Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | Apr. 20, 2018 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | LIGAND PHARMACEUTICALS INC | |
Entity Central Index Key | 886,163 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity common stock outstanding (shares) | 21,301,400 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 51,024 | $ 20,620 |
Short-term investments | 213,329 | 181,041 |
Investment in Viking | 27,535 | 0 |
Accounts receivable, net | 37,108 | 25,596 |
Note receivable from Viking | 3,877 | 3,877 |
Inventory | 10,531 | 4,373 |
Other current assets | 5,647 | 1,514 |
Total current assets | 349,051 | 237,021 |
Deferred income taxes | 69,368 | 84,422 |
Investment in Viking | 0 | 6,438 |
Intangible assets, net | 225,306 | 228,584 |
Goodwill | 85,961 | 85,959 |
Commercial license rights, net | 19,969 | 19,526 |
Property and equipment, net | 4,119 | 4,212 |
Other assets | 894 | 4,859 |
Total assets | 754,668 | 671,021 |
Current liabilities: | ||
Accounts payable | 3,407 | 2,259 |
Accrued liabilities | 8,480 | 7,377 |
Current contingent liabilities | 7,545 | 4,703 |
2019 convertible senior notes, net | 227,547 | 224,529 |
Total current liabilities | 246,979 | 238,868 |
Long-term contingent liabilities | 6,376 | 9,258 |
Long-term deferred revenue, net | 3,000 | 3,525 |
Other long-term liabilities | 1,135 | 723 |
Total liabilities | 257,490 | 252,374 |
Commitments and contingencies | ||
Equity component of currently redeemable convertible notes (Note 3) | 16,078 | 18,859 |
Stockholders' equity: | ||
Common stock, $0.001 par value; 33,333,333 shares authorized; 21,301,980 and 21,148,665 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively | 21 | 21 |
Additional paid-in capital | 808,765 | 798,205 |
Accumulated other comprehensive (loss) income | (286) | 2,486 |
Accumulated deficit | (327,400) | (400,924) |
Total stockholders' equity | 481,100 | 399,788 |
Total liabilities and stockholders' equity | $ 754,668 | $ 671,021 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Common stock, par value (USD per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (shares) | 33,333,333 | 33,333,333 |
Common stock, shares issued (shares) | 21,301,980 | 21,148,665 |
Common stock, shares outstanding (shares) | 21,301,980 | 21,148,665 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | ||
Revenues: | |||
Royalties | $ 20,820 | $ 24,230 | |
Material sales | 4,391 | 1,121 | |
License fees, milestones and other revenues | 30,946 | 3,916 | |
Total revenues | 56,157 | 29,267 | |
Operating costs and expenses: | |||
Cost of sales | [1] | 788 | 341 |
Amortization of intangibles | 3,278 | 2,715 | |
Research and development | 7,407 | 8,673 | |
General and administrative | 7,643 | 7,322 | |
Total operating costs and expenses | 19,116 | 19,051 | |
Income from operations | 37,041 | 10,216 | |
Other (expense) income: | |||
Interest expense, net | (2,605) | (2,941) | |
Increase in contingent liabilities | (960) | (140) | |
Gain (loss) from Viking | 21,097 | (1,083) | |
Other income, net | 739 | 141 | |
Total other income (expense), net | 18,271 | (4,023) | |
Income before income taxes | 55,312 | 6,193 | |
Income tax expense | (10,033) | (1,114) | |
Net income | $ 45,279 | $ 5,079 | |
Per share amounts: | |||
Basic net income per share (USD per share) | $ 2.13 | $ 0.24 | |
Shares used in basic per share calculations (shares) | 21,209,000 | 20,938,000 | |
Diluted net income per share (USD per share) | $ 1.83 | $ 0.22 | |
Shares used in diluted per share calculations (shares) | 24,800,314 | 23,019,189 | |
[1] | Excludes amortization of intangibles. |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Statement of Comprehensive Income [Abstract] | ||
Net income: | $ 45,279 | $ 5,079 |
Unrealized net gain on available-for-sale securities, net of tax | (149) | (66) |
Less: Reclassification of net realized gain included in net income, net of tax | 0 | 428 |
Comprehensive income | $ 45,130 | $ 5,441 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Operating activities | ||
Net income | $ 45,279 | $ 5,079 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Non-cash change in estimated fair value of contingent liabilities | 960 | 140 |
Depreciation and amortization | 3,002 | 2,979 |
Amortization of debt discount and issuance fees | 3,018 | 2,838 |
Stock-based compensation | 4,555 | 6,045 |
Deferred income taxes | 9,862 | 1,018 |
Change in fair value of the Viking convertible debt receivable and warrants | (748) | (76) |
(Gain) / loss from equity investments | (21,183) | 1,083 |
Changes in operating assets and liabilities: | ||
Payments to CVR holders and other contingency payments | 0 | (4,998) |
Royalties recorded in retained earnings upon adoption of ASU 606 | 32,707 | 0 |
Accounts receivable | (11,512) | 7,643 |
Inventory | (4,978) | (1,197) |
Accounts payable and accrued liabilities | 321 | (1,963) |
Other | (522) | 633 |
Net cash provided by operating activities | 60,761 | 19,224 |
Investing activities | ||
Payments to CVR holders and other contingency payments | (1,000) | 0 |
Purchase of short-term investments | (98,957) | (73,352) |
Proceeds from sale of short-term investments | 12,291 | 17,719 |
Proceeds from maturity of short-term investments | 54,325 | 30,052 |
Other | (240) | (87) |
Net cash used in investing activities | (33,581) | (25,668) |
Financing activities | ||
Net proceeds from stock option exercises and ESPP | 8,916 | 355 |
Taxes paid related to net share settlement of equity awards | (3,797) | (2,022) |
Share repurchase | (1,895) | 0 |
Net cash provided by (used in) provided by financing activities | 3,224 | (1,667) |
Net increase (decrease) in cash and cash equivalents | 30,404 | (8,111) |
Cash and cash equivalents at beginning of period | 20,620 | 18,752 |
Cash and cash equivalents at end of period | 51,024 | 10,641 |
Supplemental disclosure of cash flow information | ||
Interest paid | 919 | 919 |
Taxes paid | 171 | 96 |
Supplemental schedule of non-cash activity | ||
Accrued inventory purchases | 1,180 | 3,909 |
Unrealized gain (loss) on AFS investments | $ 0 | $ (66) |
Basis of Presentation and Summa
Basis of Presentation and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Summary of Significant Accounting Policies | Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation The Company’s condensed consolidated financial statements include the financial statements of Ligand and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. We have included all adjustments, consisting only of normal recurring adjustments, which we considered necessary for a fair presentation of our financial results. These unaudited condensed consolidated financial statements and accompanying notes should be read together with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 . Interim financial results are not necessarily indicative of the results that may be expected for the full year. Significant Accounting Policies The Company describes its significant accounting policies in Note 1 to the financial statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2017. Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. Actual results may differ from those estimates. Accounting Standards Recently Adopted Revenue Recognition - In May 2014, the FASB issued new guidance related to revenue recognition, ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”), which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. The new guidance requires a company to recognize revenue upon transfer of goods or services to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services. ASC 606 defines a five-step approach for recognizing revenue, which may require a company to use more judgment and make more estimates than under the current guidance. We adopted this new standard as of January 1, 2018, by using the modified-retrospective method. Financial Instruments - In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall ("Subtopic 825-10"), which requires equity investments (other than those accounted for under the equity method or those that result in consolidation) to be measured at fair value, with changes in fair value recognized in net income. We have strategic investments, including Viking, that fall under this guidance update. We have adopted ASU 2016-01 effective January 1, 2018 as a cumulative-effect adjustment and reclassified $2.6 million unrealized gains on equity investments, net of tax, from accumulated other comprehensive income to accumulated deficit on our consolidated balance sheet. Effective January 1, 2018, our results of operations include the changes in fair value of these financial instruments. See Viking subsection below for further information on the Viking investment. Statement of Cash Flows - In August 2016 the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. The new standard clarifies certain aspects of the statement of cash flows, and aims to reduce diversity in practice regarding how certain transactions are classified in the statement of cash flows. This standard was effective January 1, 2018. The Company adopted ASU No. 2016-15 effective January 1, 2018. We have updated our presentation of Payments to CVR holders and other contingency payments to conform to the standard and have revised our prior year cash flows accordingly. Accounting Standards Not Yet Adopted Financial Instruments - In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables and available for sale debt securities. The ASU is effective for us beginning in the first quarter of 2020, with early adoption permitted. We are currently evaluating the impact of ASU 2016-13 on the consolidated financial statements. We do not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on our consolidated financial statements or disclosures. Revenue Our revenue is generated primarily from royalties on sales of products commercialized by the Company's partners, Captisol material sales, license fees and development and regulatory milestone payments. On January 1, 2018, we adopted ASC 606 which amends the guidance for recognition of revenue from contracts with customers by using the modified-retrospective method applied to those contracts that were not completed as of January 1, 2018. The results for the reporting period beginning January 1, 2018, are presented in accordance with the new standard, although comparative information has not been restated and continues to be reported under the accounting standards and policies in effect for those periods. See Note 1, Summary of significant accounting policies, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2017. Upon adoption, we recorded a net decrease of $25.4 million to Accumulated deficit due to the cumulative impact of adopting the new standard—with the impact related primarily to the acceleration of royalty revenue, net of related deferred tax impact. The adoption of this new standard resulted in lower reported total revenues and operating income in the first quarter of 2018 of $11.9 million compared to what reported amounts would have been under the prior standard. Our accounting policies under the new standard were applied prospectively and are noted below. Royalties, License Fees and Milestones We receive royalty revenue on sales by our partners of products covered by patents that we own. We do not have future performance obligations under these license arrangements. We generally satisfy our obligation to grant intellectual property rights on the effective date of the contract. However, we apply the royalty recognition constraint