Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2015 | Jul. 31, 2015 | |
Entity Registrant Name | IRONWOOD PHARMACEUTICALS INC | |
Entity Central Index Key | 1,446,847 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q2 | |
Class A common stockholders | ||
Entity Common Stock, Shares Outstanding | 126,676,412 | |
Class B common stock | ||
Entity Common Stock, Shares Outstanding | 15,898,444 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2015 | Dec. 31, 2014 |
Current assets: | ||
Cash and cash equivalents | $ 256,450 | $ 74,297 |
Available-for-sale securities | 236,865 | 174,037 |
Accounts receivable | 1,057 | 10 |
Related party accounts receivable, net | 25,992 | 25,829 |
Inventory | 0 | 4,954 |
Prepaid expenses and other current assets | 6,595 | 9,180 |
Total current assets | 526,959 | 288,307 |
Restricted cash | 8,147 | 8,147 |
Property and equipment, net | 25,017 | 29,826 |
Convertible note hedges | 90,314 | |
Other assets | 3,504 | 3,042 |
Total assets | 653,941 | 329,322 |
Current liabilities: | ||
Accounts payable and related party accounts payable, net | 6,650 | 9,762 |
Accrued research and development costs | 5,530 | 3,574 |
Accrued expenses | 18,945 | 22,612 |
Current portion of capital lease obligations | 1,203 | 1,152 |
Current portion of deferred rent | 5,009 | 4,992 |
Current portion of deferred revenue | 7,191 | 7,191 |
Current portion of PhaRMA notes payable | 17,571 | 11,258 |
Total current liabilities | 62,099 | 60,541 |
Capital lease obligations, net of current portion | 1,959 | 2,571 |
Deferred rent, net of current portion | 8,821 | 10,522 |
Deferred revenue, net of current portion | 5,393 | 8,989 |
Note hedge warrants | 69,456 | |
Convertible senior notes | 214,292 | |
PhaRMA notes payable, net of current portion | 147,793 | $ 158,147 |
Other liabilities | $ 3,845 | |
Commitments and contingencies | ||
Stockholders' equity: | ||
Preferred stock, $0.001 par value, 75,000,000 shares authorized, no shares issued and outstanding | ||
Additional paid-in capital | $ 1,188,807 | $ 1,055,876 |
Accumulated deficit | (1,048,688) | (967,446) |
Accumulated other comprehensive income (loss) | 22 | (19) |
Total stockholders' equity | 140,283 | 88,552 |
Total liabilities and stockholders' equity | 653,941 | 329,322 |
Class A common stockholders | ||
Stockholders' equity: | ||
Common stock | 126 | 125 |
Class B common stock | ||
Stockholders' equity: | ||
Common stock | $ 16 | $ 16 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2015 | Dec. 31, 2014 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 75,000,000 | 75,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Class A common stockholders | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 126,414,773 | 124,915,658 |
Common stock, shares outstanding | 126,414,773 | 124,915,658 |
Class B common stock | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 16,153,146 | 15,907,272 |
Common stock, shares outstanding | 16,153,146 | 15,907,272 |
Condensed Consolidated Statemen
Condensed Consolidated 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 | |
Consolidated Statements of Operations | ||||
Collaborative arrangements revenue | $ 27,744 | $ 6,840 | $ 56,676 | $ 21,445 |
Cost and expenses: | ||||
Cost of revenue | 8,150 | 10,518 | 8,162 | 12,442 |
Research and development | 28,648 | 22,142 | 55,289 | 49,286 |
Selling, general and administrative | 32,955 | 29,299 | 63,301 | 59,223 |
Total cost and expenses | 69,753 | 61,959 | 126,752 | 120,951 |
Loss from operations | (42,009) | (55,119) | (70,076) | (99,506) |
Other (expense) income: | ||||
Interest expense | (5,874) | (5,303) | (11,094) | (10,586) |
Interest and investment income | 71 | 65 | 136 | 109 |
Loss on derivatives | (208) | (208) | ||
Other expense, net | (6,011) | (5,238) | (11,166) | (10,477) |
Net loss | $ (48,020) | $ (60,357) | $ (81,242) | $ (109,983) |
Net loss per share - basic and diluted | $ (0.34) | $ (0.44) | $ (0.57) | $ (0.82) |
Weighted average number of common shares used in net loss per share - basic and diluted: | 142,098 | 138,315 | 141,690 | 134,053 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Consolidated Statements of Comprehensive Loss | ||||
Net loss | $ (48,020) | $ (60,357) | $ (81,242) | $ (109,983) |
Other comprehensive income: | ||||
Unrealized gains on available-for-sale securities | 19 | 15 | 41 | 1 |
Total other comprehensive income | 19 | 15 | 41 | 1 |
Comprehensive loss | $ (48,001) | $ (60,342) | $ (81,201) | $ (109,982) |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Cash flows from operating activities: | ||
Net loss | $ (81,242) | $ (109,983) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 6,043 | 6,211 |
Share-based compensation expense | 12,329 | 12,086 |
Change in fair value of note hedge warrants | (1,393) | |
Change in fair value of convertible note hedges | 1,601 | |
Write-down of inventory to net realizable value and loss on non-cancelable purchase commitments | 8,150 | 8,894 |
Accretion of discount/ premium on investment securities | 298 | 466 |
Non-cash interest expense | 1,170 | 788 |
Changes in assets and liabilities: | ||
Accounts receivable and related party accounts receivable | (1,210) | (1,242) |
Prepaid expenses and other current assets | 2,676 | (84) |
Inventory | 4 | 272 |
Other assets | (462) | (116) |
Accounts payable, related party accounts payable and accrued expenses | (5,978) | (7,691) |
Accrued research and development costs | 1,956 | (1,177) |
Deferred revenue | (3,596) | (1,164) |
Deferred rent | (1,684) | (1,364) |
Net cash used in operating activities | (61,338) | (94,104) |
Cash flows from investing activities: | ||
Purchases of available-for-sale securities | (202,091) | (206,943) |
Sales and maturities of available-for-sale securities | 139,006 | 121,969 |
Purchases of property and equipment | (2,840) | (2,023) |
Proceeds from sale of property and equipment | 27 | |
Net cash used in investing activities | (65,898) | (86,997) |
Cash flows from financing activities: | ||
Proceeds from issuance of convertible senior notes | 335,699 | |
Proceeds from issuance of common stock | 190,428 | |
Proceeds from issuance of note hedge warrants | 70,849 | |
Purchase of convertible note hedges | (91,915) | |
Costs associated with issuance of convertible senior notes | (10,930) | |
Proceeds from exercise of stock options issued employee stock purchase plan | 10,941 | 11,064 |
Payments on capital lease | (561) | (524) |
Principal payments on PhaRMA notes | (4,694) | |
Net cash provided by financing activities | 309,389 | 200,968 |
Net increase in cash and cash equivalents | 182,153 | 19,867 |
Cash and cash equivalents, beginning of period | 74,297 | 75,490 |
Cash and cash equivalents, end of period | $ 256,450 | $ 95,357 |
Nature of Business
Nature of Business | 6 Months Ended |
Jun. 30, 2015 | |
Nature of Business | |
Nature of Business | 1. Nature of Business Overview Ironwood Pharmaceuticals, Inc. (the “Company”) is an entrepreneurial pharmaceutical company focused on creating medicines that make a difference for patients, building value to earn the continued support of its fellow shareholders, and empowering its team to passionately pursue excellence. The Company’s core strategy is to establish a leading gastrointestinal (“GI”) therapeutics company, leveraging its development and commercial capabilities in addressing GI disorders as well as its pharmacologic expertise in guanylate cyclase (“GC”) pathways. The Company has one marketed product, linaclotide, which is available in the United States (“U.S.”) and Mexico under the trademarked name LINZESS ® and is available in certain European countries and Canada under the trademarked name CONSTELLA ® . Linaclotide is also being developed and commercialized in other parts of the world by certain of the Company’s partners. In August 2012, the U.S. Food and Drug Administration (“FDA”) approved LINZESS as a once-daily treatment for adult men and women suffering from irritable bowel syndrome with constipation (“IBS-C”) or chronic idiopathic constipation (“CIC”). The Company and Allergan plc (“Allergan”), formerly Actavis plc, began commercializing LINZESS in the U.S. in December 2012. In November 2012, the European Commission granted marketing authorization to CONSTELLA for the symptomatic treatment of moderate to severe IBS-C in adults. CONSTELLA is the first, and to date, only drug approved in the European Union (“E.U.”) for IBS-C. The Company’s European partner, Almirall, S.A. (“Almirall”), began commercializing CONSTELLA in Europe in the second quarter of 2013. Currently, CONSTELLA is commercially available in certain European countries, including the United Kingdom, Italy and Spain. In May 2014, Almirall suspended commercialization of CONSTELLA in Germany following an inability to reach agreement with the German National Association of Statutory Health Insurance Funds on a reimbursement price that reflects the innovation and value of CONSTELLA. Almirall is assessing all possibilities to facilitate continued access to CONSTELLA for appropriate patients in Germany. In December 2013 and February 2014, linaclotide was approved in Canada and Mexico, respectively, as a treatment for adult women and men suffering from IBS-C or CIC. Allergan has exclusive rights to commercialize linaclotide in Canada as CONSTELLA and, through a sublicense from Allergan, Almirall has exclusive rights to commercialize linaclotide in Mexico as LINZESS. In May 2014, Allergan began commercializing CONSTELLA in Canada and in June 2014, Almirall began commercializing LINZESS in Mexico. Astellas Pharma Inc. (“Astellas”), the Company’s partner in Japan, is developing linaclotide for the treatment of patients with IBS-C and chronic constipation in its territory. In October 2014, Astellas initiated a double-blind, placebo-controlled Phase III clinical trial of linaclotide in adult patients with IBS-C. In October 2012, the Company entered into a collaboration agreement with AstraZeneca AB (“AstraZeneca”) to co-develop and co-commercialize linaclotide in China, Hong Kong and Macau, with AstraZeneca having primary responsibility for the local operational execution. In July 2015, the Company and AstraZeneca reported positive top-line data from a double-blind, placebo-controlled Phase III clinical trial of linaclotide in adult patients with IBS-C. The Company continues to assess alternatives to bring linaclotide to IBS-C and CIC sufferers in the parts of the world outside of its partnered territories. The Company and Allergan are also exploring development opportunities to enhance the clinical profile of LINZESS by seeking to expand its utility in its indicated populations, as well as studying linaclotide in additional indications and populations and in new formulations to assess its potential to treat various GI conditions. In November 2014, as part of this strategy, the Company and Allergan initiated a Phase III clinical trial in the U.S. evaluating a 72 mcg dose of linaclotide in adult patients with CIC to provide a broader range of treatment options to physicians and adult CIC patients. In addition to linaclotide-based opportunities, the Company is advancing multiple GI development programs as well as further leveraging the pharmacological expertise in GC pathways that it established through the development of linaclotide, a guanylate cyclase type-C agonist, to advance a second GC program targeting soluble guanylate cyclase (“sGC”). sGC is a validated mechanism with the potential for broad therapeutic utility and multiple opportunities for product development in cardiovascular disease and other indications. In June 2015, the Company issued approximately $335.7 million in aggregate principal amount of 2.25% Convertible Senior Notes due 2022 (the “2022 Notes”). The Company received net proceeds of approximately $324.0 million from the sale of the 2022 Notes, after deducting fees and expenses of approximately $11.7 million (Note 9). Basis of Presentation The accompanying condensed consolidated financial statements and the related disclosures are unaudited and have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”). Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the Securities and Exchange Commission on February 18, 2015 (the “2014 Annual Report on Form 10-K”). The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all normal recurring adjustments considered necessary for a fair presentation of the Company’s financial position as of June 30, 2015, and the results of its operations for the three and six months ended June 30, 2015 and 2014 and its cash flows for the six months ended June 30, 2015 and 2014. The results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the full year or any other subsequent interim period. Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of Ironwood Pharmaceuticals, Inc. and its wholly owned subsidiaries, Ironwood Pharmaceuticals Securities Corporation and Ironwood Pharmaceuticals GmbH. All intercompany transactions and balances are eliminated in consolidation. Use of Estimates The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires the Company’s management to make estimates and judgments that may affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company’s management evaluates its estimates, including those related to revenue recognition, available-for-sale securities, inventory valuation and related reserves, impairment of long-lived assets, initial valuation procedures for the issuance of convertible notes, fair value of derivatives, balance sheet classification of notes payable and convertible notes, income taxes including the valuation allowance for deferred tax assets, research and development expense, contingencies and share-based compensation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. Changes in estimates are reflected in reported results in the period in which they become known. Summary of Significant Accounting Policies The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” in the Company’s 2014 Annual Report on Form 10-K. During the three months ended June 30, 2015, the Company adopted the following accounting policies: Deferred Financing Costs On April 7, 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires debt issuance costs to be presented in an entity’s balance sheet as a direct deduction from the associated debt liability. While the standard is retrospectively effective for annual reporting periods beginning after December 15, 2015, early adoption is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued. The Company has elected early adoption in the three months ended June 30, 2015, which resulted in a balance sheet reclassification of issuance costs in connection with the 11% PhaRMA Notes due 2024 (the “PhaRMA Notes”) of approximately $1.4 million recorded in prepaid expenses and other current assets and approximately $2.8 million in other assets to a reduction in PhaRMA notes payable. The financing costs incurred in connection with the issuance of the Company’s 2022 Notes were recorded as a reduction in the carrying value of such debt. The Company’s adoption of this standard did not have a significant impact on its results of operations or cash flows for the three or six months ended June 30, 2015. Derivative Assets and Liabilities In June 2015, in connection with the issuance of the 2022 Notes, the Company entered into convertible note hedge transactions (the “Convertible Note Hedges”). Concurrently with entering into the Convertible Note Hedges, the Company also entered into certain warrant transactions in which it sold note hedge warrants (the “Note Hedge Warrants”) to the Convertible Note Hedge counterparties to acquire 20,249,665 shares of the Company’s Class A common stock, subject to customary anti-dilution adjustments (Note 9). These instruments were assessed by the Company to be derivative financial instruments, as it was determined that the instruments meet the criteria for classification as derivatives under Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging (“ASC 815”). The derivatives are recorded as assets or liabilities at fair value using the Black-Scholes option pricing model, and the changes in fair value are immediately recorded as a component of other (expense) income in the Condensed Consolidated Statements of Operations, as the derivatives had not been formally designated as hedges for accounting purposes in accordance with ASC 815. New Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition , and most industry-specific guidance. The new standard requires that an entity 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 update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this update recognized at the date of initial application. In July 2015, the FASB approved a one year deferral of the effective date of this standard to annual reporting periods, and interim reporting periods within those years, beginning after December 15, 2017. Early adoption is permitted to the original effective date of December 15, 2016, including interim reporting periods within those years. The Company is currently evaluating the potential impact that ASU 2014-09 may have on its financial position and results of operations. For a discussion of additional recent accounting pronouncements please refer to Note 2, “Summary of Significant Accounting Policies,” in the Company’s 2014 Annual Report on Form 10-K. The Company did not adopt any other new accounting pronouncements during the three or six months ended June 30, 2015 that had a material effect on the Company’s condensed consolidated financial statements. |
