Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Aug. 04, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | Neos Therapeutics, Inc. | |
Entity Central Index Key | 1,467,652 | |
Trading Symbol | neos | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 28,080,635 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Current Assets: | ||
Cash and cash equivalents | $ 57,362 | $ 24,352 |
Short-term investments | 21,262 | 15,430 |
Accounts receivable, net of allowances for chargebacks and cash discounts of $2,477 and $950, respectively | 5,669 | 6,135 |
Inventories | 6,080 | 5,767 |
Deferred contract sales organization fees | 312 | 720 |
Other current assets | 2,376 | 2,865 |
Total current assets | 93,061 | 55,269 |
Property and equipment, net | 8,223 | 7,076 |
Intangible assets, net | 16,879 | 17,647 |
Other assets | 185 | 150 |
Total assets | 118,348 | 80,142 |
Current Liabilities: | ||
Accounts payable | 8,290 | 7,798 |
Accrued expenses | 8,414 | 5,264 |
Deferred revenue | 6,893 | 3,662 |
Current portion of long-term debt | 7,022 | 4,921 |
Total current liabilities | 30,619 | 21,645 |
Long-Term Liabilities: | ||
Long-term debt, net of current portion | 59,001 | 58,599 |
Derivative liability | 2,086 | |
Deferred rent | 1,128 | 1,174 |
Other Long-term liabilities | 198 | 272 |
Total long-term liabilities | 62,413 | 60,045 |
Stockholders' Equity (Deficit): | ||
Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued or outstanding at June 30, 2017 and December 31, 2016 | ||
Common stock, $0.001 par value, 100,000,000 authorized at June 30, 2017 and December 31, 2016; 27,379,541 and 27,360,635 issued and outstanding at June 30, 2017, respectively; 16,079,902 and 16,060,996 issued and outstanding at December 31, 2016, respectively | 27 | 16 |
Treasury stock, at cost, 18,906 shares at June 30, 2017 and December 31, 2016 | (232) | (232) |
Additional paid-in capital | 261,409 | 198,787 |
Accumulated deficit | (235,882) | (200,118) |
Accumulated other comprehensive loss | (6) | (1) |
Total stockholders' equity (deficit) | 25,316 | (1,548) |
Total liabilities and stockholders' equity | $ 118,348 | $ 80,142 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Receivables allowance for chargebacks and cash discounts (in dollars) | $ 2,477 | $ 950 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, authorized shares | 5,000,000 | 5,000,000 |
Preferred stock, issued shares | 0 | 0 |
Preferred stock, outstanding shares | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized shares | 100,000,000 | 100,000,000 |
Common stock, issued shares | 27,379,541 | 16,079,902 |
Common stock, outstanding shares | 27,360,635 | 16,060,996 |
Treasury stock, shares | 18,906 | 18,906 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Revenues: | ||||
Net product sales | $ 4,909 | $ 1,485 | $ 10,536 | $ 4,068 |
Cost of goods sold | 2,576 | 2,343 | 7,191 | 5,099 |
Gross profit (loss) | 2,333 | (858) | 3,345 | (1,031) |
Research and development | 3,692 | 3,748 | 5,416 | 5,724 |
Selling and marketing expenses | 11,706 | 16,229 | 22,412 | 22,653 |
General and administrative expenses | 3,316 | 3,169 | 6,854 | 6,460 |
Loss from operations | (16,381) | (24,004) | (31,337) | (35,868) |
Interest expense | (2,390) | (1,604) | (4,602) | (2,617) |
Loss on debt extinguishment | (1,187) | (1,187) | ||
Other income, net | 97 | 256 | 175 | 519 |
Net loss | $ (18,674) | $ (26,539) | $ (35,764) | $ (39,153) |
Weighted average common shares outstanding | ||||
Weighted average common shares outstanding used to compute net loss per share, basic and diluted | 22,613,382 | 16,050,138 | 21,127,303 | 16,037,728 |
Net loss per share of common stock, basic and diluted | ||||
Net loss per share of common stock, basic and diluted | $ (0.83) | $ (1.65) | $ (1.69) | $ (2.44) |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Comprehensive Income (loss) | ||||
Net loss | $ (18,674) | $ (26,539) | $ (35,764) | $ (39,153) |
Other comprehensive (loss) income: | ||||
Net unrealized (loss) gain on short-term investments | (3) | (21) | (5) | 38 |
Total other comprehensive (loss) income | (3) | (21) | (5) | 38 |
Comprehensive loss | $ (18,677) | $ (26,560) | $ (35,769) | $ (39,115) |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - 6 months ended Jun. 30, 2017 - USD ($) $ in Thousands | Common Stock | Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total |
Balance, beginning at Dec. 31, 2016 | $ 16 | $ (232) | $ 198,787 | $ (200,118) | $ (1) | $ (1,548) |
Balance, beginning (in shares) at Dec. 31, 2016 | 16,079,902 | (18,906) | ||||
Increase (Decrease) in Stockholders Equity | ||||||
Issuance of common stock, net of issuance costs | $ 11 | 60,076 | 60,087 | |||
Issuance of common stock, net of issuance costs (in shares) | 11,299,639 | |||||
Share-based compensation expense | 1,933 | 1,933 | ||||
Beneficial conversion feature on convertible notes | 613 | 613 | ||||
Net unrealized loss on investments | (5) | (5) | ||||
Net loss | (35,764) | (35,764) | ||||
Balance, ending at Jun. 30, 2017 | $ 27 | $ (232) | $ 261,409 | $ (235,882) | $ (6) | $ 25,316 |
Balance, ending (in shares) at Jun. 30, 2017 | 27,379,541 | (18,906) |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Cash Flows From Operating Activities: | ||
Net loss | $ (35,764) | $ (39,153) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Share-based compensation expense | 1,933 | 1,430 |
Depreciation and amortization of property and equipment | 643 | 929 |
Amortization of intangible assets | 817 | 835 |
Deferred interest on debt | 2,111 | 668 |
Amortization of senior debt discounts | 245 | 261 |
Loss on debt extinguishment | 942 | |
Gain on sale of equipment | (33) | (415) |
Other adjustments | (95) | 109 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 466 | (1,756) |
Inventories | (313) | (1,907) |
Deferred contract sales organization fees | 720 | (166) |
Other assets | 454 | (159) |
Accounts payable | 180 | (1,884) |
Accrued expenses | 3,150 | 6,048 |
Deferred revenue | 3,231 | 2,614 |
Net cash used in operating activities | (22,255) | (31,604) |
Cash Flows From Investing Activities: | ||
Purchases of short-term investments | (26,821) | (38,232) |
Sales and maturities of short-term investments | 21,021 | |
Proceeds from sale-leaseback of equipment | 3,222 | |
Capital expenditures | (1,776) | (2,653) |
Intangible asset expenditures | (49) | (607) |
Net cash used in investing activities | (4,403) | (41,492) |
Cash Flows From Financing Activities: | ||
Proceeds from the issuance of common stock, net of issuance costs | 60,087 | |
Proceeds from Deerfield debt note, net of fees | 58,420 | |
Payment of senior debt and fee | (26,063) | |
Payments made on borrowings | (379) | (8,151) |
Proceeds from exercise of stock options and warrants | 13 | |
Payments made on behalf of Deerfield | (40) | |
Net cash provided by financing activities | 59,668 | 24,219 |
Increase (decrease) in cash and cash equivalents | 33,010 | (48,877) |
Cash and Cash Equivalents: | ||
Beginning | 24,352 | 90,763 |
Ending | 57,362 | 41,886 |
Supplemental Disclosure of Noncash Transactions: | ||
Issuance of senior secured convertible notes | 6,586 | |
Capital lease liability from sale-leaseback transactions | 3,222 | |
Derivative liability incurred in connection with First Amendment to Facility | 2,043 | |
Beneficial conversion feature incurred on convertible notes | 613 | |
Deferred contract sales organization fees | 312 | 359 |
Supplemental Cash Flow Information: | ||
Interest paid | $ 2,249 | $ 2,787 |
Organization and nature of oper
Organization and nature of operations | 6 Months Ended |
Jun. 30, 2017 | |
Organization and nature of operations | |
Organization and nature of operations | Note 1. Organization and nature of operations Neos Therapeutics, Inc., a Delaware corporation, and its subsidiaries (the “Company”), is a fully integrated pharmaceutical company. The Company has developed a broad, proprietary modified-release drug delivery technology that enables the manufacture of single and multiple ingredient extended-release pharmaceuticals in patient- and caregiver-friendly orally disintegrating tablet and liquid suspension dosage forms. The Company has a pipeline of extended-release pharmaceuticals including two approved products and one proprietary product candidate in late stage development for the treatment of attention deficit hyperactivity disorder (“ADHD”). Adzenys XR-ODT was approved by the US Food and Drug Administration (the “FDA”) on January 27, 2016 and launched commercially on May 16, 2016. Also, the Company received approval from the FDA for Cotempla XR-ODT, its methylphenidate XR-ODT for the treatment of ADHD in patients 6 to 17 years old, on June 19, 2017, and plans to launch this product in the fall of 2017. In addition, the Company manufactures and markets a generic Tussionex (hydrocodone and chlorpheniramine) (“generic Tussionex”), extended-release liquid suspension for the treatment of cough and upper respiratory symptoms of a cold. |
Summary of significant accounti
Summary of significant accounting policies | 6 Months Ended |
Jun. 30, 2017 | |
Summary of significant accounting policies | |
Summary of significant accounting policies | Note 2. Summary of significant accounting policies Basis of presentation: The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), for interim information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all of the information and footnotes necessary for a complete presentation of financial position, results of operations, and cash flows. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) necessary for a fair presentation of results of operations for and financial condition as of the end of the interim period have been included. Results of operations for the three and six months ended June 30, 2017 are not necessarily indicative of the results for the year ending December 31, 2017 or any period thereafter. The audited consolidated financial statements as of and for the year ended December 31, 2016 included information and footnotes necessary for such presentation and were included in the Neos Therapeutics, Inc. Annual Report on Form 10-K and filed with the SEC on March 15, 2017. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2016. Principles of consolidation: At June 30, 2017 and December 31, 2016 and for the three and six months ended June 30, 2017 and 2016, the condensed consolidated financial statements include the accounts of the Company and its four wholly-owned subsidiaries. All significant intercompany transactions have been eliminated. Use of estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. Reclassifications: Certain reclassifications have been made to the prior year’s condensed consolidated financial statements to conform to the current period’s presentation. Liquidity: During 2016 and the six months ended June 30, 2017, the Company produced operating losses and used cash to fund operations. Management intends to achieve profitability through revenue growth from pharmaceutical products developed with its extended-release technologies. The Company does not anticipate it will be profitable until after the successful commercialization of its approved products, Adzenys XR-ODT and Cotempla XR-ODT, or, if approved, its ADHD product candidate. Accordingly, management has performed the review required for going concern accounting and believes the Company presently has sufficient liquidity to continue to operate for the next twelve months after the filing of this Report on Form 10-Q. Cash equivalents: The Company invests its available cash balances in bank deposits and money market funds. The Company considers highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. Management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. The Company’s primary objectives for investment of available cash are the preservation of capital and the maintenance of liquidity. Short-term investments: Short-term investments consist of debt securities that have original maturities greater than three months but less than or equal to one year and are classified as available-for-sale securities. Such securities are carried at estimated fair value, with any unrealized holding gains or losses reported, net of any tax effects reported, as accumulated other comprehensive income or loss, which is a separate component of stockholders’ equity. Realized gains and losses, and declines in value judged to be other-than-temporary, if any, are included in other income (expense) in the consolidated results of operations. A decline in the market value of any available-for-sale security below cost that is deemed to be other-than-temporary results in a reduction in fair value charged to earnings in that period, and a new cost basis for the security is established. Dividend and interest income are recognized in other income when earned. The cost of securities sold is calculated using the specific identification method. The Company places all investments with government agencies, or corporate institutions whose debt is rated as investment grade. The Company classifies all available-for-sale marketable securities with maturities greater than one year from the balance sheet date, if any, as non-current assets. Inventories: Inventories are stated at the lower of cost (first in, first out) or market in 2016 and, effective January 1, 2017, inventory is now required to be measured at the lower of cost (first in, first out) or net realizable value. The change to stating inventories at the lower of cost or net realizable value in 2017 was adopted prospectively and did not have a significant effect on the Company’s ongoing financial reporting as valuing inventory at the lower of cost or net realizable value approximated the prior policy of valuing inventory at the lower of cost or market. Inventories have been reduced by an allowance for excess and obsolete inventories. Cost elements include material, labor and manufacturing overhead. Inventories consist of raw materials, work in process, finished goods and deferred cost of goods sold. The cost of sales associated with the deferred product revenues are recorded as deferred costs of goods sold that are released from inventory into cost of goods sold as the deferred revenue is recognized into revenue. Until objective and persuasive evidence exists that regulatory approval has been received and future economic benefit is probable, pre-launch inventories are expensed into research and development. Manufacturing costs for the production of Adzenys XR-ODT incurred after the January 27, 2016 FDA approval date are being capitalized into inventory and manufacturing costs for the production of Cotempla XR-ODT incurred after June 30, 2017, following the FDA approval date of June 19, 2017, will be capitalized into inventory. Derivative liabilities: The Company evaluates its debt and equity issuances to determine if those contracts or embedded components of those contracts qualify as derivatives requiring separate recognition in the Company’s financial statements. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as a liability and the change in fair value is recorded in other income (expense) in the consolidated results of operations. In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within twelve months of the balance sheet date. When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption and are classified in interest expense in the consolidated results of operations. Intangible assets : Intangible assets subject to amortization, which principally include proprietary modified-release drug delivery technology, the costs to acquire the rights to Tussionex Abbreviated New Drug Application (“Tussionex ANDA”) and patents, are recorded at cost and amortized over the estimated lives of the assets, which primarily range from 10 to 20 years. Revenue recognition: Revenue is generated from product sales, recorded on a net sales basis. Product revenue is recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) price to the buyer is fixed and determinable; and (4) collectability is reasonably assured. Revenue from sales transactions where the buyer has the right to return the product is recognized at the time of sale only if (1) the price to the buyer is substantially fixed or determinable at the date of sale, (2) the buyer has paid for the product, or the buyer is obligated to pay for the product and the obligation is not contingent on resale of the product, (3) the buyer’s obligation to pay would not be changed in the event of theft or physical destruction or damage of the product, (4) the buyer acquiring the product for resale has economic substance apart from that provided by the Company, (5) the Company does not have significant obligations for future performance to directly bring about resale of the product by the buyer, and (6) the amount of future returns can be reasonably estimated. The Company sells its commercial products to a limited number of pharmaceutical wholesalers, all subject to rights of return. Pharmaceutical wholesalers buy drug products directly from manufacturers. Title to the product passes upon delivery to the wholesalers, when the risks and rewards of ownership are assumed by the wholesaler (freight on board destination). These wholesalers then resell the product to retail customers such as food, drug and mass merchandisers. The Company has a limited sales history for Adzenys XR-ODT and no sales history for Cotempla XR-ODT, and has determined that at this time it cannot reliably estimate expected returns of the product at the time of shipment to wholesalers. Accordingly, the Company defers or will defer recognition of revenue on product shipments of Adzenys XR-ODT and Cotempla XR-ODT, respectively, until the right of return no longer exists, which occurs at the earlier of the time Adzenys XR-ODT and Cotempla XR-ODT units are dispensed through patient prescriptions or expiration of the right of return. The Company calculates and expects to calculate patient prescriptions dispensed of Adzenys XR-ODT and Cotempla XR-ODT, respectively, using an analysis of third-party information. Net product sales Net product sales for the Company’s products represent total gross product sales less gross to net sales adjustments. Gross to net sales adjustments include savings offers, prompt payment discounts, wholesaler fees and estimated allowances for product returns, rebates and chargebacks to be incurred on the selling price of the