Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | Apr. 30, 2014 | |
Document and Entity Information [Abstract] | ' | ' |
Entity Registrant Name | 'DISCOVERY LABORATORIES INC /DE/ | ' |
Entity Central Index Key | '0000946486 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Well-known Seasoned Issuer | 'No | ' |
Entity Voluntary Filers | 'No | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 85,052,281 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q1 | ' |
Document Type | '10-Q | ' |
Amendment Flag | 'false | ' |
Document Period End Date | 31-Mar-14 | ' |
Consolidated_Balance_Sheets_Un
Consolidated Balance Sheets (Unaudited) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current Assets: | ' | ' |
Cash and cash equivalents | $75,942 | $86,283 |
Accounts receivable | 0 | 67 |
Inventory, net | 173 | 112 |
Prepaid expenses and other current assets | 702 | 777 |
Total current assets | 76,817 | 87,239 |
Property and equipment, net | 2,007 | 1,656 |
Restricted cash | 325 | 325 |
Other assets | 349 | 97 |
Total assets | 79,498 | 89,317 |
Current Liabilities: | ' | ' |
Accounts payable | 2,578 | 1,433 |
Accrued expenses | 3,726 | 4,785 |
Deferred revenue | 85 | 139 |
Common stock warrant liability | 4,672 | 5,425 |
Equipment loans, current portion | 74 | 73 |
Total current liabilities | 11,135 | 11,855 |
Long-term debt, $30,000 net of discount of $11,207 at March 31, 2014 and $11,646 at December 31, 2013 | 18,793 | 18,354 |
Equipment loans, non-current portion | 49 | 69 |
Other liabilities | 714 | 538 |
Total liabilities | 30,691 | 30,816 |
Stockholders' Equity: | ' | ' |
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued or outstanding | 0 | 0 |
Common stock, $0.001 par value; 150,000,000 shares authorized; 85,073,173 and 84,659,111 shares issued at March 31, 2014 and December 31, 2013, respectively; 85,052,281 and 84,638,219 shares outstanding at March 31, 2014 and December 31, 2013, respectively | 85 | 85 |
Additional paid-in capital | 543,202 | 541,420 |
Accumulated deficit | -491,426 | -479,950 |
Treasury stock (at cost); 20,892 shares | -3,054 | -3,054 |
Total stockholders' equity | 48,807 | 58,501 |
Total liabilities & stockholders' equity | $79,498 | $89,317 |
Consolidated_Balance_Sheets_Un1
Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, except Share data, unless otherwise specified | ||
LIABILITIES & STOCKHOLDERS' EQUITY | ' | ' |
Long term debt, gross | $30,000 | $30,000 |
Long-term debt, discount | $11,207 | $11,646 |
Stockholders' Equity: | ' | ' |
Preferred stock, par value (in dollars per share) | $0.00 | $0.00 |
Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $0.00 | $0.00 |
Common stock, shares authorized (in shares) | 150,000,000 | 150,000,000 |
Common stock, shares issued (in shares) | 85,073,173 | 84,659,111 |
Common stock, shares outstanding (in shares) | 85,052,281 | 84,638,219 |
Treasury stock (at cost) (in shares) | 20,892 | 20,892 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (Unaudited) (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Revenues: | ' | ' |
Product sales | $28 | $0 |
Grant revenue | 3 | 72 |
Total revenues | 31 | 72 |
Expenses: | ' | ' |
Cost of product sales | 781 | 0 |
Research and development | 5,590 | 8,472 |
Selling, general and administrative | 4,423 | 4,220 |
Total expenses | 10,794 | 12,692 |
Operating loss | -10,763 | -12,620 |
Change in fair value of common stock warrant liability | 378 | 162 |
Other income / (expense): | ' | ' |
Interest and other income | 2 | 1 |
Interest and other expense | -1,093 | -178 |
Other income / (expense), net | -1,091 | -177 |
Net loss | ($11,476) | ($12,635) |
Net loss per common share - Basic and diluted (in dollars per share) | ($0.14) | ($0.29) |
Weighted average number of common shares outstanding - basic and diluted (in shares) | 84,728 | 43,657 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (Unaudited) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Cash flow from operating activities: | ' | ' |
Net loss | ($11,476) | ($12,635) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Depreciation and amortization | 149 | 197 |
Provision for excess inventory | 766 | 0 |
Stock-based compensation and 401(k) Plan employer match | 954 | 612 |
Fair value adjustment of common stock warrants | -378 | -162 |
Amortization of discount on long-term debt | 439 | 59 |
Changes in: | ' | ' |
Inventory | -1,083 | 195 |
Accounts receivable | 67 | 0 |
Prepaid expenses and other current assets | 75 | 98 |
Accounts payable | 1,145 | 659 |
Accrued expenses | -1,059 | 814 |
Deferred revenue | -54 | 0 |
Other assets | 0 | -111 |
Other liabilities | 176 | 39 |
Net cash used in operating activities | -10,279 | -10,235 |
Cash flows from investing activities: | ' | ' |
Purchase of property and equipment | -497 | -120 |
Net cash used in investing activities | -497 | -120 |
Cash flows from financing activities: | ' | ' |
Proceeds from issuance of long-term debt, net of expenses | 0 | 9,850 |
Proceeds from exercise of common stock options | 31 | 1 |
Proceeds from exercise of common stock warrants | 423 | 0 |
Repayment of equipment loans | -19 | -18 |
Net cash provided by financing activities | 435 | 9,833 |
Net decrease in cash and cash equivalents | -10,341 | -522 |
Cash and cash equivalents - beginning of period | 86,283 | 26,892 |
Cash and cash equivalents - end of period | 75,942 | 26,370 |
Supplementary disclosure of cash flows information: | ' | ' |
Interest paid | $649 | $116 |
Organization_and_Business
Organization and Business | 3 Months Ended |
Mar. 31, 2014 | |
Organization and Business [Abstract] | ' |
Organization and Business | ' |
Note 1 – Organization and Business | |
Discovery Laboratories, Inc. (referred to as “we,” “us,” or the “Company”) is a specialty biotechnology company focused on creating life-saving products for critical-care patients with respiratory disease and improving the standard of care in pulmonary medicine. Our proprietary drug technology produces a synthetic, peptide-containing surfactant (KL4 surfactant) that is structurally similar to pulmonary surfactant, a substance produced naturally in the lung and essential for normal respiratory function and survival. We are developing our KL4 surfactant in liquid, lyophilized and aerosolized dosage forms. We are also developing novel drug delivery technologies potentially to enable efficient delivery of our aerosolized KL4 surfactant. We believe that our proprietary technologies may make it possible, for the first time, to develop a significant pipeline of products to address a variety of respiratory diseases for which there frequently are few or no approved therapies. | |
We are initially focused on improving the management of respiratory distress syndrome (RDS) in premature infants. RDS is a serious respiratory condition caused by insufficient surfactant production in underdeveloped lungs of premature infants. RDS is the most prevalent respiratory disease in the Neonatal Intensive Care Unit (NICU) and can result in long-term respiratory problems, developmental delay and death. Our first KL4 surfactant drug product, SURFAXIN® (lucinactant) Intratracheal Suspension for the prevention of RDS in premature infants at high risk for RDS, was approved by the United States Food and Drug Administration (FDA) in 2012. SURFAXIN is our KL4 surfactant in liquid form, and is the first synthetic, peptide-containing surfactant approved by the FDA and the only alternative to animal-derived surfactants currently used in the United States (U.S.). SURFAXIN has been commercially available in the U.S. since November 2013. | |
Premature infants with severe RDS currently are treated with surfactants that can only be administered by endotracheal intubation supported with mechanical ventilation, both invasive procedures that may each result in serious respiratory conditions and other complications. To avoid such complications, many neonatologists treat infants with less severe RDS by less invasive means, typically nasal continuous positive airway pressure (nCPAP). Unfortunately, a significant number of premature infants on nCPAP will not respond well (an outcome referred to as nCPAP failure) and thereafter may require delayed surfactant therapy. Since neonatologists currently cannot predict which infants will experience nCPAP failure, neonatologists are faced with difficult choices in treating infants with less severe RDS. This is because the medical outcomes for those infants who experience nCPAP failure and receive delayed surfactant therapy may be less favorable than the outcomes for infants who receive surfactant therapy in the first hours of life. | |
AEROSURF® is our investigational combination drug/device product that combines our KL4 surfactant with our proprietary capillary aerosol generator (CAG). AEROSURF potentially will enable administration of aerosolized KL4 surfactant to premature infants supported with nCPAP, without invasive intubation and mechanical ventilation. By enabling delivery of our KL4 surfactant using less invasive procedures, we believe that AEROSURF may address a serious unmet medical need and potentially enable the treatment of a significantly greater number of premature infants with RDS who could benefit from surfactant therapy but are currently not treated. | |