required under the guidance for sales-based royalties which requires a sales-based royalty to be recorded no sooner than the underlying sale. Therefore, royalties on sales of products commercialized by the Company’s partners are recognized in the quarter the product is sold. Our partners generally report sales information to us on a one quarter lag. Thus, we estimate the expected royalty proceeds based on an analysis of historical experience and interim data provided by our partners including their publicly announced sales. Differences between actual and estimated royalty revenues are adjusted for in the period in which they become known, typically the following quarter. Our contracts with customers often will include future contingent milestone based payments. We include contingent milestone based payments in the estimated transaction price when there is a basis to reasonably estimate the amount of the payment. These estimates are based on historical experience, anticipated results and our best judgment at the time. If the contingent milestone based payment is sales-based we apply the royalty recognition constraint and record revenue when the underlying sale has taken place. Significant judgments must be made in determining the transaction price for our sales of intellectual property. Because of the risk that products in development with our partners will not reach development based milestones or receive regulatory approval, we generally recognize any contingent payments that would be due to us upon or after the development milestone or regulatory approval. Material Sales We recognize revenue when control of Captisol material or intellectual property license rights is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of the product, meaning the customer has the ability to use and obtain the benefit of the Captisol material or intellectual property license right. We recognize revenue for satisfied performance obligations only when we determine there are no uncertainties regarding payment terms or transfer of control. Sales tax and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. We expense incremental costs of obtaining a contract when incurred if the expected amortization period of the asset that we would have recognized is one year or less or the amount is immaterial. We did not incur any incremental costs of obtaining a contract during the periods reported. Depending on the terms of the arrangement, we may also defer a portion of the consideration received because we have to satisfy a future obligation. We use an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available. We have elected to recognize the cost for freight and shipping when control over Captisol material has transferred to the customer as an expense in cost of sales. The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the Consolidated Balance Sheet. Except for royalty revenue, we generally receive payment at the point we satisfy our obligation or soon after. Therefore, we do not generally carry a contract asset or contract liability balance. The Company has revenue sharing arrangements whereby certain revenue proceeds are shared with a third party. The revenue standard requires an entity to determine whether it is a principal or an agent in these transactions by evaluating the nature of its promise to the customer. The Company received a $4.6 million milestone payment from a license partner in the first quarter of 2018 of which $3.0 million was paid to a third-party in-licensor. The Company recorded net revenue of $1.6 million as it believes it was an agent in the transaction. Disaggregation of Revenue Under ASC 605, the legacy revenue standard, the Company would have reported total royalty revenue of $32.7 million in the first quarter of 2018, disaggregated as follows: Promacta $24.1 million , Kyprolis $6.5 million , Evomela $1.7 million and Other $0.4 M. In the first quarter of 2017 royalty revenue continues to be reported in accordance with ASC 605 and was $24.7 million or disaggregated as follows: Promacta $16.7 million , Kyprolis $4.6 million , Evomela, $1.9 million and Other $1.1 million . Royalty revenue was $20.8 million in first quarter of 2018 or disaggregated as follows: Promacta $15.6 million , Kyprolis $3.3 million , Evomela $1.6 million and Other $0.4 million . The following table represents disaggregation of Material Sales and License fees, milestone and other (in thousands): Three months ended March 31, 2018 2017 Material Sales Captisol $ 4,391 $ 1,121 License fees, milestones and other License Fees $ 26,955 $ 2,872 Milestone 2,825 1,008 Other 1,166 36 $ 30,946 $ 3,916 Short-term Investments The Company's investments consist of the following at March 31, 2018 and December 31, 2017 (in thousands): March 31, 2018 December 31, 2017 Amortized cost Gross unrealized gains Gross unrealized losses Estimated fair value Amortized cost Gross unrealized gains Gross unrealized losses Estimated fair value Short-term investments Bank deposits $ 94,855 $ 5 $ (97 ) $ 94,763 $ 80,095 $ 6 $ (42 ) $ 80,059 Corporate bonds 73,129 — (216 ) 72,913 55,335 — (96 ) 55,239 Commercial paper 29,977 — (26 ) 29,951 27,933 — (20 ) 27,913 U.S. Government bonds 11,964 — (22 ) 11,942 8,939 — (10 ) 8,929 Agency bonds — — — — 4,991 — (1 ) 4,990 Municipal bonds 2,014 — (12 ) 2,002 2,028 — (13 ) 2,015 Corporate equity securities 181 1,577 — 1,758 207 1,689 — 1,896 $ 212,120 $ 1,582 $ (373 ) $ 213,329 $ 179,528 $ 1,695 $ (182 ) $ 181,041 Inventory Inventory, which consists of finished goods, is stated at the lower of cost or market value. The Company determines cost using the first-in, first-out method. Goodwill and Other Identifiable Intangible Assets Goodwill and other identifiable intangible assets consist of the following (in thousands): March 31, December 31, 2018 2017 Indefinite lived intangible assets IPR&D $ 2,410 $ 7,923 Goodwill 85,961 85,959 Definite lived intangible assets Complete technology 228,413 222,900 Less: Accumulated amortization (26,176 ) (23,301 ) Trade name 2,642 2,642 Less: Accumulated amortization (949 ) (916 ) Customer relationships 29,600 29,600 Less: Accumulated amortization (10,634 ) (10,264 ) Total goodwill and other identifiable intangible assets, net $ 311,267 $ 314,543 Commercial License Rights Commercial license rights consist of the following (in thousands): March 31, December 31, 2018 2017 Aziyo and CorMatrix $ 17,696 $ 17,696 Selexis 8,602 8,602 $ 26,298 $ 26,298 Less: accumulated amortization (6,329 ) (6,772 ) Total commercial rights, net $ 19,969 $ 19,526 Commercial license rights represent a portfolio of future milestone and royalty payment rights acquired from Selexis in April 2013 and April 2015 and CorMatrix in May 2016. Individual commercial license rights acquired are carried at allocated cost and approximate fair value. In May 2017, the Company entered into a Royalty Agreement with Aziyo pursuant to which the Company will receive royalties from certain marketed products that Aziyo acquired from CorMatrix. The Company accounts for the Aziyo commercial license right as a financial asset in accordance with ASC 310 and amortizes the commercial license right using the 'effective interest' method whereby the Company forecasts expected cash flows over the term of the arrangement to arrive at an annualized effective interest. The annual effective interest associated with the forecasted cash flows from the Royalty Agreement with Aziyo as of March 31, 2018 is 26% . Revenue is calculated by multiplying the carrying value of the commercial license right by the effective interest. We elected a prospective approach to account for changes in estimated cash flows and selected a method for determining when an impairment would be recognized and how to measure that impairment. In circumstances where our new estimate of expected cash flows is greater than previously expected, we will update our yield prospectively. While it has not occurred to date, in circumstances where our new estimate of expected cash flows is less than previously expected and below our original estimated yield we will record impairment. Impairment will be recognized by reducing the financial asset to an amount that represents the present value of our most recent estimate of expected cash flows discounted by the original effective interest rate. In circumstances where our new estimate of expected cash flows is less than previously expected, but not below our original estimated yield, we will update our yield prospectively. The Company accounts for commercial license rights related to developmental pipeline products on a non-accrual basis. These developmental pipeline products are non-commercialized, non-approved products that require FDA or other regulatory approval, and thus have uncertain cash flows. The developmental pipeline products are on a non-accrual basis as the Company is not yet able to forecast future cash flows given their pre-commercial stages of development. The Company will prospectively update its yield model under the effective interest method once the underlying products are commercialized and the Company can reliably forecast expected cash flows. Income will be calculated by multiplying the carrying value of the commercial license right by the effective interest rate. Viking The Company's equity ownership interest in Viking decreased in the first quarter of 2018 to approximately 12.4% due to Viking's financing events in February 2018. As a result, in February 2018, the Company has concluded that it does not exert significant influence over Viking and has discontinued accounting for its investment in Viking under the equity method. The market value of the Company's equity investment in Viking was $27.5 million as of March 31, 2018 and as a result the Company recorded an unrealized gain of $21.1 million in Gain (loss) from Viking in its condensed consolidated statement of operations. The Company also has outstanding warrants to purchase 1.5 million shares of Viking's common stock at an exercise price of $1.50 per share and a convertible note receivable with 2.5% fixed rate interest due from Viking with a maturity date of May 21, 2018. The Company recorded the warrants and note receivable at the fair value of $4.6 million and $3.9 million at March 31, 2018 and $3.8 million and $3.9 million at December 31, 2017 , respectively. The following table presents summarized financial information of Viking (in thousands): Three months ended March 31, 2018 2017 Condensed Statement of Operations: Total revenue $ — $ — Gross profit $ — $ — Loss from operations $ 4,805 $ 4,968 Net Loss $ 3,551 $ 5,222 March 31, December 31, 2018 2017 Condensed Balance Sheet: Current assets $ 78,731 $ 21,852 Noncurrent assets 240 270 $ 78,971 $ 22,122 Current liabilities $ 6,339 $ 8,657 Noncurrent liabilities $ — $ — Stockholder's equity $ 72,632 $ 13,465 Accrued Liabilities Accrued liabilities consist of the following (in thousands): March 31, December 31, 2018 2017 Compensation $ 1,455 $ 4,085 Professional fees 497 430 Amounts owed to former licensees 3,417 396 Royalties owed to third parties 1,043 954 Deferred revenue 75 173 Other 1,993 1,339 Total accrued liabilities $ 8,480 $ 7,377 Stock-Based Compensation Stock-based compensation expense for awards to employees and non-employee directors is recognized on a straight-line basis over the vesting period until the last tranche vests. The following table summarizes stock-based compensation expense recorded as components of research and development expenses and general and