respective product sales. Wholesale distribution fees based on definitive contractual agreements are incurred on the management of these products by wholesalers and are recorded within net sales for generic Tussionex and as deferred wholesale distribution fees in other current assets for Adzenys XR-ODT and/or Cotempla XR-ODT. The deferred wholesale distribution fees for Adzenys XR-ODT are and Cotempla XR-ODT will be later recorded within net product sales when revenue associated with those fees is recognized. The Company estimates and records gross to net sales adjustments for product returns, rebates and chargebacks based upon analysis of third-party information, including information obtained from the Company’s third party logistics providers (“3PLs”), with respect to its inventory levels and sell-through to the wholesalers’ customers, for savings offers from data available from third parties regarding savings offers processed for prescriptions written for the Company’s products, and, for generic Tussionex, experience reported by the Company’s previous commercialization partners. Due to estimates and assumptions inherent in determining the amount of returns, rebates and chargebacks, the actual amount of returns and claims for rebates and chargebacks may be different from the estimates, at which time reserves would be adjusted accordingly. Wholesale distribution fees and the allowance for prompt pay discounts are recorded at the time of shipment and such fees and allowances and all other accruals are recorded in the same period that the related revenue is recognized. Savings offers The Company offers or expects to offer savings programs for Adzenys XR-ODT and Cotempla XR-ODT, respectively, to patients covered under commercial payor plans in which the cost of a prescription to such patients is discounted. The Company records the amount redeemed based on information from third-party providers and recognizes the discount as a reduction of revenue in the same period the related revenue is recognized. Product returns Wholesalers’ contractual return rights are limited to defective product, product that was shipped in error, product ordered by customer in error, product returned due to overstock, product returned due to dating or product returned due to recall or other changes in regulatory guidelines. The return policy for expired product allows the wholesaler to return such product starting six months prior to expiry date to twelve months post expiry date. Generic Tussionex product returns are estimated based upon data available from sales of the Company’s product by its former commercialization partner and from actual experience as reported by retailers. Historical trend of returns will be continually monitored and may result in future adjustments to such estimates. Rebates The Company’s products are subject to commercial managed care and government-managed Medicare and Medicaid programs whereby discounts and rebates are provided to participating managed care organizations and federal and/or state governments. Estimated rebates payable under such programs are recorded as a reduction of revenue at the time revenues are recorded. Calculations related to these rebate accruals are estimated based on information from third-party providers. Historical trend of such rebates will be continually monitored and may result in future adjustments to such estimates. Wholesaler chargebacks The Company’s products are subject to certain programs with wholesalers whereby pricing on products is discounted below wholesaler list price to participating entities. These entities purchase products through wholesalers at the discounted price, and the wholesalers charge the difference between their acquisition cost and the discounted price back to the Company. Chargebacks are accounted for by establishing an accrual in an amount equal to the Company’s estimate of chargeback claims at the time of product sale based on information provided by third parties. Due to estimates and assumptions inherent in determining the amount of chargebacks, the actual amount of claims for chargebacks may be different from estimates, which may result in adjustments to such reserves. Research and development costs: Research and development costs are charged to operations when incurred and include salaries and benefits, facilities costs, overhead costs, raw materials, laboratory and clinical supplies, clinical trial costs, contract services, fees paid to regulatory authorities for review and approval of the Company’s product candidates and other related costs. During the third quarter of 2016, the Company reclassified its approved product and facility regulatory fees out of research and development expense and into cost of sales commensurate with the commercial launch of Adzenys XR-ODT. The Company has reclassified all such applicable regulatory fees for prior quarters and prior years out of research and development expense and into cost of goods sold in accordance with this approach. Advertising costs: Advertising costs are comprised of print and electronic media placements that are expensed as incurred. The Company recognized advertising costs of $10,000 and $248,000 during the three and six months ended June 30, 2017, respectively, and advertising costs of $120,000 during the six months ended June 30, 2016. There were no advertising costs during the three months ended June 30, 2016. Share-based compensation: Share-based compensation awards, including grants of employee stock options, restricted stock, restricted stock units (“RSUs”) and modifications to existing stock options, are recognized in the statement of operations based on their fair values. Compensation expense related to awards to employees is recognized on a straight-line basis, based on the grant date fair value, over the requisite service period of the award, which is generally the vesting term. The fair value of the Company’s stock-based awards to employees and directors is estimated using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including (1) the expected stock price volatility, (2) the expected term of the award, (3) the risk-free interest rate and (4) expected dividends. Due to the previous lack of a public market for the trading of its common stock and a lack of company-specific historical and implied volatility data, the Company had, prior to the IPO, historically utilized third party valuation analyses to determine the fair value. After the closing of the Company’s IPO, the Company’s board of directors has determined the fair value of each share of underlying common stock based on the closing price of the Company’s common stock as reported by the NASDAQ Global Market on the date of grant. Under new guidance for accounting for share-based payments, the Company has elected to continue estimating forfeitures at the time of grant and, if necessary, revise the estimate in subsequent periods if actual forfeitures differ from those estimates. Ultimately, the actual expense recognized over the vesting period will only be for those options that vest. The adoption of this standard in 2017 did not have a material impact on the Company’s business, financial position, results of operations or liquidity. Beginning in July 2016, the Company began recording stock compensation expense in the same income statement line as the cash compensation of the employee with the option in accordance with Staff Accounting Bulletin (“SAB”) Topic 14 due to the increased number and amount of options and option compensation. The Company has reclassified all prior quarters’ amounts out of general and administrative expense to the appropriate income statement line in accordance with this approach. Paragraph IV litigation costs: Legal costs incurred by the Company in the enforcement of the Company’s intellectual property rights are charged to expense as incurred. Income taxes: Income taxes are accounted for using the liability method, under which deferred taxes are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax laws that will be in effect when the differences are expected to reverse. Management evaluates the Company’s tax positions in accordance with guidance on accounting for uncertainty in income taxes. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not that the position will be sustained upon examination. As of June 30, 2017 and December 31, 2016, the Company has unrecognized tax benefits associated with uncertain tax positions in the consolidated financial statements. These uncertain tax positions were netted against net operating losses (NOL’s) with no separate reserve for uncertain tax positions required. Deferred tax assets should be reduced by a valuation allowance if current evidence indicates that it is considered more likely than not that these benefits will not be realized. At June 30, 2017 and December 31, 2016, based on the level of historical operating results and projections for the taxable income for the future, the Company has determined that it is more likely than not that the deferred tax assets will not be realized. In evaluating the objective evidence that historical results provide, the Company considered that three years of cumulative operating losses was significant negative evidence outweighing projections for future taxable income. Therefore, management has determined that it is more likely than not that the deferred tax assets will not be realized. Accordingly, the Company has recorded a valuation allowance to reduce deferred tax assets to zero. The Company may not ever be able to realize the benefit of some or all of the federal and state loss carryforwards, either due to ongoing operating losses or due to ownership changes, which limit the usefulness of the loss carryforwards. Recent accounting pronouncements: In August 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments . This ASU was designed to reduce the diversity in practice of how the eight specified items are presented and classified in the statement of cash flows, including debt prepayment or debt extinguishment costs. The amendments are effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those years. The Company believes the amendments will not have a significant effect on its ongoing financial reporting as the Company has classified its debt prepayment and debt extinguishment costs in the Consolidated Statements of Cash Flows in accordance with the amendments. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and 2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, including interim periods within those years. The new standard must be adopted using a modified retrospective transition and requires application of the new guidance at the beginning of the earliest comparative period presented. The Company is evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance replaces transaction-and industry-specific revenue recognition guidance under current U.S. GAAP with a principles-based approach for determining revenue recognition. The new guidance requires an entity to recognize the amount of revenue based on the value of transferred goods or services to customers. There is also 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. The standard becomes effective for the Company beginning in the first quarter of 2018. Earlier application is permitted in 2017. In March and April 2016, the FASB issued new guidance intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The guidance permits the use of either a retrospective or cumulative effect transition method. The Company has a limited sales history for Adzenys XR-ODT and no sales history for Cotempla XR-ODT and has determined that at this time it cannot reliably estimate historical returns of the product at the time of delivery to wholesalers, when title to the asset transfers and the customer is invoiced. The Company is assessing other market data obtained from its third party logistics companies to determine a reliable return rate. The Company expects the impact of this new standard will accelerate revenue based on satisfaction of the performance obligation upon delivery at a point in time when the customer obtains control of the asset. For purposes of providing comparable periods upon adoption, the Company is considering a retrospective transition method. From time to time, additional new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption. |
Net loss per share
Net loss per share | 6 Months Ended |
Jun. 30, 2017 | |
Net loss per share | |
Net loss per share | Note 3. Net loss per share Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and common share equivalents outstanding for the period. Common stock equivalents are only included when their effect is dilutive. Potentially dilutive securities, which include warrants, outstanding stock options under the stock option plan and shares issuable in future periods, such as RSU awards, have been excluded from the computation of diluted net loss per share as they would be anti-dilutive. For all periods presented, there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the Company’s net loss position. Restricted stock is considered legally issued and outstanding on the grant date, while RSUs are not considered legally issued and outstanding until the RSUs vest. Once the RSUs are vested, equivalent common shares will be issued or issuable to the grantee and therefore the RSUs are not considered for inclusion in total common shares issued and outstanding until vested. The following potentially dilutive securities outstanding as of June 30, 2017 and 2016 were excluded from consideration in the computation of diluted net loss per share of common stock for the six months ended June 30, 2017 and 2016, respectively, because including them would have been anti-dilutive: June 30, 2017 2016 Senior Secured Convertible Notes — registered conversion shares not issued — Series C Redeemable Convertible Preferred Stock Warrants (as converted) Stock options outstanding RSU’s granted, not issued or outstanding — |
Fair value of financial instrum
Fair value of financial instruments | 6 Months Ended |
Jun. 30, 2017 | |
Fair value of financial instruments | |
Fair value of financial instruments | Note 4. Fair value of financial instruments The Company records financial assets and liabilities at fair value. The carrying amounts of certain financial assets and liabilities including cash and cash equivalents, accounts receivable, other current assets, accounts payable, accrued liabilities and deferred revenue, approximated their fair value due to their short maturities. The remaining financial instruments were reported on the Company’s condensed consolidated balance sheets at amounts that approximate current fair values based on market based assumptions and inputs. As a basis for categorizing inputs, the Company uses a three tier fair value hierarchy, which prioritizes the inputs used to measure fair value from market based assumptions to entity specific assumptions as follows: Level 1: Unadjusted quoted prices for identical assets in an active market. Level 2: Quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full-term of the asset. Level 3: Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset. The following table presents the hierarchy for the Company’s financial instruments measured at fair value on a recurring basis for the indicated dates: Fair Value as of June 30, 2017 Level 1 Level 2 Level 3 Total (in thousands) Cash and cash equivalents $ $ $ — $ Short-term investments — — Earnout liability — — Derivative liability (see Note 7) — — $ $ $ $ Fair Value as of December 31, 2016 Level 1 Level 2 Level 3 Total (in thousands) Cash-and cash equivalents $ $ $ — $ Short-term investments — — Earnout liability — — $ $ $ $ The Company’s Level 1 assets included bank deposits, certificates of deposit and actively traded money market funds with a maturity of 90 days or less at June 30, 2017 and December 31, 2016. Asset values were considered to approximate fair value due to their short-term nature. The Company’s Level 2 assets included commercial paper and corporate bonds with maturities of less than one year that are not actively traded which were classified as available for sale securities. The estimated fair values of these securities were determined by third parties using valuation techniques that incorporate standard observable inputs and assumptions such as quoted prices for similar assets, benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids/offers and other pertinent reference data. The Company’s cash and cash equivalents and short-term investments had quoted prices at June 30, 2017 as shown below: June 30, 2017 Amortized Unrealized Market Cost Gain / (Loss) Value (in thousands) Bank deposits and money market funds $ $ — $ Financial and corporate debt securities ) $ $ ) $ December 31, 2016 Amortized Unrealized Market Cost Gain / (Loss) Value (in thousands) Bank deposits and money market funds $ $ — $ Financial and corporate debt securities ) $ $ ) $ The Company’s Level 3 liability included the fair value of the earnout liability at June 30, 2017 and December 31, 2016 and the fair value of the Deerfield derivative liability at June 30, 2017. The fair value of the earnout liability was determined after taking into consideration valuations using the Monte Carlo method based on assumptions at December 31, 2016 and revised at June 30, 2017. These revisions were primarily for the updated revenue forecast for the Company’s generic Tussionex and the use of a directly calculated 42% revenue volatility based on data for potential comparable publicly-traded companies in the generic drug manufacturing space including the Company, whereas previously an unlevered equity volatility of 50% had been selected. Significant changes to these assumptions would result in increases/decreases to the fair value of the earnout liability. The fair value of the derivative liability was determined after taking into consideration valuations using the Monte Carlo method based on assumptions at June 1, 2017 and June 30, 2017. The methodologies and significant inputs used in the determination of the fair value of the debt derivative liability were as follows: June 30, 2017 Initial Valuation (in thousands) (in thousands) Date of Valuation 6/30/2017 6/1/2017 Valuation Method Monte Carlo Monte Carlo Volatility (annual) 50% 50% Time period from valuation until maturity of debt (yrs.) 4.864 4.943 Cumulative probability of a change in control prepayment implied by model 28% 28% Cumulative probability of other accelerated prepayments implied by model 17% 17% Discount rate 15.98% 15.87% Fair value of liability at valuation date $2,086 $2,043 Significant changes to these assumptions would result in increases/decreases to the fair value of the earnout and debt derivative liabilities. Changes in Level 3 liabilities measured at fair value for the periods indicated were as follows: Level 3 Liabilities (in thousands) Balance at December 31, 2016 $ Change in fair value — Balance at March 31, 2017 $ Addition of Deerfield derivative liability Change in fair value ) Balance at June 30, 2017 $ |
