Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2012 |
Accounting Policies [Abstract] | ' |
Basis of Presentation | ' |
Basis of Presentation |
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. |
Principles of Consolidation | ' |
Principles of Consolidation |
The consolidated financial statements include the accounts for Spectrum Pharmaceuticals, Inc., our wholly-owned subsidiaries, and joint ventures that we control, or variable interests for which we are determined to be the primary beneficiary. We evaluate the need to consolidate joint ventures in accordance with authoritative guidance. Investments by outside parties in our consolidated entities are recorded as non-controlling interest in our consolidated financial statements, and stated net after allocation of income and losses in the entity. |
As of December 31, 2012, we had seven consolidated subsidiaries: Allos Therapeutics, Inc., a wholly owned subsidiary acquired in 2012, Allos Therapeutics Ltd. a wholly-owned subsidiary of Allos and formed in England and Wales (inactive), Spectrum Pharmaceuticals Cayman 99% owned, Spectrum Pharmaceuticals International Holdings LLC wholly-owned and organized in Delaware in 2012, OncoRx Pharma Private Limited or OncoRx, wholly-owned and organized in Mumbai, India in 2008; RIT Oncology, LLC, or RIT, wholly-owned since March 15, 2009 and organized in Delaware in October 2008; and a consolidated joint venture, Spectrum Pharma Canada, organized in Quebec, Canada in January 2008. We have eliminated all significant intercompany balances and transactions among the consolidated entities from the consolidated financial statements. |
Variable Interest Entity | ' |
Variable Interest Entity |
Our Canadian affiliate, Spectrum Pharma Canada, is owned 50% by us and was organized in Quebec, Canada in January 2008. We fund 100% of the expenditures and, as a result we are the party with the controlling financial interest. We are the primary beneficiary of Spectrum Pharma Canada, which is determined to be a variable interest entity. As a result of this characterization, it is consolidated in our financial statements as though it is a wholly-owned subsidiary. |
Use of Estimates | ' |
Use of Estimates |
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent obligations in the consolidated financial statements and accompanying notes. The estimation process requires assumptions to be made by management about future events and conditions, and as such, is inherently subjective and uncertain. Actual results could differ materially from those estimates. |
Segment and Geographic Information | ' |
Segment and Geographic Information |
We operate in one reportable segment: acquiring, developing and commercializing prescription drug products. Accordingly, we report the accompanying consolidated financial statements in the aggregate, including all of our activities in one reportable segment. Foreign operations were not significant for any of the periods presented herein. |
Cash, Equivalents and Marketable Securities | ' |
Cash, Equivalents and Marketable Securities |
We consider cash and investments with financial institutions with maturities of three months or less when purchased that can be liquidated without prior notice or penalty, to be cash and equivalents. Marketable securities have maturities from three months to one year when purchased and are classified as available-for-sale. As of December 31, 2012, marketable securities are valued at fair value, which approximates cost due to their short-term maturities. |
As of December 31, 2012, we held substantially all of our cash, equivalents and marketable securities at major financial institutions, which must invest our funds in accordance with our investment policy with the principal objectives of such policy being preservation of capital, fulfillment of liquidity needs and above market returns commensurate with preservation of capital. Our investment policy also requires that investments in marketable securities be in only highly rated instruments, which are primarily US treasury bills or US treasury backed securities, with limitations on investing in securities of any single issuer. We maintain cash balances in excess of federally insured limits in reputable financial institutions. To a limited degree, the Federal Deposit Insurance Corporation and third parties insure these investments. However, these investments are not insured against the possibility of a complete loss of earnings or principal and are inherently subject to the credit risk related to the continued credit worthiness of the underlying issuer and general credit market risks. We manage such risks on our portfolio by investing in highly liquid, highly rated instruments and limit investing in long-term maturity instruments. |
Cash, equivalents and marketable securities, including long term bank certificates of deposits, and investments totaled $145.5 million and $170.6 million as of December 31, 2012 and 2011, respectively. Long term bank certificates of deposit include a $250,000 restricted certificate of deposit that collateralizes tenant improvement obligations to the lessor of our principal offices. The following is a summary of such investments (in 000’s): |
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| | Amortized | | | Gross | | | Gross | | | Estimated | | | Cash | | | Marketable Security | |
Cost | Unrealized | Unrealized | fair |
| | | Gains | | Losses | | Value | | | Current | | | Long | |
| | | | Term |
December 31, 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and equivalents | | $ | 139,698 | | | $ | — | | | $ | — | | | $ | 139,698 | | | $ | 139,698 | | | $ | — | | | $ | — | |
Bank CDs (including restricted certificate of deposit of $250) | | | 987 | | | | — | | | | — | | | | 987 | | | | — | | | | 987 | | | | — | |
Money market currency funds | | | 2,323 | | | | — | | | | — | | | | 2,323 | | | | — | | | | 2,323 | | | | — | |
Other securities (included in other assets) | | | 1,747 | | | | 733 | | | | — | | | | 2,480 | | | | — | | | | — | | | | 2,480 | |
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Total investments | | $ | 144,755 | | | $ | 733 | | | $ | — | | | $ | 145,488 | | | $ | 139,698 | | | $ | 3,310 | | | $ | 2,480 | |
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December 31, 2011 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and equivalents | | $ | 121,202 | | | $ | — | | | $ | — | | | $ | 121,202 | | | $ | 121,202 | | | $ | — | | | $ | — | |
Bank CDs (including restricted certificate of deposit of $500) | | | 27,845 | | | | — | | | | — | | | | 27,845 | | | | — | | | | 18,562 | | | | 9,283 | |
Money market currency funds | | | 14,485 | | | | — | | | | — | | | | 14,485 | | | | — | | | | 14,485 | | | | — | |
U.S. Government securities | | | 7,013 | | | | — | | | | — | | | | 7,013 | | | | — | | | | 7,013 | | | | — | |
Other securities (included in other assets) | | | 35 | | | | — | | | | 29 | | | | 6 | | | | — | | | | — | | | | 6 | |
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Total investments | | $ | 170,580 | | | $ | — | | | $ | 29 | | | $ | 170,551 | | | $ | 121,202 | | | $ | 40,060 | | | $ | 9,289 | |
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As of December 31, 2012, none of the securities had been in a continuous unrealized loss position longer than one year. |
