Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Jan. 17, 2017 | Jun. 30, 2015 | |
Document and Entity Information | |||
Entity Registrant Name | SUPERNUS PHARMACEUTICALS INC | ||
Entity Central Index Key | 1,356,576 | ||
Document Type | 10-K/A | ||
Document Period End Date | Dec. 31, 2015 | ||
Amendment Flag | true | ||
Amendment Description | Unless the context requires otherwise, the words "Supernus," "we," "our," and "the Company" refer to Supernus Pharmaceuticals, Inc. and its subsidiaries. Supernus Pharmaceuticals, Inc. (the Company) is filing this Amendment No. 1 on Form 10-K/A (the Amended Form 10-K) to its Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (the Original Form 10-K), which was originally filed with the Securities and Exchange Commission (SEC) on March 9, 2016 (the Original Filing Date), to reflect the restatement of consolidated financial statements (Restatement) as described below. In this Amended Form 10-K for the fiscal year ended December 31, 2015, we are restating our previously issued and audited consolidated financial statements and the related disclosures for the fiscal years ended December 31, 2015 and 2014. As discussed in further detail below and in Note 2 to the accompanying consolidated financial statements, the Restatement is the result of a misapplication in the guidance on accounting for revenue recognition related to the sale of future revenues (as described below). We assessed the impact of this misapplication on our prior interim and annual consolidated financial statements and concluded that the impact was material to these consolidated financial statements. Consequently, we have restated the prior period consolidated financial statements identified above. All amounts in this Amended Form 10-K affected by the Restatement reflect such amounts as restated. For a more detailed explanation of these matters and resulting restatements, please see Part I, Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations; Part II, Item 8: Financial Statements – Note 2 to the Consolidated Financial Statements; and Part II, Item 9A: Controls and Procedures. For the convenience of the reader, this Amended Form 10-K sets forth the Original Form 10-K for the fiscal year ended December 31, 2015 in its entirety, as amended by and to reflect the Restatement and includes certain restated information for the fiscal year ended December 31, 2014. | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | No | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $ 659,264,478 | ||
Entity Common Stock, Shares Outstanding | 50,121,242 | ||
Document Fiscal Year Focus | 2,015 | ||
Document Fiscal Period Focus | FY |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Current assets: | ||
Cash and cash equivalents | $ 33,498 | $ 36,396 |
Marketable securities | 28,692 | 37,940 |
Accounts receivable, net | 25,908 | 17,270 |
Inventories, net | 12,587 | 13,441 |
Prepaid expenses and other current assets | 5,261 | 3,679 |
Total current assets | 105,946 | 108,726 |
Long term marketable securities | 55,009 | 19,816 |
Property and equipment, net | 3,874 | 2,448 |
Deferred legal fees | 22,503 | 5,209 |
Intangible assets, net | 976 | 225 |
Other non-current assets | 318 | 360 |
Total assets | 188,626 | 136,784 |
Current liabilities: | ||
Accounts payable | 4,314 | 1,863 |
Accrued sales deductions | 26,794 | 8,461 |
Accrued expenses | 25,153 | 17,656 |
Non-recourse liability related to sale of future royalties, current portion | 497 | |
Deferred licensing revenue | 176 | 143 |
Total current liabilities | 56,934 | 28,123 |
Deferred licensing revenue, net of current portion | 1,390 | 1,274 |
Convertible notes, net of discount | 7,085 | 26,223 |
Non-recourse liability related to sale of future royalties-long term | 30,031 | 30,025 |
Other non-current liabilities | 4,325 | 3,876 |
Derivative liabilities | 854 | 6,564 |
Total liabilities | 100,619 | 96,085 |
Stockholders' equity: | ||
Common stock, $0.001 par value, 130,000,000 shares authorized December 31, 2015 and 2014; 49,004,674 and 42,974,463 shares issued and outstanding at December 31, 2015 and 2014, respectively | 49 | 43 |
Additional paid-in capital | 263,955 | 230,263 |
Accumulated other comprehensive loss | (488) | (154) |
Accumulated deficit | (175,509) | (189,453) |
Total stockholders' equity | 88,007 | 40,699 |
Total liabilities and stockholders' equity | $ 188,626 | $ 136,784 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 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 | 49,004,674 | 42,974,463 |
Common stock, shares outstanding | 49,004,674 | 42,974,463 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Revenue | |||
Net product sales | $ 143,526 | $ 89,571 | $ 11,552 |
Royalty Revenue | 3,038 | 633 | |
Licensing revenue | 901 | 2,474 | 467 |
Total revenue | 147,465 | 92,678 | 12,019 |
Costs and expenses | |||
Cost of product sales | 8,423 | 5,758 | 1,104 |
Research and development | 29,135 | 19,586 | 17,245 |
Selling, general and administrative | 89,063 | 72,612 | 55,590 |
Total costs and expenses | 126,621 | 97,956 | 73,939 |
Operating income (loss) | 20,844 | (5,278) | (61,920) |
Other income (expense) | |||
Interest income | 643 | 348 | 299 |
Interest expense | (1,229) | (4,963) | (7,849) |
Interest expense - non-recourse liability related to sale of future royalties | (3,541) | (658) | |
Changes in fair value of derivative liabilities | 193 | 2,809 | (13,354) |
Loss on extinguishment of debt | (2,338) | (2,592) | (9,550) |
Other income | 38 | 39 | 101 |
Total other expense | (6,234) | (5,017) | (30,353) |
Earnings (loss) before income taxes | 14,610 | (10,295) | (92,273) |
Income tax expense | 666 | 630 | |
Net income (loss) | $ 13,944 | $ (10,925) | $ (92,273) |
Income (loss) per common share: | |||
Basic (in dollars per share) | $ 0.29 | $ (0.26) | $ (2.90) |
Diluted (in dollars per share) | $ 0.28 | $ (0.26) | $ (2.90) |
Weighted-average number of common shares outstanding: | |||
Basic (in shares) | 47,485,258 | 42,260,896 | 31,848,299 |
Diluted (in shares) | 51,160,380 | 42,260,896 | 31,848,299 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Consolidated Statements of Comprehensive Income (Loss) | |||
Net income (loss) | $ 13,944 | $ (10,925) | $ (92,273) |
Other comprehensive (loss) income: | |||
Unrealized net (loss) gain on marketable securities | (334) | (154) | 57 |
Other comprehensive (loss) income: | (334) | (154) | 57 |
Comprehensive income (loss) | $ 13,610 | $ (11,079) | $ (92,216) |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholder's Equity - USD ($) $ in Thousands | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total |
Beginning balance at Dec. 31, 2012 | $ 31 | $ 143,851 | $ (57) | $ (86,255) | $ 57,570 |
Beginning balance (in shares) at Dec. 31, 2012 | 30,621,869 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Exercise of over allotment from secondary offering | 1,791 | 1,791 | |||
Exercise of over allotment from secondary offering (in shares) | 239,432 | ||||
Share-based compensation | 1,913 | 1,913 | |||
Issuance of employee stock purchase plan shares | 444 | 444 | |||
Issuance of employee stock purchase plan shares (in shares) | 81,370 | ||||
Exercise of stock options | 78 | 78 | |||
Exercise of stock options (in shares) | 62,513 | ||||
Equity conversion feature on issuance of convertible notes, less issuance costs of $869 | 21,467 | 21,467 | |||
Equity issued on conversion of convertible notes | $ 9 | 42,408 | 42,417 | ||
Equity issued on conversion of convertible notes (in shares) | 8,978,253 | ||||
Net income (loss) | (92,273) | (92,273) | |||
Other comprehensive income (loss) | 57 | 57 | |||
Ending balance at Dec. 31, 2013 | $ 40 | 211,952 | (178,528) | 33,464 | |
Ending balance (in shares) at Dec. 31, 2013 | 39,983,437 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Share-based compensation | 2,857 | 2,857 | |||
Issuance of employee stock purchase plan shares | 516 | 516 | |||
Issuance of employee stock purchase plan shares (in shares) | 76,333 | ||||
Exercise of stock options | 54 | 54 | |||
Exercise of stock options (in shares) | 17,627 | ||||
Equity issued on conversion of convertible notes | $ 3 | 14,884 | 14,887 | ||
Equity issued on conversion of convertible notes (in shares) | 2,897,066 | ||||
Net income (loss) | (10,925) | (10,925) | |||
Other comprehensive income (loss) | (154) | (154) | |||
Ending balance at Dec. 31, 2014 | $ 43 | 230,263 | (154) | (189,453) | 40,699 |
Ending balance (in shares) at Dec. 31, 2014 | 42,974,463 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Share-based compensation | 4,090 | 4,090 | |||
Issuance of employee stock purchase plan shares | 930 | 930 | |||
Issuance of employee stock purchase plan shares (in shares) | 98,986 | ||||
Exercise of stock options | 937 | 937 | |||
Exercise of stock options (in shares) | 205,640 | ||||
Equity issued on conversion of convertible notes | $ 6 | 27,083 | 27,089 | ||
Equity issued on conversion of convertible notes (in shares) | 5,693,062 | ||||
Exercise of warrants | 652 | 652 | |||
Exercise of warrants (in shares) | 32,523 | ||||
Net income (loss) | 13,944 | 13,944 | |||
Other comprehensive income (loss) | (334) | (334) | |||
Ending balance at Dec. 31, 2015 | $ 49 | $ 263,955 | $ (488) | $ (175,509) | $ 88,007 |
Ending balance (in shares) at Dec. 31, 2015 | 49,004,674 |
Consolidated Statements of Cha7
Consolidated Statements of Changes in Stockholder's Equity (Parenthetical) $ in Thousands | 12 Months Ended |
Dec. 31, 2013USD ($) | |
Consolidated Statements of Changes in Stockholder's Equity | |
Equity conversion feature on issuance of convertible notes, issuance costs | $ 869 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Cash flows from operating activities | |||
Net income (loss) | $ 13,944 | $ (10,925) | $ (92,273) |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||
Loss on extinguishment of debt | 2,338 | 2,592 | 9,550 |
Change in fair value of derivative liability | (193) | (2,809) | 13,354 |
Unrealized (loss) gain on marketable securities | (154) | 57 | |
Depreciation and amortization | 921 | 928 | 742 |
Amortization of deferred financing costs and debt discount | 748 | 2,090 | 3,033 |
Non-cash interest expense on non-recourse liability related to sale of future royalties | 3,541 | 658 | |
Non-cash royalty revenue | (3,038) | (633) | |
Share-based compensation expense | 4,090 | 2,857 | 1,913 |
Changes in operating assets and liabilities: | |||
Accounts receivable | (8,638) | (12,216) | (5,043) |
Inventories | 854 | (6,289) | (6,000) |
Prepaid expenses and other assets | (1,582) | (1,144) | (889) |
Accounts payable | 2,061 | (2,054) | 336 |
Accrued sales deduction | 18,333 | 7,461 | 1,000 |
Accrued expenses | 507 | 2,031 | 7,156 |
Deferred product revenue, net | (7,882) | 7,883 | |
Deferred licensing revenue | 149 | (204) | 803 |
Other non-current liabilities | 489 | 1,198 | 429 |
Net cash provided by (used in) operating activities | 34,524 | (24,495) | (57,949) |
Cash flows from investing activities | |||
Purchases of marketable securities | (63,859) | (53,262) | (85,567) |
Sales and maturities of marketable securities | 37,581 | 53,473 | 75,806 |
Purchases of property and equipment | (2,104) | (593) | (1,646) |
Deferred legal fees | (10,907) | (2,277) | (705) |
Net cash used in investing activities | (39,289) | (2,659) | (12,112) |
Cash flows from financing activities | |||
Proceeds from issuance of common stock | 1,867 | 571 | 2,437 |
Proceeds from convertible debt issuance | 90,000 | ||
Cash settlement of debt to equity conversion | (1) | (1,727) | |
Repayment of secured notes payable | (24,344) | ||
Financing costs and underwriters discounts | (3,627) | ||
Proceeds from sale of future royalties | 30,000 | ||
Net cash provided by financing activities | 1,867 | 30,570 | 62,739 |
Net change in cash and cash equivalents | (2,898) | 3,416 | (7,322) |
Cash and cash equivalents at beginning of year | 36,396 | 32,980 | 40,302 |
Cash and cash equivalents at end of year | 33,498 | 36,396 | 32,980 |
Supplemental cash flow information: | |||
Cash paid for interest | 825 | 2,854 | 4,313 |
Noncash financial activity: | |||
Conversion of convertible notes and interest make-whole | 27,089 | 14,887 | 42,417 |
Initial value of interest make-whole derivative issued in connection with the convertible debt | 9,270 | ||
Initial value of conversion option reported in equity | $ 22,336 | ||
Exercise of warrants | 652 | ||
Deferred legal fees included in accrued expenses | $ 9,789 | $ 2,228 |
Organization and Nature of Oper
Organization and Nature of Operations | 12 Months Ended |
Dec. 31, 2015 | |
Organization and Nature of Operations | |
Organization and Nature of Operations | 1. Organization and Nature of Operations Supernus Pharmaceuticals, Inc. (the Company) was incorporated in Delaware on March 30, 2005, and commenced operations on December 22, 2005. 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. |
Restatement of Financial Statem
Restatement of Financial Statements | 12 Months Ended |
Dec. 31, 2015 | |
Restatement of Financial Statements | |
Restatement of Financial Statements | 2. Restatement of Financial Statements In July 2014, the Company entered into a royalty monetization transaction and recorded the transaction as revenue. In October 2016, the Company submitted to the U.S. Securities and Exchange Commission’s (the SEC) Office of the Chief Accountant (the OCA) a request for post-accounting review of the royalty monetization transaction. On November 9, 2016, the OCA completed its review and informed the Company that the royalty monetization transaction should have been recorded as a debt obligation in 2014. As a result, on November 10, 2016, the Company’s Audit Committee concluded that the Company’s financial statements for the years ended December 31, 2014 and December 31, 2015, and the interim quarterly reports in those years beginning with the third quarter of 2014, and the interim quarterly reports for the first and second quarters in 2016, and related reports of the Company’s independent registered public accounting firms thereon, should no longer be relied upon and will be restated. The Company is restating in this Annual Report its financial statements for the years ended December 31, 2015 and 2014. This restatement results in noncash, financial statement corrections and will have no impact on the Company’s current or previously reported cash and marketable securities position or net product sales. The Company has also made corrections to reflect (i) the recording during the fourth quarter of 2014 of a current tax expense related to an increase in our reserve for an uncertain tax position related to alternative minimum taxes that had been previously recognized in the second quarter of 2015 and (ii) an increase in Selling, General and Administrative Expense in 2014 which is fully offset by a corresponding decrease in Selling, General and Administrative Expense in 2015. This adjustment is the result of the recognition of stock compensation expense over a period of twelve months as opposed to four years related to certain option grants granted in January 2014. Additionally, during the first quarter of 2015, the Company purchased a Certificate of Deposit (CD) that has been continually renewed on a quarterly basis. This CD has 91 days to maturity and the Company incorrectly classified this amount as cash and cash equivalents on the balance sheets at March 31, 2015, June 30, 2015, September 30, 2015 and December 31, 2015. We have corrected the balance sheets in all periods to reflect the reclassification from cash and cash equivalents to current marketable securities. An adjustment was made to the Statement of Cash Flows for the years ended December 31, 2015 and 2014 to change cash used in investing activities, with an offset to cash provided by operations for certain accrued legal fees that have been deferred. The impact of the restatement and other corrections on the Consolidated Balance Sheet, Consolidated Statement of Operations and Consolidated Statement of Cash Flows as of and for the years ended December 31, 2015 and 2014 is presented below, in thousands, except share and per share data. Year Ended December 31, 2015 As Previously Restatement Other Reported Adjustments Corrections As Restated Consolidated Statement of Operations Royalty revenue $ — $ $ $ Total revenue Selling, general and administrative ) Total costs and expenses ) Operating income Interest expense — non-recourse liability related to sale of future royalties — ) ) Total other expense ) ) ) Earnings before income taxes ) Income tax expense ) Net income ) Income per common share: Basic ) Year Ended December 31, 2015 As Previously Restatement Other Reported Adjustments Corrections As Restated Consolidated Statements of Cash Flows Net cash provided by operating activities $ $ $ Net cash used in investing activities ) ) ) Net change in cash and cash equivalents ) ) ) As of December 31, 2015 As Previously Restatement Other Reported Adjustments Corrections As Restated Consolidated Balance Sheet Cash and cash equivalents $ $ ) $ Marketable securities Accrued expenses Non-recourse liability related to sale of future royalties — current portion — Total current liabilities Non-recourse liability related to sale of future royalties — long term — Total liabilities Accumulated deficit ) ) ) ) Total stockholders’ equity ) ) Year Ended December 31, 2014 As Previously Restatement Other Reported Adjustments Corrections As Restated Consolidated Statement of Operations Royalty revenue $ — $ $ $ Revenue from royalty agreement ) — Total revenue ) Selling, general and administrative Total costs and expenses Operating income (loss) ) ) ) Interest expense — non-recourse liability related to sale of future royalties — ) ) Total other expense ) ) ) Earnings (loss) before income taxes ) ) ) Income tax expense — Net Income (loss) ) ) ) Income (loss) per common share: Basic ) ) Income (loss) per common share: Diluted ) ) Weighted average number of common shares - Diluted ) Year Ended December 31, 2014 As Previously Restatement Other Reported Adjustments Corrections As Restated Consolidated Statements of Cash Flows Net cash provided by (used in) operating activities $ $ ) $ ) $ ) Net cash used in investing activities ) ) Net cash provided by financing activities As of December 31, 2014 As Previously Restatement Other Reported Adjustments Corrections As Restated Consolidated Balance Sheet Accrued expenses Total current liabilities Non-recourse liability related to sale of future royalties — long term — Total liabilities