| Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed financial statements including disclosure of contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period and accompanying notes. The Company's critical accounting policies are those that are both most important to the Company's financial condition and results of operations and require the most difficult, subjective or complex judgments on the part of management in their application, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Because of the uncertainty of factors surrounding the estimates or judgments used in the preparation of the financial statements, actual results may materially vary from these estimates. Accounting Guidance Not Yet Adopted In May 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. In July 2015, the FASB finalized a one year delay in the effective date of this standard, which will now be effective for the Company on January 1, 2018, however early adoption is permitted any time after the original effective date, which for us is January 1, 2017. We have not yet selected a transition method and are currently evaluating the impact of ASU 2014-09 on our condensed consolidated financial statements. Reclassifications Certain reclassifications have been made to prior year amounts to conform with the current year presentation. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. All cash and cash equivalents are held in United States financial institutions. The carrying amount of cash and cash equivalents approximates its fair value due to its short-term nature. The Company, at times, maintains balances with financial institutions in excess of the FDIC limit. Fair Value of Financial Instruments The Company's financial instruments consist of cash and cash equivalents, accounts receivable, and accounts payable. The carrying values of these financial instruments approximate their fair values due to their short term maturities. Short Term Investments Investments consisted of U.S. Treasury securities that have an original maturity of greater than three months and typically less than 180 days. The Company's investments were classified as Level 1 and available-for-sale and are recorded at fair value, based upon quoted market prices. No gains or losses on investments are realized until the sale occurs or a decline in fair value is determined to be other-than-temporary. If a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established. Fair Value Measurements U.S. GAAP establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value: • Level 1: Quoted prices in active markets for identical assets or liabilities. • Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The fair value of interest-bearing cash, cash equivalents and short term investments are classified as Level 1 at June 30, 2015 and December 31, 2014 . The Company is required by U.S. GAAP to record certain assets and liabilities at fair value on a recurring basis. The guidance in ASC 815 required that the Company mark the value of its warrant liability to market and recognize the change in valuation in its statement of operations each reporting period. Determining the warrant liability to be recorded required the Company to develop estimates to be used in calculating the fair value of the warrant. Since these preferred stock warrants did not trade in an active securities market, the Company recognized a warrant liability and estimated the fair value of these warrants using a Probability-Weighted Expected Returns valuation model. Therefore, the warrant liability was considered a Level 3 measurement. All warrants outstanding immediately prior to the IPO were net exercised in connection with the IPO. There were no outstanding warrants as of June 30, 2015 . Concentration of Major Customers and Vendors The Company's customers are its commercial and licensing partners. The Company is dependent on these commercial partners to market and sell Argatroban; therefore, the Company's future revenues are highly dependent on these collaboration and distribution arrangements. The Company received a $30.0 million upfront payment during February 2015 under the terms of the Cephalon License- See "revenue recognition" below for more detail. The total revenues and accounts receivables broken down by major customers as a percentage of the total are as follows: Three Months Ended Six Months Ended 2015 2014 2015 2014 Net revenues The Medicines Company 37 % 13 % 13 % 20 % Sandoz, Inc. 30 % 27 % 7 % 45 % Cephalon, Inc. (Teva) - See Revenue Recognition — % — % 71 % — % Hikma Pharmaceutical — % 60 % — % 35 % Other 33 % — % 9 % — % 100 % 100 % 100 % 100 % June 30, December 31, 2015 2014 Accounts receivable The Medicines Company 74 % 61 % Sandoz, Inc. 16 % 35 % Other 10 % 4 % 100 % 100 % Currently, for Argatroban, the Company uses one vendor as its sole source supplier. Because of the unique equipment and process for manufacturing Argatroban, transferring manufacturing activities for Argatroban to an alternate supplier would be a time consuming and costly endeavor, and there are only a limited number of manufacturers that are capable of performing this function for the Company. Pre-Launch Inventory The Company capitalizes inventory costs associated with certain products