Fair Value Measurements | ' |
Fair Value Measurements |
We measure fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. These tiers include the following: |
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date. The fair value hierarchy gives the highest priority to Level 1 inputs. |
Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. These inputs include quoted prices for similar assets or liabilities; quoted market 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 are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. |
In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as consider counterparty credit risk in the assessment of fair value. Cash equivalents consist of certificates of deposit and are valued at cost, which approximates fair value due to the short-term maturities of these instruments. Marketable securities consist of certificates of deposit, US Government Treasury bills, US treasury-backed securities and corporate deposits, which are stated at fair value as it approximates carrying value due to the short term maturities of these instruments. |
The fair value of the deferred development cost liability and the deferred payment contingency was valued using the discounted cash flow method of the income approach. The unobservable inputs to the valuation models that have the most significant effect on the fair value of our deferred development cost liability and deferred payment contingency are the determination of the present value factors for future cash flows. The assumptions included internal estimates of research and development personnel needed to perform the research and development services; and estimates of expected cash outflows to third parties for services and supplies over the expected period that the services will be performed, approximately through 2022 for the research and development obligations. We determined the present value factor to be a weighted-average cost of capital of approximately 11.0% in 2012. |
A majority of our financial assets have been classified as Level 2. These assets have been initially valued at the transaction price and subsequently valued utilizing third party pricing services. The pricing services use many observable market inputs to determine value, including reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. We validate the prices provided by our third party pricing services by understanding the models used, obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming those securities trade in active markets. |
We did not elect the fair value option, as allowed, to account for financial assets and liabilities that were not previously carried at fair value. Therefore, material financial assets and liabilities that are not carried at fair value, such as trade accounts receivable and payable, are reported at their historical carrying values. |
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The carrying values of our assets and liabilities that are required to be measured at fair value on a recurring basis as of December 31, 2012 and 2011 are classified in the table below in one of the three categories of the fair value hierarchy described below: |
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| | Fair Value Measurements | | | | | | | | | | | | | |
($ in ‘000’s) | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | | | | | | | | | | | |
December 31, 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and equivalents | | $ | 139,698 | | | $ | — | | | $ | — | | | $ | 139,698 | | | | | | | | | | | | | |
Bank CDs (including restricted certificate of deposit of $250) | | | — | | | | 987 | | | | — | | | | 987 | | | | | | | | | | | | | |
Money market currency funds | | | — | | | | 2,323 | | | | — | | | | 2,323 | | | | | | | | | | | | | |
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Cash and equivalents, and marketable securities and investments | | | 139,698 | | | | 3,310 | | | | — | | | | 143,008 | | | | | | | | | | | | | |
Deferred compensation investments, including life insurance cash surrender value | | | — | | | | 2,881 | | | | — | | | | 2,881 | | | | | | | | | | | | | |
Other securities | | | 2,480 | | | | — | | | | — | | | | 2,480 | | | | | | | | | | | | | |
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| | $ | 142,178 | | | $ | 6,191 | | | $ | — | | | $ | 148,369 | | | | | | | | | | | | | |
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Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deferred executive compensation liability | | | — | | | | 2,365 | | | | — | | | | 2,365 | | | | | | | | | | | | | |
Deferred development costs | | | — | | | | — | | | | 12,233 | | | | 12,233 | | | | | | | | | | | | | |
Deferred payment contingency | | | — | | | | — | | | | 2,287 | | | | 2,287 | | | | | | | | | | | | | |
Contingent value right | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
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| | $ | — | | | $ | 2,365 | | | $ | 14,520 | | | $ | 16,885 | | | | | | | | | | | | | |
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| | Fair Value Measurements | | | | | | | | | | | | | |
($ in ‘000’s) | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | | | | | | | | | | | |
December 31, 2011 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and equivalents | | $ | 121,202 | | | $ | — | | | $ | — | | | $ | 121,202 | | | | | | | | | | | | | |
Bank CDs (including restricted certificate of deposit of $500) | | | — | | | | 27,845 | | | | — | | | | 27,845 | | | | | | | | | | | | | |
Money market currency funds | | | — | | | | 14,485 | | | | — | | | | 14,485 | | | | | | | | | | | | | |
U.S. Government securities | | | — | | | | 7,013 | | | | — | | | | 7,013 | | | | | | | | | | | | | |
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Cash and equivalents, marketable securities and investments | | | 121,202 | | | | 49,343 | | | | — | | | | 170,545 | | | | | | | | | | | | | |
Deferred compensation investments | | | — | | | | 972 | | | | — | | | | 972 | | | | | | | | | | | | | |
Other securities | | | 6 | | | | — | | | | — | | | | 6 | | | | | | | | | | | | | |
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| | $ | 121,208 | | | $ | 50,315 | | | $ | — | | | $ | 171,523 | | | | | | | | | | | | | |
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Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deferred executive compensation liability | | | — | | | | 969 | | | | — | | | | 969 | | | | | | | | | | | | | |
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| | $ | — | | | $ | 969 | | | $ | — | | | $ | 969 | | | | | | | | | | | | | |
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The following summarizes the activity of Level 3 inputs measured on a recurring basis for the years ended December 31, 2012 and 2011: |
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| | Fair Value Measurements of 1 | | | | | | | | | | | | | | | | | | | | | | | | | |
Unobservable Inputs (Level 3) | | | | | | | | | | | | | | | | | | | | | | | | |
($ in 000’s) | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2010 | | $ | 3,904 | | | | | | | | | | | | | | | | | | | | | | | | | |