We are also developing a lyophilized (freeze-dried) dosage form of our KL4 surfactant that is stored as a powder and reconstituted to liquid form prior to use with the objective of improving ease of use for healthcare practitioners, as well as potentially to prolong shelf life and eliminate the need for cold-chain storage. We are initially developing this dosage form for use in our AEROSURF development program. We are also planning to seek regulatory advice to determine if we could gain marketing authorization for a lyophilized dosage form of SURFAXIN under a development plan that would be both capital efficient and capable of implementation within a reasonable time. If feasible, we would likely implement such a development plan and would plan to introduce it commercially as a life-cycle extension of SURFAXIN under the name SURFAXIN LS™, in the U.S. and potentially in other markets. | |
To support the commercial introduction of SURFAXIN in the U.S. and our other KL4 surfactant pipeline products, if approved, we have established our own specialty respiratory critical care commercial and medical affairs team. This team includes medical professionals with experience in neonatal/pediatric respiratory critical care, and has focused on products that address neonatal indications, beginning with SURFAXIN. We believe that this team will be positioned to efficiently introduce our other KL4 surfactant products under development, if approved, including AEROSURF and potentially SURFAXIN LS and future applications of our aerosolized KL4 surfactant. | |
In addition, we recognize that our commercial and medical affairs team could potentially support introductions of other synergistic pipeline products, including products owned or developed by third parties for the NICU/PICU. To that end, we would consider potential transactions focused on securing commercial rights to such synergistic products, including in the form of product acquisitions, in-licensing agreements or distribution, marketing or co-marketing arrangements. | |
In the future, we expect that we may be able to leverage the information, data and know-how that we gain from our development efforts with SURFAXIN and AEROSURF to support development of a product pipeline to address serious critical care respiratory conditions in larger children and adults in pediatric and adult intensive care units (PICUs and ICUs), including potentially acute lung injury (ALI), chronic obstructive pulmonary disorder (COPD) and cystic fibrosis (CF). At the present time, however, we are focusing our resources primarily on the commercial introduction of SURFAXIN and development of AEROSURF through phase 2 clinical trials. Once we have advanced these objectives, we expect to be in a better position to assess the potential of other development programs to address the critical care needs of patients in the PICU and ICU. | |
We also have developed a disposable aerosol-conducting airway connector for infants that is intended to simplify the delivery of aerosolized medications (including our aerosolized KL4 surfactant) and other inhaled therapies to critical-care patients requiring ventilatory support. This device introduces aerosolized medications directly at the patient interface and minimizes the number of connections in the ventilator circuit. We have registered this device in the U.S. as a Class I, exempt medical device under the name AFECTAIR® and it is currently commercially available in the U.S. |
Liquidity_Risks_and_Management
Liquidity Risks and Management's Plans | 3 Months Ended |
Mar. 31, 2014 | |
Liquidity Risks and Management's Plans [Abstract] | ' |
Liquidity Risks and Management's Plans | ' |
Note 2 – Liquidity Risks and Management’s Plans | |
We have incurred substantial losses since inception, due to investments in research and development, manufacturing, and, more recently, commercialization and medical affairs activities, and we expect to continue to incur substantial losses over the next several years. Historically, we have funded our business operations through various sources, including public and private securities offerings, debt facilities, strategic alliances, the use of committed equity financing facilities (CEFFs) and at-the-market equity programs, and capital equipment financings. | |
As of March 31, 2014, we had cash and cash equivalents of $75.9 million and long-term debt of $30 million ($18.8 million net of discount) under our Deerfield Loan with affiliates of Deerfield Management Company, L.P. (Deerfield) (see, Note 7 – “Deerfield Loan”) . Before any additional financings, including under our ATM Program (see, Note 11, “At-the-Market Program (ATM Program),” to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2013 (2013 Form 10‑K)), we anticipate that we will have sufficient cash available to fund our operations and debt service obligations through the third quarter of 2015. | |
Our future capital requirements depend upon many factors, primarily the success of our efforts to (i) execute the commercial introduction of SURFAXIN in the U.S.; (ii) advance the AEROSURF development program to completion of the phase 2 clinical program as planned in the second half of 2015; and (iii) secure one or more strategic alliances or other collaboration arrangements (a) to support the development and, if approved, commercial introduction of AEROSURF in markets outside the U.S., including potentially in the European Union, and (b) to support the regulatory approval process and commercial introduction of SURFAXIN in certain markets outside the U.S. We believe that, if we are able to complete the AEROSURF phase 2 clinical program on a timely basis and obtain encouraging results, and if we are able to advance the commercial introduction of SURFAXIN, our ability to enter into a significant strategic alliance will be enhanced. There can be no assurance, however, that our efforts will be successful, or that, even if successful, we will be able to obtain additional capital to support our activities when needed on acceptable terms, if at all. | |
For the next several years, we expect that our cash outflows for marketing, commercial and medical activities, development programs, operations and debt service will outpace the rate at which we may generate revenues. To execute our business strategy and fund our operations over the next several years, we will require significant additional infusions of capital until such time as the net revenues from the sale of approved products and from other sources are sufficient to offset our cash flow requirements. While we currently intend to retain all rights and commercialize our approved products in the U.S., an important priority for us is to secure additional capital and strategic resources to support the continued development and commercial introduction of our RDS products in markets outside the U.S. For our AEROSURF development program, we are seeking a significant strategic alliance that potentially could provide development, regulatory and commercial market expertise as well as financial resources, and, if approved, support the commercial introduction of AEROSURF in the EU and other selected markets outside the U.S. Such alliances typically also would provide financial resources, in the form of upfront payments, milestone payments, commercialization royalties and a sharing of research and development expenses. To advance SURFAXIN in markets outside the U.S. where regulatory marketing authorization is facilitated by the information contained in our new drug application (NDA) approved by the FDA, we would consider various financing or collaboration arrangements that could provide regulatory expertise, support the commercial introduction of SURFAXIN in markets outside the U.S., and potentially provide a sharing of revenues. Such countries could potentially include those in Latin America, North Africa and the Middle East. We also plan to consider other public and private equity offerings, including under our ATM Program, which currently may allow for the sale of up to approximately $23 million of our commons stock (see, Note 11, “At-the-Market Program (ATM Program)”), as well as other financing transactions, such as secured equipment financing facilities or other similar transactions. | |
As of March 31, 2014, we had outstanding warrants to purchase approximately 14.5 million shares of our common stock at various prices, exercisable on different dates into 2019. Of these warrants, warrants to purchase 7 million shares were issued to Deerfield in connection with the Deerfield Loan at an exercise price of $2.81 per share. The Deerfield Warrants may be exercised for cash or on a cashless basis. In lieu of paying cash upon exercise, the holders also may elect to reduce the principal amount of the Deerfield Loan in an amount sufficient to satisfy the exercise price of the Deerfield Warrants. In addition to the Deerfield Warrants, we have outstanding five-year warrants issued in February 2011 to purchase approximately 4.6 million shares of common stock that contain anti-dilution provisions that adjust the exercise price if we issue any common stock, securities convertible into common stock, or other securities (subject to certain exceptions) at a value below the then-existing exercise price of the warrants. These warrants currently have an exercise price of $1.50 per share. Although we believe that, in the future, we will secure additional capital from the exercise of at least a portion of our outstanding warrants, there can be no assurance that the market price of our common stock will equal or exceed price levels that would make exercise of outstanding warrants likely, that holders of the Deerfield Warrants would choose to exercise their warrants for cash, or that holders of any of our outstanding warrants would choose to exercise any or all of their warrants prior to the applicable warrant expiration dates. Moreover, if our outstanding warrants are exercised, such exercises likely will be at a discount to the then-market value of our common stock and have a dilutive effect on the value of our shares of common stock at the time of exercise. | |
