Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2013 |
Use of Estimates | ' |
Use of Estimates |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Consolidation | ' |
Consolidation |
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Repligen Sweden AB. All significant intercompany accounts and transactions have been eliminated in consolidation. |
Foreign Currency | ' |
Foreign Currency |
The Company translates the assets and liabilities of its foreign subsidiary at rates in effect at the end of the reporting period. Revenues and expenses are translated at average rates in effect during the reporting period. Translation adjustments are included in accumulated other comprehensive income. |
Revenue Recognition | ' |
Revenue Recognition |
Product Sales |
The Company generates revenue from the sale of products, licensing transactions and research and development collaborations. The Company’s product revenues are from the sale of bioprocessing products to customers in the life science and biopharmaceutical industries. Revenue related to product sales is recognized upon delivery of the product to the customer as long as there is persuasive evidence of an arrangement, the sales price is fixed or determinable and collection of the related receivable is reasonably assured. Determination of whether these criteria have been met are based on management’s judgments primarily regarding the fixed nature of the fee charged for the product delivered and the collectability of those fees. The Company has a few longstanding customers who comprise the majority of revenue and have excellent payment histories and therefore the Company does not require collateral. The Company has had no significant write-offs of uncollectible invoices in the periods presented. |
At the time of sale, the Company also evaluates the need to accrue for warranty and sales returns. The supply agreements the Company has with its customers and the related purchase orders identify the terms and conditions of each sale and the price of the goods ordered. Due to the nature of the sales arrangements, inventory produced for sale is tested for quality specifications prior to shipment. Since the product is manufactured to order and in compliance with required specifications prior to shipment, the likelihood of sales return, warranty or other issues is largely diminished. Sales returns and warranty issues are infrequent and have had nominal impact on the Company’s financial statements historically. |
Orencia Royalty |
In April 2008, the Company settled its outstanding litigation with Bristol and began recognizing royalty revenue in fiscal year 2009 for Bristol’s net sales in the United States of Orencia®, which is used in the treatment of rheumatoid arthritis. Pursuant to the settlement with Bristol (see Note 9), the Company recognized royalty revenue of $17,881,000 and $14,753,000 for the fiscal years ended December 31, 2013 and 2012, respectively, and $8,769,000 for the nine-month fiscal year ended December 31, 2011. Revenue earned from Bristol royalties is recorded in the periods when it is earned based on royalty reports sent by Bristol to the Company. The Company has no continuing obligations to Bristol as a result of this settlement. The Company’s royalty agreement with Bristol provides that the Company will receive such royalty payments from Bristol through December 31, 2013. |
Therapeutics Licensing Agreements |
Activities under licensing agreements are evaluated in accordance with ASC 605-25 to determine if they represent a multiple element revenue arrangement. The Company identifies the deliverables included within the agreement and evaluates which deliverables represent separate units of accounting. The Company accounts for those components as separate units of accounting if the following two criteria are met: |
|
| • | | The delivered item or items have value to the customer on a stand-alone basis. | | | | | | | | | | | | | |
|
| • | | If there is a general right of return relative to the delivered items, delivery or performance of the undelivered items is considered probable and within our control. | | | | | | | | | | | | | |
Factors considered in this determination include, among other things, whether any other vendors sell the items separately and if the licensee could use the delivered item for its intended purpose without the receipt of the remaining deliverables. If multiple deliverables included in an arrangement are separable into different units of accounting, the Company allocates the arrangement consideration to those units of accounting. The amount of allocable arrangement consideration is limited to amounts that are fixed or determinable. Arrangement consideration is allocated at the inception of the arrangement to the identified units of accounting based on their relative selling price. Revenue is recognized for each unit of accounting when the appropriate revenue recognition criteria are met. |
