Accounting Policies, by Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 |
Accounting Policies [Abstract] | ' |
Basis of Accounting, Policy [Policy Text Block] | ' |
Basis of Presentation |
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The accompanying Consolidated Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP, and the rules and regulations of the Securities and Exchange Commission, or SEC. The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries: Sucampo AG, or SAG, based in Zug, Switzerland, in which the company conducts certain worldwide and European operations; Sucampo Pharma, Ltd., or SPL, based in Tokyo and Osaka, Japan, in which the Company conducts its Asian operations; Sucampo Pharma Americas LLC, or SPA, based in Bethesda, Maryland, in which the Company conducts operations in North and South America; Sucampo Pharma Europe, Ltd., or SPE, based in Oxford, United Kingdom, and Ambrent Investments S.à r.l., based in Luxembourg which conduct operations in Europe. All significant inter-company balances and transactions have been eliminated. |
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The preparation of financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of assets and liabilities at the date of the financial statements, disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. |
Cash and Cash Equivalents, Policy [Policy Text Block] | ' |
Cash and Cash Equivalents |
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For the purpose of the Consolidated Balance Sheets and Consolidated Statements of Cash Flows, cash equivalents include all highly liquid investments with a maturity of 90 days or less at the time of purchase |
Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block] | ' |
Restricted Cash |
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Restricted cash primarily represents collateral pledged to support a loan agreement with The Bank of Tokyo-Mitsubishi UFJ, Ltd. (the Tokyo-Mitsubishi Bank); a loan agreement with The Mizuho Bank, Ltd. (the Mizuho Bank); a loan agreement between Numab AG (Numab) and Zurcher Kantonalbank, which the Company serves as guarantor; and operating leases with certain financial institutions. Restricted cash totaled approximately $28.6 million and $18.9 million at December 31, 2013 and 2012, respectively. |
Investment, Policy [Policy Text Block] | ' |
Current and Non-Current Investments |
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Current and non-current investments consist primarily of United States government agency securities, certificates of deposit, corporate bonds, municipal securities and variable rate demand notes, and are classified as current or non-current based on their maturity dates. The Company classifies all investments as available-for-sale securities and reports unrealized gains or losses, net of related tax effects, in other comprehensive income. |
Concentration Risk, Credit Risk, Policy [Policy Text Block] | ' |
Certain Risks, Concentrations and Uncertainties |
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Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash and cash equivalents, restricted cash, investments and receivables. The Company places its cash, cash equivalents and restricted cash with highly rated financial institutions and invests its excess cash in highly rated investments. As of December 31, 2013 and 2012, approximately $16.4 million, or 17.1%, and $16.8 million, or 18.4%, respectively, of the Company’s cash, cash equivalents, restricted cash and investments were issued or insured by the United States government or United States government agencies. The Company has not experienced any losses on these accounts related to amounts in excess of insured limits. |
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The Company’s products and product candidates under development require approval from the FDA or other international regulatory agencies prior to commercial sales. For those product candidates or indications that have not yet been approved by the FDA or international regulatory agencies, there can be no assurance the products will receive the necessary approval. If the Company is denied approval or approval is delayed, it may have a material adverse impact on the Company. |
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The Company’s products, AMITIZA and RESCULA, compete in a rapidly changing, highly competitive market, which is characterized by advances in scientific discovery, changes in customer requirements, evolving regulatory requirements and developing industry standards. Any failure by the Company to anticipate or to respond adequately or timely to scientific developments in its industry, changes in customer requirements or changes in regulatory requirements or industry standards, or any significant delays in the development or introduction of products could have a material adverse effect on the Company’s business, operating results and future cash flows. |
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The Company’s expected activities may necessitate significant uses of working capital. The Company’s working capital requirements will depend on many factors, including the successful sales of AMITIZA and RESCULA, research and development efforts to develop new products or indications, payments received under contractual agreements with other parties, the status of competitive products and market acceptance of the Company’s new products by physicians and patients. The Company plans to continue financing operations with its existing cash and investments as well as with product royalty revenue and cash received from milestones and other revenue related to its joint collaboration, license and supply agreements. |
