Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | May 04, 2018 | |
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 | Mar. 31, 2018 | |
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 | 28,996,956 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Current Assets: | ||
Cash and cash equivalents | $ 24,777 | $ 31,969 |
Short-term investments | 12,444 | 18,448 |
Accounts receivable, net of allowances for chargebacks and cash discounts of $1,435 and $1,154, respectively | 19,642 | 13,671 |
Inventories | 13,399 | 11,732 |
Other current assets | 2,841 | 3,575 |
Total current assets | 73,103 | 79,395 |
Property and equipment, net | 8,173 | 8,203 |
Intangible assets, net | 15,931 | 16,348 |
Other assets | 149 | 162 |
Total assets | 97,356 | 104,108 |
Current Liabilities: | ||
Accounts payable | 10,662 | 11,460 |
Accrued expenses | 28,580 | 20,944 |
Current portion of long-term debt | 948 | 896 |
Total current liabilities | 40,190 | 33,300 |
Long-Term Liabilities: | ||
Long-term debt, net of current portion | 58,973 | 58,938 |
Derivative liability | 1,474 | 1,660 |
Deferred rent | 1,059 | 1,083 |
Other long-term liabilities | 179 | 180 |
Total long-term liabilities | 61,685 | 61,861 |
Stockholders' Equity (Deficit): | ||
Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued or outstanding at March 31, 2018 and December 31, 2017 | ||
Common stock, $0.001 par value, 100,000,000 authorized at March 31, 2018 and December 31, 2017; 29,030,757 and 28,996,956 issued and outstanding at March 31, 2018, respectively; 29,030,757 and 28,996,956 issued and outstanding at December 31, 2017, respectively | 29 | 29 |
Treasury stock, at cost, 33,801 shares at March 31, 2018 and December 31, 2017 | (352) | (352) |
Additional paid-in capital | 275,551 | 274,584 |
Accumulated deficit | (279,744) | (265,308) |
Accumulated other comprehensive loss | (3) | (6) |
Total stockholders' equity (deficit) | (4,519) | 8,947 |
Total liabilities and stockholders' equity | $ 97,356 | $ 104,108 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Receivables allowances for chargebacks and cash discounts (in dollars) | $ 1,435 | $ 1,154 |
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 | 29,030,757 | 29,030,757 |
Common stock, outstanding shares | 28,996,956 | 28,996,956 |
Treasury stock, shares | 33,801 | 33,801 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Revenues: | ||
Net product sales | $ 10,729 | $ 5,631 |
Cost of goods sold | 5,221 | 4,750 |
Gross profit | 5,508 | 881 |
Research and development | 1,691 | 1,724 |
Selling and marketing expenses | 12,990 | 10,706 |
General and administrative expenses | 3,345 | 3,539 |
Loss from operations | (12,518) | (15,088) |
Interest expense | (2,220) | (2,211) |
Other income, net | 302 | 78 |
Net loss | $ (14,436) | $ (17,221) |
Weighted average common shares outstanding used to compute net loss per share, basic and diluted | 28,996,956 | 19,624,712 |
Net loss per share of common stock, basic and diluted | $ (0.50) | $ (0.88) |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Comprehensive Income (loss) | ||
Net loss | $ (14,436) | $ (17,221) |
Other comprehensive income (loss): | ||
Net unrealized gain (loss) on short-term investments | 3 | (2) |
Total other comprehensive income (loss) | 3 | (2) |
Comprehensive loss | $ (14,433) | $ (17,223) |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - 3 months ended Mar. 31, 2018 - USD ($) $ in Thousands | Common Stock | Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive (Loss) | Total |
Balance, beginning at Dec. 31, 2017 | $ 29 | $ (352) | $ 274,584 | $ (265,308) | $ (6) | $ 8,947 |
Balance, beginning (in shares) at Dec. 31, 2017 | 29,030,757 | (33,801) | ||||
Increase (Decrease) in Stockholders Equity | ||||||
Share-based compensation expense | 967 | 967 | ||||
Net unrealized gain on investments | 3 | 3 | ||||
Net loss | (14,436) | (14,436) | ||||
Balance, ending at Mar. 31, 2018 | $ 29 | $ (352) | $ 275,551 | $ (279,744) | $ (3) | $ (4,519) |
Balance, ending (in shares) at Mar. 31, 2018 | 29,030,757 | (33,801) |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Cash Flows From Operating Activities: | |||
Net loss | $ (14,436) | $ (17,221) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Share-based compensation expense | 967 | 985 | |
Depreciation and amortization of property and equipment | 421 | 335 | |
Amortization of patents and other intangible assets | 434 | 408 | |
Changes in fair value of earnout, derivative and warrant liabilities | (186) | ||
Deferred interest on debt | 2,087 | ||
Amortization of senior debt discounts | 209 | 81 | |
Amortization of short-term investment purchase discounts | (35) | (6) | |
Gain on sale of equipment | (1) | (20) | |
Other adjustments | (24) | (23) | |
Changes in operating assets and liabilities: | |||
Accounts receivable | (5,971) | (5,717) | |
Inventories | (1,667) | 298 | |
Deferred contract sales organization fees | 597 | ||
Other assets | 1,154 | 597 | |
Accounts payable | (1,205) | (1,313) | |
Accrued expenses | 7,636 | 2,973 | |
Net cash used in operating activities | (12,704) | (15,939) | |
Cash Flows From Investing Activities: | |||
Purchases of short-term investments | (10,951) | (8,534) | |
Sales and maturities of short-term investments | 16,993 | 13,397 | |
Proceeds from sale-leaseback of equipment | 481 | ||
Capital expenditures | (286) | (198) | |
Intangible asset expenditures | (17) | ||
Net cash provided by investing activities | 5,739 | 5,146 | |
Cash Flows From Financing Activities: | |||
Proceeds from the issuance of common stock, net of issuance costs | 30,265 | ||
Payments made on borrowings | (227) | (163) | |
Net cash (used in) provided by financing activities | (227) | 30,102 | |
(Decrease) increase in cash and cash equivalents | (7,192) | 19,309 | |
Cash and Cash Equivalents: | |||
Beginning | 31,969 | 24,352 | $ 24,352 |
Ending | 24,777 | 43,661 | $ 31,969 |
Supplemental Disclosure of Noncash Transactions: | |||
Prepaid assets included in accounts payable | 407 | ||
Acquired equipment under capital lease | 105 | ||
Capital lease liability from purchase of equipment | 105 | ||
Deferred contract sales organization fees | 500 | ||
Capital lease liability from sale-leaseback transactions | 481 | ||
Supplemental Cash Flow Information: | |||
Interest paid | $ 2,040 | $ 19 |
Organization and nature of oper
Organization and nature of operations | 3 Months Ended |
Mar. 31, 2018 | |
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 three approved products 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. 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, the Company initiated an early experience program with limited product availability on September 5, 2017 before launching this product nationwide on October 2, 2017. Also, the Company received approval from the FDA for Adzenys ER oral suspension (“Adzenys ER”) on September 15, 2017 and launched this product on February 26, 2018. 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 | 3 Months Ended |
Mar. 31, 2018 | |
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 months ended March 31, 2018 are not necessarily indicative of the results for the year ending December 31, 2018 or any period thereafter. The audited consolidated financial statements as of and for the year ended December 31, 2017 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 16, 2018. 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, 2017. Principles of consolidation: At March 31, 2018 and December 31, 2017 and for the three months ended March 31, 2018 and 2017, 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: In 2017, the Company reclassified certain patents from Other assets to Intangible assets, net as reported on the condensed consolidated balance sheets. Liquidity: During 2017 and the three months ended March 31, 2018, 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, Cotempla XR-ODT and Adzenys ER. 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 material 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 measured at the lower of cost (first in, first out) or net realizable value. 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 and finished goods. 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, for the production of Cotempla XR-ODT incurred after June 30, 2017, following the FDA approval date of June 19, 2017, and for the production of Adzenys ER incurred after September 30, 2017, following the FDA approval date of September 15, 2017, are being 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. The Company estimates that the patents it has filed have a future beneficial value. Therefore, costs associated with filing for its patents are capitalized. Once the patent is approved and commercial revenue realized, the costs associated with the patent are amortized over the useful life of the patent. If the patent is not approved, the costs will be expensed. Revenue recognition: Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services at a point in time. The Company makes estimates of the net sales price, including estimates of variable consideration (e.g., savings offers, prompt payment discounts, product returns, wholesaler fees, wholesaler chargebacks and estimated rebates) to be incurred on the selling price of the respective product sales, and recognizes the estimated amount as revenue when it transfers control of the product to its customers (e.g., upon delivery). Variable consideration is determined using either an expected value or a most likely amount method. The estimate of variable consideration is also subject to a constraint such that some or all of the estimated amount of variable consideration will only be included in the transaction price to the extent that it is probable that a significant reversal of revenue (in the context of the contract) will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Estimating variable consideration and the related constraint will require the use of significant management judgment and other market data. The Company provides for prompt payment discounts, wholesaler fees and wholesaler chargebacks based on customer contractual stipulations. The Company analyzes recent product return history and other market data obtained from its third party logistics providers (“3PLs”) to determine a reliable return rate. Additionally, management analyzes historical savings offers and rebate payments based on patient prescriptions dispensed for Adzenys XR ODT, Cotempla XR ODT and Adzenys ER and information obtained from third party providers to determine these respective variable considerations. The Company sells its generic Tussionex, Adzenys XR-ODT, Cotempla XR-ODT and Adzenys ER 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 views its operations and manages its business in one operating segment, which is the development, manufacturing and commercialization of pharmaceuticals. Disaggregation of revenue The following table disaggregates the Company’s net product sales by product: March 31, 2018 2017 (in thousands) Adzenys XR-ODT $ $ Cotempla XR-ODT — Adzenys ER — Generic Tussionex $ $ Net branded product sales Net product sales for branded Adzenys XR-ODT, Cotempla XR-ODT and Adzenys ER 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, estimated rebates to be incurred on the selling price of the respective product sales and estimated allowances for product returns. The Company recognizes branded total gross product sales less gross to net sales adjustments as revenue based on shipments from 3PLs to the Company’s wholesaler customers. Savings offers The Company offers savings programs for Adzenys XR-ODT, Cotempla XR-ODT and Adzenys ER to patients covered under commercial payor plans in which the