government and other rebates	33,109	35,550
Total current liabilities	50,681	51,317
Milestone obligation under license agreement	25,000	25,000
Other non-current liabilities	3,597	3,706
Total liabilities	79,278	80,023
Commitments and contingencies (Notes 10 and 11)
Stockholders' equity:
Preferred stock, $0.001 par value; 20,000,000 shares authorized, and no shares issued or outstanding
Common stock, $0.001 par value; 150,000,000 shares authorized; 43,930,529 and 42,815,291 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively	44	43
Additional paid-in capital	474,234	460,794
Accumulated other comprehensive income	142	39
Accumulated deficit	(345,255)	(327,849)
Total stockholders' equity	129,165	133,027
Total liabilities and stockholders' equity	$ 208,443	$ 213,050

CONDENSED CONSOLIDATED BALANCE3

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2016	Dec. 31, 2015
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	20,000,000	20,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	43,930,529	42,815,291
Common stock, shares outstanding	43,930,529	42,815,291

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Revenues:
Net product sales	$ 38,482	$ 28,344	$ 107,773	$ 78,076
Total revenues	38,482	28,344	107,773	78,076
Operating expenses:
Cost of goods sold	6,990	6,510	19,440	17,291
Research and development	7,294	9,974	21,542	20,398
Selling, general and administrative	21,908	18,458	75,880	55,650
Intangible asset amortization	2,943	2,943	8,828	10,029
Total operating expenses	39,135	37,885	125,690	103,368
Loss from operations	(653)	(9,541)	(17,917)	(25,292)
Other income	223	80	511	225
Net loss	$ (430)	$ (9,461)	$ (17,406)	$ (25,067)
Basic and diluted net loss per share	$ (0.01)	$ (0.22)	$ (0.40)	$ (0.60)
Weighted average shares outstanding, basic and diluted	43,515,404	42,435,405	43,275,074	42,059,839

CONDENSED CONSOLIDATED STATEME5

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Net loss	$ (430)	$ (9,461)	$ (17,406)	$ (25,067)
Other comprehensive income:
Change in net unrealized gain on marketable securities	18	10	103	21
Tax provision on other comprehensive income	0	0	0	0
Other comprehensive income, net of tax	18	10	103	21
Comprehensive loss	$ (412)	$ (9,451)	$ (17,303)	$ (25,046)

CONDENSED CONSOLIDATED STATEME6

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - 9 months ended Sep. 30, 2016 - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Other Comprehensive Income	Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2015	42,815,291	42,815,291
Beginning balance at Dec. 31, 2015	$ 133,027	$ 43	$ 460,794	$ 39	$ (327,849)
Issuance of common stock from the exercise of stock options and settlement of restricted stock units	7,001	$ 1	7,000
Issuance of common stock form the exercise of stock options and settlement of restricted stock awards		1,115,238
Stock-based compensation expense	6,440		6,440
Net loss	(17,406)				(17,406)
Other comprehensive income, net of tax	$ 103			103
Ending balance (in shares) at Sep. 30, 2016	43,930,529	43,930,529
Ending balance at Sep. 30, 2016	$ 129,165	$ 44	$ 474,234	$ 142	$ (345,255)

CONDENSED CONSOLIDATED STATEME7

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Cash flows from operating activities
Net loss	$ (17,406)	$ (25,067)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation of property and equipment	654	420
Stock-based compensation	6,440	6,074
Amortization of discounts and premiums on marketable securities	76	612
Intangible asset amortization	8,828	10,029
Other non-cash adjustments	483	659
Changes in operating assets and liabilities:
Accounts receivable	52	(12,135)
Prepaid expenses and other assets	(5,399)	(6,892)
Inventory	63	453
Accounts payable and accrued liabilities	1,730	7,737
Accrued government and other rebates	(2,441)	30,915
Net cash provided by (used in) operating activities	(6,920)	12,805
Cash flows from investing activities
Purchases of property and equipment	(710)	(1,813)
Purchases of marketable securities	(130,858)	(127,609)
Proceeds from sales of marketable securities		999
Maturities of marketable securities	113,409	97,411
Net cash used in investing activities	(18,159)	(31,012)
Cash flows from financing activities
Obligations paid in connection with settlement of equity awards		(282)
Proceeds from exercise of employee stock options	7,001	4,374
Net cash provided by financing activities	7,001	4,092
Net decrease in cash and cash equivalents	(18,078)	(14,115)
Cash and cash equivalents
Beginning of period	50,843	60,901
End of period	$ 32,765	$ 46,786

Business Organization and Prese

Business Organization and Presentation	9 Months Ended
	Sep. 30, 2016
Business Organization and Presentation	1. Business Organization and Presentation Business Organization Vanda Pharmaceuticals Inc. (the Company) is a specialty pharmaceutical company focused on the development and commercialization of novel therapies to address high unmet medical needs and improve the lives of patients. The Company commenced its operations in 2003 and operates in one reporting segment. The Company’s portfolio includes the following products: • HETLIOZ ® ® ® ® • Fanapt ® ® ® ® ® • Tradipitant (VLY-686), a small molecule neurokinin-1 receptor (NK-1R) antagonist, which is presently in clinical development for the treatment of chronic pruritus in atopic dermatitis and gastroparesis. • Trichostatin A, a small molecule histone deacetylase (HDAC) inhibitor. • AQW051, a Phase II alpha-7 nicotinic acetylcholine receptor partial agonist. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s consolidated financial statements for the fiscal year ended December 31, 2015 included in the Company’s annual report on Form 10-K. The financial information as of September 30, 2016 and for the three and nine months ended September 30, 2016 and 2015 is unaudited, but in the opinion of management, all adjustments, consisting only of normal recurring accruals, considered necessary for a fair statement of the results for these interim periods have been included. The condensed consolidated balance sheet data as of December 31, 2015 was derived from audited financial statements but does not include all disclosures required by GAAP. The results of the Company’s operations for any interim period are not necessarily indicative of the results that may be expected for any other interim period or for a full fiscal year. The financial information included herein should be read in conjunction with the consolidated financial statements and notes in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2015.

