Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | Apr. 24, 2014 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'INCYTE CORP | ' |
Entity Central Index Key | '0000879169 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Large Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 167,627,959 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q1 | ' |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current assets: | ' | ' |
Cash and cash equivalents | $436,585 | $471,429 |
Marketable securities-available-for-sale | 82,646 | 37,575 |
Restricted investments | 625 | 500 |
Accounts receivable, net | 46,394 | 35,374 |
Inventory | 347 | 406 |
Deferred income taxes | 892 | 895 |
Prepaid expenses and other current assets | 13,681 | 9,620 |
Total current assets | 581,170 | 555,799 |
Restricted investments | 14,375 | 14,500 |
Inventory | 15,502 | 14,937 |
Property and equipment, net | 38,654 | 26,848 |
Other assets, net | 17,125 | 17,484 |
Total assets | 666,826 | 629,568 |
Current liabilities: | ' | ' |
Accounts payable | 17,950 | 19,102 |
Accrued compensation | 14,691 | 28,079 |
Interest payable | 4,462 | 1,909 |
Accrued and other current liabilities | 56,954 | 46,062 |
Deferred revenue-Collaborative agreements | 12,887 | 12,890 |
Total current liabilities | 106,944 | 108,042 |
Convertible senior notes | 665,222 | 661,567 |
Other liabilities | 34,036 | 26,803 |
Deferred income taxes | 892 | 895 |
Deferred revenue-Collaborative agreements | 22,154 | 25,369 |
Total liabilities | 829,248 | 822,676 |
Stockholders' deficit: | ' | ' |
Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued or outstanding as of March 31, 2014 and December 31, 2013 | ' | ' |
Common stock, $0.001 par value; 400,000,000 shares authorized; 167,492,843 and 162,984,680 shares issued and outstanding as of March 31, 2014 and December 31, 2013, respectively | 167 | 163 |
Additional paid-in capital | 1,606,365 | 1,541,773 |
Accumulated other comprehensive gain | 2,040 | 1,993 |
Accumulated deficit | -1,770,994 | -1,737,037 |
Total stockholders' deficit | -162,422 | -193,108 |
Total liabilities and stockholders' deficit | $666,826 | $629,568 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Condensed Consolidated Balance Sheets | ' | ' |
Preferred stock, par value (in dollars per share) | $0.00 | $0.00 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $0.00 | $0.00 |
Common stock, shares authorized | 400,000,000 | 400,000,000 |
Common stock, shares issued | 167,492,843 | 162,984,680 |
Common stock, shares outstanding | 167,492,843 | 162,984,680 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Operations (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Revenues: | ' | ' |
Product revenues, net | $69,651 | $48,289 |
Product royalty revenues | 9,826 | 5,909 |
Contract revenues | 10,214 | 16,737 |
Other revenues | 101 | 142 |
Total revenues | 89,792 | 71,077 |
Costs and expenses: | ' | ' |
Cost of product revenues | 168 | 150 |
Research and development | 75,585 | 52,763 |
Selling, general and administrative | 36,974 | 22,261 |
Total costs and expenses | 112,727 | 75,174 |
Loss from operations | -22,935 | -4,097 |
Interest and other income, net | 735 | 199 |
Interest expense | -11,443 | -11,728 |
Debt exchange expense on senior note conversions | -265 | ' |
Loss before provision for income taxes | -33,908 | -15,626 |
Provision for income taxes | 49 | 43 |
Net loss | ($33,957) | ($15,669) |
Basic and diluted net loss per share (in dollars per share) | ($0.21) | ($0.12) |
Shares used in computing basic and diluted net loss per share (in shares) | 165,357 | 134,345 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Comprehensive Loss (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Condensed Consolidated Statements of Comprehensive Loss | ' | ' |
Net loss | ($33,957) | ($15,669) |
Other comprehensive gain: | ' | ' |
Unrealized gain on marketable securities, net of tax | 47 | 136 |
Reclassification adjustment for realized gains on marketable securities | ' | -15 |
Other comprehensive gain | 47 | 121 |
Comprehensive loss | ($33,910) | ($15,548) |
Condensed_Consolidated_Stateme2
Condensed Consolidated Statements of Cash Flows (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Cash flows from operating activities: | ' | ' |
Net loss | ($33,957) | ($15,669) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ' | ' |
Depreciation and amortization of debt discounts | 9,623 | 7,734 |
Stock-based compensation | 15,347 | 9,197 |
Excess tax benefit from stock based compensation | 31 | ' |
Debt exchange expense on senior note conversions | 265 | ' |
Realized gain on restricted cash and investments and marketable securities, net | ' | -15 |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable | -11,020 | 42,910 |
Prepaid expenses and other assets | -4,899 | -837 |
Inventory | -506 | -577 |
Accounts payable | -1,152 | 1,554 |
Accrued and other liabilities | -2,208 | -2,820 |
Deferred revenue - Collaborative agreements | -3,218 | -16,739 |
Net cash (used in) provided by operating activities | -31,694 | 24,738 |
Cash flows from investing activities: | ' | ' |
Capital expenditures | -2,663 | -894 |
Maturities of marketable securities | 90 | ' |
Purchases of marketable securities | -45,114 | 136 |
Net cash used in investing activities | -47,687 | -758 |
Cash flows from financing activities: | ' | ' |
Proceeds from issuance of common stock under stock plans | 44,833 | 17,777 |
Excess tax benefit from stock based compensation | -31 | ' |
Cash paid in connection with exchange of 4.75% convertible senior notes due 2015 | -265 | ' |
Net cash provided by financing activities | 44,537 | 17,777 |
Net (decrease) increase in cash and cash equivalents | -34,844 | 41,757 |
Cash and cash equivalents at beginning of period | 471,429 | 224,057 |
Cash and cash equivalents at end of period | 436,585 | 265,814 |
Supplemental Schedule of Cash Flow Information | ' | ' |
Interest paid | 0 | ' |
Incomes taxes paid | 0 | ' |
Purchase of property and equipment financed by direct financing lease | 7,806 | ' |
4.75% Convertible Senior Notes due 2015 | ' | ' |
Supplemental Schedule of Cash Flow Information | ' | ' |
Reclassification to additional paid in capital in connection with exchange of 4.75% convertible senior notes due 2015 | $4,446 | ' |
Condensed_Consolidated_Stateme3
Condensed Consolidated Statements of Cash Flows (Parenthetical) (4.75% Convertible Senior Notes due 2015) | Mar. 31, 2014 |
4.75% Convertible Senior Notes due 2015 | ' |
Interest rate of debt (as a percent) | 4.75% |
Organization_and_business
Organization and business | 3 Months Ended |
Mar. 31, 2014 | |
Organization and business | ' |
Organization and business | ' |
1. Organization and business | |
Incyte Corporation (“Incyte,” “we,” “us,” or “our”) is a biopharmaceutical company focused on developing and commercializing proprietary small molecule drugs, primarily for oncology. Our pipeline includes compounds in various stages, ranging from preclinical to late stage development, and a commercialized product, JAKAFI® (ruxolitinib). Our operations are treated as one operating segment. | |
Summary_of_significant_account
Summary of significant accounting policies | 3 Months Ended |
Mar. 31, 2014 | |
Summary of significant accounting policies | ' |
Summary of significant accounting policies | ' |
2. Summary of significant accounting policies | |
Basis of presentation | |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The condensed consolidated balance sheet as of March 31, 2014 and the condensed consolidated statements of operations, comprehensive loss and cash flows for the three months ended March 31, 2014 and 2013, are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which we consider necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The condensed consolidated balance sheet at December 31, 2013 has been derived from audited financial statements. | |
Although we believe that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information and footnote information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. | |
Results for any interim period are not necessarily indicative of results for any future interim period or for the entire year. The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013. | |
Principles of Consolidation. The consolidated financial statements include the accounts of Incyte Corporation and our wholly owned subsidiaries. All inter-company accounts, transactions, and profits have been eliminated in consolidation. | |
Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. | |
Concentrations of Credit Risk. Cash, cash equivalents, marketable securities, trade receivables and restricted investments are financial instruments which potentially subject us to concentrations of credit risk. The estimated fair value of financial instruments approximates the carrying value based on available market information. We primarily invest our excess available funds in notes and bills issued by the U.S. government and its agencies and corporate debt securities and, by policy, limit the amount of credit exposure to any one issuer and to any one type of investment, other than securities issued or guaranteed by the U.S. government. Our receivables mainly relate to our product sales of JAKAFI and collaborative agreements with pharmaceutical companies. We have not experienced any significant credit losses on cash, cash equivalents, marketable securities, trade receivables or restricted investments to date and do not require collateral on receivables. | |
Cash and Cash Equivalents. Cash and cash equivalents are held in U.S. banks or in custodial accounts with U.S. banks. Cash equivalents are defined as all liquid investments and money market funds with maturity from date of purchase of 90 days or less that are readily convertible into cash. | |
Marketable Securities—Available-for-Sale. All marketable securities are classified as available-for-sale. Available-for-sale securities are carried at fair value, based on quoted market prices and observable inputs, with unrealized gains and losses, net of tax, reported as a separate component of stockholders’ deficit. We classify marketable securities that are available for use in current operations as current assets on the consolidated balance sheets. Realized gains and losses and declines in value judged to be other than temporary for available-for-sale securities are included in “Interest and other income, net.” The cost of securities sold is based on the specific identification method. | |
Accounts Receivable. As of March 31, 2014 and December 31, 2013, we had no allowance for doubtful accounts. We provide an allowance for doubtful accounts based on experience and specifically identified risks. Accounts receivable are carried at fair value and charged off against the allowance for doubtful accounts when we determine that recovery is unlikely and we cease collection efforts. | |
Inventory. Inventories are determined at the lower of cost or market value with cost determined under the specific identification method and may consist of raw materials, work in process and finished goods. We began capitalizing inventory in mid-November 2011 once the U.S. Food and Drug Administration (“FDA”) approved JAKAFI as the related costs were expected to be recoverable through the commercialization of the product. Costs incurred prior to approval of JAKAFI have been recorded as research and development expense in our statements of operations. As a result, cost of product revenues for the next 36 months will reflect a lower average per unit cost of materials. | |
The raw materials and work-in-process inventory is not subject to expiration and the shelf life for finished goods inventory is 24 or 36 months from the start of manufacturing of the finished goods. We evaluate for potential excess inventory by analyzing current and future product demand relative to the remaining product shelf life. We build demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance and patient usage. We classify inventory as current on the consolidated balance sheets when we expect inventory to be consumed for commercial use within the next twelve months. | |
Property and Equipment. Property and equipment is stated at cost, less accumulated depreciation and amortization. Depreciation is recorded using the straight-line method over the estimated useful lives of the respective assets (generally three to five years). Leasehold improvements are amortized over the shorter of the estimated useful life of the assets or lease term. | |
Management continually reviews the estimated useful lives of technologically sensitive equipment and believes that those estimates appropriately reflect the current useful life of our assets. In the event that a currently unknown significantly advanced technology became commercially available, we would re-evaluate the value and estimated useful lives of our existing equipment, possibly having a material impact on the financial statements. | |
Lease Accounting. We account for operating leases by recording rent expense on a straight-line basis over the expected life of the lease, commencing on the date we gain possession of leased property. We include tenant improvement allowances and rent holidays received from landlords and the effect of any rent escalation clauses as adjustments to straight-line rent expense over the expected life of the lease. | |
Capital leases are reflected as a liability at the inception of the lease based on the present value of the minimum lease payments or, if lower, the fair value of the property. Assets under capital leases are recorded in property and equipment, net on the consolidated balance sheets and depreciated in a manner similar to other property and equipment. | |
Certain construction projects are accounted for as direct financing arrangements, whereby we record, over the construction period, the full cost of the asset in property and equipment, net on the consolidated balance sheets. A corresponding liability is also recorded, net of leasehold improvements paid for by us, and is amortized over the expected lease term through monthly rental payments using the effective interest method. | |
Income Taxes. We account for income taxes using the asset and liability approach which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts reportable for income tax purposes. In addition, we follow the guidance related to accounting for uncertainty in income taxes. This guidance creates a single model to address uncertainty in tax positions and clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before it is recognized in the financial statements. | |