Inventories
Inventories | 6 Months Ended |
Jun. 30, 2017 | |
Inventories | |
Inventories | Note 5. Inventories Inventories at the indicated dates consist of the following: June 30, December 31, 2017 2016 (in thousands) Raw materials $ $ Work in progress Finished goods Deferred cost of goods sold Inventory at cost Inventory reserve ) ) $ $ The deferred cost of goods sold relates to Adzenys XR-ODT and will be recognized when the associated revenue is recognized. |
Sale-leaseback transaction
Sale-leaseback transaction | 6 Months Ended |
Jun. 30, 2017 | |
Sale-leaseback transaction | |
Sale-leaseback transaction | Note 6. Sale-leaseback transaction The Company accounts for the sale and leaseback transactions discussed below as capital leases. Accordingly, the leased assets are recorded in property and equipment and the capitalized lease obligations are included in long-term liabilities at the present value of the future lease payments in accordance with the terms of the lease (see Note 7 for further details). Lease payments are applied using the effective interest rate inherent in the leases. Depreciation of the property and equipment is included within depreciation and amortization in the condensed consolidated statements of operations and condensed consolidated statements of cash flows. In 2012, the Company negotiated financing arrangements with a related party which provided for the sale-leaseback of up to $6.5 million of the Company’s property and equipment with a bargain purchase option at the end of the respective lease. These financing arrangements were executed in five separate tranches that occurred in February, July and November 2013, and March 2014. In the aggregate, the Company sold groups of assets for $795,000 and $5.5 million, which resulted in a net gains of approximately $116,000 and $2.7 million, in the years ended December 31, 2014 and 2013, respectively, and executed capital leases for these assets with repurchase options at the end of each respective lease term. Gains on the transactions are recognized on a straight-line basis over each respective 42-month lease term. The two February 2013 and the November 2013 leases for a total of $3.5 million and $1.0 million of assets expired in July 2016 and April 2017, respectively, and the related $2.6 million and $161,000 gains, respectively, were fully amortized at that time and the $385,000 and $100,000 lease buy-out option liabilities, respectively, were fully satisfied. The July 2013 lease for a total of $1.0 million of assets expired in December 2016 and the related $0.1 million loss had been recorded at inception of the lease and the $100,000 lease buy-out option liability was fully satisfied. In February 2017, the Company entered into an agreement with a related party for the sale-leaseback of newly acquired assets of up to $5.0 million to finance its capital expenditures. Each lease under this master agreement will be for an initial term of 36 months and will have an option to purchase the equipment at the end of the respective lease that management considers to be a bargain purchase option. Under this agreement, the Company entered into leases and sold assets with a total capitalized cost of $481,000 and $2,742,000 at effective interest rates of 14.3% and 14.9% on February 13, 2017 and June 30, 2017, respectively. The February sale resulted in net gains of $14,000 which has been deferred and is being amortized over the 36-month term of the lease. There was no gain or loss on the June 2017 sale. For the three months ended June 30, 2017 and 2016, approximately $13,000 and $206,000, respectively, and for the six months ended June 30, 2017 and 2016 approximately $33,000 and $415,000, respectively, of the net gain on sale-leasebacks was recognized in other income on the condensed consolidated statements of operations. |
Long-term debt
Long-term debt | 6 Months Ended |
Jun. 30, 2017 | |
Long-term debt | |
Long-term debt | Note 7. Long-term debt Long-term debt at the indicated dates consists of the following: June 30, December 31, 2017 2016 (in thousands) Deerfield senior secured credit facility, net of discount of $3,246 and $1,401, respectively $ $ Senior secured convertible notes due June 1, 2018, net of discount of $606 — Capital leases, maturing through June 2020 Less current portion ) Long-term debt $ $ Senior secured credit facility: On May 11, 2016, the Company entered into a $60.0 million senior secured credit facility (“Facility”) with Deerfield Private Design Fund III, L.P. (66 2/3% of loan) and Deerfield Special Situations Fund, L.P. (33 1/3% of Loan) (“Deerfield”), as lenders. On February 8, 2017, the Company closed an underwritten public offering of 5,750,000 shares of its common stock at a public offering price of $5.00 per share, which includes 750,000 shares of the Company’s common stock resulting from the underwriters’ exercise of their over-allotment option at the public offering price on February 17, 2017 (see Note 8). Deerfield, the Company’s senior lender, participated in the purchase of the Company’s common shares as part of this public offering, and as a result, is now classified as a related party. Approximately $33 million of the $60 million Facility proceeds was used to prepay the existing $24.3 million principal and $0.1 million of accrued interest related to the senior Loan and Security Agreement (“LSA”) with Hercules Technology III, L.P., (“Hercules”), the $1.1 million LSA end of term fee, an LSA prepayment charge of $243,000 and the $5.9 million of principal and $1.3 million of interest on the 10% related party amended and restated subordinated note (“Note”) that was issued by the Company to Essex Capital Corporation (“Essex”), which were otherwise payable in 2016 and 2017. Principal on the Facility is due in three equal annual installments beginning in May 2019 and continuing through May 2021, with a final payment of principal, interest and all other obligations under the Facility due May 11, 2022. Interest is due quarterly beginning in June 2016, at a rate of 12.95% per year. The Company had an option, which it exercised, to defer payment of each of the first four interest payments, adding such amounts to the outstanding loan principal. The aggregate $6.6 million in deferred interest payments (“Accrued Interest”) was to be paid in cash on June 1, 2017. Borrowings under the Facility are collateralized by substantially all of the Company’s assets, except the assets under capital lease, and the Company will maintain cash on deposit of not less than $5.0 million. On June 1, 2017 (the “Amendment Date”), the Company and Deerfield entered into a First Amendment (the “Amendment”) to the Facility which extended the date to repay the Accrued Interest under the Facility to June 1, 2018 (the “PIK Maturity Date”), which may be extended to June 1, 2019 at the election of the Company if certain conditions have been met as specified in the Amendment. The right to payment of the Accrued Interest was memorialized in the form of Senior Secured Convertible Notes (the “Convertible Notes”) issued to Deerfield on the Amendment Date. Interest is due quarterly at a rate of 12.95% per year. The principal amount of the Convertible Notes issued under the Amendment and all accrued and unpaid interest thereon shall become due and payable upon written notice from Deerfield, and if either (a) the Company does not meet certain quarterly sales milestones specified in the Amendment or (b) the Company has not received and publicly announced FDA approval of the new drug applications on or before the applicable PDUFA goal date as set forth on the schedules to Amendment. Per the Amendment, the Company will prepay all of the outstanding obligations under the Facility and the Convertible Notes upon the occurrence of a change in control or a sale of substantially all of the Company’s assets and liabilities. The Amendment increased the staggered prepayment fees for prepayments due upon a change of control or any other prepayment made or required to be made by the Company by 300 basis points from June 1, 2017 through the period ending prior to May 11, 2020 for the change in control prepayment fees and through the period ending prior to May 11, 2022 for any other prepayments, respectively (the “Prepayment Premiums”). Such Prepayment Premiums, as amended, range from 12.75% to 2%. The $6.6 million of Convertible Notes may be converted into shares of the Company’s common stock at the noteholder’s option at any time up to the close of business on the date that is five days prior to the PIK Maturity Date. The per share conversion price will be the greater of (a) 95% of the average of the volume weighted average prices per share of the Company’s common stock on the NASDAQ Global Market for the three trading day period immediately preceding such conversion, and (b) $7.00. Deerfield cannot own more than 9.985% of the Company’s outstanding shares at any one time, and the aggregate conversion cannot exceed 19.9% of the Company’s outstanding common stock as of June 1, 2017. In conjunction with the Amendment to the Facility and the related issuance of the Convertible Notes, the Company entered into a Registration Rights Agreement (“Registration Agreement”) which required the Company to file a registration statement with the SEC to register the shares of common stock issued or issuable upon conversion of the Convertible Notes (“Conversion Shares”) (subject to certain adjustment for stock split, dividend or other distribution, recapitalization or similar events, “Registrable Securities”) (See Note 7) within 30 days from June 1, 2017, which is to become effective per the SEC no later than 75 days thereafter. Such filing was made on June 30, 2017 and became effective on July 11, 2017. This filing covered 940,924 shares, which is the number of shares that would be issued at the floor conversion rate of $7.00 per share. The Company is also required to, among other things, maintain the effectiveness of such registration statement, continue to file the required SEC filings on a timely basis, use its best efforts to ensure that the registered securities are listed on each securities exchange on which securities of the same class or series as issued by the Company are then listed and comply with any FINRA requests. The Company’s obligations with respect to each registration end at the date which is the earlier of (a) when all of the Registrable Securities covered by such registration have been sold or (b) when Deerfield or any of its transferee or assignee under the Registration Agreement cease to hold any Registrable Securities. For each registration, the Company shall bear all reasonable expenses, other than underwriting discounts and commissions, and shall reimburse Deerfield or any assignee or transferee for up to $25,000 in legal fees. The Company currently expects to satisfy all of its obligations under this Registration Agreement and does not expect to pay any damages pursuant to this agreement; therefore, no liability has been recorded (See Note 11). The Company has accounted for the Amendment as a debt modification as the instruments were not substantially different; therefore, the remaining debt discount on the original Facility is being amortized using the effective interest method over the remaining term of the modified debt. The Company evaluated the Amendment together with the Convertible Notes to determine if those contracts or embedded components of those contracts qualified as derivatives requiring separate recognition. This evaluation identified a derivative liability of $2.0 million for the fair value of the change in control and other accelerated payment features as the prepayment fees resulted in premiums that were greater than 10% (see Note 4). As the change in control and other accelerated payments terms, including the prepayment fees, were applied to the entire debt per the terms of the amended Facility, the corresponding debt discount will be amortized using the effective interest method over the remaining term of the Facility. The fees paid to or on behalf of the creditor for the debt modification totaled $40,000 and were recorded as additional debt discount on the amended Facility to be amortized to interest expense using the effective interest method over the term of the Facility. The Company’s evaluation also determined that the embedded conversion options should not be bifurcated as derivatives from the Convertible Notes host instruments. Therefore, the Company recorded a $0.6 million discount to the convertible notes for the intrinsic value of the embedded conversion option based upon the difference between the fair value of the underlying common stock on June 1, 2017 and the effective conversion price embedded in the Convertible Notes, which will be amortized using the effective interest method to interest expense over the one year term of the Convertible Notes. The Company recorded a $0.6 million corresponding credit to a beneficial conversion feature classified as additional paid in capital in stockholders’ equity (deficit) in the Company’s financial statements. In connection with the Facility, the Company paid a $1,350,000 yield enhancement fee to Deerfield, approximately $173,000 of legal costs to the Company’s attorneys and $58,000 of legal costs on behalf of Deerfield’s attorneys, all of which were recorded as debt discount and amortized over the six-year term of the Facility, using the effective interest method. Borrowings under the Facility are collateralized by substantially all of the Company’s assets, except the Company’s assets under capital lease, and the Company will maintain cash on deposit of not less than $5.0 million. Pursuant to the Convertible Notes, if the Company shall fail to provide the number of conversion shares, then the Company shall pay damages to Deerfield or subsequent holder or any designee (“Holder”) for each day after the third business day after receipt of notice of conversion (“Share Delivery Date”) that such conversion is not timely effected. The Facility also contains certain customary nonfinancial covenants, including limitations on the Company’s ability to transfer assets, engage in a change of control, merge or acquire with or into another entity, incur additional indebtedness and distribute assets to shareholders. Upon an event of default, the lenders may declare all outstanding obligations accrued under the Facility to be immediately due and payable, and exercise its security interests and other rights. As of June 30, 2017, the Company was in compliance with the covenants under the Facility and the Convertible Notes. Debt discount amortization for the Facility, including the Amendment after June 1, 2017, was calculated using the effective interest rates of 15.03% on the original facility debt and 23.80% on the Convertible Notes, charged to interest expense and totaled $163,000 and $245,000 for the three and six months ended June 30, 2017, respectively, and $36,000 for both the three and six months ended June 30, 2016. Senior debt: In March 2014, the Company entered into the LSA, which was subsequently amended in August 2014, September 2014, December 2014 and June 2015. As amended, the LSA provided a total commitment of $25.0 million, available in four draws. Borrowings under the LSA were collateralized by substantially all of the Company’s assets, except the Company’s intellectual property and assets under capital lease. The first draw of $10.0 million, (“Tranche 1”), was issued during March 2014 and was used in its entirety to repay outstanding principal under a previous credit facility. The second draw of $5.0 million, (“Tranche 2”), was issued during September 2014. The third draw (“Tranche 3”) in the amount of $5.0 million was issued in March 2015. In June 2015, the fourth and final draw of $5.0 million, (“Tranche 4”), was issued prior to meeting the Tranche 4 milestones, which were met in July 2015. Each draw was to be repaid in monthly installments, comprised of interest-only monthly payments until May 2016, when installments of interest and principal calculated over a thirty-month amortization period commenced. A balloon payment of the entire principal balance outstanding on October 1, 2017 and all accrued but unpaid interest thereunder was due and payable on October 1, 2017. The interest rate was 9% per annum for Tranche 1 and Tranche 4 and 10.5% per annum for Tranche 2 and Tranche 3. An end of term charge of $1.1 million was payable at the earliest to occur of (1) October 1, 2017, (2) the date the Company prepaid its outstanding Secured Obligations, as defined therein, or (3) the date the Secured Obligations became due and payable. As such, the end of term charge of $1.1 million was paid on May 11, 2016 when the Company prepaid its outstanding Secured Obligations, as defined therein. In connection with the LSA, the Company issued the Hercules Warrants which consisted of 60,000 Series C warrants in March 2014 and 110,000 Series C warrants in September 2014 at the then current price of $5.00 per share. The Hercules Warrants became warrants with a term of five years for the purchase of 70,833 shares of common stock at a price of $12.00 per share upon the closing of the Company’s IPO and were therefore reclassified from warrant liability to Additional Paid in Capital within Stockholders’ Equity at July 22, 2015. LSA end of term charge amortization totaled $38,000 and $121,000 for the three and six months ended June 30, 2016, respectively. LSA debt discount amortization charged to interest expense totaled $33,000 and $104,000 for the three and six months ended June 30, 2016, respectively. The early prepayment of the LSA with some of the proceeds from the Facility resulted in a $1,187,000 loss on debt extinguishment which is separately shown in the consolidated statement of operations for the three and six months ended June 30, 2016. 10% subordinated related party note: The Company had a Note in the aggregate principal amount of $5.9 million that was issued by the Company to Essex which was to mature in March 2017. Interest was to be accrued and added to the principal balance until such time as the Company achieved positive EBITDA for three consecutive months. During the three and six months ended June 30, 2016, interest expense of $87,000 and $263,000, respectively, was accrued. On May 11, 2016, the Company prepaid the $5.9 million outstanding aggregate principal and $1.3 million in accrued and unpaid interest. Capital lease obligations to related party: As described in Notes 6 and 13, during the six months ended June 30, 2017 and the years ended December 31, 2014 and 2013, the Company entered into agreements with a related party for the sale-leaseback of existing and newly acquired assets with a total capitalized cost of $3.2 million, $795,000 and $5.5 million, respectively, which are classified as capital leases. The approximate imputed interest rate on these leases is 14.9%, 14.5% and 14.5%, respectively. Interest expense on these leases was $22,000 and $42,000 for the three and six months ended June 30, 2017, respectively, and $61,000 and $139,000 for the three and six months ended June 30, 2016, respectively. Future principal payments of long-term debt including capital leases are as follows: Period ending: June 30, (in thousands) 2018 $ 2019 2020 2021 2022 Future principal payments $ Less unamortized debt discount related to long-term debt ) Less current portion of long-term debt ) Total long-term debt $ |
