Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 02, 2016 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | scln | |
Entity Registrant Name | SCICLONE PHARMACEUTICALS INC | |
Entity Central Index Key | 880,771 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 51,053,583 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 130,113 | $ 101,403 |
Restricted cash in escrow for SEC settlement (Note 9) | 12,826 | |
Accounts receivable, net of allowances of $91 and $594 as of September 30, 2016 and December 31, 2015, respectively | 37,749 | 39,363 |
Inventories | 13,751 | 10,976 |
Prepaid expenses and other current assets | 2,529 | 3,654 |
Deferred tax assets | 94 | 299 |
Total current assets | 184,236 | 168,521 |
Property and equipment, net | 1,826 | 2,651 |
Investments in third party (Note 10) | 2,718 | |
Goodwill | 32,101 | 32,979 |
Other assets | 12,480 | 12,468 |
Total assets | 233,361 | 216,619 |
Current liabilities: | ||
Accounts payable | 4,736 | 4,495 |
Accrued and other current liabilities | 19,882 | 32,151 |
Deferred revenue | 174 | |
Total current liabilities | 24,618 | 36,820 |
Other long-term liabilities | 78 | 87 |
Commitments and contingencies (Note 9) | ||
Stockholders' equity: | ||
Preferred stock; $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding | ||
Common stock; $0.001 par value; 100,000,000 shares authorized; 50,872,875 and 49,533,835 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively | 51 | 50 |
Additional paid-in capital | 301,433 | 296,086 |
Accumulated other comprehensive income | 1,357 | 2,070 |
Accumulated deficit | (94,176) | (118,494) |
Total stockholders' equity | 208,665 | 179,712 |
Total liabilities and stockholders' equity | $ 233,361 | $ 216,619 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Condensed Consolidated Balance Sheets [Abstract] | ||
Allowance for doubtful accounts | $ 91 | $ 594 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 50,872,875 | 49,533,835 |
Common stock, shares outstanding | 50,872,875 | 49,533,835 |
Condensed Consolidated Statemen
Condensed Consolidated Statements Of Income - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Revenues: | ||||
Product sales, net | $ 39,457 | $ 41,986 | $ 112,646 | $ 112,356 |
Promotion services | 1,087 | 894 | 3,388 | 2,038 |
Total net revenues | 40,544 | 42,880 | 116,034 | 114,394 |
Operating expenses: | ||||
Cost of product sales | 5,585 | 6,853 | 17,110 | 17,131 |
Sales and marketing | 13,320 | 15,073 | 40,104 | 39,746 |
Research and development | 3,288 | 1,039 | 9,520 | 8,708 |
General and administrative | 7,900 | 7,294 | 23,472 | 20,762 |
SEC settlement expense | 26 | 10,826 | ||
Total operating expenses | 30,093 | 30,285 | 90,206 | 97,173 |
Income from operations | 10,451 | 12,595 | 25,828 | 17,221 |
Non-operating income (expense): | ||||
Interest and investment income | 270 | 252 | 792 | 614 |
Other income (expense), net | 451 | (281) | 330 | (305) |
Income before provision for income tax | 11,172 | 12,566 | 26,950 | 17,530 |
Provision for income tax | 1,056 | 587 | 2,632 | 611 |
Net income | $ 10,116 | $ 11,979 | $ 24,318 | $ 16,919 |
Basic net income per share | $ 0.20 | $ 0.24 | $ 0.49 | $ 0.34 |
Diluted net income per share | $ 0.19 | $ 0.23 | $ 0.46 | $ 0.32 |
Weighted average shares used in computing: | ||||
Basic net income per share | 50,379 | 49,869 | 49,957 | 49,920 |
Diluted net income per share | 52,595 | 52,126 | 52,482 | 52,344 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements Of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Condensed Consolidated Statements Of Comprehensive Income [Abstract] | ||||
Net income | $ 10,116 | $ 11,979 | $ 24,318 | $ 16,919 |
Other comprehensive loss, net of income tax | ||||
Foreign currency translation | (123) | (661) | (713) | (618) |
Total other comprehensive loss | (123) | (661) | (713) | (618) |
Total comprehensive income | $ 9,993 | $ 11,318 | $ 23,605 | $ 16,301 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements Of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Operating activities: | ||
Net income | $ 24,318 | $ 16,919 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Non-cash expense related to stock-based compensation | 4,576 | 3,437 |
Provision for doubtful accounts | 541 | |
Provision for expiring inventory | 34 | 0 |
Depreciation and amortization | 737 | 802 |
Loss on disposal of fixed assets | 1 | 2 |
Deferred income taxes | 199 | 12 |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | 1,572 | (526) |
Inventories | 641 | 1,215 |
Prepaid expenses and other assets | 686 | 692 |
Accounts payable | (2,470) | (4,076) |
Accrued and other current liabilities | 845 | 11,822 |
Deferred revenue | (174) | (394) |
Other long-term liabilities | (8) | (80) |
Net cash provided by operating activities | 30,957 | 30,366 |
Investing activities: | ||
Investments in third party (Note 10) | (2,718) | |
Loans to third party (Note 4) | (7,250) | |
Proceeds from the sale of short-term investments | 75 | |
Purchases of property and equipment | (141) | (1,152) |
Net cash used in investing activities | (2,859) | (8,327) |
Financing activities: | ||
Repurchase of common stock including commissions | (12,811) | |
Proceeds related to issuances of common stock, net | 610 | 3,696 |
Net cash provided by (used in) financing activities | 610 | (9,115) |
Effect of exchange rate changes on cash and cash equivalents | 2 | 72 |
Net increase in cash and cash equivalents | 28,710 | 12,996 |
Cash and cash equivalents, beginning of period | 101,403 | 86,228 |
Cash and cash equivalents, end of period | 130,113 | $ 99,224 |
Supplemental disclosure of non-cash operating activities: | ||
Release of restricted cash in escrow for SEC settlement | $ 12,826 |
Basis Of Presentation
Basis Of Presentation | 9 Months Ended |
Sep. 30, 2016 | |
Basis Of Presentation [Abstract] | |
Basis Of Presentation | Note 1 — Basis of Presentation The accompanying unaudited condensed consolidated financial statements of SciClone Pharmaceuticals, Inc. (“SciClone” or the “Company”) have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) consistent with those applied in, and should be read in conjunction with, the audited consolidated financial statements and the notes thereto for the year ended December 31, 2015 included in the Company’s Form 10-K as filed with the Securities and Exchange Commission (“SEC”). The Company prepared the unaudited condensed consolidated financial statements following the requirements of the SEC for interim reporting. As permitted under those rules, certain footnotes or other information that are normally required by GAAP can be condensed or omitted. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The interim financial information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented and are not necessarily indicative of results for subsequent interim periods or for the full year. The unaudited condensed consolidated balance sheet data as of December 31, 2015 is derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ significantly from those estimates. Customer Concentration In China, pharmaceutical products are imported and distributed through a tiered method of distribution. For the Company’s proprietary product ZADAXIN ® , the Company manufactures its product using its US and European contract manufacturers, and it generates its product sales revenue through sales of ZADAXIN products to Sinopharm Holding Lingyun Biopharmaceutical (Shanghai) Co. Limited (“Sinopharm”). Sinopharm acts as an importer, and also as the top “tier” of the distribution system (“Tier 1”) in China. The Company’s ZADAXIN sales occur when the importer purchases product from the Company, without any right of return except for replacement of product in the events of damaged product or quality control issues. As the Company bears risk of loss until delivery has occurred, revenue is not recognized until the shipment reaches its destination. After the Company’s sale of ZADAXIN to the importer, Sinopharm clears products through China import customs, sells directly to large hospitals and holds additional product it has purchased in inventory for sale to the next tier in the distribution system. The second-tier (“Tier 2”) distributors are responsible for the further sale and distribution of the products they purchase from the importer, either through sales of product directly to the retail level (hospitals and pharmacies), or to third-tier (“Tier 3”) local or regional distributors who, in turn, sell products to hospitals and pharmacies. The Company’s other product sales revenues result from the sale of the Company’s in-licensed products to importing agents and distributors. Promotion services revenues result from fees received for exclusively promoting products for certain pharmaceutical partners. These importing agents, distributors and partners are the Company’s customers. Sinopharm contributed 92% and 98% of the Company’s total net revenue for the three-month periods ended September 30, 2016 and 2015, respectively, which revenues related to the Company’s China segment. Sinopharm contributed 92% of the Company’s total net revenue for both the nine-month periods ended September 30, 2016 and 2015, which revenues related to the Company’s China segment. There were no other customers that exceeded 10% of the Company’s total net revenue in the periods presented. Total ZADAXIN product sales were $37.8 million or 93% of total net revenues, and were $39.2 million or 91% of total net revenues, for the three months ended September 30, 2016 and 2015, respectively. Total ZADAXIN product sales were $107.9 million or 93% of total net revenues, and were $105.9 million or 93% of total net revenues, for the nine months ended September 30, 2016 and 2015, respectively. As of September 30, 2016, approximately $34.8 million, or 92% , of the Company's accounts receivable was attributable to one customer, Sinopharm, in China. The Company generally does not require collateral from its customers. The Company maintains reserves for potential credit losses and such actual losses may vary significantly from its estimates. Per the Company’s previous contractual arrangement with Sinopharm through December 31, 2015, and a renewed contractual arrangement with Sinopharm (the Company’s sole distributor for ZADAXIN in China) which took effect January 1, 2016, the Company’s sales of ZADAXIN to Sinopharm were denominated in US dollars through June 30, 2016. However, the established importer price was adjusted quarterly based upon exchange rate fluctuations between the US dollar and Chinese Yuan Renminbi (“RMB”) . Effective July 1, 2016, the Company’s sales of ZADAXIN to Sinopharm are and will be denominated in RMB. A significant portion of the Company’s other revenues and expenses are also denominated in RMB and a significant portion of the Company’s assets and liabilities are denominated in RMB and all are exposed to foreign exchange risk. In the recent year and months, the RMB has experienced devaluation. Such devaluation negatively affects the US dollar value of revenues while it positively affects the US dollar value of China operating expenses. RMB is not freely convertible into foreign currencies. In China, foreign exchange transactions are required by law to be transacted only by authorized financial institutions at the exchange rates quoted by the People’s Bank of China. Remittances in currencies other than RMB by the Company in China require certain supporting documentation in order to process the remittance. Accounts Receivable Receivable Reserve. The Company records a receivable reserve based on a specific review of its overdue invoices. The Company’s estimate for a reserve is determined after considering its existing contractual payment terms, payment patterns of its customers and individual customer circumstances, the age of any outstanding receivables and its current customer relationships. Accounts receivable are written off at the point when they are considered uncollectible. As of December 31, 2015, the Company had a receivable reserve of $0.5 million related to accounts receivable from one customer that was more than one year past due. During 2014, the Company’s subsidiary, SciClone Pharmaceuticals International China Holding Ltd (“SPIL China”) executed an agreement with this customer providing for settlement of the receivable balance, which at the