Financing Costs Related to Long-term Debt. Costs associated with obtaining long-term debt are deferred and amortized over the term of the related debt using the effective interest method. Such costs are included in other assets, net on the consolidated balance sheet. | |
Grant Accounting. Grant amounts received from government agencies for operations are deferred and are amortized into income over the service period of the grant. Grant amounts received for purchases of capital assets are deferred and amortized into interest and other income, net over the useful life of the related capital assets. Such amounts are recorded in other liabilities on the consolidated balance sheet. | |
Net Loss Per Share. Our basic and diluted losses per share are calculated by dividing the net loss by the weighted average number of shares of common stock outstanding during all periods presented. Options to purchase stock and shares issuable upon the conversion of convertible debt are included in diluted earnings per share calculations, unless the effects are anti-dilutive. | |
Accumulated Other Comprehensive Income (Loss). Accumulated other comprehensive income (loss) consists of unrealized gains or losses on marketable securities and restricted cash and investments. | |
Revenue Recognition. Revenues are recognized when (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the price is fixed or determinable and (4) collectability is reasonably assured. Revenues are deferred for fees received before earned or until no further obligations exist. We exercise judgment in determining that collectability is reasonably assured or that services have been delivered in accordance with the arrangement. We assess whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. We assess collectability based primarily on the customer’s payment history and on the creditworthiness of the customer. | |
Product Revenues | |
Our product revenues consist of U.S. sales of JAKAFI and are recognized once we meet all four revenue recognition criteria described above. In November 2011, we began shipping JAKAFI to our specialty pharmacy customers, which in turn dispense JAKAFI to patients in fulfillment of prescriptions. | |
We recognize revenues for product received by our specialty pharmacy customers net of allowances for customer credits, including estimated rebates, chargebacks, discounts, returns, distribution service fees, patient assistance programs, and Medicare Part D coverage gap reimbursements. Product shipping and handling costs are included in cost of product revenues. | |
Customer Credits: Our specialty pharmacy customers are offered various forms of consideration, including allowances, service fees and prompt payment discounts. We expect our specialty pharmacy customers will earn prompt payment discounts and, therefore, we deduct the full amount of these discounts from total product sales when revenues are recognized. Service fees are also deducted from total product sales as they are earned. | |
Rebates: Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program. Rebate amounts are based upon contractual agreements or legal requirements with public sector (e.g. Medicaid) benefit providers. Rebates are amounts owed after the final dispensing of the product to a benefit plan participant and are based upon contractual agreements or legal requirements with public sector benefit providers. The accrual for rebates is based on statutory discount rates and expected utilization as well as historical data we have accumulated since product launch. Our estimates for expected utilization of rebates are based in part on third party market research data, and data received from our specialty pharmacy customers. Rebates are generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters’ unpaid rebates. If actual future rebates vary from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment. | |
Chargebacks: Chargebacks are discounts that occur when contracted customers purchase directly from a specialty pharmacy, or an intermediary distributor. Contracted customers, which currently consist primarily of Public Health Service institutions, non-profit clinics, and Federal government entities purchasing via the Federal Supply Schedule, generally purchase the product at a discounted price. The specialty pharmacy or distributor, in turn, charges back to us the difference between the price initially paid by the specialty pharmacy or distributor and the discounted price paid to the specialty pharmacy or distributor by the customer. The accrual for chargebacks is based on the estimated contractual discounts on the inventory levels on hand in our distribution channel. If actual future chargebacks vary from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment. | |
Medicare Part D Coverage Gap: Medicare Part D prescription drug benefit mandates manufacturers to fund 50% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients. Our estimates for the expected Medicare Part D coverage gap are based on historical invoices received and in part from data received from our specialty pharmacy customers. Funding of the coverage gap is generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters. If actual future funding varies from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment. | |
Co-payment assistance: Patients who have commercial insurance and meet certain eligibility requirements may receive co-payment assistance. We accrue a liability for co-payment assistance based on actual program participation and estimates of program redemption using data provided by third-party administrators. | |
Product Royalty Revenues | |
Royalty revenues on commercial sales for ruxolitinib (marketed as JAKAVI® outside the United States) by Novartis Pharmaceutical International Ltd. (“Novartis”) are based on net sales of licensed products in licensed territories as provided by Novartis. We recognize royalty revenues in the period the sales occur. | |
Contract and License Revenues | |
Under agreements involving multiple deliverables, services and/or rights to use assets that we entered into prior to January 1, 2011, the multiple elements are divided into separate units of accounting when certain criteria are met, including whether the delivered items have stand-alone value to the customer and whether there is objective and reliable evidence of the fair value of the undelivered items. When separate units of accounting exist, consideration is allocated among the separate elements based on their respective fair values. The determination of fair value of each element is based on objective evidence from historical sales of the individual elements by us to other customers. If such evidence of fair value for each undelivered element of the arrangement does not exist, all revenue from the arrangement is deferred until such time that evidence of fair value for each undelivered element does exist or until all elements of the arrangement are delivered. When elements are specifically tied to a separate earnings process, revenue is recognized when the specific performance obligation tied to the element is completed. When revenues for an element are not specifically tied to a separate earnings process, they are recognized ratably over the term of the agreement. We assess whether a substantive milestone exists at the inception of our agreements. For all milestones within our arrangements that are considered substantive, we recognize revenue upon the achievement of the associated milestone. If a milestone is not considered substantive, we would recognize the applicable milestone payment over the remaining period of performance under the arrangement. Further information about our collaborative arrangements can be found below in Note 7, License Agreements. As of March 31, 2014, all remaining potential milestones under our collaborative arrangements are considered substantive. | |
On January 1, 2011, updated guidance on the recognition of revenues for agreements with multiple deliverables became effective and applies to any agreements we may enter into on or after January 1, 2011. This updated guidance (i) relates to whether multiple deliverables exist, how the deliverables in a revenue arrangement should be separated and how the consideration should be allocated; (ii) requires companies to allocate revenues in an arrangement using estimated selling prices of deliverables if a vendor does not have vendor-specific objective evidence or third-party evidence of selling price; and (iii) eliminates the use of the residual method and requires companies to allocate revenues using the relative selling price method. During the three months ended March 31, 2014 and 2013, we did not enter into any agreements that are subject to this updated guidance. If we enter into an agreement with multiple deliverables after January 1, 2011 or amend existing agreements, this updated guidance could have a material effect on our financial statements. | |
Our collaborations often include contractual milestones, which typically relate to the achievement of pre-specified development, regulatory and commercialization events. These three categories of milestone events reflect the three stages of the life-cycle of our drugs, which we describe in more detail in the following paragraphs. | |
The regulatory review and approval process, which includes preclinical testing and clinical trials of each drug candidate, is lengthy, expensive and uncertain. Securing approval by the FDA requires the submission of extensive preclinical and clinical data and supporting information to the FDA for each indication to establish a drug candidate’s safety and efficacy. The approval process takes many years, requires the expenditure of substantial resources, involves post-marketing surveillance and may involve ongoing requirements for post-marketing studies. Before commencing clinical investigations of a drug candidate in humans, we must submit an Investigational New Drug application (“IND”), which must be reviewed by the FDA. | |
The steps generally required before a drug may be marketed in the United States include preclinical laboratory tests, animal studies and formulation studies, submission to the FDA of an IND for human clinical testing, performance of adequate and well-controlled clinical trials in three phases, as described below, to establish the safety and efficacy of the drug for each indication, submission of a new drug application (“NDA”) to the FDA for review and FDA approval of the NDA. | |
Similar requirements exist within foreign regulatory agencies as well. The time required satisfying the FDA requirements or similar requirements of foreign regulatory agencies may vary substantially based on the type, complexity and novelty of the product or the targeted disease. | |
Preclinical testing includes laboratory evaluation of product pharmacology, drug metabolism, and toxicity, which includes animal studies, to assess potential safety and efficacy as well as product chemistry, stability, formulation, development, and testing. The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND. The FDA may raise safety concerns or questions about the conduct of the clinical trials included in the IND, and any of these concerns or questions must be resolved before clinical trials can proceed. We cannot be sure that submission of an IND will result in the FDA allowing clinical trials to commence. Clinical trials involve the administration of the investigational drug or the marketed drug to human subjects under the supervision of qualified investigators and in accordance with good clinical practices regulations covering the protection of human subjects. Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined. Phase I usually involves the initial introduction of the investigational drug into healthy volunteers to evaluate its safety, dosage tolerance, absorption, metabolism, distribution and excretion. Phase II usually involves clinical trials in a limited patient population to evaluate dosage tolerance and optimal dosage, identify possible adverse effects and safety risks, and evaluate and gain preliminary evidence of the efficacy of the drug for specific indications. Phase III clinical trials usually further evaluate clinical efficacy and safety by testing the drug in its final form in an expanded patient population, providing statistical evidence of efficacy and safety, and providing an adequate basis for labeling. We cannot guarantee that Phase I, Phase II or Phase III testing will be completed successfully within any specified period of time, if at all. Furthermore, we, the institutional review board for a trial, or the FDA may suspend clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. | |
Generally, the milestone events contained in our collaboration agreements coincide with the progression of our drugs from development, to regulatory approval and then to commercialization. The process of successfully discovering a new development candidate, having it approved and successfully commercialized is highly uncertain. As such, the milestone payments we may earn from our partners involve a significant degree of risk to achieve. Therefore, as a drug candidate progresses through the stages of its life-cycle, the value of the drug candidate generally increases. | |
Research and Development Costs. Our policy is to expense research and development costs as incurred. We often contract with clinical research organizations (“CROs”) to facilitate, coordinate and perform agreed upon research and development of a new drug. To ensure that research and development costs are expensed as incurred, we record monthly accruals for clinical trials and preclinical testing costs based on the work performed under the contract. | |
These CRO contracts typically call for the payment of fees for services at the initiation of the contract and/or upon the achievement of certain clinical trial milestones. In the event that we prepay CRO fees, we record the prepayment as a prepaid asset and amortize the asset into research and development expense over the period of time the contracted research and development services are performed. Most professional fees, including project and clinical management, data management, monitoring, and medical writing fees are incurred throughout the contract period. These professional fees are expensed based on their percentage of completion at a particular date. Our CRO contracts generally include pass through fees. Pass through fees include, but are not limited to, regulatory expenses, investigator fees, travel costs, and other miscellaneous costs, including shipping and printing fees. We expense the costs of pass through fees under our CRO contracts as they are incurred, based on the best information available to us at the time. The estimates of the pass through fees incurred are based on the amount of work completed for the clinical trial and are monitored through correspondence with the CROs, internal reviews and a review of contractual terms. The factors utilized to derive the estimates include the number of patients enrolled, duration of the clinical trial, estimated patient attrition, screening rate and length of the dosing regimen. CRO fees incurred to set up the clinical trial are expensed during the setup period. Reimbursable costs incurred in connection with collaborative license agreements are recorded as a reduction of research and development expenses. | |
