Cover Page
Cover Page - shares | 3 Months Ended | |
Mar. 31, 2020 | Apr. 29, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2020 | |
Document Transition Report | false | |
Entity File Number | 001-35518 | |
Entity Registrant Name | SUPERNUS PHARMACEUTICALS, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 20-2590184 | |
Entity Address, Address Line One | 9715 Key West Avenue | |
Entity Address, City or Town | Rockville | |
Entity Address, State or Province | MD | |
Entity Address, Postal Zip Code | 20850 | |
City Area Code | 301 | |
Local Phone Number | 838-2500 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Title of 12(b) Security | Common Stock, $0.001 par value per share | |
Entity Common Stock, Shares Outstanding | 52,538,659 | |
Trading Symbol | SUPN | |
Security Exchange Name | NASDAQ | |
Entity Central Index Key | 0001356576 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets | ||
Cash and cash equivalents | $ 225,767 | $ 181,381 |
Marketable securities | 175,104 | 165,692 |
Accounts receivable, net | 119,195 | 87,332 |
Inventories, net | 24,418 | 26,628 |
Prepaid expenses and other current assets | 12,564 | 11,611 |
Total current assets | 557,048 | 472,644 |
Long term marketable securities | 534,712 | 591,773 |
Property and equipment, net | 18,011 | 17,068 |
Intangible assets, net | 23,579 | 24,840 |
Lease assets | 21,911 | 21,279 |
Deferred income taxes | 34,067 | 32,063 |
Other assets | 538 | 615 |
Total assets | 1,189,866 | 1,160,282 |
Current liabilities | ||
Accounts payable | 3,124 | 10,141 |
Accrued product returns and rebates | 119,453 | 107,629 |
Accrued expenses and other current liabilities | 33,003 | 37,130 |
Income taxes payable | 9,097 | 2,443 |
Nonrecourse liability related to sale of future royalties, current portion | 3,658 | 3,244 |
Total current liabilities | 168,335 | 160,587 |
Convertible notes, net | 349,232 | 345,170 |
Nonrecourse liability related to sale of future royalties, long term | 18,369 | 19,248 |
Lease liabilities, long term | 30,804 | 30,440 |
Other liabilities | 9,743 | 9,409 |
Total liabilities | 576,483 | 564,854 |
Stockholders’ equity | ||
Common stock, $0.001 par value; 130,000,000 shares authorized; 52,537,159 and 52,533,348 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively | 53 | 53 |
Additional paid-in capital | 392,430 | 388,410 |
Accumulated other comprehensive earnings (loss), net of tax | (166) | 7,417 |
Retained earnings | 221,066 | 199,548 |
Total stockholders’ equity | 613,383 | 595,428 |
Total liabilities and stockholders’ equity | $ 1,189,866 | $ 1,160,282 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock shares authorized (in shares) | 130,000,000 | 130,000,000 |
Common stock shares issued (in shares) | 52,537,159 | 52,533,348 |
Common stock shares outstanding (in shares) | 52,537,159 | 52,533,348 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Earnings - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Revenues | ||
Total revenues | $ 94,976 | $ 85,474 |
Costs and expenses | ||
Cost of goods sold | 4,152 | 3,684 |
Research and development | 18,937 | 15,394 |
Selling, general and administrative | 42,875 | 40,968 |
Total costs and expenses | 65,964 | 60,046 |
Operating earnings | 29,012 | 25,428 |
Other income (expense) | ||
Interest expense | (5,755) | (5,870) |
Interest income, net | 5,777 | 4,681 |
Total other income (expense) | 22 | (1,189) |
Earnings before income taxes | 29,034 | 24,239 |
Income tax expense | 7,516 | 5,899 |
Net earnings | $ 21,518 | $ 18,340 |
Earnings per share | ||
Basic (in dollars per share) | $ 0.41 | $ 0.35 |
Diluted (in dollars per share) | $ 0.40 | $ 0.34 |
Weighted-average shares outstanding | ||
Basic (in shares) | 52,534,787 | 52,336,443 |
Diluted (in shares) | 53,581,051 | 53,985,385 |
Net product sales | ||
Revenues | ||
Total revenues | $ 92,490 | $ 83,099 |
Royalty revenues | ||
Revenues | ||
Total revenues | $ 2,486 | $ 2,375 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Earnings - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Statement of Comprehensive Income [Abstract] | ||
Net earnings | $ 21,518 | $ 18,340 |
Other comprehensive (loss) earnings | ||
Unrealized (loss) gain on marketable securities, net of tax | (7,583) | 4,585 |
Other comprehensive (loss) earnings | (7,583) | 4,585 |
Comprehensive earnings | $ 13,935 | $ 22,925 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Changes in Stockholder's Equity - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Earnings (Loss) | Retained Earnings |
Balance (in shares) at Dec. 31, 2018 | 52,316,583 | ||||
Balance at Dec. 31, 2018 | $ 453,023 | $ 52 | $ 369,637 | $ (3,158) | $ 86,492 |
Increase (Decrease) in Stockholders' Equity | |||||
Share-based compensation | 3,287 | 3,287 | |||
Exercise of stock options (in shares) | 57,665 | ||||
Exercise of stock options | 783 | 783 | |||
Net earnings | 18,340 | 18,340 | |||
Unrealized (loss) gain on marketable securities, net of tax | 4,585 | 4,585 | |||
Balance (in shares) at Mar. 31, 2019 | 52,374,248 | ||||
Balance at Mar. 31, 2019 | 480,018 | $ 52 | 373,707 | 1,427 | 104,832 |
Balance (in shares) at Dec. 31, 2019 | 52,533,348 | ||||
Balance at Dec. 31, 2019 | 595,428 | $ 53 | 388,410 | 7,417 | 199,548 |
Increase (Decrease) in Stockholders' Equity | |||||
Share-based compensation | 3,988 | 3,988 | |||
Exercise of stock options (in shares) | 3,811 | ||||
Exercise of stock options | 32 | 32 | |||
Net earnings | 21,518 | 21,518 | |||
Unrealized (loss) gain on marketable securities, net of tax | (7,583) | (7,583) | |||
Balance (in shares) at Mar. 31, 2020 | 52,537,159 | ||||
Balance at Mar. 31, 2020 | $ 613,383 | $ 53 | $ 392,430 | $ (166) | $ 221,066 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash flows from operating activities | ||
Net earnings | $ 21,518 | $ 18,340 |
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||
Share-based compensation expense | 3,988 | 3,287 |
Depreciation and amortization | 1,732 | 1,679 |
Amortization of premium/discount on marketable securities | (451) | (1,102) |
Amortization of deferred financing costs and debt discount | 4,061 | 3,848 |
Noncash interest expense | 1,366 | 1,437 |
Noncash royalty revenue | (1,567) | (1,576) |
Noncash operating lease cost | 991 | 879 |
Deferred income tax benefit | 538 | 279 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (31,823) | 23,013 |
Inventories | 2,210 | (859) |
Prepaid expenses and other current assets | (454) | (1,799) |
Other noncurrent assets | 0 | (196) |
Accounts payable | (7,017) | 4,045 |
Accrued product returns and rebates | 11,824 | (18,863) |
Accrued expenses and other current liabilities | (3,634) | (3,177) |
Income taxes payable | 6,654 | 4,856 |
Other liabilities | (1,020) | (1,098) |
Net cash provided by operating activities | 8,916 | 32,993 |
Cash flows from investing activities | ||
Purchases of marketable securities | (15,382) | (150,167) |
Sales and maturities of marketable securities | 53,357 | 47,143 |
Purchases of property and equipment | (2,537) | (221) |
Deferred legal fees | 0 | (1) |
Net cash provided by (used in) investing activities | 35,438 | (103,246) |
Cash flows from financing activities | ||
Proceeds from issuance of common stock | 32 | 783 |
Net cash provided by financing activities | 32 | 783 |
Net change in cash and cash equivalents | 44,386 | (69,470) |
Cash and cash equivalents at beginning of year | 181,381 | 192,248 |
Cash and cash equivalents at end of period | 225,767 | 122,778 |
Supplemental cash flow information | ||
Cash paid for interest on convertible notes | 1,258 | 1,258 |
Income taxes paid | 324 | 800 |
Noncash investing and financing activities | ||
Deferred legal fees and fixed assets included in accounts payable and accrued expenses | 708 | 250 |
Property and equipment additions from utilization of tenant improvement allowance | $ 0 | $ 282 |
Organization and Business
Organization and Business | 3 Months Ended |
Mar. 31, 2020 | |
Organization and Nature of Operations | |
Organization and Business | Organization and Business Supernus Pharmaceuticals, Inc. (the Company) was incorporated in Delaware and commenced operations in 2005. The Company is a pharmaceutical company focused on developing and commercializing products for the treatment of central nervous system (CNS) diseases. The Company markets two products: Oxtellar XR for the treatment of epilepsy and Trokendi XR for the prophylaxis of migraine headache and the treatment of epilepsy. The Company is also developing multiple proprietary CNS product candidates to address significant unmet medical needs and market opportunities. The Company launched Oxtellar XR and Trokendi XR for the treatment of epilepsy in 2013, followed by the launch of Trokendi XR for the prophylaxis of migraine headache in adolescents and adults in 2017. The Company launched Oxtellar XR with an expanded indication to include monotherapy for partial seizures in January 2019. COVID-19 Impact |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The Company’s condensed consolidated financial statements include the accounts of: Supernus Pharmaceuticals, Inc.; Supernus Europe Ltd.; Biscayne Neurotherapeutics, Inc.; and Biscayne Neurotherapeutics Australia Pty Ltd. These are collectively referred to herein as “Supernus” or “the Company.” All significant intercompany transactions and balances have been eliminated in consolidation. The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with the requirements of the U.S. Securities and Exchange Commission (SEC) for interim financial information. As permitted under Generally Accepted Accounting Principles in the United States (U.S. GAAP), certain notes and other information have been omitted from the interim unaudited condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company’s most recent Annual Report on Form 10-K, for the year ended December 31, 2019, filed with the SEC. In management’s opinion, the condensed consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows. The results of operations for any interim period are not necessarily indicative of the Company’s future quarterly or annual results. The Company, which is primarily located in the United States (U.S.), operates in one operating segment. Use of Estimates The Company bases its estimates on: historical experience; various forecasts; information received from its service providers; information from other sources; and other assumptions that the Company believes are reasonable under the circumstances. Actual results could differ materially from the Company’s estimates. The Company evaluates the methodologies employed in making its estimates on an ongoing basis. Inventories Inventories, which are recorded at the lower of cost or net realizable value, include materials, labor, direct costs and indirect costs. These are valued using the first-in, first-out method. The Company writes down inventory that has become obsolete, or has a cost basis in excess of its expected net realizable value. Expired inventory is disposed of, and the related costs are recognized as Cost of goods sold in the condensed consolidated statement of earnings. Inventories Produced in Preparation of Product Launches The Company capitalizes inventories produced in preparation for product launches when future commercialization of a product is probable and when future economic benefit is expected to be realized. The determination to capitalize is based on the particular facts and circumstances relating to the product. Capitalization of such inventory begins when the Company determines that (i) positive results have been obtained for the clinical trials that are necessary to support regulatory approval; (ii) uncertainties regarding regulatory approval have been significantly reduced; and (iii) it is probable that these capitalized costs will provide future economic benefit in excess of capitalized costs. In evaluating whether these conditions are met, the Company considers the following factors: the product candidate’s current status in the regulatory approval process; results from the related pivotal clinical trials; results from meetings with relevant regulatory agencies prior to the filing of regulatory applications; compilation of the regulatory applications; consequent acceptance by the regulatory body; potential impediments to the approval process, such as product safety or efficacy concerns, potential labeling restrictions, and other impediments; historical experience with manufacturing and commercializing similar products as well as the relevant product candidate; and the resilience of the Company’s manufacturing environment, including its supply chain, in determining logistical constraints that could hamper approval or commercialization. In assessing the economic benefit that the Company is likely to realize, the Company considers: the shelf life of the product in relation to the expected timeline for approval; patent related or contract issues that may prevent or delay commercialization; product stability data of all pre-approval production to determine whether there is adequate expected shelf life; viability of commercialization, taking into account competitive dynamics in the marketplace and market acceptance; anticipated future sales; and anticipated reimbursement strategies that may prevail with respect to the product, if approved. In applying the lower of cost or net realizable value to pre-launch inventory, the Company estimates a range of likely commercial prices based on comparable commercial products and pre-launch discussions with managed care providers. The Company could be required to write down previously capitalized costs related to pre-launch inventories upon a change in such judgment(s), due to, among other potential factors, a denial or significant delay of approval by regulatory bodies, a delay in commercialization, or other adverse factors. Revenue from Product Sales The Company’s customers, who are primarily pharmaceutical wholesalers and distributors, purchase product to fulfill orders from retail pharmacy chains and independent pharmacies of varying size and purchasing power. The Company recognizes gross revenue when its products are physically received by its customers, upon shipment from a third party fulfillment center. Customers take control of our products, including title and ownership, upon physical receipt of our products at the customers' facilities. Customer orders are generally fulfilled within a few days of receipt, resulting in minimal order backlog. The Company does not adjust revenue for any financing effects, in transactions where the Company expects the period between the transfer of the goods or services and collection to be less than one year. There are no minimum product purchase requirements with customers. The Company recognizes revenue from product sales in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. Product sales are recorded net of various forms of variable consideration, including: provision for estimated rebates; provision for estimated future product returns; and an estimated allowance for discounts. These are collectively considered "sales deductions." As described below, variability in the net transaction price for the Company’s products arises primarily from the aforementioned sales deductions. Variable consideration on