Supernus Pharmaceuticals (SUPN) 10-Q 7 Aug 15 2015 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Aug. 03, 2015
Document and Entity Information
Entity Registrant Name	SUPERNUS PHARMACEUTICALS INC
Entity Central Index Key	1,356,576
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		48,446,269
Document Fiscal Year Focus	2,015
Document Fiscal Period Focus	Q2

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 33,110	$ 36,396
Marketable securities	36,681	37,940
Accounts receivable, net	17,900	17,270
Inventories, net	13,592	13,441
Prepaid expenses and other current assets	4,457	3,845
Total current assets	105,740	108,892
Long term marketable securities	33,488	19,816
Property and equipment, net	2,908	2,448
Intangible assets, net	11,597	5,434
Other non-current assets	435	918
Total assets	154,168	137,508
Current liabilities:
Accounts payable	4,518	1,863
Accrued expenses	31,753	25,487
Deferred licensing revenue	143	143
Total current liabilities	36,414	27,493
Deferred licensing revenue, net of current portion	1,202	1,274
Convertible notes, net of discount	8,762	26,947
Other non-current liabilities	3,355	3,876
Derivative liabilities	2,070	6,564
Total liabilities	51,803	66,154
Stockholders' equity:
Common stock, $0.001 par value, 130,000,000 shares authorized at June 30, 2015 and December 31, 2014; 48,444,821 and 42,974,463 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively	48	43
Additional paid-in capital	258,202	230,122
Accumulated other comprehensive loss	(151)	(154)
Accumulated deficit	(155,734)	(158,657)
Total stockholders' equity	102,365	71,354
Total liabilities and stockholders' equity	$ 154,168	$ 137,508

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Consolidated Balance Sheets
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	130,000,000	130,000,000
Common stock, shares issued	48,444,821	42,974,463
Common stock, shares outstanding	48,444,821	42,974,463

Consolidated Statements of Oper

Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenue
Net product sales	$ 34,266	$ 27,609	$ 62,363	$ 36,604
Licensing revenue	786	2,066	822	2,152
Total revenue	35,052	29,675	63,185	38,756
Costs and expenses
Cost of product sales	1,762	1,661	3,380	2,155
Research and development	6,878	4,677	10,561	9,159
Selling, general and administrative	23,336	19,581	42,737	37,109
Total costs and expenses	31,976	25,919	56,678	48,423
Operating income (loss)	3,076	3,756	6,507	(9,667)
Other income (expense)
Interest income	137	85	250	187
Interest expense	(331)	(1,278)	(712)	(2,485)
Changes in fair value of derivative liabilities	1	678	(48)	1,355
Loss on extinguishment of debt	(241)	(39)	(2,375)	(1,732)
Other income	25		25
Total other income (expense)	(409)	(554)	(2,860)	(2,675)
Earnings (loss) before income taxes	2,667	3,202	3,647	(12,342)
Income tax expense	662		724
Net income (loss)	$ 2,005	$ 3,202	$ 2,923	$ (12,342)
Income (loss) per common share:
Basic	$ 0.04	$ 0.08	$ 0.06	$ (0.30)
Diluted	$ 0.03	$ 0.08	$ 0.06	$ (0.30)
Weighted-average number of common shares:
Basic (in shares)	47,911,932	42,056,285	46,246,866	41,595,232
Diluted (in shares)	52,273,549	42,372,137	47,687,992	41,595,232

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Consolidated Statements of Comprehensive Income (Loss)
Net income (loss)	$ 2,005	$ 3,202	$ 2,923	$ (12,342)
Other comprehensive (loss) income:
Unrealized net (loss) gain on marketable securities	(86)		3	1
Other comprehensive (loss) income:	(86)		3	1
Comprehensive income (loss)	$ 1,919	$ 3,202	$ 2,926	$ (12,341)

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities
Net income (loss)	$ 2,923	$ (12,342)
Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used in) operating activities:
Loss on extinguishment of debt	2,375	1,732
Change in fair value of derivative liability	48	(1,355)
Unrealized gain on marketable securities	3	1
Depreciation and amortization	431	460
Amortization of deferred financing costs and debt discount	524	1,087
Share-based compensation expense	2,020	1,319
Changes in operating assets and liabilities:
Accounts receivable	(630)	(5,800)
Inventories	(151)	(2,949)
Prepaid expenses and other assets	(738)	(1,019)
Accounts payable	2,655	(1,329)
Accrued expenses	6,266	2,059
Deferred product revenue, net		(7,882)
Deferred licensing revenue	(72)	(133)
Other non-current liabilities	(482)	107
Net cash provided by (used in) operating activities	15,172	(26,044)
Cash flows from investing activities
Purchases of marketable securities	(34,274)	(19,902)
Sales and maturities of marketable securities	21,862	27,093
Purchases of property and equipment, net	(777)	(381)
Deferred legal fees	(6,278)	(2,040)
Net cash (used in) provided by investing activities	(19,467)	4,770
Cash flows from financing activities
Proceeds from issuance of common stock	1,009	251
Cash settlement of debt to equity conversion		(1)
Net cash provided by financing activities	1,009	250
Net change in cash and cash equivalents	(3,286)	(21,024)
Cash and cash equivalents at beginning of period	36,396	32,980
Cash and cash equivalents at end of period	33,110	11,956
Supplemental cash flow information:
Cash paid for interest	504	1,502
Noncash financial activity:
Conversion of convertible notes and interest make-whole	$ 25,056	$ 10,676

Organization and Business

Organization and Business	6 Months Ended
	Jun. 30, 2015
Organization and Business
Organization and Business	1. Organization and Business Supernus Pharmaceuticals, Inc. (the Company) is a specialty pharmaceutical company focused on developing and commercializing products for the treatment of central nervous system (CNS) diseases, including neurological and psychiatric disorders. The Company markets two epilepsy products, Oxtellar XR and Trokendi XR, and has several proprietary product candidates in clinical development that address the psychiatry market. The Company commenced the commercialization of Oxtellar XR and Trokendi XR in 2013.