As of March 31, 2014, 150 million shares of common stock were authorized under our Amended and Restated Certificate of Incorporation, and approximately 42.1 million shares of common stock were available for issuance and not otherwise reserved. | |
Although we currently believe that we will be able to successfully execute our business strategy, there can be no assurance that our AEROSURF development program will be successful within our anticipated time frame, if at all, that we will succeed in obtaining the necessary regulatory approvals in the U.S. and other markets, that any approved product, including SURFAXIN, will be commercially viable, that the ATM Program will be available when needed, if at all, or that we will be able to obtain additional capital when needed on acceptable terms, if at all, that we will be successful. We will require significant additional capital to satisfy debt obligations and sustain operations, and to complete the development and, if they are approved, support the commercial introduction of our products. Failure to secure the necessary additional capital would have a material adverse effect on our business, financial condition and results of operations. Even if we succeed in raising additional capital and developing and subsequently commercializing product candidates, we may never achieve sufficient sales revenue to achieve or maintain profitability. |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 3 Months Ended | ||
Mar. 31, 2014 | |||
Summary of Significant Accounting Policies [Abstract] | ' | ||
Summary of Significant Accounting Policies | ' | ||
Note 3 – Summary of Significant Accounting Policies | |||
Basis of Presentation | |||
The accompanying interim unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information in accordance with the instructions to Form 10‑Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normally recurring accruals) considered for fair presentation have been included. Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. There have been no changes to our critical accounting policies since December 31, 2013. For a discussion of our accounting policies, see, the consolidated financial statements and notes thereto in our 2013 Form 10-K. Readers are encouraged to review those disclosures in conjunction with this Quarterly Report on Form 10-Q. | |||
Inventory | |||
Inventories, which are recorded at the lower of cost or market, include materials, labor, and other direct and indirect costs and are valued at cost using the first-in, first-out method. We capitalize inventories produced in preparation for commercial launches when the related product candidates receive regulatory approval and that the related costs will be recoverable through the commercial sale of the product. Costs incurred prior to FDA approval of drug products and registration of medical devices are recorded in our statement of operations as research and development expense. Inventory is evaluated for impairment through consideration of factors such as the net realizable value, lower of cost or market, obsolescence, and expiry. Inventories do not have carrying values that exceed either cost or net realizable value. | |||
We evaluate our expiry risk by evaluating current and future product demand relative to product shelf life. We build demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance and hospital ordering practices. | |||
Accrued Severance and Retention Costs | |||
A liability for employee severance and retention benefits is recognized when (1) management has committed to a plan of termination; (2) the plan provides sufficient details, such as the employees affected, amounts to be paid, and expected dates of termination and payment; (3) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn; and (4) the plan has been communicated to employees. The cost of such benefits are accrued over the remaining service period. | |||
In September 2013, we implemented an employee severance and retention plan for employees at our manufacturing facility in Totowa, NJ (“Totowa Facility”) to minimize employee turnover and encourage employees to remain with us through any potential plant closing. The plan provides for severance for non-union employees and retention bonuses for management. If we succeed in our efforts to secure longer-term utilization of the Totowa Facility, the severance plan and retention bonuses will remain in effect. The total cash amount expected to be paid for severance and retention under this plan through June 2016, assuming a June 2015 plant closing, is approximately $1.1 million. The plan-related expense incurred for the quarter ended March 31, 2014 is $0.1 million and is included in research and development expense. The related accrued liability is $0.2 million as of March 31, 2014. | |||
In addition, at the Totowa Facility, there are 14 employees who are subject to a collective bargaining agreement under which they would be eligible to receive severance payments if the Totowa Facility were closed. The plan-related expense incurred for the quarter ended March 31, 2014 is $33,000 and is included in research and development expense. The related accrued liability is $0.4 million as of March 31, 2014. | |||
Product Sales | |||
Revenues from product sales are recognized when (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the price is fixed or determinable and (4) collectability is reasonably assured. | |||
Our products are distributed in the U.S. using a specialty distributor. Under this model, the specialty distributor purchases and takes physical delivery and title of product, and then sells to hospitals. We began the commercial introduction of SURFAXIN in the fourth quarter of 2013 and, for that reason, we currently cannot make a reasonable estimate of future product returns when product is delivered to the specialty distributor. Therefore, we currently do not recognize revenue upon product shipment to the specialty distributor, even though the distributor is invoiced upon product shipment. Instead, we recognize revenue once product has been sold through to the hospital and all revenue recognition criteria have been met. Once product has been delivered to the hospital, the risk of material returns is significantly mitigated. We will begin to recognize revenue at the time of shipment of product to our specialty distributor when we can reasonably estimate expected distributor sales deductions and returns. In developing estimates for sales returns, we consider the shelf life of the product, expected demand based on market data and return rates of other surfactant products. | |||
Product sales are recorded net of accruals for estimated chargebacks, discounts, specialty distributor deductions and returns. | |||
· | Chargebacks. Chargebacks are discounts that occur when contracted customers purchase directly from our specialty distributor. Contracted customers, which currently consist primarily of member hospitals of Group Purchasing Organizations, generally purchase the product at a discounted price. Our specialty distributor, in turn, charges back the difference between the price initially paid by the specialty distributor and the discounted price paid to the specialty distributor by the customer. The allowance for specialty distributor chargebacks is based on known sales to contracted customers. | ||
· | Sales discounts: Sales discounts are offered to certain contracted customers based upon a customer’s historical volume of surfactant product purchases. Customers must enter into a Letter of Participation (LOP) with us to receive sales discounts. Sales discounts are periodically adjusted on a prospective basis based upon the customer’s purchases of SURFAXIN, as provided in the LOP. The allowance for sales discounts is based on known sales to contracted customers. | ||
· | Specialty distributor deductions. Our specialty distributor is offered various forms of consideration including allowances, service fees and prompt payment discounts. Specialty distributor allowances and service fees are provided in our contractual agreement and are generally a percentage of the purchase price paid by the specialty distributor. The specialty distributor is offered a prompt pay discount for payment within a specified period. | ||
· | Returns. Sales of our products are not subject to a general right of return; however, we will accept product that is damaged or defective when shipped or for expired product up to six months subsequent to its expiry date. Product that has been administered to patients is no longer subject to any right of return. | ||
Research and development expense | |||
