Document and Entity Information
Document and Entity Information | 6 Months Ended |
Jun. 30, 2017 | |
Document and Entity Information [Abstract] | |
Entity Registrant Name | Strongbridge Biopharma plc |
Entity Central Index Key | 1,634,432 |
Document Type | 6-K |
Document Period End Date | Jun. 30, 2017 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Non-accelerated Filer |
Document Fiscal Year Focus | 2,017 |
Document Fiscal Period Focus | Q2 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 33,864 | $ 66,837 |
Accounts receivable | 616 | |
Inventory | 1,403 | |
Prepaid expenses and other current assets | 1,863 | 764 |
Total current assets | 37,746 | 67,601 |
Property and equipment, net | 20 | 25 |
Deferred tax asset | 1,599 | |
Intangible assets, net | 58,389 | 60,900 |
Goodwill | 7,256 | 7,256 |
Other assets | 301 | 150 |
Total assets | 103,712 | 137,531 |
Current liabilities: | ||
Accounts payable | 1,200 | 1,089 |
Accrued liabilities | 6,958 | 14,868 |
Total current liabilities | 8,158 | 15,957 |
Long-term debt | 18,566 | 18,434 |
Warrant liability | 41,237 | 11,090 |
Supply agreement liability, noncurrent | 25,921 | 25,078 |
Total liabilities | 93,882 | 70,559 |
Commitments and contingencies (Note 8) | ||
Stockholders’ equity: | ||
Deferred shares, $1.098 par value, 40,000 shares authorized, issued and outstanding at June 30, 2017 and December 31, 2016 | 44 | 44 |
Ordinary shares, $0.01 par value, 600,000,000 shares authorized at June 30, 2017 and December 31, 2016; 35,335,026 shares issued and outstanding at June 30, 2017 and December 31, 2016 | 353 | 353 |
Additional paid-in capital | 198,508 | 195,975 |
Accumulated deficit | (189,075) | (129,400) |
Total stockholders’ equity | 9,830 | 66,972 |
Total liabilities and stockholders’ equity | $ 103,712 | $ 137,531 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2017 | Dec. 31, 2016 |
Consolidated Balance Sheets | ||
Deferred shares, par value (in dollars per share) | $ 1.098 | $ 1.098 |
Deferred shares, shares authorized | 40,000 | 40,000 |
Deferred shares, shares issued | 40,000 | 40,000 |
Deferred shares, shares outstanding | 40,000 | 40,000 |
Ordinary shares, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Ordinary shares, shares authorized | 600,000,000 | 600,000,000 |
Ordinary shares, shares issued | 35,335,026 | 35,335,026 |
Ordinary shares, shares outstanding | 35,335,026 | 35,335,026 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Revenues: | ||||
Net product sales | $ 1,529 | $ 1,529 | ||
Total revenues | 1,529 | 1,529 | ||
Cost and expenses: | ||||
Cost of sales (excluding amortization of intangible asset) | 377 | 377 | ||
Research and development | 4,128 | $ 4,572 | 7,609 | $ 11,366 |
Selling, general and administrative | 10,142 | 4,014 | 17,584 | 8,143 |
Amortization of intangible asset | 1,255 | 2,511 | ||
Impairment of intangible asset | 5,228 | 5,228 | ||
Total cost and expenses | 15,902 | 13,814 | 28,081 | 24,737 |
Operating loss | (14,373) | (13,814) | (26,552) | (24,737) |
Other income (expense), net: | ||||
Unrealized loss on fair value of warrants | (15,219) | (30,147) | ||
Interest expense | (737) | (1,474) | ||
Foreign exchange (loss) gain | (14) | 3 | (25) | (44) |
Other income (expense), net | 60 | 44 | 25 | (1,246) |
Total other income (expense), net | (15,910) | 47 | (31,621) | (1,290) |
Loss before income taxes | (30,283) | (13,767) | (58,173) | (26,027) |
Income tax (expense) benefit | 92 | 871 | (1,502) | 926 |
Net loss | (30,191) | (12,896) | (59,675) | (25,101) |
Net loss attributable to non-controlling interest | 55 | 105 | ||
Net loss attributable to Strongbridge Biopharma | (30,191) | (12,841) | (59,675) | (24,996) |
Net loss attributable to ordinary shareholders: | ||||
Basic and diluted | $ (30,191) | $ (12,841) | $ (59,675) | $ (24,996) |
Net loss per share attributable to ordinary shareholders: | ||||
Basic and diluted | $ (0.86) | $ (0.61) | $ (1.69) | $ (1.18) |
Weighted-average shares used in computing net loss per share attributable to ordinary shareholders: | ||||
Basic and diluted | 35,335,026 | 21,205,382 | 35,335,026 | 21,205,382 |
Consolidated Statement of Share
Consolidated Statement of Shareholders' Equity - 6 months ended Jun. 30, 2017 - USD ($) $ in Thousands | Ordinary Shares | Deferred Shares | Additional Paid-In Capital | Accumulated Deficit | Total |
Balance at beginning of period at Dec. 31, 2016 | $ 353 | $ 44 | $ 195,975 | $ (129,400) | $ 66,972 |
Balance (in shares) at Dec. 31, 2016 | 35,335,026 | 40,000 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Net loss | (59,675) | (59,675) | |||
Stock-based compensation | 2,533 | 2,533 | |||
Balance at end of period at Jun. 30, 2017 | $ 353 | $ 44 | $ 198,508 | $ (189,075) | $ 9,830 |
Balance (in shares) at Jun. 30, 2017 | 35,335,026 | 40,000 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flow - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Cash flows from operating activities: | ||
Net loss | $ (59,675) | $ (25,101) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Change in fair value of warrant liability | 30,147 | |
Stock-based compensation | 2,533 | 2,418 |
Amortization of intangible asset | 2,511 | |
Amortization of debt discounts and debt issuance costs | 282 | |
Deferred income tax expense (benefit) | 1,599 | (926) |
Depreciation | 5 | 5 |
Impairment of intangible asset | 5,228 | |
Impairment/loss on investment in Antisense Therapeutics | 550 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (616) | |
Inventory | (1,403) | |
Prepaid expenses and other current assets | (1,099) | (95) |
Other assets | (151) | 825 |
Accounts payable | 111 | (827) |
Accrued liabilities and other liabilities | 433 | 184 |
Net cash used in operating activities | (25,323) | (17,739) |
Cash flows from investing activities: | ||
Payments for acquisition | (7,500) | |
Net cash used in investing activities | (7,500) | |
Cash flows from financing activities: | ||
Payment for amendment of long-term debt | (150) | |
Net cash used in financing activities | (150) | |
Net decrease in cash and cash equivalents | (32,973) | (17,739) |
Cash and cash equivalents—beginning of period | 66,837 | 51,623 |
Cash and cash equivalents—end of period | 33,864 | $ 33,884 |
Supplemental disclosures of cash flow information - Cash paid during the year for: | ||
Income taxes other, net of refunds | 255 | |
Interest | $ 762 |
Organization
Organization | 6 Months Ended |
Jun. 30, 2017 | |
Organization | |
Organization | 1. Organizatio Strongbridge Biopharma plc is a global commercial-stage biopharmaceutical company focused on the development and commercialization of therapies for rare diseases with significant unmet needs. Our first commercial product is Keveyis® (dichlorphenamide), the first and only treatment approved by the U.S. Food and Drug Administration ("FDA") for hyperkalemic, hypokalemic, and related variants of primary periodic paralysis. Keveyis has orphan drug exclusivity status in the United States through August 7, 2022. In addition to this neuromuscular disease product, we have two clinical-stage product candidates for rare endocrine diseases, Recorlev™ and veldoreotide. Recorlev (levoketoconazole) is a cortisol synthesis inhibitor currently being studied for the treatment of endogenous Cushing's syndrome. Veldoreotide is a next-generation somatostatin analog (SSA) being investigated for the treatment of acromegaly, with potential additional applications in Cushing's syndrome and neuroendocrine tumors. Both Recorlev and veldoreotide have received orphan designation from the FDA and the European Medicines Agency ("EMA"). Given the well-identified and concentrated prescriber base addressing our target markets, we intend to use a small, focused sales force to effectively market Keveyis and our other products and product candidates, if approved, in the United States, the European Union and other key global markets. We believe that our ability to execute on this strategy is enhanced by the significant commercial and clinical development experience of key members of our management team. We will continue to identify and evaluate the potential acquisition of other products and product candidates that would be complementary to our existing rare neuromuscular and endocrine franchises or that would form the basis for new rare disease franchises. We believe this approach will enable us to maximize our commercial potential by further leveraging our existing resources and expertise. Liquidity As of June 30, 2017, we held cash and cash equivalents of $33.9 million. On July 14, 2017, we entered into a $50 million senior credit facility to retire our prior credit facility and provide us with additional capital. We initially borrowed $40 million under the term loan agreement and have the option to borrow an additional $10 million based upon the achievement of a certain revenue milestone on or prior to June 30, 2018. Concurrent with the initial borrowing, CRG purchased $3 million of our ordinary shares at a price of $6.98 per share. We intend to use the equity proceeds and the remainder of the initial loan proceeds (after deducting loan origination costs and other fees and expenses incurred in connection