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Revenues from Takeda, an unrelated party, accounted for 81.3%, 74.4% and 96.9%, of the Company’s total revenues for the years ended December 31, 2013, 2012 and 2011, respectively. Accounts receivable, unbilled accounts receivable and product royalties receivable from Takeda accounted for 88.2% and 98.0% of the Company’s total accounts receivable, unbilled accounts receivable and product royalties receivable at December 31, 2013 and 2012. Revenues from another unrelated party, Abbott, accounted for 17.6%, 19.3% and 2.3% of the Company’s total revenues for the years ended December 31, 2013, 2012 and 2011. The Company depends significantly upon collaborations with Takeda and Abbott, and its activities may be impacted if these relationships are disrupted (Note 13). |
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The Company has an exclusive supply arrangement with R-Tech Ueno, Ltd, or R-Tech, to provide the Company with commercial and clinical supplies of its product and product candidates. R-Tech also provides certain preclinical and other research and development services. Any difficulties or delays in performing the services under these arrangements may cause the Company to lose revenues, delay research and development activities or otherwise disrupt the Company’s operations (see Note 10). |
Fair Value of Financial Instruments, Policy [Policy Text Block] | ' |
Fair Value of Financial Instruments |
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The carrying amounts of the Company’s financial instruments approximate their fair values based on their short maturities, independent valuations or internal assessments. The Company’s financial instruments include cash and cash equivalents, restricted cash, current and non-current investments, receivables, accounts payable and accrued expenses. The carrying amounts of the notes payable at December 31, 2013 and 2012 were less than the estimated fair values (see Note 11.) The Company’s debt is subject to the fair value disclosure requirements as discussed in Note 4 below, and is classified as a Level 2 security. |
Receivables, Trade and Other Accounts Receivable, Allowance for Doubtful Accounts, Policy [Policy Text Block] | ' |
Accounts Receivable and Unbilled Accounts Receivable |
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Accounts receivable primarily represent amounts due under the Takeda and Abbott Agreements. Unbilled accounts receivable consist of research and development expenses that are reimbursable by Takeda, but as of the balance sheet date have not been billed to Takeda. The Company recorded an allowance for doubtful accounts of approximately $440,000 and $280,000 at December 31, 2013 and 2012, respectively, related to certain disputed Takeda invoices. |
Royalty Recognition Policy [Policy Text Block] | ' |
Product Royalties Receivable |
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Product royalties receivable represent amounts due from Takeda for the Company’s royalties on sales of AMITIZA, which are based on reports obtained directly from Takeda. |
Inventory, Policy [Policy Text Block] | ' |
Inventory |
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Inventory is stated at cost or market, whichever is lower. Cost is determined on a first-in, first-out basis. Inventory is reviewed periodically for potential excess, dated or obsolete status. The Company’s management evaluates the carrying value of inventory on a regular basis, taking into account such factors as historical and anticipated future sales compared to quantities on hand, the prices the Company expects to obtain for products in their respective markets compared to historical costs, and the remaining shelf life of goods on hand. |
Property, Plant and Equipment, Policy [Policy Text Block] | ' |
Property and Equipment |
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Property and equipment are recorded at cost and consist of computer and office machines, furniture and fixtures, and leasehold improvements. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Computer and office machines are depreciated over four years and furniture and fixtures are depreciated over seven years. Leasehold improvements are amortized over the shorter of ten years or the life of the lease. Significant additions and improvements are capitalized. Expenditures for maintenance and repairs are charged to earnings as incurred. When assets are sold or retired, the related cost and accumulated depreciation are removed from the respective accounts and any resulting gain or loss is included in earnings. |
Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block] | ' |
Impairment Evaluation for Long-lived Assets |
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When necessary, the Company assesses the recoverability of its long-lived assets by determining whether the carrying value of such assets can be recovered through undiscounted future operating cash flows. If impairment is indicated, the Company measures the amount of such impairment by comparing the fair value to the carrying value. There have been no impairment charges recorded during the years ended December 31, 2013, 2012 or 2011 because there have been no indicators of impairment during those years. |
Revenue Recognition, Policy [Policy Text Block] | ' |
Revenue Recognition |
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The Company’s revenues are derived primarily from product royalties, development milestone payments, clinical development activities and product sales. |
Research and Development Revenue [Policy Text Block] | ' |
Research and Development Revenue |
