Accounting Policies, by Policy (Policies) | 12 Months Ended |
Dec. 31, 2014 |
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 U.S. of America, (GAAP) and the rules and regulations of the Securities and Exchange Commission, (SEC). The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries: SAG, based in Zug, Switzerland, through which the Company conducts certain worldwide and European operations; Sucampo Pharma, LLC, based in Tokyo and Osaka, Japan, through which the Company conducts its Asian operations; Sucampo Pharma Americas LLC, based in Bethesda, Maryland, through which the Company conducts operations in North and South America and Sucampo Pharma Europe, Ltd., based in Oxford, U.K. 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. |
Error Corrections and Prior Period Adjustments, Policy [Policy Text Block] | Revisions to Previously Issued Financial Statements |
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While preparing historical financial statements for the year ended December 31, 2013 and quarters ended March 31, 2014 and June 30, 2014, the Company identified certain immaterial errors in the presentation of certain line items in the previously reported financial statements. In accordance with ASC Topic 250, Accounting Changes and Error Corrections, ASC Topic 250-10-S99-1, Assessing Materiality, and ASC Topic 250-10-S99-2, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, the Company evaluated these errors and, based on an analysis of quantitative and qualitative factors, determined that they were not material, individually or in aggregate, to any previously issued financial statements and, therefore, amendment of previously filed reports with the SEC was not required. The Company is including herein the correction of all such immaterial errors that have not been revised in its previous periodic filings. |
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The Company has revised the Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2013 and 2012, the three months March 31, 2014, and the Consolidated Balance Sheets as of December 31, 2013 and 2012 to correct errors in the recognition of indirect taxes at its Swiss subsidiary. The errors affect the years ended December 31, 2012 and 2013 and the periods ended March 31, 2013, June 30, 2013, September 30, 2013 and March 31, 2014. During those periods, the Company overstated its indirect tax liability and understated net income. |
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The Company has also revised the Consolidated Statements of Cash Flows for the year ended December 31, 2013 to correct errors in the classification of foreign exchange gains and losses in net cash used in operating activities, investing activities and the effect of exchange rates on cash and cash equivalents and the change in net income. The errors in classification affect the year ended December 31, 2013 and the periods ended September 30, 2013, June 30, 2013 and March 31, 2013. These errors have no effect on the balances of cash and cash equivalents. |
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Selected Items - Annual | | As | | Revision | | As | |
Previously | Adjustment | Revised |
Reported | | |
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Consolidated Balance Sheet | | | | | | | | | |
(In thousands) | | Presentation as of December 31, 2013 | |
Other assets | | $ | 584 | | | $ | (96 | ) | | $ | 488 | |
Total assets | | | 136,973 | | | | (96 | ) | | | 136,877 | |
Other liabilities | | | 2,150 | | | | (917 | ) | | | 1,233 | |
Total liabilities | | | 78,825 | | | | (917 | ) | | | 77,908 | |
Accumulated deficit | | | (27,681 | ) | | | 821 | | | | (26,860 | ) |
Total stockholders' equity | | | 58,148 | | | | 821 | | | | 58,969 | |
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Consolidated Statements of Operations and Comprehensive Income | | | | | | | | |
(In thousands) | | Presentation as of the year ended December 31, 2012 | |
Other income (expense), net | | $ | 1,602 | | | $ | 225 | | | $ | 1,827 | |
Total non-operating income (expense), net | | | (565 | ) | | | 225 | | | | (340 | ) |
Income (loss) before income taxes | | | 7,752 | | | | 225 | | | | 7,977 | |
Net income | | | 4,836 | | | | 225 | | | | 5,061 | |
Comprehensive income | | | 3,148 | | | | 225 | | | | 3,373 | |
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Consolidated Statements of Operations and Comprehensive Income | | | | | | | | |
(In thousands, except per share data) | | Presentation as of the year ended December 31, 2013 | |
Other income (expense), net | | $ | 2,921 | | | $ | 596 | | | $ | 3,517 | |
Total non-operating income (expense), net | | | 1,151 | | | | 596 | | | | 1,747 | |
Income (loss) before income taxes | | | 10,347 | | | | 596 | | | | 10,943 | |
Net income | | | 6,419 | | | | 596 | | | | 7,015 | |
Net income per share: Basic | | | 0.15 | | | | 0.02 | | | | 0.17 | |
Net income per share: Diluted | | | 0.15 | | | | 0.01 | | | | 0.16 | |
Comprehensive income | | | 5,854 | | | | 596 | | | | 6,450 | |
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Consolidated Statements of Cash Flows | | | | | | | | | | | | |
(In thousands) | | Presentation as of the year ended December 31, 2013 | |
Net cash provided by (used in) operating activities | | $ | (5,418 | ) | | $ | 1,209 | | | $ | (4,209 | ) |
Net cash provided by (used in) investing activities | | | (13,881 | ) | | | 1,265 | | | | (12,616 | ) |
Effect of exchange rates on cash and cash equivalents | | | 798 | | | | (2,474 | ) | | | (1,676 | ) |
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Selected Items - Quarterly | | As | | Revision | | As | |
Previously | Adjustment | Revised |
Reported | | |