We track research and development expense by activity, as follows: (a) product development and manufacturing, (b) medical and regulatory operations, and (c) direct preclinical and clinical programs. Research and development expense includes personnel, facilities, manufacturing and quality operations, pharmaceutical and device development, research, clinical, regulatory, other preclinical and clinical activities and medical affairs. Research and development costs are charged to operations as incurred. | |||
Net loss per common share | |||
Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per common share is computed by giving effect to all potentially dilutive securities outstanding for the period. For the quarters ended March 31, 2014 and 2013, the number of shares of common stock potentially issuable upon the exercise of certain stock options and warrants was 21.3 million and 15.8 million shares, respectively. | |||
In accordance with Accounting Standards Codification (ASC) Topic 260, “Earnings per Share,” when calculating diluted net loss per common share, a gain associated with the decrease in the fair value of certain warrants classified as derivative liabilities results in an adjustment to the net loss; and the dilutive impact of the assumed exercise of the warrants results in an adjustment to the weighted average common shares outstanding. We utilize the treasury stock method to calculate the dilutive impact of the assumed exercise of the warrants. For the quarters ended March 31, 2014 and 2013, the effect of the adjustments for all warrants classified as derivative liabilities was non-dilutive. | |||
For the quarters ended March 31, 2014 and 2013, all potentially dilutive securities were anti-dilutive and therefore have been excluded from the computation of diluted net loss per share. | |||
We do not have any components of other comprehensive income (loss). | |||
Recent accounting pronouncements | |||
There were no new accounting pronouncements issued during the three months ended March 31, 2014 that are expected to have a material impact on the Company’s financial position, operating results or disclosures. |
Fair_Value_of_Financial_Instru
Fair Value of Financial Instruments | 3 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Fair Value of Financial Instruments [Abstract] | ' | ||||||||||||||||
Fair Value of Financial Instruments | ' | ||||||||||||||||
Note 4 – Fair Value of Financial Instruments | |||||||||||||||||
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. | |||||||||||||||||
Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows: | |||||||||||||||||
· | Level 1 – Quoted prices in active markets for identical assets and liabilities. | ||||||||||||||||
· | Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | ||||||||||||||||
· | Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. | ||||||||||||||||
Fair Value on a Recurring Basis | |||||||||||||||||
The tables below categorize assets and liabilities measured at fair value on a recurring basis as of March 31, 2014 and December 31, 2013: | |||||||||||||||||
Fair Value | Fair value measurement using | ||||||||||||||||
31-Mar-14 | Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets: | |||||||||||||||||
Cash and cash equivalents | $ | 75,942 | $ | 75,942 | $ | – | $ | – | |||||||||
Certificate of Deposit | 325 | 325 | – | – | |||||||||||||
Total Assets | $ | 76,267 | $ | 76,267 | $ | – | $ | – | |||||||||
Liabilities: | |||||||||||||||||
Common stock warrant liability | $ | 4,672 | $ | – | $ | – | $ | 4,672 | |||||||||
Fair Value | Fair value measurement using | ||||||||||||||||
December 31, | |||||||||||||||||
2013 | Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets: | |||||||||||||||||
Cash and cash equivalents | $ | 86,283 | $ | 86,283 | $ | – | $ | – | |||||||||
Certificate of Deposit | 325 | 325 | – | – | |||||||||||||
Total Assets | $ | 86,608 | $ | 86,608 | $ | – | $ | – | |||||||||
Liabilities: | |||||||||||||||||
Common stock warrant liability | $ | 5,425 | $ | – | $ | – | $ | 5,425 | |||||||||
The table below summarizes the activity of Level 3 inputs measured on a recurring basis for the three months ended March 31, 2014 and 2013: | |||||||||||||||||
(in thousands) | Fair Value Measurements of | ||||||||||||||||
Common Stock Warrants Using | |||||||||||||||||
Significant Unobservable Inputs | |||||||||||||||||
(Level 3) | |||||||||||||||||
Balance at December 31, 2013 | $ | 5,425 | |||||||||||||||
Exercise of warrants | (375 | ) | |||||||||||||||
Change in fair value of common stock warrant liability | (378 | ) | |||||||||||||||
Balance at March 31, 2014 | $ | 4,672 | |||||||||||||||
(in thousands) | Fair Value Measurements of | ||||||||||||||||
Common Stock Warrants Using | |||||||||||||||||
Significant Unobservable Inputs | |||||||||||||||||
(Level 3) | |||||||||||||||||
Balance at December 31, 2012 | $ | 6,305 | |||||||||||||||
Change in fair value of common stock warrant liability | (162 | ) | |||||||||||||||
Balance at March 31, 2013 | $ | 6,143 | |||||||||||||||
The significant unobservable inputs used in the fair value measurement of the common stock warrants measured on a recurring basis are the historical volatility of our common stock market price, expected term of the applicable warrants, and the risk-free interest rate based on the U.S. Treasury yield curve in effect at the measurement date. In addition to the significant unobservable inputs noted above, certain fair value measurements also take into account an assumption of the likelihood and timing of the occurrence of an event that would result in an adjustment to the exercise price in accordance with the anti-dilutive pricing provisions in the warrant. Any significant increases or decreases in the unobservable inputs, with the exception of the risk-free interest rate, may result in significantly higher or lower fair value measurements. | |||||||||||||||||
Significant Unobservable Input | 31-Mar-14 | 31-Dec-13 | |||||||||||||||
Assumptions of Level 3 Valuations | |||||||||||||||||
Historical Volatility | 60%-62 | % | 62% -76 | % | |||||||||||||
Expected Term (in years) | 0.1 – 1.9 | 0.4 – 2.1 | |||||||||||||||
Risk-free interest rate | 0.03% - 0.41 | % | 0.08% - 0.44 | % | |||||||||||||
Fair Value of Long-Term Debt | |||||||||||||||||
At March 31, 2014, the estimated fair value of the Deerfield Loan was $23.7 million compared to a carrying value, net of discounts, of $18.8 million. At December 31, 2013, the estimated fair value of the Deerfield Loan was $23.6 million compared to a carrying value, net of discounts, of $18.4 million. The estimated fair value of the Deerfield Loan was based on discounting the future contractual cash flows to the present value. This analysis utilizes certain Level 3 unobservable inputs, including current cost of capital. Considerable judgment is required to interpret market data and to develop estimates of fair value. The estimates presented are not necessarily indicative of amounts we could realize in a current market exchange. The use of alternative market assumptions and estimation methodologies could have a material effect on these estimates of fair value. |
Inventory
Inventory | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Inventory [Abstract] | ' | ||||||||
Inventory | ' | ||||||||
Note 5 – Inventory | |||||||||
Inventory is comprised of the following for the periods presented: | |||||||||
March 31, | December 31, | ||||||||
(in thousands) | 2014 | 2013 | |||||||
Inventories, current: | |||||||||
Raw materials | $ | 52 | $ | 52 | |||||
Finished goods, net of reserves | 121 | 60 | |||||||
173 | 112 | ||||||||
Inventories, non-current: | |||||||||
Raw materials | 256 | – | |||||||
Total inventories, net | $ | 429 | $ | 112 | |||||
Raw materials inventory that is not expected to be used in commercial production until more than 12 months from the balance sheet date is classified as a non-current other asset on the balance sheet. The shelf life of our raw materials is 2‑5 years. Since the commercial introduction of SURFAXIN in the fourth quarter of 2013, we have made investments to increase our raw materials inventory to support future commercial production. | |||||||||
In addition, as of March 31, 2014, we had $1.0 million of raw materials that were purchased prior to October 4, 2013, the date the FDA approved updated SURFAXIN product specifications, which enabled the commercial introduction of SURFAXIN. These raw materials have a carrying value of zero, as the costs to purchase this material were expensed in the period of purchase as research and development expense, and accordingly are not reflected in the inventory balances shown above. These raw materials are anticipated to be used in manufacturing development, research and development activities and in the manufacture of commercial product. | |||||||||
Inventory reserves as of March 31, 2014 and December 31, 2013 were $1.3 million and $0.5 million, respectively. Inventory reserves reflect costs of SURFAXIN finished goods inventories that are not anticipated to be recoverable through the commercial sale of the product during the initial launch period due to product expiration. These reserves ensure that the inventory carrying values do not exceed net realizable value. |
Common_Stock_Warrant_Liability
Common Stock Warrant Liability | 3 Months Ended | |||||||||||||||||||||
Mar. 31, 2014 | ||||||||||||||||||||||
Common Stock Warrant Liability [Abstract] | ' | |||||||||||||||||||||
