Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 03, 2017 | |
Entity Registrant Name | IRONWOOD PHARMACEUTICALS INC | |
Entity Central Index Key | 1,446,847 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
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 | 2,017 | |
Document Fiscal Period Focus | Q1 | |
Class A common stock | ||
Entity Common Stock, Shares Outstanding | 134,064,057 | |
Class B common stock | ||
Entity Common Stock, Shares Outstanding | 14,552,306 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 133,319 | $ 54,004 |
Available-for-sale securities | 162,020 | 251,212 |
Accounts receivable | 1,152 | 933 |
Related party accounts receivable, net | 49,995 | 63,921 |
Inventory | 1,513 | 1,081 |
Prepaid expenses and other current assets | 8,664 | 9,030 |
Restricted cash | 1,190 | |
Total current assets | 357,853 | 380,181 |
Restricted cash, net of current portion | 7,057 | 8,247 |
Property and equipment, net | 18,633 | 20,512 |
Convertible note hedges | 150,509 | 132,521 |
Intangible assets, net | 165,699 | 166,119 |
Goodwill | 785 | 785 |
Other assets | 783 | 1,456 |
Total assets | 701,319 | 709,821 |
Current liabilities: | ||
Accounts payable and related party accounts payable, net | 20,578 | 17,703 |
Accrued research and development costs | 5,106 | 6,937 |
Accrued expenses and other current liabilities | 31,818 | 38,301 |
Current portion of capital lease obligations | 5,501 | 6,227 |
Current portion of deferred rent | 588 | 7,719 |
Deferred revenue | 741 | |
Current portion of contingent consideration | 14,561 | 14,244 |
Total current liabilities | 78,893 | 91,131 |
Capital lease obligations, net of current portion | 21 | 82 |
Deferred rent, net of current portion | 2,554 | 557 |
Contingent consideration, net of current portion | 64,712 | 63,416 |
Note hedge warrants | 133,424 | 113,237 |
Other liabilities | 8,190 | 8,190 |
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 | 1,273,853 | 1,258,398 |
Accumulated deficit | (1,244,324) | (1,191,823) |
Accumulated other comprehensive loss | (41) | (7) |
Total stockholders' equity | 29,637 | 66,716 |
Total liabilities and stockholders' equity | 701,319 | 709,821 |
Class A common stock | ||
Stockholders' equity: | ||
Common stock | 134 | 133 |
Class B common stock | ||
Stockholders' equity: | ||
Common stock | 15 | 15 |
2.25% Convertible Senior Notes due in 2022 | ||
Current liabilities: | ||
Notes payable | 237,851 | 234,243 |
11% PhaRMA Notes | ||
Current liabilities: | ||
Notes payable | $ 132,249 | |
8.375% Notes due 2026 | ||
Current liabilities: | ||
Notes payable | $ 146,037 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2017 | Dec. 31, 2016 |
Preferred stock | ||
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 stock | ||
Common stock | ||
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 | 133,937,146 | 132,631,387 |
Common stock, shares outstanding | 133,937,146 | 132,631,387 |
Class B common stock | ||
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 | 14,552,306 | 14,784,077 |
Common stock, shares outstanding | 14,552,306 | 14,484,077 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenues: | ||
Collaborative arrangements revenue | $ 51,877 | $ 66,042 |
Product revenue, net | 289 | |
Total revenues | 52,166 | 66,042 |
Cost and expenses: | ||
Cost of revenues, excluding amortization of acquired intangible asset | 531 | |
Research and development | 33,702 | 31,842 |
Selling, general and administrative | 55,604 | 36,168 |
Amortization of acquired intangible asset | 420 | |
Loss on fair value remeasurement of contingent consideration | 1,614 | |
Total cost and expenses | 91,871 | 68,010 |
Loss from operations | (39,705) | (1,968) |
Other (expense) income: | ||
Interest expense | (8,983) | (9,907) |
Interest and investment income | 395 | 221 |
Loss on derivatives | (2,199) | (1,643) |
Loss on extinguishment of debt | (2,009) | |
Other expense, net | (12,796) | (11,329) |
Net loss | $ (52,501) | $ (13,297) |
Net loss per share - basic and diluted | $ (0.36) | $ (0.09) |
Weighted average number of common shares used in net loss per share - basic and diluted: | 147,786 | 143,593 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Condensed Consolidated Statements of Comprehensive Loss | ||
Net loss | $ (52,501) | $ (13,297) |
Other comprehensive (loss) income: | ||
Unrealized (losses) gains on available-for-sale securities | (34) | 115 |
Total other comprehensive (loss) income | (34) | 115 |
Comprehensive loss | $ (52,535) | $ (13,182) |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash flows from operating activities: | ||
Net loss | $ (52,501) | $ (13,297) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 2,910 | 2,833 |
Amortization of acquired intangible asset | 420 | |
Share-based compensation expense | 7,279 | 6,806 |
Change in fair value of note hedge warrants | 20,187 | (7,135) |
Change in fair value of convertible note hedges | (17,988) | 8,778 |
Write-down of excess non-cancelable ZURAMPIC sample purchase commitments | 1,353 | |
(Gain) loss on facility subleases | (1,579) | 3,480 |
Accretion of discount/premium on investment securities | 105 | 340 |
Non-cash interest expense | 3,877 | 3,572 |
Non-cash change in fair value of contingent consideration | 1,614 | |
Loss on extinguishment of debt | 2,009 | |
Changes in assets and liabilities: | ||
Accounts receivable and related party accounts receivable | 13,707 | 1,500 |
Prepaid expenses and other current assets | 372 | (1,093) |
Inventory | 71 | |
Other assets | 201 | 385 |
Accounts payable, related party accounts payable and accrued expenses | (5,238) | (8,104) |
Accrued research and development costs | (1,831) | 2,380 |
Deferred revenue | 741 | 320 |
Deferred rent | (3,555) | (604) |
Net cash (used in) provided by operating activities | (27,846) | 161 |
Cash flows from investing activities: | ||
Purchases of available-for-sale securities | (44,777) | (52,629) |
Sales and maturities of available-for-sale securities | 133,830 | 76,985 |
Purchases of property and equipment | (1,037) | (1,008) |
Proceeds from sale of property and equipment | 43 | |
Net cash provided by investing activities | 88,059 | 23,348 |
Cash flows from financing activities: | ||
Proceeds from issuance of 2026 Notes, net of discount to lender | 146,250 | |
Costs associated with issuance of 2026 Notes | (209) | |
Proceeds from exercise of stock options and employee stock purchase plan | 8,171 | 1,841 |
Payments on capital leases | (796) | (413) |
Principal payments on PhaRMA notes | (134,258) | (5,298) |
Payments on contingent purchase price consideration | (56) | |
Net cash provided by (used in) financing activities | 19,102 | (3,870) |
Net increase in cash and cash equivalents | 79,315 | 19,639 |
Cash and cash equivalents, beginning of period | 54,004 | 261,287 |
Cash and cash equivalents, end of period | $ 133,319 | $ 280,926 |
Net Loss Per Share
Net Loss Per Share | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure Text Block | |
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 convertible note hedge transactions (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 a 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 10). 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 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. The Note Hedge Warrants could have a dilutive effect on the Company’s 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 10). The Note Hedge Warrants are not considered for purposes of calculating the number of diluted weighted averages shares outstanding, as their effect would be antidilutive. The following potentially dilutive securities have been excluded from the computation of diluted weighted average shares outstanding as their effect would be anti-dilutive (in thousands): Three Months Ended March 31, 2017 2016 Options to purchase common stock 22,538 Shares subject to repurchase 37 Restricted stock units 2,255 1,255 Note hedge warrants 20,250 20,250 2022 Notes 20,250 20,250 An insignificant number of shares issuable under the Company’s employee stock purchase plan were excluded from the calculation of diluted weighted average shares outstanding because their effects would be anti-dilutive. |
Business Combinations
Business Combinations | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure Text Block | |
Business Combinations | 3. Business Combination The Company closed the Lesinurad Transaction on June 2, 2016 (the “Acquisition Date”) with AstraZeneca pursuant to which the Company received an exclusive license to develop, manufacture and commercialize in the U.S. products containing lesinurad as an active ingredient, including ZURAMPIC (the “Products”). Subject to the terms of the Lesinurad License, AstraZeneca is obligated to conduct certain development activities on the Company’s behalf for (i) ZURAMPIC, including the post-marketing activities currently required by the FDA, for which the Company is obligated to reimburse AstraZeneca up to $100.0 million over up to ten years, and (ii) DUZALLO, for which the Company will also reimburse AstraZeneca. In connection with the Lesinurad License, the Company and AstraZeneca entered into a commercial supply agreement (the “Lesinurad CSA”), pursuant to which the Company relies exclusively on AstraZeneca for the commercial manufacture and supply of ZURAMPIC and, if approved, DUZALLO, and the lesinurad transitional services agreement (the “Lesinurad TSA”), pursuant to which AstraZeneca is providing certain support services, including development, regulatory and commercial services, to the Company for ZURAMPIC until such activities under the Lesinurad TSA are transferred to the Company. The Company may obtain production techniques from AstraZeneca via a manufacturing technology transfer available under the Lesinurad CSA upon provision of six-months’ notice. The Company is responsible for commercialization of the Products in the U.S., and any additional development of the Products for commercialization in the U.S. In addition, under the terms of the Lesinurad License, the Company has the right of first negotiation and right of last refusal with AstraZeneca for the right to commercialize, develop and manufacture for commercialization in the U.S., products for the prevention or treatment of gout that include verinurad as at least one of its active ingredients. The Company concluded that the Lesinurad Transaction included inputs and processes that have the ability to create outputs and accordingly accounted for the transaction as a business combination in accordance with ASC 805. As such, the assets acquired and liabilities assumed were recorded at fair value, with the remaining purchase price recorded as goodwill. The purchase price consists of the up-front payment to AstraZeneca of $100.0 million, which was made in June 2016, and the fair value of contingent consideration of approximately $67.9 million. In addition to the up-front payment, the Company will also pay a tiered royalty to AstraZeneca in the single-digits as a percentage of net sales of the Products in the U.S., as well as commercial and other milestones of up to $165.0 million over the duration of the Lesinurad License. As of the Acquisition Date, the contingent consideration fair value of approximately $67.9 million was calculated using a discounted cash flow estimate of expected future milestone and royalty payments to AstraZeneca based on the Company’s internally forecasted net product revenue of ZURAMPIC and, if approved, DUZALLO. The fair value of contingent consideration in the purchase price includes initial measurement period adjustments as of the Acquisition Date. The Company also paid approximately $1.6 million in transaction-related costs, including external consulting fees, which were expensed as incurred as selling, general and administrative expenses during the year ended December 31, 2016. The Company preliminarily valued the acquired assets and liabilities based on their estimated fair value as of the Acquisition Date upon closing the Lesinurad Transaction. Certain of these estimates were adjusted during the year ended December 31, 2016 as additional information became available related to conditions that existed as of the Acquisition Date. No such adjustments were made during the three months ended March 31, 2017. The fair values included in the Company’s condensed consolidated balance sheets as of March 31, 2017 are based on the Company’s best estimates. The Company will continue to evaluate all information available, including the results of multiple ongoing market research projects, and further adjustments to the respective fair values of these items may be made if additional information becomes available regarding conditions that existed at the time of the acquisition, but such adjustments may be made no later than June 1, 2017. The completion of the valuation of the acquired assets and liabilities may result in additional adjustments to the carrying value of assets and liabilities, revision to the useful life of the finite intangible asset, the determination of any residual amount that will be allocated to goodwill and the related tax effects. The related amortization of the acquired finite-lived intangible asset is also subject to revision based on the final valuation. As of March 31, 2017, the goodwill balance includes insignificant measurement period adjustments made in prior quarters. The following table presents the allocation of the purchase consideration for the Lesinurad Transaction as of the Acquisition Date, including the contingent consideration (in thousands): As of the Acquisition Date: Cash portion of consideration $ 100,000 Contingent consideration 67,885 Total purchase consideration $ 167,885 As of the Acquisition Date: Developed technology — ZURAMPIC $ 22,000 IPR&D - DUZALLO 145,100 Goodwill 785 Net assets acquired $ 167,885 The fair value of the IPR&D - DUZALLO was determined using a probability adjusted discounted cash flow approach, including assumptions of projected revenues, operating expenses and a discount rate of 14.0% applied to the projected cash flows. The remaining cost of development for this asset was approximately $13.9 million as of the Acquisition Date, with an expected completion date of no later than December 31, 2017. Through March 31, 2017, the Company continued to incur costs related to DUZALLO. The fair value of the developed technology - ZURAMPIC intangible asset was determined using a probability adjusted discounted cash flow approach, including assumptions of projected revenues, operating expenses and a discount rate of 12.5% applied to the projected cash flows. The Company considers the developed technology - ZURAMPIC intangible asset acquired to be developed technology, as it was approved by the FDA for commercialization as of the Acquisition Date. The Company believes the assumptions are representative of those a market participant would use in estimating fair value. The developed technology - ZURAMPIC intangible asset is finite lived. The amount allocated to the developed technology - ZURAMPIC intangible asset is being amortized on a straight-line basis to amortization of acquired intangible assets within the Company’s condensed consolidated statements of operations over its estimated useful life of approximately 13 years, the period of estimated future cash flows from the Acquisition Date. The Company believes that the straight-line method of amortization represents the pattern in which the economic benefits of the intangible asset are consumed. As of March 31, 2017, the Company recognized accumulated amortization of approximately $1.4 million with respect to the developed technology - ZURAMPIC intangible asset. The estimated future amortization of developed technology - ZURAMPIC intangible asset is expected to be as follows (in thousands): As of March 31, 2017 2017 (1) $ 1,262 2018 1,682 2019 1,682 2020 1,682 2021 and thereafter 14,291 Total $ 20,599 (1) For the nine months ending December 31, 2017. The amount allocated to the IPR&D - DUZALLO is considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts. As of March 31, 2017, there was no impairment related to the IPR&D – DUZALLO or the developed technology - ZURAMPIC intangible asset. The Company allocated the excess of the purchase price over the identifiable intangible assets to goodwill. Such goodwill is not deductible for tax purposes and represents the value placed on entering new markets, expanding market share and operating synergies. As of March 31, 2017, there was no impairment of goodwill. All goodwill has been assigned to the Company’s single reporting unit, which is the single operating segment human therapeutics. These fair value measurements were based on significant inputs not observable in the market and thus represent Level 3 fair value measurements (Note 6). As of March 31, 2017, the estimated fair value of the Company’s contingent consideration liability increased by approximately $11.4 million to approximately $79.3 million, compared to the Acquisition Date estimated fair value primarily due to the passage of time and changes in the yield curve equivalent to the Company’s credit risk, which was the estimated cost of debt financing for similar market participants used in the valuation. |