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The Company evaluated the multiple deliverables within the collaboration and license agreements in accordance with the guidance of multiple deliverables to determine whether the delivered elements that are the obligation of the Company have value to other parties to the agreement on a stand-alone basis and whether objective reliable evidence of fair value of the undelivered items exists. Deliverables that meet these criteria are considered a separate unit of accounting. Deliverables that do not meet these criteria are combined and accounted for as a single unit of accounting. The appropriate recognition of revenue is then applied to each separate unit of accounting. The Company’s deliverables under the Takeda Agreement and Abbott Agreement, including the related rights and obligations, contractual cash flows and performance periods, are more fully described in Note 12 below. |
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Where agreements include contingent milestones the Company evaluates whether each milestone is substantive. Milestones are considered substantive if all of the following conditions are met: (1) it is commensurate with either our performance to meet the milestone or the enhancement of the value of the delivered item or items as a result of a specific outcome resulting from the our performance to achieve the milestone, (2) it relates solely to past performance, and (3) the value of the milestone is reasonable relative to all the deliverables and payment terms (including other potential milestone consideration) within the arrangement. Where milestones are not considered substantive their treatment is based on either a time-based or proportional performance model. |
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The Company applies a time-based model of revenue recognition for cash flows associated with research and development deliverables agreed upon prior to January 1, 2011 under the Takeda Agreement. Under this model, cash flow streams related to each unit of accounting are recognized as revenue over the estimated performance period. Upon receipt of cash payments, such as development milestones, revenue is recognized to the extent the accumulated service time has occurred. The remainder is deferred and recognized as revenue ratably over the remaining estimated performance period. A change in the period of time expected to complete the deliverable is accounted for as a change in estimate on a prospective basis. In cases where milestone payments are received after the completion of the associated development period, the Company recognizes revenue upon completion of the performance obligation. Revenue is limited to amounts that are nonrefundable and that the other party to the agreement is contractually obligated to pay to the Company. The research and development revenue for these obligations is limited to the lesser of the actual reimbursable costs incurred or the straight-line amount of revenue recognized over the estimated performance period. Revenues are recognized for reimbursable costs only if those costs can be reasonably determined. |
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For research and development deliverables agreed upon subsequent to January 1, 2011 which are reimbursable by Takeda at contractually predetermined percentages, the Company recognizes revenue when the underlying research and development expenses are incurred, assuming all other revenue recognition criteria are met. |
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The Company applies a proportional-performance model using the percentage-of-completion method of revenue recognition for cash flows associated with research and development deliverables under the Abbott Agreement. Since the Company has previous research and development experience and the expected cost to complete the development can be reasonably estimated, the Company believes a proportional-performance methodology of revenue recognition is appropriate. Under this method, revenue in any period is recognized as a percentage of the total actual cost expended relative to the total estimated costs required to satisfy the performance obligations under the arrangement related to the development. Revenue recognized is limited to the amounts that are non-refundable and that the other party to the agreement is contractually obligated to pay to the Company. A change in the period of time expected to complete the deliverable is accounted for as a change in estimate on a prospective basis. Research and development costs are not reimbursable under the Abbott Agreement. |
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Contract revenue relates to development and consulting activities and is accounted for under the time-based model. |
Product Royalty Revenue [Policy Text Block] | ' |
Product Royalty Revenue |
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Royalty revenues are based on net sales of licensed products and are recorded on an accrual basis when earned in accordance with contractual terms if third-party results are reliably measurable, collectability is reasonably assured and all other revenue recognition criteria are met. |
Revenue Recognition, Sales of Goods [Policy Text Block] | ' |
Product Sales Revenue |
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AMITIZA product sales consist of AMITIZA sales to Abbott in Japan and by the Company in Europe. Revenue from AMITIZA product sales is recognized when persuasive evidence of an arrangement exists, delivery has occurred, title to product and associated risk of loss have passed to the customer, the price is fixed or determinable, and collection from the customer is reasonably assured. The Company did not record sales deductions and returns for sales of AMITIZA due to the absence of discounts and rebates and the lack of right of return. |