Summary of Significant Accounti

Summary of Significant Accounting Policies	9 Months Ended
	Sep. 30, 2016
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 that affect the reported amounts of assets and liabilities at the date of the financial statements, disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. The Company has estimated its annual fees for Fanapt ® Inventory Inventory, which is recorded at the lower of cost or market, includes the cost of third-party manufacturing and other direct and indirect costs and is valued using the first-in, first-out method. The Company capitalizes inventory costs associated with its products upon regulatory approval when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized; otherwise, such costs are expensed as research and development. Inventory is evaluated for impairment by consideration of factors such as lower of cost or market, net realizable value, obsolescence or expiry. Inventory not expected to be consumed within 12 months following the balance sheet date are classified as non-current. Revenue from Net Product Sales The Company’s revenues consist of net product sales of HETLIOZ ® ® Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, (in thousands) 2016 2015 2016 2015 Revenues: HETLIOZ ® $ 18,715 $ 11,682 $ 52,376 $ 29,159 Fanapt ® 19,767 16,662 55,397 48,917 Total revenues $ 38,482 $ 28,344 $ 107,773 $ 78,076 The Company applies the revenue recognition guidance in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Subtopic 605-15, Revenue Recognition—Products Major Customers HETLIOZ ® ® Product Sales Discounts and Allowances The Company’s product sales are recorded net of applicable discounts, rebates, chargebacks, service fees, co-pay assistance and product returns that are applicable for various government and commercial payors. Reserves established for discounts and returns are classified as reductions of accounts receivable if the amount is payable to direct customers, with the exception of service fees. Service fees are classified as a liability. Reserves established for rebates, chargebacks or co-pay assistance are classified as a liability if the amount is payable to a party other than customers. The Company currently records sales allowances for the following: Prompt-pay: Rebates: Chargebacks: Medicare Part D Coverage Gap: Service Fees: Co-payment Assistance: Product Returns: Stock-Based Compensation Compensation costs for all stock-based awards to employees and directors are measured based on the grant date fair value of those awards and recognized over the period during which the employee or director is required to perform service in exchange for the award. The Company recognizes the expense over the award’s vesting period. The fair value of stock options granted and restricted stock units (RSUs) awarded are amortized using the straight-line method. As stock-based compensation expense recognized in the consolidated statements of operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are required to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model that uses the assumptions noted in the following table. Expected volatility rates are based on the historical volatility of the Company’s publicly traded common stock and other factors. The risk-free interest rates are based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The Company has not paid dividends to its stockholders since its inception (other than a dividend of preferred share purchase rights, which was declared in September 2008) and does not plan to pay dividends in the foreseeable future. Assumptions used in the Black-Scholes-Merton option pricing model for employee and director stock options granted during the nine months ended September 30, 2016 and 2015 were as follows: Nine Months Ended September 30, September 30, 2016 2015 Expected dividend yield 0 % 0 % Weighted average expected volatility 57 % 60 % Weighted average expected term (years) 6.1 6.0 Weighted average risk-free rate 1.37 % 1.67 % Weighted average fair value per share $ 4.51 $ 6.45 Stock-based compensation expense recognized for the three and nine months ended September 30, 2016 and 2015 was comprised of the following: Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, (in thousands) 2016 2015 2016 2015 Research and development $ 539 $ 516 $ 1,552 $ 1,743 Selling, general and administrative 1,561 1,545 4,888 4,331 $ 2,100 $ 2,061 $ 6,440 $ 6,074 Advertising Expense The Company expenses the costs of advertising, including branded promotional expenses, as incurred. Branded advertising expenses, recorded in selling, general and administrative expenses, were $0.1 million and $0.5 million for the three months ended September 30, 2016 and 2015, respectively, and $1.2 million and $2.4 million for the nine months ended September 30, 2016 and 2015, respectively. Non-Cash Investing and Financing Activities For the nine months ended September 30, 2015, the Company recorded an intangible asset of $25.0 million relating to HETLIOZ ® ® Recent accounting pronouncements In August 2016, the FASB issued Accounting Standards Update (ASU) 2016-15, Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses, In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, In February 2016, the FASB issued ASU 2016-02, Leases In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers Revenue from Contracts with Customers Revenue from Contracts with Customers, Principal versus Agent Considerations (Reporting Revenue versus Net), Revenue from Contracts with Customers, identifying Performance Obligations and Licensing Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients,

Earnings per Share

Earnings per Share	9 Months Ended
	Sep. 30, 2016
Earnings per Share	3. Earnings per Share Basic earnings per share (EPS) is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding. Diluted EPS is computed by dividing the net loss by the weighted average number of shares of common stock outstanding, plus potential outstanding common stock for the period. Potential outstanding common stock includes stock options and shares underlying RSUs, but only to the extent that their inclusion is dilutive. The following table presents the calculation of basic and diluted net loss per share of common stock for the three and nine months ended September 30, 2016 and 2015: Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, (in thousands, except for share and per share amounts) 2016 2015 2016 2015 Numerator: Net loss $ (430 ) $ (9,461 ) $ (17,406 ) $ (25,067 ) Denominator: Weighted average shares outstanding, basic and diluted 43,515,404 42,435,405 43,275,074 42,059,839 Net loss per share, basic and diluted $ (0.01 ) $ (0.22 ) $ (0.40 ) $ (0.60 ) Antidilutive securities excluded from calculations of diluted net loss per share 3,845,456 5,181,975 5,298,256 5,534,752 The Company incurred net losses for the three and nine months ended September 30, 2016 and 2015 causing inclusion of any potentially dilutive securities to have an anti-dilutive effect, resulting in dilutive loss per share and basic loss per share attributable to common stockholders being equivalent.

Marketable Securities

Marketable Securities	9 Months Ended
	Sep. 30, 2016
Marketable Securities	4. Marketable Securities The following is a summary of the Company’s available-for-sale marketable securities as of September 30, 2016, which all have contract maturities of less than one year: Gross Gross Fair September 30, 2016 Amortized Unrealized Unrealized Market (in thousands) Cost Gains Losses Value U.S. Treasury and government agencies $ 54,662 $ 33 $ — $ 54,695 Corporate debt 55,010 117 (8 ) 55,119 $ 109,672 $ 150 $ (8 ) $ 109,814 The following is a summary of the Company’s available-for-sale marketable securities as of December 31, 2015, which all have contract maturities of less than one year: Gross Gross Fair December 31, 2015 Amortized Unrealized Unrealized Market (in thousands) Cost Gains Losses Value U.S. Treasury and government agencies $ 44,059 $ 6 $ (8 ) $ 44,057 Corporate debt 48,239 46 (5 ) 48,280 $ 92,298 $ 52 $ (13 ) $ 92,337

Fair Value Measurements

Fair Value Measurements	9 Months Ended
	Sep. 30, 2016
Fair Value Measurements	5. Fair Value Measurements Authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: • Level 1 — defined as observable inputs such as quoted prices in active markets • Level 2 — defined as inputs other than quoted prices in active markets that are either directly or indirectly observable • Level 3 — defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions Marketable securities classified in Level 1 and Level 2 as of September 30, 2016 and December 31, 2015 consist of available-for-sale marketable securities. The valuation of Level 1 instruments is determined using a market approach, and is based upon unadjusted quoted prices for identical assets in active markets. The valuation of investments classified in Level 2 also is determined using a market approach based upon quoted prices for similar assets in active markets, or other inputs that are observable for substantially the full term of the financial instrument. Level 2 securities include certificates of deposit, commercial paper and corporate notes that use as their basis readily observable market parameters. The Company did not transfer any assets between Level 2 and Level 1 during the nine months ended September 30, 2016 and 2015. As of September 30, 2016, the Company held certain assets that are required to be measured at fair value on a recurring basis, as follows: Fair Value Measurement as of September 30, 2016 Using Quoted Prices in Significant Active Markets for Significant Other Unobservable September 30, Identical Assets Observable Inputs Inputs (in thousands) 2016 (Level 1) (Level 2) (Level 3) Available-for-sale securities: U.S. Treasury and government agencies $ 54,695 $ 54,695 $ — $ — Corporate debt 55,119 — 55,119 $ 109,814 $ 54,695 $ 55,119 $ — As of December 31, 2015, the Company held certain assets that are required to be measured at fair value on a recurring basis, as follows: Fair Value Measurement as of December 31, 2015 Using Quoted Prices in Significant Active Markets for Significant Other Unobservable December 31, Identical Assets Observable Inputs Inputs (in thousands) 2015 (Level 1) (Level 2) (Level 3) Available-for-sale securities: U.S. Treasury and government agencies $ 44,057 $ 44,057 $ — $ — Corporate debt 48,280 — 48,280 $ 92,337 $ 44,057 $ 48,280 $ — The Company also has financial assets and liabilities, not required to be measured at fair value on a recurring basis, which primarily consist of cash and cash equivalents, accounts receivable, restricted cash, accounts payable and accrued liabilities, and milestone obligations under license agreements, the carrying value of which materially approximate their fair values.