Collaboration, License, Co-Prom
Collaboration, License, Co-Promotion and Other Commercial Agreements | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure Text Block | |
Collaboration, License, Co-Promotion and Other Commercial Agreements | 4. Collaboration, License, Co-Promotion and Other Commercial Agreements For the three months ended March 31, 2017, the Company had linaclotide collaboration agreements with Allergan for North America and AstraZeneca for China, Hong Kong and Macau, as well as linaclotide license agreements with Astellas for Japan and with Allergan for the Allergan License Territory. The Company also had agreements with Allergan to co-promote VIBERZI in the U.S. and promote CANASA and DELZICOL in the U.S. The following table provides amounts included in the Company’s condensed consolidated statements of operations as collaborative arrangements revenue attributable to transactions from these arrangements (in thousands): Three Months Ended March 31, 2017 2016 Linaclotide Agreements: Allergan (North America) $ $ Allergan (Europe and other) (1) AstraZeneca (China, Hong Kong and Macau) 208 Astellas (Japan) Co-Promotion Agreements: Exact Sciences (Cologuard) (2) Allergan (VIBERZI) Total collaborative arrangements revenue $ $ (1) In October 2015, Almirall, S.A. (“Almirall”) transferred its exclusive license to develop and commercialize linaclotide in Europe to Allergan. In January 2017, the Company and Allergan expanded the license to cover the Allergan License Territory. For the three months ended March 31, 2016, collaborative arrangements revenue includes an insignificant amount of revenue from Almirall. (2) In August 2016, the Company terminated the Cologuard Co-Promotion Agreement. Under the terms of the agreement, the Company will continue to receive royalty payments through July 2017. Linaclotide Agreements Collaboration Agreement for North America with Allergan 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. The collaboration agreement for North America also includes contingent milestone payments, as well as a contingent equity investment, based on the achievement of specific development and commercial milestones. As of March 31, 2017, $205.0 million in license fees and all six development milestone payments had been received by the Company, as well as a $25.0 million equity investment in the Company’s capital stock (Note 13). The Company can also achieve up to $100.0 million in a sales-related milestone if certain conditions are met, which will be recognized as collaborative arrangements revenue as earned. As a result of the research and development cost-sharing provisions of the linaclotide collaboration for North America, the Company offset approximately $0.4 million and approximately $2.0 million against research and development costs during the three months ended March 31, 2017 and 2016, respectively, to reflect the obligations of each party under the collaboration to bear half of the development costs incurred. The Company and Allergan began commercializing LINZESS in the U.S. in December 2012. 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 set forth in the collaboration agreement for North America. During the years ended December 31, 2016 and 2015, these adjustments to the share of the net profits were reduced or eliminated in connection with the co-promotion activities under the Company’s agreement with Allergan to co-promote VIBERZI in the U.S., as described below in Co-Promotion Agreement with Allergan for VIBERZI . Additionally, these adjustments to the share of the net profits are eliminated, in full, in 2018 and all subsequent years under the terms of the Company’s commercial agreement with Allergan entered into in January 2017 under which the Company will promote Allergan’s CANASA and DELZICOL products, as described below in Commercial Agreement with Allergan . Net profits or net losses consist of net sales of LINZESS to third-party customers and sublicense income in the U.S. less the cost of goods sold as well as selling, general and administrative expenses. LINZESS 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 recognized collaborative arrangements revenue from the Allergan collaboration agreement for North America during the three months ended March 31, 2017 and 2016 as follows (in thousands): Three Months Ended March 31, 2017 2016 Collaborative arrangements revenue related to sales of LINZESS in the U.S. $ 49,452 $ 46,647 Sale of API — 3,017 Royalty revenue 499 309 Total collaborative arrangements revenue $ 49,951 $ 49,973 The collaborative arrangements revenue recognized in the three months ended March 31, 2017 and 2016 primarily represents the Company’s share of the net profits and net losses on the sale of LINZESS in the U.S. The Company recorded none and approximately $3.0 million related to the sale of API to Allergan under the terms of the linaclotide collaboration for North America during the three months ended March 31, 2017 and 2016, respectively. The following table presents the amounts recorded by the Company for commercial efforts related to LINZESS in the U.S. in the three months ended March 31, 2017 and 2016 (in thousands): Three Months Ended March 31, 2017 2016 Collaborative arrangements revenue related to sales of LINZESS in the U.S. (1)(2) $ 49,452 $ 46,647 Selling, general and administrative costs incurred by the Company (1) (11,109) (9,153) The Company’s share of net profit $ 38,343 $ 37,494 (1) Includes only collaborative arrangement revenue or selling, general and administrative costs attributable to the cost-sharing arrangement with Allergan. (2) Certain of the unfavorable adjustments to the Company’s share of the LINZESS net profits were reduced or eliminated in connection with the co-promotion activities under the Company’s agreement with Allergan to co-promote VIBERZI in the U.S., as described below in Co-Promotion Agreement with Allergan for VIBERZI . In May 2014, CONSTELLA became commercially available in Canada and in June 2014, LINZESS became commercially available in Mexico. In October 2015, Almirall and Allergan terminated the sublicense arrangement with respect to Mexico, returning the exclusive rights to commercialize CONSTELLA in Mexico to Allergan. CONSTELLA continues to be available to adult IBS-C patients 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 partner or the ability to estimate the royalty revenue in the period earned. The Company recognized approximately $0.5 million and approximately $0.3 million of combined royalty revenues from Canada and Mexico during the three months ended March 31, 2017 and 2016, respectively. License Agreement with Allergan (All countries other than the countries and territories of North America, China, Hong Kong, Macau, and Japan) In April 2009, the Company entered into a license agreement with Almirall (the “European License Agreement”) 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. In October 2015, Almirall transferred its exclusive license to develop and commercialize linaclotide in Europe to Allergan. The Company was required to participate on a joint development committee over linaclotide’s development period and a joint commercialization committee while the product was being commercialized. Additionally, in October 2015, the Company and Allergan separately entered into an amendment to the European License Agreement relating to the development and commercialization of linaclotide in Europe. Pursuant to the terms of the amendment, (i) certain sales‑based milestones payable to the Company under the European License Agreement were modified to increase the total milestone payments such that, when aggregated with certain commercial launch milestones, they could total up to $42.5 million, (ii) the royalties payable to the Company during the term of the European License Agreement were modified such that the royalties based on sales volume in Europe begin in the mid‑single digit percent and escalate to the upper‑teens percent by calendar year 2019, and (iii) Allergan assumed responsibility for the manufacturing of linaclotide API for Europe from the Company, as well as the associated costs. The Company concluded that the 2015 amendment to the European License Agreement was not a modification to the linaclotide collaboration agreement with Allergan for North America. The commercial launch and sales‑based milestones under the European License Agreement are recognized as revenue as earned. The Company recognized an insignificant amount of royalty revenue during each of the three months ended March 31, 2017 and 2016, respectively. In January 2017, concurrently with entering into the commercial agreement as described below in Commercial Agreement with Allergan, the Company and Allergan entered into an amendment to the European License Agreement. The European License Agreement, as amended (the “Allergan License Agreement”), extended the license to develop and commercialize linaclotide in The Company concluded that the 2017 amendment was a material modification to the European License Agreement; however, this modification did not have a material impact on the Company's condensed consolidated financial statements as there was no deferred revenue associated with the European License Agreement. The Company also concluded that the 2017 amendment to the European License Agreement was not a material modification to the linaclotide collaboration agreement with Allergan for North America. The Company’s conclusions on deliverables under ASC Topic 605-25, Revenue Recognition—Multiple-Element Arrangements (“ASC 605-25”) are described below in Commercial Agreement with Allergan. License Agreement for Japan with Astellas In November 2009, the Company entered into a license agreement with Astellas, as amended, to develop and commercialize linaclotide for the treatment of IBS-C, CIC and other GI conditions in Japan. Astellas is responsible for all activities relating to development, regulatory approval and commercialization in Japan, as well as funding the associated 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 was recognized as collaborative arrangements revenue on a straight‑line basis over the Company’s estimate of the period over which linaclotide was developed under the license agreement. The development period was completed in December 2016 upon approval of LINZESS by the Japanese Ministry of Health, Labor and Welfare at which point all previously deferred revenue under the agreement was recognized. During the three months ended March 31, 2016, the Company recognized approximately $1.3 million of revenue related to the up‑front licensing fee. The agreement also includes three development milestone payments that totaled up to $45.0 million, all of which were achieved and recognized as revenue through December 31, 2016. The first milestone payment, consisting of $15.0 million upon enrollment of the first study subject in a Phase III study for linaclotide in Japan, was achieved in November 2014. The second milestone payment, consisting of $15.0 million upon filing of an NDA for linaclotide with the Japanese Ministry of Health, Labor and Welfare was achieved in February 2016. The third development milestone payment consisting of $15.0 million upon approval of an NDA by the Japanese Ministry of Health, Labor and Welfare to market linaclotide in Japan was achieved in December 2016. 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. These royalties on the sales of LINZESS will be recorded one quarter in arrears as the Company does not have access to the royalty reports from Astellas or the ability to estimate the royalty revenue in the period earned. During the three months ended March 31, 2017, the Company recognized an insignificant amount in collaborative arrangements revenue from the Astellas license agreement. During the three months ended March 31, 2016, the Company recognized approximately $14.7 million in collaborative arrangements revenue from the Astellas license agreement, which primarily consisted of $12.9 million recognized as revenue in conjunction with the achievement of the second development milestone. The remaining balance of approximately $2.1 million associated with the second milestone payment was recognized over the development period through December 31, 2016. Collaboration Agreement for China, Hong Kong and Macau with AstraZeneca 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 up-front 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 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. At the inception of the arrangement, 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 at the inception of the AstraZeneca Collaboration Agreement. 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 License 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 modification did not, however, have a material impact on the Company’s condensed consolidated financial statements. The total amount of the non-contingent consideration allocable to the AstraZeneca Agreements was approximately $34.0 million (“Arrangement Consideration”), which includes the $25.0 million non-refundable up-front payment and approximately $9.0 million representing 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. The Company allocated the Arrangement Consideration to the non-contingent deliverables based on management’s best estimated 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. Of the total 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 months ended March 31, 2017 and 2016, respectively, the Company recognized no revenue and an insignificant amount in collaborative arrangements revenue related to the License Deliverable in connection with the modification to the IDP and development budget in August 2014, as these portions of the Arrangement Consideration were no longer contingent. 