Net Loss Per Share
Net Loss Per Share | 6 Months Ended |
Jun. 30, 2015 | |
Net Loss Per Share | |
Net Loss Per Share | 2. Net Loss Per Share Basic and diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. In June 2015, in connection with the issuance of approximately $335.7 million in aggregate principal amount of the 2022 Notes, the Company entered into the Convertible Note Hedges. The Convertible Note Hedges are generally expected to reduce the potential dilution to the Company’s Class A common stockholders upon conversion of the 2022 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 2022 Notes in the event that the market price per share of the Company’s Class A common stock, as measured under the terms of the Convertible Note Hedges, is greater than the conversion price of the 2022 Notes (Note 9). The Convertible Note Hedges are not considered for purposes of calculating the number of diluted weighted average shares outstanding, as their effect would be antidilutive. Concurrently with entering into the Convertible Note Hedges, the Company also entered Note Hedge Warrants to the Convertible Note Hedge counterparties to acquire 20,249,665 shares of the Company’s Class A common stock, subject to customary anti-dilution adjustments. The Note Hedge Warrants could have a dilutive effect on the Class A common stock to the extent that the market price per share of the Class A common stock exceeds the applicable strike price of such warrants (Note 9). The following table sets forth potential common shares subject to repurchase and issuable upon the exercise of outstanding options, the exercise of the Note Hedge Warrants, the vesting of restricted stock units and the conversion of the 2022 Notes, all of which have been excluded from the computation of diluted weighted average shares outstanding as they would be anti-dilutive (in thousands): Six Months Ended June 30, 2015 2014 Options to purchase common stock Shares subject to repurchase Restricted stock units — Note hedge warrants — 2022 Notes — The number of shares issuable under the Company’s employee stock purchase plan that were excluded from the calculation of diluted weighted average shares outstanding because their effects would be anti-dilutive was insignificant. |
Collaboration and License Agree
Collaboration and License Agreements | 6 Months Ended |
Jun. 30, 2015 | |
Collaboration and License Agreements | |
Collaboration and License Agreements | 3. Collaboration and License Agreements At June 30, 2015, the Company had linaclotide collaboration agreements with Allergan and AstraZeneca, and linaclotide license agreements with Almirall and Astellas. The Company also had a co-promotion agreement with Exact Sciences Corp. (“Exact Sciences”) to co-promote Cologuard ® . The following table provides amounts included in the Company’s consolidated statements of operations as collaborative arrangements revenue attributable to transactions from these arrangements (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014 Allergan plc $ $ $ $ AstraZeneca AB Almirall, S.A. Astellas Pharma Inc. Exact Sciences Corp. — — Total collaborative arrangements revenue $ $ $ $ Allergan plc In September 2007, the Company entered into a collaboration agreement with Allergan to develop and commercialize linaclotide for the treatment of IBS-C, CIC and other GI conditions in North America. Under the terms of this collaboration agreement, the Company shares equally with Allergan all development costs as well as net profits or losses from the development and sale of linaclotide in the U.S. The Company receives royalties in the mid-teens percent based on net sales in Canada and Mexico. Allergan is solely responsible for the further development, regulatory approval and commercialization of linaclotide in those countries and funding any costs. In September 2012, Allergan sublicensed its commercialization rights in Mexico to Almirall. Allergan made non-refundable, up-front payments totaling $70.0 million to the Company in order to obtain rights to linaclotide in North America. Because the license to jointly develop and commercialize linaclotide did not have a standalone value without research and development activities provided by the Company, the Company recorded the up-front license fee as collaborative arrangements revenue on a straight-line basis through September 30, 2012, the period over which linaclotide was jointly developed under the collaboration. The collaboration agreement also includes contingent milestone payments, as well as a contingent equity investment, based on the achievement of specific development and commercial milestones. At June 30, 2015, $205.0 million in license fees and development milestone payments had been received by the Company, as well as a $25.0 million equity investment in the Company’s capital stock. The Company can also achieve up to $100.0 million in a sales-related milestone if certain conditions are met. The collaboration agreement included a contingent equity investment, in the form of a forward purchase contract, which required Allergan to purchase shares of the Company’s convertible preferred stock upon achievement of a specific development milestone. At the inception of the arrangement, the Company valued the contingent equity investment and recorded an approximately $9.0 million asset and incremental deferred revenue. The $9.0 million of incremental deferred revenue was recognized as collaborative arrangements revenue on a straight-line basis over the period of the Company’s continuing involvement through September 30, 2012. In July 2009, the Company achieved the development milestone triggering the equity investment and reclassified the forward purchase contract as a reduction to convertible preferred stock. On September 1, 2009, the Company issued 2,083,333 shares of convertible preferred stock to Allergan (Note 11). The Company achieved all six development milestones under this agreement totaling $135.0 million, which were recognized through September 2012. The remaining milestone payment that could be received from Allergan upon the achievement of sales targets will be recognized as collaborative arrangements revenue as earned. As a result of the research and development cost-sharing provisions of the collaboration, the Company offset approximately $4.4 million and approximately $11.9 million against research and development costs during the three and six months ended June 30, 2015, respectively, and approximately $1.5 million and approximately $2.1 million during the three and six months ended June 30, 2014, respectively, to reflect each Company’s obligation under the collaboration to bear half of the development costs incurred. In addition, in March 2015, the Company and Allergan agreed to share certain costs relating to the manufacturing of linaclotide active pharmaceutical ingredient (“API”) and certain other manufacturing activities. This arrangement resulted in net amounts received from Allergan of approximately $4.3 million for costs incurred in prior periods, which were recorded by the Company as a reduction in research and development expenses during the three months ended March 31, 2015. The Company receives 50% of the net profits and bears 50% of the net losses from the commercial sale of LINZESS in the U.S.; provided, however, that if either party provides fewer calls on physicians in a particular year than it is contractually required to provide, such party’s share of the net profits will be adjusted as stipulated by the collaboration agreement. Net profits or net losses consist of net sales to third-party customers and sublicense income in the U.S. less cost of goods sold as well as selling, general and administrative expenses. Net sales are calculated and recorded by Allergan and may include gross sales net of discounts, rebates, allowances, sales taxes, freight and insurance charges, and other applicable deductions. The Company records its share of the net profits or net losses from the sale of LINZESS on a net basis and presents the settlement payments to and from Allergan as collaboration expense or collaborative arrangements revenue, as applicable. The Company and Allergan began commercializing LINZESS in the U.S. in December 2012. The following table presents the amounts recorded by the Company for commercial efforts related to LINZESS in the U.S. in the three and six months ended June 30, 2015 and 2014 (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014 Collaborative arrangements revenue (1) (2) $ $ $ $ Selling, general and administrative costs incurred by the Company (1) ) ) ) ) The Company’s share of net profit $ $ ) $ $ ) (1) Includes only collaborative arrangement revenue or selling, general and administrative costs attributable to the cost-sharing arrangement with Allergan . (2) Includes a net profit share adjustment payable to Allergan of approximately $1.2 million and $2.4 million recorded during the three and six months ended June 30, 2015, respectively, and a net profit share adjustment received from Allergan of approximately $2.3 million recorded during the three months ended June 30, 2014, as described above. The collaborative arrangements revenue recognized in the three and six months ended June 30, 2015 and 2014 primarily represents the Company’s share of the net profits and net losses on the sale of LINZESS in the U.S. In May 2014, Allergan began commercializing CONSTELLA in Canada and in June 2014, Almirall began commercializing LINZESS in Mexico. The Company records royalties on sales of CONSTELLA in Canada and LINZESS in Mexico one quarter in arrears as it does not have access to the royalty reports from its partners or the ability to estimate the royalty revenue in the period earned. The Company recognized an insignificant amount and approximately $0.3 million of royalty revenues in Canada and Mexico during the three and six months ended June 30, 2015, respectively. Almirall, S.A. In April 2009, the Company entered into a license agreement with Almirall to develop and commercialize linaclotide in Europe (including the Commonwealth of Independent States and Turkey) for the treatment of IBS-C, CIC and other GI conditions. Under the terms of the license agreement, Almirall is responsible for the expenses associated with the development and commercialization of linaclotide in the European territory and the Company is required to participate on a joint development committee over linaclotide’s development period and a joint commercialization committee while the product is being commercialized. In May 2009, the Company received an approximately $38.0 million payment from Almirall representing a $40.0 million non-refundable up-front payment net of foreign withholding taxes. The Company elected to record the non-refundable up-front payment net of taxes withheld. The license agreement also included a $15.0 million contingent equity investment, in the form of a forward purchase contract, which required Almirall to purchase shares of the Company’s convertible preferred stock upon achievement of a specific development milestone. At the inception of the arrangement, the Company valued the contingent equity investment at approximately $6.0 million. The Company recognized the up-front license fee and the value of the contingent equity investment totaling approximately $6.0 million as collaborative arrangements revenue on a straight-line basis through September 30, 2012, the period over which linaclotide was developed under the license agreement. In November 2009, the Company achieved the development milestone triggering the equity investment and on November 13, 2009, the Company received $15.0 million from Almirall for the purchase of 681,819 shares of convertible preferred stock (Note 11). The original license agreement also included contingent milestone payments that could total up to $40.0 million upon achievement of specific development and commercial launch milestones. In November 2010, the Company achieved a development milestone, which resulted in an approximately $19.0 million payment, representing a $20.0 million milestone, net of foreign withholding taxes. This development milestone was recognized as collaborative arrangements revenue through September 2012. Commercial milestone payments under the original license agreement consisted of $4.0 million due upon the first commercial launch in each of the five major E.U. countries set forth in the agreement. In June 2013 and February 2014, the Company and Almirall amended the original license agreement. Pursuant to the terms of the amendments, (i) the commercial launch milestones were reduced to $17.0 million; (ii) new sales-based milestone payments were added to the agreement; and (iii) the escalating royalties based on sales of linaclotide were modified such that they begin in the low-twenties percent and escalate to the mid-forties percent through April 2017, and thereafter begin in the mid-twenties percent and escalate to the mid-forties percent at lower sales thresholds. In each case, these royalty payments are reduced by the transfer price paid for the API included in the product actually sold in the Almirall territory and other contractual deductions. The Company concluded that the amendments were a modification under ASU No. 2009-13, Multiple-Deliverable Revenue Arrangements (“ASU No. 2009-13”), but the modification did not have a material impact on the Company’s consolidated financial statements. The commercial launch and sales-based milestones are recognized as revenue as earned. The Company records royalties on sales of CONSTELLA one quarter in arrears as it does not have access to the royalty reports from Almirall or the ability to estimate the royalty revenue in the period earned. During the second quarter of 2013, the Company achieved two milestones under the amended Almirall license agreement, which resulted in payments of approximately $1.9 million from Almirall to the Company related to the commercial launches in two of the five major E.U. countries, the United Kingdom and Germany. The approximately $1.9 million payment represented the two $1.0 million milestones, net of foreign tax withholdings. During the first and second quarters of 2014, the Company achieved two milestones under the amended Almirall license agreement triggering payments of approximately $1.0 million each related to the commercial launches in two additional major E.U. countries, Italy and Spain. Each approximately $1.0 million payment represents the $1.0 million milestone, net of foreign tax withholdings. The Company recognized an insignificant amount and approximately $0.2 million of collaborative arrangements revenue, comprised of royalty revenue, from the Almirall license agreement during the three and six months ended June 30, 2015, respectively. The Company recognized approximately $2.8 million and approximately $7.3 million in total collaborative arrangements revenue from the Almirall license agreement during the three and six months ended June 30, 2014, respectively, including approximately $1.7 million and approximately $5.1 million, respectively, from the sale of API to Almirall, approximately $0.9 million and approximately $1.9 million, respectively, in commercial launch milestones, and approximately $0.2 million and approximately $0.3 million, respectively, in royalty revenue. Astellas Pharma Inc. In November 2009, the Company entered into a license agreement with Astellas to develop and commercialize linaclotide for the treatment of IBS-C, CIC and other GI conditions in Japan, South Korea, Taiwan, Thailand, the Philippines and Indonesia. As a result of an amendment executed in March 2013, the Company regained rights to linaclotide in South Korea, Taiwan, Thailand, the Philippines and Indonesia. The Company concluded that the amendment was not a material modification of the license agreement. Astellas continues to be responsible for all activities relating to development, regulatory approval and commercialization in Japan as well as funding any costs and the Company is required to participate on a joint development committee over linaclotide’s development period. In 2009, Astellas paid the Company a non-refundable, up-front licensing fee of $30.0 million, which is being recognized as collaborative arrangements revenue on a straight-line basis over the Company’s estimate of the period over which linaclotide will be developed under the license agreement. In March 2013, the Company revised its estimate of the development period from 115 months to 85 months based on the Company’s assessment of regulatory approval timelines for Japan. During the three and six months ended June 30, 2015 and 2014, the Company recognized approximately $1.3 million and approximately $2.6 million of revenue related to the up-front licensing fee, respectively, including approximately $0.5 million and approximately $1.0 million of revenue in each period attributable to the March 2013 revision to the estimated development period. At June 30, 2015, approximately $8.9 million of the up-front license fee remained deferred. The agreement also