Common stock
Common stock | 6 Months Ended |
Jun. 30, 2017 | |
Common stock | |
Common stock | Note 8. Common stock On February 8, 2017, the Company closed an underwritten public offering of 5,750,000 shares of its common stock at a public offering price of $5.00 per share, which included 750,000 shares of its common stock resulting from the underwriters’ exercise of their over-allotment option on February 17, 2017. Deerfield, the Company’s senior lender, participated in the purchase of the Company’s common shares as part of this public offering, and as a result, is now classified as a related party. The net proceeds to the Company from this offering, after deducting underwriting discounts and commissions and other offering expenses payable by the Company, were approximately $26.7 million. On June 30, 2017, the Company closed an underwritten public offering of 4,800,000 shares of the its common stock at a public offering price of $6.25 per share for total proceeds of $30.0 million before estimated offering costs of $0.2 million. The Company also granted the underwriters a 30-day option to purchase up to an additional 720,000 shares of its common stock which was exercised in full on July 26, 2017. The net proceeds to the Company through July 26, 2017 from this offering, after deducting offering expenses payable by the Company, were approximately $34.3 million (see Note 14). The shares of common stock for both the June 2017 and February 2017 offerings were offered pursuant to a shelf registration statement on Form S-3, including a base prospectus, filed by us on August 1, 2016, and declared effective by the Securities and Exchange Commission (“SEC”), on August 12, 2016. This shelf registration statement covers the offering, issuance and sale by the Company of up to an aggregate of $125.0 million of its common stock, preferred stock, debt securities, warrants and/or units (the “Shelf”). The Company simultaneously entered into a sales agreement with Cowen and Company, LLC, as sales agent, to provide for the offering, issuance and sale by the Company of up to $40.0 million of its common stock from time to time in “at-the-market” offerings under the Shelf (the “Sales Agreement”). During the three-month period ended March 31, 2017, the Company sold an aggregate 749,639 shares of common stock under the Sales Agreement, at an average sale price of approximately $5.01 per share in February 2017 for gross proceeds of $3.7 million and net proceeds of $3.6 million and paying total compensation to the sales agent of approximately $0.1 million. No sales have been made under the Sales Agreement during the three-month period ended June 30, 2017. As of July 26, 2017, $62.5 million of the Company’s common stock, preferred stock, debt securities, warrants and/or units remained available to be sold pursuant to the Shelf, including $36.2 million of the Company’s common stock which remained available to be sold under the Sales Agreement, subject to certain conditions specified therein. |
Share-based Compensation
Share-based Compensation | 6 Months Ended |
Jun. 30, 2017 | |
Share-based Compensation | |
Share-based Compensation | Note 9. Share-based Compensation Share-based Compensation Plans In July 2015, the Company adopted the Neos Therapeutics, Inc. 2015 Stock Option and Incentive Plan (“2015 Plan”) which became effective immediately prior to the closing of the IPO and initially had 767,330 shares of common stock reserved for issuance. On January 1, 2016 and each January 1 thereafter, the number of shares of common stock reserved and available for issuance under the 2015 Plan shall be cumulatively increased by five percent of the number of shares of stock issued and outstanding on the immediately preceding December 31 or such lesser number of shares determined by the administrator of the 2015 Plan. Accordingly, on January 1, 2017 and 2016, the Company added 803,049 shares and 800,797 shares, respectively, to the option pool. The 2015 Plan superseded the Neos Therapeutics, Inc. 2009 Equity Plan (“2009 Plan”), originally adopted in November 2009 and which had 1,375,037 shares reserved and available for issuance. Effective upon closing of the IPO, the Company’s board of directors determined not to grant any further awards under the 2009 Plan. The shares of common stock underlying any awards that are forfeited, canceled, reacquired by the Company prior to vesting, satisfied without the issuance of stock or otherwise terminated (other than by exercise) under the 2009 Plan will be added to the shares of common stock available under the 2015 Plan. This number is subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization. The 2015 Plan is administered by the Company’s compensation committee. The Company’s compensation committee has full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted, to make any combination of awards to participants and to determine the specific terms and conditions of each award, subject to the provisions of the 2015 Plan. The Company’s compensation committee may delegate authority to grant certain awards to the Company’s chief executive officer. Through June 30, 2017, the Company has granted options, restricted stock and RSUs. The exercise price per share for the stock covered by a stock award granted shall be determined by the administrator at the time of grant but shall not be less than 100 percent of the fair market value on the date of grant. Unexercised stock awards under the 2015 Plan expire after the earlier of 10 years or termination of employment, except in the case of any unexercised vested options, which generally expire 90 days after termination of employment. The 2009 Plan allowed the Company to grant options to purchase shares of the Company’s common stock and to grant restricted stock awards to members of its management and selected members of the Company’s board of directors. Restricted stock awards are recorded as deferred compensation and amortized into compensation expense, on a straight-line basis over a defined vesting period ranging from 1 to 48 months. Options were granted to officers, employees, nonemployee directors and consultants, and independent contractors of the Company. The Company also granted performance based awards to selected management. The performance options vested over a three-year period based on achieving certain operational milestones and the remaining options vest in equal increments over periods ranging from two to four-years. Unexercised options under the 2009 Plan expire after the earlier of 10 years or termination of employment, except in the case of any unexercised vested options, which generally expire 90 days after termination of employment. All terminated options are available for reissuance under the 2015 Plan. Since the inception of the 2015 Plan through December 31, 2016, 7,500 shares related to forfeited 2009 Plan options and 18,906 shares related to the surrender of restricted stock were added to the shares available under the 2015 Plan. During the six months ended June 30, 2017, 971 shares related to forfeited 2009 Plan options were added to the shares available under the 2015 Plan. As of June 30, 2017, 685,119 shares of common stock remain available for grant under the 2015 Plan. Share-based Compensation Expense The Company has reported share-based compensation expense for the three and six months ended June 30, 2017 and 2016, respectively, in its condensed consolidated statements of operations as follows: Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 (in thousands) Cost of goods sold $ $ $ $ Research and development Selling and marketing expenses General and administrative expenses $ $ $ $ The total share based compensation expense included in the table above is attributable to stock options, RSUs and restricted stock of $0.9 million, $21,000 and $23,000, for the three months ended June 30, 2017, respectively and $1.9 million, $21,000, $45,000, for the six months ended June 30, 2017, respectively. The total share based compensation expense included in the table above is attributable to stock options and restricted stock of $0.8 million and $23,000, for the three months ended June 30, 2016, respectively, and $1.4 million and $45,000, for the six months ended June 30, 2016, respectively. As of June 30, 2017, there was $7.8 million of compensation costs adjusted for any estimated forfeitures, related to non-vested stock options, RSUs, and restricted stock granted under the Company’s equity incentive plans not yet recognized in the Company’s financial statements. The unrecognized compensation cost is expected to be recognized over a weighted average period of 2.5 years for stock options, 3.8 years for RSUs, and 0.3 years for restricted stock. Stock Options During the six months ended June 30, 2017, the Company’s board of directors granted 413,250 options. The Company estimates the fair value of all stock options on the grant date by applying the Black-Scholes option pricing valuation model. The application of this valuation model involves assumptions that are highly subjective, judgmental and sensitive in the determination of compensation cost. Prior to the IPO, given the absence of an active market for the Company’s common stock prior to its IPO, the Company’s board of directors was required to estimate the fair value of its common stock at the time of each option grant primarily based upon valuations performed by a third party valuation firm. The weighted-average key assumptions used in determining the fair value of options granted during the period indicated are as follows: Six Months Ended June 30, 2017 Estimated dividend yield % Expected stock price volatility % Weighted-average risk-free interest rate % Expected life of option in years Weighted-average option fair value at grant $ A summary of outstanding and exercisable options as of June 30, 2017 and December 31, 2016 and the activity from December 31, 2016 through June 30, 2017, is presented below: Weighted- Number of Average Intrinsic Options Exercise Price Value (in thousands) Outstanding at December 31, 2016 $ $ Exercisable at December 31, 2016 $ $ Granted $ Exercised — — Expired, forfeited or cancelled ) Outstanding at June 30, 2017 $ $ Exercisable at June 30, 2017 $ $ The weighted-average remaining contractual life of options outstanding and exercisable on June 30, 2017 was 8.3 and 7.5 years, respectively. The option exercise price for all options granted January 1, 2017 through June 30, 2017 was $7.00 per share. The weighted-average remaining contractual life of options outstanding and exercisable on December 31, 2016 was 8.5 and 7.6 years, respectively. The option exercise price for all options granted in the year ended December 31, 2016 ranged from $8.84 to $10.96 per share. Restricted Stock Units : On May 1, 2017, the Company granted 78,750 RSUs to members of its management which vest in four equal annual installments, beginning May 1, 2018. The Company had not issued any RSUs previously. A summary of outstanding RSUs as of June 30, 2017 and December 31, 2016 and the activity from December 31, 2016 through June 30, 2017, is presented below: Weighted- Number of Average RSUs Fair Value Outstanding at December 31, 2016 — $ — Granted $ Exercised — — Expired, forfeited or cancelled — — Outstanding at June 30, 2017 $ The weighted-average remaining contractual life of RSUs outstanding on June 30, 2017 was 9.8 years. Restricted stock: The Company did not issue any shares of restricted stock for the six months ended June 30, 2017, or for the year ended December 31, 2016. At June 30, 2017, there was $26,000 of unrecognized compensation cost related to restricted stock, which is expected to be recognized over 3.5 months. No vested restricted stock awards were settled during the six months ended June 30, 2017. The Company had 35,513 shares of unvested restricted stock with a weighted average fair value of $2.55 as of June 30, 2017 and December 31, 2016. For the six months ended June 30, 2017, there were no shares of restricted stock granted, vested or forfeited. |
Treasury stock
Treasury stock | 6 Months Ended |
Jun. 30, 2017 | |
Treasury stock | |
Treasury stock | Note 10. Treasury stock The Company has the authority to repurchase common stock from former employees, officers, directors or other persons who performed services for the Company at the lower of the original purchase price or the then-current fair market value. On October 17, 2016, 9,709 shares of restricted stock were surrendered by the holder to the Company to cover taxes associated with vesting of restricted stock and such shares were added back into the treasury stock of the Company, increasing total treasury stock to 18,906 shares. |
Commitments and contingencies
Commitments and contingencies | 6 Months Ended |
Jun. 30, 2017 | |
Commitments and contingencies | |
Commitments and contingencies | Note 11. Commitments and contingencies Registration Payment Arrangement— On June 1, in conjunction with the Amendment to the Facility and the related issuance of the Convertible Notes, the Company entered into the Registration Agreement which required the Company to file a registration statement with the SEC to register the Registrable Securities (See Note 7) within 30 days from June 1, 2017, which is to become effective per the SEC no later than 75 days thereafter. Such filing was made on June 30, 2017 and became effective on July 11, 2017. This filing covered 940,924 shares, which is the number of shares that would be issued at the floor conversion rate of $7.00 per share. The Company is also required to, among other things, maintain the effectiveness of such registration statement, continue to file the required SEC filings on a timely basis, use its best efforts to ensure that the registered securities are listed on each securities exchange on which securities of the same class or series as issued by the Company are then listed and comply with any FINRA requests. Upon any Registration Failure, the Company shall pay additional damages to the Holder for each 30-day period (prorated for any partial period) after the date of such Registration Failure in an amount in cash equal to two percent of the original principal amount of the Convertible Notes. The Company’s obligations with respect to each registration end at the date which is the earlier of (a) when all of the Registrable Securities covered by such registration have been sold or (b) when Deerfield or any of its transferee or assignee under the Registration Agreement cease to hold any of the Registrable Securities. For each registration filing, the Company shall bear all reasonable expenses, other than underwriting discounts and commissions, and shall reimburse Deerfield or any assignee or transferee for up to $25,000 in legal fees. The Company currently expects to satisfy all of its obligations under the Registration Agreement and does not expect to pay any damages pursuant to this agreement; therefore, no liability has been recorded. In accordance with the Convertible Notes, if the Company shall fail to provide the number of conversion shares, then the Company shall pay damages to the Holders for each day after the third business day after the Share Delivery Date that such conversion is not timely effected. The damages, as stated in the Convertible Notes, are an amount equal to two percent of the product of (I) the number of Conversion Shares not issued to the Holder on or prior to the Share Delivery Date and to which the Holder is entitled and (II) the volume weighted average price of the Company’s common stock on the Share Delivery Date. Alternatively, in lieu of the foregoing damages, at the written election of the Holder, if, on or after the applicable date of delivery via facsimile or electronic mail of a notice of conversion , the Holder purchases shares of the Company’s common stock to deliver in satisfaction of a sale by such Holder of Conversion Shares that such Holder anticipated receiving from the Company (such purchased shares, “Buy-In Shares”), the Company shall be obligated to promptly pay to such Holder (in addition to all other available remedies that the Holder may otherwise have), 110% of the amount by which (A) such Holder’s total purchase price (including brokerage commissions, if any) for such Buy-In Shares exceeds (B) the net proceeds received by such Holder from the sale of the number of shares equal to up to the number of Conversion Shares such Holder was entitled to receive but had not received on the Share Delivery Date. If the Company fails to pay the additional damages within five (5) Business Days of the date incurred, then the Holder entitled to such payments shall have the right to require the Company, upon written notice, to immediately issue, in lieu of such