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 offset an insignificant amount in research and development costs during each of the three months ended March 31, 2017 and 2016. 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. The Company reassesses the periods of performance for each deliverable at the end of each reporting period. In March 2017, the Company began providing supply of linaclotide drug product and certain commercialization-related services pursuant to the AstraZeneca Collaboration Agreement. During the three months ended March 31, 2017, the Company recognized approximately $0.2 million as collaborative arrangements revenue related to linaclotide drug product, as this deliverable was no longer contingent. Milestone payments received from AstraZeneca upon the achievement of sales targets will be recognized as earned. Co-Promotion and Other Agreements Co-Promotion Agreement with Exact Sciences Corp. for Cologuard In March 2015, the Company and Exact Sciences 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”). The Exact Sciences Co-Promotion Agreement was terminated by the parties in August 2016. Under the terms of the non-exclusive Exact Sciences Co-Promotion Agreement, the Company’s sales team promoted and educated health care practitioners regarding Cologuard through July 2016. Exact Sciences maintained 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 is compensated primarily via royalties earned on the net sales of Cologuard generated from the healthcare practitioners on whom the Company called with such royalties being payable through July 2017. There are no refund provisions in the Exact Sciences Co-Promotion Agreement. Activities under the Exact Sciences Co-Promotion Agreement were evaluated in accordance with ASC 605-25, to determine if they represented a multiple element revenue arrangement. The Company identified the following deliverables in the Exact Sciences Co-Promotion Agreement through July 31, 2016: (i) second position sales detailing, (ii) promotional support services, and (iii) medical education services. Each of the deliverables was 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. The Company determined that the BESP for each of the three deliverables approximated the value allocated to the deliverables under the agreement. The revenue related to each deliverable is recognized as collaborative arrangements revenue in the Company’s condensed consolidated statement of operations, in accordance with ASC 605-25, during the period earned. During the three months ended March 31, 2017 and 2016, the Company recognized approximately $1.1 million and approximately $0.7 million, respectively, as collaborative arrangements revenue related to this arrangement. Co-Promotion Agreement with Allergan for VIBERZI In August 2015, the Company and Allergan entered into an agreement for the co‑promotion of VIBERZI in the U.S., Allergan’s treatment for adults suffering from IBS‑D (the “VIBERZI Co‑Promotion Agreement”). Under the terms of the VIBERZI Co‑Promotion Agreement, the Company’s clinical sales specialists are detailing VIBERZI to the approximately 25,000 health care practitioners to whom they detail LINZESS. Allergan is responsible for all costs and activities relating to the commercialization of VIBERZI outside of the co‑promotion. Under the terms of the VIBERZI Co‑Promotion Agreement, the Company’s promotional efforts are compensated based on the volume of calls delivered by the Company’s sales force, with the terms of the agreement reducing or eliminating certain of the unfavorable adjustments to the Company’s share of net profits stipulated by the linaclotide collaboration agreement with Allergan for North America, provided that the Company provides a minimum number of VIBERZI calls on physicians. The Company has the potential to achieve milestone payments of up to $10.0 million based on the net sales of VIBERZI in each of 2017 and 2018, and is also compensated via reimbursements for medical education initiatives. The Company’s promotional efforts under the non‑exclusive co‑promotion began when VIBERZI became commercially available in December 2015, and will continue until December 31, 2017, unless earlier terminated by either party pursuant to the provisions of the VIBERZI Co‑Promotion Agreement. Either party may also terminate the VIBERZI Co‑Promotion Agreement in the event of an uncured material breach by the other party, withdrawal of necessary approvals by the FDA, for convenience, or bankruptcy or insolvency of the other party. Allergan may terminate the VIBERZI Co‑Promotion Agreement if the Company does not provide the minimum number of calls on physicians for VIBERZI. Activities under the VIBERZI Co‑Promotion Agreement were evaluated in accordance with ASC 605‑25 to determine if they represented a multiple element revenue arrangement. The Company concluded that the VIBERZI Co‑Promotion Agreement does not represent a material modification to the linaclotide collaboration agreement with Allergan for North America, as it is not material to the total arrangement consideration under the collaboration agreement, does not significantly modify the existing deliverables, and does not significantly change the term of the agreement. The Company identified the following deliverables in the VIBERZI Co‑Promotion Agreement: (i) second position sales detailing of VIBERZI, and (ii) medical education services. Each of the deliverables was deemed to have standalone value based on their nature and both deliverables met the criteria to be accounted for as separate units of accounting under ASC 605‑25. The Company determined the BESP for each of the deliverables approximated the value allocated to the deliverables under the agreement. As consideration is earned over the term of the agreement, the revenue will be allocated to each deliverable based on the relative selling price, using management’s BESP, and recognized as collaborative arrangements revenue in the Company’s condensed consolidated statement of operations, in accordance with ASC 605‑25, during the quarter earned. Under the linaclotide collaboration agreement for North America with Allergan, 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 set forth in the agreement; however, certain of these adjustments to the share of the net profits may be reduced or eliminated in connection with the co-promotion activities under the VIBERZI Co-Promotion Agreement through December 31, 2017. In connection with these co-promotion activities, the net profit share adjustments payable to Allergan under the linaclotide collaboration agreement for North America were reduced by approximately $1.9 million and approximately $1.2 million during the three months ended March 31, 2017 and 2016, respectively. During the three months ended September 30, 2016, the Company also met the requirement for the minimum number of VIBERZI calls on physicians for 2016, which resulted in the Company’s reversal of an approximately $2.4 million unfavorable adjustment previously recorded to collaborative arrangements revenue related to the linaclotide collaboration agreement with Allergan for North America . This approximately $2.4 million adjustment was originally recorded as an unfavorable adjustment to collaborative arrangements revenue during the six months ended June 30, 2015. During each of the three months ended March 31, 2017 and 2016, the Company recognized approximately $0.5 million in collaborative arrangements revenue related to the VIBERZI Co‑Promotion Agreement for the performance of medical education services. Commercial Agreement with Allergan In January 2017, concurrently with entering into the amendment to the European License Agreement, the Company and Allergan entered into a commercial agreement under which the adjustments to the Company’s or Allergan’s share of the net profits under the share adjustment provision of the collaboration agreement for linaclotide in North America relating to the contractually required calls on physicians in each year are eliminated, in full, in 2018 and all subsequent years. Pursuant to the commercial agreement, Allergan also appointed the Company, on a non-exclusive basis, to promote CANASA, approved for the treatment of ulcerative proctitis, and DELZICOL, approved for the treatment of ulcerative colitis, in the U.S. for approximately two years. The Company will perform certain third position details |
Product Revenue
Product Revenue | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure Text Block | |
Product Revenue | 5. Product Revenue In October 2016, ZURAMPIC became commercially available in the U.S. Due to the early stage of the product launch, the Company determined that it was not able to reliably make certain estimates, including returns, necessary to recognize product revenue upon shipment to distributors. As a result, the Company records net product revenue for ZURAMPIC using a deferred revenue recognition model (sell-through). Under the deferred revenue model, the Company does not recognize revenue until ZURAMPIC is prescribed to an end-user. As of March 31, 2017, the Company had approximately $0.7 million of deferred revenue related to ZURAMPIC product in the distribution channel. The Company will continue to evaluate when, if ever, it has sufficient volume of historical activity and visibility into the distribution channel, in order to reasonably make all estimates required under ASC 605 to recognize revenue upon shipment to its distributors. During the three months ended March 31, 2017, the Company recognized approximately $0.3 million of revenue related to product sales of ZURAMPIC in the U.S. This revenue is included as part of collaborative arrangements revenue on the Company’s condensed consolidated statements of operations. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure Text Block | |
Fair Value of Financial Instruments | 6. 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 March 31, 2017 and December 31, 2016 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 for similar instruments in active markets, 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 mainly 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 are 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 Company validates the prices provided by its third-party pricing services by obtaining market values from other pricing sources and analyzing pricing data in certain instances. 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 Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs March 31, 2017 (Level 1) (Level 2) (Level 3) Assets: Cash and cash equivalents: Money market funds $ 86,428 $ 86,428 $ — $ — U.S. Treasury securities 21,473 21,473 — — U.S. government-sponsored securities 19,979 — 19,979 — Available-for-sale securities: U.S. Treasury securities 68,980 68,980 — — U.S. government-sponsored securities 93,040 — 93,040 — Convertible Note Hedges 150,509 — — 150,509 Total assets measured at fair value $ 440,409 $ 176,881 $ 113,019 $ 150,509 Liabilities: Note Hedge Warrants $ 133,424 $ — $ — $ 133,424 Contingent Consideration 79,273 — — 79,273 Total liabilities measured at fair value $ 212,697 $ — $ — $ 212,697 Fair Value Measurements at Reporting Date Using Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs December 31, 2016 (Level 1) (Level 2) (Level 3) Assets: Cash and cash equivalents: Money market funds $ $ $ — $ — Available-for-sale securities: U.S. Treasury securities — — U.S. government-sponsored securities — — Convertible Note Hedges 132,521 — — 132,521 Total assets measured at fair value $ $ $ $ Liabilities: Note Hedge Warrants $ 113,237 $ — $ — $ 113,237 Contingent Consideration 77,660 — — 77,660 Total liabilities measured at fair value $ 190,897 $ — $ — $ 190,897 There were no transfers between fair value measurement levels during the three months ended March 31, 2017 or 2016. 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 March 31, 2017 and December 31, 2016 are carried at amounts that approximate fair value due to their short-term maturities. The non-current portion of the capital lease obligations at March 31, 2017 and December 31, 2016 approximates fair value as it bears interest at a rate approximating a market interest rate. Convertible Note Hedges and Note Hedge Warrants The Company’s Convertible Note Hedges and the Note Hedge Warrants are recorded as derivative assets and liabilities, and are classified as Level 3 under the fair value hierarchy. 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 the fair value as of March 31, 2017 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 volatility of the Company’s Class A common stock. The Company has not paid and does not anticipate paying cash dividends on its shares of common stock in the foreseeable future; therefore, the expected dividend yield is assumed to be zero. Changes to these inputs could materially affect the valuation 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 March 31, 2017 and December 31, 2016: Three months ended Year Ended March 31, December 31, 2017 2016 Convertible Note Hedge Convertible Note Hedge Note Hedges Warrants Note Hedges Warrants Risk-free interest rate (1) 2.0 % 2.0 % 2.0 % 2.1 % Time to maturity 5.2 5.8 5.5 6.0 Stock price (2) $ 17.06 $ 17.06 $ 15.29 $ 15.29 Strike price (3) $ 16.58 $ 21.50 $ 16.58 $ 21.50 Common stock volatility (4) 45.4 % 45.9 % 47.4 % 45.8 % Dividend yield — % — % — % — % (1) Based on U.S. Treasury yield curve, with terms commensurate with the terms of the Convertible Note Hedges and the Note Hedge Warrants. (2) The closing price of the Company’s Class A common stock on the last trading day of the quarter ended March 31, 2017 and December 31, 2016. (3) As per the respective agreements for the Convertible Note Hedges and Note Hedge Warrants. (4) Selected volatility based on historical volatility of the Company’s Class A common stock. 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 in other expense, net within the Company’s condensed consolidated statements of operations. 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 December 31, 2016 through March 31, 2017 (in thousands): Convertible Note Hedge Note Hedges Warrants Balance at December 31, 2016 $ 132,521 $ (113,237) Change in fair value, recorded as a component of gain (loss) on derivatives 17,988 (20,187) Balance at March 31, 2017 $ 150,509 $ (133,424) Contingent Consideration In connection with the Lesinurad Transaction, the Company recorded a liability of $67.9 million as of the Acquisition Date. This valuation was based on a Monte-Carlo simulation, which includes significant estimates related to probability weighted net cash outflow projections, discounted using a yield curve equivalent to the Company’s credit risk, which was the estimated cost of debt financing for market participants. This estimate represents the probability weighted analysis of expected future milestone and royalty payments based on net sales to be made to AstraZeneca. Changes to these inputs are re-evaluated each reporting period and could materially affect the valuation of the contingent consideration. The estimated fair value of contingent consideration was approximately $79.3 million as of March 31, 2017. The following table reflects the change in the Company’s Level 3 contingent consideration payable from December 31, 2016 through March 31, 2017 (in thousands): Contingent Consideration Fair value at December 31, 2016 $ 77,660 Changes in fair value 1,614 Payments/transfers to accrued expenses and other current liabilities (1) Fair value at March 31, 2017 $ 79,273 11% PhaRMA Notes In January 2013, the Company closed a private placement of $175.0 million in aggregate principal amount of the PhaRMA Notes. The outstanding principal balance of the PhaRMA Notes was redeemed in January 2017. The estimated fair value of the PhaRMA Notes was approximately $134.9 million as of December 31, 2016 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 10). The fair value of the 2022 Notes, which differs from their carrying value, is influenced by interest rates, the price of the Company’s Class A common stock and the volatility thereof, and the prices for the 2022 Notes observed in market trading, which are Level 2 inputs. The estimated fair value of the 2022 Notes was approximately $419.7 million and approximately $384.2 million as of March 31, 2017 and December 31, 2016, respectively. 8.375% Notes Due 2026 In September 2016, the Company closed a direct private placement pursuant to which the Company issued $150.0 million in aggregate principal amount of the 2026 Notes in January 2017. |