product sales is only recognized when it is probable that a significant reversal will not occur. Significant judgment is required in estimating certain sales deductions. In making these estimates, the Company considers: historical experience; product price increases; current contractual arrangements under applicable payor programs; unbilled claims; processing time lags; and inventory levels in the wholesale and retail distribution channel. The Company adjusts its estimates of revenue either when the most likely amount of consideration it expects to receive changes, or when the consideration becomes fixed. If actual results in the future vary from our estimates, the Company adjusts these estimates. These adjustments could materially affect net product sales and earnings in the period that such adjustments are recorded. Sales Deductions The Company records product sales net of the following sales deductions: • Rebates: Rebates are discounts which the Company pays under either public sector or private sector health care programs. Public sector rebate programs encompass: various Medicaid drug rebate programs; Medicare gap coverage programs; programs covering public health service institutions; and government entities. All federal employees and agencies purchase drugs under the Federal Supply Schedule. Private sector rebate programs include: contractual agreements with managed care providers, under which the Company pays fees to gain access to that provider’s patient drug formulary; and Company sponsored programs, under which the Company defrays or eliminates patient co-payment charges that the patient would otherwise be obligated to pay to their managed care provider in order to fill their prescription. Rebates paid under public sector programs are generally mandated under law, whereas private sector rebates are generally contractually negotiated by the Company with managed care providers. Both types of rebates vary over time. Rebates are owed upon dispensing our product to a patient; i.e., filling a prescription. The accrual balance for rebates consists of the following three components. First, because rebates are generally invoiced and paid quarterly in arrears, the accrual balance consists of an estimate of the amount expected to be incurred for prescriptions dispensed in the current quarter. Second, the accrual balance also includes an estimate for known or estimated prior quarters’ unpaid rebates, to cover prescriptions dispensed in past quarters, but for which no invoice has yet been received. Third, the accrual balance includes an estimate for rebates that will be prospectively owed, for prescriptions filled in future quarters. This pertains to product that has been sold by the Company to wholesalers or distributors, and which resides either as wholesaler/distributor inventory or as inventory held at pharmacies, but as of the end of the reporting period, this product has not been dispensed to a patient. The Company’s estimates of expected rebate claims vary by program and by type of customer, because the period from the date at which the prescription is filled and the date at which the Company receives and pays the invoice varies substantially. For each of its products, the Company bases its estimates of expected rebate claims on multiple factors, including: historical levels of deductions; contractual terms with managed care providers; actual and anticipated changes in product price; prospective changes in managed care fee for service contracts; prospective changes in co-pay assistance programs; and anticipated changes in program utilization rates i.e., patient participation rates under each specific program. The Company records an estimated liability for rebates at the time the customer takes title to the product (i.e., at the time of sale to wholesalers/distributors), and records this liability as a reduction to gross product sales. This liability is recorded as an increase in Accrued product returns and rebates, in current liabilities on our condensed consolidated balance sheets. The sensitivity of the Company’s estimates varies by program and by type of customer. If actual rebates vary from estimated amounts, the Company will adjust the balances of such accrued rebates to reflect actual experience with respect to these programs. These adjustments could materially affect the estimated liability balance, net product sales and earnings in the period in which the adjustment(s) is made. • Returns : Sales of the Company’s products are not subject to a general right of return. Product that has been used to fill patient prescriptions is no longer subject to any right of return. However, the Company will accept return of product that is damaged or defective when shipped from its third party fulfillment center. The Company will accept return of expired product six months prior to and up to 12 months subsequent to the product’s expiry date. Expired or defective returned product cannot be re-sold and is therefore destroyed. The Company records an estimated liability for product returns at the time the customer takes title to the product (i.e., at time of sale) as a reduction to gross product sales. This liability is recorded as an increase in Accrued product returns and rebates , in current liabilities on our condensed consolidated balance sheets. The Company estimates the liability for returns based primarily on the actual returns experience for its two commercial products. Because the Company’s products have a shelf life of 48 months from date of manufacture, and because the Company accepts return of product up to 12 months post expiry, there is a significant time lag of several years between the time when the product is sold and the time when the Company issues credit on expired product. The Company’s returns policy generally permits product returns to be processed at current wholesaler price rather than at historical acquisition price. Hence, the Company’s estimated liability for product returns is affected by price increases taken subsequent to the date of sale. When the Company adjusts its estimates for product returns, the adjustment affects the estimated liability, product sales and earnings in the period of adjustment. Those adjustments may be material to our financial results. • Sales discounts : Distributors and wholesalers of the Company's pharmaceutical products are generally offered various forms of consideration, including allowances, service fees and prompt payment discounts for distributing our products. Distributor and wholesaler allowances and service fees arise from contractual agreements, and are estimated as a percentage of the price at which the Company sells product to them. In addition, distributors and wholesalers are offered a prompt pay discount for payment within a specified period. The Company accounts for these discounts at the time of sale, as a reduction to gross product sales, and records these discounts as a valuation allowance against Accounts receivable on the condensed consolidated balance sheets. License Revenues License and Collaboration Agreements The Company has entered into collaboration agreements to facilitate commercialization of both Oxtellar XR and Trokendi XR outside of the U.S. Those agreements include the right to use the Company’s intellectual property as a functional license, and generally include an up-front license fee and ongoing milestone payments upon the achievement of certain specific events. These agreements may also require minimum royalty payments based on sales of products which use the applicable intellectual property. Up-front license fees are recognized once the license has been executed between the Company and its licensee. Milestones are a form of variable consideration that are recognized when either the underlying events have transpired (i.e., event-based milestone) or when the sales-based targets have been met by the collaborative partner (i.e., sales-based milestone). Both types of milestone payments are nonrefundable. The Company estimates the amount of the milestone to be included in the transaction price by using the most likely amount method. The Company includes in the transaction price some or all of the amount of variable consideration (i.e., the value of the associated milestone), but includes this only to the extent that it is probable that a significant revenue reversal will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Assessing whether it is probable that a significant revenue reversal will not occur once the uncertainty related to the variable consideration is subsequently resolved requires management judgment, and may require assessing factors that are outside of the Company’s influence, such as: likelihood of regulatory success; availability of third party information; and expected time period until achievement of the event. These factors are evaluated based on the specific facts and circumstances. Event-based milestones are recognized in the period that the related event, such as regulatory approval, occurs. Sales-based milestones are recognized as revenue only when the sales-based target is achieved. There are no guaranteed minimum amounts owed to the Company related to license and collaboration agreements. Royalty Revenues The Company recognizes noncash royalty revenue for amounts earned pursuant to its royalty agreement with United Therapeutics Corporation (United Therapeutics), based on estimated product sales by United Therapeutics (see Note 3). This agreement includes the right to use the Company’s intellectual property as a functional license. In 2014, the Company sold certain of these royalty rights to Healthcare Royalty Partners III, L.P. (HC Royalty) (see Note 17, Commitments and Contingencies). Sales of Orenitram by United Therapeutics result in payments made by United Therapeutics to HC Royalty, in accordance with these agreements. Consequent to this agreement, the Company recorded a nonrecourse liability related to this transaction, and amortizes this amount as noncash royalty revenue. The Company also recognizes noncash interest expense related to this liability, and accrues interest expense at an effective interest rate (see Note 16). The interest rate is determined based on projections of HC Royalty’s rate of return. Royalty revenue also includes cash royalty amounts received from collaboration partners, including from Shire Plc (Shire, a subsidiary of Takeda Pharmaceutical Company Ltd), based on net product sales in the current period of Shire’s product, Mydayis. Royalty revenue is only recognized when the underlying product sale by Shire occurs. The Shire arrangement also includes Shire's right to use the Company’s intellectual property as a functional license. There are no guaranteed minimum amounts owed to the Company related to any of these royalty revenue agreements. Research and Development Expense and Related Accrued Research and Development Expenses Research and development expenditures are expensed as incurred. These expenses include: salaries, benefits and share-based compensation; contract research and development services provided by third parties; costs for conducting preclinical and clinical studies; cost of acquiring or manufacturing clinical trial materials; regulatory costs; facilities costs; depreciation expense and other allocated expenses; and license fees and milestone payments related to in-licensed products and technologies. Assets acquired that are used for research and development and that have no future alternative use are expensed as in-process research and development. The Company estimates preclinical and clinical trial expenses based on services performed pursuant to contracts with research institutions, clinical investigators, clinical research organizations (CROs) and other service providers that provide services on the Company’s behalf. In recording service fees, the Company estimates the cost of those services which have been performed on behalf of the Company during the current period, and compares those costs with the cumulative expenses recorded and cumulative payments made for such services. As appropriate, the Company accrues additional service fees, or defers nonrefundable 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 adjusts its accrued expenses, or its deferred advance payments, accordingly. If the Company subsequently determines that it no longer expects the services associated with a nonrefundable advance payment to be rendered, the remaining portion of that advance payment is charged to expense in the period in which such a determination is made. Marketable Securities Marketable securities consist of investments in: U.S. Treasury bills and notes; certificates of deposit; various U.S. governmental agency debt securities; corporate and municipal bonds; and other fixed income securities. The Company places all investments with governmental, 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's investments are classified as available-for-sale and are carried at fair value. Any unrealized holding gains or losses on debt securities are reported, net of any tax effects, as a component of other comprehensive earnings (loss) in the condensed consolidated statement of comprehensive earnings. Realized gains and losses are included in interest income, and are determined using the specific identification method for determining the cost of securities sold. The Company adopted Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326) on January 1, 2020, using the allowance approach. Declines in fair value below amortized cost related to credit losses (i.e., impairment due to credit losses), if any, are included in the condensed consolidated statement of earnings. A corresponding allowance is established. If the estimate of expected credit losses decreases in subsequent periods, the Company will reverse the credit losses through current period earnings, and adjust accordingly the allowance (see Note 2 - Recently Issued Accounting Pronouncements). Share-Based Compensation Stock Options The Company recognizes share-based compensation expense over the service period using the straight-line method. Employee share-based compensation for stock options is measured based on estimated fair value as of the grant date, using the Black-Scholes option-pricing model, in calculating the fair value of option grants as of the grant date. The Company uses the following assumptions for estimating fair value of option grants: Fair Value of Common Stock —The fair value of common stock underlying the option grants is determined based on observable market prices of the Company’s common stock. Expected Volatility —Volatility is a measure of the amount by which the Company’s share price has historically fluctuated or is expected to fluctuate (i.e., expected volatility) during a period. Beginning in the first quarter of 2019, the Company began using the historical volatility of its common stock to measure expected volatility. Prior to the first quarter of 2019, volatility was estimated using the observed volatility of the common stock of several public entities of similar size, complexity, and stage of development, as well as taking into consideration the Company’s actual volatility since the Company’s IPO in 2012. 