time was $1.9 million, of which $1.0 million was paid in 2014. SPIL China collected $0.4 million under this agreement in May 2015 and this gain on recovery was recorded as a $0.4 million reduction to general and administrative expense for the nine-month period ended September 30, 2015. In March 2016, SPIL China collected the remaining $0.5 million from this customer and this gain on recovery was recorded as a reduction to general and administrative expense for the first quarter of 2016. The Company recognized $0.5 million of bad debt expense in general and administrative expense during the first quarter of 2015 related to past due receivables from another customer, due to uncertainty regarding the collectability of the customer’s outstanding receivable balance. The Company wrote-off the $0.5 million of past due accounts receivable from this customer during the fourth quarter of 2015 as uncollectible. As of September 30, 2016, the Company had a receivable reserve of $0.1 million. Revenue Recognition The Company recognizes revenue when persuasive evidence of an arrangement exists, services have been rendered or delivery has occurred, the price to the buyer is fixed or determinable and collectability is reasonably assured. Product Revenue . The Company recognizes product revenue from selling manufactured ZADAXIN product at the time of delivery. Sales of ZADAXIN to Sinopharm are recognized upon arrival of a shipment to its destination, which marks the point when title and risk of loss to product are transferred. The Company also earns product revenue from purchasing medical products from pharmaceutical companies and selling them directly to importers or distributors. The Company recognizes revenue related to these products based on the “sell-in” method, when the medical products have been delivered to the importers or distributors. Payments by the importing agents and distributors are not contingent upon sale to the end user by the importing agents or distributors. Effective January 1, 2016, the Company’s new contractual arrangement with its China importer and distributor for ZADAXIN, Sinopharm, is resulting in the later recognition (relative to practices prevailing under the old contractual arrangement through December 31, 2015) of a portion of the Company’s revenue due from Sinopharm related to situations where the provincial tender price is greater relative to a reference (baseline) tender price. The tender price is the ultimate retail end price approved by provincial authorities. There is a price mechanism in the new contractual arrangement whereby the customer is invoiced at a lower base price relative to that prevailing in the previous agreement. The lower base price (as well as estimated price compensation payable due to the distributor for situations where the provincial tender price is lower than the reference (baseline) tender price) is recorded as revenue at the time the sale is completed upon arrival at destination. To date, there are no situations where a provincial tender price is less than the reference (baseline) tender price. The distributor is invoiced for the portion of the price that results from situations where the provincial tender price is greater than the reference (baseline) tender price at a later time, and such amount is recognized as revenue after the amount has been agreed with the distributor. It is expected that the price compensation due to the Company related to sales in a quarter under the price adjustment mechanism for provinces with tender prices above the reference (baseline) tender price will be recognized on a rolling two-to-three quarter delayed basis relative to the originating sales quarter. Promotion Services Revenue . The Company recognizes promotion services revenue after designated medical products are delivered to the distributors as specified in a promotion services contract, which marks the period when marketing and promotion services have been rendered and the revenue recognition criteria are met. Revenue Reserve. The Company generally maintains a revenue reserve for product returns based on estimates of the amount of product to be returned by its customers which are based on historical patterns, analysis of market demand and/or a percentage of sales based on industry trends, and management’s evaluation of specific factors that may increase the risk of product returns. Importing agents or distributors do not have contractual rights of return except under limited terms regarding product quality. However, the Company is expected to replace products that have expired or are deemed to be damaged or defective when delivered upon arrival at destination. The calculation of the revenue reserve requires estimates and involves a high degree of subjectivity and judgment. As a result of the uncertainties involved in estimating the revenue reserve, there is a possibility that materially different amounts could be reported under different conditions or using different assumptions. As of September 30, 2016 and December 31, 2015, the Company’s revenue reserves were $0. 1 million. Investments As of September 30, 2016, the Company’s investment portfolio included an available-for-sale investment in the common stock of a third party (Note 10) categorized within Level 2 of the fair value hierarchy. This investment security was acquired in early September 2016. The Company records unrealized gains or losses on available-for-sale investments in other comprehensive income (loss). Realized gains and losses and declines in value judged to be other-than temporary on available-for-sale investments are included in earnings. Available-for sale investments are evaluated for impairment each reporting period. An investment is considered impaired if the fair value of the investment is less than its cost. If after consideration of all available evidence to evaluate the realizable value of its investment, impairment is determined to be other-than-temporary, then an impairment loss is recognized in the condensed consolidated statement of operations. Inventories Inventories consist of raw materials, work in progress and finished products. Inventories are valued at the lower of cost or market (net realizable value), with cost determined on a first-in, first-out basis, and include amounts related to materials, labor and overhead. The Company periodically reviews the inventory in order to identify excess and obsolete items, including pharmaceutical products approaching their expiration dates. If obsolete or excess items are observed and there are no alternate uses for the inventory, the Company will record a write-down to net realizable value. For the three- and nine-month periods ended September 30, 2016, the Company recorded inventory write-downs to cost of product sales of approximately $0 and $34,000 , respectively, related to ZADAXIN inventory expected to expire. For the three- and nine-month periods ended September 30, 2015, the Company recorded no write-downs related to inventory. Loans Receivable Loans receivable are due from a single third party (see Note 4). Loans are initially recorded, and continue to be carried, at unpaid principal balances under “other assets” on the unaudited condensed consolidated balance sheet. Carried balances are subsequently adjusted for payments of principal or adjustments to the allowance for loan losses to account for any impairment. Interest income is recognized over the term of the loans and is calculated using the simple-interest method, as the loans do not have associated premium or discount. If the loans were to experience impairment, interest income would not be recognized unless the likelihood of further loss was remote. Although the measurement basis is unpaid principal (as adjusted for subsequent payments or impairment), not fair value, the loans receivable would qualify as Level 3 measurements under the fair value hierarchy (Note 2) due to the presence of significant unobservable inputs related to the counterparty, which is a private entity. Management considers impairment to exist when, based on current information or factors (such as payment history, value of collateral, and assessment of the counterparty’s current creditworthiness), it is probable that principal and interest payments will not be collected according to the contractual agreements. Management considers a loan payment delinquent when not received by the due date. As of September 30, 2016 and December 31, 2015, management concluded the loans receivable were not impaired, and there was no allowance for loan losses. Net Income Per Share Basic net income per share has been computed by dividing net income by the weighted-average number of shares of common stock outstanding for the period. Diluted net income per share is computed by dividing net income by the weighted-average number of common equivalent shares outstanding for the period. Diluted net income per share includes any dilutive impact from outstanding stock options, stock awards and the employee stock purchase plan using the treasury stock method. The following is a reconciliation of the numerator and denominators of the basic and diluted net income per share computations (in thousands, except per share amounts): Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Numerator: Net income $ 10,116 $ 11,979 $ 24,318 $ 16,919 Denominator: Weighted-average shares outstanding used to compute basic net income per share 50,379 49,869 49,957 49,920 Effect of dilutive securities 2,216 2,257 2,525 2,424 Weighted-average shares outstanding used to compute diluted net income per share 52,595 52,126 52,482 52,344 Basic net income per share $ 0.20 $ 0.24 $ 0.49 $ 0.34 Diluted net income per share $ 0.19 $ 0.23 $ 0.46 $ 0.32 For the three months ended September 30, 2016 and 2015, outstanding stock options and awards for 2,394,941 and 1,514,534 shares were excluded from the calculation of diluted net income per share because the effect from the assumed exercise or issuance of these options and awards calculated under the treasury stock method would have been anti-dilutive. In addition, for the three months ended September 30, 2016 and 2015, outstanding stock options and awards for 275,000 and 312,500 shares, respectively, subject to performance conditions were excluded from the calculation of diluted net income per share because the performance criteria had not been met. For the nine months ended September 30, 2016 and 2015, outstanding stock options and awards for 2,151,751 and 1,043,815 shares, respectively, were excluded from the calculation of diluted net income per share because the effect from the assumed exercise or issuance of these options and awards calculated under the treasury stock method would have been anti-dilutive. In addition, for the nine months ended September 30, 2016 and 2015, outstanding stock options and awards for 275,000 and 325,137 shares, respectively, subject to performance conditions were excluded from the calculation of diluted net income per share because the performance criteria had not been met. Error Corrections The Company revised its condensed consolidated statement of income for the nine months ended September 30, 2015 by reducing general and administrative expense and increasing sales and marketing expense by $0.7 million for costs incurred related to marketing events. The Company provided $1.3 million of additional income tax expense, and recorded a corresponding accrual in accrued and other current liabilities, during the nine months ended September 30, 2016 to correct an error. The error corrected reflected the recognition of a previously unrecognized liability for an uncertain tax position related to the potential nondeductibility, under the People’s Republic of China (“PRC”) tax regulations, of certain marketing costs related to the Company’s China operations. The adjustment related to tax years 2013 to 2015 and reflected the estimated tax exposure for each year as well as accrued interest thereon; such tax and interest amounts were $0.4 million, $0.5 million, and $0.4 million for the full years 2013, 2014, and 2015, respectively. The Company’s management evaluated the effects of the error on each prior annual and interim period, as well as the total error accumulated at the end of each respective prior period, and concluded under both approaches that the effects of the error were not material to previously issued annual or interim financial statements. The Company’s management also evaluated the total amount of the error correction in relation to projected results for full year 2016 and concluded the impact is not expected to be material to the projected annual results. Accordingly, the total adjustment was recorded out-of-period in the first nine months of 2016. Management also concluded that the relevant amounts were not material to current liabilities or stockholders’ equity in any prior period or the current period. New Accounting Standards Updates In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, "Revenue from Contracts with Customers (Topic 606)" , which contains new accounting literature relating to how and when a company recognizes revenue. Under ASU 2014-09, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. ASU 2014-09 is effective for the Company’s fiscal year beginning January 1, 2018, which reflects a one year deferral approved by the FASB in July 2015, with early application permitted provided that the effective date is not earlier than the original effective date. The Company is in the process of determining what impact, if any, the adoption of ASU 2014-09 will have on its financial statements and related disclosures. The standard permits the use of either the full retrospective or modified retrospective transition method. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting. In November 2015, the FASB issued ASU 2015-17, " Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”. This ASU amends existing guidance to require that deferred income tax liabilities and assets be classified as noncurrent in a classified balance sheet, and eliminates the prior guidance which required an entity to separate deferred tax liabilities and assets into a current amount and a noncurrent amount in a classified balance sheet. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted as of the beginning of an interim or annual period. Additionally, the new guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company has not yet selected an adoption method. The impact of adopting this guidance is not expected to be material to the consolidated financial statements given the Company’s deferred tax amounts. In January 2016, the FASB issued ASU 2016-01, “Financial Instruments (Topic 825): Recognition and Measurement of Financial Assets and Liabilities” . The amended guidance (i) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (ii) eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is currently required to be disclosed for financial instruments measured at fair value; (iii) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments and (iv) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, or calendar 2018 for the Company. The amended guidance should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The Company is evaluating the impact of adoption of this update on its consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 2016-02, “ Leases (Topic 842) ”. Under the new guidance, lessees will be required to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on the balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. This update is effective for the Company from calendar 2019 and from the first interim period of calendar 2019, with earlier application permitted. The Company is evaluating the impact of the adoption of this update on its consolidated financial statements and related disclosures. In March 2016, the FASB issued ASU 2016-09, “Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which outlines new provisions intended to simplify various aspects related to accounting for share-based payments and their presentation in the financial statements. The Company currently plans to implement this ASU as required in the first quarter of calendar 2017. The Company does not expect that the adoption will have a material impact on its consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, “ Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements. ” This ASU requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The standard is effective for the Company from calendar 2020, with early adoption permitted for calendar 2019. The Company has yet to commence an evaluation of the impact of the adoption of this standard on its consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments (Topic 230)." Current GAAP is unclear or does not include specific guidance on how to classify certain transactions in the statement of cash flows. This ASU is intended to reduce diversity in practice in how eight particular transactions are classified in the statement of cash flows. ASU No. 2016-15 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, provided that all of the amendments are adopted in the same period. Entities will be required to apply the guidance retrospectively. If it is impracticable to apply the guidance retrospectively for an issue, the amendments related to that issue would be applied prospectively. As the likelihood of the Company experiencing one or more of the eight particular specified transactions is low, ASU 2016-15 is not expected to have a material impact on the Company's consolidated financial statements . |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Measurements [Abstract] | |
Fair Value Measurements | Note 2 — Fair Value Measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. The three levels of input are: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The following tables represent the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) measured at fair value on a recurring basis ( in thousands ): Fair Value Measurements as of September 30, 2016 Using Quoted Prices in Significant Active Markets Other Significant for Observable Unobservable Balance Identical Assets Inputs Inputs as of Description (Level 1) (Level 2) (Level 3) September 30, 2016 Money market funds $ 19,693 $ — $ — $ 19,693 Common stock investments in third party (Note 10) — 2,718 — 2,718 Total $ 19,693 $ 2,718 $ — $ 22,411 Fair Value Measurements as of December 31, 2015 Using Quoted Prices in Significant Active Markets Other Significant for Observable Unobservable Balance Identical Assets Inputs Inputs as of Description (Level 1) (Level 2) (Level 3) December 31, 2015 Money market funds $ 19,678 $ — $ — $ 19,678 Total $ 19,678 $ — $ — $ 19,678 |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2016 | |
Inventories [Abstract] | |
Inventories | Note 3 — Inventories Inventories consisted of the following (in thousands): September 30, December 31, 2016 2015 Raw materials $ 4,367 $ 3,871 Work in progress 258 535 Finished goods 9,126 6,570 $ 13,751 $ 10,976 Included in the Company’s inventory as of September 30, 2016 and December 31, 2015 was $3.0 million and $ 3.3 million, respectively, in inventory held at distributors related to non-ZADAXIN products. |
Loans Receivable
Loans Receivable | 9 Months Ended |
Sep. 30, 2016 | |
Loans Receivable [Abstract] | |
Loans Receivable | Note 4 — Loans Receivable As part of the Company’s May 2013 license and supply agreement with Zensun (Shanghai) Science & Technology Co. Ltd (“Zensun”), the Company previously agreed to loan up to $12 million to Zensun. The entry into the license and supply agreement in the second quarter of 2013, pursuant to which the Company licensed the exclusive rights to promote, market, distribute, and sell Neucardin TM , a chronic heart failure product under development by Zensun (such rights licensed for the People’s Republic of China, Hong Kong and Macao) is more fully described in the Company’s quarterly report on Form 10-Q for the second quarter of 2013. Pursuant to its agreement to loan funds, the Company loaned $12 million to Zensun. The extension of credit and funding to Zensun was accomplished through two of the Company's subsidiaries, SPIL China and SciClone Pharmaceuticals (China) Ltd. (“SciClone China”). With respect to lender SciClone China, Zensun can make RMB-denominated borrowings for up to RMB 1,550,000 using an entrustment mechanism with a bank as an intermediary. In the third quarter of 2014, SciClone China entered into an entrusted loan agreement for RMB 1,550,000 (approximately US $232,000 as of September 30, 2016) with Zensun, using a major Chinese bank as the lending agent. SciClone China is the principal and ultimately bears the credit risk, not the bank. The loan bears interest at a fixed rate of 7.5% per annum and Zensun is subject to obligations of the borrower as specified in the loan agreements. The loan term is sixty-six months. All outstanding principal and interest balances must be repaid by the maturity date, with prepayments permitted without penalty upon prior notice. With respect to lender SPIL China, Zensun could request US-dollar denominated borrowings up to $11.75 million. As of September 30, 2016, borrowings totaling $11.75 million had been requested by Zensun and paid by SPIL China with $4.5 million lent in the second half of 2014 and $7.25 million lent in the second quarter of 2015. These borrowings bear interest at a fixed rate of 7.5% per annum payable annually in arrears at each interest payment date as defined in the overall loan agreement. These borrowings mature on September 26, 2017 , with an option (granted at loan origination) electable by the borrower to extend for two additional years provided certain conditions are met. As of September 30, 2016, the borrower had notified the Company of its intent to exercise its option to extend the borrowings for two additional years. All outstanding balances must be repaid by the maturity date, with prepayments permitted without penalty upon prior notice. The proceeds of the two separate but related loans are to be used for working capital and general corporate purposes by Zensun. To secure the loans, Zensun pledged its entire equity interest in its subsidiary, Shanghai Dongxin Biochemical Technology Co. Ltd. (whose assets include real property) to SPIL China. Management, on the basis of (i) a creditworthiness evaluation using recent Zensun financial information, (ii) consideration of evidence of the market value of the pledged security indicating such market value exceeded the outstanding loan principal, and (iii) consideration of Zensun’s compliance with the terms of the loans and timely payments of interest, concluded there were no indications of loan impairment as of September 30, 2016 or December 31, 2015; accordingly, there is no allowance for losses. The two loans are included in “other assets” on the Company’s unaudited condensed consolidated balance sheet as of September 30, 2016 and December 31, 2015. Interest income on the loans amounted to $0.2 million for both the three months ended September 30, 2016 and 2015. Interest income on the loans amounted to $0.7 million and $0.5 million for the nine months ended September 30, 2016 and 2015, respectively, and is included in interest and investment income in the unaudited condensed consolidated statements of income. |
Goodwill
Goodwill | 9 Months Ended |
Sep. 30, 2016 | |
Goodwill [Abstract] | |
Goodwill | Note 5 — Goodwill The following table represents the change in goodwill for the nine months ended September 30, 2016 ( in thousands ): Balance as of December 31, 2015 $ 32,979 Translation adjustments (878) Balance as of September 30, 2016 $ 32,101 |
Accrued And Other Current Liabi
Accrued And Other Current Liabilities | 9 Months Ended |
Sep. 30, 2016 | |
Accrued And Other Current Liabilities [Abstract] | |
Accrued And Other Current Liabilities | Note 6 — Accrued and Other Current Liabilities Accrued and other current liabilities consisted of the following (in thousands): September 30, December 31, 2016 2015 Accrued SEC settlement loss (Note 9) $ — $ 12,826 Accrued sales and marketing expenses 7,300 8,511 Accrued taxes, tax reserves and interest 5,772 4,323 Accrued compensation and benefits 3,881 4,341 Accrued professional fees 1,241 1,130 Accrued manufacturing costs 1,173 444 Other 515 576 $ 19,882 $ 32,151 |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) | 9 Months Ended |
Sep. 30, 2016 | |
Accumulated Other Comprehensive Income (Loss) [Abstract] | |