with the incurrence of the loan), plus any additional amounts that may be borrowed in the future, for general corporate purposes and working capital. We may never achieve profitability, and unless and until we do, we will continue to need to raise additional capital. We believe the combination of our existing cash resources as of June 30, 2017 and the net proceeds from our July 14, 2017 debt and equity financing provides us with sufficient resources under our current operating plan, which includes the potential regulatory approval and launch of Recorlev, to achieve consistent positive cash flows from operating activities. We expect our funding requirements for operating activities to increase in 2017 and possibly beyond due to expenses associated with the commercialization of Keveyis, the execution of the Recorlev SONICS and LOGICS Phase 3 clinical trials, and our selling, general and administrative expenses. Our funding requirements will also increase to the extent we pursue potential in-licenses, acquisitions or similar transactions as part of our strategy. These expenses may be offset only in part by sales of Keveyis. To the extent our sales of Keveyis are less than we anticipate, or our expenses are higher than we anticipate, we may be required to fund our operations and capital needs through equity or debt financings. There can be no assurances, however, that additional funding will be available on terms acceptable to us. Our loan and security agreement contains financial and non-financial covenants including minimum amounts of net revenue in 2017 and beyond. Failure to comply with the covenants could result in the lenders declaring the loan immediately due and payable. Our liquidity requirements are predicated on maintaining compliance with the debt covenants and repaying outstanding borrowings in accordance with the loan agreement. |
Summary of significant accounti
Summary of significant accounting policies and basis of presentation | 6 Months Ended |
Jun. 30, 2017 | |
Summary of significant accounting policies and basis of presentation | |
Summary of significant accounting policies and basis of presentation | 2. Summary of significant accounting policies and basis of presentation Basis of presentation These unaudited consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (U.S. GAAP). The unaudited consolidated financial statements reflect all adjustments, which include only normal recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the operating results and financial position for the periods presented. The preparation of the unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures in the consolidated financial statements. Actual results could differ from those estimates. These unaudited consolidated financial statements should be read in conjunction with the accounting policies and notes to the audited consolidated financial statements included in Strongbridge Biopharma’s 2016 Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 4, 2017. Operating results for the six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. Revenue recognition Prior to the April 2017 launch of Keveyis, we have not previously generated any revenue. Therefore, we adopted Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers, effective April 1, 2017. Topic 606 applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We apply the five-step model to contracts only when it is probable that we will collect the consideration we are entitled to receive in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract and determine those that are performance obligations, and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. For a complete discussion of accounting for net product revenue, see Note 3, "Revenue Recognition". Inventory Inventory is stated at the lower of cost and net realizable value. Cost is determined using the first-in, first-out method. Our inventory consists of only finished goods. Foreign currency translation The consolidated financial statements are reported in United States dollars, which is our functional currency, including each of our consolidated subsidiaries. Transactions in foreign currencies are remeasured into our functional currency at the rate of exchange prevailing at the date of the transaction. Any monetary assets and liabilities arising from these transactions are remeasured into our functional currency at exchange rates prevailing at the balance sheet date or on settlement. Resulting gains and losses are recorded in foreign exchange gain (loss) in our consolidated statements of operations. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. We must apply significant judgment in this process. Actual results could materially differ from those estimates. Net loss per share Basic net loss per share is calculated by dividing the net loss attributable to shareholders by the weighted average number of shares of ordinary shares outstanding during the period. Diluted net loss per share is calculated by dividing the net loss attributable to shareholders by the weighted‑average number of shares of ordinary shares outstanding for the period, including any dilutive effect from outstanding stock options or other equity-based awards. Shares used in the diluted net loss per share calculations exclude anti‑dilutive ordinary shares equivalents, which currently consist of outstanding stock options, unvested restricted stock units and warrants. The following potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding as of June 30, 2017 and 2016, as they would be anti-dilutive: Six Months Ended June 30, 2017 2016 Warrants 7,428,571 — Stock options issued and outstanding 6,139,647 3,293,341 Unvested restricted stock units 222,000 170,000 Recent accounting pronouncements In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update ( ASU) 2017-04, Intangibles - Goodwill and Other : Simplifying the Accounting for Goodwill Impairment . ASU 2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This standard, which will be effective for the us beginning in the first quarter of fiscal year 2021, is required to be applied prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently evaluating the impact this standard will have on its financial statements. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments , which clarifies how certain cash receipts and cash payments are presented and classified in the statement of cash flows in order to reduce diversity in practice. The guidance is effective for us beginning in the first quarter of fiscal year 2018. Early adoption is permitted. We are currently evaluating the impact of adopting this guidance on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation - Improvements to Employee Share-Based Payment Accounting , which affects all entities that issue share-based payment awards to their employees. The amendments in this ASU cover such areas as the recognition of excess tax benefits and deficiencies, the classification of those excess tax benefits on the statement of cash flows, an accounting policy election for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification and the classification of those taxes paid on the statement of cash flows. This ASU is effective for annual and interim periods beginning after December 15, 2016. This guidance can be applied either prospectively, retrospectively or using a modified retrospective transition method. Early adoption is permitted. We have adopted the standard effective January 1, 2017 and have elected to account for forfeitures as they occur as opposed to estimating forfeitures. The adoption of this standard did not have a material impact on our financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases , that discusses how an entity should account for lease assets and lease liabilities. The guidance specifies that an entity who is a lessee under lease agreements should recognize lease assets and lease liabilities for those leases classified as operating leases under previous FASB guidance. Accounting for leases by lessors is largely unchanged under the new guidance. The guidance is effective for the us beginning in the first quarter of fiscal year 2019. Early adoption is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. We are currently evaluating the impact of adopting this guidance on our consolidated financial statements. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities , that modifies certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The accounting standard update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted. We are currently assessing the impact that adopting this new accounting guidance will have on our consolidated financial statements. In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory . ASU No. 2015-11 applies only to inventory for which cost is determined by methods other than last in, first-out and the retail inventory method, which includes inventory that is measured using first-in, first-out or average cost. Inventory within the scope of this standard is required to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. We adopted this standard on April 1, 2017. The adoption of this standard had no impact on the Company’s consolidated financial statements , there was no accounting impact to previously issued financial statements based on our adoption . In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , which requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that re fl ects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The new guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash fl ows arising from customer contracts, including signi fi cant judgments and changes in judgments and assets recognized from costs incurred to obtain or ful fi ll a contract. We adopted this new standard on April 1, 2017 in conjunction with the launch of Keveyis. As we did not record revenue prior to the quarter ending June 30, 2017, there was no accounting impact to previously issued financial statements based on our adoption of ASC Topic 606. |