Transfers in / (out) of Level 3 | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjustments resulting from change in value of warrants recognized in earnings | | | 3,488 | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjustments resulting from exercise of warrants recognized in equity | | | (7,392 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
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Balance at December 31, 2011 | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
Transfers in / (out) of Level 3: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deferred development costs | | | 12,233 | | | | | | | | | | | | | | | | | | | | | | | | | |
Deferred payment contingency | | | 2,287 | | | | | | | | | | | | | | | | | | | | | | | | | |
Contingent right value | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
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Balance at December 31, 2012 | | $ | 14,520 | | | | | | | | | | | | | | | | | | | | | | | | | |
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The fair value of the deferred development costs and deferred payment contingency are measured at the end of each reporting period using Level 3 inputs. The significant unobservable assumptions we use include the determination of present value factors for future cash flows. |
The fair value of common stock warrants were measured on their respective origination dates and at the end of each reporting period using Level 3 inputs. The significant assumptions we use in the calculations under the Black-Scholes Option Pricing Model as of December 31, 2011 included an expected term based on the remaining contractual life of the warrants, a risk-free interest rate based upon observed interest rates appropriate for the expected term of the instruments, volatility based on the historical volatility of our common stock, and a zero dividend rate based on our past, current and expected practices of granting dividends on common stock. |
The fair value of common stock warrants decreased approximately $3.9 million due to the exercise of 3,747,312 warrants on or before September 15, 2011, for a total aggregate exercise price of $24.8 million. |
Concentration of credit risk | ' |
Concentration of credit risk |
Our investments are subject to concentration of credit risk, which is managed by diversification of the investment portfolio and by the purchase of investment-grade securities. |
Our product sales are concentrated in a limited number of customers. A summary of our customers that represent 10% or more of our total consolidated gross product sales are as follows: |
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| | 2012 | | | 2011 | | | 2010 | | | | | | | | | | | | | | | | | |
Oncology Supply | | | 26.5 | % | | | 57 | % | | | 45.7 | % | | | | | | | | | | | | | | | | |
McKesson Specialty | | | 23.2 | % | | | 19.1 | % | | | * | | | | | | | | | | | | | | | | | |
ICS | | | 19.4 | % | | | * | | | | * | | | | | | | | | | | | | | | | | |
Cardinal Health | | | 15.7 | % | | | * | | | | * | | | | | | | | | | | | | | | | | |
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(*) | Less than 10% | | | | | | | | | | | | | | | | | | | | | | | | | | | |
No other single customer generated over 10% of our consolidated gross product sales during the prior three fiscal years. |
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We are exposed to risks associated with extending credit to our customers related to the sale of products. We do not require collateral or other security to support credit sales, however, we maintain reserves for potential bad debt and to date, credit losses have been within management’s expectations. A summary of our customers that represent 10% or more of our net receivables as of December 31, 2012 and 2011 are as follows: |
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| | 2012 | | | 2011 | | | | | | | | | | | | | | | | | | | | | |
Oncology Supply | | | 37.7 | % | | | 26.8 | % | | | | | | | | | | | | | | | | | | | | |
McKesson Specialty | | | 26 | % | | | 54.1 | % | | | | | | | | | | | | | | | | | | | | |
ICS | | | 19.1 | % | | | * | | | | | | | | | | | | | | | | | | | | | |
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(*) | Less than 10% | | | | | | | | | | | | | | | | | | | | | | | | | | | |
No other single customer owed us more than 10% of net receivables during the prior fiscal years. |
We have single source suppliers for raw materials and the manufacturing of finished product of ZEVALIN. We are exposed to loss of revenue from the sale of this product if the supplier cannot fulfill demand. We also have single source suppliers for raw materials, and manufactured finished product for our development drug candidates. If we are unable to obtain sufficient quantities of such product, our research and development activities may be adversely affected. |
Inventories | ' |
Inventories |
Inventories are valued at the lower of cost (first-in, first-out method) or market. The lower of cost or market is determined based on net estimated realizable value after appropriate consideration is given to obsolescence, excessive levels, deterioration, and other factors. |
We continually review product inventories on hand, evaluating inventory levels relative to product demand, remaining shelf life, future marketing plans and other factors. We adjust our inventory to reflect situations in which the cost of inventory is not expected to be recovered. We record a reserve to adjust inventory to its net realizable value if (i) a product is close to expiration and not expected to be sold, (ii) when a product has reached its expiration date or (iii) when a product is not expected to be saleable. In determining reserves for these products, we consider factors such as the amount of inventory on hand and its remaining shelf life, and current and expected market conditions, including management forecasts and levels of competition. We have evaluated the current level of inventory considering historical trends and other factors, and based on our evaluation, we have recorded adjustments to reflect inventory at its net realizable value. These adjustments are estimates, which could vary significantly from actual results if future economic conditions, customer demand, competition or other relevant factors differ from expectations. These estimates require us to make assessments about the future demand for our products in order to categorize the status of such inventory items as slow-moving, obsolete or in excess-of-need. These estimates are subject to the ongoing accuracy of our forecasts of market conditions, industry trends, competition and other factors. Differences between our estimated reserves and actual inventory adjustments have historically not been significant, and are accounted for in the current period as a change in estimate. During 2012 and 2011, inventories of $4.3 million and $1.3 million, respectively, were recorded against cost of goods sold and the total reserve was $4.2 million and $1.3 million at December 31, 2012 and 2011, respectively. |
The allowance for inventory reserves is as follows: |
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| | Year Ended December 31, | | | | | | | | | | | | | | | | | |
| | 2012 | | | 2011 | | | 2010 | | | | | | | | | | | | | | | | | |
Balance at beginning of period | | $ | 1,343 | | | $ | 50 | | | $ | — | | | | | | | | | | | | | | | | | |