Accumulated Other Comprehensive Income (Loss) | Note 7 — Accumulated Other Comprehensive Income (Loss) Changes in the composition of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2016 and 2015 are as follows ( in thousands ): Balances as of July 1, 2016 $ 1,480 Other comprehensive loss related to foreign currency translation (123) Balances as of September 30, 2016 $ 1,357 Balances as of July 1, 2015 $ 3,307 Other comprehensive loss related to foreign currency translation (661) Balances as of September 30, 2015 $ 2,646 Balances as of January 1, 2016 $ 2,070 Other comprehensive loss related to foreign currency translation (713) Balances as of September 30, 2016 $ 1,357 Balances as of January 1, 2015 $ 3,264 Other comprehensive loss related to foreign currency translation (618) Balances as of September 30, 2015 $ 2,646 |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2016 | |
Stockholders' Equity [Abstract] | |
Stockholders' Equity | Note 8 — Stockholders’ Equity Stock-based Compensation The following table summarizes the stock-based compensation expenses included in the unaudited condensed consolidated statements of income ( in thousands ): Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Sales and marketing $ 286 $ 217 $ 728 $ 685 Research and development 92 65 200 159 General and administrative 1,729 1,079 3,648 2,593 $ 2,107 $ 1,361 $ 4,576 $ 3,437 Stock Options During the nine months ended September 30, 2016, the Company granted options to purchase a total of 1,390,000 shares of common stock and options to purchase 1,630,359 shares of common stock were exercised. As of September 30, 2016, there was approximately $7.4 million of unrecognized compensation expense, net of forfeitures, related to non-vested stock options, which is expected to be recognized over a weighted-average remaining period of approximately 2.50 years. Restricted Stock Units (RSUs) During the nine months ended September 30, 2016, 315,000 RSUs were granted at a grant date fair value per share of $ 10.01 and 150,500 RSUs vested. As of September 30, 2016, there was approximately $ 4.3 million of unrecognized compensation cost, net of forfeitures, related to non-vested RSUs, which is expected to be recognized over a weighted-average remaining period of approximately 1.48 years. Repurchase of Common Stock The Company repurchased and retired 1,526,306 shares at a cost of $12.8 million during the nine-month period ended September 30, 2015 under its share repurchase program that expired December 31, 2015 . |
Commitments And Contingencies
Commitments And Contingencies | 9 Months Ended |
Sep. 30, 2016 | |
Commitments And Contingencies [Abstract] | |
Commitments And Contingencies | Note 9 — Commitments and Contingencies Legal Matters The Company is a party to various legal proceedings and was subject to government investigations, as noted in this section below. All legal proceedings and any government investigations are subject to inherent uncertainties, unfavorable rulings or other adverse events which could occur. Unfavorable outcomes could include substantial monetary damages or awards, injunctions or other remedies, and if any of these were to occur, the possibility exists for a material adverse impact on the Company’s business, results of operations, financial position, and overall trends. The Company might also conclude that settling one or more such matters is in the best interests of its stockholders and its business, and any such settlement could include substantial payments. As previously disclosed, since 2010 the SEC and the US Department of Justice (“DOJ”) had each been conducting formal investigations of the Company regarding a range of matters, including the possibility of violations of the Foreign Corrupt Practices Act (“FCPA”), primarily related to certain historical sales and marketing activities with respect to the Company’s China operations. In response to these matters, the Company’s Board appointed a Special Committee of independent directors (the “Special Committee”) to oversee its response to the government inquiry. Based on an initial review, the Special Committee decided to undertake an independent investigation as to matters reflected in and arising from the SEC and DOJ investigations in order to evaluate whether any violation of the FCPA or other laws occurred. The Company previously recorded a charge to operating expenses in the fourth quarter of 2013 in the amount of $ 2.0 million for the accrual of an estimated loss associated with the SEC and DOJ investigations based on the available information at the time. In the second quarter of 2015, the Company recorded an additional charge to operating expenses of $10.8 million based on an agreement in principle reached with the SEC which had not yet been finalized at that time, bringing the accrued liability to $12.8 million. On October 7, 2015, the Company deposited $12.8 million in an interest-bearing escrow account that it established related to the agreement in principle regarding a proposed settlement of FCPA-related matters with the staff of the SEC, creating a cash restriction at the time of deposit. On February 4, 2016, the Company announced that it entered into a settlement agreement with the SEC fully resolving the SEC’s investigation into possible violations of the FCPA. Under the terms of the settlement agreement, in February 2016 the Company paid to the SEC a total of $12.8 million which was released from its escrow account, including disgorgement, pre-judgment interest and a penalty as final settlement. This payment was in line with the charges the Company previously recorded and disclosed as summarized above. As part of the agreement the Company neither admitted nor denied engagement in any wrongdoing and the Company agreed to give status reports to the SEC for the next three years on its continued remediation and implementation of anti-corruption compliance measures. The DOJ has also completed its related investigation and has declined to pursue any action. NovaMed Pharmaceuticals (Shanghai) Co. Ltd. (“NovaMed Shanghai”) was a party to a Distribution and Supply Agreement with MEDA Pharma GmbH & Co. KG (“MEDA”). Following the Company’s acquisition of NovaMed Shanghai, MEDA claimed it had a right to terminate the agreement under a change of control provision. NovaMed Shanghai does not believe that MEDA had a right of termination under the agreement. NovaMed Shanghai filed an application for binding arbitration with the China International Economic and Trade Arbitration Commission (“CIETAC”) on July 26, 2012. On April 2, 2014, CIETAC issued the final Award of the Arbitral Tribunal. The Arbitral Tribunal found that MEDA did have a right to terminate the agreement upon a change of control, but that MEDA must make reasonable reimbursement to NovaMed Shanghai before any product rights are returned to MEDA. The amount that must be paid includes $333,333 as “unjust enrichment” plus an amount for reasonable compensation for such services provided by NovaMed Shanghai to MEDA. The amount of such payment for services was not determined by the Arbitral Tribunal, but was left to be determined by NovaMed Shanghai. On April 30, 2014, NovaMed Shanghai informed MEDA that its determination of reasonable compensation for its services was $3,314,629 , including the $333,333 for unjust enrichment. MEDA made a counter offer and the parties were attempting to resolve the matter without an additional arbitration proceeding. In December 2014, NovaMed Shanghai filed a “Request for Second Arbitration” with CIETAC in order to enforce its right to compensation. The arbitration case is pending with CIETAC. On April 20, 2016, the Second Arbitral Tribunal ordered the bifurcation of the proceedings. The first stage of the proceedings will deal with the question whether NovaMed Shanghai in principle has claims against MEDA. A first oral hearing took place on July 6 and 7, 2016. The parties were originally invited to comment on the issues raised at the first hearing until October 14, 2016. Due to ongoing settlement negotiations between the parties this deadline has been extended to December 23, 2016. If one party feels the need to then respond to the other party's submission, the Second Arbitral Tribunal will at its discretion grant such opportunity to file an additional submission until February 6, 2017. The parties are further expected to file cost submissions by February 13, 2017. In parallel, the parties are in settlement discussions. The date for the next hearing has not yet been scheduled. The amount of any final payment to NovaMed Shanghai remains uncertain, and as such the Company has not recognized it as a gain contingency. Purchase Obligations Under agreements with certain of the Company’s pharmaceutical partners, the Company is committed to certain annual minimum product purchases where the contract is subject to termination if the annual minimum order is not met. As of September 30, 2016, the Company did not have any material unmet purchase obligations. |
Investments In Third Party
Investments In Third Party | 9 Months Ended |
Sep. 30, 2016 | |
Investments In Third Party [Abstract] | |
Investments In Third Party | Note 10 — Investments in Third Party On September 9, 2016, the Company and Soligenix, Inc. (trading under ticker “SNGXD” on the OTCQB over-the-counter market) entered into an exclusive license agreement (the “License Agreement”), including a common stock purchase agreement, pursuant to which Soligenix granted rights to the Company to develop, promote, market, distribute and sell an oral mucositis-targeted drug candidate (“SGX942”) in the People’s Republic of China, including Hong Kong and Macau, as well as Taiwan, South Korea and Vietnam (the “Territory”). Under the terms of the License Agreement, the Company will be responsible for all aspects of development, product registration, and commercialization in the Territory, having access to data generated by Soligenix. In exchange for exclusive rights, beyond an upfront payment, the Company will pay to Soligenix royalties on net sales, and Soligenix will supply commercial drug product to the Company on a cost-plus basis, while maintaining worldwide manufacturing rights. This exclusive agreement builds on an existing collaboration between the two companies established in 2013, in which the Company provided its complete oral mucositis clinical and regulatory data library to Soligenix in exchange for certain, previously undisclosed, commercialization rights to the oral mucositis drug candidate in the Greater China market. As the Company obtained rights for Greater China (mainland China, Hong Kong, and Macau) in the earlier 2013 exchange, the September 2016 agreement in substance represented the acquisition of additional rights for Taiwan, South Korea, and Vietnam. As part of the License Agreement, the Company entered into a common stock purchase agreement with Soligenix pursuant to which the Company bought 3,529,412 shares of Soligenix common stock. These common shares are unregistered but the Company has demand registration rights and can compel a registration of the securities in a reasonably short time in the event the Company plans to sell the shares. The total cash consideration of $3,000,000 paid to Soligenix at the time of the transaction reflected the purchase price of the common stock and the consideration for expanded territorial rights in South Korea, Taiwan and Vietnam. As of the transaction date, the common stock was recorded at an initial cost of $2.7 million representing publicly available quoted prices. As of September 30, 2016, the fair value of the Soligenix common stock investment was $2.7 million and unrealized gains (losses) on the investment were zero . The Company is holding the Soligenix shares in the context of a business relationship, and as such has classified them as available-for-sale. The common stock investment will be adjusted to fair value at each reporting date with unrealized gains (losses) reported as a component of other comprehensive income (loss). The residual cash consideration of $0.3 million related to the expanded territorial rights was recorded as research and development expense for the three - and nine - month periods ended September 30, 2016. |
In-License Costs
In-License Costs | 9 Months Ended |
Sep. 30, 2016 | |
In-License Costs [Abstract] | |