includes three additional development milestone payments that could total up to $45.0 million, none of which the Company considers substantive. The first milestone payment consists of $15.0 million upon enrollment of the first study subject in a Phase III study for linaclotide in Japan, which was achieved in November 2014 and for which approximately $11.3 million was recognized as revenue through June 30, 2015, including approximately $0.5 million and approximately $1.1 million recognized during the three and six months ended June 30, 2015, respectively. The remaining approximately $3.7 million of this milestone payment will be recognized over the remaining development period. The two additional milestone payments consist of $15.0 million upon filing of the Japanese equivalent of an NDA with the relevant regulatory authority in Japan and $15.0 million upon approval of such equivalent by the relevant regulatory authority. In addition, the Company will receive royalties which escalate based on sales volume, beginning in the low-twenties percent, less the transfer price paid for the API included in the product actually sold and other contractual deductions. During the three and six months ended June 30, 2015, the Company recognized approximately $1.8 million and approximately $4.1 million, respectively, in collaborative arrangements revenue from the Astellas license agreement, including an insignificant amount and approximately $0.5 million, respectively, from the sale of API to Astellas. During the three and six months ended June 30, 2014, the Company reco gnized approximately $2.0 million and approximately $3.2 million, respectively, in collaborative arrangements revenue from the Astellas license agreement, including approximately $0.7 million during the three and six months ended June 30, 2014 from the sale of API to Astellas. AstraZeneca AB In October 2012, the Company entered into a collaboration agreement with AstraZeneca (the “AstraZeneca Collaboration Agreement”) to co-develop and co-commercialize linaclotide in China, Hong Kong and Macau (the “License Territory”). The collaboration provides AstraZeneca with an exclusive nontransferable license to exploit the underlying technology in the License Territory. The parties share responsibility for continued development and commercialization of linaclotide under a joint development plan and a joint commercialization plan, respectively, with AstraZeneca having primary responsibility for the local operational execution. The parties agreed to an Initial Development Plan (“IDP”) which includes the planned development of linaclotide in China, including the lead responsibility for each activity and the related internal and external costs. The IDP indicates that AstraZeneca is responsible for a multinational Phase III clinical trial (the “Phase III Trial”), the Company is responsible for nonclinical development and supplying clinical trial material and both parties are responsible for the regulatory submission process. The IDP indicates that the party specifically designated as being responsible for a particular development activity under the IDP shall implement and conduct such activities. The activities are governed by a Joint Development Committee (“JDC”), with equal representation from each party. The JDC is responsible for approving, by unanimous consent, the joint development plan and development budget, as well as approving protocols for clinical studies, reviewing and commenting on regulatory submissions, and providing an exchange of data and information. The AstraZeneca Collaboration Agreement will continue until there is no longer a development plan or commercialization plan in place, however, it can be terminated by AstraZeneca at any time upon 180 days’ prior written notice. Under certain circumstances, either party may terminate the AstraZeneca Collaboration Agreement in the event of bankruptcy or an uncured material breach of the other party. Upon certain change in control scenarios of AstraZeneca, the Company may elect to terminate the AstraZeneca Collaboration Agreement and may re-acquire its product rights in a lump sum payment equal to the fair market value of such product rights. In connection with the AstraZeneca Collaboration Agreement, the Company and AstraZeneca also executed a co-promotion agreement (the “Co-Promotion Agreement”), pursuant to which the Company utilized its existing sales force to co-promote NEXIUM ® (esomeprazole magnesium), one of AstraZeneca’s products, in the U.S. The Co-Promotion Agreement expired in May 2014. There are no refund provisions in the AstraZeneca Collaboration Agreement and the Co-Promotion Agreement (together, the “AstraZeneca Agreements”). Under the terms of the AstraZeneca Collaboration Agreement, the Company received a $25.0 million non-refundable upfront payment upon execution. The Company is also eligible for $125.0 million in additional commercial milestone payments contingent on the achievement of certain sales targets. The parties will also share in the net profits and losses associated with the development and commercialization of linaclotide in the License Territory, with AstraZeneca receiving 55% of the net profits or incurring 55% of the net losses until a certain specified commercial milestone is achieved, at which time profits and losses will be shared equally thereafter. Activities under the AstraZeneca Agreements were evaluated in accordance with ASC Topic 605-25, Revenue Recognition — Multiple-Element Arrangements (“ASC 605-25”), to determine if they represented a multiple element revenue arrangement. The Company identified the following deliverables in the AstraZeneca Agreements: · an exclusive license to develop and commercialize linaclotide in the License Territory (the “License Deliverable”), · research, development and regulatory services pursuant to the IDP, as modified from time to time (the “R&D Services”), · JDC services, · obligation to supply clinical trial material, and · co-promotion services for AstraZeneca’s product (the “Co-Promotion Deliverable”). The License Deliverable is nontransferable and has certain sublicense restrictions. The Company determined that the License Deliverable had standalone value as a result of AstraZeneca’s internal product development and commercialization capabilities, which would enable it to use the License Deliverable for its intended purposes without the involvement of the Company. The remaining deliverables were deemed to have standalone value based on their nature and all deliverables met the criteria to be accounted for as separate units of accounting under ASC 605-25. Factors considered in this determination included, among other things, whether any other vendors sell the items separately and if the customer could use the delivered item for its intended purpose without the receipt of the remaining deliverables. The Company identified the supply of linaclotide drug product for commercial requirements and commercialization services as contingent deliverables because these services are contingent upon the receipt of regulatory approval to commercialize linaclotide in the License Territory, and there were no binding commitments or firm purchase orders pending for commercial supply. As these deliverables are contingent, and are not at an incremental discount, they are not evaluated as deliverables at the inception of the arrangement. These contingent deliverables will be evaluated and accounted for separately as each related contingency is resolved. As of June 30, 2015, no contingent deliverables were provided by the Company under the AstraZeneca Agreements. In August 2014, the Company and AstraZeneca, through the JDC, modified the IDP and development budget to include approximately $14.0 million in additional activities over the remaining development period, to be shared by the Company and AstraZeneca under the terms of the AstraZeneca Collaboration Agreement. These additional activities serve to support the continued development of linaclotide in the Licensed Territory, including the Phase III Trial. Pursuant to the terms of the modified IDP and development budget, certain of the Company’s deliverables were modified, specifically the R&D Services and the obligation to supply clinical trial material. The Company determined that the 2014 modification to the IDP and development budget should be accounted for as a modification to the AstraZeneca Collaboration Agreement. However, this modification did not have a material impact on the Company’s consolidated financial statements as there was an insignificant amount of deferred revenue associated with the AstraZeneca Collaboration Agreement as of the date of the modification. In accordance with ASU No. 2009-13, the Company reallocated the arrangement consideration to all of the identified deliverables in the arrangement (both delivered and undelivered) based on the information available as of the date of the modification. During the three months ended June 30, 2015, the Company and AstraZeneca modified the expected development timeline due to a lengthened review timeline in China as a result of recent changes made by the China Food and Drug Administration (“CFDA”) to the approval process. No changes were made to the development budget. This lengthened timeline did not impact the Company’s allocation of the Arrangement Consideration, and had an insignificant impact on the Company’s consolidated financial statements, including the amounts recognized for the R&D Services and JDC services deliverables. The total amount of the non-contingent consideration allocable to the AstraZeneca Agreements of approximately $34.0 million (“Arrangement Consideration”) includes the $25.0 million non-refundable upfront payment and 55% of the costs for clinical trial material supply services and research, development and regulatory activities allocated to the Company in the IDP or as approved by the JDC in subsequent periods, or approximately $9.0 million. The Company allocated the Arrangement Consideration of approximately $34.0 million to the non-contingent deliverables based on management’s best estimate of selling price (“BESP”) of each deliverable using the relative selling price method as the Company did not have vendor-specific objective evidence or third-party evidence of selling price for such deliverables. The Company estimated the BESP for the License Deliverable using a multi-period excess-earnings method under the income approach which utilized cash flow projections, the key assumptions of which included the following market conditions and entity-specific factors: (a) the specific rights provided under the license to develop and commercialize linaclotide; (b) the potential indications for linaclotide pursuant to the license; (c) the likelihood linaclotide will be developed for more than one indication; (d) the stage of development of linaclotide for IBS-C and CIC and the projected timeline for regulatory approval; (e) the development risk by indication; (f) the market size by indication; (g) the expected product life of linaclotide assuming commercialization; (h) the competitive environment, and (i) the estimated development and commercialization costs of linaclotide in the License Territory. The Company utilized a discount rate of 11.5% in its analysis, representing the weighted average cost of capital derived from returns on equity for comparable companies. The Company determined its BESP for the remaining deliverables based on the nature of the services to be performed and estimates of the associated effort and cost of the services adjusted for a reasonable profit margin such that they represented estimated market rates for similar services sold on a standalone basis. The Company concluded that a change in key assumptions used to determine BESP for each deliverable would not have a significant effect on the allocation of the Arrangement Consideration, as the estimated selling price of the License Deliverable significantly exceeds the other deliverables. Of the approximately $34.0 million of Arrangement Consideration, approximately $29.7 million was allocated to the License Deliverable, approximately $1.8 million to the R&D Services, approximately $0.1 million to the JDC services, approximately $0.3 million to the clinical trial material supply services, and approximately $2.1 million to the Co-Promotion Deliverable in the relative selling price model, at the time of the material modification. Because the Company shares development costs with AstraZeneca, payments from AstraZeneca with respect to both research and development and selling, general and administrative costs incurred by the Company prior to the commercialization of linaclotide in the License Territory are recorded as a reduction in expense, in accordance with the Company’s policy, which is consistent with the nature of the cost reimbursement. Development costs incurred by the Company that pertain to the joint development plan and subsequent amendments to the joint development plan, as approved by the JDC, are recorded as research and development expense as incurred. Payments to AstraZeneca are recorded as incremental research and development expense. The Company completed its obligations related to the License Deliverable upon execution of the AstraZeneca Agreements; however, the revenue recognized in the statement of operations was limited to the non-contingent portion of the License Deliverable consideration in accordance with ASC 605-25. During the three and six months ended June 30, 2015, and as a result of the modification to the IDP and development budget in August 2014, the Company recognized approximately $0.4 million and approximately $1.6 million, respectively, as collaborative arrangements revenue related to this deliverable as this portion of the Arrangement Consideration was no longer contingent. During the three and six months ended June 30, 2014, the Company did not recognize any amounts in collaborative arrangements revenue related to the License Deliverable. The Company also performs R&D Services and JDC services, and supplies clinical trial materials during the estimated development period. All Arrangement Consideration allocated to such services is being recognized as a reduction of research and development costs, using the proportional performance method, by which the amounts are recognized in proportion to the costs incurred. As a result of the cost-sharing arrangements under the collaboration, the Company recognized approximately $0.4 million and approximately $0.7 million, respectively, in incremental research and development costs during the three and six months ended June 30, 2015, and approximately $0.9 million and approximately $1.3 million in incremental research and development costs during the three and six months ended June 30, 2014. The amount allocated to the Co-Promotion Deliverable was recognized as collaborative arrangements revenue using the proportional performance method, which approximates recognition on a straight-line basis beginning on the date that the Company began to co-promote AstraZeneca’s product, through December 31, 2013 (the earliest cancellation date). As of December 31, 2013, the Company completed its obligation related to the Co-Promotion Deliverable; however, the revenue recognized in the statement of operations was limited to the non-contingent consideration in accordance with ASC 605-25. During the three and six months ended June 30, 2015, the Company recognized an insignificant amount as collaborative arrangements revenue related to this deliverable as this portion of the Arrangement Consideration was no longer contingent. During the three and six months ended June 30, 2014, the Company recognized approximately $0.3 million and approximately $0.7 million, respectively, in collaborative arrangements revenue related to this deliverable. The Company reassesses the periods of performance for each deliverable at the end of each reporting period. Milestone payments received from AstraZeneca upon the achievement of sales targets will be recognized as earned. Exact Sciences Corp. In March 2015, the Company entered into an agreement to co-promote Exact Sciences’ Cologuard ®, the first and only FDA-approved noninvasive stool DNA screening test for colorectal cancer (the “Exact Sciences Co-promotion Agreement”). Under the terms of the Exact Sciences Co-promotion Agreement, the Company’s sales team is promoting and educating health care practitioners regarding Cologuard, with LINZESS remaining the Company’s first-position product. The companies are also collaborating on medical education initiatives to support more in-depth understanding of Cologuard and the importance of colorectal cancer screening. Exact Sciences maintains responsibility for all other aspects of the commercialization of Cologuard outside of the co-promotion. Under the terms of the Exact Sciences Co-promotion Agreement, the Company will be compensated via reimbursements for sales detailing, promotional support services and medical education initiatives. During the initial one-year term of the agreement, the Company could receive up to a maximum reimbursement of approximately $4.8 million. Royalties are earned on the net sales of Cologuard generated from the healthcare practitioners on whom the Company calls less the sales promotion reimbursement to the Company. The Company will also be compensated via royalties during the term and for one year following the termination of the Company’s co-promotion efforts. There are no refund provisions in the Exact Sciences Co-promotion Agreement. The non-exclusive Exact Sciences Co-promotion Agreement covers an initial one-year term, and renews automatically for successive one month periods unless and until terminated by either party. Either party may terminate the agreement in the event of an uncu |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 6 Months Ended |
