Kubota Pharmaceutical (KBBTF) 10-Q 7 Aug 15 2015 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Jul. 31, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	ACUCELA INC.
Entity Central Index Key	1,400,482
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2,015
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		36,481,309

CONDENSED BALANCE SHEETS

CONDENSED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 7,807	$ 18,778
Investments	84,883	85,008
Accounts receivable from collaborations	6,022	5,285
Deferred tax asset	0	61
Prepaid expenses and other current assets	2,680	2,582
Total current assets	101,392	111,714
Property and equipment, net	1,008	742
Long-term investments	81,818	84,033
Long-term deferred tax asset	0	42
Other assets	320	435
Total assets	184,538	196,966
Current liabilities:
Accounts payable	35	441
Accrued liabilities	4,495	4,176
Accrued compensation	1,684	1,683
Deferred revenue from collaborations	1,853	6,231
Deferred rent and lease incentives	116	25
Total current liabilities	$ 8,183	$ 12,556
Commitments and contingencies (Note 4)
Long-term deferred rent, lease incentives, and others	$ 1,175	$ 47
Total long-term liabilities	1,175	47
Shareholders’ equity:
Common stock, no par value,100,000 shares authorized as of June 30, 2015 and December 31, 2014; 36,481 and 35,809 shares issued and outstanding as of June 30, 2015 and December 31, 2014	186,591	186,589
Additional paid-in capital	7,956	3,601
Accumulated other comprehensive loss	(223)	(361)
Accumulated deficit	(19,144)	(5,466)
Total shareholders’ equity	175,180	184,363
Total liabilities and shareholders’ equity	$ 184,538	$ 196,966

CONDENSED BALANCE SHEETS (Paren

CONDENSED BALANCE SHEETS (Parenthetical) - shares shares in Thousands	Jun. 30, 2015	Dec. 31, 2014
Equity [Abstract]
Common stock, shares authorized	100,000	100,000
Common stock, shares issued	36,481	35,809
Common stock, shares outstanding	36,481	35,809

CONDENSED STATEMENTS OF OPERATI

CONDENSED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Statement [Abstract]
Revenue from collaborations	$ 7,181	$ 9,086	$ 14,396	$ 19,632
Expenses:
Research and development	5,643	6,501	11,509	14,471
General and administrative	11,542	2,481	17,050	4,842
Total expenses	17,185	8,982	28,559	19,313
Income (loss) from operations	(10,004)	104	(14,163)	319
Other income (expense), net:
Interest income	264	120	502	164
Interest expense	0	(1)	0	(14)
Other income (expense), net	0	39	(19)	35
Total other income, net	264	158	483	185
Income (loss) before income tax	(9,740)	262	(13,680)	504
Income tax benefit (expense)	2	(191)	2	(379)
Net income (loss)	$ (9,738)	$ 71	$ (13,678)	$ 125
Net income (loss) per share
Basic (in dollars per share)	$ (0.27)	$ 0	$ (0.38)	$ 0
Diluted (in dollars per share)	$ (0.27)	$ 0	$ (0.38)	$ 0
Weighted average shares
Basic (shares)	36,241	35,641	36,026	29,918
Diluted (shares)	36,241	35,867	36,026	30,199

CONDENSED STATEMENTS OF COMPREH

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ (9,738)	$ 71	$ (13,678)	$ 125
Other comprehensive income (loss):
Net unrealized gain (loss) on securities	(146)	10	138	(98)
Comprehensive income (loss)	$ (9,884)	$ 81	$ (13,540)	$ 27

CONDENSED STATEMENTS OF CASH FL

CONDENSED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities
Net income (loss)	$ (13,678)	$ 125
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	214	255
Stock-based compensation	5,456	383
Amortization net of premium/discount on marketable securities	1,140	379
Deferred taxes	103	278
Changes in operating assets and liabilities:
Accounts receivable from collaborations	(737)	(1,551)
Prepaid expenses and other current assets	43	544
Accounts payable	(406)	(379)
Accrued liabilities	319	(1,494)
Accrued compensation	1	(2,354)
Deferred rent and lease incentives	1,219	(137)
Deferred revenue from collaborations	(4,378)	2,119
Other assets	115	5
Net cash used in operating activities	(10,589)	(1,827)
Cash flows from investing activities
Purchases of marketable securities available for sale	(47,212)	(141,750)
Maturities of marketable securities available for sale	48,409	14,905
Net additions to property and equipment	(480)	(4)
Net cash provided by (used in) investing activities	717	(126,849)
Proceeds from (Repurchase of) Equity	(1,101)	0
Cash flows from financing activities
Proceeds from issuance of common stock	2	149,206
Payments for deferred offering costs	0	(1,545)
Net cash provided by (used in) financing activities	(1,099)	147,661
(Decrease) increase in cash and cash equivalents	(10,971)	18,985
Cash and cash equivalents—beginning of period	18,778	13,994
Cash and cash equivalents—end of period	7,807	32,979
Supplemental disclosure
Unpaid deferred offering costs	0	5,548
Conversion of convertible preferred stock upon IPO	0	28,209
Conversion of contingently convertible debt, related party, upon IPO	$ 0	$ 12,000