cost of a prescription to such patients is discounted. The Company records the amount of redeemed savings offers based on information from third-party providers against the estimated discount recorded as accrued expenses. The estimated discount is recorded as a gross to net sales adjustments at the time revenue is recognized. Prompt payment discounts Prompt payment discounts are based on standard programs with wholesalers and are recorded as a discount allowance against accounts receivable and as a gross to net sales adjustments at the time revenue is recognized. Wholesale distribution fees Wholesale distribution fees are based on definitive contractual agreements for the management of the Company’s products by wholesalers and are recorded as accrued expenses and as a gross to net sales adjustment at the time revenue is recognized. Rebates for branded products 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. Calculations related to these rebate accruals are estimated based on information from third-party providers. Estimated rebates payable under such programs are recorded as a reduction of revenue at the time revenues are recorded. Historical trends of estimated rebates will be continually monitored and may result in future adjustments to such estimates. Product returns of branded products 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. Estimated returns are recorded as accrued expenses and as a gross to net sales adjustments at the time revenue is recognized. The Company analyzed recent branded product return history and other market data obtained from the Company’s 3PLs to determine a reliable return rate. Net generic product sales Net product sales for generic Tussionex product represent total gross product sales less gross to net sales adjustments. Gross to net sales adjustments include prompt payment discounts, estimated allowances for product returns, wholesaler fees, estimated government rebates and estimated chargebacks to be incurred on the selling price of generic Tussionex related to the respective product sales. The Company recognizes generic Tussionex total gross product sales less gross to net sales adjustments as revenue based on shipments from 3PLs to the Company’s wholesaler customers. Prompt payment discounts Prompt payment discounts are based on standard programs with wholesalers and are recorded as a discount allowance against accounts receivable and as a gross to net sales adjustments at the time revenue is recognized. Product returns of generic product 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. Estimated returns are recorded as accrued expenses and as a gross to net sales adjustments at the time revenue is recognized. Generic Tussionex product returns were estimated based upon return data available from sales of the Company’s generic Tussionex product over the past three years. Wholesale distribution fees Wholesale distribution fees are based on definitive contractual agreements for the management of the Company’s product by wholesalers and are recorded as accrued expenses and as a gross to net sales adjustments at the time revenue is recognized. Rebates for generic product The Company’s generic Tussionex product is subject to state government-managed Medicaid programs whereby discounts and rebates are provided to participating state governments. Estimated government rebates are recorded as accrued expenses and as a gross to net sales adjustments at the time revenue is recognized. Generic Tussionex government rebates are estimated based upon rebate payment data available from sales of the Company’s generic Tussionex product over the past three years. Historical trends of such rebates will be continually monitored and may result in future adjustments to such estimates. Wholesaler chargebacks The Company’s generic Tussionex 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. Estimated chargebacks are recorded as a discount allowance against accounts receivable and as a gross to net sales adjustments at the time revenue is recognized based on information provided by third parties. Due to estimates and assumptions inherent in determining the amount of generic Tussionex returns, rebates and chargebacks, the actual amount of returns, 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 are recorded in the same period that the related revenue is recognized. 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. Advertising costs: Advertising costs are comprised of print and electronic media placements that are expensed as incurred. The Company recognized advertising costs of $0.2 million during each of the three months ended March 31, 2018 and 2017. 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. 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 March 31, 2018 and December 31, 2017, 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. 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, at March 31, 2018 and December 31, 2017, the Company 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 March 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2018-05 (“ASU 2018-05”), Income Taxes (Topic 740) — Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 , which was issued to state the income tax accounting implications of the Tax Cuts and Jobs Act of 2017 (the “TCJA”). The guidance clarifies the measurement period timeframe, changes in subsequent reporting periods and reporting requirements as a result of the TCJA. The measurement period begins in the period that includes the TCJA’s enactment date which was December 22, 2017 and as a result the Company has reflected the impact of this ASU on the deferred tax calculation as of December 31, 2017. In February 2018, the FASB issued ASU No. 2018-02, Income Statement —Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income , which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the TCJA, and requires certain disclosures about stranded tax effects. ASU 2018-02 is effective for entities for fiscal years beginning after December 15, 2018 with early adoption permitted, and shall be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the corporate income tax rate in the TCJA is recognized. The Company will adopt this standard on January 1, 2019. The adoption of this standard will not have a material impact on the Company’s consolidated results of operations or financial position. In May 2017, the FASB issued ASU No. 2017-09, Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the modification. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. This standard became effective for the Company on January 1, 2018. The adoption of this standard does not have a material impact on the Company’s consolidated results of operations or financial position. In August 2016, the FASB issued 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. This standard became effective for the Company on January 1, 2018. The adoption of this standard does not have a significant effect on the Company’s ongoing financial reporting as the Company had 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. In January 2018, the FASB issued ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842, Leases (Topic 842) , which adds two practical expedients to the new lease guidance. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, 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 standard will have on its consolidated financial statements and related disclosures and has not determined the expected impact at this time. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (the “New Revenue Standard”) . The New Revenue Standard replaces transaction-and industry-specific revenue recognition guidance under current U.S. GAAP with a principles-based approach for determining revenue recognition. The New Revenue Standard 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 contracts with customers. The New Revenue Standard became effective for the Company on January 1, 2018. For purposes of providing comparable periods upon adoption, the Company applied the full retrospective transition method, which required the Company to restate each prior reporting period presented. The impact of the New Revenue Standard relates to the Company’s accounting for branded net product sales. There are no changes to the net product sales of generic Tussionex revenue since the Company has estimated product returns since inception of recognizing revenue in August 2014. The Company implemented internal controls and key system functionality to enable the preparation of financial information and reached conclusions on key accounting assessments related to the New Revenue Standard, including management’s assessment that the impact of accounting for costs incurred to obtain a contract is immaterial. Under the New Revenue Standard, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those good or services. Therefore, the Company is required to make estimates of the net sales price, including estimates of variable consideration (e.g., savings offers, prompt payment discounts, product returns, wholesaler fees and estimated rebates) to be incurred on the selling price of the respective branded product sales, and recognize the estimated amount as revenue, when it transfers control of the product to its customers (e.g., upon shipment or delivery). Variable consideration must be determined using either an expected value or most likely amount method. The estimate of variable consideration is also subject to a constraint such that some or all of the estimated amount of variable consideration will only be included in the transaction price to the extent that it is probable that a significant reversal of revenue (in the context of the contract) will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Estimating variable consideration and the related constraint require the use of significant management judgment and other market data. To implement the New Revenue Standard, the Company analyzed recent branded product return history and other market data obtained from its 3PLs to determine a reliable return rate. Additionally, management analyzed historical savings offers, prompt payment discounts, wholesaler fees and rebates payments based on patient prescriptions dispensed of Adzenys XR-ODT, Cotempla XR-ODT and information obtained from third-party providers to determine these respective variable considerations. Management has concluded that estimates of the above variable considerations are reasonably constrained, and estimates can be used for recognizing branded total gross product sales less gross to net sales adjustments as revenue beginning January 1, 2018. Refer to Impacts to Previously Reported Results below for the impact of adoption of the New Revenue Standard included in the Company’s condensed consolidated statements of operations. Impacts to Previously Reported Results Adoption of the new revenue standard impacted the Company’s previously reported results as follows: Three Months Ended March 31, 2017 As Previously New Revenue Condensed consolidated statements of operations Reported Adjustment As Adjusted (in thousands, except per share amounts) Revenue: net product sales $ $ $ Cost of goods sold Gross profit ) Net loss attributable to common stock ) ) ) Net loss per share of common stock, basic and diluted ) ) ) December 31, 2017 As Previously New Revenue Condensed consolidated statements of balance sheet Reported Adjustment As Adjusted (in thousands) Inventories $ $ ) $ Other current assets ) Total current assets ) Accrued expenses Deferred revenue ) — Total current liabilities ) Accumulated deficit ) ) ) Total liabilities and stockholder’ equity ) Adoption of the New Revenue Standard had no impact to cash from or used in operating, financing, or investing activities on the Company’s consolidated statements of cash flows. 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 | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 and 2017 were excluded from consideration in the computation of diluted net loss per share of common stock for the three months ended March 31, 2018 and 2017, respectively, because including them would have been anti-dilutive: March 31, 2018 2017 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 | 3 Months Ended |