Revenue recognition
Revenue recognition | 6 Months Ended |
Jun. 30, 2017 | |
Revenue recognition | |
Revenue recognition | 3. Revenue recognition Product Revenue, Net We sell Keveyis to one specialty pharmacy provider, (the “Customer”), who is the exclusive distributor of the Product in the United States. The Customer subsequently resells the Product to patients, which are covered by payors that may provide for government-mandated or privately negotiated rebates with respect to the purchase of the Product. Revenues from sales of Keveyis are recognized when we satisfy a performance obligation by transferring control of Keveyis to the Customer. Transfer of control occurs upon receipt of Keveyis by the Customer. We expense incremental costs related to the set-up of the contract with the Customer when incurred as these costs did not meet the criteria for capitalization. Reserves for Variable Consideration Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from rebates, co-pay assistance and other allowances that are offered between us and the patients’ payors. There is no variable consideration reserve for returns as we do not accept returns of the Product. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the Customer) or a current liability (if the amount is payable to a party other than the Customer). Where appropriate, these estimates may take into consideration a range of possible outcomes that are probability-weighted for relevant factors such as our historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the contract. The amount of variable consideration that is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from our estimates. We will reassess our estimates on an ongoing basis. If actual results in the future vary from our estimates, we will adjust our estimates. Any such adjustments would affect net product revenue and earnings in the period such variances become known. Trade Discount : We provide our Customer with a discount that is explicitly stated in our contract and is recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, we receive sales order management, data and distribution services from our Customer. To the extent, the services received are distinct from our sale of products to the Customer, these payments are classified in selling, general and administrative expenses in our consolidated statement of operations and comprehensive loss. Funded Co-pay Assistance Program : We contract with a third-party to manage the co-pay assistance program intended to provide financial assistance to qualified insured patients. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that we expect to receive associated with Product that has been recognized as revenue, but remains in the distribution channel inventories at the end of each reporting period. These payments are consideration payable to the customer and the related reserve is recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses on the consolidated balance sheet. Government Rebates : We are subject to discount obligations under state Medicaid programs and Medicare. We estimate our Medicaid and Medicare rebates based upon a range of possible outcomes that are probability-weighted for the estimated patient mix. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses on the consolidated balance sheet. For Medicaid, accruals are based on estimates of future Medicaid beneficiary utilization applied to the Medicaid unit rebate formula established by the Center for Medicaid and Medicare Services. Effective January 1, 2011, manufacturers of pharmaceutical products are responsible for 50% of the patient’s cost of branded prescription drugs related to the Medicare Part D Coverage Gap. In order to estimate the cost to us of this Medicare coverage gap responsibility, we estimate the number of patients in the prescription drug coverage gap for whom we will owe an additional liability under the Medicare Part D program. Our liability for these rebates consists of estimates of claims for the current quarter and estimated future claims that will be made for the Product that has been recognized as revenue, but remains in the distribution channel inventories at the end of each reporting period. Temporary Supply and Patient Assistance Programs : We provide free Product to uninsured patients who satisfy pre-established criteria for either the Temporary Supply Program or the Patient Assistance Program. Patients who meet the Temporary Supply Program eligibility criteria may receive a temporary supply of free Product for no more than sixty days while we are determining the patient’s third-party insurance, prescription drug benefit or other third-party coverage for the Product. The Patient Assistance Program provides free Product for up to twelve months to patients that satisfy pre-established criteria for financial need. We do not recognize any revenue related to these free products and the associated costs are classified in selling, general and administrative expenses in our consolidated statements of operations and comprehensive loss. To date, our only source of product revenue has been from the U.S. sales of the Product, which we began shipping to the Customer in April 2017. The following table summarizes activity in each of the product revenue allowance and reserve categories for the six months ended June 30, 2017 (in thousands): Co-pay Trade assistance Government discount program rebates Total Balance at December 31, 2016 $ — $ — $ — $ — Provision related to current period sales 72 42 159 273 Adjustment related to prior period sales — — — — Credit or payments made during the period (72) (35) — (107) Balance at June 30, 2017 $ — $ 7 $ 159 $ 166 |
Fair value measurement
Fair value measurement | 6 Months Ended |
Jun. 30, 2017 | |
Fair value measurement | |
Fair value measurement | 4. Fair value measurement We follow FASB accounting guidance on fair value measurements for financial assets and liabilities measured on a recurring basis. Because of their short term nature, the amounts reported in the balance sheet for cash and cash equivalents, and accounts payable approximate fair value. The guidance requires fair value measurements to maximize the use of “observable inputs.” The three-level hierarchy of inputs to measure fair value are as follows: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Because of their short term nature, the amounts reported in the balance sheet for cash and cash equivalents, and accounts payable approximate fair value. Level 2: Significant observable inputs other than Level 1 prices such as 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 or liability Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). The fair values of the outstanding warrants were measured using the Black-Scholes option-pricing model. Inputs used to determine estimated fair value of the warrant liabilities include the estimated fair value of the underlying stock at the valuation date, the estimated term of the warrants, risk-free interest rates, expected dividends and the expected volatility of the underlying stock. The significant unobservable inputs used in the fair value measurement of the warrant liabilities were the volatility rate and the estimated term of the warrants. Generally, increases (decreases) in the fair value of the underlying stock and estimated term would result in a directionally similar impact to the fair value measurement. The following table presents our assets and liabilities that are measured at fair value on a recurring basis for the periods presented (in thousands) : As of June 30, 2017 Level I Level II Level III Total Cash equivalents 33,579 — — 33,579 Total assets $ 33,579 $ — $ — $ 33,579 Warrant liabilities — — 41,237 41,237 Total liabilities $ — $ — $ 41,237 $ 41,237 As of December 31, 2016 Level I Level II Level III Total Warrant liabilities — — 11,090 11,090 Total liabilities $ — $ — $ 11,090 $ 11,090 |
Intangible assets and goodwill
Intangible assets and goodwill | 6 Months Ended |
Jun. 30, 2017 | |
Intangible assets and goodwill | |