Summary of Significant Accounti

Summary of Significant Accounting Policies	6 Months Ended
	Jun. 30, 2015
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies	2. Summary of Significant Accounting Policies Basis of Presentation The Company’s unaudited consolidated financial statements include the accounts of Supernus Pharmaceuticals, Inc. and Supernus Europe Ltd. These are collectively referred to herein as “Supernus” or “the Company.” All significant intercompany transactions and balances have been eliminated in consolidation. The Company’s unaudited consolidated financial statements have been prepared in accordance with t he requirements of the U.S. Securities and Exchange Commission (SEC) for interim financial information. As permitted under Generally Accepted Accounting Principles in the United States (U.S. GAAP), certain notes and other information have been omitted from the interim unaudited consolidated financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC. In the opinion of management, the consolidated financial statements reflect all adjustments necessary to fairly present the Company’s financial position, results of operations, and cash flows for the periods presented. These adjustments are of a normal recurring nature. The Company currently operates in one business segment. The results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of the Company’s future financial results. Accounts Receivable, net Accounts receivable are reported in the consolidated balance sheets at outstanding amounts, less an allowance for doubtful accounts and discounts. The Company extends credit without requiring collateral. The Company writes off uncollectible receivables when the likelihood of collection is remote. The Company evaluates the collectability of accounts receivable on a regular basis. An allowance, when needed, is based upon various factors including the financial condition and payment history of customers, an overall review of collections experience on other accounts, and economic factors or events expected to affect future collections experience. No accounts have been written off in 2015 and 2014. The Company recorded an allowance of approximately $4.9 million and $4.1 million for estimated sales discounts as of June 30, 2015 and December 31, 2014, respectively. Revenue Recognition Revenue from product sales is recognized when persuasive evidence of an arrangement exists; delivery has occurred and title to the product and associated risk of loss has passed to the customer; the price is fixed or determinable; collection from the customer has been reasonably assured; all performance obligations have been met; and returns and allowances can be reasonably estimated. Product sales are recorded net of estimated rebates, chargebacks, discounts, co ‑pay assistance and other deductions as well as estimated product returns (collectively, “sales deductions”). Our products are distributed through wholesalers and pharmaceutical distributors. Each of these wholesalers and distributors will take title and ownership to the product upon physical receipt of the product and then distribute our products to pharmacies. For the three and six months ended June 30, 2015, the revenue for Oxtellar XR and Trokendi XR was recognized contemporaneously upon shipment of finished product to wholesalers, net of allowances for estimated sales deductions and returns. Beginning in the second quarter of 2014, the Company began recognizing revenue for Trokendi XR, net of estimated sales deductions, at the time of shipments to wholesalers. Prior to this change in accounting estimate, the Company recognized revenue for Trokendi XR once delivery had occurred and all sales deductions were known or reasonably estimated. The effect of this change was to increase net product sales by $15.4 million and cost of product sales by $0.9 million for the three and six month periods ended June 30, 2014. Sales Deductions Allowances for estimated sales deductions are provided for the following: • Rebates. Rebates include mandated discounts under the Medicaid Drug Rebate Program, the Medicare coverage gap program, as well as negotiated discounts with commercial health ‑care providers. Rebates are amounts owed after the final dispensing of products to a benefit plan participant and are based upon contractual agreements or legal requirements with the public sector (e.g. Medicaid) and with private sector benefit providers. The allowance for rebates is based on statutory and contractual discount rates and expected claimed rebates paid based on a plan provider’s utilization. Rebates are generally invoiced and paid quarterly in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters’ unpaid rebates. If actual future rebates vary from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment. • Chargebacks. Chargebacks are discounts that occur when contracted customers purchase directly from an intermediary distributor or wholesaler. Contracted customers, which currently consist primarily of Public Health Service institutions and Federal government entities purchasing via the Federal Supply Schedule, generally purchase the product at a discounted price. The distributor or wholesaler, in turn, charges back the difference between the price initially paid by the distributor or wholesaler and the discounted price paid to the distributor or wholesaler by the customer. The allowance for distributor/wholesaler chargebacks is based on known sales to contracted customers. • Distributor/Wholesaler deductions and discounts. U.S. specialty distributors and wholesalers are offered various forms of consideration including allowances, service fees and prompt payment discounts as consideration for distributing our products. Distributor allowances and service fees arise from contractual agreements with distributors and are generally a percentage of the purchase price paid by the distributors and wholesalers. Wholesale customers are offered a prompt pay discount for payment within a specified period. • Co ‑pay assistance. Patients who pay in cash or have commercial insurance and meet certain eligibility requirements may receive co ‑pay assistance from the Company. The intent of this program is to reduce the patient’s out of pocket costs. Liabilities for co ‑pay assistance are based on actual program participation and estimates of program redemption using data provided by third ‑party administrators. • Returns. Sales of our products are not subject to a general right of return; however, the Company will accept product that is damaged or defective when shipped directly from our warehouse or for expired product up to 12 months subsequent to its expiry date. Product that has been used to fill patient prescriptions is no longer subject to any right of return. Milestone Payments Milestone payments on licensing agreements are recognized as revenue when the collaborative partner acknowledges completion of the milestone and substantive effort was necessary to achieve the milestone. Management may recognize revenue contingent upon the achievement of a milestone in its entirety in the period in which the milestone is achieved only if the milestone meets all the criteria to be considered substantive. The Company recorded $750,000 of milestone revenue during the three and six months ended June 30, 2015 and $2.0 million of milestone revenue during the three and six months ended June 30, 2014. Cost of Product Sales The cost of product sales consist primarily of materials, third-party manufacturing costs, freight and distribution costs, allocation of labor, quality control and assurance, and other manufacturing overhead costs. Income Taxes The Company utilizes the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Valuation allowances are established to reduce deferred tax assets to the amounts expected to be realized. The Company accounts for uncertain tax positions in its consolidated financial statements when it is more ‑likely ‑than ‑not that the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. The Company’s policy is to recognize any interest and penalties related to income taxes in income tax expense. During the three and six months ended June 30, 2015, the Company had pre ‑tax income of $2.7 million and $3.6 million, respectively. The provision for Federal and state income taxes related to such pre ‑tax income has been largely offset by the utilization of available net operating loss carryforwards (NOL’s). Accordingly, the Company reduced its valuation allowance against its deferred tax assets and recognized an income tax expense for the jurisdictions that did not have sufficient NOL’s to offset the expected tax expense. Recently Issued Accounting Pronouncements In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” This ASU provides guidance about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the software license element of the arrangement is consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, then it should account for the arrangement as a service contract. The amendments in this ASU are effective for financial statements issued for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. The Company has elected to early adopt the amendment. In April 2015, the FASB issued ASU No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs." This ASU more closely aligns the treatment of debt issuance costs with debt discounts and premiums and requires debt issuance costs be presented as a direct deduction from the carrying amount of the related debt. The amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. This guidance should be applied on a retrospective basis and the Company will be required to comply with the applicable disclosures for a change in accounting principle. Presently, the Company is assessing what effect the adoption of ASU 2015-03 will have on our consolidated financial statements and accompanying notes. In August 2014, the FASB issued ASU No. 2014 ‑15 “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern”. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue to meet its obligations as they become due within one year after the date that the financial statements are issued. ASU 2014 ‑15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. We do not believe the adoption of the new standard will have a significant impact on our operations. In May 2014, the FASB issued ASU No. 2014 ‑09, Revenue from Contracts with Customers. ASU 2014 ‑09 will eliminate transaction ‑ and industry ‑specific revenue recognition guidance under current GAAP and replace it with a principles ‑based approach for determining revenue recognition. ASU 2014 ‑09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014 ‑09 is effective for annual reporting periods beginning after December 15, 2016. The FASB has voted to approve a one-year deferral, changing the effective date to annual reporting periods beginning after December 15, 2017, with early adoption being permitted for periods ending after December 15, 2016. Earlier adoption is not permitted. Entities can transition to the standard either retrospectively or as a cumulative effect adjustment as of the date of adoption. Presently, the Company is assessing what effect the adoption of ASU 2014 ‑09 will have on our consolidated financial statements and accompanying notes. The Company has evaluated all other ASUs issued through the date the consolidated financials were issued and believes that the adoption of these will not have a material impact on the Company’s consolidated financial statements.