administrative expenses for the periods indicated (in thousands): Three months ended March 31, 2018 2017 Stock-based compensation expense as a component of: Research and development expenses $ 1,767 $ 3,939 General and administrative expenses 2,788 2,106 $ 4,555 $ 6,045 The fair-value for options that were awarded to employees and directors was estimated at the date of grant using the Black-Scholes option valuation model with the following weighted-average assumptions: Three months ended March 31, 2018 2017 Risk-free interest rate 2.7% 2.1% Dividend yield — — Expected volatility 33% 47% Expected term 5.7 6.9 Lease Obligations The Company describes its operating lease obligations in Note 5 to the financial statements in Item 8 of its Annual Report on Form 10-K for the year ended December 31, 2017. There were no significant changes in the Company's operating lease commitments during the first three months of 2018. Income Per Share Basic income per share is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed based on the sum of the weighted average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of shares issuable under 2019 Convertible Senior Notes and the associated warrants, stock options and restricted stock. The 2019 Convertible Senior Notes have a dilutive impact when the average market price of the Company’s common stock exceeds the applicable conversion price of the notes. The warrants have a dilutive effect to the extent the market price per share of common stock exceeds the applicable exercise price of the warrants. Potentially dilutive common shares from stock options and restricted stock are determined using the average share price for each period under the treasury stock method. In addition, proceeds from exercise of stock options and the average amount of unrecognized compensation expense for restricted stock are assumed to be used to repurchase shares. In loss periods, basic net loss per share and diluted net loss per share are identical because the otherwise dilutive potential common shares become anti-dilutive and are therefore excluded. The following table presents the calculation of weighted average shares used to calculate basic and diluted earnings per share: Three months ended March 31, 2018 2017 Weighted average shares outstanding: 21,208,793 20,937,627 Dilutive potential common shares: Restricted stock 63,959 185,745 Stock options 1,119,611 954,509 2019 Convertible Senior Notes 1,719,099 941,308 Warrants 688,852 — Shares used to compute diluted income per share 24,800,314 23,019,189 Potentially dilutive shares excluded from calculation due to anti-dilutive effect 148,404 3,711,067 |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements The following table presents the Company's hierarchy for assets and liabilities measured at fair value. March 31, 2018 December 31, 2017 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Short-term investments (1) $ 29,292 $ 211,572 $ — $ 240,864 $ 1,896 $ 179,145 $ — $ 181,041 Note receivable Viking (2) — — 3,877 3,877 — — 3,877 3,877 Investment in warrants (3) 4,594 — — 4,594 3,846 — — 3,846 Total assets $ 33,886 $ 211,572 $ 3,877 $ 249,335 $ 5,742 $ 179,145 $ 3,877 $ 188,764 Liabilities: Current portion of contingent liabilities - Crystal (7) $ — $ — $ 3,618 $ 3,618 $ — $ — $ 4,618 4,618 Current contingent liabilities-CyDex (4) — — 86 86 — — 86 86 Long-term portion of contingent liabilities - Crystal (7) — — 3,783 3,783 — — 3,783 3,783 Long-term contingent liabilities-CyDex (4) — — 1,503 1,503 — — 1,503 1,503 Long-term contingent liabilities-Metabasis (5) — 1,089 — 1,089 — 3,971 — 3,971 Liability for amounts owed to former licensees (6) 264 — — 264 284 — — 284 Total liabilities $ 264 $ 1,089 $ 8,990 $ 10,343 $ 284 $ 3,971 $ 9,990 $ 14,245 (1) Investments in equity securities, which the Company received from Viking and another licensee as upfront and event-based payments, are classified as level 1 as the fair value is determined using quoted market prices in active markets for the same securities. Short-term investments in marketable debt securities with maturities greater than 90 days are classified as level 2 of the fair value hierarchy, as these investment securities are valued based upon quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. (2) The fair value of the convertible note receivable approximates the book value since it will mature in May 21, 2018. (3) Investment in warrants, which the Company received as a result of Viking’s partial repayment of the Viking note receivable and the Company’s purchase of Viking common stock and warrants in April 2016 , are classified as level 1 as the fair value is determined using quoted market prices in active markets for the same securities. The change of the fair value is recorded in the other income or expenses in the Company's condensed consolidated statement of operations. (4) The fair value of the liabilities for CyDex contingent liabilities were determined based on the income approach. To the extent the estimated future income may vary significantly given the long-term nature of the estimate, the Company utilizes a Monte Carlo model. The fair value is subjective and is affected by changes in inputs to the valuation model including management’s estimates of timing and probability of achievement of certain revenue thresholds and developmental and regulatory milestones which may be achieved and affect amounts owed to former license holders. Changes in these assumptions can materially affect the fair value estimate. (5) The liability for CVRs for Metabasis are determined using quoted prices in a market that is not active for the underlying CVR. At March 31, 2018 , the Company has a CVR payable of $3.8 million to the Glucagon CVR holders due on July 2, 2018, which is not included in the fair value disclosure. (6) The liability for amounts owed to former licensees are determined using quoted market prices in active markets for the underlying investment received from a partner, a portion of which is owed to former licensees. (7) The fair value of Crystal contingent liabilities was determined using a probability weighted income approach. Most of the contingent payments are based on development or regulatory milestones as defined in the merger agreement with Crystal. The fair value is subjective and is affected by changes in inputs to the valuation model including management’s estimates regarding the timing and probability of achievement of certain developmental and regulatory milestones. At March 31, 2018 , most of the development and regulatory milestones were estimated to be highly probable of being achieved between 2018 and 2019. Changes in these estimates may materially affect the fair value. For the three months ended March 31, 2018 , there was no change to the fair value of the contingent liabilities associated with CyDex or Crystal. The Company made a $1.0 million payment to the former shareholders of Crystal in the first quarter of 2018. The following table represents significant unobservable inputs used in determining the fair value of contingent liabilities assumed in the acquisition of CyDex: March 31, 2018 December 31, 2017 Revenue volatility 25% 25% Average probability of commercialization 12.5% 12.5% Market price of risk 2.9% 2.9% Other Fair Value Measurements 2019 Convertible Senior Notes In August 2014, the Company issued $245.0 million aggregate principal amount of its 2019 Convertible Senior Notes. The Company uses a quoted rate in a market that is not active, which is classified as a Level 2 input, to estimate the current fair value of its 2019 Convertible Senior Notes. The estimated fair value of the 2019 Senior Convertible Notes was $536.1 million as of March 31, 2018 . The carrying value of the notes does not reflect the market rate. Additionally, at the time of the convertible notes issuance, the Company entered into convertible bond hedges, which is not required to be measured or disclosed at fair value, to offset the impact of potential dilution to the Company's common stock upon the conversion of the notes. See Note 3 Convertible Senior Notes for additional information about the convertible notes and the bond hedges. |
Convertible Senior Notes
Convertible Senior Notes | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Convertible Senior Notes | Convertible Senior Notes In August 2014, the Company issued and as of March 31, 2018 had outstanding $245.0 million aggregate principal amount of 2019 Convertible Senior Notes due August 15, 2019. The effective rate of the liability component was estimated to be 5.83% . The 2019 Convertible Senior Notes are convertible into common stock at an initial conversion rate of 13.3251 shares per $1,000 principal amount of convertible notes, subject to adjustment upon certain events, which is equivalent to an initial conversion price of approximately $75.05 per share of common stock. The notes bear cash interest at a rate of 0.75% per year, payable semi-annually. Holders of the 2019 Convertible Senior Notes may convert the notes at any time prior to the close of business on the business day immediately preceding May 15, 2019, under any of the following circumstances: (1) during any fiscal quarter (and only during such fiscal quarter) commencing after December 31, 2014, if, for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading day period ending on the last trading day of the immediately preceding fiscal quarter, the last reported sale price of the Company's common stock on such trading day is greater than 130% of the conversion price on such trading day; (2) during the five business day period immediately following any 10 consecutive trading day period, in which the trading price per $1,000 principal amount of notes was less than 98% of the product of the last reported sale price of the Company's common stock on such trading day and the conversion rate on each such trading day; or (3) upon the occurrence of certain specified corporate events as specified in the indenture governing the notes. As of March 31, 2018 , the Company's last reported sale price has exceeded the 130% threshold described above and accordingly the Convertible Notes have been classified as a current liability as of March 31, 2018 . As a result, the related unamortized discount of $16.1 million was classified as temporary equity component of currently redeemable convertible notes on the Company's Condensed Consolidated Balance Sheet. The determination of whether or not the Convertible Notes are convertible as described above is made each quarter until maturity, conversion or repurchase. It is possible that the Convertible Notes may not be convertible in future periods, in which case the Convertible Notes would be classified as long-term debt, unless one of the other conversion events described above were to occur. On or after May 15, 2019 until the close of business on the second scheduled trading day immediately preceding August 15, 2019, holders of the notes may convert all or a portion of their notes at any time, regardless of the foregoing circumstances. Upon conversion, the Company must deliver cash to settle the principal and may deliver cash or shares of common stock, at its option, to settle any premium due upon conversion. The 2019 Convertible Senior Notes will have a dilutive effect to the extent the average market price per share of the Company's common stock for a given reporting period exceeds the conversion price of $75.05 per share. As of March 31, 2018 , the “if-converted value” exceeded the