Inventory

Inventory	9 Months Ended
	Sep. 30, 2016
Inventory	6. Inventory The Company evaluates expiry risk by evaluating current and future product demand relative to product shelf life. The Company builds demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance and patient usage. Inventory levels are evaluated for the amount of inventory that would be sold within one year. At certain times, the level of inventory can exceed the forecasted level of cost of goods sold for the next twelve months. The Company classifies the estimate of such inventory as non-current. Inventory consisted of the following as of September 30, 2016 and December 31, 2015: September 30, December 31, (in thousands) 2016 2015 Current assets Finished goods $ 865 $ 1,294 $ 865 $ 1,294 Non-Current assets Raw materials $ 127 $ 127 Work-in-process 2,241 2,369 Finished goods 223 — $ 2,591 $ 2,496

Accounts Payable and Accrued Li

Accounts Payable and Accrued Liabilities	9 Months Ended
	Sep. 30, 2016
Accounts Payable and Accrued Liabilities	7. Accounts Payable and Accrued Liabilities The following is a summary of the Company’s accounts payable and accrued liabilities as of September 30, 2016 and December 31, 2015: September 30, December 31, (in thousands) 2016 2015 Research and development expenses $ 2,575 $ 3,199 Consulting and other professional fees 4,162 5,088 Compensation and employee benefits 3,071 468 Royalties payable 6,413 5,328 Other 1,351 1,684 $ 17,572 $ 15,767

Intangible Assets

Intangible Assets	9 Months Ended
	Sep. 30, 2016
Intangible Assets	8. Intangible Assets The following is a summary of the Company’s intangible assets as of September 30, 2016: September 30, 2016 (in thousands) Estimated Useful Life (Years) Gross Accumulated Net HETLIOZ ® January 2033 $ 33,000 $ 4,751 $ 28,249 Fanapt ® November 2016 27,941 26,266 1,675 $ 60,941 $ 31,017 $ 29,924 The following is a summary of the Company’s intangible assets as of December 31, 2015: December 31, 2015 (in thousands) Estimated Useful Life Gross Accumulated Net HETLIOZ ® January 2033 $ 33,000 $ 3,460 $ 29,540 Fanapt ® November 2016 27,941 18,729 9,212 $ 60,941 $ 22,189 $ 38,752 In January 2014, the Company announced that the FDA had approved the NDA for HETLIOZ ® ® ® ® ® ® ® ® ® In 2009, the Company announced that the FDA had approved the NDA for Fanapt ® ® ® ® ® Business Combinations ® The intangible assets are being amortized over their estimated useful economic life using the straight-line method. Amortization expense was $2.9 million and $2.9 million for the three months ended September 30, 2016 and 2015, respectively, and $8.8 million and $10.0 million for the nine months ended September 30, 2016 and 2015, respectively. The following is a summary of the future intangible asset amortization schedule as of September 30, 2016: (in thousands) Total Remainder 2017 2018 2019 2020 Thereafter HETLIOZ ® $ 28,249 $ 430 $ 1,721 $ 1,721 $ 1,721 $ 1,721 $ 20,935 Fanapt ® 1,675 1,675 — — — — — $ 29,924 $ 2,105 $ 1,721 $ 1,721 $ 1,721 $ 1,721 $ 20,935

Income Taxes

Income Taxes	9 Months Ended
	Sep. 30, 2016
Income Taxes	9. Income Taxes Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The fact that the Company has historically generated net operating losses (NOLs) serves as strong evidence that it is more likely than not that deferred tax assets will not be realized in the future. Therefore, the Company has a full valuation allowance against all deferred tax assets as of September 30, 2016 and December 31, 2015. As a result of the tax valuation allowance against deferred tax assets, there was no provision for income taxes for the three and nine months ended September 30, 2016 and 2015. Certain tax attributes of the Company, including NOLs and credits, are subject to limitation as a result of any ownership change as defined under Internal Revenue Code of 1986, as amended (IRC), Section 382. A change in ownership could affect the Company’s ability to use NOLs and credit carryforward (tax attributes). Ownership changes did occur as of December 31, 2014 and December 31, 2008. However, the Company believes that it had sufficient Built-In-Gain to offset the IRC Section 382 limitation generated by the ownership changes. Any future ownership changes may cause the Company’s existing tax attributes to have additional limitations. Additionally, the Company maintains a valuation allowance on its tax attributes and therefore, any IRC Section 382 limitation would not have a material impact on the Company’s provision for income taxes as of September 30, 2016.

Commitments and Contingencies

Commitments and Contingencies	9 Months Ended
	Sep. 30, 2016
Commitments and Contingencies	10. Commitments and Contingencies Operating leases Commitments relating to operating leases represent the minimum annual future payments under operating leases for a total of 40,188 square feet of office space for the Company’s headquarters at 2200 Pennsylvania Avenue, N.W. in Washington, D.C. that expire in 2026 and the operating lease for 2,880 square feet of office space for the Company’s European headquarters in London that has a noncancellable lease term ending in 2021. The following is a summary of the minimum annual future payments under operating leases for office space as of September 30, 2016: Cash payments due by year (in thousands) Total Remainder 2017 2018 2019 2020 Thereafter Operating leases $ 22,063 $ 445 $ 1,933 $ 2,230 $ 2,284 $ 2,341 $ 12,830 In 2011, the Company entered into an operating lease for its headquarters at 2200 Pennsylvania Avenue, N.W. in Washington, D.C. A lease amendment in 2014 increased the office space under lease to 30,260 square feet, and a lease amendment in June 2016 extended the lease term from April 2023 to September 2026. Subject to the prior rights of other tenants, the Company has the right to renew the lease for five years following its expiration. The Company has the right to sublease or assign all or a portion of the premises, subject to standard conditions. The lease may be terminated early by the Company or the landlord under certain circumstances. In June 2016, the Company entered into a sublease under which the Company will lease 9,928 square feet of office space for its headquarters at 2200 Pennsylvania Avenue, N.W. in Washington, D.C. The sublease term begins in January 2017 and ends in July 2026, but may be terminated earlier by either party under certain circumstances. The Company has the right to sublease or assign all or a portion of the premises, subject to standard conditions. Rent expense under operating leases was $0.7 million and $0.5 million for the three months ended September 30, 2016 and 2015, respectively, and $1.7 million and $1.4 million for the nine months ended September 30, 2016 and 2015, respectively. Guarantees and Indemnifications The Company has entered into a number of standard intellectual property indemnification agreements in the ordinary course of its business. Pursuant to these agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners or customers, in connection with any U.S. patent or any copyright or other intellectual property infringement claim by any third party with respect to the Company’s products. The term of these indemnification agreements is generally perpetual from the date of execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. Since inception, the Company has not incurred costs to defend lawsuits or settle claims related to these indemnification agreements. The Company also indemnifies its officers and directors for certain events or occurrences, subject to certain conditions. License Agreements The Company’s rights to develop and commercialize its products are subject to the terms and conditions of licenses granted to the Company by other pharmaceutical companies. HETLIOZ ® . ® ® ® ® ® ® ® ® ® ® ® ® The license agreement was amended in April 2013 to add a process that would allow BMS to waive the right to develop and commercialize HETLIOZ ® ® Either party may terminate the HETLIOZ ® Fanapt ® . ® ® ® ® ® ® ® ® ® ® Pursuant to the terms of the settlement agreement with Novartis, Novartis transferred all U.S. and Canadian rights in the Fanapt ® ® ® ® The Company has entered into distribution agreements with Probiomed S.A. de C.V. for the commercialization of Fanapt ® ® Tradipitant. Pursuant to the license agreement, the Company paid Lilly an initial license fee of $1.0 million and will be responsible for all development costs. The initial license fee was recognized as research and development expense in the consolidated statement of operations for the year ended December 31, 2012. Lilly is also eligible to receive additional payments based upon achievement of specified development and commercialization milestones as well as tiered-royalties on net sales at percentage rates up to the low double digits. These milestones include $4.0 million for pre-NDA approval milestones and up to $95.0 million for future regulatory approval and sales milestones. The Company is obligated to use its commercially reasonable efforts to develop and commercialize tradipitant. Either party may terminate the license agreement under certain circumstances, including a material breach of the license agreement by the other. In the event that the Company terminates the license agreement, or if Lilly terminates due to the Company’s breach or for certain other reasons set forth in the license agreement, all rights licensed and developed by the Company under the license agreement will revert or otherwise be licensed back to Lilly on an exclusive basis, subject to payment by Lilly to the Company of a royalty on net sales of products that contain tradipitant. AQW051. ® Pursuant to the license agreement, the Company is obligated to use its commercially reasonable efforts to develop and commercialize AQW051 and is responsible for all development costs under the AQW051 license agreement. The Company has no milestone obligations; however, Novartis is eligible to receive tiered-royalties on net sales at percentage rates up to the mid-teens. Research and Development and Marketing Agreements In the course of its business, the Company regularly enters into agreements with clinical organizations to provide services relating to clinical development and clinical manufacturing activities under fee service arrangements. The Company’s current agreements for clinical services may be terminated on generally 60 days’ notice without incurring additional charges, other than charges for work completed but not paid for through the effective date of termination and other costs incurred by the Company’s contractors in closing out work in progress as of the effective date of termination.