Business and Basis of Presentat

Business and Basis of Presentation	6 Months Ended
	Jun. 30, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Business and Basis of Presentation	Business and Basis of Presentation Business Acucela Inc. (“we,” “our” and “us”) is a clinical-stage biotechnology company that specializes in discovering and developing novel drug candidates to potentially treat and slow the progression of sight-threatening ophthalmic diseases affecting millions of individuals worldwide. In 2008 , we and Otsuka Pharmaceutical Co., Ltd. (“Otsuka”) entered into a definitive agreement to co-develop Emixustat hydrochloride ("Emixustat"), our lead investigational compound which is currently being evaluated in a Phase 2b/3 clinical trial in patients with geographic atrophy associated with dry AMD. Results of Shareholders Meetings On May 1, 2015, at a special shareholders meeting (the "Special Meeting"), our shareholders approved the two shareholder proposals that removed all of the members of our Board of Directors (other than Dr. Kubota) and elected the following new members to our Board of Directors: Yoshitaka Kitao, Dr. Shiro Mita, Eisaku Nakamura and Robert Takeuchi. In addition, on May 1, 2015, at the initial meeting of the new Board of Directors, our founder and former chief executive officer, Dr. Kubota, was appointed as our President and Chief Executive Officer, replacing Brian O'Callaghan, who resigned effective on May 3, 2015. Steven Tarr, John Gebhart and Edward Danse were appointed as the Company’s chief operation officer, chief financial officer and chief business officer, respectively. At the annual shareholders meeting held on June 25, 2015, Dr. Ryo Kubota, Dr. Shiro Mita, Eisaku Nakamura and Robert Takeuchi were re-elected, and Shintaro Asako was elected to the Board of Directors. Effective June 25, 2015, Yoshitaka Kitao resigned from the Board of Directors. Unaudited Interim Financial Information We have prepared the accompanying financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These financial statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of our balance sheets, operating results, and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for fiscal year 2015. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with the rules and regulations of the SEC. These financial statements should be read in conjunction with the audited financial statements and accompanying notes in Item 8 of Part II, “Financial Statements and Supplementary Data,” of our 2014 Annual Report on Form 10-K. Prior year presentation of cash flows includes a re-classification to conform with the current year presentation of purchased interest on marketable securities. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. Segments We operate in one segment, pharmaceutical product development. All of our significant assets are located in the United States. During the three and six months ended June 30, 2015 and 2014 , all revenue was generated in the United States.

Significant Accounting Policies

Significant Accounting Policies	6 Months Ended
	Jun. 30, 2015
Accounting Policies [Abstract]
Significant Accounting Policies	Significant Accounting Policies Cash and Cash Equivalents and Investments We consider investments in highly liquid instruments purchased with an original maturity at purchase of three months or less to be cash equivalents. The amounts are recorded at cost, which approximates fair value. Our cash equivalents consist of money market funds at June 30, 2015 and money market funds and certificates of deposit at December 31, 2014. We have classified our entire investment portfolio, which consists of corporate debt securities, commercial paper and certificates of deposit, as available-for-sale. Available-for-sale securities are stated at fair value as of each balance sheet date based on market quotes, and unrealized gains and losses are reflected as a net amount under the caption of accumulated other comprehensive loss. Premiums or discounts arising at acquisition are amortized into earnings. We periodically evaluate whether declines in fair values of our investments below their cost are other-than-temporary. This evaluation consists of several qualitative and quantitative factors regarding the severity and duration of the unrealized loss, as well as whether it is more likely than not that we will hold the investment until recovery of its amortized cost basis. Realized gains and losses are calculated using the specific identification method. Realized gains and losses and declines in value judged to be other-than-temporary are recorded within the statements of income under the caption other income (expense). We consider an investment with a maturity greater than twelve months from the balance sheet date as long-term and a maturity less than twelve months as short-term at the balance sheet date. Concentration of Credit Risk Our accounts receivable, as of June 30, 2015 and December 31, 2014, consist of amounts due from our collaborations with Otsuka. There was no allowance for doubtful accounts for the periods presented, as we believe all outstanding amounts will be paid based on our contractual arrangements with Otsuka and history of successful collections thereunder and collateral is not required. Revenue recognized for the three and six month periods ended June 30, 2015 and 2014 consist of amounts derived from our collaboration agreements with Otsuka. Income Taxes We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have already been recognized in the financial statements or tax returns. Excess tax benefits associated with stock option exercises and other equity awards are credited to stockholders' equity. Deferred tax liabilities and assets are based on the difference between financial statement carrying amounts and the tax basis of assets and liabilities, operating loss, and tax credit carryforwards and are measured using enacted tax rates expected to be in effect in the years the differences or carryforwards are anticipated to be recovered or settled. A valuation allowance is established when we believe that it is more likely than not that benefits of the deferred tax assets will not be realized.