Net additions charged to expense | | | 4,264 | | | | 1,320 | | | | 50 | | | | | | | | | | | | | | | | | |
Deductions | | | (1,419 | ) | | | (27 | ) | | | — | | | | | | | | | | | | | | | | | |
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Balance at end of period | | $ | 4,188 | | | $ | 1,343 | | | $ | 50 | | | | | | | | | | | | | | | | | |
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Property and Equipment | ' |
Property and Equipment |
Property and equipment are recorded at cost less accumulated depreciation. Maintenance and repairs are expensed as incurred. Upon sale or disposition of assets, any gain or loss is included in the statements of operations. |
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The cost of property, plant and equipment is depreciated using the straight-line method over the following estimated useful lives of the respective assets. Leasehold improvements are amortized over the lesser of the estimated useful lives of the respective assets or the related lease terms. |
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Computers and software | | | 3 to 5 years | | | | | | | | | | | | | | | | | | | | | | | | | |
Office furniture and equipment | | | 5 to 7 years | | | | | | | | | | | | | | | | | | | | | | | | | |
Lab and media equipment | | | 2 to 7 years | | | | | | | | | | | | | | | | | | | | | | | | | |
All long-lived assets, including property and equipment, are reviewed for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. If impairment is indicated, we reduce the carrying value of the asset to fair value. Fair value would be determined by the use of appraisals, discounted cash flow analyses or comparable fair values of similar assets. |
Patents and Licenses | ' |
Patents and Licenses |
We expense all licensing and patent application costs as they are incurred. |
Goodwill and Intangible Assets | ' |
Goodwill and Intangible Assets |
Goodwill represents the excess of acquisition cost over the fair value of the net assets of the acquired businesses. Goodwill has an indefinite useful life and is not amortized, but instead tested for impairment annually. We perform our annual evaluation as of October 1 each year. |
Intangible assets are reviewed for impairment when facts or circumstances suggest that the carrying value of these assets may not be recoverable. Our policy is to identify and record impairment losses, if necessary, on intangible product rights when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. It is our policy to expense costs as incurred in connection with the renewal or extension of its intangible assets. |
We acquired 50% of the rights in RIT in December 2008 and the remaining 50% in March 2009. The purchase price for the acquisition of ZEVALIN rights was allocated to identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date which is being amortized over its useful life of 10 years. Such a valuation requires significant estimates and assumptions including but not limited to: determining the timing and expected costs to complete the in-process projects, projecting regulatory approvals, estimating future cash flows from product sales resulting from in-process projects, and developing appropriate discount rates and probability rates by project. We believe the fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions. |
Identifiable intangible assets with definite lives are amortized on a straight-line basis over their estimated useful lives, ranging from 1 to 10 years. |
We acquired all of the oncology drug assets of Targent in April 2006. As part of the consideration for the purchase of these assets, we agreed to pay milestone payments to Targent upon the achievement of certain regulatory events as well as for certain sales levels for FUSILEV within a calendar year. During 2011, we capitalized $16.8 million associated with the achievement of these milestones which are being amortized to cost of goods sold on a straight-line basis over the estimated useful life of 8.7 years. |
On April 1, 2012, we acquired the licensing rights to market ZEVALIN outside of the U.S. (ZEVALIN Rights) from Bayer Pharma AG or Bayer. The process for estimating the fair values of these identifiable intangible assets involved the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates. These identified intangible assets are being amortized over the estimated useful life of 10 years. |
We acquired Allos on September 5, 2012, and recorded intangible assets related to developed technology and Ex-U.S. and Canada distribution rights through an agreement with a third-party, Mundipharma. These intangible assets are amortized over their expected period of economic benefit of 14 years and 10 years, respectively. In selecting the method of amortization, we considered pattern in which economic benefits of this asset are consumed. As the pattern of use could not be reliably determine with sufficient precision, we used a straight-line method of amortization (see Note 8). |
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Under the purchase method of accounting, the total purchase consideration is allocated to Allos net tangible and intangible assets based on their estimated fair values as of the closing date. The excess of the purchase price over the fair value of assets acquired and liabilities assumed was allocated to goodwill. The acquired intangible assets consisted of FOLOTYN developed technology for approved indications of currently marketed products, and its distribution rights outside of the U.S. and Canada through an agreement with a third-party, Mundipharma (see Note 11). |
The weighted-average amortization period for such intangible assets acquired is outlined in the table below: |
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| | Fair Value | | | Weighted-Average | | | | | | | | | | | | | | | | | | | | | |
of | | | | | | | | | | | | | | | | | | | | |
Intangible | | | | | | | | | | | | | | | | | | | | |
| | Assets | | | Amortization | | | | | | | | | | | | | | | | | | | | | |
| | Acquired | | | Period | | | | | | | | | | | | | | | | | | | | | |
Developed Technology — FOLOTYN® | | $ | 118,400 | | | | 14 years | | | | | | | | | | | | | | | | | | | | | |
FOLOTYN® Ex-U.S. and Canada Distribution Rights | | | 27,900 | | | | 10 years | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total identifiable intangible assets | | $ | 146,300 | | | | | | | | | | | | | | | | | | | | | | | | | |
The fair value of the developed technology and distribution rights intangible assets was estimated using the income approach. The income approach uses valuation techniques to convert future amounts to a single present amount (discounted). Our measurement is based on the value indicated by current market expectations about those future amounts. The fair value considered our estimates of future incremental earnings that may be achieved by the intangible assets. |
With respect to the acquisition discussed, we believe the fair values assigned to the assets acquired and liabilities assumed were based upon reasonable assumptions. Our allocation of the purchase price was largely dependent on discounted cash flow analyses of projects and products of Allos. We cannot provide assurance that the underlying assumptions used to forecast the cash flows or the timely and successful completion of such projects will materialize as we estimated. For these reasons, among others, our actual results may vary significantly from the estimated results. |