In-License Costs | Note 11 — In-License Costs For the three- and nine-month periods ended September 30, 2016, the Company recognized $0.3 million and $2.3 million of research and development (“R&D”) expenses for upfront and milestone payments related to in-license agreements. For the three-and nine-month periods ended September 30, 2015, the Company recognized $0 and $5.5 million, respectively, in R&D expenses related to upfront and milestone payments for its in-license agreements, primarily with Theravance Biopharma, Inc. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2016 | |
Income Taxes [Abstract] | |
Income Taxes | Note 12 — Income Taxes The provision for income taxes primarily relates to taxable income of the Company’s China operations. The provision for income tax was $1.1 million and $0.6 million for the three-month periods ended September 30, 2016 and 2015, respectively. The lower tax for the three-month period ended September 30, 2015 primarily related to the restructuring of the Company’s China business. The provision for income tax was $2.6 million and $0.6 million for the nine month periods ended September 30, 2016 and 2015, respectively. For the nine-month period ended September 30, 2016, the Company’s tax provision included $1.3 million of additional tax expense representing the correction of an error related to a previously unrecognized liability for an uncertain tax position in China (refer also to Note 1, “ Error Corrections” ) . In addition, the tax provision for the nine-month period ended September 30, 2015 was lower, compared to the nine-month period ended September 30, 2016, due to lower tax related to restructuring the Company’s China business. The Company’s statutory tax rate in China was 25% in 2016 and 2015. The Company has concluded that its offshore undistributed accumulated earnings as of December 31, 2015 were indefinitely reinvested, and has therefore provided no taxes thereon. The Company concluded that a portion of its earnings expected to be generated by foreign subsidiaries in 2016 will be repatriated to the parent company in order to address the parent company’s liquidity needs. A dividend distribution was already made to the parent company in early 2016 and further distributions may be made. The actual repatriation year-to-date and any further anticipated repatriations, however, are not expected to result in any additional US federal or state tax liability for 2016 as ongoing tax-deductible corporate expenses already incurred and expected to be incurred by the parent company more than offset the amount of the taxable income represented by the dividend distributions. These actual amounts and expectations have been reflected in the Company’s estimated annual effective tax rate for 2016. |
Segment Information And Geograp
Segment Information And Geographic Data | 9 Months Ended |
Sep. 30, 2016 | |
Segment Information And Geographic Data [Abstract] | |
Segment Information And Geographic Data | Note 13 — Segment Information and Geographic Data The Company reports segment information based on the internal reporting used by management for evaluating segment performance based on management’s estimates of the appropriate allocation of resources to segments. The Company operates and manages its business primarily on a geographic basis. Accordingly, the Company determined its operating segments and reporting units, which are generally based on the nature and location of its customers, to be 1) China, and 2) Rest of the World, including the US and Hong Kong. The Company evaluates the performance of its operating segments based on revenues and operating income (loss). Revenues for geographic segments are generally based on the location of customers. Operating income (loss) for each segment includes revenues, related cost of sales and operating expenses directly attributable to the segment. Operating income (loss) for each segment excludes non-operating income and expense. Summary information by operating segment for the three- and nine-month periods ended September 30, 2016 and 2015 is as follows ( in thousands ): Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Revenue: China $ 38,315 $ 40,676 $ 110,442 $ 109,388 Rest of the World (including the US and Hong Kong) 2,229 2,204 5,592 5,006 Total net revenues $ 40,544 $ 42,880 $ 116,034 $ 114,394 Income (loss) from operations: China $ 14,500 $ 14,649 $ 41,154 $ 34,650 Rest of the World (including the US and Hong Kong) (4,049) (2,054) (15,326) (17,429) Total income from operations $ 10,451 $ 12,595 $ 25,828 $ 17,221 Non-operating income (expense), net: China $ 719 $ (44) $ 1,113 $ 288 Rest of the World (including the US and Hong Kong) 2 15 9 21 Total non-operating income (expense), net $ 721 $ (29) $ 1,122 $ 309 Income (loss) before provision for income tax: China $ 15,219 $ 14,605 $ 42,267 $ 34,938 Rest of the World (including the US and Hong Kong) (4,047) (2,039) (15,317) (17,408) Total income before provision for income tax $ 11,172 $ 12,566 $ 26,950 $ 17,530 Long-lived assets as of September 30, 2016 and December 31, 2015 by operating segment are as follows ( in thousands ): September 30, December 31, 2016 2015 China $ 47,755 $ 46,315 Rest of the World (including the US and Hong Kong) 1,370 1,783 $ 49,125 $ 48,098 |
Basis Of Presentation (Policy)
Basis Of Presentation (Policy) | 9 Months Ended |
Sep. 30, 2016 | |
Basis Of Presentation [Abstract] | |
Basis Of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements of SciClone Pharmaceuticals, Inc. (“SciClone” or the “Company”) have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) consistent with those applied in, and should be read in conjunction with, the audited consolidated financial statements and the notes thereto for the year ended December 31, 2015 included in the Company’s Form 10-K as filed with the Securities and Exchange Commission (“SEC”). The Company prepared the unaudited condensed consolidated financial statements following the requirements of the SEC for interim reporting. As permitted under those rules, certain footnotes or other information that are normally required by GAAP can be condensed or omitted. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The interim financial information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented and are not necessarily indicative of results for subsequent interim periods or for the full year. The unaudited condensed consolidated balance sheet data as of December 31, 2015 is derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. |
Use Of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ significantly from those estimates. |
Concentration Of Risk | Customer Concentration In China, pharmaceutical products are imported and distributed through a tiered method of distribution. For the Company’s proprietary product ZADAXIN ® , the Company manufactures its product using its US and European contract manufacturers, and it generates its product sales revenue through sales of ZADAXIN products to Sinopharm Holding Lingyun Biopharmaceutical (Shanghai) Co. Limited (“Sinopharm”). Sinopharm acts as an importer, and also as the top “tier” of the distribution system (“Tier 1”) in China. The Company’s ZADAXIN sales occur when the importer purchases product from the Company, without any right of return except for replacement of product in the events of damaged product or quality control issues. As the Company bears risk of loss until delivery has occurred, revenue is not recognized until the shipment reaches its destination. After the Company’s sale of ZADAXIN to the importer, Sinopharm clears products through China import customs, sells directly to large hospitals and holds additional product it has purchased in inventory for sale to the next tier in the distribution system. The second-tier (“Tier 2”) distributors are responsible for the further sale and distribution of the products they purchase from the importer, either through sales of product directly to the retail level (hospitals and pharmacies), or to third-tier (“Tier 3”) local or regional distributors who, in turn, sell products to hospitals and pharmacies. The Company’s other product sales revenues result from the sale of the Company’s in-licensed products to importing agents and distributors. Promotion services revenues result from fees received for exclusively promoting products for certain pharmaceutical partners. These importing agents, distributors and partners are the Company’s customers. Sinopharm contributed 92% and 98% of the Company’s total net revenue for the three-month periods ended September 30, 2016 and 2015, respectively, which revenues related to the Company’s China segment. Sinopharm contributed 92% of the Company’s total net revenue for both the nine-month periods ended September 30, 2016 and 2015, which revenues related to the Company’s China segment. There were no other customers that exceeded 10% of the Company’s total net revenue in the periods presented. Total ZADAXIN product sales were $37.8 million or 93% of total net revenues, and were $39.2 million or 91% of total net revenues, for the three months ended September 30, 2016 and 2015, respectively. Total ZADAXIN product sales were $107.9 million or 93% of total net revenues, and were $105.9 million or 93% of total net revenues, for the nine months ended September 30, 2016 and 2015, respectively. As of September 30, 2016, approximately $34.8 million, or 92% , of the Company's accounts receivable was attributable to one customer, Sinopharm, in China. The Company generally does not require collateral from its customers. The Company maintains reserves for potential credit losses and such actual losses may vary significantly from its estimates. Per the Company’s previous contractual arrangement with Sinopharm through December 31, 2015, and a renewed contractual arrangement with Sinopharm (the Company’s sole distributor for ZADAXIN in China) which took effect January 1, 2016, the Company’s sales of ZADAXIN to Sinopharm were denominated in US dollars through June 30, 2016. However, the established importer price was adjusted quarterly based upon exchange rate fluctuations between the US dollar and Chinese Yuan Renminbi (“RMB”) . Effective July 1, 2016, the Company’s sales of ZADAXIN to Sinopharm are and will be denominated in RMB. A significant portion of the Company’s other revenues and expenses are also denominated in RMB and a significant portion of the Company’s assets and liabilities are denominated in RMB and all are exposed to foreign exchange risk. In the recent year and months, the RMB has experienced devaluation. Such devaluation negatively affects the US dollar value of revenues while it positively affects the US dollar value of China operating expenses. RMB is not freely convertible into foreign currencies. In China, foreign exchange transactions are required by law to be transacted only by authorized financial institutions at the exchange rates quoted by the People’s Bank of China. Remittances in currencies other than RMB by the Company in China require certain supporting documentation in order to process the remittance. |