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RESCULA product sales consist of RESCULA sales in the United States. The Company recognizes revenue from RESCULA product sales less deductions for estimated sales discounts and sales returns. Revenue from product sales of RESCULA is recognized when persuasive evidence of an arrangement exists, title passes, the price is fixed or determinable, and collectability is reasonably assured. The Company accounts for rebates to certain governmental agencies as a reduction of product sales. The Company allows customers to return product within a specified time period prior to and subsequent to the product’s labeled expiration date. As a result, the Company estimates an accrual for product returns, which is recorded as a reduction of product sales. Given the Company’s limited history of selling RESCULA and the return period, the Company cannot reasonably estimate product returns from the wholesale distribution channel. Therefore, the Company is deferring the recognition of revenue until there is confirmation of pull-through sales to end-user customers. The Company will continue to defer recognition until the point at which the Company has obtained sufficient sales history to reasonably estimate returns from the wholesalers. The Company’s three largest wholesale customers accounted for 96.2% of its RESCULA product sales for the year ended December 31, 2013. |
Copromotion Revenue Policy Text Block | ' |
Co-promotion Revenue |
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Co-promotion revenue relates to a limited reimbursement of co-promotion costs based on details to healthcare prescribers. |
Contract Revenue Policy Text Block [Policy Text Block] | ' |
Contract and Collaboration Revenue |
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Contract revenue relates to development and consulting activities and is accounted for under the time-based model. |
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The Company considers its participation in joint committees under its collaboration and license agreements as separate deliverables under the contracts and recognizes the fair value of such participation as collaboration revenue over the period of the participation per the terms of the contracts. |
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The Company has determined that it is acting as a principal under both the Takeda Agreement and the Abbott Agreement and, as such, records revenue on a gross basis in the Condensed Consolidated Statements of Comprehensive Income (Loss). |
Revenue Recognition, Deferred Revenue [Policy Text Block] | ' |
Deferred Revenue |
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Deferred revenue represents payments received for licensing fees, option fees, consulting, research and development contracts and related cost sharing and supply agreements, mainly with Takeda, Abbott and R-Tech, which are deferred until revenue can be recognized under the Company’s revenue recognition policy. Deferred revenue is classified as current if management believes the Company will be able to recognize the deferred amount as revenue within 12 months of the balance sheet date. At December 31, 2013 and 2012, total deferred revenue was approximately $7.5 million and $10.8 million, respectively. |
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Total deferred revenue consists of the following as of: |
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| | December 31, | | | | | |
(In thousands) | | 2013 | | | 2012 | | | | | |
Deferred revenue, current | | $ | 1,365 | | | $ | 3,700 | | | | | |
Deferred revenue, non-current | | | 6,169 | | | | 7,093 | | | | | |
| | $ | 7,534 | | | $ | 10,793 | | | | | |
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Deferred revenue to related parties, included in total deferred revenue: | | | | | | | | | | | | |
Deferred revenue to related parties, current | | $ | 477 | | | $ | 479 | | | | | |
Deferred revenue to related parties, non-current | | | 4,925 | | | | 5,386 | | | | | |
Total | | $ | 5,402 | | | $ | 5,865 | | | | | |
Cost of Sales, Policy [Policy Text Block] | ' |
Cost of Goods Sold |
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Cost of goods sold relates to purchase and distribution costs of the products sold by the Company, including inventory write-offs for excess and obsolete inventory and amortization of marketing licenses. |
Research and Development Expense, Policy [Policy Text Block] | ' |
Research and Development Expenses |
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Research and development costs are expensed in the period in which they are incurred and include the expenses from third parties who conduct research and development activities pursuant to development and consulting agreements on behalf of the Company. Costs related to the acquisition of intellectual property are expensed as incurred in research and development expenses since the underlying technology associated with such acquisitions is unproven, has not received regulatory approval at its early stage of development and does not have alternative future uses. Milestone payments due under agreements with third party contract research organizations, or CROs, are accrued when it is considered probable that the milestone event will be achieved. |
Selling, General and Administrative Expenses, Policy [Policy Text Block] | ' |
General and Administrative Expenses |
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General and administrative costs are expensed as incurred and consist primarily of salaries and other related costs for personnel serving executive, finance, accounting, information technology and human resource functions. Other costs include facility costs and professional fees for legal and accounting services. |