Additional paid-in capital Accumulated deficit ) ) ) ) Total stockholders’ equity ) ) |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2015 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 3. Summary of Significant Accounting Policies Basis of Presentation The Company’s consolidated financial statements include the accounts of Supernus Pharmaceuticals, Inc. and Supernus Europe Ltd., collectively referred to herein as “Supernus” or “the Company.” All significant intercompany transactions and balances have been eliminated in consolidation. The Company’s consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP). The Company, which is primarily located in the United States, operates in one operating segment. Use of Estimates The preparation of the financial statements in accordance with U.S. GAAP requires the Company to make estimates and judgments in certain circumstances that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. In preparing these consolidated financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, future royalty revenue related to Orenitram net product sales, accrued sales deductions, fair value of financial assets and liabilities, derivative liabilities, common stock options, income taxes, preclinical study and clinical trial accruals, and other contingencies. Management bases its estimates on historical experience or on various other assumptions, including information received from its service providers and independent valuation consultants, which it believes to be reasonable under the circumstances. Actual results could differ from these estimates. Cash and Cash Equivalents The Company considers all investments in highly liquid financial instruments with an original maturity of three months or less to be cash equivalents. Marketable Securities Marketable securities consist of investments in U.S. Treasuries Certificate of Deposit, various U.S. governmental agency debt securities, corporate bonds and other fixed income securities. The Company’s investments are classified as available for sale. Such securities are carried at estimated fair value, with any unrealized holding gains or losses reported, net of any tax effects reported, as accumulated other comprehensive income, which is a separate component of stockholders’ equity. Realized gains and losses, and declines in value judged to be other-than-temporary, if any, are included in consolidated results of operations. A decline in the market value of any available for sale security below cost that is deemed to be other-than-temporary results in a reduction in fair value, which is charged to earnings in that period, and a new cost basis for the security is established. Dividend and interest income is recognized when earned. The cost of securities sold is calculated using the specific identification method. The Company places all investments with government, industrial, or financial institutions whose debt is rated as investment grade. The Company classifies all available-for-sale marketable securities with maturities greater than one year from the balance sheet date as non-current assets. The Company established the Supernus Supplemental Executive Retirement Plan (SERP) for the sole purpose of receiving funds for executives from a previous SERP and providing a continuing deferral program under the Supernus SERP. As of December 31, 2015 and 2014, the estimated fair value of the mutual fund investment securities within the SERP was approximately $263,000 and $305,000, respectively. The fair value of these assets is included within other non-current assets on the consolidated balance sheets. A corresponding noncurrent liability is also included in the consolidated balance sheets to reflect the Company’s obligation for the SERP. The Company has not made, and has no plans to make, contributions to the SERP. The securities are restricted in nature and can only be used for purposes of paying benefits under the SERP. Accounts Receivable, net Accounts receivable are reported on 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. No allowance for uncollectible receivables is recorded at December 31, 2015 or December 31, 2014. The Company recorded an allowance of approximately $3.8 million and $4.1 million for expected sales discounts as of December 31, 2015 and December 31, 2014, respectively. The following table includes those customers that represent more than 10% of total net product sales for 2015 and more than 10% of the accounts receivable balance on the consolidated balance sheet as of December 31, 2015: Percent of Net Percent of Accounts Customer A % % Customer B % % Customer C % % % % Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, accounts receivable and marketable securities. The counterparties are various corporations and financial institutions of high credit standing. Substantially all of the Company’s cash and cash equivalents are maintained with well known, U.S. and non U.S. financial institutions, government agencies, and corporations. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and, therefore, management believes they bear minimal risk. Inventory Inventories, which are recorded at the lower of cost or market, include materials, labor, and other direct and indirect costs and are valued using the first-in, first-out method. The Company capitalizes inventories produced in preparation for commercial launches when it becomes probable that the related product candidates will receive regulatory approval and that the related costs will be recoverable through the commercial sale of the product. Property and Equipment Property and equipment are stated at cost. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to operations. Repairs and maintenance costs are expensed as incurred. Depreciation and amortization are computed using the straight-line method over the following average useful lives: Computer equipment 3 years Software 3 years Lab equipment and furniture 5 - 10 years Leasehold improvements Shorter of lease term or useful life Deferred Legal Fees Deferred legal fees have been incurred in connection with legal proceedings related to patents for Oxtellar XR and Trokendi XR (see Note 7). Amortization of the deferred legal fees will begin upon successful outcome of the on-going litigation. Deferred legal fees will be charged to expense in the event of an unsuccessful outcome of the on-going litigation. Intangible Assets Intangible assets consist primarily of purchased patents and deferred legal fees. Patents are carried at cost less accumulated amortization, which is calculated on a straight-line basis over the estimated useful lives of the patents, generally estimated to be ten years. The carrying value of the patents is assessed for impairment annually during the fourth quarter of each year, or more frequently if impairment indicators exist. There were no indicators of impairment identified at December 31, 2015, 2014 or 2013. Impairment of Long-Lived Assets Long-lived assets consist primarily of purchased patents, deferred legal fees, and property and equipment. The Company assesses the recoverability of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If indications of impairment exist, projected future undiscounted cash flows associated with the asset are compared to the carrying amount to determine whether the asset’s value is recoverable. Evaluating for impairment requires judgment, including the estimation of future cash flows, future growth rates and profitability and the expected life over which cash flows will occur. Changes in the Company’s business strategy or adverse changes in market conditions could impact impairment analyses and require the recognition of an impairment charge equal to the excess of the carrying value of the long-lived assets over its estimated fair value. For the years ended December 31, 2015, 2014, and 2013, the Company determined that there was no impairment of the Company’s long-lived assets. Deferred Financing Costs Deferred financing costs consist of financing costs incurred by the Company in connection with the closing of the Company’s 7.50% Convertible Senior Secured Notes and Secured Notes Payable (see Note 9). The Company amortizes deferred financing costs over the term of the related debt using the effective interest method. When extinguishing debt, the related deferred financing costs are written off. Preclinical Study and Clinical Trial Accruals The Company estimates preclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions, investigators, and clinical research organizations (CROs) that conduct these activities on our behalf. In recording service fees, the Company estimates the time period over which the related services will be performed and compares the level of effort expended through the end of each period to the cumulative expenses recorded and payments made for such services and, as appropriate, accrues additional service fees or defers any non-refundable advance payments until the related services are performed. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust its accrual or deferred advance payment accordingly. If the Company later determines that it no longer expects the services associated with a nonrefundable advance payment to be rendered, the advance payment will be charged to expense in the period that such determination is made. 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. Beginning in the fourth quarter of 2013, the Company began recognizing revenue for Oxtellar XR, net of estimated sales deductions, at the time of shipment to wholesalers. Prior to this time, the Company recognized revenue for Oxtellar XR upon fulfillment of prescriptions, net of all known or estimated sales deductions. Beginning in the second quarter of 2014, the Company began recognizing revenue for Trokendi XR, net of estimated sales deductions, at the time of shipment to wholesalers. Prior to this time, the Company recognized revenue for Trokendi XR upon fulfillment of prescriptions to patients, net of all known or estimated sales deductions. For the year ended December 31, 2015, the revenue for Oxtellar XR and Trokendi XR was recognized contemporaneously upon shipment of finished products to wholesalers, net of allowances for estimated sales deductions and returns. During the year ended December 31, 2015, the Company recorded a $2.9 million reduction to net revenue related to a change in estimate associated with its accrued sales deductions of $26.8 million at December 31, 2015. The change in estimate reflects returns experience associated with our initial launch shipments, which have now passed their expiry dating. Revenue from Product Sales The Company launched Oxtellar XR on February 4, 2013 and launched Trokendi XR on August 26, 2013. During the fourth quarter of 2013, we began to recognize revenue for Oxtellar XR contemporaneously upon shipment of finished product to wholesalers less allowances for estimated sales deductions and, during the second quarter of 2014, we began to recognize revenue for Trokendi XR contemporaneously upon shipment of finished product to wholesalers less allowances for estimated sales deductions. Through December 31, 2013, the Company recorded shipments of Trokendi XR to wholesalers as deferred revenue i.e., sales price net of known sales deductions (e.g. prompt pay discounts and other similar charges defined below). At the time, we lacked the experiential data which would allow us to estimate all remaining sales rebates, allowances and returns. Accordingly, when this data became available to the Company, we moved to contemporaneous revenue recognition in the second quarter of 2014. Royalty Revenue In the third quarter of 2014, the Company received a $30.0 million payment pursuant to a royalty agreement related to the purchase by HC Royalty of certain of the Company’s rights under the agreement with United Therapeutics Corporation related to the commercialization of Orenitram. We have recorded a non-recourse liability related to this transaction and have begun to amortize this amount to recognize royalty revenue as royalties are received by HC Royalty from United Therapeutics. We also recognize non-cash interest expense related to this liability that accrues at an effective interest rate determined based on projections of HC Royalty’s rate of return. We recognized royalty revenue of $3.0 million and $0.6 million for the years ended December 31, 2015 and 2014, respectively. We recognized interest expense of $3.5 million and $0.7 million for the years ended December 31, 2015 and 2014, respectively. 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 healthcare 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 or estimated 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 and expired product six months prior and 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. Revenue Recognition of License Revenue License and Collaboration Agreements We have entered into collaboration agreements to have both Oxtellar XR and Trokendi XR commercialized outside of the U.S. These agreements generally include an up-front license fee and ongoing milestone payments upon the achievement of specific events. We believe the milestones meet all of the necessary criteria to be considered substantive and therefore should be recognized as revenue when achieved. For up-front license fees, we have estimated the service period of the contract and are recognizing this payment as revenue on a straight-line basis over the respective service period. 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. Substantive milestone payments are recognized upon achievement of the milestone only if all of the following conditions are met: · the milestone payments are non-refundable; · achievement of the milestone involves a degree of risk and was not reasonably assured at the inception of the arrangement; · substantive effort on the partner’s part is involved in achieving the milestone; and · the amount of the milestone payment is reasonable in relation to the effort expended or the risk associated with achievement of the milestone. Determination as to whether a payment meets the aforementioned conditions involves management’s judgment. If any of these conditions are not met, the resulting payment would not be considered a substantive milestone, and therefore the resulting payment would be considered part of the consideration for the single unit of accounting and amortized over the appropriate period. The Company recorded milestone revenues of $0.8 million and $2.0 million during the years ended December 31, 2015 and 2014, respectively. There was no revenue generated from the achievement of milestones in the year ended December 31, 2013. 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. Research and Development Costs Research and development costs are expensed as incurred. Research and development costs primarily consist of employee-related expenses, including salaries and benefits; share-based compensation expense; expenses incurred under agreements with clinical research organizations (CROs), investigative sites, and consultants that conduct the Company’s clinical trials; the cost of acquiring and manufacturing clinical trial materials; the cost of manufacturing materials used in process validation, to the extent that those materials are manufactured prior to receiving regulatory approval for those products and are not expected to be sold commercially, facilities costs that do not have an alternative future use; related depreciation and other allocated expenses; license fees for and milestone payments related to in-licensed products and technologies; and costs associated with animal testing activities and regulatory approvals. Advertising Expense The Company records the cost of its advertising efforts when services are performed or goods are delivered. The Company incurred approximately $19.3 million, $14.8 million, and $14.6 million in advertising costs for the years ended December 31, 2015, 2014, and 2013, respectively and are recorded in the sales, general and administrative expense line of the Statement of Operations. Share-Based Compensation Employee share-based compensation is measured based on the estimated fair value on the grant date. The grant date fair value is calculated using the Black-Scholes option-pricing model, which requires the use of subjective assumptions including volatility, expected term, risk-free rate, and the fair value of the underlying common stock. The Company recognizes expense using the straight-line method less estimated forfeitures. The Company records the expense for stock option grants to non-employees based on the estimated fair value of the stock option using the Black-Scholes option-pricing model. The fair value of non-employee awards is re-measured at each reporting period. As a result, stock compensation expense for non-employee awards with vesting is affected by subsequent changes in the fair value of the Company’s common stock. Income Taxes The Company utilizes the asset and 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 In November 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”. The standard requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent. ASU 2015-17 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted and the standard may be applied either retrospectively or on a prospective basis to all deferred tax assets and liabilities. We early adopted ASU 2015-17 during our fourth quarter of fiscal year 2015 on a prospective basis. Accordingly, we reclassified the current deferred taxes to noncurrent on our December 31, 2015 Consolidated Balance Sheet, eliminating the presentation of the offsetting $0.2 million current deferred tax asset and non-current deferred tax liability. In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” Under this new guidance, entities that measure inventory using any method other than last-in, first-out or the retail inventory method will be required to measure inventory at the lower of cost and net realizable value. The amendments in this ASU, which should be applied prospectively, are effective for annual and interim periods beginning after December 15, 2016. Early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption of ASU No. 2015-11 on our consolidated financial statements and related disclosures. In April 2015, the FASB issued 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 adopt the amendment early. The adoption of this standard had no impact on the Company’s financial results. 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 has been applied on a retrospective basis and the impact is reflected in the as previously reported column in Note 2. The adoption of ASU No. 2015-03 resulted in a reclassification of deferred financing costs of $724,000 and $104,000 from asset to liability classification on the Company’s consolidated financial statements as of December 31, 2014 and December 31, 2015, respectively. 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 consolidated financial statements. 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 U.S. 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. 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 and has not yet selected a method of adoption. The Company has evaluated all other ASUs issued through the date the consolidated financials were issued and believes that no other ASU will have a material impact on the Company’s consolidated financial statements. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 12 Months Ended |