Available-for-Sale Securities
Available-for-Sale Securities | 3 Months Ended |
Mar. 31, 2017 | |
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Available-for-Sale Securities | 7. Available-for-Sale Securities The following tables summarize the available-for-sale securities held at March 31, 2017 and December 31, 2016 (in thousands): Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value March 31, 2017 U.S. Treasury securities $ 68,995 $ — $ (15) $ 68,980 U.S. government-sponsored securities 93,066 3 (29) 93,040 Total $ 162,061 $ 3 $ (44) $ 162,020 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value December 31, 2016 U.S. Treasury securities $ 115,026 $ 6 $ (11) $ 115,021 U.S. government-sponsored securities 136,193 10 (12) 136,191 Total $ 251,219 $ 16 $ (23) $ 251,212 The contractual maturities of all securities held at March 31, 2017 are one year or less. There were 44 and 34 available-for-sale securities in an unrealized loss position at March 31, 2017 and December 31, 2016, respectively, none of which had been in an unrealized loss position for more than twelve months. The aggregate fair value of these securities at March 31, 2017 and December 31, 2016 was approximately $155.3 million and approximately $111.3 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 March 31, 2017. There were no sales of available-for-sale securities during the three months ended March 31, 2017 or 2016. Net unrealized holding gains or losses for the period that have been included in accumulated other comprehensive loss were not material to the Company’s condensed consolidated results of operations. |
Inventory
Inventory | 3 Months Ended |
Mar. 31, 2017 | |
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Inventory | 8. Inventory Inventory consisted of the following (in thousands): March 31, 2017 December 31, 2016 Raw Materials $ 1,513 $ 1,010 Work in Progress — 71 $ 1,513 $ 1,081 The Company’s inventory represents linaclotide API and drug product that is available for commercial sale. The Company evaluates inventory levels quarterly and any inventory that has a cost basis in excess of its expected net realizable value, inventory that becomes obsolete, inventory in excess of expected sales requirements, inventory that fails to meet commercial sale specifications or is otherwise impaired is written down with a corresponding charge to the statement of operations in the period that the impairment is first identified. No such impairments were recorded during the three months ended March 31, 2017 or 2016. |
Accrued Expenses and Other Curr
Accrued Expenses and Other Current Liabilities | 3 Months Ended |
Mar. 31, 2017 | |
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Accrued Expenses and Other Current Liabilities | 9. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following (in thousands): March 31, 2017 December 31, 2016 Salaries and benefits $ $ Professional fees Accrued interest Repurchasable Stock — 882 Other $ $ As of March 31, 2017, other accrued expenses of approximately $10.4 million included approximately $0.6 million related to expenses incurred under the Lesinurad TSA and approximately $1.3 million related to excess non-cancelable ZURAMPIC sample purchase commitments, pursuant to the Company’s forecasts, as a result of a reduction in near-term forecasted demand. As of December 31, 2016, other accrued expenses of approximately $9.4 million included approximately $2.8 million related to expenses incurred under the Lesinurad TSA. |
Notes Payable
Notes Payable | 3 Months Ended |
Mar. 31, 2017 | |
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Notes Payable | 10. Notes Payable 8.375% Notes due 2026 On September 23, 2016, the Company closed a direct private placement, pursuant to which the Company issued $150.0 million in aggregate principal amount of 8.375% notes due 2026 on the Funding Date, January 5, 2017. The proceeds from the issuance of the 2026 Notes were used to redeem the outstanding principal balance of the PhaRMA Notes on the Funding Date. The Company capitalized approximately $0.5 million of debt issuance costs, which were netted against the carrying value of the 2026 Notes. The 2026 Notes bear an annual interest rate of 8.375%, with interest payable March 15, June 15, September 15 and December 15 of each year (each an “8.375% Payment Date”) commencing on June 15, 2017. Principal of the 2026 Notes will be payable on the 8.375% Payment Dates beginning March 15, 2019. From March 15, 2019, the Company will make quarterly payments on the 2026 Notes equal to the greater of (i) 7.5% of net sales of linaclotide in the U.S. for the preceding quarter (the “8.375% Synthetic Royalty Amount”) and (ii) accrued and unpaid interest on the 2026 Notes (the “8.375% Required Interest Amount”). Principal on the 2026 Notes will be repaid in an amount equal to the 8.375% Synthetic Royalty Amount minus the 8.375% Required Interest Amount, when this is a positive number, until the principal has been paid in full. Given the principal payments on the 2026 Notes are based on the 8.375% Synthetic Royalty Amount, which will vary from quarter to quarter, the 2026 Notes may be repaid prior to September 15, 2026, the final legal maturity date. The 2026 Notes are secured by a security interest in a segregated bank account established to receive the required quarterly payments as well as certain limited accounts receivables, payment intangibles or other rights to payment or proceeds, in each case, up to the 8.375% Synthetic Royalty Amount or estimated equivalent thereto, as applicable. Up to the amount of the required quarterly payments under the 2026 Notes, Allergan will deposit its quarterly profit (loss) sharing payments due to the Company related to net sales of linaclotide in the U.S. pursuant to the collaboration agreement for North America, 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 8.375% Payment Date, the Company is obligated to deposit such shortfall out of the Company’s general funds into the segregated bank account. The 2026 Notes may be redeemed at any time prior to maturity, in whole or in part, at the option of the Company. If the applicable redemption of the 2026 Notes occurs prior to March 15, 2018, the Company will pay a redemption price equal to the outstanding principal balance of the 2026 Notes being redeemed, plus (i) the difference between (A) the required interest amount that would have otherwise been payable from the date of redemption through March 15, 2018 on the outstanding principal balance of the 2026 Notes being redeemed, minus (B) the aggregate amount of interest the purchasers would earn if the outstanding principal balance of the 2026 Notes being redeemed were reinvested for the period from the date of redemption through March 15, 2018 at a rate per annum equal to the yield expressed as a rate listed in The Wall Street Journal for United States Treasury securities having a term of not greater than 12 months on the date three business days prior to the date of redemption, plus (ii) an amount equal to the redemption premium that would otherwise be payable as if such redemption had occurred at March 15, 2018. If the applicable redemption of the 2026 Notes occurs on or after March 15, 2018, the Company will pay a redemption price equal to the percentage of outstanding principal balance of the 2026 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 2026 Notes being redeemed): Redemption Payment Dates Percentage From and including March 15, 2018 to and including March 14, 2019 108.00 % From and including March 15, 2019 to and including March 14, 2020 105.50 % From and including March 15, 2020 to and including March 14, 2021 102.75 % From and including March 15, 2021 and thereafter 100.00 % The 2026 Notes contain certain covenants related to the Company’s obligations with respect to the commercialization of linaclotide and the related collaboration agreement with Allergan for North America, 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 2026 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 accounting for the 2026 Notes will require the Company to make certain estimates and assumptions about the future net sales of linaclotide in the U.S. Linaclotide has been marketed as LINZESS in the U.S. since December 2012 and the estimates of the magnitude and timing of linaclotide net sales are subject to significant variability and uncertainty. These estimates and assumptions are likely to change, which may result in future adjustments to the portion of the 2026 Notes that will be 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. 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, which began 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 by 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 March 31, 2017 and December 31, 2016 consisted of the following (in thousands): March 31, 2017 December 31, 2016 Liability component: Principal $ 335,699 $ 335,699 Less: unamortized debt discount (91,254) (94,675) Less: unamortized debt issuance costs (6,594) (6,781) Net carrying amount $ 237,851 $ 234,243 Equity component $ 114,199 $ 114,199 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 purchasers’ discounts and 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 their seven-year term. The effective interest rate on the liability components of the 2022 Notes for the period from the date of issuance through March 31, 2017 was 9.34%. The following table sets forth total interest expense recognized related to the 2022 Notes during the three months ended March 31, 2017 and 2016 (in thousands): Three Months Ended March 31, 2017 2016 Contractual interest expense $ 1,888 $ 1,888 Amortization of debt issuance costs 187 153 Amortization of debt discount 3,421 3,135 Total interest expense $ 5,496 $ 5,176 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. The Convertible Note Hedges and Note Hedge Warrants are accounted for as derivative assets and liabilities, respectively, in accordance with ASC Topic 815, “Derivatives and Hedging” (Note 6). 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 were redeemed at par on the 2026 Notes’ Funding Date, January 5, 2017, resulting in a loss on extinguishment of debt related to the write-off of the remaining PhaRMA Notes unamortized debt issuance costs of approximately $2.0 million. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure Text Block | |
Commitments and Contingencies | 11. Commitments and Contingencies Lease Commitments The Company rents office and laboratory space at its corporate headquarters at 301 Binney Street, Cambridge, Massachusetts (the “Facility”) under a non ‑ cancelable operating lease, entered into in January 2007, as amended (“2007 Lease Agreement”). In March 2017, the Company and BMR-Rogers Street LLC (the “Landlord”) entered into an additional amendment (the “2017 Amendment”) to the 2007 Lease Agreement. The 2017 Amendment extends the term of the 2007 Lease Agreement through January 31, 2025 for the approximately 223,000 square feet of the Facility that the Company currently occupies. The 2017 Amendment also provides that the Landlord will resume possession of the approximately 93,000 square feet of additional space in the Facility that the Company previously subleased to a third party in 2014. The 2007 Lease Agreement, as amended by the 2017 Amendment, contains various provisions including an option to extend the term of the lease for an additional five years at a market base rental rate, a 3% annual rent escalation, and in certain cases, free rent periods. The rent expense, inclusive of the escalating rent payments and free rent periods, is recognized on a straight ‑ line basis over the lease term through January 2025. Additionally, the 2017 Amendment reduces the required letter of credit to secure the Company’s obligations under the lease agreement to approximately $6.4 million, which is recorded as restricted cash. During 2014, the Company entered into an agreement, with the Landlord’s consent, to sublease a portion of its corporate headquarters that it did not intend to use for its operation. In connection with the sublease, as well as a rent escalation tied to the Consumer Price Index and fair market rent pursuant to the terms of the 2007 Lease Agreement, the Company had previously recorded losses related to its obligations to the Landlord associated with the sublet space, net of sublease income in accordance with ASC Topic 420, “Exit or Disposal Cost Obligations”. Pursuant to the 2017 Amendment, the Landlord resumed possession of the space that the Company previously subleased to a third party, and the Company is no longer obligated for the sublease associated with this space. The provisions of the 2007 Lease Agreement governing the space which was previously subleased were terminated and as such, the Company revised its accounting estimates associated with its rent expense and sublease income. Upon the relief of these future liabilities, the Company recorded a gain on the extinguishment of sublease loss of approximately $1.6 million during the three months ended March 31, 2017. The change in accounting estimate associated with rent expense is recognized on a prospective, straight-line basis through May 2017. Rent expenses related to the 2007 Lease Agreement and the 2017 Amendment, net of sublease income, recorded during the three months ended March 31, 2017 and 2016 were approximately $1.0 million and approximately $5.5 million, respectively. At March 31, 2017, future minimum lease payments under all non‑cancelable operating lease arrangements were as follows (in thousands): Total Operating Lease Payments 2017 (1) $ 2018 2019 17,609 2020 18,137 2021 and thereafter 79,857 Total future minimum lease payments $ (1) Amounts are for the nine months ending December 31, 2017. Commercial Supply Commitments The Lesinurad CSA with AstraZeneca provides for commercial supply and samples of ZURAMPIC, and, if approved by the FDA, DUZALLO. The Lesinurad CSA includes certain purchase obligations based on the Company’s forecasted demand for commercial product and samples. During the Lesinurad TSA period, title for ZURAMPIC commercial supply and samples do not pass to the Company. Accordingly, the Company records purchases of ZURAMPIC commercial supply and samples from AstraZeneca as prepaid assets until they are sold or used. During the three months ended March 31, 2017, the Company recorded an expense of approximately $1.3 million for excess non-cancelable ZURAMPIC sample purchase commitments, pursuant to the Company’s forecasts, as a result of a reduction in near-term forecasted demand. This write-down was recorded in selling, general and administrative expenses in the Company's condensed consolidated statement of operations. |