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Selling and Marketing Expenses |
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Selling and marketing expenses represent costs the Company incurs to co-promote AMITIZA and promote RESCULA, including salaries, benefits and related costs of the Company’s sales force and other sales and marketing personnel, costs of market research and analysis and other selling and marketing expenses. |
Interest Income, Policy [Policy Text Block] | ' |
Interest Income |
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Interest income consists of interest earned on the Company’s cash and cash equivalents and current and non-current investments. |
Accrued Research and Development Expenses, Policy [Policy Text Block] | ' |
Accrued Research and Development Expenses |
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As part of the process of preparing Consolidated Financial Statements, the Company is required to estimate accruals for research and development expenses. This process involves reviewing and identifying services which have been performed by third parties on the Company’s behalf and determining the value of these services. Examples of these services are payments to clinical investigators and contract service organizations. In addition, the Company makes estimates of costs incurred to date but not yet invoiced, in relation to external CROs and clinical site costs. The Company analyzes the progress of clinical trials, including levels of patient enrollment; invoices received and contracted costs, when evaluating the adequacy of the accrued liabilities for research and development. The Company makes significant judgments and estimates in determining the accrued balance in any accounting period. |
Compensation Related Costs, Policy [Policy Text Block] | ' |
Employee Stock-Based Compensation |
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The Company applied accounting guidance for share-based awards that requires the measurement and recognition of expense for all share-based compensation of employees and directors to be based on estimated fair values of the share-based awards. This guidance requires companies to estimate the fair value of share-based awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service period in the Company’s consolidated statement of operations. |
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The Company’s determination of fair value of share-based awards on the date of grant using an option-pricing model is affected by the Company’s stock price and assumptions regarding a number of highly complex and subjective variables. |
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The assumptions used to estimate the fair value of stock options granted for the three years ended December 31, 2013 were as follows: |
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| | Year Ended December 31, |
| | 2013 | | 2012 | | 2011 |
Expected volatility | | 65% | - | 75% | | 62% | - | 64% | | 55% | - | 64% |
Risk-free interest rate | | 1.23% | - | 1.40% | | 0.76% | - | 1.60% | | 1.30% | - | 3.30% |
Expected term (in years) | | 5.5 | - | 6.25 | | 5.5 | - | 6.25 | | 2.1 | - | 6.25 |
Expected dividend yield | | | 0% | | | | 0% | | | | 0% | |
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Expected Volatility: The Company evaluated the assumptions used to estimate expected volatility, including whether implied volatility of its options appropriately reflects the market’s expectations of future volatility. The Company determined that it would calculate the expected volatility rate using historical stock prices obtained from comparable publicly-traded companies due to the limited history of the Company’s common stock activity. |
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Risk-Free Interest Rate: The risk-free interest rate is based on the market yield currently available on United States Treasury securities with a maturity that approximates the expected term of the share-based awards. |
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Expected Term: The Company elected to use the “simplified” method to calculate its expected term of share-based awards. Under this method, the expected term is the weighted average of the vesting term and the contractual term. The Company has used a lattice based model to determine the expected term for its market condition share-based awards. |
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Expected Dividend Yield: The Company has not paid, and does not anticipate paying, any dividends in the foreseeable future. |
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Employee stock-based compensation expense for the three years ended December 31, 2013 has been reduced for estimated forfeitures as such expense is based upon awards expected to ultimately vest. Accounting guidance on share-based payments requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. During the years ended December 31, 2013, 2012 and 2011, the estimated forfeiture rate ranged from 10.0% to 14.0%. |
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Employee stock-based compensation expense recorded in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) for the three years ended December 31, 2013 was as follows: |
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| | Year Ended December 31, | |
(In thousands) | | 2013 | | | 2012 | | | 2011 | |
Research and development expense | | $ | 293 | | | $ | 535 | | | $ | 234 | |
General and administrative expense | | | 1,260 | | | | 1,349 | | | | 964 | |
Selling and marketing expense | | | 191 | | | | 349 | | | | 172 | |
Total | | | 1,744 | | | | 2,233 | | | | 1,370 | |