Intangible assets and goodwill | 5. Intangible assets and goodwill The gross carrying amount of in‑process research and development, acquired developed product rights and goodwill is as follows (in thousands): As of June 30, 2017 Beginning of Period Additions Amortization End of Period IPR&D $ 20,723 $ — $ — $ 20,723 Acquired product rights 40,177 — (2,511) 37,666 Goodwill 7,256 — — 7,256 Total $ 68,156 $ — $ (2,511) $ 65,645 As of December 31, 2016 Beginning of Period Additions Impairment End of Period IPR&D $ 36,551 $ — $ (15,828) $ 20,723 Acquired product rights — 40,177 — 40,177 Goodwill 7,256 — — 7,256 Total $ 43,807 $ 40,177 $ (15,828) $ 68,156 Our finite lived intangible asset consists of acquired developed product rights obtained from the asset acquisition of Keveyis® (dichlorphenamide) from a subsidiary of Taro Pharmaceutical Industries Ltd. (“Taro”). Keveyis is approved in the United States to treat hyperkalemic, hypokalemic and related variants of primary periodic paralysis, a group of rare hereditary disorders that cause episodes of muscle weakness or paralysis. Keveyis has received orphan drug exclusivity status in the United States through August 7, 2022. In connection with the Asset Purchase Agreement and Supply Agreement we entered into with Taro, we have paid Taro an upfront payment in two installments of $1 million in December 2016 and $7.5 million in March 2017. We concluded that the supply price payable by us exceeds fair value and, therefore, used a discounted cash flow method with a probability assumption to value the payments in excess of fair value at $29.3 million, for which we have recorded an intangible asset and corresponding liability. This liability will be reduced as we purchase inventory over the term of the Supply Agreement. In addition, we incurred transaction costs of $2.4 million, which were recorded in our Statement of Operations during the year ended December 31, 2016. The overall recording of the transaction resulted in the recording of an intangible asset of $40.2 million. This asset is being amortized over an eight-year period using the straight-line method. We recorded amortization expense of $2.5 million and $0 for the six months ended June 30, 2017 and 2016, respectively. |
Accrued liabilities
Accrued liabilities | 6 Months Ended |
Jun. 30, 2017 | |
Accrued liabilities | |
Accrued liabilities | 6. Accrued liabilities Accrued liabilities consist of the following (in thousands): June 30, December 31, 2017 2016 Consulting and professional fees $ 2,573 $ 1,110 Accrued payable due Taro Pharmaceuticals Industries Ltd. — 7,500 Accrued interest 430 — Supply agreement - current portion 2,574 4,207 Employee compensation 1,351 1,554 Other 30 497 Total accrued liabilities $ 6,958 $ 14,868 |
Long Term Debt
Long Term Debt | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure | |
Long Term Debt | 7. Long-Term debt On December 28, 2016, we entered into a loan and security agreement (the “Loan Agreement”) with Oxford Finance LLC (“Oxford”) and Horizon Technology Finance Corporation (“Horizon”) (collectively, the “Lenders”). The Loan Agreement provided for a $40 million credit facility, of which $20 million was borrowed initially. Under the Loan Agreement, we have access to two additional tranches of $10 million each, which would be available to us, subject to the achievement of certain specified milestones. The borrowings pursuant to the Loan Agreement mature after 48 months. The Loan Agreement provides for interest-only payments initially for the first 18 months of the loan followed by an amortization period of 30 months, a final payment fee equal to 8% of the amount borrowed, and interest payable at an annual rate equal to the sum of 8.22% plus the greater of 0.53% or the 30-day US LIBOR rate. The credit facility provides that if we satisfy certain milestones and borrows the final $10 million tranche, the interest-only period would be extended by an additional six months and the amortization period would be 24 months. We have granted a security interest in substantially all of its existing assets and assets acquired by us in the future , including intellectual property. The Loan Agreement contains facility and prepayment fees, and customary affirmative and negative covenants, including a financial covenant regarding minimum amounts of net revenue and events of default and restricts the payment of cash dividends. The Loan Agreement contains a material adverse change clause whereby a material adverse change in our business, operations or financial condition would be considered an event of default whereby the lenders could declare all amounts under the Loan Agreement as immediately due and payable. We incurred $1.3 million in debt discounts and $0.3 million of debt issuance costs relating to this Loan Agreement, each of which have been recorded as a reduction to the long-term debt. These amounts will be amortized over the outstanding period of the debt to interest expense using the effective interest rate method. In connection with the execution of the Loan Agreement, we issued warrants to the Lenders to purchase an aggregate of 428,571 ordinary shares at an exercise price equal to $2.45 per share. The warrants were immediately exercisable and expire after ten years. We accounted for these warrants as equity, and the fair value was recorded into additional paid-in capital. On March 31, 2017, we entered into an amendment to the Loan Agreement that was made effective as of January 27, 2017 and provided for an extension to the dates by which our Swedish subsidiary was required to enter into security documents granting security interests on certain of its assets in favor of Oxford, as collateral agent for the Lender, and to increase the amount of debt we can incur under, and the amount of cash collateral it can provide for purposes of, our corporate credit card program from $100,000 to $250,000. In connection with the amendment, we paid $150,000 to the Lenders. The $150,000 was recorded as additional debt discount cost and will be amortized as an adjustment of interest expense over the remaining term of the Loan. Future principal payments due under the Loan Agreement are as follows (in thousands) : Principal Payments 2017 $ — 2018 4,000 2019 8,000 2020 8,000 Total future payments $ 20,000 On June 22, 2017, we notified the Lenders of our intentions to prepay our current Loan Agreement. Effective July 14, 2017 we retired the Loan Agreement and incurred a prepayment fee of $0.8 million and final payment interest charge of $1.6 million. |
Commitments and contingencies
Commitments and contingencies | 6 Months Ended |
Jun. 30, 2017 | |
Commitments and contingencies | |
Commitments and contingencies | 8. Commitments and contingencies (a) Lease obligations In March 2015, we entered into a 52‑month building sublease agreement for 14,743 square feet of office space in Trevose, Pennsylvania. The lease has annual rent escalations and is recognized on a straight‑line basis over the term of the lease. As of June 30, 2017, future minimum commitments under facility operating leases were as follows (in thousands): Operating leases 2017 $ 159 2018 319 2019 184 Total minimum lease payments $ 662 Rent expense recognized under our operating lease, including additional rent charges for utilities, parking, maintenance and real estate taxes, was approximately $152,000 and $138,000 for the six months ended June 30, 2017 and 2016, respectively. (b) Commitments to Taro Pharmaceuticals Industries Ltd. In December 2016, we acquired the United States marketing rights to Keveyis® (dichlorphenamide) from a subsidiary of Taro. Keveyis is approved in the United States to treat hyperkalemic, hypokalemic and related variants of primary periodic paralysis, a group of rare hereditary disorders that cause episodes of muscle weakness or paralysis. Keveyis has received orphan drug exclusivity status in the United States through August 7, 2022. Under the terms of an asset purchase agreement, we paid Taro an upfront payment in two installments of $1 million in December 2016 and $7.5 million in March 2017, and will pay an aggregate of $7.5 million in potential milestones upon the achievement of certain product sales targets. Taro has agreed to continue to manufacture Keveyis for us under an exclusive supply agreement through the orphan exclusivity period. We are obligated to purchase certain annual minimum amounts of product totaling approximately $29 million over a six-year period. The supply agreement may extend beyond the orphan exclusivity period unless terminated by either party pursuant to the terms of the agreement. If terminated by Taro at the conclusion of the orphan exclusivity period, we have the right to manufacture the product on our own or have the product manufactured by a third party on our behalf. |
Income taxes
Income taxes | 6 Months Ended |
Jun. 30, 2017 | |
Income taxes | |
Income taxes | 9. Income taxes Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts and tax bases of assets and liabilities and operating loss carryforwards and other attributes using enacted rates expected to be in effect when those differences reverse. Valuation allowances are provided against deferred tax assets that are not more likely than not to be realized. We assess our ability to realize deferred tax assets. Changes in future earnings projections, among other factors, may cause us to adjust our valuation allowance on deferred tax assets. Any such adjustments would impact our income tax expense in the period in which it is determined that these factors have changed. For the six months ended June 30, 2017, we recorded a full valuation allowance against our deferred tax asset, resulting in income tax expense of $1.5 million. |