prior to regulatory approval and product launch, based on management's judgment of reasonably certain future commercial use and net realizable value, when it is reasonably certain that the pre-launch inventories will be saleable. The determination to capitalize is made once the Company (or its third party development partners) has filed a New Drug Application (an "NDA") that has been acknowledged by the FDA as containing sufficient information to allow the FDA to conduct its review in an efficient and timely manner and management is reasonably certain that all regulatory and legal hurdles will be cleared. This determination is based on the particular facts and circumstances relating to the expected FDA approval of the drug product being considered, and accordingly, the time frame within which the determination is made varies from product to product. The Company may be required to write down previously capitalized costs related to pre-launch inventories upon a change in such judgment, or due to a denial or delay of approval by regulatory bodies, or a delay in commercialization, or other potential factors. As of June 30, 2015 the Company had $1,873 in inventories related to product that was not yet available to be sold but could be converted to other uses. Inventory Inventories are recorded at the lower of cost or market, with cost determined on a first-in, first-out basis and consists of finished products. The Company periodically reviews the composition of inventory in order to identify obsolete, slow-moving or otherwise non-saleable items. If non-saleable items are observed and there are no alternate uses for the inventory, the Company will record a write-down to net realizable value in the period that the decline in value is first recognized. In most instances, inventory is shipped from the Company's vendor directly to the Company's customers. Property and Equipment Property and equipment are stated at cost. Depreciation is computed over the estimated useful lives of the assets utilizing the straight-line method. Leasehold improvements are being amortized over the shorter of their useful lives or the lease term. Research and Development Expense Costs incurred for research and product development, including costs incurred for technology in the development stage, are expensed as incurred. Clinical study costs are accrued over the service periods specified in the contracts and adjusted as necessary based upon an ongoing review of the level of effort and costs actually incurred. Advance payments for goods or services that will be used for future research and development activities are deferred and capitalized. Such amounts are recognized as an expense as the related goods are delivered or services performed. Advertising and Marketing Advertising and marketing costs are expensed as incurred. Advertising and marketing costs were $1,612 and $596 for the three months ended June 30, 2015 and 2014 , respectively, and $2,571 and $665 for the six months ended June 30, 2015 and 2014 , respectively. Redeemable Convertible Preferred Stock The carrying value of redeemable convertible preferred stock was increased by periodic accretions, using the interest method so that the carrying amount would equal the redemption amount at the earliest redemption date. Accounting for Income Taxes The Company accounts for deferred taxes using the asset and liability method as specified by ASC 740, Income Taxes . Deferred income tax assets and liabilities are determined based on differences between the financial statement reporting and the tax basis of assets and liabilities, operating losses and tax credit carryforwards. Deferred income taxes are measured using the enacted tax rates and laws that are anticipated to be in effect when the differences are expected to reverse. The measurement of deferred income tax assets is reduced, if necessary, by a valuation allowance for any tax benefits which are not expected to be realized. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted. The Company received approval to sell a portion of the Company's New Jersey net operating losses ("NOL's") as part of the Technology Business Tax Certificate Program sponsored by The New Jersey Economic Development Authority. Under the program, emerging biotechnology firms with unused net operating loss carryovers and unused research and development credits are allowed to sell these benefits to other firms. During the six months ended June 30, 2014 , the Company sold New Jersey state NOL carry forwards, which resulted in the recognition of a $1,295 tax benefit. During the six months ended June 30, 2015 , the Company recorded a provision for income taxes of $246 based upon its estimated federal AMT and state tax liability. Revenue Recognition Product revenue — The Company recognizes net revenue from Argatroban supplied to its commercial partners and Ryanodex ® and Diclofenac-misoprostol supplied to the end user, when the following four basic revenue recognition criteria under the related accounting guidance are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. Prior to the shipment of manufactured products, the Company conducts initial product release and stability testing in accordance with cGMP. The Company's commercial