Common Stock Warrant Liability | ' | |||||||||||||||||||||
Note 6 – Common Stock Warrant Liability | ||||||||||||||||||||||
We account for common stock warrants in accordance with applicable accounting guidance provided in ASC Topic 815 “Derivatives and Hedging – Contracts in Entity’s Own Equity” (ASC 815), either as derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement. | ||||||||||||||||||||||
The form of warrant agreement for the registered warrants that we issued in our May 2009 and February 2010 public offerings generally provide that, in the event a related registration statement or an exemption from registration is not available for the issuance or resale of the warrant shares upon exercise of the warrant, the holder may exercise the warrant on a cashless basis. Notwithstanding the availability of cashless exercise, generally accepted accounting principles (GAAP) provide that these registered warrants are deemed to be subject to potential net cash settlement and must be classified as derivative liabilities because (i) under federal securities laws, providing freely-tradable shares upon exercise of the warrants may not be within our control in all circumstances, and (ii) the warrant agreements do not expressly provide that there is no circumstance in which we may be required to effect a net cash settlement of the warrants. The accounting guidance expressly precludes an evaluation of the likelihood that cash settlement could occur. Accordingly, the May 2009 and February 2010 warrants have been classified as derivative liabilities and reported, at each balance sheet date, at estimated fair value determined using the Black-Scholes option-pricing model. | ||||||||||||||||||||||
The form of warrant agreement for the registered five-year warrants that we issued in the February 2011 public offering (February 2011 five-year warrants) contain anti-dilutive provisions that adjust the exercise price if we issue any common stock, securities convertible into common stock, or other securities (subject to certain exceptions) at a value below the then-existing exercise price of the February 2011 five-year warrants. Although by their express terms, these warrants are not subject to potential cash settlement, due to the nature of the anti-dilution provisions, these warrants have been classified as derivative liabilities and reported, at each balance sheet date, at estimated fair value determined using a trinomial pricing model. | ||||||||||||||||||||||
Selected terms and estimated fair value of warrants accounted for as derivative are as follows: | ||||||||||||||||||||||
Fair Value of Warrants | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||
Issuance | Number of | Exercise | Warrant | Value at | ||||||||||||||||||
Date | Warrant Shares | Price | Expiration | Issuance | ||||||||||||||||||
Issuable | Date | Date | March 31, | December 31, | ||||||||||||||||||
2014 | 2013 | |||||||||||||||||||||
5/13/09 | 466,667 | $ | 17.25 | 5/13/14 | $ | 3,360 | $ | – | $ | – | ||||||||||||
2/23/10 | 916,669 | 12.75 | 2/23/15 | 5,701 | 1 | 6 | ||||||||||||||||
2/22/11 | 4,552,600 | 1.5 | 2/22/16 | 8,004 | 4,671 | 5,419 | ||||||||||||||||
$ | 4,672 | $ | 5,425 | |||||||||||||||||||
During the three months ended March 31, 2014, holders of the February 2011 five-year warrants exercised warrants to purchase 282,350 shares of common stock for total proceeds of $0.4 million. There were no February 2011 five-year warrants exercised during the three months ended March 31, 2013. | ||||||||||||||||||||||
Changes in the estimated fair value of warrants classified as derivative liabilities are reported in the accompanying Consolidated Statement of Operations as the “Change in fair value of common stock warrants.” |
Deerfield_Loan
Deerfield Loan | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Deerfield Loan [Abstract] | ' | ||||||||
Deerfield Loan | ' | ||||||||
Note 7 –Deerfield Loan | |||||||||
Long-term debt consists solely of amounts due under a $30 million loan (Deerfield Loan) with affiliates of Deerfield Management Company, L.P. (Deerfield) for the periods presented: | |||||||||
March 31, | December 31, | ||||||||
(in thousands) | 2014 | 2013 | |||||||
Note Payable | $ | 30,000 | $ | 30,000 | |||||
Unamortized discount | (11,207 | ) | (11,646 | ) | |||||
Long-term debt, net of discount | $ | 18,793 | $ | 18,354 | |||||
The principal amount of the loan is payable in equal annual installments on the fourth, fifth and sixth anniversaries of the Deerfield Loan agreement, provided that the amount payable on the fourth anniversary shall be deferred for one year if either (i) our “Net Sales” for the immediately preceding 12-month period are at least $20 million, or (ii) our “Equity Value” is at least $200 million; and provided further, that the amount payable on the fifth anniversary (together with any amount deferred on the fourth anniversary) shall be deferred until the sixth anniversary if either (i) our “Net Sales” for the immediately preceding 12-month period are at least $30 million, or (ii) our “Equity Value” is at least $250 million. Accordingly, if the milestones are achieved in each year, payment of the principal amount could be deferred until the sixth anniversary date of the loan, on February 13, 2019. | |||||||||
The following amounts comprise the Deerfield Loan interest expense for the periods presented: | |||||||||
Three months ended | |||||||||
(in thousands) | March 31, | ||||||||
2014 | 2013 | ||||||||
Cash interest expense | $ | 647 | $ | 113 | |||||
Non-cash amortization of debt discount | 439 | 57 | |||||||
Amortization of debt costs | 5 | 5 | |||||||
Total interest expense | $ | 1,091 | $ | 175 | |||||
Cash interest expense represents interest at an annual rate of 8.75% on the outstanding principal amount for the period, payable quarterly in cash. Non-cash amortization of debt discount represents the amortization of transaction fees and the fair value of the warrants issued in connection with the Deerfield Loan. The amortization of debt costs represents legal costs incurred in connection with the Deerfield Loan. | |||||||||
In connection with the loan, we issued to Deerfield warrants to purchase 7.0 million shares of our common stock at an exercise price of $2.81 per share that expire on February 13, 2019. The Deerfield warrants are derivatives that qualify for an exemption from liability accounting as provided for in ASC Topic 815 “Derivatives and Hedging – Contracts in Entity’s Own Equity” (ASC 815) and are classified as equity. See, Note 9, “Deerfield Loan,” to the Consolidated Financial Statements in our 2013 Form 10-K. |
Stock_Options_and_Stockbased_E
Stock Options and Stock-based Employee Compensation | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Stock Options and Stock-based Employee Compensation [Abstract] | ' | ||||||||
Stock Options and Stock-based Employee Compensation | ' | ||||||||
Note 8 – Stock Options and Stock-Based Employee Compensation | |||||||||
We recognize in our consolidated financial statements all stock-based awards to employees and non-employee directors based on their fair value on the date of grant, calculated using the Black-Scholes option-pricing model. Compensation expense related to stock-based awards is recognized ratably over the vesting period, which for employees is typically three years. | |||||||||
The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing formula that uses weighted-average assumptions noted in the following table. | |||||||||
March 31, | |||||||||
2014 | 2013 | ||||||||
Weighted-average expected volatility | 100 | % | 110 | % | |||||
Weighted-average expected term | 5.4 years | 4.8 years | |||||||
Weighted-average risk-free interest rate | 1.6 | % | 0.74 | % | |||||
Expected dividends | – | – | |||||||
The table below summarizes the total stock-based compensation expense included in the statements of operations for the periods presented: | |||||||||
Three Months Ended | |||||||||
(in thousands) | March 31, | ||||||||
2014 | 2013 | ||||||||
Research & Development | $ | 248 | $ | 141 | |||||
Selling, General & Administrative | 455 | 215 | |||||||
Total | $ | 703 | $ | 356 |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 3 Months Ended | ||
Mar. 31, 2014 | |||
Summary of Significant Accounting Policies [Abstract] | ' | ||
Basis of Presentation | ' | ||
Basis of Presentation | |||
The accompanying interim unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information in accordance with the instructions to Form 10‑Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normally recurring accruals) considered for fair presentation have been included. Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. There have been no changes to our critical accounting policies since December 31, 2013. For a discussion of our accounting policies, see, the consolidated financial statements and notes thereto in our 2013 Form 10-K. Readers are encouraged to review those disclosures in conjunction with this Quarterly Report on Form 10-Q. | |||
Inventory | ' | ||
Inventory | |||