Stock-based compensation
Stock-based compensation | 6 Months Ended |
Jun. 30, 2017 | |
Stock-based compensation | |
Stock based compensation | 10. Stock‑based compensation Our board of directors has adopted, the 2017 Inducement Plan (the “Inducement Plan”). The Inducement Plan provides for the grant of equity-based awards to new employees. The purpose of the Inducement Plan is to attract valued employees by offering them a greater stake in our success and a closer identity with us, and to encourage ownership of our ordinary shares by such employees. The Inducement Plan is effective as of February 23, 2017. As of June 30, 2017, 89,850 shares are available for issuance pursuant to the Inducement Plan. Our board of directors has adopted, and our shareholders have approved, the 2015 Equity Compensation Plan (the “2015 Plan”). The 2015 Plan provides for the grant of incentive stock options to our employees and any parent or subsidiary corporations’ employees, and for the grant of nonstatutory stock options, stock awards, and restricted stock units to our employees, directors and consultants and our parent or subsidiary corporations’ employees and consultants. The 2015 Plan is effective as of September 3, 2015. As of June 30, 2017, 428,814 shares are available for issuance pursuant to the 2015 Plan. Our board of directors has adopted, and our shareholders have approved, the Non‑Employee Director Equity Compensation Plan (the “Non‑Employee Director Plan”). The Non‑Employee Director Plan provides for the grant of nonstatutory stock options, stock awards, and restricted stock units to our non‑employee directors. The Non‑Employee Director Plan is effective as of September 3, 2015. As of June 30, 2017, 792 shares are available for issuance pursuant to the Non‑Employee Director Plan. A summary of our outstanding stock options as of June 30, 2017 is as follows: Options Outstanding Weighted- Average Weighted- Remaining Average Contractual Number of Exercise Term Aggregate Shares Price (Years) Intrinsic Value (in thousands) Outstanding—January 1, 2017 3,249,784 $ 11.00 6.89 $ — Granted 2,943,200 $ 3.44 Forfeited and cancelled (53,337) $ 8.28 Exercised — — Outstanding—June 30, 2017 6,139,647 $ 7.40 8.02 $ 14,417 Vested and exercisable—June 30, 2017 1,758,858 $ 10.63 5.68 $ 1,924 Included in the stock options outstanding at June 30, 2017 are unvested stock options to purchase 88,908 shares at a weighted average exercise price of $18.80 per share for which the vesting of certain tranches will accelerate if the fair value per share of our stock reaches $31.46. In addition, the options outstanding include 97,652 shares that vest upon a market appreciation event, so long as it occurs prior to May 26, 2019 and 97,652 shares that will vest upon the one year anniversary of the market appreciation event. The market appreciation event, which had not yet occurred as of June 30, 2017, is defined as the last trading day in the period in which our closing stock price on each of 20 consecutive trading days reported on NASDAQ has been at least $30.14 or $33.66 for the respective grantee. Stock‑based compensation expense We recognized stock‑based compensation expense for employees and directors for stock options and RSUs in the accompanying unaudited consolidated statements of operations as follows (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Research and development $ 281 $ (87) $ 498 $ 196 General and administrative 1,082 1,177 2,035 2,222 Total stock-based compensation $ 1,363 $ 1,090 $ 2,533 $ 2,418 As of June 30, 2017, the total unrecognized compensation expense related to unvested stock options, net of estimated forfeitures, is $11.3 million, which we expect to recognize over an estimated weighted‑average period of 2.92 years. In determining the estimated fair value of our service-based awards, we use the Black‑Scholes option‑pricing model and assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment. The fair value of our service-based awards that were granted during the years was estimated with the following assumptions: Six Months Ended June 30, 2017 2016 Expected term (in years) 5.95 5.87 Risk-free interest rate 1.78% - 2.26% 1.3% - 1.6% Expected volatility 78.2% - 81.8% 78.1% - 83.6% Dividend rate —% —% Restricted Stock Units On February 26, 2016, our board of directors approved grants of restricted stock units (“RSUs”) to employees. These RSUs vest two years from the date of issuance, provided that the employee is employed by us on such vesting date. All RSUs will fully vest upon a change of control of our company. If and when the RSUs vest, we will issue one ordinary share for each whole RSU that has vested, subject to satisfaction of the executive’s tax withholding obligations. The RSUs will cease to be outstanding upon such issuance of ordinary shares. We recorded expense, which is included in the stock-based compensation table above, of $98,000 and $78,000 for the three months ended June 30, 2017 and 2016, respectively, and $185,000 and $112,000 for the six months ended June 30, 2017 and 2016, respectively. As of June 30, 2017, the total unrecognized compensation expense related to unvested RSUs is $0.4 million, which we expect to recognize over an estimated weighted‑average period of 1.2 years. A summary of our unvested RSUs as of June 30, 2017 is as follows: Number of Shares Unvested—January 1, 2017 184,000 Granted 40,000 Forfeited (2,000) Vested — Unvested—June 30, 2017 222,000 |
Subsequent events
Subsequent events | 6 Months Ended |
Jun. 30, 2017 | |
Subsequent events | |
Subsequent events | 11. Subsequent Events On July 14, 2017, we entered into a $50 million senior credit facility with CRG LP (“CRG”), a healthcare-focused investment firm, to retire our existing debt facility and provide additional capital to us. We initially borrowed $40 million under the term loan agreement and have the option to borrow an additional $10 million based upon the achievement of a certain revenue milestone on or prior to June 30, 2018. Concurrent with this first tranche, CRG purchased $3 million of our ordinary shares at a price of $6.98 per share. The term loan agreement has a six-year term with three years of interest-only payments. The interest-only period may be extended to six years based upon the achievement of certain milestones during the first three years of the loan term. As a condition to the new credit facility, we issued warrants with a seven-year term to CRG to purchase 394,289 ordinary shares at an exercise price of $7.37 per share. In addition, pursuant to terms of the new credit facility, we used a portion of the initial loan proceeds to repay all of the amounts we owed under the Loan Agreement to Oxford and Horizon, and the other lenders named therein. We intend to use the remainder of the initial loan proceeds (after deducting loan origination costs and other fees and expenses incurred in connection with the incurrence of the loan), plus any additional amounts that may be borrowed in the future, for general corporate purposes and working capital. |
Summary of significant accoun18
Summary of significant accounting policies and basis of presentation (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
Summary of significant accounting policies and basis of presentation | |
Basis of presentation | Basis of presentation These unaudited consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (U.S. GAAP). The unaudited consolidated financial statements reflect all adjustments, which include only normal recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the operating results and financial position for the periods presented. The preparation of the unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures in the consolidated financial statements. Actual results could differ from those estimates. These unaudited consolidated financial statements should be read in conjunction with the accounting policies and notes to the audited consolidated financial statements included in Strongbridge Biopharma’s 2016 Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 4, 2017. Operating results for the six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. |
Revenue Recognition | Revenue recognition Prior to the April 2017 launch of Keveyis, we have not previously generated any revenue. Therefore, we adopted Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers, effective April 1, 2017. Topic 606 applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We apply the five-step model to contracts only when it is probable that we will collect the consideration we are entitled to receive in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract and determine those that are performance obligations, and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. For a complete discussion of accounting for net product revenue, see Note 3, "Revenue Recognition". |