Employee Stock Benefit Plans
Employee Stock Benefit Plans | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure Text Block | |
Employee Stock Benefit Plans | 12. 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 months ended March 31, 2017 and 2016 (in thousands): Three Months Ended March 31, 2017 2016 Research and development $ $ Selling, general and administrative $ $ A summary of stock option activity for the three months ended March 31, 2017 is as follows: Weighted- Average Number of Shares Fair Value (in thousands) Outstanding at December 31, 2016 20,455 $ 11.92 Granted 2,859 16.64 Exercised (854) 8.54 Cancelled (186) 12.54 Outstanding at March 31, 2017 22,274 $ 12.65 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 months ended March 31, 2017 and 2016: Three Months Ended March 31, 2017 2016 Expected volatility 46.0 % 46.0 % Expected term (in years) 6.0 Risk-free interest rate 2.0 % % Expected dividend yield — % — % The Company utilizes RSUs in addition to stock options as part of the equity compensation it provides to its employees, each RSU representing the right to receive one share of the Company’s Class A Common Stock pursuant to the terms of the applicable award agreement and granted pursuant to the terms of the Company’s 2010 Equity 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 three months ended March 31, 2017 is as follows: Weighted- Average Number Grant Date of Shares Fair Value (in thousands) Unvested as of December 31, 2016 1,299 $ 12.53 Granted 1,195 $ 16.71 Vested (210) $ 12.85 Forfeited (29) $ 13.80 Unvested as of March 31, 2017 2,255 $ 14.70 |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure Text Block | |
Related Party Transactions | 13. Related Party Transactions 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. Amounts due to and due from Allergan 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. The Company had approximately $50.0 million and approximately $63.9 million in related party accounts receivable, net of related party accounts payable, associated with Allergan as of March 31, 2017 and December 31, 2016, respectively. The Company has and currently obtains health insurance services for its employees from an insurance provider whose President and Chief Executive Officer became a member of the Company’s Board of Directors in April 2016. The Company paid approximately $3.0 million and approximately $1.9 million in insurance premiums to this insurance provider during the three months ended March 31, 2017 and 2016, respectively. At March 31, 2017 and December 31, 2016, the Company had no accounts payable due to this related party. |
Nature of Business (Policies)
Nature of Business (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Policy Text Blocks | |
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. Additionally, 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, 2016, which was filed with the Securities and Exchange Commission on February 22, 2017 (the “2016 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 March 31, 2017, and the results of its operations for the three months ended March 31, 2017 and 2016 and its cash flows for the three months ended March 31, 2017 and 2016. The results of operations for the three months ended March 31, 2017 and 2016 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. generally accepted accounting principles requires the Company’s management to make estimates and judgments that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the amounts of revenues and expenses during the reported periods. On an ongoing basis, the Company’s management evaluates its estimates, judgments and methodologies. Significant estimates and assumptions in the condensed consolidated financial statements include those related to revenue recognition, including returns, rebates, and other pricing adjustments; available-for-sale securities; inventory valuation, and related reserves; impairment of long-lived and intangible 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 expenses; goodwill; contingent consideration; acquired intangible assets; 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 materially from these estimates under different assumptions or conditions. Changes in estimates are reflected in reported results in the period in which they become known. |
New Accounting Pronouncements | New Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the “FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. Except as set forth below, the Company did not adopt any new accounting pronouncements during the three months ended March 31, 2017 that had a material effect on its condensed consolidated financial statements. In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, 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, 2017 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. Early adoption is permitted beginning after December 15, 2016, including interim reporting periods within those years. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing (“ASU 2016-10”), which clarifies certain aspects of identifying performance obligations and licensing implementation guidance. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”), related to disclosures of remaining performance obligations, as well as other amendments to guidance on collectability, non-cash consideration and the presentation of sales and other similar taxes collected from customers. These standards have the same effective date and transition date as ASU 2014-09. The Company is analyzing the potential impact that ASU 2014-09, ASU 2016-10 and ASU 2016-12 may have on its financial position and results of operations. This analysis of the Company’s collaborative arrangements and license agreements includes, but is not limited to, reviewing variable consideration as it relates to its agreements, assessing potential disclosures and evaluating the impact of each potential method of adoption on the Company’s condensed consolidated financial statements. As of March 31, 2017, the Company has progressed its assessment of the impact of these ASUs on its revenue-generating license agreements for linaclotide. The Company is in the process of assessing the impact of these ASUs to its revenue-generating linaclotide collaboration agreements, the Lesinurad License, and its co-promotion agreements. In addition, the Company continues to monitor additional changes, modifications, clarifications or interpretations undertaken by the FASB, which may impact its conclusions. In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which supersedes the lease accounting requirements in ASC Topic 840, “Leases”, and most industry-specific guidance. ASU 2016-02 requires the identification of arrangements that should be accounted for as leases by lessees. In general, for lease arrangements exceeding a 12-month term, these arrangements must now be recognized as assets and liabilities on the balance sheet of the lessee. Under ASU 2016-02, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing, while the income statement will reflect lease expense for operating leases and amortization and interest expense for financing leases. The balance sheet amount recorded for existing leases at the date of adoption of ASU 2016-02 must be calculated using the applicable incremental borrowing rate at the date of adoption. In addition, ASU 2016-02 requires the use of modified retrospective method, which will require adjustment to all comparative periods presented in the condensed consolidated financial statements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the potential impact that ASU 2016-02 may have on the Company’s financial position and results of operations. In October 2016, the FASB issued ASU No. 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory (“ASU 2016-16”). ASU 2016-16 eliminates the ability to defer the tax expense related to intra-entity asset transfers other than Inventory. Under the new standard, entities should recognize the income tax consequences on an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 is effective for fiscal periods beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the potential impact that the adoption of ASU 2016-16 will have on the Company’s financial position or results of operations. In October 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash (“ASU 2016-18”), which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash or restricted cash equivalents. Therefore, amounts described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. The Company is evaluating the potential impact that the adoption of ASU 2016-18 will have on the Company’s financial position and results of operations. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”), to clarify the definition of a business by adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets versus businesses. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company will evaluate the potential impact that the adoption of ASU 2017-01 will have on the Company’s financial position or results of operations for all future transactions that are within the scope of Topic 805. In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350) (“ASU 2017-04”) to simplify the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is evaluating the potential impact that the adoption of ASU 2017-04 will have on the Company’s financial position and results of operations. |
Net Loss Per Share (Tables)
Net Loss Per Share (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Table Text Blocks | |
Schedule of potentially dilutive securities that have been excluded from computation of diluted weighted average shares outstanding | The following potentially dilutive securities have been excluded from the computation of diluted weighted average shares outstanding as their effect would be anti-dilutive (in thousands): Three Months Ended March 31, 2017 2016 Options to purchase common stock 22,538 Shares subject to repurchase 37 Restricted stock units 2,255 1,255 Note hedge warrants 20,250 20,250 2022 Notes 20,250 20,250 |
Business Combinations (Tables)
Business Combinations (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Table Text Blocks | |
Schedule of preliminary allocation of purchase consideration including contingent acquisition consideration payable | The following table presents the allocation of the purchase consideration for the Lesinurad Transaction as of the Acquisition Date, including the contingent consideration (in thousands): As of the Acquisition Date: Cash portion of consideration $ 100,000 Contingent consideration 67,885 Total purchase consideration $ 167,885 |
Schedule of identifiable assets acquired | As of the Acquisition Date: Developed technology — ZURAMPIC $ 22,000 IPR&D - DUZALLO 145,100 Goodwill 785 Net assets acquired $ 167,885 |
Schedule of estimated future amortization expense | The estimated future amortization of developed technology - ZURAMPIC intangible asset is expected to be as follows (in thousands): As of March 31, 2017 2017 (1) $ 1,262 2018 1,682 2019 1,682 2020 1,682 2021 and thereafter 14,291 Total $ 20,599 (1) For the nine months ending December 31, 2017. |
Collaboration, License, Co-Pr22
Collaboration, License, Co-Promotion and Other Commercial Agreements (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Table Text Blocks | |
Schedule of revenue attributable to transactions from collaboration and license arrangements | The following table provides amounts included in the Company’s condensed consolidated statements of operations as collaborative arrangements revenue attributable to transactions from these arrangements (in thousands): Three Months Ended March 31, 2017 2016 Linaclotide Agreements: Allergan (North America) $ $ Allergan (Europe and other) (1) AstraZeneca (China, Hong Kong and Macau) 208 Astellas (Japan) Co-Promotion Agreements: Exact Sciences (Cologuard) (2) Allergan (VIBERZI) Total collaborative arrangements revenue $ $ (1) In October 2015, Almirall, S.A. (“Almirall”) transferred its exclusive license to develop and commercialize linaclotide in Europe to Allergan. In January 2017, the Company and Allergan expanded the license to cover the Allergan License Territory. For the three months ended March 31, 2016, collaborative arrangements revenue includes an insignificant amount of revenue from Almirall. In August 2016, the Company terminated the Cologuard Co-Promotion Agreement. Under the terms of the agreement, the Company will continue to receive royalty payments through July 2017. |
Allergan | |
Table Text Blocks | |
Schedule of revenue attributable to transactions from collaboration and license arrangements | The Company recognized collaborative arrangements revenue from the Allergan collaboration agreement for North America during the three months ended March 31, 2017 and 2016 as follows (in thousands): Three Months Ended March 31, 2017 2016 Collaborative arrangements revenue related to sales of LINZESS in the U.S. $ 49,452 $ 46,647 Sale of API — 3,017 Royalty revenue 499 309 Total collaborative arrangements revenue $ 49,951 $ 49,973 |
Schedule of amount recorded by the Company for share of net loss related to collaborative arrangement | The following table presents the amounts recorded by the Company for commercial efforts related to LINZESS in the U.S. in the three months ended March 31, 2017 and 2016 (in thousands): Three Months Ended March 31, 2017 2016 Collaborative arrangements revenue related to sales of LINZESS in the U.S. (1)(2) $ 49,452 $ 46,647 Selling, general and administrative costs incurred by the Company (1) (11,109) (9,153) The Company’s share of net profit $ 38,343 $ 37,494 (1) Includes only collaborative arrangement revenue or selling, general and administrative costs attributable to the cost-sharing arrangement with Allergan. (2) Certain of the unfavorable adjustments to the Company’s share of the LINZESS net profits were reduced or eliminated in connection with the co-promotion activities under the Company’s agreement with Allergan to co-promote VIBERZI in the U.S., as described below in Co-Promotion Agreement with Allergan for VIBERZI . |
Fair Value of Financial Instr23
Fair Value of Financial Instruments (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Table Text Blocks | |
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 Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs March 31, 2017 (Level 1) (Level 2) (Level 3) Assets: Cash and cash equivalents: Money market funds $ 86,428 $ 86,428 $ — $ — U.S. Treasury securities 21,473 21,473 — — U.S. government-sponsored securities 19,979 — 19,979 — Available-for-sale securities: U.S. Treasury securities 68,980 68,980 — — U.S. government-sponsored securities 93,040 — 93,040 — Convertible Note Hedges 150,509 — — 150,509 Total assets measured at fair value $ 440,409 $ 176,881 $ 113,019 $ 150,509 Liabilities: Note Hedge Warrants $ 133,424 $ — $ — $ 133,424 Contingent Consideration 79,273 — — 79,273 Total liabilities measured at fair value $ 212,697 $ — $ — $ 212,697 Fair Value Measurements at Reporting Date Using Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs December 31, 2016 (Level 1) (Level 2) (Level 3) Assets: Cash and cash equivalents: Money market funds $ $ $ — $ — Available-for-sale securities: U.S. Treasury securities — — U.S. government-sponsored securities — — Convertible Note Hedges 132,521 — — 132,521 Total assets measured at fair value $ $ $ $ Liabilities: Note Hedge Warrants $ 113,237 $ — $ — $ 113,237 Contingent Consideration 77,660 — — 77,660 Total liabilities measured at fair value $ 190,897 $ — $ — $ 190,897 |