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Consolidated Balance Sheet | | | | | | | | | |
(In thousands) | | Presentation as of March 31, 2014 | |
Other Assets | | $ | 455 | | | $ | 28 | | | $ | 483 | |
Other liabilities | | | 1,596 | | | | (917 | ) | | | 679 | |
Total liabilities | | | 78,839 | | | | (917 | ) | | | 77,922 | |
Accumulated deficit | | | (27,006 | ) | | | 945 | | | | (26,061 | ) |
Total stockholders' equity | | | 65,406 | | | | 945 | | | | 66,351 | |
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Consolidated Statements of Operations and Comprehensive Income | | | | | | | | |
(In thousands) | | Presentation as of the three months ended March 31, 2014 | |
Other income (expense), net | | $ | (323 | ) | | $ | 124 | | | $ | (199 | ) |
Total non-operating income (expense), net | | | (666 | ) | | | 124 | | | | (542 | ) |
Income (loss) before income taxes | | | 1,939 | | | | 124 | | | | 2,063 | |
Income tax benefit (provision) | | | (1,264 | ) | | | (44 | ) | | | (1,308 | ) |
Net income | | | 675 | | | | 80 | | | | 755 | |
Comprehensive income | | | 564 | | | | 80 | | | | 644 | |
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 at December 31, 2014 primarily represented collateral pledged to support a loan guarantee and development agreement (Numab 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 $2.4 million at December 31, 2014. |
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Restricted cash at December 31, 2013 primarily represented collateral pledged to support a loan agreement with The Bank of Tokyo-Mitsubishi UFJ, Ltd. (Tokyo-Mitsubishi Bank); a loan agreement with The Mizuho Bank, Ltd. (Mizuho Bank); the Numab Agreement, which the Company serves as guarantor; and operating leases with certain financial institutions. Restricted cash totaled approximately $28.6 million at December 31, 2013. |
Investment, Policy [Policy Text Block] | Current and Non-Current Investments |
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Current and non-current investments consist primarily of U.S. 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, 2014 and 2013, approximately $37.0 million, or 33.6%, and $16.4 million, or 17.1%, respectively, of the Company’s cash, cash equivalents, restricted cash and investments were issued or insured by the U.S. government or U.S. government agencies. The Company has not experienced any losses on these accounts related to amounts in excess of insured limits. |
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Revenues from Takeda, an unrelated party, accounted for 71.3%, 81.3% and 74.4% of the Company’s total revenues for the years ended December 31, 2014, 2013 and 2012, respectively. Accounts receivable and product royalties receivable from Takeda accounted for 88.5% and 88.2% of the Company’s total accounts receivable and product royalties receivable at December 31, 2014 and 2013. Revenues from another unrelated party, Abbott, accounted for 27.8%, 17.6% and 19.3% of the Company’s total revenues for the years ended December 31, 2014, 2013 and 2012. The Company depends significantly upon collaborations with Takeda and Abbott, and its activities may be impacted if these relationships are disrupted (see Note 14). |
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The Company has an exclusive supply arrangement with 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 12). |
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 (as defined below) payable at December 31, 2014 and 2013 were less than the estimated fair values (see Note 13.) 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 |
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Accounts receivable primarily represents amounts due under the North America Takeda Agreement and Japan Abbott Agreement. The Company recorded an allowance for doubtful accounts of approximately $25,000 and $440,000 at December 31, 2014 and 2013, respectively, related to certain disputed Takeda invoices. Accounts receivable of approximately $779,000 was charged off against the allowance for doubtful accounts during the year ended December 31, 2014. |
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, Including Intangible Assets, Policy [Policy Text Block] | Impairment Evaluation for Long-lived Assets |
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The Company reviews definite lived intangible assets for impairment when events or changes in circumstances indicate that the carrying value of its intangible assets may not be recoverable. The carrying value of an intangible asset is assessed for impairment whenever anticipated future undiscounted cash flows from an intangible asset are estimated to be less than its carrying value. The amount of impairment loss recognized is the amount the carrying value exceeds its fair value (see Note 6). |
Revenue Recognition, Policy [Policy Text Block] | Revenue Recognition |
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The Company’s revenues are derived primarily from product royalties, product sales, development milestone payments, clinical development activities, contract and collaboration activities,]. |
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Multiple-Element Arrangements |
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The Company evaluated the multiple deliverables within the AMITIZA agreements in accordance with the guidance of multiple deliverables under ASC 605-25 to determine whether the deliverables can be separated for revenue recognition purposes. The separation criteria include whether the deliverables have standalone value and whether objective reliable evidence of fair value 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 AMITIZA agreements are more fully described in Note 14 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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Research and Development Revenue |