cash damages, the number of Shares equal to the quotient of (X) the aggregate amount of the damages payments described herein divided by (Y) the Conversion Price specified by the Holder in the notice of conversion. Patent infringement litigation: On July 25, 2016, the Company received a paragraph IV certification from Actavis Laboratories FL, Inc. (“Actavis”) advising the Company that Actavis has filed an Abbreviated New Drug Application (“ANDA”) with the FDA for a generic version of Adzenys XR-ODT. The certification notice alleges that the four U.S. patents listed in the FDA’s Orange Book for Adzenys XR-ODT, one with an expiration date in April 2026 and three with expiration dates in June 2032, will not be infringed by Actavis’s proposed product, are invalid and/or are unenforceable. On September 1, 2016, the Company filed a patent infringement lawsuit in federal district court against Actavis. This case alleges that Actavis infringed the Company’s Adzenys XR-ODT patents by submitting to the FDA an ANDA seeking to market a generic version of Adzenys XR-ODT prior to the expiration of the Company’s patents. This lawsuit automatically stayed, or barred, the FDA from approving Actavis’s ANDA for 30 months or until a district court decision that is adverse to the asserted patents is rendered, whichever is earlier. The Company intends to vigorously enforce its intellectual property rights relating to Adzenys XR-ODT. The Company cannot predict the timing or outcome of these proceedings. Operating lease: The Company leases its Grand Prairie, Texas office space and manufacturing facility under an operating lease which expires in 2024. In addition, in December 2015, the Company executed a 60-month lease for office space in Blue Bell, Pennsylvania for its commercial operations, which commenced on May 1, 2016. The Company accounts for rent expense on long-term operating leases on a straight-line basis over the life of the lease resulting in a deferred rent balance of $1.1 million at June 30, 2017 and $1.2 million at December 31, 2016, respectively. The Company is also liable for a share of operating expenses for both premises as defined in the lease agreements. The Company’s share of these operating expenses was $62,000 and $121,000 for the three and six months ended June 30, 2017, respectively, and $59,000 and $116,000 for the three and six months ended June 30, 2016, respectively. Rent expense, excluding the share of operating expenses, for the three and six months ended June 30, 2017 was $252,000 and $504,000, respectively, and $252,000 and $505,000 for the three and six months ended June 30, 2016, respectively. Cash incentive bonus plan: In July 2015, the Company adopted the Senior Executive Cash Incentive Bonus Plan (“Bonus Plan”). The Bonus Plan provides for cash payments based upon the attainment of performance targets established by the Company’s compensation committee. The payment targets will be related to financial and operational measures or objectives with respect to the Company, or corporate performance goals, as well as individual targets. The Company has recorded $291,000 and $618,000 of bonus expense for the three and six months ended June 30, 2017 and $291,000 and $543,000 of bonus expense for the three and six months ended June 30, 2016, respectively. |
License agreements
License agreements | 6 Months Ended |
Jun. 30, 2017 | |
License agreements | |
License agreements | Note 12. License agreements On July 23, 2014, the Company entered into a Settlement Agreement and an associated License Agreement (the “License Agreement”) with Shire LLC (“Shire”) for a non-exclusive license to certain patents for certain activities with respect to the Company’s New Drug Application No. 204326 for an extended-release orally disintegrating amphetamine polistirex tablet (“Neos NDA”). In accordance with the terms of the License Agreement, following the receipt of the approval from the FDA for Adzenys XR-ODT, the Company paid a lump sum, non-refundable license fee of an amount less than $1.0 million on February 26, 2016. The Company is paying a single digit royalty on net sales of Adzenys XR-ODT during the life of the patents. On January 26, 2017, the Company sent a letter to Shire, notifying Shire that the Company has made a Paragraph IV certification to the FDA that in the Company’s opinion and to the best of its knowledge, the patents owned by Shire that purportedly cover the Company’s NT-0201 product candidate are invalid, unenforceable and/or will not be infringed by the commercial manufacture, use or sale of NT-0201. On March 6, 2017, the Company entered into a license agreement with Shire, pursuant to which Shire granted the Company a non-exclusive license to certain patents owned by Shire for certain activities with respect to the Company’s New Drug Application No. 204325 for NT-0201. Under the terms of the agreement, the Company must pay a lump sum, non-refundable license fee of an amount less than $1.0 million due no later than thirty days after receiving regulatory approval by the FDA of the Company’s NDA for NT-0201. The Company will also pay a single digit royalty on net sales of the NT-0201 during the life of the relevant Shire patents. Additionally, the license agreement contains a covenant from Shire not to file a patent infringement suit against the Company alleging that NT-0201 infringes the Shire patents. Upon payment, such license fees are capitalized as an intangible asset and are amortized over the life of the longest associated patent. The royalties are recorded as cost of goods sold in the same period as the net sales upon which they are calculated. |
Related party transactions
Related party transactions | 6 Months Ended |
Jun. 30, 2017 | |
Related party transactions | |
Related party transactions | Note 13. Related party transactions As described in Note 6, in February 2017, the Company entered into an agreement with a related party for the sale-leaseback of newly acquired assets of up to $5.0 million to finance the Company’s capital expenditures. Each lease under this master agreement will be for an initial term of 36 months and will have an option to purchase the equipment at the end of the respective lease that management considers to be bargain purchase option. Under this master agreement, the Company entered into leases and sold assets with a total capitalized cost of $481,000 and $2,742,000 at effective interest rates of 14.3% and 14.9% on February 13, 2017 and June 30, 2017, respectively. Also, in 2012, the Company negotiated financing arrangements with the same related party that provided for the sale-leaseback of up to $6.5 million of the Company’s property and equipment. From the 2012 financing arrangements, the Company has a lease obligation remaining of $121,000 and $445,000 at June 30, 2017 and December 31, 2016, respectively. The total lease obligation under all related party financing arrangements was $3,289,000 and $445,000 at June 30, 2017 and December 31, 2016, respectively. On February 8, 2017, the Company closed an underwritten public offering of 5,750,000 shares of its common stock at a public offering price of $5.00 per share, which includes 750,000 shares of the Company’s common stock resulting from the underwriters’ exercise of their over-allotment option at the public offering price on February 17, 2017 (see Note 8). On June 30, 2017, the Company closed an underwritten public offering of 4,800,000 shares of its common stock at a public offering price of $6.25 per share for total proceeds of $30.0 million before estimated offering costs of $0.2 million. The Company also granted the underwriters a 30-day option to purchase up to an additional 720,000 shares of its common stock (see Note 8). Deerfield, the Company’s senior lender, participated in the purchase of the Company’s common shares as part of both public offerings, and as a result, is now classified as a related party. The Company is obligated under a $60.0 million senior secured credit Facility that was issued by the Company to Deerfield. On June 1, 2017, the Company and Deerfield entered into an Amendment to the Company’s existing Facility with Deerfield which extended the date to repay the Accrued Interest under the Facility to June 1, 2018, which may be extended to June 1, 2019 at the election of the Company if certain conditions have been met as specified in the Amendment. The right to payment of the Accrued Interest was memorialized in the form of Convertible Notes issued to Deerfield on the Amendment Date. (See Note 7). |
Subsequent events
Subsequent events | 6 Months Ended |
Jun. 30, 2017 | |
Subsequent events | |
Subsequent events | Note 14. Subsequent events The underwriters exercised their option to purchase 720,000 shares of our common stock on July 26, 2017. The total net proceeds to the Company from the June 30, 2017 offering including net proceeds from the exercise of the underwriter’s option shares, after deducting offering expenses payable by the Company, were approximately $34.3 million. |
Summary of significant accoun22
Summary of significant accounting policies (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
Summary of significant accounting policies | |
Basis of presentation | Basis of presentation: The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), for interim information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all of the information and footnotes necessary for a complete presentation of financial position, results of operations, and cash flows. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) necessary for a fair presentation of results of operations for and financial condition as of the end of the interim period have been included. Results of operations for the three and six months ended June 30, 2017 are not necessarily indicative of the results for the year ending December 31, 2017 or any period thereafter. The audited consolidated financial statements as of and for the year ended December 31, 2016 included information and footnotes necessary for such presentation and were included in the Neos Therapeutics, Inc. Annual Report on Form 10-K and filed with the SEC on March 15, 2017. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2016. |
Principles of consolidation | Principles of consolidation: At June 30, 2017 and December 31, 2016 and for the three and six months ended June 30, 2017 and 2016, the condensed consolidated financial statements include the accounts of the Company and its four wholly-owned subsidiaries. All significant intercompany transactions have been eliminated. |
Use of estimates | Use of estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. |
Reclassifications | Reclassifications: Certain reclassifications have been made to the prior year’s condensed consolidated financial statements to conform to the current period’s presentation. |
Liquidity | Liquidity: During 2016 and the six months ended June 30, 2017, the Company produced operating losses and used cash to fund operations. Management intends to achieve profitability through revenue growth from pharmaceutical products developed with its extended-release technologies. The Company does not anticipate it will be profitable until after the successful commercialization of its approved products, Adzenys XR-ODT and Cotempla XR-ODT, or, if approved, its ADHD product candidate. Accordingly, management has performed the review required for going concern accounting and believes the Company presently has sufficient liquidity to continue to operate for the next twelve months after the filing of this Report on Form 10-Q. |
Cash equivalents | Cash equivalents: The Company invests its available cash balances in bank deposits and money market funds. The Company considers highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. Management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. The Company’s primary objectives for investment of available cash are the preservation of capital and the maintenance of liquidity. |
Short-term investments | Short-term investments: Short-term investments consist of debt securities that have original maturities greater than three months but less than or equal to one year and are classified as available-for-sale securities. Such securities are carried at estimated fair value, with any unrealized holding gains or losses reported, net of any tax effects reported, as accumulated other comprehensive income or loss, which is a separate component of stockholders’ equity. Realized gains and losses, and declines in value judged to be other-than-temporary, if any, are included in other income (expense) in the consolidated results of operations. A decline in the market value of any available-for-sale security below cost that is deemed to be other-than-temporary results in a reduction in fair value charged to earnings in that period, and a new cost basis for the security is established. Dividend and interest income are recognized in other income when earned. The cost of securities sold is calculated using the specific identification method. The Company places all investments with government agencies, or corporate institutions whose debt is rated as investment grade. The Company classifies all available-for-sale marketable securities with maturities greater than one year from the balance sheet date, if any, as non-current assets. |
Inventories | Inventories: Inventories are stated at the lower of cost (first in, first out) or market in 2016 and, effective January 1, 2017, inventory is now required to be measured at the lower of cost (first in, first out) or net realizable value. The change to stating inventories at the lower of cost or net realizable value in 2017 was adopted prospectively and did not have a significant effect on the Company’s ongoing financial reporting as valuing inventory at the lower of cost or net realizable value approximated the prior policy of valuing inventory at the lower of cost or market. Inventories have been reduced by an allowance for excess and obsolete inventories. Cost elements include material, labor and manufacturing overhead. Inventories consist of raw materials, work in process, finished goods and deferred cost of goods sold. The cost of sales associated with the deferred product revenues are recorded as deferred costs of goods sold that are released from inventory into cost of goods sold as the deferred revenue is recognized into revenue. Until objective and persuasive evidence exists that regulatory approval has been received and future economic benefit is probable, pre-launch inventories are expensed into research and development. Manufacturing costs for the production of Adzenys XR-ODT incurred after the January 27, 2016 FDA approval date are being capitalized into inventory and manufacturing costs for the production of Cotempla XR-ODT incurred after June 30, 2017, following the FDA approval date of June 19, 2017, will be capitalized into inventory. |
Derivative liabilities | Derivative liabilities: The Company evaluates its debt and equity issuances to determine if those contracts or embedded components of those contracts qualify as derivatives requiring separate recognition in the Company’s financial statements. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as a liability and the change in fair value is recorded in other income (expense) in the consolidated results of operations. In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within twelve months of the balance sheet date. When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption and are classified in interest expense in the consolidated results of operations. |
Intangible assets | Intangible assets : Intangible assets subject to amortization, which principally include proprietary modified-release drug delivery technology, the costs to acquire the rights to Tussionex Abbreviated New Drug Application (“Tussionex ANDA”) and patents, are recorded at cost and amortized over the estimated lives of the assets, which primarily range from 10 to 20 years. |
Revenue recognition | Revenue recognition: Revenue is generated from product sales, recorded on a net sales basis. Product revenue is recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) price to the buyer is fixed and determinable; and (4) collectability is reasonably assured. Revenue from sales transactions where the buyer has the right to return the product is recognized at the time of sale only if (1) the price to the buyer is substantially fixed or determinable at the date of sale, (2) the buyer has paid for the product, or the buyer is obligated to pay for the product and the obligation is not contingent on resale of the product, (3) the buyer’s obligation to pay would not be changed in the event of theft or physical destruction or damage of the product, (4) the buyer acquiring the product for resale has economic substance apart from that provided by the Company, (5) the Company does not have significant obligations for future performance to directly bring about resale of the product by the buyer, and (6) the amount of future returns can be reasonably estimated. The Company sells its commercial products to a limited number of pharmaceutical wholesalers, all subject to rights of return. Pharmaceutical wholesalers buy drug products directly from manufacturers. Title to the product passes upon delivery to the wholesalers, when the risks and rewards of ownership are assumed by the wholesaler (freight on board destination). These wholesalers then resell the product to retail customers such as food, drug and mass merchandisers. The Company has a limited sales history for Adzenys XR-ODT and no sales history for Cotempla XR-ODT, and has determined that at this time it cannot reliably estimate expected returns of the product at the time of shipment to wholesalers. Accordingly, the Company defers or will defer recognition of revenue on product shipments of Adzenys XR-ODT and Cotempla XR-ODT, respectively, until the right of return no longer exists, which occurs at the earlier of the time Adzenys XR-ODT and Cotempla XR-ODT units are dispensed through patient prescriptions or expiration of the right of return. The Company calculates and expects to calculate patient prescriptions dispensed of Adzenys XR-ODT and Cotempla XR-ODT, respectively, using an analysis of third-party information. |