We evaluate the recoverability of definite-lived intangible assets whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable. Such circumstances could include, but are not limited to the following: |
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| (i) | a significant decrease in the market value of an asset; | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| (ii) | a significant adverse change in the extent or manner in which an asset is used; or | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| (iii) | an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset. | | | | | | | | | | | | | | | | | | | | | | | | | | |
We measure the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds its fair value. No impairment loss was recorded during the years 2012, 2011 or 2010. |
Revenue Recognition | ' |
Revenue Recognition |
Revenue from product sales is recognized upon shipment of product when title and risk of loss have transferred to the customer. We sell our products to wholesalers and distributors of oncology products and directly to the end user, directly or through Global Purchasing Organizations or GPO’s (e.g., certain hospitals or hospital systems and clinics with whom we have entered into a direct purchase agreement). Our wholesalers and distributors purchase our products and sell the products directly to end users, which include, but are not limited to, hospitals, clinics, medical facilities, managed care facilities and private oncology based practices. Revenue from product sales is recognized upon shipment of product when title and risk of loss have transferred to the customer, and the following additional criteria are met: |
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| (i) | the price is substantially fixed and determinable; | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| (ii) | our customer has economic substance apart from that provided by us; | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| (iii) | our customer’s obligation to pay us is not contingent on resale of the product; | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| (iv) | we do not have significant obligations for future performance to directly bring about the resale of our product; and | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| (v) | we have a reasonable basis to estimate future returns. | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Generally, revenue is recognized when all four of the following criteria are met: |
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| (i) | persuasive evidence that an arrangement exists; | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| (ii) | delivery of the products has occurred, or services have been rendered; | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| (iii) | the selling price is both fixed and determinable; and | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| (iv) | collectability is reasonably assured. | | | | | | | | | | | | | | | | | | | | | | | | | | |
We calculate a provision for estimated product returns, sales discounts, rebates, chargeback’s and distribution and data fees are established as a reduction of gross product sales at the time such revenues are recognized. Thus, revenue is recorded, net of such estimated provisions. We state the related accounts receivable at net realizable value, with any allowance for doubtful accounts charged to general operating expenses. If revenue from sales is not reasonably determinable due to provisions for estimates, promotional adjustments, price adjustments, returns or any other potential adjustments, we defer the revenue and recognize revenue when the estimates are reasonably determinable, even if the monies for the gross sales have been received. |
We utilize a third-party logistics company to store and distribute FUSILEV. The same third party logistics company also stores and ships ZEVALIN kits containing the CD20 MAB. |
During 2009, we changed the supply and distribution model for ZEVALIN. Previously, we sold ZEVALIN kits containing the CD20 MAB to radiopharmacies, who in turn ordered the radioactive isotope (Y-90 or In-111) separately and radiolabeled (or attached) the radioactive isotope to the CD20 MAB. The radiopharmacy then sold the end user product to the consumer. Under the current model we do not sell the ZEVALIN kits containing the CD20 MAB to the radiopharmacies, but instead contract with them, as a fee-for-service, to radiolabel the individual components of the CD20 MAB to the radioactive isotope, and then, also under a fee-for-service arrangement, have them distribute the end use product to the end user; the clinics, hospitals or other medical settings. In this regard, we now sell the CD20 MAB together with the radioactive isotope as the end user product. In November 2011 we received FDA approval to remove the bioscan and starting in January 2012 we are no longer supplying the imaging kit (In-111) used for bioscan. |
Product returns allowances | ' |
Product returns allowances |
Customers are typically permitted to return products within thirty days after shipment, if incorrectly shipped or not ordered, and six months after the expiration of product dating for FUSILEV, subject to certain restocking fees and preauthorization requirements, as applicable. The returned product is destroyed if it is damaged, quality is compromised or past its expiration date. In general, returned product is not resold. As of each balance sheet date, we estimate potential returns, based on several factors, including: inventory held by distributors, sell through data of distributor sales to end users, customer and end-user ordering and re-ordering patterns, aging of accounts receivables, rates of returns for directly substitutable products and pharmaceutical products for the treatment of therapeutic areas similar to indications served by our products, shelf life of our products, historical rates of actual returns and based on experience of our management with selling similar oncology products. We record an allowance for future returns by debiting revenue, thereby reducing product sales and crediting a reserve for returns to reduce other accrued obligations. No returns reserve is recorded for ZEVALIN since in the U.S. we invoice our end user customers and recognize revenues only when a patient is treated with ZEVALIN and for Ex. U.S. we invoice upon delivery. FOLOTYN returns are limited to defective product or product that was shipped in error. Historical allowances for product returns have been within estimated amounts reserved or accrued. The amount of allowances for sales returns we recognized in the consolidated balance sheets as of December 31, 2012 and 2011 are $4.9 million and $4.0 million, respectively and are recorded in other accrued obligations. |
Government chargebacks | ' |
Government chargebacks |