Stock Compensation. Share-based payment transactions with employees, which include stock options, restricted stock units (“RSUs”) and performance shares (“PSUs”), are recognized as compensation expense over the requisite service period based on their estimated fair values on the dates of grant. The stock compensation process requires significant judgment and the use of estimates, particularly surrounding Black-Scholes assumptions such as stock price volatility over the option term and expected option lives, as well as expected forfeiture rates and the probability of PSUs vesting. The fair value of stock options, which are subject to graded vesting, are recognized as compensation expense over the requisite service period using the accelerated attribution method. The fair value of RSUs, which are generally subject to cliff vesting, are recognized as compensation expense over the requisite service period using the straight line attribution method. The fair value of PSUs are recognized as compensation expense beginning at the time in which the performance conditions are deemed probable of achievement, over the remaining requisite service period. We recorded $15.3 million and $9.2 million of stock compensation expense for the three months ended March 31, 2014 and 2013, respectively. | |
Fair_value_of_financial_instru
Fair value of financial instruments | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
Fair value of financial instruments | ' | |||||||||||||
Fair value of financial instruments | ' | |||||||||||||
3. Fair value of financial instruments | ||||||||||||||
Financial Accounting Standards Board (“FASB”) accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (“the exit price”) in an orderly transaction between market participants at the measurement date. The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. In determining fair value we use quoted prices and observable inputs. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of us. The fair value hierarchy is broken down into three levels based on the source of inputs as follows: | ||||||||||||||
Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities. | ||||||||||||||
Level 2—Valuations based on observable inputs and quoted prices in active markets for similar assets and liabilities. | ||||||||||||||
Level 3—Valuations based on inputs that are unobservable and models that are significant to the overall fair value measurement. | ||||||||||||||
Our marketable securities consist of investments in U.S. government agencies, corporate debt securities and non-agency mortgage-backed securities that are classified as available-for-sale. | ||||||||||||||
At March 31, 2014 and December 31, 2013, our Level 2 corporate debt securities and mortgage-backed securities are valued using readily available pricing sources which utilize market observable inputs, including the current interest rate and other characteristics for similar types of instruments. | ||||||||||||||
The following fair value hierarchy table presents information about each major category of our financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2014 (in thousands): | ||||||||||||||
Fair Value Measurement at Reporting Date Using: | ||||||||||||||
Quoted Prices in | Significant Other | Significant | Balance as of | |||||||||||
Active Markets for | Observable | Unobservable | March 31, 2014 | |||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||||
Cash and cash equivalents | $ | 436,585 | $ | — | $ | — | $ | 436,585 | ||||||
Corporate debt securities | — | 78,757 | — | 78,757 | ||||||||||
Mortgage-backed securities | — | 3,889 | — | 3,889 | ||||||||||
Total assets | $ | 436,585 | $ | 82,646 | $ | — | $ | 519,231 | ||||||
The following fair value hierarchy table presents information about each major category of our financial assets measured at fair value on a recurring basis as of December 31, 2013 (in thousands): | ||||||||||||||
Fair Value Measurement at Reporting Date Using: | ||||||||||||||
Quoted Prices in | Significant Other | Significant | Balance as of | |||||||||||
Active Markets for | Observable | Unobservable | December 31, 2013 | |||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||||
Cash and cash equivalents | $ | 471,429 | $ | — | $ | — | $ | 471,429 | ||||||
Corporate debt securities | — | 33,655 | — | 33,655 | ||||||||||
Mortgage-backed securities | — | 3,920 | — | 3,920 | ||||||||||
Total assets | $ | 471,429 | $ | 37,575 | $ | — | $ | 509,004 | ||||||
The following is a summary of our marketable security portfolio as of March 31, 2014 and December 31, 2013, respectively. | ||||||||||||||
Amortized | Net | Net | Estimated | |||||||||||
Cost | Unrealized | Unrealized | Fair Value | |||||||||||
Gains | Losses | |||||||||||||
(in thousands) | ||||||||||||||
March 31, 2014 | ||||||||||||||
Corporate debt securities | $ | 78,800 | $ | — | $ | (43 | ) | $ | 78,757 | |||||
Mortgage backed securities | 1,806 | 2,083 | — | 3,889 | ||||||||||
$ | 80,606 | $ | 2,083 | $ | (43 | ) | $ | 82,646 | ||||||
December 31, 2013 | ||||||||||||||
Corporate debt securities | $ | 33,685 | $ | — | $ | (30 | ) | $ | 33,655 | |||||
Mortgage backed securities | 1,897 | 2,023 | — | 3,920 | ||||||||||
$ | 35,582 | $ | 2,023 | $ | (30 | ) | $ | 37,575 | ||||||
Our corporate debt securities generally have contractual maturity dates of between 12 to 18 months. Because of the potential for prepayment on mortgage-backed securities, they are not categorized by contractual maturity. |
Concentration_of_Credit_Risk
Concentration of Credit Risk | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
Concentration of Credit Risk | ' | |||||
Concentration of Credit Risk | ' | |||||
4. Concentration of Credit Risk | ||||||
In December 2009, we entered into a license, development and commercialization agreement with Eli Lilly and Company (“Lilly”). In November 2009, we entered into a collaboration and license agreement with Novartis. The concentration of credit risk related to our collaborative partners is as follows: | ||||||
Percentage of Total | ||||||
Contract Revenues for the | ||||||
Quarters Ended, | ||||||
March 31, | ||||||
2014 | 2013 | |||||
Collaboration Partner A | 68 | % | 60 | % | ||
Collaboration Partner B | 32 | % | 40 | % | ||
Collaboration Partner A and Collaboration Partner B comprised in the aggregate 38% and 28% of the accounts receivable balance as of March 31, 2014 and December 31, 2013, respectively. | ||||||
Our product revenues are concentrated in a limited number of specialty pharmacy customers. The concentration of credit risk related to our specialty pharmacy customers is as follows: | ||||||
Percentage of Total Net | ||||||
Product Revenues for the | ||||||
Quarters Ended, | ||||||
March 31, | ||||||
2014 | 2013 | |||||
Customer A | 29 | % | 27 | % | ||
Customer B | 21 | % | 18 | % | ||
Customer C | 11 | % | 12 | % | ||
Customer D | 9 | % | 12 | % | ||
We are exposed to risks associated with extending credit to specialty pharmacy customers related to the sale of products. Customer A, Customer B, Customer C and Customer D comprised in the aggregate 48% and 49% of the accounts receivable balance as of March 31, 2014 and December 31, 2013, respectively. | ||||||
Inventory
Inventory | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Inventory | ' | |||||||
Inventory | ' | |||||||
5. Inventory | ||||||||
Our inventory balance consists of the following: | ||||||||
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
(in thousands) | ||||||||
Raw materials | $ | 591 | $ | 591 | ||||
Work-in-process | 14,911 | 14,346 | ||||||
Finished goods | 347 | 406 | ||||||
15,849 | 15,343 | |||||||
Inventories—current | 347 | 406 | ||||||
Inventories—non-current | $ | 15,502 | $ | 14,937 | ||||
Inventories, stated at the lower of cost or market, consist of raw materials, work in process and finished goods. At March 31, 2014, $0.3 million of inventory was classified as current on the consolidated balance sheets as we expect this inventory to be consumed for commercial use within the next twelve months. At March 31, 2014, $15.5 million of inventory was classified as non-current on the consolidated balance sheets as we did not expect this inventory to be consumed for commercial use within the next twelve months. We obtain a number of inventory components from single source suppliers due to technology, availability, price, quality or other considerations. The loss of a single source supplier, the deterioration of its relationship with a single source supplier, or any unilateral violation of the contractual terms under which we are supplied components by a single source supplier could adversely affect our total revenues and gross margins. | ||||||||
The raw materials and work-in-process inventory is not subject to expiration and the shelf life for finished goods inventory is 24 or 36 months from the start of manufacturing of the finished goods. We evaluate for potential excess inventory by analyzing current and future product demand relative to the remaining product shelf life. We build demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance and patient usage. | ||||||||
Property_and_Equipment
Property and Equipment | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Property and Equipment | ' | |||||||
Property and Equipment | ' | |||||||
6. Property and Equipment | ||||||||
Property and equipment consists of the following: | ||||||||
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
(in thousands) | ||||||||
Office equipment | $ | 2,332 | $ | 2,332 | ||||
Laboratory equipment | 20,615 | 20,228 | ||||||
Computer equipment | 14,272 | 13,930 | ||||||
Leasehold improvements | 2,453 | 2,454 | ||||||
Assets under construction | 32,254 | 20,377 | ||||||
71,926 | 59,321 | |||||||
Less accumulated depreciation and amortization | (33,272 | ) | (32,473 | ) | ||||
$ | 38,654 | $ | 26,848 | |||||
In 2013, we entered into a lease agreement for a new corporate headquarters, which will consist of approximately 190,000 square feet of laboratory and office space located in Wilmington, Delaware. The term of this lease is 15 years from the date of commencement. The lease is expected to commence in late 2014 with a monthly lease rate of $0.5 million for the first 10 years of the lease with the monthly lease rate increasing annually during the last five years of lease. | ||||||||
We will account for the lease as a direct financing arrangement whereby over the construction period, we will record the value of the facility (consisting of the estimated fair value of the existing shell, plus construction costs to be incurred) as a capital asset, with a corresponding lease liability, net of approximately $10.8 million of build out costs to be paid for by us during the construction period. In addition, we have posted a $15.0 million letter of credit for the facility lease for the benefit of the landlord, which is collateralized by a restricted investments account for the same amount. This amount will be recorded as restricted investments on the consolidated balance sheets and will be reduced over a period of time during the duration of the lease. The letter of credit could be subject to accelerated reductions if we meet certain pre-defined financial targets. Through March 31, 2014 we recorded a total of $32.3 million of assets under construction within property and equipment on our consolidated balance sheet, which consisted of the estimated fair value of the existing shell of $15.2 million prior to the build out, and a total of $17.1 million of build-out costs recorded through March 31, 2014. We have paid a total of $2.4 million through March 31, 2014 for our portion of the build out costs incurred through that date. The corresponding lease liability of $29.9 million is included within other liabilities on the consolidated balance sheet at March 31, 2014. | ||||||||
License_agreements
License agreements | 3 Months Ended |
Mar. 31, 2014 | |
License agreements | ' |
License agreements | ' |
7. License agreements | |
Novartis | |
In November 2009, we entered into a Collaboration and License Agreement with Novartis. Under the terms of the agreement, Novartis received exclusive development and commercialization rights outside of the United States to our JAK inhibitor ruxolitinib and certain back-up compounds for hematologic and oncology indications, including all hematological malignancies, solid tumors and myeloproliferative diseases. We retained exclusive development and commercialization rights to JAKAFI (ruxolitinib) in the United States and in certain other indications. Novartis also received worldwide exclusive development and commercialization rights to our c-MET inhibitor compound INC280 (INCB28060) and certain back-up compounds in all indications. We retained options to co-develop and to co-promote INC280 in the United States. | |
Under this agreement, we received an upfront payment and immediate milestone payment totaling $210.0 million and were initially eligible to receive up to $1.1 billion in milestone payments across multiple indications upon the achievement of pre-specified events, including up to $162.0 million for the achievement of development milestones, up to $450.0 million for the achievement of regulatory milestones and up to $500.0 million for the achievement of commercialization milestones. | |