partners can return the products within contracted specified timeframes if the products do not meet the applicable inspection tests. The Company estimates its return reserves based on its experience with historical return rates. Historically, product returns have not been material. The Company has a no return policy for Ryanodex ® . Revenues from product sales to end users are recorded net of provisions for estimated chargebacks, rebates, returns (if applicable), prompt pay discounts and other deductions, such as shelf stock adjustments, which can be reasonably estimated. When sales provisions are not considered reasonably estimable by Eagle, the revenue is deferred to a future period when more information is available to evaluate the impact. Royalties — The Company recognizes revenue from royalties based on its commercial partners' net sales of products. Royalties are recognized as earned in accordance with contract terms when they can be reasonably estimated and collectability is reasonably assured. The Company's commercial partners are obligated to report their net product sales and the resulting royalty due to the Company within 60 days from the end of each quarter. Based on historical product sales, royalty receipts and other relevant information, the Company accrues royalty revenue each quarter and subsequently determines a true-up when it receives royalty reports from its commercial partners. Historically, these true-up adjustments have been immaterial. License revenue — The Company analyzes each element of our licensing agreements to determine the appropriate revenue recognition. The terms of the license agreement may include payment to us of non-refundable up-front license fees, milestone payments if specified objectives are achieved, and/or royalties on product sales. The Company recognizes revenue from upfront payments over the period of significant involvement under the related agreements unless the fee is in exchange for products delivered or services rendered that represent the culmination of a separate earnings process and no further performance obligation exists under the contract. When a sale combines multiple elements upon performance of multiple services, the Company allocates revenue for transactions that include multiple elements to each unit of accounting based on its relative selling price, and recognizes revenue for each unit of accounting when the revenue recognition criteria have been met. The Company follows the selling price hierarchy as outlined in the guidance Revenue Recognition (ASC Topic 605) - Multiple-Deliverable Revenue Arrangements. The guidance provides a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor-specific objective evidence (“VSOE”), (ii) third-party evidence (“TPE”) if available and when VSOE is not available, and (iii) best estimate of the selling price (“BESP”) if neither VSOE nor TPE is available. The Company uses BESP to determine the standalone selling price for such deliverables. The Company has an established process for developing BESP, which incorporates, pricing practices, historical selling prices, the effect of market conditions as well as entity-specific factors. Estimated selling price is monitored and evaluated on a regular basis to ensure that changes in circumstances are accounted for in a timely manner. The Company recognizes milestone payments as revenue upon the achievement of specified milestones only if (1) the milestone payment is non-refundable, (2) substantive effort is involved in achieving the milestone, (3) the amount of the milestone is reasonable in relation to the effort expended or the risk associated with achievement of the milestone, and (4) the milestone is at risk for both parties. If any of these conditions are not met, we defer the milestone payment and recognize it as revenue over the estimated period of performance under the contract. As described above, under the terms of the Cephalon License, the Company received an upfront cash payment of $30.0 million , and is eligible to receive up to $90.0 million in additional milestone payments. The $30.0 million upfront payment was allocated between the license issued to Cephalon and obtaining and maintaining regulatory approvals and conducting post-approval clinical studies using the Company’s best estimate of selling price for each deliverable. The full $30.0 million was recognized as income in February 2015, as the Company substantially completed its requirements for obtaining regulatory approval, which consisted of filing the New Drug Application on February 13, 2015, and the remaining obligations were estimated to have minimal effort. The remaining milestones, if achieved, will be recognized in the period earned. In addition, the Company is entitled to receive royalty payments in the double digit range of net sales of the product, if approved by the FDA. In connection with the Cephalon License, the Company agreed to enter into a supply agreement with Cephalon, pursuant to which the Company will be responsible for supplying product to Cephalon for a specified period. Collaborative licensing and development revenue — The Company recognizes revenue from reimbursements received in connection with feasibility studies and development work for