principal amount of the 2019 Convertible Senior Notes by $294.2 million . Upon the occurrence of certain circumstances, holders of the 2019 Convertible Senior Notes may redeem all or a portion of their notes, which may require the use of a substantial amount of cash. As of March 31, 2018, we had working capital of $102.1 million , which includes the 2019 Convertible Senior notes that are currently redeemable as of March 31, 2018 but excludes another $16.1 million that is classified as mezzanine equity. The debt may change from current to non-current period over period, primarily as a result of changes in the Company’s stock price. In the event that all the debt was converted, we have three business days following a 50 trading day observation period from the convert date to pay the principal in cash. We have positive operating income and positive cash flow from operations since December 31, 2013 and, accordingly, while there can be no assurance, we believe we have the ability to raise additional capital through an offering using a registration statement on form S-3 or via alternative financing arrangements such as convertible or straight debt. In March and April 2018, the Company received notices for conversion of $21.8 million in principal of 2019 Convertible Senior Notes. Convertible Bond Hedge and Warrant Transactions In August 2014, the Company entered into convertible bond hedges and sold warrants covering 3,264,643 shares of its common stock to minimize the impact of potential dilution to the Company's common stock upon conversion of the 2019 Convertible Senior Notes. The convertible bond hedges have an exercise price of $75.05 per share and are exercisable when and if the 2019 Convertible Senior Notes are converted. If upon conversion of the 2019 Convertible Senior Notes, the price of the Company's common stock is above the exercise price of the convertible bond hedges, the counterparties will deliver shares of common stock and/or cash with an aggregate value approximately equal to the difference between the price of common stock at the conversion date and the exercise price, multiplied by the number of shares of common stock related to the convertible bond hedge transaction being exercised. The convertible bond hedges and warrants described below are separate transactions entered into by the Company and are not part of the terms of the 2019 Convertible Senior Notes. Holders of the 2019 Convertible Senior Notes and warrants will not have any rights with respect to the convertible bond hedges. The Company paid $48.1 million for these convertible bond hedges and recorded the amount as a reduction to additional paid-in capital. Concurrently with the convertible bond hedge transactions, the Company entered into warrant transactions whereby it sold warrants to acquire approximately 3,264,643 shares of common stock with an exercise price of approximately $125.08 per share, subject to certain adjustments. The warrants have various expiration dates ranging from November 13, 2019 to April 22, 2020. The warrants will have a dilutive effect to the extent the market price per share of common stock exceeds the applicable exercise price of the warrants, as measured under the terms of the warrant transactions. The Company received $11.6 million for these warrants and recorded this amount to additional paid-in capital. The common stock issuable upon exercise of the warrants will be in unregistered shares, and the Company does not have the obligation and does not intend to file any registration statement with the Securities and Exchange Commission registering the issuance of the shares under the warrants. The following table summarizes information about the equity and liability components of the 2019 Convertible Senior Notes (in thousands). March 31, 2018 December 31, 2017 Principal amount outstanding $ 245,000 $ 245,000 Unamortized discount (including unamortized debt issuance cost) (17,453 ) (20,471 ) Total current portion of notes payable $ 227,547 $ 224,529 |
Income Tax
Income Tax | 3 Months Ended |
Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Tax | Income Tax The Company’s effective tax rate may vary from the U.S. federal statutory tax rate due to the change in the mix of earnings in various state jurisdictions with different statutory rates, benefits related to tax credits, and the tax impact of non-deductible expenses, stock award activities and other permanent differences between income before income taxes and taxable income. The effective tax rate for the three months ended March 31, 2018 and 2017 was 18% and 18% , respectively. The variance from the U.S. federal statutory tax rate of 21% in 2018 and 35% in 2017 was primarily attributable to tax deductions related to stock award activities which were recorded as discrete items in the quarter. The release of a valuation allowance relating to our investment in Viking also contributed to the variance from the U.S. federal statutory rate in the first quarter of 2018. We continue to evaluate the impact of the U.S. Tax Cuts and Jobs Act (Tax Act) and we have not adjusted our provisional tax estimates related to the Tax Act that we recorded in the fourth quarter of 2017. Our accounting remains incomplete as of March 31, 2018 and will be refined and, if necessary, adjusted throughout 2018 as required by SEC Staff Accounting Bulletin No. 118 (SAB 118). |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Stockholders' Equity | Stockholders’ Equity The Company grants options and awards to employees and non-employee directors pursuant to a stockholder approved stock incentive plan, which is described in further detail in Note 8, Stockholders' Equity, of Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017. The following is a summary of the Company’s stock option and restricted stock activity and related information: Stock Options Restricted Stock Awards Shares Weighted- Average Exercise Price Shares Weighted- Average Grant Date Fair Value Balance as of December 31, 2017 1,876,332 $ 53.17 133,294 $ 91.60 Granted 202,994 159.02 45,203 158.29 Options exercised/RSUs vested (133,800 ) 64.73 (53,501 ) 80.49 Balance as of March 31, 2018 1,945,526 $ 63.43 124,996 $ 120.48 As of March 31, 2018 , outstanding options to purchase 1.3 million shares were exercisable with a weighted average exercise price per share of $39.09 . Employee Stock Purchase Plan The price at which common stock is purchased under the Amended ESPP is equal to 85% of the fair market value of the common stock on the first or last day of the offering period, whichever is lower. As of March 31, 2018 , 67,394 shares were available for future purchases under the Amended ESPP. |
Litigation
Litigation | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Litigation | Litigation The Company records an estimate of a loss when the loss is considered probable and estimable. Where a liability is probable and there is a range of estimated loss and no amount in the range is more likely than any other number in the range, the Company records the minimum estimated liability related to the claim in accordance with FASB ASC Topic 450 Contingencies. As additional information becomes available, the Company assesses the potential liability related to its pending litigation and revises its estimates. Revisions in the Company's estimates of potential liability could materially impact its results of operations. In November 2017, CyDex, our wholly owned subsidiary, received a paragraph IV certification from Teva Pharmaceuticals USA, Inc., Teva Pharmaceutical Industries Ltd. and Actavis, LLC (collectively “Teva”) alleging that certain of our patents related to Captisol were invalid, unenforceable and/or will not be infringed by Teva’s ANDA related to Spectrum Pharmaceuticals’ NDA for Evomela. On December 20, 2017, CyDex filed a complaint against Teva in the U.S. District Court for the District of Delaware, asserting that Teva’s ANDA would infringe our patents. On March 22, Teva filed an answer and counterclaims seeking declarations of non-infringement and invalidity as to each of the asserted patents and on April 12, CyDex filed an answer to Teva’s counterclaims. |
Basis of Presentation and Sum13
Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The Company’s condensed consolidated financial statements include the financial statements of Ligand and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. We have included all adjustments, consisting only of normal recurring adjustments, which we considered necessary for a fair presentation of our financial results. These unaudited condensed consolidated financial statements and accompanying notes should be read together with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 . Interim financial results are not necessarily indicative of the results that may be expected for the full year. |
Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. Actual results may differ from those estimates. |
Accounting Standards Recently Adopted and Accounting Standards Not Yet Adopted | Accounting Standards Recently Adopted Revenue Recognition - In May 2014, the FASB issued new guidance related to revenue recognition, ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”), which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. The new guidance requires a company to recognize revenue upon transfer of goods or services to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services. ASC 606 defines a five-step approach for recognizing revenue, which may require a company to use more judgment and make more estimates than under the current guidance. We adopted this new standard as of January 1, 2018, by using the modified-retrospective method. Financial Instruments - In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall ("Subtopic 825-10"), which requires equity investments (other than those accounted for under the equity method or those that result in consolidation) to be measured at fair value, with changes in fair value recognized in net income. We have strategic investments, including Viking, that fall under this guidance update. We have adopted ASU 2016-01 effective January 1, 2018 as a cumulative-effect adjustment and reclassified $2.6 million unrealized gains on equity investments, net of tax, from accumulated other comprehensive income to accumulated deficit on our consolidated balance sheet. Effective January 1, 2018, our results of operations include the changes in fair value of these financial instruments. See Viking subsection below for further information on the Viking investment. Statement of Cash Flows - In August 2016 the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. The new standard clarifies certain aspects of the statement of cash flows, and aims to reduce diversity in practice regarding how certain transactions are classified in the statement of cash flows. This standard was effective January 1, 2018. The Company adopted ASU No. 2016-15 effective January 1, 2018. We have updated our presentation of Payments to CVR holders and other contingency payments to conform to the standard and have revised our prior year cash flows accordingly. Accounting Standards Not Yet Adopted Financial Instruments - In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables and available for sale debt securities. The ASU is effective for us beginning in the first quarter of 2020, with early adoption permitted. We are currently evaluating the impact of ASU 2016-13 on the consolidated financial statements. We do