Inventory | Inventory Inventory is stated at the lower of cost and net realizable value. Cost is determined using the first-in, first-out method. Our inventory consists of only finished goods. |
Foreign currency translation | Foreign currency translation The consolidated financial statements are reported in United States dollars, which is our functional currency, including each of our consolidated subsidiaries. Transactions in foreign currencies are remeasured into our functional currency at the rate of exchange prevailing at the date of the transaction. Any monetary assets and liabilities arising from these transactions are remeasured into our functional currency at exchange rates prevailing at the balance sheet date or on settlement. Resulting gains and losses are recorded in foreign exchange gain (loss) in our consolidated statements of operations. |
Use of estimates | Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. We must apply significant judgment in this process. Actual results could materially differ from those estimates. |
Net loss per share | Net loss per share Basic net loss per share is calculated by dividing the net loss attributable to shareholders by the weighted average number of shares of ordinary shares outstanding during the period. Diluted net loss per share is calculated by dividing the net loss attributable to shareholders by the weighted‑average number of shares of ordinary shares outstanding for the period, including any dilutive effect from outstanding stock options or other equity-based awards. Shares used in the diluted net loss per share calculations exclude anti‑dilutive ordinary shares equivalents, which currently consist of outstanding stock options, unvested restricted stock units and warrants. The following potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding as of June 30, 2017 and 2016, as they would be anti-dilutive: Six Months Ended June 30, 2017 2016 Warrants 7,428,571 — Stock options issued and outstanding 6,139,647 3,293,341 Unvested restricted stock units 222,000 170,000 |
Recent accounting pronouncements | Recent accounting pronouncements In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update ( ASU) 2017-04, Intangibles - Goodwill and Other : Simplifying the Accounting for Goodwill Impairment . ASU 2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This standard, which will be effective for the us beginning in the first quarter of fiscal year 2021, is required to be applied prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently evaluating the impact this standard will have on its financial statements. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments , which clarifies how certain cash receipts and cash payments are presented and classified in the statement of cash flows in order to reduce diversity in practice. The guidance is effective for us beginning in the first quarter of fiscal year 2018. Early adoption is permitted. We are currently evaluating the impact of adopting this guidance on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation - Improvements to Employee Share-Based Payment Accounting , which affects all entities that issue share-based payment awards to their employees. The amendments in this ASU cover such areas as the recognition of excess tax benefits and deficiencies, the classification of those excess tax benefits on the statement of cash flows, an accounting policy election for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification and the classification of those taxes paid on the statement of cash flows. This ASU is effective for annual and interim periods beginning after December 15, 2016. This guidance can be applied either prospectively, retrospectively or using a modified retrospective transition method. Early adoption is permitted. We have adopted the standard effective January 1, 2017 and have elected to account for forfeitures as they occur as opposed to estimating forfeitures. The adoption of this standard did not have a material impact on our financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases , that discusses how an entity should account for lease assets and lease liabilities. The guidance specifies that an entity who is a lessee under lease agreements should recognize lease assets and lease liabilities for those leases classified as operating leases under previous FASB guidance. Accounting for leases by lessors is largely unchanged under the new guidance. The guidance is effective for the us beginning in the first quarter of fiscal year 2019. Early adoption is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. We are currently evaluating the impact of adopting this guidance on our consolidated financial statements. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities , that modifies certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The accounting standard update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted. We are currently assessing the impact that adopting this new accounting guidance will have on our consolidated financial statements. In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory . ASU No. 2015-11 applies only to inventory for which cost is determined by methods other than last in, first-out and the retail inventory method, which includes inventory that is measured using first-in, first-out or average cost. Inventory within the scope of this standard is required to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. We adopted this standard on April 1, 2017. The adoption of this standard had no impact on the Company’s consolidated financial statements , there was no accounting impact to previously issued financial statements based on our adoption . In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , which requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that re fl ects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The new guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash fl ows arising from customer contracts, including signi fi cant judgments and changes in judgments and assets recognized from costs incurred to obtain or ful fi ll a contract. We adopted this new standard on April 1, 2017 in conjunction with the launch of Keveyis. As we did not record revenue prior to the quarter ending June 30, 2017, there was no accounting impact to previously issued financial statements based on our adoption of ASC Topic 606. |
Summary of significant accoun19
Summary of significant accounting policies and basis of presentation (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Summary of significant accounting policies and basis of presentation | |
Schedule of potentially dilutive securities excluded from computations of diluted weighted average shares outstanding | Six Months Ended June 30, 2017 2016 Warrants 7,428,571 — Stock options issued and outstanding 6,139,647 3,293,341 Unvested restricted stock units 222,000 170,000 |
Revenue recognition (Tables)
Revenue recognition (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Revenue recognition | |
Summary of product revenue allowance and reserve categories | The following table summarizes activity in each of the product revenue allowance and reserve categories for the six months ended June 30, 2017 (in thousands): Co-pay Trade assistance Government discount program rebates Total Balance at December 31, 2016 $ — $ — $ — $ — Provision related to current period sales 72 42 159 273 Adjustment related to prior period sales — — — — Credit or payments made during the period (72) (35) — (107) Balance at June 30, 2017 $ — $ 7 $ 159 $ 166 |
Fair value measurement (Tables)
Fair value measurement (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Fair value measurement | |
Schedule of fair value of financial assets by level | The following table presents our assets and liabilities that are measured at fair value on a recurring basis for the periods presented (in thousands) : As of June 30, 2017 Level I Level II Level III Total Cash equivalents 33,579 — — 33,579 Total assets $ 33,579 $ — $ — $ 33,579 Warrant liabilities — — 41,237 41,237 Total liabilities $ — $ — $ 41,237 $ 41,237 As of December 31, 2016 Level I Level II Level III Total Warrant liabilities — — 11,090 11,090 Total liabilities $ — $ — $ 11,090 $ 11,090 |
Intangible assets and goodwill
Intangible assets and goodwill (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Intangible assets and goodwill | |
Schedule of gross carrying amount of in process research and development and goodwill | The gross carrying amount of in‑process research and development, acquired developed product rights and goodwill is as follows (in thousands): As of June 30, 2017 Beginning of Period Additions Amortization End of Period IPR&D $ 20,723 $ — $ — $ 20,723 Acquired product rights 40,177 — (2,511) 37,666 Goodwill 7,256 — — 7,256 Total $ 68,156 $ — $ (2,511) $ 65,645 As of December 31, 2016 Beginning of Period Additions Impairment End of Period IPR&D $ 36,551 $ — $ (15,828) $ 20,723 Acquired product rights — 40,177 — 40,177 Goodwill 7,256 — — 7,256 Total $ 43,807 $ 40,177 $ (15,828) $ 68,156 |
Accrued liabilities (Tables)
Accrued liabilities (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Accrued liabilities | |