During the three months ended March 31, 2014, we recognized a $7.0 million development milestone under this agreement based on the formal initiation by Novartis of a Phase II clinical trial evaluating INC280 in non-small cell lung cancer. In 2013, we recognized and received a $25.0 million development milestone payment under this agreement based on the formal initiation by Novartis of a Phase II clinical trial evaluating INC280. In 2012, we recognized and received a $40.0 million regulatory milestone payment under this agreement for the achievement of a predefined milestone for the European Union regulatory approval of Jakavi. In 2011, we recognized and received a $15.0 million development milestone payment under this agreement for the achievement of a predefined milestone in the Phase I dose-escalation trial for INC280 in patients with solid tumors and a $10.0 million regulatory milestone payment for the JAKAFI approval in the United States. We determined the 2014, 2013, 2012 and 2011 milestones to be substantive as their achievement required substantive efforts by us and was at risk until the milestones were ultimately achieved. We also are eligible to receive tiered, double-digit royalties ranging from the upper-teens to the mid-twenties on future ruxolitinib net sales outside of the United States. In addition, should Novartis receive reimbursement and pricing approval for ruxolitinib in a specified number of countries, we will be obligated to pay to Novartis tiered royalties in the low single digits on future ruxolitinib net sales within the United States. Each company is responsible for costs relating to the development and commercialization of ruxolitinib in its respective territories, with costs of collaborative studies shared equally. Novartis is responsible for all costs relating to the development and commercialization of INC280 after the initial Phase I clinical trial, which has been completed. | |
The Novartis agreement will continue on a program-by-program basis until Novartis has no royalty payment obligations with respect to such program or, if earlier, the termination of the agreement or any program in accordance with the terms of the agreement. Royalties are payable by Novartis on a product-by-product and country-by-country basis until the latest to occur of (1) the expiration of the last valid claim of the licensed patent rights covering the licensed product in the relevant country, (2) the expiration of regulatory exclusivity for the licensed product in such country and (3) a specified period from first commercial sale in such country of the licensed product by Novartis or its affiliates or sublicensees. The agreement may be terminated in its entirety or on a program-by-program basis by Novartis for convenience. The agreement may also be terminated by either party under certain other circumstances, including material breach. | |
We determined that there were two deliverables under the agreement: (i) the ex U.S. license for ruxolitinib and (ii) our obligations in connection with our participation on the joint development committee for myelofibrosis and polycythemia vera/essential thrombocythemia. We concluded that these deliverables should be accounted for as a single unit of accounting and the $150.0 million upfront payment received in December 2009 and the immediate $60.0 million milestone payment received in January 2010 should be recognized on a straight line basis through December 2013, when we estimated we would complete our obligations in connection with our participation on the joint development committee for myelofibrosis and polycythemia vera, our estimated performance period under the agreement. We completed this substantive performance obligation related to this arrangement in December 2013. | |
At December 31, 2009, we recorded $10.9 million of reimbursable costs incurred prior to the effective date of the agreement as deferred revenue on the condensed consolidated balance sheet. These costs were recognized on a straight line basis through December 2013 consistent with the aforementioned upfront and milestone payments. Future reimbursable costs incurred after the effective date of the agreement with Novartis will be recorded net against the related research and development expenses. At March 31, 2014 and December 31, 2013, $1.1 million and $1.7 million, respectively, of reimbursable costs were included in accounts receivable on the condensed consolidated balance sheets. Research and development expenses for the three months ended March 31, 2014 and 2013 were net of $1.1 million and $0.9 million, respectively, of costs reimbursed by Novartis. Contract revenue under the Novartis agreement was $7.0 million and $13.5 million for the three months ended March 31, 2014 and 2013, respectively. | |
Lilly | |
In December 2009, we entered into a License, Development and Commercialization Agreement with Lilly. Under the terms of the agreement, Lilly received exclusive worldwide development and commercialization rights to our JAK inhibitor baricitinib, and certain back-up compounds for inflammatory and autoimmune diseases. We received an upfront payment of $90.0 million, and were initially eligible to receive up to $665.0 million in substantive milestone payments across multiple indications upon the achievement of pre-specified events, including up to $150.0 million for the achievement of development milestones, up to $365.0 million for the achievement of regulatory milestones and up to $150.0 million for the achievement of commercialization milestones. In 2012, we recognized a $50.0 million development milestone under this agreement for the achievement of a predefined milestone for the initiation of the rheumatoid arthritis Phase III program for baricitinib. In 2010, we recognized and received a $30.0 million development milestone payment based upon the initial three month data in the Phase IIa clinical trial of baricitinib for the treatment of rheumatoid arthritis and a $19.0 million development milestone payment for the Phase IIb clinical trial initiation of baricitinib for the treatment of rheumatoid arthritis. We determined the 2012 and 2010 milestones to be substantive as their achievement required substantive efforts by us and was at risk until the milestones were ultimately achieved. We also could receive tiered, double-digit royalty payments on future global net sales with rates ranging up to 20% if the product is successfully commercialized. | |
We retained options to co-develop our JAK inhibitors with Lilly on a compound-by-compound and indication-by-indication basis. Lilly will be responsible for all costs relating to the development and commercialization of the compounds unless we elect to co-develop any compounds or indications. If we elect to co-develop any compounds and/or indications, we would be responsible for funding 30% of the associated future global development costs from the initiation of a Phase IIb trial through regulatory approval. We would receive an incremental royalty rate increase across all tiers resulting in effective royalty rates ranging up to the high twenties on potential future global net sales for compounds and/or indications that we elect to co-develop. We also retained an option to co-promote products in the United States. In July 2010, we elected to co-develop baricitinib with Lilly in rheumatoid arthritis and we are responsible for funding 30% of the associated future global development costs for this indication from the initiation of the Phase IIb trial through regulatory approval. We have retained certain mechanisms to give us cost protection as baricitinib advances in clinical development. We can defer our portion of co-development study costs by indication if they exceed a predetermined level. This deferment would be credited against future milestones or royalties and we would still be eligible for the full incremental royalties related to the co-development option. In addition, even if we have started co-development funding for any indication, we can at any time opt out and stop future co-development cost sharing. If we elect to do this we would still be eligible for our base royalties plus an incremental pro-rated royalty commensurate with our contribution to the total co-development cost for those indications for which we co-funded. The Lilly agreement will continue until Lilly no longer has any royalty payment obligations or, if earlier, the termination of the agreement in accordance with its terms. Royalties are payable by Lilly on a product-by-product and country- by-country basis until the latest to occur of (1) the expiration of the last valid claim of the licensed patent rights covering the licensed product in the relevant country, (2) the expiration of regulatory exclusivity for the licensed product in such country and (3) a specified period from first commercial sale in such country of the licensed product by Lilly or its affiliates or sublicensees. The agreement may be terminated by Lilly for convenience, and may also be terminated under certain other circumstances, including material breach. | |
We determined that there were two deliverables under the agreement: (i) the worldwide license and (ii) our obligations in connection with a co-development option. We concluded that these deliverables should be accounted for as a single unit of accounting and the $90.0 million upfront payment should be recognized on a straight line basis as revenue through December 2016, our estimated performance period under the agreement. Reimbursable costs incurred after the effective date with Lilly will be recorded net against the related research and development expenses. At March 31, 2014 and December 31, 2013, $0.0 million of reimbursable costs were included in accounts receivable on the consolidated balance sheet. Contract revenue under the Lilly agreement was $3.2 million for each of the three months ended March 31, 2014 and 2013. | |
Stock_compensation
Stock compensation | 3 Months Ended | |||||||||
Mar. 31, 2014 | ||||||||||
Stock compensation | ' | |||||||||
Stock compensation | ' | |||||||||
8. Stock compensation | ||||||||||
We recorded $15.3 million and $9.2 million of stock compensation expense for the three months ended March 31, 2014, and 2013, respectively. Stock compensation expense included within our condensed consolidated statements of operations included research and development expense of $8.3 million and $6.5 million and selling, general and administrative expense of $7.0 million and $2.7 million for the three months ended March 31, 2014 and 2013, respectively. | ||||||||||
We utilized the Black-Scholes valuation model for estimating the fair value of the stock compensation granted, with the following weighted-average assumptions: | ||||||||||
Employee Stock | Employee Stock | |||||||||
Options For the | Purchase Plan For the | |||||||||
Three Months | Three Months | |||||||||
Ended | Ended | |||||||||
March 31, | March 31, | |||||||||
2014 | 2013 | 2014 | 2013 | |||||||
Average risk-free interest rates | 1.18 | % | 0.55 | % | 0.44 | % | 0.25 | % | ||
Average expected life (in years) | 4.47 | 4.21 | 0.25 | 0.25 | ||||||
Volatility | 50 | % | 47 | % | 52 | % | 44 | % | ||
Weighted-average fair value (in dollars) | 26.52 | 6.95 | 8.65 | 3.26 | ||||||
The risk-free interest rate is derived from the U.S. Federal Reserve rate in effect at the time of grant. The expected life calculation is based on the observed and expected time to the exercise of options by our employees based on historical exercise patterns for similar type options. Expected volatility is based on the historical volatility of our common stock over the period commensurate with the expected life of the options. A dividend yield of zero is assumed based on the fact that we have never paid cash dividends and have no present intention to pay cash dividends. | ||||||||||
The following table summarizes activity under all stock option plans: | ||||||||||
Shares | Number | Weighted | ||||||||
Available for | Outstanding | Average | ||||||||
Grant | Exercise | |||||||||
Price per | ||||||||||
Share | ||||||||||
Balance at December 31, 2013 | 5,376,614 | 20,123,089 | $ | 15.16 | ||||||
Shares added | 400,000 | — | — | |||||||
Options granted | (1,361,243 | ) | 1,361,243 | 63.15 | ||||||
RSUs and PSUs granted | (563,683 | ) | 563,683 | — | ||||||
Options exercised | — | (3,943,037 | ) | 11.37 | ||||||
Options cancelled | 76,848 | (76,848 | ) | 21.71 | ||||||
RSUs cancelled | 738 | (738 | ) | — | ||||||
Balance at March 31, 2014 | 3,929,274 | 18,027,392 | $ | 19.72 | ||||||
Exercisable, March 31, 2014 | — | 10,685,304 | $ | 13.47 | ||||||
In January 2014, we began granting RSUs and PSUs to our employees at the share price on the date of grant. Each RSU represents the right to acquire one share of our common stock. We granted a total of 115,323 RSUs during the three months ended March 31, 2014 which will cliff vest in three years and will be recognized as stock compensation expense over this period. Also, in January 2014, Hervé Hoppenot, our new President and Chief Executive Officer, was granted a one-time grant of 400,000 RSUs outside of our 2010 Stock Incentive Plan. Vesting of the RSUs will be subject to Mr. Hoppenot’s continued employment on the applicable vesting dates, with one-sixth of the RSUs vesting at the end of each of the calendar years 2014 through 2019, subject to earlier acceleration of vesting upon the occurrence of certain events in accordance with the terms of his employment agreement. | ||||||||||
We granted a total of 48,360 PSUs during the three months ended March 31, 2014. The PSUs contain performance conditions which are not deemed probable of achievement at March 31, 2014, therefore, no stock compensation expense has been recognized as of March 31, 2014 for these awards. We will begin to recognize stock compensation expense for these awards if the performance conditions are deemed probable of achievement. The actual number of shares of our common stock into which each PSU may convert are subject to a multiplier of up to 125% based on the level at which the performance conditions are achieved. | ||||||||||
Based on our historical experience of employee turnover, we have assumed an annualized forfeiture rate of 5% for our options and RSUs. Under the true-up provisions of the stock compensation guidance, we will record additional expense if the actual forfeiture rate is lower than we estimated, and will record a recovery of prior expense if the actual forfeiture is higher than we estimated. | ||||||||||
Total compensation cost of options and RSUs granted but not yet vested, as of March 31, 2014, was $71.1 million, for which the cost of the options and RSUs are expected to be recognized over the weighted average period of 3.0 years. Total compensation cost of PSUs granted but not yet vested, as of March 31, 2014, was $3.1 million which will begin to be recognized should the performance conditions be deemed probable of occurrence. | ||||||||||
Debt
Debt | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
Debt | ' | |||||||||||||
Debt | ' | |||||||||||||
9. Debt | ||||||||||||||
The components of the convertible notes are as follows (in thousands): | ||||||||||||||
Carrying Amount | ||||||||||||||
Debt | 2014 Interest Rates | Maturities | March 31, | December 31, | ||||||||||
March 31 | 2014 | 2013 | ||||||||||||
4.75% Convertible Senior Notes due 2015 | 4.75 | % | 2015 | $ | 81,444 | $ | 84,193 | |||||||
0.375% Convertible Senior Notes due 2018 | 0.375 | % | 2018 | 304,400 | 301,037 | |||||||||
