Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | 5-May-15 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | BIOSPECIFICS TECHNOLOGIES CORP | |
Entity Central Index Key | 875622 | |
Current Fiscal Year End Date | -19 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 6,739,712 | |
Document Fiscal Year Focus | 2015 | |
Document Fiscal Period Focus | Q1 | |
Document Type | 10-Q | |
Amendment Flag | FALSE | |
Document Period End Date | 31-Mar-15 |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (unaudited) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Current assets: | ||
Cash and cash equivalents | $10,733,859 | $9,810,816 |
Short term investments | 13,010,685 | 10,900,436 |
Accounts receivable, net | 3,656,516 | 2,938,731 |
Investment interest receivable | 66,576 | 48,316 |
Income tax receivable | 639,120 | 653,116 |
Deferred tax asset | 16,907 | 16,907 |
Deferred royalty buy-down | 628,723 | 569,641 |
Prepaid expenses | 236,730 | 210,847 |
Total current assets | 28,989,116 | 25,148,810 |
Long-term Investments | 1,250,000 | 1,250,000 |
Deferred royalty buy-down - long term | 3,085,706 | 3,271,120 |
Deferred tax assets - long term | 1,062,705 | 1,061,864 |
Patent costs, net | 284,193 | 295,030 |
Total assets | 34,671,720 | 31,026,824 |
Current liabilities: | ||
Accounts payable and accrued expenses | 783,581 | 543,696 |
Deferred revenue | 49,378 | 49,378 |
Accrued liabilities of discontinued operations | 78,138 | 78,138 |
Total current liabilities | 911,097 | 671,212 |
Long-term deferred revenue | 86,412 | 98,757 |
Stockholders' equity: | ||
Series A Preferred stock, $.50 par value, 700,000 shares authorized; none outstanding | 0 | 0 |
Common stock, $.001 par value; 10,000,000 shares authorized; 7,074,209 and 7,062,209 shares issued, 6,739,712 and 6,730,622 outstanding as of March 31, 2015 and December 31, 2014, respectively | 7,074 | 7,062 |
Additional paid-in capital | 26,260,165 | 25,059,458 |
Retained earnings | 11,951,878 | 9,620,978 |
Treasury stock, 334,497 and 331,587 shares at cost as of March 31,2015 and December 31, 2014, respectively | -4,544,906 | -4,430,643 |
Total stockholders' equity | 33,674,211 | 30,256,855 |
Total liabilities and stockholders' equity | $34,671,720 | $31,026,824 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (unaudited) (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Stockholders' equity: | ||
Series A Preferred stock, par value (in dollars per share) | $0.50 | $0.50 |
Series A Preferred stock, authorized (in shares) | 700,000 | 700,000 |
Series A Preferred stock, outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $0.00 | $0.00 |
Common stock, authorized (in shares) | 10,000,000 | 10,000,000 |
Common stock, issued (in shares) | 7,074,209 | 7,062,209 |
Common stock, outstanding (in shares) | 6,739,712 | 6,730,622 |
Treasury stock, shares (in shares) | 334,497 | 331,587 |
Condensed_Consolidated_Income_
Condensed Consolidated Income Statement (unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Revenues: | ||
Royalties | $5,594,109 | $2,740,318 |
Licensing revenues | 12,345 | 17,283 |
Total Revenues | 5,606,454 | 2,757,601 |
Costs and expenses: | ||
Research and development | 239,465 | 382,704 |
General and administrative | 1,803,122 | 1,246,305 |
Total Cost and Expenses | 2,042,587 | 1,629,009 |
Operating income | 3,563,867 | 1,128,592 |
Other income: | ||
Interest income | 13,720 | 6,971 |
Other income | 4,633 | 4,828 |
Total other income | 18,353 | 11,799 |
Income before income tax expense | 3,582,220 | 1,140,391 |
Income tax expense | -1,251,320 | -386,402 |
Net income | $2,330,900 | $753,989 |
Basic net income per share (in dollars per share) | $0.35 | $0.12 |
Diluted net income per share (in dollars per share) | $0.32 | $0.11 |
Shares used in computation of basic net income per share (in shares) | 6,739,047 | 6,378,859 |
Shares used in computation of diluted net income per share (in shares) | 7,218,033 | 7,022,172 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Cash Flows (unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Cash flows from operating activities: | ||
Net income | $2,330,900 | $753,989 |
Adjustments to reconcile net income to net cash provided By operating activities: | ||
Amortization | 172,554 | 44,845 |
Stock-based compensation expense | 5,354 | 5,354 |
Deferred tax expense (benefit) | -841 | 5,020 |
Gain on the sale of fixed assets | 0 | -1,150 |
Changes in operating assets and liabilities: | ||
Accounts receivable | -717,785 | 3,072,312 |
Income tax receivable | 13,996 | -38,268 |
Investment interest receivable | -18,260 | 10,296 |
Prepaid expenses | -25,883 | -1,428 |
Patent costs | 0 | -151,453 |
Accounts payable and accrued expenses | 239,885 | 242,809 |
Deferred revenue | -12,345 | -17,283 |
Net cash provided by operating activities | 1,987,575 | 3,925,043 |
Cash flows from investing activities: | ||
Maturity of marketable investments | 5,197,986 | 2,206,964 |
Purchases of marketable investments | -7,343,620 | -3,213,002 |
Proceeds from sale of fixed asset | 0 | 1,150 |
Net cash used in investing activities | -2,145,634 | -1,004,888 |
Cash flows from financing activities: | ||
Proceeds from stock option exercises | 37,200 | 66,100 |
Payments for repurchase of common stock | -114,263 | -80,971 |
Excess tax benefits from share-based payment arrangements | 1,158,165 | 404,650 |
Net cash provided by financing activities | 1,081,102 | 389,779 |
Increase in cash and cash equivalents | 923,043 | 3,309,934 |
Cash and cash equivalents at beginning of year | 9,810,816 | 5,624,860 |
Cash and cash equivalents at end of period | 10,733,859 | 8,934,794 |
Cash paid during the year for: | ||
Interest | 0 | 0 |
Taxes | $80,000 | $15,000 |
ORGANIZATION_AND_DESCRIPTION_O
ORGANIZATION AND DESCRIPTION OF BUSINESS | 3 Months Ended | |
Mar. 31, 2015 | ||
ORGANIZATION AND DESCRIPTION OF BUSINESS [Abstract] | ||
ORGANIZATION AND DESCRIPTION OF BUSINESS | 1 | ORGANIZATION AND DESCRIPTION OF BUSINESS |
We are a biopharmaceutical company involved in the development of an injectable collagenase clostridium histolyticum, or CCH, for multiple indications. We have a development and license agreement with Auxilium Pharmaceuticals, Inc. (“Auxilium”) for injectable collagenase (named XIAFLEX®) for marketed indications and CCH for indications in development. On January 29, 2015, Auxilium was acquired by Endo International plc (“Endo”) (the “Acquisition”) and is now a wholly owned subsidiary of Endo. Endo is currently selling XIAFLEX in the U.S. for the treatment of Dupuytren’s contracture and Peyronie’s disease and has an agreement with Swedish Orphan Biovitrum AB (“Sobi”), pursuant to which Sobi has marketing rights for XIAPEX® (the EU trade name for XIAFLEX) for Dupuytren’s contracture and Peyronie’s disease in Europe and certain Eurasian countries. Sobi is currently selling XIAPEX in Europe for the treatment of Dupuytren’s contracture and Peyronie’s disease. In addition, Endo has an agreement with Asahi Kasei Pharma Corporation (“Asahi”) pursuant to which Asahi has the right to commercialize XIAFLEX for the treatment of Dupuytren’s contracture and Peyronie’s disease in Japan. Endo also has an agreement with Actelion Pharmaceuticals Ltd. (“Actelion”), pursuant to which Actelion has the right to commercialize XIAFLEX for the treatment of Dupuytren’s contracture and Peyronie’s disease in Canada, Australia, Brazil and Mexico. Endo has an option to acquire the rights to additional indications that we may pursue, including human lipoma, and acquired this option in connection with the Acquisition. Prior to the Acquisition, Auxilium had this option and exercised its option to acquire the rights to frozen shoulder, cellulite and canine lipoma indications. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||||||||||
Basis of Presentation | |||||||||||||||||
The accompanying condensed consolidated financial statements are unaudited, but include all adjustments (consisting only of normal, recurring adjustments) which we consider necessary for a fair presentation of our financial position at such dates and the operating results and cash flows for those periods. Although we believe that the disclosures in our financial statements are adequate to make the information presented not misleading, certain information normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) has been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for quarterly reporting. | |||||||||||||||||
The information included in this Report should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC. | |||||||||||||||||