Mar. 31, 2018 | |
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 and accrued liabilities, approximated their fair value due to their short-term 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 March 31, 2018 Level 1 Level 2 Level 3 Total (in thousands) Cash and cash equivalents $ $ $ — $ Short-term investments — — Total financial assets $ — $ Earnout liability $ — $ — $ $ Derivative liability (see Note 8) — — Total financial liabilities $ — $ — $ $ Fair Value as of December 31, 2017 Level 1 Level 2 Level 3 Total (in thousands) Cash and cash equivalents $ $ — $ — $ Short-term investments — — Total financial assets $ $ $ — $ Earnout liability $ — $ — $ $ Derivative liability (see Note 8) — — Total financial liabilities $ — $ — $ $ 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 March 31, 2018 and December 31, 2017. 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 March 31, 2018 and December 31, 2017 as shown below: March 31, 2018 Amortized Unrealized Market Cost Gain / (Loss) Value (in thousands) Bank deposits and money market funds $ $ — $ Financial and corporate debt securities ) $ $ ) $ December 31, 2017 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 and the fair value of the Deerfield Private Design Fund III, L.P. and Deerfield Special Situations Fund, L.P. derivative liability at March 31, 2018 and December 31, 2017. The fair value of the derivative liability was determined after taking into consideration valuations using the Monte Carlo method based on assumptions at December 31, 2017 and March 31, 2018. There were no significant changes in the pricing assumptions during the three months ended March 31, 2018. The methodologies and significant inputs used in the determination of the fair value of the debt derivative liability were as follows: Derivative Liability Date of Valuation 3/31/2018 12/31/2017 Valuation Method Monte Carlo Monte Carlo Volatility (annual) N/A N/A Time period from valuation until maturity of debt (yrs.) 4.113 4.360 Cumulative probability of a change in control prepayment implied by model 27% 27% Cumulative probability of other accelerated prepayments implied by model 16% 17% Discount rate 16.53% 16.20% Fair value of liability at valuation date (thousands) $1,474 $1,660 Significant changes to these assumptions would result in increases/decreases to the fair value of the 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, 2017 $ Change in fair value ) Balance at March 31, 2018 $ |
Inventories
Inventories | 3 Months Ended |
Mar. 31, 2018 | |
Inventories | |
Inventories | Note 5. Inventories Inventories at the indicated dates consist of the following: December 31, March 31, 2017 2018 (as adjusted) (in thousands) Raw materials $ $ Work in progress Finished goods Inventory at cost Inventory reserve ) ) $ $ |
Sale-leaseback transaction
Sale-leaseback transaction | 3 Months Ended |
Mar. 31, 2018 | |
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 under the provisions of Accounting Standards Codification (“ASC”) Topic 840-40, Leases—Sale Leaseback Transactions . 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 12). 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 consolidated statements of operations and 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. The two February leases and the July lease had been fully satisfied before 2017. The November 2013 leases for a total of $1.0 million of assets expired in April 2017 and the related $161,000 gain was fully amortized at that time and the $100,000 lease buy-out option liability was fully satisfied. The March 2014 lease for $795,000 of assets expired in September 2017 and the related $116,000 gain was fully amortized at that time and the lease buy-out option liability of $79,000 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 is for an initial term of 36 months and has 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 March 31, 2018 and 2017, approximately $1,000 and $20,000, respectively, of the net gain on sale-leasebacks was recognized in other income on the condensed consolidated statements of operations. |
Accrued expenses
Accrued expenses | 3 Months Ended |
Mar. 31, 2018 | |
Accrued expenses | |
Accrued expenses | Note 7. Accrued expenses Accrued expenses as of March 31, 2018 and December 31, 2017 consist of the following: March 31, December 31, (in thousands) Accrued savings offers $ $ Accrued rebates Accrued customer returns Accrued wholesaler fees Accrued payroll and benefits Other accrued expenses Total accrued expenses $ $ |
Long-term debt
Long-term debt | 3 Months Ended |
Mar. 31, 2018 | |
Long-term debt | |
Long-term debt | Note 8. Long-term debt Long-term debt at the indicated dates consists of the following: March 31, December 31, 2018 2017 (in thousands) Deerfield senior secured credit facility, net of discount of $2,635 and $2,843, respectively $ $ Capital leases, maturing through May 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 (the “Facility”) with Deerfield Private Design Fund III, L.P. (66 2/3% of Facility) and Deerfield Special Situations Fund, L.P. (33 1/3% of Facility) (collectively, “Deerfield”), as lenders. In February 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 (see Note 9). 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, was classified as a related party at the time of the corresponding transactions. 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 (the “LSA”) with Hercules Technology III, L.P., (“Hercules”), the $1.1 million LSA end of term fee, a 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 (the “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 (the “Accrued Interest”) was due and payable on June 1, 2017. Borrowings under the Facility are collateralized by substantially all of the Company’s assets, except the assets under capital lease. The terms of the Facility require the Company to 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 was 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 was to become due and payable upon written notice from Deerfield, and if either (a) the Company did not meet certain quarterly sales milestones specified in the Amendment or (b) the Company had not received and publicly announced FDA approval of the new drug applications on or before the applicable Prescription Drug User Fee Act (the “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 was convertible 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 was 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. On October 26, 2017, Deerfield provided a conversion notice electing to convert the entire $6.6 million of Convertible Notes into shares of the Company’s common stock at a conversion price of $7.08 per share. The conversion price was based on 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. This resulted in issuing 929,967 shares of the Company’s common stock to Deerfield on this date and the Convertible Notes were cancelled. In conjunction with the Amendment to the Facility and the related issuance of the Convertible Notes, the Company entered into a Registration Rights Agreement (the “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 (the “Conversion Shares”) (subject to certain adjustment for stock split, dividend or other distribution, recapitalization or similar events, the “Registrable Securities”) within 30 days from June 1, 2017, which was to become effective per the SEC no later than 75 days thereafter. The Company filed a registration statement on Form S-3 to comply with the Registration Agreement on June 30, 2017, which 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 Financial Industry Regulatory Authority (“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 12). 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 $2.1 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. Pursuant to the Convertible Notes, if the Company had failed to provide the number of conversion shares, then the Company would have paid damages to Deerfield or subsequent holder or any designee (“Holder”) for each day after the third business day after receipt of notice of conversion (the “Share Delivery Date”) that such conversion was 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 March 31, 2018, the Company was in compliance with the covenants under the Facility. 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 25.35% on the Convertible Notes, charged to interest expense and totaled $209,000 for the three months ended March 31, 2018 and $1,316,000 for the year ended December 31, 2017, respectively. Capital lease obligations to related party: As described in Notes 6 and 11, during the years ended December 31, 2017, 2014 and 2013, the Company entered into agreements with Essex 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 $98,000 and 19,000 for the three months ended March 31, 2018 and 2017, respectively. Future principal payments of long-term debt including capital leases are as follows: Period ending: March 31, (in thousands) 2019 $ 2020 2021 2022 2023 Thereafter — 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 | 3 Months Ended |
Mar. 31, 2018 | |
Common stock | |
Common stock | Note 9. Common stock In February 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, was classified as a related party at the time of the corresponding transactions. 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 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. 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 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 year ended December 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 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 months ended March 31, 2018. As of March 31, 2018, $58.0 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. On October 26, 2017, Deerfield provided a conversion notice electing to convert the entire $6.6 million of Convertible Notes into shares of the Company’s common stock at a conversion price of $7.08 per share. The conversion price was based on 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. This resulted in issuing 929,967 shares of the Company’s common stock to Deerfield on this date and the Convertible Notes were cancelled. |
Share-based Compensation
Share-based Compensation | 3 Months Ended |
Mar. 31, 2018 | |
Share-based Compensation | |