Fair Value of Financial Instrum

Fair Value of Financial Instruments	6 Months Ended
	Jun. 30, 2015
Fair Value of Financial Instruments
Fair Value of Financial Instruments	3. Fair Value of Financial Instruments The fair value of an asset or liability should represent the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Such transactions to sell an asset or transfer a liability are assumed to occur in the principal or most advantageous market for the asset or liability. Accordingly, fair value is determined based on a hypothetical transaction at the measurement date, considered from the perspective of a market participant rather than from a reporting entity’s perspective. The Company reports assets and liabilities that are measured at fair value using a three level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: · Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. · Level 2—Inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (interest rates, yield curves, etc.) and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). · Level 3—Unobservable inputs that reflect the Company’s own assumptions, based on the best information available, including the Company’s own data. In accordance with the fair value hierarchy described above, the following tables show the fair value of the Company’s financial assets and liabilities that are required to be measured at fair value, in thousands: Fair Value Measurements at June 30, 2015 (unaudited) Significant Total Carrying Quoted Prices Other Significant Value at in Active Observable Unobservable June 30, Markets Inputs Inputs 2015 (Level 1) (Level 2) (Level 3) Assets: Cash and cash equivalents $ $ $ — $ — Marketable securities — — Long term marketable securities — — Marketable securities - restricted (SERP) — — Total assets at fair value $ $ $ $ — Liabilities: Derivative liabilities $ $ — $ — $ Fair Value Measurements at December 31, 2014 Significant Total Carrying Quoted Prices Other Significant Value at in Active Observable Unobservable December 31, Markets Inputs Inputs 2014 (Level 1) (Level 2) (Level 3) Assets: Cash and cash equivalents $ $ $ — $ — Marketable securities — — Long term marketable securities — — Marketable securities - restricted (SERP) — — Total assets at fair value $ $ $ $ — Liabilities: Derivative liabilities $ $ — $ — $ The fair value of the restricted marketable securities is included within other non-current assets in the consolidated balance sheets. The Company’s Level 1 assets include money market funds and U.S. Treasury and government agency debt securities with quoted prices in active markets. Level 2 assets include the SERP (Supplemental Executive Retirement Plan) assets, commercial paper and investment grade corporate bonds and other fixed income securities. Level 3 liabilities include the estimated fair value of the interest make-whole liability associated with the Company’s 7.50% Convertible Senior Secured Notes due 2019 (the Notes) and outstanding warrants to purchase Common Stock, which are recorded as derivative liabilities. The fair value of the interest make-whole liability of the Notes was calculated using a binomial-lattice model with the following key assumptions as of June 30, 2015, unaudited: Volatility 45% Stock Price as of June 30, 2015 $16.98 per share Credit Spread 1522 bps Term 1.8 years Dividend Yield 0.0% The fair value of the common stock warrant liability was calculated using a Black-Scholes model with the following assumptions as of June 30, 2015, unaudited: Exercise Price $4.00 - $5.00 per share Volatility 65% Stock Price as of June 30, 2015 $16.98 per share Term 5.6 - 6.5 years Dividend Yield 0.0% Risk-Free Rate 1.8% -2.1% Significant changes to these assumptions could result in increases/decreases to the fair value of the derivative liabilities. Changes in the fair value of the warrants and the interest make-whole liability are recognized as a component of Other Income (Expense) in the Consolidated Statements of Operations. The following table presents information about the Company’s Level 3 liabilities as of December 31, 2014 and June 30, 2015 that are included in the Non-Current Liabilities section of the Consolidated Balance Sheets, in thousands: Six Months ended June 30, 2015 (unaudited) Balance at December 31, 2014 $ Changes in fair value of derivative liabilities included in earnings Reduction due to conversion of debt to equity ) Balance at June 30, 2015 $ The carrying value, face value and estimated fair value of the Notes was approximately $8.8 million, $10.7 million and $36.1 million, respectively, as of June 30, 2015. The fair value was estimated based on actual trade information as well as quoted prices provided by bond traders, which would be characterized within Level 2 of the fair value hierarchy. This fair value amount gives recognition to the value of the interest make-whole liability and the value of the conversion option. These items have been accounted for as derivative liabilities and additional paid-in-capital, respectively. The carrying amounts of other financial instruments, including accounts receivable, accounts payable and accrued expenses approximate fair value due to their short-term maturities. Unrestricted marketable securities held by the Company were as follows, in thousands: At June 30, 2015 (unaudited): Available for Sale Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Corporate debt securities $ $ $ ) $ At December 31, 2014: Available for Sale Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Corporate debt securities $ $ $ ) $ The contractual maturities of the unrestricted available for sale marketable securities held by the Company were as follows, in thousands: June 30, 2015 (unaudited) Less Than 1 Year $ 1-5 years Greater Than 5 Years — Total $ The Company has not experienced any other-than-temporary losses on its marketable securities and restricted marketable securities. The cost of securities sold is calculated using the specific identification method.

Inventories

Inventories	6 Months Ended
	Jun. 30, 2015
Inventories
Inventories	4. Inventories Inventories consist of the following, in thousands: June 30, December 31, 2015 2014 (unaudited) Raw materials $ $ Work in process Finished goods $ $

Property and Equipment

Property and Equipment	6 Months Ended
	Jun. 30, 2015
Property and Equipment
Property and Equipment	5. Property and Equipment Property and equipment consist of the following, in thousands: June 30, December 31, 2015 2014 (unaudited) Computer equipment $ $ Software Lab equipment and furniture Leasehold improvements Less accumulated depreciation and amortization ) ) $ $ Depreciation expense on property and equipment was approximately $160,000 and $317,000 for the three and six months ended June 30, 2015 and $176,000 and $345,000 for the three and six months ended June 30, 2014.

Intangible Assets

Intangible Assets	6 Months Ended
	Jun. 30, 2015
Intangible Assets
Intangible Assets	6. Intangible Assets The Company purchased certain patents from Shire Laboratories, Inc. pursuant to a 2005 purchase agreement. These patents are being amortized over the weighted average life of the patents purchased in that transaction. Deferred legal fees have been incurred in connection with litigation related to patents for Oxtellar XR and Trokendi XR (see Part II, Item I—Legal Proceedings in this Quarterly Report on Form 10-Q). The following sets forth the gross carrying amount and related accumulated amortization of these intangible assets, in thousands: June 30, 2015 (unaudited) December 31, 2014 Weighted- Gross Carrying Accumulated Gross Carrying Accumulated Average Life Amount Amortization Amount Amortization Purchased patents 10.0 $ $ $ $ Deferred legal fees $ $ — $ $ — Deferred legal fees will be capitalized as part of the patents upon successful outcome of the on-going litigation related to these patents, at which point amortization of those costs will begin. If the Company is unsuccessful, the deferred legal fees will be expensed at that time. Four U.S. patents have been issued covering Oxtellar XR and six U.S. patents have been issued covering Trokendi XR, with the patents expiring no earlier than 2027. Amortization expense associated with purchased patents was approximately $57,000 for each of the three months ended June 30, 2015 and 2014 and was approximately $115,000 for each of the six months ended June 30, 2015 and 2014. The estimated annual aggregate amortization expense through December 31, 2015 is $229,000. The net book value of intangible assets as of June 30, 2015 was approximately $11.6 million and December 31, 2014 was approximately $5.4 million. There were no indicators of impairment identified at June 30, 2015 or December 31, 2014.

Accrued Liabilities

Accrued Liabilities	6 Months Ended
	Jun. 30, 2015
Accrued Liabilities
Accrued Liabilities	7. Accrued Liabilities Accrued Liabilities are comprised of the following, in thousands: June 30, December 31, 2015 2014 (unaudited) Accrued sales deductions $ $ Accrued compensation Accrued professional fees Accrued product costs Accrued clinical trial and clinical supply costs Accrued sales and marketing expenses Accrued interest expense Other accrued liabilities $ $

Convertible Senior Secured Note

Convertible Senior Secured Notes	6 Months Ended
	Jun. 30, 2015
Convertible Senior Secured Notes
Convertible Senior Secured Notes	8. Convertible Senior Secured Notes The table below summarizes activity related to the Notes from issuance on May 3, 2013 through June 30, 2015, in thousands: Gross proceeds $ Initial value of interest make-whole derivative reported as debt discount ) Conversion option reported as debt discount and APIC ) Conversion of debt to equity - principal ) Conversion of debt to equity - accretion of debt discount Accretion of debt discount December 31, 2014 carrying value Conversion of debt to equity - principal ) Conversion of debt to equity - accretion of debt discount Accretion of debt discount June 30, 2015 carrying value, unaudited $ During the six month period ended June 30, 2015, approximately $25.3 million of the Notes were presented to the Company for conversion. Accordingly, the Company issued approximately 4.8 million shares of common stock in conversion of the principal amount of the Notes. The Company issued an additional 0.5 million shares of common stock in settlement of the interest make-whole provision related to the converted Notes. As a result of the conversions, the Company incurred a loss of approximately $2.4 million on extinguishment of debt during the six months ended June 30, 2015, which is included as a separate component of other income (expense) on the consolidated statement of operations. During the six month period ended June 30, 2014, as a result of approximately $9.7 million in note conversions, the Company incurred a loss of approximately $1.7 million on extinguishment of debt.