Our products are subject to certain programs with federal government qualified entities whereby pricing on products is discounted below distributor list price to participating entities. These entities purchase products through distributors at the discounted price, and the distributors charge the difference between their acquisition cost and the discounted price back to us. We account for chargebacks by establishing an accrual in an amount equal to our estimate of chargeback claims at the time of product sale. We also evaluate the adequacy of previously recorded chargebacks based on data regarding specific entities claims activity over time to adjust current period chargebacks for these same distributors. Due to estimates and assumptions inherent in determining the amount of government chargebacks, the time lag to receive information from distributors, the actual amount of claims for chargebacks may be materially different from our estimates, at which time we would adjust our reserves accordingly. |
Discounts | ' |
Discounts |
Discounts (generally prompt payment discounts) are accrued at the end of every reporting period based on the gross sales made to customers during the period and based on their terms of trade for a product. We generally review the terms of the contracts, specifically price and discount structures, and payment terms between the customer and us to estimate the discount accrual. |
Rebates | ' |
Rebates |
Customer rebates are estimated at every period end, based on direct purchases, depending on whether any rebates have been offered based on definitive contractual agreements. The rebates are recognized when products are purchased and a periodic credit is given. |
Medicaid Rebates | ' |
Medicaid Rebates |
Our products are subject to state government-managed Medicaid programs whereby discounts and rebates are provided to participating state governments. We record estimated rebates payable under governmental programs, including Medicaid, as a reduction of revenue in the same period the related sale is recorded. Our calculations related to these rebate accruals require estimates, including estimates of customer mix primarily based on a combination of market and clinical research, to determine which sales will be subject to rebates and the amount of such rebates. Our estimate of utilization is based on historical claims and supplemented by management’s judgment with respect to many factors, including changes in sales trends, an evaluation of current laws and regulations and product pricing. We update our estimates and assumptions each period and record any necessary adjustments to our reserves. Additionally, there is a time lag between the date we determine the estimated liability and when we actually pay the liability. Although allowances and accruals are recorded at the time of product sale, certain rebates are typically paid out, on average, up to six months or longer after the sale. |
Distribution and Data Fees | ' |
Distribution and Data Fees |
Distribution and data fees are paid to authorized wholesalers and specialty distributors of FUSILEV and FOLOTYN as a percentage of WAC for products sold. The services provided include contract administration, inventory management, product sales reporting by customer, returns for clinics and hospitals. We accrue distribution and data fees based on a percentage of FUSILEV and FOLOTYN revenues that are set and governed by distribution agreements. |
We also state the related accounts receivable at net realizable value, with any allowance for doubtful accounts charged to general operating expenses. If revenue from sales is not reasonably determinable due to provisions for estimates, promotional adjustments, price adjustments, returns or any other potential adjustments, we defer the revenue and recognize revenue when the estimates are reasonably determinable, even if the monies for the gross sales have been received. |
Milestone Payments | ' |
Milestone Payments |
Milestone payments under collaborative arrangements are triggered either by the results of our research and development efforts or by specified sales results by a third-party collaborator. Milestones related to our development-based activities may include initiation of various phases of clinical trials, successful completion of a phase of development or results from a clinical trial, acceptance of a New Drug Application by the FDA or an equivalent filing with an equivalent regulatory agency in another territory, or regulatory approval by the FDA or by an equivalent regulatory agency in another territory. Due to the uncertainty involved in meeting these development-based milestones, the development-based milestones are considered to be substantial (i.e. not just achieved through passage of time) at the inception of the collaboration agreement. In addition, the amounts of the payments assigned thereto are considered to be commensurate with the enhancement of the value of the delivered intellectual property as a result of our performance. Our involvement is necessary to the achievement of development-based milestones. We would account for development-based milestones as revenue upon achievement of the substantive milestone events. Milestones related to sales-based activities may be triggered upon events such as the first commercial sale of a product or when sales first achieve a defined level. These sales-based milestones would be achieved after the completion of our development activities. We would account for the sales-based milestones in the same manner as royalties, with revenue recognized upon achievement of the milestone. In addition, upon the achievement of either development-based or sales-based milestone events, we have no future performance obligations related to any milestone payments. |
License Fees | ' |
License Fees |
We recognize license fees based on the facts and circumstances of each contractual agreement. In general, we recognize income upon the signing of a contractual agreement that grants rights to products or technology to a third party if we have no further obligation to provide products or services to the third party after entering into the contract. |
Research and Development | ' |
Research and Development |
Research and development expenses include salaries and benefits, clinical trial and related manufacturing costs, contract and other outside service fees, and facilities and overhead costs related to our research and development efforts. Research and development expenses also consist of costs incurred for proprietary and collaborative research and development and include activities such as product registries and investigator-sponsored trials. Research and development costs are expensed as incurred. In certain instances, we enter into agreements with third parties for research and development activities, where we may prepay fees for services at the initiation of the contract. We record such prepayment as a prepaid asset and charge research and development expense over the period of time the contracted research and development services are performed. Other types of arrangements with third parties may be fixed fee or fee for service, and may include monthly payments or payments upon the completion of milestones or receipt of deliverables. |
As of each balance sheet date, we review purchase commitments and accrue drug development expenses based on factors such as estimates of work performed, patient enrollment, completion of patient studies and other events. We maintain regular communication with our vendors, including our clinical sites, and gauge the reasonableness of estimates provided. However, actual clinical trial costs may differ materially from estimated clinical trial costs and are adjusted for in the period in which they become known. |