Reclassification | |||||||||||||||||
Certain reclassifications have been made to prior year balances to conform to the current year’s presentation. | |||||||||||||||||
Principles of Consolidation | |||||||||||||||||
The condensed consolidated financial statements include the accounts of the Company and its subsidiary, Advance Biofactures Corp. (“ABC-NY”). All intercompany balances and transactions have been eliminated. | |||||||||||||||||
Critical Accounting Policies, Estimates and Assumptions | |||||||||||||||||
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the use of management’s estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company makes certain assumptions and estimates for its deferred tax assets and deferred royalty buydown. For further details see notes “Provision for Income Taxes” and “Third Party Royalties and Royalty Buy-Down.” Actual results could differ from those estimates. | |||||||||||||||||
Cash, Cash Equivalents and Investments | |||||||||||||||||
Cash equivalents include only securities having a maturity of three months or less at the time of purchase. Investments are stated on an amortized cost basis. The Company limits its credit risk associated with cash, cash equivalents and investments by placing its investments with banks it believes are highly creditworthy and with highly rated money market funds, certificates of deposit and pre-refunded municipal bonds. All investments are classified as held to maturity. As of March 31, 2015 and December 31, 2014, the aggregate fair value of these investments was $14.3 million and $12.2 million, respectively. No unrealized gains or losses were recorded in the balance sheet in either period. | |||||||||||||||||
Fair Value Measurements | |||||||||||||||||
Management believes that the carrying amounts of the Company’s financial instruments, including cash, cash equivalents, held to maturity investments, accounts receivable, accounts payable and accrued expenses, approximate fair value due to the nature of those instruments. As of March 31, 2015 and 2014, there were no recorded unrealized gains or losses on our held to maturity investments as they are held to maturity. | |||||||||||||||||
Concentration of Credit Risk and Major Customers | |||||||||||||||||
The Company maintains bank account balances, which, at times, may exceed insured limits. The Company has not experienced any losses with these accounts and believes that it is not exposed to any significant credit risk on cash. | |||||||||||||||||
The Company maintains its investment in FDIC insured certificates of deposits with several banks and pre-refunded municipal bonds. | |||||||||||||||||
At March 31, 2015 and 2014, our accounts receivable balances were $3.7 million and $2.9 million, respectively. Our accounts receivables until January 29, 2015 were from one customer, Auxilium, and due to the Acquisition, our accounts receivables from January 29, 2015 on have been from one customer, Endo. | |||||||||||||||||
The Company is dependent on one customer who generates almost all its revenues. This one customer was Auxilium until the Acquisition on January 29, 2015. From January 29, 2015 on, this one customer has been Endo. In the quarters ended March 31, 2015 and 2014, the licensing, sublicensing, milestones and royalty revenues were $5.6 million and $2.7, respectively. | |||||||||||||||||
Revenue Recognition | |||||||||||||||||
We currently recognize revenues resulting from the licensing and sublicensing of the use of our technology and from services we sometimes perform in connection with the licensed technology under the guidance of Accounting Standards Codification 605, Revenue Recognition (“ASC 605”). | |||||||||||||||||
If we determine that separate elements exist in a revenue arrangement under ASC 605, we recognize revenue for delivered elements only when the fair values of undelivered elements are known, when the associated earnings process is complete, when payment is reasonably assured and, to the extent the milestone amount relates to our performance obligation, when our customer confirms that we have met the requirements under the terms of the agreement. | |||||||||||||||||
Revenues, and their respective treatment for financial reporting purposes, are as follows: | |||||||||||||||||
Royalty / Mark-Up on Cost of Goods Sold | |||||||||||||||||
For those arrangements for which royalty and mark-up on cost of goods sold information becomes available and collectability is reasonably assured, we recognize revenue during the applicable period in which it is earned. For interim quarterly and year-end reporting purposes, when collectability is reasonably assured, but a reasonable estimate of royalty and mark-up on cost of goods sold cannot be made, the royalty and mark-up on cost of goods sold are generally recognized in the quarter that the applicable licensee provides the written report and related information to us. | |||||||||||||||||
Under our Second Amended and Restated Development and Licensing Agreement with Auxilium (the “Auxilium Agreement”), which Endo assumed in the Acquisition, we do not participate in the selling, marketing or manufacturing of products for which we receive royalties and a mark-up on the cost of goods sold revenues. The royalty and mark-up on cost of goods sold revenues will generally be recognized in the quarter that Endo provides the written reports and related information to us; that is, royalty and mark-up on cost of goods sold revenues are generally recognized one quarter following the quarter in which the underlying sales by Endo occurred. The royalties payable by Endo to us are subject to set-off for certain patent costs. | |||||||||||||||||
Licensing Revenue | |||||||||||||||||
We include revenue recognized from upfront licensing, sublicensing and milestone payments in “License Revenues” in our consolidated statements of income in this Report. | |||||||||||||||||
Upfront License and Sublicensing Fees | |||||||||||||||||
We generally recognize revenue from upfront licensing and sublicensing fees when the agreement is signed, we have completed the earnings process and we have no ongoing performance obligation with respect to the arrangement. Nonrefundable upfront technology license fees for product candidates for which we are providing continuing services related to product development are deferred and recognized as revenue over the development period. | |||||||||||||||||
Milestones | |||||||||||||||||
Milestones, in the form of additional license fees, typically represent nonrefundable payments to be received in conjunction with the achievement of a specific event identified in the contract, such as completion of specified development activities and/or regulatory submissions and/or approvals. We believe that a milestone represents the culmination of a distinct earnings process when it is not associated with ongoing research, development or other performance on our part. We recognize such milestones as revenue when they become due and collection is reasonably assured. When a milestone does not represent the culmination of a distinct earnings process, we recognize revenue in a manner similar to that of an upfront license fee. | |||||||||||||||||
The timing and amount of revenue that we recognize from licenses of technology, either from upfront fees or milestones where we are providing continuing services related to product development, is primarily dependent upon our estimates of the development period. We define the development period as the point from which research activities commence up to regulatory approval of either our or our partners’ submission, assuming no further research is necessary. As product candidates move through the development process, it is necessary to revise these estimates to consider changes to the product development cycle, such as changes in the clinical development plan, regulatory requirements, or various other factors, many of which may be outside of our control. Should the U.S. Food and Drug Administration (“FDA”) or other regulatory agencies require additional data or information, we would adjust our development period estimates accordingly. The impact on revenue of changes in our estimates and the timing thereof is recognized prospectively over the remaining estimated product development period. | |||||||||||||||||
Treasury Stock | |||||||||||||||||
The Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders’ equity. For the three months ended March 31, 2015, we repurchased 2,910 shares at an average price of $39.27 as compared to 3,225 shares at an average price of $25.10 in the 2014 period. | |||||||||||||||||