Jun. 30, 2015 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | 4. Fair Value of Financial Instruments The tables below present information about the Company’s assets that are measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014 and indicate the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize observable inputs such as quoted prices in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are either directly or indirectly observable, such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs utilize unobservable data points in which there is little or no market data, which require the Company to develop its own assumptions for the asset or liability. The Company’s investment portfolio includes many fixed income securities that do not always trade on a daily basis. As a result, the pricing services used by the Company apply other available information as applicable through processes such as benchmark yields, benchmarking of like securities, sector groupings and matrix pricing to prepare valuations. In addition, model processes were used to assess interest rate impact and develop prepayment scenarios. These models take into consideration relevant credit information, perceived market movements, sector news and economic events. The inputs into these models may include benchmark yields, reported trades, broker-dealer quotes, issuer spreads and other relevant data. The following tables present the assets and liabilities the Company has measured at fair value on a recurring basis (in thousands): Fair Value Measurements at Reporting Date Using June 30, 2015 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Money market funds $ $ $ — $ — U.S. Treasury securities — — U.S. government-sponsored securities — Convertible note hedges — — Total assets Liabilities: Note hedge warrants — — Total liabilities — — Total assets and liabilities measured at fair value $ $ $ $ Fair Value Measurements at Reporting Date Using December 31, 2014 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Money market funds $ $ $ — $ — U.S. Treasury securities — — U.S. government-sponsored securities — — Total assets measured at fair value $ $ $ $ — There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the three or six months ended June 30, 2015 or 2014. Cash equivalents, accounts receivable, related party accounts receivable, prepaid expenses and other current assets, accounts payable, related party accounts payable, accrued expenses and the current portion of capital lease obligations at June 30, 2015 and December 31, 2014 are carried at amounts that approximate fair value due to their short-term maturities. The non-current portion of the capital lease obligations at June 30, 2015 and December 31, 2014 approximates fair value as it bears interest at a rate approximating a market interest rate. The Company classifies its derivative financial instruments as Level 3 under the fair value hierarchy. The Company’s Convertible Note Hedges and the Note Hedge Warrants issued in connection with the Convertible Note Hedges are recorded as derivative assets and liabilities because they do not qualify for equity classification. In addition, the derivative assets and liabilities do not qualify for hedge accounting . These derivatives are not actively traded and are valued using the Black-Scholes option-pricing model which requires the use of subjective assumptions. Significant inputs used to determine fair value as of June 30, 2015 included the price per share of the Company’s Class A common stock, time to maturity of the derivative instruments, the strike prices of the derivative instruments, the risk-free interest rate, and the historical and implied volatility of the Company’s Class A common stock. Changes to these inputs could materially affect the valuation of the of the Convertible Note Hedges and Note Hedge Warrants. The following inputs were used in the fair market valuation of the Convertible Note Hedges and Note Hedge Warrants as of June 30, 2015: Convertible Note Hedges Note Hedge Warrants Risk-free interest rate (1) % % Time to maturity Stock price (2) $ $ Strike price (3) $ $ Common stock volatility (4) % % Dividend yield % % (1) Based on U.S. Treasury Curve. (2) The closing price of the Company’s common stock on the last trading day of the quarter. (3) As per agreement. (4) Selected volatility based on historical volatility and implied volatility The Convertible Note Hedges and the Note Hedge Warrants are recorded at fair value at each reporting period and changes in fair value are recorded immediately in the Company’s Condensed Consolidated Statements of Operations, and reported in other expense, net. Gains and losses for these derivative financial instruments are presented separately in the Company’s Condensed Consolidated Statements of Cash Flows. The following table reflects the change in the Company’s Level 3 convertible note derivatives from their initial value at issuance through June 30, 2015: Convertible Note Hedges Note Hedge Warrants Balance at December 31, 2014 $ — $ — Issuance of note hedge warrants — ) Purchase of convertible note hedges — Change in fair value, recorded as a component of Loss on derivatives ) Balance at June 30, 2015 $ $ ) 11% PhaRMA Notes In January 2013, the Company closed a private placement of $175.0 million in aggregate principal amount of notes due on or before June 15, 2024 (the “PhaRMA Notes”). The estimated fair value of the PhaRMA Notes was approximately $177.6 million and approximately $182.5 million as of June 30, 2015 and December 31, 2014, respectively, and was determined using Level 3 inputs, including a quoted rate. 2.25% Convertible Senior Notes In June 2015, the Company issued approximately $335.7 million of its 2022 Notes. The Company separately accounted for the liability and equity components of the 2022 Notes by allocating the proceeds between the liability component and equity component (Note 9). The fair value of the 2022 Notes, which differs from their carrying value, is influenced by interest rates, the Company’s stock price and stock price volatility, and is determined by reference to prices for the 2022 Notes observed in market trading, which are Level 2 inputs. The estimated fair value of the 2022 Notes as of June 30, 2015 was approximately $326.9 million. |
Available-for-Sale Securities
Available-for-Sale Securities | 6 Months Ended |
Jun. 30, 2015 | |
Available-for-Sale Securities | |
Available-for-Sale Securities | 5. Available-for-Sale Securities The following tables summarize the available-for-sale securities held at June 30, 2015 and December 31, 2014 (in thousands): Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value June 30, 2015 U.S. Treasury securities $ $ $ — $ U.S. government-sponsored securities ) Total $ $ $ ) $ Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value December 31, 2014 U.S. Treasury securities $ $ $ — $ U.S. government-sponsored securities ) Total $ $ $ ) $ The contractual maturities of all securities held at June 30, 2015 are one year or less. There were 18 and 27 available-for-sale securities in an unrealized loss position at June 30, 2015 and December 31, 2014, respectively, none of which had been in an unrealized loss position for more than twelve months. The aggregate fair value of these securities at June 30, 2015 and December 31, 2014 was approximately $73.8 million and approximately $101.9 million, respectively. The Company reviews its investments for other-than-temporary impairment whenever the fair value of an investment is less than amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. To determine whether an impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity. The Company did not hold any securities with other-than-temporary impairment at June 30, 2015. There were no sales of available-for-sale securities during the three or six months ended June 30, 2015 or 2014. Gross realized gains and losses on the sales of available-for-sale securities that have been included in other (expense) income, net unrealized holding gains or losses for the period that have been included in accumulated other comprehensive income as well as gains and losses reclassified out of accumulated other comprehensive income into other (expense) income were not material to the Company’s consolidated results of operations. The cost of securities sold or the amount reclassified out of the accumulated other comprehensive income into other (expense) income is based on the specific identification method for purposes of recording realized gains and losses. |
Inventory
Inventory | 6 Months Ended |
Jun. 30, 2015 | |
Inventory | |
Inventory | 6. Inventory Inventory consisted of the following (in thousands): June 30, 2015 December 31, 2014 Raw materials $ — $ Inventory at June 30, 2015 and December 31, 2014 represents linaclotide API that is available for commercial sale. The Company writes down the value of its inventory for excess, obsolescence or other net realizable value adjustments to cost of revenue, as described in the Company’s significant accounting policies in the 2014 Annual Report on Form 10-K. As part of the Company’s net realizable value assessment of its inventory, the Company also routinely assesses whether it has any excess non-cancelable purchase commitments resulting from its two minimum supply agreements with its suppliers of linaclotide API. The Company amended one API supply agreement on July 31, 2015 and the second API supply agreement on August 4, 2015 (Note 12). The minimum purchase requirements from these amended supply agreements have been included in the Company’s determination of its excess non-cancelable purchase commitments during the second quarter of 2015. The determination of the net realizable value of inventory and excess non-cancelable purchase commitments at December 31, 2014 was based on partner demand forecasts , that are received quarterly, to project the next 24 months of demand and the Company’s internal forecast for projected demand in subsequent years. During the second quarter of 2015, the Company’s partner in Europe reduced its forecasted purchases of linaclotide API for the subsequent 18 months. In addition, the CFDA recently made regulatory changes to the marketing approval process in China which resulted in a lengthened approval timeline for linaclotide. The extended timeline for commercialization of linaclotide in Chi na resulted in a lower projected sales of linaclotide API to the Company ’s partner in China , during the years included in the assessment. As a result, the Company wrote-down its on hand inventory balance of approximately $5.0 million to zero and accrued approximately $3.2 million for excess non-cancelable inventory purchase commitments at June 30, 2015. The approximately $5.0 million inventory write-down and the approximately $3.2 million accrual for excess non-cancelable inventory purchase commitments have both been included within cost of revenu e in the Condensed Consolidated Statement of Operations . The accrual for excess non-cancelable inventory purchase commitments has been recorded as a long term liability in the Company’s Condensed Consolidated Balance Sheet. The Company believes that its remaining, non-cancelable purchase commitments for linaclotide API are realizable at June 30, 2 015. During the three months ended June 30, 2014, Almirall reduced its inventory demand forecast, mainly due to the suspension of the commercialization of CONSTELLA in Germany, which led the Company to write down approximately $8.9 million of inventory to net realizable value. |
Property and Equipment
Property and Equipment | 6 Months Ended |
Jun. 30, 2015 | |
Property and Equipment | |
Property and Equipment | 7. Property and Equipment Property and equipment, net consisted of the following (in thousands): June 30, 2015 December 31, 2014 Manufacturing equipment $ $ Laboratory equipment Computer and office equipment Furniture and fixtures Software Construction in process Leased vehicles Leasehold improvements Less accumulated depreciation and amortization ) ) $ $ |
Accrued Expenses
Accrued Expenses | 6 Months Ended |
Jun. 30, 2015 | |
Accrued Expenses | |
Accrued Expenses | 8. Accrued Expenses Accrued expenses consisted of the following (in thousands): June 30, 2015 December 31, 2014 Salaries and benefits $ $ Professional fees Accrued interest Other $ $ |
Notes Payable
Notes Payable | 6 Months Ended |
Jun. 30, 2015 | |
Notes Payable. | |
Notes Payable | 9. Notes Payable 2.25% Convertible Senior Notes due 2022 In June 2015, the Company issued approximately $335.7 million aggregate principal amount of the 2022 Notes. The Company received net proceeds of approximately $324.0 million from the sale of the 2022 Notes, after deducting fees and expenses of approximately $11.7 million. The Company used approximately $21.1 million of the net proceeds from the sale of the 2022 Notes to pay the net cost of the Convertible Note Hedges (after such cost was partially offset by the proceeds to the Company from the sale of the Note Hedge Warrants), as described below. The 2022 Notes are governed by an indenture (the “Indenture”) between the Company and U.S. Bank National Association, as the trustee. The 2022 Notes are senior unsecured obligations and bear cash interest at the annual rate of 2.25%, payable on June 15 and December 15 of each year, beginning on December 15, 2015. The 2022 Notes will mature on June 15, 2022, unless earlier converted or repurchased. The Company may settle conversions of the 2022 Notes through payment or delivery, as the case may be, of cash, shares of Class A common stock of the Company or a combination of cash and shares of Class A common stock, at the Company’s option (subject to, and in accordance with, the settlement provisions of the Indenture). The initial conversion rate for the 2022 Notes is 60.3209 shares of Class A common stock (subject to adjustment as provided for in the Indenture) per $1,000 principal amount of the 2022 Notes, which is equal to an initial conversion price of approximately $16.58 per share and 20,249,665 shares . Holders of the 2022 Notes may convert their 2022 Notes at their option at any time prior to the close of business on the business day immediately preceding December 15, 2021 in multiples of $1,000 principal amount, only under the following circumstances: · during any calendar quarter commencing after the calendar quarter ending on September 30, 2015 (and only during such calendar quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the 2022 Notes on each applicable trading day; · during the five business day period after any five consecutive trading day period (the “measurement period”) in which the “trading price” (as defined in the Indenture) per $1,000 principal amount of the 2022 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate for the 2022 Notes on each such trading day; or · upon the occurrence of specified corporate events described in the Indenture. On or after December 15, 2021, until the close of business on the second scheduled trading day immediately preceding June 15, 2022, holders may convert their 2022 Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. If a make-whole fundamental change, as described in the Indenture, occurs and a holder elects to convert its 2022 Notes in connection with such make-whole fundamental change, such holder may be entitled to an increase in the conversion rate as described in the Indenture. The Company may not redeem the 2022 Notes prior to the maturity date and no “sinking fund” is provided for the 2022 Notes, which means that the Company is not required to periodically redeem or retire the 2022 Notes. Upon the occurrence of certain fundamental changes involving the Company, holders of the 2022 Notes may require the Company to repurchase for cash all or part of their 2022 Notes at a repurchase price equal to 100% of the principal amount of the 2022 Notes to be repurchased, plus accrued and unpaid interest. The Indenture does not contain any financial covenants or restrict the Company’s ability to repurchase the Company’s securities, pay dividends or make restricted payments in the event of a transaction that substantially increases the Company’s level of indebtedness. The Indenture provides for customary events of default. In the case of an event of default with respect to the 2022 Notes arising from specified events of bankruptcy or insolvency, all outstanding 2022 Notes will become due and payable immediately without further action or notice. If any other event of default with respect to the 2022 Notes under the Indenture occurs or is continuing, the trustee or holders of at least 25% in aggregate principal amount of the then outstanding 2022 Notes may declare the principal amount of the 2022 Notes to be immediately due and payable. Notwithstanding the foregoing, the Indenture provides that, upon the Company’s election, and for up to 180 days, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right to receive additional interest on the 2022 Notes. In accordance with accounting guidance for debt with conversion and other options, the Company separately accounted for the liability and equity components of the 2022 Notes by allocating the proceeds between the liability component and the embedded conversion option, or equity component, due to the Company’s ability to settle the 2022 Notes in cash, its Class A common stock, or a combination of cash and Class A common stock at the option of the Company. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The allocation was performed in a manner that reflected the Company’s non-convertible debt borrowing rate for similar debt. The equity component of the 2022 Notes was recognized as a debt discount and represents the difference between the gross proceeds from the issuance of the 2022 Notes and the fair value of the liability of the 2022 Notes on their respective dates of issuance. The excess of the principal amount of the liability component over its carrying amount, or debt discount, is amortized to interest expense using the effective interest method over seven years, or the life of the 2022 Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. The Company’s outstanding Convertible Note balances as of June 30, 2015 consisted of the following (in thousands): Liability component: Principal $ Less: unamortized debt discount ) Net carrying amount $ Equity component $ In connection with the issuance of the 2022 Notes, the Company incurred approximately $11.7 million of debt issuance costs, which primarily consisted of initial purchaser discounts, legal and other professional fees. The Company allocated these costs to the liability and equity components based on the allocation of the proceeds. The portion of these costs allocated to the equity components totaling approximately $4.0 million were recorded as a reduction to additional paid-in capital. The portion of these costs allocated to the liability components totaling approximately $7.7 million were recorded as a reduction in the carrying value of the debt on the balance sheet and are amortized to interest expense using the effective interest method over the expected life of the 2022 Notes. The Company determined the expected life of the 2022 Notes was equal to its seven-year term. The effective interest rate on the liability components of the 2022 Notes for the period from the date of issuance through June 30, 2015 was 9.34%. The following table sets forth total interest expense recognized related to the 2022 Notes during the three months ended June 30, 2015 (in thousands): Contractual interest expense $ Amortization of debt issuance costs Amortization of debt discount Total interest expense $ Convertible Note Hedge and Warrant Transactions with Respect to 2022 Notes To minimize the impact of potential dilution to the Company’s Class A common stockholders upon conversion of the 2022 Notes, the Company entered into the Convertible Note Hedges covering 20,249,665 shares of the Company’s Class A common stock in connection with the issuance of the 2022 Notes. The Convertible Note Hedges have an exercise price of approximately $16.58 per share and are exercisable when and if the 2022 Notes are converted. If upon conversion of the 2022 Notes, the price of the Company’s Class A common stock is above the exercise price of the Convertible Note Hedges, the counterparties are obligated to deliver shares of the Company’s Class A common stock and/or cash with an aggregate value approximately equal to the difference between the price of the Company’s Class A common stock at the conversion date and the exercise price, multiplied by the number of shares of the Company’s Class A common stock related to the Convertible Note Hedge being exercised. Concurrently with entering into the Convertible Note Hedges, the Company also sold Note Hedge Warrants to the Convertible Note Hedge counterparties to acquire 20,249,665 shares of the Company’s Class A common stock, subject to customary anti-dilution adjustments. The strike price of the Note Hedge Warrants is initially $21.50 per share, subject to adjustment, and such warrants are exercisable over the 150 trading day period beginning on September 15, 2022. The Note Hedge Warrants could have a dilutive effect on the Class A common stock to the extent that the market price per share of the Company’s Class A common stock exceeds the applicable strike price of such warrants. The Convertible Note Hedges and the Note Hedge Warrants are separate transactions entered into by the Company and are not part of the terms of the 2022 Notes. Holders of the 2022 Notes and the Note Hedge Warrants do not have any rights with respect to the Convertible Note Hedges. The Company paid approximately $91.9 million for the Convertible Note Hedges and recorded this amount as a long-term asset on the condensed consolidated balance sheet. The Company received approximately $70.8 million for the Note Hedge Warrants and recorded this amount as a long-term liability, resulting in a net cost to the Company of approximately $21.1 million. 11% PhaRMA Notes due 2024 In January 2013, the Company closed a private placement of $175.0 million in aggregate principal amount of notes due on or before June 15, 2024. The PhaRMA Notes bear an annual interest rate of 11%, with interest payable March 15, June 15, September 15 and December 15 of each year (each a “Payment Date”) beginning June 15, 2013. On March 15, 2014, the Company began making quarterly payments on the PhaRMA Notes equal to the greater of (i) 7.5% of net sales of LINZESS in the U.S. for the preceding quarter (the “Synthetic Royalty Amount”) and (ii) accrued and unpaid interest on the PhaRMA Notes (the “Required Interest Amount”). Principal on the PhaRMA Notes will be repaid in an amount equal to the Synthetic Royalty Amount minus the Required Interest Amount, when this is a positive number, until the principal has been paid in full. Given the principal payments on the PhaRMA Notes are based on the Synthetic Royalty Amount, which will vary from quarter to quarter, the PhaRMA Notes may be repaid prior to June 15, 2024, the final legal maturity date. The Company made principal payments of approximately $5.9 million through June 30, 2015, and expects to pay approximately $17.6 million of the principal within twelve months following June 30, 2015. The PhaRMA Notes are secured solely by a security interest in a segregated bank account established to receive the required quarterly payments. Up to the amount of the required quarterly payments under the PhaRMA Notes, Allergan will deposit its quarterly profit (loss) sharing payments due to the Company under the collaboration agreement, if any, into the segregated bank account. If the funds deposited by Allergan into the segregated bank account are insufficient to make a required payment of interest or principal on a particular Payment Date, the Company is obligated to deposit such shortfall out of the Company’s general funds into the segregated bank account. The PhaRMA Notes may be redeemed at any time prior to maturity, in whole or in part, at the option of the Company. The Company will pay a redemption price equal to the percentage of outstanding principal balance of the PhaRMA Notes being redeemed specified below for the period in which the redemption occurs (plus the accrued and unpaid interest to the redemption date on the PhaRMA Notes being redeemed): Payment Dates Redemption Percentage From and including January 1, 2015 to and including December 31, 2015 % From and including January 1, 2016 to and including December 31, 2016 % From and including January 1, 2017 and thereafter % The PhaRMA Notes contain certain covenants related to the Company’s obligations with respect to the commercialization of LINZESS and the related collaboration agreement with Allergan , as well as certain customary covenants, including covenants that limit or restrict the Company’s ability to incur certain liens, merge or consolidate or make dispositions of assets. The PhaRMA Notes also specify a number of events of default (some of which are subject to applicable cure periods), including, among other things, covenant defaults, other non-payment defaults, and bankruptcy and insolvency defaults. Upon the occurrence of an event of default, subject to cure periods in certain circumstances, all amounts outstanding may become immediately due and payable. The upfront cash proceeds of $175.0 million, less a discount of approximately $0.4 million for payment of legal fees incurred on behalf of the noteholders, were recorded as notes payable at issuance. The Company also capitalized approximately $7.3 million of debt issuance costs in connection with the PhaRMA Notes. During the three months ended June 30, 2015, the Company early adopted ASU 2015-03, which requires debt issuance costs to be presented in an entity’s balance sheet as a direct deduction from the associated debt liability (Note 1). The Company’s adoption of ASU 2015-03 in the current period resulted in a balance sheet reclassification of issuance costs in connection with the PhaRMA Notes of approximately $1.4 million to prepaid expenses and other current assets and approximately $2.8 million in other assets to a reduction in PhaRMA notes payable. The PhaRMA Notes issuance costs and discount are being amortized over the estimated term of the obligation using the effective interest method. The repayment provisions represent embedded derivatives that are clearly and closely related to the PhaRMA Notes and as such do not require separate accounting treatment. The accounting for the PhaRMA Notes requires the Company to make certain estimates and assumptions about the future net sales of LINZESS in the U.S. LINZESS has been marketed since December 2012 and the estimates of the magnitude and timing of LINZESS net sales are subject to significant variability due to the recent product launch and the extended time period associated with the PhaRMA Notes, and thus subject to significant uncertainty. Therefore, these estimates and assumptions are likely to change as the Company gains additional experience marketing LINZESS, which may result in future adjustments to the portion of the PhaRMA Notes that is classified as a current liability, the amortization of debt issuance costs and discounts as well as the accretion of the interest expense. Any such adjustments could be material to the Company’s condensed consolidated financial statements. |
Employee Stock Benefit Plans
Employee Stock Benefit Plans | 6 Months Ended |
Jun. 30, 2015 | |
Employee Stock Benefit Plans | |
Employee Stock Benefit Plans | 10. Employee Stock Benefit Plans The Company has several share-based compensation plans under which stock options, restricted stock awards, restricted stock units (“RSUs”), and other share-based awards are available for grant to employees, directors and consultants of the Company. The following table summarizes share-based compensation expense reflected in the condensed consolidated statements of operations for the three and six months ended June 30, 2015 and 2014 (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014 Research and development $ $ $ $ Selling, general and administrative $ $ $ $ A summary of stock option activity for the six months ended June 30, 2015 is as follows: Number of Shares Weighted-Average Exercise Price (in thousands) Outstanding at December 31, 2014 $ Granted Exercised ) Cancelled ) Outstanding at June 30, 2015 $ The weighted-average assumptions used to estimate the fair value of the stock options using the Black-Scholes option-pricing model were as follows for the three and six months ended June 30, 2015 and 2014: Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014 Expected volatility % % % % Expected term (in years) Risk-free interest rate % % % % Expected dividend yield — % — % — % — % Beginning in the first quarter of 2015, the Company revised certain of its equity incentive programs to include RSUs, in addition to stock options, each representing the right to receive one share of the Company’s Class A common stock and granted pursuant to the terms of the Company’s Amended and Restated 2010 Employee, Director and Consultant Equity Incentive Plan. The RSUs generally vest 25% per year on the approximate anniversary of the date of grant until fully vested, provided the employee remains continuously employed with the Company through each vesting date. Shares of the Company’s Class A common stock are delivered to the employee upon vesting, subject to payment of applicable withholding taxes. The fair value of all RSUs is based on the market value of the Company’s Class A common stock on the date of grant. Compensation expense, including the effect of estimated forfeitures, is recognized over the applicable service period. A summary of RSU activity for the six months ended June 30, 2015 is as follows: Number of Shares Weighted- Average Fair Value (in thousands) Unvested as of December 31, 2014 — — Granted $ Vested — — Forfeited ) Unvested as of June 30, 2015 $ |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2015 | |
Related Party Transactions | |
Related Party Transactions | 11. Related Party Transactions The Company has and currently obtains legal services from a law firm that is an investor in the Company. The Company paid an insignificant amount in legal fees to this investor during the three and six months ended June 30, 2015 and 2014. At June 30, 2015 and December 31, 2014, the Company had an insignificant amount of accounts payable due to this related party. In September 2009, Allergan became a related party when the Company sold to Allergan 2,083,333 shares of the Company’s convertible preferred stock. In November 2009, Almirall became a related party when the Company sold to Almirall 681,819 shares of the Company’s convertible preferred stock (Note 3). These shares of preferred stock converted to the Company’s Class B common stock on a 1:1 basis upon the completion of the Company’s initial public offering in February 2010. Amounts due to and due from Allergan and Almirall are reflected as related party accounts payable and related party accounts receivable, respectively. These balances are reported net of any balances due to or from the related party. At June 30, 2015, the Company had an insignificant amount in related party accounts receivable associated with Almirall and approximately $26.0 million in related party accounts receivable, net of related party accounts payable, associated with Allergan. At December 31, 2014, the Company did not have any related party accounts receivable associated with Almirall and approximately $25.8 million in related party accounts receivable, net of related party accounts payable, associated with Allergan. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2015 | |
Subsequent Events | |
Subsequent Events | 12. Subsequent Events On August 4, 2015, the Company and Allergan entered into an agreement for the co-promotion of VIBERZI™ (eluxadoline) in the U.S., Allergan’s new treatment for adults suffering from irritable bowel syndrome with diarrhea (“IBS-D”). Under the terms of the agreement, the Company’s clinical sales specialists will detail VIBERZI to the approximately 25,000 health care practitioners to whom they detail LINZESS. The Company’s promotional efforts will be compensated based on the volume of calls delivered by the Company’s sales force, as well as agreed upon performance metrics, including the potential to achieve milestone payments based on the net sales of VIBERZI. Allergan will be responsible for all costs relating to the commercialization of VIBERZI outside of the co-promotion. On July 31, 2015 and August 4, 2015, the Company entered into amendments with two of its suppliers of linaclotide API. The Company is responsible for supplying API to its collaboration partners outside of the U.S. One amendment reduces the Company’s non-cancelable purchase commitments and the other increases the Company’s non-cancelable purchase commitments, but extends the timeframe over which the Company must purchase the product. The amended contracts include total non-cancelable commercial supply purchase obligations of $34.5 million through 2023 . |
Nature of Business (Policies)
Nature of Business (Policies) | 6 Months Ended |
Jun. 30, 2015 | |
Nature of Business | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements and the related disclosures are unaudited and have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”). Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the Securities and Exchange Commission on February 18, 2015 (the “2014 Annual Report on Form 10-K”). The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all normal recurring adjustments considered necessary for a fair presentation of the Company’s financial position as of June 30, 2015, and the results of its operations for the three and six months ended June 30, 2015 and 2014 and its cash flows for the six months ended June 30, 2015 and 2014. The results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the full year or any other subsequent interim period. |