Future milestone payments, if any, under a license agreement will be recognized under the provisions of ASC 605-28, which the Company adopted on January 1, 2011. The Company has elected to recognize a payment that is contingent upon the achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. A milestone is substantive if: |
|
| • | | It can only be achieved based in whole or in part on either (1) the Company’s performance or (2) on the occurrence of a specific outcome resulting from the Company’s performance; | | | | | | | | | | | | | |
|
| • | | There is substantive uncertainty at the date an arrangement is entered into that the event will be achieved; and | | | | | | | | | | | | | |
|
| • | | It would result in additional payments being due to the entity. | | | | | | | | | | | | | |
The Company believes that the clinical milestone payments pursuant to the license agreement with Pfizer, Inc. (“Pfizer”), as described in Note 10, are substantive and thus will be recognized when achieved. The commercial milestone payments and royalty payments received under license agreements, if any, will be recognized as revenue when they are earned. |
Research and Development Agreements |
For the fiscal year ended December 31, 2013, the Company recognized $1,589,000 of revenue from sponsored research and development projects under agreements with the National Institutes of Health / Scripps Research Institute, the Muscular Dystrophy Association, GoFar and the European Friedrich’s Ataxia Consortium for Translational Studies. |
In the fiscal year ended December 31, 2012, the Company recognized $803,000 of revenue from sponsored research and development projects under agreements with the National Institutes of Health / Scripps Research Institute, the European Friedrich’s Ataxia Consortium for Translational Studies, GoFar, and the Friedreich’s Ataxia Research Alliance. |
For the nine-month fiscal year ended December 31, 2011, the Company recognized $1,466,000 of revenue from sponsored research and development projects under agreements with the Muscular Dystrophy Association, the National Institutes of Health / Scripps Research Institute, the European Friedrich’s Ataxia Consortium for Translational Studies, Go Friedreich’s Ataxia Research (“GoFar”), and the Friedreich’s Ataxia Research Alliance. For the nine-month period ended December 31, 2010, the Company recognized $1,102,000 of revenue from sponsored research and development projects under agreements with the Muscular Dystrophy Association, the National Institutes of Health / Scripps Research Institute, GoFar, and the Friedreich’s Ataxia Research Alliance. For the nine months ended December 31, 2010, the Company also recognized approximately $733,000 in one-time grants under the Qualifying Therapeutic Discovery Project Program, which was created in March 2010 as part of the Patient Protection and Affordability Care Act. |
|
Research revenue is recognized when the expense has been incurred and services have been performed. Determination of which costs incurred qualify for reimbursement under the terms of the Company’s contractual agreements and the timing of when such costs were incurred involves the judgment of management. The Company’s calculations are based upon the agreed-upon terms as stated in the arrangements. However, should the estimated calculations change or be challenged by other parties to the agreements, research revenue may be adjusted in subsequent periods. The calculations have not historically changed or been challenged and the Company does not anticipate any subsequent change in its revenue related to sponsored research and development projects. |
There have been no material changes to the Company’s initial estimates related to revenue recognition in any periods presented in the accompanying consolidated financial statements. |
Risks and Uncertainties | ' |
Risks and Uncertainties |
The Company evaluates its operations periodically to determine if any risks and uncertainties exist that could impact its operations in the near term. The Company does not believe that there are any significant risks which have not already been disclosed in the consolidated financial statements. A loss of certain suppliers could temporarily disrupt operations, although alternate sources of supply exist for these items. The Company has mitigated these risks by working closely with key suppliers, identifying alternate sources and developing contingency plans. |
Cash, Cash Equivalents and Marketable Securities | ' |
Cash, Cash Equivalents and Marketable Securities |
At December 31, 2013 and December 31, 2012, the Company’s investments included money market funds as well as short-term and long-term marketable securities. Marketable securities are investments with original maturities of greater than 90 days. Long-term marketable securities are securities with maturities of greater than one year. The average remaining contractual maturity of marketable securities at December 31, 2013 is approximately 10.5 months. |
Investments in debt securities consisted of the following at December 31, 2013: |
|
| | | | | | | | | | | | | | | | |