Dec. 31, 2015 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | 4. 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 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 (Restated): Fair Value Measurements at December 31, 2015 Total Carrying Quoted Prices Significant Significant 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 Total Carrying Quoted Prices Significant Significant 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 cash held with bank, Certificate of Deposit, and money market funds. Level 2 assets include the SERP (Supplemental Executive Retirement Plan) assets, commercial paper and investment grade corporate bonds and other fixed income securities. Level 2 securities are valued using third-party pricing sources that apply applicable inputs and other relevant data into their models to estimate fair value. 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 the outstanding warrants to purchase Common Stock, which are recorded as derivative liabilities. As of December 31, 2015, no warrants remained outstanding. 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 December 31 2015: Volatility 45% Stock Price as of December 31, 2015 $13.44 per share Credit Spread 2363 bps Term 1.33 years Dividend Yield 0.0% 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 December 31, 2015 that are included in the Non-Current Liabilities section of the Consolidated Balance Sheets, in thousands: Year Ended Balance at December 31, 2013 $ Changes in fair value of derivative liabilities included in earnings ) Reduction due to conversion of debt to equity ) Balance at December 31, 2014 Changes in fair value of derivative liabilities included in earnings ) Reduction due to conversion of debt to equity ) Cashless exercise of common stock warrants ) Balance at December 31, 2015 $ The carrying value, face value and estimated fair value of the Notes was approximately $7.2 million, $8.5 million and $22.6 million, respectively, as of December 31, 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 (restated): At December 31, 2015: Available for Sale Amortized Gross Gross Fair Value Corporate debt securities $ ) $ At December 31, 2014: Available for Sale Amortized Gross Gross 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 (restated): December 31, 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 | 12 Months Ended |
Dec. 31, 2015 | |
Inventories | |
Inventories | 5. Inventories Inventories consist of the following, in thousands: December 31, December 31, Raw materials $ $ Work in process Finished goods $ $ |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2015 | |
Property and Equipment | |
Property and Equipment | 6. Property and Equipment Property and equipment consist of the following, in thousands: December 31, December 31, Computer equipment $ $ Software Lab equipment and furniture Leasehold improvements Construction in progress — Less accumulated depreciation and amortization ) ) $ $ Depreciation and amortization expense on property and equipment was approximately $678,000, $699,000, and $512,000 for the years ended December 31, 2015, 2014 and 2013, respectively. |
Intangible Assets
Intangible Assets | 12 Months Ended |
Dec. 31, 2015 | |
Intangible Assets | |
Intangible Assets | 7. 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. The following sets forth the gross carrying amount and related accumulated amortization of these intangible assets, in thousands: December 31, 2015 December 31, 2014 Weighted- Gross Carrying Accumulated Gross Carrying Accumulated Purchased patents $ $ $ $ Capitalized patent defense costs $ $ $ — $ — 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. The Company reached an agreement to settle certain litigation related to Trokendi XR in October 2015, at which time the Company capitalized the costs associated with that litigation and began amortization. The net book value of intangible assets was $1.0 million as of December 31, 2015 and was $0.2 million as of December 31, 2014. Amortization expense on intangible assets was approximately $243,000, $229,000, and $229,000 for the years ended December 31, 2015, 2014 and 2013, respectively. There were no indicators of impairment identified at December 31, 2015 or December 31, 2014. |
Accrued Expenses
Accrued Expenses | 12 Months Ended |
Dec. 31, 2015 | |
Accrued Expenses | |
Accrued Expenses | 8. Accrued Expenses Accrued expenses are comprised of the following, in thousands (restated): December 31, December 31, Accrued compensation $ $ Accrued professional fees Accrued clinical trial and clinical supply costs Accrued sales and marketing expenses Accrued product costs Accrued interest expense Other accrued expenses $ $ |
Convertible Senior Secured Note
Convertible Senior Secured Notes | 12 Months Ended |
Dec. 31, 2015 | |
Convertible Senior Secured Notes | |
Convertible Senior Secured Notes | 9. Convertible Senior Secured Notes On May 3, 2013, the Company issued $90.0 million aggregate principal amount of Notes. The Company completed this private placement offering in reliance on Section 4(a)(2) under the Securities Act of 1933, as amended (the Securities Act). The notes were available for resale in transactions exempt from the registration requirements of the Securities Act to persons reasonably believed by the initial purchasers to be “qualified institutional buyers” as defined in Rule 144A under the Securities Act. Aggregate offering expenses in connection with the transaction, including the underwriters’ fee of $3.0 million, were approximately $3.5 million, resulting in net proceeds of approximately $86.5 million. The Company used approximately $19.6 million to repay in full its borrowings under and terminate its then existing secured credit facility. The Company issued the Notes under an Indenture, dated May 3, 2013 (the Indenture), between the Company and U.S. Bank National Association, as Trustee and Collateral Agent. The Notes provide for 7.50% interest per annum on the principal amount of the Notes, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on November 1, 2013. Interest will accrue on the Notes from and including May 3, 2013 and the Notes will mature on May 1, 2019, unless earlier converted, redeemed or repurchased by the Company. The Notes are convertible into the Company’s common stock (Common Stock) as described below. The Notes are the Company’s senior secured obligations and (i) rank senior in right of payment to any of the indebtedness that is expressly subordinated in right of payment to the Notes; (ii) rank effectively senior to any of the unsecured indebtedness to the extent of the value of the collateral securing the Notes; (iii) rank equal in right of payment with all of the Company’s indebtedness that is not subordinated to the Notes; and (iv) are structurally subordinated to all indebtedness and liabilities, including trade payables, of the Company’s existing and future subsidiaries. The Notes are secured by a first-priority lien, other than customary permitted liens, on substantially all of the Company’s and its domestic subsidiaries’ assets, whether now owned or hereafter acquired, including license agreements, general intangibles, accounts, instruments, investment property, intellectual property and any proceeds of the foregoing pursuant to that certain Security and Pledge Agreement, dated May 3, 2013 (the Security Agreement), between the Company and U.S. Bank National Association, as Collateral Agent. The Indenture restricts the ability of the Company and its existing and future subsidiaries to make investments, including transfers of the Company’s assets that constitute collateral securing the Notes, in its existing and future foreign subsidiaries. The Company is entitled to the release of property and other assets constituting collateral from the liens securing the Notes and the obligations thereunder (i) to enable the Company to consummate the sale, transfer, license, monetization or other disposition of such property or assets; (ii) with the consent of the holders of at least 66 2 / 3 % of the aggregate principal amount of the Notes then outstanding and affected; or (iii) pursuant to a modification or amendment of the Indenture, the Notes or the Security Agreement. Prior to the close of business on the business day immediately preceding November 1, 2018, a holder of Notes may convert all or a portion of its Notes, in principal amounts equal to $1,000 or an integral multiple thereof, only if one or more of the following conditions has been satisfied: (1) if, for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading day period ending within five trading days prior to a conversion date, the last reported sale price of the Company’s Common Stock exceeds the conversion price on each such trading day; (2) during the five consecutive business day period immediately following any five consecutive trading day period (the Measurement Period), in which, for each trading day of that Measurement Period, the trading price (as defined in the Indenture) per $1,000 principal amount of Notes for such trading day was less than 98% of the product of the last reported sale price of the Company’s Common Stock on such trading day and the applicable conversion rate on such trading day; (3) upon the occurrence of specified corporate transactions; or (4) if the Company calls the Notes for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date. On and after November 1, 2018, a holder of Notes may convert all or a portion of its Notes, in principal amounts equal to $1,000 or an integral multiple thereof, at any time prior to the close of business on the business day immediately preceding the maturity date of the Notes, regardless of the foregoing circumstances. The Company will settle conversion of the Notes through payment or delivery, as the case may be of cash, shares of Common Stock or a combination thereof, at its election. The conversion rate for the Notes is equal to 188.7059 shares of Common Stock per $1,000 principal amount of notes (which is equivalent to an initial conversion price of approximately $5.30 per share of Common Stock). The conversion rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a “make-whole fundamental change” (as defined in the Indenture), the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its notes in connection with such make-whole fundamental change as described in the Indenture. Effective November 1, 2013, if, for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading day period ending within five trading days prior to a conversion date, the last reported sale price of the Company’s common stock exceeds the conversion price on each such trading day, the Company became required, in certain circumstances, to make an interest make-whole payment to converting holders equal to the sum of the present value of the remaining scheduled payments of interest that would have been made on the Notes to be converted had such notes remained outstanding until May 1, 2017 computed using a discount rate equal to 2%. The Company may pay an interest make-whole payment either in cash or in Common Stock, at its election. If the Company elects to pay an interest make-whole payment in Common Stock, then the stock will be valued at 95% of the simple average of the daily volume- weighted average price (VWAP) per share for the 10 trading days ending on and including the trading day immediately preceding the conversion date. Notwithstanding the foregoing, the number of shares the Company may deliver in connection with an interest make-whole payment and repayment of principal will not exceed 221.7294 shares per $1,000 principal amount of Notes, subject to adjustment. If, pursuant to its election to deliver Common Stock in connection with the payment of the interest make-whole amount, the Company would be required to deliver a number of shares of Common Stock in excess of such threshold, the Company would deliver cash in lieu of shares otherwise deliverable upon conversions in excess thereof (based on the simple average of the daily VWAP for the 10 trading days ending on and including the trading day immediately preceding the conversion date). Upon (i) the occurrence of a fundamental change (as defined in the Indenture) or (ii) if the Company calls the Notes for redemption as described below (either event, a “make-whole fundamental change”) and a holder elects to convert its Notes in connection with such make-whole fundamental change, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares (the “Additional Shares”) as described below. The Company will notify holders within one business day after the first public announcement by it or a third party of an event or transaction that the Company reasonably determines would, if consummated, constitute a make-whole fundamental change. Upon receiving notice or otherwise becoming aware of a potential make-whole fundamental change described, the Company will use commercially reasonable efforts to announce or cause the announcement of such potential make-whole fundamental change in time to deliver such notice at least 50 scheduled trading days prior to the anticipated effective date for such transaction. The Company will notify the Trustee and holders of the effective date of any make-whole fundamental change no later than one business day after such effective date. The number of additional shares by which the Company will increase the conversion rate will be determined based on the date on which the make-whole fundamental change occurs or becomes effective (the Effective Date) and the price (the Stock Price) paid (or deemed paid) per share of the Company’s Common Stock in the fundamental change. If the holders of the Company’s common stock receive only cash in a make-whole fundamental change (i) the Stock Price shall be the cash amount paid per share and (ii) the Company will satisfy its conversion obligation to a holder that converts its Notes any time after such make-whole fundamental change by delivering to such holder, on the third business day immediately following the relevant conversion date, an amount of cash, for each $1,000 principal amount of Notes converted, equal to the product of (x) the conversion rate in effect on the relevant conversion date (as increased by the Additional Shares, if any) and (y) the Stock Price. Otherwise, (i) the Stock Price will equal the average of the last reported sale prices of the Company’s Common Stock over the five trading day period ending on, and including, the trading day immediately preceding the Effective Date of the make-whole fundamental change and (ii) the Company will satisfy its conversion obligation to a holder that converts its Notes in connection with such make-whole fundamental change based on the conversion rate as increased by the number of Additional Shares. In connection with a make-whole fundamental change triggered by redemption of the Notes, the Effective Date of such make-whole fundamental change will be the date on which the Company delivers notice of the redemption. Notwithstanding the foregoing, in no event will the conversion rate exceed the maximum conversion rate, which is 221.7294 shares per $1,000 principal amount of Notes, which amount is inclusive of repayment of the principal of the Notes. If a fundamental change occurs at any time, holders will have the right, at their option, to require the Company to purchase for cash any or all of the Notes, or any portion of the principal amount thereof, that is equal to $1,000 or an integral multiple of $1,000 in excess thereof, on a date of the Company’s choosing that is not less than 20 calendar days nor more than 35 calendar days after the date on which it delivers a fundamental change notice. The price the Company is required to pay for a Note is equal to 100% of the principal amount of such Note plus accrued and unpaid interest, if any, to, but excluding, the fundamental change purchase date. Any Notes purchased by the Company will be paid for in cash. The Company may not redeem the Notes prior to May 1, 2017. On or after May 1, 2017, the Company may redeem for cash all, but not less than all, of the Notes if the last reported sale price of the Company’s Common Stock equals or exceeds 140% of the applicable conversion price for at least 20 trading days during the 30 consecutive trading day period ending on the trading day immediately prior to the date the Company delivers written notice of the redemption. The redemption price will be equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company calls the Notes for redemption, a make- whole fundamental change will be deemed to occur and the Company will, in certain circumstances, increase the conversion rate for holders who convert their notes in connections with such make-whole fundamental change as described in the Indenture. The Company incurred approximately $3.5 million of financing costs (including the underwriters’ fee) in connection with the issuance of the Notes. Approximately $0.9 million of this amount was allocated to additional paid-in capital and the remaining $2.6 million is recorded as a deferred cost being amortized over the term of the Notes. As of December 31, 2015, approximately $0.1 million remained unamortized, of which $0.03 million is current and $0.07 million is long term. The table below summarizes activity related to the Notes from issuance on May 3, 2013 through December 31, 2015, in thousands (Restated): 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 December 31, 2015 carrying value $ During the year ended December 31, 2015, approximately $27.5 million of the Notes were presented to the Company for conversion. Accordingly, the Company issued approximately 5.2 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 on extinguishment of debt of approximately $2.3 million during the period ended December 31, 2015. During the year ended December 31, 2014, approximately $13.4 million of the Notes were presented to the Company for conversion. Accordingly, the Company issued approximately 2.5 million shares of common stock in conversion of the principal amount of the Notes. The Company issued an additional 0.4 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 on extinguishment of debt of approximately $2.6 million during the period ended December 31, 2014. Secured Notes Payable In January 2011, the Company entered into a secured credit facility pursuant to a loan and security agreement with certain lenders, which was subsequently amended in December 2011, providing for term loans of up to an aggregate of $30.0 million. On January 26, 2011 and December 30, 2011, the Company drew down $15.0 million and $15.0 million, respectively, of term loans under this secured credit facility. The Company used approximately $19.6 million of the Convertible Note proceeds to repay in full its borrowings under and terminate this secured credit facility in May 2013. Upon repayment of the secured notes payable, the Company incurred an approximately $1.2 million loss on extinguishment of debt during the period ended December 31, 2013. |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2015 | |