Schedule of assumptions used in fair market valuations | The following inputs were used in the fair market valuation of the Convertible Note Hedges and Note Hedge Warrants as of March 31, 2017 and December 31, 2016: Three months ended Year Ended March 31, December 31, 2017 2016 Convertible Note Hedge Convertible Note Hedge Note Hedges Warrants Note Hedges Warrants Risk-free interest rate (1) 2.0 % 2.0 % 2.0 % 2.1 % Time to maturity 5.2 5.8 5.5 6.0 Stock price (2) $ 17.06 $ 17.06 $ 15.29 $ 15.29 Strike price (3) $ 16.58 $ 21.50 $ 16.58 $ 21.50 Common stock volatility (4) 45.4 % 45.9 % 47.4 % 45.8 % Dividend yield — % — % — % — % (1) Based on U.S. Treasury yield curve, with terms commensurate with the terms of the Convertible Note Hedges and the Note Hedge Warrants. (2) The closing price of the Company’s Class A common stock on the last trading day of the quarter ended March 31, 2017 and December 31, 2016. (3) As per the respective agreements for the Convertible Note Hedges and Note Hedge Warrants. (4) Selected volatility based on historical volatility of the Company’s Class A common stock. |
Schedule of the change in Level 3 convertible note derivatives | The following table reflects the change in the Company’s Level 3 convertible note derivatives from December 31, 2016 through March 31, 2017 (in thousands): Convertible Note Hedge Note Hedges Warrants Balance at December 31, 2016 $ 132,521 $ (113,237) Change in fair value, recorded as a component of gain (loss) on derivatives 17,988 (20,187) Balance at March 31, 2017 $ 150,509 $ (133,424) |
Schedule of changes in contingent consideration payable | The following table reflects the change in the Company’s Level 3 contingent consideration payable from December 31, 2016 through March 31, 2017 (in thousands): Contingent Consideration Fair value at December 31, 2016 $ 77,660 Changes in fair value 1,614 Payments/transfers to accrued expenses and other current liabilities (1) Fair value at March 31, 2017 $ 79,273 |
Available-for-Sale Securities (
Available-for-Sale Securities (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Table Text Blocks | |
Schedule of summary of available-for-sale securities | The following tables summarize the available-for-sale securities held at March 31, 2017 and December 31, 2016 (in thousands): Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value March 31, 2017 U.S. Treasury securities $ 68,995 $ — $ (15) $ 68,980 U.S. government-sponsored securities 93,066 3 (29) 93,040 Total $ 162,061 $ 3 $ (44) $ 162,020 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value December 31, 2016 U.S. Treasury securities $ 115,026 $ 6 $ (11) $ 115,021 U.S. government-sponsored securities 136,193 10 (12) 136,191 Total $ 251,219 $ 16 $ (23) $ 251,212 |
Inventory (Tables)
Inventory (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Table Text Blocks | |
Schedule of Inventory | Inventory consisted of the following (in thousands): March 31, 2017 December 31, 2016 Raw Materials $ 1,513 $ 1,010 Work in Progress — 71 $ 1,513 $ 1,081 |
Accrued Expenses and Other Cu26
Accrued Expenses and Other Current Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Table Text Blocks | |
Schedule of accrued expenses and other current liabilities | Accrued expenses and other current liabilities consisted of the following (in thousands): March 31, 2017 December 31, 2016 Salaries and benefits $ $ Professional fees Accrued interest Repurchasable Stock — 882 Other $ $ |
Notes Payable (Tables)
Notes Payable (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Table Text Blocks | |
Schedule of outstanding Convertible Note | The Company’s outstanding Convertible Note balances as of March 31, 2017 and December 31, 2016 consisted of the following (in thousands): March 31, 2017 December 31, 2016 Liability component: Principal $ 335,699 $ 335,699 Less: unamortized debt discount (91,254) (94,675) Less: unamortized debt issuance costs (6,594) (6,781) Net carrying amount $ 237,851 $ 234,243 Equity component $ 114,199 $ 114,199 |
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 March 31, 2017 and 2016 (in thousands): Three Months Ended March 31, 2017 2016 Contractual interest expense $ 1,888 $ 1,888 Amortization of debt issuance costs 187 153 Amortization of debt discount 3,421 3,135 Total interest expense $ 5,496 $ 5,176 |
Schedule of redemption price as percentage of outstanding principal balance | Redemption Payment Dates Percentage From and including March 15, 2018 to and including March 14, 2019 108.00 % From and including March 15, 2019 to and including March 14, 2020 105.50 % From and including March 15, 2020 to and including March 14, 2021 102.75 % From and including March 15, 2021 and thereafter 100.00 % |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Table Text Blocks | |
Schedule of future minimum lease payments under all non-cancelable lease arrangements | At March 31, 2017, future minimum lease payments under all non‑cancelable operating lease arrangements were as follows (in thousands): Total Operating Lease Payments 2017 (1) $ 2018 2019 17,609 2020 18,137 2021 and thereafter 79,857 Total future minimum lease payments $ (1) Amounts are for the nine months ending December 31, 2017. |
Employee Stock Benefit Plans (T
Employee Stock Benefit Plans (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Table Text Blocks | |
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 months ended March 31, 2017 and 2016 (in thousands): Three Months Ended March 31, 2017 2016 Research and development $ $ Selling, general and administrative $ $ |
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 March 31, 2017 2016 Expected volatility 46.0 % 46.0 % Expected term (in years) 6.0 Risk-free interest rate 2.0 % % Expected dividend yield — % — % |
Summary of stock option activity | Weighted- Average Number of Shares Fair Value (in thousands) Outstanding at December 31, 2016 20,455 $ 11.92 Granted 2,859 16.64 Exercised (854) 8.54 Cancelled (186) 12.54 Outstanding at March 31, 2017 22,274 $ 12.65 |
Summary of RSU activity | Weighted- Average Number Grant Date of Shares Fair Value (in thousands) Unvested as of December 31, 2016 1,299 $ 12.53 Granted 1,195 $ 16.71 Vested (210) $ 12.85 Forfeited (29) $ 13.80 Unvested as of March 31, 2017 2,255 $ 14.70 |
Nature of Business - Overview (
Nature of Business - Overview (Details) | 3 Months Ended |
Mar. 31, 2017 | |
Overview | |
Treatment of ulcerative | 2 years |
Nature of Business - Notes Paya
Nature of Business - Notes Payable (Details) - USD ($) $ in Millions | Jan. 05, 2017 | Mar. 31, 2017 | Sep. 23, 2016 | Jun. 30, 2015 | Jan. 31, 2013 |
Notes Payable | |||||
Notes Payable | |||||
Net proceed received | $ 11.2 | ||||
Fees and expenses | $ 3.7 | ||||
2.25% Convertible Senior Notes due in 2022 | Convertible Senior Notes | |||||
Notes Payable | |||||
Aggregate principal amount of notes issued | $ 335.7 | ||||
Annual interest rate of notes (as a percent) | 2.25% | ||||
Fees and expenses | $ 11.7 | ||||
8.375% Notes due 2026 | Notes Payable | |||||
Notes Payable | |||||
Aggregate principal amount of notes issued | $ 150 | ||||
Annual interest rate of notes (as a percent) | 8.375% | 8.375% | |||
11% PhaRMA Notes | Notes Payable | |||||
Notes Payable | |||||
Aggregate principal amount of notes issued | $ 175 | ||||
Annual interest rate of notes (as a percent) | 11.00% | 11.00% | |||
Debt redeemed | $ 135.1 |
Net Loss Per Share - Notes Paya
Net Loss Per Share - Notes Payable (Details) $ in Millions | Jun. 30, 2015USD ($) |
Convertible Senior Notes | 2.25% Convertible Senior Notes due in 2022 | |
Notes Payable | |
Aggregate principal amount of notes issued | $ 335.7 |
Net Loss Per Share - Note Hedge
Net Loss Per Share - Note Hedge Warrants (Details) | Mar. 31, 2017shares |
Note Hedge Warrant Derivatives | Class A common stock | |
Note Hedge Warrants | |
Shares into which warrants may be converted (in shares) | 20,249,665 |
Net Loss Per Share - Potentiall
Net Loss Per Share - Potentially Dilutive Securities (Details) - shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Potentially dilutive securities | ||
Total potentially dilutive securities excluded from the computation of diluted weighted average shares outstanding (in shares) | 65,081 | 64,330 |
Options to purchase common stock | ||
Potentially dilutive securities | ||
Total potentially dilutive securities excluded from the computation of diluted weighted average shares outstanding (in shares) | 22,274 | 22,538 |
Shares subject to repurchase | ||
Potentially dilutive securities | ||
Total potentially dilutive securities excluded from the computation of diluted weighted average shares outstanding (in shares) | 52 | 37 |
Restricted stock units | ||
Potentially dilutive securities | ||
Total potentially dilutive securities excluded from the computation of diluted weighted average shares outstanding (in shares) | 2,255 | 1,255 |
Note Hedge Warrants | ||
Potentially dilutive securities | ||
Total potentially dilutive securities excluded from the computation of diluted weighted average shares outstanding (in shares) | 20,250 | 20,250 |
Convertible Debt Securities (2020 Notes) | ||
Potentially dilutive securities | ||
Total potentially dilutive securities excluded from the computation of diluted weighted average shares outstanding (in shares) | 20,250 | 20,250 |
Business Combinations - General
Business Combinations - General Information (Details) - USD ($) $ in Thousands | Jun. 02, 2016 | Jun. 30, 2016 | Mar. 31, 2017 |
Lesinurad transaction | |||
Business Combinations | |||
Payment for acquisition of lesinurad license | $ 100,000 | ||
Lesinurad transaction | Adjustment | |||
Business Combinations | |||
Net assets and liabilities | $ 0 | ||
Lesinurad transaction | AstraZeneca | |||
Business Combinations | |||
Reimbursement obligation | 100,000 | ||
Payment for acquisition of lesinurad license | 100,000 | ||
Contingent consideration | 67,885 | ||
Acquisition related issuance costs | $ 1,600 | ||
Net assets and liabilities | $ 167,885 | ||
Licensing agreement | AstraZeneca | |||
Business Combinations | |||
Period for reimbursement amount of development activities (in years) | 10 years | ||
Milestone payment to be paid by company upon milestone achievement | $ 165,000 | ||
Royalty percentage per agreement | single digits | ||
Commercial Supply Agreement (CSA) | Lesinurad transaction | AstraZeneca | |||
Business Combinations | |||
Time period for manufacturing technology transfer per agreement | 6 months |
Business Combinations - Allocat
Business Combinations - Allocation of Purchase Price Consideration (Details) - Lesinurad transaction $ in Thousands | Jun. 02, 2016USD ($) |
Preliminary allocation of purchase consideration | |
Cash portion of consideration | $ 100,000 |
AstraZeneca | |
Preliminary allocation of purchase consideration | |
Cash portion of consideration | 100,000 |
Contingent consideration | 67,885 |
Total purchase consideration | $ 167,885 |
Business Combinations - Net Ass
Business Combinations - Net Assets Acquired (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 | Jun. 02, 2016 |
Identifiable assets acquired | |||
Goodwill | $ 785 | $ 785 | |
Lesinurad transaction | AstraZeneca | |||
Identifiable assets acquired | |||
Goodwill | $ 785 | ||
Net assets acquired | 167,885 | ||
Lesinurad transaction | AstraZeneca | IPR&D - DUZALLO | |||
Identifiable assets acquired | |||
In-process research and development | 145,100 | ||
Lesinurad transaction | AstraZeneca | Developed technology - ZURAMPIC | |||
Identifiable assets acquired | |||
Developed technology | $ 22,000 |
Business Combinations - Fair Va
Business Combinations - Fair Value Determination (Details) - Lesinurad transaction - AstraZeneca - USD ($) $ in Millions | Jun. 02, 2016 | Mar. 31, 2017 |
IPR&D - DUZALLO | ||
Business Combinations | ||
Discount rate applied to determine fair value (as a percent) | 14.00% | |
Remaining cost of development for intangible asset | $ 13.9 | |
Developed technology - ZURAMPIC | ||
Business Combinations | ||
Discount rate applied to determine fair value (as a percent) | 12.50% | |
Estimated useful life | 13 years | |
Accumulated amortization of intangible assets | $ 1.4 |
Business Combinations - Estimat
Business Combinations - Estimated Future Amortization Expense (Details) - Lesinurad transaction - AstraZeneca - Developed technology - ZURAMPIC $ in Thousands | Mar. 31, 2017USD ($) |
Estimated future amortization expense | |
2,017 | $ 1,262 |
2,018 | 1,682 |
2,019 | 1,682 |
2,020 | 1,682 |
2021 and thereafter | 14,291 |
Total | $ 20,599 |
Business Combinations - Intangi
Business Combinations - Intangible Asset and Goodwill Impairment (Details) - Lesinurad transaction - AstraZeneca $ in Thousands | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Business Combinations | |
Impairment of goodwill | $ 0 |
IPR&D - DUZALLO | |
Business Combinations | |
Impairment of indefinite-lived intangible | 0 |
Developed technology - ZURAMPIC | |
Business Combinations | |
Impairment of finite-lived intangible | $ 0 |
Business Combinations - Conting
Business Combinations - Contingent Consideration Fair Value (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | |
Business Combinations | ||
Non-cash change in fair value of contingent consideration | $ 1,614 | |
Significant Unobservable Inputs (Level 3) | ||
Business Combinations | ||
Non-cash change in fair value of contingent consideration | 1,614 | |
Contingent consideration | $ 79,273 | $ 77,660 |
Collaboration, License, Co-Pr42
Collaboration, License, Co-Promotion and Other Commercial Agreements - Summary (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Collaboration, License and Co-Promotion Agreements | ||
Collaborative arrangements revenue | $ 51,877 | $ 66,042 |
Linaclotide | ||
Collaboration, License and Co-Promotion Agreements | ||
Collaborative arrangements revenue | 200 | |
Allergan | Product related collaborative arrangements | North America | Linaclotide | ||
Collaboration, License and Co-Promotion Agreements | ||
Collaborative arrangements revenue | 49,951 | 49,973 |
Allergan | Product related collaborative arrangements | Europe | Linaclotide | ||
Collaboration, License and Co-Promotion Agreements | ||
Collaborative arrangements revenue | 109 | 83 |
Allergan | Co-Promotion Agreements | Viberzi | ||
Collaboration, License and Co-Promotion Agreements | ||
Collaborative arrangements revenue | 457 | 457 |
AstraZeneca | Product related collaborative arrangements | China, Hong Kong, and Macau | Linaclotide | ||
Collaboration, License and Co-Promotion Agreements | ||
Collaborative arrangements revenue | 208 | 130 |
Astellas | Collaborative arrangement | ||
Collaboration, License and Co-Promotion Agreements | ||
Collaborative arrangements revenue | 14,700 | |
Astellas | Product related collaborative arrangements | Japan | Linaclotide | ||
Collaboration, License and Co-Promotion Agreements | ||
Collaborative arrangements revenue | 12 | 14,680 |