Inventories, which are recorded at the lower of cost or market, include materials, labor, and other direct and indirect costs and are valued at cost using the first-in, first-out method. We capitalize inventories produced in preparation for commercial launches when the related product candidates receive regulatory approval and that the related costs will be recoverable through the commercial sale of the product. Costs incurred prior to FDA approval of drug products and registration of medical devices are recorded in our statement of operations as research and development expense. Inventory is evaluated for impairment through consideration of factors such as the net realizable value, lower of cost or market, obsolescence, and expiry. Inventories do not have carrying values that exceed either cost or net realizable value. | |||
We evaluate our expiry risk by evaluating current and future product demand relative to product shelf life. We build demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance and hospital ordering practices. | |||
Accrued Severance and Retention Costs | ' | ||
Accrued Severance and Retention Costs | |||
A liability for employee severance and retention benefits is recognized when (1) management has committed to a plan of termination; (2) the plan provides sufficient details, such as the employees affected, amounts to be paid, and expected dates of termination and payment; (3) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn; and (4) the plan has been communicated to employees. The cost of such benefits are accrued over the remaining service period. | |||
In September 2013, we implemented an employee severance and retention plan for employees at our manufacturing facility in Totowa, NJ (“Totowa Facility”) to minimize employee turnover and encourage employees to remain with us through any potential plant closing. The plan provides for severance for non-union employees and retention bonuses for management. If we succeed in our efforts to secure longer-term utilization of the Totowa Facility, the severance plan and retention bonuses will remain in effect. The total cash amount expected to be paid for severance and retention under this plan through June 2016, assuming a June 2015 plant closing, is approximately $1.1 million. The plan-related expense incurred for the quarter ended March 31, 2014 is $0.1 million and is included in research and development expense. The related accrued liability is $0.2 million as of March 31, 2014. | |||
In addition, at the Totowa Facility, there are 14 employees who are subject to a collective bargaining agreement under which they would be eligible to receive severance payments if the Totowa Facility were closed. The plan-related expense incurred for the quarter ended March 31, 2014 is $33,000 and is included in research and development expense. The related accrued liability is $0.4 million as of March 31, 2014. | |||
Product Sales | ' | ||
Product Sales | |||
Revenues from product sales are recognized when (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the price is fixed or determinable and (4) collectability is reasonably assured. | |||
Our products are distributed in the U.S. using a specialty distributor. Under this model, the specialty distributor purchases and takes physical delivery and title of product, and then sells to hospitals. We began the commercial introduction of SURFAXIN in the fourth quarter of 2013 and, for that reason, we currently cannot make a reasonable estimate of future product returns when product is delivered to the specialty distributor. Therefore, we currently do not recognize revenue upon product shipment to the specialty distributor, even though the distributor is invoiced upon product shipment. Instead, we recognize revenue once product has been sold through to the hospital and all revenue recognition criteria have been met. Once product has been delivered to the hospital, the risk of material returns is significantly mitigated. We will begin to recognize revenue at the time of shipment of product to our specialty distributor when we can reasonably estimate expected distributor sales deductions and returns. In developing estimates for sales returns, we consider the shelf life of the product, expected demand based on market data and return rates of other surfactant products. | |||
Product sales are recorded net of accruals for estimated chargebacks, discounts, specialty distributor deductions and returns. | |||
· | Chargebacks. Chargebacks are discounts that occur when contracted customers purchase directly from our specialty distributor. Contracted customers, which currently consist primarily of member hospitals of Group Purchasing Organizations, generally purchase the product at a discounted price. Our specialty distributor, in turn, charges back the difference between the price initially paid by the specialty distributor and the discounted price paid to the specialty distributor by the customer. The allowance for specialty distributor chargebacks is based on known sales to contracted customers. | ||
· | Sales discounts: Sales discounts are offered to certain contracted customers based upon a customer’s historical volume of surfactant product purchases. Customers must enter into a Letter of Participation (LOP) with us to receive sales discounts. Sales discounts are periodically adjusted on a prospective basis based upon the customer’s purchases of SURFAXIN, as provided in the LOP. The allowance for sales discounts is based on known sales to contracted customers. | ||
· | Specialty distributor deductions. Our specialty distributor is offered various forms of consideration including allowances, service fees and prompt payment discounts. Specialty distributor allowances and service fees are provided in our contractual agreement and are generally a percentage of the purchase price paid by the specialty distributor. The specialty distributor is offered a prompt pay discount for payment within a specified period. | ||
· | Returns. Sales of our products are not subject to a general right of return; however, we will accept product that is damaged or defective when shipped or for expired product up to six months subsequent to its expiry date. Product that has been administered to patients is no longer subject to any right of return. | ||
Research and development expense | ' | ||
Research and development expense | |||
We track research and development expense by activity, as follows: (a) product development and manufacturing, (b) medical and regulatory operations, and (c) direct preclinical and clinical programs. Research and development expense includes personnel, facilities, manufacturing and quality operations, pharmaceutical and device development, research, clinical, regulatory, other preclinical and clinical activities and medical affairs. Research and development costs are charged to operations as incurred. | |||
Net loss per common share | ' | ||
Net loss per common share | |||
Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per common share is computed by giving effect to all potentially dilutive securities outstanding for the period. For the quarters ended March 31, 2014 and 2013, the number of shares of common stock potentially issuable upon the exercise of certain stock options and warrants was 21.3 million and 15.8 million shares, respectively. | |||
In accordance with Accounting Standards Codification (ASC) Topic 260, “Earnings per Share,” when calculating diluted net loss per common share, a gain associated with the decrease in the fair value of certain warrants classified as derivative liabilities results in an adjustment to the net loss; and the dilutive impact of the assumed exercise of the warrants results in an adjustment to the weighted average common shares outstanding. We utilize the treasury stock method to calculate the dilutive impact of the assumed exercise of the warrants. For the quarters ended March 31, 2014 and 2013, the effect of the adjustments for all warrants classified as derivative liabilities was non-dilutive. | |||
For the quarters ended March 31, 2014 and 2013, all potentially dilutive securities were anti-dilutive and therefore have been excluded from the computation of diluted net loss per share. | |||
We do not have any components of other comprehensive income (loss). | |||
Recent accounting pronouncements | ' | ||
Recent accounting pronouncements | |||
There were no new accounting pronouncements issued during the three months ended March 31, 2014 that are expected to have a material impact on the Company’s financial position, operating results or disclosures. |
Fair_Value_of_Financial_Instru1
Fair Value of Financial Instruments (Tables) | 3 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Fair Value of Financial Instruments [Abstract] | ' | ||||||||||||||||
Assets and liabilities measured at fair value | ' | ||||||||||||||||
The tables below categorize assets and liabilities measured at fair value on a recurring basis as of March 31, 2014 and December 31, 2013: | |||||||||||||||||
Fair Value | Fair value measurement using | ||||||||||||||||
31-Mar-14 | Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets: | |||||||||||||||||
Cash and cash equivalents | $ | 75,942 | $ | 75,942 | $ | – | $ | – | |||||||||
Certificate of Deposit | 325 | 325 | – | – | |||||||||||||
Total Assets | $ | 76,267 | $ | 76,267 | $ | – | $ | – | |||||||||
Liabilities: | |||||||||||||||||
Common stock warrant liability | $ | 4,672 | $ | – | $ | – | $ | 4,672 | |||||||||
Fair Value | Fair value measurement using | ||||||||||||||||
December 31, | |||||||||||||||||
2013 | Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets: | |||||||||||||||||