Stockholders' Equity | |
Stockholders' Equity | 10. Stockholders’ Equity Common Stock The holders of the Common Stock are entitled to one vote for each share of Common Stock held. On May 1, 2012, the Company completed its IPO, in which 10 million shares of the Company’s Common Stock were sold at a price of $5 per share. Additionally, the underwriters of the Company’s IPO exercised the full amount of their over-allotment option resulting in the sale of an additional 449,250 shares of the Company’s Common Stock at a price of $5 per share, resulting in cash proceeds to the Company of $52.3 million. The Company realized net proceeds of $47.6 million from the IPO, after issuance costs of approximately $4.7 million. On December 5, 2012, the Company completed a follow-on offering, in which 6 million shares of the Company’s Common Stock were sold at a price of $8 per share. Additionally, the underwriters of the Company’s follow-on offering exercised their over-allotment options in January 2013 resulting in the sale of an additional 239,432 shares of the Company’s Common Stock at a price of $8 per share, resulting in total cash proceeds to the Company of $49.9 million. The Company realized net proceeds of $46.6 million from the follow-on offering, after issuance costs of approximately $3.3 million. During the period from November 1, 2013 through December 31, 2015, the Company issued 15,372,477 shares of common stock as a result of the conversion of approximately $81.5 million of Convertible Notes and approximately 2,195,904 shares of common stock in settlement of the interest-make whole associated with those conversions. |
Share-Based Payments
Share-Based Payments | 12 Months Ended |
Dec. 31, 2015 | |
Share-Based Payments | |
Share-Based Payments | 11. Share-Based Payments Stock Option Plans 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. 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. Option awards granted to the directors generally vest over a one year term. 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: Year Ended December 31, 2015 2014 2013 Research and development $ $ $ Selling, general and administrative Total $ $ $ The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model using the assumptions in the following table: Year Ended December 31, 2015 2014 2013 Fair value of common stock $9.13 - $21.21 $7.63 - $10.02 $5.40 - $7.90 Expected volatility 60.9% - 64.6% 64.5% - 68.3% 69.5% - 70.9% Dividend Yield 0% 0% 0% Expected term 6.25 years 6.25 years 6.25 - 9.60 years Risk-free interest rate 1.54% - 1.74% 1.67% - 1.97% 1.20% - 2.94% Expected forfeiture rate 5% 5% 5% Fair Value of Common Stock —For option grants that occurred after the Company’s IPO on May 1, 2012, the fair value of the Common Stock underlying the option grants was determined based on observable market prices of the Company’s Common Stock. Expected Volatility —Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company has identified several public entities of similar size, complexity, and stage of development and, accordingly, historical volatility has been calculated using the volatility of these companies, as well as taking into consideration the Company’s actual volatility since our IPO. As our historical experience is not sufficient to calculate volatility for our option grants, the Company will continue to use guideline peer group volatility information until the historical volatility of its own Common Stock is sufficient on its own to measure expected volatility for future option grants. Dividend Yield —The Company has never declared or paid dividends and has no plans to do so in the foreseeable future. Expected Term —This is the period of time that the options granted are expected to remain unexercised. Options granted have a maximum term of ten years. The Company determines the average expected life of stock options according to the “simplified method” as described in Staff Accounting Bulletin 110, which is the mid-point between the vesting date and the end of the contractual term. Over time, management will track estimates of the expected life of the option term so that estimates will approximate actual behavior for similar options. Risk-Free Interest Rate —This is the U.S. Treasury rate for the week of each option grant during the year, having a term that most closely resembles the expected term of the option. Expected Forfeiture Rate —The forfeiture rate is the estimated percentage of options granted that are expected to be forfeited or canceled on an annual basis before becoming fully vested. The following table summarizes stock option and SAR activity: Number of Weighted- Weighted-Average Outstanding, December 31, 2013 $ Granted $ Exercised ) $ Forfeited ) $ Outstanding, December 31, 2014 $ Granted $ Exercised ) $ Forfeited ) $ Outstanding, December 31, 2015 $ As of December 31, 2015: Vested and expected to vest $ Exercisable $ The aggregate intrinsic value of options outstanding, vested and expected to vest, and exercisable as of December 31, 2015 is approximately $12.6 million, $12.4 million and $5.0 million, respectively. The aggregate intrinsic value of options outstanding, vested and expected to vest, and exercisable as of December 31, 2014 is approximately $2.0 million, $2.0 million and $1.5 million, respectively. The aggregate intrinsic value of options outstanding, vested and expected to vest, and exercisable as of December 31, 2013 is approximately $1.4 million, $1.4 million and $1.0 million, respectively. The weighted-average, grant-date fair value of options granted for the years ended December 31, 2015, 2014, and 2013 was $6.05, $5.79, and $4.98 per share, respectively. The total fair value of the underlying Common Stock related to shares that vested during the years ended December 31, 2015, 2014, and 2013 was approximately $2.6 million, $1.9 million, and $0.5 million, respectively. The total intrinsic value of options exercised amounted to approximately $1.6 million, $0.1 million, and $0.4 million, respectively, during the years ended December 31, 2015, 2014, and 2013. As of December 31, 2015 and 2014, the total unrecognized compensation expense, net of estimated forfeitures, was approximately $7.2 million, and $5.9 million, respectively, which the Company expects to recognize over a weighted-average period of 2.54 and 2.56 years, respectively. |
Earnings per Share
Earnings per Share | 12 Months Ended |
Dec. 31, 2015 | |
Earnings per Share | |
Earnings per Share | 12. 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, SAR, and potential Employee Stock Purchase Plan (ESPP) awards, and the if-converted method is used to determine the dilutive effect of the Company’s Notes. The following common stock equivalents were excluded in the calculation of diluted loss per share because their effect would be anti-dilutive as applied to the loss from continuing operations applicable to common stockholders for the years ended December 31, 2015, 2014, and 2013: Year Ended December 31, 2015 2014 2013 Shares underlying Convertible Senior Secured Notes — Warrants to purchase common stock Stock options, stock appreciation rights, non-vested stock options and ESPP awards — The following table sets forth the computation of basic and diluted net income per share for the years ended December 31, 2015, 2014, and 2013, in thousands, except share and per share amounts: Year ended December 31, 2015 2014 2013 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 debt — — Loss on extinguishment of outstanding debt, as if converted ) — — Total adjustments — — Net income 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 | 12 Months Ended |
Dec. 31, 2015 | |
Income Taxes | |
Income Taxes | 13. Income Taxes The components of the income tax expense/ (benefit) for the years ended December 31, 2015, 2014, and 2013 were as follow, in thousands: Year Ended 2015 2014 2013 Current Federal $ $ $ — State — — Deferred Federal — — — State — — — Total $ $ $ — For the years ended December 31, 2015 and 2014, the expense (benefit) for US. Federal or state income taxes was $0.7 million and $0.6 million. For the year ended December 31, 2013, there was no expense (benefit) for U.S. Federal or state income taxes based on continuing operations, net operating loss carryforwards and the Company’s valuation allowance against its deferred income tax asset. A reconciliation of the expected income tax expense/(benefit) computed using the U.S. Federal statutory income tax rate to the Company’s effective income tax rate is as follows, in thousands: Year Ended December 31, 2015 2014 2013 Income tax expense/(benefit) computed at U.S. Federal statutory tax rate $ $ ) $ ) Permanent items State income taxes ) ) Change in valuation allowance ) Uncertain income tax position ) Research and development credits ) ) ) Other ) ) Deferred rate change — — Income tax expense (benefit) $ $ $ — The Company recorded a change in our deferred income tax rate due to changes in state apportionment factors. The deferred income tax expense/(benefit) have been entirely offset by the net change in valuation allowances. The significant components of the Company’s deferred income tax assets (liabilities) were as follow, in thousands: As of December 31, 2015 2014 Deferred tax assets: Net operating loss carryforward $ $ Deferred rent credit Accrued compensation and non-qualified stock options Deferred financing costs Depreciation and amortization Research and development credits Capitalized overhead into inventory (UNICAP §263A) Non-recourse liability related to sale of future royalties Other AMT Credit Valuation allowance ) ) Net deferred tax asset Deferred tax liability: Debt discount on convertible notes ) ) Depreciation ) — Net deferred taxes $ — $ — In assessing the realizability of deferred income tax assets, management considers whether it is more likely than not that some or all of the deferred income tax assets will not be realized. The ultimate realization of the deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the net operating loss (NOL) and tax credit carryforwards are available. Management considers projected future taxable income, the scheduled reversal of deferred income tax liabilities, and available tax planning strategies that can be implemented by the Company in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the NOL and credit carryforwards are available to reduce income taxes payable, management has established a full valuation allowance as the Company is not more likely than not to realize such net deferred tax assets. The net decrease during the year ended December 31, 2015 in total valuation allowance of approximately $1.8 million is due to the pretax book income which was generated in the current year and an adjustment in the Company’s deferred income tax rate. As of December 31, 2015, the U.S. Federal and state NOL carryforwards amounted to approximately $91.8 million ($31.6 million tax effected) and $58.9 million ($3.2 million tax effected), respectively, and will expire in various years beginning in 2030. As of December 31, 2015, the Company has available research and development credit carryforwards of approximately $5.5 million, which expire, if unused, starting in 2026. The use of the Company’s U.S. Federal and state NOL carryforwards and research and development credits are restricted in annual use due to changes in the Company’s ownership. For the year ended December 31, 2015, the Company utilized NOL’s of approximately $18.2 million and expects the remaining $150.7 million of NOL carryforwards to become available over the years from 2016 to 2020, in amounts ranging from $7.8 million to $20.3 million per year. In addition, the Company has available research and development credits of approximately $5.5 million expected to become available in 2020 to 2021. The Company’s state NOL’s will have a similar limitation to the amount noted for US Federal. Additionally, despite the NOL carryforwards, the Company may have a future tax liability due to state and local income tax requirements. The Company paid no Federal income taxes in the years ended December 31, 2015, 2014, or 2013. The Company accounts for uncertain income tax positions pursuant to the guidance in FASB ASC Topic 740, Income Taxes . The Company recognizes interest and penalties related to uncertain tax positions, if any, in income tax expense. As of December 31, 2015, the Company accrued interest of a nominal amount and penalties of $0.1 million related to uncertain tax positions. The Company’s income taxes have not been subject to examination by any tax jurisdictions since its inception in 2005. Due to NOL and research and development credit carryforwards, all U.S. Federal and state income tax returns filed by the Company are subject to examination by the taxing jurisdictions. Any uncertain income tax position liability has been recorded to the Company’s deferred income tax assets to offset such tax attribute carryforwards. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows, in thousands: Year Ended December 31, 2015 2014 2013 Balance as of January 1 $ $ $ Gross (decreases) increases related to prior-year tax positions ) Gross increases related to current-year tax positions Gross decreases related to current-year tax positions ) ) — Change in tax rates ) ) — Balance as of December 31 $ $ $ The Company believes that most of its uncertain income tax positions would not result in adjustments to its effective income tax rate because a corresponding adjustments to deferred income tax assets would be offset by adjustments to recorded valuation allowances. As of December 31, 2015 and 2014, the Company recorded $.6 million and $.6 million of current tax expense on setting up an uncertain tax position related to the Alternative Minimum Tax. The Company does not anticipate a significant increase or decrease in the uncertain income tax benefits within the next 12 months. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2015 | |
Commitments and Contingencies | |
Commitments and Contingencies | 14. 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 December 31, 2015, 2014, and 2013, approximately $0.2 million, $0.1 million, and $0.5 million, respectively, of the allowance was utilized and is included in fixed assets and deferred rent. As of December 31, 2015, $0.5 million is available for tenant improvements. Rent expense for the leased facilities and leased vehicles for the years ended December 31, 2015, 2014, and 2013 was approximately, $2.6 million, $2.3 million, and $1.6 million, respectively. Future minimum lease payments under non-cancelable operating leases as of December 31, 2015 are as follows, in thousands: Year ending December 31: 2016 $ 2017 2018 2019 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, 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 product sales in the low-single digits. The Company has also entered into a purchase and sale agreement with 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. |
Employee Benefit Plan
Employee Benefit Plan | 12 Months Ended |
Dec. 31, 2015 | |
Employee Benefit Plan | |
Employee Benefit Plan | 15. Employee Benefit Plan On January 2, 2006, the Company established the Supernus Pharmaceuticals, Inc. 401(k) Profit Sharing Plan (the 401(k) Plan) for its employees under Section 401(k) of the Internal Revenue Code (Code). Under the 401(k) Plan, all full-time employees who are at least 21 years old are eligible to participate in the 401(k) Plan. Employees may participate starting on the first day of the month following employment. Employees may contribute up to the lesser of 90% of eligible compensation or the applicable limit established by the Code. Employees are 100% vested in their contributions to the 401(k) Plan. The Company matches 100% of a participant’s contribution for the first 3% of their salary deferral and matches 50% of the next 2% of their salary deferral. As determined by the Board, the Company may elect to make a discretionary contribution not exceeding 60% of the annual compensation paid to all participating employees. The Company’s contributions to the 401(k) Plan approximated $1.4 million, $1.1 million, and $0.6 million for the years ended December 31, 2015, 2014, and 2013, respectively. |
Collaboration Agreements
Collaboration Agreements | 12 Months Ended |
Dec. 31, 2015 | |
Collaboration Agreements | |
Collaboration Agreements | 16. Collaboration Agreements 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. The revenue generated in the year ended December 31, 2014 was $2.0 million for a milestone payment. 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 if a certain threshold is reached per the terms of the Agreement. Prior to that time, we will receive no revenue under this license agreement. |
Quarterly Financial Information
Quarterly Financial Information (unaudited) | 12 Months Ended |
Dec. 31, 2015 | |
Quarterly Financial Information (unaudited) | |