Principles of Consolidation | Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of Ironwood Pharmaceuticals, Inc. and its wholly owned subsidiaries, Ironwood Pharmaceuticals Securities Corporation and Ironwood Pharmaceuticals GmbH. All intercompany transactions and balances are eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires the Company’s management to make estimates and judgments that may affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company’s management evaluates its estimates, including those related to revenue recognition, available-for-sale securities, inventory valuation and related reserves, impairment of long-lived assets, initial valuation procedures for the issuance of convertible notes, fair value of derivatives, balance sheet classification of notes payable and convertible notes, income taxes including the valuation allowance for deferred tax assets, research and development expense, contingencies and share-based compensation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. Changes in estimates are reflected in reported results in the period in which they become known. |
Deferred Financing Cost | Deferred financing costs On April 7, 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires debt issuance costs to be presented in an entity’s balance sheet as a direct deduction from the associated debt liability. While the standard is retrospectively effective for annual reporting periods beginning after December 15, 2015, early adoption is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued. The Company has elected early adoption in the three months ended June 30, 2015, which resulted in a balance sheet reclassification of issuance costs in connection with the 11% PhaRMA Notes due 2024 (the “PhaRMA Notes”) of approximately $1.4 million recorded in prepaid expenses and other current assets and approximately $2.8 million in other assets to a reduction in PhaRMA notes payable. The financing costs incurred in connection with the issuance of the Company’s 2022 Notes were recorded as a reduction in the carrying value of such debt. The Company’s adoption of this standard did not have a significant impact on its results of operations or cash flows for the three or six months ended June 30, 2015. |
Derivative Assets and Liabilities | Derivative A ssets and Liabilities In June 2015, in connection with the issuance of the 2022 Notes, the Company entered into convertible note hedge transactions (the “Convertible Note Hedges”). Concurrently with entering into the Convertible Note Hedges, the Company also entered into certain warrant transactions in which it sold note hedge warrants (the “Note Hedge Warrants”) to the Convertible Note Hedge counterparties to acquire 20,249,665 shares of the Company’s Class A common stock, subject to customary anti-dilution adjustments (Note 9). These instruments were assessed by the Company to be derivative financial instruments, as it was determined that the instruments meet the criteria for classification as derivatives under Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging (“ASC 815”). The derivatives are recorded as assets or liabilities at fair value using the Black-Scholes option pricing model, and the changes in fair value are immediately recorded as a component of other (expense) income in the Condensed Consolidated Statements of Operations, as the derivatives had not been formally designated as hedges for accounting purposes in accordance with ASC 815. |
New Accounting Pronouncements | New Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition , and most industry-specific guidance. The new standard requires that an entity 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 update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this update recognized at the date of initial application. In July 2015, the FASB approved a one year deferral of the effective date of this standard to annual reporting periods, and interim reporting periods within those years, beginning after December 15, 2017. Early adoption is permitted to the original effective date of December 15, 2016, including interim reporting periods within those years. The Company is currently evaluating the potential impact that ASU 2014-09 may have on its financial position and results of operations. For a discussion of additional recent accounting pronouncements please refer to Note 2, “Summary of Significant Accounting Policies,” in the Company’s 2014 Annual Report on Form 10-K. The Company did not adopt any other new accounting pronouncements during the three or six months ended June 30, 2015 that had a material effect on the Company’s condensed consolidated financial statements. |
Net Loss Per Share (Tables)
Net Loss Per Share (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Net Loss Per Share | |
Schedule of potentially dilutive securities that have been excluded from computation of diluted weighted average shares outstanding | The following table sets forth potential common shares subject to repurchase and issuable upon the exercise of outstanding options, the exercise of the Note Hedge Warrants, the vesting of restricted stock units and the conversion of the 2022 Notes, all of which have been excluded from the computation of diluted weighted average shares outstanding as they would be anti-dilutive (in thousands): Six Months Ended June 30, 2015 2014 Options to purchase common stock Shares subject to repurchase Restricted stock units — Note hedge warrants — 2022 Notes — |
Collaboration and License Agr21
Collaboration and License Agreements (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Collaboration and License Agreements | |
Schedule of revenue attributable to transactions from collaboration and license arrangements | The following table provides amounts included in the Company’s consolidated statements of operations as collaborative arrangements revenue attributable to transactions from these arrangements (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014 Allergan plc $ $ $ $ AstraZeneca AB Almirall, S.A. Astellas Pharma Inc. Exact Sciences Corp. — — Total collaborative arrangements revenue $ $ $ $ |
Schedule of amounts recorded for commercial efforts related to LIZNESS | The following table presents the amounts recorded by the Company for commercial efforts related to LINZESS in the U.S. in the three and six months ended June 30, 2015 and 2014 (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014 Collaborative arrangements revenue (1) (2) $ $ $ $ Selling, general and administrative costs incurred by the Company (1) ) ) ) ) The Company’s share of net profit $ $ ) $ $ ) (1) Includes only collaborative arrangement revenue or selling, general and administrative costs attributable to the cost-sharing arrangement with Allergan . (2) Includes a net profit share adjustment payable to Allergan of approximately $1.2 million and $2.4 million recorded during the three and six months ended June 30, 2015, respectively, and a net profit share adjustment received from Allergan of approximately $2.3 million recorded during the three months ended June 30, 2014, as described above. |
Fair Value of Financial Instr22
Fair Value of Financial Instruments (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Fair Value of Financial Instruments | |
Schedule of assets and liabilities measured at fair value on a recurring basis | The following tables present the assets and liabilities the Company has measured at fair value on a recurring basis (in thousands): Fair Value Measurements at Reporting Date Using June 30, 2015 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Money market funds $ $ $ — $ — U.S. Treasury securities — — U.S. government-sponsored securities — Convertible note hedges — — Total assets Liabilities: Note hedge warrants — — Total liabilities — — Total assets and liabilities measured at fair value $ $ $ $ Fair Value Measurements at Reporting Date Using December 31, 2014 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Money market funds $ $ $ — $ — U.S. Treasury securities — — U.S. government-sponsored securities — — Total assets measured at fair value $ $ $ $ — |
Schedule of assumptions used in fair market valuations | Convertible Note Hedges Note Hedge Warrants Risk-free interest rate (1) % % Time to maturity Stock price (2) $ $ Strike price (3) $ $ Common stock volatility (4) % % Dividend yield % % (1) Based on U.S. Treasury Curve. (2) The closing price of the Company’s common stock on the last trading day of the quarter. (3) As per agreement. (4) Selected volatility based on historical volatility and implied volatility |
Schedule of the change in Level 3 convertible note derivatives | Convertible Note Hedges Note Hedge Warrants Balance at December 31, 2014 $ — $ — Issuance of note hedge warrants — ) Purchase of convertible note hedges — Change in fair value, recorded as a component of Loss on derivatives ) Balance at June 30, 2015 $ $ ) |
Available-for-Sale Securities (
Available-for-Sale Securities (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Available-for-Sale Securities | |
Schedule of summary of available-for-sale securities | The following tables summarize the available-for-sale securities held at June 30, 2015 and December 31, 2014 (in thousands): Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value June 30, 2015 U.S. Treasury securities $ $ $ — $ U.S. government-sponsored securities ) Total $ $ $ ) $ Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value December 31, 2014 U.S. Treasury securities $ $ $ — $ U.S. government-sponsored securities ) Total $ $ $ ) $ |
Inventory (Tables)
Inventory (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Inventory | |
Schedule of Inventory | Inventory consisted of the following (in thousands): June 30, 2015 December 31, 2014 Raw materials $ — $ |
Property and Equipment (Tables)
Property and Equipment (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Property and Equipment | |
Schedule of property and equipment | Property and equipment, net consisted of the following (in thousands): June 30, 2015 December 31, 2014 Manufacturing equipment $ $ Laboratory equipment Computer and office equipment Furniture and fixtures Software Construction in process Leased vehicles Leasehold improvements Less accumulated depreciation and amortization ) ) $ $ |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Accrued Expenses | |
Schedule of accrued expenses | Accrued expenses consisted of the following (in thousands): June 30, 2015 December 31, 2014 Salaries and benefits $ $ Professional fees Accrued interest Other $ $ |
Notes Payable (Tables)
Notes Payable (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Notes Payable. | |
Schedule of outstanding Convertible Note | The Company’s outstanding Convertible Note balances as of June 30, 2015 consisted of the following (in thousands): Liability component: Principal $ Less: unamortized debt discount ) Net carrying amount $ Equity component $ |
Schedule of interest expense related to Convertible Notes | The following table sets forth total interest expense recognized related to the 2022 Notes during the three months ended June 30, 2015 (in thousands): Contractual interest expense $ Amortization of debt issuance costs Amortization of debt discount Total interest expense $ |
Schedule of redemption price as percentage of outstanding principal balance | Payment Dates Redemption Percentage From and including January 1, 2015 to and including December 31, 2015 % From and including January 1, 2016 to and including December 31, 2016 % From and including January 1, 2017 and thereafter % |
Employee Stock Benefit Plans (T
Employee Stock Benefit Plans (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Employee Stock Benefit Plans | |
Share-based compensation expense reflected in the condensed consolidated statements of operations | The following table summarizes share-based compensation expense reflected in the condensed consolidated statements of operations for the three and six months ended June 30, 2015 and 2014 (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014 Research and development $ $ $ $ Selling, general and administrative $ $ $ $ |
Summary of stock option activity | Number of Shares Weighted-Average Exercise Price (in thousands) Outstanding at December 31, 2014 $ Granted Exercised ) Cancelled ) Outstanding at June 30, 2015 $ |
Schedule of weighted-average assumptions used to estimate the fair value of the stock options using the Black-Scholes option-pricing model | Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014 Expected volatility % % % % Expected term (in years) Risk-free interest rate % % % % Expected dividend yield — % — % — % — % |
Summary of RSU activity | Number of Shares Weighted- Average Fair Value (in thousands) Unvested as of December 31, 2014 — — Granted $ Vested — — Forfeited ) Unvested as of June 30, 2015 $ |
Nature of Business (Details)
Nature of Business (Details) - Class of Stock [Domain] $ in Thousands | 1 Months Ended | 6 Months Ended | |||
Jun. 30, 2015USD ($)shares | Nov. 30, 2014 | Jun. 30, 2015USD ($) | Dec. 31, 2014USD ($) | Jan. 31, 2013USD ($) | |
Common stock | |||||
Dosage of linaclotide evaluated in adult patients during Phase III clinical trial with Actavis (in mcg) | 72 | ||||
Deferred Finance Costs | |||||
Net proceeds received | $ 335,699 | ||||
Prepaid expenses and other current assets | $ 6,595 | 6,595 | $ 9,180 | ||
Other assets | $ 3,504 | $ 3,504 | 3,042 | ||
Note hedge warrants | |||||
Derivative Assets and Liabilities | |||||
Convertible notes, bond hedge warrants issued | shares | 20,249,665 | ||||
Accounting Standards Update 2015-03 | New Accounting Pronouncement, Early Adoption, Effect | |||||
Deferred Finance Costs | |||||
Prepaid expenses and other current assets | 1,400 | ||||
Other assets | $ 2,800 | ||||
Convertible Senior Notes | |||||
Deferred Finance Costs | |||||
Annual interest rate of notes (as a percent) | 2.25% | 2.25% | |||
PhaRMA Notes | |||||
Deferred Finance Costs | |||||
Aggregate principal amount of notes issued | $ 175,000 | ||||
Annual interest rate of notes (as a percent) | 11.00% | ||||
2.25% Convertible Senior Notes due in 2022 | Convertible Senior Notes | |||||
Deferred Finance Costs | |||||
Aggregate principal amount of notes issued | $ 335,700 | $ 335,700 | |||
Net proceeds received | 324,000 | 324,000 | |||
Fees and expenses | $ 11,700 | $ 11,700 | |||
Annual interest rate of notes (as a percent) | 2.25% | 2.25% |
Net Loss Per Share (Details)
Net Loss Per Share (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Potentially dilutive securities | ||
Total potentially dilutive securities excluded from the computation of diluted weighted average shares outstanding | 62,290,000 | 21,016,000 |
Note hedge warrants | ||
Potentially dilutive securities | ||
Total potentially dilutive securities excluded from the computation of diluted weighted average shares outstanding | 20,250,000 | |
Note hedge warrants | Class A common stockholders | ||
Potentially dilutive securities | ||
Convertible notes, bond hedge warrants issued | 20,249,665 | |
Options to purchase common stock | ||
Potentially dilutive securities | ||
Total potentially dilutive securities excluded from the computation of diluted weighted average shares outstanding | 21,149,000 | 20,818,000 |
Shares subject to repurchase | ||
Potentially dilutive securities | ||
Total potentially dilutive securities excluded from the computation of diluted weighted average shares outstanding | 149,000 | 198,000 |
Restricted stock units | ||
Potentially dilutive securities | ||
Total potentially dilutive securities excluded from the computation of diluted weighted average shares outstanding | 492,000 | |
2.25% Convertible Senior Notes due in 2022 | ||
Potentially dilutive securities | ||
Total potentially dilutive securities excluded from the computation of diluted weighted average shares outstanding | 20,250,000 | |
2.25% Convertible Senior Notes due in 2022 | Convertible Senior Notes | ||
Potentially dilutive securities | ||
Aggregate principal amount of notes issued | $ 335.7 |
Collaboration and License Agr31
Collaboration and License Agreements (Details) $ in Thousands | Nov. 13, 2009USD ($)shares | Sep. 01, 2009shares | Oct. 31, 2012USD ($) | Sep. 30, 2012USD ($) | Nov. 30, 2010USD ($) | Nov. 30, 2009USD ($) | May. 31, 2009USD ($) | Apr. 30, 2009USD ($) | Sep. 30, 2007USD ($) | Jun. 30, 2015USD ($) | Jun. 30, 2014USD ($) | Jun. 30, 2015USD ($)item | Jun. 30, 2014USD ($) | Dec. 31, 2012USD ($) | Mar. 31, 2015USD ($) | Dec. 31, 2014USD ($) | |
Collaboration and License Agreements | |||||||||||||||||
Total collaborative arrangements revenue | $ 27,744 | $ 6,840 | $ 56,676 | $ 21,445 | |||||||||||||
Net amounts receivable from third party | 1,057 | 1,057 | $ 10 | ||||||||||||||
Collaborative arrangements | |||||||||||||||||
Collaboration and License Agreements | |||||||||||||||||
Total collaborative arrangements revenue | 27,744 | 6,840 | 56,676 | 21,445 | |||||||||||||
Allergan Plc | Collaborative arrangements | |||||||||||||||||
Collaboration and License Agreements | |||||||||||||||||
Total collaborative arrangements revenue | 24,381 | 1,778 | 49,707 | 10,225 | |||||||||||||
Net profit share adjustment payable | 1,200 | 2,400 | |||||||||||||||
Net profit share adjustment received | 2,300 | ||||||||||||||||