Cash and cash equivalents | $ | 86,283 | $ | 86,283 | $ | – | $ | – | |||||||||
Certificate of Deposit | 325 | 325 | – | – | |||||||||||||
Total Assets | $ | 86,608 | $ | 86,608 | $ | – | $ | – | |||||||||
Liabilities: | |||||||||||||||||
Common stock warrant liability | $ | 5,425 | $ | – | $ | – | $ | 5,425 | |||||||||
Common stock warrants measured at Level 3 inputs on recurring basis | ' | ||||||||||||||||
The table below summarizes the activity of Level 3 inputs measured on a recurring basis for the three months ended March 31, 2014 and 2013: | |||||||||||||||||
(in thousands) | Fair Value Measurements of | ||||||||||||||||
Common Stock Warrants Using | |||||||||||||||||
Significant Unobservable Inputs | |||||||||||||||||
(Level 3) | |||||||||||||||||
Balance at December 31, 2013 | $ | 5,425 | |||||||||||||||
Exercise of warrants | (375 | ) | |||||||||||||||
Change in fair value of common stock warrant liability | (378 | ) | |||||||||||||||
Balance at March 31, 2014 | $ | 4,672 | |||||||||||||||
(in thousands) | Fair Value Measurements of | ||||||||||||||||
Common Stock Warrants Using | |||||||||||||||||
Significant Unobservable Inputs | |||||||||||||||||
(Level 3) | |||||||||||||||||
Balance at December 31, 2012 | $ | 6,305 | |||||||||||||||
Change in fair value of common stock warrant liability | (162 | ) | |||||||||||||||
Balance at March 31, 2013 | $ | 6,143 | |||||||||||||||
Significant unobservable input assumption used for valuation | ' | ||||||||||||||||
The significant unobservable inputs used in the fair value measurement of the common stock warrants measured on a recurring basis are the historical volatility of our common stock market price, expected term of the applicable warrants, and the risk-free interest rate based on the U.S. Treasury yield curve in effect at the measurement date. In addition to the significant unobservable inputs noted above, certain fair value measurements also take into account an assumption of the likelihood and timing of the occurrence of an event that would result in an adjustment to the exercise price in accordance with the anti-dilutive pricing provisions in the warrant. Any significant increases or decreases in the unobservable inputs, with the exception of the risk-free interest rate, may result in significantly higher or lower fair value measurements. | |||||||||||||||||
Significant Unobservable Input | 31-Mar-14 | 31-Dec-13 | |||||||||||||||
Assumptions of Level 3 Valuations | |||||||||||||||||
Historical Volatility | 60%-62 | % | 62% -76 | % | |||||||||||||
Expected Term (in years) | 0.1 – 1.9 | 0.4 – 2.1 | |||||||||||||||
Risk-free interest rate | 0.03% - 0.41 | % | 0.08% - 0.44 | % |
Inventory_Tables
Inventory (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Inventory [Abstract] | ' | ||||||||
Schedule of inventory | ' | ||||||||
Inventory is comprised of the following for the periods presented: | |||||||||
March 31, | December 31, | ||||||||
(in thousands) | 2014 | 2013 | |||||||
Inventories, current: | |||||||||
Raw materials | $ | 52 | $ | 52 | |||||
Finished goods, net of reserves | 121 | 60 | |||||||
173 | 112 | ||||||||
Inventories, non-current: | |||||||||
Raw materials | 256 | – | |||||||
Total inventories, net | $ | 429 | $ | 112 |
Common_Stock_Warrant_Liability1
Common Stock Warrant Liability (Tables) | 3 Months Ended | |||||||||||||||||||||
Mar. 31, 2014 | ||||||||||||||||||||||
Common Stock Warrant Liability [Abstract] | ' | |||||||||||||||||||||
Estimated fair value of warrants accounted for derivative liabilities | ' | |||||||||||||||||||||
Selected terms and estimated fair value of warrants accounted for as derivative are as follows: | ||||||||||||||||||||||
Fair Value of Warrants | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||
Issuance | Number of | Exercise | Warrant | Value at | ||||||||||||||||||
Date | Warrant Shares | Price | Expiration | Issuance | ||||||||||||||||||
Issuable | Date | Date | March 31, | December 31, | ||||||||||||||||||
2014 | 2013 | |||||||||||||||||||||
5/13/09 | 466,667 | $ | 17.25 | 5/13/14 | $ | 3,360 | $ | – | $ | – | ||||||||||||
2/23/10 | 916,669 | 12.75 | 2/23/15 | 5,701 | 1 | 6 | ||||||||||||||||
2/22/11 | 4,552,600 | 1.5 | 2/22/16 | 8,004 | 4,671 | 5,419 | ||||||||||||||||
$ | 4,672 | $ | 5,425 |
Deerfield_Loan_Tables
Deerfield Loan (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Deerfield Loan [Abstract] | ' | ||||||||
Long term debt included in balance sheet | ' | ||||||||
Long-term debt consists solely of amounts due under a $30 million loan (Deerfield Loan) with affiliates of Deerfield Management Company, L.P. (Deerfield) for the periods presented: | |||||||||
March 31, | December 31, | ||||||||
(in thousands) | 2014 | 2013 | |||||||
Note Payable | $ | 30,000 | $ | 30,000 | |||||
Unamortized discount | (11,207 | ) | (11,646 | ) | |||||
Long-term debt, net of discount | $ | 18,793 | $ | 18,354 | |||||
Interest expense included in statement of operations | ' | ||||||||
The following amounts comprise the Deerfield Loan interest expense for the periods presented: | |||||||||
Three months ended | |||||||||
(in thousands) | March 31, | ||||||||
2014 | 2013 | ||||||||
Cash interest expense | $ | 647 | $ | 113 | |||||
Non-cash amortization of debt discount | 439 | 57 | |||||||
Amortization of debt costs | 5 | 5 | |||||||
Total interest expense | $ | 1,091 | $ | 175 |
Stock_Options_and_Stockbased_E1
Stock Options and Stock-based Employee Compensation (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Stock Options and Stock-based Employee Compensation [Abstract] | ' | ||||||||
Weighted-average assumptions in estimating fair value of options | ' | ||||||||
The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing formula that uses weighted-average assumptions noted in the following table. | |||||||||
March 31, | |||||||||
2014 | 2013 | ||||||||
Weighted-average expected volatility | 100 | % | 110 | % | |||||
Weighted-average expected term | 5.4 years | 4.8 years | |||||||
Weighted-average risk-free interest rate | 1.6 | % | 0.74 | % | |||||
Expected dividends | – | – | |||||||
Employee stock-based compensation | ' | ||||||||
The table below summarizes the total stock-based compensation expense included in the statements of operations for the periods presented: | |||||||||
Three Months Ended | |||||||||
(in thousands) | March 31, | ||||||||
2014 | 2013 | ||||||||
Research & Development | $ | 248 | $ | 141 | |||||
Selling, General & Administrative | 455 | 215 | |||||||
Total | $ | 703 | $ | 356 |
Liquidity_Risks_and_Management1
Liquidity Risks and Management's Plans (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Feb. 22, 2011 | Feb. 28, 2011 | Mar. 31, 2014 | 31-May-13 | Mar. 31, 2014 |
Deerfield Management Company [Member] | Issued February 22, 2011 [Member] | Issued February 22, 2011 [Member] | Issued February 22, 2011 [Member] | Issued February 22, 2011 [Member] | Lazard ATM Program [Member] | |||||
Liquidity Risks and Management's Plans [Abstract] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Cash and cash equivalents | $75,942,000 | $86,283,000 | $26,370,000 | $26,892,000 | ' | ' | ' | ' | ' | ' |
Long-term debt, carrying amount | 30,000,000 | 30,000,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Long-Term Debt | 18,793,000 | 18,354,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Stockholders' Equity [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Maximum value of potential common stock available for issue | ' | ' | ' | ' | ' | ' | ' | ' | ' | $23,000,000 |
Class of Warrant or Right [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of warrant shares issuable (in shares) | ' | ' | ' | ' | ' | 4,552,600 | ' | 4,600,000 | ' | ' |
Common stock, shares authorized (in shares) | 150,000,000 | 150,000,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock available for future issuance (in shares) | 42,100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of warrant shares outstanding (in shares) | ' | 14,500,000 | ' | ' | 7,000,000 | ' | ' | ' | ' | ' |
Exercisable period of warrants | ' | ' | ' | ' | ' | '5 years | '5 years | ' | ' | ' |
Exercise price of warrants (in dollars per share) | $2.81 | ' | ' | ' | $2.81 | $1.50 | ' | ' | $1.50 | ' |
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Details) (USD $) | 3 Months Ended | |
Share data in Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Net loss per common share [Abstract] | ' | ' |
Potential common stock issuable upon exercise of stock options and warrants (in shares) | 21.3 | 15.8 |
Severance and Retention Plan [Member] | ' | ' |
Restructuring Cost and Reserve [Line Items] | ' | ' |
Total cash amount expected to be paid for severance and retention | 1,100,000 | ' |
Related expense incurred, severance and retention | 100,000 | ' |
Related liability, severance and retention | 200,000 | ' |
Severance and Retention Plan [Member] | Severance [Member] | ' | ' |
Restructuring Cost and Reserve [Line Items] | ' | ' |
Related expense incurred, severance and retention | 33,000 | ' |
Related liability, severance and retention | 400,000 | ' |
Number of employees to receive severance payments | 14 | ' |
Fair_Value_of_Financial_Instru2
Fair Value of Financial Instruments (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Liabilities [Abstract] | ' | ' |
Fair value of loan | $23,700,000 | $23,600,000 |
Long-Term Debt | 18,793,000 | 18,354,000 |
Recurring [Member] | ' | ' |
Assets [Abstract] | ' | ' |