Net product sales | Net product sales Net product sales for the Company’s products represent total gross product sales less gross to net sales adjustments. Gross to net sales adjustments include savings offers, prompt payment discounts, wholesaler fees and estimated allowances for product returns, rebates and chargebacks to be incurred on the selling price of the respective product sales. Wholesale distribution fees based on definitive contractual agreements are incurred on the management of these products by wholesalers and are recorded within net sales for generic Tussionex and as deferred wholesale distribution fees in other current assets for Adzenys XR-ODT and/or Cotempla XR-ODT. The deferred wholesale distribution fees for Adzenys XR-ODT are and Cotempla XR-ODT will be later recorded within net product sales when revenue associated with those fees is recognized. The Company estimates and records gross to net sales adjustments for product returns, rebates and chargebacks based upon analysis of third-party information, including information obtained from the Company’s third party logistics providers (“3PLs”), with respect to its inventory levels and sell-through to the wholesalers’ customers, for savings offers from data available from third parties regarding savings offers processed for prescriptions written for the Company’s products, and, for generic Tussionex, experience reported by the Company’s previous commercialization partners. Due to estimates and assumptions inherent in determining the amount of returns, rebates and chargebacks, the actual amount of returns and claims for rebates and chargebacks may be different from the estimates, at which time reserves would be adjusted accordingly. Wholesale distribution fees and the allowance for prompt pay discounts are recorded at the time of shipment and such fees and allowances and all other accruals are recorded in the same period that the related revenue is recognized. |
Savings offers | Savings offers The Company offers or expects to offer savings programs for Adzenys XR-ODT and Cotempla XR-ODT, respectively, to patients covered under commercial payor plans in which the cost of a prescription to such patients is discounted. The Company records the amount redeemed based on information from third-party providers and recognizes the discount as a reduction of revenue in the same period the related revenue is recognized. |
Product returns | Product returns Wholesalers’ contractual return rights are limited to defective product, product that was shipped in error, product ordered by customer in error, product returned due to overstock, product returned due to dating or product returned due to recall or other changes in regulatory guidelines. The return policy for expired product allows the wholesaler to return such product starting six months prior to expiry date to twelve months post expiry date. Generic Tussionex product returns are estimated based upon data available from sales of the Company’s product by its former commercialization partner and from actual experience as reported by retailers. Historical trend of returns will be continually monitored and may result in future adjustments to such estimates. |
Rebates | Rebates The Company’s products are subject to commercial managed care and government-managed Medicare and Medicaid programs whereby discounts and rebates are provided to participating managed care organizations and federal and/or state governments. Estimated rebates payable under such programs are recorded as a reduction of revenue at the time revenues are recorded. Calculations related to these rebate accruals are estimated based on information from third-party providers. Historical trend of such rebates will be continually monitored and may result in future adjustments to such estimates. |
Wholesaler chargebacks | Wholesaler chargebacks The Company’s products are subject to certain programs with wholesalers whereby pricing on products is discounted below wholesaler list price to participating entities. These entities purchase products through wholesalers at the discounted price, and the wholesalers charge the difference between their acquisition cost and the discounted price back to the Company. Chargebacks are accounted for by establishing an accrual in an amount equal to the Company’s estimate of chargeback claims at the time of product sale based on information provided by third parties. Due to estimates and assumptions inherent in determining the amount of chargebacks, the actual amount of claims for chargebacks may be different from estimates, which may result in adjustments to such reserves. |
Research and development costs | Research and development costs: Research and development costs are charged to operations when incurred and include salaries and benefits, facilities costs, overhead costs, raw materials, laboratory and clinical supplies, clinical trial costs, contract services, fees paid to regulatory authorities for review and approval of the Company’s product candidates and other related costs. During the third quarter of 2016, the Company reclassified its approved product and facility regulatory fees out of research and development expense and into cost of sales commensurate with the commercial launch of Adzenys XR-ODT. The Company has reclassified all such applicable regulatory fees for prior quarters and prior years out of research and development expense and into cost of goods sold in accordance with this approach. |
Advertising costs | Advertising costs: Advertising costs are comprised of print and electronic media placements that are expensed as incurred. The Company recognized advertising costs of $10,000 and $248,000 during the three and six months ended June 30, 2017, respectively, and advertising costs of $120,000 during the six months ended June 30, 2016. There were no advertising costs during the three months ended June 30, 2016. |
Share-based compensation | Share-based compensation: Share-based compensation awards, including grants of employee stock options, restricted stock, restricted stock units (“RSUs”) and modifications to existing stock options, are recognized in the statement of operations based on their fair values. Compensation expense related to awards to employees is recognized on a straight-line basis, based on the grant date fair value, over the requisite service period of the award, which is generally the vesting term. The fair value of the Company’s stock-based awards to employees and directors is estimated using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including (1) the expected stock price volatility, (2) the expected term of the award, (3) the risk-free interest rate and (4) expected dividends. Due to the previous lack of a public market for the trading of its common stock and a lack of company-specific historical and implied volatility data, the Company had, prior to the IPO, historically utilized third party valuation analyses to determine the fair value. After the closing of the Company’s IPO, the Company’s board of directors has determined the fair value of each share of underlying common stock based on the closing price of the Company’s common stock as reported by the NASDAQ Global Market on the date of grant. Under new guidance for accounting for share-based payments, the Company has elected to continue estimating forfeitures at the time of grant and, if necessary, revise the estimate in subsequent periods if actual forfeitures differ from those estimates. Ultimately, the actual expense recognized over the vesting period will only be for those options that vest. The adoption of this standard in 2017 did not have a material impact on the Company’s business, financial position, results of operations or liquidity. Beginning in July 2016, the Company began recording stock compensation expense in the same income statement line as the cash compensation of the employee with the option in accordance with Staff Accounting Bulletin (“SAB”) Topic 14 due to the increased number and amount of options and option compensation. The Company has reclassified all prior quarters’ amounts out of general and administrative expense to the appropriate income statement line in accordance with this approach. |
Paragraph IV litigation costs | Paragraph IV litigation costs: Legal costs incurred by the Company in the enforcement of the Company’s intellectual property rights are charged to expense as incurred. |
Income taxes | Income taxes: Income taxes are accounted for using the liability method, under which deferred taxes are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax laws that will be in effect when the differences are expected to reverse. Management evaluates the Company’s tax positions in accordance with guidance on accounting for uncertainty in income taxes. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not that the position will be sustained upon examination. As of June 30, 2017 and December 31, 2016, the Company has unrecognized tax benefits associated with uncertain tax positions in the consolidated financial statements. These uncertain tax positions were netted against net operating losses (NOL’s) with no separate reserve for uncertain tax positions required. Deferred tax assets should be reduced by a valuation allowance if current evidence indicates that it is considered more likely than not that these benefits will not be realized. At June 30, 2017 and December 31, 2016, based on the level of historical operating results and projections for the taxable income for the future, the Company has determined that it is more likely than not that the deferred tax assets will not be realized. In evaluating the objective evidence that historical results provide, the Company considered that three years of cumulative operating losses was significant negative evidence outweighing projections for future taxable income. Therefore, management has determined that it is more likely than not that the deferred tax assets will not be realized. Accordingly, the Company has recorded a valuation allowance to reduce deferred tax assets to zero. The Company may not ever be able to realize the benefit of some or all of the federal and state loss carryforwards, either due to ongoing operating losses or due to ownership changes, which limit the usefulness of the loss carryforwards. |
Recent accounting pronouncements | Recent accounting pronouncements: In August 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments . This ASU was designed to reduce the diversity in practice of how the eight specified items are presented and classified in the statement of cash flows, including debt prepayment or debt extinguishment costs. The amendments are effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those years. The Company believes the amendments will not have a significant effect on its ongoing financial reporting as the Company has classified its debt prepayment and debt extinguishment costs in the Consolidated Statements of Cash Flows in accordance with the amendments. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and 2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, including interim periods within those years. The new standard must be adopted using a modified retrospective transition and requires application of the new guidance at the beginning of the earliest comparative period presented. The Company is evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance replaces transaction-and industry-specific revenue recognition guidance under current U.S. GAAP with a principles-based approach for determining revenue recognition. The new guidance requires an entity to recognize the amount of revenue based on the value of transferred goods or services to customers. There is also 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. The standard becomes effective for the Company beginning in the first quarter of 2018. Earlier application is permitted in 2017. In March and April 2016, the FASB issued new guidance intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The guidance permits the use of either a retrospective or cumulative effect transition method. The Company has a limited sales history for Adzenys XR-ODT and no sales history for Cotempla XR-ODT and has determined that at this time it cannot reliably estimate historical returns of the product at the time of delivery to wholesalers, when title to the asset transfers and the customer is invoiced. The Company is assessing other market data obtained from its third party logistics companies to determine a reliable return rate. The Company expects the impact of this new standard will accelerate revenue based on satisfaction of the performance obligation upon delivery at a point in time when the customer obtains control of the asset. For purposes of providing comparable periods upon adoption, the Company is considering a retrospective transition method. From time to time, additional new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption. |
Net loss per share (Tables)
Net loss per share (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Net loss per share | |
Schedule of potentially dilutive securities excluded in the computation of diluted net loss per share | June 30, 2017 2016 Senior Secured Convertible Notes — registered conversion shares not issued — Series C Redeemable Convertible Preferred Stock Warrants (as converted) Stock options outstanding RSU’s granted, not issued or outstanding — |
Fair value of financial instr24
Fair value of financial instruments (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Fair value of financial instruments | |
Schedule of hierarchy for financial instruments measured at fair value on a recurring basis | Fair Value as of June 30, 2017 Level 1 Level 2 Level 3 Total (in thousands) Cash and cash equivalents $ $ $ — $ Short-term investments — — Earnout liability — — Derivative liability (see Note 7) — — $ $ $ $ Fair Value as of December 31, 2016 Level 1 Level 2 Level 3 Total (in thousands) Cash-and cash equivalents $ $ $ — $ Short-term investments — — Earnout liability — — $ $ $ $ |
Schedule of cash and cash equivalents and short-term investments | June 30, 2017 Amortized Unrealized Market Cost Gain / (Loss) Value (in thousands) Bank deposits and money market funds $ $ — $ Financial and corporate debt securities ) $ $ ) $ December 31, 2016 Amortized Unrealized Market Cost Gain / (Loss) Value (in thousands) Bank deposits and money market funds $ $ — $ Financial and corporate debt securities ) $ $ ) $ |
Schedule of changes in Level 3 liabilities measured at fair value | Level 3 Liabilities (in thousands) Balance at December 31, 2016 $ Change in fair value — Balance at March 31, 2017 $ Addition of Deerfield derivative liability Change in fair value ) Balance at June 30, 2017 $ |
Derivative liability | |
Fair value of financial instruments | |
Methodologies and significant inputs used in determination of fair value | June 30, 2017 Initial Valuation (in thousands) (in thousands) Date of Valuation 6/30/2017 6/1/2017 Valuation Method Monte Carlo Monte Carlo Volatility (annual) 50% 50% Time period from valuation until maturity of debt (yrs.) 4.864 4.943 Cumulative probability of a change in control prepayment implied by model 28% 28% Cumulative probability of other accelerated prepayments implied by model 17% 17% Discount rate 15.98% 15.87% Fair value of liability at valuation date $2,086 $2,043 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Inventories | |
Schedule of inventories | June 30, December 31, 2017 2016 (in thousands) Raw materials $ $ Work in progress Finished goods Deferred cost of goods sold Inventory at cost Inventory reserve ) ) $ $ |
Long-term debt (Tables)
Long-term debt (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Long-term debt | |
Schedule of long-term debt | June 30, December 31, 2017 2016 (in thousands) Deerfield senior secured credit facility, net of discount of $3,246 and $1,401, respectively $ $ Senior secured convertible notes due June 1, 2018, net of discount of $606 — Capital leases, maturing through June 2020 Less current portion ) Long-term debt $ $ |
Schedule of future principal payments of long-term debt, including capital leases | Period ending: June 30, (in thousands) 2018 $ 2019 2020 2021 2022 Future principal payments $ Less unamortized debt discount related to long-term debt ) Less current portion of long-term debt ) Total long-term debt $ |
Share-based Compensation (Table
Share-based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Share-based Compensation | |
Schedule of share-based compensation expense | Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 (in thousands) Cost of goods sold $ $ $ $ Research and development Selling and marketing expenses General and administrative expenses $ $ $ $ |
Schedule of weighted-average key assumptions used in determining fair value of options granted | Six Months Ended June 30, 2017 Estimated dividend yield % Expected stock price volatility % Weighted-average risk-free interest rate % Expected life of option in years Weighted-average option fair value at grant $ |
Summary of outstanding and exercisable options | Weighted- Number of Average Intrinsic Options Exercise Price Value (in thousands) Outstanding at December 31, 2016 $ $ Exercisable at December 31, 2016 $ $ Granted $ Exercised — — Expired, forfeited or cancelled ) Outstanding at June 30, 2017 $ $ Exercisable at June 30, 2017 $ $ |
Summary of outstanding RSUs | Weighted- Number of Average RSUs Fair Value Outstanding at December 31, 2016 — $ — Granted $ Exercised — — Expired, forfeited or cancelled — — Outstanding at June 30, 2017 $ |
Organization and nature of op28
Organization and nature of operations (Details) | 6 Months Ended |
Jun. 30, 2017product | |
Organization and nature of operations | |
Number of approved product | 2 |
Number of proprietary product candidates | 1 |
Summary of significant accoun29
Summary of significant accounting policies (Details) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017USD ($)subsidiary | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($)subsidiary | Jun. 30, 2016USD ($) | Dec. 31, 2016USD ($)subsidiary | |
Product returns | |||||
Return time period for expired product prior to expiry date | 6 months | ||||
Return time period for expired product after expiry date | 12 months | ||||
Advertising costs | |||||
Advertising costs | $ 10,000 | $ 0 | $ 248,000 | $ 120,000 | |
Income taxes | |||||
Deferred tax assets, net of valuation allowance | $ 0 | $ 0 | $ 0 | ||
Wholly-owned subsidiaries | |||||