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 during which options are expected to remain unexercised. Options have a maximum contractual term of ten years. Beginning in the first quarter of 2019, the Company began estimating the average expected life of stock options using its historical experience. Prior to the first quarter of 2019, the Company determined 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. Risk-Free Interest Rate —This is the observed U.S. Treasury Note rate, as of the week each option grant is issued, with a term that most closely resembles the expected term of the option. Expected Forfeiture Rate —Forfeitures are accounted for as they occur. Restricted Stock Units (RSUs) Compensation expense is recorded based on amortizing the fair market value as of the date of the grant over the implied service period. RSUs generally vest one year from the date of grant and are subject to continued service requirements. Performance Stock Units (PSUs) Performance-Based Awards Compensation expense for performance-based awards is recognized based on amortizing the fair market value as of the grant date over the periods during which the achievement of the performance is probable . Performance-based PSU awards require certain performance targets to be achieved in order for these awards to vest . These awards vest on the date of achievement of the performance target. Market-Based Awards Compensation expense for market-based awards is recognized on a straight-line basis over the requisite service period, regardless of whether the market condition is satisfied. Market-based PSU awards subject to market-based performance targets require achievement of the performance target in order for these units to vest. The Company estimates fair value as of the grant date and expected term using a Monte Carlo simulation that incorporates option-pricing inputs covering the period from the grant date through the end of the derived requisite service period. The expected volatility as of grant date is estimated based historical daily volatility of the Company's common stock over the expected term of the award. The risk-free interest rate is based on the U.S. Treasury Note rate, as of the week the award is issued, with a term that most closely resembles the expected term of the award. Advertising Expense Advertising expense includes the cost of promotional materials and activities, such as printed marketing materials, marketing programs and speaker programs. The cost of the Company's advertising efforts are expensed as incurred. The Company incurred approximately $11.6 million and $9.9 million in advertising costs for the three months ended March 31, 2020 and 2019, respectively. These expenses are recorded as a component of Selling, general and administrative expenses in the condensed consolidated statements of earnings. 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 for 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. When appropriate, 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 estimated as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authorities, based on full knowledge of the position and relevant facts. The Company's policy is to recognize any interest and penalties related to income taxes as income tax expense in the relevant period. Recently Issued Accounting Pronouncements Accounting Pronouncements Adopted ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) - The new standard, issued in July 2016, requires credit losses on financial assets to be measured as the net amount expected to be collected, rather than based on incurred losses. For available-for-sale debt securities, the new standard did not revise the definition of impairment; i.e., the investment is impaired if the fair value of the investment is less than its cost. It also did not revise the requirement under ASC 320, for an entity to recognize in net income only the impairment amount related to credit risk, and to recognize, in other comprehensive income, the noncredit impairment amount. The new standard made certain targeted changes to the impairment of available-for-sale debt securities, to eliminate the concept of "other than temporary" from the impairment model. Targeted changes to the impairment model included recognition of credit losses on available-for-sale debt securities using the allowance method, and limiting the allowance to the amount by which fair value is below amortized cost. The new standard also requires enhanced disclosure of credit risk associated with respective assets. The Company adopted the new standard effective January 1, 2020. The adoption of the standard did not have a material impact on its condensed consolidated financial statements. ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract - The new standard, issued in August 2018, aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or to obtain internal-use software. This includes hosting arrangements that include an internal-use software license. This ASU also requires that the implementation costs of a hosting arrangement that is a service contract are expensed over the term of the hosting arrangement, which includes reasonably certain renewals. The Company adopted the new standard effective January 1, 2020. The adoption of the standard did not have a material impact on its condensed consolidated financial statements. ASU 2018-18, Clarifying the Interaction Between Topic 808 and Topic 606 - The new standard, issued in November 2018, clarifies when transactions between participants in a collaborative arrangement are within the scope of Topic 606. The Company adopted the new standard effective January 1, 2020. The adoption of the standard did not have a material impact on its condensed consolidated financial statements. ASU 2018-13, Changes to Disclosure Requirements for Fair Value Measurements (Topic 820) - The new standard, issued in August 2018, improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies and adds certain disclosure requirements. The Company adopted the new standard effective January 1, 2020. The adoption of the standard did not have a material impact on its condensed consolidated financial statements. New Accounting Pronouncements Not Yet Adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes - The new standard, issued in December 2019, simplifies the accounting for income taxes. This guidance will be effective on January 1, 2021 on a prospective basis, with early adoption permitted. |
Disaggregated Revenues
Disaggregated Revenues | 3 Months Ended |
Mar. 31, 2020 | |
Disaggregation of Revenue [Abstract] | |
Disaggregated Revenues | Disaggregated Revenues The following table summarizes the disaggregation of revenues by nature, (dollars in thousands): Three Months ended March 31, 2020 2019 (unaudited) Net product sales Trokendi XR $ 68,551 $ 63,693 Oxtellar XR 23,939 19,406 Total net product sales $ 92,490 $ 83,099 Royalty revenues 2,486 2,375 Total revenues $ 94,976 $ 85,474 Trokendi XR accounted for 74% and 77% of the Company’s total net product sales for the three months ended March 31, 2020 and 2019, respectively. The Company recognized noncash royalty revenue of $1.6 million for the three months ended March 31, 2020 and 2019, respectively, consequent to the Company's agreement with HC Royalty (see Note 2). The Company ceased production and distribution of all blister pack configurations for Trokendi XR in 2017. Subsequent to ceasing blister pack production and distribution in 2017, the observed rate of product return for all blister pack configurations of Trokendi XR steadily declined over time. This return rate trend was firmly established over a multi-year period. However, in the first quarter of 2020, the return rate for the final blister pack lots of Trokendi XR produced in 2017 exhibited a return rate significantly higher than had been experienced with all previous lots. The lots for which a higher return rate was observed are the last lots which were produced and distributed. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The fair value of an asset or liability represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The Company reports assets and liabilities measured at fair value using a three level hierarchy that prioritizes the inputs used to measure fair value. 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. The Company has the ability to access these prices as of the measurement date. Level 1 assets include: cash held at banks; certificates of deposit; money market funds; investment grade corporate debt securities and U.S. government agency and municipal debt securities. • Level 2—Level 2 securities are valued using third-party pricing sources that apply relevant inputs and data in their models to estimate fair value. Inputs are quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; inputs other than quoted prices but that are observable for the asset or liability (e.g., interest rates; yield curves); and inputs that are derived principally from or corroborated by observable market data, by correlation, or by other means (i.e., market corroborated inputs). Level 2 assets include: investment grade corporate debt securities, U.S. government agency and municipal debt securities; other fixed income securities; and SERP (Supplemental Executive Retirement Plan) assets. The fair value of the restricted marketable securities is recorded in Other assets on the condensed consolidated balance sheets. • Level 3—Unobservable inputs that reflect the Company’s own assumptions. These are based on the best information available, including the Company’s own data. There were no level 3 assets as of March 31, 2020 or December 31, 2019. Financial Assets The Company’s financial assets that are required to be measured at fair value on a recurring basis are as follows (dollars in thousands): Fair Value Measurements at March 31, 2020 (unaudited) Total Fair Value at March 31, Quoted Prices Significant Assets: Cash and cash equivalents Cash $ 19,911 $ 19,911 $ — Money market funds 205,856 205,856 Marketable securities Corporate debt securities 174,939 — 174,939 Municipal debt securities 165 — 165 Long term marketable securities Corporate debt securities 524,683 255 524,428 U.S. government agency debt securities 10,029 — 10,029 Other noncurrent assets Marketable securities - restricted (SERP) 342 8 334 Total assets at fair value $ 935,925 $ 226,030 $ 709,895 Fair Value Measurements at December 31, 2019 (unaudited) Total Fair Value at December 31, Quoted Prices Significant Assets: Cash and cash equivalents Cash $ 78,912 $ 78,912 $ — Money market funds 102,469 102,469 — Marketable securities Corporate debt securities 165,527 — 165,527 Municipal debt securities 165 — 165 Long term marketable securities Corporate debt securities 571,828 254 571,574 U.S. government agency and municipal debt securities 19,945 — 19,945 Other noncurrent assets Marketable securities - restricted (SERP) 418 3 415 Total assets at fair value $ 939,264 $ 181,638 $ 757,626 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 available-for-sale marketable securities held by the Company are as follows, (dollars in thousands): March 31, December 31, 2019 (unaudited) Corporate and U.S. government agency and municipal debt securities Amortized cost $ 710,072 $ 747,598 Gross unrealized gains 5,362 10,031 Gross unrealized losses (5,618) (164) Total fair value $ 709,816 $ 757,465 The contractual maturities of the unrestricted available-for-sale marketable securities held by the Company are as follows, (dollars in thousands): March 31, (unaudited) Less than 1 year $ 175,104 1 year to 2 years 181,141 2 years to 3 years 199,207 3 years to 4 years 154,364 Greater than 4 years — Total $ 709,816 As of March 31, 2020, there was no impairment due to credit loss on any available-for-sale marketable securities. Financial Liabilities The following table sets forth the Company’s financial liabilities that are not carried at fair value, (dollars in thousands): March 31, 2020 December 31, 2019 (unaudited) Carrying Value Fair Value (Level 2) Carrying Value Fair Value (Level 2) 2023 Notes $ 349,232 $ 328,038 $ 345,170 $ 366,023 The fair value is estimated based on actual trading information, as well as quoted prices provided by bond traders. |
Convertible Senior Notes Due 20
Convertible Senior Notes Due 2023 | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Convertible Senior Notes Due 2023 | Convertible Senior Notes Due 2023 The 0.625% Convertible Senior Notes Due 2023 (2023 Notes), which were issued in March 2018, bear interest at an annual rate of 0.625%, payable semi-annually in arrears on April 1 and October 1 of each year. The 2023 Notes will mature on April 1, 2023, unless earlier converted or repurchased by the Company. The Notes are being amortized to interest expense at an effective interest rate of 5.41% over the contractual term of the 2023 Notes. The Company may not redeem the 2023 Notes at its option before maturity. The total principal amount of 2023 Notes is $402.5 million. The 2023 Notes were issued pursuant to an Indenture between the Company and Wilmington Trust, National Association, as trustee. The Indenture includes customary terms and covenants, including certain events of default upon which the 2023 Notes may be due and payable immediately. The Indenture does not contain any financial or operating covenants or restrictions on the payment of dividends, the issuance of other indebtedness, or the issuance or repurchase of securities by the Company. The Company will settle conversions by paying or delivering, as applicable, cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at its election, based on the applicable conversion rate. The initial conversion rate is 16.8545 shares per $1,000 principal amount of the 2023 Notes, which represents an initial conversion price of approximately $59.33 per share, and is subject to adjustment as specified in the Indenture. In the event of conversion, if converted in cash, the holders would forgo all future interest payments, any unpaid accrued interest, and the possibility of further stock price appreciation. If a “make-whole fundamental change,” as defined in the Indenture, occurs, then the Company will in certain circumstances increase the conversion rate for a specified period of time. If a “fundamental change,” as defined in the Indenture occurs, then noteholders may require the Company to repurchase their 2023 Notes at a cash repurchase price equal to the principal amount of the 2023 Notes to be repurchased, plus accrued and unpaid interest, if any. Contemporaneous with the issuance of the 2023 Notes, the Company also entered into separate privately negotiated convertible note hedge transactions (collectively, the Convertible Note Hedge Transactions) with each of the call spread counterparties. The Company issued 402,500 convertible note hedge options. In the event that shares or cash are deliverable to holders of the 2023 Notes upon conversion at limits defined in the Indenture, counterparties to the convertible note hedges will be required to deliver up to approximately 6.8 million shares of the Company’s common stock, or to pay cash to the Company in a similar amount as the value that the Company delivers to the holders of the 2023 Notes, based on a conversion price of $59.33 per share. Concurrently with entering into the Convertible Note Hedge Transactions, the Company also entered into separate privately negotiated warrant transactions (collectively, the Warrant Transactions) with each of the call spread counterparties. The Company issued a total of 6,783,939 warrants. The warrants entitle the holder to one share per warrant. The strike price of the Warrant Transactions will initially be $80.9063 per share of the Company’s common stock, and is subject to adjustment. The Convertible Note Hedge Transactions are expected to reduce the potential dilution of the Company’s common stock upon conversion of the 2023 Notes, and/or offset any potential cash payments the Company is required to make in excess of the principal amount of converted 2023 Notes, as the case may be. The Warrant Transactions are intended to partially offset the cost to the Company of the purchased Convertible Note Hedge Transactions; however, the Warrant Transactions could have a dilutive effect with respect to the Company’s common stock to the extent that the market price per share of the Company’s common stock, as measured under the terms of the Warrant Transactions, exceeds the strike price of the warrants. The liability component of the 2023 Notes consists of the following, (dollars in thousands): March 31, December 31, (unaudited) 2023 Notes $ 402,500 $ 402,500 Unamortized debt discount and deferred financing costs (53,268) (57,330) Total carrying value $ 349,232 $ 345,170 |