Up-front fee received | $ 70,000 | ||||||||||||||||
Equity investment in the entity's capital stock | 25,000 | ||||||||||||||||
Asset value for contingent equity investment by collaborative party recorded at inception of agreement | 9,000 | ||||||||||||||||
Incremental deferred revenue related to contingent equity investment | $ 9,000 | ||||||||||||||||
Net cost sharing offset or incremental expense related to research and development expense | 4,400 | 1,500 | 11,900 | 2,100 | |||||||||||||
Net amounts receivable from third party | $ 4,300 | ||||||||||||||||
Collaborative arrangements revenue | [1],[2] | 24,275 | 1,778 | 49,413 | 10,225 | ||||||||||||
Selling, general and administrative costs incurred by the Company | [2] | (8,314) | (7,806) | (16,003) | (15,805) | ||||||||||||
The Company's share of net profit | 15,961 | (6,028) | 33,410 | (5,580) | |||||||||||||
Allergan Plc | Collaborative arrangements | Convertible preferred stock (Note 11) | |||||||||||||||||
Collaboration and License Agreements | |||||||||||||||||
Issuance of Convertible preferred stock (in shares) | shares | 2,083,333 | ||||||||||||||||
Allergan Plc | Collaborative arrangements | Development and sales milestones | |||||||||||||||||
Collaboration and License Agreements | |||||||||||||||||
Cumulative license fees and development milestone payments received | $ 205,000 | ||||||||||||||||
Allergan Plc | Collaborative arrangements | Development milestones | |||||||||||||||||
Collaboration and License Agreements | |||||||||||||||||
Number of milestones achieved under collaboration agreement | item | 6 | ||||||||||||||||
Milestone payment received | $ 135,000 | ||||||||||||||||
Allergan Plc | Collaborative arrangements | Commercialization milestone | |||||||||||||||||
Collaboration and License Agreements | |||||||||||||||||
Percentage of net profit from commercialization | 50.00% | ||||||||||||||||
Percentage of net loss from commercialization | 50.00% | ||||||||||||||||
Allergan Plc | Collaborative arrangements | Maximum | Sales milestones | |||||||||||||||||
Collaboration and License Agreements | |||||||||||||||||
Milestone Payment to be Received by Company upon Milestone Achievement First Commercial Drug Launch | 100,000 | $ 100,000 | |||||||||||||||
AstraZeneca | Collaborative arrangements | |||||||||||||||||
Collaboration and License Agreements | |||||||||||||||||
Total collaborative arrangements revenue | 466 | 278 | 1,696 | 686 | |||||||||||||
Up-front fee received | $ 25,000 | ||||||||||||||||
Net cost sharing offset or incremental expense related to research and development expense | 400 | 900 | 700 | 1,300 | |||||||||||||
AstraZeneca | Collaborative arrangements | Commercialization milestone | |||||||||||||||||
Collaboration and License Agreements | |||||||||||||||||
Percentage of net profit from commercialization | 55.00% | ||||||||||||||||
Percentage of net loss from commercialization | 55.00% | ||||||||||||||||
Almirall, S.A. | |||||||||||||||||
Collaboration and License Agreements | |||||||||||||||||
Collaborative arrangements revenue | 200 | 200 | |||||||||||||||
Almirall, S.A. | Collaborative arrangements | |||||||||||||||||
Collaboration and License Agreements | |||||||||||||||||
Total collaborative arrangements revenue | 116 | 2,833 | 217 | 7,315 | |||||||||||||
Up-front fee received | $ 40,000 | $ 6,000 | |||||||||||||||
Milestone Payment to be Received by Company upon Milestone Achievement First Commercial Drug Launch | 4,000 | 4,000 | |||||||||||||||
Asset value for contingent equity investment by collaborative party recorded at inception of agreement | $ 6,000 | ||||||||||||||||
Incremental deferred revenue related to contingent equity investment | $ 6,000 | ||||||||||||||||
Royalty revenue | 200 | 300 | |||||||||||||||
Almirall, S.A. | Collaborative arrangements | Convertible preferred stock (Note 11) | |||||||||||||||||
Collaboration and License Agreements | |||||||||||||||||
Equity investment in the entity's capital stock | $ 15,000 | ||||||||||||||||
Issuance of Convertible preferred stock (in shares) | shares | 681,819 | ||||||||||||||||
Almirall, S.A. | Collaborative arrangements | Development milestones | |||||||||||||||||
Collaboration and License Agreements | |||||||||||||||||
Milestone payment received | $ 20,000 | ||||||||||||||||
Astellas Pharma Inc. | |||||||||||||||||
Collaboration and License Agreements | |||||||||||||||||
Collaborative arrangements revenue | 1,800 | ||||||||||||||||
Astellas Pharma Inc. | Collaborative arrangements | |||||||||||||||||
Collaboration and License Agreements | |||||||||||||||||
Total collaborative arrangements revenue | 1,805 | $ 1,951 | 4,080 | $ 3,219 | |||||||||||||
Up-front fee received | $ 30,000 | ||||||||||||||||
Exact Sciences Corp. | Collaborative arrangements | |||||||||||||||||
Collaboration and License Agreements | |||||||||||||||||
Total collaborative arrangements revenue | 976 | 976 | |||||||||||||||
Canada and Mexico | Allergan Plc | Collaborative arrangements | |||||||||||||||||
Collaboration and License Agreements | |||||||||||||||||
Royalty revenue | $ 300 | $ 300 | |||||||||||||||
[1] | Includes a net profit share adjustment payable to Allergan of approximately $1.2 million and $2.4 million recorded during the three and six months ended June 30, 2015, respectively, and a net profit share adjustment received from Allergan of approximately $2.3 million recorded during the three months ended June 30, 2014, as described above. | ||||||||||||||||
[2] | Includes only collaborative arrangement revenue or selling, general and administrative costs attributable to the cost-sharing arrangement with Allergan. |
Collaboration and License Agr32
Collaboration and License Agreements (Details 2) $ in Thousands | Nov. 13, 2009USD ($)shares | Nov. 30, 2010USD ($) | May. 31, 2009USD ($) | Apr. 30, 2009USD ($) | Jun. 30, 2015USD ($) | Jun. 30, 2014USD ($) | Mar. 31, 2014USD ($) | Jun. 30, 2013USD ($)item | Jun. 30, 2015USD ($)item | Jun. 30, 2014USD ($) | Dec. 31, 2012USD ($) | Feb. 28, 2014USD ($) |
Collaboration and License Agreements | ||||||||||||
Total collaborative arrangements revenue | $ 27,744 | $ 6,840 | $ 56,676 | $ 21,445 | ||||||||
Collaborative arrangements | ||||||||||||
Collaboration and License Agreements | ||||||||||||
Total collaborative arrangements revenue | 27,744 | 6,840 | 56,676 | 21,445 | ||||||||
Almirall, S.A. | Collaborative arrangements | ||||||||||||
Collaboration and License Agreements | ||||||||||||
Up-front fee received, net | $ 38,000 | |||||||||||
Up-front fee received | $ 40,000 | $ 6,000 | ||||||||||
Asset value for contingent equity investment by collaborative party recorded at inception of agreement | $ 6,000 | |||||||||||
Incremental deferred revenue related to contingent equity investment | 6,000 | |||||||||||
Milestone payment due upon the first commercial launch in each of the five major European Union countries | 4,000 | $ 4,000 | ||||||||||
Number of major European Union countries | item | 5 | 5 | ||||||||||
Number of major European Union countries in which commercial launch occurred | item | 2 | |||||||||||
Total collaborative arrangements revenue | $ 116 | 2,833 | $ 217 | 7,315 | ||||||||
Revenue recognized from sale of API | 1,700 | 5,100 | ||||||||||
Revenue recognized in commercial launch milestones | 900 | 1,900 | ||||||||||
Revenue recognized in royalty payments | 200 | $ 300 | ||||||||||
Almirall, S.A. | Collaborative arrangements | Convertible preferred stock (Note 11) | ||||||||||||
Collaboration and License Agreements | ||||||||||||
Equity investment in the entity's capital stock | $ 15,000 | |||||||||||
Issuance of Convertible preferred stock (in shares) | shares | 681,819 | |||||||||||
Almirall, S.A. | Collaborative arrangements | Development and sales milestones | ||||||||||||
Collaboration and License Agreements | ||||||||||||
Maximum contingent equity and milestone payments to be received | 40,000 | |||||||||||
Almirall, S.A. | Collaborative arrangements | Development milestones | ||||||||||||
Collaboration and License Agreements | ||||||||||||
Milestone payment received, net of foreign withholding taxes | $ 19,000 | |||||||||||
Milestone payment received | $ 20,000 | |||||||||||
Total milestone payment due upon the first commercial launch in all major European Union countries | $ 17,000 | $ 17,000 | ||||||||||
Almirall, S.A. | Collaborative arrangements | Development milestones | Convertible preferred stock (Note 11) | ||||||||||||
Collaboration and License Agreements | ||||||||||||
Contingent equity investment to be received form forward purchase contract | $ 15,000 | |||||||||||
Almirall, S.A. | Collaborative arrangements | Amended Development Milestones | ||||||||||||
Collaboration and License Agreements | ||||||||||||
Milestone payment received, net of foreign withholding taxes | 1,000 | $ 1,900 | ||||||||||
Milestone payment received | 1,000 | $ 1,000 | ||||||||||
Number of milestones achieved under collaboration agreement | item | 2 | |||||||||||
Milestones, net of foreign tax withholdings | $ 1,000 | $ 1,000 |
Collaboration and License Agr33
Collaboration and License Agreements (Details 3) $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | 18 Months Ended | |||
Mar. 31, 2013 | Nov. 30, 2009USD ($) | Jun. 30, 2015USD ($) | Jun. 30, 2014USD ($) | Jun. 30, 2015USD ($) | Jun. 30, 2014USD ($) | Jun. 30, 2015USD ($) | |
Collaboration and License Agreements | |||||||
Collaborative arrangements revenue | $ 27,744 | $ 6,840 | $ 56,676 | $ 21,445 | |||
Collaborative arrangements | |||||||
Collaboration and License Agreements | |||||||
Collaborative arrangements revenue | 27,744 | 6,840 | 56,676 | 21,445 | |||
Astellas Pharma Inc. | Collaborative arrangements | |||||||
Collaboration and License Agreements | |||||||
Up-front fee received | $ 30,000 | ||||||
Estimated development period prior to assessment | 115 months | ||||||
Estimated development period | 85 months | ||||||
Revenue recognized as a result of revised estimate of development period | 500 | 500 | 1,000 | 1,000 | |||
Up-front license fee revenue recognized | 1,300 | 1,300 | 2,600 | 2,600 | |||
Up-front license fee deferred | 8,900 | 8,900 | $ 8,900 | ||||
Collaborative arrangements revenue | 1,805 | 1,951 | 4,080 | 3,219 | |||
Revenue recognized from sale of API | $ 700 | $ 500 | $ 700 | ||||
Astellas Pharma Inc. | Collaborative arrangements | Additional development milestones | |||||||
Collaboration and License Agreements | |||||||
Total number of milestone payments to be received (in payments) | 3 | ||||||
Astellas Pharma Inc. | Collaborative arrangements | Additional development milestones | Maximum | |||||||
Collaboration and License Agreements | |||||||
Total milestone payments to be received | $ 45,000 | ||||||
Astellas Pharma Inc. | Collaborative arrangements | Phase 3 milestones | |||||||
Collaboration and License Agreements | |||||||
Milestone payment to be received by company upon milestone achievement | 15,000 | ||||||
Revenue recognized over the remaining development period | 3,700 | 3,700 | 3,700 | ||||
Collaborative arrangements revenue | $ 500 | $ 1,100 | $ 11,300 | ||||
Astellas Pharma Inc. | Collaborative arrangements | Japanese NDA equivalent filing milestone | |||||||
Collaboration and License Agreements | |||||||
Total number of milestone payments to be received (in payments) | 2 | ||||||
Milestone payment to be received by company upon milestone achievement | $ 15,000 | ||||||
Astellas Pharma Inc. | Collaborative arrangements | Approval of Japanese NDA equivalent filing milestone | |||||||
Collaboration and License Agreements | |||||||
Milestone payment to be received by company upon milestone achievement | $ 15,000 |
Collaboration and License Agr34
Collaboration and License Agreements (Details 4) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||||
Mar. 31, 2015 | Aug. 31, 2014 | Oct. 31, 2012 | Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Collaboration and License Agreements | |||||||
Total revenues | $ 27,744 | $ 6,840 | $ 56,676 | $ 21,445 | |||
Collaborative arrangement | |||||||
Collaboration and License Agreements | |||||||
Collaborative arrangements revenue earned | 400 | 1,600 | |||||
Collaborative arrangements | |||||||
Collaboration and License Agreements | |||||||
Total revenues | 27,744 | 6,840 | 56,676 | 21,445 | |||
AstraZeneca | Collaborative arrangements | |||||||
Collaboration and License Agreements | |||||||
Prior notice period to terminate the agreement | 180 days | ||||||
Up-front fee received | $ 25,000 | ||||||
Additional budget for activities supporting the development of linaclotide | $ 14,000 | ||||||
Total amount of non-contingent arrangement consideration | $ 34,000 | ||||||
Percentage of costs of clinical trial material supply services and research, development and regulatory activities allocated | 55.00% | ||||||
Amount of arrangement consideration for clinical trial material supply services and research, development and regulatory activities | $ 9,000 | ||||||
Discount rate utilized in analysis (as a percent) | 11.50% | ||||||
Arrangement Consideration allocated to the License Deliverable | $ 29,700 | ||||||
Arrangement Consideration allocated to the R&D Services | 1,800 | ||||||
Arrangement Consideration allocated to the JDC services | 100 | ||||||
Arrangement Consideration allocated to the clinical trial material supply services | 300 | ||||||
Arrangement Consideration allocated to Co-Promotion Deliverable | 2,100 | ||||||
Net cost sharing offset or incremental expense related to research and development expense | 400 | 900 | 700 | 1,300 | |||
Collaborative arrangements revenue earned | 300 | 700 | |||||
Total revenues | 466 | $ 278 | 1,696 | $ 686 | |||
AstraZeneca | Collaborative arrangements | Sales milestones | |||||||
Collaboration and License Agreements | |||||||
Milestone payment to be received by company upon milestone achievement | $ 125,000 | ||||||
AstraZeneca | Collaborative arrangements | Commercialization milestone | |||||||
Collaboration and License Agreements | |||||||
Percentage of net profit from commercialization | 55.00% | ||||||
Percentage of net loss from commercialization | 55.00% | ||||||
Exact Sciences Corp | Co-promotion | |||||||
Collaboration and License Agreements | |||||||
Total revenues | $ 1,000 | $ 1,000 | |||||
Initial term of agreement | 1 year | ||||||
Period following termination of agreement during which the reduced royalties will be paid | 1 year | ||||||
Exact Sciences Corp | Co-promotion | Maximum | |||||||
Collaboration and License Agreements | |||||||
Reimbursement of revenue | $ 4,800 |
Collaboration and License Agr35
Collaboration and License Agreements (Details 5) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Collaboration and License Agreements | ||||
Research and development expense | $ 28,648 | $ 22,142 | $ 55,289 | $ 49,286 |
Other Collaboration and License Agreements | ||||
Collaboration and License Agreements | ||||
Aggregate up-front fee paid | 5,800 | |||
Contingent milestone payable per product, maximum | 114,500 | |||
Research and development expense | $ 1,000 | |||
Other Collaboration and License Agreements | Sales milestones | ||||
Collaboration and License Agreements | ||||
Contingent milestone payable per product | 35,000 | |||
Other Collaboration and License Agreements | Development milestones | ||||
Collaboration and License Agreements | ||||
Contingent milestone payable | 7,500 | |||
Milestone payment | 2,500 | |||
Contingent milestone payable per product | 21,500 | |||
Other Collaboration and License Agreements | Regulatory milestones | ||||
Collaboration and License Agreements | ||||
Contingent milestone payable | 18,000 | |||
Milestone payment | 0 | |||
Contingent milestone payable per product | $ 58,000 |
Fair Value of Financial Instr36
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Jun. 30, 2015 | Dec. 31, 2014 | Jun. 30, 2014 | Jan. 31, 2013 |
Description | ||||
Available-for-sale securities | $ 236,865 | $ 174,037 | ||
Transfers between Level 1 and Level 2 of the fair value hierarchy | $ 0 | $ 0 | ||
PhaRMA Notes | ||||
Description | ||||
Aggregate principal amount of notes issued in private placement | $ 175,000 | |||
Annual cash interest rate | 11.00% | |||
PhaRMA Notes | 11% PhaRMA Notes | ||||
Description | ||||
Aggregate principal amount of notes issued in private placement | $ 175,000 | |||
Convertible Senior Notes | ||||
Description | ||||
Annual cash interest rate | 2.25% | |||
Convertible Senior Notes | 2.25% Convertible Senior Notes due in 2022 | ||||
Description | ||||
Aggregate principal amount of notes issued in private placement | $ 335,700 | |||
Annual cash interest rate | 2.25% | |||
Significant Other Observable Inputs (Level 2) | Convertible Senior Notes | 2.25% Convertible Senior Notes due in 2022 | ||||
Description | ||||
Estimated fair value | $ 326,900 | |||
Significant Unobservable Inputs (Level 3) | PhaRMA Notes | 11% PhaRMA Notes | ||||
Description | ||||
Estimated fair value | 177,600 | 182,500 | ||
Recurring basis | ||||
Description | ||||
Total assets | 581,456 | |||
Total liabilities | 69,456 | |||
Recurring basis | Note hedge warrants | ||||
Description | ||||
Total liabilities | 69,456 | |||
Recurring basis | Convertible Note Hedges | ||||
Description | ||||
Total assets | 90,314 | |||
Recurring basis | Fair Value | ||||
Description | ||||