Summary Stockholders' Equity

Summary Stockholders' Equity	6 Months Ended
	Jun. 30, 2015
Stockholders' Equity
Stockholders' Equity	9. Summary Stockholders’ Equity The following summary table provides details related to the activity in certain captions within Stockholders’ Equity for the six month period ended June 30, 2015, in thousands. Common Stock Additional Paid-in Capital (unaudited) Balance, December 31, 2014 $ $ Share-based compensation — Issuance of ESPP shares — Exercise of stock options — Equity issued on note conversion Balance, June 30, 2015 $ $

Share-Based Payments

Share-Based Payments	6 Months Ended
	Jun. 30, 2015
Share-Based Payments
Share-Based Payments	10. Share-Based Payments The Company has adopted the Supernus Pharmaceuticals, Inc. 2012 Equity Incentive Plan (the 2012 Plan), which is stockholder approved, and provides for the grant of stock options and certain other awards, including stock appreciation rights (SAR), restricted and unrestricted stock, stock units, performance awards, cash awards and other awards that are convertible into or otherwise based on the Company’s common stock, to the Company’s key employees, directors, and consultants and advisors. The 2012 Plan is administered by the Company’s Board of Directors and provides for the issuance of up to 4,000,000 shares of the Company’s Common Stock upon the exercise of stockawards. Option awards are granted with an exercise price equal to the estimated fair value of the Company’s Common Stock at the grant date; those option awards generally vest in four annual installments, starting on the first anniversary of the date of grant and have ten year contractual terms. Share-based compensation recognized related to the grant of employee and non-employee stock options, SAR, potential Employee Stock Purchase Plan (ESPP) awards and non-vested stock was as follows, in thousands: Three Months ended June 30, Six Months ended June 30, 2015 2014 2015 2014 (unaudited) (unaudited) Research and development $ $ $ $ Selling, general and administrative Total $ $ $ $ The following table summarizes stock option and SAR activity: Number of Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (in years) Outstanding, December 31, 2014 $ 8.04 Granted (unaudited) $ Exercised (unaudited) ) $ Forfeited or expired (unaudited) ) $ Outstanding, June 30, 2015 (unaudited) $ 8.34 As of December 31, 2014: Vested and expected to vest $ 8.03 Exercisable $ 6.91 As of June 30, 2015: Vested and expected to vest (unaudited) $ 8.32 Exercisable (unaudited) $ 7.32

Earnings per Share

Earnings per Share	6 Months Ended
	Jun. 30, 2015
Earnings per Share
Earnings per Share	11. Earnings per Share Basic income (loss) per common share is determined by dividing income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted income (loss) per share is computed by dividing the income (loss) attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period. The treasury stock method is used to determine the dilutive effect of the Company’s stock option grants, SARs, and warrants, and the if-converted method is used to determine the dilutive effect of the Company’s Notes. The assumed conversion of the Notes would result in a loss on extinguishment of debt which would cause a net loss in the three months ended June 30, 2014 and the six months ended June 30, 2015 and June 30, 2014; thus, the effect would be anti-dilutive. The following common stock equivalents were excluded in the calculation of diluted income (loss) per share because their effect would be anti-dilutive as applied to the income (loss) from continuing operations applicable to common stockholders for the three and six months ended June 30, 2015 and 2014: Three Months ended June 30, Six Months ended June 30, 2015 2014 2015 2014 (unaudited) (unaudited) Shares underlying Convertible Senior Secured Notes — Warrants to purchase common stock Stock options, stock appreciation rights, and non-vested stock options — — — The following table sets forth the computation of basic and diluted net income per share for the three and six months ended June 30, 2015 and 2014, in thousands, except share and per share amounts: Three Months ended June 30, Six Months ended June 30, 2015 2014 2015 2014 (unaudited) (unaudited) Numerator, in thousands: Net income (loss) used for calculation of basic EPS $ $ $ $ ) Interest expense on convertible debt — — — Changes in fair value of derivative liabilities ) — — — Loss on extinguishment of outstanding debt — — — Loss on extinguishment of outstanding debt, as if converted ) — — — Total adjustments ) — — — Net income (loss) used for calculation of diluted EPS $ $ $ $ ) Denominator: Weighted average shares outstanding, basic Effect of dilutive potential common shares: Shares underlying Convertible Senior Secured Notes — — — Shares issuable to settle interest make-whole derivatives — — — Stock options, stock appreciation rights, and non-vested stock options — Total potential dilutive common shares — Weighted average shares outstanding, diluted Net income (loss) per share, basic $ $ $ $ ) Net income (loss) per share, diluted $ $ $ $ )

Income Taxes

Income Taxes	6 Months Ended
	Jun. 30, 2015
Income Taxes
Income Taxes	12. Income Taxes During the three and six months ended June 30, 2015, the Company had pre-tax income of $2.7 million and $3.6 million, respectively. The provision for Federal and state income taxes related to the pre-tax income has been largely offset by the utilization of available net operating loss carryforwards (NOL’s). Accordingly, the Company reduced its valuation allowance against its deferred tax assets and recognized an income tax expense for the jurisdictions that did not have sufficient NOL’s to offset the expected tax expense. During the three months ended June 30, 2015, the Company recorded $0.7 million of current tax expense related to an increase in our reserve for an uncertain tax position related to the Alternative Minimum Tax.

Commitments and Contingencies

Commitments and Contingencies	6 Months Ended
	Jun. 30, 2015
Commitments and Contingencies
Commitments and Contingencies	13. Commitments and Contingencies The Company has concurrent leases for office and lab space that extend through April 2020. The Company may elect to extend the term of the leases for an additional five-year term. The leases provide for a tenant improvement allowance of approximately $2.1 million in aggregate. During the three and six months ended June 30, 2015, $0.2 million of the allowance was utilized and is included in fixed assets and deferred rent. During the three and six months ended June 30, 2014, $0.1 million of the allowance was utilized. As of June 30, 2015, $0.5 million remains available for tenant improvements. Rent expense for the leased facilities and leased vehicles for the three and six months ended June 30, 2015 was approximately, $0.6 million, and $1.2 million, respectively. Rent expense for the leased facilities and leased vehicles for the three and six months ended June 30, 2014 was approximately, $0.5 million, and $1.0 million, respectively. Future minimum lease payments under non-cancelable operating leases as of June 30, 2015 are as follows, in thousands: Year ending December 31: 2015 (remaining) $ 2016 2017 2018 Thereafter $ The Company has obtained exclusive licenses from third parties for proprietary rights to support the product candidates in the Company’s psychiatry portfolio. Under license agreements with Afecta Pharmaceuticals, Inc. (Afecta), the Company has an exclusive option to evaluate Afecta’s CNS pipeline and to obtain exclusive worldwide rights to selected product candidates, including an exclusive license to SPN-810. The Company does not owe any future milestone payments for SPN-810. The Company is obligated to pay royalties to Afecta based on worldwide net sales of each of these products in the low-single digits. The Company has also entered into a purchase and sale agreement with Rune Healthcare Limited (Rune), where the Company obtained the exclusive worldwide rights to a product concept from Rune. There are no future milestone payments due to Rune under this agreement. If the Company receives approval to market and sell any products based on the Rune product concept for SPN-809, the Company is obligated to pay royalties to Rune based on net sales worldwide in the low single digits.

Collaboration Agreements

Collaboration Agreements	6 Months Ended
	Jun. 30, 2015
Collaboration Agreements
Collaboration Agreements	14. Collaboration Agreements United Therapeutics The Company has a license agreement with United Therapeutics Corporation to use one of its proprietary technologies for an oral formulation of Remodulin for the treatment of pulmonary arterial hypertension and potentially for additional indications. Through June 30, 2015, the Company has received $3.5 million in milestone payments under the agreement. During 2014, we entered into a Royalty Interest Acquisition Agreement with HC Royalty. Pursuant to this Agreement, HC Royalty made a $30.0 million cash payment to the Company in consideration for acquiring from the Company certain royalty and milestone rights related to the commercialization of Orenitram (treprostinil) Extended-Release Tablets. We will retain full ownership of the royalty rights after a certain threshold has been reached per the terms of the Agreement. There was no revenue generated in the three and six months ended June 30, 2015. The revenue generated in the three and six months ended June 30, 2014 was $2.0 million for a milestone payment. As of June 30, 2015 and December 31, 2014 there are no receivables or payables related to the collaboration with United Therapeutics Corporation. Stendhal Licenses In August 2011, we executed a Development and Licensing Agreement with Especificos Stendhal, S.A., DE C.V. (Stendhal) that provided Stendhal an exclusive license to our licensed intellectual property underlying our Oxtellar XR product in Mexico, Venezuela, Colombia and other select markets in Central and South America. The agreement included the right to our patents, proprietary information, and know-how of our drug-delivery technology and pharmaceutical product underlying our Oxtellar XR product. Stendhal is responsible for all costs associated with clinical development, approval, commercialization and distribution of the product in the defined territory, which may be expanded upon certain events. We have received $1.5 million from Stendhal, which was recognized as revenue on a straight-line basis over the substantive obligation period. As of June 30, 2015, this up-front payment had been fully recognized as revenue. We may receive up to $1.5 million in additional milestone payments, based on certain regulatory and commercial milestones defined in the agreement. In September 2012, the Company executed a Development and Licensing Agreement (Stendhal License Agreement) with Stendhal that provided Stendhal with an exclusive license of the Company’s licensed intellectual property underlying the Trokendi XR product in the defined territory. The license included the right to the Company’s patents, proprietary information, and know-how of the Company’s drug-delivery technology and pharmaceutical product underlying its Trokendi XR product. Stendhal is responsible for all costs associated with clinical development, approval, commercialization and distribution of the product in the defined territory. The Company received $1.8 million that is being recognized as revenue on a straight-line basis over its substantive obligation period of twelve years. As of June 30, 2015, approximately $1.3 million of this amount was recorded as deferred revenue of which $0.1 million was current and $1.2 million was non-current. The Company monitors this estimate on a quarterly basis to determine if facts and circumstances may have changed that would require a prospective adjustment to the recognition period. The Company may receive up to an additional $1.8 million in future milestone payments, based on certain milestones defined in the Stendhal License Agreement. The licensing revenue generated from Stendhal in the six months ended June 30, 2015 and June 30, 2014 was $0.8 million and $0.1 million, respectively. As of June 30, 2015 and December 31, 2014, there is $1.3 million and $1.4 million, respectively, in deferred licensing revenue included in the balance sheet. There were de minimis amounts of product revenue for the six months ended June 30, 2015 and 2014. There is a combined amount of $0.8 million of milestone and product receivables at June 30, 2015 and a de minimis amount of receivables at December 31, 2014.