Receivables and Doubtful Accounts | |||||||||||||||||
Trade accounts receivable are stated at the amount the Company expects to collect. We may maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We consider the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. Prior to January 29, 2015, our accounts receivable balance was typically due from Auxilium and from January 29, 2015 on, due to the Acquisition, our accounts receivable balance has been due from Endo, our one large pharmaceutical customer. Auxilium and Endo have historically paid timely and have been a financially stable as organizations. Due to the nature of the accounts receivable balance, we believe the risk of doubtful accounts is minimal. If the financial condition of our customer were to deteriorate, adversely affecting its ability to make payments, additional allowances would be required. We may provide for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after we have used reasonable collection efforts are written off through a credit to accounts receivable. | |||||||||||||||||
Deferred Revenue | |||||||||||||||||
Nonrefundable upfront product license fees for product candidates for which we are providing continuing services related to product development are deferred and recognized as revenue over the development period. For the three months ended March 31, 2015 and 2014, we recognized deferred revenue of $12,345 and $17,283, respectively. At March 31, 2015 and December 31, 2014, our remaining deferred revenue balances were $135,790 and $148,135, respectively. | |||||||||||||||||
Reimbursable Third Party Development Costs | |||||||||||||||||
We accrued patent expenses for research and development (“R&D”) that are reimbursable by us under the Auxilium Agreement. We capitalize certain patent costs related to estimated third party development costs that are reimbursable under the Auxilium Agreement. As of March 31, 2015 and December 31, 2014 our net reimbursable third party patent expense accrual was approximately $15,000 and $34,000, respectively. | |||||||||||||||||
Third Party Royalties | |||||||||||||||||
We have entered into licensing and royalty agreements with the Research Foundation of the State University of New York at Stony Brook and Dr. Martin K. Gelbard and have agreed to pay certain royalties on net sales of products for specific indications. The royalty rates differ from agreement to agreement and, in certain cases, have been redacted with the permission of the SEC. No assumptions should be made that the disclosed royalty rates payable to a particular third party are the same or similar with respect to the royalty rates payable to other third parties. We accrued third party royalty expenses on net sales reported to us by Auxilium through January 29, 2015 and we have accrued third party royalty expenses on net sales reported to us by Endo since January 29, 2015. Third party royalty costs are generally expensed in the quarter that Auxilium provided or Endo provides the written reports and related information to us; that is, generally one quarter following the quarter in which the underlying sales by Auxilium, or Endo due to the Acquisition, occurred. For the three months ended March 31, 2015 and 2014, third party royalty expenses were $0.4 million and $0.1 million, respectively. We expect our third party royalty expenses under general and administrative expenses will continue to increase if net sales by Endo for XIAFLEX increase and potential new indications for CCH are approved. | |||||||||||||||||
Royalty Buy-Down | |||||||||||||||||
On March 31, 2012, we entered into an amendment to our existing agreement with Dr. Martin K. Gelbard, dated August 27, 2008, related to our future royalty obligations for Peyronie’s disease. The amendment enables us to buy down a portion of our future royalty obligations in exchange for an initial cash payment of $1.5 million and five additional cash payments of $600,000, two of which have been paid as of March 31, 2015. We are currently making the payments to buy down the future royalty obligations, which royalty obligations terminate five years after first commercial sale. The Company amortizes long-term contracts with finite lives in a manner that reflects the pattern in which the economic benefits of the assets are consumed or otherwise used up. Dr. Gelbard’s agreement is amortized based on an income forecast method by estimating sales of XIAFLEX for Peyronie’s disease on an annual basis as measured by the proportion to the total estimated sales over the five year period. For the three months ended March 31, 2015, we amortized approximately $126,000 related to this agreement. As of March 31, 2015, the remaining capitalized balance was $3.10 million. We perform an evaluation of the recoverability of the carrying value to determine if facts and circumstances indicate that the carrying value of the assets may be impaired and if any adjustment is warranted. Based on our evaluation as of March 31, 2015, no impairment existed. | |||||||||||||||||
R&D Expenses | |||||||||||||||||
R&D expenses include, but are not limited to, internal costs, such as salaries and benefits, costs of materials, lab expense, facility costs and overhead. R&D expenses also consist of third party costs, such as medical professional fees, product costs used in clinical trials, consulting fees and costs associated with clinical study arrangements. We may fund R&D at medical research institutions under agreements that are generally cancelable. All of these costs are charged to R&D as incurred, which may be measured by percentage of completion, contract milestones, patient enrollment, or the passage of time. | |||||||||||||||||
Clinical Trial Expenses | |||||||||||||||||
Our cost accruals for clinical trials are based on estimates of the services received and efforts expended pursuant to contracts with various clinical trial centers and clinical research organizations. In the normal course of business we contract with third parties to perform various clinical trial activities in the ongoing development of potential drugs. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events, the successful enrollment of patients, the completion of portions of the clinical trial, or similar conditions. The objective of our accrual policy is to match the recording of expenses in our financial statements to the actual cost of services received and efforts expended. As such, expenses related to each patient enrolled in a clinical trial are recognized ratably beginning upon entry into the trial and over the course of the patient’s continued participation in the trial. In the event of early termination of a clinical trial, we accrue an amount based on our estimate of the remaining non-cancelable obligations associated with the winding down of the clinical trial. Our estimates and assumptions could differ significantly from the amounts that may actually be incurred. | |||||||||||||||||
Stock-Based Compensation | |||||||||||||||||
The Company has one stock-based compensation plan in effect. Accounting Standards Codification 718, Compensation - Stock Compensation (“ASC 718”), requires the recognition of compensation expense, using a fair-value based method, for costs related to all stock options including stock options and common stock issued to our employees and directors under our stock plans. ASC 718 requires companies to estimate the fair value of stock option awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service periods in our condensed consolidated statements of operations. | |||||||||||||||||
Under the ASC 718, we estimate the fair value of our employee stock option awards at the date of grant using the Black-Scholes option-pricing model, which requires the use of certain subjective assumptions. The most significant of these assumptions are our estimates of the expected volatility of the market price of our stock and the expected term of an award. When establishing an estimate of the expected term of an option award, we consider the vesting period for the award, our recent historical experience of employee stock option exercises (including forfeitures) and the expected volatility of our common stock. As required under the accounting rules, we review our estimates at each grant date and, as a result, our valuation assumptions used to value employee stock-based awards granted in future periods may change. No stock options were granted in each of the periods ended March 31, 2015 and 2014. | |||||||||||||||||