Exact Sciences | Co-Promotion Agreements | Cologuard | ||
Collaboration, License and Co-Promotion Agreements | ||
Collaborative arrangements revenue | $ 1,140 | $ 719 |
Collaboration, License, Co-Pr43
Collaboration, License, Co-Promotion and Other Commercial Agreements - North America (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | |
Sep. 30, 2007 | Mar. 31, 2017USD ($)item | Mar. 31, 2016USD ($) | |
AstraZeneca | Licensing agreement | |||
Collaboration, License and Co-Promotion Agreements | |||
Royalty percentage per agreement | single digits | ||
North America | Collaborative arrangement | |||
Collaboration, License and Co-Promotion Agreements | |||
Revenue recognized from sale of API | $ 0 | $ 3,000 | |
North America | Allergan | Product related collaborative arrangements | |||
Collaboration, License and Co-Promotion Agreements | |||
Equity investment in the entity's capital stock | 25,000 | ||
Net cost sharing offset or incremental expense related to research and development expense | 400 | 2,000 | |
North America | Allergan | Product related collaborative arrangements | Development milestones | |||
Collaboration, License and Co-Promotion Agreements | |||
Cumulative license fees and development milestone payments received | $ 205,000 | ||
Number of milestone payments | item | 6 | ||
North America | Allergan | Product related collaborative arrangements | Commercialization milestone | |||
Collaboration, License and Co-Promotion Agreements | |||
Percentage of net profit from commercialization | 50.00% | ||
Percentage of net loss from commercialization | 50.00% | ||
North America | Future payments | Product related collaborative arrangements | Maximum | Sales milestones | |||
Collaboration, License and Co-Promotion Agreements | |||
Milestone payment to be received by company upon milestone achievement | $ 100,000 | ||
U.S. | Allergan | Collaborative arrangement | |||
Collaboration, License and Co-Promotion Agreements | |||
Collaborative arrangements revenue related to sales of LINZESS in the U.S. | 49,452 | 46,647 | |
Revenue recognized from sale of API | 3,017 | ||
Royalty revenue | 499 | 309 | |
Total collaborative arrangements revenue | 49,951 | 49,973 | |
U.S. | Allergan | Product related collaborative arrangements | |||
Collaboration, License and Co-Promotion Agreements | |||
Collaborative arrangements revenue related to sales of LINZESS in the U.S. | 49,452 | 46,647 | |
Selling, general and administrative costs incurred by the Company | (11,109) | (9,153) | |
The Company's share of net profit (loss) | 38,343 | 37,494 | |
Canada and Mexico | Allergan | Product related collaborative arrangements | |||
Collaboration, License and Co-Promotion Agreements | |||
Royalty percentage per agreement | mid-teens | ||
Royalty revenue | $ 500 | $ 300 |
Collaboration, License, Co-Pr44
Collaboration, License, Co-Promotion and Other Commercial Agreements - European Territory (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Oct. 31, 2015 | |
Almirall | ||
Collaboration, License and Co-Promotion Agreements | ||
Annual royalty | 5 years | |
Almirall S A and Allergan Plc | Europe | Product related collaborative arrangements | ||
Collaboration, License and Co-Promotion Agreements | ||
Remaining milestone payment due upon the amendment to the license agreement | $ 42.5 |
Collaboration, License, Co-Pr45
Collaboration, License, Co-Promotion and Other Commercial Agreements - Japan (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | ||
Nov. 30, 2009USD ($) | Mar. 31, 2017USD ($)item | Mar. 31, 2016USD ($) | Dec. 31, 2016USD ($) | |
Collaboration, License and Co-Promotion Agreements | ||||
Collaborative arrangements revenue | $ 51,877 | $ 66,042 | ||
Astellas | Collaborative arrangement | ||||
Collaboration, License and Co-Promotion Agreements | ||||
Collaborative arrangements revenue | 14,700 | |||
Deferred revenue related | $ 2,100 | |||
Astellas | Collaborative arrangement | Second development milestones | ||||
Collaboration, License and Co-Promotion Agreements | ||||
Collaborative arrangements revenue | 12,900 | |||
Astellas | Japan | Product related collaborative arrangements | ||||
Collaboration, License and Co-Promotion Agreements | ||||
Up-front fee received | $ 30,000 | |||
Up-front license fee revenue recognized | $ 1,300 | |||
Astellas | Japan | Product related collaborative arrangements | Additional development milestones | ||||
Collaboration, License and Co-Promotion Agreements | ||||
Number of milestone payments to be received (in payments) | item | 3 | |||
Astellas | Japan | Product related collaborative arrangements | Additional development milestones | Maximum | ||||
Collaboration, License and Co-Promotion Agreements | ||||
Total milestone payments to be received | $ 45,000 | |||
Astellas | Japan | Product related collaborative arrangements | Phase 3 milestones | ||||
Collaboration, License and Co-Promotion Agreements | ||||
Milestone payment to be received by company upon milestone achievement | 15,000 | |||
Astellas | Japan | Product related collaborative arrangements | Approval of Japanese NDA equivalent filing milestone | ||||
Collaboration, License and Co-Promotion Agreements | ||||
Milestone payment to be received by company upon milestone achievement | $ 15,000 |
Collaboration, License, Co-Pr46
Collaboration, License, Co-Promotion and Other Commercial Agreements - China, Hong Kong and Macau (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | ||
Aug. 31, 2014 | Oct. 31, 2012 | Mar. 31, 2017 | Mar. 31, 2016 | |
Collaboration, License and Co-Promotion Agreements | ||||
Collaborative arrangements revenue | $ 51,877 | $ 66,042 | ||
Linaclotide | ||||
Collaboration, License and Co-Promotion Agreements | ||||
Collaborative arrangements revenue | 200 | |||
AstraZeneca | Product related collaborative arrangements | China, Hong Kong, and Macau | ||||
Collaboration, License and Co-Promotion 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 | |||
Amount of arrangement consideration for clinical trial material supply services and research, development and regulatory activities | $ 9,000 | |||
Percentage of costs of clinical trial material supply services and research, development and regulatory activities allocated | 55.00% | |||
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 | |||
AstraZeneca | Product related collaborative arrangements | China, Hong Kong, and Macau | Linaclotide | ||||
Collaboration, License and Co-Promotion Agreements | ||||
Collaborative arrangements revenue | $ 208 | $ 130 | ||
AstraZeneca | Product related collaborative arrangements | China, Hong Kong, and Macau | Sales milestones | ||||
Collaboration, License and Co-Promotion Agreements | ||||
Milestone payment to be received by company upon milestone achievement | $ 125,000 | |||
AstraZeneca | Product related collaborative arrangements | China, Hong Kong, and Macau | Commercialization milestone | ||||
Collaboration, License and Co-Promotion Agreements | ||||
Percentage of net profit from commercialization | 55.00% | |||
Percentage of net loss from commercialization | 55.00% |
Collaboration, License, Co-Pr47
Collaboration, License, Co-Promotion and Other Commercial Agreements - Co-Promotion Agreements (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | |
Mar. 31, 2017USD ($)item | Mar. 31, 2016USD ($) | Jun. 30, 2015USD ($) | Dec. 31, 2016USD ($) | |
Collaboration, License and Co-Promotion Agreements | ||||
Collaborative arrangements revenue | $ 52,166 | $ 66,042 | ||
Treatment of ulcerative | 2 years | |||
Viberzi | ||||
Collaboration, License and Co-Promotion Agreements | ||||
Collaborative Arrangement Revenues Earned | $ 2,400 | |||
Co-Promotion Agreements | Viberzi | ||||
Collaboration, License and Co-Promotion Agreements | ||||
Collaborative Arrangement Revenues Earned | $ 500 | $ 2,400 | ||
Allergan | ||||
Collaboration, License and Co-Promotion Agreements | ||||
Treatment of ulcerative | 2 years | |||
Allergan | Co-Promotion Agreements | Viberzi | ||||
Collaboration, License and Co-Promotion Agreements | ||||
Number of health care practitioners (in practitioners) | item | 25,000 | |||
Milestone payment to be received by company upon milestone achievement | $ 10,000 | |||
Net profit share adjustment | $ 1,900 | $ 1,200 |
Collaboration, License, Co-Pr48
Collaboration, License, Co-Promotion and Other Commercial Agreements - Other Collaborations and License Agreements (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Collaboration, License and Co-Promotion Agreements | ||
Research and development | $ 33,702 | $ 31,842 |
Agreement One - other collaboration and license agreements | Development milestones | ||
Collaboration, License and Co-Promotion Agreements | ||
Contingent milestone payable | 7,500 | |
Milestone payment made | 2,500 | |
Agreement One - other collaboration and license agreements | Regulatory milestones | ||
Collaboration, License and Co-Promotion Agreements | ||
Contingent milestone payable | 18,000 | |
Milestone payment made | 0 | |
Agreement Two - other collaboration and license agreements | ||
Collaboration, License and Co-Promotion Agreements | ||
Contingent milestone payable per product, maximum | 114,500 | |
Agreement Two - other collaboration and license agreements | Sales milestones | ||
Collaboration, License and Co-Promotion Agreements | ||
Contingent milestone payable per product | 35,000 | |
Agreement Two - other collaboration and license agreements | Development milestones | ||
Collaboration, License and Co-Promotion Agreements | ||
Contingent milestone payable per product | 21,500 | |
Agreement Two - other collaboration and license agreements | Regulatory milestones | ||
Collaboration, License and Co-Promotion Agreements | ||
Contingent milestone payable per product | $ 58,000 |
Product Revenue (Details)
Product Revenue (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Product Revenue | |
Product revenue, net | $ 289 |
Co-Promotion Agreements | Zurampic | |
Product Revenue | |
Deferred revenue related | 700 |
Product revenue, net | $ 300 |
Fair Value of Financial Instr50
Fair Value of Financial Instruments - Measured on Recurring Basis (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 |
Assets: | |||
Available-for-sale securities | $ 162,020 | $ 251,212 | |
Convertible note hedges | 150,509 | 132,521 | |
Liabilities: | |||
Note hedge warrants | 133,424 | 113,237 | |
Fair value transfers | |||
Fair value transfer between measurement levels | 0 | $ 0 | |
Convertible Note Hedge | |||
Assets: | |||
Convertible note hedges | 91,900 | ||
Note Hedge Warrant Derivatives | |||
Liabilities: | |||
Note hedge warrants | 70,800 | ||
Significant Unobservable Inputs (Level 3) | |||
Liabilities: | |||
Contingent consideration | 79,273 | 77,660 | |
Recurring basis | |||
Assets: | |||
Total assets measured at fair value | 440,409 | 416,219 | |
Liabilities: | |||
Contingent consideration | 79,273 | 77,660 | |
Total liabilities | 212,697 | 190,897 | |
Recurring basis | Convertible Note Hedge | |||
Assets: | |||
Convertible note hedges | 150,509 | 132,521 | |
Recurring basis | Note Hedge Warrant Derivatives | |||
Liabilities: | |||
Note hedge warrants | 133,424 | 113,237 | |
Recurring basis | Money market funds | |||
Assets: | |||
Cash and cash equivalents | 86,428 | 32,486 | |
Recurring basis | U.S. Treasury securities | |||
Assets: | |||
Cash and cash equivalents | 21,473 | ||
Available-for-sale securities | 68,980 | 115,021 | |
Recurring basis | U.S. government-sponsored securities | |||
Assets: | |||
Cash and cash equivalents | 19,979 | ||
Available-for-sale securities | 93,040 | 136,191 | |
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | |||
Assets: | |||
Total assets measured at fair value | 176,881 | 147,507 | |
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Money market funds | |||
Assets: | |||
Cash and cash equivalents | 86,428 | 32,486 | |
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. Treasury securities | |||
Assets: | |||
Cash and cash equivalents | 21,473 | ||
Available-for-sale securities | 68,980 | 115,021 | |
Recurring basis | Significant Other Observable Inputs (Level 2) | |||
Assets: | |||
Total assets measured at fair value | 113,019 | 136,191 | |
Recurring basis | Significant Other Observable Inputs (Level 2) | U.S. government-sponsored securities | |||
Assets: | |||
Cash and cash equivalents | 19,979 | ||
Available-for-sale securities | 93,040 | 136,191 | |
Recurring basis | Significant Unobservable Inputs (Level 3) | |||
Assets: | |||
Total assets measured at fair value | 150,509 | 132,521 | |
Liabilities: | |||
Contingent consideration | 79,273 | 77,660 | |
Total liabilities | 212,697 | 190,897 | |
Recurring basis | Significant Unobservable Inputs (Level 3) | Convertible Note Hedge | |||
Assets: | |||
Convertible note hedges | 150,509 | 132,521 | |
Recurring basis | Significant Unobservable Inputs (Level 3) | Note Hedge Warrant Derivatives | |||
Liabilities: | |||
Note hedge warrants | $ 133,424 | $ 113,237 |
Fair Value of Financial Instr51
Fair Value of Financial Instruments - Change in Fair Value (Details) - Significant Unobservable Inputs (Level 3) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | ||
Change in level 3 liabilities | |||
Payments/transfers to accrued expenses and other current liabilities | $ (1) | ||
Convertible Note Hedge | |||
Convertible Note Hedges and Note Hedge Warrants | |||
Risk-free interest rate (as a percent) | [1] | 2.00% | 2.00% |
Time to maturity | 5 years 2 months 12 days | 5 years 6 months | |
Stock price (in dollars per share) | [2] | $ 17.06 | $ 15.29 |
Strike price (in dollars per share) | [3] | $ 16.58 | $ 16.58 |
Common stock volatility (as a percent) | [4] | 45.40% | 47.40% |
Change in level 3 assets | |||
Balance at beginning of period | $ 132,521 | ||
Change in fair value, recorded as a component of gain (loss) on derivatives | 17,988 | ||
Balance at end of period | $ 150,509 | $ 132,521 | |
Note Hedge Warrants | |||
Convertible Note Hedges and Note Hedge Warrants | |||
Risk-free interest rate (as a percent) | [1] | 2.00% | 2.10% |
Time to maturity | 5 years 9 months 18 days | 6 years | |
Stock price (in dollars per share) | [2] | $ 17.06 | $ 15.29 |
Strike price (in dollars per share) | [3] | $ 21.50 | $ 21.50 |
Common stock volatility (as a percent) | [4] | 45.90% | 45.80% |
Change in level 3 assets | |||
Balance at beginning of period | $ (113,237) | ||
Balance at end of period | $ (113,237) | ||
Change in level 3 liabilities | |||
Change in fair value, recorded as a component of gain (loss) on derivatives | (20,187) | ||
Balance at end of period | $ (133,424) | ||
[1] | Based on U.S. Treasury yield curve, with terms commensurate with the terms of the Convertible Note Hedges and the Note Hedge Warrants. | ||
[2] | The closing price of the Company’s Class A common stock on the last trading day of the quarter ended March 31, 2017 and December 31, 2016. | ||
[3] | As per the respective agreements for the Convertible Note Hedges and Note Hedge Warrants. | ||
[4] | Selected volatility based on historical volatility of the Company’s Class A common stock. |
Fair Value of Financial Instr52
Fair Value of Financial Instruments - Contingent Consideration - Liability Recorded (Details) $ in Millions | Jun. 02, 2016USD ($) |
Scenario, Previously Reported | Lesinurad transaction | AstraZeneca | |
Contingent Consideration | |
Estimated fair value of contingent acquisition consideration payable | $ 67.9 |
Fair Value of Financial Instr53