Summary of Significant Accoun21

Summary of Significant Accounting Policies (Policies)	6 Months Ended
	Jun. 30, 2015
Summary of Significant Accounting Policies
Basis of Presentation	Basis of Presentation The Company’s unaudited consolidated financial statements include the accounts of Supernus Pharmaceuticals, Inc. and Supernus Europe Ltd. These are collectively referred to herein as “Supernus” or “the Company.” All significant intercompany transactions and balances have been eliminated in consolidation. The Company’s unaudited consolidated financial statements have been prepared in accordance with the requirements of the U.S. Securities and Exchange Commission (SEC) for interim financial information. As permitted under Generally Accepted Accounting Principles in the United States (U.S. GAAP), certain notes and other information have been omitted from the interim unaudited consolidated financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC. In the opinion of management, the consolidated financial statements reflect all adjustments necessary to fairly present the Company’s financial position, results of operations, and cash flows for the periods presented. These adjustments are of a normal recurring nature. The Company currently operates in one business segment. The results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of the Company’s future financial results.
Accounts Receivable, net	Accounts Receivable, net Accounts receivable are reported in the consolidated balance sheets at outstanding amounts, less an allowance for doubtful accounts and discounts. The Company extends credit without requiring collateral. The Company writes off uncollectible receivables when the likelihood of collection is remote. The Company evaluates the collectability of accounts receivable on a regular basis. An allowance, when needed, is based upon various factors including the financial condition and payment history of customers, an overall review of collections experience on other accounts, and economic factors or events expected to affect future collections experience. No accounts have been written off in 2015 and 2014. The Company recorded an allowance of approximately $4.9 million and $4.1 million for estimated sales discounts as of June 30, 2015 and December 31, 2014, respectively.
Revenue Recognition	Revenue Recognition Revenue from product sales is recognized when persuasive evidence of an arrangement exists; delivery has occurred and title to the product and associated risk of loss has passed to the customer; the price is fixed or determinable; collection from the customer has been reasonably assured; all performance obligations have been met; and returns and allowances can be reasonably estimated. Product sales are recorded net of estimated rebates, chargebacks, discounts, co-pay assistance and other deductions as well as estimated product returns (collectively, “sales deductions”). Our products are distributed through wholesalers and pharmaceutical distributors. Each of these wholesalers and distributors will take title and ownership to the product upon physical receipt of the product and then distribute our products to pharmacies. For the three and six months ended June 30, 2015, the revenue for Oxtellar XR and Trokendi XR was recognized contemporaneously upon shipment of finished product to wholesalers, net of allowances for estimated sales deductions and returns. Beginning in the second quarter of 2014, the Company began recognizing revenue for Trokendi XR, net of estimated sales deductions, at the time of shipments to wholesalers. Prior to this change in accounting estimate, the Company recognized revenue for Trokendi XR once delivery had occurred and all sales deductions were known or reasonably estimated. The effect of this change was to increase net product sales by $15.4 million and cost of product sales by $0.9 million for the three and six month periods ended June 30, 2014. Sales Deductions Allowances for estimated sales deductions are provided for the following: · Rebates. Rebates include mandated discounts under the Medicaid Drug Rebate Program, the Medicare coverage gap program, as well as negotiated discounts with commercial health-care providers. Rebates are amounts owed after the final dispensing of products to a benefit plan participant and are based upon contractual agreements or legal requirements with the public sector (e.g. Medicaid) and with private sector benefit providers. The allowance for rebates is based on statutory and contractual discount rates and expected claimed rebates paid based on a plan provider’s utilization. Rebates are generally invoiced and paid quarterly in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters’ unpaid rebates. If actual future rebates vary from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment. · Chargebacks. Chargebacks are discounts that occur when contracted customers purchase directly from an intermediary distributor or wholesaler. Contracted customers, which currently consist primarily of Public Health Service institutions and Federal government entities purchasing via the Federal Supply Schedule, generally purchase the product at a discounted price. The distributor or wholesaler, in turn, charges back the difference between the price initially paid by the distributor or wholesaler and the discounted price paid to the distributor or wholesaler by the customer. The allowance for distributor/wholesaler chargebacks is based on known sales to contracted customers. · Distributor/Wholesaler deductions and discounts. U.S. specialty distributors and wholesalers are offered various forms of consideration including allowances, service fees and prompt payment discounts as consideration for distributing our products. Distributor allowances and service fees arise from contractual agreements with distributors and are generally a percentage of the purchase price paid by the distributors and wholesalers. Wholesale customers are offered a prompt pay discount for payment within a specified period. · Co-pay assistance. Patients who pay in cash or have commercial insurance and meet certain eligibility requirements may receive co-pay assistance from the Company. The intent of this program is to reduce the patient’s out of pocket costs. Liabilities for co-pay assistance are based on actual program participation and estimates of program redemption using data provided by third-party administrators. · Returns. Sales of our products are not subject to a general right of return; however, the Company will accept product that is damaged or defective when shipped directly from our warehouse or for expired product up to 12 months subsequent to its expiry date. Product that has been used to fill patient prescriptions is no longer subject to any right of return. Milestone Payments Milestone payments on licensing agreements are recognized as revenue when the collaborative partner acknowledges completion of the milestone and substantive effort was necessary to achieve the milestone. Management may recognize revenue contingent upon the achievement of a milestone in its entirety in the period in which the milestone is achieved only if the milestone meets all the criteria to be considered substantive. The Company recorded $750,000 of milestone revenue during the three and six months ended June 30, 2015 and $2.0 million of milestone revenue during the three and six months ended June 30, 2014.
Cost of Product Sales	Cost of Product Sales The cost of product sales consist primarily of materials, third-party manufacturing costs, freight and distribution costs, allocation of labor, quality control and assurance, and other manufacturing overhead costs.
Income Taxes	Income Taxes The Company utilizes the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Valuation allowances are established to reduce deferred tax assets to the amounts expected to be realized. The Company accounts for uncertain tax positions in its consolidated financial statements when it is more-likely-than-not that the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. The Company’s policy is to recognize any interest and penalties related to income taxes in income tax expense.
Recently Issued Accounting Pronouncements	Recently Issued Accounting Pronouncements In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” This ASU provides guidance about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the software license element of the arrangement is consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, then it should account for the arrangement as a service contract. The amendments in this ASU are effective for financial statements issued for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. The Company has elected to early adopt the amendment. In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs.” This ASU more closely aligns the treatment of debt issuance costs with debt discounts and premiums and requires debt issuance costs be presented as a direct deduction from the carrying amount of the related debt. The amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. This guidance should be applied on a retrospective basis and the Company will be required to comply with the applicable disclosures for a change in accounting principle. Presently, the Company is assessing what effect the adoption of ASU 2015-03 will have on our consolidated financial statements and accompanying notes. In August 2014, the FASB issued ASU No. 2014-15 “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern”. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue to meet its obligations as they become due within one year after the date that the financial statements are issued. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. We do not believe the adoption of the new standard will have a significant impact on our operations. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 will eliminate transaction- and industry-specific revenue recognition guidance under current GAAP and replace it with a principles-based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016. The FASB has voted to approve a one-year deferral, changing the effective date to annual reporting periods beginning after December 15, 2017, with early adoption being permitted for periods ending after December 15, 2016. Earlier adoption is not permitted. Entities can transition to the standard either retrospectively or as a cumulative effect adjustment as of the date of adoption. Presently, the Company is assessing what effect the adoption of ASU 2014-09 will have on our consolidated financial statements and accompanying notes. The Company has evaluated all other ASUs issued through the date the consolidated financials were issued and believes that the adoption of these will not have a material impact on the Company’s consolidated financial statements.