Share-based Compensation | Note 10. Share-based Compensation Share-based Compensation Plans In July 2015, the Company adopted the Neos Therapeutics, Inc. 2015 Stock Option and Incentive Plan (the “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, 2018 and 2017, the Company added 1,449,847 shares and 803,049 shares, respectively, to the option pool. The 2015 Plan superseded the Neos Therapeutics, Inc. 2009 Equity Plan (the “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 March 31, 2018, 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, 2017, 9,304 shares related to forfeited 2009 Plan options and 33,801 shares related to the surrender of restricted stock were added to the shares available under the 2015 Plan. During the three months ended March 31, 2018, 5,000 shares related to forfeited 2009 Plan options were added to the shares available under the 2015 Plan. As of March 31, 2018, 1,377,804 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 months ended March 31, 2018 and 2017, respectively, in its condensed consolidated statements of operations as follows: Three Months Ended March 31, 2018 2017 (in thousands) Cost of goods sold $ $ Research and development Selling and marketing General and administrative $ $ The total share based compensation expense included in the table above is attributable to stock options and RSUs of $931,000 and $36,000 for the three months ended March 31, 2018, respectively. The total share based compensation expense included in the table above is attributable to stock options and restricted stock of $963,000 and $22,000 for the three months ended March 31, 2017, respectively. As of March 31, 2018, there was $8.9 million of compensation costs adjusted for any estimated forfeitures, related to non-vested stock options and RSUs 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 and 3.6 years for RSUs. There is no unrecognized compensation cost associated with grants of restricted stock. Stock Options During the three months ended March 31, 2018, the Company’s board of directors granted 608,753 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: Three Months Ended March 31, 2018 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 March 31, 2018 and December 31, 2017 and the activity from December 31, 2017 through March 31, 2018, is presented below: Weighted- Number of Average Intrinsic Options Exercise Price Value (in thousands) Outstanding at December 31, 2017 $ $ Exercisable at December 31, 2017 $ $ Granted $ Exercised — — Expired, forfeited or cancelled ) Outstanding at March 31, 2018 $ $ Exercisable at March 31, 2018 $ $ The weighted-average remaining contractual life of options outstanding and exercisable on March 31, 2018 was 8.1 and 7.0 years, respectively. The option exercise prices for all options granted January 1, 2018 through March 31, 2018 ranged from $8.30 per share to $10.40 per share. The weighted-average remaining contractual life of options outstanding and exercisable on December 31, 2017 was 7.9 and 7.2 years, respectively. The option exercise price for all options granted in the year ended December 31, 2017 ranged from $7.00 to $9.10 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. On October 2, 2017, the Company granted 6,250 RSUs to a member of its management which vest in four equal annual installments, beginning October 2, 2018. On March 1, 2018, the Company granted 93,750 RSUs to members of its management which vest in four equal annual installments, beginning March 1, 2019. The Company had not issued any RSUs previously. A summary of outstanding RSUs as of March 31, 2018 and December 31, 2017 and the activity from December 31, 2017 through March 31, 2018, is presented below: Weighted- Number of Average RSUs Fair Value Outstanding at December 31, 2017 $ Granted Exercised — — Expired, forfeited or cancelled — — Outstanding at March 31, 2018 $ The weighted-average remaining contractual life of RSUs outstanding on March 31, 2018 was 9.5 years. Restricted stock The Company did not issue any shares of restricted stock for the three months ended March 31, 2018, or for the year ended December 31, 2017. No vested restricted stock awards were settled during the three months ended March 31, 2018. The Company had no unvested restricted stock as of March 31, 2018 and December 31, 2017. For the three months ended March 31, 2018, there were no shares of restricted stock granted or forfeited. |
Treasury stock
Treasury stock | 3 Months Ended |
Mar. 31, 2018 | |
Treasury stock | |
Treasury stock | Note 11. 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 16, 2017, October 17, 2016 and October 16, 2015, 14,895 shares, 9,709 shares and 9,197 shares, respectively, 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 33,801 shares as of December 31, 2017 and March 31, 2018. |
Commitments and contingencies
Commitments and contingencies | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and contingencies | |
Commitments and contingencies | Note 12. Commitments and contingencies Registration Payment Arrangement: In June 2017, 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 8) within 30 days from June 1, 2017, which was to become effective per the SEC no later than 75 days thereafter. The Company filed a registration statement on Form S-3 to comply with the Registration Agreement on June 30, 2017, which 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. Patent Infringement Litigation: On October 31, 2017, the Company received a paragraph IV certification from Teva Pharmaceuticals USA, Inc. (“Teva”) advising the Company that Teva had filed an Abbreviated New Drug Application (“ANDA”) with the FDA for a generic version of Cotempla XR-ODT, in connection with seeking to market its product prior to the expiration of patents covering Cotempla XR-ODT. The certification notice alleged that the three U.S. patents listed in the FDA’s Orange Book for Cotempla XR-ODT, one with an expiration date in April 2026 and two with expiration dates in June 2032, will not be infringed by Teva’s proposed product, are invalid and/or are unenforceable. On December 13, 2017, the Company filed a patent infringement lawsuit in federal district court in the District of Delaware against Teva alleging that Teva infringed the Company’s Cotempla XR-ODT patents by submitting to the FDA an ANDA seeking to market a generic version of Cotempla XR-ODT prior to the expiration of the Company’s patents. This lawsuit automatically stayed, or barred, the FDA from approving Teva’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 Cotempla XR-ODT. On July 25, 2016, the Company received a paragraph IV certification from Actavis Laboratories FL, Inc. (“Actavis”) advising the Company that Actavis had filed an ANDA with the FDA for a generic version of Adzenys XR-ODT. The certification notice alleged 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 in the District of Delaware against Actavis alleging 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. On October 17, 2017, the Company entered into a Settlement Agreement (the “Settlement Agreement”) and a Licensing Agreement (the “Licensing Agreement” and collectively with the Settlement Agreement, the “Agreement”) with Actavis. The Agreement resolves all ongoing litigation involving the Company’s Adzenys XR-ODT patents and Actavis’s ANDA. Under the Agreement, the Company granted Actavis the right to manufacture and market its generic version of Adzenys XR-ODT under the ANDA beginning on September 1, 2025, or earlier under certain circumstances. A stipulation and order of dismissal was entered by the U.S. District Court for the District of Delaware. The Agreement has been submitted to the applicable governmental agencies. Other Litigation: On March 7, 2018, the Company received a citation advising the Company that the County of Harris Texas (the “County”) filed a lawsuit on December 13, 2017 against the Company and various other alleged manufacturers, promoters, sellers and distributors of opioid pharmaceutical products. Through this lawsuit, the County seeks to recoup as damages some of the expenses it allegedly has incurred to combat opioid use and addiction. The County also seeks punitive damages, disgorgement of profits and attorneys’ fees. While the Company believes that the lawsuit is without merit and intends to vigorously defend against it, the Company is not able to predict at this time whether this proceeding will have a material impact on its results of operations. 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 $1,059,000 million at March 31, 2018 and $1,083,000 million at December 31, 2017, 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 $54,000 and $59,000 for the three months ended March 31, 2018 and 2017, respectively. Rent expense for these leases, excluding the share of operating expenses, was $253,000 and $252,000 for the three months ended March 31, 2018 and 2017, 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 $344,000 and $327,000 of compensation expense for the three months ended March 31, 2018 and 2017, respectively, under the Bonus Plan. |
License agreements
License agreements | 3 Months Ended |
Mar. 31, 2018 | |
License agreements | |
License agreements | Note 13. License agreements On October 17, 2017, the Company entered into the Agreement with Actavis. Under the Licensing Agreement, the Company granted Actavis a non-exclusive license to certain patents owned by the Company by which Actavis has the right to manufacture and market its generic version of Adzenys XR-ODT under its ANDA beginning on September 1, 2025, or earlier under certain circumstances. The Licensing Agreement has been submitted to the applicable governmental agencies (see Note 12). On July 23, 2014, the Company entered into a Settlement Agreement and an associated License Agreement (the “2014 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 (the “NDA”) No. 204326 for an extended-release orally disintegrating amphetamine polistirex tablet. In accordance with the terms of the 2014 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 in February 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 had 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 product, Adzenys ER, are invalid, unenforceable and/or will not be infringed by the commercial manufacture, use or sale of Adzenys ER. On March 6, 2017, the Company entered into a License Agreement (the “2017 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 NDA No. 204325 for an extended-release amphetamine liquid suspension. In accordance with the terms of the 2017 License Agreement, following the receipt of the approval from the FDA for Adzenys ER, the Company paid a lump sum, non-refundable license fee of an amount less than $1.0 million in October 2017. The Company will also pay a single digit royalty on net sales of Adzenys ER during the life of the relevant Shire patents. Such license fees are capitalized as an intangible asset and are amortized into cost of goods sold 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. Additionally, each of the 2014 and 2017 License Agreements contains a covenant from Shire not to file a patent infringement suit against the Company alleging that Adzenys XR-ODT or Adzenys ER, respectively, infringes the Shire patents. |
Related party transactions
Related party transactions | 3 Months Ended |
Mar. 31, 2018 | |
Related party transactions | |
Related party transactions | Note 14. 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. The total lease obligation under all related party financing arrangements was $2,467,000 and $2,678,000 at March 31, 2018 and December 31, 2017, respectively. In February 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 9). 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. 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 (see Note 9). 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, was classified as a related party at the time of the corresponding transactions. 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. On October 26, 2017, Deerfield provided a conversion notice electing to convert the entire $6.6 million of Convertible Notes into shares of the Company’s common stock at a conversion price of $7.08 per share. The conversion price was based on 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. This resulted in issuing 929,967 shares of the Company’s common stock to Deerfield on this date and the Convertible Notes were cancelled (see Note 8). |
Summary of significant accoun22
Summary of significant accounting policies (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