Share-Based Payments
Share-Based Payments | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Share-Based Payments | Share-Based Payments Share-based compensation expense is as follows (dollars in thousands): Three Months ended 2020 2019 (unaudited) Research and development $ 681 $ 574 Selling, general and administrative 3,307 2,713 Total $ 3,988 $ 3,287 Stock Option and Stock Appreciation Rights The following table summarizes stock option and stock appreciation rights (SAR) activities: Number of Weighted- Weighted- Outstanding, December 31, 2019 4,606,559 $ 23.05 6.66 Granted 1,105,925 $ 23.99 Exercised (3,811) $ 8.33 Forfeited (25,275) $ 28.12 Outstanding, March 31, 2020 (unaudited) 5,683,398 $ 23.22 7.08 As of December 31, 2019: Vested and expected to vest 4,606,559 $ 23.05 6.66 Exercisable 2,598,112 $ 15.68 5.48 As of March 31, 2020: Vested and expected to vest 5,683,398 $ 23.22 7.08 Exercisable 3,394,315 $ 18.71 5.75 Restricted Stock Units During the three months ended March 31, 2020, the Company granted 26,055 RSUs with a weighted average grant date fair value per share of $23.99, which generally vest one year from the date of grant. Performance Stock Units Performance-Based Awards During the three months ended March 31, 2020, the Company granted 15,625 performance-based awards, with a weighted average grant date fair value per share of $23.99, which require certain performance targets to be achieved in order for these awards to vest . Vesting is subject to continued service requirements through the date that the achievement of the performance target is certified. Market-Based Awards During the three months ended March 31, 2020, the Company granted 15,625 market-based awards, with a weighted average grant date fair value per share of $23.41, which are subject to market-based performance targets in order for these awards to vest. |
Earnings per Share
Earnings per Share | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Earnings per Share | Earnings per Share Basic earnings per share (EPS) is calculated using the weighted-average number of common shares outstanding. Diluted EPS is calculated using the weighted-average number of common shares outstanding, including the dilutive effect of the Company’s stock option grants, SARs, RSUs, PSUs, warrants, employee stock purchase plan (ESPP) awards and the 2023 Notes, as determined per the treasury stock method. Effect of Convertible Notes and Related Convertible Note Hedges and Warrants In connection with the issuance of the 2023 Notes, the Company entered into Convertible Note Hedge and Warrant Transactions as described further in Note 5, Convertible Senior Notes Due 2023 . The expected collective impact of the Convertible Note Hedge and Warrant Transactions is to reduce the potential dilution that may occur between the conversion price of $59.33 per share and the strike price of the warrants of $80.9063 per share. The 2023 Notes and related Convertible Note Hedge and Warrant Transactions are excluded in the calculation of diluted EPS because inclusion would be anti-dilutive. Specifically, the denominator of the diluted EPS calculation excludes the additional shares related to the 2023 Notes and warrants, because the average price of the Company's common stock was less than the conversion price of the 2023 Notes of $59.33 per share, as well as less than the strike price of the warrants of $80.9063 per share. Prior to actual conversion, the Convertible Note Hedge Transactions are not considered in calculating diluted earnings per share, as their impact would be anti-dilutive. In addition to the above described effect of the 2023 Notes and the related Convertible Note Hedge and Warrant Transactions, the Company also excluded the common stock equivalents of the following outstanding stock-based awards in the calculation of diluted EPS, because their inclusion would be anti-dilutive: Three Months ended 2020 2019 (unaudited) Stock options, RSUs, PSUs 3,034,099 608,948 The following table sets forth the computation of basic and diluted net earnings per share for the three months ended March 31, 2020 and 2019 (dollars in thousands, except share and per share amounts): Three Months ended March 31, 2020 2019 (unaudited) Numerator, dollars in thousands: Net earnings $ 21,518 $ 18,340 Denominator: Weighted average shares outstanding, basic 52,534,787 52,336,443 Effect of dilutive securities: Stock options, PSU, RSU and SAR 1,046,264 1,648,942 Weighted average shares outstanding, diluted 53,581,051 53,985,385 Earnings per share, basic $ 0.41 $ 0.35 Earnings per share, diluted $ 0.40 $ 0.34 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Tax Expense The following table provides information regarding the Company’s income tax expense for the three months ended March 31, 2020 and 2019, (dollars in thousands): Three Months ended 2020 2019 (unaudited) Income tax expense $ 7,516 $ 5,899 Effective tax rate 25.9 % 24.3 % The increases in income tax expense and the effective tax rate for the three months ended March 31, 2020, as compared to the same period in the prior year, are primarily attributable to higher income before taxes, increase in the number of states in which we owe taxes and an increase in non-deductible expenses. On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The CARES Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the U.S. economy and fund a nationwide effort to curtail the effect of the COVID-19 pandemic. While the CARES Act provides sweeping tax changes in response to the COVID-19 pandemic, some of the more significant provisions which are expected to impact the Company’s financial statements include removal of certain limitations on utilization of net operating losses and increasing the ability to deduct interest expense, as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act. As of March 31, 2020, the Company expects that these provisions will not have a material impact as the Company does not have net operating losses that would fall under these provisions and does not expect interest expense to be limited. The ultimate impact of the CARES Act may differ from this estimate due to changes in interpretations and assumptions, guidance that may be issued and actions the Company may take in response to the CARES Act. The CARES Act is highly detailed and the Company will continue to assess the impact that various provisions will have on its business. |
Leases
Leases | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Leases | Leases The Company has operating leases for its new headquarters office at 9715 Key West Ave, Rockville, MD; its former headquarters office and lab space at 1550 East Gude Drive in Rockville, MD; and for its fleet vehicles. The Company’s existing leases for its former headquarters office and lab space run through April 2020. With respect to the fleet vehicle leases, given the volume of individual leases involved in the overall arrangement, the Company applies a portfolio approach to effectively account for the operating lease assets and liabilities. New Headquarters Lease The Company entered into a new lease agreement, effective January 31, 2019, with Advent Key West, LLC (Landlord), for its new headquarters office in Rockville, MD (Premises). The term of the new headquarters lease commenced on February 1, 2019 (the Commencement Date) and will continue until April 30, 2034, unless earlier terminated in accordance with the terms of the lease. The lease includes options to extend the lease for up to 10 years, beyond 2034. Fixed rent with respect to the Premises began on the Commencement Date. However, the Landlord agreed to a rent abatement from the Commencement Date through April 30, 2020. The initial fixed rental rate is approximately $195,000 per month for the first 12 months, and will automatically increase by 2% on each anniversary of the Commencement Date. Under the terms of the Lease, the Company provided a security deposit of approximately $195,000, and be required to pay all utility charges for the Premises, in addition to its pro rata share of any operating expenses and real estate taxes. The lease also provides for a tenant improvement allowance of approximately $10.2 million in the aggregate. As of December 31, 2019, the tenant improvement allowance was fully utilized and recorded as leasehold improvements within Property and equipment on the condensed consolidated balance sheets. Supplemental balance sheet information related to leases is as follows (dollars in thousands): March 31, December 31, (unaudited) Assets Lease assets $ 21,911 $ 21,279 Liabilities Accrued expenses and other current liabilities Lease liabilities, current $ 3,456 $ 2,825 Non-current Lease liabilities, long term 30,804 30,440 Total lease liabilities $ 34,260 $ 33,265 Weighted-average remaining lease term (years) 12.1 12.5 Weighted-average discount rate 4.3 % 4.4 % Operating lease costs are as follows (dollars in thousands): Three Months ended 2020 2019 (unaudited) Fixed lease cost $ 1,497 $ 1,032 Variable lease cost 627 465 Total operating lease cost $ 2,124 $ 1,497 Supplemental cash flow information related to leases is as follows (dollars in thousands): Three Months ended March 31, 2020 2019 (unaudited) Cash paid for operating leases $ 1,261 $ 1,313 Lease assets and tenant receivables obtained for new operating leases $ 1,715 $ 17,136 Future minimum lease payments under noncancellable operating leases, as of March 31, 2020, are as follows (dollars in thousands, unaudited): 2020 (remaining) $ 3,672 2021 4,760 2022 4,226 2023 2,537 2024 2,587 Thereafter 26,784 Total future minimum lease payments $ 44,566 Less: Imputed interest (1) (10,306) Present value of lease liabilities $ 34,260 ________________________________________________________________ (1) Calculated using the interest rate for each lease. |
Accounts Receivable
Accounts Receivable | 3 Months Ended |
Mar. 31, 2020 | |
Receivables [Abstract] | |
Accounts Receivable | Accounts ReceivableAs of March 31, 2020 and December 31, 2019, the Company recorded allowances of approximately $10.3 million and $11.0 million, respectively, for prompt pay discounts and contractual service fees paid to the Company’s customers. |
Inventories
Inventories | 3 Months Ended |
Mar. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories Inventories consist of the following (dollars in thousands): March 31, December 31, (unaudited) Raw materials $ 4,331 $ 4,582 Work in process 8,221 11,428 Finished goods 11,866 10,618 Total $ 24,418 $ 26,628 As of March 31, 2020 and December 31, 2019, the Company did not capitalize any pre-launch inventory costs. |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and Equipment Property and equipment consists of the following (dollars in thousands): March 31, December 31, (unaudited) Lab equipment and furniture $ 11,538 $ 11,053 Leasehold improvements 14,974 14,217 Software 2,225 2,225 Computer equipment 2,013 1,839 Construction-in-progress 431 433 31,181 29,767 Less accumulated depreciation and amortization (13,170) (12,699) Total $ 18,011 $ 17,068 Depreciation and amortization expense on property and equipment was approximately $0.5 million and $0.4 million for the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, there were no identified indicators of impairment. |
Intangible Assets
Intangible Assets | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Intangible AssetsIntangible assets consist of patent defense costs, which are deferred legal fees incurred in conjunction with defending patents for Oxtellar XR and Trokendi XR. The Company amortizes these costs over the useful life of the respective patents. The following sets forth the gross carrying amount and related accumulated amortization of the intangible assets (dollars in thousands): Weighted- March 31, December 31, (unaudited) Capitalized patent defense costs 2.76 - 7.01 years $ 43,375 $ 43,375 Less accumulated amortization (19,796) (18,535) Total $ 23,579 $ 24,840 U.S. patents covering Oxtellar XR and Trokendi XR will expire no earlier than 2027. As regards Trokendi XR, the Company entered into settlement agreements that allow third parties to enter the market by January 1, 2023, or earlier under certain circumstances. Amortization expense on intangible assets was approximately $1.3 million for both three month periods ended March 31, 2020 and 2019, respectively. As of March 31, 2020, there were no identified indicators of impairment. |
Accrued Expenses and Other Curr
Accrued Expenses and Other Current Liabilities | 3 Months Ended |
Mar. 31, 2020 | |
Payables and Accruals [Abstract] | |
Accrued Expenses and Other Current Liabilities | Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following (dollars in thousands): March 31, December 31, (unaudited) Accrued clinical trial costs (1) $ 11,224 $ 13,285 Accrued compensation 9,549 11,223 Accrued professional fees 4,706 3,936 Lease liabilities, current 3,456 2,825 Other accrued expenses 4,068 5,861 Total $ 33,003 $ 37,130 _____________________________________________________________________ (1) Includes preclinical and all clinical trial-related costs. |
Accrued Product Returns and Reb
Accrued Product Returns and Rebates | 3 Months Ended |
Mar. 31, 2020 | |
Accrued Product Returns and Rebates | |
Accrued Product Returns and Rebates | Accrued Product Returns and Rebates Accrued product returns and rebates consist of the following (dollars in thousands): March 31, December 31, (unaudited) Accrued product rebates $ 94,612 $ 88,811 Accrued product returns 24,841 18,818 Total $ 119,453 $ 107,629 |
Other Income (Expense)
Other Income (Expense) | 3 Months Ended |
Mar. 31, 2020 | |
Other Income and Expenses [Abstract] | |