Fair Value | 76,267,000 | 86,608,000 |
Recurring [Member] | Level 1 [Member] | ' | ' |
Assets [Abstract] | ' | ' |
Fair Value | 76,267,000 | 86,608,000 |
Recurring [Member] | Level 2 [Member] | ' | ' |
Assets [Abstract] | ' | ' |
Fair Value | 0 | 0 |
Recurring [Member] | Level 3 [Member] | ' | ' |
Assets [Abstract] | ' | ' |
Fair Value | 0 | 0 |
Recurring [Member] | Cash and cash equivalents [Member] | ' | ' |
Assets [Abstract] | ' | ' |
Fair Value | 75,942,000 | 86,283,000 |
Recurring [Member] | Cash and cash equivalents [Member] | Level 1 [Member] | ' | ' |
Assets [Abstract] | ' | ' |
Fair Value | 75,942,000 | 86,283,000 |
Recurring [Member] | Cash and cash equivalents [Member] | Level 2 [Member] | ' | ' |
Assets [Abstract] | ' | ' |
Fair Value | 0 | 0 |
Recurring [Member] | Cash and cash equivalents [Member] | Level 3 [Member] | ' | ' |
Assets [Abstract] | ' | ' |
Fair Value | 0 | 0 |
Recurring [Member] | Certificate of Deposit [Member] | ' | ' |
Assets [Abstract] | ' | ' |
Fair Value | 325,000 | 325,000 |
Recurring [Member] | Certificate of Deposit [Member] | Level 1 [Member] | ' | ' |
Assets [Abstract] | ' | ' |
Fair Value | 325,000 | 325,000 |
Recurring [Member] | Certificate of Deposit [Member] | Level 2 [Member] | ' | ' |
Assets [Abstract] | ' | ' |
Fair Value | 0 | 0 |
Recurring [Member] | Certificate of Deposit [Member] | Level 3 [Member] | ' | ' |
Assets [Abstract] | ' | ' |
Fair Value | 0 | 0 |
Recurring [Member] | Common Stock Warrant Liability [Member] | ' | ' |
Liabilities [Abstract] | ' | ' |
Fair Value | 4,672,000 | 5,425,000 |
Recurring [Member] | Common Stock Warrant Liability [Member] | Level 1 [Member] | ' | ' |
Liabilities [Abstract] | ' | ' |
Fair Value | 0 | 0 |
Recurring [Member] | Common Stock Warrant Liability [Member] | Level 2 [Member] | ' | ' |
Liabilities [Abstract] | ' | ' |
Fair Value | 0 | 0 |
Recurring [Member] | Common Stock Warrant Liability [Member] | Level 3 [Member] | ' | ' |
Liabilities [Abstract] | ' | ' |
Fair Value | $4,672,000 | $5,425,000 |
Fair_Value_of_Financial_Instru3
Fair Value of Financial Instruments, Level 3 Rollforward (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 |
In Thousands, unless otherwise specified | Level 3 [Member] | Level 3 [Member] | ||
Fair value measurements of common stock warrants using significant unobservable inputs (level 3) | ' | ' | ' | ' |
Balance at beginning of period | $4,672 | $5,425 | $5,425 | $6,305 |
Exercise of warrants | ' | ' | -375 | ' |
Change in fair value of common stock warrant liability | ' | ' | -378 | -162 |
Balance at end of period | $4,672 | $5,425 | $4,672 | $6,143 |
Fair_Value_of_Financial_Instru4
Fair Value of Financial Instruments, Significant Unobsesrvable input assumptions of Level 3 valuations (Details) (Level 3 [Member]) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2014 | Dec. 31, 2013 | |
Minimum [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Historical Volatility (in hundredths) | 60.00% | 62.00% |
Expected Term (in years) | '0 years 1 month 6 days | '0 years 4 months 24 days |
Risk-free interest rate (in hundredths) | 0.03% | 0.08% |
Maximum [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Historical Volatility (in hundredths) | 62.00% | 76.00% |
Expected Term (in years) | '1 year 10 months 24 days | '2 years 1 month 6 days |
Risk-free interest rate (in hundredths) | 0.41% | 0.44% |
Inventory_Details
Inventory (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Oct. 04, 2013 |
Inventories, current [Abstract] | ' | ' | ' |
Raw materials | $52,000 | $52,000 | ' |
Finished goods, net of reserves | 121,000 | 60,000 | ' |
Inventory | 173,000 | 112,000 | ' |
Inventories, non-current [Abstract] | ' | ' | ' |
Raw materials | 256,000 | 0 | ' |
Inventory | 429,000 | 112,000 | ' |
Raw materials on hand purchased prior to October 4, 2013 | ' | ' | 1,000,000 |
Inventory reserves | $1,300,000 | $500,000 | ' |
Minimum [Member] | ' | ' | ' |
Inventories, non-current [Abstract] | ' | ' | ' |
Life of raw materials | '2 years | ' | ' |
Maximum [Member] | ' | ' | ' |
Inventories, non-current [Abstract] | ' | ' | ' |
Life of raw materials | '5 years | ' | ' |
Common_Stock_Warrant_Liability2
Common Stock Warrant Liability (Details) (USD $) | 3 Months Ended | 0 Months Ended | 0 Months Ended | 0 Months Ended | 1 Months Ended | 3 Months Ended | |||||||||
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | 13-May-09 | Mar. 31, 2014 | Dec. 31, 2013 | Feb. 23, 2010 | Mar. 31, 2014 | Dec. 31, 2013 | Feb. 22, 2011 | Feb. 28, 2011 | Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | 31-May-13 |
Five Year Warrant 1 [Member] | Five Year Warrant 1 [Member] | Five Year Warrant 1 [Member] | Five Year Warrant 2 [Member] | Five Year Warrant 2 [Member] | Five Year Warrant 2 [Member] | Five Year Warrant 3 [Member] | Five Year Warrant 3 [Member] | Five Year Warrant 3 [Member] | Five Year Warrant 3 [Member] | Five Year Warrant 3 [Member] | Five Year Warrant 3 [Member] | ||||
Class of Warrant or Right [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Exercisable period of warrants | ' | ' | ' | '5 years | ' | ' | '5 years | ' | ' | '5 years | '5 years | ' | ' | ' | ' |
Estimated fair value of warrants accounted for as derivative liabilities [Abstract] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Issuance Date | ' | ' | ' | 13-May-09 | ' | ' | 23-Feb-10 | ' | ' | 22-Feb-11 | ' | ' | ' | ' | ' |
Number of Warrant Shares Issuable (in shares) | ' | ' | ' | 466,667 | ' | ' | 916,669 | ' | ' | 4,552,600 | ' | 4,600,000 | ' | ' | ' |
Exercise Price (in dollars per share) | $2.81 | ' | ' | $17.25 | ' | ' | $12.75 | ' | ' | $1.50 | ' | ' | ' | ' | $1.50 |
Warrant Expiration Date | ' | ' | ' | 13-May-14 | ' | ' | 23-Feb-15 | ' | ' | 22-Feb-16 | ' | ' | ' | ' | ' |
Fair Value of Warrants | $4,672 | ' | $5,425 | $3,360 | $0 | $0 | $5,701 | $1 | $6 | $8,004 | ' | $4,671 | ' | $5,419 | ' |
Exercise of warrants by warrant holders to purchase common stock (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 282,350 | 0 | ' | ' |
Proceeds from exercise of warrants | $423 | $0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | $400 | ' | ' | ' |
Deerfield_Loan_Details
Deerfield Loan (Details) (USD $) | 3 Months Ended | 12 Months Ended |
Share data in Millions, except Per Share data, unless otherwise specified | Mar. 31, 2014 | Dec. 31, 2013 |
Line of Credit Facility [Line Items] | ' | ' |
Loan facility, maximum amount | $30,000,000 | ' |
Loan facility payment terms | 'The principal amount of the loan is payable in equal annual installments on the fourth, fifth and sixth anniversaries of the Deerfield Loan agreement, provided that the amount payable on the fourth anniversary shall be deferred for one year if either (i) our "Net Sales" for the immediately preceding 12-month period are at least $20 million, or (ii) our "Equity Value" is at least $200 million; and provided further, that the amount payable on the fifth anniversary (together with any amount deferred on the fourth anniversary) shall be deferred until the sixth anniversary if either (i) our "Net Sales" for the immediately preceding 12-month period are at least $30 million, or (ii) our "Equity Value" is at least $250 million. | ' |
Cash interest rate under loan facility (in hundredths) | 8.75% | ' |
Number of shares under issued warrants (in shares) | 7 | ' |
Exercise price of warrants (in dollars per share) | $2.81 | ' |
Carrying value of Facility Agreement [Abstract] | ' | ' |
Note Payable | 30,000,000 | 30,000,000 |
Unamortized discount | -11,207,000 | -11,646,000 |
Long-term debt, net of discount | 18,793,000 | 18,354,000 |
Interest expense [Abstract] | ' | ' |
Cash interest expense | 647,000 | 113,000 |
Non-cash amortization of debt discounts | 439,000 | 57,000 |
Amortization of debt costs | 5,000 | 5,000 |
Total interest | 1,091,000 | 175,000 |
Fourth anniversary [Member] | Minimum [Member] | ' | ' |
Line of Credit Facility [Line Items] | ' | ' |
Net sales for 12-month period immediately preceding repayment date | 20,000,000 | ' |
Equity Value at repayment date | 200,000,000 | ' |
Sixth anniversary [Member] | Minimum [Member] | ' | ' |
Line of Credit Facility [Line Items] | ' | ' |
Net sales for 12-month period immediately preceding repayment date | 30,000,000 | ' |
Equity Value at repayment date | $250,000,000 | ' |
Stock_Options_and_Stockbased_E2
Stock Options and Stock-based Employee Compensation (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Stock Options and Stock-based Employee Compensation [Abstract] | ' | ' |
Weighted-average vesting period of stock options | '3 years | ' |
Weighted-average assumptions used in estimating fair value of stock options [Abstract] | ' | ' |
Weighted average expected volatility (in hundredths) | 100.00% | 110.00% |
Weighted average expected term (in years) | '5 years 4 months 24 days | '4 years 9 months 18 days |
Weighted average risk-free interest rate (in hundredths) | 1.60% | 0.74% |
Expected dividends (in hundredths) | 0.00% | 0.00% |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' |
Employee stock-based compensation | $703 | $356 |
Research and Development [Member] | ' | ' |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' |
Employee stock-based compensation | 248 | 141 |
Selling, General & Administrative [Member] | ' | ' |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' |
Employee stock-based compensation | $455 | $215 |