Cash and Cash Equivalents and I

Cash and Cash Equivalents and Investments	6 Months Ended
	Jun. 30, 2015
Fair Value Disclosures [Abstract]
Cash and Cash Equivalents and Investments	Cash and Cash Equivalents and Investments Cash, cash equivalents and investments at June 30, 2015 and December 31, 2014 include all cash, money market funds, corporate debt securities, commercial paper and certificates of deposit. We consider our investments as available-for-sale. Available-for-sale securities are stated at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value: Level 1—Quoted prices in active markets for identical assets and liabilities, Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities, and Level 3—Unobservable inputs in which there is little or no market data available, which requires us to develop our own assumptions. We measure the fair value of money market funds based on quoted prices in active markets for identical assets or liabilities. All other financial instruments were valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. We did not hold any financial instruments categorized as Level 3 as of June 30, 2015 or December 31, 2014. Cash and cash equivalents and investments as of June 30, 2015 and December 31, 2014 consisted of the following (in thousands): June 30, 2015 Amortized Cost Gross Unrealized Fair Value Holding Gains Holding Losses Cash $ 1,382 $ — $ — $ 1,382 Level 1 Securities: Money market funds 6,425 — — 6,425 Level 2 Securities: U.S. government agencies 240 — — 240 Corporate debt securities 157,113 3 (284 ) 156,832 Certificates of deposit 9,620 10 (1 ) 9,629 $ 174,780 $ 13 $ (285 ) $ 174,508 December 31, 2014 Amortized Cost Gross Unrealized Fair Value Holding Gains Holding Losses Cash $ 767 $ — $ — $ 767 Level 1 Securities: Money market funds 17,771 — — 17,771 Level 2 Securities: Commercial paper 15,992 2 (1 ) 15,993 Corporate debt securities 131,586 — (398 ) 131,188 Certificates of deposit 22,115 4 (19 ) 22,100 $ 188,231 $ 6 $ (418 ) $ 187,819 As of June 30, 2015 , $2.2 million of certificates of deposit, $79.4 million of corporate debt securities and $0.2 million of U.S. government agencies mature in greater than one year, but less than two years. All other investment securities held at June 30, 2015 mature within 12 months. Market values were determined for each individual security in the investment portfolio. The declines in value of certain of these investments are primarily related to changes in interest rates and are considered to be temporary in nature. We evaluate, among other things, the duration and extent to which the fair value of a security is less than its cost, the financial condition of the issuer, and our intent to sell, or whether it is more likely than not we will be required to sell the security before recovery of the amortized cost basis. We do not consider these investments to be other-than-temporarily impaired as of June 30, 2015 .

Commitments and Contingencies

Commitments and Contingencies	6 Months Ended
	Jun. 30, 2015
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies Commitments In addition to the contractual commitments, which consist of operating leases for corporate office and laboratory space, disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014, we have not incurred any additional contractual obligations or commitments outside of the normal course of business other than the following: Severance and Change in Effective Control Agreements On March 24, 2015, our Board of Directors approved the terms of the Severance and Change in Effective Control Agreements to be entered into with each member of our management team and certain other employees. The Severance and Change in Effective Control Agreements provide that if the employee terminates for any reason or for no reason (including disability), voluntarily resigns for good reason (as defined in the agreement), or the employee dies, and the termination occurs within the six month period following a Qualifying Change in Effective Control (as defined in the Severance and Change in Effective Control Agreements), the employee will be entitled to an amount equal to the sum of six months of his or her monthly base salary, plus 50% of the employee’s annual target bonus for 2015, plus the premiums required to continue the employee’s group health care coverage for a period of six months following termination, which will be “grossed up” to cover taxes. The Severance and Change in Effective Control Agreements terminate upon the earlier of November 1, 2015 or the employee’s termination date (unless the termination is within six months following a Qualifying Change in Effective Control). On May 1, 2015, as a result of the actions taken by our shareholders at the Special Meeting, a Qualifying Change in Effective Control was deemed to have taken place under the terms of the Severance and Change in Effective Control Agreements. As of June 30, 2015 , payments totaling $0.5 million have been made under this plan and payments totaling an additional $0.2 million were accrued. Retention Pool On February 24, 2015, the compensation committee of the Board of Directors approved the creation of a pool of $0.6 million of which we accrued approximately $0.2 million through June 30, 2015 to be distributed at the discretion of the compensation committee to employees who remain employed with us on December 31, 2015. Allocations of the pool will not be determined until the fourth quarter of 2015. Special Shareholders' Meeting Expenses Dr. Ryo Kubota and SBI Holdings, Inc., our two largest shareholders, incurred certain fees and expenses totaling approximately $0.8 million in preparation for the May 1, 2015 Special Shareholders’ meeting. Our Board of Directors appointed a special committee (the "Special Committee") consisting entirely of independent directors to evaluate these expenses to determine if the expenses, or a portion thereof, should be reimbursed by the Company. The Special Committee met on June 8, 2015 and concluded that the reimbursement of these expenses was appropriate. Accordingly, the income statement for the three and six months ended June 30, 2015 reflects these expenses. As of June 30, 2015 , approximately $0.3 million of this amount remained payable. Litigation From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We are not currently a party to any material legal proceedings, and to our knowledge none is threatened. There can be no assurance that future legal proceedings arising in the ordinary course of business or otherwise will not have a material adverse effect on our financial position, results of operations or cash flows.