Quarterly Financial Information (unaudited) | 17. Quarterly Financial Information (unaudited) Quarterly financial information for fiscal 2015 and 2014 are presented in the following table, in thousands, except per share data, unaudited: 1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter 2015 Revenue $ $ $ $ Total costs and expenses Operating income Net income Net income per share, basic Net income per share, diluted 1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter 2014 Revenue $ $ (1) $ $ Total costs and expenses Operating loss ) ) Net loss ) ) Net loss per share, basic ) ) Net loss per share, diluted ) ) (1) The Company’s results for the second quarter of 2014 include the change in accounting estimate regarding revenue recognition on product sales for Trokendi XR from prescriptions filled to shipments to wholesalers. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2015 | |
Subsequent Events | |
Subsequent Events | 18. Subsequent Events Subsequent to December 31, 2015, holders of the Notes converted approximately $2.0 million of the Notes. We issued a total of approximately 0.4 million shares of common stock in conversion of the principal amount of the Notes and accrued interest thereon resulting in a remaining outstanding balance of $6.6 million. As of February 5, 2016, litigation with respect to Oxtellar XR was decided in favor of the Company pending appeal when a federal court ruled that three of our patents were found to be valid, and that Actavis infringed two of these three patents. |
Summary of Significant Accoun27
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2015 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The Company’s consolidated financial statements include the accounts of Supernus Pharmaceuticals, Inc. and Supernus Europe Ltd., collectively referred to herein as “Supernus” or “the Company.” All significant intercompany transactions and balances have been eliminated in consolidation. The Company’s consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP). The Company, which is primarily located in the United States, operates in one operating segment. |
Use of Estimates | Use of Estimates The preparation of the financial statements in accordance with U.S. GAAP requires the Company to make estimates and judgments in certain circumstances that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. In preparing these consolidated financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, future royalty revenue related to Orenitram net product sales, accrued sales deductions, fair value of financial assets and liabilities, derivative liabilities, common stock options, income taxes, preclinical study and clinical trial accruals, and other contingencies. Management bases its estimates on historical experience or on various other assumptions, including information received from its service providers and independent valuation consultants, which it believes to be reasonable under the circumstances. Actual results could differ from these estimates. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all investments in highly liquid financial instruments with an original maturity of three months or less to be cash equivalents. |
Marketable Securities | Marketable Securities Marketable securities consist of investments in U.S. Treasuries Certificate of Deposit, various U.S. governmental agency debt securities, corporate bonds and other fixed income securities. The Company’s investments are classified as available for sale. Such securities are carried at estimated fair value, with any unrealized holding gains or losses reported, net of any tax effects reported, as accumulated other comprehensive income, which is a separate component of stockholders’ equity. Realized gains and losses, and declines in value judged to be other-than-temporary, if any, are included in consolidated results of operations. A decline in the market value of any available for sale security below cost that is deemed to be other-than-temporary results in a reduction in fair value, which is charged to earnings in that period, and a new cost basis for the security is established. Dividend and interest income is recognized when earned. The cost of securities sold is calculated using the specific identification method. The Company places all investments with government, industrial, or financial institutions whose debt is rated as investment grade. The Company classifies all available-for-sale marketable securities with maturities greater than one year from the balance sheet date as non-current assets. The Company established the Supernus Supplemental Executive Retirement Plan (SERP) for the sole purpose of receiving funds for executives from a previous SERP and providing a continuing deferral program under the Supernus SERP. As of December 31, 2015 and 2014, the estimated fair value of the mutual fund investment securities within the SERP was approximately $263,000 and $305,000, respectively. The fair value of these assets is included within other non-current assets on the consolidated balance sheets. A corresponding noncurrent liability is also included in the consolidated balance sheets to reflect the Company’s obligation for the SERP. The Company has not made, and has no plans to make, contributions to the SERP. The securities are restricted in nature and can only be used for purposes of paying benefits under the SERP. |
Accounts Receivable, net | Accounts Receivable, net Accounts receivable are reported on 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. No allowance for uncollectible receivables is recorded at December 31, 2015 or December 31, 2014. The Company recorded an allowance of approximately $3.8 million and $4.1 million for expected sales discounts as of December 31, 2015 and December 31, 2014, respectively. The following table includes those customers that represent more than 10% of total net product sales for 2015 and more than 10% of the accounts receivable balance on the consolidated balance sheet as of December 31, 2015: Percent of Net Percent of Accounts Customer A % % Customer B % % Customer C % % % % |
Concentration of Credit Risk | Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, accounts receivable and marketable securities. The counterparties are various corporations and financial institutions of high credit standing. Substantially all of the Company’s cash and cash equivalents are maintained with well known, U.S. and non U.S. financial institutions, government agencies, and corporations. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and, therefore, management believes they bear minimal risk. |
Inventory | Inventory Inventories, which are recorded at the lower of cost or market, include materials, labor, and other direct and indirect costs and are valued using the first-in, first-out method. The Company capitalizes inventories produced in preparation for commercial launches when it becomes probable that the related product candidates will receive regulatory approval and that the related costs will be recoverable through the commercial sale of the product. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to operations. Repairs and maintenance costs are expensed as incurred. Depreciation and amortization are computed using the straight-line method over the following average useful lives: Computer equipment 3 years Software 3 years Lab equipment and furniture 5 - 10 years Leasehold improvements Shorter of lease term or useful life |
Deferred Legal Fees | Deferred Legal Fees Deferred legal fees have been incurred in connection with legal proceedings related to patents for Oxtellar XR and Trokendi XR (see Note 7). Amortization of the deferred legal fees will begin upon successful outcome of the on-going litigation. Deferred legal fees will be charged to expense in the event of an unsuccessful outcome of the on-going litigation. |
Intangible Assets | Intangible Assets Intangible assets consist primarily of purchased patents and deferred legal fees. Patents are carried at cost less accumulated amortization, which is calculated on a straight-line basis over the estimated useful lives of the patents, generally estimated to be ten years. The carrying value of the patents is assessed for impairment annually during the fourth quarter of each year, or more frequently if impairment indicators exist. There were no indicators of impairment identified at December 31, 2015, 2014 or 2013. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets Long-lived assets consist primarily of purchased patents, deferred legal fees, and property and equipment. The Company assesses the recoverability of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If indications of impairment exist, projected future undiscounted cash flows associated with the asset are compared to the carrying amount to determine whether the asset’s value is recoverable. Evaluating for impairment requires judgment, including the estimation of future cash flows, future growth rates and profitability and the expected life over which cash flows will occur. Changes in the Company’s business strategy or adverse changes in market conditions could impact impairment analyses and require the recognition of an impairment charge equal to the excess of the carrying value of the long-lived assets over its estimated fair value. For the years ended December 31, 2015, 2014, and 2013, the Company determined that there was no impairment of the Company’s long-lived assets. |
Deferred Financing Costs | Deferred Financing Costs Deferred financing costs consist of financing costs incurred by the Company in connection with the closing of the Company’s 7.50% Convertible Senior Secured Notes and Secured Notes Payable (see Note 9). The Company amortizes deferred financing costs over the term of the related debt using the effective interest method. When extinguishing debt, the related deferred financing costs are written off. |
Preclinical Study and Clinical Trial Accruals | Preclinical Study and Clinical Trial Accruals The Company estimates preclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions, investigators, and clinical research organizations (CROs) that conduct these activities on our behalf. In recording service fees, the Company estimates the time period over which the related services will be performed and compares the level of effort expended through the end of each period to the cumulative expenses recorded and payments made for such services and, as appropriate, accrues additional service fees or defers any non-refundable advance payments until the related services are performed. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust its accrual or deferred advance payment accordingly. If the Company later determines that it no longer expects the services associated with a nonrefundable advance payment to be rendered, the advance payment will be charged to expense in the period that such determination is made. |
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. Beginning in the fourth quarter of 2013, the Company began recognizing revenue for Oxtellar XR, net of estimated sales deductions, at the time of shipment to wholesalers. Prior to this time, the Company recognized revenue for Oxtellar XR upon fulfillment of prescriptions, net of all known or estimated sales deductions. Beginning in the second quarter of 2014, the Company began recognizing revenue for Trokendi XR, net of estimated sales deductions, at the time of shipment to wholesalers. Prior to this time, the Company recognized revenue for Trokendi XR upon fulfillment of prescriptions to patients, net of all known or estimated sales deductions. For the year ended December 31, 2015, the revenue for Oxtellar XR and Trokendi XR was recognized contemporaneously upon shipment of finished products to wholesalers, net of allowances for estimated sales deductions and returns. During the year ended December 31, 2015, the Company recorded a $2.9 million reduction to net revenue related to a change in estimate associated with its accrued sales deductions of $26.8 million at December 31, 2015. The change in estimate reflects returns experience associated with our initial launch shipments, which have now passed their expiry dating. Revenue from Product Sales The Company launched Oxtellar XR on February 4, 2013 and launched Trokendi XR on August 26, 2013. During the fourth quarter of 2013, we began to recognize revenue for Oxtellar XR contemporaneously upon shipment of finished product to wholesalers less allowances for estimated sales deductions and, during the second quarter of 2014, we began to recognize revenue for Trokendi XR contemporaneously upon shipment of finished product to wholesalers less allowances for estimated sales deductions. Through December 31, 2013, the Company recorded shipments of Trokendi XR to wholesalers as deferred revenue i.e., sales price net of known sales deductions (e.g. prompt pay discounts and other similar charges defined below). At the time, we lacked the experiential data which would allow us to estimate all remaining sales rebates, allowances and returns. Accordingly, when this data became available to the Company, we moved to contemporaneous revenue recognition in the second quarter of 2014. Royalty Revenue In the third quarter of 2014, the Company received a $30.0 million payment pursuant to a royalty agreement related to the purchase by HC Royalty of certain of the Company’s rights under the agreement with United Therapeutics Corporation related to the commercialization of Orenitram. We have recorded a non-recourse liability related to this transaction and have begun to amortize this amount to recognize royalty revenue as royalties are received by HC Royalty from United Therapeutics. We also recognize non-cash interest expense related to this liability that accrues at an effective interest rate determined based on projections of HC Royalty’s rate of return. We recognized royalty revenue of $3.0 million and $0.6 million for the years ended December 31, 2015 and 2014, respectively. We recognized interest expense of $3.5 million and $0.7 million for the years ended December 31, 2015 and 2014, respectively. 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 healthcare 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 or estimated 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 and expired product six months prior and 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. |
Revenue Recognition of License Revenue | Revenue Recognition of License Revenue License and Collaboration Agreements We have entered into collaboration agreements to have both Oxtellar XR and Trokendi XR commercialized outside of the U.S. These agreements generally include an up-front license fee and ongoing milestone payments upon the achievement of specific events. We believe the milestones meet all of the necessary criteria to be considered substantive and therefore should be recognized as revenue when achieved. For up-front license fees, we have estimated the service period of the contract and are recognizing this payment as revenue on a straight-line basis over the respective service period. 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. Substantive milestone payments are recognized upon achievement of the milestone only if all of the following conditions are met: · the milestone payments are non-refundable; · achievement of the milestone involves a degree of risk and was not reasonably assured at the inception of the arrangement; · substantive effort on the partner’s part is involved in achieving the milestone; and · the amount of the milestone payment is reasonable in relation to the effort expended or the risk associated with achievement of the milestone. Determination as to whether a payment meets the aforementioned conditions involves management’s judgment. If any of these conditions are not met, the resulting payment would not be considered a substantive milestone, and therefore the resulting payment would be considered part of the consideration for the single unit of accounting and amortized over the appropriate period. The Company recorded milestone revenues of $0.8 million and $2.0 million during the years ended December 31, 2015 and 2014, respectively. There was no revenue generated from the achievement of milestones in the year ended December 31, 2013. |
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. |
Research and Development Costs | Research and Development Costs Research and development costs are expensed as incurred. Research and development costs primarily consist of employee-related expenses, including salaries and benefits; share-based compensation expense; expenses incurred under agreements with clinical research organizations (CROs), investigative sites, and consultants that conduct the Company’s clinical trials; the cost of acquiring and manufacturing clinical trial materials; the cost of manufacturing materials used in process validation, to the extent that those materials are manufactured prior to receiving regulatory approval for those products and are not expected to be sold commercially, facilities costs that do not have an alternative future use; related depreciation and other allocated expenses; license fees for and milestone payments related to in-licensed products and technologies; and costs associated with animal testing activities and regulatory approvals. |
Advertising Expense | Advertising Expense The Company records the cost of its advertising efforts when services are performed or goods are delivered. The Company incurred approximately $19.3 million, $14.8 million, and $14.6 million in advertising costs for the years ended December 31, 2015, 2014, and 2013, respectively and are recorded in the sales, general and administrative expense line of the Statement of Operations. |
Share-Based Compensation | Share-Based Compensation Employee share-based compensation is measured based on the estimated fair value on the grant date. The grant date fair value is calculated using the Black-Scholes option-pricing model, which requires the use of subjective assumptions including volatility, expected term, risk-free rate, and the fair value of the underlying common stock. The Company recognizes expense using the straight-line method less estimated forfeitures. The Company records the expense for stock option grants to non-employees based on the estimated fair value of the stock option using the Black-Scholes option-pricing model. The fair value of non-employee awards is re-measured at each reporting period. As a result, stock compensation expense for non-employee awards with vesting is affected by subsequent changes in the fair value of the Company’s common stock. |