1.25% Convertible Senior Notes due 2020 | 1.25 | % | 2020 | 279,378 | 276,337 | |||||||||
Less current portion | — | — | ||||||||||||
$ | 665,222 | $ | 661,567 | |||||||||||
The carrying amount and fair value of our convertible notes are as follows (in thousands): | ||||||||||||||
March 31, 2014 | December 31, 2013 | |||||||||||||
Carrying | Fair Value | Carrying | Fair Value | |||||||||||
Amount | Amount | |||||||||||||
4.75% Convertible Senior Notes due 2015 | $ | 81,444 | $ | 557,029 | $ | 84,193 | $ | 556,272 | ||||||
0.375% Convertible Senior Notes due 2018 | 304,400 | 475,549 | 301,037 | 448,350 | ||||||||||
1.25% Convertible Senior Notes due 2020 | 279,378 | 480,469 | 276,337 | 454,913 | ||||||||||
$ | 665,222 | $ | 1,513,047 | $ | 661,567 | $ | 1,459,535 | |||||||
The fair values of the 4.75% Convertible Senior Notes due 2015 (the “2015 Notes”), the 0.375% Convertible Senior Notes due 2018 (the “2018 Notes”) and the 1.25% Convertible Senior Notes due 2020 (the “2020 Notes”) are based on data from readily available pricing sources which utilize market observable inputs and other characteristics for similar types of instruments, and, therefore, these convertible notes are classified within Level 2 in the fair value hierarchy. During the three months ended March 31, 2014, we entered into a negotiated agreement with a holder of the 2015 Notes pursuant to which the holder agreed to exchange $4.9 million aggregate principal amount of the 2015 Notes for the shares of our stock into which the 2015 Notes were convertible, aggregating 0.6 million shares, and $0.3 million in cash. We recorded $0.3 million in debt exchange expense on senior note conversions for the three months ended March 31, 2014. | ||||||||||||||
Net_loss_per_share
Net loss per share | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
Net loss per share | ' | |||||
Net loss per share | ' | |||||
10. Net loss per share | ||||||
For all periods presented, both basic and diluted net loss per common share are computed by dividing the net loss by the number of weighted average common shares outstanding during the period. Stock options and potential common shares issuable upon conversion of the 2015 Notes, 2018 Notes, 2020 Notes and the convertible subordinated note due 2014 issued to Pfizer (the “Pfizer Note”) were excluded from the computation of diluted net loss per share, as their share effect was anti-dilutive for all periods presented. | ||||||
The potential common shares that were excluded from the diluted net loss per share computation are as follows: | ||||||
2014 | 2013 | |||||
Outstanding employee awards | 18,027,392 | 24,208,663 | ||||
Common shares issuable upon conversion of 2015 Notes | 10,441,728 | 45,583,814 | ||||
Common shares issuable upon conversion of 2018 Notes | 7,245,263 | — | ||||
Common shares issuable upon conversion of 2020 Notes | 7,245,263 | — | ||||
Common shares issuable upon conversion of Pfizer Note (1) | — | 1,025,641 | ||||
Total potential common shares excluded from diluted net loss per share computation | 42,959,646 | 70,818,118 | ||||
(1) In August 2013, the holder of the Pfizer Note elected to convert the $10.0 million principal amount into 1,025,641 shares of common stock. | ||||||
Commitments_and_Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2014 | |
Commitments and Contingencies | ' |
Commitments and Contingencies | ' |
11. Commitments and Contingencies | |
In March and April 2013, two lawsuits were filed in the United States District Court for the District of Delaware against us, our former chief executive officer, our former chief commercial officer, and our chief drug development and medical officer. The complaints each allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 on behalf of a purported class of purchasers of our stock between April 26, 2012 and August 1, 2012. In general, the complaints allege that the defendants issued materially false or misleading statements concerning our business and prospects relating to the commercial launch of JAKAFI. The complaints seek damages in an unspecified amount, equitable relief of an unspecified nature, and costs and expenses of litigation. The actions were subsequently consolidated. On February 21, 2014 the Court granted our motion to dismiss the consolidated amended complaint. On March 31, 2014 the Court entered an order dismissing the action with prejudice. | |
Summary_of_significant_account1
Summary of significant accounting policies (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Summary of significant accounting policies | ' |
Basis of presentation | ' |
Basis of presentation | |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The condensed consolidated balance sheet as of March 31, 2014 and the condensed consolidated statements of operations, comprehensive loss and cash flows for the three months ended March 31, 2014 and 2013, are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which we consider necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The condensed consolidated balance sheet at December 31, 2013 has been derived from audited financial statements. | |
Although we believe that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information and footnote information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. | |
Results for any interim period are not necessarily indicative of results for any future interim period or for the entire year. The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013. | |
Principles of Consolidation | ' |
Principles of Consolidation. The consolidated financial statements include the accounts of Incyte Corporation and our wholly owned subsidiaries. All inter-company accounts, transactions, and profits have been eliminated in consolidation. | |
Use of Estimates | ' |
Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. | |
Concentrations of Credit Risk | ' |
Concentrations of Credit Risk. Cash, cash equivalents, marketable securities, trade receivables and restricted investments are financial instruments which potentially subject us to concentrations of credit risk. The estimated fair value of financial instruments approximates the carrying value based on available market information. We primarily invest our excess available funds in notes and bills issued by the U.S. government and its agencies and corporate debt securities and, by policy, limit the amount of credit exposure to any one issuer and to any one type of investment, other than securities issued or guaranteed by the U.S. government. Our receivables mainly relate to our product sales of JAKAFI and collaborative agreements with pharmaceutical companies. We have not experienced any significant credit losses on cash, cash equivalents, marketable securities, trade receivables or restricted investments to date and do not require collateral on receivables. | |
Cash and Cash Equivalents | ' |
Cash and Cash Equivalents. Cash and cash equivalents are held in U.S. banks or in custodial accounts with U.S. banks. Cash equivalents are defined as all liquid investments and money market funds with maturity from date of purchase of 90 days or less that are readily convertible into cash. | |
Marketable Securities-Available-for-Sale | ' |
Marketable Securities—Available-for-Sale. All marketable securities are classified as available-for-sale. Available-for-sale securities are carried at fair value, based on quoted market prices and observable inputs, with unrealized gains and losses, net of tax, reported as a separate component of stockholders’ deficit. We classify marketable securities that are available for use in current operations as current assets on the consolidated balance sheets. Realized gains and losses and declines in value judged to be other than temporary for available-for-sale securities are included in “Interest and other income, net.” The cost of securities sold is based on the specific identification method. | |
Accounts Receivable | ' |
Accounts Receivable. As of March 31, 2014 and December 31, 2013, we had no allowance for doubtful accounts. We provide an allowance for doubtful accounts based on experience and specifically identified risks. Accounts receivable are carried at fair value and charged off against the allowance for doubtful accounts when we determine that recovery is unlikely and we cease collection efforts. | |
Inventory | ' |
Inventory. Inventories are determined at the lower of cost or market value with cost determined under the specific identification method and may consist of raw materials, work in process and finished goods. We began capitalizing inventory in mid-November 2011 once the U.S. Food and Drug Administration (“FDA”) approved JAKAFI as the related costs were expected to be recoverable through the commercialization of the product. Costs incurred prior to approval of JAKAFI have been recorded as research and development expense in our statements of operations. As a result, cost of product revenues for the next 36 months will reflect a lower average per unit cost of materials. | |
The raw materials and work-in-process inventory is not subject to expiration and the shelf life for finished goods inventory is 24 or 36 months from the start of manufacturing of the finished goods. We evaluate for potential excess inventory by analyzing current and future product demand relative to the remaining product shelf life. We build demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance and patient usage. We classify inventory as current on the consolidated balance sheets when we expect inventory to be consumed for commercial use within the next twelve months. | |
Property and Equipment | ' |
Property and Equipment. Property and equipment is stated at cost, less accumulated depreciation and amortization. Depreciation is recorded using the straight-line method over the estimated useful lives of the respective assets (generally three to five years). Leasehold improvements are amortized over the shorter of the estimated useful life of the assets or lease term. | |
Management continually reviews the estimated useful lives of technologically sensitive equipment and believes that those estimates appropriately reflect the current useful life of our assets. In the event that a currently unknown significantly advanced technology became commercially available, we would re-evaluate the value and estimated useful lives of our existing equipment, possibly having a material impact on the financial statements. | |
Lease Accounting | ' |
Lease Accounting. We account for operating leases by recording rent expense on a straight-line basis over the expected life of the lease, commencing on the date we gain possession of leased property. We include tenant improvement allowances and rent holidays received from landlords and the effect of any rent escalation clauses as adjustments to straight-line rent expense over the expected life of the lease. | |
Capital leases are reflected as a liability at the inception of the lease based on the present value of the minimum lease payments or, if lower, the fair value of the property. Assets under capital leases are recorded in property and equipment, net on the consolidated balance sheets and depreciated in a manner similar to other property and equipment. | |
Certain construction projects are accounted for as direct financing arrangements, whereby we record, over the construction period, the full cost of the asset in property and equipment, net on the consolidated balance sheets. A corresponding liability is also recorded, net of leasehold improvements paid for by us, and is amortized over the expected lease term through monthly rental payments using the effective interest method. | |
Income Taxes | ' |
Income Taxes. We account for income taxes using the asset and liability approach which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts reportable for income tax purposes. In addition, we follow the guidance related to accounting for uncertainty in income taxes. This guidance creates a single model to address uncertainty in tax positions and clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before it is recognized in the financial statements. | |
Financing Costs Related to Long-term Debt | ' |
Financing Costs Related to Long-term Debt. Costs associated with obtaining long-term debt are deferred and amortized over the term of the related debt using the effective interest method. Such costs are included in other assets, net on the consolidated balance sheet. | |
Grant Accounting | ' |
Grant Accounting. Grant amounts received from government agencies for operations are deferred and are amortized into income over the service period of the grant. Grant amounts received for purchases of capital assets are deferred and amortized into interest and other income, net over the useful life of the related capital assets. Such amounts are recorded in other liabilities on the consolidated balance sheet. | |
Net Loss Per Share | ' |
Net Loss Per Share. Our basic and diluted losses per share are calculated by dividing the net loss by the weighted average number of shares of common stock outstanding during all periods presented. Options to purchase stock and shares issuable upon the conversion of convertible debt are included in diluted earnings per share calculations, unless the effects are anti-dilutive. | |
Accumulated Other Comprehensive Income (Loss) | ' |
Accumulated Other Comprehensive Income (Loss). Accumulated other comprehensive income (loss) consists of unrealized gains or losses on marketable securities and restricted cash and investments. | |
Revenue Recognition | ' |
Revenue Recognition. Revenues are recognized when (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the price is fixed or determinable and (4) collectability is reasonably assured. Revenues are deferred for fees received before earned or until no further obligations exist. We exercise judgment in determining that collectability is reasonably assured or that services have been delivered in accordance with the arrangement. We assess whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. We assess collectability based primarily on the customer’s payment history and on the creditworthiness of the customer. | |
Product Revenues | |
Our product revenues consist of U.S. sales of JAKAFI and are recognized once we meet all four revenue recognition criteria described above. In November 2011, we began shipping JAKAFI to our specialty pharmacy customers, which in turn dispense JAKAFI to patients in fulfillment of prescriptions. | |
We recognize revenues for product received by our specialty pharmacy customers net of allowances for customer credits, including estimated rebates, chargebacks, discounts, returns, distribution service fees, patient assistance programs, and Medicare Part D coverage gap reimbursements. Product shipping and handling costs are included in cost of product revenues. | |