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 months ended March 31, 2018 are not necessarily indicative of the results for the year ending December 31, 2018 or any period thereafter. The audited consolidated financial statements as of and for the year ended December 31, 2017 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 16, 2018. 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, 2017. |
Principles of consolidation | Principles of consolidation: At March 31, 2018 and December 31, 2017 and for the three months ended March 31, 2018 and 2017, 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: In 2017, the Company reclassified certain patents from Other assets to Intangible assets, net as reported on the condensed consolidated balance sheets. |
Liquidity | Liquidity: During 2017 and the three months ended March 31, 2018, 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, Cotempla XR-ODT and Adzenys ER. 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 material 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 measured at the lower of cost (first in, first out) or net realizable value. 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 and finished goods. 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, for the production of Cotempla XR-ODT incurred after June 30, 2017, following the FDA approval date of June 19, 2017, and for the production of Adzenys ER incurred after September 30, 2017, following the FDA approval date of September 15, 2017, are being 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. The Company estimates that the patents it has filed have a future beneficial value. Therefore, costs associated with filing for its patents are capitalized. Once the patent is approved and commercial revenue realized, the costs associated with the patent are amortized over the useful life of the patent. If the patent is not approved, the costs will be expensed. |
Revenue recognition | Revenue recognition: Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services at a point in time. The Company makes estimates of the net sales price, including estimates of variable consideration (e.g., savings offers, prompt payment discounts, product returns, wholesaler fees, wholesaler chargebacks and estimated rebates) to be incurred on the selling price of the respective product sales, and recognizes the estimated amount as revenue when it transfers control of the product to its customers (e.g., upon delivery). Variable consideration is determined using either an expected value or a most likely amount method. The estimate of variable consideration is also subject to a constraint such that some or all of the estimated amount of variable consideration will only be included in the transaction price to the extent that it is probable that a significant reversal of revenue (in the context of the contract) will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Estimating variable consideration and the related constraint will require the use of significant management judgment and other market data. The Company provides for prompt payment discounts, wholesaler fees and wholesaler chargebacks based on customer contractual stipulations. The Company analyzes recent product return history and other market data obtained from its third party logistics providers (“3PLs”) to determine a reliable return rate. Additionally, management analyzes historical savings offers and rebate payments based on patient prescriptions dispensed for Adzenys XR ODT, Cotempla XR ODT and Adzenys ER and information obtained from third party providers to determine these respective variable considerations. The Company sells its generic Tussionex, Adzenys XR-ODT, Cotempla XR-ODT and Adzenys ER 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 views its operations and manages its business in one operating segment, which is the development, manufacturing and commercialization of pharmaceuticals. Disaggregation of revenue The following table disaggregates the Company’s net product sales by product: March 31, 2018 2017 (in thousands) Adzenys XR-ODT $ $ Cotempla XR-ODT — Adzenys ER — Generic Tussionex $ $ Net branded product sales Net product sales for branded Adzenys XR-ODT, Cotempla XR-ODT and Adzenys ER 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, estimated rebates to be incurred on the selling price of the respective product sales and estimated allowances for product returns. The Company recognizes branded total gross product sales less gross to net sales adjustments as revenue based on shipments from 3PLs to the Company’s wholesaler customers. Savings offers The Company offers savings programs for Adzenys XR-ODT, Cotempla XR-ODT and Adzenys ER to patients covered under commercial payor plans in which the cost of a prescription to such patients is discounted. The Company records the amount of redeemed savings offers based on information from third-party providers against the estimated discount recorded as accrued expenses. The estimated discount is recorded as a gross to net sales adjustments at the time revenue is recognized. Prompt payment discounts Prompt payment discounts are based on standard programs with wholesalers and are recorded as a discount allowance against accounts receivable and as a gross to net sales adjustments at the time revenue is recognized. Wholesale distribution fees Wholesale distribution fees are based on definitive contractual agreements for the management of the Company’s products by wholesalers and are recorded as accrued expenses and as a gross to net sales adjustment at the time revenue is recognized. Rebates for branded products 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. Calculations related to these rebate accruals are estimated based on information from third-party providers. Estimated rebates payable under such programs are recorded as a reduction of revenue at the time revenues are recorded. Historical trends of estimated rebates will be continually monitored and may result in future adjustments to such estimates. Product returns of branded products 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. Estimated returns are recorded as accrued expenses and as a gross to net sales adjustments at the time revenue is recognized. The Company analyzed recent branded product return history and other market data obtained from the Company’s 3PLs to determine a reliable return rate. Net generic product sales Net product sales for generic Tussionex product represent total gross product sales less gross to net sales adjustments. Gross to net sales adjustments include prompt payment discounts, estimated allowances for product returns, wholesaler fees, estimated government rebates and estimated chargebacks to be incurred on the selling price of generic Tussionex related to the respective product sales. The Company recognizes generic Tussionex total gross product sales less gross to net sales adjustments as revenue based on shipments from 3PLs to the Company’s wholesaler customers. Prompt payment discounts Prompt payment discounts are based on standard programs with wholesalers and are recorded as a discount allowance against accounts receivable and as a gross to net sales adjustments at the time revenue is recognized. Product returns of generic product 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. Estimated returns are recorded as accrued expenses and as a gross to net sales adjustments at the time revenue is recognized. Generic Tussionex product returns were estimated based upon return data available from sales of the Company’s generic Tussionex product over the past three years. Wholesale distribution fees Wholesale distribution fees are based on definitive contractual agreements for the management of the Company’s product by wholesalers and are recorded as accrued expenses and as a gross to net sales adjustments at the time revenue is recognized. Rebates for generic product The Company’s generic Tussionex product is subject to state government-managed Medicaid programs whereby discounts and rebates are provided to participating state governments. Estimated government rebates are recorded as accrued expenses and as a gross to net sales adjustments at the time revenue is recognized. Generic Tussionex government rebates are estimated based upon rebate payment data available from sales of the Company’s generic Tussionex product over the past three years. Historical trends of such rebates will be continually monitored and may result in future adjustments to such estimates. Wholesaler chargebacks The Company’s generic Tussionex 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. Estimated chargebacks are recorded as a discount allowance against accounts receivable and as a gross to net sales adjustments at the time revenue is recognized based on information provided by third parties. Due to estimates and assumptions inherent in determining the amount of generic Tussionex returns, rebates and chargebacks, the actual amount of returns, 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 are recorded in the same period that the related revenue is recognized. |
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. |
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 $0.2 million during each of the three months ended March 31, 2018 and 2017. |
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. |
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 March 31, 2018 and December 31, 2017, 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. 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, at March 31, 2018 and December 31, 2017, the Company 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 March 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2018-05 (“ASU 2018-05”), Income Taxes (Topic 740) — Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 , which was issued to state the income tax accounting implications of the Tax Cuts and Jobs Act of 2017 (the “TCJA”). The guidance clarifies the measurement period timeframe, changes in subsequent reporting periods and reporting requirements as a result of the TCJA. The measurement period begins in the period that includes the TCJA’s enactment date which was December 22, 2017 and as a result the Company has reflected the impact of this ASU on the deferred tax calculation as of December 31, 2017. In February 2018, the FASB issued ASU No. 2018-02, Income Statement —Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income , which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the TCJA, and requires certain disclosures about stranded tax effects. ASU 2018-02 is effective for entities for fiscal years beginning after December 15, 2018 with early adoption permitted, and shall be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the corporate income tax rate in the TCJA is recognized. The Company will adopt this standard on January 1, 2019. The adoption of this standard will not have a material impact on the Company’s consolidated results of operations or financial position. In May 2017, the FASB issued ASU No. 2017-09, Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the modification. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. This standard became effective for the Company on January 1, 2018. The adoption of this standard does not have a material impact on the Company’s consolidated results of operations or financial position. In August 2016, the FASB issued 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. This standard became effective for the Company on January 1, 2018. The adoption of this standard does not have a significant effect on the Company’s ongoing financial reporting as the Company had 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. In January 2018, the FASB issued ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842, Leases (Topic 842) , which adds two practical expedients to the new lease guidance. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, 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 standard will have on its consolidated financial statements and related disclosures and has not determined the expected impact at this time. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (the “New Revenue Standard”) . The New Revenue Standard replaces transaction-and industry-specific revenue recognition guidance under current U.S. GAAP with a principles-based approach for determining revenue recognition. The New Revenue Standard 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 contracts with customers. The New Revenue Standard became effective for the Company on January 1, 2018. For purposes of providing comparable periods upon adoption, the Company applied the full retrospective transition method, which required the Company to restate each prior reporting period presented. The impact of the New Revenue Standard relates to the Company’s accounting for branded net product sales. There are no changes to the net product sales of generic Tussionex revenue since the Company has estimated product returns since inception of recognizing revenue in August 2014. The Company implemented internal controls and key system functionality to enable the preparation of financial information and reached conclusions on key accounting assessments related to the New Revenue Standard, including management’s assessment that the impact of accounting for costs incurred to obtain a contract is immaterial. Under the New Revenue Standard, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those good or services. Therefore, the Company is required to make estimates of the net sales price, including estimates of variable consideration (e.g., savings offers, prompt payment discounts, product returns, wholesaler fees and estimated rebates) to be incurred on the selling price of the respective branded product sales, and recognize the estimated amount as revenue, when it transfers control of the product to its customers (e.g., upon shipment or delivery). Variable consideration must be determined using either an expected value or most likely amount method. The estimate of variable consideration is also subject to a constraint such that some or all of the estimated amount of variable consideration will only be included in the transaction price to the extent that it is probable that a significant reversal of revenue (in the context of the contract) will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Estimating variable consideration and the related constraint require the use of significant management judgment and other market data. To implement the New Revenue Standard, the Company analyzed recent branded product return history and other market data obtained from its 3PLs to determine a reliable return rate. Additionally, management analyzed historical savings offers, prompt payment discounts, wholesaler fees and rebates payments based on patient prescriptions dispensed of Adzenys XR-ODT, Cotempla XR-ODT and information obtained from third-party providers to determine these respective variable considerations. Management has concluded that estimates of the above variable considerations are reasonably constrained, and estimates can be used for recognizing branded total gross product sales less gross to net sales adjustments as revenue beginning January 1, 2018. Refer to Impacts to Previously Reported Results below for the impact of adoption of the New Revenue Standard included in the Company’s condensed consolidated statements of operations. Impacts to Previously Reported Results Adoption of the new revenue standard impacted the Company’s previously reported results as follows: Three Months Ended March 31, 2017 As Previously New Revenue Condensed consolidated statements of operations Reported Adjustment As Adjusted (in thousands, except per share amounts) Revenue: net product sales $ $ $ Cost of goods sold Gross profit ) Net loss attributable to common stock ) ) ) Net loss per share of common stock, basic and diluted ) ) ) December 31, 2017 As Previously New Revenue Condensed consolidated statements of balance sheet Reported Adjustment As Adjusted (in thousands) Inventories $ $ ) $ Other current assets ) Total current assets ) Accrued expenses Deferred revenue ) — Total current liabilities ) Accumulated deficit ) ) ) Total liabilities and stockholder’ equity ) Adoption of the New Revenue Standard had no impact to cash from or used in operating, financing, or investing activities on the Company’s consolidated statements of cash flows. 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. |
Summary of significant accoun23
Summary of significant accounting policies (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Summary of significant accounting policies | |
Schedule of disaggregation of revenue | March 31, 2018 2017 (in thousands) Adzenys XR-ODT $ $ Cotempla XR-ODT — Adzenys ER — Generic Tussionex $ $ |
ASU 2014-09 | |
Summary of significant accounting policies | |
Schedule of impacts to reported results due to new revenue standard | Three Months Ended March 31, 2017 As Previously New Revenue Condensed consolidated statements of operations Reported Adjustment As Adjusted (in thousands, except per share amounts) Revenue: net product sales $ $ $ Cost of goods sold Gross profit ) Net loss attributable to common stock ) ) ) Net loss per share of common stock, basic and diluted ) ) ) December 31, 2017 As Previously New Revenue Condensed consolidated statements of balance sheet Reported Adjustment As Adjusted (in thousands) Inventories $ $ ) $ Other current assets ) Total current assets ) Accrued expenses Deferred revenue ) — Total current liabilities ) Accumulated deficit ) ) ) Total liabilities and stockholder’ equity ) |
Net loss per share (Tables)
Net loss per share (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Net loss per share | |
Schedule of potentially dilutive securities excluded in the computation of diluted net loss per share | March 31, 2018 2017 Series C Redeemable Convertible Preferred Stock Warrants (as converted) Stock options outstanding RSU’s granted, not issued or outstanding — |
Fair value of financial instr25
Fair value of financial instruments (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Fair value of financial instruments | |
Schedule of hierarchy for financial instruments measured at fair value on a recurring basis | Fair Value as of March 31, 2018 Level 1 Level 2 Level 3 Total (in thousands) Cash and cash equivalents $ $ $ — $ Short-term investments — — Total financial assets $ — $ Earnout liability $ — $ — $ $ Derivative liability (see Note 8) — — Total financial liabilities $ — $ — $ $ Fair Value as of December 31, 2017 Level 1 Level 2 Level 3 Total (in thousands) Cash and cash equivalents $ $ — $ — $ Short-term investments — — Total financial assets $ $ $ — $ Earnout liability $ — $ — $ $ Derivative liability (see Note 8) — — Total financial liabilities $ — $ — $ $ |
Schedule of cash and cash equivalents and short-term investments | March 31, 2018 Amortized Unrealized Market Cost Gain / (Loss) Value (in thousands) Bank deposits and money market funds $ $ — $ Financial and corporate debt securities ) $ $ ) $ December 31, 2017 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, 2017 $ Change in fair value ) Balance at March 31, 2018 $ |
Derivative liability | |
Fair value of financial instruments | |
Methodologies and significant inputs used in determination of fair value | Derivative Liability Date of Valuation 3/31/2018 12/31/2017 Valuation Method Monte Carlo Monte Carlo Volatility (annual) N/A N/A Time period from valuation until maturity of debt (yrs.) 4.113 4.360 Cumulative probability of a change in control prepayment implied by model 27% 27% Cumulative probability of other accelerated prepayments implied by model 16% 17% Discount rate 16.53% 16.20% Fair value of liability at valuation date (thousands) $1,474 $1,660 |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Inventories | |
Schedule of inventories | December 31, March 31, 2017 2018 (as adjusted) (in thousands) Raw materials $ $ Work in progress Finished goods Inventory at cost Inventory reserve ) ) $ $ |
Accrued expenses (Tables)
Accrued expenses (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Accrued expenses | |
Schedule of accrued expenses | March 31, December 31, (in thousands) Accrued savings offers $ $ Accrued rebates Accrued customer returns Accrued wholesaler fees Accrued payroll and benefits Other accrued expenses Total accrued expenses $ $ |
Long-term debt (Tables)
Long-term debt (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Long-term debt | |
Schedule of long-term debt | March 31, December 31, 2018 2017 (in thousands) Deerfield senior secured credit facility, net of discount of $2,635 and $2,843, respectively $ $ Capital leases, maturing through May 2020 Less current portion ) ) Long-term debt $ $ |
Schedule of future principal payments of long-term debt including capital leases | Period ending: March 31, (in thousands) 2019 $ 2020 2021 2022 2023 Thereafter — 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) | 3 Months Ended |
Mar. 31, 2018 | |
Share-based Compensation | |
Schedule of share-based compensation expense | Three Months Ended March 31, 2018 2017 (in thousands) Cost of goods sold $ $ Research and development Selling and marketing General and administrative $ $ |
Schedule of weighted-average key assumptions used in determining fair value of options granted | Three Months Ended March 31, 2018 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, 2017 $ $ Exercisable at December 31, 2017 $ $ Granted $ Exercised — — Expired, forfeited or cancelled ) Outstanding at March 31, 2018 $ $ Exercisable at March 31, 2018 $ $ |
Summary of outstanding RSUs | Weighted- Number of Average RSUs Fair Value Outstanding at December 31, 2017 $ Granted Exercised — — Expired, forfeited or cancelled — — Outstanding at March 31, 2018 $ |
Organization and nature of op30
Organization and nature of operations (Details) | 3 Months Ended |
Mar. 31, 2018item | |
Organization and nature of operations | |
Number of approved product | 3 |
Summary of significant accoun31
Summary of significant accounting policies (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018USD ($)segmentsubsidiary | Mar. 31, 2017USD ($)subsidiary | Dec. 31, 2017USD ($) | |
Summary of significant accounting policies | |||
Number of operating segments | segment | 1 | ||
Disaggregation of revenue | |||
Revenues | $ 10,729 | $ 5,631 | |
Product returns of branded products | |||
Return time period for expired branded product prior to expiry date | 6 months | ||
Return time period for expired branded product after expiry date | 12 months | ||
Product returns of generic product | |||
Return time period for expired product prior to expiry date | 6 months | ||
Return time period for expired product after expiry date | 12 months | ||
Return period of Tusioness product (in years) | 3 years | ||
Advertising costs | |||
Advertising costs | $ 200 | 200 | |
Income taxes | |||
Deferred tax assets, net of valuation allowance | 0 | $ 0 | |
Adzenys XR-ODT | |||
Disaggregation of revenue | |||
Revenues | 4,992 | 3,113 | |
Cotempla XR-ODT | |||
Disaggregation of revenue | |||
Revenues | 3,647 | ||
Adzenys ER | |||
Disaggregation of revenue | |||
Revenues | 203 | ||
Generic Tussionex | |||
Disaggregation of revenue | |||
Revenues | $ 1,887 | $ 2,518 | |
Minimum | |||
Intangible assets | |||
Useful life | 10 years | ||
Maximum | |||
Intangible assets | |||