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The Company applied 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 North America 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. |
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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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Product Royalty Revenue |
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Product royalty revenue represents royalty revenue earned on net sales of AMITIZA under the North America Takeda Agreement, and is recorded on an accrual basis when earned in accordance with contractual terms, collectability is reasonably assured and all other revenue recognition criteria are met. |
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Product Sales Revenue |
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Product sales revenue consists of AMITIZA sales under the Japan Abbott Agreement, the Global License Agreement, and prior to the Global License Agreement, by the Company in Europe, and RESCULA sales by the Company in the U.S. 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. There have been no product sales as of December 31, 2014 under the Global License Agreement. |
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RESCULA product sales consist of RESCULA sales in the U.S. 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 prior to and up to 12 months 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 has ceased marketing RESCULA during the third quarter of 2014 and all remaining inventory is set to expire during March 2015. |
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The Company’s three largest wholesale customers accounted for 89.0% and 96.2% of its RESCULA product sales for the years ended December 31, 2014 and 2013, respectively. |
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Co-promotion Revenue |
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Takeda reimbursements of co-promotion costs under the North America Takeda Agreement, including costs associated with the Company’s specialty sales force and miscellaneous marketing activities, are recognized as co-promotion revenue as the related costs are incurred and Takeda becomes contractually obligated to pay the amounts. We have determined that we are acting as a principal under this agreement, and as such, we record reimbursements of these amounts on a gross basis as co-promotion revenue. In December 2014, as a result of the amendment to the North America Takeda Agreement, we ceased co-promoting AMITIZA. |
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Contract and Collaboration Revenue |
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Contract and Collaboration revenue relates to development and consulting activities and includes $8.0 million of the upfront payment received from Takeda in 2014 under the Global License Agreement. |
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The Company considers its participation in joint committees under the Japan Abbott Agreement and North America Takeda Agreement 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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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 also includes product sales of RESCULA that are deferred until the product is sold to end-user customers or until wholesale customers return the product to the Company. 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, 2014 and 2013, total deferred revenue was approximately $7.2 million and $7.5 million, respectively. |
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Total deferred revenue consists of the following as of: |
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| | December 31, | | | | | |
(In thousands) | | 2014 | | | 2013 | | | | | |
Deferred revenue, current | | $ | 2,051 | | | $ | 1,365 | | | | | |
Deferred revenue, non-current | | | 5,118 | | | | 6,169 | | | | | |
| | $ | 7,169 | | | $ | 7,534 | | | | | |
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Deferred revenue to related parties, included in total deferred revenue: | | | | | | | | | |
Deferred revenue to related parties, current | | $ | 453 | | | $ | 477 | | | | | |
Deferred revenue to related parties, non-current | | | 4,141 | | | | 4,925 | | | | | |
Total | | $ | 4,594 | | | $ | 5,402 | | | | | |
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 (CROs) are accrued when it is considered probable that the milestone event will be achieved. |
Accrued Research and Development Expenses [Policy Text Block] | Accrued Research and Development ExpensesAs 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. 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. No material adjustments have been required for this accrual during the years ended December 31, 2014 and 2013. |
Compensation Related Costs, Policy [Policy Text Block] | Employee Stock-Based Compensation |
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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 several subjective variables. The assumptions used to estimate the fair value of stock options granted for the years ended December 31, 2014, 2013 and 2012 were as follows: |
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| Year Ended December 31, | |
| 2014 | | 2013 | | 2012 | |
Expected volatility | 70% | - | 72% | | 65% | - | 75% | | 62% | - | 64% | |
Risk-free interest rate | 1.63% | - | 2.01% | | 1.23% | - | 1.40% | | 0.76% | - | 1.60% | |
Expected term (in years) | 5.28 | - | 6.25 | | 5.5 | - | 6.25 | | 5.5 | - | 6.25 | |
Expected dividend yield | | 0% | | | | 0% | | | | 0% | | |