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Employee stock-based compensation expense per basic and diluted share of common stock | | $ | 0.04 | | | $ | 0.05 | | | $ | 0.03 | |
Income Tax, Policy [Policy Text Block] | ' |
Income Taxes |
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The Company accounts for income taxes under the asset and liability method in accordance with the relevant accounting guidance for income taxes. Under the asset and liability method, the current income tax provision or benefit is the amount of income taxes expected to be payable or refundable for the current year. A deferred income tax asset or liability is recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credits and loss carry-forwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Tax rate changes are reflected in the income tax provision during the period such changes are enacted. Changes in ownership may limit the amount of net operating loss, or NOL, carry-forwards that can be utilized in the future to offset taxable income. |
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In September 2011, the Company internally transferred certain intellectual property and licenses from the Company’s subsidiaries, including the United States based subsidiary, to SAG. Since the transfer of these assets was to a related party, the recognition of a deferred tax asset by SAG is prohibited and the net tax effect of the transaction is deferred in consolidation. The tax liability generated from this transaction is offset by a deferred charge that is being amortized over ten years. Following the decision of the International Court of Arbitration of the International Chamber of Commerce on the Takeda Agreement in July 2012, the Company determined that the internal transfer of the intellectual property was only partially complete and is continuing to evaluate whether the United States rights related to AMITIZA will transfer to SAG in the future. This resulted in a reassessment of the deferred charge, deferred tax liability and the mix of profits and losses earned in each jurisdiction. For the year ended December 31, 2012, the Company recorded a benefit of approximately $1.9 million related to the partial reversal of the internal transfer and reduced the deferred charge and deferred tax liability by approximately $23.8 million and $24.1 million, respectively. As of December 31, 2013 and 2012, the total deferred charge is $5.2 million and $5.9 million after a net current year amortization expense of $673,000 and $77,000, respectively. |
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For all significant intercompany transactions, the Company’s management has evaluated the terms of the transactions using significant estimates and judgments to ensure that each significant transaction would be on similar terms if the Company completed the transaction with an unrelated party. Although the Company believes there will be no material tax liabilities to the Company as a result of multi-jurisdictional transactions, there can be no assurance that taxing authorities will not assert that transactions were entered into at monetary values other than fair values. If such assertions were made, the Company’s intention would be to vigorously defend its positions; however, there can be no assurance that additional liabilities may not occur as a result of any such assertions. |
Income Tax Uncertainties, Policy [Policy Text Block] | ' |
Uncertain Tax Positions |
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The Company applies the accounting guidance for uncertain tax positions that requires the application of a more likely than not threshold to the recognition and de-recognition of uncertain tax positions. If the recognition threshold is met, the Company recognizes a tax benefit measured at the largest amount of the tax benefit that, in its judgment, is more than 50% likely to be realized upon settlement. |
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The Company has recorded an income tax liability of approximately $679,000 and $1.1 million, including interest, for uncertain tax positions as of December 31, 2013 and 2012, respectively. As of December 31, 2013, $42,000 and $637,000 are reflected as other current liabilities and other liabilities, respectively, in the accompanying Consolidated Balance Sheets. As of December 31, 2012, $660,000 and $471,000 are reflected as other current liabilities and other liabilities, respectively, in the accompanying Consolidated Balance Sheets. These amounts represent the aggregate tax effect of differences between tax return positions and the amounts otherwise recognized in the Company’s Consolidated Financial Statements. The liability for uncertain tax positions as of December 31, 2013 and 2012 mainly pertained to the Company’s interpretation of nexus in certain states related to revenue sourcing for state income tax purposes, as well as uncertain tax positions related to related party interest in foreign jurisdictions. During the twelve months ended December 31, 2013, the liability for income taxes has decreased approximately $452,000. This decrease in the liability is related primarily to settlement of prior periods with state tax authorities, offset by a net increase related to current year activity in the United States and revisions to prior year estimates. |