Further, ASC 718 requires that employee stock-based compensation costs be recognized over the requisite service period, or the vesting period, in a manner similar to all other forms of compensation paid to employees. The allocation of employee stock-based compensation costs to each operating expense line are estimated based on specific employee headcount information at each grant date and estimated stock option forfeiture rates and revised, if necessary, in future periods if actual employee headcount information or forfeitures differ materially from those estimates. As a result, the amount of employee stock-based compensation costs we recognize in each operating expense category in future periods may differ significantly from what we have recorded in the current period. | |||||||||||||||||
Stock-based compensation expense of $5,354 was recognized for the three months ended March 31, 2015 and 2014 in general and administrative expenses. | |||||||||||||||||
Stock Option Activity | |||||||||||||||||
A summary of our stock option activity during the three months ended March 31, 2015 is presented below: | |||||||||||||||||
Shares | Weighted | Weighted | Aggregate | ||||||||||||||
Average | Average | Intrinsic | |||||||||||||||
Exercise | Remaining | Value | |||||||||||||||
Price | Contractual Term | ||||||||||||||||
Outstanding at January 1, 2015 | 759,958 | $ | 11.04 | 3.12 | $ | 23,483,235 | |||||||||||
Grants | - | - | - | - | |||||||||||||
Exercised | (12,000 | ) | 3.1 | - | 450,467 | ||||||||||||
Forfeitures or expirations | - | - | - | - | |||||||||||||
Outstanding at March 31, 2015 | 747,958 | 11.16 | 2.91 | 23,924,725 | |||||||||||||
Exercisable at March 31, 2015 | 716,708 | $ | 10.55 | 2.77 | $ | 20,494,302 | |||||||||||
During the three months ended March 31, 2015 and 2014, the Company received $37,200 and $66,100, respectively, from stock options exercised by option holders. | |||||||||||||||||
Aggregate intrinsic value represents the total pre-tax intrinsic value based on the closing price of our common stock of $39.15 on March 31, 2015, which would have been received by the option holders had all option holders exercised their options as of that date. We have approximately $52,000 in unrecognized compensation cost related to stock options outstanding as of March 31, 2015, which we expect to recognize over 2.5 years. | |||||||||||||||||
Property and Equipment | |||||||||||||||||
Property and equipment are stated at cost, less accumulated depreciation. Machinery and equipment, furniture and fixtures, and autos are depreciated on the straight-line basis over their estimated useful lives of five to ten years. Leasehold improvements are amortized over the lesser of their estimated useful lives or the remaining life of the lease. As of March 31, 2015 and December 31, 2014, property and equipment were fully depreciated. | |||||||||||||||||
Comprehensive Income | |||||||||||||||||
For the three months ended March 31, 2015 and 2014, we had no components of other comprehensive income other than net income itself. | |||||||||||||||||
Provision for Income Taxes | |||||||||||||||||
Deferred tax assets and liabilities are recognized based on the expected future tax consequences, using current tax rates, of temporary differences between the financial statement carrying amounts and the income tax basis of assets and liabilities. A valuation allowance is applied against any net deferred tax asset if, based on the weighted available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. | |||||||||||||||||
We use the asset and liability method of accounting for income taxes, as set forth in Accounting Standards Codification. Under this method, deferred income taxes, when required, are provided on the basis of the difference between the financial reporting and income tax basis of assets and liabilities at the statutory rates enacted for future periods. We classify interest associated with income taxes under interest expense and tax penalties under other. | |||||||||||||||||
The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefit recognized in the consolidated financial statements from such position is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate settlement. As of March 31, 2015 and 2014, the Company has not recorded any unrecognized tax benefits. | |||||||||||||||||
New Accounting Pronouncements | |||||||||||||||||
In May 2014, the Financial Accounting Standards Board (“FASB”) issued a new standard related to revenue recognition, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new standard will replace most of the existing revenue recognition standards in U.S. GAAP when it becomes effective on January 1, 2017. Early adoption is not permitted. The new standard can be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the change recognized at the date of the initial application in retained earnings. The Company is assessing the potential impact of the new standard on financial reporting and has not yet selected a transition method. |
NET_INCOME_PER_SHARE
NET INCOME PER SHARE | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
NET INCOME PER SHARE [Abstract] | |||||||||
NET INCOME PER SHARE | 3 | NET INCOME PER SHARE | |||||||
In accordance with Accounting Standards Codification 260, Earnings Per Share, basic net income per share amount is computed using the weighted-average number of shares of common stock outstanding during the periods presented, while diluted net income per share is computed using the sum of the weighted-average number of common and common equivalent shares outstanding. Common equivalent shares used in the computation of diluted earnings per share result from the assumed exercise of stock options using the treasury stock method. | |||||||||
The following table summarizes the number of common equivalent shares that were excluded for the calculation of diluted net income per share reported in the condensed consolidated statement of operations. | |||||||||
Three Months Ended | |||||||||
March 31, | |||||||||
2015 | 2014 | ||||||||
Stock options | 20,000 | 105,000 | |||||||
At March 31, 2015, the Company had 20,000 options outstanding which vest upon the achievement of certain performance criteria, which has not yet been met. These options expire on December 2, 2019 and have an exercise price of $29.21. |
ACCOUNTS_PAYABLE_AND_ACCRUED_E
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
ACCOUNTS PAYABLE AND ACCRUED EXPENSES [Abstract] | |||||||||
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 4 | ACCOUNTS PAYABLE AND ACCRUED EXPENSES | |||||||
Accounts payable and accrued expenses consisted of the following: | |||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Trade accounts payable and accrued expenses | $ | 470,075 | $ | 309,188 | |||||
Accrued legal and other professional fees | 133,631 | 65,205 | |||||||
Accrued payroll and related costs | 179,875 | 169,303 | |||||||
Total | $ | 783,581 | $ | 543,696 |
PATENT_COSTS
PATENT COSTS | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
PATENT COSTS [Abstract] | |||||||||
PATENT COSTS | 5 | PATENT COSTS | |||||||
We amortize intangible assets with definite lives on a straight-line basis over their remaining estimated useful lives, ranging from one to twelve years, and review for impairment on a quarterly basis and when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. As of March 31, 2015, there was no indicator that an impairment existed. | |||||||||
We capitalized legal patent costs related to patent prosecution and maintenance. For the three months ended March 31, 2015, we did not increase our capitalized patent costs as no information was reported to us by Auxilium through January 29, 2015 or Endo from January 29, 2015 on. These patent costs are creditable against future royalty revenues. For each period presented below, net patent costs consisted of: | |||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Patents | $ | 671,326 | $ | 671,326 | |||||
Accumulated Amortization | (387,133 | ) | (376,296 | ) | |||||
$ | 284,193 | $ | 295,030 | ||||||
The amortization expense for patents for the three months ended March 31, 2015 was approximately $11,000. In the comparable period of 2014, the amortization expense for patents was approximately $192,000. The estimated aggregate amortization expense for the, in dollars, for the remaining nine months of 2015 and each of the years below is approximately as follows: | |||||||||
2015 | $ | 33,000 | |||||||
2016 | 35,000 | ||||||||
2017 | 35,000 | ||||||||
2018 | 35,000 | ||||||||