Legal Matters

Legal Matters	9 Months Ended
	Sep. 30, 2016
Legal Matters	11. Legal Matters In June 2014, the Company filed suit against Roxane Laboratories, Inc. (Roxane) in the U.S. District Court for the District of Delaware (the Delaware District Court). The suit seeks an adjudication that Roxane has infringed one or more claims of the Company’s U.S. Patent No. 8,586,610 (the ‘610 Patent) by submitting to the FDA an Abbreviated New Drug Application (ANDA) for a generic version of Fanapt ® ® In 2015, the Company filed six separate patent infringement lawsuits in the Delaware District Court against Roxane, Inventia Healthcare Pvt. Ltd., Lupin Ltd. and Lupin Pharmaceuticals, Inc. (Lupin), Taro Pharmaceuticals USA, Inc. and Taro Pharmaceutical Industries, Ltd. (Taro), and Apotex Inc. and Apotex Corp., (collectively, the Defendants). The lawsuits each seek an adjudication that the respective Defendants infringed one or more claims of the ‘610 Patent and/or the Company’s U.S. Patent No. 9,138,432 (the ‘432 Patent) by submitting to the FDA an ANDA for a generic version of Fanapt ® Lupin filed counter claims for declaratory judgment of invalidity and noninfringement of seven of the Company’s method of treatment patents that are listed in the Approved Drug Products with Therapeutic Equivalence Evaluations ® On October 24, 2016, the Company entered into a License Agreement with Taro to resolve the Company’s patent litigation against Taro regarding Taro’s ANDA seeking approval of its generic version of Fanapt ® ® ® On February 26, 2016, Roxane filed suit against the Company in the U.S. District Court for the Southern District of Ohio. The suit seeks a declaratory judgment of invalidity and noninfringement of the Method of Treatment Patents. The Company has not sued Roxane for infringing the Method of Treatment Patents. The Company filed a motion to dismiss this lawsuit for lack of personal jurisdiction or to transfer the lawsuit to the Delaware District Court. On February 26, 2016, Roxane filed a Petition for Inter Partes

Stock-Based Compensation

Stock-Based Compensation	9 Months Ended
	Sep. 30, 2016
Stock-Based Compensation	12. Stock-Based Compensation As of September 30, 2016, there were 6,831,988 shares that were subject to outstanding options and RSUs under the 2006 Equity Incentive Plan (2006 Plan) and the 2016 Equity Incentive Plan (2016 Plan) (collectively, the Plans). The 2006 Plan expired by its terms on April 12, 2016. Outstanding options and RSUs under the 2006 Plan remain in effect and the terms of the 2006 Plan continue to apply, but no additional awards can be granted under the 2006 Plan. On June 16, 2016, the Company’s stockholders approved the 2016 Plan. There are 2,000,000 shares of common stock reserved for issuance under the 2016 Plan, of which 1,835,000 shares remained available for future grant as of September 30, 2016. The Company has granted option awards under the Plans with service conditions (service option awards) that are subject to terms and conditions established by the compensation committee of the board of directors. Service option awards have 10-year contractual terms and all service option awards granted prior to December 31, 2006, service option awards granted to new employees, and certain service option awards granted to existing employees vest and become exercisable on the first anniversary of the grant date with respect to the 25% of the shares subject to service option awards. The remaining 75% of the shares subject to the service option awards vest and become exercisable monthly in equal installments thereafter over three years. Certain service option awards granted to existing employees after December 31, 2006 vest and become exercisable monthly in equal installments over four years. The initial service option awards granted to directors upon their election vest and become exercisable in equal monthly installments over a period of four years, while the subsequent annual service option awards granted to directors vest and become exercisable in equal monthly installments over a period of one year. Certain service option awards to executives and directors provide for accelerated vesting if there is a change in control of the Company. Certain service option awards to employees and executives provide for accelerated vesting if the respective employee’s or executive’s service is terminated by the Company for any reason other than cause or permanent disability. As of September 30, 2016, $10.2 million of unrecognized compensation costs related to unvested service option awards are expected to be recognized over a weighted average period of 1.3 years. No option awards are classified as a liability as of September 30, 2016. A summary of option activity under the Plans for the nine months ended September 30, 2016 follows: Weighted Average Weighted Average Aggregate Stock Options Number of Exercise Price at Remaining Term Intrinsic (in thousands, except for share and per share amounts) Shares Grant Date (Years) Value Outstanding at December 31, 2015 6,252,448 $ 11.87 6.16 $ 7,498 Granted 861,511 8.39 Forfeited (377,448 ) 11.16 Expired (205,266 ) 14.47 Exercised (827,572 ) 8.46 3,870 Outstanding at September 30, 2016 5,703,673 11.79 5.78 36,336 Exercisable at September 30, 2016 3,908,977 12.41 4.47 25,210 Vested and expected to vest at September 30, 2016 5,569,895 11.84 5.70 35,434 Proceeds from the exercise of stock options amounted to $7.0 million for the nine months ended September 30, 2016 and $4.4 million for the nine months ended September 30, 2015. An RSU is a stock award that entitles the holder to receive shares of the Company’s common stock as the award vests. The fair value of each RSU is based on the closing price of the Company’s stock on the date of grant. The Company has granted RSUs under the Plans with service conditions (service RSUs) that vest in four equal annual installments provided that the employee remains employed with the Company. As of September 30, 2016, $8.9 million of unrecognized compensation costs related to unvested service RSUs are expected to be recognized over a weighted average period of 1.8 years. No RSUs are classified as a liability as of September 30, 2016. A summary of RSU activity under the Plans for the nine months ended September 30, 2016 follows: Number of Weighted Shares Average Underlying Grant Date RSUs RSUs Fair Value Unvested at December 31, 2015 1,022,681 $ 10.90 Granted 632,242 8.39 Forfeited (238,942 ) 10.27 Vested (287,666 ) 9.65 Unvested at September 30, 2016 1,128,315 9.95 The grant date fair value for the 287,666 shares underlying RSUs that vested during the nine months ended September 30, 2016 was $2.8 million.