Total assets | 235,003 | |||
Total assets and liabilities measured at fair value | 650,912 | |||
Recurring basis | Fair Value | Money market funds | ||||
Description | ||||
Total assets | 254,277 | 60,966 | ||
Recurring basis | Fair Value | U.S. Treasury securities | ||||
Description | ||||
Total assets | 46,657 | 24,005 | ||
Recurring basis | Fair Value | U.S. government-sponsored securities | ||||
Description | ||||
Total assets | 190,208 | 150,032 | ||
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||||
Description | ||||
Total assets | 300,934 | 84,971 | ||
Total assets and liabilities measured at fair value | 300,934 | |||
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Money market funds | ||||
Description | ||||
Total assets | 254,277 | 60,966 | ||
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. Treasury securities | ||||
Description | ||||
Total assets | 46,657 | 24,005 | ||
Recurring basis | Significant Other Observable Inputs (Level 2) | ||||
Description | ||||
Total assets | 190,208 | 150,032 | ||
Total assets and liabilities measured at fair value | 190,208 | |||
Recurring basis | Significant Other Observable Inputs (Level 2) | U.S. government-sponsored securities | ||||
Description | ||||
Total assets | 190,208 | $ 150,032 | ||
Recurring basis | Significant Unobservable Inputs (Level 3) | ||||
Description | ||||
Total assets | 90,314 | |||
Total liabilities | 69,456 | |||
Total assets and liabilities measured at fair value | 159,770 | |||
Recurring basis | Significant Unobservable Inputs (Level 3) | Note hedge warrants | ||||
Description | ||||
Total liabilities | 69,456 | |||
Recurring basis | Significant Unobservable Inputs (Level 3) | Convertible Note Hedges | ||||
Description | ||||
Total assets | $ 90,314 |
Fair Value of Financial Instr37
Fair Value of Financial Instruments (Details 2) - Jun. 30, 2015 - USD ($) $ / shares in Units, $ in Thousands | Total | Total | |
Changes in fair value | |||
Gain-loss on mark-to-market derivatives | $ (208) | $ (208) | |
Issuance of note hedge warrants | 70,849 | ||
Purchase of convertible note hedges | $ (91,915) | ||
Note hedge warrants | Significant Unobservable Inputs (Level 3) | |||
Derivative Instrument Detail [Abstract] | |||
Risk-free interest rate (as a percent) | [1] | 2.10% | |
Time to maturity | 7 years 6 months | ||
Stock price (in dollars per share) | [2] | $ 12.06 | $ 12.06 |
Strike price (in dollars per share) | [3] | $ 21.50 | $ 21.50 |
Common stock volatility (as a percent) | [4] | 39.00% | |
Dividend yield (as a percent) | 0.00% | ||
Changes in fair value | |||
Balance at beginning of period | $ 0 | ||
Issuance of note hedge warrants | (70,849) | ||
Change in fair value, recorded as a component of Loss on derivatives | 1,393 | ||
Balance at end of period | $ (69,456) | (69,456) | |
Convertible Note Hedges | |||
Changes in fair value | |||
Balance at beginning of period | 0 | ||
Purchase of convertible note hedges | 91,915 | ||
Change in fair value, recorded as a component of Loss on derivatives | (1,601) | ||
Balance at end of period | $ 90,314 | $ 90,314 | |
Convertible Note Hedges | Significant Unobservable Inputs (Level 3) | |||
Derivative Instrument Detail [Abstract] | |||
Risk-free interest rate (as a percent) | [1] | 2.10% | |
Time to maturity | 7 years | ||
Stock price (in dollars per share) | [2] | $ 12.06 | $ 12.06 |
Strike price (in dollars per share) | [3] | $ 16.58 | $ 16.58 |
Common stock volatility (as a percent) | [4] | 42.00% | |
Dividend yield (as a percent) | 0.00% | ||
[1] | (1)Based on U.S. Treasury Curve. | ||
[2] | (2)The closing price of the Company’s common stock on the last trading day of the quarter. | ||
[3] | (3) As per agreement | ||
[4] | (4) Selected volatility based on historical volatility and implied volatility |
Available-for-Sale Securities38
Available-for-Sale Securities (Details) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2015USD ($)item | Jun. 30, 2014USD ($) | Jun. 30, 2015USD ($)item | Jun. 30, 2014USD ($) | Dec. 31, 2014USD ($)item | |
Available-for-Sale Securities | |||||
Amortized Cost | $ 236,844,000 | $ 236,844,000 | $ 174,056,000 | ||
Gross Unrealized Gains | 50,000 | 6,000 | |||
Gross Unrealized Losses | (29,000) | (25,000) | |||
Fair Value | $ 236,865,000 | $ 236,865,000 | $ 174,037,000 | ||
Contractual maturity period, maximum | 1 year | ||||
Number of investments classified as available-for-sale securities in an unrealized loss position | item | 18 | 18 | 27 | ||
Number of investments classified as available-for-sale securities in an unrealized loss position for more than twelve months | item | 0 | 0 | 0 | ||
Aggregate fair value of securities none of which had been in an unrealized loss position for more than twelve months | $ 73,800,000 | $ 73,800,000 | $ 101,900,000 | ||
Proceeds from sales of available-for-sale securities | 0 | $ 0 | 0 | $ 0 | |
U.S. government-sponsored securities | |||||
Available-for-Sale Securities | |||||
Amortized Cost | 190,197,000 | 190,197,000 | 150,055,000 | ||
Gross Unrealized Gains | 40,000 | 2,000 | |||
Gross Unrealized Losses | (29,000) | (25,000) | |||
Fair Value | 190,208,000 | 190,208,000 | 150,032,000 | ||
U.S. Treasury securities | |||||
Available-for-Sale Securities | |||||
Amortized Cost | 46,647,000 | 46,647,000 | 24,001,000 | ||
Gross Unrealized Gains | 10,000 | 4,000 | |||
Fair Value | $ 46,657,000 | $ 46,657,000 | $ 24,005,000 |
Inventory (Details)
Inventory (Details) $ in Thousands | Jul. 31, 2015 | Jun. 30, 2015USD ($) | Dec. 31, 2014USD ($) | Jun. 30, 2014USD ($) | Jun. 30, 2015USD ($) | Jun. 30, 2014USD ($) | Dec. 31, 2014USD ($) |
Number of minimum supply agreements | 2 | 2 | |||||
Demand forecast period | 24 months | ||||||
Subsequent forecast period | 18 months | ||||||
Write-down of inventory | $ 8,900 | $ 8,150 | $ 8,894 | ||||
Non-cancelable purchase commitments | $ 3,200 | 3,200 | |||||
Net realizable value | 0 | $ 4,954 | 0 | $ 4,954 | |||
Subsequent event | |||||||
Number of minimum supply agreements | 1 | ||||||
Cost of revenue | |||||||
Write-down of inventory | 5,000 | ||||||
Non-cancelable purchase commitments | $ 3,200 | $ 3,200 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | Jun. 30, 2015 | Dec. 31, 2014 |
Property and equipment | ||
Property and equipment, gross | $ 83,030 | $ 82,805 |
Less accumulated depreciation and amortization | (58,013) | (52,979) |
Property and equipment, net | 25,017 | 29,826 |
Manufacturing equipment | ||
Property and equipment | ||
Property and equipment, gross | 3,623 | 3,623 |
Laboratory equipment | ||
Property and equipment | ||
Property and equipment, gross | 14,916 | 15,126 |
Computer and office equipment | ||
Property and equipment | ||
Property and equipment, gross | 5,208 | 5,185 |
Furniture and fixtures | ||
Property and equipment | ||
Property and equipment, gross | 2,093 | 2,093 |
Software | ||
Property and equipment | ||
Property and equipment, gross | 14,124 | 13,921 |
Construction in process | ||
Property and equipment | ||
Property and equipment, gross | 123 | 1,457 |
Leased vehicles | ||
Property and equipment | ||
Property and equipment, gross | 4,473 | 4,472 |
Leasehold improvements | ||
Property and equipment | ||
Property and equipment, gross | $ 38,470 | $ 36,928 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Jun. 30, 2015 | Dec. 31, 2014 |
Accrued Expenses | ||
Salaries and benefits | $ 13,398 | $ 16,582 |
Professional fees | 466 | 574 |
Accrued interest | 1,142 | 850 |
Other | 3,939 | 4,606 |
Total accrued expense | $ 18,945 | $ 22,612 |
Notes Payable (Details)
Notes Payable (Details) - Jun. 30, 2015 - USD ($) | Total | Total |
Notes Payable | ||
Net proceeds received | $ 335,699,000 | |
Convertible Senior Notes | ||
Notes Payable | ||
Annual interest rate of notes (as a percent) | 2.25% | 2.25% |
Maximum period of the sole remedy for event failures in the Indenture | 180 days | |
2.25% Convertible Senior Notes due in 2022 | Convertible Senior Notes | ||
Notes Payable | ||
Aggregate principal amount of notes issued | $ 335,700,000 | $ 335,700,000 |
Net proceeds received | 324,000,000 | 324,000,000 |
Fees and expenses | 11,700,000 | $ 11,700,000 |
Payments for convertible bond hedges | $ 21,100,000 | |
Annual interest rate of notes (as a percent) | 2.25% | 2.25% |
Amortization period | 7 years | |
Class A common stockholders | Convertible Senior Notes | ||
Notes Payable | ||
Number of trading days | 30 days | |
Class A common stockholders | Maximum | Convertible Senior Notes | ||
Notes Payable | ||
Number of trading days | 20 days | |
Class A common stockholders | 2.25% Convertible Senior Notes due in 2022 | Convertible Senior Notes | ||
Notes Payable | ||
Initial conversion rate, number of shares to be issued per $1000 of principal amount (in shares) | 60.3209 | |
Initial conversion price (in dollars per share) | $ 16.58 | $ 16.58 |
Approximate shares issued upon converison (in shares) | 20,249,665 | |
Principal amount used for debt instrument conversion ratio | $ 1,000 | |
Number of trading days | 30 days | |
Minimum percentage of stock price | 130.00% | |
Number of business days immediately after any five consecutive trading day period during the measurement period | 5 days | |
Number of consecutive trading days before five business days during the measurement period | 5 days | |
Repurchase price, as percentage of principal amount, if company undergoes change of control | 100.00% | |
Class A common stockholders | 2.25% Convertible Senior Notes due in 2022 | Maximum | Convertible Senior Notes | ||
Notes Payable | ||
Percentage of the trading price to the product of the sale price of the entity's common stock and the conversion rate | 98.00% | |
Class A common stockholders | 2.25% Convertible Senior Notes due in 2022 | Minimum | Convertible Senior Notes | ||
Notes Payable | ||
Percentage of aggregate principal amount payable, in case of event of default | 25.00% |
Notes Payable (Details 2)
Notes Payable (Details 2) - Jun. 30, 2015 - 2.25% Convertible Senior Notes due in 2022 - Convertible Senior Notes - USD ($) $ in Thousands | Total | Total | Total |
Liability component: | |||
Principal | $ 335,699 | $ 335,699 | $ 335,699 |
Less: unamortized debt discount | (113,704) | (113,704) | (113,704) |
Net carrying amount | 221,995 | 221,995 | 221,995 |
Equity component | 114,199 | 114,199 | 114,199 |
Debt Issuance Cost | 11,700 | ||
Debt issuance costs allocated to equity components | 4,000 | 4,000 | $ 4,000 |
Debt issuance costs allocated to liability components | $ 7,700 | ||
Debt instrument term | 7 years | ||
Effective interest rate on liability components | 9.34% | ||
Contractual interest expense | 293 | ||
Amortization of debt issuance costs | 22 | ||
Amortization of debt discount | 495 | ||
Total interest expense | $ 810 |
Notes Payable (Details 3)
Notes Payable (Details 3) - Jun. 30, 2015 - USD ($) $ / shares in Units, $ in Thousands | Total |
Notes Payable | |
Long-term asset | $ 90,314 |
Long-term liability | 69,456 |
Convertible Note Hedge | |
Notes Payable | |
Long-term asset | 91,900 |
Long-term liability | 70,800 |
Issuance cost | $ 21,100 |
Convertible Note Hedge | Class A common stockholders | |
Notes Payable | |
Convertible notes, shares issued | 20,249,665 |
Convertible notes, share price (in dollars per share) | $ 16.58 |
Convertible notes, bond hedge warrants issued | 20,249,665 |
Convertible notes, bond hedge warrants strike price (in dollars per share) | $ 21.50 |
Number of trading days for exercise of warrants | 150 days |
Notes Payable (Details 4)
Notes Payable (Details 4) - USD ($) $ in Thousands | Mar. 15, 2014 | Jan. 04, 2013 | Jun. 30, 2015 | Dec. 31, 2014 | Jan. 31, 2013 |
Notes Payable | |||||
Estimated principal payments | $ 17,571 | $ 11,258 | |||
Prepaid expenses and other current assets | 6,595 | 9,180 | |||
Other assets | 3,504 | 3,042 | |||
PhaRMA notes payable, net of current portion | 147,793 | 158,147 | |||
PhaRMA Notes | |||||
Notes Payable | |||||
Aggregate principal amount of notes issued in private placement | $ 175,000 | ||||
Annual cash interest rate | 11.00% | ||||
Principal payment | 5,900 | ||||
Estimated principal payments | $ 17,600 | ||||
Percentage of net sales of LINZESS considered to determine quarterly payments on the notes | 7.50% | ||||
Upfront cash proceeds | $ 175,000 | ||||
Discount on issuance of debt | 400 | ||||
Debt issuance costs capitalized | $ 7,300 | ||||
PhaRMA Notes | From and including January 1, 2015 to and including December 31, 2015 | |||||
Notes Payable | |||||
DebtInstrumentRedemptionPeriodStartDate | Jan. 1, 2015 | ||||
DebtInstrumentRedemptionPeriodEndDate | Dec. 31, 2015 | ||||
Redemption Percentage | 105.50% | ||||
PhaRMA Notes | From and including January 1, 2016 to and including December 31, 2016 | |||||
Notes Payable | |||||
DebtInstrumentRedemptionPeriodStartDate | Jan. 1, 2016 | ||||
DebtInstrumentRedemptionPeriodEndDate | Dec. 31, 2016 | ||||
Redemption Percentage | 102.75% | ||||
PhaRMA Notes | From and including January 1, 2017 and thereafter | |||||
Notes Payable | |||||
DebtInstrumentRedemptionPeriodStartDate | Jan. 1, 2017 | ||||
Redemption Percentage | 100.00% | ||||
Accounting Standards Update 2015-03 | New Accounting Pronouncement, Early Adoption, Effect | |||||
Notes Payable | |||||
Prepaid expenses and other current assets | 1,400 | ||||
Other assets | $ 2,800 |
Employee Stock Benefit Plans (D
Employee Stock Benefit Plans (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Share-based compensation is reflected in the condensed consolidated statements of operations | ||||
Share-based compensation | $ 6,903 | $ 6,012 | $ 12,329 | $ 12,086 |
Research and development | ||||
Share-based compensation is reflected in the condensed consolidated statements of operations | ||||
Share-based compensation | 2,691 | 2,271 | 4,745 | 4,961 |
Selling, general and administrative | ||||
Share-based compensation is reflected in the condensed consolidated statements of operations | ||||
Share-based compensation | $ 4,212 | $ 3,741 | $ 7,584 | $ 7,125 |
Employee Stock Benefit Plans 47
Employee Stock Benefit Plans (Details 2) - Options to purchase common stock - $ / shares shares in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Number of Shares | ||||
Outstanding at the beginning of the period (in shares) | 19,957 | |||
Granted (in shares) | 2,936 | |||
Exercised (in shares) | (1,443) | |||
Cancelled (in shares) | (301) | |||
Outstanding at the end of the period (in shares) | 21,149 | 21,149 | ||
Weighted-Average Exercise Price | ||||
Outstanding at the beginning of the period (in dollars per share) | $ 10.07 | |||
Granted (in dollars per share) | 15.43 | |||
Exercised (in dollars per share) | 6.14 | |||
Cancelled (in dollars per share) | 13.29 | |||
Outstanding at the end of the period (in dollars per share) | $ 11.04 | $ 11.04 | ||
Weighted-average assumptions used to estimate the fair value of the stock options using the Black-Scholes option-pricing model | ||||
Expected volatility (as a percent) | 46.80% | 48.10% | 46.10% | 46.70% |
Expected term | 6 years | 6 years 1 month 6 days | 6 years | 6 years 1 month 6 days |
Risk-free interest rate (as a percent) | 1.70% | 2.00% | 1.70% | 1.80% |
Employee Stock Benefit Plans 48
Employee Stock Benefit Plans (Details 3) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2014 | |
Additional disclosures | |||||
Share-based compensation | $ 6,903 | $ 6,012 | $ 12,329 | $ 12,086 | |
Restricted stock units | |||||
Restricted Stock | |||||
Common stock receivable per option exercised (in shares) | 1 | ||||
Vesting percentage | 25.00% | ||||
Summary of unvested shares of restricted stock, shares | |||||
Granted (in shares) | 502,000 | ||||
Forfeited (in shares) | (10,000) | ||||
Outstanding at the end of the period (in shares) | 492,000 | 492,000 | |||
Summary of unvested shares of restricted stock, weighted-average fair value | |||||
Granted (in dollars per share) | $ 15.59 | ||||
Forfeited (in dollars per share) | 15.62 | ||||
Outstanding at the end of the period (in dollars per share) | $ 15.59 | $ 15.59 | |||
Options to purchase common stock | |||||
Additional disclosures | |||||
Shares issuable under outstanding options | 21,149,000 | 21,149,000 | 19,957,000 |
Related Party Transactions (Det
Related Party Transactions (Details) $ in Millions | 1 Months Ended | 6 Months Ended | ||
Nov. 30, 2009shares | Sep. 30, 2009shares | Jun. 30, 2015USD ($) | Dec. 31, 2014USD ($) | |
Class B common stock | ||||
Related Party Transactions | ||||
Preferred stock conversion basis | 1 | |||
Allergan Plc | ||||
Related Party Transactions | ||||
Accounts receivable | $ | $ 26 | $ 25.8 | ||
Allergan Plc | Convertible preferred stock (Note 11) | ||||
Related Party Transactions | ||||
Issuance of Convertible preferred stock (in shares) | 2,083,333 | |||
Almirall, S.A. | Convertible preferred stock (Note 11) | ||||
Related Party Transactions | ||||
Issuance of Convertible preferred stock (in shares) | 681,819 |
Subsequent Events (Details)
Subsequent Events (Details) - Aug. 04, 2015 - Subsequent event $ in Millions | USD ($) |
Allergan Plc | Co-promotion | |
Subsequent Events | |
Number of health care practitioners (in practitioners) | 25,000 |
Suppliers | |
Subsequent Events | |
Number of suppliers (in suppliers) | 2 |
Number of amendments (in amendments) | 1 |
Non-cancellable commercial supply purchase obligations through 2023 | $ 34.5 |