| | December 31, 2013 | |
| | Amortized | | | Gross | | | Gross | | | Fair Value | |
Cost | Unrealized | Unrealized |
| Gain | Loss |
Marketable securities: | | | | | | | | | | | | | | | | |
U.S. Government and agency securities | | $ | 8,165,464 | | | $ | 435 | | | $ | (630 | ) | | $ | 8,165,269 | |
Corporate and other debt securities | | | 13,626,690 | | | | 3,636 | | | | (2,045 | ) | | | 13,628,281 | |
| | | | | | | | | | | | | | | | |
| | | 21,792,154 | | | | 4,071 | | | | (2,675 | ) | | | 21,793,550 | |
Long-term marketable securities: | | | | | | | | | | | | | | | | |
U.S. Government and agency securities | | | 11,599,415 | | | | 466 | | | | (7,034 | ) | | | 11,592,847 | |
Corporate and other debt securities | | | 625,882 | | | | 100 | | | | (227 | ) | | | 625,755 | |
| | | | | | | | | | | | | | | | |
| | | 12,225,297 | | | | 566 | | | | (7,261 | ) | | | 12,218,602 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 34,017,451 | | | $ | 4,637 | | | $ | (9,936 | ) | | $ | 34,012,152 | |
| | | | | | | | | | | | | | | | |
At December 31, 2013, the Company’s investments included forty-two debt securities in unrealized loss positions with a total unrealized loss of approximately $10,000 and a total fair market value of approximately $18,981,000. All investments with gross unrealized losses have been in unrealized loss positions for less than 12 months. The unrealized losses were caused primarily by current economic and market conditions. There was no change in the credit risk of the securities. The Company does not intend to sell any investments in an unrealized loss position and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases. There were no realized gains or losses on the investments for the fiscal years ended December 31, 2013 and 2012, or the nine-month fiscal year ended December 31, 2011. |
Investments in debt securities consisted of the following at December 31, 2012: |
|
| | | | | | | | | | | | | | | | |
| | December 31, 2012 | |
| | Amortized | | | Gross | | | Gross | | | Fair Value | |
Cost | Unrealized | Unrealized |
| Gain | Loss |
Marketable securities: | | | | | | | | | | | | | | | | |
U.S. Government and agency securities | | $ | 2,000,897 | | | $ | 353 | | | $ | (7 | ) | | $ | 2,001,243 | |
Corporate and other debt securities | | | 8,835,098 | | | | 8,854 | | | | — | | | | 8,843,952 | |
| | | | | | | | | | | | | | | | |
| | | 10,835,995 | | | | 9,207 | | | | (7 | ) | | | 10,845,195 | |
Long-term marketable securities: | | | | | | | | | | | | | | | | |
U.S. Government and agency securities | | | 5,198,264 | | | | 2,747 | | | | — | | | | 5,201,011 | |
Corporate and other debt securities | | | 4,711,679 | | | | 3,525 | | | | (1,360 | ) | | | 4,713,844 | |
| | | | | | | | | | | | | | | | |
| | | 9,909,943 | | | | 6,272 | | | | (1,360 | ) | | | 9,914,855 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 20,745,938 | | | $ | 15,479 | | | $ | (1,367 | ) | | $ | 20,760,050 | |
| | | | | | | | | | | | | | | | |
The contractual maturities of debt securities at December 31, 2013 were as follows: |
|
| | | | | | | | | | | | | | | | |
| | Amortized | | | Fair Value | | | | | | | | | |
Cost | | | | | | | | |
Due in 1 year or less | | $ | 21,792,154 | | | $ | 21,793,550 | | | | | | | | | |
Due in 1 to 2 years | | | 12,225,297 | | | | 12,218,602 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | $ | 34,017,451 | | | $ | 34,012,152 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Fair Value Measurement | ' |
Fair Value Measurement |
In determining the fair value of its assets and liabilities, the Company uses various valuation approaches. The Company employs a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy is broken down into three levels based on the source of inputs as follows: |
|
| | | | | | | | | | | | | | | | |
Level 1 | | — | | Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. | | | | | | | | | | | | |
Level 2 | | — | | Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly. | | | | | | | | | | | | |
Level 3 | | — | | Valuations based on inputs that are unobservable and significant to the overall fair value measurement. | | | | | | | | | | | | |
The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level input that is significant to the overall fair value measurement. |
The Company’s fixed income investments are comprised of obligations of U.S. government agencies, corporate debt securities and other interest bearing securities. These investments have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third party pricing services or other market observable data. The pricing services utilize industry standard valuation models, including both income and market based approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. The Company validates the prices provided by third party pricing services by reviewing their pricing methods and matrices, obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming that the relevant markets are active. After completing its validation procedures, the Company did not adjust or override any fair value measurements provided by the pricing services as of December 31, 2013. |