Significant accounting policies | |||||
Number of wholly-owned subsidiaries | subsidiary | 4 | 4 | 4 | ||
Minimum | |||||
Intangible assets | |||||
Useful life | 10 years | ||||
Maximum | |||||
Intangible assets | |||||
Useful life | 20 years |
Net loss per share (Details)
Net loss per share (Details) - shares | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Senior Secured Convertible Notes | ||
Net loss per share | ||
Potentially dilutive shares excluded in the computation of diluted net loss per share | 940,924 | |
Warrants | Series C Redeemable Convertible Preferred Stock Warrants (as converted) | ||
Net loss per share | ||
Potentially dilutive shares excluded in the computation of diluted net loss per share | 70,833 | 70,833 |
Employee stock options | ||
Net loss per share | ||
Potentially dilutive shares excluded in the computation of diluted net loss per share | 2,357,123 | 1,909,460 |
RSU's | ||
Net loss per share | ||
Potentially dilutive shares excluded in the computation of diluted net loss per share | 78,750 |
Fair value of financial instr31
Fair value of financial instruments - Hierarchy (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Hierarchy for financial instruments measured at fair value on a recurring basis | ||
Short-term investments | $ 21,262 | $ 15,430 |
Derivative liability | 2,086 | |
Recurring basis | Fair Value | ||
Hierarchy for financial instruments measured at fair value on a recurring basis | ||
Cash and cash equivalents | 57,362 | 24,352 |
Short-term investments | 21,262 | 15,430 |
Earnout liability | 177 | 232 |
Derivative liability | 2,086 | |
Financial instruments measured at fair value on a recurring basis | 80,887 | 40,014 |
Recurring basis | Fair Value | Level 1 | ||
Hierarchy for financial instruments measured at fair value on a recurring basis | ||
Cash and cash equivalents | 52,664 | 17,917 |
Financial instruments measured at fair value on a recurring basis | 52,664 | 17,917 |
Recurring basis | Fair Value | Level 2 | ||
Hierarchy for financial instruments measured at fair value on a recurring basis | ||
Cash and cash equivalents | 4,698 | 6,435 |
Short-term investments | 21,262 | 15,430 |
Financial instruments measured at fair value on a recurring basis | 25,960 | 21,865 |
Recurring basis | Fair Value | Level 3 | ||
Hierarchy for financial instruments measured at fair value on a recurring basis | ||
Earnout liability | 177 | 232 |
Derivative liability | 2,086 | |
Financial instruments measured at fair value on a recurring basis | $ 2,263 | $ 232 |
Fair value of financial instr32
Fair value of financial instruments - Cash and cash equivalents and short-term investments (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Cash and cash equivalents and short-term investments | ||
Amortized cost of cash and cash equivalents and short-term investments | $ 78,630 | $ 39,783 |
Unrealized gain / (loss) of cash and cash equivalents and short-term investments | (6) | (1) |
Market value of cash and cash equivalents and short-term investments | 78,624 | 39,782 |
Bank deposits and money market funds | ||
Cash and cash equivalents and short-term investments | ||
Amortized cost of cash and cash equivalents and short-term investments | 52,664 | 17,917 |
Market value of cash and cash equivalents and short-term investments | 52,664 | 17,917 |
Financial and corporate debt securities | ||
Cash and cash equivalents and short-term investments | ||
Amortized cost of cash and cash equivalents and short-term investments | 25,966 | 21,866 |
Unrealized gain / (loss) of cash and cash equivalents and short-term investments | (6) | (1) |
Market value of cash and cash equivalents and short-term investments | $ 25,960 | $ 21,865 |
Fair value of financial instr33
Fair value of financial instruments - Earnout liability and Derivative liability (Details) - Recurring basis - Level 3 - Monte Carlo - USD ($) $ in Thousands | Jun. 01, 2017 | Jun. 30, 2017 | Jun. 30, 2017 |
Earnout liability | |||
Methodologies and significant inputs used in the determination of the fair value | |||
Revenue volatility | 42.00% | ||
Equity volatility | 50.00% | ||
Derivative liability | |||
Methodologies and significant inputs used in the determination of the fair value | |||
Volatility (as a percent) | 50.00% | 50.00% | |
Time period from valuation until end of earnout | 4 years 11 months 10 days | 4 years 10 months 11 days | |
Cumulative probability of a change in control prepayment implied by model | 28.00% | 28.00% | |
Cumulative probability of other accelerated prepayments implied by model | 17.00% | 17.00% | |
Discount rate | 15.87% | 15.98% | |
Fair value of liability at valuation date | $ 2,043 | $ 2,086 | $ 2,086 |
Fair value of financial instr34
Fair value of financial instruments - Changes in Level 3 (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 30, 2017 | Mar. 31, 2017 | |
Changes in Level 3 liabilities measured at fair value | ||
Balance at beginning of period | $ 232 | $ 232 |
Addition of Deerfield derivative liability | 2,043 | |
Changes in fair value | (12) | |
Balance at end of period | $ 2,263 | $ 232 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Inventories | ||
Raw materials | $ 2,086 | $ 1,672 |
Work in progress | 1,507 | 2,546 |
Finished goods | 2,187 | 2,060 |
Deferred cost of goods sold | 558 | 225 |
Inventory at cost | 6,338 | 6,503 |
Inventory reserve | (258) | (736) |
Inventories net | $ 6,080 | $ 5,767 |
Sale-leaseback transaction (Det
Sale-leaseback transaction (Details) - Related Party Sale-leaseback Transactions | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | 14 Months Ended | |||||||||
Jun. 30, 2017USD ($) | Feb. 28, 2017USD ($) | Dec. 31, 2016USD ($) | Mar. 31, 2014USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Dec. 31, 2014USD ($) | Dec. 31, 2013USD ($) | Mar. 31, 2014tranche | Apr. 30, 2017USD ($) | Jul. 31, 2016USD ($) | Dec. 31, 2012USD ($) | |
Other income, net | ||||||||||||||
Sale-leaseback transaction | ||||||||||||||
Net gain recognized in period on sale leaseback transaction | $ 13,000 | $ 206,000 | $ 33,000 | $ 415,000 | ||||||||||
Transaction One | ||||||||||||||
Sale-leaseback transaction | ||||||||||||||
Maximum amount authorized under sale and leaseback transaction | $ 6,500,000 | |||||||||||||
Number of tranches | tranche | 5 | |||||||||||||
Proceeds from sale of assets | $ 795,000 | $ 5,500,000 | ||||||||||||
Deferred gain | $ 116,000 | $ 2,700,000 | ||||||||||||
Lease term | 42 months | |||||||||||||
Imputed interest rate on lease (as a percent) | 14.50% | 14.50% | ||||||||||||
Leases 1 & 2 February 2013 | ||||||||||||||
Sale-leaseback transaction | ||||||||||||||
Original value of assets for which lease expired | $ 3,500,000 | |||||||||||||
Cumulative gain recognized | 2,600,000 | |||||||||||||
Original value of lease buy-out option liability | $ 385,000 | |||||||||||||
Lease 3 July 2013 | ||||||||||||||
Sale-leaseback transaction | ||||||||||||||
Original value of assets for which lease expired | $ 1,000,000 | |||||||||||||
Loss recognized | 100,000 | |||||||||||||
Original value of lease buy-out option liability | $ 100,000 | |||||||||||||
Lease 4 November 2013 | ||||||||||||||
Sale-leaseback transaction | ||||||||||||||
Original value of assets for which lease expired | $ 1,000,000 | |||||||||||||
Cumulative gain recognized | 161,000 | |||||||||||||
Original value of lease buy-out option liability | $ 100,000 | |||||||||||||
Transaction Two | ||||||||||||||
Sale-leaseback transaction | ||||||||||||||
Maximum amount authorized under sale and leaseback transaction | $ 5,000,000 | |||||||||||||
Proceeds from sale of assets | $ 2,742,000 | $ 481,000 | ||||||||||||
Lease term | 36 months | |||||||||||||
Imputed interest rate on lease (as a percent) | 14.90% | 14.30% | ||||||||||||
Amortization period | 36 months | 36 months | ||||||||||||
Net gain on sale leaseback | $ 14,000 | |||||||||||||
Net gain recognized in period on sale leaseback transaction | $ 0 |
Long-term debt - Summary (Detai
Long-term debt - Summary (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Long-term debt | ||
Long-term debt and capital lease obligations, including current maturities | $ 66,023 | $ 63,520 |
Less current portion | (7,022) | (4,921) |
Total long-term debt | 59,001 | 58,599 |
Debt instrument, unamortized discount | ||
Unamortized discount on debt | 3,852 | |
Senior Secured Convertible Notes Due 2018 | ||
Long-term debt | ||
Long-term debt and capital lease obligations, including current maturities | 5,980 | |
Debt instrument, unamortized discount | ||
Unamortized discount on debt | 606 | |
Debt issued to entities affiliated with Deerfield | Senior Secured Credit Facility | ||
Long-term debt | ||
Long-term debt and capital lease obligations, including current maturities | 56,754 | 63,075 |
Debt instrument, unamortized discount | ||
Unamortized discount on debt | 3,246 | 1,401 |
Capital leases | ||
Long-term debt | ||
Long-term debt and capital lease obligations, including current maturities | $ 3,289 | $ 445 |
Long-term debt - Senior Secured
Long-term debt - Senior Secured Credit facility (Details) | Jun. 30, 2017USD ($)$ / sharesshares | Jun. 01, 2017USD ($)item$ / shares | Feb. 17, 2017shares | Feb. 08, 2017$ / sharesshares | May 11, 2016USD ($)iteminstallment | Jun. 30, 2017USD ($)$ / shares | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($)$ / sharesshares | Jun. 30, 2016USD ($) | Dec. 31, 2016USD ($) |
Long-term debt | ||||||||||
Proceeds from debt | $ 58,420,000 | |||||||||
payment of senior debt and fee | 26,063,000 | |||||||||
Debt discount amortization | $ 245,000 | 261,000 | ||||||||
Derivative liability | $ 2,086,000 | $ 2,086,000 | 2,086,000 | |||||||
Unamortized discount on debt | $ 3,852,000 | $ 3,852,000 | 3,852,000 | |||||||
Beneficial conversion feature on convertible notes | $ 613,000 | |||||||||
Senior Notes and Subordinated Debt | ||||||||||
Long-term debt | ||||||||||
Repayments of debt | $ 33,000,000 | |||||||||
Senior debt (Hercules LSA) | ||||||||||
Long-term debt | ||||||||||
payment of senior debt and fee | 24,300,000 | |||||||||
Interest paid | 100,000 | |||||||||
Payments of end of term fee | 1,100,000 | |||||||||
Prepayment charges | 243,000 | |||||||||
Senior Secured Convertible Note | ||||||||||
Long-term debt | ||||||||||
Face amount of debt issued | $ 6,600,000 | |||||||||
Interest rate (as a percent) | 12.95% | |||||||||
Term of debt (in years) | 1 year | |||||||||
Effective interest rate during debt term (as a percent) | 23.80% | 23.80% | ||||||||
Time period before debt maturity when debt conversion option expires | 5 days | |||||||||
Increase in prepayment fee (in basis points) | 300 | |||||||||
Conversion price, expressed as a percent of stock price | 95.00% | |||||||||
Number of trading days used to determine conversion stock price | 3 days | |||||||||
Unamortized discount on debt | $ 600,000 | |||||||||
Beneficial conversion feature on convertible notes | $ 600,000 | |||||||||
Maximum percentage of stock for note holder | 9.985% | |||||||||
Maximum percentage of stock for aggregate conversion | 19.90% | |||||||||
Senior Secured Convertible Note | Registration Agreement | ||||||||||
Long-term debt | ||||||||||
Liability recorded for expected unmet agreement obligations | $ 0 | |||||||||
Common Stock | ||||||||||
Long-term debt | ||||||||||
Issuance of common stock, net of issuance costs (in shares) | shares | 11,299,639 | |||||||||
Underwritten Public Offering | Common Stock | ||||||||||
Long-term debt | ||||||||||
Issuance of common stock, net of issuance costs (in shares) | shares | 4,800,000 | 5,750,000 | ||||||||
Public offering price (in dollars per share) | $ / shares | $ 6.25 | $ 5 | $ 6.25 | $ 6.25 | ||||||
Over-allotment option | Common Stock | ||||||||||
Long-term debt | ||||||||||
Issuance of common stock, net of issuance costs (in shares) | shares | 750,000 | |||||||||
Minimum | Senior Secured Convertible Note | ||||||||||
Long-term debt | ||||||||||
Prepayment fee of debt (in percentage) | 12.75% | |||||||||
Conversion price | $ / shares | $ 7 | |||||||||
Maximum | Senior Secured Convertible Note | ||||||||||
Long-term debt | ||||||||||
Prepayment fee of debt (in percentage) | 2.00% | |||||||||
Senior Secured Credit Facility | Registration Agreement | ||||||||||
Long-term debt | ||||||||||
Maximum Reimbursable Legal Fees | $ 25,000 | |||||||||
Senior Secured Credit Facility | Debt issued to entities affiliated with Deerfield | ||||||||||
Long-term debt | ||||||||||
Face amount of debt issued | 60,000,000 | |||||||||
Proceeds from debt | $ 60,000,000 | |||||||||
Date of first required principal payment | May 1, 2019 | |||||||||
Number of equal annual installments | installment | 4 | |||||||||
Interest rate (as a percent) | 12.95% | |||||||||
Number of first interest payments for which the reporting entity has the option to defer | item | 4 | |||||||||
Interest accrued | 6,600,000 | |||||||||
Debt yield enhancement fee | $ 1,350,000 | |||||||||
Term of debt (in years) | 6 years | |||||||||
Minimum cash on deposit to maintain under debt arrangement | $ 5,000,000 | |||||||||
Effective interest rate during debt term (as a percent) | 15.03% | 15.03% | ||||||||
Debt discount amortization | $ 163,000 | $ 36,000 | $ 245,000 | 36,000 | ||||||
Unamortized discount on debt | $ 3,246,000 | $ 3,246,000 | $ 3,246,000 | $ 1,401,000 | ||||||
Senior Secured Credit Facility | Debt issued to entities affiliated with Deerfield | Company's Attorneys | ||||||||||
Long-term debt | ||||||||||
Debt legal costs | $ 173,000 | |||||||||
Senior Secured Credit Facility | Debt issued to entities affiliated with Deerfield | On Behalf Of Deerfield's Attorneys | ||||||||||
Long-term debt | ||||||||||
Debt legal costs | $ 58,000 | |||||||||
Senior Secured Credit Facility | Deerfield Private Design Fund III, LP | ||||||||||
Long-term debt | ||||||||||
Debt borrowing structure (as a percent) | 66.67 | |||||||||
Senior Secured Credit Facility | Deerfield Special Situations Fund, LP | ||||||||||
Long-term debt | ||||||||||
Debt borrowing structure (as a percent) | 33.33 | |||||||||
Senior Secured Credit Facility | Senior Secured Convertible Note | ||||||||||
Long-term debt | ||||||||||
Derivative liability | $ 2,000,000 | |||||||||
Minimum premiums as percent required to treat as derivative | 10.00% | |||||||||
Payment of debt modification fee | $ 40,000 | |||||||||
Maximum time period to register shares per agreement | 30 days | |||||||||
Maximum time period for registration to become effective per agreement | 75 days | |||||||||
Senior Secured Credit Facility | Minimum | Senior Secured Convertible Note | ||||||||||
Long-term debt | ||||||||||
Conversion price | $ / shares | $ 7 | |||||||||
Senior Secured Credit Facility | Maximum | Senior Secured Convertible Note | ||||||||||
Long-term debt | ||||||||||
Number of shares which may be issued for conversion of convertible notes | item | 940,924 | |||||||||
Essex Capital Corporation, as Investor | 10% subordinated note payable | ||||||||||
Long-term debt | ||||||||||
Face amount of debt issued | $ 5,900,000 | |||||||||
Repayments of debt | 5,900,000 | |||||||||
Interest paid | $ 1,300,000 | |||||||||
Interest rate (as a percent) | 10.00% | |||||||||
Interest accrued | $ 87,000 | $ 263,000 |
Long-term debt - Senior Debt (D
Long-term debt - Senior Debt (Details) | May 11, 2016USD ($) | Jul. 28, 2015$ / sharesshares | Jun. 10, 2015USD ($) | Mar. 13, 2015USD ($) | Sep. 25, 2014USD ($)$ / sharesshares | Mar. 28, 2014USD ($)item$ / sharesshares | May 31, 2016 | Jun. 30, 2016USD ($) | Jun. 30, 2016USD ($) |
Long-term debt | |||||||||
Loss on debt extinguishment | $ (1,187,000) | $ (1,187,000) | |||||||
Senior debt (Hercules LSA) | |||||||||
Long-term debt | |||||||||
Maximum borrowing capacity per agreement | $ 25,000,000 | ||||||||
Number of draws available per debt agreement | item | 4 | ||||||||
Interest paid | $ 100,000 | ||||||||
Term of interest and principal payments, which commence at a later date | 30 months | ||||||||
LSA end of term fee due upon prepayment or repayment | $ 1,100,000 | ||||||||
Payments of end of term fee | 1,100,000 | ||||||||
End of term charge amortization | 38,000 | 121,000 | |||||||
Fair value adjustment of warrants (reduction) increase | $ 33,000 | $ 104,000 | |||||||
Loss on debt extinguishment | $ 1,187,000 | ||||||||
Senior debt (Hercules LSA) | Tranche 1 | |||||||||
Long-term debt | |||||||||
Draws from senior debt note | $ 10,000,000 | ||||||||
Interest rate (as a percent) | 9.00% | ||||||||
Senior debt (Hercules LSA) | Tranche 1 | Series C Warrants Issued with Senior Debt | |||||||||
Long-term debt | |||||||||
Warrants issued (in shares) | shares | 60,000 | ||||||||
Exercise price (in dollars per share) | $ / shares | $ 5 | ||||||||
Senior debt (Hercules LSA) | Tranche 2 | |||||||||
Long-term debt | |||||||||
Draws from senior debt note | $ 5,000,000 | ||||||||
Interest rate (as a percent) | 10.50% | ||||||||
Senior debt (Hercules LSA) | Tranche 2 | Series C Warrants Issued with Senior Debt | |||||||||
Long-term debt | |||||||||
Warrants issued (in shares) | shares | 110,000 | ||||||||
Exercise price (in dollars per share) | $ / shares | $ 5 | ||||||||
Senior debt (Hercules LSA) | Tranche 3 | |||||||||
Long-term debt | |||||||||
Draws from senior debt note | $ 5,000,000 | ||||||||
Interest rate (as a percent) | 10.50% | ||||||||
Senior debt (Hercules LSA) | Tranche 4 | |||||||||
Long-term debt | |||||||||
Draws from senior debt note | $ 5,000,000 | ||||||||
Interest rate (as a percent) | 9.00% | ||||||||
Conversion, initial public offering | Common Stock Warrants | |||||||||
Long-term debt | |||||||||
Warrants issued (in shares) | shares | 70,833 | ||||||||
Exercise price (in dollars per share) | $ / shares | $ 12 | ||||||||
Warrants Term | 5 years |
Long-term debt - Subordinated R
Long-term debt - Subordinated Related Party Note (Details) - 10% subordinated note payable - Essex Capital Corporation, as Investor - USD ($) | May 11, 2016 | Jun. 30, 2016 | Jun. 30, 2016 |
Long-term debt | |||
Interest rate (as a percent) | 10.00% | ||
Face amount of debt issued | $ 5,900,000 | ||
Repayments of debt | 5,900,000 | ||
Interest paid | $ 1,300,000 | ||
Interest accrued | $ 87,000 | $ 263,000 |
Long-term debt - Capital Lease
Long-term debt - Capital Lease Obligations to Related Party (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jun. 30, 2017 | Feb. 28, 2017 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2014 | Dec. 31, 2013 | |