2019 | 35,000 | ||||||||
2020 | 24,000 | ||||||||
PROVISION_FOR_INCOME_TAXES
PROVISION FOR INCOME TAXES | 3 Months Ended | |
Mar. 31, 2015 | ||
PROVISION FOR INCOME TAXES [Abstract] | ||
PROVISION FOR INCOME TAXES | 6 | PROVISION FOR INCOME TAXES |
In determining our provision for income taxes, we consider all available information, including operating results, ongoing tax planning, and forecasts of future taxable income. The significant components of the Company’s deferred tax assets consist of stock-based compensation and deferred revenues. For the three month period ended March 31, 2015, the provision for income taxes was $1.3 million. As of March 31, 2015 and December 31, 2014, our remaining deferred tax assets were approximately $1.1 million. | ||
For the three month period ended March 31, 2014, the provision for income taxes was $0.4 million. For the three month period ended March 31, 2014, the valuation allowance with respect to the Company’s net deferred tax assets remained unchanged. As of March 31, 2014, our remaining deferred tax assets were approximately $1.5 million. | ||
As of March 31, 2015, the Company believes that there are no significant uncertain tax positions and no amounts have been recorded for interest and penalties. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 3 Months Ended | |
Mar. 31, 2015 | ||
SUBSEQUENT EVENTS [Abstract] | ||
SUBSEQUENT EVENTS | 7 | SUBSEQUENT EVENTS |
On April 22, 2015, we announced the appointment of two new members to our Board of Directors, Ms. Jennifer Chao and Jyrki Mattila, M.D., Ph.D. Ms. Jennifer Chao will serve as the Audit Committee financial expert. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||||||
Basis of Presentation | Basis of Presentation | ||||||||||||||||
The accompanying condensed consolidated financial statements are unaudited, but include all adjustments (consisting only of normal, recurring adjustments) which we consider necessary for a fair presentation of our financial position at such dates and the operating results and cash flows for those periods. Although we believe that the disclosures in our financial statements are adequate to make the information presented not misleading, certain information normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) has been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for quarterly reporting. | |||||||||||||||||
The information included in this Report should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC. | |||||||||||||||||
Reclassification | Reclassification | ||||||||||||||||
Certain reclassifications have been made to prior year balances to conform to the current year’s presentation. | |||||||||||||||||
Principles of Consolidation | Principles of Consolidation | ||||||||||||||||
The condensed consolidated financial statements include the accounts of the Company and its subsidiary, Advance Biofactures Corp. (“ABC-NY”). All intercompany balances and transactions have been eliminated. | |||||||||||||||||
Critical Accounting Policies, Estimates and Assumptions | Critical Accounting Policies, Estimates and Assumptions | ||||||||||||||||
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the use of management’s estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company makes certain assumptions and estimates for its deferred tax assets and deferred royalty buydown. For further details see notes “Provision for Income Taxes” and “Third Party Royalties and Royalty Buy-Down.” Actual results could differ from those estimates. | |||||||||||||||||
Cash, Cash Equivalents and Investments | Cash, Cash Equivalents and Investments | ||||||||||||||||
Cash equivalents include only securities having a maturity of three months or less at the time of purchase. Investments are stated on an amortized cost basis. The Company limits its credit risk associated with cash, cash equivalents and investments by placing its investments with banks it believes are highly creditworthy and with highly rated money market funds, certificates of deposit and pre-refunded municipal bonds. All investments are classified as held to maturity. As of March 31, 2015 and December 31, 2014, the aggregate fair value of these investments was $14.3 million and $12.2 million, respectively. No unrealized gains or losses were recorded in the balance sheet in either period. | |||||||||||||||||
Fair Value Measurements | Fair Value Measurements | ||||||||||||||||
Management believes that the carrying amounts of the Company’s financial instruments, including cash, cash equivalents, held to maturity investments, accounts receivable, accounts payable and accrued expenses, approximate fair value due to the nature of those instruments. As of March 31, 2015 and 2014, there were no recorded unrealized gains or losses on our held to maturity investments as they are held to maturity. | |||||||||||||||||
Concentration of Credit Risk and Major Customers | Concentration of Credit Risk and Major Customers | ||||||||||||||||
The Company maintains bank account balances, which, at times, may exceed insured limits. The Company has not experienced any losses with these accounts and believes that it is not exposed to any significant credit risk on cash. | |||||||||||||||||
The Company maintains its investment in FDIC insured certificates of deposits with several banks and pre-refunded municipal bonds. | |||||||||||||||||
At March 31, 2015 and 2014, our accounts receivable balances were $3.7 million and $2.9 million, respectively. Our accounts receivables until January 29, 2015 were from one customer, Auxilium, and due to the Acquisition, our accounts receivables from January 29, 2015 on have been from one customer, Endo. | |||||||||||||||||
The Company is dependent on one customer who generates almost all its revenues. This one customer was Auxilium until the Acquisition on January 29, 2015. From January 29, 2015 on, this one customer has been Endo. In the quarters ended March 31, 2015 and 2014, the licensing, sublicensing, milestones and royalty revenues were $5.6 million and $2.7, respectively. | |||||||||||||||||
Revenue Recognition | Revenue Recognition | ||||||||||||||||
We currently recognize revenues resulting from the licensing and sublicensing of the use of our technology and from services we sometimes perform in connection with the licensed technology under the guidance of Accounting Standards Codification 605, Revenue Recognition (“ASC 605”). | |||||||||||||||||
If we determine that separate elements exist in a revenue arrangement under ASC 605, we recognize revenue for delivered elements only when the fair values of undelivered elements are known, when the associated earnings process is complete, when payment is reasonably assured and, to the extent the milestone amount relates to our performance obligation, when our customer confirms that we have met the requirements under the terms of the agreement. | |||||||||||||||||
Revenues, and their respective treatment for financial reporting purposes, are as follows: | |||||||||||||||||
Royalty / Mark-Up on Cost of Goods Sold | |||||||||||||||||
For those arrangements for which royalty and mark-up on cost of goods sold information becomes available and collectability is reasonably assured, we recognize revenue during the applicable period in which it is earned. For interim quarterly and year-end reporting purposes, when collectability is reasonably assured, but a reasonable estimate of royalty and mark-up on cost of goods sold cannot be made, the royalty and mark-up on cost of goods sold are generally recognized in the quarter that the applicable licensee provides the written report and related information to us. | |||||||||||||||||
Under our Second Amended and Restated Development and Licensing Agreement with Auxilium (the “Auxilium Agreement”), which Endo assumed in the Acquisition, we do not participate in the selling, marketing or manufacturing of products for which we receive royalties and a mark-up on the cost of goods sold revenues. The royalty and mark-up on cost of goods sold revenues will generally be recognized in the quarter that Endo provides the written reports and related information to us; that is, royalty and mark-up on cost of goods sold revenues are generally recognized one quarter following the quarter in which the underlying sales by Endo occurred. The royalties payable by Endo to us are subject to set-off for certain patent costs. | |||||||||||||||||
Licensing Revenue | |||||||||||||||||