The following fair value hierarchy table presents information about each major category of the Company’s assets measured at fair value on a recurring basis as of December 31, 2013: |
|
| | | | | | | | | | | | | | | | |
| | Fair value measurement at reporting date using: | |
| | Quoted prices in | | | Significant | | | Significant | | | Total | |
active markets for | other observable | unobservable |
identical assets | inputs | inputs |
(Level 1) | (Level 2) | (Level 3) |
Assets: | | | | | | | | | | | | | | | | |
Money market funds | | $ | 8,265,089 | | | $ | — | | | $ | — | | | $ | 8,265,089 | |
U.S. Government and agency securities | | | 9,792,141 | | | | 9,965,975 | | | | — | | | | 19,758,116 | |
Corporate and other debt securities | | | — | | | | 14,254,036 | | | | — | | | | 14,254,036 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 18,057,230 | | | $ | 24,220,011 | | | $ | — | | | $ | 42,277,241 | |
| | | | | | | | | | | | | | | | |
The Company has no other assets or liabilities for which fair value measurement is either required or has been elected to be applied, other than the liabilities for contingent consideration recorded in connection with the Novozymes Acquisition and the acquisition of the assets of BioFlash. The contingent consideration related to Novozymes is valued using management’s best estimates of expected future milestone payments of amounts to be paid to Novozymes Biopharma DK A/S, a company organized under the laws of Denmark (“Novozymes Denmark”). The contingent consideration related to BioFlash is valued using management’s best estimates of royalties to be paid to the former shareholders of BioFlash based on sales of the acquired assets. These valuations are Level 3 valuations as the primary inputs are unobservable. Changes in the fair value of contingent consideration in the year ended December 31, 2013 are primarily attributable to a 1,000,000 Euro milestone payment made to Novozymes Denmark in March 2013 and a $55,000 minimum royalty payment made to BioFlash in January 2013, which were previously accrued. The following table provides a roll forward of the fair value of the contingent consideration: |
|
| | | | | | | | | | | | | | | | |
Balance at December 31, 2012 | | $ | 2,899,076 | | | | | | | | | | | | | |
Additions | | | — | | | | | | | | | | | | | |
Payments | | | (1,341,339 | ) | | | | | | | | | | | | |
Changes in fair value | | | 91,191 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Balance at December 31, 2013 | | $ | 1,648,928 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
There were no remeasurements to fair value during the year ended December 31, 2013 of financial assets and liabilities that are not measured at fair value on a recurring basis. |
Inventories | ' |
Inventories |
Inventories relate to the Company’s bioprocessing business. The Company values inventory at cost or, if lower, fair market value, using the first-in, first-out method. The Company reviews its inventories at least quarterly and records a provision for excess and obsolete inventory based on its estimates of expected sales volume, production capacity and expiration dates of raw materials, work-in process and finished products. Expected sales volumes are determined based on supply forecasts provided by key customers for the next 3 to 12 months. The Company writes down inventory that has become obsolete, inventory that has a cost basis in excess of its expected net realizable value, and inventory in excess of expected requirements to cost of product revenue. Manufacturing of bioprocessing finished goods is done to order and tested for quality specifications prior to shipment. Reserves for excess and obsolete inventory were $183,000 and $154,000 as of December 31, 2013 and 2012, respectively. |
A change in the estimated timing or amount of demand for the Company’s products could result in additional provisions for excess inventory quantities on hand. Any significant unanticipated changes in demand or unexpected quality failures could have a significant impact on the value of inventory and reported operating results. During all periods presented in the accompanying financial statements, there have been no material adjustments related to a revised estimate of inventory valuations. |
Work-in-process and finished products inventories consist of material, labor, outside processing costs and manufacturing overhead. Inventories consist of the following: |
|
| | | | | | | | | | | | | | | | |
| | December 31, | | | December 31, | | | | | | | | | |
2013 | 2012 | | | | | | | | |
Raw Materials | | $ | 4,557,870 | | | $ | 4,064,317 | | | | | | | | | |
Work-in-process | | | 4,285,648 | | | | 4,112,478 | | | | | | | | | |
Finished products | | | 2,955,120 | | | | 2,966,900 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total | | $ | 11,798,638 | | | $ | 11,143,695 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Accrued Liabilities | ' |
Accrued Liabilities |