third parties when its contractual services are performed, provided collectability is reasonably assured. Its principal costs under these agreements include its personnel conducting research and development, and its allocated overhead, as well as the research and development performed by outside contractors or consultants. Upon termination of a collaboration agreement, any remaining non-refundable license fees received by the Company, which had been deferred, are generally recognized in full. All such recognized revenues are included in collaborative licensing and development revenue in its statements of operations. The Company recognizes revenue from milestone payments received under collaboration agreements when earned, provided that the milestone event is substantive, its achievability was not reasonably assured at the inception of the agreement, the Company has no further performance obligations relating to the event, and collectability is reasonably assured. If these criteria are not met, the Company recognizes milestone payments ratably over the remaining period of its performance obligations under the collaboration agreement. Stock-Based Compensation The Company accounts for stock-based compensation using the fair value provisions of ASC 718, Compensation — Stock Compensation that requires the recognition of compensation expense, using a fair-value based method, for costs related to all stock-based payments including stock options and restricted stock. This topic requires companies to estimate the fair value of the stock-based awards on the date of grant for options issued to employees and directors. The Company uses a Black-Scholes valuation model as the most appropriate valuation method for pricing these options. Awards for consultants are accounted for under ASC 505-50, Equity Based Payments to Non-Employees . Any compensation expense related to consultants is marked-to-market over the applicable vesting period as they vest. There are customary limitations on the sale or transfer of the stock. The fair value of stock options granted to employees, directors, and consultants is estimated using the following assumptions: Three Months Ended Six Months Ended 2015 2014 2015 2014 Risk-free interest rate 1.42% - 2.09% 2.11% - 2.16% 1.42% - 2.09% 1.69% - 2.21% Volatility 30.11% 56.84% 30.33% 55.80% Expected term (in years) 5.50 - 7.00 years 6.59 - 10.00 years 5.50 - 7.00 years 5.50 - 7.00 years Expected dividend yield 0.0% 0.0% 0.0% 0.0% The risk-free rate assumption was based on U.S. Treasury instruments whose term was consistent with the expected term of the stock options. The expected stock price volatility was determined by examining the historical volatilities for industry peers as the Company did not have sufficient trading history for its common stock. Industry peers consist of those companies in the pharmaceutical industry similar in size, stage of life-cycle and financial leverage. The expected term of stock options represents the average of the vesting period and the contractual life of the option for employees and the life of the option for consultants. The expected dividend assumption is based on the Company's history and expectation of future dividend payouts. Changes in the estimated forfeiture rates are reflected prospectively. Earnings (Loss) Per Share Basic earnings (loss) per common share is computed using the weighted average number of shares outstanding during the period. Diluted earnings per share is computed in a manner similar to the basic earnings (loss) per share, except that the weighted-average number of shares outstanding is increased to include all common shares, including those with the potential to be issued by virtue of warrants, options, convertible debt and other such convertible instruments. Diluted earnings per share contemplate a complete conversion to common shares of all convertible instruments only if they are dilutive in nature with regards to earnings per share. The dilutive and anti-dilutive common shares equivalents outstanding at the three and six months ended June 30, 2015 and 2014 were as follows: Three Months Ended Six Months Ended 2015 2014 2015 2014 Series A — — — 544,147 Series B — — — 462,100 Series B-1 — — — 339,675 Series C — — — 401,261 Series C warrants — — — 34,359 Options 1,836,327 994,479 1,556,815 917,792 Total 1,836,327 994,479 1,556,815 2,699,334 The following table sets forth the computation for basic and diluted net income (loss) per share for the three and six months ended June 30, 2015 and 2014 : Three Months Ended Six Months Ended 2015 2014 2015 2014 Numerator Numerator for basic earnings per share-net income (loss) $ (8,177 ) $ (2,934 ) $ 11,520 $ (6,153 ) Numerator for diluted earnings per share-net income (loss) $ (8,177 ) $ (2,934 ) $ 11,520 $ (6,153 ) Denominator Basic weighted average common shares outstanding 15,546,796 14,020,133 14,900,498 11,455,408 Dilutive effect of stock options — — 975,899 — Diluted weighted average common shares outstanding 15,546,796 14,020,133 15,876,397 11,455,408 Basic net income (loss) per share Basic net income (loss) per share $ (0.53 ) $ (0.21 ) $ 0.77 $ (0.54 ) Diluted net income (loss) per share Diluted net income (loss) per share $ (0.53 ) $ (0.21 ) $ 0.73 $ (0.54 ) |