Customer Credits: Our specialty pharmacy customers are offered various forms of consideration, including allowances, service fees and prompt payment discounts. We expect our specialty pharmacy customers will earn prompt payment discounts and, therefore, we deduct the full amount of these discounts from total product sales when revenues are recognized. Service fees are also deducted from total product sales as they are earned. | |
Rebates: Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program. Rebate amounts are based upon contractual agreements or legal requirements with public sector (e.g. Medicaid) benefit providers. Rebates are amounts owed after the final dispensing of the product to a benefit plan participant and are based upon contractual agreements or legal requirements with public sector benefit providers. The accrual for rebates is based on statutory discount rates and expected utilization as well as historical data we have accumulated since product launch. Our estimates for expected utilization of rebates are based in part on third party market research data, and data received from our specialty pharmacy customers. Rebates are generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters’ unpaid rebates. If actual future rebates vary from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment. | |
Chargebacks: Chargebacks are discounts that occur when contracted customers purchase directly from a specialty pharmacy, or an intermediary distributor. Contracted customers, which currently consist primarily of Public Health Service institutions, non-profit clinics, and Federal government entities purchasing via the Federal Supply Schedule, generally purchase the product at a discounted price. The specialty pharmacy or distributor, in turn, charges back to us the difference between the price initially paid by the specialty pharmacy or distributor and the discounted price paid to the specialty pharmacy or distributor by the customer. The accrual for chargebacks is based on the estimated contractual discounts on the inventory levels on hand in our distribution channel. If actual future chargebacks vary from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment. | |
Medicare Part D Coverage Gap: Medicare Part D prescription drug benefit mandates manufacturers to fund 50% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients. Our estimates for the expected Medicare Part D coverage gap are based on historical invoices received and in part from data received from our specialty pharmacy customers. Funding of the coverage gap is generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters. If actual future funding varies from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment. | |
Co-payment assistance: Patients who have commercial insurance and meet certain eligibility requirements may receive co-payment assistance. We accrue a liability for co-payment assistance based on actual program participation and estimates of program redemption using data provided by third-party administrators. | |
Product Royalty Revenues | |
Royalty revenues on commercial sales for ruxolitinib (marketed as JAKAVI® outside the United States) by Novartis Pharmaceutical International Ltd. (“Novartis”) are based on net sales of licensed products in licensed territories as provided by Novartis. We recognize royalty revenues in the period the sales occur. | |
Contract and License Revenues | |
Under agreements involving multiple deliverables, services and/or rights to use assets that we entered into prior to January 1, 2011, the multiple elements are divided into separate units of accounting when certain criteria are met, including whether the delivered items have stand-alone value to the customer and whether there is objective and reliable evidence of the fair value of the undelivered items. When separate units of accounting exist, consideration is allocated among the separate elements based on their respective fair values. The determination of fair value of each element is based on objective evidence from historical sales of the individual elements by us to other customers. If such evidence of fair value for each undelivered element of the arrangement does not exist, all revenue from the arrangement is deferred until such time that evidence of fair value for each undelivered element does exist or until all elements of the arrangement are delivered. When elements are specifically tied to a separate earnings process, revenue is recognized when the specific performance obligation tied to the element is completed. When revenues for an element are not specifically tied to a separate earnings process, they are recognized ratably over the term of the agreement. We assess whether a substantive milestone exists at the inception of our agreements. For all milestones within our arrangements that are considered substantive, we recognize revenue upon the achievement of the associated milestone. If a milestone is not considered substantive, we would recognize the applicable milestone payment over the remaining period of performance under the arrangement. Further information about our collaborative arrangements can be found below in Note 7, License Agreements. As of March 31, 2014, all remaining potential milestones under our collaborative arrangements are considered substantive. | |
On January 1, 2011, updated guidance on the recognition of revenues for agreements with multiple deliverables became effective and applies to any agreements we may enter into on or after January 1, 2011. This updated guidance (i) relates to whether multiple deliverables exist, how the deliverables in a revenue arrangement should be separated and how the consideration should be allocated; (ii) requires companies to allocate revenues in an arrangement using estimated selling prices of deliverables if a vendor does not have vendor-specific objective evidence or third-party evidence of selling price; and (iii) eliminates the use of the residual method and requires companies to allocate revenues using the relative selling price method. During the three months ended March 31, 2014 and 2013, we did not enter into any agreements that are subject to this updated guidance. If we enter into an agreement with multiple deliverables after January 1, 2011 or amend existing agreements, this updated guidance could have a material effect on our financial statements. | |
Our collaborations often include contractual milestones, which typically relate to the achievement of pre-specified development, regulatory and commercialization events. These three categories of milestone events reflect the three stages of the life-cycle of our drugs, which we describe in more detail in the following paragraphs. | |
The regulatory review and approval process, which includes preclinical testing and clinical trials of each drug candidate, is lengthy, expensive and uncertain. Securing approval by the FDA requires the submission of extensive preclinical and clinical data and supporting information to the FDA for each indication to establish a drug candidate’s safety and efficacy. The approval process takes many years, requires the expenditure of substantial resources, involves post-marketing surveillance and may involve ongoing requirements for post-marketing studies. Before commencing clinical investigations of a drug candidate in humans, we must submit an Investigational New Drug application (“IND”), which must be reviewed by the FDA. | |
The steps generally required before a drug may be marketed in the United States include preclinical laboratory tests, animal studies and formulation studies, submission to the FDA of an IND for human clinical testing, performance of adequate and well-controlled clinical trials in three phases, as described below, to establish the safety and efficacy of the drug for each indication, submission of a new drug application (“NDA”) to the FDA for review and FDA approval of the NDA. | |
Similar requirements exist within foreign regulatory agencies as well. The time required satisfying the FDA requirements or similar requirements of foreign regulatory agencies may vary substantially based on the type, complexity and novelty of the product or the targeted disease. | |
Preclinical testing includes laboratory evaluation of product pharmacology, drug metabolism, and toxicity, which includes animal studies, to assess potential safety and efficacy as well as product chemistry, stability, formulation, development, and testing. The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND. The FDA may raise safety concerns or questions about the conduct of the clinical trials included in the IND, and any of these concerns or questions must be resolved before clinical trials can proceed. We cannot be sure that submission of an IND will result in the FDA allowing clinical trials to commence. Clinical trials involve the administration of the investigational drug or the marketed drug to human subjects under the supervision of qualified investigators and in accordance with good clinical practices regulations covering the protection of human subjects. Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined. Phase I usually involves the initial introduction of the investigational drug into healthy volunteers to evaluate its safety, dosage tolerance, absorption, metabolism, distribution and excretion. Phase II usually involves clinical trials in a limited patient population to evaluate dosage tolerance and optimal dosage, identify possible adverse effects and safety risks, and evaluate and gain preliminary evidence of the efficacy of the drug for specific indications. Phase III clinical trials usually further evaluate clinical efficacy and safety by testing the drug in its final form in an expanded patient population, providing statistical evidence of efficacy and safety, and providing an adequate basis for labeling. We cannot guarantee that Phase I, Phase II or Phase III testing will be completed successfully within any specified period of time, if at all. Furthermore, we, the institutional review board for a trial, or the FDA may suspend clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. | |
Generally, the milestone events contained in our collaboration agreements coincide with the progression of our drugs from development, to regulatory approval and then to commercialization. The process of successfully discovering a new development candidate, having it approved and successfully commercialized is highly uncertain. As such, the milestone payments we may earn from our partners involve a significant degree of risk to achieve. Therefore, as a drug candidate progresses through the stages of its life-cycle, the value of the drug candidate generally increases. | |
Research and Development Costs | ' |
Research and Development Costs. Our policy is to expense research and development costs as incurred. We often contract with clinical research organizations (“CROs”) to facilitate, coordinate and perform agreed upon research and development of a new drug. To ensure that research and development costs are expensed as incurred, we record monthly accruals for clinical trials and preclinical testing costs based on the work performed under the contract. | |
These CRO contracts typically call for the payment of fees for services at the initiation of the contract and/or upon the achievement of certain clinical trial milestones. In the event that we prepay CRO fees, we record the prepayment as a prepaid asset and amortize the asset into research and development expense over the period of time the contracted research and development services are performed. Most professional fees, including project and clinical management, data management, monitoring, and medical writing fees are incurred throughout the contract period. These professional fees are expensed based on their percentage of completion at a particular date. Our CRO contracts generally include pass through fees. Pass through fees include, but are not limited to, regulatory expenses, investigator fees, travel costs, and other miscellaneous costs, including shipping and printing fees. We expense the costs of pass through fees under our CRO contracts as they are incurred, based on the best information available to us at the time. The estimates of the pass through fees incurred are based on the amount of work completed for the clinical trial and are monitored through correspondence with the CROs, internal reviews and a review of contractual terms. The factors utilized to derive the estimates include the number of patients enrolled, duration of the clinical trial, estimated patient attrition, screening rate and length of the dosing regimen. CRO fees incurred to set up the clinical trial are expensed during the setup period. Reimbursable costs incurred in connection with collaborative license agreements are recorded as a reduction of research and development expenses. | |
Stock Compensation | ' |
Stock Compensation. Share-based payment transactions with employees, which include stock options, restricted stock units (“RSUs”) and performance shares (“PSUs”), are recognized as compensation expense over the requisite service period based on their estimated fair values on the dates of grant. The stock compensation process requires significant judgment and the use of estimates, particularly surrounding Black-Scholes assumptions such as stock price volatility over the option term and expected option lives, as well as expected forfeiture rates and the probability of PSUs vesting. The fair value of stock options, which are subject to graded vesting, are recognized as compensation expense over the requisite service period using the accelerated attribution method. The fair value of RSUs, which are generally subject to cliff vesting, are recognized as compensation expense over the requisite service period using the straight line attribution method. The fair value of PSUs are recognized as compensation expense beginning at the time in which the performance conditions are deemed probable of achievement, over the remaining requisite service period. We recorded $15.3 million and $9.2 million of stock compensation expense for the three months ended March 31, 2014 and 2013, respectively. | |
Fair_value_of_financial_instru1
Fair value of financial instruments (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
Fair value of financial instruments | ' | |||||||||||||
Schedule of fair value of assets and liabilities measured on recurring basis | ' | |||||||||||||