Basic and Diluted Net Income (Loss) Per Share | ' |
Basic and Diluted Net Income (Loss) Per Share |
We calculate basic and diluted net income (loss) per share using the weighted average number of common shares outstanding during the periods presented, and adjust the amount of net income (loss) used in this calculation for preferred stock dividends (if any) declared during the period. In periods of a net loss position, basic and diluted weighted average shares are the same. For the diluted earnings per share calculation, we adjust the weighted average number of common shares outstanding to include dilutive stock options, warrants and other common stock equivalents outstanding during the periods. |
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The following shows the amounts used in computing basic and diluted earnings per share for each of the three years in the period ended December 31, 2012: |
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(in thousands, except share and per share data) | | Net Income | | | Weighted- | | | Earnings | | | | | | | | | | | | | | | | | |
(numerator) | Average | Per Share | | | | | | | | | | | | | | | | |
| Shares | | | | | | | | | | | | | | | | | |
| Outstanding | | | | | | | | | | | | | | | | | |
| (Denominator) | | | | | | | | | | | | | | | | | |
December 31, 2012 (As Restated) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic earnings per share: | | $ | 94,201 | | | | 58,588,916 | | | $ | 1.61 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Diluted earnings per share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dilutive preferred shares | | | | | | | 40,000 | | | | | | | | | | | | | | | | | | | | | |
Dilutive options | | | | | | | 4,749,299 | | | | | | | | | | | | | | | | | | | | | |
Incremental shares assumed issued on exercise of in the money warrants | | | | | | | 224,437 | | | | | | | | | | | | | | | | | | | | | |
Unvested restrictive stock | | | | | | | 1,034,604 | | | | | | | | | | | | | | | | | | | | | |
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Diluted earnings per share | | $ | 94,201 | | | | 64,637,256 | | | $ | 1.46 | | | | | | | | | | | | | | | | | |
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(in thousands, except share and per share data) | | Net Income | | | Weighted- | | | Earnings | | | | | | | | | | | | | | | | | |
(numerator) | Average | Per Share | | | | | | | | | | | | | | | | |
| Shares | | | | | | | | | | | | | | | | | |
| Outstanding | | | | | | | | | | | | | | | | | |
| (Denominator) | | | | | | | | | | | | | | | | | |
December 31, 2011 (As Restated) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic earnings per share: | | $ | 49,931 | | | | 53,272,767 | | | $ | 0.94 | | | | | | | | | | | | | | | | | |
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Diluted earnings per share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dilutive preferred shares | | | | | | | 40,000 | | | | | | | | | | | | | | | | | | | | | |
Dilutive options | | | | | | | 4,185,224 | | | | | | | | | | | | | | | | | | | | | |
Change in shares related to Targent and Management incentive plan milestones as if they had been issued at the beginning of the quarter earned | | | | | | | 248,193 | | | | | | | | | | | | | | | | | | | | | |
Incremental shares assumed issued on exercise of in the money warrants | | | | | | | 200,656 | | | | | | | | | | | | | | | | | | | | | |
Unvested restrictive stock | | | | | | | 12,874 | | | | | | | | | | | | | | | | | | | | | |
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Diluted earnings per share | | $ | 49,931 | | | | 57,959,714 | | | $ | 0.86 | | | | | | | | | | | | | | | | | |
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(in thousands, except share and per share data) | | December 31, | | | | | | | | | | | | | | | | | | | | | | | | | |
2010 | | | | | | | | | | | | | | | | | | | | | | | | |
(As Restated) | | | | | | | | | | | | | | | | | | | | | | | | |
Net loss — attributable to Spectrum Pharmaceuticals, Inc. stockholders | | $ | (47,064 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Less: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Preferred dividends paid in cash or stock | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loss attributable to Spectrum stockholders | | $ | (47,064 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Weighted average shares issued and outstanding | | | 49,502,854 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Basic and diluted net loss per share | | $ | (0.95 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
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The following table sets forth the number of shares excluded from the computation of diluted earnings per share, as their inclusion would have been anti-dilutive: |
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| | December 31, | | | | | | | | | | | | | | | | | | | | | | | | | |
2010 | | | | | | | | | | | | | | | | | | | | | | | | |
Series E Preferred Shares | | | 52,000 | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock Options | | | 5,157,935 | | | | | | | | | | | | | | | | | | | | | | | | | |
Warrants | | | 4,142,312 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 9,352,247 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accounting for Employee Share-Based Compensation | ' |
Accounting for Employee Share-Based Compensation |
We measure compensation expense for all share-based awards at fair value on the date of grant for the portion that is ultimately expected to vest and recognize compensation expense in our consolidated statements of operations over the service period that the awards are expected to vest. We have elected to recognize compensation expense for all options with graded vesting on a straight-line basis over the vesting period of the entire option. |
The fair value of share-based compensation is estimated based on the closing market price of our common stock on the day prior to the award grants for stock awards, using the Black-Scholes Option Pricing Model for stock options and warrants and a lattice or Monte Carlo valuation model for the management incentive plan. We estimate volatility based on historical volatility of our common stock, and estimate the expected term based on several criteria, including the vesting period of the grant and the term of the award. |
We recorded share-based employee compensation as follows: |
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| | Year Ended December 31, | | | | | | | | | | | | | | | | | |
| | 2012 | | | 2011 | | | 2010 | | | | | | | | | | | | | | | | | |
| | ($ in ‘000’s) | | | | | | | | | | | | | | | | | |
Research and development expense | | $ | 1,843 | | | $ | 1,628 | | | $ | 2,484 | | | | | | | | | | | | | | | | | |
Selling, general and administrative expense | | | 13,041 | | | | 20,609 | | | | 5,801 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | 14,884 | | | $ | 22,237 | | | $ | 8,285 | | | | | | | | | | | | | | | | | |
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Warrant accounting | ' |
Warrant accounting |