We include revenue recognized from upfront licensing, sublicensing and milestone payments in “License Revenues” in our consolidated statements of income in this Report. | |||||||||||||||||
Upfront License and Sublicensing Fees | |||||||||||||||||
We generally recognize revenue from upfront licensing and sublicensing fees when the agreement is signed, we have completed the earnings process and we have no ongoing performance obligation with respect to the arrangement. Nonrefundable upfront technology license fees for product candidates for which we are providing continuing services related to product development are deferred and recognized as revenue over the development period. | |||||||||||||||||
Milestones | |||||||||||||||||
Milestones, in the form of additional license fees, typically represent nonrefundable payments to be received in conjunction with the achievement of a specific event identified in the contract, such as completion of specified development activities and/or regulatory submissions and/or approvals. We believe that a milestone represents the culmination of a distinct earnings process when it is not associated with ongoing research, development or other performance on our part. We recognize such milestones as revenue when they become due and collection is reasonably assured. When a milestone does not represent the culmination of a distinct earnings process, we recognize revenue in a manner similar to that of an upfront license fee. | |||||||||||||||||
The timing and amount of revenue that we recognize from licenses of technology, either from upfront fees or milestones where we are providing continuing services related to product development, is primarily dependent upon our estimates of the development period. We define the development period as the point from which research activities commence up to regulatory approval of either our or our partners’ submission, assuming no further research is necessary. As product candidates move through the development process, it is necessary to revise these estimates to consider changes to the product development cycle, such as changes in the clinical development plan, regulatory requirements, or various other factors, many of which may be outside of our control. Should the U.S. Food and Drug Administration (“FDA”) or other regulatory agencies require additional data or information, we would adjust our development period estimates accordingly. The impact on revenue of changes in our estimates and the timing thereof is recognized prospectively over the remaining estimated product development period. | |||||||||||||||||
Treasury Stock | Treasury Stock | ||||||||||||||||
The Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders’ equity. For the three months ended March 31, 2015, we repurchased 2,910 shares at an average price of $39.27 as compared to 3,225 shares at an average price of $25.10 in the 2014 period. | |||||||||||||||||
Receivables and Doubtful Accounts | Receivables and Doubtful Accounts | ||||||||||||||||
Trade accounts receivable are stated at the amount the Company expects to collect. We may maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We consider the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. Prior to January 29, 2015, our accounts receivable balance was typically due from Auxilium and from January 29, 2015 on, due to the Acquisition, our accounts receivable balance has been due from Endo, our one large pharmaceutical customer. Auxilium and Endo have historically paid timely and have been a financially stable as organizations. Due to the nature of the accounts receivable balance, we believe the risk of doubtful accounts is minimal. If the financial condition of our customer were to deteriorate, adversely affecting its ability to make payments, additional allowances would be required. We may provide for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after we have used reasonable collection efforts are written off through a credit to accounts receivable. | |||||||||||||||||
Deferred Revenue | Deferred Revenue | ||||||||||||||||
Nonrefundable upfront product license fees for product candidates for which we are providing continuing services related to product development are deferred and recognized as revenue over the development period. For the three months ended March 31, 2015 and 2014, we recognized deferred revenue of $12,345 and $17,283, respectively. At March 31, 2015 and December 31, 2014, our remaining deferred revenue balances were $135,790 and $148,135, respectively. | |||||||||||||||||
Reimbursable Third Party Development Costs | Reimbursable Third Party Development Costs | ||||||||||||||||
We accrued patent expenses for research and development (“R&D”) that are reimbursable by us under the Auxilium Agreement. We capitalize certain patent costs related to estimated third party development costs that are reimbursable under the Auxilium Agreement. As of March 31, 2015 and December 31, 2014 our net reimbursable third party patent expense accrual was approximately $15,000 and $34,000, respectively. | |||||||||||||||||
Third Party Royalties and Royalty Buy-Down | Third Party Royalties | ||||||||||||||||
We have entered into licensing and royalty agreements with the Research Foundation of the State University of New York at Stony Brook and Dr. Martin K. Gelbard and have agreed to pay certain royalties on net sales of products for specific indications. The royalty rates differ from agreement to agreement and, in certain cases, have been redacted with the permission of the SEC. No assumptions should be made that the disclosed royalty rates payable to a particular third party are the same or similar with respect to the royalty rates payable to other third parties. We accrued third party royalty expenses on net sales reported to us by Auxilium through January 29, 2015 and we have accrued third party royalty expenses on net sales reported to us by Endo since January 29, 2015. Third party royalty costs are generally expensed in the quarter that Auxilium provided or Endo provides the written reports and related information to us; that is, generally one quarter following the quarter in which the underlying sales by Auxilium, or Endo due to the Acquisition, occurred. For the three months ended March 31, 2015 and 2014, third party royalty expenses were $0.4 million and $0.1 million, respectively. We expect our third party royalty expenses under general and administrative expenses will continue to increase if net sales by Endo for XIAFLEX increase and potential new indications for CCH are approved. | |||||||||||||||||
Royalty Buy-Down | |||||||||||||||||
On March 31, 2012, we entered into an amendment to our existing agreement with Dr. Martin K. Gelbard, dated August 27, 2008, related to our future royalty obligations for Peyronie’s disease. The amendment enables us to buy down a portion of our future royalty obligations in exchange for an initial cash payment of $1.5 million and five additional cash payments of $600,000, two of which have been paid as of March 31, 2015. We are currently making the payments to buy down the future royalty obligations, which royalty obligations terminate five years after first commercial sale. The Company amortizes long-term contracts with finite lives in a manner that reflects the pattern in which the economic benefits of the assets are consumed or otherwise used up. Dr. Gelbard’s agreement is amortized based on an income forecast method by estimating sales of XIAFLEX for Peyronie’s disease on an annual basis as measured by the proportion to the total estimated sales over the five year period. For the three months ended March 31, 2015, we amortized approximately $126,000 related to this agreement. As of March 31, 2015, the remaining capitalized balance was $3.10 million. We perform an evaluation of the recoverability of the carrying value to determine if facts and circumstances indicate that the carrying value of the assets may be impaired and if any adjustment is warranted. Based on our evaluation as of March 31, 2015, no impairment existed. | |||||||||||||||||
R & D Expenses | R&D Expenses | ||||||||||||||||
R&D expenses include, but are not limited to, internal costs, such as salaries and benefits, costs of materials, lab expense, facility costs and overhead. R&D expenses also consist of third party costs, such as medical professional fees, product costs used in clinical trials, consulting fees and costs associated with clinical study arrangements. We may fund R&D at medical research institutions under agreements that are generally cancelable. All of these costs are charged to R&D as incurred, which may be measured by percentage of completion, contract milestones, patient enrollment, or the passage of time. | |||||||||||||||||