The Company estimates accrued liabilities by identifying services performed on the Company’s behalf, estimating the level of service performed and determining the associated cost incurred for such service as of each balance sheet date. For example, the Company would accrue for professional and consulting fees incurred with law firms, audit and accounting service providers and other third party consultants. These expenses are determined by either requesting those service providers to estimate unbilled services at each reporting date for services incurred or tracking costs incurred by service providers under fixed fee arrangements. |
The Company has processes in place to estimate the appropriate amounts to record for accrued liabilities, which principally involve the applicable personnel reviewing the services provided. In the event that the Company does not identify certain costs that have begun to be incurred or the Company under or over-estimates the level of services performed or the costs of such services, the reported expenses for that period may be too low or too high. The date on which certain services commence, the level of services performed on or before a given date, and the cost of such services often require the exercise of judgment. The Company makes these judgments based upon the facts and circumstances known at the date of the financial statements. |
Income Taxes | ' |
Income Taxes |
Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Valuation allowances are provided, if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company accounts for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors including, but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. The Company evaluates this tax position on a quarterly basis. The Company also accrues for potential interest and penalties, related to unrecognized tax benefits in income tax expense. |
Depreciation | ' |
Depreciation |
Depreciation is calculated using the straight-line method over the estimated useful life of the asset as follows: |
|
| | | | | | | | | | | | | | | | |
Classification | | Estimated Useful Life | | | | | | | | | | | | | | |
Leasehold improvements | | Shorter of the term of the lease or estimated useful life | | | | | | | | | | | | | | |
Equipment | | Three to eight years | | | | | | | | | | | | | | |
Furniture and fixtures | | Three years | | | | | | | | | | | | | | |
For depreciation of property and equipment, the Company expensed approximately $2,092,000 and $2,492,000 in the years ended December 31, 2013 and 2012, respectively, $1,117,000 in the nine-month fiscal year ended December 31, 2011 and $1,141,000 the nine-month period ended December 31, 2010. These amounts include depreciation of assets recorded under capitalized lease agreements of approximately $82,000 in the nine months ended December 31, 2010. Assets recorded under capital leases were fully depreciated at December 31, 2011. |
Earnings (Loss) Per Share | ' |
Earnings (Loss) Per Share |
Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares and dilutive common share equivalents then outstanding. Potential common share equivalents consist of restricted stock awards and the incremental common shares issuable upon the exercise of stock options and warrants. Under the treasury stock method, unexercised “in-the-money” stock options are assumed to be exercised at the beginning of the period or at issuance, if later. The assumed proceeds are then used to purchase common shares at the average market price during the period. Share-based payment awards that entitle their holders to receive non-forfeitable dividends before vesting are considered participating securities and are included in the calculation of basic and diluted earnings per share. |
A reconciliation of basic and diluted share amounts is as follows: |
|
| | | | | | | | | | | | | | | | |
| | Years ended December 31, | | | Nine Months ended December 31, | |
| | 2013 | | | 2012 | | | 2011 | | | 2010 | |
(unaudited) |
Numerator: | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 16,093,155 | | | $ | 14,156,037 | | | $ | (1,612,625 | ) | | $ | 1,987,178 | |
Denominator: | | | | | | | | | | | | | | | | |
Basic weighted average common shares outstanding | | | 31,667,015 | | | | 30,914,424 | | | | 30,774,467 | | | | 30,778,430 | |
Weighted average common stock equivalents from assumed exercise of stock options and restricted stock awards | | | 739,626 | | | | 339,010 | | | | — | | | | 170,834 | |
| | | | | | | | | | | | | | | | |
Diluted weighted average common shares outstanding | | | 32,406,641 | | | | 31,253,434 | | | | 30,774,467 | | | | 30,949,264 | |
| | | | | | | | | | | | | | | | |
Basic net income (loss) per common share | | $ | 0.51 | | | $ | 0.46 | | | $ | (0.05 | ) | | $ | 0.06 | |
| | | | | | | | | | | | | | | | |
Diluted net income (loss) per common share | | $ | 0.5 | | | $ | 0.45 | | | $ | (0.05 | ) | | $ | 0.06 | |
| | | | | | | | | | | | | | | | |
|