Business Organization and Pre20

Business Organization and Presentation (Policies)	9 Months Ended
	Sep. 30, 2016
Business organization	Business Organization Vanda Pharmaceuticals Inc. (the Company) is a specialty pharmaceutical company focused on the development and commercialization of novel therapies to address high unmet medical needs and improve the lives of patients. The Company commenced its operations in 2003 and operates in one reporting segment. The Company’s portfolio includes the following products: • HETLIOZ ® ® ® ® • Fanapt ® ® ® ® ® • Tradipitant (VLY-686), a small molecule neurokinin-1 receptor (NK-1R) antagonist, which is presently in clinical development for the treatment of chronic pruritus in atopic dermatitis and gastroparesis. • Trichostatin A, a small molecule histone deacetylase (HDAC) inhibitor. • AQW051, a Phase II alpha-7 nicotinic acetylcholine receptor partial agonist.
Basis of presentation	Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s consolidated financial statements for the fiscal year ended December 31, 2015 included in the Company’s annual report on Form 10-K. The financial information as of September 30, 2016 and for the three and nine months ended September 30, 2016 and 2015 is unaudited, but in the opinion of management, all adjustments, consisting only of normal recurring accruals, considered necessary for a fair statement of the results for these interim periods have been included. The condensed consolidated balance sheet data as of December 31, 2015 was derived from audited financial statements but does not include all disclosures required by GAAP. The results of the Company’s operations for any interim period are not necessarily indicative of the results that may be expected for any other interim period or for a full fiscal year. The financial information included herein should be read in conjunction with the consolidated financial statements and notes in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2015.
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of assets and liabilities at the date of the financial statements, disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. The Company has estimated its annual fees for Fanapt ®
Inventory	Inventory Inventory, which is recorded at the lower of cost or market, includes the cost of third-party manufacturing and other direct and indirect costs and is valued using the first-in, first-out method. The Company capitalizes inventory costs associated with its products upon regulatory approval when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized; otherwise, such costs are expensed as research and development. Inventory is evaluated for impairment by consideration of factors such as lower of cost or market, net realizable value, obsolescence or expiry. Inventory not expected to be consumed within 12 months following the balance sheet date are classified as non-current.
Net Product Sales	Revenue from Net Product Sales The Company’s revenues consist of net product sales of HETLIOZ ® ® Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, (in thousands) 2016 2015 2016 2015 Revenues: HETLIOZ ® $ 18,715 $ 11,682 $ 52,376 $ 29,159 Fanapt ® 19,767 16,662 55,397 48,917 Total revenues $ 38,482 $ 28,344 $ 107,773 $ 78,076 The Company applies the revenue recognition guidance in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Subtopic 605-15, Revenue Recognition—Products Product Sales Discounts and Allowances The Company’s product sales are recorded net of applicable discounts, rebates, chargebacks, service fees, co-pay assistance and product returns that are applicable for various government and commercial payors. Reserves established for discounts and returns are classified as reductions of accounts receivable if the amount is payable to direct customers, with the exception of service fees. Service fees are classified as a liability. Reserves established for rebates, chargebacks or co-pay assistance are classified as a liability if the amount is payable to a party other than customers. The Company currently records sales allowances for the following: Prompt-pay: Rebates: Chargebacks: Medicare Part D Coverage Gap: Service Fees: Co-payment Assistance: Product Returns:
Major Customers	Major Customers HETLIOZ ® ®
Stock-Based Compensation	Stock-Based Compensation Compensation costs for all stock-based awards to employees and directors are measured based on the grant date fair value of those awards and recognized over the period during which the employee or director is required to perform service in exchange for the award. The Company recognizes the expense over the award’s vesting period. The fair value of stock options granted and restricted stock units (RSUs) awarded are amortized using the straight-line method. As stock-based compensation expense recognized in the consolidated statements of operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are required to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model that uses the assumptions noted in the following table. Expected volatility rates are based on the historical volatility of the Company’s publicly traded common stock and other factors. The risk-free interest rates are based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The Company has not paid dividends to its stockholders since its inception (other than a dividend of preferred share purchase rights, which was declared in September 2008) and does not plan to pay dividends in the foreseeable future. Assumptions used in the Black-Scholes-Merton option pricing model for employee and director stock options granted during the nine months ended September 30, 2016 and 2015 were as follows: Nine Months Ended September 30, September 30, 2016 2015 Expected dividend yield 0 % 0 % Weighted average expected volatility 57 % 60 % Weighted average expected term (years) 6.1 6.0 Weighted average risk-free rate 1.37 % 1.67 % Weighted average fair value per share $ 4.51 $ 6.45 Stock-based compensation expense recognized for the three and nine months ended September 30, 2016 and 2015 was comprised of the following: Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, (in thousands) 2016 2015 2016 2015 Research and development $ 539 $ 516 $ 1,552 $ 1,743 Selling, general and administrative 1,561 1,545 4,888 4,331 $ 2,100 $ 2,061 $ 6,440 $ 6,074
Advertising Expense	Advertising Expense The Company expenses the costs of advertising, including branded promotional expenses, as incurred. Branded advertising expenses, recorded in selling, general and administrative expenses, were $0.1 million and $0.5 million for the three months ended September 30, 2016 and 2015, respectively, and $1.2 million and $2.4 million for the nine months ended September 30, 2016 and 2015, respectively.
Non-Cash Investing and Financing Activities	Non-Cash Investing and Financing Activities For the nine months ended September 30, 2015, the Company recorded an intangible asset of $25.0 million relating to HETLIOZ ® ®
Recent accounting pronouncements	Recent accounting pronouncements In August 2016, the FASB issued Accounting Standards Update (ASU) 2016-15, Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses, In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, In February 2016, the FASB issued ASU 2016-02, Leases In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers Revenue from Contracts with Customers Revenue from Contracts with Customers, Principal versus Agent Considerations (Reporting Revenue versus Net), Revenue from Contracts with Customers, identifying Performance Obligations and Licensing Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients,

Summary of Significant Accoun21

Summary of Significant Accounting Policies (Tables)	9 Months Ended
	Sep. 30, 2016
Revenue From Net Sales by Product	The Company’s revenues consist of net product sales of HETLIOZ ® ® Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, (in thousands) 2016 2015 2016 2015 Revenues: HETLIOZ ® $ 18,715 $ 11,682 $ 52,376 $ 29,159 Fanapt ® 19,767 16,662 55,397 48,917 Total revenues $ 38,482 $ 28,344 $ 107,773 $ 78,076
Black-Scholes-Merton Option Pricing Model for Employee and Director Stock Options Granted	Assumptions used in the Black-Scholes-Merton option pricing model for employee and director stock options granted during the nine months ended September 30, 2016 and 2015 were as follows: Nine Months Ended September 30, September 30, 2016 2015 Expected dividend yield 0 % 0 % Weighted average expected volatility 57 % 60 % Weighted average expected term (years) 6.1 6.0 Weighted average risk-free rate 1.37 % 1.67 % Weighted average fair value per share $ 4.51 $ 6.45
Stock-Based Compensation Expense	Stock-based compensation expense recognized for the three and nine months ended September 30, 2016 and 2015 was comprised of the following: Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, (in thousands) 2016 2015 2016 2015 Research and development $ 539 $ 516 $ 1,552 $ 1,743 Selling, general and administrative 1,561 1,545 4,888 4,331 $ 2,100 $ 2,061 $ 6,440 $ 6,074

Earnings per Share (Tables)