We account for common stock warrants pursuant to the applicable guidance on accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, on the understanding that in compliance with applicable securities laws, registered warrants require the issuance of registered securities upon exercise and do not sufficiently preclude an implied right to net cash settlement. We classify registered warrants on the consolidated balance sheet as a current liability, which is revalued at each balance sheet date subsequent to the initial issuance. Determining the appropriate fair-value model and calculating the fair value of registered warrants requires considerable judgment, including estimating stock price volatility and expected warrant life. We develop our estimates based on historical data. A small change in the estimates used may have a relatively large change in the estimated valuation. We use the Black-Scholes pricing model to value the registered warrants. Changes in the fair market value of the warrants are reflected in the consolidated statement of operations as “Change in the fair value of common stock warrant liability.” All registered warrants have been exercised as of December 31, 2012. |
Income Taxes | ' |
Income Taxes |
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. |
We have determined that net deferred tax assets that do not meet the “more likely than not” to be realized criteria and, accordingly, a valuation allowance has been recorded to reduce the net carrying value to an amount that we believe is more likely than not to be realized. When we establish or reduce the valuation allowance against the deferred tax assets, our provision for income taxes will increase or decrease, respectively, in the period such determination is made. |
Valuation allowances against our deferred tax assets were $1.1 million and $45.6 million at December 31, 2012 and December 31, 2011, respectively. Changes in the valuation allowances, when they are recognized in the provision for income taxes, are included as a component of the estimated annual effective tax rate. |
Foreign Currency Translation | ' |
Foreign Currency Translation |
We translate the assets and liabilities of our foreign subsidiaries stated in local functional currencies to US dollars at the rates of exchange in effect at the end of the period. Revenues and expenses are translated using rates of exchange in effect during the period. Gains and losses from the translation of financial statements denominated in foreign currencies are included as a separate component of accumulated other comprehensive income in the statement of stockholders’ equity and the statement of comprehensive income (loss). |
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We record foreign currency transactions at the exchange rate prevailing at the date of the transaction with resultant gains and losses being included in results of operations. Foreign currency transaction gains and losses have not been significant for any period presented. |
Acquisitions and Collaborations | ' |
Acquisitions and Collaborations |
For all in-licensed products, pursuant to authoritative guidance, we perform an analysis to determine whether we hold a variable interest or interests that give us a controlling financial interest in a variable interest entity. On the basis of our interpretations and conclusions, we determine whether the acquisition falls under the purview of variable interest entity accounting and if so, consider the necessity to consolidate the acquisition. |
We also perform an analysis to determine if the inputs and/or processes acquired in an acquisition qualify as a business. On the basis of our interpretations and conclusions, we determine if the in-licensed products qualify as a business and whether to account for such products as a business combination or an asset acquisition. The accounting for acquisitions requires extensive use of estimates and judgments to measure the fair value of the identifiable tangible and intangible assets acquired, including in-process research and development, and liabilities assumed. Additionally, we must determine whether an acquired entity is considered to be a business or a set of net assets, because the excess of the purchase price over the fair value of net assets acquired can only be recognized as goodwill in a business combination. |
Comprehensive Income (Loss) | ' |
Comprehensive Income (Loss) |
Comprehensive income (loss) is calculated in accordance with authoritative guidance which requires the disclosure of all components of comprehensive income, including net income (loss) and changes in equity during a period from transactions and other events and circumstances generated from non-owner sources. Our accumulated other comprehensive income (loss) at December 31, 2012 and 2011, respectively consisted primarily of foreign currency translation adjustments and net unrealized gains/losses on investments in marketable securities as of that date. |
Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements |
In June 2011, the Financial Accounting Standards Board (FASB) issued an accounting standards update that eliminates the option to present components of other comprehensive income as part of the statement of changes in equity and requires an entity to present items of net income and other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This guidance also required an entity to present on the face of the financial statements reclassification adjustments from other comprehensive income to net income, but in December 2011, the FASB issued an accounting standards update that deferred this requirement. This guidance became effective for fiscal years beginning after December 15, 2011. We adopted the provisions of the guidance in the first quarter of 2012 and elected to present items of net income and other comprehensive income in two separate but consecutive statements. |
In May 2011, the FASB issued an accounting standards update that clarifies and amends the existing fair value measurement and disclosure requirements. This guidance became effective prospectively for interim and annual periods beginning after December 15, 2011. We adopted the provisions of the guidance in the first quarter of 2012. The adoption did not have a material impact on the Company’s consolidated financial statements. |
New Accounting Standards Not Yet Adopted | ' |
New Accounting Standards Not Yet Adopted |
In February 2013, the FASB issued an accounting standards update that requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amounts are required to be reclassified in their entirety to net income. For other amounts that are not required to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. This guidance will be effective for reporting periods beginning after December 15, 2012, which will be our fiscal year 2013, with early adoption permitted. We do not expect the adoption of the guidance will have a material impact on our consolidated financial statements. |
In July 2012, the FASB issued an accounting standards update that gives an entity the option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. This guidance will be effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, which will be our fiscal year 2013, with early adoption permitted. We do not expect the adoption of the guidance will have a material impact on our consolidated financial statements. |