not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on our consolidated financial statements or disclosures. Revenue Our revenue is generated primarily from royalties on sales of products commercialized by the Company's partners, Captisol material sales, license fees and development and regulatory milestone payments. On January 1, 2018, we adopted ASC 606 which amends the guidance for recognition of revenue from contracts with customers by using the modified-retrospective method applied to those contracts that were not completed as of January 1, 2018. The results for the reporting period beginning January 1, 2018, are presented in accordance with the new standard, although comparative information has not been restated and continues to be reported under the accounting standards and policies in effect for those periods. See Note 1, Summary of significant accounting policies, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2017. Upon adoption, we recorded a net decrease of $25.4 million to Accumulated deficit due to the cumulative impact of adopting the new standard—with the impact related primarily to the acceleration of royalty revenue, net of related deferred tax impact. The adoption of this new standard resulted in lower reported total revenues and operating income in the first quarter of 2018 of $11.9 million compared to what reported amounts would have been under the prior standard. Our accounting policies under the new standard were applied prospectively and are noted below. Royalties, License Fees and Milestones We receive royalty revenue on sales by our partners of products covered by patents that we own. We do not have future performance obligations under these license arrangements. We generally satisfy our obligation to grant intellectual property rights on the effective date of the contract. However, we apply the royalty recognition constraint required under the guidance for sales-based royalties which requires a sales-based royalty to be recorded no sooner than the underlying sale. Therefore, royalties on sales of products commercialized by the Company’s partners are recognized in the quarter the product is sold. Our partners generally report sales information to us on a one quarter lag. Thus, we estimate the expected royalty proceeds based on an analysis of historical experience and interim data provided by our partners including their publicly announced sales. Differences between actual and estimated royalty revenues are adjusted for in the period in which they become known, typically the following quarter. Our contracts with customers often will include future contingent milestone based payments. We include contingent milestone based payments in the estimated transaction price when there is a basis to reasonably estimate the amount of the payment. These estimates are based on historical experience, anticipated results and our best judgment at the time. If the contingent milestone based payment is sales-based we apply the royalty recognition constraint and record revenue when the underlying sale has taken place. Significant judgments must be made in determining the transaction price for our sales of intellectual property. Because of the risk that products in development with our partners will not reach development based milestones or receive regulatory approval, we generally recognize any contingent payments that would be due to us upon or after the development milestone or regulatory approval. Material Sales We recognize revenue when control of Captisol material or intellectual property license rights is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of the product, meaning the customer has the ability to use and obtain the benefit of the Captisol material or intellectual property license right. We recognize revenue for satisfied performance obligations only when we determine there are no uncertainties regarding payment terms or transfer of control. Sales tax and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. We expense incremental costs of obtaining a contract when incurred if the expected amortization period of the asset that we would have recognized is one year or less or the amount is immaterial. We did not incur any incremental costs of obtaining a contract during the periods reported. Depending on the terms of the arrangement, we may also defer a portion of the consideration received because we have to satisfy a future obligation. We use an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available. We have elected to recognize the cost for freight and shipping when control over Captisol material has transferred to the customer as an expense in cost of sales. The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the Consolidated Balance Sheet. Except for royalty revenue, we generally receive payment at the point we satisfy our obligation or soon after. Therefore, we do not generally carry a contract asset or contract liability balance. The Company has revenue sharing arrangements whereby certain revenue proceeds are shared with a third party. The revenue standard requires an entity to determine whether it is a principal or an agent in these transactions by evaluating the nature of its promise to the customer. The Company received a $4.6 million milestone payment from a license partner in the first quarter of 2018 of which $3.0 million was paid to a third-party in-licensor. The Company recorded net revenue of $1.6 million as it believes it was an agent in the transaction. Disaggregation of Revenue Under ASC 605, the legacy revenue standard, the Company would have reported total royalty revenue of $32.7 million in the first quarter of 2018, disaggregated as follows: Promacta $24.1 million , Kyprolis $6.5 million , Evomela $1.7 million and Other $0.4 M. In the first quarter of 2017 royalty revenue continues to be reported in accordance with ASC 605 and was $24.7 million or disaggregated as follows: Promacta $16.7 million , Kyprolis $4.6 million , Evomela, $1.9 million and Other $1.1 million . Royalty revenue was $20.8 million in first quarter of 2018 or disaggregated as follows: Promacta $15.6 million , Kyprolis $3.3 million , Evomela $1.6 million and Other $0.4 million . The following table represents disaggregation of Material Sales and License fees, milestone and other (in thousands): Three months ended March 31, 2018 2017 Material Sales Captisol $ 4,391 $ 1,121 License fees, milestones and other License Fees $ 26,955 $ 2,872 Milestone 2,825 1,008 Other 1,166 36 $ 30,946 $ 3,916 |
Short-term Investments | Short-term Investments The Company's investments consist of the following at March 31, 2018 and December 31, 2017 (in thousands): March 31, 2018 December 31, 2017 Amortized cost Gross unrealized gains Gross unrealized losses Estimated fair value Amortized cost Gross unrealized gains Gross unrealized losses Estimated fair value Short-term investments Bank deposits $ 94,855 $ 5 $ (97 ) $ 94,763 $ 80,095 $ 6 $ (42 ) $ 80,059 Corporate bonds 73,129 — (216 ) 72,913 55,335 — (96 ) 55,239 Commercial paper 29,977 — (26 ) 29,951 27,933 — (20 ) 27,913 U.S. Government bonds 11,964 — (22 ) 11,942 8,939 — (10 ) 8,929 Agency bonds — — — — 4,991 — (1 ) 4,990 Municipal bonds 2,014 — (12 ) 2,002 2,028 — (13 ) 2,015 Corporate equity securities 181 1,577 — 1,758 207 1,689 — 1,896 $ 212,120 $ 1,582 $ (373 ) $ 213,329 $ 179,528 $ 1,695 $ (182 ) $ 181,041 |
Inventory | Inventory Inventory, which consists of finished goods, is stated at the lower of cost or market value. The Company determines cost using the first-in, first-out method. |
Goodwill and Other Identifiable Intangible Assets | Goodwill and Other Identifiable Intangible Assets Goodwill and other identifiable intangible assets consist of the following (in thousands): March 31, December 31, 2018 2017 Indefinite lived intangible assets IPR&D $ 2,410 $ 7,923 Goodwill 85,961 85,959 Definite lived intangible assets Complete technology 228,413 222,900 Less: Accumulated amortization (26,176 ) (23,301 ) Trade name 2,642 2,642 Less: Accumulated amortization (949 ) (916 ) Customer relationships 29,600 29,600 Less: Accumulated amortization (10,634 ) (10,264 ) Total goodwill and other identifiable intangible assets, net $ 311,267 $ 314,543 |
Commercial License Rights | Commercial License Rights Commercial license rights consist of the following (in thousands): March 31, December 31, 2018 2017 Aziyo and CorMatrix $ 17,696 $ 17,696 Selexis 8,602 8,602 $ 26,298 $ 26,298 Less: accumulated amortization (6,329 ) (6,772 ) Total commercial rights, net $ 19,969 $ 19,526 Commercial license rights represent a portfolio of future milestone and royalty payment rights acquired from Selexis in April 2013 and April 2015 and CorMatrix in May 2016. Individual commercial license rights acquired are carried at allocated cost and approximate fair value. In May 2017, the Company entered into a Royalty Agreement with Aziyo pursuant to which the Company will receive royalties from certain marketed products that Aziyo acquired from CorMatrix. The Company accounts for the Aziyo commercial license right as a financial asset in accordance with ASC 310 and amortizes the commercial license right using the 'effective interest' method whereby the Company forecasts expected cash flows over the term of the arrangement to arrive at an annualized effective interest. The annual effective interest associated with the forecasted cash flows from the Royalty Agreement with Aziyo as of March 31, 2018 is 26% . Revenue is calculated by multiplying the carrying value of the commercial license right by the effective interest. We elected a prospective approach to account for changes in estimated cash flows and selected a method for determining when an impairment would be recognized and how to measure that impairment. In circumstances where our new estimate of expected cash flows is greater than previously expected, we will update our yield prospectively. While it has not occurred to date, in circumstances where our new estimate of expected cash flows is less than previously expected and below our original estimated yield we will record impairment. Impairment will be recognized by reducing the financial asset to an amount that represents the present value of our most recent estimate of expected cash flows discounted by the original effective interest rate. In circumstances where our new estimate of expected cash flows is less than previously expected, but not below our original estimated yield, we will update our yield prospectively. The Company accounts for commercial license rights related to developmental pipeline products on a non-accrual basis. These developmental pipeline products are non-commercialized, non-approved products that require FDA or other regulatory approval, and thus have uncertain cash flows. The developmental pipeline products are on a non-accrual basis as the Company is not yet able to forecast future cash flows given their pre-commercial stages of development. The Company will prospectively update its yield model under the effective interest method once the underlying products are commercialized and the Company can reliably forecast expected cash flows. Income will be calculated by multiplying the carrying value of the commercial license right by the effective interest rate. |
Stock-Based Compensation | Stock-Based Compensation Stock-based compensation expense for awards to employees and non-employee directors is recognized on a straight-line basis over the vesting period until the last tranche vests. |