Earnings per Share (Tables)	9 Months Ended
	Sep. 30, 2016
Basic and Diluted Net Loss Per Share of Common Stock	The following table presents the calculation of basic and diluted net loss per share of common stock for the three and nine months ended September 30, 2016 and 2015: Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, (in thousands, except for share and per share amounts) 2016 2015 2016 2015 Numerator: Net loss $ (430 ) $ (9,461 ) $ (17,406 ) $ (25,067 ) Denominator: Weighted average shares outstanding, basic and diluted 43,515,404 42,435,405 43,275,074 42,059,839 Net loss per share, basic and diluted $ (0.01 ) $ (0.22 ) $ (0.40 ) $ (0.60 ) Antidilutive securities excluded from calculations of diluted net loss per share 3,845,456 5,181,975 5,298,256 5,534,752

Marketable Securities (Tables)

Marketable Securities (Tables)	9 Months Ended
	Sep. 30, 2016
Summary of Available-for-Sale Marketable Securities	The following is a summary of the Company’s available-for-sale marketable securities as of September 30, 2016, which all have contract maturities of less than one year: Gross Gross Fair September 30, 2016 Amortized Unrealized Unrealized Market (in thousands) Cost Gains Losses Value U.S. Treasury and government agencies $ 54,662 $ 33 $ — $ 54,695 Corporate debt 55,010 117 (8 ) 55,119 $ 109,672 $ 150 $ (8 ) $ 109,814 The following is a summary of the Company’s available-for-sale marketable securities as of December 31, 2015, which all have contract maturities of less than one year: Gross Gross Fair December 31, 2015 Amortized Unrealized Unrealized Market (in thousands) Cost Gains Losses Value U.S. Treasury and government agencies $ 44,059 $ 6 $ (8 ) $ 44,057 Corporate debt 48,239 46 (5 ) 48,280 $ 92,298 $ 52 $ (13 ) $ 92,337

Fair Value Measurements (Tables

Fair Value Measurements (Tables)	9 Months Ended
	Sep. 30, 2016
Assets Measured at Fair Value on Recurring Basis	As of September 30, 2016, the Company held certain assets that are required to be measured at fair value on a recurring basis, as follows: Fair Value Measurement as of September 30, 2016 Using Quoted Prices in Significant Active Markets for Significant Other Unobservable September 30, Identical Assets Observable Inputs Inputs (in thousands) 2016 (Level 1) (Level 2) (Level 3) Available-for-sale securities: U.S. Treasury and government agencies $ 54,695 $ 54,695 $ — $ — Corporate debt 55,119 — 55,119 $ 109,814 $ 54,695 $ 55,119 $ — As of December 31, 2015, the Company held certain assets that are required to be measured at fair value on a recurring basis, as follows: Fair Value Measurement as of December 31, 2015 Using Quoted Prices in Significant Active Markets for Significant Other Unobservable December 31, Identical Assets Observable Inputs Inputs (in thousands) 2015 (Level 1) (Level 2) (Level 3) Available-for-sale securities: U.S. Treasury and government agencies $ 44,057 $ 44,057 $ — $ — Corporate debt 48,280 — 48,280 $ 92,337 $ 44,057 $ 48,280 $ —

Inventory (Tables)

Inventory (Tables)	9 Months Ended
	Sep. 30, 2016
Inventory	Inventory consisted of the following as of September 30, 2016 and December 31, 2015: September 30, December 31, (in thousands) 2016 2015 Current assets Finished goods $ 865 $ 1,294 $ 865 $ 1,294 Non-Current assets Raw materials $ 127 $ 127 Work-in-process 2,241 2,369 Finished goods 223 — $ 2,591 $ 2,496

Accounts Payable and Accrued 26

Accounts Payable and Accrued Liabilities (Tables)	9 Months Ended
	Sep. 30, 2016
Summary of Accounts Payable and Accrued Liabilities	The following is a summary of the Company’s accounts payable and accrued liabilities as of September 30, 2016 and December 31, 2015: September 30, December 31, (in thousands) 2016 2015 Research and development expenses $ 2,575 $ 3,199 Consulting and other professional fees 4,162 5,088 Compensation and employee benefits 3,071 468 Royalties payable 6,413 5,328 Other 1,351 1,684 $ 17,572 $ 15,767

Intangible Assets (Tables)

Intangible Assets (Tables)	9 Months Ended
	Sep. 30, 2016
Summary of Intangible Assets	The following is a summary of the Company’s intangible assets as of September 30, 2016: September 30, 2016 (in thousands) Estimated Useful Life (Years) Gross Accumulated Net HETLIOZ ® January 2033 $ 33,000 $ 4,751 $ 28,249 Fanapt ® November 2016 27,941 26,266 1,675 $ 60,941 $ 31,017 $ 29,924 The following is a summary of the Company’s intangible assets as of December 31, 2015: December 31, 2015 (in thousands) Estimated Useful Life Gross Accumulated Net HETLIOZ ® January 2033 $ 33,000 $ 3,460 $ 29,540 Fanapt ® November 2016 27,941 18,729 9,212 $ 60,941 $ 22,189 $ 38,752
Summary of Future Intangible Asset Amortization	The following is a summary of the future intangible asset amortization schedule as of September 30, 2016: (in thousands) Total Remainder 2017 2018 2019 2020 Thereafter HETLIOZ ® $ 28,249 $ 430 $ 1,721 $ 1,721 $ 1,721 $ 1,721 $ 20,935 Fanapt ® 1,675 1,675 — — — — — $ 29,924 $ 2,105 $ 1,721 $ 1,721 $ 1,721 $ 1,721 $ 20,935

Commitments and Contingencies (

Commitments and Contingencies (Tables)	9 Months Ended
	Sep. 30, 2016
Summary of Minimum Annual Future Payments under Operating Leases	The following is a summary of the minimum annual future payments under operating leases for office space as of September 30, 2016: Cash payments due by year (in thousands) Total Remainder 2017 2018 2019 2020 Thereafter Operating leases $ 22,063 $ 445 $ 1,933 $ 2,230 $ 2,284 $ 2,341 $ 12,830

Stock-Based Compensation (Table

Stock-Based Compensation (Tables)	9 Months Ended
	Sep. 30, 2016
Summary of Option Activity	A summary of option activity under the Plans for the nine months ended September 30, 2016 follows: Weighted Average Weighted Average Aggregate Stock Options Number of Exercise Price at Remaining Term Intrinsic (in thousands, except for share and per share amounts) Shares Grant Date (Years) Value Outstanding at December 31, 2015 6,252,448 $ 11.87 6.16 $ 7,498 Granted 861,511 8.39 Forfeited (377,448 ) 11.16 Expired (205,266 ) 14.47 Exercised (827,572 ) 8.46 3,870 Outstanding at September 30, 2016 5,703,673 11.79 5.78 36,336 Exercisable at September 30, 2016 3,908,977 12.41 4.47 25,210 Vested and expected to vest at September 30, 2016 5,569,895 11.84 5.70 35,434
Summary of RSU Activity	A summary of RSU activity under the Plans for the nine months ended September 30, 2016 follows: Number of Weighted Shares Average Underlying Grant Date RSUs RSUs Fair Value Unvested at December 31, 2015 1,022,681 $ 10.90 Granted 632,242 8.39 Forfeited (238,942 ) 10.27 Vested (287,666 ) 9.65 Unvested at September 30, 2016 1,128,315 9.95

Business Organization and Pre30

Business Organization and Presentation - Additional Information (Detail)	9 Months Ended
	Sep. 30, 2016Segment
Organization and Summary of Significant Accounting Policies Disclosure [Line Items]
Number of operating segments	1

Net Sales by Product (Detail)

Net Sales by Product (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Revenues:
Net product sales	$ 38,482	$ 28,344	$ 107,773	$ 78,076
HETLIOZ
Revenues:
Net product sales	18,715	11,682	52,376	29,159
Fanapt
Revenues:
Net product sales	$ 19,767	$ 16,662	$ 55,397	$ 48,917