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Expected Volatility: expected volatility is calculated using the Company’s historical stock prices. |
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Risk-Free Interest Rate: the risk-free interest rate is based on the market yield currently available on U.S. 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 the expected term of share-based awards. The Company has used a lattice based model to determine the expected term for 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 years ended December 31, 2014, 2013 and 2012 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, 2014, 2013 and 2012, the estimated forfeiture rate ranged from 10.0% to 30.94%. |
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Employee stock-based compensation expense recorded in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2014, 2013 and 2012 was as follows: |
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| | Year Ended December 31, | |
(In thousands) | | 2014 | | | 2013 | | | 2012 | |
Research and development expense | | $ | 349 | | | $ | 293 | | | $ | 535 | |
General and administrative expense | | | 1,816 | | | | 1,260 | | | | 1,349 | |
Selling and marketing expense | | | 122 | | | | 191 | | | | 349 | |
Total | | | 2,287 | | | | 1,744 | | | | 2,233 | |
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Employee stock-based compensation expense per basic and diluted share of common stock | | $ | 0.05 | | | $ | 0.04 | | | $ | 0.05 | |
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 (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 U.S. 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 North America 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 U.S. 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, 2014 and 2013, the total deferred charge is $2.0 million and $5.2 million, respectively, after a net current year amortization and impairment expense of $3.2 million and $673,000, 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 $842,000 and $679,000, including interest, for uncertain tax positions as of December 31, 2014 and 2013, respectively. As of December 31, 2014, $263,000 and $579,000 are reflected as other current liabilities and other liabilities, respectively, in the accompanying Consolidated Balance Sheets. 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. 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, 2014 and 2013 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, 2014, the liability for income taxes has increased by approximately $163,000. This increase in the liability is related primarily to current year activity in the U.S. 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 reverse certain prior period liabilities as a result of tax periods no longer being subject to examination; therefore, the amount of $263,000 expected to reverse within the next twelve months has been recorded as a current liability. Other than this expected reversal, 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 2011, 2012, 2013 and 2014 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 Financial Accounting Standards Board (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. |
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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. In addition, the actuarial gains and losses of the Swiss Pension plan are recorded in comprehensive income. |
New Accounting Pronouncements, Policy [Policy Text Block] | Recent Accounting Pronouncements |
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In April 2014, the FASB issued Accounting Standards Update 2014-08, “Presentation of Financial Statements and Property, Plant and Equipment”. Under the new standard, only disposals representing a strategic shift in operations that have a major effect on the organization's operations and financial results, or a business activity classified as held for sale, should be presented as discontinued operations. Additionally, it expands the disclosure requirements for discontinued operations to provide more information regarding the assets, liabilities, income and expenses of discontinued operations. This update is effective for interim and annual periods beginning after December 15, 2014, and early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements. |
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In May 2014, the FASB issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers”. While the standard supersedes existing revenue recognition guidance, it closely aligns with current GAAP. Under the new standard, revenue is recognized at the time a good or service is transferred to a customer for the amount of consideration received for that specific good or service. It is effective for annual reporting periods beginning after December 15, 2016, including interim reporting periods, and early adoption is not permitted. Entities may use a full retrospective approach or report the cumulative effect as of the date of adoption. The Company is currently evaluating the impact the adoption of this standard will have on the Company’s consolidated financial statements. |
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In August 2014, the FASB issued Accounting Standards Update 2014-15, “Presentation of Financial Statements-Going Concern”. The new standard provides guidance regarding management's responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for annual reporting periods beginning after December 15, 2016, including interim reporting periods, and early adoption is permitted. The Company is currently evaluating the impact of adopting this standard, but does not expect it will have a material impact on the Company’s consolidated financial statements. |