Lease Obligations | Lease Obligations The Company describes its operating lease obligations in Note 5 to the financial statements in Item 8 of its Annual Report on Form 10-K for the year ended December 31, 2017. There were no significant changes in the Company's operating lease commitments during the first three months of 2018. |
Income Per Share | Income Per Share Basic income per share is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed based on the sum of the weighted average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of shares issuable under 2019 Convertible Senior Notes and the associated warrants, stock options and restricted stock. The 2019 Convertible Senior Notes have a dilutive impact when the average market price of the Company’s common stock exceeds the applicable conversion price of the notes. The warrants have a dilutive effect to the extent the market price per share of common stock exceeds the applicable exercise price of the warrants. Potentially dilutive common shares from stock options and restricted stock are determined using the average share price for each period under the treasury stock method. In addition, proceeds from exercise of stock options and the average amount of unrecognized compensation expense for restricted stock are assumed to be used to repurchase shares. In loss periods, basic net loss per share and diluted net loss per share are identical because the otherwise dilutive potential common shares become anti-dilutive and are therefore excluded. |
Basis of Presentation and Sum14
Basis of Presentation and Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Revenue by Source | The following table represents disaggregation of Material Sales and License fees, milestone and other (in thousands): Three months ended March 31, 2018 2017 Material Sales Captisol $ 4,391 $ 1,121 License fees, milestones and other License Fees $ 26,955 $ 2,872 Milestone 2,825 1,008 Other 1,166 36 $ 30,946 $ 3,916 |
Schedule of Investment Categories | The Company's investments consist of the following at March 31, 2018 and December 31, 2017 (in thousands): March 31, 2018 December 31, 2017 Amortized cost Gross unrealized gains Gross unrealized losses Estimated fair value Amortized cost Gross unrealized gains Gross unrealized losses Estimated fair value Short-term investments Bank deposits $ 94,855 $ 5 $ (97 ) $ 94,763 $ 80,095 $ 6 $ (42 ) $ 80,059 Corporate bonds 73,129 — (216 ) 72,913 55,335 — (96 ) 55,239 Commercial paper 29,977 — (26 ) 29,951 27,933 — (20 ) 27,913 U.S. Government bonds 11,964 — (22 ) 11,942 8,939 — (10 ) 8,929 Agency bonds — — — — 4,991 — (1 ) 4,990 Municipal bonds 2,014 — (12 ) 2,002 2,028 — (13 ) 2,015 Corporate equity securities 181 1,577 — 1,758 207 1,689 — 1,896 $ 212,120 $ 1,582 $ (373 ) $ 213,329 $ 179,528 $ 1,695 $ (182 ) $ 181,041 |
Schedule of Goodwill and Other Identifiable Intangible Assets | Goodwill and other identifiable intangible assets consist of the following (in thousands): March 31, December 31, 2018 2017 Indefinite lived intangible assets IPR&D $ 2,410 $ 7,923 Goodwill 85,961 85,959 Definite lived intangible assets Complete technology 228,413 222,900 Less: Accumulated amortization (26,176 ) (23,301 ) Trade name 2,642 2,642 Less: Accumulated amortization (949 ) (916 ) Customer relationships 29,600 29,600 Less: Accumulated amortization (10,634 ) (10,264 ) Total goodwill and other identifiable intangible assets, net $ 311,267 $ 314,543 |
Schedule of Commercial License Rights | Commercial license rights consist of the following (in thousands): March 31, December 31, 2018 2017 Aziyo and CorMatrix $ 17,696 $ 17,696 Selexis 8,602 8,602 $ 26,298 $ 26,298 Less: accumulated amortization (6,329 ) (6,772 ) Total commercial rights, net $ 19,969 $ 19,526 |
Schedule of Accrued Liabilities | Accrued liabilities consist of the following (in thousands): March 31, December 31, 2018 2017 Compensation $ 1,455 $ 4,085 Professional fees 497 430 Amounts owed to former licensees 3,417 396 Royalties owed to third parties 1,043 954 Deferred revenue 75 173 Other 1,993 1,339 Total accrued liabilities $ 8,480 $ 7,377 |
Schedule of Accounting for Share-Based Compensation | The following table summarizes stock-based compensation expense recorded as components of research and development expenses and general and administrative expenses for the periods indicated (in thousands): Three months ended March 31, 2018 2017 Stock-based compensation expense as a component of: Research and development expenses $ 1,767 $ 3,939 General and administrative expenses 2,788 2,106 $ 4,555 $ 6,045 |
Schedule of Fair-Value Options Awarded to Employees and Directors | The fair-value for options that were awarded to employees and directors was estimated at the date of grant using the Black-Scholes option valuation model with the following weighted-average assumptions: Three months ended March 31, 2018 2017 Risk-free interest rate 2.7% 2.1% Dividend yield — — Expected volatility 33% 47% Expected term 5.7 6.9 |
Schedule of Computation of Basic and Diluted Net Income (Loss) per Share | The following table presents the calculation of weighted average shares used to calculate basic and diluted earnings per share: Three months ended March 31, 2018 2017 Weighted average shares outstanding: 21,208,793 20,937,627 Dilutive potential common shares: Restricted stock 63,959 185,745 Stock options 1,119,611 954,509 2019 Convertible Senior Notes 1,719,099 941,308 Warrants 688,852 — Shares used to compute diluted income per share 24,800,314 23,019,189 Potentially dilutive shares excluded from calculation due to anti-dilutive effect 148,404 3,711,067 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis | The following table presents the Company's hierarchy for assets and liabilities measured at fair value. March 31, 2018 December 31, 2017 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Short-term investments (1) $ 29,292 $ 211,572 $ — $ 240,864 $ 1,896 $ 179,145 $ — $ 181,041 Note receivable Viking (2) — — 3,877 3,877 — — 3,877 3,877 Investment in warrants (3) 4,594 — — 4,594 3,846 — — 3,846 Total assets $ 33,886 $ 211,572 $ 3,877 $ 249,335 $ 5,742 $ 179,145 $ 3,877 $ 188,764 Liabilities: Current portion of contingent liabilities - Crystal (7) $ — $ — $ 3,618 $ 3,618 $ — $ — $ 4,618 4,618 Current contingent liabilities-CyDex (4) — — 86 86 — — 86 86 Long-term portion of contingent liabilities - Crystal (7) — — 3,783 3,783 — — 3,783 3,783 Long-term contingent liabilities-CyDex (4) — — 1,503 1,503 — — 1,503 1,503 Long-term contingent liabilities-Metabasis (5) — 1,089 — 1,089 — 3,971 — 3,971 Liability for amounts owed to former licensees (6) 264 — — 264 284 — — 284 Total liabilities $ 264 $ 1,089 $ 8,990 $ 10,343 $ 284 $ 3,971 $ 9,990 $ 14,245 (1) Investments in equity securities, which the Company received from Viking and another licensee as upfront and event-based payments, are classified as level 1 as the fair value is determined using quoted market prices in active markets for the same securities. Short-term investments in marketable debt securities with maturities greater than 90 days are classified as level 2 of the fair value hierarchy, as these investment securities are valued based upon quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. (2) The fair value of the convertible note receivable approximates the book value since it will mature in May 21, 2018. (3) Investment in warrants, which the Company received as a result of Viking’s partial repayment of the Viking note receivable and the Company’s purchase of Viking common stock and warrants in April 2016 , are classified as level 1 as the fair value is determined using quoted market prices in active markets for the same securities. The change of the fair value is recorded in the other income or expenses in the Company's condensed consolidated statement of operations. (4) The fair value of the liabilities for CyDex contingent liabilities were determined based on the income approach. To the extent the estimated future income may vary significantly given the long-term nature of the estimate, the Company utilizes a Monte Carlo model. The fair value is subjective and is affected by changes in inputs to the valuation model including management’s estimates of timing and probability of achievement of certain revenue thresholds and developmental and regulatory milestones which may be achieved and affect amounts owed to former license holders. Changes in these assumptions can materially affect the fair value estimate. (5) The liability for CVRs for Metabasis are determined using quoted prices in a market that is not active for the underlying CVR. At March 31, 2018 , the Company has a CVR payable of $3.8 million to the Glucagon CVR holders due on July 2, 2018, which is not included in the fair value disclosure. (6) The liability for amounts owed to former licensees are determined using quoted market prices in active markets for the underlying investment received from a partner, a portion of which is owed to former licensees. (7) The fair value of Crystal contingent liabilities was determined using a probability weighted income approach. Most of the contingent payments are based on development or regulatory milestones as defined in the merger agreement with Crystal. The fair value is subjective and is affected by changes in inputs to the valuation model including management’s estimates regarding the timing and probability of achievement of certain developmental and regulatory milestones. At March 31, 2018 , most of the development and regulatory milestones were estimated to be highly probable of being achieved between 2018 and 2019. Changes in these estimates may materially affect the fair value. |
Schedule of CyDex Acquisition | The following table represents significant unobservable inputs used in determining the fair value of contingent liabilities assumed in the acquisition of CyDex: March 31, 2018 December 31, 2017 Revenue volatility 25% 25% Average probability of commercialization 12.5% 12.5% Market price of risk 2.9% 2.9% |
Convertible Senior Notes (Table
Convertible Senior Notes (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Carrying Values and Coupon Rates on Financing Arrangements | The following table summarizes information about the equity and liability components of the 2019 Convertible Senior Notes (in thousands). March 31, 2018 December 31, 2017 Principal amount outstanding $ 245,000 $ 245,000 Unamortized discount (including unamortized debt issuance cost) (17,453 ) (20,471 ) Total current portion of notes payable $ 227,547 $ 224,529 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Schedule of Stock Option Plan Activity | The following is a summary of the Company’s stock option and restricted stock activity and related information: Stock Options Restricted Stock Awards Shares Weighted- Average Exercise Price Shares Weighted- Average Grant Date Fair Value Balance as of December 31, 2017 1,876,332 $ 53.17 133,294 $ 91.60 Granted 202,994 159.02 45,203 158.29 Options exercised/RSUs vested (133,800 ) 64.73 (53,501 ) 80.49 Balance as of March 31, 2018 1,945,526 $ 63.43 124,996 $ 120.48 |
Schedule of Restricted Stock Activity | The following is a summary of the Company’s stock option and restricted stock activity and related information: Stock Options Restricted Stock Awards Shares Weighted- Average Exercise Price Shares Weighted- Average Grant Date Fair Value Balance as of December 31, 2017 1,876,332 $ 53.17 133,294 $ 91.60 Granted 202,994 159.02 45,203 158.29 Options exercised/RSUs vested (133,800 ) 64.73 (53,501 ) 80.49 Balance as of March 31, 2018 1,945,526 $ 63.43 124,996 $ 120.48 |