Summary of Significant Accoun32

Summary of Significant Accounting Policies - Additional Information (Detail) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2016USD ($)	Sep. 30, 2015USD ($)	Mar. 31, 2015USD ($)	Sep. 30, 2016USD ($)Customer	Sep. 30, 2015USD ($)	Dec. 31, 2015USD ($)
Summary Of Significant Accounting Policies [Line Items]
Percentage of insurance coverage gap allocated for prescription drugs under Medicare Part D				50.00%
Advertising expenses	$ 100	$ 500		$ 1,200	$ 2,400
Milestone obligation under license agreement	25,000			25,000		$ 25,000
HETLIOZ
Summary Of Significant Accounting Policies [Line Items]
Intangible asset acquired					25,000
Milestone obligation under license agreement	$ 25,000	$ 25,000	$ 25,000	25,000	25,000
Cumulative worldwide sales milestone			$ 250,000	250,000	250,000
Purchases of property, plant and equipment and the related current liability				$ 300	$ 300
Customer Concentration Risk | Sales Revenue, Net
Summary Of Significant Accounting Policies [Line Items]
Concentration Risk, Percentage				86.00%
Number of major customers that each accounted for more than 10% of total revenues | Customer				5
Credit Concentration Risk | Accounts Receivable
Summary Of Significant Accounting Policies [Line Items]
Concentration Risk, Percentage				80.00%
Number of major customers that each accounted for more than 10% of total accounts receivable | Customer				4

Black-Scholes-Merton Option Pri

Black-Scholes-Merton Option Pricing Model for Stock Options Granted (Detail) - $ / shares	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Share Based Payment Award Stock Options Valuation Assumptions [Line Items]
Expected dividend yield	0.00%	0.00%
Weighted average expected volatility	57.00%	60.00%
Weighted average expected term (years)	6 years 1 month 6 days	6 years
Weighted average risk-free rate	1.37%	1.67%
Weighted average fair value per share	$ 4.51	$ 6.45

Total Stock-Based Compensation

Total Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	$ 2,100	$ 2,061	$ 6,440	$ 6,074
Research and development
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	539	516	1,552	1,743
Selling, general and administrative
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	$ 1,561	$ 1,545	$ 4,888	$ 4,331

Basic and Diluted Net Loss Per

Basic and Diluted Net Loss Per Share of Common Stock (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Numerator:
Net loss	$ (430)	$ (9,461)	$ (17,406)	$ (25,067)
Denominator:
Weighted average shares outstanding, basic and diluted	43,515,404	42,435,405	43,275,074	42,059,839
Net loss per share, basic and diluted:	$ (0.01)	$ (0.22)	$ (0.40)	$ (0.60)
Antidilutive securities excluded from calculations of diluted net loss per share	3,845,456	5,181,975	5,298,256	5,534,752

Summary of Available-For-Sale M

Summary of Available-For-Sale Marketable Securities (Detail) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Fair Market Value	$ 109,814	$ 92,337
U.S. Treasury and government agencies
Schedule of Available-for-sale Securities [Line Items]
Fair Market Value	54,695	44,057
Corporate debt
Schedule of Available-for-sale Securities [Line Items]
Fair Market Value	55,119	48,280
Current Investment
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	109,672	92,298
Gross Unrealized Gains	150	52
Gross Unrealized Losses	(8)	(13)
Fair Market Value	109,814	92,337
Current Investment | U.S. Treasury and government agencies
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	54,662	44,059
Gross Unrealized Gains	33	6
Gross Unrealized Losses		(8)
Fair Market Value	54,695	44,057
Current Investment | Corporate debt
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	55,010	48,239
Gross Unrealized Gains	117	46
Gross Unrealized Losses	(8)	(5)
Fair Market Value	$ 55,119	$ 48,280

Assets Measured at Fair Value o

Assets Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	$ 109,814	$ 92,337
U.S. Treasury and government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	54,695	44,057
Corporate debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	55,119	48,280
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	54,695	44,057
Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. Treasury and government agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	54,695	44,057
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	55,119	48,280
Significant Other Observable Inputs (Level 2) | Corporate debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	$ 55,119	$ 48,280

Inventory (Detail)

Inventory (Detail) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Current assets
Finished goods	$ 865	$ 1,294
Total	865	1,294
Non-Current assets
Raw materials	127	127
Work-in-process	2,241	2,369
Finished goods	223
Total	$ 2,591	$ 2,496

Summary of Accounts Payable and

Summary of Accounts Payable and Accrued Liabilities (Detail) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Accounts Payable and Accrued Liabilities [Line Items]
Research and development expenses	$ 2,575	$ 3,199
Consulting and other professional fees	4,162	5,088
Compensation and employee benefits	3,071	468
Royalties payable	6,413	5,328
Other	1,351	1,684
Accounts payable and accrued liabilities	$ 17,572	$ 15,767

Summary of Intangible Assets (D

Summary of Intangible Assets (Detail) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 60,941	$ 60,941
Accumulated Amortization	31,017	22,189
Net Carrying Amount	$ 29,924	$ 38,752
HETLIOZ
Finite-Lived Intangible Assets [Line Items]
Intangible assets, estimated useful life	2033-01	2033-01
Gross Carrying Amount	$ 33,000	$ 33,000
Accumulated Amortization	4,751	3,460
Net Carrying Amount	$ 28,249	$ 29,540
Fanapt
Finite-Lived Intangible Assets [Line Items]
Intangible assets, estimated useful life	2016-11	2016-11
Gross Carrying Amount	$ 27,941	$ 27,941
Accumulated Amortization	26,266	18,729
Net Carrying Amount	$ 1,675	$ 9,212

Intangible Assets (Textual 2 -

Intangible Assets (Textual 2 - HETLIOZ) - Additional Information (Detail) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended		9 Months Ended		12 Months Ended
	Jul. 31, 2013	Feb. 29, 2004	Mar. 31, 2015	Mar. 31, 2014	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2006	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Milestone obligation under license agreement					$ 25,000			$ 25,000
HETLIOZ
Finite-Lived Intangible Assets [Line Items]
Acquisition of intangible assets	$ 3,000	$ 500		$ 8,000			$ 1,000
Cumulative worldwide sales milestone			$ 250,000		250,000	$ 250,000
Intangible assets capitalized			25,000		25,000	25,000
Milestone obligation under license agreement			$ 25,000		$ 25,000	$ 25,000

Intangible Assets (Textual 3 -

Intangible Assets (Textual 3 - Fanapt) - Additional Information (Detail) - Fanapt - USD ($) $ in Millions	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015	Dec. 31, 2009	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Acquisition of intangible assets			$ 12
Estimated Patent life end date	2016-11	2016-11
Assets acquired and recorded at fair value, Intangible re-acquired right				$ 15.9

Intangible Assets - Additional

Intangible Assets - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Finite-Lived Intangible Assets [Line Items]
Intangible asset amortization	$ 2,943	$ 2,943	$ 8,828	$ 10,029

Summary of Future Intangible As

Summary of Future Intangible Asset Amortization (Detail) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Net Carrying Amount	$ 29,924	$ 38,752
Remainder of 2016	2,105
2,017	1,721
2,018	1,721
2,019	1,721
2,020	1,721
Thereafter	20,935
HETLIOZ
Finite-Lived Intangible Assets [Line Items]
Net Carrying Amount	28,249	29,540
Remainder of 2016	430
2,017	1,721
2,018	1,721
2,019	1,721
2,020	1,721
Thereafter	20,935
Fanapt
Finite-Lived Intangible Assets [Line Items]
Net Carrying Amount	1,675	$ 9,212
Remainder of 2016	$ 1,675