At December 31, 2013, there were outstanding options to purchase 1,610,988 shares of the Company’s common stock at a weighted average exercise price of $5.07 per share. For the fiscal year ended December 31, 2013, 187,000 shares of the Company’s common stock were excluded from the calculation of diluted earnings per share because the exercise prices of the stock options were greater than or equal to the average price of the common shares, and were therefore anti-dilutive. |
At December 31, 2012, there were outstanding options to purchase 2,315,090 shares of the Company’s common stock at a weighted average exercise price of $4.20 per share. For the fiscal year ended December 31, 2012, 1,296,700 shares of the Company’s common stock were excluded from the calculation of diluted earnings per share because the exercise prices of the stock options were greater than or equal to the average price of the common shares, and were therefore anti-dilutive. |
At December 31, 2011, there were outstanding options to purchase 2,823,400 shares of the Company’s common stock at a weighted average exercise price of $4.05 per share. Diluted weighted average shares outstanding for the nine-month fiscal year ended December 31, 2011 do not include the impact of 2,823,400 outstanding potential common shares for stock options as they would be anti-dilutive. Accordingly, basic and diluted net losses per share are the same for the nine-month fiscal year ended December 31, 2011. |
At December 31, 2010, there were outstanding options to purchase 2,566,450 shares of the Company’s common stock at a weighted average exercise price of $4.08 per share. For the nine-month fiscal year ended December 31, 2010, 1,771,100 shares of the Company’s common stock were excluded from the calculation of diluted earnings per share because the exercise prices of the stock options were greater than or equal to the average price of the common shares, and were therefore anti-dilutive. |
Segment Reporting | ' |
Segment Reporting |
The Company views its operations, makes decisions regarding how to allocate resources and manages its business as one operating segment. As a result, the financial information disclosed herein represents all of the material financial information related to the Company’s principal operating segment. |
The following table represents the Company’s total revenue by geographic area (based on the location of the customer): |
|
| | | | | | | | | | | | | | | | |
| | Years ended December 31, | | | Nine Months ended December 31, | |
| | 2013 | | | 2012 | | | 2011 | | | 2010 | |
United States | | | 51 | % | | | 46 | % | | | 48 | % | | | 48 | % |
Sweden | | | 35 | % | | | 42 | % | | | 44 | % | | | 45 | % |
United Kingdom | | | 12 | % | | | 9 | % | | | 3 | % | | | 4 | % |
Other | | | 2 | % | | | 3 | % | | | 5 | % | | | 3 | % |
| | | | | | | | | | | | | | | | |
Total | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % |
| | | | | | | | | | | | | | | | |
The following table represents the Company’s total assets by geographic area: |
|
| | | | | | | | | | | | | | | | |
| | December 31, | | | December 31, | | | | | | | | | |
2013 | 2012 | | | | | | | | |
United States | | $ | 73,557,001 | | | $ | 58,356,697 | | | | | | | | | |
Sweden | | | 45,087,903 | | | | 38,653,466 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total | | $ | 118,644,904 | | | $ | 97,010,163 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
|
The following table represents the Company’s long-lived assets by geographic area: |
|
| | | | | | | | | | | | | | | | |
| | December 31, | | | December 31, | | | | | | | | | |
2013 | 2012 | | | | | | | | |
United States | | $ | 19,858,691 | | | $ | 16,537,804 | | | | | | | | | |
Sweden | | | 12,435,614 | | | | 14,262,908 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total | | $ | 32,294,305 | | | $ | 30,800,712 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Concentrations of Credit Risk and Significant Customers | ' |
Concentrations of Credit Risk and Significant Customers |
Financial instruments that subject the Company to significant concentrations of credit risk primarily consist of cash and cash equivalents, marketable securities and accounts receivable. Per the Company’s investment policy, cash equivalents and marketable securities are invested in financial instruments with high credit ratings and credit exposure to any one issue, issuer (with the exception of U.S. treasury obligations) and type of instrument is limited. At December 31, 2013 and 2012, the Company had no investments associated with foreign exchange contracts, options contracts or other foreign hedging arrangements. |
Concentration of credit risk with respect to accounts receivable is limited to customers to whom the Company makes significant sales. While a reserve for the potential write-off of accounts receivable is maintained, the Company has not written off any significant accounts to date. To control credit risk, the Company performs regular credit evaluations of its customers’ financial condition. |
Revenue from significant customers as a percentage of the Company’s total revenue is as follows: |