Net Income (Loss) Per Share

Net Income (Loss) Per Share	6 Months Ended
	Jun. 30, 2015
Earnings Per Share [Abstract]
Net Income (Loss) Per Share	Net Income (Loss) Per Share Immediately prior to the closing of our IPO, all outstanding shares of preferred stock were converted to common stock. We issued 9,200,000 shares of common stock in the IPO. In addition, 3,636,365 shares of common stock were issued upon the conversion of the contingently convertible debt held by a related party. As a result, as of June 30, 2015 , common stock is our only outstanding class of capital stock. Basic net income (loss) per share is calculated by dividing net income by the weighted average number of shares outstanding for the period. Diluted net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares of the common stock outstanding and other dilutive securities outstanding during the period. The potential dilutive shares of our common stock include the exercise of outstanding stock options that are dilutive and restricted stock units. The following tables reconcile the numerator and denominator used to calculate diluted net income per share for the periods presented (in thousands): Three months ended June 30, Six months ended June 30, 2015 2014 2015 2014 Numerator: Net income (loss) $ (9,738 ) $ 71 $ (13,678 ) $ 125 Denominator: Weighted-average shares outstanding—basic (shares) 36,241 35,641 36,026 29,918 Dilutive effect of stock options and RSUs (shares) — 226 — 281 Weighted average shares outstanding—diluted (shares) $ 36,241 $ 35,867 $ 36,026 $ 30,199 For the three and six months ended June 30, 2015 , 55,377 and 46,545 stock options and RSUs were excluded from the calculation of diluted net income (loss) per share because the impact was anti-dilutive.

Collaboration and License Agree

Collaboration and License Agreements	6 Months Ended
	Jun. 30, 2015
Revenue Recognition [Abstract]
Collaboration and License Agreements	Collaboration and License Agreements During the three and six months ended June 30, 2015 and 2014 , we recognized $7.2 million and $9.1 million , respectively, and $14.4 million and $19.6 million , respectively, of revenues in performance of the Emixustat Agreement. Continued Involvement of the CEO The Company’s collaboration arrangements with Otsuka require the continuing involvement of our Chief Executive Officer and President, Dr. Ryo Kubota. In the event of the departure of Dr. Kubota from the Company or a change in his role or responsibilities with the Company, the arrangements are subject to termination, at the option of Otsuka. For each agreement, this provision expires upon the approval of the New Drug Application, or "NDA", for the first indication in the United States.

Shareholders_ Equity and Share-

Shareholders’ Equity and Share-Based Compensation	6 Months Ended
	Jun. 30, 2015
Shareholders’ Equity and Share-Based Compensation [Abstract]
Shareholders’ Equity and Share-Based Compensation	Shareholders’ Equity and Share-Based Compensation Changes in Accumulated Other Comprehensive Loss (in thousands): Three months ended June 30, Six months ended June 30, 2015 2014 2015 2014 Beginning balance $ (77 ) $ (115 ) $ (361 ) $ (7 ) Current period other comprehensive gain (loss), net of tax (146 ) 10 138 (98 ) Ending balance $ (223 ) $ (105 ) $ (223 ) $ (105 ) The changes in accumulated other comprehensive loss relate to unrealized holding gains and losses in available-for-sale securities. Equity Awards On April 23, 2015, we granted 9,500 restricted stock units to employees. On May 1, 2015, we granted 358,692 restricted stock units to our Chief Financial Officer; 358,692 shares of restricted stock to our Chief Operating Officer; and, 118,369 shares of restricted stock and 240,323 options to our Chief Business Officer, respectively. If such officers are terminated, the shares of restricted stock are subject to repurchase over a four -year period, with 100% of the restricted stock subject to repurchase through May 1, 2016 and the remaining 75% of the restricted stock thereafter on a decreasing percentage on a monthly pro rata basis over the following three years, terminating on May 1, 2019. The options and restricted stock units are subject to a four year vesting, with 25% vesting on the first employment anniversary and the remaining 75% on a monthly pro rata basis over the ensuing three years, with the options and restricted stock units fully vesting four years from the grant date. Both the options and the restricted stock units are subject to accelerated vesting in the event of a change of control or termination of employment under certain circumstances. Amendments to Equity Incentive Plans and Share-based Awards On March 24, 2015, our Board of Directors approved amendments to outstanding equity awards granted under our 2002 Stock Option and Restricted Stock Plan, our 2012 Equity Incentive Plan, and our 2014 Equity Incentive Plan (collectively, the "Plans") to our employees, executive officers and non-employee members of our Board. The amendments provided that for employees and executive officers, following qualifying change in control and their employment is terminated without Cause or for Good Reason (as such terms are defined in the Severance and Change in Effective Control Agreements), then any unvested portion of the awards held by such terminated employees and executives will become immediately vested. In addition, our employees, executive officers and non-employee members of our Board will be permitted to exercise their awards up to twelve months after their termination. The modifications required acceptance by the option holders, and those acceptances were obtained in April 2015. It was determined that the events of the May 1, 2015 Special Shareholders Meeting constituted a Qualifying Change in Control as defined in the Plans. Accordingly, the vesting of options previously granted to our former non-employee directors was accelerated such that these equity awards were fully vested as of May 1, 2015. General and administrative expense related to the modification of these options and related to the acceleration of vesting in the second quarter of 2015 was not material. Vesting of Restricted Stock Units During the three months ended June 30, 2015 , employees subject to the Severance and Change in Control Agreement became vested in 194,431 shares of restricted stock units.