Income Taxes - Additional Infor

Income Taxes - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Income Taxes [Line Items]
Provision for income taxes	$ 0	$ 0	$ 0	$ 0

Commitments and Contingencies -

Commitments and Contingencies - Additional Information (Detail) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016USD ($)ft²	Sep. 30, 2015USD ($)	Sep. 30, 2016USD ($)ft²	Sep. 30, 2015USD ($)
Commitments and Contingencies Disclosure [Line Items]
Rent expense | $	$ 0.7	$ 0.5	$ 1.7	$ 1.4
Washington DC Lease
Commitments and Contingencies Disclosure [Line Items]
Leased square footage	40,188
Expiration date of leases for office space	2,026
Washington DC Lease | Sublease
Commitments and Contingencies Disclosure [Line Items]
Leased square footage	9,928
Washington DC Lease Amendment
Commitments and Contingencies Disclosure [Line Items]
Leased square footage			30,260
Renewal term of lease agreement			5 years
London Lease
Commitments and Contingencies Disclosure [Line Items]
Leased square footage	2,880
Noncancellable lease term ending date	2,021

Summary of Minimum Annual Futur

Summary of Minimum Annual Future Payments Under Operating Leases for Office Space (Detail) $ in Thousands	Sep. 30, 2016USD ($)
Operating Leased Assets [Line Items]
Operating leases, Total	$ 22,063
Operating leases, Remainder of 2016	445
Operating leases, 2017	1,933
Operating leases, 2018	2,230
Operating leases, 2019	2,284
Operating leases, 2020	2,341
Operating leases, Thereafter	$ 12,830

Commitments and Contingencies48

Commitments and Contingencies (Textual 2 - HETLIOZ) - Additional Information (Detail) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended		9 Months Ended		12 Months Ended
	Jul. 31, 2013	Feb. 29, 2004	Mar. 31, 2015	Mar. 31, 2014	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2006	Dec. 31, 2015
HETLIOZ
Milestone obligation under license agreement					$ 25,000			$ 25,000
Percentage of future sublicense fees payable to third-party					Mid-twenties
HETLIOZ
HETLIOZ
Acquisition of intangible assets	$ 3,000	$ 500		$ 8,000			$ 1,000
Milestone obligation under license agreement			$ 25,000		$ 25,000	$ 25,000
Royalty payable percentage on net sales			10.00%
Cumulative worldwide sales milestone			$ 250,000		250,000	250,000
Intangible assets capitalized			$ 25,000		$ 25,000	$ 25,000

Commitments and Contingencies49

Commitments and Contingencies (Textual 3 - Fanapt) - Additional Information (Detail)	9 Months Ended
	Sep. 30, 2016USD ($)
Fanapt
Royalty received percentage on net sales	10.00%
Prepaid royalty Payment	$ 2,000,000
Royalty payment period	10 years
Royalty Rate for Annual Sales up to $200 million through November 2016
Fanapt
Royalty percentage payable on net sales below annual threshold	23.00%
Royalty Rate for Annual Sales in Excess of $200 million through November 2016
Fanapt
Royalty percentage payable on net sales above annual threshold	Mid-twenties
November 16,2016 through December 31,2019
Fanapt
Royalty payable percentage on net sales	3.00%
Maximum
Fanapt
Agreed upon sales threshold level for royalty rate	$ 200,000,000
Fanapt
Fanapt
Royalty payable percentage on net sales	6.00%

Commitments and Contingencies50

Commitments and Contingencies (Textual 4 - Tradipitant) - Additional Information (Detail) - Tradipitant $ in Millions	12 Months Ended
	Dec. 31, 2012USD ($)
Tradipitant
Future percentage of royalty payments based net sales	Low double digits
Possible future milestone payments	$ 4
Milestone payment under license agreement	1
Future Regulatory Approval and Sales Milestones
Tradipitant
Possible future milestone payments	$ 95

Legal Matters - Additional Info

Legal Matters - Additional Information (Detail)	Mar. 04, 2016Case
Roxane Laboratories Inc.
Legal Proceedings [Line Items]
Number of cases that were consolidated	2

Stock-Based Compensation (Textu

Stock-Based Compensation (Textual 1 - Stock-Based Compensation) - Additional Information (Detail) - shares	9 Months Ended
	Sep. 30, 2016	Jun. 16, 2016
2006 Plan and 2016 Plan | Outstanding options and RSUs granted (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares subject to outstanding options and RSUs	6,831,988
2016 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares of common stock reserved for issuance		2,000,000
Number of shares of common stock available for future grant	1,835,000

Stock-Based Compensation (Tex53

Stock-Based Compensation (Textual 2 Stock Option) - Additional Information (Detail) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation option awards contractual term	10 years
Portion of initial stock options granted to employees that vests on employee's first anniversary	25.00%
Portion of initial stock options granted to employees that vests ratably over three years after completion of first year of service	75.00%
Option awards vesting period, after completion of one year of service	3 years
Vesting period	4 years
Vesting period for initial stock options granted to directors	4 years
Vesting period for subsequent stock options granted to directors	1 year
Proceeds from exercise of employee stock options	$ 7,001	$ 4,374
Service option awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expenses	$ 10,200
Unrecognized compensation expenses, weighted average period	1 year 3 months 18 days

Summary of Option Activity unde

Summary of Option Activity under 2006 Plan and the 2016 Plan (Detail) - 2006 Plan and 2016 Plan - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Number of Shares
Beginning balance	6,252,448
Granted	861,511
Forfeited	(377,448)
Expired	(205,266)
Exercised	(827,572)
Ending balance	5,703,673	6,252,448
Exercisable	3,908,977
Vested and expected to vest at September 30, 2016	5,569,895
Weighted Average Exercise Price at Grant Date
Beginning balance	$ 11.87
Granted	8.39
Forfeited	11.16
Expired	14.47
Exercised	8.46
Ending balance	11.79	$ 11.87
Exercisable	12.41
Vested and expected to vest at September 30, 2016	$ 11.84
Weighted Average Remaining Term (Years)
Weighted Average Remaining Term	5 years 9 months 11 days	6 years 1 month 28 days
Exercisable	4 years 5 months 19 days
Vested and expected to vest at September 30, 2016	5 years 8 months 12 days
Aggregate Intrinsic Value
Beginning balance	$ 7,498
Exercised	3,870
Ending balance	36,336	$ 7,498
Exercisable	25,210
Vested and expected to vest at September 30, 2016	$ 35,434

Stock-Based Compensation (Tex55

Stock-Based Compensation (Textual 3 RSU) - Additional Information (Detail) - Restricted Stock Units (RSU) $ in Millions	9 Months Ended
	Sep. 30, 2016USD ($)shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period of RSU awards in equal installments	4 years
Unrecognized compensation expenses, weighted average period	1 year 9 months 18 days
Unrecognized compensation expenses related to unvested RSUs	$ 8.9
2006 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of common stock vested, shares | shares	287,666
Fair value of common stock vested	$ 2.8

Summary of RSU Activity under 2

Summary of RSU Activity under 2006 Plan and the 2016 Plan (Detail) - 2006 Plan and 2016 Plan - Restricted Stock Units (RSU)	9 Months Ended
	Sep. 30, 2016$ / sharesshares
Number of Shares Unvested
Beginning balance | shares	1,022,681
Granted | shares	632,242
Forfeited | shares	(238,942)
Vested | shares	(287,666)
Ending balance | shares	1,128,315
Weighted Average Price/Share Unvested
Beginning balance | $ / shares	$ 10.90
Granted | $ / shares	8.39
Forfeited | $ / shares	10.27
Vested | $ / shares	9.65
Ending balance | $ / shares	$ 9.95