Useful life | 20 years | ||
Wholly-owned subsidiaries | |||
Summary of significant accounting policies | |||
Number of wholly-owned subsidiaries | subsidiary | 4 | 4 |
Summary of significant accoun32
Summary of significant accounting policies - Recent accounting pronouncements (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Condensed consolidated statements of operations | |||
Net product sales | $ 10,729 | $ 5,631 | |
Cost of goods sold | 5,221 | 4,750 | |
Gross profit | 5,508 | 881 | |
Net loss attributable to common stock | $ (14,436) | $ (17,221) | |
Net loss per share of common stock, basic and diluted | $ (0.50) | $ (0.88) | |
Condensed consolidated statements of balance sheet | |||
Inventories | $ 13,399 | $ 11,732 | |
Other current assets | 2,841 | 3,575 | |
Total current assets | 73,103 | 79,395 | |
Accrued expenses | 28,580 | 20,944 | |
Total current liabilities | 40,190 | 33,300 | |
Accumulated deficit | (279,744) | (265,308) | |
Total liabilities and stockholders' equity | $ 97,356 | 104,108 | |
As Previously Reported | ASU 2014-09 | |||
Condensed consolidated statements of operations | |||
Net product sales | $ 5,627 | ||
Cost of goods sold | 4,615 | ||
Gross profit | 1,012 | ||
Net loss attributable to common stock | $ (17,090) | ||
Net loss per share of common stock, basic and diluted | $ (0.87) | ||
Condensed consolidated statements of balance sheet | |||
Inventories | 13,459 | ||
Other current assets | 5,093 | ||
Total current assets | 82,640 | ||
Accrued expenses | 10,570 | ||
Deferred revenue | 14,676 | ||
Total current liabilities | 37,602 | ||
Accumulated deficit | (266,365) | ||
Total liabilities and stockholders' equity | 107,353 | ||
New Revenue Standard Adjustment | ASU 2014-09 | |||
Condensed consolidated statements of operations | |||
Net product sales | $ 4 | ||
Cost of goods sold | 135 | ||
Gross profit | (131) | ||
Net loss attributable to common stock | $ (131) | ||
Net loss per share of common stock, basic and diluted | $ (0.01) | ||
Condensed consolidated statements of balance sheet | |||
Inventories | (1,727) | ||
Other current assets | (1,518) | ||
Total current assets | (3,245) | ||
Accrued expenses | 10,374 | ||
Deferred revenue | (14,676) | ||
Total current liabilities | (4,302) | ||
Accumulated deficit | (1,057) | ||
Total liabilities and stockholders' equity | $ (3,245) |
Net loss per share (Details)
Net loss per share (Details) - shares | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
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 |
Stock options outstanding | ||
Net loss per share | ||
Potentially dilutive shares excluded in the computation of diluted net loss per share | 3,027,931 | 2,106,650 |
RSU's | ||
Net loss per share | ||
Potentially dilutive shares excluded in the computation of diluted net loss per share | 178,750 |
Fair value of financial instr34
Fair value of financial instruments - Hierarchy (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Hierarchy for financial instruments measured at fair value on a recurring basis | ||
Short-term investments | $ 12,444 | $ 18,448 |
Derivative liability (see Note 8) | 1,474 | 1,660 |
Recurring basis | Fair Value | ||
Hierarchy for financial instruments measured at fair value on a recurring basis | ||
Cash and cash equivalents | 24,777 | 31,969 |
Short-term investments | 12,444 | 18,448 |
Total financial assets | 37,221 | 50,417 |
Earnout liability | 170 | 170 |
Derivative liability (see Note 8) | 1,474 | 1,660 |
Total financial liabilities | 1,644 | 1,830 |
Recurring basis | Fair Value | Level 1 | ||
Hierarchy for financial instruments measured at fair value on a recurring basis | ||
Cash and cash equivalents | 17,790 | 31,969 |
Total financial assets | 17,790 | 31,969 |
Recurring basis | Fair Value | Level 2 | ||
Hierarchy for financial instruments measured at fair value on a recurring basis | ||
Cash and cash equivalents | 6,987 | |
Short-term investments | 12,444 | 18,448 |
Total financial assets | 19,431 | 18,448 |
Recurring basis | Fair Value | Level 3 | ||
Hierarchy for financial instruments measured at fair value on a recurring basis | ||
Earnout liability | 170 | 170 |
Derivative liability (see Note 8) | 1,474 | 1,660 |
Total financial liabilities | $ 1,644 | $ 1,830 |
Fair value of financial instr35
Fair value of financial instruments - Cash and cash equivalents and short-term investments (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Cash and cash equivalents and short-term investments | ||
Amortized Cost | $ 37,224 | $ 50,423 |
Unrealized Gain / (Loss) | (3) | (6) |
Market Value | 37,221 | 50,417 |
Bank deposits and money market funds | ||
Cash and cash equivalents and short-term investments | ||
Amortized Cost | 17,790 | 31,969 |
Market Value | 17,790 | 31,969 |
Financial and corporate debt securities | ||
Cash and cash equivalents and short-term investments | ||
Amortized Cost | 19,434 | 18,454 |
Unrealized Gain / (Loss) | (3) | (6) |
Market Value | $ 19,431 | $ 18,448 |
Fair value of financial instr36
Fair value of financial instruments - Earnout liability and Derivative liability (Details) - Recurring basis - Level 3 - Derivative liability - Monte Carlo - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Methodologies and significant inputs used in the determination of the fair value | ||
Time period from valuation until maturity of debt (yrs.) | 4 years 1 month 11 days | 4 years 4 months 10 days |
Cumulative probability of a change in control prepayment implied by model | 27.00% | 27.00% |
Cumulative probability of other accelerated prepayments implied by model | 16.00% | 17.00% |
Discount rate | 16.53% | 16.20% |
Fair value of liability at valuation date (thousands) | $ 1,474 | $ 1,660 |
Fair value of financial instr37
Fair value of financial instruments - Changes in Level 3 (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Changes in Level 3 liabilities measured at fair value | |
Balance at beginning of period | $ 1,830 |
Change in fair value | (186) |
Balance at end of period | $ 1,644 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Inventories | ||
Raw materials | $ 3,921 | $ 3,476 |
Work in progress | 6,254 | 6,155 |
Finished goods | 3,834 | 2,470 |
Inventory at cost | 14,009 | 12,101 |
Inventory reserve | (610) | (369) |
Inventories net | $ 13,399 | $ 11,732 |
Sale-leaseback transaction (Det
Sale-leaseback transaction (Details) - Related Party Sale-leaseback Transactions | Jun. 30, 2017USD ($) | Feb. 13, 2017USD ($) | Jun. 30, 2017USD ($) | Feb. 28, 2017USD ($) | Mar. 31, 2018USD ($) | Mar. 31, 2017USD ($) | Mar. 31, 2014tranche | Sep. 30, 2017USD ($) | Apr. 30, 2017USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2012USD ($) |
Other income, net | |||||||||||
Sale-leaseback transaction | |||||||||||
Net gain recognized in period on sale leaseback transaction | $ 1,000 | $ 20,000 | |||||||||
Transaction One | |||||||||||
Sale-leaseback transaction | |||||||||||
Maximum amount authorized under sale and leaseback transaction | $ 6,500,000 | ||||||||||
Number of tranches | tranche | 5 | ||||||||||
Lease 3 July 2013 | |||||||||||
Sale-leaseback transaction | |||||||||||
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 | ||||||||||
Lease 5 March 2014 | |||||||||||
Sale-leaseback transaction | |||||||||||
Original value of assets for which lease expired | $ 795,000 | ||||||||||
Cumulative gain recognized | 116,000 | ||||||||||
Original value of lease buy-out option liability | $ 79,000 | ||||||||||
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% | |||||||||
Net gain on sale leaseback | $ 14,000 | ||||||||||
Amortization period | 36 months | ||||||||||
Net gain recognized in period on sale leaseback transaction | $ 0 |
Accrued expenses (Details)
Accrued expenses (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Accrued expenses | ||
Accrued savings offers | $ 11,893 | $ 7,168 |
Accrued rebates | 5,300 | 4,008 |
Accrued customer returns | 3,340 | 2,711 |
Accrued wholesaler fees | 3,020 | 2,345 |
Accrued payroll and benefits | 2,014 | 2,534 |
Other accrued expenses | 3,013 | 2,178 |
Total accrued expenses | $ 28,580 | $ 20,944 |
Long-term debt - Summary (Detai
Long-term debt - Summary (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Long-term debt | ||
Long-term debt and capital lease obligations, including current maturities | $ 59,921 | $ 59,834 |
Less current portion | (948) | (896) |
Long-term debt | 58,973 | 58,938 |
Debt instrument, unamortized discount | ||
Unamortized discount on debt | 2,635 | |
Debt issued to entities affiliated with Deerfield | Senior Secured Credit Facility | ||
Long-term debt | ||
Long-term debt and capital lease obligations, including current maturities | 57,364 | 57,156 |
Debt instrument, unamortized discount | ||
Unamortized discount on debt | 2,635 | 2,843 |
Capital leases, maturing through May 2020 | ||
Long-term debt | ||
Long-term debt and capital lease obligations, including current maturities | $ 2,557 | $ 2,678 |
Long-term debt - Senior Secured
Long-term debt - Senior Secured Credit facility (Details) | Oct. 26, 2017USD ($)$ / sharesshares | Jun. 30, 2017$ / sharesshares | Jun. 01, 2017USD ($)item$ / shares | May 11, 2016USD ($)iteminstallment | Feb. 28, 2017$ / sharesshares | Mar. 31, 2018USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2017USD ($) |
Long-term debt | ||||||||
Debt discount amortization | $ 209,000 | $ 81,000 | ||||||
Derivative liability | 1,474,000 | $ 1,660,000 | ||||||
Unamortized discount on debt | $ 2,635,000 | |||||||
Senior Notes and Subordinated Debt | ||||||||
Long-term debt | ||||||||
Repayments of debt | $ 33,000,000 | |||||||
Senior debt (Hercules LSA) | ||||||||
Long-term debt | ||||||||
Interest paid | 100,000 | |||||||
Payments of end of term fee | 1,100,000 | |||||||
Prepayment charges | 243,000 | |||||||
Payment of senior debt and fee | 24,300,000 | |||||||
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) | 25.35% | |||||||
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 percentage of stock price | 95.00% | |||||||
Number of trading days used to determine conversion stock price | 3 days | |||||||
Unamortized discount on debt | $ 600,000 | |||||||
Recognition of 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 | |||||||
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 | ||||||
Minimum | Senior Secured Convertible Note | ||||||||
Long-term debt | ||||||||
Prepayment fee of debt (in percentage) | 2.00% | |||||||
Conversion price | $ / shares | $ 7 | |||||||
Maximum | Senior Secured Convertible Note | ||||||||
Long-term debt | ||||||||
Prepayment fee of debt (in percentage) | 12.75% | |||||||
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 installment of principal payment | May 1, 2019 | |||||||
Number of equal annual installments | installment | 3 | |||||||
Interest rate (as a percent) | 12.95% | |||||||
Deferred interest payments | 6,600,000 | |||||||
Number of first interest payments for which the reporting entity has the option to defer | item | 4 | |||||||
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% | |||||||
Debt discount amortization | $ 209,000 | 1,316,000 | ||||||
Unamortized discount on debt | $ 2,635,000 | $ 2,843,000 | ||||||
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 | $ 2,100,000 | |||||||
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 | ||||||||
Repayments of debt | $ 5,900,000 | |||||||
Interest paid | $ 1,300,000 | |||||||
Conversion Of Convertible Notes | Senior Secured Credit Facility | ||||||||
Long-term debt | ||||||||
Amount of debt converted into stock | $ 6,600,000 | |||||||
Number of shares of stock into which debt was converted | shares | 929,967 | |||||||
Conversion price | $ / shares | $ 7.08 | |||||||