Income Taxes | Income Taxes The Company utilizes the asset and 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 November 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”. The standard requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent. ASU 2015-17 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted and the standard may be applied either retrospectively or on a prospective basis to all deferred tax assets and liabilities. We early adopted ASU 2015-17 during our fourth quarter of fiscal year 2015 on a prospective basis. Accordingly, we reclassified the current deferred taxes to noncurrent on our December 31, 2015 Consolidated Balance Sheet, eliminating the presentation of the offsetting $0.2 million current deferred tax asset and non-current deferred tax liability. In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” Under this new guidance, entities that measure inventory using any method other than last-in, first-out or the retail inventory method will be required to measure inventory at the lower of cost and net realizable value. The amendments in this ASU, which should be applied prospectively, are effective for annual and interim periods beginning after December 15, 2016. Early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption of ASU No. 2015-11 on our consolidated financial statements and related disclosures. In April 2015, the FASB issued 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 adopt the amendment early. The adoption of this standard had no impact on the Company’s financial results. 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 has been applied on a retrospective basis and the impact is reflected in the as previously reported column in Note 2. The adoption of ASU No. 2015-03 resulted in a reclassification of deferred financing costs of $724,000 and $104,000 from asset to liability classification on the Company’s consolidated financial statements as of December 31, 2014 and December 31, 2015, respectively. 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 consolidated financial statements. 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 U.S. 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. 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 and has not yet selected a method of adoption. The Company has evaluated all other ASUs issued through the date the consolidated financials were issued and believes that no other ASU will have a material impact on the Company’s consolidated financial statements. |
Restatement of Financial Stat28
Restatement of Financial Statements (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Restatement of Financial Statements | |
Schedule of restatement on the condensed consolidated balance sheet, consolidated statement of operations and consolidated statement of cash flows | Year Ended December 31, 2015 As Previously Restatement Other Reported Adjustments Corrections As Restated Consolidated Statement of Operations Royalty revenue $ — $ $ $ Total revenue Selling, general and administrative ) Total costs and expenses ) Operating income Interest expense — non-recourse liability related to sale of future royalties — ) ) Total other expense ) ) ) Earnings before income taxes ) Income tax expense ) Net income ) Income per common share: Basic ) Year Ended December 31, 2015 As Previously Restatement Other Reported Adjustments Corrections As Restated Consolidated Statements of Cash Flows Net cash provided by operating activities $ $ $ Net cash used in investing activities ) ) ) Net change in cash and cash equivalents ) ) ) As of December 31, 2015 As Previously Restatement Other Reported Adjustments Corrections As Restated Consolidated Balance Sheet Cash and cash equivalents $ $ ) $ Marketable securities Accrued expenses Non-recourse liability related to sale of future royalties — current portion — Total current liabilities Non-recourse liability related to sale of future royalties — long term — Total liabilities Accumulated deficit ) ) ) ) Total stockholders’ equity ) ) Year Ended December 31, 2014 As Previously Restatement Other Reported Adjustments Corrections As Restated Consolidated Statement of Operations Royalty revenue $ — $ $ $ Revenue from royalty agreement ) — Total revenue ) Selling, general and administrative Total costs and expenses Operating income (loss) ) ) ) Interest expense — non-recourse liability related to sale of future royalties — ) ) Total other expense ) ) ) Earnings (loss) before income taxes ) ) ) Income tax expense — Net Income (loss) ) ) ) Income (loss) per common share: Basic ) ) Income (loss) per common share: Diluted ) ) Weighted average number of common shares - Diluted ) Year Ended December 31, 2014 As Previously Restatement Other Reported Adjustments Corrections As Restated Consolidated Statements of Cash Flows Net cash provided by (used in) operating activities $ $ ) $ ) $ ) Net cash used in investing activities ) ) Net cash provided by financing activities As of December 31, 2014 As Previously Restatement Other Reported Adjustments Corrections As Restated Consolidated Balance Sheet Accrued expenses Total current liabilities Non-recourse liability related to sale of future royalties — long term — Total liabilities Additional paid-in capital Accumulated deficit ) ) ) ) Total stockholders’ equity ) ) |
Summary of Significant Accoun29
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Summary of Significant Accounting Policies | |
Schedule of customers that represent more than 10% total revenue | Percent of Net Percent of Accounts Customer A % % Customer B % % Customer C % % % % |
Schedule of average useful lives used to compute depreciation and amortization | Computer equipment 3 years Software 3 years Lab equipment and furniture 5 - 10 years Leasehold improvements Shorter of lease term or useful life |
Fair Value of Financial Instr30
Fair Value of Financial Instruments (Tables) | 12 Months Ended |
Dec. 31, 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 (Restated): Fair Value Measurements at December 31, 2015 Total Carrying Quoted Prices Significant Significant 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 Total Carrying Quoted Prices Significant Significant 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 assumptions used to calculate fair value of make-whole liability | Volatility 45% Stock Price as of December 31, 2015 $13.44 per share Credit Spread 2363 bps Term 1.33 years Dividend Yield 0.0% |
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 December 31, 2015 that are included in the Non-Current Liabilities section of the Consolidated Balance Sheets, in thousands: Year Ended Balance at December 31, 2013 $ Changes in fair value of derivative liabilities included in earnings ) Reduction due to conversion of debt to equity ) Balance at December 31, 2014 Changes in fair value of derivative liabilities included in earnings ) Reduction due to conversion of debt to equity ) Cashless exercise of common stock warrants ) Balance at December 31, 2015 $ |
Schedule of unrestricted marketable securities | Unrestricted marketable securities held by the Company were as follows, in thousands (restated): At December 31, 2015: Available for Sale Amortized Gross Gross Fair Value Corporate debt securities $ ) $ At December 31, 2014: Available for Sale Amortized Gross Gross Fair Value Corporate debt securities $ ) $ |
Schedule of contractual maturities of the unrestricted marketable securities held | The contractual maturities of the unrestricted available for sale marketable securities held by the Company were as follows, in thousands (restated): December 31, Less Than 1 Year $ 1 - 5 years Greater Than 5 Years — Total $ |
Inventories (Tables)
Inventories (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Inventories | |
Schedule of inventories | Inventories consist of the following, in thousands: December 31, December 31, Raw materials $ $ Work in process Finished goods $ $ |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Property and Equipment | |
Schedule of property and equipment | Property and equipment consist of the following, in thousands: December 31, December 31, Computer equipment $ $ Software Lab equipment and furniture Leasehold improvements Construction in progress — Less accumulated depreciation and amortization ) ) $ $ |
Intangible Assets (Tables)
Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 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: December 31, 2015 December 31, 2014 Weighted- Gross Carrying Accumulated Gross Carrying Accumulated Purchased patents $ $ $ $ Capitalized patent defense costs $ $ $ — $ — |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Accrued Expenses | |
Schedule of accrued expenses | Accrued expenses are comprised of the following, in thousands (restated): December 31, December 31, Accrued compensation $ $ Accrued professional fees Accrued clinical trial and clinical supply costs Accrued sales and marketing expenses Accrued product costs Accrued interest expense Other accrued expenses $ $ |
Convertible Senior Secured No35
Convertible Senior Secured Notes (Tables) | 12 Months Ended |
Dec. 31, 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 December 31, 2015, in thousands (Restated): 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 December 31, 2015 carrying value $ |
Share-Based Payments (Tables)
Share-Based Payments (Tables) | 12 Months Ended |
Dec. 31, 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: Year Ended December 31, 2015 2014 2013 Research and development $ $ $ Selling, general and administrative Total $ $ $ |
Schedule of assumptions used in estimation of fair value of each award option on the date of grant using Black-Scholes option-pricing model | Year Ended December 31, 2015 2014 2013 Fair value of common stock $9.13 - $21.21 $7.63 - $10.02 $5.40 - $7.90 Expected volatility 60.9% - 64.6% 64.5% - 68.3% 69.5% - 70.9% Dividend Yield 0% 0% 0% Expected term 6.25 years 6.25 years 6.25 - 9.60 years Risk-free interest rate 1.54% - 1.74% 1.67% - 1.97% 1.20% - 2.94% Expected forfeiture rate 5% 5% 5% |
Summary of stock option and SAR activity | Number of Weighted- Weighted-Average Outstanding, December 31, 2013 $ Granted $ Exercised ) $ Forfeited ) $ Outstanding, December 31, 2014 $ Granted $ Exercised ) $ Forfeited ) $ Outstanding, December 31, 2015 $ As of December 31, 2015: Vested and expected to vest $ Exercisable $ |
Earnings per Share (Tables)
Earnings per Share (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Earnings per Share | |
Schedule of common stock equivalents excluded in the calculation of diluted loss per share | Year Ended December 31, 2015 2014 2013 Shares underlying Convertible Senior Secured Notes — Warrants to purchase common stock Stock options, stock appreciation rights, non-vested stock options and ESPP awards — |
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 years ended December 31, 2015, 2014, and 2013, in thousands, except share and per share amounts: Year ended December 31, 2015 2014 2013 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 debt — — Loss on extinguishment of outstanding debt, as if converted ) — — Total adjustments — — Net income 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 (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Income Taxes | |
Schedule of components of the income tax expense/(benefit) | The components of the income tax expense/ (benefit) for the years ended December 31, 2015, 2014, and 2013 were as follow, in thousands: Year Ended 2015 2014 2013 Current Federal $ $ $ — State — — Deferred Federal — — — State — — — Total $ $ $ — |
Schedule of reconciliation of the expected income tax benefit computed using the federal statutory income tax rate to the entity's effective income tax rate | A reconciliation of the expected income tax expense/(benefit) computed using the U.S. Federal statutory income tax rate to the Company’s effective income tax rate is as follows, in thousands: Year Ended December 31, 2015 2014 2013 Income tax expense/(benefit) computed at U.S. Federal statutory tax rate $ $ ) $ ) Permanent items State income taxes ) ) Change in valuation allowance ) Uncertain income tax position ) Research and development credits ) ) ) Other ) ) Deferred rate change — — Income tax expense (benefit) $ $ $ — |
Schedule of Significant components of the entity's deferred tax assets (liabilities) | The significant components of the Company’s deferred income tax assets (liabilities) were as follow, in thousands: As of December 31, 2015 2014 Deferred tax assets: Net operating loss carryforward $ $ Deferred rent credit Accrued compensation and non-qualified stock options Deferred financing costs Depreciation and amortization Research and development credits Capitalized overhead into inventory (UNICAP §263A) Non-recourse liability related to sale of future royalties Other AMT Credit Valuation allowance ) ) Net deferred tax asset Deferred tax liability: Debt discount on convertible notes ) ) Depreciation ) — Net deferred taxes $ — $ — |
Schedule of reconciliation of the beginning and ending amount of gross unrecognized tax benefits | A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows, in thousands: Year Ended December 31, 2015 2014 2013 Balance as of January 1 $ $ $ Gross (decreases) increases related to prior-year tax positions ) Gross increases related to current-year tax positions Gross decreases related to current-year tax positions ) ) — Change in tax rates ) ) — Balance as of December 31 $ $ $ |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 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 December 31, 2015 are as follows, in thousands: Year ending December 31: 2016 $ 2017 2018 2019 Thereafter $ |
Quarterly Financial Informati40
Quarterly Financial Information (unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Quarterly Financial Information (unaudited) | |
Schedule of quarterly financial information | Quarterly financial information for fiscal 2015 and 2014 are presented in the following table, in thousands, except per share data, unaudited: 1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter 2015 Revenue $ $ $ $ Total costs and expenses Operating income Net income Net income per share, basic Net income per share, diluted 1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter 2014 Revenue $ $ (1) $ $ Total costs and expenses Operating loss ) ) Net loss ) ) Net loss per share, basic ) ) Net loss per share, diluted ) ) (1) The Company’s results for the second quarter of 2014 include the change in accounting estimate regarding revenue recognition on product sales for Trokendi XR from prescriptions filled to shipments to wholesalers. |
Organization and Nature of Op41
Organization and Nature of Operations (Details) | 12 Months Ended |
Dec. 31, 2015item | |
Organization and Nature of Operations | |
Number of proprietary products in clinical development | 2 |
Restatement of Financial Stat42
Restatement of Financial Statements - Consolidated Statement of Operations (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Impact of Restatement on the Condensed Consolidated Financial Statements | |||||||||||
Maturity (in days) | 91 days | ||||||||||
Royalty Revenue | $ 3,038 | $ 633 | |||||||||
Revenue from royalty agreement | $ 30,000 | ||||||||||
Total revenue | 147,465 | 92,678 | $ 12,019 | ||||||||
Selling, general and administrative | 89,063 | 72,612 | 55,590 | ||||||||
Total costs and expenses | $ 35,806 | $ 34,277 | $ 31,834 | $ 24,704 | $ 26,111 | 23,423 | $ 25,919 | $ 22,503 | 126,621 | 97,956 | 73,939 |
Operating income (loss) | 20,844 | (5,278) | (61,920) | ||||||||
Interest expense - non-recourse liability related to sale of future royalties | (3,541) | (658) | |||||||||
Total other expense | (6,234) | (5,017) | (30,353) | ||||||||
Earnings (loss) before income taxes | 14,610 | (10,295) | (92,273) | ||||||||
Income tax expense | 666 | 630 | |||||||||
Net income (loss) | $ 6,853 | $ 3,916 | $ 2,437 | $ 738 | $ 3,787 | $ (2,371) | $ 3,202 | $ (15,543) | $ 13,944 | $ (10,925) | $ (92,273) |
Net income (loss) per share, basic | $ 0.14 | $ 0.08 | $ 0.05 | $ 0.02 | $ 0.09 | $ (0.06) | $ 0.08 | $ (0.38) | $ 0.29 | $ (0.26) | $ (2.90) |
Net income (loss) per share, diluted | $ 0.14 | $ 0.08 | $ 0.04 | $ 0.02 | $ 0.09 | $ (0.06) | $ 0.08 | $ (0.38) | $ 0.28 | $ (0.26) | $ (2.90) |
Weighted average shares outstanding, diluted | 51,160,380 | 42,260,896 | 31,848,299 | ||||||||
Stock Option | Equity Incentive Plan 2012 | |||||||||||
Impact of Restatement on the Condensed Consolidated Financial Statements | |||||||||||
Vesting period | 12 months | ||||||||||
As Previously Reported | |||||||||||
Impact of Restatement on the Condensed Consolidated Financial Statements | |||||||||||
Revenue from royalty agreement | $ 30,000 | ||||||||||
Total revenue | $ 144,427 | 122,045 | |||||||||
Selling, general and administrative | 89,204 | 72,471 | |||||||||
Total costs and expenses | 126,762 | 97,815 | |||||||||
Operating income (loss) | 17,665 | 24,230 | |||||||||
Total other expense | (2,693) | (4,359) | |||||||||
Earnings (loss) before income taxes | 14,972 | 19,871 | |||||||||
Income tax expense | 956 | ||||||||||
Net income (loss) | $ 14,016 | $ 19,871 | |||||||||
Net income (loss) per share, basic | $ 0.30 | $ 0.47 | |||||||||
Net income (loss) per share, diluted | $ 0.32 | ||||||||||
Weighted average shares outstanding, diluted | 50,583,511 | ||||||||||
As Previously Reported | Stock Option | Equity Incentive Plan 2012 | |||||||||||
Impact of Restatement on the Condensed Consolidated Financial Statements | |||||||||||
Vesting period | 4 years | ||||||||||
Restatement Adjustments | |||||||||||
Impact of Restatement on the Condensed Consolidated Financial Statements | |||||||||||
Royalty Revenue | $ 3,038 | $ 633 | |||||||||
Revenue from royalty agreement | (30,000) | ||||||||||
Total revenue | 3,038 | (29,367) | |||||||||
Operating income (loss) | 3,038 | (29,367) | |||||||||
Interest expense - non-recourse liability related to sale of future royalties | (3,541) | (658) | |||||||||
Total other expense | (3,541) | (658) | |||||||||
Earnings (loss) before income taxes | (503) | (30,025) | |||||||||
Net income (loss) | $ (503) | $ (30,025) | |||||||||
Net income (loss) per share, basic | $ (0.01) | $ (0.73) | |||||||||
Net income (loss) per share, diluted | $ (0.58) | ||||||||||
Weighted average shares outstanding, diluted | (8,322,615) | ||||||||||
Other Corrections | |||||||||||
Impact of Restatement on the Condensed Consolidated Financial Statements | |||||||||||