Basis of Presentation and Sum18
Basis of Presentation and Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands | Jan. 01, 2018 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | Aug. 31, 2014 |
Property, Plant and Equipment [Line Items] | |||||
Unrealized gains on equity investments | $ 0 | $ (66) | |||
Decrease in accumulated deficit | (327,400) | $ (400,924) | |||
Revenues | 56,157 | 29,267 | |||
Milestone payment received | 4,600 | ||||
Third-party in-licensor portion of milestone payment received | 3,000 | ||||
Net revenue from milestone method revenue | 1,600 | ||||
Operating income (loss) | 37,041 | 10,216 | |||
Gain (loss) from Viking | $ 21,097 | $ (1,083) | |||
Outstanding warrants to purchase shares of Viking's common stock (shares) | 3,264,643 | ||||
Warrant exercise price (USD per share) | $ 125.08 | ||||
Viking Therapeutics, Inc. | |||||
Property, Plant and Equipment [Line Items] | |||||
Equity method investment, ownership (percent) | 12.40% | ||||
Market value of investment in Viking | $ 27,500 | ||||
Outstanding warrants to purchase shares of Viking's common stock (shares) | 1,500,000 | ||||
Warrant exercise price (USD per share) | $ 1.50 | ||||
Recurring | |||||
Property, Plant and Equipment [Line Items] | |||||
Assets, fair value | $ 249,335 | 188,764 | |||
Recurring | Investment in Warrants | |||||
Property, Plant and Equipment [Line Items] | |||||
Assets, fair value | 4,594 | 3,846 | |||
Recurring | Note Receivable - Viking Therapeutics | |||||
Property, Plant and Equipment [Line Items] | |||||
Assets, fair value | 3,877 | 3,877 | |||
Recurring | Level 1 | |||||
Property, Plant and Equipment [Line Items] | |||||
Assets, fair value | 33,886 | 5,742 | |||
Recurring | Level 1 | Investment in Warrants | |||||
Property, Plant and Equipment [Line Items] | |||||
Assets, fair value | $ 4,594 | 3,846 | |||
Recurring | Level 1 | Note Receivable - Viking Therapeutics | |||||
Property, Plant and Equipment [Line Items] | |||||
Note receivable, stated interest rate (as a percent) | 2.50% | ||||
Assets, fair value | $ 0 | 0 | |||
Recurring | Level 3 | |||||
Property, Plant and Equipment [Line Items] | |||||
Assets, fair value | 3,877 | 3,877 | |||
Recurring | Level 3 | Investment in Warrants | |||||
Property, Plant and Equipment [Line Items] | |||||
Assets, fair value | 0 | 0 | |||
Recurring | Level 3 | Note Receivable - Viking Therapeutics | |||||
Property, Plant and Equipment [Line Items] | |||||
Assets, fair value | $ 3,877 | $ 3,877 | |||
Accounting Standards Update 2014-09 | Difference between Revenue Guidance in Effect before and after Topic 606 | |||||
Property, Plant and Equipment [Line Items] | |||||
Decrease in accumulated deficit | $ 25,400 | ||||
Revenues | (11,900) | ||||
Operating income (loss) | (11,900) | ||||
Accumulated Other Comprehensive Income | Accounting Standards Update 2016-01 | |||||
Property, Plant and Equipment [Line Items] | |||||
Unrealized gains on equity investments | (2,600) | ||||
Retained Earnings | Accounting Standards Update 2016-01 | |||||
Property, Plant and Equipment [Line Items] | |||||
Unrealized gains on equity investments | $ 2,000 | ||||
Royalty Agreements | Aziyo | |||||
Property, Plant and Equipment [Line Items] | |||||
Effective interest rate for forecasted cash flows (as a percent) | 26.00% |
Basis of Presentation and Sum19
Basis of Presentation and Summary of Significant Accounting Policies - Revenue by Source (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Royalties | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 20,800 | |
Promacta | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 15,600 | |
Kyprolis | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 3,300 | |
Evomela | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 1,600 | |
Other | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 400 | |
Material Sales: Captisol | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 4,391 | $ 1,121 |
License fees, milestones and other | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 30,946 | 3,916 |
License Fees | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 26,955 | 2,872 |
Milestone | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 2,825 | 1,008 |
Other | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 1,166 | 36 |
Calculated under Revenue Guidance in Effect before Topic 606 | Royalties | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 32,700 | 24,700 |
Calculated under Revenue Guidance in Effect before Topic 606 | Promacta | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 24,100 | 16,700 |
Calculated under Revenue Guidance in Effect before Topic 606 | Kyprolis | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 6,500 | 4,600 |
Calculated under Revenue Guidance in Effect before Topic 606 | Evomela | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 1,700 | 1,900 |
Calculated under Revenue Guidance in Effect before Topic 606 | Other | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 400 | $ 1,100 |
Basis of Presentation and Sum20
Basis of Presentation and Summary of Significant Accounting Policies - Investment Categories (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Summary of investment categories | ||
Amortized cost | $ 212,120 | $ 179,528 |
Gross unrealized gains | 1,582 | 1,695 |
Gross unrealized losses | (373) | (182) |
Estimated fair value | 213,329 | 181,041 |
Bank deposits | ||
Summary of investment categories | ||
Amortized cost | 94,855 | 80,095 |
Gross unrealized gains | 5 | 6 |
Gross unrealized losses | (97) | (42) |
Estimated fair value | 94,763 | 80,059 |
Corporate bonds | ||
Summary of investment categories | ||
Amortized cost | 73,129 | 55,335 |
Gross unrealized gains | 0 | 0 |
Gross unrealized losses | (216) | (96) |
Estimated fair value | 72,913 | 55,239 |
Commercial paper | ||
Summary of investment categories | ||
Amortized cost | 29,977 | 27,933 |
Gross unrealized gains | 0 | 0 |
Gross unrealized losses | (26) | (20) |
Estimated fair value | 29,951 | 27,913 |
U.S. Government bonds | ||
Summary of investment categories | ||
Amortized cost | 11,964 | 8,939 |
Gross unrealized gains | 0 | 0 |
Gross unrealized losses | (22) | (10) |
Estimated fair value | 11,942 | 8,929 |
Agency bonds | ||
Summary of investment categories | ||
Amortized cost | 0 | 4,991 |
Gross unrealized gains | 0 | 0 |
Gross unrealized losses | 0 | (1) |
Estimated fair value | 0 | 4,990 |
Municipal bonds | ||
Summary of investment categories | ||
Amortized cost | 2,014 | 2,028 |
Gross unrealized gains | 0 | 0 |
Gross unrealized losses | (12) | (13) |
Estimated fair value | 2,002 | 2,015 |
Corporate equity securities | ||
Summary of investment categories | ||
Amortized cost | 181 | 207 |
Gross unrealized gains | 1,577 | 1,689 |
Gross unrealized losses | 0 | 0 |
Estimated fair value | $ 1,758 | $ 1,896 |
Basis of Presentation and Sum21
Basis of Presentation and Summary of Significant Accounting Policies - Goodwill and Other Identifiable Intangible Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Summary of Goodwill and Other Identifiable Intangible Assets | ||
Goodwill | $ 85,961 | $ 85,959 |
Total goodwill and other identifiable intangible assets, net | 311,267 | 314,543 |
Complete technology | ||
Summary of Goodwill and Other Identifiable Intangible Assets | ||
Definite lived intangible assets | 228,413 | 222,900 |
Less: Accumulated amortization | (26,176) | (23,301) |
Trade name | ||
Summary of Goodwill and Other Identifiable Intangible Assets | ||
Definite lived intangible assets | 2,642 | 2,642 |
Less: Accumulated amortization | (949) | (916) |
Customer relationships | ||
Summary of Goodwill and Other Identifiable Intangible Assets | ||
Definite lived intangible assets | 29,600 | 29,600 |
Less: Accumulated amortization | (10,634) | (10,264) |
Commercial license rights | ||
Summary of Goodwill and Other Identifiable Intangible Assets | ||
Definite lived intangible assets | 26,298 | 26,298 |
Less: Accumulated amortization | (6,329) | (6,772) |
Total goodwill and other identifiable intangible assets, net | 19,969 | 19,526 |
Acquired in-process research and development | ||
Summary of Goodwill and Other Identifiable Intangible Assets | ||
IPR&D | 2,410 | 7,923 |
Aziyo and CorMatrix | Commercial license rights | ||
Summary of Goodwill and Other Identifiable Intangible Assets | ||
Definite lived intangible assets | 17,696 | 17,696 |
Selexis | Commercial license rights | ||
Summary of Goodwill and Other Identifiable Intangible Assets | ||
Definite lived intangible assets | $ 8,602 | $ 8,602 |
Basis of Presentation and Sum22
Basis of Presentation and Summary of Significant Accounting Policies - Financials of Viking (Details) - Viking - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Condensed Statement of Operations: | |||
Total revenue | $ 0 | $ 0 | |
Gross profit | 0 | 0 | |
Loss from operations | 4,805 | 4,968 | |
Net Loss | 3,551 | $ 5,222 | |
Condensed Balance Sheet: | |||
Current assets | 78,731 | $ 21,852 | |
Noncurrent assets | 240 | 270 | |
Total assets | 78,971 | 22,122 | |
Current liabilities | 6,339 | 8,657 | |
Noncurrent liabilities | 0 | 0 | |
Stockholder's equity | $ 72,632 | $ 13,465 |
Basis of Presentation and Sum23
Basis of Presentation and Summary of Significant Accounting Policies - Accrued Liabilities and Other Long-Term Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Accrued Liabilities | ||
Compensation | $ 1,455 | $ 4,085 |
Professional fees | 497 | 430 |
Amounts owed to former licensees | 3,417 | 396 |
Royalties owed to third parties | 1,043 | 954 |
Deferred revenue | 75 | 173 |
Other | 1,993 | 1,339 |
Total accrued liabilities | $ 8,480 | $ 7,377 |
Basis of Presentation and Sum24
Basis of Presentation and Summary of Significant Accounting Policies - Accounting for Share-Based Compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Basis of Presentation [Line Items] | ||
Share-based compensation expense | $ 4,555 | $ 6,045 |
Research and development expenses | ||
Basis of Presentation [Line Items] | ||
Share-based compensation expense | 1,767 | 3,939 |
General and administrative expenses | ||
Basis of Presentation [Line Items] | ||
Share-based compensation expense | $ 2,788 | $ 2,106 |
Basis of Presentation and Sum25
Basis of Presentation and Summary of Significant Accounting Policies - Fair Value Valuation Assumptions (Details) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Risk-free interest rate (as a percent) | 2.70% | 2.10% |
Dividend yield (as a percent) | 0.00% | 0.00% |
Expected volatility (as a percent) | 33.00% | 47.00% |
Expected term | 5 years 8 months | 6 years 11 months |
Basis of Presentation and Sum26
Basis of Presentation and Summary of Significant Accounting Policies - Earnings (Loss) Per Share (Details) - shares | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Summary of computation of basic and diluted net income (loss) per share | ||
Weighted average shares outstanding (shares) | 21,208,793 | 20,937,627 |
Dilutive potential common shares: | ||
Restricted stock (shares) | 63,959 | 185,745 |
Stock options (shares) | 1,119,611 | 954,509 |
2019 convertible senior notes (shares) | 1,719,099 | 941,308 |
Warrants (shares) | 688,852 | 0 |
Shares used to compute diluted income per share (shares) | 24,800,314 | 23,019,189 |
Potentially dilutive shares excluded from calculation due to anti-dilutive effect (shares) | 148,404 | 3,711,067 |
Fair Value Measurements - Narra