Conversion price, expressed as a percentage of stock price | 95.00% | |||||||
Number of trading days used to determine conversion stock price | 3 days |
Long-term debt - Capital Lease
Long-term debt - Capital Lease Obligations to Related Party (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2014 | Dec. 31, 2013 | |
Essex sale-leaseback transactions | Transaction One | |||||
Long-term debt | |||||
Imputed interest rate on lease (as a percent) | 14.90% | 14.50% | 14.50% | ||
Capital leases, maturing through May 2020 | |||||
Long-term debt | |||||
Interest expense | $ 98,000 | $ 19,000 | |||
Capital leases, maturing through May 2020 | Essex 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, maturing through May 2020 | Essex sale-leaseback transactions | Transaction Two | |||||
Long-term debt | |||||
Newly acquired assets under sale-leaseback transaction | $ 3,200,000 |
Long-term debt - Future Princip
Long-term debt - Future Principal Payments (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Future principal payments of long-term debt including capital leases | ||
2,019 | $ 948 | |
2,020 | 16,115 | |
2,021 | 15,459 | |
2,022 | 15,020 | |
2,023 | 15,014 | |
Future principal payments | 62,556 | |
Less unamortized debt discount related to long-term debt | (2,635) | |
Less current portion of long-term debt | (948) | $ (896) |
Long-term debt | $ 58,973 | $ 58,938 |
Common stock - Public Offerings
Common stock - Public Offerings (Details) - USD ($) $ / shares in Units, $ in Thousands | Jun. 30, 2017 | Feb. 17, 2017 | Feb. 28, 2017 | Mar. 31, 2017 | Jun. 30, 2017 | Jul. 26, 2017 |
Public offerings and related transactions | ||||||
Net proceeds from issuance of stock | $ 30,265 | |||||
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 | |||
Gross proceeds from issuance of stock | $ 30,000 | |||||
Payments of stock issuance costs | $ 200 | |||||
Term of option to purchase share | 30 days | 30 days | ||||
Net proceeds from issuance of stock | $ 26,700 | $ 34,300 | ||||
Shares offered to underwriters under option granted (in shares) | 720,000 | 720,000 | ||||
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 | Oct. 26, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | Aug. 01, 2016 |
Shelf registration statement | |||||
Net proceeds from issuance of stock | $ 30,265 | ||||
Value of securities which remain available to be sold pursuant to the shelf | $ 58,000 | ||||
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 | 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 | ||||
Payments of stock issuance costs | $ 100 | ||||
Conversion Of Convertible Notes | Senior Secured Convertible Notes | |||||
Shelf registration statement | |||||
Amount of debt converted into stock | $ 6,600 | ||||
Conversion price | $ 7.08 | ||||
Conversion price, expressed as a percentage of stock price | 95.00% | ||||
Number of trading days used to determine conversion stock price | 3 days | ||||
Number of shares of stock into which debt was converted | 929,967 |
Share-based Compensation - Plan
Share-based Compensation - Plan Information (Details) - shares | Jan. 01, 2018 | Jan. 01, 2017 | Mar. 31, 2018 | Dec. 31, 2017 | Jan. 01, 2016 | Jul. 31, 2015 | Nov. 30, 2009 |
Stock options outstanding | 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 | 1,449,847 | 803,049 | |||||
Stock option exercise price, minimum expressed as percentage of fair market value on grant date | 100.00% | ||||||
Shares related to forfeited prior plan options transferred into shares available under current plan | 5,000 | 9,304 | |||||
Share of restricted stock transferred into shares available under current plan | 33,801 | ||||||
Shares available for grant | 1,377,804 | ||||||
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 | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Share-based Compensation Expense | ||
Total compensation cost | $ 967 | $ 985 |
Cost of goods sold | ||
Share-based Compensation Expense | ||
Total compensation cost | 119 | 84 |
Research and development | ||
Share-based Compensation Expense | ||
Total compensation cost | 78 | 79 |
Selling and marketing | ||
Share-based Compensation Expense | ||
Total compensation cost | 257 | 197 |
General and administrative | ||
Share-based Compensation Expense | ||
Total compensation cost | $ 513 | $ 625 |
Share-based Compensation - Ex49
Share-based Compensation - Expense Other (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Share-based Compensation Expense | ||
Total compensation cost | $ 967,000 | $ 985,000 |
Unrecognized compensation cost | 8,900,000 | |
Stock options | ||
Share-based Compensation Expense | ||
Total compensation cost | $ 931,000 | 963,000 |
Compensation cost not yet recognized, period for recognition | 2 years 6 months | |
RSU's | ||
Share-based Compensation Expense | ||
Total compensation cost | $ 36,000 | |
Compensation cost not yet recognized, period for recognition | 3 years 7 months 6 days | |
Restricted stock | ||
Share-based Compensation Expense | ||
Total compensation cost | $ 22,000 | |
Unrecognized compensation cost | $ 0 |
Share-based Compensation - Assu
Share-based Compensation - Assumptions Used in Determining Fair Value of Options (Details) - Stock options | 3 Months Ended |
Mar. 31, 2018$ / 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) | 2.65% |
Expected life of option in years | 6 years 3 months |
Weighted-average option fair value at grant (in dollars per share) | $ 4.87 |
Share-based Compensation - Opti
Share-based Compensation - Options (Details) - Stock options - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Summary of number of outstanding and exercisable options and the activity | ||
Outstanding at beginning of year (in shares) | 2,454,973 | |
Exercisable at beginning of year (in shares) | 1,137,766 | |
Granted (in shares) | 608,753 | |
Expired, forfeited or cancelled (in shares) | (35,795) | |
Outstanding at end of period (in shares) | 3,027,931 | 2,454,973 |
Exercisable at end of period (in shares) | 1,210,149 | 1,137,766 |
Summary of weighted-average exercise price of outstanding and exercisable options and the activity | ||
Outstanding at beginning of year (in dollars per share) | $ 11.195 | |
Exercisable at beginning of year (in dollars per share) | 10.919 | |
Exercise price (in dollars per share) | 8.35 | |
Expired, forfeited or cancelled (in dollars per share) | 10.28 | |
Outstanding at end of period (in dollars per share) | 10.63 | $ 11.195 |
Exercisable at end of period (in dollars per share) | $ 10.80 | $ 10.919 |
Summary of intrinsic value of outstanding and exercisable options and other information | ||
Intrinsic value, outstanding options | $ 2,582 | $ 4,764 |
Intrinsic value, exercisable options | $ 1,905 | $ 2,890 |
Weighted average remaining contractual life of options outstanding | 8 years 1 month 6 days | 7 years 10 months 24 days |
Weighted-average remaining contractual life of options exercisable | 7 years | 7 years 2 months 12 days |
Minimum | ||
Summary of weighted-average exercise price of outstanding and exercisable options and the activity | ||
Exercise price (in dollars per share) | $ 8.30 | $ 7 |
Maximum | ||
Summary of weighted-average exercise price of outstanding and exercisable options and the activity | ||
Exercise price (in dollars per share) | $ 10.40 | $ 9.10 |
Share-based Compensation - RSUs
Share-based Compensation - RSUs (Details) - RSU's - $ / shares | Oct. 02, 2018 | Mar. 01, 2018 | Oct. 02, 2017 | May 01, 2017 | Mar. 31, 2018 |
Summary of outstanding equity instruments and activity | |||||
Outstanding at beginning of year (in equity instruments) | 85,000 | ||||
Granted (in equity instruments) | 93,750 | 6,250 | 78,750 | 93,750 | |
Outstanding at end of period (in equity instruments) | 178,750 | ||||
Summary of weighted-average fair value | |||||
Outstanding at beginning of year (in dollars per equity instrument) | $ 7.15 | ||||
Granted (in dollars per equity instrument) | 8.30 | ||||
Outstanding at end of period (in dollars per equity instrument) | $ 7.76 | ||||
Summary of intrinsic value | |||||
Weighted average remaining contractual life of equity instruments outstanding | 9 years 6 months | ||||
Four equal tranches | |||||
Stock options, restricted stock and performance stock options | |||||
Vesting period | 4 years | 4 years | 4 years |
Share-based Compensation - Rest
Share-based Compensation - Restricted Stock (Details) - Restricted stock - shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Stock options, restricted stock and performance stock options | ||
Shares issued | 0 | 0 |
Vested restricted stock awards settled (in shares) | 0 | |
Unvested restricted stock outstanding (in shares) | 0 | 0 |
Shares granted | 0 | |
Shares forfeited | 0 |
Treasury stock (Details)
Treasury stock (Details) - shares | Oct. 16, 2017 | Oct. 17, 2016 | Oct. 16, 2015 | Mar. 31, 2018 | Dec. 31, 2017 |
Treasury stock | |||||
Shares of treasury stock held | 33,801 | 33,801 | |||
Restricted stock | |||||
Treasury stock | |||||
Shares surrendered by holder to cover taxes associated with vesting | 14,895 | 9,709 | 9,197 |
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 |
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 contingencies56
Commitments and contingencies - Patent Infringement Litigation (Details) | Oct. 31, 2017 |
Actavis | |
Patent infringement litigation | |
Time Period For Which FDA Approval is Barred Upon Commencement Of Lawsuit | 30 months |
Commitments and contingencies57
Commitments and contingencies - Operating Lease, Cash Incentive Bonus Plan (Details) - USD ($) | 1 Months Ended | 3 Months Ended | ||
Dec. 31, 2015 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Commitments | ||||
Deferred rent balance | $ 1,059,000 | $ 1,083,000 | ||
Bonus Expenses | 344,000 | $ 327,000 | ||
Grand Prairie Lease Plus Blue Bell Lease | ||||
Commitments | ||||
Rent expense, share of operating expenses | 54,000 | 59,000 | ||
Rent expense, excluding share of operating expenses | $ 253,000 | $ 252,000 | ||
Blue Bell, Pennsylvania | ||||
Commitments | ||||
Term of operating lease | 60 months |
License agreements (Details)
License agreements (Details) - Shire LLC - Maximum - USD ($) $ in Millions | Oct. 31, 2017 | Feb. 29, 2016 |
NDA 204,326 | ||
License agreements | ||
Payment of non-refundable license fee | $ 1 | |
NDA 204,325 | ||
License agreements | ||
Payment of non-refundable license fee | $ 1 |
Related party transactions - Sa
Related party transactions - Sale-leaseback (Details) - Related Party Sale-leaseback Transactions - USD ($) | Jun. 30, 2017 | Feb. 13, 2017 | Feb. 28, 2017 | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2012 |
Related party transactions | ||||||
Capital lease obligation | $ 2,467,000 | $ 2,678,000 | ||||
Transaction One | ||||||
Related party transactions | ||||||
Maximum amount authorized under sale and leaseback transaction | $ 6,500,000 | |||||
Transaction Two | ||||||
Related party transactions | ||||||
Maximum amount authorized under sale and leaseback transaction | $ 5,000,000 | |||||
Lease term | 36 months | |||||
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 | Oct. 26, 2017 | Jun. 30, 2017 | Feb. 17, 2017 | Feb. 28, 2017 | Jun. 30, 2017 |
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 | ||
Term of option to purchase share | 30 days | 30 days | |||
Shares 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 | ||||
Conversion Of Convertible Notes | Senior Secured Credit Facility | |||||
Stock transaction disclosures | |||||
Number of shares of stock into which debt was converted | 929,967 | ||||
Amount of debt converted into stock | $ 6.6 | ||||
Conversion price | $ 7.08 | ||||
Conversion price, expressed as a percentage of stock price | 95.00% | ||||
Number of trading days used to determine conversion stock price | 3 days |