Other Income (Expense) | Other Income (Expense) Other income (expense) consist of the following (dollars in thousands): Three Months ended March 31, 2020 2019 (unaudited) Interest income $ 5,777 $ 4,681 Interest expense (4,693) (4,710) Interest expense on nonrecourse liability related to sale of future royalties (1,062) (1,160) Total $ 22 $ (1,189) Interest expense includes noncash interest expense related to amortization of deferred financing costs and amortization of the debt discount on the 2023 Notes of $4.1 million and $3.8 million for the three months ended March 31, 2020 and 2019, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Product Licenses The Company has obtained exclusive licenses from third parties for proprietary rights to support the product candidates in the Company’s neurology and psychiatry portfolio. Under these license agreements, the Company may be required to pay certain amounts upon the achievement of defined milestones. If these products are ultimately commercialized, the Company is also obligated to pay royalties to third parties, as percentage of net product sales, for each respective product under a license agreement. Royalty Agreement In the third quarter of 2014, the Company received $30.0 million pursuant to a Royalty Interest Acquisition Agreement related to the purchase by HC Royalty of certain of the Company’s rights under the Company’s agreement with United Therapeutics, related to the commercialization of Orenitram (treprostinil) Extended-Release Tablets. Full ownership of the royalty rights will revert to the Company if and when a certain cumulative payment threshold is reached, per the terms of the agreement (see Note 2, Note 3 and Note 16). |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events Joint Development and Option Agreement with Navitor On April 21, 2020, the Company entered into a Development and Option Agreement (Development Agreement) with Navitor Pharmaceuticals, Inc. (Navitor). Under the terms of the Development Agreement, the Company and Navitor will jointly conduct a Phase II clinical program for NV-5138 in treatment-resistant depression. In addition, Navitor has granted the Company an exclusive option to license or acquire NV-5138 in all world territories, excluding Greater China, prior to initiation of a Phase III clinical program. In consideration of the rights granted under the Development Agreement, the Company will acquire Series D Preferred Shares of Navitor for $15 million, representing approximately 13% ownership in Navitor. In addition, the Company will pay to Navitor a one time, non-refundable and non-creditable option issue fee of $10 million. Total payments, exclusive of royalty payments on net sales of NV-5138 and development costs under the Development Agreement, have the potential to reach $410 million to $475 million, which include the upfront cash payment of $25 million described above, an additional license or acquisition fee depending on whether the Company ultimately licenses or acquires NV-5138, and subsequent clinical, regulatory and sales milestone payments. The Company will bear all development costs incurred by either the Company or Navitor up to a maximum of $50 million. The Development Agreement provides Navitor an option to request that the Company pay certain development costs in excess of $50 million once expenses reach this threshold and grants the Company a right of first refusal to negotiate for rights to develop and commercialize any composition of matter that has a similar mechanism of action as NV-5138. CNS Portfolio Acquisition from US WorldMeds On April 28, 2020, the Company entered into a definitive Sales and Purchase Agreement with US WorldMeds Partners, LLC, pursuant to which the Company will purchase all of the outstanding equity of USWM Enterprises, LLC (USWM Enterprises), comprising the entire issued share capital of USWM Enterprises, for total consideration of $530 million, consisting of an upfront cash payment of $300 million and additional cash payments of up to $230 million upon the achievement of certain commercial milestones. With the acquisition, the Company will add three established, marketed products and one product candidate in late-stage development to its CNS portfolio. The transaction is expected to close in the second quarter of 2020, subject to certain conditions, including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and other customary conditions. Paragraph IV Filing for Oxtellar XR On May 14, 2020, the Company received a Paragraph IV Notice Letter from Apotex Inc. and Apotex Corp advising Supernus of the submission by Apotex of an Abbreviated New Drug Application to the U.S. Food and Drug Administration (FDA) seeking approval for oxcarbazepine extended-release tablets. The Company is currently reviewing the details of this Notice Letter and intends to vigorously enforce its intellectual property rights relating to Oxtellar XR. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The Company’s condensed consolidated financial statements include the accounts of: Supernus Pharmaceuticals, Inc.; Supernus Europe Ltd.; Biscayne Neurotherapeutics, Inc.; and Biscayne Neurotherapeutics Australia Pty Ltd. These are collectively referred to herein as “Supernus” or “the Company.” All significant intercompany transactions and balances have been eliminated in consolidation. The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with the requirements of the U.S. Securities and Exchange Commission (SEC) for interim financial information. As permitted under Generally Accepted Accounting Principles in the United States (U.S. GAAP), certain notes and other information have been omitted from the interim unaudited condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company’s most recent Annual Report on Form 10-K, for the year ended December 31, 2019, filed with the SEC. In management’s opinion, the condensed consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows. The results of operations for any interim period are not necessarily indicative of the Company’s future quarterly or annual results. The Company, which is primarily located in the United States (U.S.), operates in one operating segment. |
Use of Estimates | Use of Estimates The Company bases its estimates on: historical experience; various forecasts; information received from its service providers; information from other sources; and other assumptions that the Company believes are reasonable under the circumstances. Actual results could differ materially from the Company’s estimates. The Company evaluates the methodologies employed in making its estimates on an ongoing basis. |
Inventories | Inventories Inventories, which are recorded at the lower of cost or net realizable value, include materials, labor, direct costs and indirect costs. These are valued using the first-in, first-out method. The Company writes down inventory that has become obsolete, or has a cost basis in excess of its expected net realizable value. Expired inventory is disposed of, and the related costs are recognized as Cost of goods sold in the condensed consolidated statement of earnings. Inventories Produced in Preparation of Product Launches The Company capitalizes inventories produced in preparation for product launches when future commercialization of a product is probable and when future economic benefit is expected to be realized. The determination to capitalize is based on the particular facts and circumstances relating to the product. Capitalization of such inventory begins when the Company determines that (i) positive results have been obtained for the clinical trials that are necessary to support regulatory approval; (ii) uncertainties regarding regulatory approval have been significantly reduced; and (iii) it is probable that these capitalized costs will provide future economic benefit in excess of capitalized costs. In evaluating whether these conditions are met, the Company considers the following factors: the product candidate’s current status in the regulatory approval process; results from the related pivotal clinical trials; results from meetings with relevant regulatory agencies prior to the filing of regulatory applications; compilation of the regulatory applications; consequent acceptance by the regulatory body; potential impediments to the approval process, such as product safety or efficacy concerns, potential labeling restrictions, and other impediments; historical experience with manufacturing and commercializing similar products as well as the relevant product candidate; and the resilience of the Company’s manufacturing environment, including its supply chain, in determining logistical constraints that could hamper approval or commercialization. In assessing the economic benefit that the Company is likely to realize, the Company considers: the shelf life of the product in relation to the expected timeline for approval; patent related or contract issues that may prevent or delay commercialization; product stability data of all pre-approval production to determine whether there is adequate expected shelf life; viability of commercialization, taking into account competitive dynamics in the marketplace and market acceptance; anticipated future sales; and anticipated reimbursement strategies that may prevail with respect to the product, if approved. In applying the lower of cost or net realizable value to pre-launch inventory, the Company estimates a range of likely commercial prices based on comparable commercial products and pre-launch discussions with managed care providers. The Company could be required to write down previously capitalized costs related to pre-launch inventories upon a change in such judgment(s), due to, among other potential factors, a denial or significant delay of approval by regulatory bodies, a delay in commercialization, or other adverse factors. |
Revenue Recognition | Revenue from Product Sales The Company’s customers, who are primarily pharmaceutical wholesalers and distributors, purchase product to fulfill orders from retail pharmacy chains and independent pharmacies of varying size and purchasing power. The Company recognizes gross revenue when its products are physically received by its customers, upon shipment from a third party fulfillment center. Customers take control of our products, including title and ownership, upon physical receipt of our products at the customers' facilities. Customer orders are generally fulfilled within a few days of receipt, resulting in minimal order backlog. The Company does not adjust revenue for any financing effects, in transactions where the Company expects the period between the transfer of the goods or services and collection to be less than one year. There are no minimum product purchase requirements with customers. The Company recognizes revenue from product sales in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. Product sales are recorded net of various forms of variable consideration, including: provision for estimated rebates; provision for estimated future product returns; and an estimated allowance for discounts. These are collectively considered "sales deductions." As described below, variability in the net transaction price for the Company’s products arises primarily from the aforementioned sales deductions. Variable consideration on product sales is only recognized when it is probable that a significant reversal will not occur. Significant judgment is required in estimating certain sales deductions. In making these estimates, the Company considers: historical experience; product price increases; current contractual arrangements under applicable payor programs; unbilled claims; processing time lags; and inventory levels in the wholesale and retail distribution channel. The Company adjusts its estimates of revenue either when the most likely amount of consideration it expects to receive changes, or when the consideration becomes fixed. If actual results in the future vary from our estimates, the Company adjusts these estimates. These adjustments could materially affect net product sales and earnings in the period that such adjustments are recorded. Sales Deductions The Company records product sales net of the following sales deductions: • Rebates: Rebates are discounts which the Company pays under either public sector or private sector health care programs. Public sector rebate programs encompass: various Medicaid drug rebate programs; Medicare gap coverage programs; programs covering public health service institutions; and government entities. All federal employees and agencies purchase drugs under the Federal Supply Schedule. Private sector rebate programs include: contractual agreements with managed care providers, under which the Company pays fees to gain access to that provider’s patient drug formulary; and Company sponsored programs, under which the Company defrays or eliminates patient co-payment charges that the patient would otherwise be obligated to pay to their managed care provider in order to fill their prescription. Rebates paid under public sector programs are generally mandated under law, whereas private sector rebates are generally contractually negotiated by the Company with managed care providers. Both types of rebates vary over time. Rebates are owed upon dispensing our product to a patient; i.e., filling a prescription. The accrual balance for rebates consists of the following three components. First, because rebates are generally invoiced and paid quarterly in arrears, the accrual balance consists of an estimate of the amount expected to be incurred for prescriptions dispensed in the current quarter. Second, the accrual balance also includes an estimate for known or estimated prior quarters’ unpaid rebates, to cover prescriptions dispensed in past quarters, but for which no invoice has yet been received. Third, the accrual balance includes an estimate for rebates that will be prospectively owed, for prescriptions filled in future quarters. This pertains to product that has been sold by the Company to wholesalers or distributors, and which resides either as wholesaler/distributor inventory or as inventory held at pharmacies, but as of the end of the reporting period, this product has not been dispensed to a patient. The Company’s estimates of expected rebate claims vary by program and by type of customer, because the period from the date at which the prescription is filled and the date at which the Company receives and pays the invoice varies substantially. For each of its products, the Company bases its estimates of expected rebate claims on multiple factors, including: historical levels of deductions; contractual terms with managed care providers; actual and anticipated changes in product price; prospective changes in managed care fee for service contracts; prospective changes in co-pay assistance programs; and anticipated changes in program utilization rates i.e., patient participation rates under each specific program. The Company records an estimated liability for rebates at the time the customer takes title to the product (i.e., at the time of sale to wholesalers/distributors), and records this liability as a reduction to gross product sales. This liability is recorded as an increase in Accrued product returns and rebates, in current liabilities on our condensed consolidated balance sheets. The sensitivity of the Company’s estimates varies by program and by type