Schedule of accrued liabilities | Accrued liabilities consist of the following (in thousands): June 30, December 31, 2017 2016 Consulting and professional fees $ 2,573 $ 1,110 Accrued payable due Taro Pharmaceuticals Industries Ltd. — 7,500 Accrued interest 430 — Supply agreement - current portion 2,574 4,207 Employee compensation 1,351 1,554 Other 30 497 Total accrued liabilities $ 6,958 $ 14,868 |
Long Term Debt (Tables)
Long Term Debt (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure | |
Future principal payments | Future principal payments due under the Loan Agreement are as follows (in thousands) : Principal Payments 2017 $ — 2018 4,000 2019 8,000 2020 8,000 Total future payments $ 20,000 |
Commitments and contingencies (
Commitments and contingencies (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Commitments and contingencies | |
Schedule of future minimum commitments under facility operating leases | As of June 30, 2017, future minimum commitments under facility operating leases were as follows (in thousands): Operating leases 2017 $ 159 2018 319 2019 184 Total minimum lease payments $ 662 |
Stock-based compensation (Table
Stock-based compensation (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Stock-based compensation | |
Schedule of summary of outstanding stock options activity | Options Outstanding Weighted- Average Weighted- Remaining Average Contractual Number of Exercise Term Aggregate Shares Price (Years) Intrinsic Value (in thousands) Outstanding—January 1, 2017 3,249,784 $ 11.00 6.89 $ — Granted 2,943,200 $ 3.44 Forfeited and cancelled (53,337) $ 8.28 Exercised — — Outstanding—June 30, 2017 6,139,647 $ 7.40 8.02 $ 14,417 Vested and exercisable—June 30, 2017 1,758,858 $ 10.63 5.68 $ 1,924 |
Schedule of stock-based compensation | We recognized stock‑based compensation expense for employees and directors for stock options and RSUs in the accompanying unaudited consolidated statements of operations as follows (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Research and development $ 281 $ (87) $ 498 $ 196 General and administrative 1,082 1,177 2,035 2,222 Total stock-based compensation $ 1,363 $ 1,090 $ 2,533 $ 2,418 |
Schedule of assumptions for estimating fair value of stock option awards | Six Months Ended June 30, 2017 2016 Expected term (in years) 5.95 5.87 Risk-free interest rate 1.78% - 2.26% 1.3% - 1.6% Expected volatility 78.2% - 81.8% 78.1% - 83.6% Dividend rate —% —% |
Schedule of summary of unvested RSUs | Number of Shares Unvested—January 1, 2017 184,000 Granted 40,000 Forfeited (2,000) Vested — Unvested—June 30, 2017 222,000 |
Organization - Products (Detail
Organization - Products (Details) | Jun. 30, 2017product |
Organization | |
Number of clinical-stage product candidates | 2 |
Organization - Liquidity (Detai
Organization - Liquidity (Details) - USD ($) $ / shares in Units, $ in Thousands | Jul. 14, 2017 | Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2016 | Dec. 31, 2015 |
Liquidity | |||||
Cash | $ 33,864 | $ 66,837 | $ 33,884 | $ 51,623 | |
Subsequent event | |||||
Liquidity | |||||
Issuance of shares | $ 3,000 | ||||
Price per share (in dollars per share) | $ 6.98 | ||||
Subsequent event | 2017 Credit Facility | |||||
Liquidity | |||||
Maximum borrowing capacity | $ 50,000 | ||||
Proceeds from long-term debt | 40,000 | ||||
Additional borrowing capacity on achievement of milestones | $ 10,000 |
Summary of significant accoun29
Summary of significant accounting policies and basis of presentation - Antidilutive securities (Details) - shares | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Warrants | ||
Net loss per share | ||
Anti-dilutive shares of common stock (in shares) | 7,428,571 | |
Stock options | ||
Net loss per share | ||
Anti-dilutive shares of common stock (in shares) | 6,139,647 | 3,293,341 |
RSUs | ||
Net loss per share | ||
Anti-dilutive shares of common stock (in shares) | 222,000 | 170,000 |
Revenue recognition - General (
Revenue recognition - General (Details) | 6 Months Ended |
Jun. 30, 2017pharmacy | |
Revenue recognition | |
Number of specialty pharmacy providers | 1 |
Revenue recognition - Allowance
Revenue recognition - Allowance and Reserve (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2017USD ($) | |
Reserves for Variable Consideration | |
Reserve for returns | $ 0 |
Percentage of patient’s cost of branded prescription drugs related to the Medicare Part D Coverage Gap for which manufacturers of pharmaceutical products are responsible | 50.00% |
Maximum period for which patients may receive free product under Temporary Supply Program | 60 days |
Maximum period for which patients may receive free product under Patient Assistance Program | 12 months |
Product Revenue Allowance and Reserve | |
Product revenue allowance and reserves | |
Provision related to current period sales | $ 273 |
Credit or payments made during the period | (107) |
Balance at end of period | 166 |
Product Revenue Allowance And Reserve, Trade discount | |
Product revenue allowance and reserves | |
Provision related to current period sales | 72 |
Credit or payments made during the period | (72) |
Product Revenue Allowance and Reserve, Co-pay assistance program | |
Product revenue allowance and reserves | |
Provision related to current period sales | 42 |
Credit or payments made during the period | (35) |
Balance at end of period | 7 |
Product Revenue Allowance and Reserve, Government rebates | |
Product revenue allowance and reserves | |
Provision related to current period sales | 159 |
Balance at end of period | $ 159 |
Fair value measurement (Details
Fair value measurement (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Liabilities | ||
Warrant liabilities | $ 41,237 | $ 11,090 |
Recurring | ||
Assets | ||
Cash equivalents | 33,579 | |
Total Assets | 33,579 | |
Liabilities | ||
Warrant liabilities | 41,237 | 11,090 |
Total liabilities | 41,237 | 11,090 |
Recurring | Level I | ||
Assets | ||
Cash equivalents | 33,579 | |
Total Assets | 33,579 | |
Recurring | Level III | ||
Liabilities | ||
Warrant liabilities | 41,237 | 11,090 |
Total liabilities | $ 41,237 | $ 11,090 |
Intangible assets and goodwil33
Intangible assets and goodwill - Components (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended |
Jun. 30, 2017 | Jun. 30, 2017 | Dec. 31, 2016 | |
In-process research and development and Goodwill | |||
Acquired product rights, Amortization | $ (1,255) | $ (2,511) | |
Goodwill, Beginning of Period | 7,256 | $ 7,256 | |
Goodwill, End of Period | 7,256 | 7,256 | 7,256 |
Total, Beginning of Period | 68,156 | 43,807 | |
Total, Additions | 40,177 | ||
Total, Amortization | (1,255) | (2,511) | |
Total Impairment | (15,828) | ||
Total, End of Period | 65,645 | 65,645 | 68,156 |
Acquired product rights | |||
In-process research and development and Goodwill | |||
Acquired product rights, Beginning of Period | 40,177 | ||
Acquired product rights, Additions | 40,177 | ||
Acquired product rights, Amortization | (2,511) | ||
Acquired product rights, End of Period | 37,666 | 37,666 | 40,177 |
Total, Amortization | (2,511) | ||
IPR&D | |||
In-process research and development and Goodwill | |||
IPR&D, Beginning of Period | 20,723 | 36,551 | |
IPR&D, Impairment | (15,828) | ||
IPR&D, End of Period | $ 20,723 | $ 20,723 | $ 20,723 |
Intangible assets and goodwil34
Intangible assets and goodwill - Asset purchase (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($)payment | Jun. 30, 2017USD ($) | Jun. 30, 2017USD ($) | Dec. 31, 2016USD ($)payment | Dec. 31, 2016item | Dec. 31, 2016USD ($) | |
In-process research and development and Goodwill | |||||||
Amortization of intangible asset | $ 1,255 | $ 2,511 | |||||
Acquired product rights | |||||||
In-process research and development and Goodwill | |||||||
Acquired product rights | $ 37,666 | 37,666 | $ 40,177 | ||||
Transaction costs | 2,400 | ||||||
Estimated life | 8 years | ||||||
Amortization of intangible asset | $ 2,511 | ||||||
IPR&D | |||||||
In-process research and development and Goodwill | |||||||
IPR&D, Impairment | $ (15,828) | ||||||
Asset Purchase Agreement | Keveyis | Taro | Acquired product rights | |||||||
In-process research and development and Goodwill | |||||||
Number of installment payments | 2 | 2 | 2 | ||||
Installment payment | $ 7,500 | $ 1,000 | |||||
Supply Agreement | Keveyis | Taro | Acquired product rights | |||||||
In-process research and development and Goodwill | |||||||
Acquired product rights | $ 29,300 |
Accrued liabilities (Details)
Accrued liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Accrued liabilities | ||
Consulting and professional fees | $ 2,573 | $ 1,110 |
Accrued payable due Taro Pharmaceuticals Industries Ltd | 7,500 | |
Accrued interest | 430 | |
Supply agreement - current portion | 2,574 | 4,207 |
Employee compensation | 1,351 | 1,554 |
Other | 30 | 497 |
Total accrued liabilities | $ 6,958 | $ 14,868 |
Long Term Debt - Agreements (De
Long Term Debt - Agreements (Details) | Mar. 31, 2017USD ($) | Dec. 28, 2016USD ($)item$ / sharesshares | Jun. 30, 2017USD ($) |
Loan agreement | |||
Payment for amendment of long-term debt | $ 150,000 | ||