Fair Value of Financial Instruments - Contingent Consideration - Changes in Level 3 Contingent Consideration (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Changes in contingent consideration payable | |
Non-cash change in fair value of contingent consideration | $ 1,614 |
Significant Unobservable Inputs (Level 3) | |
Changes in contingent consideration payable | |
Beginning balance | 77,660 |
Non-cash change in fair value of contingent consideration | 1,614 |
Payments/transfers to accrued expenses and other current liabilities | (1) |
Ending balance | $ 79,273 |
Fair Value of Financial Instr54
Fair Value of Financial Instruments - Notes Payable (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 23, 2016 | Jun. 30, 2015 | Jan. 31, 2013 |
Notes Payable | 11% PhaRMA Notes | |||||
Fair value disclosures | |||||
Aggregate principal amount of notes issued in private placement | $ 175 | ||||
Notes Payable | 11% PhaRMA Notes | Significant Unobservable Inputs (Level 3) | |||||
Fair value disclosures | |||||
Estimated fair value | $ 134.9 | ||||
Notes Payable | 8.375% Notes due 2026 | |||||
Fair value disclosures | |||||
Aggregate principal amount of notes issued in private placement | $ 150 | ||||
Notes Payable | 8.375% Notes due 2026 | Significant Unobservable Inputs (Level 3) | |||||
Fair value disclosures | |||||
Aggregate principal amount of notes issued in private placement | $ 150 | ||||
Estimated fair value | 152.9 | ||||
Convertible Senior Notes | 2.25% Convertible Senior Notes due in 2022 | |||||
Fair value disclosures | |||||
Aggregate principal amount of notes issued in private placement | $ 335.7 | ||||
Convertible Senior Notes | 2.25% Convertible Senior Notes due in 2022 | Significant Other Observable Inputs (Level 2) | |||||
Fair value disclosures | |||||
Estimated fair value | $ 419.7 | $ 384.2 |
Available-for-Sale Securities -
Available-for-Sale Securities - Tabular Disclosure (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Available-for-Sale Securities | ||
Amortized Cost | $ 162,061 | $ 251,219 |
Gross Unrealized Gains | 3 | 16 |
Gross Unrealized Losses | (44) | (23) |
Fair Value | 162,020 | 251,212 |
U.S. Treasury securities | ||
Available-for-Sale Securities | ||
Amortized Cost | 68,995 | 115,026 |
Gross Unrealized Gains | 6 | |
Gross Unrealized Losses | (15) | (11) |
Fair Value | 68,980 | 115,021 |
U.S. government-sponsored securities | ||
Available-for-Sale Securities | ||
Amortized Cost | 93,066 | 136,193 |
Gross Unrealized Gains | 3 | 10 |
Gross Unrealized Losses | (29) | (12) |
Fair Value | $ 93,040 | $ 136,191 |
Available-for-Sale Securities56
Available-for-Sale Securities - Additional Information (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017USD ($)item | Mar. 31, 2016USD ($) | Dec. 31, 2016USD ($)item | |
Investments, Debt and Equity Securities [Abstract] | |||
Contractual maturity period, maximum | 1 year | ||
Number of investments classified as available-for-sale securities in an unrealized loss position (in investments) | item | 44 | 34 | |
Number of investments classified as available-for-sale securities in an unrealized loss position for more than twelve months (in investments) | item | 0 | 0 | |
Aggregate fair value of securities none of which had been in an unrealized loss position for more than twelve months | $ | $ 155,300 | $ 111,300 | |
Proceeds from sales of available-for-sale securities | $ | $ 0 | $ 0 |
Inventory - Tabular Disclosure
Inventory - Tabular Disclosure (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Raw Materials | $ 1,513 | $ 1,010 |
Work in Progress | 71 | |
Total | $ 1,513 | $ 1,081 |
Inventory - General Information
Inventory - General Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Inventory | ||
Write-down of inventory | $ 0 | $ 0 |
Accrued Expenses and Other Cu59
Accrued Expenses and Other Current Liabilities - Tabular Disclosure (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Accrued Expenses and Other Current Liabilities | ||
Salaries and benefits | $ 14,597 | $ 25,884 |
Professional fees | 1,570 | 1,213 |
Accrued interest | 5,204 | 971 |
Repurchasable Stock | 882 | |
Other | 10,447 | 9,351 |
Total accrued expenses and other current liabilities | $ 31,818 | $ 38,301 |
Accrued Expenses and Other Cu60
Accrued Expenses and Other Current Liabilities - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | |
Accrued Expenses and Other Current Liabilities | ||
Other accrued expenses | $ 10,447 | $ 9,351 |
Write-down of excess non-cancelable ZURAMPIC sample purchase commitments | 1,353 | |
Lesinurad transaction | ||
Accrued Expenses and Other Current Liabilities | ||
Other accrued expenses | 600 | $ 2,800 |
Write-down of excess non-cancelable ZURAMPIC sample purchase commitments | $ 1,300 |
Notes Payable - 8.375% Notes du
Notes Payable - 8.375% Notes due 2026 - General Information (Details) - 8.375% Notes due 2026 - Notes Payable - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Sep. 23, 2016 | |
Notes Payable | ||
Aggregate principal amount of notes issued | $ 150 | |
Annual interest rate of notes (as a percent) | 8.375% | 8.375% |
Debt issuance costs capitalized | $ 0.5 | |
Percentage of net sales to determine quarterly payments (as a percent) | 7.50% | |
Redemption Period | 12 months |
Notes Payable - 8.375% Notes 62
Notes Payable - 8.375% Notes due 2026 - Redemption Percentage (Details) - 8.375% Notes due 2026 - Notes Payable | 3 Months Ended |
Mar. 31, 2017 | |
From and including March 15, 2018 to and including March 14, 2019 | |
Notes Payable | |
Payment start date | Mar. 15, 2018 |
Payment end date | Mar. 14, 2019 |
Redemption Percentage | 108.00% |
From and including March 15, 2019 to and including March 14, 2020 | |
Notes Payable | |
Payment start date | Mar. 15, 2019 |
Payment end date | Mar. 14, 2020 |
Redemption Percentage | 105.50% |
From and including March 15, 2020 to and including March 14, 2021 | |
Notes Payable | |
Payment start date | Mar. 15, 2020 |
Payment end date | Mar. 14, 2021 |
Redemption Percentage | 102.75% |
From and including March 15, 2021 and thereafter | |
Notes Payable | |
Payment start date | Mar. 15, 2021 |
Redemption Percentage | 100.00% |
Notes Payable - 2.25% Convertib
Notes Payable - 2.25% Convertible Senior Notes due 2022 - General Information (Details) - USD ($) | 1 Months Ended | 3 Months Ended |
Jun. 30, 2015 | Mar. 31, 2017 | |
Notes Payable | ||
Net proceed received | $ 146,250,000 | |
2.25% Convertible Senior Notes due in 2022 | Convertible Senior Notes | ||
Notes Payable | ||
Aggregate principal amount of notes issued | $ 335,700,000 | |
Net proceed received | 324,000,000 | |
Fees and expenses | 11,700,000 | |
Payments for convertible bond hedges | $ 21,100,000 | |
Annual interest rate of notes (as a percent) | 2.25% | |
Principal amount used for debt instrument conversion ratio | $ 1,000 | |
Maximum period of the sole remedy for event failures in the Indenture | 180 days | |
Amortization period | 7 years | |
Class A common stock | 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 | |
Principal amount used for debt instrument conversion ratio | $ 1,000 | |
Initial conversion price (in dollars per share) | $ 16.58 | |
Shares issuable upon conversion of debt (in shares) | 20,249,665 | |
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 stock | Maximum | 2.25% Convertible Senior Notes due in 2022 | Convertible Senior Notes | ||
Notes Payable | ||
Number of trading days | 20 days | |
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 stock | Minimum | 2.25% Convertible Senior Notes due in 2022 | Convertible Senior Notes | ||
Notes Payable | ||
Percentage of aggregate principal amount payable, in case of event of default | 25.00% |
Notes Payable - 2.25% Convert64
Notes Payable - 2.25% Convertible Senior Notes due 2022 - Balances (Details) - 2.25% Convertible Senior Notes due in 2022 - Convertible Senior Notes - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Liability component: | ||
Principal | $ 335,699 | $ 335,699 |
Less: unamortized debt discount | (91,254) | (94,675) |
Less: unamortized debt issuance costs | (6,594) | (6,781) |
Net carrying amount | 237,851 | 234,243 |
Equity component | $ 114,199 | $ 114,199 |
Notes Payable - 2.25% Convert65
Notes Payable - 2.25% Convertible Senior Notes due 2022 - Total Interest Expense (Details) - 2.25% Convertible Senior Notes due in 2022 - Convertible Senior Notes - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Interest Expense | ||
Contractual interest expense | $ 1,888 | $ 1,888 |
Amortization of debt issuance costs | 187 | 153 |
Amortization of debt discount | 3,421 | 3,135 |
Total interest expense | $ 5,496 | $ 5,176 |
Notes Payable - 2.25% Convert66
Notes Payable - 2.25% Convertible Senior Notes due 2022 - Additional Information (Details) - 2.25% Convertible Senior Notes due in 2022 - Convertible Senior Notes - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended |
Jun. 30, 2015 | Mar. 31, 2017 | |
Notes Payable | ||
Debt issuance costs incurred | $ 11.7 | |
Debt issuance costs allocated to equity components | 4 | |
Debt issuance costs allocated to liability components | $ 7.7 | |
Debt instrument term | 7 years | |
Effective interest rate on liability components | 9.34% |
Notes Payable - Convertible Not
Notes Payable - Convertible Note Hedge and Warrant Transactions (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | |
Notes Payable | ||
Long-term asset | $ 150,509 | $ 132,521 |
Long-term liability | 133,424 | $ 113,237 |
Net derivative issuance cost | 21,100 | |
Convertible Note Hedge | ||
Notes Payable | ||
Long-term asset | $ 91,900 | |
Convertible Note Hedge | Class A common stock | ||
Notes Payable | ||
Shares issuable upon conversion of debt (in shares) | 20,249,665 | |
Initial conversion price (in dollars per share) | $ 16.58 | |
Note Hedge Warrant Derivatives | ||
Notes Payable | ||
Long-term liability | $ 70,800 | |
Note Hedge Warrant Derivatives | Class A common stock | ||
Notes Payable | ||
Shares into which warrants may be converted (in shares) | 20,249,665 | |
Number of trading days for exercise of warrants | 150 days | |
Note Hedge Warrants | Class A common stock | ||
Notes Payable | ||
Warrants strike price (in dollars per share) | $ 21.50 |
Notes Payable - PhaRMA Notes (D
Notes Payable - PhaRMA Notes (Details) - USD ($) $ in Thousands | Jan. 05, 2017 | Mar. 31, 2017 | Jan. 31, 2013 |
Notes Payable | |||
Loss on extinguishment of debt | $ 2,009 | ||
Notes Payable | 11% PhaRMA Notes | |||
Notes Payable | |||
Annual interest rate of notes (as a percent) | 11.00% | 11.00% | |
Aggregate principal amount of notes issued in private placement | $ 175,000 | ||
Loss on extinguishment of debt | $ 2,000 |
Commitments and Contingencies -
Commitments and Contingencies - Lease Commitments (Details) | Mar. 31, 2017USD ($)ft² | Mar. 31, 2017USD ($)ft² | Mar. 31, 2016USD ($) |
Lease Commitments | |||
Restricted cash | $ 1,190,000 | $ 1,190,000 | |
(Gain) loss on facility subleases | $ (1,579,000) | $ 3,480,000 | |
Office and laboratory space in Cambridge, Massachusetts | |||
Lease Commitments | |||
Rentable area leased (in square feet) | ft² | 223,000 | 223,000 | |
Rentable area subleased (in square feet) | ft² | 93,000 | 93,000 | |
Option to extend lease term | 5 years | ||
Annual rent escalation | $ 3 | $ 3 | |
Restricted cash | $ 6,400,000 | 6,400,000 | |
(Gain) loss on facility subleases | 1,600,000 | ||
Rent expense | $ 1,000,000 | $ 5,500,000 |
Commitments and Contingencies70
Commitments and Contingencies - Operating Lease Payments (Details) - Net Operating Lease Payments $ in Thousands | Mar. 31, 2017USD ($) |
Future minimum lease payments under Operating Lease Payments | |
2,017 | $ 10,715 |
2,018 | 16,931 |
2,019 | 17,609 |
2,020 | 18,137 |
2021 and thereafter | 79,857 |
Total future minimum lease payments | $ 143,249 |
Commitments and Contingencies71
Commitments and Contingencies - Commercial Supply Commitments - Recorded Purchase Commitments (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Accrual for non-cancellable purchase commitments | |
Purchase Commitment Write-down | $ 1,353 |
Commercial Supply Commitments | |
Accrual for non-cancellable purchase commitments | |
Purchase Commitment Write-down | $ 1,300 |
Employee Stock Benefit Plans -
Employee Stock Benefit Plans - Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Employee Stock Benefit Plans | ||
Share-based compensation expense | $ 7,279 | $ 6,806 |
Research and development | ||
Employee Stock Benefit Plans | ||
Share-based compensation expense | 2,625 | 2,499 |
Selling, general and administrative | ||
Employee Stock Benefit Plans | ||
Share-based compensation expense | $ 4,654 | $ 4,307 |
Employee Stock Benefit Plans 73
Employee Stock Benefit Plans - Stock Options - Activity (Details) - Options to purchase common stock shares in Thousands | 3 Months Ended |
Mar. 31, 2017$ / sharesshares | |
Number of Shares | |
Outstanding at the beginning of the period (in shares) | shares | 20,455 |
Granted (in shares) | shares | 2,859 |
Exercised (in shares) | shares | (854) |
Cancelled (in shares) | shares | (186) |
Outstanding at the end of the period (in shares) | shares | 22,274 |
Weighted-Average Exercise Price | |
Outstanding at the beginning of the period (in dollars per share) | $ / shares | $ 11.92 |
Granted (in dollars per share) | $ / shares | 16.64 |
Exercised (in dollars per share) | $ / shares | 8.54 |
Cancelled (in dollars per share) | $ / shares | 12.54 |
Outstanding at the end of the period (in dollars per share) | $ / shares | $ 12.65 |
Employee Stock Benefit Plans 74
Employee Stock Benefit Plans - Stock Options - Assumptions (Details) - Options to purchase common stock | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
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) | 46.00% | 46.00% |
Expected term | 6 years | 6 years |
Risk-free interest rate (as a percent) | 2.00% | 1.50% |
Employee Stock Benefit Plans 75
Employee Stock Benefit Plans - Restricted Stock Units - General Information (Details) - Restricted stock units | 3 Months Ended |
Mar. 31, 2017shares | |
Employee Stock Benefit Plans | |
Right to number of shares of common stock per RSU (in shares) | 1 |
Vesting percentage (as a percent) | 25.00% |
Employee Stock Benefit Plans 76
Employee Stock Benefit Plans - Restricted Stock Units - Activity (Details) - Restricted stock units | 3 Months Ended |
Mar. 31, 2017$ / sharesshares | |
Number of Shares | |
Outstanding at the beginning of the period (in shares) | shares | 1,299 |
Granted (in shares) | shares | 1,195 |
Vested (in shares) | shares | (210) |
Forfeited (in shares) | shares | (29) |
Outstanding at the end of the period (in shares) | shares | 2,255 |
Weighted-Average Grant Date Fair Value | |
Outstanding at the beginning of the period (in dollars per share) | $ / shares | $ 12.53 |
Granted (in dollars per share) | $ / shares | 16.71 |
Vested (in dollars per share) | $ / shares | 12.85 |
Forfeited (in dollars per share) | $ / shares | 13.80 |
Outstanding at the end of the period (in dollars per share) | $ / shares | $ 14.70 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | ||
Sep. 30, 2009 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Allergan | ||||
Related Party Transactions | ||||
Accounts receivable | $ 50 | $ 63.9 | ||
Allergan | Convertible preferred stock | ||||
Related Party Transactions | ||||
Shares sold (in shares) | 2,083,333 | |||
Board of Directors | ||||
Related Party Transactions | ||||
Amount of insurance premium paid to the insurance provider | 3 | $ 1.9 | ||
Accounts payable | $ 0 | $ 0 |