Related Party Sale-leaseback Transactions | Transaction One | ||||||||
Long-term debt | ||||||||
Imputed interest rate on lease (as a percent) | 14.50% | 14.50% | ||||||
Related Party Sale-leaseback Transactions | Transaction Two | ||||||||
Long-term debt | ||||||||
Imputed interest rate on lease (as a percent) | 14.90% | 14.30% | ||||||
Capital leases | ||||||||
Long-term debt | ||||||||
Interest expense | $ 22,000 | $ 61,000 | $ 42,000 | $ 139,000 | ||||
Capital leases | Related Party Sale-leaseback Transactions | Transaction One | ||||||||
Long-term debt | ||||||||
Existing assets under sale-leaseback transaction | $ 5,500,000 | |||||||
Newly acquired assets under sale-leaseback transaction | $ 795,000 | |||||||
Capital leases | Related Party Sale-leaseback Transactions | Transaction Two | ||||||||
Long-term debt | ||||||||
Newly acquired assets under sale-leaseback transaction | $ 3,200,000 | $ 3,200,000 | $ 3,200,000 |
Long-term debt - Future Princip
Long-term debt - Future Principal Payments (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Future principal payments of long-term debt, including capital leases | ||
2,018 | $ 7,628 | |
2,019 | 15,965 | |
2,020 | 16,282 | |
2,021 | 15,000 | |
2,022 | 15,000 | |
Future principal payments | 69,875 | |
Less unamortized debt discount related to long-term debt | (3,852) | |
Less current portion of long-term debt | (7,022) | $ (4,921) |
Total long-term debt | $ 59,001 | $ 58,599 |
Common stock - Public Offerings
Common stock - Public Offerings (Details) - USD ($) $ / shares in Units, $ in Thousands | Jun. 30, 2017 | Feb. 17, 2017 | Feb. 17, 2017 | Feb. 08, 2017 | Jun. 30, 2017 | Jul. 26, 2017 |
Public offerings and related transactions | ||||||
Net proceeds from issuance of stock | $ 60,087 | |||||
Common Stock | ||||||
Public offerings and related transactions | ||||||
Issuance of common stock, net of issuance costs (in shares) | 11,299,639 | |||||
Common Stock | Underwritten Public Offering | ||||||
Public offerings and related transactions | ||||||
Issuance of common stock, net of issuance costs (in shares) | 4,800,000 | 5,750,000 | ||||
Public offering price (in dollars per share) | $ 6.25 | $ 5 | $ 6.25 | |||
Share offered to underwriters under option granted (in shares) | 720,000 | 720,000 | ||||
Term of option offered to underwriters | 30 days | 30 days | ||||
Gross proceeds from issuance of stock | $ 30,000 | $ 30,000 | ||||
Stock issuance costs | $ 200 | $ 200 | ||||
Net proceeds from issuance of stock | $ 26,700 | $ 34,300 | ||||
Common Stock | Over-allotment option | ||||||
Public offerings and related transactions | ||||||
Issuance of common stock, net of issuance costs (in shares) | 750,000 |
Common stock - Shelf Registrati
Common stock - Shelf Registration Statement and offer under sales agreement (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Mar. 31, 2017 | Jun. 30, 2017 | Jul. 26, 2017 | Aug. 01, 2016 | |
Shelf registration statement | |||||
Net proceeds from issuance of stock | $ 60,087 | ||||
Value of Securities which remain available to be sold pursuant to the Shelf | $ 62,500 | ||||
Maximum | |||||
Shelf registration statement | |||||
Authorized amount to raise capital as per shelf registration statement | $ 125,000 | ||||
Sales Agreement | Maximum | Cowen and Company LLC | |||||
Shelf registration statement | |||||
Authorized amount for issuance of common stock as per shelf registration statement | $ 40,000 | ||||
Common Stock | |||||
Shelf registration statement | |||||
Shares issued | 11,299,639 | ||||
Common Stock | Sales Agreement | |||||
Shelf registration statement | |||||
Value of common stock which remains available to be sold under the Sales Agreement | $ 36,200 | ||||
Sales Agreement | Common Stock | |||||
Shelf registration statement | |||||
Shares issued | 0 | 749,639 | |||
Sales Agreement offering price (in dollars per share) | $ 5.01 | ||||
Gross proceeds from issuance of stock | $ 3,700 | ||||
Net proceeds from issuance of stock | 3,600 | ||||
Stock issuance costs | $ 100 |
Share-based Compensation - Plan
Share-based Compensation - Plan Information (Details) | Jan. 01, 2017shares | Jan. 01, 2016shares | Jun. 30, 2017shares | Dec. 31, 2016shares | Jul. 31, 2015shares | Nov. 30, 2009shares |
Employee stock options | Performance based | ||||||
Stock options, restricted stock and performance stock options | ||||||
Vesting period | 3 years | |||||
Stock options | Minimum | ||||||
Stock options, restricted stock and performance stock options | ||||||
Vesting period | 2 years | |||||
Stock options | Maximum | ||||||
Stock options, restricted stock and performance stock options | ||||||
Vesting period | 4 years | |||||
Neos Therapeutics, Inc. 2009 Equity Plan | ||||||
Stock options, restricted stock and performance stock options | ||||||
Shares reserved for issuance under the plan | 1,375,037 | |||||
Neos Therapeutics, Inc. 2009 Equity Plan | Stock options | ||||||
Stock options, restricted stock and performance stock options | ||||||
Expiration period | 10 years | |||||
Expiration period of unexercised vested award after termination of employment | 90 days | |||||
Neos Therapeutics, Inc. 2009 Equity Plan | Restricted stock | Minimum | ||||||
Stock options, restricted stock and performance stock options | ||||||
Vesting period | 1 month | |||||
Neos Therapeutics, Inc. 2009 Equity Plan | Restricted stock | Maximum | ||||||
Stock options, restricted stock and performance stock options | ||||||
Vesting period | 48 months | |||||
Neos Therapeutics, Inc. 2015 Stock Option and Incentive Plan | ||||||
Stock options, restricted stock and performance stock options | ||||||
Shares reserved for issuance under the plan | 767,330 | |||||
Increase to the number of shares reserved and available for issuance as a percentage of outstanding common stock (as a percent) | 5.00% | |||||
Increase in number of shares reserved and available for issuance | 803,049 | 800,797 | ||||
Stock option exercise price, minimum expressed as percentage of fair market value on grant date | 100 | |||||
Shares related to forfeited prior plan options transferred into shares available under current plan | 971 | 7,500 | ||||
Share of restricted stock transferred into shares available under current plan | 18,906 | |||||
Shares available for grant | 685,119 | |||||
Neos Therapeutics, Inc. 2015 Stock Option and Incentive Plan | Stock options | ||||||
Stock options, restricted stock and performance stock options | ||||||
Expiration period | 10 years | |||||
Expiration period of unexercised vested award after termination of employment | 90 days |
Share-based Compensation - Expe
Share-based Compensation - Expense Allocation (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Share-based Compensation | ||||
Total compensation cost | $ 948 | $ 807 | $ 1,933 | $ 1,430 |
Cost of goods sold | ||||
Share-based Compensation | ||||
Total compensation cost | 87 | 73 | 171 | 142 |
Research and development | ||||
Share-based Compensation | ||||
Total compensation cost | 105 | 83 | 184 | 134 |
Selling and marketing expenses | ||||
Share-based Compensation | ||||
Total compensation cost | 217 | 182 | 413 | 322 |
General and administrative expenses | ||||
Share-based Compensation | ||||
Total compensation cost | $ 539 | $ 469 | $ 1,165 | $ 832 |
Share-based Compensation - Ex47
Share-based Compensation - Expense Other (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Share-based Compensation | ||||
Total compensation cost | $ 948,000 | $ 807,000 | $ 1,933,000 | $ 1,430,000 |
Unrecognized compensation cost | 7,800,000 | 7,800,000 | ||
Stock options | ||||
Share-based Compensation | ||||
Total compensation cost | 900,000 | 800,000 | $ 1,900,000 | 1,400,000 |
Compensation cost not yet recognized, period for recognition | 2 years 6 months | |||
RSU's | ||||
Share-based Compensation | ||||
Total compensation cost | 21,000 | $ 21,000 | ||
Compensation cost not yet recognized, period for recognition | 3 years 9 months 18 days | |||
Restricted stock | ||||
Share-based Compensation | ||||
Total compensation cost | 23,000 | $ 23,000 | $ 45,000 | $ 45,000 |
Unrecognized compensation cost | $ 26,000 | $ 26,000 | ||
Compensation cost not yet recognized, period for recognition | 3 months 15 days |
Share-based Compensation - Assu
Share-based Compensation - Assumptions Used in Determining Fair Value of Options (Details) - Stock options | 6 Months Ended |
Jun. 30, 2017$ / shares | |
Weighted average key assumptions used in determining the fair value of options granted | |
Estimated dividend yield (as a percent) | 0.00% |
Expected stock price volatility (as a percent) | 60.00% |
Weighted-average risk-free interest rate (as a percent) | 2.01% |
Expected life of option in years | 6 years 3 months |
Weighted-average option fair value at grant (in dollars per share) | $ 4.02 |
Share-based Compensation - Opti
Share-based Compensation - Options (Details) - Stock options - USD ($) $ / shares in Units, $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2017 | Dec. 31, 2016 | |
Summary of number of outstanding and exercisable options and the activity | ||
Outstanding at beginning of year (in shares) | 2,107,344 | |
Exercisable at beginning of year (in shares) | 595,424 | |
Granted (in shares) | 413,250 | |
Expired, forfeited or cancelled (in shares) | (163,471) | |
Outstanding at end of period (in shares) | 2,357,123 | 2,107,344 |
Exercisable at end of period (in shares) | 893,869 | 595,424 |
Summary of weighted-average exercise price of outstanding and exercisable options and the activity | ||
Outstanding at beginning of year (in dollars per share) | $ 12.17 | |
Exercisable at beginning of year (in dollars per share) | 9.72 | |
Granted (in dollars per share) | 7 | |
Expired, forfeited or cancelled (in dollars per share) | 10.53 | |
Outstanding at end of period (in dollars per share) | 11.38 | $ 12.17 |
Exercisable at end of period (in dollars per share) | $ 9.87 | $ 9.72 |
Summary of intrinsic value of outstanding and exercisable options and other information | ||
Intrinsic value, outstanding options | $ 1,708 | $ 1,128 |
Intrinsic value, exercisable options | $ 1,319 | $ 881 |
Weighted average remaining contractual life of options outstanding | 8 years 3 months 18 days | 8 years 6 months |
Weighted-average remaining contractual life of options exercisable | 7 years 6 months | 7 years 7 months 6 days |
Minimum | ||
Summary of weighted-average exercise price of outstanding and exercisable options and the activity | ||
Granted (in dollars per share) | $ 8.84 | |
Maximum | ||
Summary of weighted-average exercise price of outstanding and exercisable options and the activity | ||
Granted (in dollars per share) | $ 10.96 |
Share-based Compensation - RSUs
Share-based Compensation - RSUs (Details) - RSU's - $ / shares | May 01, 2017 | Jun. 30, 2017 |
Summary of outstanding equity instruments and activity | ||
Granted (in equity instruments) | 78,750 | 78,750 |
Outstanding at end of period (in equity instruments) | 78,750 | |
Summary of weighted-average fair value | ||
Granted (in dollars per equity instrument) | $ 7 | |
Outstanding at end of period (in dollars per equity instrument) | $ 7 | |
Summary of intrinsic value | ||
Weighted average remaining contractual life of equity instruments outstanding | 9 years 9 months 18 days | |
Four equal tranches | ||
Stock options, restricted stock and performance stock options | ||
Vesting period | 4 years |
Share-based Compensation - Rest
Share-based Compensation - Restricted Stock (Details) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2017 | Dec. 31, 2016 | |
Stock options, restricted stock and performance stock options | ||
Unrecognized compensation cost | $ 7,800,000 | |
Restricted stock | ||
Stock options, restricted stock and performance stock options | ||
Shares issued | 0 | 0 |
Unrecognized compensation cost | $ 26,000 | |
Compensation cost not yet recognized, period for recognition | 3 months 15 days | |
Vested restricted stock awards settled (in shares) | 0 | |
Unvested restricted stock outstanding (in shares) | 35,513 | 35,513 |
Weighted average fair value of nonvested restricted stock (in dollars per share) | $ 2.55 | $ 2.55 |
Shares granted | 0 | |
Shares vested | 0 | |
Shares forfeited | 0 |
Treasury stock (Details)
Treasury stock (Details) - shares | Oct. 17, 2016 | Jun. 30, 2017 | Dec. 31, 2016 |
Treasury stock | |||
Shares of treasury stock held | 18,906 | 18,906 | |
Restricted stock | |||
Treasury stock | |||
Shares surrendered by holder to cover taxes associated with vesting | 9,709 |
Commitments and contingencies -
Commitments and contingencies - Registration Payment Arrangement (Details) - Senior Secured Convertible Notes - Registration Agreement | Jun. 01, 2017USD ($)item$ / shares |
Registration Payment Arrangement | |
Time period after date of any Registration Failure during which additional damages are required to be paid | 30 days |
Additional damages payable upon any Registration Failure, as percent of original principal amount of debt | 2.00% |
Maximum reimbursable legal fees | $ 25,000 |
Liability recorded for expected unmet agreement obligations | $ 0 |
Damages payable as percentage of defined calculation (as a percent) | 2 |
Obligation payable to holder as percentage of difference between purchase and sale of Buy-In Shares, as defined (as a percent) | 110 |
Number of business days available for payment of additional damages | 5 days |
Minimum | |
Registration Payment Arrangement | |
Conversion price | $ / shares | $ 7 |
Maximum | |
Registration Payment Arrangement | |
Number of shares which may be issued for conversion of convertible notes | item | 940,924 |
Commitments and contingencies54
Commitments and contingencies - Patent Infringement Litigation (Details) - Actavis | Jul. 25, 2016patent |
Patent infringement litigation | |
Number Of Patents that Actavis Laboratories, Inc. alleges Will Not Be Infringed Upon | 4 |
Number Of Patents that Actavis Laboratories, Inc. alleges Will Not Be Infringed Upon Which Expire In April 2026 | 1 |
Number Of Patents that Actavis Laboratories, Inc. alleges Will Not Be Infringed Upon Which Expire In June 2032 | 3 |
Time Period For Which FDA Approval is Barred Upon Commencement Of Lawsuit | 30 months |
Commitments and contingencies55
Commitments and contingencies - Operating Lease, Cash Incentive Bonus Plan (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2015 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Commitments | ||||||
Deferred rent balance | $ 1,128,000 | $ 1,128,000 | $ 1,174,000 | |||
Bonus Expenses | 291,000 | $ 291,000 | 618,000 | $ 543,000 | ||
Grand Prairie Lease Plus Blue Bell Lease | ||||||
Commitments | ||||||
Rent expense, share of operating expenses | 62,000 | 59,000 | 121,000 | 116,000 | ||
Rent expense, excluding share of operating expenses | $ 252,000 | $ 252,000 | $ 504,000 | $ 505,000 | ||
Blue Bell, Pennsylvania | ||||||
Commitments | ||||||
Term of operating lease | 60 months |
License agreements (Details)
License agreements (Details) - Shire LLC - USD ($) $ in Millions | Mar. 06, 2017 | Feb. 26, 2016 |
NDA 204326 | Maximum | ||
License agreements | ||
Payment of non-refundable license fee | $ 1 | |
NDA for NT-0201 | ||
License agreements | ||
Maximum period for payment of license fee after regulatory approval by FDA | 30 days | |
NDA for NT-0201 | Maximum | ||
License agreements | ||
Non refundable license fee required per agreement | $ 1 |
Related party transactions - Sa
Related party transactions - Sale-leaseback (Details) - Related Party Sale-leaseback Transactions - USD ($) | 1 Months Ended | 12 Months Ended | |||||
Jun. 30, 2017 | Feb. 28, 2017 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2016 | Dec. 31, 2012 | |
Related party transactions | |||||||
Capital Lease Obligations | $ 3,289,000 | $ 445,000 | |||||
Transaction One | |||||||
Related party transactions | |||||||
Maximum amount authorized under sale and leaseback transaction | $ 6,500,000 | ||||||
Proceeds from sale of assets | $ 795,000 | $ 5,500,000 | |||||
Imputed interest rate on lease (as a percent) | 14.50% | 14.50% | |||||
Capital Lease Obligations | 121,000 | $ 445,000 | |||||
Transaction Two | |||||||
Related party transactions | |||||||
Maximum amount authorized under sale and leaseback transaction | $ 5,000,000 | ||||||
Lease term | P36M | ||||||
Proceeds from sale of assets | $ 2,742,000 | $ 481,000 | |||||
Imputed interest rate on lease (as a percent) | 14.90% | 14.30% |
Related party transactions - De
Related party transactions - Debt (Details) - USD ($) $ / shares in Units, $ in Millions | Jun. 30, 2017 | Feb. 17, 2017 | Feb. 08, 2017 | Jun. 30, 2017 |
Common Stock | ||||
Stock transaction disclosures | ||||
Issuance of common stock, net of issuance costs (in shares) | 11,299,639 | |||
Underwritten Public Offering | Common Stock | ||||
Stock transaction disclosures | ||||
Issuance of common stock, net of issuance costs (in shares) | 4,800,000 | 5,750,000 | ||
Public offering price (in dollars per share) | $ 6.25 | $ 5 | $ 6.25 | |
Proceeds from Issuance of Common Stock | $ 30 | $ 30 | ||
Payments of Stock Issuance Costs | $ 0.2 | $ 0.2 | ||
Term of option offered to underwriters | 30 days | 30 days | ||
Share offered to underwriters under option granted (in shares) | 720,000 | 720,000 | ||
Over-allotment option | Common Stock | ||||
Stock transaction disclosures | ||||
Issuance of common stock, net of issuance costs (in shares) | 750,000 | |||
Senior Secured Credit Facility | Debt issued to entities affiliated with Deerfield | Investor | ||||
Related party transactions | ||||
Face amount of debt at time of related party stock purchase | $ 60 |
Subsequent events (Details)
Subsequent events (Details) - USD ($) $ in Thousands | Jul. 26, 2017 | Jun. 30, 2017 | Feb. 17, 2017 | Feb. 08, 2017 | Jun. 30, 2017 | Jul. 26, 2017 |
Subsequent events | ||||||
Net proceeds from issuance of stock | $ 60,087 | |||||
Common Stock | ||||||
Subsequent events | ||||||
Issuance of common stock, net of issuance costs (in shares) | 11,299,639 | |||||
Underwritten Public Offering | Common Stock | ||||||
Subsequent events | ||||||
Issuance of common stock, net of issuance costs (in shares) | 4,800,000 | 5,750,000 | ||||
Net proceeds from issuance of stock | $ 26,700 | $ 34,300 | ||||
Subsequent event | Underwritten Public Offering | Common Stock | ||||||
Subsequent events | ||||||
Issuance of common stock, net of issuance costs (in shares) | 720,000 | |||||
Net proceeds from issuance of stock | $ 34,300 |