Income Taxes

Income Taxes	6 Months Ended
	Jun. 30, 2015
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes For the three and six months ended June 30, 2015 and 2014 , effective tax rates were 0% and 73% , respectively, and 0% and 75% , respectively. Due to our continuing losses, there is no difference between our statutory and effective tax rates.

Recent Accounting Pronouncement

Recent Accounting Pronouncements	6 Months Ended
	Jun. 30, 2015
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]
Recent Accounting Pronouncements	Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers . This ASU amends the existing accounting standards for revenue recognition. Under the new revenue recognition model, a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The ASU is effective in the first quarter of 2017. Early adoption is not permitted. The amendment may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We are currently evaluating the transition alternatives and impact on our financial statements.

Former CEO Severance

Former CEO Severance	6 Months Ended
	Jun. 30, 2015
Former CEO Severance [Abstract]
Former CEO Severance	Former CEO Severance Under Mr. O'Callaghan's employment agreement, dated October 14, 2014, the termination of Mr. O’Callaghan’s employment without Cause or for Good Reason (as such terms were defined in his employment agreement), entitled him to receive 18 months of salary, up to 18 months of the premiums for health benefit coverage provided under our COBRA program, and a pro-rated portion of his annual bonus (“the CEO severance amounts”). Mr. O'Callaghan resigned his position as our President and Chief Executive Officer, effective on May 3, 2015. The CEO severance amounts, totaling approximately $0.9 million in cash, were paid on May 11, 2015. In addition, pursuant to the terms of the 2014 Equity Incentive Plan, as amended, the vesting of his 712,480 options and 356,410 restricted stock units was accelerated such that all of his equity awards were fully vested as of May 3, 2015. In connection with the option modifications discussed in Note 7, Shareholders' Equity and Share-based Compensation, in April 2015, Mr. O'Callaghan's 712,480 options were modified to extend the post-termination exercise period from three months to twelve months. Stock compensation expense of $2.6 million related to the accelerated vesting of his options in connection with his termination. In addition, pursuant to the terms of the 2014 Equity Incentive Plan, as amended, the vesting of his 356,410 RSUs was accelerated such that these equity awards were fully vested as of May 3, 2015. We recognized general and administrative expense of approximately $2.0 million related to these RSUs in the six months ended June 30, 2015.

Subsequent Events

Subsequent Events	6 Months Ended
	Jun. 30, 2015
Subsequent Events [Abstract]
Subsequent Events	Subsequent Events On July 2, 2015, at a special meeting of the Board of Directors, the Board of Directors appointed Shintaro Asako and Dr. Shiro Mita as members of the Audit Committee, with Shintaro Asako to serve as the Chair of the Audit Committee. Eisaku Nakamura and Robert Takeuchi were appointed as members of the Compensation Committee, with Robert Takeuchi to serve as the Chair of the Compensation Committee. The Board of Directors approved granting 64,650 restricted stock units to employees and 4,200 restricted stock units to new hires with grant dates ranging from May 31, 2015 through to December 31, 2015 to vest annually over four years based on their anniversary hire dates. In addition, the Board approved the Company entering into an employment agreement to hire a Chief Strategy Officer which will provide him with restricted stock units equal to 1% of the outstanding common stock on July 2, 2015 on a fully diluted basis with an effective date of September 1, 2015. At the meeting of its Board of Directors held on August 4, 2015, the Board approved the Company entering into an employment agreement to hire a new Executive Vice President of Translational Medicine which will provide him with 0.35% of the outstanding common stock on July 2, 2015 on a fully diluted basis with an effective date of August 17, 2015. The shares of both the Chief Strategy Officer and the Executive Vice President of Translational Medicine are subject to a four year vesting, with 25% vesting on the first employment anniversary and the remaining 75% on a monthly pro rata basis over the ensuing three years, with the restricted stock units fully vesting four years from the employment anniversary date. The restricted stock units are subject to accelerated vesting in the event of a change of control or termination of employment under certain circumstances.