|
| | | | | | | | | | | | | | | | |
| | Years ended December 31, | | | Nine Months ended December 31, | |
| | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Orencia® Royalties from Bristol | | | 27 | % | | | 24 | % | | | 37 | % | | | 37 | % |
Bioprocessing Customer A | | | 35 | % | | | 42 | % | | | 44 | % | | | 45 | % |
Bioprocessing Customer B | | | 12 | % | | | 10 | % | | | 5 | % | | | 5 | % |
Bioprocessing Customer C | | | 13 | % | | | 10 | % | | | — | | | | — | |
Significant accounts receivable balances as a percentage of the Company’s total trade accounts receivable and royalties and other receivable balances are as follows: |
|
| | | | | | | | | | | | | | | | |
| | December 31, 2013 | | | December 31, 2012 | | | | | | | | | |
Orencia® Royalties from Bristol | | | 42 | % | | | 31 | % | | | | | | | | |
Bioprocessing Customer A | | | 17 | % | | | 21 | % | | | | | | | | |
Bioprocessing Customer C | | | 8 | % | | | 5 | % | | | | | | | | |
Tenant improvement allowance due from landlord | | | 15 | % | | | — | | | | | | | | | |
Pfizer | | | — | | | | 38 | % | | | | | | | | |
Goodwill, Other Intangible Assets and Acquisitions | ' |
Goodwill, Other Intangible Assets and Acquisitions |
Acquisitions |
Total consideration transferred for acquisitions is allocated to the assets acquired and liabilities assumed, if any, based on their fair values at the dates of acquisition. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions determined by management. Any excess of purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. Any excess of the fair value of the net tangible and intangible assets acquired over the purchase price is recognized in the statement of operations. The fair value of contingent consideration includes estimates and judgments made by management regarding the probability that future contingent payments will be made and the extent of royalties to be earned in excess of the defined minimum royalties. Management updates these estimates and the related fair value of contingent consideration at each reporting period. Changes in the fair value of contingent consideration are recorded in the consolidated statements of operations. |
The Company uses the income approach to determine the fair value of certain identifiable intangible assets including customer relationships and developed technology. This approach determines fair value by estimating after-tax cash flows attributable to these assets over their respective useful lives and then discounting these after-tax cash flows back to a present value. The Company bases its assumptions on estimates of future cash flows, expected growth rates, expected trends in technology, etc. Discount rates used to arrive at a present value as of the date of acquisition are based on the time value of money and certain industry-specific risk factors. |
Goodwill |
Goodwill is not amortized and is reviewed for impairment at least annually. There was no evidence of impairment to goodwill at December 31, 2013. There were no goodwill impairment charges during the fiscal years ended December 31, 2013 and 2012, the nine-month fiscal year ended December 31, 2011, or the nine-month period ended December 31, 2010. |
Intangible Assets |
Intangible assets are amortized over their useful lives using the estimated economic benefit method, as applicable, and the amortization expense is recorded within cost of product revenue and selling, general and administrative expense in the statements of operations. Intangible assets and their related useful lives are reviewed at least annually to determine if any adverse conditions exist that would indicate the carrying value of these assets may not be recoverable. More frequent impairment assessments are conducted if certain conditions exist, including a change in the competitive landscape, any internal decisions to pursue new or different technology strategies, a loss of a significant customer, or a significant change in the marketplace, including changes in the prices paid for our products or changes in the size of the market for our products. If impairment indicators are present, the Company determines whether the underlying intangible asset is recoverable through estimated future undiscounted cash flows. If the asset is not found to be recoverable, it is written down to the estimated fair value of the asset based on the sum of the future undiscounted cash flows expected to result from the use and disposition of the asset. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. The Company continues to believe that its intangible assets are recoverable at December 31, 2013. |
Intangible assets consisted of the following at December 31, 2013: |
|
| | | | | | | | | | | | | | | | |
| | Gross Carrying | | | Accumulated | | | Weighted | | | | | |
Amount | Amortization | Average | | | | |
| | Useful Life | | | | |
| | (in years) | | | | |
Technology – developed | | $ | 1,455,382 | | | $ | (537,589 | ) | | | 8 | | | | | |
Patents | | | 240,000 | | | | (117,500 | ) | | | 8 | | | | | |