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The Company recognizes interest and penalties related to uncertain tax positions as a component of the income tax provision. The Company expects to settle prior periods with state tax authorities; therefore, the amount of $42,000 expected to reverse within the next twelve months has been recorded as a current liability. Other than the expected settlement of tax liabilities, no additional uncertain tax positions have been identified for which it is reasonably possible that the total amount of liability for unrecognized tax benefits will significantly increase or decrease within 12 months, except for recurring accruals on existing uncertain tax positions. In addition, future changes in the unrecognized tax benefits would have an effect on the effective tax rate when recognized. |
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Currently, tax years 2010, 2011, 2012 and 2013 remain open and subject to examination in the major tax jurisdictions in which tax returns are filed. |
Deferred Charges, Policy [Policy Text Block] | ' |
Deferred Charge |
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Certain intellectual property was transferred within the group resulting in a gain in the sellers’ tax jurisdiction and a difference in the buyer’s tax jurisdiction between the new tax basis and the carrying amount of those assets. The FASB guidance on income taxes precludes the Company from including the effects of any intercompany transfers in the financial statements, and so the net tax effect of an intercompany transaction is deferred in consolidation. |
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These deferred tax effects include the reversal of any existing deferred tax asset (and its related valuation allowance, if any) or liability and any taxes currently payable resulting from the intercompany transaction when the asset remains in the consolidated group for financial reporting purposes. This deferred effect is not the result of a temporary difference and is therefore classified as a deferred charge on the Consolidated Balance Sheet separate from the Company's deferred tax assets. |
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Since the deferred charge is not part of the deferred tax assets, it is not subject to revaluation for tax rate changes and realizability as prescribed by the FASB’s guidance on income taxes. Thus, the deferred charge will remain fixed and will be amortized over the determined life of 10 years and be included as part of the provision for income taxes as a permanent difference. |
Foreign Currency Transactions and Translations Policy [Policy Text Block] | ' |
Foreign Currency |
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The Company translates the assets and liabilities of its foreign subsidiaries into U.S. Dollars at the current exchange rate in effect at the end of the year and maintains the capital accounts of these subsidiaries at the historical exchange rates. The revenue, income and expense accounts of the foreign subsidiaries are translated into U.S. Dollars at the average rates that prevailed during the relevant period. The gains and losses that results from this process are included in accumulated other comprehensive income in the stockholders’ equity section of the balance sheet. |
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Realized and unrealized foreign currency gains or losses on assets and liabilities denominated in a currency other than the functional currency are included in net income. |
Comprehensive Income, Policy [Policy Text Block] | ' |
Other Comprehensive Income |
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Comprehensive income consists of net income plus certain other items that are recorded directly to stockholders’ equity. The Company has reported comprehensive income in the Consolidated Statements of Operations and Comprehensive Income (Loss). |
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The Company has outstanding intercompany loans and investments between its subsidiaries which are eliminated for purposes of the Consolidated Financial Statements. These intercompany loans are not expected to be repaid or settled in the foreseeable future. Accordingly, the currency transaction gains or losses on these intercompany loans are recorded as part of other comprehensive income in the Consolidated Financial Statements. |
Segment Reporting, Policy [Policy Text Block] | ' |
Segment Information |
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Management has determined that the Company has three reportable segments, which are based on its method of internal reporting by geographical location. The Company’s reportable segments are the Americas, Europe and Asia. |
New Accounting Pronouncements, Policy [Policy Text Block] | ' |
Recent Accounting Pronouncements |
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In February 2013, the FASB issued an accounting update on Comprehensive Income-Topic 220: Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income, which requires the Company to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, the Company is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under United States GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under United States GAAP to be reclassified in their entirety to net income, the Company is required to cross-reference to other disclosures required under United States GAAP that provide additional detail about those amounts. The Company adopted this update effective January 1, 2013, and such adoption did not have a material impact on the Company's consolidated financial statements. |
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In July 2013, the FASB issued an Accounting Standards Update, or ASU, providing guidance on whether an uncertain tax position should be presented as a reduction to a deferred tax asset or as a separate liability. This guidance seeks to address diversity in practice. The adoption of this ASU amendment is not expected to have a material effect on the Company’s financial condition, results of operations or cash flows. |