Significant Accounting Polici18

Significant Accounting Policies (Policies)	6 Months Ended
	Jun. 30, 2015
Accounting Policies [Abstract]
Unaudited Interim Financial Information	We have prepared the accompanying financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These financial statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of our balance sheets, operating results, and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for fiscal year 2015. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with the rules and regulations of the SEC. These financial statements should be read in conjunction with the audited financial statements and accompanying notes in Item 8 of Part II, “Financial Statements and Supplementary Data,” of our 2014 Annual Report on Form 10-K. Prior year presentation of cash flows includes a re-classification to conform with the current year presentation of purchased interest on marketable securities.
Use of Estimates	The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.
Segments	We operate in one segment, pharmaceutical product development. All of our significant assets are located in the United States. During the three and six months ended June 30, 2015 and 2014 , all revenue was generated in the United States.
Cash and Cash Equivalents	We consider investments in highly liquid instruments purchased with an original maturity at purchase of three months or less to be cash equivalents. The amounts are recorded at cost, which approximates fair value. Our cash equivalents consist of money market funds at June 30, 2015 and money market funds and certificates of deposit at December 31, 2014.
Investments	We have classified our entire investment portfolio, which consists of corporate debt securities, commercial paper and certificates of deposit, as available-for-sale. Available-for-sale securities are stated at fair value as of each balance sheet date based on market quotes, and unrealized gains and losses are reflected as a net amount under the caption of accumulated other comprehensive loss. Premiums or discounts arising at acquisition are amortized into earnings. We periodically evaluate whether declines in fair values of our investments below their cost are other-than-temporary. This evaluation consists of several qualitative and quantitative factors regarding the severity and duration of the unrealized loss, as well as whether it is more likely than not that we will hold the investment until recovery of its amortized cost basis. Realized gains and losses are calculated using the specific identification method. Realized gains and losses and declines in value judged to be other-than-temporary are recorded within the statements of income under the caption other income (expense). We consider an investment with a maturity greater than twelve months from the balance sheet date as long-term and a maturity less than twelve months as short-term at the balance sheet date.
Concentration of Credit Risk	Our accounts receivable, as of June 30, 2015 and December 31, 2014, consist of amounts due from our collaborations with Otsuka. There was no allowance for doubtful accounts for the periods presented, as we believe all outstanding amounts will be paid based on our contractual arrangements with Otsuka and history of successful collections thereunder and collateral is not required. Revenue recognized for the three and six month periods ended June 30, 2015 and 2014 consist of amounts derived from our collaboration agreements with Otsuka.
Income Taxes	We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have already been recognized in the financial statements or tax returns. Excess tax benefits associated with stock option exercises and other equity awards are credited to stockholders' equity. Deferred tax liabilities and assets are based on the difference between financial statement carrying amounts and the tax basis of assets and liabilities, operating loss, and tax credit carryforwards and are measured using enacted tax rates expected to be in effect in the years the differences or carryforwards are anticipated to be recovered or settled. A valuation allowance is established when we believe that it is more likely than not that benefits of the deferred tax assets will not be realized.
Recent Accounting Pronouncements	In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers . This ASU amends the existing accounting standards for revenue recognition. Under the new revenue recognition model, a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The ASU is effective in the first quarter of 2017. Early adoption is not permitted. The amendment may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We are currently evaluating the transition alternatives and impact on our financial statements.

Cash and Cash Equivalents and19

Cash and Cash Equivalents and Investments (Tables)	6 Months Ended
	Jun. 30, 2015
Fair Value Disclosures [Abstract]
Schedule of Cash and Cash Equivalents and Investments	Cash and cash equivalents and investments as of June 30, 2015 and December 31, 2014 consisted of the following (in thousands): June 30, 2015 Amortized Cost Gross Unrealized Fair Value Holding Gains Holding Losses Cash $ 1,382 $ — $ — $ 1,382 Level 1 Securities: Money market funds 6,425 — — 6,425 Level 2 Securities: U.S. government agencies 240 — — 240 Corporate debt securities 157,113 3 (284 ) 156,832 Certificates of deposit 9,620 10 (1 ) 9,629 $ 174,780 $ 13 $ (285 ) $ 174,508 December 31, 2014 Amortized Cost Gross Unrealized Fair Value Holding Gains Holding Losses Cash $ 767 $ — $ — $ 767 Level 1 Securities: Money market funds 17,771 — — 17,771 Level 2 Securities: Commercial paper 15,992 2 (1 ) 15,993 Corporate debt securities 131,586 — (398 ) 131,188 Certificates of deposit 22,115 4 (19 ) 22,100 $ 188,231 $ 6 $ (418 ) $ 187,819