The following fair value hierarchy table presents information about each major category of our financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2014 (in thousands): | ||||||||||||||
Fair Value Measurement at Reporting Date Using: | ||||||||||||||
Quoted Prices in | Significant Other | Significant | Balance as of | |||||||||||
Active Markets for | Observable | Unobservable | March 31, 2014 | |||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||||
Cash and cash equivalents | $ | 436,585 | $ | — | $ | — | $ | 436,585 | ||||||
Corporate debt securities | — | 78,757 | — | 78,757 | ||||||||||
Mortgage-backed securities | — | 3,889 | — | 3,889 | ||||||||||
Total assets | $ | 436,585 | $ | 82,646 | $ | — | $ | 519,231 | ||||||
The following fair value hierarchy table presents information about each major category of our financial assets measured at fair value on a recurring basis as of December 31, 2013 (in thousands): | ||||||||||||||
Fair Value Measurement at Reporting Date Using: | ||||||||||||||
Quoted Prices in | Significant Other | Significant | Balance as of | |||||||||||
Active Markets for | Observable | Unobservable | December 31, 2013 | |||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||||
Cash and cash equivalents | $ | 471,429 | $ | — | $ | — | $ | 471,429 | ||||||
Corporate debt securities | — | 33,655 | — | 33,655 | ||||||||||
Mortgage-backed securities | — | 3,920 | — | 3,920 | ||||||||||
Total assets | $ | 471,429 | $ | 37,575 | $ | — | $ | 509,004 | ||||||
Summary of marketable securities portfolio | ' | |||||||||||||
Amortized | Net | Net | Estimated | |||||||||||
Cost | Unrealized | Unrealized | Fair Value | |||||||||||
Gains | Losses | |||||||||||||
(in thousands) | ||||||||||||||
March 31, 2014 | ||||||||||||||
Corporate debt securities | $ | 78,800 | $ | — | $ | (43 | ) | $ | 78,757 | |||||
Mortgage backed securities | 1,806 | 2,083 | — | 3,889 | ||||||||||
$ | 80,606 | $ | 2,083 | $ | (43 | ) | $ | 82,646 | ||||||
December 31, 2013 | ||||||||||||||
Corporate debt securities | $ | 33,685 | $ | — | $ | (30 | ) | $ | 33,655 | |||||
Mortgage backed securities | 1,897 | 2,023 | — | 3,920 | ||||||||||
$ | 35,582 | $ | 2,023 | $ | (30 | ) | $ | 37,575 | ||||||
Concentration_of_Credit_Risk_T
Concentration of Credit Risk (Tables) | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
Concentration of Credit Risk | ' | |||||
Schedule of concentration of credit risk related to collaborative partners | ' | |||||
Percentage of Total | ||||||
Contract Revenues for the | ||||||
Quarters Ended, | ||||||
March 31, | ||||||
2014 | 2013 | |||||
Collaboration Partner A | 68 | % | 60 | % | ||
Collaboration Partner B | 32 | % | 40 | % | ||
Schedule of concentration of credit risk related to specialty pharmacy customers | ' | |||||
Percentage of Total Net | ||||||
Product Revenues for the | ||||||
Quarters Ended, | ||||||
March 31, | ||||||
2014 | 2013 | |||||
Customer A | 29 | % | 27 | % | ||
Customer B | 21 | % | 18 | % | ||
Customer C | 11 | % | 12 | % | ||
Customer D | 9 | % | 12 | % | ||
Inventory_Tables
Inventory (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Inventory | ' | |||||||
Schedule of inventory | ' | |||||||
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
(in thousands) | ||||||||
Raw materials | $ | 591 | $ | 591 | ||||
Work-in-process | 14,911 | 14,346 | ||||||
Finished goods | 347 | 406 | ||||||
15,849 | 15,343 | |||||||
Inventories—current | 347 | 406 | ||||||
Inventories—non-current | $ | 15,502 | $ | 14,937 | ||||
Property_and_Equipment_Tables
Property and Equipment (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Property and Equipment | ' | |||||||
Schedule of property and equipment | ' | |||||||
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
(in thousands) | ||||||||
Office equipment | $ | 2,332 | $ | 2,332 | ||||
Laboratory equipment | 20,615 | 20,228 | ||||||
Computer equipment | 14,272 | 13,930 | ||||||
Leasehold improvements | 2,453 | 2,454 | ||||||
Assets under construction | 32,254 | 20,377 | ||||||
71,926 | 59,321 | |||||||
Less accumulated depreciation and amortization | (33,272 | ) | (32,473 | ) | ||||
$ | 38,654 | $ | 26,848 | |||||
Stock_compensation_Tables
Stock compensation (Tables) | 3 Months Ended | |||||||||
Mar. 31, 2014 | ||||||||||
Stock compensation | ' | |||||||||
Schedule of valuation assumptions used for valuation of fair value of stock compensation granted | ' | |||||||||
Employee Stock | Employee Stock | |||||||||
Options For the | Purchase Plan For the | |||||||||
Three Months | Three Months | |||||||||
Ended | Ended | |||||||||
March 31, | March 31, | |||||||||
2014 | 2013 | 2014 | 2013 | |||||||
Average risk-free interest rates | 1.18 | % | 0.55 | % | 0.44 | % | 0.25 | % | ||
Average expected life (in years) | 4.47 | 4.21 | 0.25 | 0.25 | ||||||
Volatility | 50 | % | 47 | % | 52 | % | 44 | % | ||
Weighted-average fair value (in dollars) | 26.52 | 6.95 | 8.65 | 3.26 | ||||||
Schedule of activity summarized under all stock option plans | ' | |||||||||
Shares | Number | Weighted | ||||||||
Available for | Outstanding | Average | ||||||||
Grant | Exercise | |||||||||
Price per | ||||||||||
Share | ||||||||||
Balance at December 31, 2013 | 5,376,614 | 20,123,089 | $ | 15.16 | ||||||
Shares added | 400,000 | — | — | |||||||
Options granted | (1,361,243 | ) | 1,361,243 | 63.15 | ||||||
RSUs and PSUs granted | (563,683 | ) | 563,683 | — | ||||||
Options exercised | — | (3,943,037 | ) | 11.37 | ||||||
Options cancelled | 76,848 | (76,848 | ) | 21.71 | ||||||
RSUs cancelled | 738 | (738 | ) | — | ||||||
Balance at March 31, 2014 | 3,929,274 | 18,027,392 | $ | 19.72 | ||||||
Exercisable, March 31, 2014 | — | 10,685,304 | $ | 13.47 | ||||||
Debt_Tables
Debt (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
Debt | ' | |||||||||||||
Schedule of components of convertible notes | ' | |||||||||||||
The components of the convertible notes are as follows (in thousands): | ||||||||||||||
Carrying Amount | ||||||||||||||
Debt | 2014 Interest Rates | Maturities | March 31, | December 31, | ||||||||||
March 31 | 2014 | 2013 | ||||||||||||
4.75% Convertible Senior Notes due 2015 | 4.75 | % | 2015 | $ | 81,444 | $ | 84,193 | |||||||
0.375% Convertible Senior Notes due 2018 | 0.375 | % | 2018 | 304,400 | 301,037 | |||||||||
1.25% Convertible Senior Notes due 2020 | 1.25 | % | 2020 | 279,378 | 276,337 | |||||||||
Less current portion | — | — | ||||||||||||
$ | 665,222 | $ | 661,567 | |||||||||||
Schedule of carrying amount and fair value of Convertible Notes | ' | |||||||||||||
The carrying amount and fair value of our convertible notes are as follows (in thousands): | ||||||||||||||
March 31, 2014 | December 31, 2013 | |||||||||||||
Carrying | Fair Value | Carrying | Fair Value | |||||||||||
Amount | Amount | |||||||||||||
4.75% Convertible Senior Notes due 2015 | $ | 81,444 | $ | 557,029 | $ | 84,193 | $ | 556,272 | ||||||
0.375% Convertible Senior Notes due 2018 | 304,400 | 475,549 | 301,037 | 448,350 | ||||||||||
1.25% Convertible Senior Notes due 2020 | 279,378 | 480,469 | 276,337 | 454,913 | ||||||||||
$ | 665,222 | $ | 1,513,047 | $ | 661,567 | $ | 1,459,535 | |||||||
Net_loss_per_share_Tables
Net loss per share (Tables) | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
Net loss per share | ' | |||||
Schedule of antidilutive securities excluded from the computation of earnings per share | ' | |||||
2014 | 2013 | |||||
Outstanding employee awards | 18,027,392 | 24,208,663 | ||||
Common shares issuable upon conversion of 2015 Notes | 10,441,728 | 45,583,814 | ||||
Common shares issuable upon conversion of 2018 Notes | 7,245,263 | — | ||||
Common shares issuable upon conversion of 2020 Notes | 7,245,263 | — | ||||
Common shares issuable upon conversion of Pfizer Note (1) | — | 1,025,641 | ||||
Total potential common shares excluded from diluted net loss per share computation | 42,959,646 | 70,818,118 | ||||
(1) In August 2013, the holder of the Pfizer Note elected to convert the $10.0 million principal amount into 1,025,641 shares of common stock. | ||||||
Organization_and_business_Deta
Organization and business (Details) | 3 Months Ended |
Mar. 31, 2014 | |
segment | |
Organization and business | ' |
Number of operating segments | 1 |
Summary_of_significant_account2
Summary of significant accounting policies (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Dec. 31, 2013 |
financialinvestment | ||
issuer | ||
Concentrations of Credit Risk | ' | ' |
Number of issuer to which company limits the amount of credit exposure other than US Government guaranteed securities | 1 | ' |
Number of financial investment to which company limits the amount of credit exposure other than US Government guaranteed securities | 1 | ' |
Marketable Securities -Available-for-Sale | ' | ' |
Minimum unrealized loss position for marketable securities to be classified as long-term | '6 months | ' |
Possible recovery period for long-term securities with unrealized loss position | '1 year | ' |
Accounts Receivable | ' | ' |
Allowance for doubtful accounts | $0 | $0 |
Inventory | ' | ' |
Shelf life for finished goods inventory, minimum | '24 months | ' |
Shelf life for finished goods inventory, maximum | '36 months | ' |
Minimum | ' | ' |
Property and Equipment | ' | ' |
Estimated useful life | '3 years | ' |
Maximum | ' | ' |
Property and Equipment | ' | ' |
Estimated useful life | '5 years | ' |
Summary_of_significant_account3
Summary of significant accounting policies (Details 2) | 3 Months Ended |
Mar. 31, 2014 | |
stage | |
category | |
Revenue Recognition | ' |
Percentage of Medicare Part D insurance coverage gap mandate to be funded by manufacturers | 50.00% |
Revenue Recognition | ' |
Categories of milestone events, number | 3 |
Number of stages of life-cycle drugs | 3 |
Summary_of_significant_account4
Summary of significant accounting policies (Details 3) (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Stock-Based Compensation | ' | ' |
Stock-based compensation expense | $15.30 | $9.20 |
Fair_value_of_financial_instru2
Fair value of financial instruments (Details) (Fair value measured on a recurring basis, USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Fair value measurement at reporting date using: Quoted prices in active markets for identical assets (Level 1) | ' | ' |
Fair value of financial instruments | ' | ' |
Cash and cash equivalents | $436,585 | $471,429 |
Total assets | 436,585 | 471,429 |
Fair value measurement at reporting date using: Significant other observable inputs (Level 2) | ' | ' |
Fair value of financial instruments | ' | ' |
Corporate debt securities | 78,757 | 33,655 |
Mortgage backed securities | 3,889 | 3,920 |
Total assets | 82,646 | 37,575 |
Fair Value | ' | ' |
Fair value of financial instruments | ' | ' |
Cash and cash equivalents | 436,585 | 471,429 |
Corporate debt securities | 78,757 | 33,655 |
Mortgage backed securities | 3,889 | 3,920 |
Total assets | $519,231 | $509,004 |
Fair_value_of_financial_instru3
Fair value of financial instruments (Details 2) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | Corporate debt securities | Corporate debt securities | Corporate debt securities | Corporate debt securities | Mortgage backed securities | Mortgage backed securities | ||
Minimum | Maximum | |||||||
Summary of marketable security portfolio | ' | ' | ' | ' | ' | ' | ' | ' |
Amortized Cost | $80,606 | $35,582 | $78,800 | $33,685 | ' | ' | $1,806 | $1,897 |
Net Unrealized Gains | 2,083 | 2,023 | ' | ' | ' | ' | 2,083 | 2,023 |
Net Unrealized Losses | -43 | -30 | -43 | -30 | ' | ' | ' | ' |
Estimated Fair Value | $82,646 | $37,575 | $78,757 | $33,655 | ' | ' | $3,889 | $3,920 |
Contractual maturity dates | ' | ' | ' | ' | '12 months | '18 months | ' | ' |
Concentration_of_Credit_Risk_D
Concentration of Credit Risk (Details) | 3 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | ||||||||||||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | |
Total Contract Revenues | Total Contract Revenues | Total Contract Revenues | Total Contract Revenues | Total Net Product Revenues | Total Net Product Revenues | Total Net Product Revenues | Total Net Product Revenues | Total Net Product Revenues | Total Net Product Revenues | Total Net Product Revenues | Total Net Product Revenues | Accounts receivable | Accounts receivable | Accounts receivable | Accounts receivable | |
Customer Concentration | Customer Concentration | Customer Concentration | Customer Concentration | Customer Concentration | Customer Concentration | Customer Concentration | Customer Concentration | Customer Concentration | Customer Concentration | Customer Concentration | Customer Concentration | Credit Concentration | Credit Concentration | Credit Concentration | Credit Concentration | |
Collaboration Partner A | Collaboration Partner A | Collaboration Partner B | Collaboration Partner B | Customer A | Customer A | Customer B | Customer B | Customer C | Customer C | Customer D | Customer D | Collaboration Partner A and Collaboration Partner B | Collaboration Partner A and Collaboration Partner B | Customer A, B, C and D | Customer A, B, C and D | |
Concentration of risk | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage of concentration risk | 68.00% | 60.00% | 32.00% | 40.00% | 29.00% | 27.00% | 21.00% | 18.00% | 11.00% | 12.00% | 9.00% | 12.00% | 38.00% | 28.00% | 48.00% | 49.00% |
Inventory_Details
Inventory (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Dec. 31, 2013 |
Inventory | ' | ' |
Raw materials | $591 | $591 |
Work-in-process | 14,911 | 14,346 |
Finished goods | 347 | 406 |
Total inventories | 15,849 | 15,343 |
Inventories - current | 347 | 406 |
Inventories - non -current | $15,502 | $14,937 |
Shelf life for finished goods inventory, minimum | '24 months | ' |
Shelf life for finished goods inventory, maximum | '36 months | ' |
Property_and_Equipment_Details
Property and Equipment (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Dec. 31, 2013 | |
sqft | ||
Property and Equipment | ' | ' |
Property and Equipment, gross | $71,926,000 | $59,321,000 |
Less accumulated depreciation and amortization | -33,272,000 | -32,473,000 |
Property and Equipment, net | 38,654,000 | 26,848,000 |
Area of laboratory and office building on lease (in square feet) | 190,000 | ' |
Term of lease | '15 years | ' |
Minimum monthly lease rental | 500,000 | ' |
Initial term of lease over which minimum lease rent is required to be payable | '10 years | ' |
Last term of lease | '5 years | ' |
Improvements cost payable under direct financing arrangement | 10,800,000 | ' |
Letter of credit for posted for lease facility | 15,000,000 | ' |
Lease liability | 29,900,000 | ' |
Office equipment | ' | ' |
Property and Equipment | ' | ' |
Property and Equipment, gross | 2,332,000 | 2,332,000 |
Laboratory equipment | ' | ' |
Property and Equipment | ' | ' |