Clinical Trial Expenses | Clinical Trial Expenses | ||||||||||||||||
Our cost accruals for clinical trials are based on estimates of the services received and efforts expended pursuant to contracts with various clinical trial centers and clinical research organizations. In the normal course of business we contract with third parties to perform various clinical trial activities in the ongoing development of potential drugs. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events, the successful enrollment of patients, the completion of portions of the clinical trial, or similar conditions. The objective of our accrual policy is to match the recording of expenses in our financial statements to the actual cost of services received and efforts expended. As such, expenses related to each patient enrolled in a clinical trial are recognized ratably beginning upon entry into the trial and over the course of the patient’s continued participation in the trial. In the event of early termination of a clinical trial, we accrue an amount based on our estimate of the remaining non-cancelable obligations associated with the winding down of the clinical trial. Our estimates and assumptions could differ significantly from the amounts that may actually be incurred. | |||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation | ||||||||||||||||
The Company has one stock-based compensation plan in effect. Accounting Standards Codification 718, Compensation - Stock Compensation (“ASC 718”), requires the recognition of compensation expense, using a fair-value based method, for costs related to all stock options including stock options and common stock issued to our employees and directors under our stock plans. ASC 718 requires companies to estimate the fair value of stock option awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service periods in our condensed consolidated statements of operations. | |||||||||||||||||
Under the ASC 718, we estimate the fair value of our employee stock option awards at the date of grant using the Black-Scholes option-pricing model, which requires the use of certain subjective assumptions. The most significant of these assumptions are our estimates of the expected volatility of the market price of our stock and the expected term of an award. When establishing an estimate of the expected term of an option award, we consider the vesting period for the award, our recent historical experience of employee stock option exercises (including forfeitures) and the expected volatility of our common stock. As required under the accounting rules, we review our estimates at each grant date and, as a result, our valuation assumptions used to value employee stock-based awards granted in future periods may change. No stock options were granted in each of the periods ended March 31, 2015 and 2014. | |||||||||||||||||
Further, ASC 718 requires that employee stock-based compensation costs be recognized over the requisite service period, or the vesting period, in a manner similar to all other forms of compensation paid to employees. The allocation of employee stock-based compensation costs to each operating expense line are estimated based on specific employee headcount information at each grant date and estimated stock option forfeiture rates and revised, if necessary, in future periods if actual employee headcount information or forfeitures differ materially from those estimates. As a result, the amount of employee stock-based compensation costs we recognize in each operating expense category in future periods may differ significantly from what we have recorded in the current period. | |||||||||||||||||
Stock-based compensation expense of $5,354 was recognized for the three months ended March 31, 2015 and 2014 in general and administrative expenses. | |||||||||||||||||
Stock Option Activity | |||||||||||||||||
A summary of our stock option activity during the three months ended March 31, 2015 is presented below: | |||||||||||||||||
Shares | Weighted | Weighted | Aggregate | ||||||||||||||
Average | Average | Intrinsic | |||||||||||||||
Exercise | Remaining | Value | |||||||||||||||
Price | Contractual Term | ||||||||||||||||
Outstanding at January 1, 2015 | 759,958 | $ | 11.04 | 3.12 | $ | 23,483,235 | |||||||||||
Grants | - | - | - | - | |||||||||||||
Exercised | (12,000 | ) | 3.1 | - | 450,467 | ||||||||||||
Forfeitures or expirations | - | - | - | - | |||||||||||||
Outstanding at March 31, 2015 | 747,958 | 11.16 | 2.91 | 23,924,725 | |||||||||||||
Exercisable at March 31, 2015 | 716,708 | $ | 10.55 | 2.77 | $ | 20,494,302 | |||||||||||
During the three months ended March 31, 2015 and 2014, the Company received $37,200 and $66,100, respectively, from stock options exercised by option holders. | |||||||||||||||||
Aggregate intrinsic value represents the total pre-tax intrinsic value based on the closing price of our common stock of $39.15 on March 31, 2015, which would have been received by the option holders had all option holders exercised their options as of that date. We have approximately $52,000 in unrecognized compensation cost related to stock options outstanding as of March 31, 2015, which we expect to recognize over 2.5 years. | |||||||||||||||||
Property and Equipment | Property and Equipment | ||||||||||||||||
Property and equipment are stated at cost, less accumulated depreciation. Machinery and equipment, furniture and fixtures, and autos are depreciated on the straight-line basis over their estimated useful lives of five to ten years. Leasehold improvements are amortized over the lesser of their estimated useful lives or the remaining life of the lease. As of March 31, 2015 and December 31, 2014, property and equipment were fully depreciated. | |||||||||||||||||
Comprehensive Income | Comprehensive Income | ||||||||||||||||
For the three months ended March 31, 2015 and 2014, we had no components of other comprehensive income other than net income itself. | |||||||||||||||||
Provision for Income Taxes | Provision for Income Taxes | ||||||||||||||||
Deferred tax assets and liabilities are recognized based on the expected future tax consequences, using current tax rates, of temporary differences between the financial statement carrying amounts and the income tax basis of assets and liabilities. A valuation allowance is applied against any net deferred tax asset if, based on the weighted available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. | |||||||||||||||||
We use the asset and liability method of accounting for income taxes, as set forth in Accounting Standards Codification. Under this method, deferred income taxes, when required, are provided on the basis of the difference between the financial reporting and income tax basis of assets and liabilities at the statutory rates enacted for future periods. We classify interest associated with income taxes under interest expense and tax penalties under other. | |||||||||||||||||
The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefit recognized in the consolidated financial statements from such position is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate settlement. As of March 31, 2015 and 2014, the Company has not recorded any unrecognized tax benefits. | |||||||||||||||||
New Accounting Pronouncements | New Accounting Pronouncements | ||||||||||||||||
In May 2014, the Financial Accounting Standards Board (“FASB”) issued a new standard related to revenue recognition, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new standard will replace most of the existing revenue recognition standards in U.S. GAAP when it becomes effective on January 1, 2017. Early adoption is not permitted. The new standard can be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the change recognized at the date of the initial application in retained earnings. The Company is assessing the potential impact of the new standard on financial reporting and has not yet selected a transition method. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||||||
Summary of Stock Option Activity | A summary of our stock option activity during the three months ended March 31, 2015 is presented below: | ||||||||||||||||
Shares | Weighted | Weighted | Aggregate | ||||||||||||||
Average | Average | Intrinsic | |||||||||||||||
Exercise | Remaining | Value | |||||||||||||||
Price | Contractual Term | ||||||||||||||||
Outstanding at January 1, 2015 | 759,958 | $ | 11.04 | 3.12 | $ | 23,483,235 | |||||||||||