Fair Value of Financial Instr22

Fair Value of Financial Instruments (Tables)	6 Months Ended
	Jun. 30, 2015
Fair value of financial instruments
Schedule of fair value of the financial assets and liabilities	In accordance with the fair value hierarchy described above, the following tables show the fair value of the Company’s financial assets and liabilities that are required to be measured at fair value, in thousands: Fair Value Measurements at June 30, 2015 (unaudited) Significant Total Carrying Quoted Prices Other Significant Value at in Active Observable Unobservable June 30, Markets Inputs Inputs 2015 (Level 1) (Level 2) (Level 3) Assets: Cash and cash equivalents $ $ $ — $ — Marketable securities — — Long term marketable securities — — Marketable securities - restricted (SERP) — — Total assets at fair value $ $ $ $ — Liabilities: Derivative liabilities $ $ — $ — $ Fair Value Measurements at December 31, 2014 Significant Total Carrying Quoted Prices Other Significant Value at in Active Observable Unobservable December 31, Markets Inputs Inputs 2014 (Level 1) (Level 2) (Level 3) Assets: Cash and cash equivalents $ $ $ — $ — Marketable securities — — Long term marketable securities — — Marketable securities - restricted (SERP) — — Total assets at fair value $ $ $ $ — Liabilities: Derivative liabilities $ $ — $ — $
Schedule of Level 3 liabilities included in Non-current Liabilities on the Balance Sheet	The following table presents information about the Company’s Level 3 liabilities as of December 31, 2014 and June 30, 2015 that are included in the Non-Current Liabilities section of the Consolidated Balance Sheets, in thousands: Six Months ended June 30, 2015 (unaudited) Balance at December 31, 2014 $ Changes in fair value of derivative liabilities included in earnings Reduction due to conversion of debt to equity ) Balance at June 30, 2015 $
Schedule of unrestricted marketable securities	Unrestricted marketable securities held by the Company were as follows, in thousands: At June 30, 2015 (unaudited): Available for Sale Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Corporate debt securities $ $ $ ) $ At December 31, 2014: Available for Sale Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Corporate debt securities $ $ $ ) $
Schedule of contractual maturities of the unrestricted available for sale marketable securities held	The contractual maturities of the unrestricted available for sale marketable securities held by the Company were as follows, in thousands: June 30, 2015 (unaudited) Less Than 1 Year $ 1-5 years Greater Than 5 Years — Total $
Interest make-whole liability
Fair value of financial instruments
Schedule of assumptions used to calculate fair value of liabilities	Volatility 45% Stock Price as of June 30, 2015 $16.98 per share Credit Spread 1522 bps Term 1.8 years Dividend Yield 0.0%
Warrant to purchase common stock
Fair value of financial instruments
Schedule of assumptions used to calculate fair value of liabilities	Exercise Price $4.00 - $5.00 per share Volatility 65% Stock Price as of June 30, 2015 $16.98 per share Term 5.6 - 6.5 years Dividend Yield 0.0% Risk-Free Rate 1.8% -2.1%

Inventories (Tables)

Inventories (Tables)	6 Months Ended
	Jun. 30, 2015
Inventories
Schedule of inventories	Inventories consist of the following, in thousands: June 30, December 31, 2015 2014 (unaudited) Raw materials $ $ Work in process Finished goods $ $

Property and Equipment (Tables)

Property and Equipment (Tables)	6 Months Ended
	Jun. 30, 2015
Property and Equipment
Schedule of property and equipment	Property and equipment consist of the following, in thousands: June 30, December 31, 2015 2014 (unaudited) Computer equipment $ $ Software Lab equipment and furniture Leasehold improvements Less accumulated depreciation and amortization ) ) $ $

Intangible Assets (Tables)

Intangible Assets (Tables)	6 Months Ended
	Jun. 30, 2015
Intangible Assets
Schedule of gross carrying amount and related accumulated amortization of the intangible assets	The following sets forth the gross carrying amount and related accumulated amortization of these intangible assets, in thousands: June 30, 2015 (unaudited) December 31, 2014 Weighted- Gross Carrying Accumulated Gross Carrying Accumulated Average Life Amount Amortization Amount Amortization Purchased patents 10.0 $ $ $ $ Deferred legal fees $ $ — $ $ —

Accrued Liabilities (Tables)

Accrued Liabilities (Tables)	6 Months Ended
	Jun. 30, 2015
Accrued Liabilities
Schedule of accrued liabilities	Accrued Liabilities are comprised of the following, in thousands: June 30, December 31, 2015 2014 (unaudited) Accrued sales deductions $ $ Accrued compensation Accrued professional fees Accrued product costs Accrued clinical trial and clinical supply costs Accrued sales and marketing expenses Accrued interest expense Other accrued liabilities $ $

Convertible Senior Secured No27

Convertible Senior Secured Notes (Tables)	6 Months Ended
	Jun. 30, 2015
Convertible Senior Secured Notes
Summary of issuance of Notes reflected in balance sheet	The table below summarizes activity related to the Notes from issuance on May 3, 2013 through June 30, 2015, in thousands: Gross proceeds $ Initial value of interest make-whole derivative reported as debt discount ) Conversion option reported as debt discount and APIC ) Conversion of debt to equity - principal ) Conversion of debt to equity - accretion of debt discount Accretion of debt discount December 31, 2014 carrying value Conversion of debt to equity - principal ) Conversion of debt to equity - accretion of debt discount Accretion of debt discount June 30, 2015 carrying value, unaudited $

Summary Stockholders' Equity (T

Summary Stockholders' Equity (Tables)	6 Months Ended
	Jun. 30, 2015
Stockholders' Equity
Schedule of activity in certain captions within Stockholders' Equity	The following summary table provides details related to the activity in certain captions within Stockholders’ Equity for the six month period ended June 30, 2015, in thousands. Common Stock Additional Paid-in Capital (unaudited) Balance, December 31, 2014 $ $ Share-based compensation — Issuance of ESPP shares — Exercise of stock options — Equity issued on note conversion Balance, June 30, 2015 $ $

Share-Based Payments (Tables)

Share-Based Payments (Tables)	6 Months Ended
	Jun. 30, 2015
Share-Based Payments
Schedule of share-based compensation recognized related to the grant of employee and non-employee stock options, SARS and non-vested stock	Share-based compensation recognized related to the grant of employee and non-employee stock options, SAR, potential Employee Stock Purchase Plan (ESPP) awards and non-vested stock was as follows, in thousands: Three Months ended June 30, Six Months ended June 30, 2015 2014 2015 2014 (unaudited) (unaudited) Research and development $ $ $ $ Selling, general and administrative Total $ $ $ $
Summary of stock option and SAR activity	Number of Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (in years) Outstanding, December 31, 2014 $ 8.04 Granted (unaudited) $ Exercised (unaudited) ) $ Forfeited or expired (unaudited) ) $ Outstanding, June 30, 2015 (unaudited) $ 8.34 As of December 31, 2014: Vested and expected to vest $ 8.03 Exercisable $ 6.91 As of June 30, 2015: Vested and expected to vest (unaudited) $ 8.32 Exercisable (unaudited) $ 7.32

Earnings per Share (Tables)