Property and Equipment, gross | 20,615,000 | 20,228,000 |
Computer equipment | ' | ' |
Property and Equipment | ' | ' |
Property and Equipment, gross | 14,272,000 | 13,930,000 |
Leasehold improvements | ' | ' |
Property and Equipment | ' | ' |
Property and Equipment, gross | 2,453,000 | 2,454,000 |
Assets under construction | ' | ' |
Property and Equipment | ' | ' |
Property and Equipment, gross | 32,254,000 | 20,377,000 |
Build out costs | ' | ' |
Property and Equipment | ' | ' |
Property and Equipment, gross | 17,100,000 | ' |
Build out costs paid | 2,400,000 | ' |
Fair value of facility | ' | ' |
Property and Equipment | ' | ' |
Property and Equipment, gross | $15,200,000 | ' |
License_agreements_Details
License agreements (Details) (USD $) | 3 Months Ended | 1 Months Ended | 3 Months Ended | 1 Months Ended | 3 Months Ended | 12 Months Ended | 1 Months Ended | 3 Months Ended | 12 Months Ended | 1 Months Ended | 12 Months Ended | 1 Months Ended | ||||||||||||||||||
Mar. 31, 2014 | Mar. 31, 2013 | Jan. 31, 2010 | Dec. 31, 2009 | Nov. 30, 2009 | Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | Nov. 30, 2009 | Nov. 30, 2009 | Nov. 30, 2009 | Nov. 30, 2009 | Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2011 | Dec. 31, 2011 | Dec. 31, 2012 | Jul. 31, 2010 | Dec. 31, 2009 | Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2010 | Dec. 31, 2009 | Dec. 31, 2009 | Dec. 31, 2012 | Dec. 31, 2010 | Dec. 31, 2010 | Dec. 31, 2009 | Dec. 31, 2009 | |
Collaboration and License Agreement with Novartis | Collaboration and License Agreement with Novartis | Collaboration and License Agreement with Novartis | Collaboration and License Agreement with Novartis | Collaboration and License Agreement with Novartis | Collaboration and License Agreement with Novartis | Collaboration and License Agreement with Novartis | Collaboration and License Agreement with Novartis | Collaboration and License Agreement with Novartis | Collaboration and License Agreement with Novartis | Collaboration and License Agreement with Novartis | Collaboration and License Agreement with Novartis | Collaboration and License Agreement with Novartis | Collaboration and License Agreement with Novartis | Collaboration and License Agreement with Novartis | License, Development and Commercialization Agreement with Lilly | License, Development and Commercialization Agreement with Lilly | License, Development and Commercialization Agreement with Lilly | License, Development and Commercialization Agreement with Lilly | License, Development and Commercialization Agreement with Lilly | License, Development and Commercialization Agreement with Lilly | License, Development and Commercialization Agreement with Lilly | License, Development and Commercialization Agreement with Lilly | License, Development and Commercialization Agreement with Lilly | License, Development and Commercialization Agreement with Lilly | License, Development and Commercialization Agreement with Lilly | License, Development and Commercialization Agreement with Lilly | License, Development and Commercialization Agreement with Lilly | |||
deliverable | Pre-specified events | Development milestones | Regulatory milestones | Commercialized milestones | INC280 (INCB28060) | INC280 (INCB28060) | INC280 (INCB28060) | INC280 (INCB28060) | JAKAFI (ruxolitinib) | deliverable | Maximum | Pre-specified events | Development milestones | Development milestones | Development milestones | Development milestones | Regulatory milestones | Commercialized milestones | ||||||||||||
Maximum | Maximum | Maximum | Maximum | Development milestones | Development milestones | Development milestones | Regulatory milestones | Regulatory milestones | Maximum | Maximum | Phase III | Phase IIa | Phase IIb | Maximum | Maximum | |||||||||||||||
License agreements | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Upfront and immediate milestone payment to be received under license agreement | ' | ' | ' | ' | $210,000,000 | ' | ' | ' | $1,100,000,000 | $162,000,000 | $450,000,000 | $500,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $665,000,000 | $150,000,000 | ' | ' | ' | $365,000,000 | $150,000,000 |
Amount recognized and received for the achievement of a predefined milestone | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 7,000,000 | 25,000,000 | 15,000,000 | 10,000,000 | 40,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | 50,000,000 | 30,000,000 | 19,000,000 | ' | ' |
Royalty payment obligations | ' | ' | ' | ' | ' | 0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of deliverables under license agreement | ' | ' | ' | ' | 2 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Upfront payment received under license agreement | ' | ' | ' | 150,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 90,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Immediate milestone payment received under license agreement | ' | ' | 60,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Reimbursable costs recorded as deferred revenue | ' | ' | ' | 10,900,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Reimbursable costs included in accounts receivable | ' | ' | ' | ' | ' | 1,100,000 | ' | 1,700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0 | ' | 0 | ' | ' | ' | ' | ' | ' | ' | ' |
Research and development expenses reimbursed | ' | ' | ' | ' | ' | 1,100,000 | 900,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Contract revenues | $10,214,000 | $16,737,000 | ' | ' | ' | $7,000,000 | $13,500,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $3,200,000 | $3,200,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Range of royalty payments on future global net sales, upper range (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 20.00% | ' | ' | ' | ' | ' | ' | ' |
Associated future global development costs from the initiation of a Phase IIb trial, if elected to co-develop, percentage | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 30.00% | 30.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock_compensation_Details
Stock compensation (Details) (USD $) | 3 Months Ended | |
In Millions, except Per Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Stock compensation | ' | ' |
Stock compensation expense | $15.30 | $9.20 |
Weighted-average fair value assumptions | ' | ' |
Valuation method | 'Black-Scholes valuation model | ' |
Research and development expense | ' | ' |
Stock compensation | ' | ' |
Stock compensation expense | 8.3 | 6.5 |
Selling, general and administrative expense | ' | ' |
Stock compensation | ' | ' |
Stock compensation expense | 7 | 2.7 |
Employee Stock Purchase Plan | ' | ' |
Weighted-average fair value assumptions | ' | ' |
Average risk-free interest rates (as a percent) | 0.44% | 0.25% |
Average expected life (in years) | '3 months | '3 months |
Volatility (as a percent) | 52.00% | 44.00% |
Weighted-average fair value (in dollars per share) | $8.65 | $3.26 |
Dividend yield (as a percent) | 0.00% | ' |
RSUs | ' | ' |
Weighted-average fair value assumptions | ' | ' |
Assumed annualized forfeiture rate (as a percent) | 5.00% | ' |
PSUs | ' | ' |
Stock compensation | ' | ' |
Stock compensation expense | 0 | ' |
Stock options | ' | ' |
Weighted-average fair value assumptions | ' | ' |
Average risk-free interest rates (as a percent) | 1.18% | 0.55% |
Average expected life (in years) | '4 years 5 months 19 days | '4 years 2 months 16 days |
Volatility (as a percent) | 50.00% | 47.00% |
Weighted-average fair value (in dollars per share) | $26.52 | $6.95 |
Dividend yield (as a percent) | 0.00% | ' |
Assumed annualized forfeiture rate (as a percent) | 5.00% | ' |
Stock options | RSUs | ' | ' |
Unrecognized compensation | ' | ' |
Unrecognized compensation cost for nonvested option (in dollars) | 71.1 | ' |
Vesting period of recognition of the unrecognized compensation cost of nonvested awards | '3 years | ' |
Stock options | PSUs | ' | ' |
Unrecognized compensation | ' | ' |
Unrecognized compensation cost for nonvested option (in dollars) | $3.10 | ' |
Stock_compensation_Details_2
Stock compensation (Details 2) (USD $) | 3 Months Ended | 1 Months Ended | 3 Months Ended | |||||
In Millions, except Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Jan. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 |
RSUs | RSUs | RSUs and PSUs | PSUs | PSUs | Stock options | |||
Mr. Herve Hoppenot | Maximum | |||||||
Shares Available For Grant | ' | ' | ' | ' | ' | ' | ' | ' |
Outstanding at the beginning of the period (in shares) | ' | ' | ' | ' | ' | ' | ' | 5,376,614 |
Shares added | ' | ' | ' | ' | ' | ' | ' | 400,000 |
Options granted (in shares) | ' | ' | ' | ' | ' | ' | ' | -1,361,243 |
Granted (in shares) | ' | ' | ' | ' | -563,683 | ' | ' | ' |
Options cancelled (in shares) | ' | ' | ' | ' | ' | ' | ' | 76,848 |
Cancelled (in shares) | ' | ' | 738 | ' | ' | ' | ' | ' |
Outstanding at the end of the period (in shares) | ' | ' | ' | ' | ' | ' | ' | 3,929,274 |
Number Outstanding | ' | ' | ' | ' | ' | ' | ' | ' |
Outstanding at the beginning of the period (in shares) | ' | ' | ' | ' | ' | ' | ' | 20,123,089 |
Options granted (in shares) | ' | ' | ' | ' | ' | ' | ' | 1,361,243 |
Granted (in shares) | ' | ' | 115,323 | 400,000 | 563,683 | 48,360 | ' | ' |
Options exercised (in shares) | ' | ' | ' | ' | ' | ' | ' | -3,943,037 |
Options cancelled (in shares) | ' | ' | ' | ' | ' | ' | ' | -76,848 |
Cancelled (in shares) | ' | ' | -738 | ' | ' | ' | ' | ' |
Outstanding at the end of the period (in shares) | ' | ' | ' | ' | ' | ' | ' | 18,027,392 |
Exercisable at the end of period (in shares) | ' | ' | ' | ' | ' | ' | ' | 10,685,304 |
Weighted Average Exercise Price per share | ' | ' | ' | ' | ' | ' | ' | ' |
Outstanding at the beginning of the period (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | $15.16 |
Options granted (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | $63.15 |
Options exercised (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | $11.37 |
Options cancelled (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | $21.71 |
Outstanding at the end of the period (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | $19.72 |
Exercisable at the end of the period (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | $13.47 |
Number of shares awarded for each RSU (in shares) | ' | ' | 1 | ' | ' | ' | ' | ' |
Cliff vesting period | ' | ' | '3 years | ' | ' | ' | ' | ' |
Percentage of units vesting at the end of each calendar year (as a percent) | ' | ' | ' | 16.70% | ' | ' | ' | ' |
Stock compensation expense | $15.30 | $9.20 | ' | ' | ' | $0 | ' | ' |
Multiplier conversion rate of units into common stock (as a percent) | ' | ' | ' | ' | ' | ' | 125.00% | ' |
Debt_Details
Debt (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Convertible Notes | ' | ' |
Convertible senior notes | $665,222 | $661,567 |
4.75% Convertible Senior Notes due 2015 | ' | ' |
Convertible Notes | ' | ' |
Interest rate of debt (as a percent) | 4.75% | ' |
4.75% Convertible Senior Notes due 2015 | Carrying Amount | ' | ' |
Convertible Notes | ' | ' |
Convertible senior notes | 81,444 | 84,193 |
0.375% Convertible Senior Notes due 2018 | ' | ' |
Convertible Notes | ' | ' |
Interest rate of debt (as a percent) | 0.38% | ' |
0.375% Convertible Senior Notes due 2018 | Carrying Amount | ' | ' |
Convertible Notes | ' | ' |
Convertible senior notes | 304,400 | 301,037 |
1.25% Convertible Senior Notes due 2020 | ' | ' |
Convertible Notes | ' | ' |
Interest rate of debt (as a percent) | 1.25% | ' |
1.25% Convertible Senior Notes due 2020 | Carrying Amount | ' | ' |
Convertible Notes | ' | ' |
Convertible senior notes | $279,378 | $276,337 |
Debt_Details_2
Debt (Details 2) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 |
Carrying Amount | Carrying Amount | Fair Value | Fair Value | 4.75% Convertible Senior Notes due 2015 | 4.75% Convertible Senior Notes due 2015 | 4.75% Convertible Senior Notes due 2015 | 4.75% Convertible Senior Notes due 2015 | 4.75% Convertible Senior Notes due 2015 | 0.375% Convertible Senior Notes due 2018 | 0.375% Convertible Senior Notes due 2018 | 0.375% Convertible Senior Notes due 2018 | 0.375% Convertible Senior Notes due 2018 | 0.375% Convertible Senior Notes due 2018 | 1.25% Convertible Senior Notes due 2020 | 1.25% Convertible Senior Notes due 2020 | 1.25% Convertible Senior Notes due 2020 | 1.25% Convertible Senior Notes due 2020 | 1.25% Convertible Senior Notes due 2020 | |||
Carrying Amount | Carrying Amount | Fair Value | Fair Value | Carrying Amount | Carrying Amount | Fair Value | Fair Value | Carrying Amount | Carrying Amount | Fair Value | Fair Value | ||||||||||
Convertible Notes | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Convertible senior notes | $665,222,000 | $661,567,000 | ' | ' | ' | ' | ' | $81,444,000 | $84,193,000 | $557,029,000 | $556,272,000 | ' | $304,400,000 | $301,037,000 | $475,549,000 | $448,350,000 | ' | $279,378,000 | $276,337,000 | $480,469,000 | $454,913,000 |
Long-term debt, noncurrent | ' | ' | 665,222,000 | 661,567,000 | 1,513,047,000 | 1,459,535,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Interest rate of debt (as a percent) | ' | ' | ' | ' | ' | ' | 4.75% | ' | ' | ' | ' | 0.38% | ' | ' | ' | ' | 1.25% | ' | ' | ' | ' |
Aggregate principal amount of notes exchanged | ' | ' | ' | ' | ' | ' | 4,900,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock issued in exchange of notes (in shares) | ' | ' | ' | ' | ' | ' | 600,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Cash used to fund redemption of notes | ' | ' | ' | ' | ' | ' | 300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt exchange expense | ' | ' | ' | ' | ' | ' | $300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net_loss_per_share_Details
Net loss per share (Details) (USD $) | 3 Months Ended | 1 Months Ended | 3 Months Ended | |||||||
In Millions, except Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Aug. 31, 2013 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2014 |
Stock options | Stock options | 2015 Notes | 2015 Notes | Pfizer Note | Pfizer Note | 2018 Notes | 2020 Notes | |||
Anti-dilutive securities | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Potential common shares excluded from diluted net loss per share computation | 42,959,646 | 70,818,118 | 18,027,392 | 24,208,663 | 10,441,728 | 45,583,814 | ' | 1,025,641 | 7,245,263 | 7,245,263 |
Aggregate principal amount of notes to be converted | ' | ' | ' | ' | ' | ' | $10 | ' | ' | ' |
Common stock issued in exchange of notes (in shares) | ' | ' | ' | ' | ' | ' | 1,025,641 | ' | ' | ' |
Commitments_and_Contingencies_
Commitments and Contingencies (Details) | 2 Months Ended |
Apr. 30, 2013 | |
item | |
Contingencies | ' |
Number of lawsuits filed | 2 |