Net Income (Loss) Per Share (Ta

Net Income (Loss) Per Share (Tables)	6 Months Ended
	Jun. 30, 2015
Earnings Per Share [Abstract]
Schedule of Earnings Per Share, Basic and Diluted	The following tables reconcile the numerator and denominator used to calculate diluted net income per share for the periods presented (in thousands): Three months ended June 30, Six months ended June 30, 2015 2014 2015 2014 Numerator: Net income (loss) $ (9,738 ) $ 71 $ (13,678 ) $ 125 Denominator: Weighted-average shares outstanding—basic (shares) 36,241 35,641 36,026 29,918 Dilutive effect of stock options and RSUs (shares) — 226 — 281 Weighted average shares outstanding—diluted (shares) $ 36,241 $ 35,867 $ 36,026 $ 30,199

Shareholders_ Equity and Shar21

Shareholders’ Equity and Share-Based Compensation (Tables)	6 Months Ended
	Jun. 30, 2015
Shareholders’ Equity and Share-Based Compensation [Abstract]
Changes in Accumulated Other Comprehensive Loss	Changes in Accumulated Other Comprehensive Loss (in thousands): Three months ended June 30, Six months ended June 30, 2015 2014 2015 2014 Beginning balance $ (77 ) $ (115 ) $ (361 ) $ (7 ) Current period other comprehensive gain (loss), net of tax (146 ) 10 138 (98 ) Ending balance $ (223 ) $ (105 ) $ (223 ) $ (105 )

Business and Basis of Present22

Business and Basis of Presentation (Narrative) (Details)	6 Months Ended
	Jun. 30, 2015segment
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of operating segments	1

Cash and Cash Equivalents and23

Cash and Cash Equivalents and Investments (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash	$ 1,382	$ 767
Amortized Cost	174,780	188,231
Gross Unrealized Holding Gains	13	6
Gross Unrealized Holding Losses	(285)	(418)
Fair Value	174,508	187,819
Level 1 Securities | Money market funds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Amortized Cost	6,425	17,771
Gross Unrealized Holding Gains	0	0
Gross Unrealized Holding Losses	0	0
Fair Value	6,425	17,771
Level 2 Securities | Commercial paper
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Amortized Cost		15,992
Gross Unrealized Holding Gains		2
Gross Unrealized Holding Losses		(1)
Fair Value		15,993
Level 2 Securities | US Government agencies
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Amortized Cost	240
Gross Unrealized Holding Gains	0
Gross Unrealized Holding Losses	0
Fair Value	240
Level 2 Securities | Corporate debt securities
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Amortized Cost	157,113	131,586
Gross Unrealized Holding Gains	3	0
Gross Unrealized Holding Losses	(284)	(398)
Fair Value	156,832	131,188
Level 2 Securities | Certificates of deposit
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Amortized Cost	9,620	22,115
Gross Unrealized Holding Gains	10	4
Gross Unrealized Holding Losses	(1)	(19)
Fair Value	$ 9,629	$ 22,100

Cash and Cash Equivalents and24

Cash and Cash Equivalents and Investments (Narrative) (Details) $ in Millions	Jun. 30, 2015USD ($)
Certificates of deposit
Schedule of Available-for-sale Securities [Line Items]
Securities maturing from year one to year two	$ 2.2
Corporate debt securities
Schedule of Available-for-sale Securities [Line Items]
Securities maturing from year one to year two	79.4
US Government agencies
Schedule of Available-for-sale Securities [Line Items]
Securities maturing from year one to year two	$ 0.2

Commitments and Contingencies (

Commitments and Contingencies (Narrative) (Details) - USD ($) $ in Millions	Mar. 24, 2015	Jun. 30, 2015	Feb. 24, 2015
Related Party Transaction [Line Items]
Percent of employee’s annual target bonus for 2015	50.00%
Payments under equity award agreement		$ 0.5
Accrued payments under equity award agreement		0.2
Retention pool			$ 0.6
Retention pool, accrued amount			$ 0.2
Dr. Kubota and SBI Holding [Member]
Related Party Transaction [Line Items]
Costs and expenses, related party		0.8
Due to related parties		$ 0.3

Net Income (Loss) Per Share (De

Net Income (Loss) Per Share (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended
	Feb. 28, 2014	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Class of Stock [Line Items]
Net income (loss)		$ (9,738)	$ 71	$ (13,678)	$ 125
Weighted-average shares outstanding—basic (shares)		36,241,000	35,641,000	36,026,000	29,918,000
Dilutive effect of stock options and RSUs (shares)		0	226,000	0	281,000
Weighted average shares outstanding—diluted (shares)		36,241,000	35,867,000	36,026,000	30,199,000
Antidilutive securities excluded from the calculation of diluted net income (loss) per share		55,377		46,545
Common Stock
Class of Stock [Line Items]
IPO, shares issued	9,200,000
Common Stock | Affiliated Entity | IPO
Class of Stock [Line Items]
Number of shares issued through debt conversion	3,636,365