Earnings per Share (Tables)	6 Months Ended
	Jun. 30, 2015
Earnings per Share
Schedule of common stock equivalents excluded in the calculation of diluted loss per share	Three Months ended June 30, Six Months ended June 30, 2015 2014 2015 2014 (unaudited) (unaudited) Shares underlying Convertible Senior Secured Notes — Warrants to purchase common stock Stock options, stock appreciation rights, and non-vested stock options — — —
Schedule of computation of basic and diluted net income per share	The following table sets forth the computation of basic and diluted net income per share for the three and six months ended June 30, 2015 and 2014, in thousands, except share and per share amounts: Three Months ended June 30, Six Months ended June 30, 2015 2014 2015 2014 (unaudited) (unaudited) Numerator, in thousands: Net income (loss) used for calculation of basic EPS $ $ $ $ ) Interest expense on convertible debt — — — Changes in fair value of derivative liabilities ) — — — Loss on extinguishment of outstanding debt — — — Loss on extinguishment of outstanding debt, as if converted ) — — — Total adjustments ) — — — Net income (loss) used for calculation of diluted EPS $ $ $ $ ) Denominator: Weighted average shares outstanding, basic Effect of dilutive potential common shares: Shares underlying Convertible Senior Secured Notes — — — Shares issuable to settle interest make-whole derivatives — — — Stock options, stock appreciation rights, and non-vested stock options — Total potential dilutive common shares — Weighted average shares outstanding, diluted Net income (loss) per share, basic $ $ $ $ ) Net income (loss) per share, diluted $ $ $ $ )

Commitments and Contingencies (

Commitments and Contingencies (Tables)	6 Months Ended
	Jun. 30, 2015
Commitments and Contingencies
Schedule of future minimum lease payments under non-cancelable operating leases	Future minimum lease payments under non-cancelable operating leases as of June 30, 2015 are as follows, in thousands: Year ending December 31: 2015 (remaining) $ 2016 2017 2018 Thereafter $

Organization and Business (Deta

Organization and Business (Details)	6 Months Ended
	Jun. 30, 2015product
Organization and Business
Number of proprietary products in clinical development	2

Summary of Significant Accoun33

Summary of Significant Accounting Policies (Details)	6 Months Ended
	Jun. 30, 2015segment
Basis of Presentation
Number of business segments	1

Summary of Significant Accoun34

Summary of Significant Accounting Policies (Details 2) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Accounts Receivable, net
Accounts receivable written off	$ 0	$ 0
Allowance for expected prompt-pay discounts	$ 4.9		$ 4.1

Summary of Significant Accoun35

Summary of Significant Accounting Policies (Details 3) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenue Recognition on Product Sales
Increase in net product sales	$ 34,266,000	$ 27,609,000	$ 62,363,000	$ 36,604,000
Increase in cost of product sales	1,762,000	1,661,000	$ 3,380,000	2,155,000
Sales return period			12 months
Milestone revenues recorded	$ 750,000	2,000,000	$ 750,000	2,000,000
Sales deductions
Revenue Recognition on Product Sales
Increase in net product sales		15,400,000		15,400,000
Increase in cost of product sales		$ 900,000		$ 900,000

Fair Value of Financial Instr36

Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Assets:
Marketable securities	$ 36,681	$ 37,940
Long term marketable securities	33,488	19,816
Liabilities:
Derivative liabilities	2,070	6,564
Total Carrying Value
Assets:
Cash and cash equivalents	33,110	36,396
Marketable securities	36,681	37,940
Long term marketable securities	33,488	19,816
Marketable securities - restricted (SERP)	267	305
Total assets at fair value	103,546	94,457
Liabilities:
Derivative liabilities	2,070	6,564
Quoted Prices in Active Markets (Level 1)
Assets:
Cash and cash equivalents	33,110	36,396
Total assets at fair value	33,110	36,396
Significant Other Observable Inputs (Level 2)
Assets:
Marketable securities	36,681	37,940
Long term marketable securities	33,488	19,816
Marketable securities - restricted (SERP)	267	305
Total assets at fair value	70,436	58,061
Significant Unobservable Inputs (Level 3)
Liabilities:
Derivative liabilities	$ 2,070	$ 6,564

Fair Value of Financial Instr37

Fair Value of Financial Instruments (Details 2) - Jun. 30, 2015 - $ / shares	Total
Assumptions used to calculate fair value of common stock warrant liability using Monte-Carlo simulation with a Black-Scholes lattice model
Interest rate (as a percent)	7.50%
Interest make-whole liability
Assumptions used to calculate fair value of common stock warrant liability using Monte-Carlo simulation with a Black-Scholes lattice model
Volatility (as a percent)	45.00%
Stock Price (in dollars per share)	$ 16.98
Credit Spread (as a percent)	15.22%
Term	1 year 9 months 18 days
Dividend Yield (as a percent)	0.00%
Warrant to purchase common stock
Assumptions used to calculate fair value of common stock warrant liability using Monte-Carlo simulation with a Black-Scholes lattice model
Volatility (as a percent)	65.00%
Stock Price (in dollars per share)	$ 16.98
Dividend Yield (as a percent)	0.00%
Warrant to purchase common stock | Minimum
Assumptions used to calculate fair value of common stock warrant liability using Monte-Carlo simulation with a Black-Scholes lattice model
Exercise Price (in dollars per share)	$ 4
Term	5 years 7 months 6 days
Risk-Free Rate (as a percent)	1.80%
Warrant to purchase common stock | Maximum
Assumptions used to calculate fair value of common stock warrant liability using Monte-Carlo simulation with a Black-Scholes lattice model
Exercise Price (in dollars per share)	$ 5
Term	6 years 6 months
Risk-Free Rate (as a percent)	2.10%

Fair Value of Financial Instr38

Fair Value of Financial Instruments (Details 3) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Warrant and Interest Make-Whole Liability
Reduction due to conversion of debt to equity	$ 25,056	$ 10,676
Note Liability
Carrying value of the convertible notes	8,762		$ 26,947
Amount issued	10,700
Estimated fair value of the convertible notes	36,100
Significant Unobservable Inputs (Level 3) | Derivative Financial Instruments, Liabilities
Warrant and Interest Make-Whole Liability
Balance at the beginning of the period	6,564
Changes in fair value of derivative liabilities included in earnings	48
Reduction due to conversion of debt to equity	(4,542)
Balance at the end of the period	$ 2,070

Fair Value of Financial Instr39

Fair Value of Financial Instruments (Details 4) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Fair Value of Financial Instruments
Corporate debt securities, Amortized Cost	$ 70,320	$ 57,910
Corporate debt securities, Gross Unrealized Gains	10	4
Corporate debt securities, Gross Unrealized Losses	(161)	(158)
Corporate debt securities, Fair Value	70,169	57,756
Contractual maturities of the unrestricted marketable securities held
Less Than 1 Year	36,681
1-5 years	33,488
Corporate debt securities, Fair Value	$ 70,169	$ 57,756

Inventories (Details)

Inventories (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Inventories
Raw materials	$ 2,363	$ 2,491
Work in process	4,040	6,328
Finished goods	7,189	4,622
Total inventories	$ 13,592	$ 13,441

Property and Equipment (Details

Property and Equipment (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Property and equipment
Property and equipment, gross	$ 9,515,000		$ 9,515,000		$ 8,738,000
Less accumulated depreciation and amortization	(6,607,000)		(6,607,000)		(6,290,000)
Property and equipment, net	2,908,000		2,908,000		2,448,000
Depreciation expense	160,000	$ 176,000	317,000	$ 345,000
Computer Equipment
Property and equipment
Property and equipment, gross	992,000		992,000		862,000
Software
Property and equipment
Property and equipment, gross	333,000		333,000		254,000
Lab Equipment and Furniture
Property and equipment
Property and equipment, gross	5,603,000		5,603,000		5,194,000
Leasehold Improvements
Property and equipment
Property and equipment, gross	$ 2,587,000		$ 2,587,000		$ 2,428,000

Intangible Assets (Details)