Selling, general and administrative | $ (141) | $ 141 | |||||||||
Total costs and expenses | (141) | 141 | |||||||||
Operating income (loss) | 141 | (141) | |||||||||
Earnings (loss) before income taxes | 141 | (141) | |||||||||
Income tax expense | (290) | 630 | |||||||||
Net income (loss) | $ 431 | $ (771) |
Restatement of Financial Stat43
Restatement of Financial Statements - Consolidated Statement of Cash Flows (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Impact of Restatement on the Condensed Consolidated Financial Statements | |||
Net cash provided by (used in) operating activities | $ 34,524 | $ (24,495) | $ (57,949) |
Net cash used in investing activities | (39,289) | (2,659) | (12,112) |
Net cash provided by financing activities | 1,867 | 30,570 | 62,739 |
Net change in cash and cash equivalents | (2,898) | 3,416 | $ (7,322) |
As Previously Reported | |||
Impact of Restatement on the Condensed Consolidated Financial Statements | |||
Net cash provided by (used in) operating activities | 32,123 | 7,733 | |
Net cash used in investing activities | (36,234) | (4,887) | |
Net cash provided by financing activities | 570 | ||
Net change in cash and cash equivalents | (2,244) | ||
Restatement Adjustments | |||
Impact of Restatement on the Condensed Consolidated Financial Statements | |||
Net cash provided by (used in) operating activities | (30,000) | ||
Net cash provided by financing activities | 30,000 | ||
Other Corrections | |||
Impact of Restatement on the Condensed Consolidated Financial Statements | |||
Net cash provided by (used in) operating activities | 2,401 | (2,228) | |
Net cash used in investing activities | (3,055) | $ 2,228 | |
Net change in cash and cash equivalents | $ (654) |
Restatement of Financial Stat44
Restatement of Financial Statements - Consolidated Balance Sheet (Details) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Impact of Restatement on the Condensed Consolidated Financial Statements | ||||
Cash and cash equivalents | $ 33,498 | $ 36,396 | $ 32,980 | $ 40,302 |
Marketable securities | 28,692 | 37,940 | ||
Accrued expenses | 25,153 | 17,656 | ||
Non-recourse liability related to sale of future royalties - current portion | 497 | |||
Total current liabilities | 56,934 | 28,123 | ||
Non-recourse liability related to sale of future royalties-long term | 30,031 | 30,025 | ||
Total liabilities | 100,619 | 96,085 | ||
Additional Paid in Capital | 263,955 | 230,263 | ||
Accumulated deficit | (175,509) | (189,453) | ||
Total stockholders' equity | 88,007 | 40,699 | $ 33,464 | $ 57,570 |
As Previously Reported | ||||
Impact of Restatement on the Condensed Consolidated Financial Statements | ||||
Cash and cash equivalents | 34,152 | |||
Marketable securities | 28,038 | |||
Accrued expenses | 24,813 | 17,026 | ||
Total current liabilities | 56,097 | 27,493 | ||
Total liabilities | 69,751 | 65,430 | ||
Additional Paid in Capital | 230,122 | |||
Accumulated deficit | (144,641) | (158,657) | ||
Total stockholders' equity | 118,875 | 71,354 | ||
Restatement Adjustments | ||||
Impact of Restatement on the Condensed Consolidated Financial Statements | ||||
Non-recourse liability related to sale of future royalties - current portion | 497 | |||
Total current liabilities | 497 | |||
Non-recourse liability related to sale of future royalties-long term | 30,031 | 30,025 | ||
Total liabilities | 30,528 | 30,025 | ||
Accumulated deficit | (30,528) | (30,025) | ||
Total stockholders' equity | (30,528) | (30,025) | ||
Other Corrections | ||||
Impact of Restatement on the Condensed Consolidated Financial Statements | ||||
Cash and cash equivalents | (654) | |||
Marketable securities | 654 | |||
Accrued expenses | 340 | 630 | ||
Total current liabilities | 340 | 630 | ||
Total liabilities | 340 | 630 | ||
Additional Paid in Capital | 141 | |||
Accumulated deficit | (340) | (771) | ||
Total stockholders' equity | $ (340) | $ (630) |
Summary of Significant Accoun45
Summary of Significant Accounting Policies - Segments (Details) | 12 Months Ended |
Dec. 31, 2015item | |
Basis of Presentation | |
Number of operating segments | 1 |
Summary of Significant Accoun46
Summary of Significant Accounting Policies - SERP (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Supplemental Employee Retirement Plan, Defined Benefit | Other Non-current Assets | ||
Marketable Securities - Restricted | ||
Marketable securities - restricted | $ 263,000 | $ 305,000 |
Summary of Significant Accoun47
Summary of Significant Accounting Policies - Accounts Receivable, net (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Accounts Receivable, net | ||
Allowance for uncollectible receivables | $ 0 | $ 0 |
Allowance for expected sales deductions | $ 3,800,000 | $ 4,100,000 |
Revenues Net | Customer Concentration Risk | ||
Concentration risk percentage | ||
Concentration risk percentage | 96.00% | |
Revenues Net | Customer Concentration Risk | Customer A | ||
Concentration risk percentage | ||
Concentration risk percentage | 26.00% | |
Revenues Net | Customer Concentration Risk | Customer B | ||
Concentration risk percentage | ||
Concentration risk percentage | 32.00% | |
Revenues Net | Customer Concentration Risk | Customer C | ||
Concentration risk percentage | ||
Concentration risk percentage | 38.00% | |
Accounts Receivable | Customer Concentration Risk | ||
Concentration risk percentage | ||
Concentration risk percentage | 97.00% | |
Accounts Receivable | Customer Concentration Risk | Customer A | ||
Concentration risk percentage | ||
Concentration risk percentage | 40.00% | |
Accounts Receivable | Customer Concentration Risk | Customer B | ||
Concentration risk percentage | ||
Concentration risk percentage | 28.00% | |
Accounts Receivable | Customer Concentration Risk | Customer C | ||
Concentration risk percentage | ||
Concentration risk percentage | 29.00% |
Summary of Significant Accoun48
Summary of Significant Accounting Policies - Property and Equipment (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Intangible Assets | |||
Estimated useful lives of the patents | 10 years | ||
Impairment of Long-Lived Assets | |||
Impairment of long-lived assets | $ 0 | $ 0 | $ 0 |
Computer Equipment | |||
Property and equipment | |||
Average useful lives | 3 years | ||
Computer Software, Intangible Asset | |||
Property and equipment | |||
Average useful lives | 3 years | ||
Lab Equipment and Furniture | Minimum | |||
Property and equipment | |||
Average useful lives | 5 years | ||
Lab Equipment and Furniture | Maximum | |||
Property and equipment | |||
Average useful lives | 10 years |
Summary of Significant Accoun49
Summary of Significant Accounting Policies - Revenue Recognition (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||
Sep. 30, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | May 03, 2013 | |
Revenue Recognition | |||||
Reduction in net revenues | $ 147,465 | $ 92,678 | $ 12,019 | ||
Accrued sales deductions | $ 26,794 | 8,461 | |||
Sales return period prior to expiry date | 6 months | ||||
Sales return period subsequent to expiry date | 12 months | ||||
Revenue From Royalty Agreement | $ 30,000 | ||||
Interest expense - non-recourse liability related to sale of future royalties | $ 3,541 | 658 | |||
Royalty Revenue | 3,038 | 633 | |||
Milestone revenues recorded | 800 | 2,000 | 0 | ||
Selling, General and Administrative Expenses | |||||
Advertising Expense | |||||
Advertising costs | $ 19,300 | $ 14,800 | $ 14,600 | ||
Convertible Notes Payable | |||||
Notes payable | |||||
Fixed interest rate (as a percent) | 7.50% | 7.50% | |||
Sales deductions | |||||
Revenue Recognition | |||||
Reduction in net revenues | $ 2,900 | ||||
Accrued sales deductions | $ 26,800 |
Summary of Significant Accoun50
Summary of Significant Accounting Policies - Recently Issued Accounting Pronouncements (Details) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Recently Issued Accounting Pronouncements | ||
Assets | $ 188,626 | $ 136,784 |
Liabilities | 100,619 | 96,085 |
Accounting Standards Update ("ASU") 2015-03 - Simplifying the Presentation of Debt Issuance Costs | Retrospective basis | ||
Recently Issued Accounting Pronouncements | ||
Assets | (104) | (724) |
Liabilities | (104) | $ (724) |
Retrospective early adoption | Accounting Standards Update ("ASU") 2015-17 - Income Taxes: Balance Sheet Classification of Deferred Taxes | ||
Recently Issued Accounting Pronouncements | ||
Current deferred tax asset | (200) | |
Non-current deferred tax liability | $ (200) |
Fair Value of Financial Instr51
Fair Value of Financial Instruments - Carrying Value (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Assets: | ||
Marketable securities | $ 28,692,000 | $ 37,940,000 |
Long term marketable securities | 55,009,000 | 19,816,000 |
Liabilities: | ||
Derivative liabilities | 854,000 | 6,564,000 |
Total Carrying Value | Recurring | ||
Assets: | ||
Cash and cash equivalents | 33,498,000 | 36,396,000 |
Marketable securities | 28,692,000 | 37,940,000 |
Long term marketable securities | 55,009,000 | 19,816,000 |
Marketable securities - restricted (SERP) | 263,000 | 305,000 |
Total assets at fair value | 117,462,000 | 94,457,000 |
Liabilities: | ||
Derivative liabilities | 854,000 | 6,564,000 |
Fair Value, Inputs, Level 1 | Recurring | ||
Assets: | ||
Cash and cash equivalents | 33,498,000 | 36,396,000 |
Marketable securities | 654,000 | |
Total assets at fair value | 34,152,000 | 36,396,000 |
Fair Value, Inputs, Level 2 | Recurring | ||
Assets: | ||
Marketable securities | 28,038,000 | 37,940,000 |
Long term marketable securities | 55,009,000 | 19,816,000 |
Marketable securities - restricted (SERP) | 263,000 | 305,000 |
Total assets at fair value | 83,310,000 | 58,061,000 |
Fair Value, Inputs, Level 3 | Recurring | ||
Liabilities: | ||
Derivative liabilities | 854,000 | $ 6,564,000 |
Warrants outstanding | $ 0 |
Fair Value of Financial Instr52
Fair Value of Financial Instruments - Fair Value Assumptions (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | May 03, 2013 | |
Assumptions used to calculate fair value of interest make-whole liability using Monte-Carlo simulation with a Black-Scholes lattice model | ||
Volatility (as a percent) | 45.00% | |
Stock Price (in dollars per share) | $ 13.44 | |
Credit Spread (as a percent) | 23.63% | |
Term | 1 year 3 months 29 days | |
Dividend Yield (as a percent) | 0.00% | |
Convertible Notes Payable | ||
Assumptions used to calculate fair value of interest make-whole liability using Monte-Carlo simulation with a Black-Scholes lattice model | ||
Interest rate (as a percent) | 7.50% | 7.50% |
Fair Value of Financial Instr53
Fair Value of Financial Instruments - Level 3 (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Warrant and Interest Make-Whole Liability | ||
Carrying value of the convertible notes | $ 7,085 | $ 26,223 |
Face value of the convertible notes | 8,500 | |
Estimated fair value of the convertible notes | 22,600 | |
Fair Value, Inputs, Level 3 | Derivative Financial Instruments, Liabilities | ||
Warrant and Interest Make-Whole Liability | ||
Balance at the beginning of the period | 6,564 | 12,644 |
Changes in fair value of derivative liabilities included in earnings | (193) | (2,809) |
Reduction due to conversion of debt to equity | (4,865) | (3,271) |
Cashless exercise of common stock warrants | (652) | |
Balance at the end of the period | $ 854 | $ 6,564 |
Fair Value of Financial Instr54
Fair Value of Financial Instruments - Unrestricted Marketable Securities (Details) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Fair Value of Financial Instruments | ||
Corporate debt securities, Amortized Cost | $ 84,189 | $ 57,910 |
Corporate debt securities, Gross Unrealized Gains | 5 | 4 |
Corporate debt securities, Gross Unrealized Losses | (493) | (158) |
Corporate debt securities, Fair Value | 83,701 | 57,756 |
Contractual maturities of the unrestricted marketable securities held | ||
Less Than 1 Year | 28,692 | |
1-5 years | 55,009 | |
Corporate debt securities, Fair Value | $ 83,701 | $ 57,756 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Inventories | ||
Raw materials | $ 2,887 | $ 2,491 |
Work in process | 3,946 | 6,328 |
Finished goods | 5,754 | 4,622 |
Total inventories | $ 12,587 | $ 13,441 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Property and equipment | |||
Property and equipment, gross | $ 10,842,000 | $ 8,738,000 | |
Less accumulated depreciation and amortization | (6,968,000) | (6,290,000) | |
Property and equipment, net | 3,874,000 | 2,448,000 | |
Depreciation and amortization expense | 678,000 | 699,000 | $ 512,000 |
Computer Equipment | |||
Property and equipment | |||
Property and equipment, gross | 1,112,000 | 862,000 | |
Computer Software, Intangible Asset | |||
Property and equipment | |||
Property and equipment, gross | 307,000 | 254,000 | |
Lab Equipment and Furniture | |||
Property and equipment | |||
Property and equipment, gross | 5,667,000 | 5,194,000 | |
Leasehold Improvements | |||
Property and equipment | |||
Property and equipment, gross | 2,642,000 | $ 2,428,000 | |
Construction in progress | |||
Property and equipment | |||
Property and equipment, gross | $ 1,114,000 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Finite lived intangible assets disclosures | |||
Weighted-Average Life | 10 years | ||
Additional disclosures | |||
Net book value of intangible assets | $ 976,000 | $ 225,000 | |
Amortization expense | $ 243,000 | 229,000 | $ 229,000 |
Patents | |||
Finite lived intangible assets disclosures | |||
Weighted-Average Life | 10 years | ||
Gross Carrying Amount | $ 2,292,000 | 2,292,000 | |
Accumulated Amortization | $ 2,292,000 | $ 2,067,000 | |
Patent Defense Costs | |||
Finite lived intangible assets disclosures | |||
Weighted-Average Life | 9 years 6 months | ||
Gross Carrying Amount | $ 994,000 | ||
Accumulated Amortization | $ 18,000 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Accrued Expenses | ||
Accrued compensation | $ 7,519 | $ 5,784 |
Accrued professional fees | 10,057 | 2,049 |
Accrued clinical trial and clinical supply costs | 3,677 | 2,942 |
Accrued sales and marketing expenses | 434 | 1,017 |
Accrued product costs | 113 | 3,014 |
Accrued interest expense | 295 | 639 |
Other accrued expenses | 3,058 | 2,211 |
Total | $ 25,153 | $ 17,656 |
Convertible Senior Secured No59
Convertible Senior Secured Notes (Details) | May 03, 2013USD ($) | May 31, 2013USD ($) | Dec. 31, 2015USD ($)item$ / sharesshares | Dec. 31, 2014USD ($)shares | Dec. 31, 2013USD ($)shares | Dec. 31, 2014USD ($) | Dec. 31, 2015USD ($)$ / sharesshares |
Notes payable | |||||||
Amount issued | $ 8,500,000 | $ 8,500,000 | |||||
Proceeds from convertible debt issuance | $ 90,000,000 | ||||||
Details of Notes reflected in balance sheet | |||||||
Initial value of interest make-whole derivative reported as debt discount | (9,270,000) | ||||||
Amortization of deferred financing costs and debt discount | 748,000 | $ 2,090,000 | 3,033,000 | ||||
Remaining outstanding balance | 7,085,000 | 26,223,000 | $ 26,223,000 | 7,085,000 | |||
Loss on extinguishment of debt | 2,338,000 | 2,592,000 | $ 9,550,000 | ||||
Occurrence of fundamental change | |||||||
Notes payable | |||||||
Conversion ratio, principal amount | $ 1,000 | $ 1,000 | |||||
Required notice period for notification of fundamental change | 1 day | ||||||
Redemption price (as a percent) | 100.00% | ||||||
Occurrence of fundamental change | Minimum | |||||||
Notes payable | |||||||
Period from notice date within which note holders can exercise their right to exchange the notes | 20 days | ||||||
Occurrence of fundamental change | Maximum | |||||||
Notes payable | |||||||
Period from notice date within which note holders can exercise their right to exchange the notes | 35 days | ||||||
Occurrence of make-whole fundamental change | |||||||
Notes payable | |||||||
Required notice period for notification of fundamental change | 50 days | ||||||
Company redeems Notes on or after May 1, 2017 | |||||||
Notes payable | |||||||
Threshold trading days (whether or not consecutive) | item | 20 | ||||||
Consecutive trading day period | 30 days | ||||||
Redemption price (as a percent) | 100.00% | ||||||
Threshold percentage of common stock price to determine eligibility of conversion | 140.00% | ||||||
Convertible Notes Payable | |||||||
Notes payable | |||||||
Gross proceeds | 90,000,000 | ||||||
Amount issued | $ 90,000,000 | ||||||
Fixed interest rate (as a percent) | 7.50% | 7.50% | 7.50% | ||||
Amount of underwriters' fee | $ 3,000,000 | ||||||
Offering expenses | 3,500,000 | ||||||
Proceeds from convertible debt issuance | $ 86,500,000 | ||||||
Minimum percentage of debt holder's consent require to transfer property collateral for notes | 66.67% | ||||||
Conversion ratio, principal amount | $ 1,000 | $ 1,000 | |||||
Conversion rate for the Notes (in shares) | shares | 188.7059 | ||||||
Conversion price, per share of Common Stock | $ / shares | $ 5.30 | $ 5.30 | |||||
Details of Notes reflected in balance sheet | |||||||
Gross proceeds | 90,000,000 | ||||||
Initial value of interest make-whole derivative reported as debt discount | (9,270,000) | ||||||
Conversion option reported as debt discount and APIC | $ 900,000 | (22,336,000) | |||||
Conversion of debt to equity - principal | $ (27,522,000) | (13,400,000) | (53,941,000) | $ (81,500,000) | |||
Conversion of debt to equity - accretion of debt discount | 7,077,000 | 17,926,000 | 17,926,000 | 7,077,000 | |||
Amortization of deferred financing costs and debt discount | 1,307,000 | 3,844,000 | |||||
Remaining outstanding balance | 7,085,000 | 26,223,000 | 26,223,000 | 7,085,000 | |||
Unamortized debt issuance costs | 2,600,000 | 100,000 | 100,000 | ||||
Deferred financing costs, current | 30,000 | 30,000 | |||||
Deferred financing costs, long-term | 70,000 | 70,000 | |||||
Principal amount of the Notes converted | $ 27,522,000 | $ 13,400,000 | $ 53,941,000 | $ 81,500,000 | |||
Shares of common stock issued in conversion of Notes | shares | 5,200,000 | 2,500,000 | 15,372,477 | ||||
Shares of common stock issued in settlement of the interest make-whole provision | shares | 500,000 | 400,000 | 2,195,904 | ||||
Loss on extinguishment of debt | $ 2,300,000 | $ 2,600,000 | |||||
Convertible Notes Payable | Company obtains stockholder approval prior to day before November 1, 2018 | |||||||
Notes payable | |||||||
Conversion ratio, principal amount | $ 1,000 | $ 1,000 | |||||
Threshold trading days (whether or not consecutive) | item | 20 | ||||||
Consecutive trading day period | 30 days | ||||||