Customer relationships | | | 6,897,052 | | | | (1,749,713 | ) | | | 8 | | | | | |
| | | | | | | | | | | | | | | | |
Total intangible assets | | $ | 8,592,434 | | | $ | (2,404,802 | ) | | | 8 | | | | | |
| | | | | | | | | | | | | | | | |
|
Intangible assets consisted of the following at December 31, 2012: |
|
| | | | | | | | | | | | | | | | |
| | Gross Carrying | | | Accumulated | | | Weighted | | | | | |
Amount | Amortization | Average | | | | |
| | Useful Life | | | | |
| | (in years) | | | | |
Technology – developed | | $ | 1,452,729 | | | $ | (360,748 | ) | | | 8 | | | | | |
Patents | | | 240,000 | | | | (87,500 | ) | | | 8 | | | | | |
Customer relationships | | | 6,872,383 | | | | (934,852 | ) | | | 8 | | | | | |
| | | | | | | | | | | | | | | | |
Total intangible assets | | $ | 8,565,112 | | | $ | (1,383,100 | ) | | | 8 | | | | | |
| | | | | | | | | | | | | | | | |
Amortization expense for amortized intangible assets was approximately $1,022,000 and $1,017,000 for the years ended December 31, 2013 and 2012, respectively, $158,000 for the nine-month fiscal year ended December 31, 2011 and $134,000 for the nine-month period ended December 31, 2010. The Company expects to record amortization expense of approximately $1,000,000 in each of the next five years. |
Stock Based Compensation | ' |
Stock Based Compensation |
The Company measures stock-based compensation cost at the grant date based on the estimated fair value of the award, and recognizes it as expense over the employee’s requisite service period on a straight-line basis. The Company records the expense for share-based awards subject to performance-based milestone vesting over the remaining service period when management determines that achievement of the milestone is probable. Management evaluates whether the achievement of a performance-based milestone is probable as of the reporting date. The Company has no awards that are subject to market conditions. The Company recognizes stock-based compensation expense based upon options that are ultimately expected to vest, and accordingly, such compensation expense has been adjusted by an amount of estimated forfeitures. |
The Company uses the Black-Scholes option pricing model to calculate the fair value of share-based awards on the grant date. The following assumptions are used in calculating the fair value of share-based awards: |
Expected term—The expected term of options granted represents the period of time for which the options are expected to be outstanding. For purposes of estimating the expected term, the Company has aggregated all individual option awards into one group as the Company does not expect substantial differences in exercise behavior among its employees. |
Expected volatility—The expected volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate during the expected term of options granted. The Company determines the expected volatility based primarily upon the historical volatility of the Company’s common stock over a period commensurate with the option’s expected term. |
Risk-free interest rate—The risk-free interest rate is the implied yield available on U.S. Treasury zero-coupon issues with a remaining term equal to the option’s expected term on the grant date. |
Expected dividend yield—The Company has never declared or paid any cash dividends on any of its capital stock and does not expect to do so in the foreseeable future. Accordingly, the Company uses an expected dividend yield of zero to calculate the grant-date fair value of a stock option. |
Estimated forfeiture rates—The Company has applied, based on an analysis of its historical forfeitures, annual forfeiture rates of 8% for awards granted to non-executive level employees, 3% for awards granted to executive level employees and 0% for awards granted to non-employee members of the Board of Directors to all unvested stock options as of December 31, 2013. The Company reevaluates this analysis periodically and adjusts these estimated forfeiture rates as necessary. Ultimately, the Company will only recognize expense for those shares that vest. |
Recently Issued Accounting Pronouncements | ' |
Recently Issued Accounting Pronouncements |
In February 2013, the Financial Accounting Standards Board (FASB) issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02). This newly issued accounting standard requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. This ASU is effective for reporting periods beginning after December 15, 2012. The Company adopted this standard in 2013. The adoption of this standard did not have an impact on our financial position or results of operations and no amounts were reclassified out of accumulated other comprehensive income during 2013. |
In July 2013, the FASB issued guidance to address the diversity in practice related to the financial statement presentation of unrecognized tax benefits as either a reduction of a deferred tax asset or a liability when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. This guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements. |