Intangible Assets (Details)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015USD ($)	Jun. 30, 2014USD ($)	Jun. 30, 2015USD ($)patent	Jun. 30, 2014USD ($)	Dec. 31, 2014USD ($)
Additional disclosures
Amortization expense	$ 57,000	$ 57,000	$ 115,000	$ 115,000
Estimated annual aggregate amortization expense through December 31, 2015			229,000
Net book value of intangible assets	11,597,000		$ 11,597,000		$ 5,434,000
Purchased Patents
Finite lived intangible assets disclosures
Weighted-Average Life			10 years		10 years
Gross Carrying Amount	2,292,000		$ 2,292,000		$ 2,292,000
Accumulated Amortization	2,182,000		$ 2,182,000		2,067,000
Oxtellar XR
Finite lived intangible assets disclosures
Number of U.S. patents issued | patent			4
Trokendi XR
Finite lived intangible assets disclosures
Number of U.S. patents issued | patent			6
Deferred Legal Fees
Finite lived intangible assets disclosures
Gross Carrying Amount	$ 11,487,000		$ 11,487,000		$ 5,209,000

Accrued Liabilities (Details)

Accrued Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Accrued Liabilities
Accrued sales deductions	$ 14,114	$ 8,461
Accrued compensation	6,493	5,829
Accrued professional fees	4,461	2,049
Accrued product costs	2,813	3,014
Accrued clinical trial and clinical supply costs	715	2,942
Accrued sales and marketing expenses	650	1,017
Accrued interest expense	322	639
Other accrued liabilities	2,185	1,536
Total	$ 31,753	$ 25,487

Convertible Senior Secured No44

Convertible Senior Secured Notes (Details) - USD ($) $ in Thousands, shares in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Details of Notes reflected in balance sheet
Carrying value	$ 8,762		$ 8,762		$ 26,947
Loss on extinguishment of debt	241	$ 39	2,375	$ 1,732
7.50% Convertible Senior Secured Notes due 2019
Details of Notes reflected in balance sheet
Gross proceeds					90,000
Initial value of interest make-whole derivative reported as debt discount					(9,270)
Conversion option reported as debt discount and APIC					(22,336)
Conversion of debt to equity - principal			(25,335)	(9,700)	(53,941)
Conversion of debt to equity - accretion of debt discount	6,669		6,669		17,926
Accretion of debt discount			481		4,568
Carrying value	$ 8,762		$ 8,762		$ 26,947
Shares of common stock issued in conversion of Notes			4.8
Shares of common stock issued in settlement of the interest make-whole provision			0.5
Loss on extinguishment of debt			$ 2,400	$ 1,700

Summary Stockholders' Equity (D

Summary Stockholders' Equity (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2015USD ($)
Balance at the beginning	$ 71,354
Balance at the ending	102,365
Common Stock
Balance at the beginning	43
Equity issued on note conversion	5
Balance at the ending	48
Additional Paid-in Capital
Balance at the beginning	230,122
Share-based compensation	2,020
Issuance of ESPP shares	324
Exercise of stock options	685
Equity issued on note conversion	25,051
Balance at the ending	$ 258,202

Share-Based Payments (Details)

Share-Based Payments (Details) - Jun. 30, 2015 - 2012 Plan	installmentshares
Share-based payments
Maximum number of shares of common stock provided for issuance	4,000,000
Stock Option
Share-based payments
Number of annual installments in which the awards would generally vest starting on the first anniversary of the date of grant | installment	4
Contractual term	10 years

Share-Based Payments (Details 2

Share-Based Payments (Details 2) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Share-based Payments
Share-based compensation recognized	$ 1,118	$ 652	$ 2,020	$ 1,319
Research and Development
Share-based Payments
Share-based compensation recognized	206	179	410	362
Selling, General and Administrative
Share-based Payments
Share-based compensation recognized	$ 912	$ 473	$ 1,610	$ 957

Share-Based Payments (Details 3

Share-Based Payments (Details 3) - Stock Option Stock Appreciation Rights - $ / shares	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Number of Options and SAR
Outstanding at the beginning of the period (in shares)	2,080,749
Granted (in shares)	892,500
Exercised (in shares)	(165,733)
Forfeited or expired (in shares)	(121,603)
Outstanding at the end of the period (in shares)	2,685,913	2,080,749
Vested and expected to vest (in shares)	2,625,969	2,041,026
Exercisable (in shares)	856,008	626,548
Weighted-Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 7.93
Granted (in dollars per share)	9.33
Exercised (in dollars per share)	4.13
Forfeited or expired (in dollars per share)	8.56
Outstanding at the end of the period (in dollars per share)	8.60	$ 7.93
Vested and expected to vest (in dollars per share)	8.59	7.91
Exercisable (in dollars per share)	$ 7.80	$ 6.40
Weighted-Average Remaining Contractual Term
Outstanding at the end of the period	8 years 4 months 2 days	8 years 15 days
Vested and expected to vest	8 years 3 months 26 days	8 years 11 days
Exercisable	7 years 3 months 26 days	6 years 10 months 28 days

Earnings per Share (Details)

Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Numerator, in thousands
Net income (loss) used for calculation of basic EPS	$ 2,005	$ 3,202	$ 2,923	$ (12,342)
Interest expense on convertible debt	331
Change in fair value of derivative liabilities	(195)
Loss on extinguishment of outstanding debt	241
Loss on extinguishment of outstanding debt, as if converted	(553)
Total adjustments	(176)
Net income (loss) used for calculation of diluted EPS	$ 1,829	$ 3,202	$ 2,923	$ (12,342)
Denominator
Weighted average shares outstanding, basic	47,911,932	42,056,285	46,246,866	41,595,232
Effect of dilutive potential common shares
Shares underlying Convertible Senior Secured Notes	2,417,586
Shares issuable to settle interest make-whole derivatives	246,105
Stock options, stock appreciation rights, and non-vested stock options	1,697,926	315,852	1,441,126
Total potential dilutive common shares	4,361,617	315,852	1,441,126
Weighted average shares outstanding, diluted	52,273,549	42,372,137	47,687,992	41,595,232
Net income (loss) per share, basic	$ 0.04	$ 0.08	$ 0.06	$ (0.30)
Net income (loss) per share, diluted	$ 0.03	$ 0.08	$ 0.06	$ (0.30)
7.50% Convertible Senior Secured Notes due 2019
Loss Per Share
Common stock equivalents excluded in the calculation of diluted loss per share		7,548,143	2,791,624	7,733,266
Warrant to purchase common stock
Loss Per Share
Common stock equivalents excluded in the calculation of diluted loss per share	28,613	20,571	25,950	20,928
Stock Options, Stock Appreciation Rights and Non-Vested Stock Options
Loss Per Share
Common stock equivalents excluded in the calculation of diluted loss per share				259,478

Income Taxes (Details)

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Taxes
Pre-tax income	$ 2,667	$ 3,202	$ 3,647	$ (12,342)
Income tax expense	$ 662		$ 724

Commitments and Contingencies51

Commitments and Contingencies (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Commitments and Contingencies
Additional period for which the entity may elect to extend the term of the lease			5 years
Additional tenant improvement allowance			$ 2,100
Tenant improvement allowance utilized and included in fixed assets and deferred rent	$ 200	$ 100	200	$ 100
Amount available for tenant improvements			500
Rent expense	600	$ 500	1,200	$ 1,000
Future minimum lease payments under non-cancelable operating leases
2015 (remaining)	919		919
2,016	1,379		1,379
2,017	1,291		1,291
2,018	1,314		1,314
Thereafter	1,795		1,795
Total	$ 6,698		$ 6,698

Collaboration Agreements (Detai

Collaboration Agreements (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Collaboration agreement
Revenue	$ 34,266	$ 27,609	$ 62,363	$ 36,604
Payables	4,518		4,518		$ 1,863
United Therapeutics
Collaboration agreement
Commercial milestone payments received	3,500		3,500
Revenue From Royalty Agreement					30,000
Revenue	0	$ 2,000	0	2,000
Receivables	0		0		0
Payables	0		0		0
Stendhal License
Collaboration agreement
Amount received to be recognized as revenue on a straight-line basis	1,500		1,500
Future milestone payment to be received, based on certain milestones defined in the license agreement	1,500		1,500
Collaborative Arrangement | Stendhal License
Collaboration agreement
Revenue			800	$ 100
Amount received to be recognized as revenue on a straight-line basis	1,800		$ 1,800
Collaboration agreement substantive obligation period			12 years
Deferred revenue	1,300		$ 1,300		$ 1,400
Deferred revenue current	100		100
Deferred revenue Non-current	1,200		1,200
Future milestone payment to be received, based on certain milestones defined in the license agreement	1,800		1,800
Combined amount of milestone and product receivables	$ 800		$ 800