Collaboration and License Agr27

Collaboration and License Agreements (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenue Recognition, Milestone Method [Line Items]
Revenue from collaborations	$ 7,181	$ 9,086	$ 14,396	$ 19,632
Collaborative Arrangement, Product
Revenue Recognition, Milestone Method [Line Items]
Revenue from collaborations	$ 7,200	$ 9,100	$ 14,400	$ 19,600

Shareholders_ Equity and Shar28

Shareholders’ Equity and Share-Based Compensation (Changes in AOCI) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning balance	$ (77)	$ (115)	$ (361)	$ (7)
Current period other comprehensive gain (loss), net of tax	(146)	10	138	(98)
Ending balance	$ (223)	$ (105)	$ (223)	$ (105)

Shareholders_ Equity and Shar29

Shareholders’ Equity and Share-Based Compensation (Narrative) (Details) - shares	May. 01, 2015	Apr. 23, 2015	Jun. 30, 2015
Chief Business Officer
Class of Stock [Line Items]
Options granted	240,323
Restricted Stock Units (RSUs)
Class of Stock [Line Items]
Vested units			194,431
Restricted Stock Units (RSUs) | Employee
Class of Stock [Line Items]
Equity instruments, granted		9,500
Restricted Stock Units (RSUs) | Chief Financial Officer
Class of Stock [Line Items]
Equity instruments, granted	358,692
Restricted Stock
Class of Stock [Line Items]
Repurchase period	4 years
Restricted Stock | Chief Operating Officer
Class of Stock [Line Items]
Equity instruments, granted	358,692
Restricted Stock | Chief Business Officer
Class of Stock [Line Items]
Equity instruments, granted	118,369
Restricted Stock | Chief Operating Officer and Chief Business Officer | Through May 1, 2016
Class of Stock [Line Items]
Percent of repurchase	100.00%
Restricted Stock | Chief Operating Officer and Chief Business Officer | On a Monthly Pro Rata Basis Over the Next Three Years
Class of Stock [Line Items]
Percent of repurchase	75.00%
Employee Stock Option
Class of Stock [Line Items]
Share-based compensation, vesting period	4 years
Employee Stock Option | On the First Employment Anniversary
Class of Stock [Line Items]
Vesting percentage	25.00%
Employee Stock Option | On a Monthly Pro Rata Basis Over the Next Three Years
Class of Stock [Line Items]
Vesting percentage	75.00%

Income Taxes (Narrative) (Detai

Income Taxes (Narrative) (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Tax Disclosure [Abstract]
Effective tax rate	0.00%	0.00%	73.00%	75.00%

Former CEO Severance (Details)

Former CEO Severance (Details) - USD ($) $ in Thousands	May. 03, 2015	Oct. 14, 2014	Apr. 30, 2015	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	May. 11, 2015
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items]
Stock-based compensation						$ 5,456	$ 383
General and administrative expense				$ 11,542	$ 2,481	17,050	$ 4,842
Restricted Stock Units (RSUs)
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items]
Vested units				194,431
General and administrative expense						$ 2,000
Chief Executive Officer
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items]
Severance term		18 months
Severance benefit term		18 months
Severance escrow, funded amount								$ 900
Vested options	712,480
Options modified			712,480
Stock-based compensation
Incremental compensation cost			$ 2,600
Chief Executive Officer | Restricted Stock Units (RSUs)
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items]
Vested units	356,410

Subsequent Events (Details)

Subsequent Events (Details) - Restricted Stock Units (RSUs) - shares	Aug. 04, 2015	Jul. 02, 2015	Apr. 23, 2015
Employee
Subsequent Event [Line Items]
Equity instruments, granted			9,500
Subsequent Event | Employee
Subsequent Event [Line Items]
Equity instruments, granted		64,650
Subsequent Event | New Hires
Subsequent Event [Line Items]
Equity instruments, granted		4,200
Subsequent Event | Employees and New Hires [Member]
Subsequent Event [Line Items]
Share-based compensation, vesting period		4 years
Subsequent Event | Chief Strategy Officer [Member]
Subsequent Event [Line Items]
Percent of outstanding common stock granted		1.00%
Subsequent Event | Executive Vice President of Translational Medicine [Member]
Subsequent Event [Line Items]
Percent of outstanding common stock granted	0.35%
Subsequent Event | Chief Strategy Officer and Executive Vice President of Translational Medicine [Member]
Subsequent Event [Line Items]
Share-based compensation, vesting period		4 years
Subsequent Event | Chief Strategy Officer and Executive Vice President of Translational Medicine [Member] | On the First Employment Anniversary
Subsequent Event [Line Items]
Vesting percentage		25.00%
Subsequent Event | Chief Strategy Officer and Executive Vice President of Translational Medicine [Member] | On a Monthly Pro Rata Basis Over the Next Three Years
Subsequent Event [Line Items]
Vesting percentage		75.00%