of customer. If actual rebates vary from estimated amounts, the Company will adjust the balances of such accrued rebates to reflect actual experience with respect to these programs. These adjustments could materially affect the estimated liability balance, net product sales and earnings in the period in which the adjustment(s) is made. • Returns : Sales of the Company’s products are not subject to a general right of return. Product that has been used to fill patient prescriptions is no longer subject to any right of return. However, the Company will accept return of product that is damaged or defective when shipped from its third party fulfillment center. The Company will accept return of expired product six months prior to and up to 12 months subsequent to the product’s expiry date. Expired or defective returned product cannot be re-sold and is therefore destroyed. The Company records an estimated liability for product returns at the time the customer takes title to the product (i.e., at time of sale) as a reduction to gross product sales. This liability is recorded as an increase in Accrued product returns and rebates , in current liabilities on our condensed consolidated balance sheets. The Company estimates the liability for returns based primarily on the actual returns experience for its two commercial products. Because the Company’s products have a shelf life of 48 months from date of manufacture, and because the Company accepts return of product up to 12 months post expiry, there is a significant time lag of several years between the time when the product is sold and the time when the Company issues credit on expired product. The Company’s returns policy generally permits product returns to be processed at current wholesaler price rather than at historical acquisition price. Hence, the Company’s estimated liability for product returns is affected by price increases taken subsequent to the date of sale. When the Company adjusts its estimates for product returns, the adjustment affects the estimated liability, product sales and earnings in the period of adjustment. Those adjustments may be material to our financial results. • Sales discounts : Distributors and wholesalers of the Company's pharmaceutical products are generally offered various forms of consideration, including allowances, service fees and prompt payment discounts for distributing our products. Distributor and wholesaler allowances and service fees arise from contractual agreements, and are estimated as a percentage of the price at which the Company sells product to them. In addition, distributors and wholesalers are offered a prompt pay discount for payment within a specified period. The Company accounts for these discounts at the time of sale, as a reduction to gross product sales, and records these discounts as a valuation allowance against Accounts receivable on the condensed consolidated balance sheets. License Revenues License and Collaboration Agreements The Company has entered into collaboration agreements to facilitate commercialization of both Oxtellar XR and Trokendi XR outside of the U.S. Those agreements include the right to use the Company’s intellectual property as a functional license, and generally include an up-front license fee and ongoing milestone payments upon the achievement of certain specific events. These agreements may also require minimum royalty payments based on sales of products which use the applicable intellectual property. Up-front license fees are recognized once the license has been executed between the Company and its licensee. Milestones are a form of variable consideration that are recognized when either the underlying events have transpired (i.e., event-based milestone) or when the sales-based targets have been met by the collaborative partner (i.e., sales-based milestone). Both types of milestone payments are nonrefundable. The Company estimates the amount of the milestone to be included in the transaction price by using the most likely amount method. The Company includes in the transaction price some or all of the amount of variable consideration (i.e., the value of the associated milestone), but includes this only to the extent that it is probable that a significant revenue reversal will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Assessing whether it is probable that a significant revenue reversal will not occur once the uncertainty related to the variable consideration is subsequently resolved requires management judgment, and may require assessing factors that are outside of the Company’s influence, such as: likelihood of regulatory success; availability of third party information; and expected time period until achievement of the event. These factors are evaluated based on the specific facts and circumstances. Event-based milestones are recognized in the period that the related event, such as regulatory approval, occurs. Sales-based milestones are recognized as revenue only when the sales-based target is achieved. There are no guaranteed minimum amounts owed to the Company related to license and collaboration agreements. Royalty Revenues The Company recognizes noncash royalty revenue for amounts earned pursuant to its royalty agreement with United Therapeutics Corporation (United Therapeutics), based on estimated product sales by United Therapeutics (see Note 3). This agreement includes the right to use the Company’s intellectual property as a functional license. In 2014, the Company sold certain of these royalty rights to Healthcare Royalty Partners III, L.P. (HC Royalty) (see Note 17, Commitments and Contingencies). Sales of Orenitram by United Therapeutics result in payments made by United Therapeutics to HC Royalty, in accordance with these agreements. Consequent to this agreement, the Company recorded a nonrecourse liability related to this transaction, and amortizes this amount as noncash royalty revenue. The Company also recognizes noncash interest expense related to this liability, and accrues interest expense at an effective interest rate (see Note 16). The interest rate is determined based on projections of HC Royalty’s rate of return. Royalty revenue also includes cash royalty amounts received from collaboration partners, including from Shire Plc (Shire, a subsidiary of Takeda Pharmaceutical Company Ltd), based on net product sales in the current period of Shire’s product, Mydayis. Royalty revenue is only recognized when the underlying product sale by Shire occurs. The Shire arrangement also includes Shire's right to use the Company’s intellectual property as a functional license. There are no guaranteed minimum amounts owed to the Company related to any of these royalty revenue agreements. |
Research and Development Expense and Related Accrued Research and Development Expenses | Research and Development Expense and Related Accrued Research and Development Expenses Research and development expenditures are expensed as incurred. These expenses include: salaries, benefits and share-based compensation; contract research and development services provided by third parties; costs for conducting preclinical and clinical studies; cost of acquiring or manufacturing clinical trial materials; regulatory costs; facilities costs; depreciation expense and other allocated expenses; and license fees and milestone payments related to in-licensed products and technologies. Assets acquired that are used for research and development and that have no future alternative use are expensed as in-process research and development. The Company estimates preclinical and clinical trial expenses based on services performed pursuant to contracts with research institutions, clinical investigators, clinical research organizations (CROs) and other service providers that provide services on the Company’s behalf. In recording service fees, the Company estimates the cost of those services which have been performed on behalf of the Company during the current period, and compares those costs with the cumulative expenses recorded and cumulative payments made for such services. As appropriate, the Company accrues additional service fees, or defers nonrefundable 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 adjusts its accrued expenses, or its deferred advance payments, accordingly. If the Company subsequently determines that it no longer expects the services associated with a nonrefundable advance payment to be rendered, the remaining portion of that advance payment is charged to expense in the period in which such a determination is made. |
Marketable Securities | Marketable Securities Marketable securities consist of investments in: U.S. Treasury bills and notes; certificates of deposit; various U.S. governmental agency debt securities; corporate and municipal bonds; and other fixed income securities. The Company places all investments with governmental, 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's investments are classified as available-for-sale and are carried at fair value. Any unrealized holding gains or losses on debt securities are reported, net of any tax effects, as a component of other comprehensive earnings (loss) in the condensed consolidated statement of comprehensive earnings. Realized gains and losses are included in interest income, and are determined using the specific identification method for determining the cost of securities sold. The Company adopted Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326) on January 1, 2020, using the allowance approach. Declines in fair value below amortized cost related to credit losses (i.e., impairment due to credit losses), if any, are included in the condensed consolidated statement of earnings. A corresponding allowance is established. If the estimate of expected credit losses decreases in subsequent periods, the Company will reverse the credit losses through current period earnings, and adjust accordingly the allowance (see Note 2 - Recently Issued Accounting Pronouncements). |
Share-Based Compensation | Share-Based Compensation Stock Options The Company recognizes share-based compensation expense over the service period using the straight-line method. Employee share-based compensation for stock options is measured based on estimated fair value as of the grant date, using the Black-Scholes option-pricing model, in calculating the fair value of option grants as of the grant date. The Company uses the following assumptions for estimating fair value of option grants: Fair Value of Common Stock —The fair value of common stock underlying the option grants is determined based on observable market prices of the Company’s common stock. Expected Volatility —Volatility is a measure of the amount by which the Company’s share price has historically fluctuated or is expected to fluctuate (i.e., expected volatility) during a period. Beginning in the first quarter of 2019, the Company began using the historical volatility of its common stock to measure expected volatility. Prior to the first quarter of 2019, volatility was estimated using the observed volatility of the common stock of several public entities of similar size, complexity, and stage of development, as well as taking into consideration the Company’s actual volatility since the Company’s IPO in 2012. 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 during which options are expected to remain unexercised. Options have a maximum contractual term of ten years. Beginning in the first quarter of 2019, the Company began estimating the average expected life of stock options using its historical experience. Prior to the first quarter of 2019, the Company determined 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. Risk-Free Interest Rate —This is the observed U.S. Treasury Note rate, as of the week each option grant is issued, with a term that most closely resembles the expected term of the option. Expected Forfeiture Rate —Forfeitures are accounted for as they occur. Restricted Stock Units (RSUs) Compensation expense is recorded based on amortizing the fair market value as of the date of the grant over the implied service period. RSUs generally vest one year from the date of grant and are subject to continued service requirements. Performance Stock Units (PSUs) Performance-Based Awards Compensation expense for performance-based awards is recognized based on amortizing the fair market value as of the grant date over the periods during which the achievement of the performance is probable . Performance-based PSU awards require certain performance targets to be achieved in order for these awards to vest . These awards vest on the date of achievement of the performance target. Market-Based Awards |
Advertising Expense | Advertising Expense Advertising expense includes the cost of promotional materials and activities, such as printed marketing materials, marketing programs and speaker programs. The cost of the Company's advertising efforts are expensed as incurred. The Company incurred approximately $11.6 million and $9.9 million in advertising costs for the three months ended March 31, 2020 and 2019, respectively. These expenses are recorded as a component of Selling, general and administrative expenses in the condensed consolidated statements of earnings. |
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 for 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. When appropriate, 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 estimated as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authorities, based on full knowledge of the position and relevant facts. The Company's policy is to recognize any interest and penalties related to income taxes as income tax expense in the relevant period. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements Accounting Pronouncements Adopted ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) - The new standard, issued in July 2016, requires credit losses on financial assets to be measured as the net amount expected to be collected, rather than based on incurred losses. For available-for-sale debt securities, the new standard did not revise the definition of impairment; i.e., the investment is impaired if the fair value of the investment is less than its cost. It also did not revise the requirement under ASC 320, for an entity to recognize in net income only the impairment amount related to credit risk, and to recognize, in other comprehensive income, the noncredit impairment amount. The new standard made certain targeted changes to the impairment of available-for-sale debt securities, to eliminate the concept of "other than temporary" from the impairment model. Targeted changes to the impairment model included recognition of credit losses on available-for-sale debt securities using the allowance method, and limiting the allowance to the amount by which fair value is below amortized cost. The new standard also requires enhanced disclosure of credit risk associated with respective assets. The Company adopted the new standard effective January 1, 2020. The adoption of the standard did not have a material impact on its condensed consolidated financial statements. ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract - The new standard, issued in August 2018, aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or to obtain internal-use software. This includes hosting arrangements that include an internal-use software license. This ASU also requires that the implementation costs of a hosting arrangement that is a service contract are expensed over the term of the hosting arrangement, which includes reasonably certain renewals. The Company adopted the new standard effective January 1, 2020. The adoption of the standard did not have a material impact on its condensed consolidated financial statements. ASU 2018-18, Clarifying the Interaction Between Topic 808 and Topic 606 - The new standard, issued in November 2018, clarifies when transactions between participants in a collaborative arrangement are within the scope of Topic 606. The Company adopted the new standard effective January 1, 2020. The adoption of the standard did not have a material impact on its condensed consolidated financial statements. ASU 2018-13, Changes to Disclosure Requirements for Fair Value Measurements (Topic 820) - The new standard, issued in August 2018, improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies and adds certain disclosure requirements. The Company adopted the new standard effective January 1, 2020. The adoption of the standard did not have a material impact on its condensed consolidated financial statements. New Accounting Pronouncements Not Yet Adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes - The new standard, issued in December 2019, simplifies the accounting for income taxes. This guidance will be effective on January 1, 2021 on a prospective basis, with early adoption permitted. |