Grants | - | - | - | - | |||||||||||||
Exercised | (12,000 | ) | 3.1 | - | 450,467 | ||||||||||||
Forfeitures or expirations | - | - | - | - | |||||||||||||
Outstanding at March 31, 2015 | 747,958 | 11.16 | 2.91 | 23,924,725 | |||||||||||||
Exercisable at March 31, 2015 | 716,708 | $ | 10.55 | 2.77 | $ | 20,494,302 |
NET_INCOME_PER_SHARE_Tables
NET INCOME PER SHARE (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
NET INCOME PER SHARE [Abstract] | |||||||||
Number of Common Equivalent Shares Excluded from the Calculation of Diluted Net Income Per Share | The following table summarizes the number of common equivalent shares that were excluded for the calculation of diluted net income per share reported in the condensed consolidated statement of operations. | ||||||||
Three Months Ended | |||||||||
March 31, | |||||||||
2015 | 2014 | ||||||||
Stock options | 20,000 | 105,000 |
ACCOUNTS_PAYABLE_AND_ACCRUED_E1
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
ACCOUNTS PAYABLE AND ACCRUED EXPENSES [Abstract] | |||||||||
Accounts Payable and Accrued Expenses | Accounts payable and accrued expenses consisted of the following: | ||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Trade accounts payable and accrued expenses | $ | 470,075 | $ | 309,188 | |||||
Accrued legal and other professional fees | 133,631 | 65,205 | |||||||
Accrued payroll and related costs | 179,875 | 169,303 | |||||||
Total | $ | 783,581 | $ | 543,696 |
PATENT_COSTS_Tables
PATENT COSTS (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
PATENT COSTS [Abstract] | |||||||||
Net Patent Costs | For each period presented below, net patent costs consisted of: | ||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Patents | $ | 671,326 | $ | 671,326 | |||||
Accumulated Amortization | (387,133 | ) | (376,296 | ) | |||||
$ | 284,193 | $ | 295,030 | ||||||
Estimated Aggregate Future Amortization Expense | The estimated aggregate amortization expense for the, in dollars, for the remaining nine months of 2015 and each of the years below is approximately as follows: | ||||||||
2015 | $ | 33,000 | |||||||
2016 | 35,000 | ||||||||
2017 | 35,000 | ||||||||
2018 | 35,000 | ||||||||
2019 | 35,000 | ||||||||
2020 | 24,000 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2012 | Dec. 31, 2014 | |
Payment | Payment | |||
Plan | ||||
Cash, Cash Equivalents and Investments [Abstract] | ||||
Aggregate fair value of investments | $13,010,685 | $10,900,436 | ||
Fair Value Disclosures [Abstract] | ||||
Held-to-maturity securities, unrecognized gain | 0 | 0 | ||
Held-to-maturity securities, unrecognized loss | 0 | 0 | ||
Concentration Risk [Line Items] | ||||
Accounts receivable | 3,656,516 | 2,938,731 | ||
Royalty revenue | 5,594,109 | 2,740,318 | ||
Treasury Stock [Abstract] | ||||
Treasury stock purchased (in shares) | 2,910 | 3,225 | ||
Average price of share (in dollars per share) | $39.27 | $25.10 | ||
Deferred Revenue [Abstract] | ||||
Deferred revenue recognized | 12,345 | 17,283 | ||
Deferred revenue balances | 135,790 | 148,135 | ||
Reimbursable Third Party Development Costs [Abstract] | ||||
Accrued patent costs | 15,000 | 34,000 | ||
Royalty Buy-Down [Abstract] | ||||
Royalty expenses | 400,000 | 100,000 | ||
Payment for royalty buy down | 600,000 | 1,500,000 | ||
Number of additional cash payments for royalty buy down | 5 | |||
Number of cash payments made for royalty obligation | 2 | |||
Deferred costs amortization period | 5 years | |||
Amount amortized related to agreement | 126,000 | |||
Deferred royalty buy-down - long term | 3,085,706 | |||
Share-based Compensation [Abstract] | ||||
Number of stock based compensation plans in effect | 1 | |||
Weighted-Average Exercise Price [Roll Forward] | ||||
Proceeds from stock option exercises | 37,200 | 66,100 | ||
Closing price of Company stock (in dollars per share) | $39.15 | |||
Minimum [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Estimated useful life of property, plant and equipment | 5 years | |||
Maximum [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Estimated useful life of property, plant and equipment | 10 years | |||
Stock Options [Member] | ||||
Stock Option Activity [Roll Forward] | ||||
Outstanding, beginning of period (in shares) | 759,958 | |||
Grants (in shares) | 0 | |||
Exercised (in shares) | -12,000 | |||
Forfeitures or expirations (in shares) | 0 | |||
Outstanding, end of period (in shares) | 747,958 | 759,958 | ||
Exercisable, end of period (in shares) | 716,708 | |||
Weighted-Average Exercise Price [Roll Forward] | ||||
Outstanding, beginning of period (in dollars per share) | $11.04 | |||
Grants (in dollars per share) | $0 | |||
Exercised (in dollars per share) | $3.10 | |||
Forfeitures or expirations (in dollars per share) | $0 | |||
Outstanding, end of period (in dollars per share) | $11.16 | $11.04 | ||
Exercisable, end of period (in dollars per share) | $10.55 | |||
Weighted average remaining contractual term, Options outstanding | 2 years 10 months 28 days | 3 years 1 month 13 days | ||
Weighted average remaining contractual term, Options outstanding | 2 years 10 months 28 days | 3 years 1 month 13 days | ||
Weighted average remaining contractual term, Exercisable | 2 years 9 months 7 days | |||
Aggregate intrinsic value, Options outstanding | 23,483,235 | |||
Aggregate intrinsic value, Grants | 0 | |||
Aggregate intrinsic value, Exercised | 450,467 | |||
Aggregate intrinsic value, Forfeitures or expirations | 0 | |||
Aggregate intrinsic value, Options outstanding | 23,924,725 | 23,483,235 | ||
Aggregate intrinsic value, Exercisable | 20,494,302 | |||
Proceeds from stock option exercises | 37,200 | 66,100 | ||
Unrecognized compensation cost related to non-vested stock options outstanding | 52,000 | |||
Recognized compensation period | 2 years 6 months | |||
General and Administrative [Member] | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Stock-based compensation expense | 5,354 | 5,354 | ||
Accounts Receivables [Member] | Auxilium [Member] | ||||
Concentration Risk [Line Items] | ||||
Accounts receivable | 3,700,000 | 2,900,000 | ||
Number of customers | 1 | |||
Accounts Receivables [Member] | Endo [Member] | ||||
Concentration Risk [Line Items] | ||||
Number of customers | 1 | |||
Revenues [Member] | Auxilium [Member] | ||||
Concentration Risk [Line Items] | ||||
Royalty revenue | $5,600,000 | $2,700,000 |
NET_INCOME_PER_SHARE_Details
NET INCOME PER SHARE (Details) (Stock Options [Member], USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Stock Options [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from earnings per share calculation (in shares) | 20,000 | 105,000 |
Exercise price (in dollars per share) | $29.21 |
ACCOUNTS_PAYABLE_AND_ACCRUED_E2
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Accounts payable and accrued expenses [Abstract] | ||
Trade accounts payable and accrued expenses | $470,075 | $309,188 |
Accrued legal and other professional fees | 133,631 | 65,205 |
Accrued payroll and related costs | 179,875 | 169,303 |
Total | $783,581 | $543,696 |
PATENT_COSTS_Details
PATENT COSTS (Details) (USD $) | 3 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
Net Patent Costs [Abstract] | |||
Net patent costs | $284,193 | $295,030 | |
Estimated amortization expense [Abstract] | |||
2015 | 33,000 | ||
2016 | 35,000 | ||
2017 | 35,000 | ||
2018 | 35,000 | ||
2019 | 35,000 | ||
2020 | 24,000 | ||
Patents [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Increase in capitalized patent costs | 0 | ||
Net Patent Costs [Abstract] | |||
Patents | 671,326 | 671,326 | |
Accumulated Amortization | -387,133 | -376,296 | |
Net patent costs | 284,193 | 295,030 | |
Amortization expense for patents | $11,000 | $192,000 | |
Patents [Member] | Minimum [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Estimated useful lives | 1 year | ||
Patents [Member] | Maximum [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Estimated useful lives | 12 years |
PROVISION_FOR_INCOME_TAXES_Det
PROVISION FOR INCOME TAXES (Details) (USD $) | 3 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
PROVISION FOR INCOME TAXES [Abstract] | |||
Net income tax expense (benefit) | $1,251,320 | $386,402 | |
Deferred tax assets | $1,100,000 | $1,500,000 | $1,100,000 |
SUBSEQUENT_EVENTS_Details
SUBSEQUENT EVENTS (Details) (Subsequent Event [Member], Director [Member]) | 0 Months Ended |
Apr. 22, 2015 | |
Director | |
Subsequent Event [Member] | Director [Member] | |
Subsequent Event [Line Items] | |
Number of board of directors appointed | 2 |