Accounts Receivable | Accounts Receivable Receivable Reserve. The Company records a receivable reserve based on a specific review of its overdue invoices. The Company’s estimate for a reserve is determined after considering its existing contractual payment terms, payment patterns of its customers and individual customer circumstances, the age of any outstanding receivables and its current customer relationships. Accounts receivable are written off at the point when they are considered uncollectible. As of December 31, 2015, the Company had a receivable reserve of $0.5 million related to accounts receivable from one customer that was more than one year past due. During 2014, the Company’s subsidiary, SciClone Pharmaceuticals International China Holding Ltd (“SPIL China”) executed an agreement with this customer providing for settlement of the receivable balance, which at the time was $1.9 million, of which $1.0 million was paid in 2014. SPIL China collected $0.4 million under this agreement in May 2015 and this gain on recovery was recorded as a $0.4 million reduction to general and administrative expense for the nine-month period ended September 30, 2015. In March 2016, SPIL China collected the remaining $0.5 million from this customer and this gain on recovery was recorded as a reduction to general and administrative expense for the first quarter of 2016. The Company recognized $0.5 million of bad debt expense in general and administrative expense during the first quarter of 2015 related to past due receivables from another customer, due to uncertainty regarding the collectability of the customer’s outstanding receivable balance. The Company wrote-off the $0.5 million of past due accounts receivable from this customer during the fourth quarter of 2015 as uncollectible. As of September 30, 2016, the Company had a receivable reserve of $0.1 million. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue when persuasive evidence of an arrangement exists, services have been rendered or delivery has occurred, the price to the buyer is fixed or determinable and collectability is reasonably assured. Product Revenue . The Company recognizes product revenue from selling manufactured ZADAXIN product at the time of delivery. Sales of ZADAXIN to Sinopharm are recognized upon arrival of a shipment to its destination, which marks the point when title and risk of loss to product are transferred. The Company also earns product revenue from purchasing medical products from pharmaceutical companies and selling them directly to importers or distributors. The Company recognizes revenue related to these products based on the “sell-in” method, when the medical products have been delivered to the importers or distributors. Payments by the importing agents and distributors are not contingent upon sale to the end user by the importing agents or distributors. Effective January 1, 2016, the Company’s new contractual arrangement with its China importer and distributor for ZADAXIN, Sinopharm, is resulting in the later recognition (relative to practices prevailing under the old contractual arrangement through December 31, 2015) of a portion of the Company’s revenue due from Sinopharm related to situations where the provincial tender price is greater relative to a reference (baseline) tender price. The tender price is the ultimate retail end price approved by provincial authorities. There is a price mechanism in the new contractual arrangement whereby the customer is invoiced at a lower base price relative to that prevailing in the previous agreement. The lower base price (as well as estimated price compensation payable due to the distributor for situations where the provincial tender price is lower than the reference (baseline) tender price) is recorded as revenue at the time the sale is completed upon arrival at destination. To date, there are no situations where a provincial tender price is less than the reference (baseline) tender price. The distributor is invoiced for the portion of the price that results from situations where the provincial tender price is greater than the reference (baseline) tender price at a later time, and such amount is recognized as revenue after the amount has been agreed with the distributor. It is expected that the price compensation due to the Company related to sales in a quarter under the price adjustment mechanism for provinces with tender prices above the reference (baseline) tender price will be recognized on a rolling two-to-three quarter delayed basis relative to the originating sales quarter. Promotion Services Revenue . The Company recognizes promotion services revenue after designated medical products are delivered to the distributors as specified in a promotion services contract, which marks the period when marketing and promotion services have been rendered and the revenue recognition criteria are met. Revenue Reserve. The Company generally maintains a revenue reserve for product returns based on estimates of the amount of product to be returned by its customers which are based on historical patterns, analysis of market demand and/or a percentage of sales based on industry trends, and management’s evaluation of specific factors that may increase the risk of product returns. Importing agents or distributors do not have contractual rights of return except under limited terms regarding product quality. However, the Company is expected to replace products that have expired or are deemed to be damaged or defective when delivered upon arrival at destination. The calculation of the revenue reserve requires estimates and involves a high degree of subjectivity and judgment. As a result of the uncertainties involved in estimating the revenue reserve, there is a possibility that materially different amounts could be reported under different conditions or using different assumptions. As of September 30, 2016 and December 31, 2015, the Company’s revenue reserves were $0. 1 million. |
Investments | Investments As of September 30, 2016, the Company’s investment portfolio included an available-for-sale investment in the common stock of a third party (Note 10) categorized within Level 2 of the fair value hierarchy. This investment security was acquired in early September 2016. The Company records unrealized gains or losses on available-for-sale investments in other comprehensive income (loss). Realized gains and losses and declines in value judged to be other-than temporary on available-for-sale investments are included in earnings. Available-for sale investments are evaluated for impairment each reporting period. An investment is considered impaired if the fair value of the investment is less than its cost. If after consideration of all available evidence to evaluate the realizable value of its investment, impairment is determined to be other-than-temporary, then an impairment loss is recognized in the condensed consolidated statement of operations. |
Inventories | Inventories Inventories consist of raw materials, work in progress and finished products. Inventories are valued at the lower of cost or market (net realizable value), with cost determined on a first-in, first-out basis, and include amounts related to materials, labor and overhead. The Company periodically reviews the inventory in order to identify excess and obsolete items, including pharmaceutical products approaching their expiration dates. If obsolete or excess items are observed and there are no alternate uses for the inventory, the Company will record a write-down to net realizable value. For the three- and nine-month periods ended September 30, 2016, the Company recorded inventory write-downs to cost of product sales of approximately $0 and $34,000 , respectively, related to ZADAXIN inventory expected to expire. For the three- and nine-month periods ended September 30, 2015, the Company recorded no write-downs related to inventory. |
Loans Receivable | Loans Receivable Loans receivable are due from a single third party (see Note 4). Loans are initially recorded, and continue to be carried, at unpaid principal balances under “other assets” on the unaudited condensed consolidated balance sheet. Carried balances are subsequently adjusted for payments of principal or adjustments to the allowance for loan losses to account for any impairment. Interest income is recognized over the term of the loans and is calculated using the simple-interest method, as the loans do not have associated premium or discount. If the loans were to experience impairment, interest income would not be recognized unless the likelihood of further loss was remote. Although the measurement basis is unpaid principal (as adjusted for subsequent payments or impairment), not fair value, the loans receivable would qualify as Level 3 measurements under the fair value hierarchy (Note 2) due to the presence of significant unobservable inputs related to the counterparty, which is a private entity. Management considers impairment to exist when, based on current information or factors (such as payment history, value of collateral, and assessment of the counterparty’s current creditworthiness), it is probable that principal and interest payments will not be collected according to the contractual agreements. Management considers a loan payment delinquent when not received by the due date. As of September 30, 2016 and December 31, 2015, management concluded the loans receivable were not impaired, and there was no allowance for loan losses. |
Net Income Per Share | Net Income Per Share Basic net income per share has been computed by dividing net income by the weighted-average number of shares of common stock outstanding for the period. Diluted net income per share is computed by dividing net income by the weighted-average number of common equivalent shares outstanding for the period. Diluted net income per share includes any dilutive impact from outstanding stock options, stock awards and the employee stock purchase plan using the treasury stock method. The following is a reconciliation of the numerator and denominators of the basic and diluted net income per share computations (in thousands, except per share amounts): Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Numerator: Net income $ 10,116 $ 11,979 $ 24,318 $ 16,919 Denominator: Weighted-average shares outstanding used to compute basic net income per share 50,379 49,869 49,957 49,920 Effect of dilutive securities 2,216 2,257 2,525 2,424 Weighted-average shares outstanding used to compute diluted net income per share 52,595 52,126 52,482 52,344 Basic net income per share $ 0.20 $ 0.24 $ 0.49 $ 0.34 Diluted net income per share $ 0.19 $ 0.23 $ 0.46 $ 0.32 For the three months ended September 30, 2016 and 2015, outstanding stock options and awards for 2,394,941 and 1,514,534 shares were excluded from the calculation of diluted net income per share because the effect from the assumed exercise or issuance of these options and awards calculated under the treasury stock method would have been anti-dilutive. In addition, for the three months ended September 30, 2016 and 2015, outstanding stock options and awards for 275,000 and 312,500 shares, respectively, subject to performance conditions were excluded from the calculation of diluted net income per share because the performance criteria had not been met. For the nine months ended September 30, 2016 and 2015, outstanding stock options and awards for 2,151,751 and 1,043,815 shares, respectively, were excluded from the calculation of diluted net income per share because the effect from the assumed exercise or issuance of these options and awards calculated under the treasury stock method would have been anti-dilutive. In addition, for the nine months ended September 30, 2016 and 2015, outstanding stock options and awards for 275,000 and 325,137 shares, respectively, subject to performance conditions were excluded from the calculation of diluted net income per share because the performance criteria had not been met. |
Error Corrections | Error Corrections The Company revised its condensed consolidated statement of income for the nine months ended September 30, 2015 by reducing general and administrative expense and increasing sales and marketing expense by $0.7 million for costs incurred related to marketing events. The Company provided $1.3 million of additional income tax expense, and recorded a corresponding accrual in accrued and other current liabilities, during the nine months ended September 30, 2016 to correct an error. The error corrected reflected the recognition of a previously unrecognized liability for an uncertain tax position related to the potential nondeductibility, under the People’s Republic of China (“PRC”) tax regulations, of certain marketing costs related to the Company’s China operations. The adjustment related to tax years 2013 to 2015 and reflected the estimated tax exposure for each year as well as accrued interest thereon; such tax and interest amounts were $0.4 million, $0.5 million, and $0.4 million for the full years 2013, 2014, and 2015, respectively. The Company’s management evaluated the effects of the error on each prior annual and interim period, as well as the total error accumulated at the end of each respective prior period, and concluded under both approaches that the effects of the error were not material to previously issued annual or interim financial statements. The Company’s management also evaluated the total amount of the error correction in relation to projected results for full year 2016 and concluded the impact is not expected to be material to the projected annual results. Accordingly, the total adjustment was recorded out-of-period in the first nine months of 2016. Management also concluded that the relevant amounts were not material to current liabilities or stockholders’ equity in any prior period or the current period. |