Fair Value Measurements - Narrative (Details) - USD ($) | 3 Months Ended | |||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | Aug. 31, 2014 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Repayments of related party debt | $ 1,000,000 | $ 0 | ||
2019 Convertible Senior Notes | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Aggregate principal amount outstanding | 245,000,000 | $ 245,000,000 | ||
Senior Notes | 2019 Convertible Senior Notes | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Aggregate principal amount outstanding | $ 245,000,000 | |||
Fair value of convertible debt | $ 536,100,000 |
Fair Value Measurements - Asset
Fair Value Measurements - Assets and Liabilities at Fair Value (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Recurring | ||
Assets: | ||
Assets, fair value | $ 249,335 | $ 188,764 |
Liabilities: | ||
Liabilities, fair value | 10,343 | 14,245 |
Recurring | Current contingent liabilities - Crystal | ||
Liabilities: | ||
Liabilities, fair value | 3,618 | 4,618 |
Recurring | Current contingent liabilities - CyDex | ||
Liabilities: | ||
Liabilities, fair value | 86 | 86 |
Recurring | Long-term contingent liabilities - Crystal | ||
Liabilities: | ||
Liabilities, fair value | 3,783 | 3,783 |
Recurring | Long-term contingent liabilities - CyDex | ||
Liabilities: | ||
Liabilities, fair value | 1,503 | 1,503 |
Recurring | Long-term contingent liabilities-Metabasis | ||
Liabilities: | ||
Liabilities, fair value | 1,089 | 3,971 |
Recurring | Liability for amounts owed to former licensees | ||
Liabilities: | ||
Liabilities, fair value | 264 | 284 |
Recurring | Short-term investments | ||
Assets: | ||
Assets, fair value | 240,864 | 181,041 |
Recurring | Note Receivable - Viking Therapeutics | ||
Assets: | ||
Assets, fair value | 3,877 | 3,877 |
Recurring | Investment in Warrants | ||
Assets: | ||
Assets, fair value | 4,594 | 3,846 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Assets: | ||
Assets, fair value | 33,886 | 5,742 |
Liabilities: | ||
Liabilities, fair value | 264 | 284 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Current contingent liabilities - Crystal | ||
Liabilities: | ||
Liabilities, fair value | 0 | 0 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Current contingent liabilities - CyDex | ||
Liabilities: | ||
Liabilities, fair value | 0 | 0 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Long-term contingent liabilities - Crystal | ||
Liabilities: | ||
Liabilities, fair value | 0 | 0 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Long-term contingent liabilities - CyDex | ||
Liabilities: | ||
Liabilities, fair value | 0 | 0 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Long-term contingent liabilities-Metabasis | ||
Liabilities: | ||
Liabilities, fair value | 0 | 0 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Liability for amounts owed to former licensees | ||
Liabilities: | ||
Liabilities, fair value | 264 | 284 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Short-term investments | ||
Assets: | ||
Assets, fair value | 29,292 | 1,896 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Note Receivable - Viking Therapeutics | ||
Assets: | ||
Assets, fair value | 0 | 0 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Investment in Warrants | ||
Assets: | ||
Assets, fair value | 4,594 | 3,846 |
Recurring | Significant Other Observable Inputs (Level 2) | ||
Assets: | ||
Assets, fair value | 211,572 | 179,145 |
Liabilities: | ||
Liabilities, fair value | 1,089 | 3,971 |
Recurring | Significant Other Observable Inputs (Level 2) | Current contingent liabilities - Crystal | ||
Liabilities: | ||
Liabilities, fair value | 0 | 0 |
Recurring | Significant Other Observable Inputs (Level 2) | Current contingent liabilities - CyDex | ||
Liabilities: | ||
Liabilities, fair value | 0 | 0 |
Recurring | Significant Other Observable Inputs (Level 2) | Long-term contingent liabilities - Crystal | ||
Liabilities: | ||
Liabilities, fair value | 0 | 0 |
Recurring | Significant Other Observable Inputs (Level 2) | Long-term contingent liabilities - CyDex | ||
Liabilities: | ||
Liabilities, fair value | 0 | 0 |
Recurring | Significant Other Observable Inputs (Level 2) | Long-term contingent liabilities-Metabasis | ||
Liabilities: | ||
Liabilities, fair value | 1,089 | 3,971 |
Recurring | Significant Other Observable Inputs (Level 2) | Liability for amounts owed to former licensees | ||
Liabilities: | ||
Liabilities, fair value | 0 | 0 |
Recurring | Significant Other Observable Inputs (Level 2) | Short-term investments | ||
Assets: | ||
Assets, fair value | 211,572 | 179,145 |
Recurring | Significant Other Observable Inputs (Level 2) | Note Receivable - Viking Therapeutics | ||
Assets: | ||
Assets, fair value | 0 | 0 |
Recurring | Significant Other Observable Inputs (Level 2) | Investment in Warrants | ||
Assets: | ||
Assets, fair value | 0 | 0 |
Recurring | Significant Unobservable Inputs (Level 3) | ||
Assets: | ||
Assets, fair value | 3,877 | 3,877 |
Liabilities: | ||
Liabilities, fair value | 8,990 | 9,990 |
Recurring | Significant Unobservable Inputs (Level 3) | Current contingent liabilities - Crystal | ||
Liabilities: | ||
Liabilities, fair value | 3,618 | 4,618 |
Recurring | Significant Unobservable Inputs (Level 3) | Current contingent liabilities - CyDex | ||
Liabilities: | ||
Liabilities, fair value | 86 | 86 |
Recurring | Significant Unobservable Inputs (Level 3) | Long-term contingent liabilities - Crystal | ||
Liabilities: | ||
Liabilities, fair value | 3,783 | 3,783 |
Recurring | Significant Unobservable Inputs (Level 3) | Long-term contingent liabilities - CyDex | ||
Liabilities: | ||
Liabilities, fair value | 1,503 | 1,503 |
Recurring | Significant Unobservable Inputs (Level 3) | Long-term contingent liabilities-Metabasis | ||
Liabilities: | ||
Liabilities, fair value | 0 | 0 |
Recurring | Significant Unobservable Inputs (Level 3) | Liability for amounts owed to former licensees | ||
Liabilities: | ||
Liabilities, fair value | 0 | 0 |
Recurring | Significant Unobservable Inputs (Level 3) | Short-term investments | ||
Assets: | ||
Assets, fair value | 0 | 0 |
Recurring | Significant Unobservable Inputs (Level 3) | Note Receivable - Viking Therapeutics | ||
Assets: | ||
Assets, fair value | 3,877 | 3,877 |
Recurring | Significant Unobservable Inputs (Level 3) | Investment in Warrants | ||
Assets: | ||
Assets, fair value | 0 | $ 0 |
Metabasis | Long-term contingent liabilities-Metabasis | ||
Liabilities: | ||
CVR payable to Metabasis | $ 3,800 |
Fair Value Measurements - Acqui
Fair Value Measurements - Acquisition of CyDex (Details) - Cydex Pharmaceuticals, Inc - Contingent Consideration Classified as Equity | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Credit Derivatives [Line Items] | ||
Revenue volatility (as a percent) | 25.00% | 25.00% |
Average probability of commercialization (as a percent) | 12.50% | 12.50% |
Market price of risk | 0.029 | 0.029 |
Convertible Senior Notes - Narr
Convertible Senior Notes - Narrative (Details) | 1 Months Ended | 2 Months Ended | 3 Months Ended | ||
Aug. 31, 2014USD ($)d$ / sharesshares | Apr. 30, 2018USD ($) | Mar. 31, 2018USD ($)d | Dec. 31, 2017USD ($) | Sep. 30, 2017USD ($) | |
Debt Instrument [Line Items] | |||||
Equity component of currently redeemable convertible notes (Note 3) | $ 16,078,000 | $ 18,859,000 | |||
Working capital deficit | $ 102,100,000 | ||||
Warrants issued in public offering (shares) | shares | 3,264,643 | ||||
Exercise price of convertible bond hedge (USD per share) | $ / shares | $ 75.05 | ||||
Payments for convertible bond hedges | $ 48,100,000 | ||||
Warrant exercise price (USD per share) | $ / shares | $ 125.08 | ||||
Value of warrants issued | $ 11,600,000 | ||||
2019 Convertible Senior Notes | |||||
Debt Instrument [Line Items] | |||||
Aggregate principal amount outstanding | $ 245,000,000 | $ 245,000,000 | |||
Senior Notes | 2019 Convertible Senior Notes | |||||
Debt Instrument [Line Items] | |||||
Aggregate principal amount outstanding | $ 245,000,000 | ||||
Discount rate (as a percent) | 5.83% | ||||
Initial conversion rate (shares per $1,000) | 0.0133251 | ||||
Initial conversion price (USD per share) | $ / shares | $ 75.05 | ||||
Interest rate (as a percent) | 0.75% | ||||
Threshold trading days | d | 3 | ||||
Consecutive trading days | d | 50 | ||||
If-converted value in excess of principal | $ 294,200,000 | ||||
Senior Notes | 2019 Convertible Senior Notes | Debt Instrument, Redemption, Period One | |||||
Debt Instrument [Line Items] | |||||
Threshold trading days | d | 20 | ||||
Consecutive trading days | d | 30 | ||||
Percentage of stock price trigger to classify convertible debt as current | 130.00% | 130.00% | |||
Senior Notes | 2019 Convertible Senior Notes | Debt Instrument, Redemption, Period Two | |||||
Debt Instrument [Line Items] | |||||
Threshold trading days | d | 5 | ||||
Consecutive trading days | d | 10 | ||||
Maximum threshold percentage of debt trading price trigger | 98.00% | ||||
Forecast | Senior Notes | 2019 Convertible Senior Notes | |||||
Debt Instrument [Line Items] | |||||
Notices for conversion | $ 21,800,000 |
Convertible Senior Notes - Note
Convertible Senior Notes - Notes Payable (Details) - 2019 Convertible Senior Notes - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Notes Payable, Current and Noncurrent [Abstract] | ||
Principal amount outstanding | $ 245,000,000 | $ 245,000,000 |
Unamortized discount (including unamortized debt issuance cost) | (17,453,000) | (20,471,000) |
Total current portion of notes payable | $ 227,547,000 | $ 224,529,000 |
Income Tax - Narrative (Details
Income Tax - Narrative (Details) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Effective income tax rate (as a percent) | 18.00% | 18.00% |
Federal statutory tax rate (as a percent) | 21.00% | 35.00% |
Stockholders' Equity - Stock Op
Stockholders' Equity - Stock Option Plan and Restricted Stock Activity (Details) | 3 Months Ended |
Mar. 31, 2018$ / sharesshares | |
Stock Options | |
Balance at beginning of period (shares) | shares | 1,876,332 |
Granted (shares) | shares | 202,994 |
Options exercised/RSUs vested (shares) | shares | (133,800) |
Balance at end of period (shares) | shares | 1,945,526 |
Weighted- Average Exercise Price | |
Balance at beginning of period (USD per share) | $ / shares | $ 53.17 |
Granted (USD per share) | $ / shares | 159.02 |
Options exercised/RSUs vested (USD per share) | $ / shares | 64.73 |
Balance at end of period (USD per share) | $ / shares | $ 63.43 |
Restricted Stock | |
Restricted Stock Awards | |
Nonvested at beginning of period (shares) | shares | 133,294 |
Granted (shares) | shares | 45,203 |
Exercised (shares) | shares | (53,501) |
Nonvested at end of period (shares) | shares | 124,996 |
Weighted- Average Grant Date Fair Value | |
Nonvested at beginning of period (USD per share) | $ / shares | $ 91.60 |
Granted (USD per share) | $ / shares | 158.29 |
Options exercised/RSUs vested (USD per share) | $ / shares | 80.49 |
Nonvested at end of period (USD per share) | $ / shares | $ 120.48 |
Stockholders' Equity - Narrativ
Stockholders' Equity - Narrative (Details) | 3 Months Ended |
Mar. 31, 2018$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding options that are exercisable (shares) | 1,300,000 |
Outstanding options that are exercisable, weighted average exercise price (USD per share) | $ / shares | $ 39.09 |
Employee Stock Purchase Plan | |
Employee Stock Purchase Plan | |
Share purchase price as percent of market price (as a percent) | 85.00% |
Shares available for future purchases (shares) | 67,394 |