Number of trading days prior to a conversion date within which threshold trading days should complete | item | 5 | ||||||
Threshold trading days period prior to a conversion date during which principal amount of notes for such trading day was less than 98% of the product of the last reported sale price of common stock | item | 5 | ||||||
Consecutive trading day period prior to a conversion date during which principal amount of notes for such trading day was less than 98% of the product of the last reported sale price of common stock | 5 days | ||||||
Maximum ratio of trading price for each day in measurement period to last reported sales price of Company's stock on each day of measurement period (as a percent) | 98.00% | ||||||
Convertible Notes Payable | Company calls Notes for redemption prior to day before redemption date and Note holder converts on or after November 1, 2018 | |||||||
Notes payable | |||||||
Conversion ratio, principal amount | $ 1,000 | 1,000 | |||||
Convertible Notes Payable | On or after November 1, 2013, Company makes interest make-whole payments | |||||||
Notes payable | |||||||
Conversion ratio, principal amount | $ 1,000 | $ 1,000 | |||||
Threshold trading days (whether or not consecutive) | item | 20 | ||||||
Consecutive trading day period | 30 days | ||||||
Number of trading days prior to a conversion date within which threshold trading days should complete | item | 5 | ||||||
Discount rate (as a percent) | 2.00% | ||||||
Stock value as percentage of simple average of the daily volume-weighted average price if the company elects to pay an interest make-whole payment in common stock | 95.00% | 95.00% | |||||
Number of trading days ending on and including the trading day immediately preceding the conversion date use to determine daily volume weighted average price | item | 10 | ||||||
Convertible Notes Payable | On or after November 1, 2013, Company makes interest make-whole payments | Maximum | |||||||
Notes payable | |||||||
Conversion rate for the Notes (in shares) | shares | 221.7294 | ||||||
Secured Debt | |||||||
Notes payable | |||||||
Repayment of debt | $ 19,600,000 | $ 19,600,000 | |||||
Details of Notes reflected in balance sheet | |||||||
Loss on extinguishment of debt | $ 1,200,000 |
Convertible Senior Secured No60
Convertible Senior Secured Notes - Term Loans (Details) - USD ($) $ in Thousands | May 03, 2013 | Dec. 30, 2011 | Jan. 26, 2011 | May 31, 2013 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2011 |
Notes payable | ||||||||
Loss on extinguishment of debt | $ 2,338 | $ 2,592 | $ 9,550 | |||||
Secured Debt | ||||||||
Notes payable | ||||||||
Aggregate amount | $ 30,000 | |||||||
Repayment of debt | $ 19,600 | $ 19,600 | ||||||
Loss on extinguishment of debt | $ 1,200 | |||||||
Initial term loan facility | ||||||||
Notes payable | ||||||||
Drawdown under the secured credit facility | $ 15,000 | |||||||
Additional term loan facility | ||||||||
Notes payable | ||||||||
Drawdown under the secured credit facility | $ 15,000 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) $ / shares in Units, $ in Thousands | Dec. 05, 2012USD ($)$ / sharesshares | May 01, 2012USD ($)$ / sharesshares | Jan. 31, 2013$ / sharesshares | Dec. 31, 2015USD ($)itemshares | Dec. 31, 2014USD ($)shares | Dec. 31, 2013USD ($) | Dec. 31, 2014USD ($) | Dec. 31, 2015USD ($)itemshares |
Stockholders' equity | ||||||||
Expenses incurred in connection with offering | $ 869 | |||||||
Gross cash proceeds from sale of common stock in a follow-on offering | $ 1,867 | $ 571 | $ 2,437 | |||||
Convertible Notes Payable | ||||||||
Stockholders' equity | ||||||||
Shares of common stock issued in conversion of Notes | shares | 5,200,000 | 2,500,000 | 15,372,477 | |||||
Principal amount of the Notes converted | $ 27,522 | $ 13,400 | $ 53,941 | $ 81,500 | ||||
Shares of common stock issued in settlement of the interest make-whole provision | shares | 500,000 | 400,000 | 2,195,904 | |||||
Common Stock | ||||||||
Stockholders' equity | ||||||||
Number of votes to which holders of common shares are entitled for each share held | item | 1 | 1 | ||||||
Number of shares sold | shares | 6,000,000 | 10,000,000 | ||||||
Selling price (in dollars per share) | $ / shares | $ 8 | $ 5 | $ 8 | |||||
Expenses incurred in connection with offering | $ 3,300 | $ 4,700 | ||||||
Shares of common stock sold upon exercise of full amount of over-allotment option by the underwriters | shares | 449,250 | 239,432 | ||||||
Gross proceeds from issuance of common stock | $ 52,300 | |||||||
Net cash proceeds from sale of common stock | $ 47,600 | |||||||
Gross cash proceeds from sale of common stock in a follow-on offering | 49,900 | |||||||
Net cash proceeds from sale of common stock in a follow-on offering | $ 46,600 |
Share-Based Payments - 2012 Pla
Share-Based Payments - 2012 Plan (Details) | 12 Months Ended |
Dec. 31, 2015itemshares | |
Stock Option | Directors | |
Share-based payments | |
Vesting period | 1 year |
Equity Incentive Plan 2012 | |
Share-based payments | |
Maximum number of shares of common stock provided for issuance | shares | 4,000,000 |
Equity Incentive Plan 2012 | 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 | item | 4 |
Contractual term | 10 years |
Vesting period | 12 months |
Share-Based Payments - Share-ba
Share-Based Payments - Share-based Compensation Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Share-based Payments | |||
Share-based compensation recognized | $ 4,090 | $ 2,857 | $ 1,913 |
Research and Development Expense | |||
Share-based Payments | |||
Share-based compensation recognized | 874 | 728 | 493 |
Selling, General and Administrative Expenses | |||
Share-based Payments | |||
Share-based compensation recognized | $ 3,216 | $ 2,129 | $ 1,420 |
Share-Based Payments - Activity
Share-Based Payments - Activity (Details) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Assumptions used in estimating the fair value of each option award using the Black-Scholes option-pricing model | |||
Fair value of common stock (in dollars per share) | $ 13.44 | ||
Stock Option Stock Appreciation Rights | |||
Number of Options | |||
Outstanding at the beginning of the period (in shares) | 2,080,749 | 1,463,043 | |
Granted (in shares) | 971,500 | 686,235 | |
Exercised (in shares) | (205,640) | (17,627) | |
Forfeited (in share) | (147,602) | (50,902) | |
Outstanding at the end of the period (in shares) | 2,699,007 | 2,080,749 | 1,463,043 |
Vested and expected to vest (in shares) | 2,654,381 | ||
Exercisable (in shares) | 901,672 | ||
Weighted-Average Exercise Price | |||
Outstanding at the beginning of the period (in dollars per share) | $ 7.93 | $ 7.27 | |
Granted (in dollars per share) | 10.12 | 9.20 | |
Exercised (in dollars per share) | 4.56 | 3.08 | |
Forfeited (in dollars per share) | 8.60 | 7.79 | |
Outstanding at the end of the period (in dollars per share) | 8.94 | $ 7.93 | $ 7.27 |
Vested and expected to vest (in dollars per share) | 8.93 | ||
Exercisable (in dollars per share) | $ 7.95 | ||
Stock Option | |||
Assumptions used in estimating the fair value of each option award using the Black-Scholes option-pricing model | |||
Expected volatility, minimum (as a percent) | 60.90% | 64.50% | 69.50% |
Expected volatility, maximum (as a percent) | 64.60% | 68.30% | 70.90% |
Dividend Yield (as a percent) | 0.00% | 0.00% | 0.00% |
Expected term | 6 years 3 months | 6 years 3 months | |
Risk-free interest rate, minimum (as a percent) | 1.54% | 1.67% | 1.20% |
Risk-free interest rate, maximum (as a percent) | 1.74% | 1.97% | 2.94% |
Expected forfeiture rate (as a percent) | 5.00% | 5.00% | |
Weighted-Average Remaining Contractual Term | |||
Outstanding at the end of the period | 7 years 11 months 1 day | 8 years 15 days | 8 years 6 months 4 days |
Vested and expected to vest | 7 years 10 months 24 days | ||
Exercisable | 6 years 10 months 10 days | ||
Share-based payments, additional disclosure | |||
Aggregate intrinsic value of options outstanding | $ 12.6 | $ 2 | $ 1.4 |
Aggregate intrinsic value of options vested and expected to vest | 12.4 | 2 | 1.4 |
Aggregate intrinsic value of options exercisable | $ 5 | $ 1.5 | $ 1 |
Weighted-average, grant-date fair value of options granted (in dollars per share) | $ 6.05 | $ 5.79 | $ 4.98 |
Total fair value of the common stock vested | $ 2.6 | $ 1.9 | $ 0.5 |
Total intrinsic value of options exercised | 1.6 | 0.1 | $ 0.4 |
Total unrecognized compensation expense, net of estimated forfeitures | $ 7.2 | $ 5.9 | |
Weighted-average period over which total unrecognized compensation expense is expected to be recognized | 2 years 6 months 15 days | 2 years 6 months 22 days | |
Stock Option | Minimum | |||
Assumptions used in estimating the fair value of each option award using the Black-Scholes option-pricing model | |||
Fair value of common stock (in dollars per share) | $ 9.13 | $ 7.63 | $ 5.40 |
Expected term | 6 years 3 months | ||
Expected forfeiture rate (as a percent) | 5.00% | ||
Stock Option | Maximum | |||
Assumptions used in estimating the fair value of each option award using the Black-Scholes option-pricing model | |||
Fair value of common stock (in dollars per share) | $ 21.21 | $ 10.02 | $ 7.90 |
Expected term | 9 years 7 months 6 days |
Earnings per Share (Details)
Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Numerator, in thousands | |||||||||||
Net income (loss) used for calculation of basic EPS | $ 13,944 | $ (10,925) | $ (92,273) | ||||||||
Interest expense on convertible debt | 1,229 | ||||||||||
Change in fair value of derivative liabilities | (589) | ||||||||||
Loss on extinguishment of debt | 2,337 | ||||||||||
Loss on extinguishment of outstanding debt, as if converted | (2,494) | ||||||||||
Total adjustments | 483 | ||||||||||
Net income used for calculation of diluted EPS | $ 14,427 | $ (10,925) | $ (92,273) | ||||||||
Denominator | |||||||||||
Weighted average shares outstanding, basic | 47,485,258 | 42,260,896 | 31,848,299 | ||||||||
Effect of dilutive potential common shares | |||||||||||
Shares underlying Convertible Senior Secured Notes | 2,459,009 | ||||||||||
Shares issuable to settle interest make-whole derivatives | 804,507 | ||||||||||
Stock options, stock appreciation rights, and non-vested stock options | 411,606 | ||||||||||
Total potential dilutive common shares | 3,675,122 | ||||||||||
Weighted average shares outstanding, diluted | 51,160,380 | 42,260,896 | 31,848,299 | ||||||||
Net income (loss) per share, basic | $ 0.14 | $ 0.08 | $ 0.05 | $ 0.02 | $ 0.09 | $ (0.06) | $ 0.08 | $ (0.38) | $ 0.29 | $ (0.26) | $ (2.90) |
Net income (loss) per share, diluted | $ 0.14 | $ 0.08 | $ 0.04 | $ 0.02 | $ 0.09 | $ (0.06) | $ 0.08 | $ (0.38) | $ 0.28 | $ (0.26) | $ (2.90) |
Convertible Notes Payable | |||||||||||
Loss Per Share | |||||||||||
Common stock equivalents excluded in the calculation of diluted loss per share | 7,995,340 | 6,219,782 | |||||||||
Warrant | |||||||||||
Loss Per Share | |||||||||||
Common stock equivalents excluded in the calculation of diluted loss per share | 20,957 | 20,499 | 13,388 | ||||||||
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 | 306,776 | 151,737 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Current | |||
Federal | $ 624 | $ 630 | |
State | 42 | ||
Income tax expense (benefit) | 666 | 630 | |
Reconciliation of the expected income tax benefit computed using the federal statutory income tax rate to the Company's effective income tax rate | |||
Income tax expense/(benefit) computed at U.S federal statutory tax rate | 5,114 | (3,603) | $ (32,286) |
Permanent items | 601 | 610 | 340 |
State income taxes | 42 | (245) | (4,772) |
Change in valuation allowance | (4,705) | 4,413 | 31,526 |
Uncertain income tax position | 533 | (329) | 5,411 |
Research and development credits | (979) | (535) | (156) |
Other | 60 | (125) | (63) |
Deferred rate change | 444 | ||
Income tax expense (benefit) | 666 | 630 | |
Research and development credit carryforwards | 5,500 | ||
Available NOL's | 18,200 | ||
Available from 2015 to 2019 | 150,700 | ||
Research and development credit carryforward available in 2020 to 2021 | 5,500 | ||
Federal income taxes paid | 0 | 0 | 0 |
Accrued penalties related to uncertain tax positions | 100 | ||
Deferred tax assets: | |||
Net operating loss carryforward | 34,610 | 42,715 | |
Deferred rent credit | 532 | 505 | |
Accrued compensation and non-qualified stock options | 5,886 | 3,441 | |
Deferred financing costs | 187 | 244 | |
Depreciation and amortization | 290 | 473 | |
Research and development credits | 5,529 | 4,725 | |
Capitalized overhead into inventory (UNICAP 263A) | 543 | 674 | |
Non-recourse liability related to sale of future royalties | 11,526 | 11,368 | |
Other | 498 | 552 | |
AMT Credit | 1,108 | 630 | |
Valuation allowance | (60,090) | (61,877) | |
Net deferred tax asset | 619 | 3,450 | |
Deferred tax liability: | |||
Debt discount on convertible notes | (509) | (3,450) | |
Depreciation | (110) | ||
Net change in total valuation allowance | 1,800 | ||
Reconciliation of the beginning and ending amount of gross unrecognized tax benefits | |||
Balance at the beginning of the period | 8,964 | 9,828 | 688 |
Gross increases related to prior-year tax positions | 18 | 23 | |
Gross (decreases) increases related to prior-year tax positions | (5) | ||
Gross increases related to current-year tax positions | 646 | 710 | 9,117 |
Gross decreases related to current-year tax positions | (243) | (1,057) | |
Change in tax rates | (21) | (535) | |
Balance at the end of the period | 9,341 | 8,964 | $ 9,828 |
Income tax expense | 666 | $ 630 | |
Minimum | |||
Reconciliation of the expected income tax benefit computed using the federal statutory income tax rate to the Company's effective income tax rate | |||
Available NOL's utilized per year in future years | 7,800 | ||
Maximum | |||
Reconciliation of the expected income tax benefit computed using the federal statutory income tax rate to the Company's effective income tax rate | |||
Available NOL's utilized per year in future years | 20,300 | ||
U.S. Federal | |||
Reconciliation of the expected income tax benefit computed using the federal statutory income tax rate to the Company's effective income tax rate | |||
NOL carryforwards | 91,800 | ||
NOL carryforwards after tax effect | 31,600 | ||
State | |||
Reconciliation of the expected income tax benefit computed using the federal statutory income tax rate to the Company's effective income tax rate | |||
NOL carryforwards | 58,900 | ||
NOL carryforwards after tax effect | $ 3,200 |
Commitments and Contingencies67
Commitments and Contingencies (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
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 | $ 500 |
Amount available for tenant improvements | 500 | ||
Rent expense | 2,600 | $ 2,300 | $ 1,600 |
Future minimum lease payments under non-cancelable operating leases | |||
2,016 | 1,430 | ||
2,017 | 1,290 | ||
2,018 | 1,314 | ||
2,019 | 1,341 | ||
Thereafter | 454 | ||
Total | $ 5,829 |
Employee Benefit Plan (Details)
Employee Benefit Plan (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Employee Benefit Plan | |||
Minimum age requirement for employees to participate in the plan | 21 years | ||
Maximum contribution by employee (as a percent) | 90.00% | ||
Vesting percentage of contributions by employee to the 401(k) Plan | 100.00% | ||
Employer match of employee contributions on the first level of salary deferral (as a percent) | 100.00% | ||
Percentage of eligible compensation, first level, matched by employer | 3.00% | ||
Employer match of employee contributions on the second level of salary deferral (as a percent) | 50.00% | ||
Percentage of eligible compensation, second level, partially matched by employer | 2.00% | ||
Maximum percentage of participating employee annual compensation that the company may elect to make a discretionary contribute towards | 60.00% | ||
Company's contribution to the 401(k) Plan | $ 1.4 | $ 1.1 | $ 0.6 |
Collaboration Agreements (Detai
Collaboration Agreements (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||
Sep. 30, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Collaboration agreement | ||||
Milestone revenue generated | $ 0.8 | $ 2 | $ 0 | |
Revenue From Royalty Agreement | $ 30 | |||
Collaborative Arrangement | United Therapeutics | ||||
Collaboration agreement | ||||
Milestone revenue generated | $ 2 | |||
Revenue From Royalty Agreement | $ 30 |
Quarterly Financial Informati70
Quarterly Financial Information (unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Quarterly Financial Information (unaudited) | |||||||||||
Revenue | $ 43,687 | $ 39,362 | $ 35,678 | $ 28,738 | $ 31,235 | $ 22,687 | $ 29,675 | $ 9,081 | $ 143,526 | $ 89,571 | $ 11,552 |
Total costs and expenses | 35,806 | 34,277 | 31,834 | 24,704 | 26,111 | 23,423 | 25,919 | 22,503 | 126,621 | 97,956 | 73,939 |
Operating income (loss) | 7,881 | 5,085 | 3,844 | 4,034 | 5,124 | (736) | 3,756 | (13,422) | |||
Net income (loss) | $ 6,853 | $ 3,916 | $ 2,437 | $ 738 | $ 3,787 | $ (2,371) | $ 3,202 | $ (15,543) | $ 13,944 | $ (10,925) | $ (92,273) |
Net income (loss) per share, basic | $ 0.14 | $ 0.08 | $ 0.05 | $ 0.02 | $ 0.09 | $ (0.06) | $ 0.08 | $ (0.38) | $ 0.29 | $ (0.26) | $ (2.90) |
Net income (loss) per share, diluted | $ 0.14 | $ 0.08 | $ 0.04 | $ 0.02 | $ 0.09 | $ (0.06) | $ 0.08 | $ (0.38) | $ 0.28 | $ (0.26) | $ (2.90) |
Subsequent Events (Details)
Subsequent Events (Details) $ in Thousands | Feb. 05, 2016patent | Mar. 07, 2016USD ($)shares | Dec. 31, 2015USD ($)shares | Dec. 31, 2014USD ($)shares | Dec. 31, 2014USD ($) | Dec. 31, 2015USD ($)shares |
Subsequent events | ||||||
Remaining outstanding balance | $ 7,085 | $ 26,223 | $ 26,223 | $ 7,085 | ||
Convertible Notes Payable | ||||||
Subsequent events | ||||||
Principal amount of the Notes converted | $ 27,522 | $ 13,400 | 53,941 | $ 81,500 | ||
Shares of common stock issued in conversion of Notes and accrued interest thereon | shares | 5,200,000 | 2,500,000 | 15,372,477 | |||
Remaining outstanding balance | $ 7,085 | $ 26,223 | $ 26,223 | $ 7,085 | ||
Subsequent Event | Oxtellar XR Litigation | ||||||
Subsequent events | ||||||
Number of patents found infringed upon | patent | 2 | |||||
Number of patents allegedly infringed upon | patent | 3 | |||||
Subsequent Event | Convertible Notes Payable | ||||||
Subsequent events | ||||||
Principal amount of the Notes converted | $ 2,000 | |||||
Shares of common stock issued in conversion of Notes and accrued interest thereon | shares | 400,000 | |||||
Remaining outstanding balance | $ 6,600 |