New Accounting Standards Updates | New Accounting Standards Updates In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, "Revenue from Contracts with Customers (Topic 606)" , which contains new accounting literature relating to how and when a company recognizes revenue. Under ASU 2014-09, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. ASU 2014-09 is effective for the Company’s fiscal year beginning January 1, 2018, which reflects a one year deferral approved by the FASB in July 2015, with early application permitted provided that the effective date is not earlier than the original effective date. The Company is in the process of determining what impact, if any, the adoption of ASU 2014-09 will have on its financial statements and related disclosures. The standard permits the use of either the full retrospective or modified retrospective transition method. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting. In November 2015, the FASB issued ASU 2015-17, " Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”. This ASU amends existing guidance to require that deferred income tax liabilities and assets be classified as noncurrent in a classified balance sheet, and eliminates the prior guidance which required an entity to separate deferred tax liabilities and assets into a current amount and a noncurrent amount in a classified balance sheet. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted as of the beginning of an interim or annual period. Additionally, the new guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company has not yet selected an adoption method. The impact of adopting this guidance is not expected to be material to the consolidated financial statements given the Company’s deferred tax amounts. In January 2016, the FASB issued ASU 2016-01, “Financial Instruments (Topic 825): Recognition and Measurement of Financial Assets and Liabilities” . The amended guidance (i) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (ii) eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is currently required to be disclosed for financial instruments measured at fair value; (iii) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments and (iv) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, or calendar 2018 for the Company. The amended guidance should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The Company is evaluating the impact of adoption of this update on its consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 2016-02, “ Leases (Topic 842) ”. Under the new guidance, lessees will be required to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on the balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. This update is effective for the Company from calendar 2019 and from the first interim period of calendar 2019, with earlier application permitted. The Company is evaluating the impact of the adoption of this update on its consolidated financial statements and related disclosures. In March 2016, the FASB issued ASU 2016-09, “Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which outlines new provisions intended to simplify various aspects related to accounting for share-based payments and their presentation in the financial statements. The Company currently plans to implement this ASU as required in the first quarter of calendar 2017. The Company does not expect that the adoption will have a material impact on its consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, “ Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements. ” This ASU requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The standard is effective for the Company from calendar 2020, with early adoption permitted for calendar 2019. The Company has yet to commence an evaluation of the impact of the adoption of this standard on its consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments (Topic 230)." Current GAAP is unclear or does not include specific guidance on how to classify certain transactions in the statement of cash flows. This ASU is intended to reduce diversity in practice in how eight particular transactions are classified in the statement of cash flows. ASU No. 2016-15 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, provided that all of the amendments are adopted in the same period. Entities will be required to apply the guidance retrospectively. If it is impracticable to apply the guidance retrospectively for an issue, the amendments related to that issue would be applied prospectively. As the likelihood of the Company experiencing one or more of the eight particular specified transactions is low, ASU 2016-15 is not expected to have a material impact on the Company's consolidated financial statements . |
Basis Of Presentation (Tables)
Basis Of Presentation (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Basis Of Presentation [Abstract] | |
Reconciliation Of The Numerator And Denominators Of The Basic And Diluted Net Income Per Share Computations | Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Numerator: Net income $ 10,116 $ 11,979 $ 24,318 $ 16,919 Denominator: Weighted-average shares outstanding used to compute basic net income per share 50,379 49,869 49,957 49,920 Effect of dilutive securities 2,216 2,257 2,525 2,424 Weighted-average shares outstanding used to compute diluted net income per share 52,595 52,126 52,482 52,344 Basic net income per share $ 0.20 $ 0.24 $ 0.49 $ 0.34 Diluted net income per share $ 0.19 $ 0.23 $ 0.46 $ 0.32 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Measurements [Abstract] | |
Financial Assets And Liability Measured At Fair Value On A Recurring Basis | Fair Value Measurements as of September 30, 2016 Using Quoted Prices in Significant Active Markets Other Significant for Observable Unobservable Balance Identical Assets Inputs Inputs as of Description (Level 1) (Level 2) (Level 3) September 30, 2016 Money market funds $ 19,693 $ — $ — $ 19,693 Common stock investments in third party (Note 10) — 2,718 — 2,718 Total $ 19,693 $ 2,718 $ — $ 22,411 Fair Value Measurements as of December 31, 2015 Using Quoted Prices in Significant Active Markets Other Significant for Observable Unobservable Balance Identical Assets Inputs Inputs as of Description (Level 1) (Level 2) (Level 3) December 31, 2015 Money market funds $ 19,678 $ — $ — $ 19,678 Total $ 19,678 $ — $ — $ 19,678 |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Inventories [Abstract] | |
Schedule Of Inventories | September 30, December 31, 2016 2015 Raw materials $ 4,367 $ 3,871 Work in progress 258 535 Finished goods 9,126 6,570 $ 13,751 $ 10,976 |
Goodwill (Tables)
Goodwill (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Goodwill [Abstract] | |
Schedule Of Change In Goodwill | Balance as of December 31, 2015 $ 32,979 Translation adjustments (878) Balance as of September 30, 2016 $ 32,101 |
Accrued And Other Current Lia25
Accrued And Other Current Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Accrued And Other Current Liabilities [Abstract] | |
Schedule Of Accrued And Other Current Liabilities | September 30, December 31, 2016 2015 Accrued SEC settlement loss (Note 9) $ — $ 12,826 Accrued sales and marketing expenses 7,300 8,511 Accrued taxes, tax reserves and interest 5,772 4,323 Accrued compensation and benefits 3,881 4,341 Accrued professional fees 1,241 1,130 Accrued manufacturing costs 1,173 444 Other 515 576 $ 19,882 $ 32,151 |
Accumulated Other Comprehensi26
Accumulated Other Comprehensive Income (Loss) (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Accumulated Other Comprehensive Income (Loss) [Abstract] | |
Schedule Of Changes In The Composition Of Accumulated Other Comprehensive Income (Loss) | Balances as of July 1, 2016 $ 1,480 Other comprehensive loss related to foreign currency translation (123) Balances as of September 30, 2016 $ 1,357 Balances as of July 1, 2015 $ 3,307 Other comprehensive loss related to foreign currency translation (661) Balances as of September 30, 2015 $ 2,646 Balances as of January 1, 2016 $ 2,070 Other comprehensive loss related to foreign currency translation (713) Balances as of September 30, 2016 $ 1,357 Balances as of January 1, 2015 $ 3,264 Other comprehensive loss related to foreign currency translation (618) Balances as of September 30, 2015 $ 2,646 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Stockholders' Equity [Abstract] | |
Stock-Based Compensation Expenses Included In The Condensed Consolidated Statements Of Income | Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Sales and marketing $ 286 $ 217 $ 728 $ 685 Research and development 92 65 200 159 General and administrative 1,729 1,079 3,648 2,593 $ 2,107 $ 1,361 $ 4,576 $ 3,437 |
Segment Information And Geogr28
Segment Information And Geographic Data (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Segment Information And Geographic Data [Abstract] | |
Summary Information By Operating Segment | Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Revenue: China $ 38,315 $ 40,676 $ 110,442 $ 109,388 Rest of the World (including the US and Hong Kong) 2,229 2,204 5,592 5,006 Total net revenues $ 40,544 $ 42,880 $ 116,034 $ 114,394 Income (loss) from operations: China $ 14,500 $ 14,649 $ 41,154 $ 34,650 Rest of the World (including the US and Hong Kong) (4,049) (2,054) (15,326) (17,429) Total income from operations $ 10,451 $ 12,595 $ 25,828 $ 17,221 Non-operating income (expense), net: China $ 719 $ (44) $ 1,113 $ 288 Rest of the World (including the US and Hong Kong) 2 15 9 21 Total non-operating income (expense), net $ 721 $ (29) $ 1,122 $ 309 Income (loss) before provision for income tax: China $ 15,219 $ 14,605 $ 42,267 $ 34,938 Rest of the World (including the US and Hong Kong) (4,047) (2,039) (15,317) (17,408) Total income before provision for income tax $ 11,172 $ 12,566 $ 26,950 $ 17,530 |
Long-Lived Assets By Operating Segment | September 30, December 31, 2016 2015 China $ 47,755 $ 46,315 Rest of the World (including the US and Hong Kong) 1,370 1,783 $ 49,125 $ 48,098 |
Basis Of Presentation (Narrativ
Basis Of Presentation (Narrative) (Details) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||
May 31, 2015USD ($) | Sep. 30, 2016USD ($)shares | Mar. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Sep. 30, 2015USD ($)shares | Sep. 30, 2016USD ($)customershares | Sep. 30, 2015USD ($)shares | Dec. 31, 2015USD ($)customer | Dec. 31, 2014USD ($) | Dec. 31, 2013USD ($) | Mar. 31, 2015USD ($) | |
Basis of Presentation [Line Items] | |||||||||||
Product sales | $ 39,457,000 | $ 41,986,000 | $ 112,646,000 | $ 112,356,000 | |||||||
Write-downs related to inventory | 0 | 0 | 34,000 | 0 | |||||||
Allowance for loan losses | 0 | $ 0 | 0 | $ 0 | |||||||
Product returns reserve amount | 100,000 | 100,000 | |||||||||
General and administrative | 7,900,000 | 7,294,000 | 23,472,000 | 20,762,000 | |||||||
Sales and marketing | 13,320,000 | 15,073,000 | 40,104,000 | 39,746,000 | |||||||
Income tax expense | 1,056,000 | $ 587,000 | 2,632,000 | $ 611,000 | |||||||
Accrued and other current liabilities | $ 19,882,000 | 32,151,000 | $ 19,882,000 | 32,151,000 | |||||||
Uncertain tax position | 400,000 | $ 500,000 | $ 400,000 | ||||||||
Additional Customer [Member] | |||||||||||
Basis of Presentation [Line Items] | |||||||||||
Write-down of accounts receivable | 500,000 | ||||||||||
Receivable reserve | $ 500,000 | ||||||||||
Sinopharm [Member] | Sales Revenue, Net [Member] | |||||||||||
Basis of Presentation [Line Items] | |||||||||||
Concentration percentage | 92.00% | 98.00% | 92.00% | 92.00% | |||||||
Sinopharm [Member] | Accounts Receivable [Member] | |||||||||||
Basis of Presentation [Line Items] | |||||||||||
Concentration percentage | 92.00% | ||||||||||
Accounts receivable gross | $ 34,800,000 | $ 34,800,000 | |||||||||
Number of customers | customer | 1 | ||||||||||
ZADAXIN [Member] | Sales Revenue, Net [Member] | |||||||||||
Basis of Presentation [Line Items] | |||||||||||
Product sales | $ 37,800,000 | $ 39,200,000 | $ 107,900,000 | $ 105,900,000 | |||||||
Concentration percentage | 93.00% | 91.00% | 93.00% | 93.00% | |||||||
Restatement Adjustment [Member] | |||||||||||
Basis of Presentation [Line Items] | |||||||||||
General and administrative | $ (700,000) | ||||||||||
Sales and marketing | $ 700,000 | ||||||||||