Disaggregated Revenues (Tables)
Disaggregated Revenues (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Disaggregation of Revenue [Abstract] | |
Summary of disaggregation of revenues by nature | The following table summarizes the disaggregation of revenues by nature, (dollars in thousands): Three Months ended March 31, 2020 2019 (unaudited) Net product sales Trokendi XR $ 68,551 $ 63,693 Oxtellar XR 23,939 19,406 Total net product sales $ 92,490 $ 83,099 Royalty revenues 2,486 2,375 Total revenues $ 94,976 $ 85,474 |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Schedule of fair value of the financial assets and liabilities | The Company’s financial assets that are required to be measured at fair value on a recurring basis are as follows (dollars in thousands): Fair Value Measurements at March 31, 2020 (unaudited) Total Fair Value at March 31, Quoted Prices Significant Assets: Cash and cash equivalents Cash $ 19,911 $ 19,911 $ — Money market funds 205,856 205,856 Marketable securities Corporate debt securities 174,939 — 174,939 Municipal debt securities 165 — 165 Long term marketable securities Corporate debt securities 524,683 255 524,428 U.S. government agency debt securities 10,029 — 10,029 Other noncurrent assets Marketable securities - restricted (SERP) 342 8 334 Total assets at fair value $ 935,925 $ 226,030 $ 709,895 Fair Value Measurements at December 31, 2019 (unaudited) Total Fair Value at December 31, Quoted Prices Significant Assets: Cash and cash equivalents Cash $ 78,912 $ 78,912 $ — Money market funds 102,469 102,469 — Marketable securities Corporate debt securities 165,527 — 165,527 Municipal debt securities 165 — 165 Long term marketable securities Corporate debt securities 571,828 254 571,574 U.S. government agency and municipal debt securities 19,945 — 19,945 Other noncurrent assets Marketable securities - restricted (SERP) 418 3 415 Total assets at fair value $ 939,264 $ 181,638 $ 757,626 |
Schedule of unrestricted available-for-sale marketable securities | Unrestricted available-for-sale marketable securities held by the Company are as follows, (dollars in thousands): March 31, December 31, 2019 (unaudited) Corporate and U.S. government agency and municipal debt securities Amortized cost $ 710,072 $ 747,598 Gross unrealized gains 5,362 10,031 Gross unrealized losses (5,618) (164) Total fair value $ 709,816 $ 757,465 |
Schedule of contractual maturities of the unrestricted available-for-sale marketable securities held | The contractual maturities of the unrestricted available-for-sale marketable securities held by the Company are as follows, (dollars in thousands): March 31, (unaudited) Less than 1 year $ 175,104 1 year to 2 years 181,141 2 years to 3 years 199,207 3 years to 4 years 154,364 Greater than 4 years — Total $ 709,816 |
Schedule of financial liabilities that are not carried at fair value | The following table sets forth the Company’s financial liabilities that are not carried at fair value, (dollars in thousands): March 31, 2020 December 31, 2019 (unaudited) Carrying Value Fair Value (Level 2) Carrying Value Fair Value (Level 2) 2023 Notes $ 349,232 $ 328,038 $ 345,170 $ 366,023 |
Convertible Senior Notes Due _2
Convertible Senior Notes Due 2023 (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Summary of liability component of 2023 Notes | The liability component of the 2023 Notes consists of the following, (dollars in thousands): March 31, December 31, (unaudited) 2023 Notes $ 402,500 $ 402,500 Unamortized debt discount and deferred financing costs (53,268) (57,330) Total carrying value $ 349,232 $ 345,170 |
Share-Based Payments (Tables)
Share-Based Payments (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of share-based compensation expense | Share-based compensation expense is as follows (dollars in thousands): Three Months ended 2020 2019 (unaudited) Research and development $ 681 $ 574 Selling, general and administrative 3,307 2,713 Total $ 3,988 $ 3,287 |
Summary of stock options and SAR activities | The following table summarizes stock option and stock appreciation rights (SAR) activities: Number of Weighted- Weighted- Outstanding, December 31, 2019 4,606,559 $ 23.05 6.66 Granted 1,105,925 $ 23.99 Exercised (3,811) $ 8.33 Forfeited (25,275) $ 28.12 Outstanding, March 31, 2020 (unaudited) 5,683,398 $ 23.22 7.08 As of December 31, 2019: Vested and expected to vest 4,606,559 $ 23.05 6.66 Exercisable 2,598,112 $ 15.68 5.48 As of March 31, 2020: Vested and expected to vest 5,683,398 $ 23.22 7.08 Exercisable 3,394,315 $ 18.71 5.75 |
Earnings per Share (Tables)
Earnings per Share (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of common stock equivalents excluded in the calculation of diluted earnings per share | In addition to the above described effect of the 2023 Notes and the related Convertible Note Hedge and Warrant Transactions, the Company also excluded the common stock equivalents of the following outstanding stock-based awards in the calculation of diluted EPS, because their inclusion would be anti-dilutive: Three Months ended 2020 2019 (unaudited) Stock options, RSUs, PSUs 3,034,099 608,948 |
Schedule of computation of basic and diluted earnings per share | The following table sets forth the computation of basic and diluted net earnings per share for the three months ended March 31, 2020 and 2019 (dollars in thousands, except share and per share amounts): Three Months ended March 31, 2020 2019 (unaudited) Numerator, dollars in thousands: Net earnings $ 21,518 $ 18,340 Denominator: Weighted average shares outstanding, basic 52,534,787 52,336,443 Effect of dilutive securities: Stock options, PSU, RSU and SAR 1,046,264 1,648,942 Weighted average shares outstanding, diluted 53,581,051 53,985,385 Earnings per share, basic $ 0.41 $ 0.35 Earnings per share, diluted $ 0.40 $ 0.34 |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of reconciliation of income tax expense at the U.S Federal statutory income tax rate to the entity's effective income tax rate | The following table provides information regarding the Company’s income tax expense for the three months ended March 31, 2020 and 2019, (dollars in thousands): Three Months ended 2020 2019 (unaudited) Income tax expense $ 7,516 $ 5,899 Effective tax rate 25.9 % 24.3 % |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Schedule of balance sheet information related to leases | Supplemental balance sheet information related to leases is as follows (dollars in thousands): March 31, December 31, (unaudited) Assets Lease assets $ 21,911 $ 21,279 Liabilities Accrued expenses and other current liabilities Lease liabilities, current $ 3,456 $ 2,825 Non-current Lease liabilities, long term 30,804 30,440 Total lease liabilities $ 34,260 $ 33,265 Weighted-average remaining lease term (years) 12.1 12.5 Weighted-average discount rate 4.3 % 4.4 % |
Schedule of lease costs and supplemental cash flow information | Operating lease costs are as follows (dollars in thousands): Three Months ended 2020 2019 (unaudited) Fixed lease cost $ 1,497 $ 1,032 Variable lease cost 627 465 Total operating lease cost $ 2,124 $ 1,497 Supplemental cash flow information related to leases is as follows (dollars in thousands): Three Months ended March 31, 2020 2019 (unaudited) Cash paid for operating leases $ 1,261 $ 1,313 Lease assets and tenant receivables obtained for new operating leases $ 1,715 $ 17,136 |
Schedule of maturities of operating lease liabilities | Future minimum lease payments under noncancellable operating leases, as of March 31, 2020, are as follows (dollars in thousands, unaudited): 2020 (remaining) $ 3,672 2021 4,760 2022 4,226 2023 2,537 2024 2,587 Thereafter 26,784 Total future minimum lease payments $ 44,566 Less: Imputed interest (1) (10,306) Present value of lease liabilities $ 34,260 ________________________________________________________________ (1) Calculated using the interest rate for each lease. |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Schedule of inventories | Inventories consist of the following (dollars in thousands): March 31, December 31, (unaudited) Raw materials $ 4,331 $ 4,582 Work in process 8,221 11,428 Finished goods 11,866 10,618 Total $ 24,418 $ 26,628 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and equipment consists of the following (dollars in thousands): March 31, December 31, (unaudited) Lab equipment and furniture $ 11,538 $ 11,053 Leasehold improvements 14,974 14,217 Software 2,225 2,225 Computer equipment 2,013 1,839 Construction-in-progress 431 433 31,181 29,767 Less accumulated depreciation and amortization (13,170) (12,699) Total $ 18,011 $ 17,068 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
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 the intangible assets (dollars in thousands): Weighted- March 31, December 31, (unaudited) Capitalized patent defense costs 2.76 - 7.01 years $ 43,375 $ 43,375 Less accumulated amortization (19,796) (18,535) Total $ 23,579 $ 24,840 |
Accrued Expenses and Other Cu_2
Accrued Expenses and Other Current Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Payables and Accruals [Abstract] | |
Schedule of accrued expenses and other current liabilities | Accrued expenses and other current liabilities consist of the following (dollars in thousands): March 31, December 31, (unaudited) Accrued clinical trial costs (1) $ 11,224 $ 13,285 Accrued compensation 9,549 11,223 Accrued professional fees 4,706 3,936 Lease liabilities, current 3,456 2,825 Other accrued expenses 4,068 5,861 Total $ 33,003 $ 37,130 _____________________________________________________________________ (1) Includes preclinical and all clinical trial-related costs. |
Accrued Product Returns and R_2
Accrued Product Returns and Rebates (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accrued Product Returns and Rebates | |
Schedule of accrued product returns and rebates | Accrued product returns and rebates consist of the following (dollars in thousands): March 31, December 31, (unaudited) Accrued product rebates $ 94,612 $ 88,811 Accrued product returns 24,841 18,818 Total $ 119,453 $ 107,629 |
Other Income (Expense) (Tables)
Other Income (Expense) (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Other Income and Expenses [Abstract] | |
Schedule of other income (expense) | Other income (expense) consist of the following (dollars in thousands): Three Months ended March 31, 2020 2019 (unaudited) Interest income $ 5,777 $ 4,681 Interest expense (4,693) (4,710) Interest expense on nonrecourse liability related to sale of future royalties (1,062) (1,160) Total $ 22 $ (1,189) |
Organization and Business (Deta
Organization and Business (Details) | 3 Months Ended |
Mar. 31, 2020product | |
Organization and Nature of Operations | |
Number of commercial products | 2 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies - Basis of Presentation (Details) | 3 Months Ended |
Mar. 31, 2020segment | |
Accounting Policies [Abstract] | |
Number of operating segments | 1 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Revenue Recognition (Details) | 3 Months Ended |
Mar. 31, 2020USD ($)product | |
Revenue Recognition | |
Sales return period prior to expiry date | 6 months |
Sales return period subsequent to expiry date | 12 months |
Number of commercial products | product | 2 |
Maximum | |
Revenue Recognition | |
Product shelf life | 48 months |
License and collaboration agreements | |
Revenue Recognition | |
Guaranteed minimum amounts | $ 0 |
Royalty revenue agreements | |
Revenue Recognition | |
Guaranteed minimum amounts | $ 0 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Share-based Compensation (Details) | 3 Months Ended |
Mar. 31, 2020 | |
Share-Based Payments | |
Maximum contractual term of share-based grants | 10 years |
RSUs | |
Share-Based Payments | |
Vesting period | 1 year |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Advertising Expense (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Selling, general and administrative | ||
Advertising Expense | ||
Advertising costs | $ 11.6 | $ 9.9 |
Disaggregated Revenues Summary
Disaggregated Revenues Summary of Revenues (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Disaggregation of Revenue [Line Items] | ||
Total revenues | $ 94,976 | $ 85,474 |
Trokendi XR | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 68,551 | 63,693 |
Oxtellar XR | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 23,939 | 19,406 |
Net product sales | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 92,490 | 83,099 |
Royalty revenues | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | $ 2,486 | $ 2,375 |
Disaggregated Revenues (Details
Disaggregated Revenues (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Revenue Recognition | ||
Non-cash royalty revenue | $ 1,567 | $ 1,576 |
Net product sales | (94,976) | (85,474) |
Net earnings | (21,518) | (18,340) |
Trokendi XR | ||
Revenue Recognition | ||
Net product sales | (68,551) | $ (63,693) |
Trokendi XR | Sales Returns | ||
Revenue Recognition | ||
Provision for product returns | 8,000 | |
Net product sales | 8,000 | |
Net earnings | $ 5,900 | |
Earnings per basic and diluted share (in dollars per share) | $ 0.11 | |
Revenues | Customer Concentration Risk | Trokendi XR | ||
Revenue Recognition | ||
Concentration risk percentage (more than) | 74.00% | 77.00% |
Fair Value of Financial Instr_3
Fair Value of Financial Instruments - Narrative (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
Fair value of financial instruments | ||
Impairment due to credit losses | $ 0 | |
Recurring | Fair Value (Level 3) | ||
Fair value of financial instruments | ||
Total assets at fair value | $ 0 | $ 0 |
Fair Value of Financial Instr_4