2016 Credit Facility | |||
Loan agreement | |||
Maximum borrowing capacity | $ 40,000,000 | ||
Line of credit proceeds | $ 20,000,000 | ||
Number of additional tranches | item | 2 | ||
Credit facility term | 48 months | ||
Interest-only payment period | 18 months | ||
Amortization period | 30 months | ||
Final payment fee (as a percent) | 8.00% | ||
Fixed interest rate (as a percent) | 8.22% | ||
Variable interest rate (as a percent) | 0.53% | ||
Debt discounts | $ 1,300,000 | ||
Debt issuance costs | 300,000 | ||
Payment for amendment of long-term debt | $ 150,000 | ||
Additional debt discount | 150,000 | ||
2016 Credit Facility | Minimum | |||
Loan agreement | |||
Amount of cash collateral | 100,000 | ||
2016 Credit Facility | Maximum | |||
Loan agreement | |||
Amount of cash collateral | $ 250,000 | ||
2016 Credit Facility-Tranche One | |||
Loan agreement | |||
Additional borrowing capacity on achievement of milestones | 10,000,000 | ||
2016 Credit Facility-Tranche Two | |||
Loan agreement | |||
Additional borrowing capacity on achievement of milestones | $ 10,000,000 | ||
Amortization period | 24 months | ||
Interest payment only extension period | 6 months | ||
Warrants in connection with 2016 loan agreement | 2016 Credit Facility | |||
Loan agreement | |||
Securities that warrants may purchase (in shares) | shares | 428,571 | ||
Warrant exercise price (in dollars per share) | $ / shares | $ 2.45 | ||
Warrant expiration period | 10 years |
Long Term Debt - Future princip
Long Term Debt - Future principal payments (Details) $ in Thousands | Jun. 30, 2017USD ($) |
Future principal payments | |
2,018 | $ 4,000 |
2,019 | 8,000 |
2,020 | 8,000 |
Total future payments | $ 20,000 |
Long Term Debt - Prepayment (De
Long Term Debt - Prepayment (Details) - 2016 Credit Facility $ in Millions | Jul. 14, 2017USD ($) |
Debt | |
Prepayment fee | $ 0.8 |
Interest charges | $ 1.6 |
Commitments and contingencies -
Commitments and contingencies - Lease (Details) | 1 Months Ended | 6 Months Ended | |
Mar. 31, 2015ft² | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | |
Future minimum commitments under facility operating leases | |||
2,017 | $ 159,000 | ||
2,018 | 319,000 | ||
2,019 | 184,000 | ||
Total minimum lease payments | 662,000 | ||
Rent expense | $ 152,000 | $ 138,000 | |
Building lease, March 2015 | |||
Lease | |||
Lease term | 52 months | ||
Amount of space leased (in square feet) | ft² | 14,743 |
Commitments and contingencies40
Commitments and contingencies - Commitments to Taro (Details) - Acquired product rights - Taro - Keveyis $ in Millions | 1 Months Ended | |||
Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($)payment | Dec. 31, 2016item | Dec. 31, 2016USD ($) | |
Asset Purchase Agreement | ||||
Other Commitments | ||||
Number of installment payments | 2 | 2 | ||
Installment payment | $ 7.5 | $ 1 | ||
Potential milestone payments | $ 7.5 | |||
Supply Agreement | ||||
Other Commitments | ||||
Minimum amount of purchases obligated | $ 29 | |||
Purchase obligation period | 6 years |
Income taxes (Details)
Income taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Components of income tax (benefit) provision | ||||
Income tax expense | $ (92) | $ (871) | $ 1,502 | $ (926) |
Stock-based compensation - Gene
Stock-based compensation - General (Details) | Jun. 30, 2017shares |
Inducement Plan | |
Stock-based compensation | |
Number of shares available for issuance | 89,850 |
2015 Plan | |
Stock-based compensation | |
Number of shares available for issuance | 428,814 |
Non-Employee Director Plan | |
Stock-based compensation | |
Number of shares available for issuance | 792 |
Stock-based compensation - Stoc
Stock-based compensation - Stock options (Details) - USD ($) $ / shares in Units, $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2017 | Dec. 31, 2016 | |
Summary of outstanding stock options | ||
Outstanding at beginning of period (in shares) | 3,249,784 | |
Granted (in shares) | 2,943,200 | |
Forfeited and cancelled (in shares) | (53,337) | |
Outstanding at end of period (in shares) | 6,139,647 | 3,249,784 |
Vested and exercisable at end of period (in shares) | 1,758,858 | |
Weighted-Average Exercise Price | ||
Granted (in dollars per share) | $ 3.44 | |
Forfeited and cancelled (in dollars per share) | 8.28 | |
Outstanding (in dollars per share) | 7.40 | $ 11 |
Vested and exercisable at end of period (in dollars per share) | $ 10.63 | |
Additional Disclosures - Options | ||
Weighted Average Remaining Contractual Term, Outstanding | 8 years 7 days | 6 years 10 months 21 days |
Weighted Average Remaining Contractual Term, Vested and exercisable | 5 years 8 months 5 days | |
Aggregate Intrinsic Value, Outstanding (in dollars) | $ 14,417 | |
Aggregate Intrinsic Value, Vested and exercisable at end of the period (in dollars) | $ 1,924 |
Stock-based compensation - Opti
Stock-based compensation - Options outstanding (Details) - $ / shares | 6 Months Ended | |
Jun. 30, 2017 | Dec. 31, 2016 | |
Stock options | ||
Options outstanding (in shares) | 6,139,647 | 3,249,784 |
Options outstanding, weighted-average exercise price (in dollars per share) | $ 7.40 | $ 11 |
Vesting subject to acceleration | ||
Stock options | ||
Options outstanding (in shares) | 88,908 | |
Options outstanding, weighted-average exercise price (in dollars per share) | $ 18.80 | |
Vesting subject to acceleration | Grantee, Two | ||
Stock options | ||
Share price threshold | 31.46 | |
Vesting based on market appreciation event | Grantee, Four | ||
Stock options | ||
Share price threshold | 30.14 | |
Vesting based on market appreciation event | Grantee, Five | ||
Stock options | ||
Share price threshold | $ 33.66 | |
Vesting based on market appreciation event | Vesting at market appreciation event | ||
Stock options | ||
Options outstanding (in shares) | 97,652 | |
Consecutive trading days threshold | 20 days | |
Vesting based on market appreciation event | Vesting at one year anniversary of market appreciation event | ||
Stock options | ||
Options outstanding (in shares) | 97,652 | |
Vesting period following event | 1 year | |
Consecutive trading days threshold | 20 days |
Stock-based compensation - St45
Stock-based compensation - Stock-based compensation expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Stock-based compensation expense | ||||
Total stock-based compensation | $ 1,363 | $ 1,090 | $ 2,533 | $ 2,418 |
Employee and directors stock options | ||||
Stock-based compensation expense | ||||
Total unrecognized compensation expense | 11,300 | $ 11,300 | ||
Estimated weighted average period over which expense is expected to be recognized | 2 years 11 months 1 day | |||
Research and development | ||||
Stock-based compensation expense | ||||
Total stock-based compensation | 281 | (87) | $ 498 | 196 |
General and administration expense | ||||
Stock-based compensation expense | ||||
Total stock-based compensation | $ 1,082 | $ 1,177 | $ 2,035 | $ 2,222 |
Stock-based compensation - Fair
Stock-based compensation - Fair value assumptions (Details) | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Fair value assumptions | ||
Expected term (in years) | 5 years 11 months 12 days | 5 years 10 months 13 days |
Minimum Risk-free interest rate (as a percent) | 1.78% | 1.30% |
Maximum Risk-free interest rate (as a percent) | 2.26% | 1.60% |
Minimum Expected volatility (as a percent) | 78.20% | 78.10% |
Maximum Expected volatility (as a percent) | 81.80% | 83.60% |
Stock-based compensation - Rest
Stock-based compensation - Restricted stock units (Details) - USD ($) | Feb. 26, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 |
Stock-based compensation | |||||
Stock-based compensation | $ 1,363,000 | $ 1,090,000 | $ 2,533,000 | $ 2,418,000 | |
RSUs | |||||
Stock-based compensation | |||||
Vesting period | 2 years | ||||
Number of shares issued for each stock award vested | 1 | ||||
Stock-based compensation | 98,000 | $ 78,000 | 185,000 | $ 112,000 | |
Total unrecognized compensation expense | $ 400,000 | $ 400,000 | |||
Estimated weighted average period over which expense is expected to be recognized | 1 year 2 months 12 days | ||||
Summary of unvested RSUs | |||||
Unvested - Beginning of period (in shares) | 184,000 | ||||
Granted (in shares) | 40,000 | ||||
Forfeited (in shares) | (2,000) | ||||
Unvested - End of period (in shares) | 222,000 | 222,000 |
Subsequent events (Details)
Subsequent events (Details) - Subsequent event $ / shares in Units, $ in Millions | Jul. 14, 2017USD ($)$ / sharesshares |
Subsequent events | |
Issuance of shares | $ 3 |
Price per share (in dollars per share) | $ / shares | $ 6.98 |
Warrants in connection with 2017 loan agreement | |
Subsequent events | |
Warrant term | 7 years |
Securities that warrants may purchase (in shares) | shares | 394,289 |
Warrant exercise price (in dollars per share) | $ / shares | $ 7.37 |
2017 Credit Facility | |
Subsequent events | |
Maximum borrowing capacity | $ 50 |
Proceeds from long-term debt | 40 |
Additional borrowing capacity on achievement of milestones | $ 10 |
Loan agreement term | 6 years |
Interest only payment term | 3 years |
Extension of interest only payment term upon achievement of milestones | 6 years |