Restatement Adjustment [Member] | Nine months ended September 30, 2016 [Member] | |||||||||||
Basis of Presentation [Line Items] | |||||||||||
Income tax expense | $ 1,300,000 | ||||||||||
Stock Options And Awards [Member] | |||||||||||
Basis of Presentation [Line Items] | |||||||||||
Shares excluded from the calculation of diluted net income (loss) per share | shares | 2,394,941 | 1,514,534 | 2,151,751 | 1,043,815 | |||||||
Stock Options And Awards Subject To Performance Conditions [Member] | |||||||||||
Basis of Presentation [Line Items] | |||||||||||
Shares excluded from the calculation of diluted net income (loss) per share | shares | 275,000 | 312,500 | 275,000 | 325,137 | |||||||
SPIL China [Member] | One Customer [Member] | |||||||||||
Basis of Presentation [Line Items] | |||||||||||
Accounts receivable gross | 1,900,000 | $ 1,900,000 | |||||||||
Number of customers | customer | 1 | ||||||||||
Period past due | 1 year | ||||||||||
Allowance for doubtful accounts, collected | $ 400,000 | $ 500,000 | $ 1,000,000 | ||||||||
Reduction to general and administrative expense | $ 500,000 | $ 400,000 | |||||||||
Receivable reserve | $ 100,000 | $ 500,000 | $ 100,000 | $ 500,000 |
Basis Of Presentation (Reconcil
Basis Of Presentation (Reconciliation Of The Numerator And Denominators Of The Basic And Diluted Net Income Per Share Computations) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Basis Of Presentation [Abstract] | ||||
Net income | $ 10,116 | $ 11,979 | $ 24,318 | $ 16,919 |
Weighted-average shares outstanding used to compute basic net income per share | 50,379 | 49,869 | 49,957 | 49,920 |
Effect of dilutive securities | 2,216 | 2,257 | 2,525 | 2,424 |
Weighted-average shares outstanding used to compute diluted net income per share | 52,595 | 52,126 | 52,482 | 52,344 |
Basic net income per share | $ 0.20 | $ 0.24 | $ 0.49 | $ 0.34 |
Diluted net income per share | $ 0.19 | $ 0.23 | $ 0.46 | $ 0.32 |
Fair Value Measurements (Financ
Fair Value Measurements (Financial Assets And Liability Measured At Fair Value On A Recurring Basis) (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets, Fair Value | $ 22,411 | $ 19,678 |
Quoted Prices In Active Markets For Identical Assets (Level 1) [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets, Fair Value | 19,693 | 19,678 |
Significant Other Observable Inputs (Level 2) [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets, Fair Value | 2,718 | |
Money Market Funds [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets, Fair Value | 19,693 | 19,678 |
Money Market Funds [Member] | Quoted Prices In Active Markets For Identical Assets (Level 1) [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets, Fair Value | 19,693 | $ 19,678 |
Common Stock Investments In Third Party (Note 10) [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets, Fair Value | 2,718 | |
Common Stock Investments In Third Party (Note 10) [Member] | Significant Other Observable Inputs (Level 2) [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets, Fair Value | $ 2,718 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Inventories [Abstract] | ||
Raw materials | $ 4,367 | $ 3,871 |
Work in progress | 258 | 535 |
Finished goods | 9,126 | 6,570 |
Total | 13,751 | 10,976 |
Inventory held at distributors | $ 3,000 | $ 3,300 |
Loans Receivable (Details)
Loans Receivable (Details) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||
May 31, 2013USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2015USD ($) | Sep. 30, 2016CNY (¥)loan | Sep. 30, 2016USD ($)loan | Sep. 30, 2015USD ($) | Dec. 31, 2015loan | Jun. 30, 2015USD ($) | Dec. 31, 2014USD ($) | Sep. 30, 2014CNY (¥) | |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||||
Commitment agreement, number of loan agreements | loan | 2 | 2 | 2 | |||||||
Interest and investment income | $ 270,000 | $ 252,000 | $ 792,000 | $ 614,000 | ||||||
Zensun [Member] | ||||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||||
Collateralized loan amount, maximum | $ 12,000,000 | |||||||||
SPIL China [Member] | Zensun [Member] | ||||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||||
Collateralized loan amount, maximum | 11,750,000 | |||||||||
Loan receivable | $ 11,750,000 | $ 11,750,000 | ||||||||
Interest rate | 7.50% | 7.50% | ||||||||
Expiration date | Sep. 26, 2017 | Sep. 26, 2017 | ||||||||
Collateralized loan, option to extend, period | 2 years | 2 years | ||||||||
Collateralized loan, extension, period | 2 years | 2 years | ||||||||
SciClone Pharmaceuticals (China) Ltd [Member] | Zensun [Member] | ||||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||||
Collateralized loan amount, maximum | ¥ | ¥ 1,550,000 | |||||||||
Loan receivable | $ 232,000 | $ 232,000 | ¥ 1,550,000 | |||||||
Interest rate | 7.50% | 7.50% | ||||||||
Term | 66 months | 66 months | ||||||||
SPIL China and SciClone Pharmaceuticals (China) Ltd [Member | Zensun [Member] | ||||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||||
Interest and investment income | $ 200,000 | $ 200,000 | $ 700,000 | $ 500,000 | ||||||
Loan One [Member] | Zensun [Member] | ||||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||||
Loan receivable | $ 12,000,000 | $ 12,000,000 | ||||||||
Loan One [Member] | SPIL China [Member] | Zensun [Member] | ||||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||||
Loan receivable | $ 4,500,000 | |||||||||
Loan Two [Member] | SPIL China [Member] | Zensun [Member] | ||||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||||
Loan receivable | $ 7,250,000 |
Goodwill (Schedule Of Changes I
Goodwill (Schedule Of Changes In Goodwill) (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Goodwill [Abstract] | |
Balance as of December 31, 2015 | $ 32,979 |
Translation adjustments | (878) |
Balance as of September 30, 2016 | $ 32,101 |
Accrued And Other Current Lia35
Accrued And Other Current Liabilities (Schedule Of Accrued And Other Current Liabilities) (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Accrued And Other Current Liabilities [Abstract] | ||
Accrued SEC settlement loss (Note 9) | $ 12,826 | |
Accrued sales and marketing expenses | $ 7,300 | 8,511 |
Accrued taxes, tax reserves and interest | 5,772 | 4,323 |
Accrued compensation and benefits | 3,881 | 4,341 |
Accrued professional fees | 1,241 | 1,130 |
Accrued manufacturing costs | 1,173 | 444 |
Other | 515 | 576 |
Total | $ 19,882 | $ 32,151 |
Accumulated Other Comprehensi36
Accumulated Other Comprehensive Income (Loss) (Schedule Of Changes In The Composition Of Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Accumulated Other Comprehensive Income (Loss) [Abstract] | ||||
Beginning balance | $ 1,480 | $ 3,307 | $ 2,070 | $ 3,264 |
Other comprehensive loss related to foreign currency translation | (123) | (661) | (713) | (618) |
Ending balance | $ 1,357 | $ 2,646 | $ 1,357 | $ 2,646 |
Stockholders' Equity (Narrative
Stockholders' Equity (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based compensation expenses recognized | $ 2,107 | $ 1,361 | $ 4,576 | $ 3,437 |
Share repurchase program, expiration date | Dec. 31, 2015 | |||
Stock repurchased and retired, shares | 1,526,306 | |||
Stock repurchased and retired, value | $ 12,800 | |||
Stock Options [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Unrecognized compensation expense, net of forfeitures | 7,400 | $ 7,400 | ||
Unrecognized compensation expense, weighted-average remaining period for recognition, in years | 2 years 6 months | |||
Common stock, options granted, shares | 1,390,000 | |||
Common stock, option exercises, shares | 1,630,359 | |||
RSUs [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Weighted average grant date fair value of options per share | $ 10.01 | |||
Unrecognized compensation expense, net of forfeitures | $ 4,300 | $ 4,300 | ||
Unrecognized compensation expense, weighted-average remaining period for recognition, in years | 1 year 5 months 23 days | |||
RSUs granted, shares | 315,000 | |||
RSUs vested, shares | 150,500 |
Stockholders' Equity (Stock-Bas
Stockholders' Equity (Stock-Based Compensation Expenses Included In The Condensed Consolidated Statements Of Income) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Stock-based compensation expenses recognized | $ 2,107 | $ 1,361 | $ 4,576 | $ 3,437 |
Sales And Marketing [Member] | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Stock-based compensation expenses recognized | 286 | 217 | 728 | 685 |
Research And Development [Member] | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Stock-based compensation expenses recognized | 92 | 65 | 200 | 159 |
General And Administrative [Member] | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Stock-based compensation expenses recognized | $ 1,729 | $ 1,079 | $ 3,648 | $ 2,593 |
Commitments And Contingencies (
Commitments And Contingencies (Details) - USD ($) | Apr. 30, 2014 | Apr. 02, 2014 | Feb. 29, 2016 | Sep. 30, 2015 | Jun. 30, 2015 | Dec. 31, 2013 | Sep. 30, 2015 | Dec. 31, 2015 | Oct. 07, 2015 |
Contingencies and Commitments [Line Items] | |||||||||
Estimated SEC/DOJ investigation loss | $ 26,000 | $ 10,800,000 | $ 2,000,000 | $ 10,826,000 | |||||
SEC settlement loss | $ 12,800,000 | ||||||||
Escrow released and SEC settlement paid | $ 12,800,000 | ||||||||
Escrow deposit | $ 12,826,000 | $ 12,800,000 | |||||||
NovaMed [Member] | |||||||||
Contingencies and Commitments [Line Items] | |||||||||
Reimbursement for unjust enrichment | $ 333,333 | ||||||||
Determination of reasonable compensation for services provided, including unjust enrichment | $ 3,314,629 |
Investments In Third Party (Nar
Investments In Third Party (Narrative) (Details) - USD ($) | Sep. 09, 2016 | Sep. 30, 2016 | Sep. 30, 2016 |
Business Acquisition [Line Items] | |||
Cash consideration | $ 2,718,000 | ||
Fair value of common stock | $ 2,718,000 | 2,718,000 | |
Soligenix [Member] | |||
Business Acquisition [Line Items] | |||
Shares purchased | 3,529,412 | ||
Cash consideration | $ 3,000,000 | ||
Unrealized gains (losses) on investment | 0 | ||
Research and development expense | $ 300,000 | $ 300,000 |
In-License Costs (Narrative) (D
In-License Costs (Narrative) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
In-License Agreement [Member] | ||||
Research and development expense | $ 0.3 | $ 0 | $ 2.3 | $ 5.5 |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Income Tax Disclosure [Line Items] | |||||
Provision for income tax | $ 1,056 | $ 587 | $ 2,632 | $ 611 | |
China [Member] | |||||
Income Tax Disclosure [Line Items] | |||||
Statutory income tax rate | 25.00% | 25.00% | |||
Nine months ended September 30, 2016 [Member] | Restatement Adjustment [Member] | |||||
Income Tax Disclosure [Line Items] | |||||
Provision for income tax | $ 1,300 |
Segment Information And Geogr43
Segment Information And Geographic Data (Summary Information By Operating Segment) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Segment Reporting Information [Line Items] | ||||
Revenue | $ 40,544 | $ 42,880 | $ 116,034 | $ 114,394 |
Income (loss) from operations | 10,451 | 12,595 | 25,828 | 17,221 |
Non-operating income (expense), net | 721 | (29) | 1,122 | 309 |
Income (loss) before provision for income tax | 11,172 | 12,566 | 26,950 | 17,530 |
China [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 38,315 | 40,676 | 110,442 | 109,388 |
Income (loss) from operations | 14,500 | 14,649 | 41,154 | 34,650 |
Non-operating income (expense), net | 719 | (44) | 1,113 | 288 |
Income (loss) before provision for income tax | 15,219 | 14,605 | 42,267 | 34,938 |
Rest of the World (including the US and Hong Kong) [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 2,229 | 2,204 | 5,592 | 5,006 |
Income (loss) from operations | (4,049) | (2,054) | (15,326) | (17,429) |
Non-operating income (expense), net | 2 | 15 | 9 | 21 |
Income (loss) before provision for income tax | $ (4,047) | $ (2,039) | $ (15,317) | $ (17,408) |
Segment Information And Geogr44
Segment Information And Geographic Data (Long-Lived Assets By Operating Segment) (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Segment Reporting Information [Line Items] | ||
Long-lived assets | $ 49,125 | $ 48,098 |
China [Member] | ||
Segment Reporting Information [Line Items] | ||
Long-lived assets | 47,755 | 46,315 |
Rest of the World (including the US and Hong Kong) [Member] | ||
Segment Reporting Information [Line Items] | ||
Long-lived assets | $ 1,370 | $ 1,783 |