Fair Value of Financial Instruments - Carrying Value (Details) - Recurring - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Other noncurrent assets | ||
Marketable securities - restricted (SERP) | $ 8 | $ 3 |
Total assets at fair value | 226,030 | 181,638 |
Significant Other Observable Inputs (Level 2) | ||
Other noncurrent assets | ||
Marketable securities - restricted (SERP) | 334 | 415 |
Total assets at fair value | 709,895 | 757,626 |
Total Fair Value | ||
Other noncurrent assets | ||
Marketable securities - restricted (SERP) | 342 | 418 |
Total assets at fair value | 935,925 | 939,264 |
Corporate debt securities | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Marketable securities | ||
Marketable securities | 0 | 0 |
Long term marketable securities | ||
Long term marketable securities | 255 | 254 |
Corporate debt securities | Significant Other Observable Inputs (Level 2) | ||
Marketable securities | ||
Marketable securities | 174,939 | 165,527 |
Long term marketable securities | ||
Long term marketable securities | 524,428 | 571,574 |
Corporate debt securities | Total Fair Value | ||
Marketable securities | ||
Marketable securities | 174,939 | 165,527 |
Long term marketable securities | ||
Long term marketable securities | 524,683 | 571,828 |
Municipal debt securities | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Marketable securities | ||
Marketable securities | 0 | 0 |
Municipal debt securities | Significant Other Observable Inputs (Level 2) | ||
Marketable securities | ||
Marketable securities | 165 | 165 |
Municipal debt securities | Total Fair Value | ||
Marketable securities | ||
Marketable securities | 165 | 165 |
U.S. government agency and municipal debt securities | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Long term marketable securities | ||
Long term marketable securities | 0 | 0 |
U.S. government agency and municipal debt securities | Significant Other Observable Inputs (Level 2) | ||
Long term marketable securities | ||
Long term marketable securities | 10,029 | 19,945 |
U.S. government agency and municipal debt securities | Total Fair Value | ||
Long term marketable securities | ||
Long term marketable securities | 10,029 | 19,945 |
Cash | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Assets: | ||
Cash and cash equivalents | 19,911 | 78,912 |
Cash | Significant Other Observable Inputs (Level 2) | ||
Assets: | ||
Cash and cash equivalents | 0 | 0 |
Cash | Total Fair Value | ||
Assets: | ||
Cash and cash equivalents | 19,911 | 78,912 |
Money market funds | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Assets: | ||
Cash and cash equivalents | 205,856 | 102,469 |
Money market funds | Significant Other Observable Inputs (Level 2) | ||
Assets: | ||
Cash and cash equivalents | 0 | |
Money market funds | Total Fair Value | ||
Assets: | ||
Cash and cash equivalents | $ 205,856 | $ 102,469 |
Fair Value of Financial Instr_5
Fair Value of Financial Instruments - Unrestricted Marketable Securities (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Fair Value Disclosures [Abstract] | ||
Amortized cost | $ 710,072 | $ 747,598 |
Gross unrealized gains | 5,362 | 10,031 |
Gross unrealized losses | (5,618) | (164) |
Total fair value | $ 709,816 | $ 757,465 |
Fair Value of Financial Instr_6
Fair Value of Financial Instruments Fair Value of Financial Instruments - Contractual Maturities (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Fair Value Disclosures [Abstract] | ||
Less than 1 year | $ 175,104 | |
1 year to 2 years | 181,141 | |
2 years to 3 years | 199,207 | |
3 years to 4 years | 154,364 | |
Greater than 4 years | 0 | |
Total | $ 709,816 | $ 757,465 |
Fair Value of Financial Instr_7
Fair Value of Financial Instruments - Financial Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Fair value of financial instruments | ||
Carrying Value | $ 349,232 | $ 345,170 |
0.625% Convertible Senior Notes due 2023 | Significant Other Observable Inputs (Level 2) | ||
Fair value of financial instruments | ||
Carrying Value | 349,232 | 345,170 |
Fair Value | $ 328,038 | $ 366,023 |
Convertible Senior Notes Due _3
Convertible Senior Notes Due 2023 - Narrative (Details) | 1 Months Ended | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2018USD ($)$ / sharesshares | Mar. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Sep. 30, 2018$ / shares | |
Notes payable | ||||
Strike price of the warrant transactions (in dollars per share) | $ / shares | $ 80.9063 | $ 80.9063 | ||
2023 Notes | ||||
Notes payable | ||||
Interest rate | 0.625% | |||
Effective interest rate | 5.41% | |||
2023 Notes | $ | $ 402,500,000 | $ 402,500,000 | $ 402,500,000 | |
Conversion rate for the notes (in shares per $1,000 principal amount) | 0.0168545 | |||
Conversion price, per share of common stock (in dollars per share) | $ / shares | $ 59.33 | $ 59.33 | ||
Convertible note hedge options issued (in shares) | 402,500 | |||
Common stock issued upon conversion of notes (in shares) | 6,800,000 | |||
Warrants issued (in shares) | 6,783,939 | |||
Number of shares per warrant entitled to holder (in shares) | 1 | |||
Conversion of debt to equity | $ | $ 0 | $ 0 |
Convertible Senior Notes Due _4
Convertible Senior Notes Due 2023 - Summary of liability component of 2023 Notes (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2018 |
Debt Instrument [Line Items] | |||
Total carrying value | $ 349,232,000 | $ 345,170,000 | |
2023 Notes | |||
Debt Instrument [Line Items] | |||
2023 Notes | 402,500,000 | 402,500,000 | $ 402,500,000 |
Unamortized debt discount and deferred financing costs | (53,268,000) | (57,330,000) | |
Total carrying value | $ 349,232,000 | $ 345,170,000 |
Share-Based Payments - Share-ba
Share-Based Payments - Share-based Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Share-based payments | ||
Share-based compensation expense | $ 3,988 | $ 3,287 |
Research and development | ||
Share-based payments | ||
Share-based compensation expense | 681 | 574 |
Selling, general and administrative | ||
Share-based payments | ||
Share-based compensation expense | $ 3,307 | $ 2,713 |
Share-Based Payments - Activity
Share-Based Payments - Activity (Details) - Stock option and Stock Appreciation Rights - $ / shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Number of Options and SAR | ||
Outstanding at the beginning of the period (in shares) | 4,606,559 | |
Granted (in shares) | 1,105,925 | |
Exercised (in shares) | (3,811) | |
Forfeited (in shares) | (25,275) | |
Outstanding at the end of the period (in shares) | 5,683,398 | 4,606,559 |
Vested and expected to vest (in shares) | 5,683,398 | 4,606,559 |
Exercisable (in shares) | 3,394,315 | 2,598,112 |
Weighted- Average Exercise Price (per share) | ||
Outstanding at the beginning of the period (in dollars per share) | $ 23.05 | |
Granted (in dollars per share) | 23.99 | |
Exercised (in dollars per share) | 8.33 | |
Forfeited (in dollars per share) | 28.12 | |
Outstanding at the end of the period (in dollars per share) | 23.22 | $ 23.05 |
Vested and expected to vest (in dollars per share) | 23.22 | 23.05 |
Exercisable (in dollars per share) | $ 18.71 | $ 15.68 |
Weighted- Average Remaining Contractual Term (in years) | ||
Outstanding at the end of the period | 7 years 29 days | 6 years 7 months 28 days |
Vested and expected to vest | 7 years 29 days | 6 years 7 months 28 days |
Exercisable | 5 years 9 months | 5 years 5 months 23 days |
Share-Based Payments - Narrativ
Share-Based Payments - Narrative (Details) | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
RSUs | |
Share-Based Payments | |
Granted (in shares) | shares | 26,055 |
Weighted average fair value, grant date, (in dollars per share) | $ / shares | $ 23.99 |
Performance-Based Awards | |
Share-Based Payments | |
Granted (in shares) | shares | 15,625 |
Weighted average fair value, grant date, (in dollars per share) | $ / shares | $ 23.99 |
Market-Based Awards | |
Share-Based Payments | |
Granted options (in shares) | shares | 15,625 |
Weighted average fair value, grant date, options (in dollars per share) | $ / shares | $ 23.41 |
Earnings per Share (Details)
Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |||
Mar. 31, 2020 | Mar. 31, 2019 | Sep. 30, 2018 | Mar. 31, 2018 | |
Income per share | ||||
Strike price of the warrant transactions (in dollars per share) | $ 80.9063 | $ 80.9063 | ||
Common stock equivalents excluded in the calculation of diluted income per share (in shares) | 3,034,099 | 608,948 | ||
Numerator, dollars in thousands: | ||||
Net earnings | $ 21,518 | $ 18,340 | ||
Denominator: | ||||
Weighted average shares outstanding, basic (in shares) | 52,534,787 | 52,336,443 | ||
Effect of dilutive securities: | ||||
Stock options, PSU, RSU and SAR (in shares) | 1,046,264 | 1,648,942 | ||
Weighted average shares outstanding, diluted (in shares) | 53,581,051 | 53,985,385 | ||
Earnings per share, basic (in dollars per share) | $ 0.41 | $ 0.35 | ||
Earnings per share, diluted (in dollars per share) | $ 0.40 | $ 0.34 | ||
2023 Notes | ||||
Income per share | ||||
Conversion price, per share of common stock (in dollars per share) | $ 59.33 | $ 59.33 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Income tax expense | $ 7,516 | $ 5,899 |
Effective tax rate | 25.90% | 24.30% |
Leases - New Headquarters Lease
Leases - New Headquarters Lease (Details) - Advent Key West, LLC (Landlord) $ in Thousands | Feb. 01, 2019USD ($) |
Leases | |
Optional lease renewal term | 10 years |
Initial fixed monthly rental rate | $ 195 |
Increase in fixed monthly rental payments | 2.00% |
Required security deposit | $ 195 |
Tenant improvement allowance | $ 10,200 |
Leases - Leases Balance Sheet I
Leases - Leases Balance Sheet Information (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Balance sheet information related to leases | ||
Lease assets | $ 21,911 | $ 21,279 |
Lease liabilities, current | 3,456 | 2,825 |
Lease liabilities, long term | 30,804 | 30,440 |
Total lease liabilities | $ 34,260 | $ 33,265 |
Weighted-average remaining lease term (years) | 12 years 1 month 6 days | 12 years 6 months |
Weighted-average discount rate | 4.30% | 4.40% |
Leases - Lease Costs (Details)
Leases - Lease Costs (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Operating leases cost | ||
Fixed lease cost | $ 1,497 | $ 1,032 |
Variable lease cost | 627 | 465 |
Total operating lease cost | $ 2,124 | $ 1,497 |
Leases - Supplemental Cash Flow
Leases - Supplemental Cash Flows (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Leases [Abstract] | ||
Cash paid for operating leases | $ 1,261 | $ 1,313 |
Lease assets and tenant receivables obtained for new operating leases | $ 1,715 | $ 17,136 |
Leases - Schedule of Maturities
Leases - Schedule of Maturities of Lease Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Operating leases | ||
2020 (remaining) | $ 3,672 | |
2021 | 4,760 | |
2022 | 4,226 | |
2023 | 2,537 | |
2024 | 2,587 | |
Thereafter | 26,784 | |
Total future minimum lease payments | 44,566 | |
Less: Imputed interest | (10,306) | |
Present value of lease liabilities | $ 34,260 | $ 33,265 |
Accounts Receivable (Details)
Accounts Receivable (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Receivables [Abstract] | ||
Allowance for expected sales discounts and allowances | $ 10.3 | $ 11 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 4,331 | $ 4,582 |
Work in process | 8,221 | 11,428 |
Finished goods | 11,866 | 10,618 |
Total inventories | $ 24,418 | $ 26,628 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Property and equipment | |||
Property and equipment, gross | $ 31,181 | $ 29,767 | |
Less accumulated depreciation and amortization | (13,170) | (12,699) | |
Property and equipment, net | 18,011 | 17,068 | |
Depreciation and amortization expense | 500 | $ 400 | |
Lab equipment and furniture | |||
Property and equipment | |||
Property and equipment, gross | 11,538 | 11,053 | |
Leasehold improvements | |||
Property and equipment | |||
Property and equipment, gross | 14,974 | 14,217 | |
Software | |||
Property and equipment | |||
Property and equipment, gross | 2,225 | 2,225 | |
Computer equipment | |||
Property and equipment | |||
Property and equipment, gross | 2,013 | 1,839 | |
Construction-in-progress | |||
Property and equipment | |||
Property and equipment, gross | $ 431 | $ 433 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Intangible Assets | |||
Less accumulated amortization | $ (19,796) | $ (18,535) | |
Total | 23,579 | 24,840 | |
Additional disclosures | |||
Amortization expense | 1,300 | $ 1,300 | |
Capitalized patent defense costs | |||
Intangible Assets | |||
Capitalized patent defense costs | $ 43,375 | $ 43,375 | |
Capitalized patent defense costs | Minimum | |||
Intangible Assets | |||
Weighted- Average Life (Years) | 2 years 9 months 3 days | ||
Capitalized patent defense costs | Maximum | |||
Intangible Assets | |||
Weighted- Average Life (Years) | 7 years 3 days |
Accrued Expenses and Other Cu_3
Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Payables and Accruals [Abstract] | ||
Accrued clinical trial costs | $ 11,224 | $ 13,285 |
Accrued compensation | 9,549 | 11,223 |
Accrued professional fees | 4,706 | 3,936 |
Lease liabilities, current | 3,456 | 2,825 |
Other accrued expenses | 4,068 | 5,861 |
Total | $ 33,003 | $ 37,130 |
Accrued Product Returns and R_3
Accrued Product Returns and Rebates (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Accrued Product Returns and Rebates | ||
Accrued product rebates | $ 94,612 | $ 88,811 |
Accrued product returns | 24,841 | 18,818 |
Total | $ 119,453 | $ 107,629 |
Other Income (Expense) (Details
Other Income (Expense) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Other Income and Expenses [Abstract] | ||
Interest income | $ 5,777 | $ 4,681 |
Interest expense | (4,693) | (4,710) |
Interest expense on nonrecourse liability related to sale of future royalties | (1,062) | (1,160) |
Total other income (expense) | 22 | (1,189) |
Non-cash interest expense | $ 4,061 | $ 3,848 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2014 |
Commitments and Contingencies Disclosure [Abstract] | |||
Nonrecourse liability related to sale of future royalties, long term | $ 18,369 | $ 19,248 | $ 30,000 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event $ in Millions | Apr. 28, 2020USD ($)numberOfMarketProductsnumberOfProductsCandidates | Apr. 21, 2020USD ($) |
USWM Enterprises, LLC | ||
Subsequent Event [Line Items] | ||
Consideration transferred | $ 530 | |
Upfront cash payment | 300 | |
Additional cash payments upon milestone achievements | $ 230 | |
Number of established marketed products | numberOfMarketProducts | 3 | |
Number of product candidates | numberOfProductsCandidates | 1 | |
Navitor | Development Agreement | ||
Subsequent Event [Line Items] | ||
Payments to acquire Series D Preferred Shares | $ 15 | |
Payment for option issue fee | 10 | |
Upfront cash payment | 25 | |
Threshold for development costs payments | 50 | |
Navitor | Development Agreement | Minimum | ||
Subsequent Event [Line Items] | ||
Total potential payments | 410 | |
Navitor | Development Agreement | Maximum | ||
Subsequent Event [Line Items] | ||
Total potential payments | $ 475 | |
Navitor | Development Agreement | ||
Subsequent Event [Line Items] | ||
Ownership percentage | 13.00% |